1 00:00:00,080 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:11,600 --> 00:00:15,440 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,440 --> 00:00:18,400 Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each 4 00:00:18,480 --> 00:00:21,360 Speaker 2: day for insight from the best in markets, economics, and 5 00:00:21,400 --> 00:00:24,720 Speaker 2: geopolitics from our global headquarters in New York City. We 6 00:00:24,760 --> 00:00:27,400 Speaker 2: are live on Bloomberg Television weekday mornings from six to 7 00:00:27,480 --> 00:00:31,000 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 8 00:00:31,200 --> 00:00:33,479 Speaker 2: or anywhere else you listen, and as always on the 9 00:00:33,479 --> 00:00:37,040 Speaker 2: Bloomberg Terminal and the Bloomberg Business App. Joining us now 10 00:00:37,080 --> 00:00:39,879 Speaker 2: to discuss the state of energy, not just domestically but worldwide, 11 00:00:39,920 --> 00:00:44,040 Speaker 2: the seventeenth United States Secretary of Energy, Chris Right, Mister Secretary, 12 00:00:44,040 --> 00:00:46,280 Speaker 2: welcome back to the program sir, looking forward to an 13 00:00:46,320 --> 00:00:48,480 Speaker 2: in dev conversation with you about what you cover every 14 00:00:48,479 --> 00:00:50,160 Speaker 2: single day. So, first of all, just on a run 15 00:00:50,200 --> 00:00:52,080 Speaker 2: so we can deal with that. What is the current 16 00:00:52,120 --> 00:00:55,240 Speaker 2: stance of the US officially on the use and import 17 00:00:55,560 --> 00:00:56,520 Speaker 2: of the running crude? 18 00:00:58,560 --> 00:01:01,560 Speaker 3: Oh, the sanctions are still in pl no change there. 19 00:01:01,800 --> 00:01:04,520 Speaker 3: I think the Trump what President Trump was referring to 20 00:01:04,640 --> 00:01:07,679 Speaker 3: there is Hey, if we make a large piece and 21 00:01:07,760 --> 00:01:11,440 Speaker 3: sanctions come off, aron can flourish. 22 00:01:11,120 --> 00:01:13,319 Speaker 2: If you could a decent understanding the miss the Secretary 23 00:01:13,319 --> 00:01:15,120 Speaker 2: of just how much of running crud is being consumed 24 00:01:15,120 --> 00:01:19,280 Speaker 2: and impulsive already as things stand, despite the sanctions. 25 00:01:21,080 --> 00:01:23,280 Speaker 3: We do so, a RAM produces about three and a 26 00:01:23,319 --> 00:01:26,440 Speaker 3: half million barrels a day, and they've been import they've 27 00:01:26,480 --> 00:01:29,280 Speaker 3: been exporting about one and a half million barrels of 28 00:01:29,280 --> 00:01:32,639 Speaker 3: oil a day, and the maximum pressure campaign that President 29 00:01:32,680 --> 00:01:35,480 Speaker 3: Trump did in his last term tamp that down to 30 00:01:35,560 --> 00:01:37,720 Speaker 3: only one hundred or two hundred thousand barrels a day. 31 00:01:37,760 --> 00:01:39,880 Speaker 3: They cut off ninety percent of it. That was a 32 00:01:40,080 --> 00:01:43,520 Speaker 3: possible strategy here as well, but hadn't been implemented yet. 33 00:01:43,640 --> 00:01:47,000 Speaker 3: We tried to give negotiations a chance see if we 34 00:01:47,000 --> 00:01:48,480 Speaker 3: can do it without maximum pressure. 35 00:01:48,800 --> 00:01:51,560 Speaker 4: So is maximum pressure still on the table or is 36 00:01:51,600 --> 00:01:53,200 Speaker 4: the ad ministration walking away from that? 37 00:01:55,480 --> 00:01:57,880 Speaker 3: Well, the goal right now, of course, is to get 38 00:01:57,880 --> 00:02:00,160 Speaker 3: a peace deal, is to get peace into the middle 39 00:02:00,400 --> 00:02:03,880 Speaker 3: and spread the focus on commerce not conflict. So no, 40 00:02:04,120 --> 00:02:06,720 Speaker 3: it's not actively being discussed right now, but the situation 41 00:02:06,840 --> 00:02:09,760 Speaker 3: is still dynamic there. We want to see peace, prosperity 42 00:02:09,800 --> 00:02:12,120 Speaker 3: and security as the future of the Middle East. 43 00:02:12,480 --> 00:02:14,320 Speaker 4: When it comes to what's going on in Iran as well. 44 00:02:14,360 --> 00:02:17,600 Speaker 4: In terms of the IAEA, the Foreign Minister said yesterday 45 00:02:17,639 --> 00:02:20,280 Speaker 4: that basically they have no plans to having the Director 46 00:02:20,320 --> 00:02:23,480 Speaker 4: General Raphael Grossy in Iran and doesn't sound like they're 47 00:02:23,520 --> 00:02:27,160 Speaker 4: willing to give the inspectors the space, time and access 48 00:02:27,200 --> 00:02:29,440 Speaker 4: they need to look at these nuclear facilities. 49 00:02:29,639 --> 00:02:31,440 Speaker 5: What is the United States response to that? 50 00:02:33,720 --> 00:02:35,720 Speaker 3: Yeah, look, this is early on. 51 00:02:35,880 --> 00:02:36,720 Speaker 5: This is early on. 52 00:02:37,000 --> 00:02:40,000 Speaker 3: Iran has just had most of its nuclear program entirely 53 00:02:40,040 --> 00:02:43,519 Speaker 3: devastated by Israel and the United States. They're a little 54 00:02:43,560 --> 00:02:45,720 Speaker 3: bit humbled, they're a little bit shell shocked right now. 55 00:02:46,040 --> 00:02:48,520 Speaker 3: So yeah, I wouldn't put too much weight on those words, 56 00:02:48,720 --> 00:02:52,120 Speaker 3: but a final peace steal certainly has to have confidence 57 00:02:52,360 --> 00:02:55,400 Speaker 3: in a dismantlement of the Iranian nuclear program and that 58 00:02:55,440 --> 00:02:58,240 Speaker 3: people can have security it won't be resurrected in the future. 59 00:02:58,520 --> 00:03:00,480 Speaker 4: You deal with a lot of nuclear at the Energy 60 00:03:00,560 --> 00:03:04,280 Speaker 4: Department before the US strikes, but after the Israeli strikes. 61 00:03:04,320 --> 00:03:08,880 Speaker 4: Raphael Grossi told us that the IAEA cannot verify with 62 00:03:09,000 --> 00:03:12,800 Speaker 4: the four hundred kilograms of sixty percent enriched uranium in 63 00:03:12,919 --> 00:03:16,480 Speaker 4: Isfahan was currently where it was? 64 00:03:16,480 --> 00:03:18,480 Speaker 5: Was it still there? Do the Irradians take it out? 65 00:03:18,720 --> 00:03:22,639 Speaker 4: Doesn't the IAEA need to go in and verify where 66 00:03:22,639 --> 00:03:23,960 Speaker 4: this enriched uranium is. 67 00:03:26,240 --> 00:03:29,040 Speaker 3: I think that's quite likely part of a future negotiation 68 00:03:29,200 --> 00:03:30,200 Speaker 3: or a future deal. 69 00:03:30,200 --> 00:03:32,040 Speaker 2: Miss the Secretary. Of course, this is just one part 70 00:03:32,080 --> 00:03:33,960 Speaker 2: of the conversaction and energy right now. I can tell 71 00:03:33,960 --> 00:03:36,000 Speaker 2: you earlier on this morning, there's a report that you 72 00:03:36,040 --> 00:03:37,960 Speaker 2: might have seen that came from reuts As. Actually the 73 00:03:38,040 --> 00:03:41,240 Speaker 2: Administraction is readying a package of executive actions aimed a 74 00:03:41,280 --> 00:03:45,360 Speaker 2: boosting energy supply to power the US expansion of artificial energy. 75 00:03:45,400 --> 00:03:47,440 Speaker 2: Mister Secretary, what can you share with this this morning? 76 00:03:49,600 --> 00:03:54,320 Speaker 3: Yeah, Look, artificial intelligence is an incredibly exciting development that's coming. 77 00:03:54,560 --> 00:03:57,240 Speaker 3: It is going to revolutionize not just our economy but 78 00:03:57,360 --> 00:04:00,560 Speaker 3: our health drug discovery, but it also plays huge role 79 00:04:00,600 --> 00:04:03,240 Speaker 3: in national defense, which is why I've compared it to 80 00:04:03,280 --> 00:04:07,000 Speaker 3: the Manhattan Project. It's critical, it'll be transformative, and we 81 00:04:07,080 --> 00:04:10,160 Speaker 3: must lead. We cannot be second place in AI. And 82 00:04:10,240 --> 00:04:12,920 Speaker 3: to do that, we have the scientist, we have the capital. 83 00:04:13,360 --> 00:04:17,039 Speaker 3: You have to have a huge growth in US electricity production. 84 00:04:17,480 --> 00:04:19,719 Speaker 3: So we need to get the morass in the way 85 00:04:19,760 --> 00:04:22,440 Speaker 3: that's really hobbled the American energy system for the last 86 00:04:22,480 --> 00:04:25,560 Speaker 3: four years, and we got to unleash American investment in 87 00:04:25,600 --> 00:04:28,800 Speaker 3: American capitalism. That's going to take building a lot of 88 00:04:28,839 --> 00:04:29,719 Speaker 3: new power generation. 89 00:04:29,920 --> 00:04:33,480 Speaker 6: Mister Secretary, to build on that idea, what type of 90 00:04:33,720 --> 00:04:35,840 Speaker 6: energy production are you looking at? I know that New 91 00:04:35,920 --> 00:04:38,960 Speaker 6: York State was just looking at potentially creating a new 92 00:04:39,200 --> 00:04:40,640 Speaker 6: nuclear energy plan. 93 00:04:40,880 --> 00:04:43,080 Speaker 5: Is that one of the paths of travel. 94 00:04:42,720 --> 00:04:44,680 Speaker 6: That you think is going to be pivotal for the 95 00:04:44,760 --> 00:04:45,479 Speaker 6: United States? 96 00:04:47,600 --> 00:04:50,920 Speaker 3: Absolutely, look to have a secure power glided into power AI. 97 00:04:51,160 --> 00:04:55,479 Speaker 3: You need ninety nine point percent of the time on 98 00:04:55,760 --> 00:04:59,240 Speaker 3: power and so that today our biggest source of reliable 99 00:04:59,240 --> 00:05:02,480 Speaker 3: power today by far as natural gas. Our second biggest 100 00:05:02,520 --> 00:05:05,320 Speaker 3: source is nuclear, and our third biggest source right behind 101 00:05:05,320 --> 00:05:08,200 Speaker 3: that is coal. So those are the three keys to 102 00:05:08,279 --> 00:05:11,320 Speaker 3: the future of our electricity grid. Nuclear we haven't built 103 00:05:11,360 --> 00:05:13,080 Speaker 3: much for a while, so I was thrilled to see 104 00:05:13,120 --> 00:05:17,000 Speaker 3: the governor's announcement embracing nuclear in New York. We have 105 00:05:17,040 --> 00:05:21,080 Speaker 3: the governors of Tennessee and Georgia and Virginia passionate about 106 00:05:21,080 --> 00:05:23,880 Speaker 3: getting new nuclear built in their states. So yes, one 107 00:05:23,920 --> 00:05:26,880 Speaker 3: of our goals in this administration is is to launch 108 00:05:27,160 --> 00:05:28,800 Speaker 3: the American nuclear renaissance. 109 00:05:28,960 --> 00:05:32,400 Speaker 6: Mister Secretary, how do you encourage this type of investment 110 00:05:32,440 --> 00:05:34,400 Speaker 6: at a time where the goal of the President has 111 00:05:34,440 --> 00:05:37,920 Speaker 6: also been to lower prices. And we've seen this particularly 112 00:05:38,000 --> 00:05:40,560 Speaker 6: in the energy space, where the President has been very 113 00:05:40,640 --> 00:05:43,640 Speaker 6: vocal about the desire to see energy prices lower. And 114 00:05:43,680 --> 00:05:45,599 Speaker 6: this has led to a number of oil rigs in 115 00:05:45,640 --> 00:05:48,119 Speaker 6: the shell patch to be taken offline because it isn't 116 00:05:48,320 --> 00:05:51,240 Speaker 6: profitable for a lot of these companies to be producing 117 00:05:51,360 --> 00:05:52,320 Speaker 6: as much as they used to. 118 00:05:52,560 --> 00:05:54,000 Speaker 5: How do you sort of square that circle? 119 00:05:56,160 --> 00:05:59,120 Speaker 3: Yes, yeah, prices are supply and demand. Prices are supply 120 00:05:59,200 --> 00:06:02,479 Speaker 3: and demand. But what we're doing in the administration is 121 00:06:02,600 --> 00:06:06,120 Speaker 3: everything possible to lower the cost to produce energy in 122 00:06:06,120 --> 00:06:08,200 Speaker 3: the United States. Cheaper to produce a barrel of oil 123 00:06:08,279 --> 00:06:10,800 Speaker 3: or an mcf and natural gas, you know, or a 124 00:06:10,800 --> 00:06:13,720 Speaker 3: ton of coal or a kilo one hour of electricity 125 00:06:13,720 --> 00:06:17,960 Speaker 3: from nuclear plants. So that's deregulatory, that's common sense regulation 126 00:06:18,120 --> 00:06:21,359 Speaker 3: focused on health and safety and the environment, but not 127 00:06:21,480 --> 00:06:26,520 Speaker 3: the nonsense that just burdens burdens energy producers. Nuclear will 128 00:06:26,560 --> 00:06:28,760 Speaker 3: be a little bit more expensive at the start, but 129 00:06:28,800 --> 00:06:32,320 Speaker 3: I think that cost will be borne by hyperscalers. They 130 00:06:32,400 --> 00:06:36,159 Speaker 3: want to see nuclear rearrives and they'll sign higher power 131 00:06:36,200 --> 00:06:39,640 Speaker 3: purchase agreements to help kickstart nuclear we need to grow 132 00:06:39,680 --> 00:06:42,920 Speaker 3: the energy supply and keep cost down. You're right, that's 133 00:06:42,920 --> 00:06:45,320 Speaker 3: a challenge. You're right to bring that issue up, and 134 00:06:45,360 --> 00:06:47,200 Speaker 3: that's what I work on seven days a week. 135 00:06:47,320 --> 00:06:49,880 Speaker 2: Let's get at the regulatory burden. We're lucky to have 136 00:06:49,920 --> 00:06:52,880 Speaker 2: someone in your seat that's actually ran an energy company 137 00:06:52,880 --> 00:06:55,320 Speaker 2: in this country. As you know, permitting it is really 138 00:06:55,360 --> 00:06:58,320 Speaker 2: difficult across many dimensions. You have to go state by 139 00:06:58,400 --> 00:07:00,960 Speaker 2: state and the things you can do at the executive 140 00:07:01,080 --> 00:07:03,359 Speaker 2: level to make this a lot easier. Could you describe 141 00:07:03,360 --> 00:07:04,440 Speaker 2: those kind of things. 142 00:07:06,160 --> 00:07:08,560 Speaker 3: That there are a number of things, and it is 143 00:07:08,600 --> 00:07:12,280 Speaker 3: why we created the National Energy Dominance Council. That's really 144 00:07:12,320 --> 00:07:15,840 Speaker 3: to bring people leaders from all different agencies that impact 145 00:07:15,840 --> 00:07:18,600 Speaker 3: the ability to build things in our country together and 146 00:07:18,680 --> 00:07:21,520 Speaker 3: say what We talked to producers and say, you know, 147 00:07:21,520 --> 00:07:23,680 Speaker 3: why aren't you building that? And they'll give us a 148 00:07:23,720 --> 00:07:26,680 Speaker 3: list of seven things. It'll take us seven years, and 149 00:07:26,720 --> 00:07:29,120 Speaker 3: we're really worried about this one and that one. So 150 00:07:29,160 --> 00:07:31,440 Speaker 3: we dive into those issues and say how can we 151 00:07:31,480 --> 00:07:35,120 Speaker 3: simplify that. But I'll highlight a Supreme Court decision from 152 00:07:35,160 --> 00:07:38,040 Speaker 3: just a few weeks ago on to get more oil 153 00:07:38,120 --> 00:07:40,960 Speaker 3: out of Utah via train that've been held up for 154 00:07:41,160 --> 00:07:44,679 Speaker 3: years through suits over NEPA, and the Supreme Court ruled 155 00:07:44,800 --> 00:07:48,240 Speaker 3: eight to zero. Every Supreme Court justice involved in the 156 00:07:48,280 --> 00:07:51,160 Speaker 3: case said, yes, we need to put NEPA back in 157 00:07:51,200 --> 00:07:54,440 Speaker 3: its box. It's to check to make sure the environment's 158 00:07:54,480 --> 00:07:58,360 Speaker 3: being considered. It's not to have years long, endless delays 159 00:07:58,520 --> 00:08:01,040 Speaker 3: because if you delay something, you make it more uncertain, 160 00:08:01,160 --> 00:08:03,360 Speaker 3: more expensive, and simply less things get built. 161 00:08:03,520 --> 00:08:05,920 Speaker 2: Miss the Secretary, appreciate your time, sir, as always to 162 00:08:05,960 --> 00:08:07,880 Speaker 2: break down the situation. Hopefully we can engage on this 163 00:08:07,920 --> 00:08:11,000 Speaker 2: conversation again, Chris. Right there, the Energy Secretary of the 164 00:08:11,080 --> 00:08:23,320 Speaker 2: United States, Tobin Marcus of All for Research, joins us 165 00:08:23,320 --> 00:08:25,520 Speaker 2: now for more. Tobin, welcome to the program. I just 166 00:08:25,560 --> 00:08:27,120 Speaker 2: want to pick up on the language, the words used 167 00:08:27,120 --> 00:08:29,640 Speaker 2: by the COMMA secretary. How would lot mak we inked 168 00:08:29,680 --> 00:08:33,520 Speaker 2: the deal? What's the deal? Do you have any details whatsoever? 169 00:08:34,679 --> 00:08:36,640 Speaker 7: This seems to be the third time for the giving 170 00:08:36,880 --> 00:08:40,000 Speaker 7: this particular deal because it seems to be a solidification 171 00:08:40,160 --> 00:08:42,360 Speaker 7: of the framework to get back to the Geneva and 172 00:08:42,480 --> 00:08:46,079 Speaker 7: census that was reached about two months ago. So it's 173 00:08:46,120 --> 00:08:48,040 Speaker 7: good to have that lockdown. But it does not really 174 00:08:48,080 --> 00:08:50,199 Speaker 7: look to me like that's delivering any kind of incremental 175 00:08:50,240 --> 00:08:54,920 Speaker 7: relief or incremental steps forward. It's just solidifying the set 176 00:08:54,960 --> 00:08:57,439 Speaker 7: of understandings that was required to keep the trading relationship 177 00:08:57,440 --> 00:09:00,240 Speaker 7: from going further off track in terms of access to 178 00:09:00,320 --> 00:09:02,600 Speaker 7: RARR earths on their side and the rollback of some 179 00:09:02,600 --> 00:09:04,640 Speaker 7: of the incremental export controls on our side. 180 00:09:04,800 --> 00:09:06,760 Speaker 4: I was at those talks in London. I still can't 181 00:09:06,760 --> 00:09:09,880 Speaker 4: get from this administration and idea of what the language 182 00:09:09,920 --> 00:09:13,320 Speaker 4: looks like. Who signed it. The Chinese say earlier this 183 00:09:13,360 --> 00:09:15,960 Speaker 4: morning the US side will correspondingly cancel a series of 184 00:09:15,960 --> 00:09:19,439 Speaker 4: restrictive measures taken against China, which measures. 185 00:09:20,480 --> 00:09:23,640 Speaker 7: So it seems from my perspective that the Chinese have 186 00:09:23,720 --> 00:09:27,400 Speaker 7: been primarily focused on the further expansion of export controls 187 00:09:27,440 --> 00:09:30,480 Speaker 7: and took place after the Geneva meeting. So certainly the 188 00:09:30,920 --> 00:09:36,080 Speaker 7: restrictions on natural gas liquids, on aerospace, on EA software, 189 00:09:36,440 --> 00:09:38,040 Speaker 7: those are I think are clearly in the set of 190 00:09:38,080 --> 00:09:39,920 Speaker 7: things that are going to be rolled off. The initial 191 00:09:40,000 --> 00:09:43,280 Speaker 7: vote of contention from the Chinese side was this declaration 192 00:09:43,480 --> 00:09:46,400 Speaker 7: that anyone using baway send chips is in violation of 193 00:09:46,480 --> 00:09:49,760 Speaker 7: US export controls, that the uside characterized as a restatement 194 00:09:49,760 --> 00:09:53,400 Speaker 7: of existing policy, and the Chinese side characterized as incremental 195 00:09:53,440 --> 00:09:55,920 Speaker 7: expansion of export control. So that, in my mind is 196 00:09:55,920 --> 00:09:59,040 Speaker 7: the question. I don't think that the US has committed 197 00:09:59,040 --> 00:10:01,040 Speaker 7: to rolling that back, but that I think is sort 198 00:10:01,040 --> 00:10:04,880 Speaker 7: of the final piece of wiggle room in how we 199 00:10:04,960 --> 00:10:05,720 Speaker 7: understand this. 200 00:10:05,720 --> 00:10:06,840 Speaker 5: This isn't a trade deal. 201 00:10:06,880 --> 00:10:08,959 Speaker 4: This is just an understanding of some of the de 202 00:10:09,240 --> 00:10:12,480 Speaker 4: escalation we've seen in these talks in Geneva and London. 203 00:10:12,520 --> 00:10:14,880 Speaker 4: So where does this leave the relationship more long term, 204 00:10:14,920 --> 00:10:16,600 Speaker 4: for more of a comprehensive agreement. 205 00:10:17,800 --> 00:10:20,040 Speaker 7: It still looks very challenging to me. I think that 206 00:10:20,080 --> 00:10:23,760 Speaker 7: the bullish narrative in markets immediately after the Geneva meeting 207 00:10:23,960 --> 00:10:26,559 Speaker 7: was we've come down to thirty but of that thirty, 208 00:10:26,760 --> 00:10:29,080 Speaker 7: twenty percent is FEDYL related, and that should be an 209 00:10:29,120 --> 00:10:31,960 Speaker 7: easy thing for the Chinese side to alleviate Trump's concern 210 00:10:32,040 --> 00:10:35,080 Speaker 7: on you know, this is an authoritarian society, Well like 211 00:10:35,120 --> 00:10:37,760 Speaker 7: we should just think that they can flip a switch 212 00:10:38,000 --> 00:10:40,280 Speaker 7: and do whatever they need to do on export controls 213 00:10:40,320 --> 00:10:43,920 Speaker 7: on tentinal precursors to satisfy the US side. I think 214 00:10:43,960 --> 00:10:46,600 Speaker 7: that's easier said than done, even to the extent that 215 00:10:46,600 --> 00:10:48,680 Speaker 7: they can fully lay our substantive concerns, you know. I 216 00:10:48,679 --> 00:10:52,440 Speaker 7: mean there have been multiple rounds of headlines from Boomberg 217 00:10:52,600 --> 00:10:56,240 Speaker 7: among others about Vietnam aiming towards a twenty to twenty 218 00:10:56,320 --> 00:10:58,319 Speaker 7: five percent teriff rate in their talks. 219 00:10:58,360 --> 00:10:59,040 Speaker 5: Even if we've. 220 00:10:58,920 --> 00:11:00,719 Speaker 7: Reached a deal, that's what the to look consist of, 221 00:11:01,000 --> 00:11:02,880 Speaker 7: and we're taking Vietnam to twenty five, it does not 222 00:11:02,960 --> 00:11:05,160 Speaker 7: really make sense to take off that twenty percent Fennel 223 00:11:05,200 --> 00:11:07,920 Speaker 7: tariff and China at ten. It would be very upside 224 00:11:07,920 --> 00:11:10,720 Speaker 7: down to go after Vietnam, where the main concerns have 225 00:11:10,800 --> 00:11:13,720 Speaker 7: been around them as sort of an outlet for Chinese 226 00:11:13,760 --> 00:11:16,800 Speaker 7: industrial over capacity and transshipping and so forth, and hit 227 00:11:16,840 --> 00:11:19,040 Speaker 7: them harder than China itself. So I think we have 228 00:11:19,040 --> 00:11:20,600 Speaker 7: a long way to go. I mean, the Chinese love 229 00:11:21,240 --> 00:11:23,280 Speaker 7: slow delivered to mechanisms, and that's what we have in 230 00:11:23,280 --> 00:11:25,160 Speaker 7: place now. And I think these talks will drag out 231 00:11:25,160 --> 00:11:27,439 Speaker 7: for quite a while longer before we get further inco 232 00:11:27,480 --> 00:11:28,240 Speaker 7: mentally easy. 233 00:11:28,200 --> 00:11:28,920 Speaker 5: Isn't that Tobin? 234 00:11:29,200 --> 00:11:31,440 Speaker 6: Kind of what we expect across the board, that this 235 00:11:31,559 --> 00:11:33,040 Speaker 6: is going to be a process and they're going to 236 00:11:33,080 --> 00:11:35,680 Speaker 6: be frameworks that are going to be announced on July ninth. 237 00:11:35,720 --> 00:11:37,360 Speaker 5: That will then kick the can down the road. 238 00:11:37,640 --> 00:11:39,960 Speaker 6: And right now the market is banking on escalate to 239 00:11:39,960 --> 00:11:42,520 Speaker 6: de escalate, as John was talking about when it came 240 00:11:42,559 --> 00:11:44,280 Speaker 6: to a run, but also when it comes to trade 241 00:11:44,320 --> 00:11:46,439 Speaker 6: deals and what the path forward is likely to be 242 00:11:46,520 --> 00:11:47,160 Speaker 6: for the president. 243 00:11:48,400 --> 00:11:51,520 Speaker 7: Yeah, so I think I am less optimistic about exactly 244 00:11:51,559 --> 00:11:53,680 Speaker 7: what these deals are going to deliver in terms of 245 00:11:53,720 --> 00:11:57,200 Speaker 7: market relevant relief than I think sort of hull blue 246 00:11:57,280 --> 00:11:59,959 Speaker 7: about deals in general and deal making as an enter 247 00:12:00,760 --> 00:12:03,839 Speaker 7: would suggest, you know, latnux indication that there's going to 248 00:12:03,840 --> 00:12:06,080 Speaker 7: be ten of these deals, and now we'll see they've 249 00:12:06,120 --> 00:12:07,839 Speaker 7: been teasing a bunch of deals right around the corner 250 00:12:07,880 --> 00:12:10,080 Speaker 7: for about two months now. But even if deals get 251 00:12:10,160 --> 00:12:12,400 Speaker 7: rolled out, I mean, again in Vietnam being in my 252 00:12:12,520 --> 00:12:16,040 Speaker 7: mind sort of the easiest or most important example, we 253 00:12:16,320 --> 00:12:19,920 Speaker 7: seem to be aiming towards a significant increase in reciprocal 254 00:12:20,000 --> 00:12:22,640 Speaker 7: terriff rates in that set of talks. So if we 255 00:12:22,720 --> 00:12:24,520 Speaker 7: roll out that deal, that's not like good news for 256 00:12:24,559 --> 00:12:26,800 Speaker 7: the market, it's not good news for I need to 257 00:12:26,800 --> 00:12:29,439 Speaker 7: take one name that was mentioned just a moment ago, 258 00:12:30,280 --> 00:12:33,880 Speaker 7: and similarly elsewhere, you know, like the sectoral tariffs have 259 00:12:33,920 --> 00:12:36,920 Speaker 7: been the sticking point primarily with Japan, with India to 260 00:12:36,960 --> 00:12:39,520 Speaker 7: some extent, they will be a huge sticking point with 261 00:12:39,600 --> 00:12:41,800 Speaker 7: the EU, although those talks are not quite as far along. 262 00:12:42,080 --> 00:12:43,960 Speaker 7: It doesn't really look to me like the US side 263 00:12:44,040 --> 00:12:45,360 Speaker 7: is going to give on those. And so if we 264 00:12:45,400 --> 00:12:48,480 Speaker 7: get a bunch of deals that don't drop the sectoral tariffs, 265 00:12:48,600 --> 00:12:50,880 Speaker 7: I don't really think that this represents a big kind 266 00:12:50,920 --> 00:12:53,679 Speaker 7: of dubbish impulse for markets. 267 00:12:54,040 --> 00:12:56,439 Speaker 2: Type and appreciate your time and your opinion, Thank you, sir, 268 00:12:56,480 --> 00:13:08,400 Speaker 2: type of Marcus there before Free said it's not just 269 00:13:08,480 --> 00:13:11,120 Speaker 2: this morning the White House announcing imminem plans assigned trade 270 00:13:11,160 --> 00:13:13,720 Speaker 2: agreements with ten countries, with the focus now shifting to 271 00:13:13,760 --> 00:13:17,920 Speaker 2: the European Union. Marissa Adams of HSBC stand constructive, writing, 272 00:13:17,920 --> 00:13:20,320 Speaker 2: we have entered a new era for trade. We don't 273 00:13:20,360 --> 00:13:22,960 Speaker 2: expect things to go back to the way they were, Marissa, 274 00:13:23,040 --> 00:13:24,920 Speaker 2: joints is now for more. Marissa, good morning, it's going. 275 00:13:24,800 --> 00:13:25,520 Speaker 1: To see you. Good morning. 276 00:13:25,520 --> 00:13:26,000 Speaker 5: Thanks for having me. 277 00:13:26,080 --> 00:13:28,880 Speaker 2: You've said this before. Trade doesn't stand still, but it 278 00:13:28,920 --> 00:13:31,400 Speaker 2: has changed. Can you just walk us all through how 279 00:13:31,480 --> 00:13:32,080 Speaker 2: it's changed. 280 00:13:32,400 --> 00:13:35,960 Speaker 1: Yeah, And it's really interesting because we did see disruption 281 00:13:36,040 --> 00:13:36,800 Speaker 1: through the pandemic. 282 00:13:37,160 --> 00:13:38,760 Speaker 5: You know, we've seen a different. 283 00:13:38,679 --> 00:13:42,960 Speaker 1: Period of negotiations, but really posts April second, it's changed 284 00:13:43,000 --> 00:13:45,079 Speaker 1: that I am at both on the supply side and 285 00:13:45,160 --> 00:13:48,199 Speaker 1: the demand side. Now we've see these ten percent baseline 286 00:13:48,200 --> 00:13:50,080 Speaker 1: tariffs that are now in place, and I think it 287 00:13:50,120 --> 00:13:52,080 Speaker 1: is really clear. I always want to keep reminding people 288 00:13:52,160 --> 00:13:54,520 Speaker 1: they're there, so whilst we have a lot of negotiations, 289 00:13:54,559 --> 00:13:57,920 Speaker 1: ten percent is actually in place. But what's really changed 290 00:13:58,000 --> 00:14:00,480 Speaker 1: is the speed of negotiations. And you know, we've heard 291 00:14:00,480 --> 00:14:04,040 Speaker 1: this morning around the China deal. The Indian trade negotiators 292 00:14:04,040 --> 00:14:07,240 Speaker 1: are in DC this week. There's optimism around you deal, 293 00:14:07,240 --> 00:14:09,199 Speaker 1: and I think that this is actually quite a positive 294 00:14:09,200 --> 00:14:12,120 Speaker 1: sign that quite quickly we're looking to come to agreements. Now, 295 00:14:12,120 --> 00:14:14,680 Speaker 1: I would say there are deals in principle, they're not 296 00:14:14,720 --> 00:14:16,680 Speaker 1: free trade agreements, and free trade agreements, as we know, 297 00:14:16,800 --> 00:14:19,240 Speaker 1: take five to ten multiple years to really get down 298 00:14:19,240 --> 00:14:21,160 Speaker 1: to the nitty gritty detail. But at least this is 299 00:14:21,200 --> 00:14:23,920 Speaker 1: a positive sign that we're getting to some certainty For corporates. 300 00:14:24,000 --> 00:14:26,200 Speaker 2: What are you seeing from individual corporations at the moment, 301 00:14:26,280 --> 00:14:28,040 Speaker 2: what are they doing. We've been having this debate with 302 00:14:28,040 --> 00:14:29,960 Speaker 2: economists and maybe it's better to have this debate with you. 303 00:14:30,360 --> 00:14:32,440 Speaker 2: Are you seeing them take the hit on margins, pass 304 00:14:32,440 --> 00:14:34,640 Speaker 2: it on to consumers, something in between? What are they doing? 305 00:14:34,800 --> 00:14:36,760 Speaker 1: So it really depends sector bisector, and I think the 306 00:14:36,840 --> 00:14:38,440 Speaker 1: one industry where we've seen at the most is in 307 00:14:38,480 --> 00:14:43,120 Speaker 1: consumer retail. They have shorter order cycles, the lower margins, 308 00:14:43,200 --> 00:14:44,760 Speaker 1: So what we're seeing there is that some of them 309 00:14:44,800 --> 00:14:46,400 Speaker 1: are actually taking a hit to their bottom line. We've 310 00:14:46,400 --> 00:14:48,280 Speaker 1: seen a few companies come out this week around that. 311 00:14:48,800 --> 00:14:51,000 Speaker 1: The numbers, though still are fairly small, and I think 312 00:14:51,080 --> 00:14:54,400 Speaker 1: ten percent is something that co corporates can absorb. When 313 00:14:54,400 --> 00:14:56,960 Speaker 1: it starts to get to twenty five, thirty, forty fifty, 314 00:14:57,320 --> 00:14:58,920 Speaker 1: that's at a stage where even if you want to 315 00:14:58,920 --> 00:15:01,280 Speaker 1: compress your margins are going to have past pass costs 316 00:15:01,280 --> 00:15:02,000 Speaker 1: on to consumers. 317 00:15:02,080 --> 00:15:04,520 Speaker 6: How much confidence do they have in terms of where 318 00:15:04,560 --> 00:15:06,880 Speaker 6: tariffs are going to be the highest i e. China, 319 00:15:07,000 --> 00:15:09,680 Speaker 6: that they're actually moving production. How quickly is that happening? 320 00:15:09,840 --> 00:15:12,240 Speaker 1: And it's a really good question in the sense that 321 00:15:12,320 --> 00:15:14,640 Speaker 1: it depends if you are a shorter industry or a 322 00:15:14,640 --> 00:15:16,920 Speaker 1: longer order industry. So we've seen in the tech industry, 323 00:15:16,920 --> 00:15:19,520 Speaker 1: as an example, a lot of investment in semiconductors here 324 00:15:19,520 --> 00:15:22,120 Speaker 1: in the United States. But a factory isn't built overnight. 325 00:15:22,160 --> 00:15:25,040 Speaker 1: So we've got those commitments there, but five to six 326 00:15:25,120 --> 00:15:25,880 Speaker 1: seven years. 327 00:15:25,640 --> 00:15:26,480 Speaker 5: To build a factory. 328 00:15:26,720 --> 00:15:28,480 Speaker 1: You're only going to do that once you know there 329 00:15:28,560 --> 00:15:30,360 Speaker 1: is a certain path around how much more it will 330 00:15:30,360 --> 00:15:32,720 Speaker 1: cost to come on shore. And again, margins is key. 331 00:15:32,760 --> 00:15:36,000 Speaker 1: So some of those high margin tech industry tech businesses 332 00:15:36,000 --> 00:15:38,160 Speaker 1: in the OEMs, they can afford to come back to 333 00:15:38,160 --> 00:15:39,800 Speaker 1: the US. If you're in the ones that are a 334 00:15:39,800 --> 00:15:41,920 Speaker 1: little bit narrow, you're still having to compete with OEMs 335 00:15:41,960 --> 00:15:44,600 Speaker 1: in Asia for the ultimate end game. So that's where 336 00:15:44,600 --> 00:15:46,960 Speaker 1: it becomes a bit of a challenge. So we've seen movement, 337 00:15:47,440 --> 00:15:49,200 Speaker 1: and even over the past three four years there was 338 00:15:49,240 --> 00:15:52,680 Speaker 1: a lot of movement into Latin America into Canada's trading partners, 339 00:15:52,880 --> 00:15:55,480 Speaker 1: but even that is still five six seven years away 340 00:15:55,480 --> 00:15:57,520 Speaker 1: from really being fully up and in production. 341 00:15:58,000 --> 00:16:00,400 Speaker 6: John alluded to this earlier, and it's a really good point, 342 00:16:00,440 --> 00:16:03,360 Speaker 6: the idea that ahead of any kind of tariff, there 343 00:16:03,400 --> 00:16:07,080 Speaker 6: was a stockpiling of goods at prices pre tariff, and 344 00:16:07,160 --> 00:16:09,840 Speaker 6: so we haven't really seen the ramifications either when it 345 00:16:09,880 --> 00:16:12,480 Speaker 6: comes to margins or when it comes to consumer pricing, 346 00:16:12,920 --> 00:16:14,280 Speaker 6: when does that run out? 347 00:16:14,400 --> 00:16:15,760 Speaker 5: I mean, how long is that runway? 348 00:16:16,080 --> 00:16:18,840 Speaker 1: Yeah, and Q one data actually, you know, you look 349 00:16:18,840 --> 00:16:21,600 Speaker 1: at Q one data, really strong results. The wto trade 350 00:16:21,640 --> 00:16:25,080 Speaker 1: index at quite a significant high that's seen, and that 351 00:16:25,200 --> 00:16:27,120 Speaker 1: is really due to that front loading. I think we'll 352 00:16:27,160 --> 00:16:28,800 Speaker 1: start to see some of the effects in Q four, 353 00:16:29,200 --> 00:16:31,160 Speaker 1: But industry by industry, So if you look at the 354 00:16:31,160 --> 00:16:33,560 Speaker 1: healthcare industry, I've been in New York this week speaking 355 00:16:33,560 --> 00:16:35,800 Speaker 1: to a lot of pharmaceutical companies and they have long 356 00:16:35,880 --> 00:16:38,080 Speaker 1: term contracts, so they are locked in for a year 357 00:16:38,120 --> 00:16:39,800 Speaker 1: and a half two years for some of that production, 358 00:16:39,960 --> 00:16:42,920 Speaker 1: so they may not actually see it for quite a time. 359 00:16:43,400 --> 00:16:45,040 Speaker 1: Same thing with the energy sector, where you have long 360 00:16:45,120 --> 00:16:48,160 Speaker 1: term energy sector contracts, but anything that is shorter order 361 00:16:48,200 --> 00:16:50,520 Speaker 1: and where they're able to adjust, they will. Now one 362 00:16:50,560 --> 00:16:52,560 Speaker 1: of your guests earlier was talking about the fact that 363 00:16:52,600 --> 00:16:54,760 Speaker 1: exporters don't really seem to be taking the hit at 364 00:16:54,760 --> 00:16:57,240 Speaker 1: this stage. That also might start to change because as 365 00:16:57,280 --> 00:16:59,440 Speaker 1: you're starting to negotiate with those suppliers, is there a 366 00:16:59,440 --> 00:17:02,080 Speaker 1: stage fore you you know, you've got to get them 367 00:17:02,120 --> 00:17:04,159 Speaker 1: to lower their prices a little bit to offset the tariffs. 368 00:17:04,240 --> 00:17:06,160 Speaker 1: So I think in Q four we'll start to see 369 00:17:06,160 --> 00:17:07,000 Speaker 1: some of those effects. 370 00:17:07,160 --> 00:17:10,400 Speaker 4: The political cell though for tariffs is to bring manufacturing 371 00:17:10,440 --> 00:17:12,600 Speaker 4: not to Canada or Mexico but to the United States 372 00:17:12,720 --> 00:17:14,160 Speaker 4: is ten percent getting it done. 373 00:17:14,800 --> 00:17:17,320 Speaker 1: It's starting to create those conversations. And I think in 374 00:17:17,359 --> 00:17:19,679 Speaker 1: addition to it's not just terriffs that's an impact. If 375 00:17:19,680 --> 00:17:22,720 Speaker 1: there's tax incentives, if there's other regulatory incentives. Now, the 376 00:17:22,760 --> 00:17:25,840 Speaker 1: other thing that is hasn't necessarily been expressed here is 377 00:17:25,840 --> 00:17:29,560 Speaker 1: also about resiliency, and we saw after the pandemic, corporates 378 00:17:29,560 --> 00:17:31,520 Speaker 1: were really focused on resiliency. How do you get those 379 00:17:31,560 --> 00:17:34,040 Speaker 1: items actually into the country. So there is a huge 380 00:17:34,040 --> 00:17:36,720 Speaker 1: benefit in the healthcare industry, for example, they have already 381 00:17:36,760 --> 00:17:39,399 Speaker 1: done region for regions, so where they are supplying medications 382 00:17:39,440 --> 00:17:41,439 Speaker 1: here in the United States, they've actually brought that production 383 00:17:41,520 --> 00:17:44,040 Speaker 1: on shore. So it is really starting to happen. It's 384 00:17:44,080 --> 00:17:45,440 Speaker 1: just that it's a little bit longer of an order 385 00:17:45,440 --> 00:17:47,360 Speaker 1: cycle and they need some more incentives to actually make 386 00:17:47,359 --> 00:17:47,920 Speaker 1: that investment. 387 00:17:48,040 --> 00:17:50,960 Speaker 4: What about the sectoral tariffs that were potentially going to 388 00:17:50,960 --> 00:17:53,400 Speaker 4: get when it comes to things like pharmaceuticals that are 389 00:17:53,440 --> 00:17:55,200 Speaker 4: also going to be on what many would say more 390 00:17:55,440 --> 00:17:56,840 Speaker 4: sound legal footing. 391 00:17:57,080 --> 00:17:59,159 Speaker 1: And that I'd say is more of a concern for 392 00:17:59,200 --> 00:18:02,400 Speaker 1: corporates than the percent. So where those land and how 393 00:18:02,440 --> 00:18:04,480 Speaker 1: that means they have to rejig some of their supply 394 00:18:04,600 --> 00:18:06,520 Speaker 1: chains is going to be a challenge, so. 395 00:18:06,880 --> 00:18:07,680 Speaker 5: They're looking at that. 396 00:18:07,760 --> 00:18:10,159 Speaker 1: What I would say is that the biggest challenge of 397 00:18:10,160 --> 00:18:12,480 Speaker 1: the moment is still this uncertainty. So you don't want 398 00:18:12,480 --> 00:18:14,600 Speaker 1: to make an investment. You're waiting to pause to move 399 00:18:14,640 --> 00:18:17,439 Speaker 1: through that, and as a result of that, companies are 400 00:18:17,520 --> 00:18:18,679 Speaker 1: delaying decisions. 401 00:18:18,880 --> 00:18:20,159 Speaker 5: There's only so long you can delay. 402 00:18:20,240 --> 00:18:22,840 Speaker 1: Now. I can't tell you whether three months is okay, 403 00:18:22,920 --> 00:18:24,800 Speaker 1: six months is okay, at nine months, but we will 404 00:18:24,840 --> 00:18:27,720 Speaker 1: start to see that and that is a challenge, especially 405 00:18:27,760 --> 00:18:31,080 Speaker 1: if you want to supply onshore and also create more 406 00:18:31,080 --> 00:18:33,320 Speaker 1: production capabilities in the United States. 407 00:18:33,520 --> 00:18:36,119 Speaker 2: Just quickly, how has your business changed? How have you 408 00:18:36,160 --> 00:18:38,040 Speaker 2: and the team had to winnovate? What kind of solutions 409 00:18:38,040 --> 00:18:40,080 Speaker 2: have you had to come up with the corporations? 410 00:18:40,480 --> 00:18:42,520 Speaker 1: So great question. Thank you very much for that. I 411 00:18:42,560 --> 00:18:46,200 Speaker 1: appreciate it. And we are having to do three things. 412 00:18:46,240 --> 00:18:48,560 Speaker 1: So the first thing is really doubling down on working 413 00:18:48,600 --> 00:18:53,120 Speaker 1: capital treasurers and CFOs. I think over six seven years ago, 414 00:18:53,160 --> 00:18:56,480 Speaker 1: we're lucky a little bit blessed in the low interest 415 00:18:56,520 --> 00:18:59,320 Speaker 1: certain environment with less volatility, But now they're looking for 416 00:18:59,359 --> 00:19:01,920 Speaker 1: more tools in their toolkits, so we're looking at ways 417 00:19:01,920 --> 00:19:06,399 Speaker 1: to help them finance receivables, payables, inventory as well. So 418 00:19:06,440 --> 00:19:09,320 Speaker 1: inventory finance is a relatively new product area where again 419 00:19:09,359 --> 00:19:11,160 Speaker 1: you weren't having to hold so much on shore now 420 00:19:11,200 --> 00:19:14,680 Speaker 1: you are. The second area is around services. So services 421 00:19:14,720 --> 00:19:17,480 Speaker 1: trade is twenty six percent of global trade. It's growing 422 00:19:17,480 --> 00:19:20,119 Speaker 1: at three times the break and actually we're seeing a 423 00:19:20,119 --> 00:19:24,600 Speaker 1: lot of traditional goods manufacturers going into services trade. So 424 00:19:24,640 --> 00:19:28,320 Speaker 1: we've started to create contract monetization facilities for that, financing 425 00:19:28,320 --> 00:19:32,119 Speaker 1: those long term contracts that again are not traditional goods trade, 426 00:19:32,119 --> 00:19:34,280 Speaker 1: but actually it is an exchange and trade of information. 427 00:19:34,359 --> 00:19:36,200 Speaker 2: You've got ten seconds to time me the third one. 428 00:19:36,400 --> 00:19:39,800 Speaker 1: The third one is we are working with them on 429 00:19:39,920 --> 00:19:41,400 Speaker 1: how they look at new corridors. 430 00:19:41,560 --> 00:19:42,879 Speaker 5: So I think HSBC we're. 431 00:19:42,720 --> 00:19:45,560 Speaker 1: In over sixty markets. We have local presence with their suppliers, 432 00:19:45,600 --> 00:19:48,240 Speaker 1: so we're helping them to advance the new markets. 433 00:19:48,320 --> 00:19:50,800 Speaker 2: Perfect time, and we'll continue this conversation. I'm up against 434 00:19:50,800 --> 00:19:52,240 Speaker 2: the heartbreaks. We've got to go, but it's good to 435 00:19:52,240 --> 00:19:54,440 Speaker 2: see you. Thank you, thank you, very much. Marissa Adams 436 00:19:54,480 --> 00:20:07,760 Speaker 2: there of HSBC joining us NAT's have that conversation. Alejandro 437 00:20:07,840 --> 00:20:10,879 Speaker 2: Vindol of ned Davis Research, Al Hondre, welcome back to 438 00:20:10,920 --> 00:20:13,600 Speaker 2: the program. Just frame things from your standpoint. Where's this 439 00:20:13,680 --> 00:20:16,160 Speaker 2: labor market at right now? Chair and Pou spent hours 440 00:20:16,200 --> 00:20:18,959 Speaker 2: talking about an economy that was solid. Do you believe 441 00:20:19,200 --> 00:20:19,840 Speaker 2: it's solid? 442 00:20:21,480 --> 00:20:23,480 Speaker 8: You know, of course solid is a relative. Colin again, 443 00:20:23,480 --> 00:20:25,880 Speaker 8: thank you for having me back again. So the way 444 00:20:25,920 --> 00:20:28,439 Speaker 8: I would frame the labor market, it's not a super 445 00:20:28,440 --> 00:20:29,400 Speaker 8: technical term. 446 00:20:29,200 --> 00:20:30,600 Speaker 5: But I would say it's okay. 447 00:20:31,000 --> 00:20:34,320 Speaker 8: So we've been seeing signs of softening through a broad 448 00:20:34,440 --> 00:20:37,159 Speaker 8: array of reports, whether it's the jobless claims from the 449 00:20:37,200 --> 00:20:39,760 Speaker 8: continuing Claims data we saw yesterday rose to the highest 450 00:20:39,800 --> 00:20:43,040 Speaker 8: since twenty eleven or twenty twenty one, I'm sorry, some 451 00:20:43,080 --> 00:20:46,600 Speaker 8: weakness and payrolls, more balancing in the labor market from 452 00:20:46,600 --> 00:20:49,119 Speaker 8: the Jolt survey. But if you look at most of 453 00:20:49,160 --> 00:20:53,440 Speaker 8: that data, it's still quite far from their recessionary thresholds. 454 00:20:53,680 --> 00:20:56,400 Speaker 8: So it still gives the Fed some time to sort 455 00:20:56,400 --> 00:20:58,840 Speaker 8: of sit and wait and see how a lot of 456 00:20:58,880 --> 00:21:01,600 Speaker 8: you know, these potential polye changes can impact growth and 457 00:21:01,640 --> 00:21:02,800 Speaker 8: inflation in the coming months. 458 00:21:02,880 --> 00:21:03,399 Speaker 5: Alle hundred. 459 00:21:03,480 --> 00:21:06,480 Speaker 6: Can we continue to see the sort of just weakening 460 00:21:06,520 --> 00:21:10,639 Speaker 6: but not weak trend When does weakening tip over into weak. 461 00:21:13,080 --> 00:21:16,560 Speaker 8: Our base case scenario is kind of, you know, just 462 00:21:16,840 --> 00:21:19,200 Speaker 8: sort of going about a slower pace of growth, not 463 00:21:19,240 --> 00:21:21,720 Speaker 8: necessarily recession, which is I think of what you meant 464 00:21:21,760 --> 00:21:24,919 Speaker 8: by week. Ultimately the base that the main thing to 465 00:21:24,960 --> 00:21:27,560 Speaker 8: watch is the labor market. So we've kind of had 466 00:21:27,800 --> 00:21:30,119 Speaker 8: these slow downs and growth over the past few years, 467 00:21:30,119 --> 00:21:33,560 Speaker 8: some upticks, but we haven't fallen into that recession territory 468 00:21:33,960 --> 00:21:36,120 Speaker 8: really because of that resiliency and the labor market. 469 00:21:36,200 --> 00:21:39,439 Speaker 5: So that's why we're watching it so closely. I don't know. 470 00:21:39,520 --> 00:21:42,160 Speaker 8: Our base case is that we kind of muddle through 471 00:21:42,200 --> 00:21:45,080 Speaker 8: with about the same sort of this slowing in growth, 472 00:21:45,119 --> 00:21:48,640 Speaker 8: but still away from recessionary thresholds. But again it's very 473 00:21:48,680 --> 00:21:51,920 Speaker 8: dependent on policy. If most of the downside risks come 474 00:21:51,960 --> 00:21:55,320 Speaker 8: into fruition, whether it comes through tariffs or higher inflation 475 00:21:55,520 --> 00:21:58,480 Speaker 8: and increase uncertainty, we could see pronounced weakness in the 476 00:21:58,520 --> 00:22:01,800 Speaker 8: labor market. If care sort of settle at a more 477 00:22:01,840 --> 00:22:05,600 Speaker 8: reasonable level, we get the big beautiful bill with tax 478 00:22:05,680 --> 00:22:09,639 Speaker 8: cuts in some expansionary policy, then that could sort of 479 00:22:09,680 --> 00:22:12,159 Speaker 8: keep the labor market from falling over the edge. So 480 00:22:12,280 --> 00:22:14,320 Speaker 8: just in general, a lot of uncertainty, pretty much what 481 00:22:14,320 --> 00:22:15,919 Speaker 8: you guys were mentioning earlier. 482 00:22:15,600 --> 00:22:17,160 Speaker 5: Which is what everyone's been talking about. 483 00:22:17,160 --> 00:22:19,240 Speaker 6: We have a week until that July fourth self imposed 484 00:22:19,240 --> 00:22:21,800 Speaker 6: deadline for the one big beautiful bill where no one's 485 00:22:21,800 --> 00:22:24,080 Speaker 6: going to be going on vacation, essensibly because John canceled 486 00:22:24,119 --> 00:22:26,600 Speaker 6: it or amor canceled it earlier. But there is this 487 00:22:26,720 --> 00:22:30,280 Speaker 6: question going forward about how much the economic outlook could change, 488 00:22:30,440 --> 00:22:33,320 Speaker 6: not only with a week from now that July fourth deadline, 489 00:22:33,359 --> 00:22:35,720 Speaker 6: but also July ninth. How big is the sort of 490 00:22:35,800 --> 00:22:36,879 Speaker 6: range of scenarios for you. 491 00:22:38,240 --> 00:22:41,560 Speaker 8: Well, again, the base case and the highest probability of 492 00:22:41,600 --> 00:22:45,000 Speaker 8: more than fifty percent is just slowing growth and then 493 00:22:45,359 --> 00:22:48,080 Speaker 8: either stable or slightly higher inflation, So kind of what 494 00:22:48,119 --> 00:22:51,840 Speaker 8: you guys mentioned before, that stagflation light. But there are 495 00:22:52,000 --> 00:22:54,760 Speaker 8: some tail risks that you could maybe see things get 496 00:22:54,880 --> 00:22:58,440 Speaker 8: extraordinarily better. Right, Let's just say we do miraculously get 497 00:22:58,440 --> 00:23:01,720 Speaker 8: these ninety deals in ninety day within the next couple 498 00:23:01,800 --> 00:23:04,560 Speaker 8: of weeks or less than that, actually within one week 499 00:23:05,320 --> 00:23:07,560 Speaker 8: we get the big beautiful bill, that could be you know, 500 00:23:07,920 --> 00:23:11,240 Speaker 8: maybe a tail positive upside surprise, but I think it's 501 00:23:11,240 --> 00:23:14,000 Speaker 8: a lesser likely scenario. And then I talked before about 502 00:23:14,040 --> 00:23:16,600 Speaker 8: the potential recessionary scenario, but I do think that's lower 503 00:23:16,640 --> 00:23:19,560 Speaker 8: as well. So yeah, base case actually very in line 504 00:23:19,600 --> 00:23:22,080 Speaker 8: with what the FED has said, is a slow down 505 00:23:22,080 --> 00:23:26,200 Speaker 8: in growth below potential but still positive and slightly higher inflation. 506 00:23:26,560 --> 00:23:29,240 Speaker 4: Well, you have individuals who are saying, like Michael Hartnett 507 00:23:29,240 --> 00:23:31,720 Speaker 4: this morning, a pivot from tariff to text cuts, raycuts 508 00:23:32,200 --> 00:23:33,960 Speaker 4: could lead to higher risk of a bubble in the 509 00:23:33,960 --> 00:23:35,520 Speaker 4: second half of the year. But you think the second 510 00:23:35,520 --> 00:23:38,320 Speaker 4: half of the year is still going to be talking 511 00:23:38,320 --> 00:23:40,280 Speaker 4: about policy uncertainty. 512 00:23:39,800 --> 00:23:43,280 Speaker 5: In Washington, d C. Yeah, I do think it'll. 513 00:23:43,640 --> 00:23:46,000 Speaker 8: Part of it is I don't think these tariff deals 514 00:23:46,040 --> 00:23:48,280 Speaker 8: are going to be done that quickly, so there's still 515 00:23:48,359 --> 00:23:50,800 Speaker 8: going to be some back and forth and some uncertainty. 516 00:23:51,520 --> 00:23:54,080 Speaker 8: We should have a little more uncertainty from the big 517 00:23:54,119 --> 00:23:56,719 Speaker 8: beautiful bill. I would suspect that's probably going to get 518 00:23:56,720 --> 00:23:58,720 Speaker 8: approved at least over the next month or so, or 519 00:23:58,720 --> 00:24:01,159 Speaker 8: we get some closure there. But I do think the 520 00:24:01,160 --> 00:24:04,960 Speaker 8: tariff uncertainty will continue, and the impact it's going to 521 00:24:05,000 --> 00:24:07,119 Speaker 8: have on inflation will take some time. 522 00:24:07,320 --> 00:24:09,280 Speaker 5: So I think we'll be watching the data. 523 00:24:09,640 --> 00:24:11,760 Speaker 8: And then there's also a lot of other policies that 524 00:24:11,800 --> 00:24:13,640 Speaker 8: have happened since the beginning of the year. We had 525 00:24:13,640 --> 00:24:15,719 Speaker 8: the Doge cuts at the beginning of the year that 526 00:24:15,760 --> 00:24:19,040 Speaker 8: could have reciprocal impacts on state and local governments. What 527 00:24:19,080 --> 00:24:21,480 Speaker 8: we started seeing at the federal level, and then also 528 00:24:21,520 --> 00:24:23,800 Speaker 8: the immigration policies. What are they going to do to 529 00:24:23,840 --> 00:24:25,959 Speaker 8: the labor force? What are they going to do to growth? 530 00:24:26,040 --> 00:24:29,440 Speaker 8: So it's not just those tariffs and big beautiful bill, 531 00:24:29,480 --> 00:24:32,040 Speaker 8: but there's a lot of other things going on that 532 00:24:32,280 --> 00:24:34,600 Speaker 8: may just have more of a delayed ripple effect as 533 00:24:34,600 --> 00:24:37,040 Speaker 8: the year progresses, and just contributing uncertainty. 534 00:24:37,200 --> 00:24:39,040 Speaker 4: How quickly do we need to get to some clarity 535 00:24:39,080 --> 00:24:44,320 Speaker 4: and all these issues for the US to maintain this exceptionalism. 536 00:24:43,760 --> 00:24:48,080 Speaker 8: Well exceptionalism, the way I describe it is just the fact, 537 00:24:48,320 --> 00:24:51,159 Speaker 8: especially compared to the rest of the developed world, we 538 00:24:51,280 --> 00:24:53,760 Speaker 8: just have the potential to grow so much faster. 539 00:24:54,320 --> 00:24:56,800 Speaker 5: And it's pretty much just based on two things. 540 00:24:56,920 --> 00:25:00,680 Speaker 8: We have generally faster labor force growth, we have faster 541 00:25:00,760 --> 00:25:04,480 Speaker 8: productivity growth, and over short periods of time, it's really 542 00:25:04,600 --> 00:25:07,679 Speaker 8: hard to see the effect, say the long term effect 543 00:25:07,680 --> 00:25:10,520 Speaker 8: on the long term growth of those items. But if 544 00:25:10,520 --> 00:25:12,320 Speaker 8: we were to see a huge production in our labor 545 00:25:12,320 --> 00:25:14,840 Speaker 8: force because of maybe some of the immigration policy, some 546 00:25:14,880 --> 00:25:17,520 Speaker 8: of the early retirement we've been seeing, that could create 547 00:25:17,560 --> 00:25:20,720 Speaker 8: a downside risk to long term US exceptionalism and growth. 548 00:25:21,359 --> 00:25:24,520 Speaker 8: And then, of course tariffs right holding all lost constant 549 00:25:24,560 --> 00:25:28,639 Speaker 8: tariffs reduce competitiveness, They reduce the gains from comparative advantage, 550 00:25:28,680 --> 00:25:32,040 Speaker 8: and could reduce that strong productivity the US has. On 551 00:25:32,080 --> 00:25:35,399 Speaker 8: the other end, we're also just generally more productive than 552 00:25:35,440 --> 00:25:38,520 Speaker 8: a lot of the developed world because we're less regulated, 553 00:25:38,520 --> 00:25:41,600 Speaker 8: we have more fluid labor markets, we have lower taxes. 554 00:25:41,680 --> 00:25:44,200 Speaker 8: Big Beautiful Bill will probably contribute to that as well. 555 00:25:44,960 --> 00:25:47,560 Speaker 8: We're also energy independent, so there's a lot of things 556 00:25:47,600 --> 00:25:49,520 Speaker 8: that still work in our favor, but there's a few 557 00:25:49,560 --> 00:25:52,800 Speaker 8: policy items that could whittle down some of that advantage 558 00:25:52,840 --> 00:25:54,760 Speaker 8: that we've had for several years now. 559 00:25:54,840 --> 00:25:56,639 Speaker 2: Every time I see you, I want to move to 560 00:25:56,680 --> 00:26:00,119 Speaker 2: the sumbub. Every single time I one that grill, I 561 00:26:00,119 --> 00:26:02,080 Speaker 2: want that terrace, the trees in the back. 562 00:26:02,160 --> 00:26:03,800 Speaker 5: I think she should run architectural idea. 563 00:26:03,880 --> 00:26:04,600 Speaker 2: We move into Florida. 564 00:26:04,680 --> 00:26:08,080 Speaker 5: Yeah, oh gosh, it's always beautiful. It's like perfect. 565 00:26:08,200 --> 00:26:10,240 Speaker 2: We're moving to Florida. We're moving one hundred grad Dock. 566 00:26:10,400 --> 00:26:14,360 Speaker 2: I have met Davis Freesaid. This is the Bloomberg Surveillance Podcast, 567 00:26:14,480 --> 00:26:18,399 Speaker 2: bringing you the best in markets, economics, and geopolitics. You 568 00:26:18,440 --> 00:26:21,199 Speaker 2: can watch the show live on Bloomberg TV weekday mornings 569 00:26:21,200 --> 00:26:24,159 Speaker 2: from six am to nine am Eastern. Subscribe to the 570 00:26:24,160 --> 00:26:27,679 Speaker 2: podcast on Apple, Spotify, or anywhere else you listen, and 571 00:26:27,720 --> 00:26:30,840 Speaker 2: as always, on the Bloomberg Terminal and the Bloomberg Business app.