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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and Amrie hortert join us each day

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Speaker 2: for insight from the best in markets, economics, and geopolitics

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Speaker 2: from our global headquarters in New York City. We are

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Speaker 2: live on Bloomberg Television weekday mornings from six to nine

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Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

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Speaker 2: anywhere else you listen, and as always on the Bloomberg

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Speaker 2: Terminal and the Bloomberg Business App. Let's extend the conversation.

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Speaker 2: Eachwar percent out of Cornell right in the following. The

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Speaker 2: President has now declared open war on the US institutional framework,

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Speaker 2: which underpins the dollars dominance in global finance, as well

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Speaker 2: as other aspects of US financial supremacy. Each war joins

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Speaker 2: us now for more. Each one, Welcome back to the

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Speaker 2: program sir. Let's just take your line of thinking. If

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Speaker 2: we have declared open war on US institutions, where are

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Speaker 2: you seeing signs of damage?

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Speaker 3: So, if one thinks about, what are the key elements

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Speaker 3: of the institutional framework that, as I mentioned, have underpinned

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Speaker 3: the dollars supremacy and foreign investors trust, particularly in the

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Speaker 3: US financial system. It includes a system of checks and

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Speaker 3: balances that is institutionalized, the rule of law, and most importantly,

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Speaker 3: an independent central bank. Each of these elements of the

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Speaker 3: US institutional framework, you know, took some things during the

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Speaker 3: first wrong term, but during the second term, Trump is

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Speaker 3: really taking a hatchet to each of them. None of

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Speaker 3: the checks and balances, either from Congress or to some extent,

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Speaker 3: from the judicial system, seem to be working very well.

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Speaker 3: The fedce independence is really crucial, and if you emphasize

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Speaker 3: there is operational independence. You know, no central bank can

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Speaker 3: be ultimately free of political influence, because after all, it

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Speaker 3: has to serve the welfare of the people. But in

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Speaker 3: the operational decision making, you know, all evidence seems to

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Speaker 3: suggest that leaving the central bank alone to do its

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Speaker 3: job is that I think makes it most effective and credible,

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Speaker 3: and that's what Trump is attacking.

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Speaker 4: The FED said that they would abide by what the

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Speaker 4: court decides. I read that statement to the President live

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Speaker 4: in the cabinet room, and it came out and asked him,

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Speaker 4: would you abide by the courts? And he says, yes,

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Speaker 4: of course he will. So if the court decides that

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Speaker 4: Lisa Cook can stay. Is the damage already done or

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Speaker 4: do you think that Ben just bolsters the view in

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Speaker 4: America that we do have independent institutions.

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Speaker 3: Well, at the moment, I think a great deal of

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Speaker 3: damage has already been done, because Trump is very clear

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Speaker 3: that he wants to bend every institution in the US,

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Speaker 3: including a statutorily independent one like the Federal Reserve, to

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Speaker 3: his will in terms of policy making and the broader

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Speaker 3: elements of policy that need to line up with his desires.

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Speaker 3: And that's not quite You know what has helped America

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Speaker 3: maintain it's financial supremacy. It's a sense that everybody, including

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Speaker 3: the government, has to play by the rules. You know,

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Speaker 3: we may not like the rules, but whether you're a

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Speaker 3: domestic investor or foreign investor, or the very government that

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Speaker 3: sets the rules, you have to play by the rules.

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Speaker 3: And that is the element that Trump is attacking now.

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Speaker 3: Even a system where you have the rules very clearly

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Speaker 3: laid out, ultimately it is norms that matter, because you

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Speaker 3: cannot really write a rule that covers every eventuality, every

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Speaker 3: circumstance of the world. And those norms are certainly being shattered.

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Speaker 3: And this is I think the real concern because even

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Speaker 3: if Lisa Cook does stay on the board, a certain

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Speaker 3: red line has been crossed and has made it very

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Speaker 3: clear that it is loyalty to him and his policies

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Speaker 3: that matter is much more than technical competence, even in

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Speaker 3: an institution that is supposed to be largely run in

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Speaker 3: technocratic grounds.

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Speaker 4: What does happen though, if, as the DOJ said last week,

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Speaker 4: they're potentially going to investigate this, what happens if Governor

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Speaker 4: Cook is convicted of mortgage fraud? Does she belong there?

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Speaker 3: So this is a really ugly matter, and it is

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Speaker 3: going to get uglier because we are seeing that these

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Speaker 3: allegations seem to be swelling up without much of the

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Speaker 3: evidence being presented, And of course, once the evidence comes out,

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Speaker 3: things will become a lot clearer what the intentions were,

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Speaker 3: what the motives were, and, as your colleague pointed out,

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Speaker 3: the definition of causes very important here. Trump has argued

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Speaker 3: that Lisa Quick is one of the overseers of the

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Speaker 3: mortgage market and therefore any malfeasans or even the notion

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Speaker 3: of malfeasance there is enough to be considered cause for

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Speaker 3: firing her. But the question here is whether the real

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Speaker 3: cause should be in terms of her incompetence when it

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Speaker 3: comes to monetary policy issues, or some much deeper issue

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Speaker 3: of malfeasance, which certainly has not been established yet, but

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Speaker 3: whatever it is, it has certainly put the Fed on

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Speaker 3: notice that every one of its voting members it's going

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Speaker 3: to be subject to very careful scrutiny, which perhaps is

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Speaker 3: not by itself a bad thing, but in a potentially

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Speaker 3: very ugly way, being held to standards that certainly deviate

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Speaker 3: from the past.

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Speaker 2: Each way, I agree that this moment is ugly. I

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Speaker 2: would also suggest in the same way that you have

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Speaker 2: it's very difficult to discuss because we have hearing about

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Speaker 2: the allegations, but no formal legal investigation has been opened.

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Speaker 2: At the same time, Governor Kirk hasn't exactly denied anything

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Speaker 2: that's been alleged, which makes it equally as complicated each

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Speaker 2: wa I'm trying to understand how different this moment is

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Speaker 2: to a moment we had a number of years ago

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Speaker 2: of a financial disclosures of Federal Reserve officials who later

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Speaker 2: resigned themselves because it became a distraction for the institution.

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Speaker 2: Why do you believe this moment is different?

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Speaker 3: I think Lisa Cook is making a very important stand

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Speaker 3: because without the evidence being clearly revealed, and in the

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Speaker 3: case of the other federal officials, there were allegations initially,

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Speaker 3: but ultimately they resigned when the evidence did come out.

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Speaker 3: So at this stage we do not have any clear evidence. Yet,

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Speaker 3: we have a bunch of allegations by one Trump administration official,

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Speaker 3: and these have largely been intermediated through the platform x

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Speaker 3: So I think the real issue is whether there will

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Speaker 3: be a process that is enow to take its course.

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Speaker 3: So rather than firing on the basis of this allegation,

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Speaker 3: if it were if it was a situation where the

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Speaker 3: evidence was clearly laid out so we could all see it,

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Speaker 3: and then the ramifications were teased out, and then the

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Speaker 3: president took action, it will be a very different thing.

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Speaker 3: And of course the context is very important here. Trump

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Speaker 3: has been attacking the FED. He's already made comments about

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Speaker 3: Lisa Cook not having done what he thinks she and

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Speaker 3: other members of the FED board should have done, which

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Speaker 3: is to cut interest rates quite aggressively. So there seems

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Speaker 3: to be a mix of these allegations plus what he

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Speaker 3: considers malfeasance in terms of not following his policy wishes,

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Speaker 3: So I think that's one of the reasons why Lisa

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Speaker 3: Cook might be making a standard. Of course, we're still

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Speaker 3: agree and see how the evidence bleaves.

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Speaker 2: Old stay with us. More Bloomberg surveillance coming up after this.

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Speaker 2: The former Trump White House trade official Kate Colloquwitz right

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Speaker 2: in the following they expanded terrifs further weaken the prospects

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Speaker 2: for a near term US India trade deal, with bilateral

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Speaker 2: talks stored. Kate joined us now for more, Kate, welcome

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Speaker 2: back to the program. I think we have to start

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Speaker 2: from the very top blurring the lines between economics and

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Speaker 2: national security objectives. Can you just build on that and

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Speaker 2: why India is so important right now?

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Speaker 5: Yeah, the situation with India is at a place I

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Speaker 5: think none of us predicted early in the president's term.

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Speaker 5: You know, they had risen out of the gate really

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Speaker 5: as one of the first countries with which we expected

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Speaker 5: a trade deal. But these national security issues, particularly the

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Speaker 5: ongoing situation with Russia and Ukraine, have really elevated them

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Speaker 5: as a problem in the President's mind. And now we

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Speaker 5: see terror us reaching the levels of China almost the

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Speaker 5: highest of any country at present.

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Speaker 2: Okay, as you know, China still buys Russian energy, the

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Speaker 2: Europeans still buy Russian gas. Does consistency mats a here?

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Speaker 1: Well?

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Speaker 5: Apparently not. The President has made clear, of course, that

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Speaker 5: he'll go after some of these other nations with this

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Speaker 5: new executive order that targets buyers of Russian oil. But

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Speaker 5: it's very clear only one country has received the additional penalties,

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Speaker 5: and that's India. So hard to say that there's consistency here.

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Speaker 4: So where do the talks stand now we know that

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Speaker 4: they're basically on hold. How quickly could these two trading

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Speaker 4: partners coalesce and get you an agreement?

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Speaker 5: Well, as we've seen with other previously stuck agreements. I mean,

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Speaker 5: I think anything can happen if you get the two

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Speaker 5: leaders together. What we've seen so far, however, is that

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Speaker 5: India's Prime Minister, because he has his own domestic political challenges,

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Speaker 5: of course, is somewhat reluctant to get on the phone

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Speaker 5: with President Trump. As you all know, that can be

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Speaker 5: quite uncertain as to what the President can ask when

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Speaker 5: he gets on the phone with you. But I think

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Speaker 5: it could get unstuck if the two men get together

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Speaker 5: and find a pathway forward. That's what We've seen happen

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Speaker 5: with President Trump, and I think it could happen here

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Speaker 5: with India.

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Speaker 4: Is it going to potentially hurt India's chances given the

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Speaker 4: fact that Prime Minister Modi is set to have a

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Speaker 4: meeting and meet Shijipan in the next couple of days.

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Speaker 5: Well, I think that Prime Minister Modi is trying to

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Speaker 5: flex a little bit here and show that he has

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Speaker 5: other options. I'm not sure it will impact President Trump's

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Speaker 5: view of this. I think this still has to be

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Speaker 5: an issue resolved between the United States and India, and

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Speaker 5: it doesn't matter if the Indians bring the Chinese alongside.

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Speaker 5: It is hard to ignore, however, that the highest tariff

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Speaker 5: rates at present really are on countries aligned with China,

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Speaker 5: and that's China, India, and Brazil, a group of nations

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Speaker 5: the President has repeatedly targeted.

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Speaker 4: When it comes to the exemptions, though this is really

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Speaker 4: key the likes of Apple, which put a lot of

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Speaker 4: time and effort into moving their supply chain out of

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Speaker 4: China into India. Do you think that exemption stays.

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Speaker 5: Well, that exemption is not really related to India so

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Speaker 5: much as it is to the President's impending action on

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Speaker 5: semiconductors and their derivatives like the products Apple makes, So

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Speaker 5: that exception is really in place only until the President

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Speaker 5: makes that move on semi conductors, which you know the

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Speaker 5: White House has said is imminent. But you raise a

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Speaker 5: very important point, which is in the first president and

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Speaker 5: President Trump's first administration, a lot of companies moved from

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Speaker 5: China and they moved to India. So you know, we

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Speaker 5: could see some very dramatic consequences for those that have

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Speaker 5: done their manufacturing there.

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Speaker 2: I'm Marie just to build on some of that. Mexico

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Speaker 2: Canada Okay, next year, how crucial are those negotiations going

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Speaker 2: to be?

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Speaker 3: They're really important.

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Speaker 5: The US Mexico Canada Agreement, of course, is coming up

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Speaker 5: under review. This was an agreement renegotiated by the first

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Speaker 5: Trump administration. It's an agreement he's called the greatest trade

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Speaker 5: deal ever negotiated. But the truth is the North American

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Speaker 5: supply chain for American manufacturers is critical. It is crucial

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Speaker 5: in this global competition with China, with India, and I

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Speaker 5: think it will be very important to see that reshort

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Speaker 5: essentially and restabilized well.

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Speaker 4: When it comes to the goods that are going between

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Speaker 4: these borders ninety percent or USMCA compliance. They're also getting

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Speaker 4: this exemption when it comes to the tariff rates. What

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Speaker 4: does the Trump administration want to see build upon their

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Speaker 4: USMCA that they themselves struck when it comes to renegotiating

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Speaker 4: that exact trade deal.

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Speaker 5: Well, I think what we've seen in a number of

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Speaker 5: the trade frameworks is what we're going to see in

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Speaker 5: the USMCA negotiations, and that's to get rid of what

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Speaker 5: we consider transhipt goods. And again, this is to ensure

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Speaker 5: that Chinese inputs, Chinese goods are not somehow making their

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Speaker 5: way into the United States through our North American partners.

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Speaker 5: So when the USMCA was renegotiated, we did see tightened

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Speaker 5: rules to ensure that all cars that benefit from USMCA

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Speaker 5: are almost entirely North American content, about seventy five percent.

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Speaker 5: I think the President will push Mexico and Canada for

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Speaker 5: similar commitments on a range of goods to ensure that

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Speaker 5: anything benefiting from this duty free treatment is actually a

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Speaker 5: product of North America.

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Speaker 2: Okay, we're still trying to figure out if some of

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Speaker 2: these tariffs actually stand up to legal screen today and

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Speaker 2: in the cabinet meeting yesterday, the Treasury Secretary talked about

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Speaker 2: customs revenue of north of five hundred billion dollars a year.

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Speaker 2: These tariffs and the revenue they're generating now too big

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Speaker 2: to strike down.

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Speaker 5: Well, it's a great question. I think we are nearing that,

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Speaker 5: and certainly the president's rhetoric, the president of his cabinet

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Speaker 5: really justifying the value of this tear least tariffs and

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Speaker 5: what they're doing for the deficit in the United States

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Speaker 5: indicate that by and large they are here to stay.

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Speaker 5: We have action after action piling up which threatened to

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Speaker 5: raise the tariff level. I think it's going to be

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Speaker 5: very challenging in a wholesale fashion to see these tariffs

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Speaker 5: coming down.

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Speaker 2: Any stay with US multilindex. Savannah's coming up off to

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Speaker 2: this in New York City, Max Show the form of

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Speaker 2: Chief of Staff to the FULMA Vice President Mike Pench

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Speaker 2: joins us now for more.

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Speaker 1: Mont, good morning, good morning, thanks for having me.

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Speaker 2: Thank you for big ka a much more interventionist White

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Speaker 2: House over the past week and maybe the last number

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Speaker 2: of months as well. Can you just weigh in how

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Speaker 2: are you framing things in the moment?

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Speaker 1: Well, on this pretty good topic, I actually think there

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Speaker 1: is probably broader support among a lot of small government

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Speaker 1: people who say, you know what, the notion of a

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Speaker 1: FED truly being independent was a nice notion, went before

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Speaker 1: it had seven trillion dollars of assets on his books,

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Speaker 1: and so you have a lot of unlikely people with

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Speaker 1: fourteen year terms have enormous influence over the economy. Having

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Speaker 1: said that, I think there's probably a desire also that

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Speaker 1: if there was actually effort to change it, it'd be

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Speaker 1: more above board than coming up with sort of these

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Speaker 1: fraudulent charge is against the board governor because there's probably

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Speaker 1: plenty political pointees indministration of multiple mortgages too, and said

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Speaker 1: they're both their primary residents. So I'm sure there's a

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Speaker 1: double standard here, and I wish there is a more

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Speaker 1: intellectual appeal about the Fed's role as a postcon with

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Speaker 1: bogus chargers.

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Speaker 2: I just want to pick up on the language a

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Speaker 2: difference between challenges of fraud and fortullent challenges. Which one

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Speaker 2: do you think it is?

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Speaker 1: I think these are bogus charges. I mean, what makes

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Speaker 1: you believe that, Well, I don't know how many how

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Speaker 1: many homes she has or if she listed both as

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Speaker 1: private resident, is that really a reason you're going to

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Speaker 1: remove somebody as a board governor. And again I believe

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Speaker 1: there's probably plenty of people indministration who have done the

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Speaker 1: same on their mortgage file.

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Speaker 3: Well.

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Speaker 4: Lots of reporting over this summer about Ken Paxton, who's

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Speaker 4: the Attorney General of Texas who's running to be the senator.

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Speaker 4: Good point, And do you think is litmus test now

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Speaker 4: for the president? He's going to decide whether or not

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Speaker 4: he's going to back Ken pax then, because he has

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Speaker 4: three residences listen as a primary more.

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Speaker 1: You know Emory, he's very flexible in these things. I

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Speaker 1: think this is this is more about his effort to

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Speaker 1: exert control over the FED because I think they're concerned

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Speaker 1: that their trade agenda is causing great weakness in the

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Speaker 1: labor market and they want rates lower. And to be fair,

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Speaker 1: this is what the President has always wanted, his lower rates.

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Speaker 1: Even when he had the option to appoint Jerome Powell

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Speaker 1: in the first administration, there were three options between Kevin Warsh,

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Speaker 1: John Taylor, and Jerome Powell, and the President asked who's

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Speaker 1: going to make rades lower? And that's one of the

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Speaker 1: ironies is that he chose the person who Steve Nichen

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Speaker 1: told him is going to keep rates lower, but obviously

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Speaker 1: he wants even lower.

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Speaker 4: They are now, how difficult is next week going to be?

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Speaker 4: If the Senate Banking Committee begins their hearing of Steve

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Speaker 4: Myron and you look at some of the Republicans on

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Speaker 4: that committee. Are we going to see pushback not just

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Speaker 4: from the likes of Elizabeth Warren but also like Tom

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Speaker 4: tell Us.

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Speaker 1: We haven't seen it yet, Henry. He said, I'm not

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Speaker 1: so confident that it's going to be significant pushback on

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Speaker 1: his appointment. And I look, again, I think this is

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Speaker 1: about effort, exert control, want to have a majority so

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Speaker 1: he can lower rates faster. But again, I think it's

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Speaker 1: reflective of a concern about where the labor market's going.

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Speaker 2: I remember Stephen Mall nominates it for a seat on

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Speaker 2: the Federal sev the Senate was Republican at the time,

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Speaker 2: and he didn't make it, and that was what's the

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Speaker 2: difference between that first time for the president and this

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Speaker 2: second thing?

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Speaker 1: Yeah, yeah, great question, because I think this is much

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Speaker 1: broader than the Reserve. I think it's about all of

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Speaker 1: his nominations. I think that you know, you go to

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Speaker 1: his cabinet and I think it'd be hard to envision

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Speaker 1: that RFK would have gotten confirmed in a previous Republican

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Speaker 1: controlled Senate. I think this is basically a reflection that

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Speaker 1: Republicans are very worried about the president primary. He has

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Speaker 1: shown his ability to engage in primaries and exert that control,

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Speaker 1: and there's just an enormous fear factor, and he's using

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Speaker 1: that with great leverage amongst Senate Republicans.

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Speaker 2: Has the Ponzi changed.

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Speaker 1: The Party's absolutely changed. I mean, I think the party

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Speaker 1: has certainly become far more populous. I think you know,

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Speaker 1: when you see basically the federal government looking to seize

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Speaker 1: means of production and the biggest cheerleaders are Elizabeth Warren

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Speaker 1: and Bernie Sanders, and there's not a Republican speaking out

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Speaker 1: about the government taking over ten percent of intel. On

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Speaker 1: the heels of saying, you know, in selling we have

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Speaker 1: export controls, we don't want to sell these chips to China. Oh,

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Speaker 1: but if you allow us to take fifteen percent of

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Speaker 1: the profits of a video, it's okay. And on the

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Speaker 1: heels of saying we're gonna take golden shares of Nippon

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Speaker 1: Steel a US steel, It's like this is clearly moving

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Speaker 1: a direction where the populism and the progressive merge, and

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Speaker 1: there's been total silence among center Republicans and centered Republicans.

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Speaker 4: With their silence, you say, potentially though, they're interested in

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Speaker 4: revamping the Federal Reserve because they're in favor of small government.

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Speaker 4: Nothing you just listed in terms of taking shares of

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Speaker 4: companies is small government, he Marie.

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Speaker 1: That's I think one of the shocking parts is that

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Speaker 1: I do believe that the first Trump administration was predominantly

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Speaker 1: small government, was deregulatory, it reduced taxes, and I feel

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Speaker 1: like the second administration is exerted its influence in all

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Speaker 1: sectors of the economy and looking to exert its muscle.

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Speaker 1: And I think it's a very different agenda.

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Speaker 4: To be more constructive on what they're doing in terms of,

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Speaker 4: say intel, There's been a lot of criticism that they're

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Speaker 4: mirroring what China does, or this is state capitalism like

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Speaker 4: Europeans did in the nineteen sixties. What do you actually

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Speaker 4: think Trump is thinking? Is this about building a sovereign

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Speaker 4: well fun what is actually the strategy?

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Speaker 1: I think could he kind of rejected the Sovereign Wealth

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Speaker 1: Fund the other day, But I do think it's concerning,

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Speaker 1: you know, the trajectory there is basically Saudi Arabia, China, Iran, Russia.

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Speaker 1: Those are the ones with sovereign wealth funds. I certainly

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Speaker 1: hope that's not where we're going. I do think it's

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Speaker 1: more for in his mind simply about leverage and where

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Speaker 1: he can have leverage. But again, the base of it

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Speaker 1: was two weeks before he more or lessened s ANUWAYD

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Speaker 1: the Intel CEOs and Chinese spy and then basically allowing

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Speaker 1: to basically saying, Okay, well, we're not so worried about

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Speaker 1: the national security and more as long as we can

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Speaker 1: have ten percent. It's like, what's the justification. I feel

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Speaker 1: like when you do this, you crowd out private investors.

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Speaker 1: I don't think this would be good for either side.

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Speaker 1: I think you can see Intel shock. Intel stock probably

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Speaker 1: declined because what private investor wants to engage and they

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Speaker 1: feel like the federal government can just come in and

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Speaker 1: take ten percent or more.

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Speaker 2: This is the Bloomberg Survendments podcast, bringing you the best

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Speaker 2: in markets, economics, anngio politics. You can watch the show

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Speaker 2: Bloomberg Terminal and the Bloomberg Business out

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Speaker 1: Mm hmm