WEBVTT - More Trump Tariffs, McDonald's Strong Report 0:00:02.759 --> 0:00:07.240 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.480 --> 0:00:13.280 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:00:13.360 --> 0:00:16.360 weekdays at ten am Easter on Apple car Play and 0:00:16.360 --> 0:00:19.400 Android Auto with the Bloomberg Business App. Listen on demand 0:00:19.400 --> 0:00:23.040 wherever you get your podcasts, or watch us live on YouTube. 0:00:23.640 --> 0:00:25.680 All right, let's go to the topic du jour, and 0:00:25.720 --> 0:00:29.360 that's about Trump tariffs and how it actually could affect growth. 0:00:29.360 --> 0:00:33.199 For example, we're looking at economists kind of reevaluating the 0:00:33.200 --> 0:00:37.199 impact of policies on the US economy and then the sequencing, Right, 0:00:37.240 --> 0:00:39.040 if you have tariffs now, but then you have tax 0:00:39.080 --> 0:00:41.520 cuts later, what that winds up looking like then for growth? 0:00:41.560 --> 0:00:45.159 And the current is Bloomberg's a global economy reporter and 0:00:45.200 --> 0:00:48.839 he joins us now from DC. What's the scuttle butt 0:00:48.960 --> 0:00:52.639 among economists when it comes to President Trump's tariffs policy. 0:00:53.680 --> 0:00:56.639 I think moving faster and expected alex is one way 0:00:56.680 --> 0:00:58.240 to think about it. I mean, to be clear, there 0:00:58.320 --> 0:01:01.720 is no you know here that the President is either 0:01:01.760 --> 0:01:04.760 imposing tariffs or that he believes in tariffs as a 0:01:04.760 --> 0:01:07.319 tool of trade policy. But I think there is a 0:01:07.360 --> 0:01:11.039 sense of a shock at the pace of the moves. 0:01:11.080 --> 0:01:13.440 Remember a couple of things. His trade team isn't actually 0:01:13.480 --> 0:01:15.840 a confirmed in office yet it converce actory Howard Lopnik 0:01:16.000 --> 0:01:19.399 and Jameson Greers trade represent that of be formally appointed 0:01:19.440 --> 0:01:22.600 to their roles there. There was an executive order on 0:01:22.720 --> 0:01:25.479 day one of the organization setting out this the remit 0:01:25.520 --> 0:01:27.800 for a study in the US trading policy with partners 0:01:27.800 --> 0:01:30.640 around the world. But already we've had threats of tariffs 0:01:30.720 --> 0:01:34.880 on Columbia, threats of tariff on Mexico and Kinada, actual 0:01:34.959 --> 0:01:38.040 tariffs implemented on China ten percent across the board. Also 0:01:38.080 --> 0:01:40.680 that's new territory, not just intermediate goods across the board. 0:01:40.959 --> 0:01:44.319 And of course now we have the expected announcement of 0:01:44.360 --> 0:01:47.960 tariffs and steel aluminium that the President took yesterday, and 0:01:48.600 --> 0:01:51.280 the reciprocal tariff idea that he's also flooded, due for 0:01:51.360 --> 0:01:54.240 detail again this week. So you know, it's easy to 0:01:54.240 --> 0:01:56.400 say this isn't a shock. He spoke about it during 0:01:56.400 --> 0:01:58.160 the campaign. But the breath and pace that I think 0:01:58.240 --> 0:01:59.280 is catching people off guard. 0:02:00.280 --> 0:02:02.600 So initially on Friday morning, when we got the report 0:02:02.600 --> 0:02:05.920 from Reuters that Trump was considering reciprocal tariffs that day, 0:02:05.920 --> 0:02:08.800 there wasn't really any indication of which country he was 0:02:08.800 --> 0:02:09.440 referring to. 0:02:09.840 --> 0:02:10.519 How are you all. 0:02:10.360 --> 0:02:13.520 Thinking about this whole concept of reciprocal tariffs and what 0:02:13.560 --> 0:02:15.920 the implications could be globally. 0:02:17.120 --> 0:02:20.280 Well, reciprocal tariff idea is going to be a very 0:02:20.320 --> 0:02:22.720 technical one. You know, we really need to see the 0:02:22.760 --> 0:02:25.320 exact details of what the President is thinking about. But 0:02:25.400 --> 0:02:29.320 the rough analysis from people following this trade expert is 0:02:29.400 --> 0:02:32.480 essentially what President is saying is if a the US 0:02:33.160 --> 0:02:35.680 puts the tariff on one country's goods of say two percent, 0:02:35.760 --> 0:02:37.680 and that country puts a tariff on US goods of 0:02:37.680 --> 0:02:39.440 say ten percent, the President wants to. 0:02:39.480 --> 0:02:41.040 Level that up to level of playing field. 0:02:41.240 --> 0:02:44.120 And I think is that this might be a replacement 0:02:44.160 --> 0:02:47.120 to the universal tariff of ten percent that he spoke about. 0:02:47.520 --> 0:02:51.640 So different different ideas there in the mix. But again 0:02:51.800 --> 0:02:53.120 that's a technical one we're going to have to wait 0:02:53.160 --> 0:02:54.919 and see in detail. Where it certainly adds to thee 0:02:55.040 --> 0:02:56.079 of more tariffs coming. 0:02:57.000 --> 0:02:59.840 So the idea that the tariffs center them cells are 0:02:59.840 --> 0:03:02.880 knows surprise, But it's the speed at which President Trump 0:03:02.919 --> 0:03:04.959 is mood but moving on tariffs that is a surprise, 0:03:05.000 --> 0:03:07.600 which then raises the question of the quote unquote positive 0:03:07.639 --> 0:03:12.600 parts of the administration like deregulation and lower corporate taxes 0:03:12.600 --> 0:03:16.000 to then offset the hit we might take from tariffs. 0:03:16.160 --> 0:03:18.680 What do you guys expect in terms of the speed there. 0:03:19.680 --> 0:03:22.280 Yeah, I mean to clear to President and his team 0:03:22.600 --> 0:03:25.240 say that this trade policy, this hole is trade policy 0:03:25.320 --> 0:03:28.520 will drive investment in the US, will bring manufacturing back home, 0:03:28.760 --> 0:03:32.079 It will raise revenue for the government, and it will 0:03:32.080 --> 0:03:33.240 balance trading books. 0:03:32.960 --> 0:03:33.760 With the rest of the world. 0:03:33.880 --> 0:03:37.040 Along with, as you say, this deregulation policy, and you know, 0:03:37.080 --> 0:03:39.080 making it easier to build things, make it easier to 0:03:39.120 --> 0:03:43.440 extract resources and energy from the ground, getting infrastructure projects moving, 0:03:44.400 --> 0:03:47.640 and you know, it's kind of a pro business deregularty 0:03:47.680 --> 0:03:50.480 attitude writ large. So there is a case that the 0:03:50.520 --> 0:03:54.040 new administration is will at least animal spirits. Economists haven't 0:03:54.120 --> 0:03:58.160 yet down graded their forecast, right anything like that. You 0:03:58.160 --> 0:03:59.920 know that I'm f single out to you experts perform 0:04:00.040 --> 0:04:02.800 once back in January. But you know, nonetheless, there's also 0:04:02.880 --> 0:04:06.160 feeling that, wait a minute, right now, we seem. 0:04:05.920 --> 0:04:08.000 To be at the very least pain stage of this. 0:04:08.120 --> 0:04:10.960 We're seeing those spending cuts this federal level of staff 0:04:10.960 --> 0:04:14.360 lost staff, job cuts at federal level, the terriffs. Of course, 0:04:15.080 --> 0:04:17.160 the sweeteners if you have too wrong in the economy, 0:04:17.480 --> 0:04:21.120 that's the deregulation. Just mentioned that the tax cuts that, 0:04:21.160 --> 0:04:24.160 of course haven't yet been agreed by Congress. So, you know, 0:04:24.360 --> 0:04:28.599 supporters saying, look, this is a big program here, ultimately 0:04:28.720 --> 0:04:31.280 will lead to a stronger and faster going economy, but 0:04:31.320 --> 0:04:33.680 a lot of skeptics are saying that there's potential for 0:04:33.720 --> 0:04:34.760 significant disruption and. 0:04:34.839 --> 0:04:35.760 Pain along the way. 0:04:36.600 --> 0:04:41.000 Very early saying yet, but certainly plenty of skepticism, unspecoid 0:04:41.040 --> 0:04:42.000 support on both sides of this. 0:04:42.360 --> 0:04:44.680 So there's a lot of conversation about what tariffs can 0:04:44.760 --> 0:04:47.400 mean for different countries across the globe. But if we 0:04:47.480 --> 0:04:50.320 were to bring it back to the consumer, how exactly 0:04:50.360 --> 0:04:53.000 would that impact the consumer. Would we see countries just 0:04:53.120 --> 0:04:57.400 passing off tariff costs onto consumers? What does that look like? 0:04:58.240 --> 0:05:00.080 Yeah, it depends on the level of the tier and 0:05:00.200 --> 0:05:02.120 depends on the type of goods. 0:05:02.400 --> 0:05:02.560 Right. 0:05:02.640 --> 0:05:05.279 So, for example, the last trade war between President Trump's 0:05:05.279 --> 0:05:08.480 administration in China was mostly intermediate goods that components and 0:05:08.520 --> 0:05:12.200 materials that factories are buying off of China, you know, 0:05:12.320 --> 0:05:14.640 ultimately didn't have that much of an impact on the 0:05:14.680 --> 0:05:17.000 mainStreet inflation this time around the president that's put ten 0:05:17.040 --> 0:05:19.080 percent tariffs and all the goods coming out of China 0:05:19.320 --> 0:05:21.719 and coming into the US, so that's like consumer goods, 0:05:22.000 --> 0:05:26.280 typical household baskets. Similarly, from Mexico, a big portion of 0:05:26.400 --> 0:05:29.880 exports from Mexico to the US was on food, food 0:05:30.000 --> 0:05:33.040 stuff like fruit and veg and an apparel. So if 0:05:33.080 --> 0:05:35.800 you start putting tariffs on those kind of products, then 0:05:35.839 --> 0:05:37.640 the question becomes who's going to absorb it. Is the 0:05:37.720 --> 0:05:41.200 seller going to cut their prices and absorb that tariff 0:05:41.640 --> 0:05:43.679 or will the buy Will the buyer absorbed the tariff 0:05:43.720 --> 0:05:45.720 in the US, and or will it be passed along 0:05:45.760 --> 0:05:48.840 to consumers? And that's where Commas saying, hang on, some 0:05:49.000 --> 0:05:51.120 of this will surely have to plats on the consumers, 0:05:51.320 --> 0:05:53.640 and that's why they say in the first round, effect 0:05:53.640 --> 0:05:54.840 at least will be inflationary. 0:05:55.120 --> 0:05:56.640 Well, and that's the interesting part. 0:05:56.720 --> 0:05:58.479 I was talking about this a little earlier with Isabelle 0:05:58.520 --> 0:06:01.640 and Nora about commodities, is but commodities are efficient markets, 0:06:01.640 --> 0:06:03.679 so they'll just rerate, So the price of the commodity 0:06:03.720 --> 0:06:05.880 will rebrate to account for the tax. In order to 0:06:06.200 --> 0:06:09.120 have the consumer or the company, whomever's buying it want 0:06:09.160 --> 0:06:11.280 to buy it. If I'm buying a coat, that's not 0:06:11.400 --> 0:06:13.880 the same thing, Like that's not an efficient market. I'm 0:06:13.920 --> 0:06:16.279 just not going to buy the coat. And so there's 0:06:16.320 --> 0:06:18.520 different distinctions based on what's actually. 0:06:18.279 --> 0:06:20.679 Being taxed, very different distinctions. 0:06:20.680 --> 0:06:22.680 And you hear some FED officials make the point that 0:06:22.960 --> 0:06:24.880 even if FED officials have different views, like some make 0:06:24.880 --> 0:06:26.960 the point it's a one off, we kind of look 0:06:27.080 --> 0:06:29.479 through that impact. Others saying, wait a minute, this could 0:06:29.480 --> 0:06:32.080 be the kind of start of setting off a longer 0:06:32.160 --> 0:06:35.560 term consumer inflation Expectations that University of Michigan surveyed the 0:06:35.600 --> 0:06:37.520 end of last week show that consumers. 0:06:37.040 --> 0:06:40.000 Are a bit worried about inflation now, especially due to tires. 0:06:40.400 --> 0:06:42.400 So it's you know, it's not a very clear cut 0:06:42.440 --> 0:06:45.880 impact on this and for either side of the argument. 0:06:45.960 --> 0:06:48.080 But remember again there's also a bigger picture of view 0:06:48.400 --> 0:06:51.080 that you have those people who argue this will drive 0:06:51.200 --> 0:06:53.880 investment and employment, but there are also those who say 0:06:53.960 --> 0:06:57.360 will hurt consumer confidence and business confidence because they don't 0:06:57.360 --> 0:06:59.120 have certainty, don't know how to invest. So there'll be 0:06:59.160 --> 0:07:01.480 a lot of confusion in the meantime on tell this 0:07:01.560 --> 0:07:02.800 trade policy to settle down. 0:07:03.320 --> 0:07:06.280 So how are other global leaders responding to this? I know, 0:07:06.440 --> 0:07:08.040 when I was watching the Super Bowl last night, I 0:07:08.080 --> 0:07:11.800 actually saw an ad for from Canada about tariffs, and 0:07:12.280 --> 0:07:16.520 I missed that. Really it was super interesting a cowboy hating. 0:07:16.800 --> 0:07:17.720 No it was not. 0:07:17.920 --> 0:07:20.800 There was no stash flying around, there was no mustaches, 0:07:20.880 --> 0:07:23.200 but it was a really interesting ad. And I'm just curious. 0:07:23.280 --> 0:07:25.600 What are you all seeing in terms of the response 0:07:25.680 --> 0:07:27.680 from other world leaders. 0:07:28.960 --> 0:07:32.440 Well, you know, again early days you get different response 0:07:32.480 --> 0:07:34.960 from different capitals. But broadly speaking, when it comes to 0:07:35.080 --> 0:07:37.440 merchandise goods trade, a lot of the messaging has been 0:07:37.800 --> 0:07:38.880 you know, what do you want us to buy? 0:07:38.920 --> 0:07:39.800 We're willing to step up. 0:07:39.880 --> 0:07:43.480 Mexico stepped up with putting troops in the border for 0:07:43.600 --> 0:07:47.000 that Fentanel and immigration issue, as in Canada, but Canada 0:07:47.040 --> 0:07:48.880 has also made clear that you know, they're in the 0:07:48.920 --> 0:07:51.800 market to buy US goods. The European Union has said 0:07:52.120 --> 0:07:54.200 that they're willing to step up and buy maybe more 0:07:54.520 --> 0:07:57.560 US gas or other products you have. Japan here last 0:07:57.600 --> 0:08:00.320 week prominent s Orshiba talking about one trillion worth an 0:08:00.360 --> 0:08:03.080 investment in the US. And this goes around. If all 0:08:03.080 --> 0:08:04.520 of these world leaders make the point. They're willing to 0:08:04.600 --> 0:08:07.640 invest in buy goods, but they're also making it clear 0:08:07.720 --> 0:08:09.840 that they will retaliate in kind as well if the 0:08:09.960 --> 0:08:13.520 US pushes this faith policy too far. China has already 0:08:13.840 --> 0:08:17.000 retaliate literally today, those tariffs from China have gone into 0:08:17.120 --> 0:08:20.080 fact on agricultural goods, agricultural machinery coming out of the 0:08:20.160 --> 0:08:22.960 US into into China. And of course I've got some 0:08:23.000 --> 0:08:25.600 anti trust measures going on against some US companies as well. 0:08:26.400 --> 0:08:29.400 You have a playbook ready to retaliate if they want to. 0:08:29.960 --> 0:08:32.360 Canada head threatend to Italian as in Mexico. So you know, 0:08:32.440 --> 0:08:34.040 there's a there's a kind of a play nice we'll 0:08:34.160 --> 0:08:35.800 we'll come and see what can we do deal all this, 0:08:35.920 --> 0:08:37.600 but if that does mark out, they're willing to respond 0:08:37.640 --> 0:08:37.920 as well. 0:08:38.120 --> 0:08:40.000 All right, and I really appreciate always the best and 0:08:40.080 --> 0:08:43.320 the current Bloomberg Global Economy reporter joining us on Trump 0:08:43.360 --> 0:08:44.960 tariffs and what that does to growth. 0:08:46.880 --> 0:08:50.400 You were listening to the Bloomberg Intelligence Podcast. Catch the 0:08:50.480 --> 0:08:53.840 program live weekdays at ten am Eastern on Apple car 0:08:53.920 --> 0:08:56.680 Play and the Android Auto with the Bloomberg Business app. 0:08:56.800 --> 0:08:59.520 You can also listen live on Amazon Alexa from our 0:08:59.559 --> 0:09:03.760 flagship New York station just say Alexa played Bloomberg eleven thirty. 0:09:04.600 --> 0:09:06.439 All right, I wanted to get a broader take on 0:09:06.520 --> 0:09:11.319 the Trump administration and some deeper changes at taking place nationally, 0:09:11.559 --> 0:09:15.400 particularly when it comes to diversity, equity and inclusion. Mark Morioll, 0:09:15.559 --> 0:09:18.520 CEO of a National Urban League, joins us now on 0:09:18.640 --> 0:09:20.800 this and side note. Mark was mayor of New Orleans 0:09:20.840 --> 0:09:23.800 from nineteen ninety four to two thousand and two. Mark, 0:09:23.840 --> 0:09:24.960 did you watch the Super Bowl? 0:09:25.000 --> 0:09:25.480 Were you there? 0:09:26.280 --> 0:09:26.480 Hey? 0:09:26.600 --> 0:09:30.760 I was there, and I was an Eagles fan because 0:09:30.800 --> 0:09:33.240 I lived in Philadelphia during my days in college at 0:09:33.480 --> 0:09:33.880 U Penn. 0:09:34.679 --> 0:09:38.199 And I tell you what, I didn't expect that outcome. 0:09:38.280 --> 0:09:40.280 I felt Philadelphia would win, but I thought it was 0:09:40.320 --> 0:09:42.400 going to be a competitive game all the way down 0:09:42.440 --> 0:09:45.280 to the end. It wasn't really a competitive game. The 0:09:45.360 --> 0:09:47.120 Eagles really really dominate. 0:09:47.280 --> 0:09:48.480 Yeah, they took it. 0:09:49.240 --> 0:09:49.960 It was surprising. 0:09:51.000 --> 0:09:52.880 It was from somebody who like literally just started to 0:09:52.960 --> 0:09:55.120 understand football yesterday. I'm actually not kidding. 0:09:55.200 --> 0:09:57.080 I was like, what is this Jeeves? 0:09:57.200 --> 0:09:57.360 Huh? 0:09:57.520 --> 0:10:01.000 What what is that team? Anyway, side, I'm glad you went. 0:10:01.040 --> 0:10:03.240 I'm glad you got to see it. Either way, it 0:10:03.360 --> 0:10:04.599 was always a fun experience. 0:10:04.920 --> 0:10:07.000 To watch. Mark. 0:10:07.200 --> 0:10:09.640 You are CEO of the National Urban League. It's the 0:10:09.960 --> 0:10:15.000 largest historical civil rights and urban advocacy organization in the country. 0:10:15.320 --> 0:10:17.760 What are you guys doing right now to combat sort 0:10:17.760 --> 0:10:21.120 of anti DEI rhetoric and policy from DC. 0:10:22.400 --> 0:10:26.760 So, we are working very hard to get institutions, leaders, 0:10:27.160 --> 0:10:31.400 corporations to reaffirm their commitment. Jamie Diamond and JP Morgan 0:10:31.480 --> 0:10:34.800 Chase have done so. Roger Bigodell in the National Football 0:10:34.880 --> 0:10:37.959 League have done so. Companies like Delta and Target, and 0:10:38.000 --> 0:10:42.080 there's an entire list. Those that have reaffirmed their commitment 0:10:42.240 --> 0:10:44.840 may not have gotten as much media attention as those 0:10:45.720 --> 0:10:49.120 that have walked away. I'm dismayed by those who say 0:10:49.640 --> 0:10:53.439 they have walked away. What every company in America should 0:10:53.480 --> 0:10:57.000 be doing is living up to the meaning of the 0:10:57.040 --> 0:11:01.640 Civil Rights Act of nineteen sixty four prevents non discrimination, 0:11:03.040 --> 0:11:07.400 or rather is a non discrimination law which prevents discrimination 0:11:07.520 --> 0:11:08.640 based on race, creed. 0:11:08.520 --> 0:11:10.000 Color, religion, and national origin. 0:11:10.640 --> 0:11:13.400 Many of those who are promoting from behind the scenes 0:11:14.240 --> 0:11:17.640 the antide and I movement are trying to roll back 0:11:17.760 --> 0:11:21.920 progress this nation is made over the last seventy years. Women, 0:11:22.160 --> 0:11:28.920 African Americans, latinos Asians, indigenous Americans, disabled Americans, LGBTQ Americans 0:11:29.240 --> 0:11:32.400 have had a chance over the last seventy years to 0:11:32.559 --> 0:11:37.439 participate in the mainstream of American life, in jobs and 0:11:37.600 --> 0:11:42.520 business opportunities, around corporate board tables, in elected office. This 0:11:42.920 --> 0:11:47.080 is a full scale attack on all of that progress 0:11:47.960 --> 0:11:54.680 based on a false and misleading narrative that somehow diversity 0:11:54.800 --> 0:11:59.920 equity and inclusion promotes quotas and undermines narritive. I take 0:12:00.120 --> 0:12:04.800 great exception to that, because what diversity equity inclusion says 0:12:05.000 --> 0:12:09.199 is give everyone with merit a chance, not just some, 0:12:10.400 --> 0:12:15.199 not just men, not just white men. Give everybody, including 0:12:16.120 --> 0:12:20.040 a chance for the opportunities that America represents. 0:12:20.440 --> 0:12:22.280 That's what this is all about. 0:12:22.400 --> 0:12:25.480 And so we are going to continue to work and 0:12:25.640 --> 0:12:29.920 fight and advocate for continuation of this country's commitment to 0:12:29.960 --> 0:12:30.840 equal opportunity. 0:12:31.360 --> 0:12:33.480 Well, market sounds like last week was a really big 0:12:33.600 --> 0:12:35.680 week for you. You were inducted into the Nola Wall 0:12:35.760 --> 0:12:38.880 of Walk of Fame on Thursday, and you received a 0:12:38.960 --> 0:12:42.280 Humanitarian Award the first time a non sports person was 0:12:42.360 --> 0:12:45.920 chosen for this award at the Super Bowl party on Saturday. 0:12:46.280 --> 0:12:48.199 So very big week for you. But back on the 0:12:48.360 --> 0:12:52.000 notion of companies walking back their commitments. Do you think 0:12:52.000 --> 0:12:53.959 this is really just a sigh of relief for companies 0:12:54.000 --> 0:12:56.880 that weren't necessarily genuine about these commitments, or do you 0:12:56.960 --> 0:13:00.199 think maybe corporations just want to have the freedom to 0:13:00.240 --> 0:13:03.240 make their own decisions without having to necessarily report and 0:13:03.280 --> 0:13:04.600 be held accountable in those ways. 0:13:05.960 --> 0:13:10.160 Well, reporting being accountable is what the law requires, It's 0:13:10.200 --> 0:13:15.360 always required that. That's our system of laws, our systems 0:13:15.400 --> 0:13:19.680 of the constitution. But I think some companies are frankly 0:13:19.760 --> 0:13:23.559 being intimidated. There's a behind the scenes ever to intimidate, 0:13:24.360 --> 0:13:28.560 to deveain, to threaten companies. I heard one story where 0:13:28.559 --> 0:13:30.760 a company was told that if they did not walk 0:13:30.880 --> 0:13:34.679 back their Dee and I, this group would launch a 0:13:35.360 --> 0:13:39.800 social media campaign and show some lewde and lascivious videos 0:13:39.840 --> 0:13:42.079 that may have taken place at an event that the 0:13:42.160 --> 0:13:43.280 company co sponsored. 0:13:43.880 --> 0:13:45.079 This is what we're faced. 0:13:45.080 --> 0:13:49.840 We're faced with a smear campaign, a campaign of attacks, 0:13:50.160 --> 0:13:53.800 a campaign of division, and yes, it is a campaign 0:13:54.600 --> 0:13:59.320 of hate. Major corporations in America operate under rubric of law. 0:14:00.480 --> 0:14:04.120 They follow that law. That law makes things fair and 0:14:04.320 --> 0:14:08.400 equitable for everyone. All diversity, equity, inclusion is is a 0:14:08.520 --> 0:14:11.280 program to implement non discrimination laws. 0:14:12.040 --> 0:14:17.240 That's what it represents, and this nation cannot walk back. 0:14:17.360 --> 0:14:19.600 And we are going to battle and fight and work 0:14:20.400 --> 0:14:23.080 in the courts and in every way, shape or form 0:14:23.400 --> 0:14:27.320 possible to ensure that this nation remains committed to equal opportunity. 0:14:27.600 --> 0:14:29.040 Hey, Mark, it's really good to catch up with you. 0:14:29.200 --> 0:14:32.600 Congratulations on the host of the awards. Congratulations on the 0:14:32.800 --> 0:14:35.320 Eagles winning as well. Thank you so much for your 0:14:35.440 --> 0:14:38.400 time today. Mark Mariral joining us their CEO of the 0:14:38.520 --> 0:14:40.200 National Urban League. 0:14:44.000 --> 0:14:47.760 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:14:47.880 --> 0:14:51.240 weekdays at ten am Eastern Apple car Play and Android 0:14:51.280 --> 0:14:54.200 Auto with the Bloomberg Business App. Listen on demand wherever 0:14:54.320 --> 0:14:57.520 you get your podcasts, or watch us live on YouTube. 0:14:58.280 --> 0:15:00.600 Today we are joined by Michael Hale, and he is 0:15:00.600 --> 0:15:04.240 Bloomberg Intelligence senior restaurant and food service analysts here to 0:15:04.360 --> 0:15:07.960 talk about McDonald's earnings. So we have McDonald's sales that 0:15:08.080 --> 0:15:12.480 improved on stronger international results. What is your broad read 0:15:12.520 --> 0:15:13.240 on this, Michael? 0:15:14.720 --> 0:15:17.520 You know, the most important piece of the report really 0:15:17.680 --> 0:15:21.720 is the US recovery post E Coli, and we got 0:15:21.760 --> 0:15:24.360 some good news on that front. So traffic was actually 0:15:24.520 --> 0:15:27.320 positive in December, so I think that was much better 0:15:27.360 --> 0:15:31.360 than anyone had expected. They cited kind of a choppy 0:15:31.520 --> 0:15:36.800 January here, but the only region is still impacted by 0:15:36.920 --> 0:15:39.200 E COLI seems to be the Rocky Mountain region where 0:15:39.200 --> 0:15:42.080 the outbreak occurred. And they expect a full US recovery 0:15:42.160 --> 0:15:44.080 by the beginning of the second quarter. 0:15:43.880 --> 0:15:44.600 Which is good news. 0:15:45.280 --> 0:15:47.640 What about the rest of the world versus the US, 0:15:47.880 --> 0:15:49.880 It was the rest of the world that really performed 0:15:49.920 --> 0:15:52.520 well yeah, yeah. 0:15:52.480 --> 0:15:55.600 And a big part of that was just lapping like 0:15:55.760 --> 0:15:59.160 pretty weak year ago results, right, so we wrapped the 0:15:59.280 --> 0:16:01.840 start of the of the Israel Hamas war, and so 0:16:02.080 --> 0:16:06.359 the Middle East was stronger. Countries with large Muslim populations 0:16:06.400 --> 0:16:09.600 were also stronger. And then also China lapped a very 0:16:09.600 --> 0:16:13.120 weak result last year and management cited some stabilization in 0:16:13.280 --> 0:16:17.440 that market, which is encouraging for them. So the easy 0:16:17.560 --> 0:16:22.400 comps was what really fueled international sales. You know, we're 0:16:22.480 --> 0:16:27.479 kind of more bullish on the US moving forward than international, 0:16:27.800 --> 0:16:30.200 you know, because outside of the Middle East, in China, 0:16:30.320 --> 0:16:32.880 Europe we think is going to continue to kind of 0:16:32.960 --> 0:16:36.880 be an issue for them. The Arizona is experienced it's 0:16:36.880 --> 0:16:41.080 seeing much higher inflation than the US, and that's really 0:16:41.200 --> 0:16:44.880 crimping low income and family spending on the continent. 0:16:45.240 --> 0:16:46.640 Are people still buying the Big Mac? 0:16:48.760 --> 0:16:51.400 They don't break out Big Mac sales, but they cited 0:16:51.480 --> 0:16:54.360 pretty strong results out of the Chicken Big Mac, which 0:16:55.080 --> 0:16:57.600 I was kind of surprised about. You know, my associate 0:16:57.680 --> 0:17:01.440 tried it, he was not a big fan. But but yeah, 0:17:01.520 --> 0:17:03.960 they cited you know, pretty strong results out of the 0:17:04.040 --> 0:17:06.399 Chicken Big Mac in the United States and other markets. 0:17:06.800 --> 0:17:09.879 I think France was who they called out specifically and 0:17:10.760 --> 0:17:12.720 to the point where they're going to continue to to 0:17:13.240 --> 0:17:15.840 you know, bring it back as a limited time offare 0:17:15.840 --> 0:17:16.399 in the future. 0:17:16.720 --> 0:17:19.520 So I was actually talking to an IB user, a 0:17:19.560 --> 0:17:25.240 Bloomberg user about this. Why are McDonald's franchises elsewhere like 0:17:25.320 --> 0:17:27.640 a rest of world so much better than in the US, 0:17:27.760 --> 0:17:30.520 and that like you can get like super good food 0:17:30.560 --> 0:17:32.240 that doesn't take like fast food. 0:17:32.400 --> 0:17:32.920 Why is that? 0:17:34.160 --> 0:17:36.480 Yeah, Jonathan Farrowe asked me the same thing this morning. 0:17:36.800 --> 0:17:38.920 He said he wants them all to be like the 0:17:39.600 --> 0:17:42.480 you know McDonald's in Italy, you know, And the answer 0:17:42.520 --> 0:17:45.200 I had there was just more discerning tastes. 0:17:45.040 --> 0:17:49.840 Right, that might be it, no, but really, like is 0:17:49.880 --> 0:17:52.119 it I mean, does it affect margins, Like, what are 0:17:52.119 --> 0:17:54.120 the margins like in the US versus rest of the world. 0:17:55.320 --> 0:17:58.000 We don't we don't have that information, you know what 0:17:58.080 --> 0:18:03.680 I mean. It's a franchise business, right, So you know 0:18:04.000 --> 0:18:06.399 what I mean, So we don't have a ton of 0:18:06.480 --> 0:18:09.680 color on all the different franchise markets and what kind 0:18:09.720 --> 0:18:14.640 of margins they pull in. You know, the US generally 0:18:14.800 --> 0:18:20.119 is a lower margin for the franchise business, just because 0:18:20.119 --> 0:18:23.160 they have a lot more franchisees and need a lot 0:18:23.240 --> 0:18:30.520 more oversight. The international franchise business tends to generate wider margins. 0:18:30.960 --> 0:18:32.800 So I always used to think about McDonald's is a 0:18:32.880 --> 0:18:36.720 really cheap place, a discount fast food place, but prices 0:18:36.760 --> 0:18:39.600 are getting higher. Are we still seeing demand from lower 0:18:39.680 --> 0:18:41.320 income consumers for the brand? 0:18:42.920 --> 0:18:45.840 You know, it continues to be the weak spot at 0:18:45.960 --> 0:18:48.560 McDonald's and for anyone that has a lot of exposure 0:18:48.560 --> 0:18:51.399 to low income consumers. So the entire QSR space, right, 0:18:51.480 --> 0:18:55.320 Jack in the Box, Wendy's, Burger King, you know, a 0:18:55.359 --> 0:18:58.080 lot a lot of chains, you know struggled last year 0:18:58.119 --> 0:19:01.359 because of their inability to draw low income consumers. You know, 0:19:01.760 --> 0:19:06.520 they're impacted most by inflation, right, We've had four plus 0:19:06.640 --> 0:19:11.400 years of restaurant price hikes and higher costs across the board, right, 0:19:11.480 --> 0:19:15.479 and so you know, chains that are exposed to low 0:19:15.520 --> 0:19:17.920 income consumers are going to continue to press on value 0:19:17.960 --> 0:19:20.840 to try to bring them into the fold. You know, 0:19:21.240 --> 0:19:24.960 it seemed like it didn't seem like restaurants and sales 0:19:25.160 --> 0:19:27.520 did improve for a quick service in the fourth quarter, 0:19:27.640 --> 0:19:29.359 and we think a big part of that is just 0:19:29.440 --> 0:19:31.800 a re establishing of their value proposition. 0:19:31.960 --> 0:19:32.080 Right. 0:19:32.440 --> 0:19:35.000 McDonald's early last year got a lot of shade about 0:19:35.040 --> 0:19:38.440 the eighteen dollars big mac meal in Connecticut, right, and 0:19:38.560 --> 0:19:41.760 so they decided to push hard on value, and prior 0:19:41.840 --> 0:19:44.320 to the E Coli outbreak, you know, October had some 0:19:44.440 --> 0:19:47.240 really good results. They were drawing customers in with that 0:19:47.359 --> 0:19:50.440 five dollars meal deal, and traffic was positive for the 0:19:50.520 --> 0:19:55.240 first time during the year. So value pushing on value 0:19:55.280 --> 0:19:58.879 has been successful for McDonald's. That's not good for their 0:19:58.960 --> 0:20:02.440 competitors because Donald's has the most scale, right, But we 0:20:02.560 --> 0:20:04.960 think this is going to continue throughout twenty twenty five 0:20:05.080 --> 0:20:06.280 in the quick service industry. 0:20:06.440 --> 0:20:08.360 So just to confirm you're seeing, there was a meal 0:20:08.400 --> 0:20:10.720 that came up to eighteen dollars. You totally missed this. 0:20:11.000 --> 0:20:11.960 She totally missed this one. 0:20:13.040 --> 0:20:18.320 Yeah, yeah, it was one franchisee in Connecticut. Of course 0:20:18.359 --> 0:20:25.040 it was Connecticut, right, no comment, no, fair enough, fair enough. 0:20:25.400 --> 0:20:28.000 But he was he was pushing back because he, you know, 0:20:28.160 --> 0:20:30.440 he was dealing with a lot of inflation and he 0:20:30.640 --> 0:20:33.320