WEBVTT - More Pain To Come For Grocers, As Amazon's Push Grows: Mushkin 0:00:05.840 --> 0:00:08.760 Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 0:00:08.800 --> 0:00:11.559 Along with my co host Lisa Abramowitz. Each day we 0:00:11.680 --> 0:00:15.160 bring you the most important, noteworthy, and useful interviews for 0:00:15.240 --> 0:00:17.880 you and your money, whether you're at the grocery store 0:00:18.000 --> 0:00:20.759 or the trading floor. Find the Bloomberg P M L 0:00:20.880 --> 0:00:34.239 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. The 0:00:34.360 --> 0:00:37.040 fight over your dinner table. No, it's not between you 0:00:37.159 --> 0:00:40.239 and perhaps your children or your other relatives. It's the 0:00:40.280 --> 0:00:43.360 fight between grocery stores to deliver the food that would 0:00:43.360 --> 0:00:45.760 actually end up on your table. Here to tell us 0:00:45.800 --> 0:00:48.760 more about the grocery store wars is Scott Mushkin's senior 0:00:48.840 --> 0:00:53.000 retail and staples analysts for Wolf Research. Scott, always a 0:00:53.080 --> 0:00:58.000 pleasure give us your sort of thoughts on the cost 0:00:58.200 --> 0:01:02.400 that is being borne by companies like Amazon to actually 0:01:02.520 --> 0:01:05.679 get the food and products to the table of their 0:01:05.800 --> 0:01:09.280 consumers and customers. Because that's not cheap. They say, it's 0:01:09.400 --> 0:01:13.360 free if you're a prime customer, but somehow, somewhere someone's 0:01:13.400 --> 0:01:16.040 paying for it. Yeah, it's great point, Pam, and thanks 0:01:16.080 --> 0:01:18.720 again for having me on. Highly says so, yeah, I mean, 0:01:18.720 --> 0:01:21.520 I think the challenge with consumables, and particularly those every 0:01:21.560 --> 0:01:25.800 day reordable items like go with toothbrush or toothpaste, high 0:01:25.800 --> 0:01:29.720 and deodorant. I we as consumers would like them delivered 0:01:29.720 --> 0:01:32.360 to our our house. Our our research shows the challenges. 0:01:32.440 --> 0:01:35.399 It's it's not that economical to get us to get 0:01:35.440 --> 0:01:37.680 us those products. And so I think there's this push 0:01:37.680 --> 0:01:40.440 and pull and trying to understand how the economics will work, 0:01:41.160 --> 0:01:43.360 what the model will be like as we go forward 0:01:43.400 --> 0:01:46.840 over the next five to ten years. UM and Amazon's 0:01:47.000 --> 0:01:50.280 you know, obviously bought Whole Foods. It's in what we 0:01:50.320 --> 0:01:53.120 consider the driver's seat of trying to put an omni 0:01:53.160 --> 0:01:56.560 channel spin on consumables. UM and we had just the 0:01:56.560 --> 0:01:58.560 head the announcement at of Walmart it's gonna be delivering 0:01:58.600 --> 0:02:01.000 from a lot of its stores. So the grocery wars 0:02:01.040 --> 0:02:05.040 are definitely taking place. We think they favor Amazon significantly, 0:02:05.560 --> 0:02:08.000 UM as they don't have and they haven't built out 0:02:08.040 --> 0:02:10.320 their assets there in the process of doing that, And 0:02:10.360 --> 0:02:13.080 for other bricks and mortar companies, it's it's tough. I mean, 0:02:13.080 --> 0:02:15.880 they're having to follow Amazon, who's now setting the strategic 0:02:16.000 --> 0:02:18.919 vision for the for the industry. All right, So I'm 0:02:18.960 --> 0:02:21.640 just wondering. So Amazon might have the upper hand, but 0:02:21.720 --> 0:02:25.000 they've tried to get into this industry before and failed, 0:02:25.160 --> 0:02:28.880 and this is notoriously hard hard nut to crack as 0:02:28.880 --> 0:02:34.000 far as food delivery and replacing brick and mortar. Do 0:02:34.040 --> 0:02:37.120 you think that the stock reaction which has been fierce 0:02:37.200 --> 0:02:40.640 with with grocers like Kroger and bankruptcy is of an 0:02:40.639 --> 0:02:43.920 increasing number of such companies. Do you think it's overdone 0:02:43.919 --> 0:02:46.880 at this point? You know, Actually I don't, uh, And 0:02:46.919 --> 0:02:49.320 I think the challenges we go. We look to China, 0:02:49.360 --> 0:02:51.079 we look to China and what Ali Bob is doing 0:02:51.080 --> 0:02:55.480 with Hima, and we think the purchase of Amazon of 0:02:55.560 --> 0:02:59.640 Whole Foods is a watershed event where what we're going 0:02:59.720 --> 0:03:01.799 to see, I think is a blend of an omni 0:03:01.880 --> 0:03:05.000 channel blend developed um And it's a darn shame because 0:03:05.040 --> 0:03:07.920 the stores had a huge home field advantage We've talked 0:03:07.919 --> 0:03:12.720 about before where people still buy almost all their fresh 0:03:12.880 --> 0:03:16.079 at the store um, and what we're seeing is that 0:03:16.200 --> 0:03:20.280 home field advantage being surrendered to the vision of Amazon. 0:03:20.360 --> 0:03:21.680 And I think it's going to be a like it's 0:03:21.720 --> 0:03:24.079 an omni channel blend and will incorporate some bricks and 0:03:24.120 --> 0:03:27.919 mortar stores as you've seen them by by Whole Foods UM. 0:03:28.000 --> 0:03:29.480 But so I think they you know, they have some 0:03:29.520 --> 0:03:31.880 of their best people working on this. We think they're 0:03:31.880 --> 0:03:35.240 going to combine Amazon Now, Amazon Fresh, and Whole Foods 0:03:35.240 --> 0:03:38.560 into one offering. UM. But the the idea is to 0:03:39.320 --> 0:03:42.600 really bring omni channel, the omni channel experience and incorporate 0:03:42.720 --> 0:03:45.920 stores uh into into that offering to make it a 0:03:45.960 --> 0:03:48.880 little bit more economical. Alright, So so far this year, 0:03:48.960 --> 0:03:52.120 Kroger and Walmart have lost more than thirty billion dollars 0:03:52.120 --> 0:03:56.280 in market value combined. Other grocers have also seen their 0:03:56.320 --> 0:04:00.880 shares plunge. Is there a specific company you're looking at 0:04:01.360 --> 0:04:06.040 that has more pain to go? So we've been pretty 0:04:06.080 --> 0:04:08.080 bullish on the U S economy and what's going on 0:04:08.160 --> 0:04:11.440 with the tax the tax cuts. We think nominal growth 0:04:11.440 --> 0:04:13.880 in the US has got to pick up UM. But 0:04:14.000 --> 0:04:16.960 that's really a short term call, short term relief for 0:04:16.960 --> 0:04:21.599 an industry that's under extraordinary pain and change. UM. So 0:04:21.680 --> 0:04:24.880 our long term vision of staples retailing, as we call 0:04:24.960 --> 0:04:27.560 it is is someone is very negative. And the reason 0:04:27.640 --> 0:04:29.680 is we think Amazon is gonna grab twenty share, up 0:04:29.680 --> 0:04:33.080 from less than three percent share right now, and that 0:04:33.200 --> 0:04:35.159 twenty share has got to come from someone well but 0:04:35.279 --> 0:04:39.200 but but very negative meaning how many bankruptcy is or 0:04:39.240 --> 0:04:43.240 how much devastation with respect to specific grocers. Well, we've 0:04:43.240 --> 0:04:45.960 already seen some announcements. We had wind Dixie which was 0:04:46.120 --> 0:04:48.680 a private company but had public debt. They did they're 0:04:48.720 --> 0:04:53.159 doing a pre pack UH bankruptcy tops up in UH 0:04:53.160 --> 0:04:55.400 in the northern part of the US. I think it's 0:04:55.400 --> 0:04:57.640 gonna be, you know, part of what we see. One 0:04:57.680 --> 0:05:00.480 of the things that we're we're we've been thinking about 0:05:00.520 --> 0:05:03.560 a lot is contents. You know, who has content that 0:05:03.600 --> 0:05:06.919 people may pay for another majority of one subscription to 0:05:07.040 --> 0:05:09.920 Primes you're paying a month and when that's going to 0:05:10.000 --> 0:05:11.200 get you as a lot, it's going to get you 0:05:11.200 --> 0:05:14.960 access to Whole Food now Fresh obviously all the video 0:05:15.000 --> 0:05:18.400 content that Amazon has. So what other retailers are set 0:05:18.480 --> 0:05:21.720 up with content specific to them. We actually think there's 0:05:21.720 --> 0:05:23.920 actually favors they're not public companies, but we think its 0:05:23.960 --> 0:05:27.839 favors some of the smaller private supermarkets. UH. Someone like 0:05:27.960 --> 0:05:31.160 h eb Down in Texas, very good grosser, a very 0:05:31.160 --> 0:05:35.240 good merchant and probably able to charge for delivery. The 0:05:35.240 --> 0:05:38.760 other company that we like is Sprouts. UH. Sprouts Farmers 0:05:38.760 --> 0:05:44.480 Market square footstore right and called the best pure foods 0:05:44.560 --> 0:05:48.919 pure play, um Natural Organic Fresh. So we like we 0:05:49.000 --> 0:05:52.520 like Sprouts. All the other companies public, and some of 0:05:52.520 --> 0:05:55.159 them are private by private equity. You know, we get 0:05:55.160 --> 0:05:57.320 really nervous because a lot of share is going to 0:05:57.400 --> 0:06:01.480 have to move in our opinion, and when that share moves, 0:06:01.600 --> 0:06:03.800 it's a lot of pressure. The other thing is it's 0:06:03.800 --> 0:06:07.160 just costing more to do business. So you know, Walmart, 0:06:07.520 --> 0:06:09.960 they're gonna have two thousand stores that have clicking, you know, 0:06:10.040 --> 0:06:14.400 clicking collect They're gonna have another eight stores delivering. That's 0:06:14.400 --> 0:06:17.599 all added costs and unless you're able to charge um, 0:06:17.640 --> 0:06:20.320 it's going to really hurt the economics of the business 0:06:20.320 --> 0:06:24.200 as we move forward. Thing for Kroger, you know, Scott, 0:06:24.200 --> 0:06:26.240 I'm surprised that that you that I'm talking to you. 0:06:26.240 --> 0:06:28.400 I think you're in Mississippi. I thought you'd be you'd 0:06:28.400 --> 0:06:32.680 be at the Shop Talk Uh trade show, because that's 0:06:32.760 --> 0:06:36.320 you know where a lot of the Amazon and eBay, Alphabet, 0:06:36.400 --> 0:06:39.279 Facebook and all these companies are given presentations about the 0:06:39.320 --> 0:06:42.040 future of retail. And one of the points I was 0:06:42.080 --> 0:06:47.400 reading about earlier is that Google is integrating the retail 0:06:47.480 --> 0:06:50.600 product categories like you know from Walmart or Target. With 0:06:50.640 --> 0:06:53.320 what they describe as the Universal Shopping Cart. They're gonna 0:06:53.360 --> 0:06:56.960 share the checkout page and the online payments with a 0:06:57.040 --> 0:07:01.560 commission pricing model. Any thoughts on it? Yeah, I mean, 0:07:01.600 --> 0:07:03.880 so you know, Google is basically going to start charging 0:07:03.920 --> 0:07:08.920 some of these retailers for their search um and again 0:07:09.080 --> 0:07:11.880 somewhat Amazon has an advantage here. A lot of searches 0:07:11.920 --> 0:07:14.800 start right on Amazon for product um and so they 0:07:14.840 --> 0:07:17.840 have an ecosystem that includes all of this. And so 0:07:17.880 --> 0:07:20.840 if you're using Google, and Google has a lot of power, 0:07:20.880 --> 0:07:23.480 they're going to start charging you as a retailer. UM. 0:07:23.520 --> 0:07:27.280 I actually think that's an advantage to Amazon UM. And another. 0:07:28.360 --> 0:07:31.240 The reason to fear the retailer's economics not that they're 0:07:31.240 --> 0:07:33.000 necessary going to go away and go bankrupt all of 0:07:33.000 --> 0:07:36.040 these guys, but the retailer's economics are going to be 0:07:36.120 --> 0:07:39.280 under pressure UM. And of course we saw today with 0:07:39.560 --> 0:07:42.960 an Amazon announcement that pressure tends to roll downhill to 0:07:43.040 --> 0:07:45.400 some of these manufacturers. So manufacturers are gonna be under 0:07:45.400 --> 0:07:48.560 pressure to particularly again if you don't have good content, 0:07:48.640 --> 0:07:50.160 if you're not you don't have things that people are 0:07:50.160 --> 0:07:52.760 willing to pay pay for Scott Mushkin, Thank you so 0:07:52.840 --> 0:07:56.120 much for joining us. Scott Mushkin, managing director and senior 0:07:56.200 --> 0:08:00.880 Staples retail analyst with Wolf Research normally in New York, 0:08:00.920 --> 0:08:19.720 but today in Mississippi. Right now the share is of Facebook. 0:08:19.720 --> 0:08:22.960 They are lower by five percent, the company grappling with 0:08:23.000 --> 0:08:26.680 backlash over its role in spreading disinformation. Here to tell 0:08:26.760 --> 0:08:28.480 us a little bit more about the story and what 0:08:28.640 --> 0:08:31.920 the reaction and congress might be is our own technology 0:08:31.960 --> 0:08:35.920 reporter Sarah Friar joining us from San Francisco. Sarah, thanks 0:08:36.000 --> 0:08:39.120 very much for being with us. Any updates in terms 0:08:39.200 --> 0:08:42.600 of the Facebook reaction to this and also reaction to 0:08:42.640 --> 0:08:46.080 the news that Alex Stamos, the chief information security officer, 0:08:46.600 --> 0:08:51.120 is set to leave the company in August. Well, I 0:08:51.160 --> 0:08:54.760 have a story today that explains how Facebook made this 0:08:55.440 --> 0:08:59.480 into a crisis almost by the way it responded to it. Uh, 0:08:59.720 --> 0:09:04.440 they smically by pre empting the news reports with its 0:09:04.480 --> 0:09:08.400 own blog posts on Friday explaining that it was suspending 0:09:08.440 --> 0:09:11.559 Cambridge Analytica. It made it seem like they had their 0:09:11.559 --> 0:09:16.520 own information on Cambridge Analytica obtaining the data they didn't. 0:09:16.840 --> 0:09:20.600 So now Facebook has as they're spiraling into crisis. They 0:09:20.640 --> 0:09:23.280 have to show people that they don't actually know if 0:09:23.320 --> 0:09:25.960 the reports are true on their end, so they can't 0:09:25.960 --> 0:09:30.400 take stronger action or have Mark Zuckerberg or Cheryl Sandberg 0:09:30.440 --> 0:09:33.640 speak until they have completed an internal audit. So they 0:09:33.720 --> 0:09:38.120 really put themselves in this really difficult position that they 0:09:38.120 --> 0:09:41.160 didn't need to be in, where they're sort of trying 0:09:41.200 --> 0:09:44.520 to undo some of the weight that they gave to 0:09:44.640 --> 0:09:47.880 the reports by pre empting them. So, Sarah, is this 0:09:48.040 --> 0:09:51.520 why the shares are down so much? Because the botched 0:09:51.640 --> 0:09:56.719 response suggects to suggests a vacuum of either leadership or 0:09:57.440 --> 0:10:01.800 appropriate response thought in the c suite? Or is it 0:10:02.080 --> 0:10:03.960 sort of a game change, or now that the FTC, 0:10:04.120 --> 0:10:08.240 the Federal Trade Commission is getting involved and President Trump 0:10:08.280 --> 0:10:12.760 also commenting and saying just this morning that all Americans 0:10:12.800 --> 0:10:17.439 should expect privacy of data. I think that there's a 0:10:17.559 --> 0:10:20.200 number of factors. I think Facebook made this a big story, 0:10:20.400 --> 0:10:25.520 in part by taking action before the story happened. Um, 0:10:25.559 --> 0:10:29.480 But I do think that this is a moment in 0:10:29.480 --> 0:10:32.120 in all of Facebook news where people look at it 0:10:32.200 --> 0:10:35.360 the way things have worked in they're starting to say, wait, 0:10:35.400 --> 0:10:38.920 this is not good, this is not helpful for our 0:10:39.679 --> 0:10:43.480 users of these products that are so dominant around the world, 0:10:43.960 --> 0:10:46.319 So we need to start asking questions about the way 0:10:46.360 --> 0:10:50.000 it's always worked. Facebook's um stands here is that this 0:10:50.080 --> 0:10:53.599 is this is a problem that's sort of been resolved 0:10:53.600 --> 0:10:59.480 by an update they made, uh that they have you know, 0:10:59.600 --> 0:11:03.320 they have to degraize this is actually true audited. Nobody 0:11:03.360 --> 0:11:07.440 trusts them anymore. We have people calling for Zuckerberg or 0:11:07.440 --> 0:11:10.640 Sandberg to testify in front of lawmakers on both sides 0:11:10.679 --> 0:11:13.480 of the Atlantic. The sec is down falls. This is 0:11:13.520 --> 0:11:17.040 a point where people are saying that they don't expect 0:11:17.080 --> 0:11:20.000 that Facebook will have usn best interest in heart when 0:11:20.000 --> 0:11:23.000 they when they go and try to solve these problems 0:11:23.120 --> 0:11:25.560 on their own and then reassure the public that they've 0:11:25.600 --> 0:11:28.880 done so. Sarah, maybe you could just also speak to 0:11:28.960 --> 0:11:34.800 the perhaps confrontation or the constant back and forth between 0:11:35.360 --> 0:11:40.000 those people at Facebook who are more eager to look 0:11:40.000 --> 0:11:42.720 at ways to make money than those who are fighting 0:11:43.080 --> 0:11:48.360 for the protection of data and information that has been 0:11:48.480 --> 0:11:54.880 voluntarily entered into the Facebook system by users. So basically 0:11:54.960 --> 0:11:59.360 saying that the information that was accessed by Alexander Cogan, 0:11:59.440 --> 0:12:03.160 the creator of this personality app, he that he didn't 0:12:03.200 --> 0:12:07.360 in a way that was valid per Facebook policies at 0:12:07.400 --> 0:12:10.000 the time, which allowed people to give information not to 0:12:10.120 --> 0:12:12.800 some themselves but on their friends. So two and seventy 0:12:12.880 --> 0:12:16.360 thousand people using the app resulted in information on fifty 0:12:16.440 --> 0:12:21.080 million people. Facetoos doesn't allow that anymore, but further policies 0:12:21.120 --> 0:12:25.160 at the time that was routine. And um, what people 0:12:25.160 --> 0:12:28.160 are saying now is is okay, we understand that you 0:12:28.240 --> 0:12:32.240 change those policies Facebook, but did you ever look into, 0:12:32.440 --> 0:12:36.560 you know, once these third parties received data on white 0:12:36.559 --> 0:12:38.679 floss of people, did you ever look into whether they 0:12:38.679 --> 0:12:42.680 were doing right by it? Didn't protecting it? Of course, 0:12:42.720 --> 0:12:47.040 in this case, Alexander Cogan gave that data to Cambridge Analytic, 0:12:47.080 --> 0:12:50.560 to which the users had not agreed to. And there's 0:12:50.600 --> 0:12:53.680 a big question here about like, how how does Facebook 0:12:53.720 --> 0:12:59.040 audit these relationships with third parties and the company you know, 0:12:59.120 --> 0:13:01.480 I don't know. Sincesarily think it's an odds with their 0:13:01.520 --> 0:13:04.720 business model. I mean, their business model is all about 0:13:04.760 --> 0:13:09.000 making sure that the information that people give Facebook, uh 0:13:09.160 --> 0:13:12.720 their demographic information, their interests, their groups that they've joined, 0:13:12.760 --> 0:13:16.360 all that information can be used with marketers to target them. 0:13:16.400 --> 0:13:19.800 Add that's like, that's like the promise of the free Internet, right, 0:13:19.840 --> 0:13:22.680 you get the internet for free. These companies get your 0:13:22.760 --> 0:13:24.400 data and they get to target you add based on 0:13:24.400 --> 0:13:28.160 that data. Um, advertisers, I spoke to one last night. 0:13:28.360 --> 0:13:32.280 They actually want Facebook to show users that they are 0:13:32.559 --> 0:13:36.400 good with their data privacy. Advertisers don't want to be 0:13:36.559 --> 0:13:40.800 advertising on a service that users have a bad feeling about. Um, 0:13:40.840 --> 0:13:43.200 it's not going to be good for their business. And 0:13:43.240 --> 0:13:45.960 I would, well, you tell me. I mean, with the 0:13:46.000 --> 0:13:48.480 revelation that Alex Stamos is gonna be leaving the company 0:13:48.800 --> 0:13:52.120 in August, Uh, didn't he lead a group of engineers 0:13:52.120 --> 0:13:55.400 that found out in June of that and that was 0:13:55.440 --> 0:13:57.960 the month of Democratic National Committee announced that it has 0:13:58.000 --> 0:14:01.240 been attacked by Russian hackers. They said, yeah, there's a 0:14:01.240 --> 0:14:03.400 lot of Russian activity and that they actually had people 0:14:03.400 --> 0:14:08.000 paying for these fake accounts. Yeah. I actually I was 0:14:08.040 --> 0:14:10.680 speaking with the head of news Feed in August of 0:14:10.720 --> 0:14:13.400 that year and he said, oh, yeah, we've been starting 0:14:13.400 --> 0:14:17.280 to look into misinformation on Facebook and the spread of it. 0:14:17.360 --> 0:14:19.840 I mean, the company was starting to see the signs. 0:14:20.520 --> 0:14:24.760 Just remember Facebook's position at that time. The company was 0:14:24.800 --> 0:14:31.120 responding to a controversy over its its news curation, that 0:14:31.240 --> 0:14:35.520 it may be silencing conservative viewpoints. So the the company, 0:14:35.720 --> 0:14:40.280 the company's reaction to crises is very, very reactionary. They 0:14:40.320 --> 0:14:42.360 don't want any bad news out there. They want everyone 0:14:42.360 --> 0:14:46.760 to feel like they are this unbiased rap for anything, seraphire, 0:14:47.080 --> 0:14:48.840 We're gonna have to leave it there. Thank you so much, 0:14:48.880 --> 0:14:51.360 and thank you for all of your fantastic reporting. Sarah 0:14:51.360 --> 0:15:09.080 Fryar is a technology reporter for Bloomberg News trade tariffs 0:15:09.200 --> 0:15:11.840 and China. I'm here to help us understand the current 0:15:11.880 --> 0:15:14.320 situation and what is likely to unfold this week. Is 0:15:14.440 --> 0:15:18.800 Andrew Mayetta. He is our global economy reporter for Bloomberg News. 0:15:19.120 --> 0:15:22.080 He can be followed on Twitter at a Mayeta and 0:15:22.160 --> 0:15:25.280 he joins us from our nine one studios into Washington, 0:15:25.640 --> 0:15:28.480 d C. Andrew, thanks for being with us. Maybe just 0:15:28.520 --> 0:15:30.480 bring everyone up to date on what is going on 0:15:30.560 --> 0:15:33.800 between the United States and China as it relates to 0:15:34.520 --> 0:15:39.040 trade in tariff wars. Sure, so, the US Administration has 0:15:39.080 --> 0:15:45.720 been investigating whether China basically disregards US intellectual property and 0:15:45.800 --> 0:15:51.080 forces American companies to transfer technological know how to the Chinese, 0:15:51.800 --> 0:15:56.160 and that investigation is nearing a close. Report has been 0:15:56.200 --> 0:15:59.240 submitted to the president, and he's considering a number of 0:15:59.280 --> 0:16:03.680 different options, including UH sixty billion dollars in tariffs on 0:16:03.840 --> 0:16:07.160 Chinese products. All Right, Andrew, I was struck by a 0:16:07.200 --> 0:16:10.440 top headline today on the Bloomberg Terminal about how China 0:16:10.880 --> 0:16:16.560 is pledging not to interfere or violate intellectual property rules 0:16:16.760 --> 0:16:21.720 with any foreign companies coming to the nation, basically saying, guys, 0:16:21.880 --> 0:16:23.880 let's just work this out. We're not going to do 0:16:23.920 --> 0:16:27.560 anything bad. Please trust us. Does that Does that work? 0:16:27.600 --> 0:16:31.960 Does that fly? I think Larry Cudlow, who just replaced 0:16:31.960 --> 0:16:35.320 Gary Cohen, is going to say this is positive, this 0:16:35.360 --> 0:16:38.160 is encouraging. We should work with this. We should sit 0:16:38.200 --> 0:16:41.760 down at the negotiating table where the world's two biggest economies. 0:16:42.280 --> 0:16:45.000 You know that global recovery is actually going pretty well. 0:16:45.320 --> 0:16:48.520 Let's not mess this up. I think Peter Navarro is 0:16:48.520 --> 0:16:52.120 going to say, these guys have made promises before, they 0:16:52.160 --> 0:16:54.760 haven't lived up to them. They've been making promises since 0:16:54.800 --> 0:16:57.200 two thousand one, since they joined a w t O 0:16:57.960 --> 0:17:01.480 and talk is cheap. Well, Andrew, can you give us 0:17:01.520 --> 0:17:06.400 some specific examples of products that might be hit with 0:17:06.520 --> 0:17:08.640 these kinds of tariffs. I mean I was looking at 0:17:08.680 --> 0:17:13.200 things like textiles, and the details there are really astounding 0:17:13.280 --> 0:17:15.679 because it, you know, it really goes everything from the 0:17:15.800 --> 0:17:18.840 kind of fabrics that you might use in uh, clothing, 0:17:19.480 --> 0:17:23.560 to the kinds of products that boy I mean, uh, 0:17:23.640 --> 0:17:28.080 you'd never you know, whisk brooms, ethel alcohol, milk and cream, olives, tuna. 0:17:28.160 --> 0:17:31.840 I mean, it is a dizzying array of products. Yeah. 0:17:31.880 --> 0:17:36.240 My understanding is they're looking at everything from shoes, apparel, 0:17:37.200 --> 0:17:41.040 travel goods, so we're talking luggage to you know, higher 0:17:41.119 --> 0:17:46.399 end consumer electronics. I understand that one way USCR is 0:17:46.440 --> 0:17:51.119 looking at it is they're taking China's own economic plan, 0:17:51.320 --> 0:17:56.560 the made in China Plan, and they're looking at areas 0:17:56.600 --> 0:17:59.840 of technology that China is trying to lead in and 0:18:00.040 --> 0:18:03.959 they're trying to target those areas for tariffs. All right, 0:18:04.320 --> 0:18:08.200 So one thing, as we are watched the headlines coming 0:18:08.280 --> 0:18:11.320 out of the G twenty meeting in Buenos Aires, uh, 0:18:11.440 --> 0:18:15.639 in Argentina that's ongoing right now, there actually is a 0:18:15.840 --> 0:18:21.320 greater call for trade, free trade and trade tariffs loosening 0:18:21.520 --> 0:18:25.360 or any other restrictions being sort of released among countries 0:18:25.440 --> 0:18:28.080 other than the US. Can you talk a little bit 0:18:28.080 --> 0:18:31.720 about that and how much that could potentially offset talk 0:18:31.800 --> 0:18:34.560 of a trade war, tariffs or other rhetoric that we're 0:18:34.600 --> 0:18:38.240 hearing out of the White House. Yeah, I think that overall, 0:18:38.280 --> 0:18:43.120 actually the situation for the global economy and trade volumes 0:18:43.200 --> 0:18:46.480 is pretty positive. UM. For the first year in a 0:18:46.520 --> 0:18:52.280 long time, trade growth and trade volumes actually outpaced growth 0:18:52.359 --> 0:18:55.720 in in overall outputs. In other words, trade resumed being 0:18:55.960 --> 0:18:59.119 an engine of global growth. So so things are actually 0:18:59.160 --> 0:19:01.800 going well, and I think that most countries in the 0:19:01.840 --> 0:19:05.560 world don't want a trade war. What's unusual about the 0:19:05.640 --> 0:19:08.800 situation is you have the US, which has been kind 0:19:08.840 --> 0:19:13.719 of at the vanguard of creating the current global training system, 0:19:13.760 --> 0:19:16.679 basically trying to blow it up from within UM and 0:19:16.760 --> 0:19:20.080 pushing for major changes. And you have China, which for 0:19:20.280 --> 0:19:22.840 years has kind of been seen as a pariah, pushing 0:19:22.880 --> 0:19:26.040 for the status quo. So how exactly that equilibrium works 0:19:26.040 --> 0:19:29.480 out at a place like the G twenty, It'll be 0:19:29.480 --> 0:19:32.800 interesting to see how it works out. Andrew any any 0:19:32.800 --> 0:19:35.280 word or any any inkling of how does it work 0:19:35.359 --> 0:19:38.439 out between the United States and let's say, Canada and 0:19:38.520 --> 0:19:41.280 Mexico in terms of exemptions on some of the already 0:19:41.280 --> 0:19:46.800 announced tariffs. Well, Canada and Mexico have been excluded from 0:19:46.880 --> 0:19:52.399 the steel tariffs that President Trump announced earlier this month. Um, 0:19:52.480 --> 0:19:55.919 but President Trump, as kind of is his want, has 0:19:55.960 --> 0:20:00.000 added um a condition to it. He's basically said, look, 0:20:00.280 --> 0:20:04.280 your exclude for now. I'm recognizing your important security partners, 0:20:04.480 --> 0:20:06.560 but I want a good NAFTA. And if you don't 0:20:06.560 --> 0:20:09.520 give me a good NAFTA, then you know that that 0:20:09.560 --> 0:20:12.560 exclusion could go away. So that it's kind of creating 0:20:12.600 --> 0:20:16.959 a bit of a storm hanging over the NAFTA talks. Well, 0:20:16.960 --> 0:20:19.159 we're gonna have to wait and see what happens. But boy, Andrew, 0:20:19.160 --> 0:20:20.760 I think you're gonna end up in the nitty gritty. 0:20:20.800 --> 0:20:22.600 I mean, I've been looking at things like the commissioned 0:20:22.640 --> 0:20:25.679 voting on things like rubber bands from China, Sri Lanka, 0:20:25.760 --> 0:20:29.760 and Thailand, as well as digital video receivers. So it 0:20:29.760 --> 0:20:34.119 really just covers the you know, an entire encyclopedia of 0:20:34.320 --> 0:20:37.680 products and services, encyclopedia of agencies that have to weigh 0:20:37.680 --> 0:20:39.000 in on this, which is going to be a part 0:20:39.040 --> 0:20:40.920 of the issue getting all of them to agree on 0:20:40.920 --> 0:20:43.280 on rubber bands. And you know, I'm gonna follow you 0:20:43.320 --> 0:20:45.360 know what I'm gonna do. I'm gonna follow Andrew Mayetta 0:20:45.400 --> 0:20:49.879 on Twitter. Follow you back. Okay, Andrew Mayetta, our global 0:20:49.920 --> 0:20:52.520 economy reporter for Bloomberg News, joining us from our ninety 0:20:52.600 --> 0:20:56.320 nine one studios in Washington, D C. And uh, well, 0:20:56.320 --> 0:20:57.919 we'll have to see what happens to the rest of 0:20:57.920 --> 0:21:01.600 the week. Sixty billion dollars potential hit to two trades. 0:21:17.400 --> 0:21:20.440 We do have a Federal Reserve meeting that is underway 0:21:20.520 --> 0:21:24.040 in Washington, D C. And will conclude tomorrow, most likely 0:21:24.240 --> 0:21:27.680 with an additional rate hike. Here to talk about what 0:21:27.760 --> 0:21:29.879 we can expect and what we ought to be paying 0:21:29.880 --> 0:21:33.639 attention to, is Ira Jersey, chief US interest rate strategist 0:21:33.760 --> 0:21:38.480 for Bloomberg Intelligence. Ira, let's start by taking a temperature 0:21:38.680 --> 0:21:42.280 of debt markets. What are they expecting j Powell to 0:21:42.359 --> 0:21:46.280 do tomorrow in his first press conference as chairman of 0:21:46.320 --> 0:21:49.960 the Federal Reserve. Yeah so so a like you mentioned, Lisa, 0:21:50.200 --> 0:21:52.880 a hike is all but baked in the cake here. Um, 0:21:53.200 --> 0:21:56.159 the shock would be if they didn't hike. Actually, we're 0:21:56.200 --> 0:22:00.119 now a price for hike tomorrow. Um. The other was 0:22:00.119 --> 0:22:02.959 saying that the market's going to be looking for is 0:22:03.320 --> 0:22:05.720 will some of the hawk is comments that J Pale 0:22:05.800 --> 0:22:08.000 made during the Humphrey Hawk and testimony, and a number 0:22:08.040 --> 0:22:10.960 of others have have hinted at will that UM show 0:22:11.080 --> 0:22:13.639 up in the summary of Economic projections that are also 0:22:13.720 --> 0:22:16.760 be released with the statement tomorrow, and uh, and then J. 0:22:16.880 --> 0:22:19.200 Powell will have to kind of describe them in more 0:22:19.240 --> 0:22:22.040 detail during his press conference. Because the market is now 0:22:22.080 --> 0:22:24.840 pricing for five hikes by the end of ten and 0:22:24.880 --> 0:22:27.880 I think that that's pretty Uh, that's pretty interesting because 0:22:27.920 --> 0:22:29.879 when we talked just a couple of weeks ago, the 0:22:30.200 --> 0:22:32.639 market was only pricing for four, so we were pricing 0:22:32.640 --> 0:22:35.600 in a full other hike now over the next year 0:22:35.600 --> 0:22:37.720 and a half or so. Alright, what if you could 0:22:37.760 --> 0:22:41.720 bring into this conversation the global issues having to do 0:22:41.920 --> 0:22:46.920 with the reduction and quantitative easing Because European Central Bike 0:22:46.920 --> 0:22:50.000 President Mario drag announcing that he's going to phase out 0:22:50.000 --> 0:22:54.639 those monthly asset purchases by the end of yeah. So 0:22:54.640 --> 0:22:58.680 so I think the ECB action is is kind of realistic, 0:22:58.680 --> 0:23:01.359 but they're trying to temper that with UM, you know, 0:23:01.400 --> 0:23:03.760 saying look, we're gonna we're gonna stop our asset purchases. 0:23:03.760 --> 0:23:05.760 We're gonna try to avoid a taper tantrum, and so 0:23:05.840 --> 0:23:07.840 far they kind of have. Um. I think we had 0:23:07.840 --> 0:23:12.480 our taper tantrum for for that last June UM. But 0:23:12.480 --> 0:23:14.240 but by saying that, hey, we're still not going to 0:23:14.359 --> 0:23:16.240 hike for a very long time, I think that that's 0:23:16.240 --> 0:23:19.400 tempered the expectations of of how steep the yield curve 0:23:19.440 --> 0:23:21.760 can get in Europe. And and that is the one 0:23:21.960 --> 0:23:24.760 thing that could probably significantly steep in the U S 0:23:24.840 --> 0:23:28.440 yield curve is um is if if European rates back 0:23:28.520 --> 0:23:30.399 up quite a lot. So he's still very low interest 0:23:30.480 --> 0:23:33.240 rates in Germany and a lot of developed Europe, and 0:23:33.280 --> 0:23:36.000 if those were to move forty sixty basis points, those 0:23:36.040 --> 0:23:39.480 would have significant, uh knock on effects to US rates. 0:23:39.520 --> 0:23:42.560 But so far it's been um pretty orderly at least, 0:23:42.760 --> 0:23:44.720 you know, you've seen a little modestly higher rates, but 0:23:44.760 --> 0:23:48.040 they haven't really spiked higher like they did last June 0:23:48.040 --> 0:23:51.560 when he first suggested that that that quantitative easing might 0:23:51.560 --> 0:23:55.440 be coming to an end. Okay, now take that possibility 0:23:55.720 --> 0:24:00.280