Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
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Speaker 2: anywhere else you listen, and as always on the Bloomberg
Speaker 2: Terminal and the Bloomberg Business app. The former US Vice
Speaker 2: President Mike Pence taking a critical stance on President Trump's tariffs,
Speaker 2: writing in a Wall Street Journal op ed in the
Speaker 2: past few months that since the President announced his Liberation
Speaker 2: Day tariffs, the only thing America has been limerated from
Speaker 2: is trillions of dollars in investments. And pleased to say,
Speaker 2: the forty eighth Vice President of the United States, Mike Pence,
Speaker 2: joins us now for more. It's the vice president of Mornick.
Speaker 3: Good morning, votes for having me on.
Speaker 2: Thanks for being I want to pick up on a
Speaker 2: question I know you've been exploring. What can forty seven
Speaker 2: then from forty five. Let's start that, and silk Aback's right.
Speaker 4: Well, well, first off, I'm want to give President Trump
Speaker 4: all the credit in the world for a historic political comeback.
Speaker 4: But in that Republican primary I was traveling as a
Speaker 4: candidate in twenty twenty three, I mostly heard people saying,
Speaker 4: we want to get back in the midst of the
Speaker 4: failed economic policies of the Biden administration. We want to
Speaker 4: get back to what the Trump pens administration was advancing.
Speaker 4: And so in the Wall Street Journal I gave the
Speaker 4: president great credit, high marks for securing the border, for
Speaker 4: restoring morale and recruitment in our military, for taking the
Speaker 4: fight to the Hoho Thies. Since then, I will talk
Speaker 4: more later. I'm very encouraged about the strong stand that
Speaker 4: the President is taking on the world stage, particularly in
Speaker 4: the Middle.
Speaker 3: East and in Eastern Europe.
Speaker 4: But what I wanted to call attention to was the
Speaker 4: policy toward tariffs was was changed with Liberation Day. During
Speaker 4: our administration, we use tariffs in the threat of tariffs
Speaker 4: principally focused on China to leverage changes in behavior, but
Speaker 4: the objective was to essentially lower trade barriers and expand trade.
Speaker 4: In this administration, I think what we saw several months ago,
Speaker 4: now it's paused again happily, is the kind of broad
Speaker 4: based industrial policy that I think ultimately will harm the
Speaker 4: American economy, will harm American consumers, and so we've spoken
Speaker 4: out against it. We've tried to take a stand. What
Speaker 4: I like to say is free trade with free nations.
Speaker 4: Be tough on China, be tough on trade abusers, but
Speaker 4: have the objective of ultimately lowering trade barriers, and that's
Speaker 4: how America wins and prospers. That's how we won during
Speaker 4: our first term.
Speaker 2: You've identified that change. What's your understanding of what's behind it,
Speaker 2: what's lent that change?
Speaker 4: Well, I think that what's changed is that I think
Speaker 4: the president feels at least I perceive it. You know,
Speaker 4: sometimes I tell people that I know President Trump better
Speaker 4: than his most ardent defenders. We served together for four
Speaker 4: and a half years. We had a close working relationship,
Speaker 4: and I've said many times President Trump is not an isolationist.
Speaker 4: He is someone deeply committed to free market capitalism. But
Speaker 4: for all of his career he has been very sympathetic
Speaker 4: to protectionist thinking in philosophy. You can go back thirty
Speaker 4: years on YouTube and find Donald Trump saying the same
Speaker 4: things that President Trump is saying today. He and I
Speaker 4: had many vigorous conversations during our four years about trade.
Speaker 4: I come from one of the leading exporting states in
Speaker 4: the country. What we make, we grow in Indiana, we
Speaker 4: sell to the world. But at the end of the day,
Speaker 4: I think what you're seeing is not different influences around
Speaker 4: President Trump. I think you're simply seeing him extending out
Speaker 4: into a philosophy of government and economics that he has
Speaker 4: long believed.
Speaker 5: Were these impulses then there when he during the first
Speaker 5: administration and individuals like you maybe talked him out of it, well,
Speaker 5: I don't know.
Speaker 3: That it was.
Speaker 4: I mean, there were a few times that I saw
Speaker 4: him change his mind on things, but I think it
Speaker 4: was more about priorities in the first term, to make
Speaker 4: sure that we passed the tax cuts, rolled back regulation,
Speaker 4: unleashed American energy, and we changed the national consensus on China.
Speaker 3: In China with its years of trade abuses.
Speaker 4: And I played a leading role in articulating that in
Speaker 4: the early going, and I'm incredibly proud of that record
Speaker 4: and that at least the Biden administration didn't change the
Speaker 4: tariff policy towards China. But for me it was more
Speaker 4: about it was more about driving toward free trade agreement.
Speaker 4: So I had the privilege of announcing the beginning of
Speaker 4: a free trade agreement with UK at this in the
Speaker 4: City of London. We renegotiated a free trade agreement with
Speaker 4: South Korea that's back in the news this week with
Speaker 4: new tariff threats, and I was leading with my counterpart
Speaker 4: in Japan. I was actually tasked with leading a working
Speaker 4: group for a free trade agreement with Japan. So for US,
Speaker 4: it was that we saw an expansion of trade and
Speaker 4: opening markets as a key part of American growth right now.
Speaker 4: I actually believe that President Trump is driving toward a
Speaker 4: long term change in industrial policy in America where he
Speaker 4: sees permanent unilateral.
Speaker 3: Trade tariff barriers.
Speaker 4: As beneficial to America in the long term, and as
Speaker 4: a free market conservative, as something I just don't embrace.
Speaker 5: Can you do that and isolate China with the rest
Speaker 5: of the world on board at the same time, Well, a, Marie.
Speaker 3: I think that's the right question that.
Speaker 4: Senator Phil Graham, we had on Capitol Hill with our
Speaker 4: foundation yesterday, had over one hundred staffers that came out
Speaker 4: to hear him He had probably the best description of it.
Speaker 3: He said.
Speaker 4: He said, by going after all of the free nations
Speaker 4: that you're trading with at the same time that you're
Speaker 4: trying to bring China farther along in opening markets and
Speaker 4: ending years of trade abuses, he said, it's like it's
Speaker 4: like dismissing your front line in a football game and
Speaker 4: expecting that you're going to take on the other side. Look,
Speaker 4: we need Japan, we need South Korea, we need Australia,
Speaker 4: we need the EU to continue to bring the kind
Speaker 4: of economic pressure on China that I believe is all
Speaker 4: that President g and the Chinese Communist Party will will respect.
Speaker 3: We saw some change.
Speaker 4: Remember that Phase one trade deal in the early days
Speaker 4: of twenty twenty. Most people have long since forgotten it.
Speaker 4: There were bigger stories that year by far, but we
Speaker 4: saw the China when we imposed those two hundred and
Speaker 4: fifty billion dollars in tariffs. The Chinese came to the
Speaker 4: table quickly and began negotiations. And I still believe that's
Speaker 4: the right approach, with free trade, with free nations being
Speaker 4: the backstop.
Speaker 6: Mister Vice President, I want to pick out a line
Speaker 6: in that Wall Street Journal up ed that John was
Speaker 6: mentioning that you wrote, mister Trump's proposed tariffs would be
Speaker 6: the largest peacetime hike in American history, harming consumers and
Speaker 6: driving inflation. President Trump his administration has been talking about
Speaker 6: they're not going to be inflationary, that the producers and
Speaker 6: other countries are going to absorb it. Are you seeing
Speaker 6: evidence that that's not the case. Are you really concerned
Speaker 6: about what this does to the economy?
Speaker 4: Well, I really am, and I understand that that's the
Speaker 4: debate right now. We haven't seen the inflation from Liberation Day,
Speaker 4: and I think there's several reasons to explain that.
Speaker 3: Number one is.
Speaker 4: The teriff regime was paused and has now been paused again,
Speaker 4: and the markets and are responding to that, and businesses
Speaker 4: are responding. Secondly, I got to tell you the businesses
Speaker 4: I talked to as I travel around the country have
Speaker 4: been spending an awful lot of money on inventory right now.
Speaker 4: You know, there's an old saying where I come from
Speaker 4: that you know, I was born in the morning, but
Speaker 4: not yesterday morning. So people say that these tariffs are common,
Speaker 4: So why don't we Why don't we fill the warehouse
Speaker 4: right now? And I think that's wise but you know,
Speaker 4: at the end of the day, I also think that
Speaker 4: you know, the President on Liberation Day talked about twenty
Speaker 4: five fifty seventy percent tariffs on countries, and seeing some
Speaker 4: of these early frameworks that end up with the UK
Speaker 4: with ten percent, there's a temptation to say, well, that's
Speaker 4: just ten percent, And so I think that's the reason
Speaker 4: why markets, so my businesses have not adjusted prices yet.
Speaker 4: But if we have a unilateral tariff of ten percent
Speaker 4: on the American economy of all imported goods, that's four
Speaker 4: times the average tariff today. And the reality is that
Speaker 4: I watch, you know, I spent a lot of time
Speaker 4: in that cabinet room. I watched a little bit of
Speaker 4: the cabinet meeting this week, and I saw Secretary Vessant
Speaker 4: speaking very glowingly about the projection is three hundred billion
Speaker 4: dollars in tariff revenue this year. Well, tariffs are attax
Speaker 4: and American importers and businesses and ultimately consumers pay almost
Speaker 4: all of that. And so literally a week after we
Speaker 4: managed to extend the Trumpets tax cuts and prevent a
Speaker 4: two thousand dollars tax increase on working families, the administration
Speaker 4: is right now boasting.
Speaker 3: Of the fact that.
Speaker 4: The average American household is going to see about three
Speaker 4: thousand dollars increase in the cost of goods because we're
Speaker 4: paying that. So that's why I referred to a liberation day.
Speaker 4: I said, could well be the largest peacetime tax hike
Speaker 4: in American history. We've been pushing back on that. I
Speaker 4: welcome the pauses, but I I really do believe the
Speaker 4: antidote here is free trade with free nations. Tough on China,
Speaker 4: but continue continue to drive toward lowering trade barriers and
Speaker 4: you know, non tariff subsidient.
Speaker 2: He reflects the inflation risk. The White House of don't
Speaker 2: say like this feder af to cut interest rates. You've
Speaker 2: been in the room a few times. I'm sure it's
Speaker 2: talking about this federic f How did the president end
Speaker 2: up with a the heat dislikes so much? How did
Speaker 2: that happen?
Speaker 4: Well, well, I've been watching a lot of what the
Speaker 4: presidents had to say about Jay Powell lately.
Speaker 3: And.
Speaker 4: He did appoint him, So it's part of the awkward
Speaker 4: aspect here. Well, first, I think the President of the
Speaker 4: United States is fully entitled to express his opinion about
Speaker 4: both the FED chair and about the Federal Reserve itself.
Speaker 4: I have long had great concerns about the dual.
Speaker 3: Mandate and the Federal Reserve.
Speaker 4: I think it confuses the issue, and the Federal Reserve
Speaker 4: has his for your viewers, has a dual mandate to
Speaker 4: protect the integrity of the dollar and achieve full employment.
Speaker 4: I think the Federal Reserve ought to just focus on
Speaker 4: the dollar. And I think that the hesitation that I
Speaker 4: have seen from the Fed chair and ostensibly the Committee
Speaker 4: is that the uncertainty around these broad based tariffs and
Speaker 4: the potential for inflation has slowed their intention and and
Speaker 4: their earlier efforts at at lowering rates.
Speaker 3: And so.
Speaker 4: How the President got to where he can he considers
Speaker 4: the Federal Reserve chairman to be worthy of the nickname
Speaker 4: too late. I can't really testify, but but to me,
Speaker 4: you're pushing back on on the idea that what's what
Speaker 4: seems to be holding up the Federal Reserve. Although I
Speaker 4: read this morning there's now more vigorous debate. I'm sure
Speaker 4: you've covered here on Bloomberg on the Committee as that
Speaker 4: there we may have lowering of interest rates, which certainly
Speaker 4: would welcome.
Speaker 2: As you know, the President one of his greatest strengths
Speaker 2: is to break the status quaid and have very little
Speaker 2: respect for it. That limits to that, and it's fed
Speaker 2: independence and example of it.
Speaker 4: That's that's right, and I think, look, the President appoints
Speaker 4: the chairman of the Federal Reserve, and a careful study
Speaker 4: of American history shows I don't really accept that the
Speaker 4: Federal Reserve should be a completely.
Speaker 3: Separate agency, you.
Speaker 4: Know, like a college of cardinals that we never refer
Speaker 4: to other than in respectful hush tones. John, I think
Speaker 4: the president ought to be able to express himself. Elected
Speaker 4: officials ought to be able to express themselves, because it's
Speaker 4: almost like that old saying about the Supreme Court. You
Speaker 4: know that justices do read the newspaper, and I expect
Speaker 4: that's also true of members of the Federal Reserve.
Speaker 2: You have taken a balance view on the current administration.
Speaker 2: You've been somewhat critically of trained. We've discussed that, I
Speaker 2: would say ringing endulsement about that approach to the Middle East.
Speaker 2: So let's talk about that. You know where you were
Speaker 2: in your first term with the president, where he is
Speaker 2: in his second term, and what went wrong in between
Speaker 2: from your standpoint on the Middle East.
Speaker 4: Well, I just think when Joe Biden returned to a
Speaker 4: policy of appeasement toward Iran, it really in bold UH
Speaker 4: the enemies UH of Israel across UH the region. I
Speaker 4: I I traveled to Israel in about six months UH
Speaker 4: after October seventh and saw what occurred there, and I
Speaker 4: I would tell you it's one of the things I'm
Speaker 4: probably most proud of our administration.
Speaker 3: And not only did UH did we we.
Speaker 4: Changed the national consensus on China, but UH we were
Speaker 4: probably UH the most pro Israel administration since the re
Speaker 4: establishment of the State of Israel in nineteen forty eight.
Speaker 4: There's just simply to recognize it. Moving the American embassy
Speaker 4: to Jerusalem, recognizing the gol Onites, these were all historic
Speaker 4: achievements that everyone told us would foment violence and discord
Speaker 4: UH across the Middle East. But again, another twenty twenty
Speaker 4: story that is long forgotten by many.
Speaker 3: People's the Abraham.
Speaker 4: Of course, I mean we we actually imonstrated that when
Speaker 4: you stand without UH w W in an unwavering way
Speaker 4: with with Israel that I call our most cherished ally
Speaker 4: throughout our history, it sends a very clear scegnal that
Speaker 4: makes peace more possible. Not less possible. We also isolated
Speaker 4: Iran as never before. We unleashed our military to take
Speaker 4: down the ISIS Caliphate, and of course the President made
Speaker 4: the decision to take down Accustom Solomoni, the head of
Speaker 4: the Iran Revolutionary Guard. All of that had Iran on
Speaker 4: its back heels. The Biden administration changed that went back
Speaker 4: to the Obama approach of re engaging with the Mullahs
Speaker 4: in Tehran. I think they were emboldened the violence that
Speaker 4: we saw, whether it be October seventh with Hamas one
Speaker 4: of their patron groups, where the Houthis all were a
Speaker 4: resultd I've always believed that that weakness arouses evil, but
Speaker 4: peace comes through strength, and the weakness of the Biden
Speaker 4: administration I think created the conditions for the mayhem that
Speaker 4: the new Trump administration inherited. And that's why I've been
Speaker 4: so encouraged to see the strong stand the President has
Speaker 4: taken with Israel. We publicly encouraged the use of American
Speaker 4: military assets.
Speaker 3: If Iran was not willing to dismantle their.
Speaker 4: Nuclear program, I believe it needed to be destroyed, and
Speaker 4: I commend the President for his decisive leadership in our
Speaker 4: incredible airman who delivered those payloads.
Speaker 5: You welcomed those strikes on the Irani nuclear facilities. But
Speaker 5: the President still talks about a deal with Iran. Do
Speaker 5: you think he'll do a deal at any cost?
Speaker 3: Well, I hope not.
Speaker 4: I said in that Wall Street Journal piece that you cited.
Speaker 4: It was about two months ago, and one of my concerns,
Speaker 4: in addition to some of the tariff issues that we
Speaker 4: talked about, was that a lot of what we were
Speaker 4: hearing from the administration in the first hundred days sounded
Speaker 4: an awful lot like a new Iran nuclear deal, and
Speaker 4: we pushed back on that pretty hard.
Speaker 3: And I.
Speaker 4: My hope is that the President, having seen both the
Speaker 4: run up to the need for American action and also
Speaker 4: the response by the Malus in Tehran, we'll keep He'll
Speaker 4: keep his hand on the holster and look ultimately for
Speaker 4: achieving the objective that that has been the stated US
Speaker 4: policy through multiple administrations that Ran can never be allowed
Speaker 4: to obtain a nuclear weapon or have a nuclear program
Speaker 4: of any kind.
Speaker 5: When it comes to foreign policy, you've been very critical
Speaker 5: and hawkish on Russia. In the debate when you were
Speaker 5: running with President Trump in the first term, you called
Speaker 5: putin a small and bullying dictator. Why do you think
Speaker 5: Trump has only just started changing his tune when it
Speaker 5: comes to Vladimir.
Speaker 3: Well, I've never had any illusions about Vladimir Putin. No,
Speaker 3: but President Trump has Well, that remains to be seen.
Speaker 4: I would tell you that, you know, I was on
Speaker 4: the Foreign Affairs Committee when I was in the Congress.
Speaker 4: I've been a student of Vladimir Putin. He's never made
Speaker 4: a secret of his ambitions in Eastern Europe. It's something
Speaker 4: he's spoken about, written about. His aim has always been
Speaker 4: to re establish the old Soviet sphere of influence in
Speaker 4: Eastern Europe. And I really do believe it was our
Speaker 4: administration in the Trump Pence years that were the first
Speaker 4: to literally provide lethal aid to Ukraine. I think that's
Speaker 4: what discouraged Putin from crossing.
Speaker 3: That border during those four years.
Speaker 4: Forget, and I think it continues to be the only
Speaker 4: pathway toward peace today.
Speaker 6: But forgive me, mister Vice President, to go back to
Speaker 6: Emory's question, what's changed? Because right now we've seen a
Speaker 6: president who's warned against Russia doing crossing certain real lines
Speaker 6: that Russia's crossed, and then the sanctions haven't come. Right,
Speaker 6: what do you think is going on.
Speaker 3: Well, I'm hopeful that they will.
Speaker 4: What makes you I am I've seen some statements by
Speaker 4: my friend Senator Lindsey Graham, who just in the last
Speaker 4: few days said that the President told him to move
Speaker 4: the bill, and these new Russia sanctions, which are the
Speaker 4: secondary sanctions against people that are doing business with Russia
Speaker 4: that are subsidizing the war effort by oil purchases and
Speaker 4: energy purchases, I think can be enormously impactful.
Speaker 3: But you know, I would I would say that, you.
Speaker 4: Know, I've made it very clear that that my deep
Speaker 4: conviction is Vladimir Putin doesn't want piece. Vladimir Putin wants Ukraine,
Speaker 4: and despite the stops and starts that gave him any
Speaker 4: of US concern, including that famous Oval Office meeting between
Speaker 4: the President and President Zelenski, who I came to know, well,
Speaker 4: I sense that my old running mate is coming around
Speaker 4: to recognizing Putin's real intentions here. I mean when I
Speaker 4: think that the the clear irritation in the President's voice
Speaker 4: of having a conversation and then to see some of
Speaker 4: the some of the worst drone attacks launched in Kiev
Speaker 4: within a matter of hours, is I think having its effect.
Speaker 4: But look, I just think that I was pleased that
Speaker 4: the President countermanded what had been a pause of aid
Speaker 4: to Ukraine last week, which I think was unfortunate wherever
Speaker 4: it originated. But I commend the President for reversing that decision.
Speaker 4: And my hope is when the Senate reconvenes that Senator
Speaker 4: Thunal will put the Graham Bill on the floor and
Speaker 4: put it on the President's desk.
Speaker 3: I think it's time, and it's my judgment.
Speaker 4: I've met Vladimir Putin. I've stood with him closer than
Speaker 4: I'm sitting next to you. I've told him things he
Speaker 4: didn't want to hear, and I think he is I
Speaker 4: think he is not a man who understands anything other
Speaker 4: than strength. And this is a moment, I think where
Speaker 4: it's in the interest of our country, it's in the
Speaker 4: interest of our allies in the region and long term
Speaker 4: peace in Eastern Europe for US to continue to provide
Speaker 4: military support to Ukraine, to put punishing sanctions on Russia
Speaker 4: until the just and lasting peace can be secured.
Speaker 2: President, I appreciate your time, sir, enjoyed the conversation.
Speaker 3: Great, it's going to say it. Thank you.
Speaker 2: The former Vice President of the United States. There Mike
Speaker 2: Plans joining US non plays the science Bloomberg's mid Men
Speaker 2: Low from Kuala Lumpa, Midmen, good.
Speaker 3: Morning, good morning.
Speaker 7: Yes, I'm here the Asian Summit and it's a big
Speaker 7: day because the Asian foreign ministers are meeting with many
Speaker 7: key dialogue partners, including the envoye from Career, Japan, China,
Speaker 7: the US, and of course the EU as well. And
Speaker 7: joining me here is the EU's top diplomat, Kayak Kalas.
Speaker 7: Thank you so much for making time. So tariffs have
Speaker 7: been looing very large over this entire summit. The EU
Speaker 7: hasn't yet received that letter from Trump. What is your
Speaker 7: team expecting to see you, whether that let it comes,
Speaker 7: any specific coverouts in particular that you're expecting to have achieved.
Speaker 8: Well. Of course, sir, trade team is working very hard
Speaker 8: to get good agreement, but at the same time we
Speaker 8: are also working with other countries like here in Southeast
Speaker 8: Asia or in the world to have trade deals and
Speaker 8: trade agreement agreements to diversify our trade portfolios.
Speaker 7: Okay, so the Chinese Forum MINUSA one is here as well.
Speaker 7: Are you going to meet him to maybe stabilize relations
Speaker 7: a little bit? Because it seems like that you China
Speaker 7: sub it might be partially derailed from what we have
Speaker 7: reported before.
Speaker 8: Well, we had a good meeting in Brussels with my
Speaker 8: counterpart and we are discussing it's the same format that
Speaker 8: we have had in twenty twenty three the summit then,
Speaker 8: and and it's important the substance. What are we discussing?
Speaker 7: But you're cutting a shot and you're you're not bringing
Speaker 7: any additional business.
Speaker 8: Now, there was there was no no you know plan
Speaker 8: that was that was the question that that actually wasn't
Speaker 8: clear how China wants to hold this summit and now
Speaker 8: we know that it's one day, and what kind of
Speaker 8: meetings we have and what discussions we have.
Speaker 7: What is your response to China's assertion that the EU's
Speaker 7: public percubin has been unfair, that the EU does have
Speaker 7: its own immense subsidies for its manufacturers and producers as well.
Speaker 7: Is there a double standard being applied.
Speaker 8: No, Well, our subsidies are in accordance with the WTO rules.
Speaker 3: So this is very very clear.
Speaker 8: We want a level playing fields. We are very worried
Speaker 8: about the economic version of China, and we are also
Speaker 8: worried about they're enabling Russia's war in Ukraine. So these
Speaker 8: are the two big.
Speaker 3: Issues we have.
Speaker 7: Let's talk about Gaza because President Trump said that a
Speaker 7: ceasfire could be insight this week or next week. What
Speaker 7: you envision as the EU's role in supporting that ceasfire.
Speaker 8: Well, we have been working very hard since the last
Speaker 8: Foreign Affairs Council that we had in Brussels with these
Speaker 8: reel is to really improve the situation on the ground
Speaker 8: with the humanitarian aid for the people, so that the
Speaker 8: situation would be better. We achieved an agreement on very
Speaker 8: concrete terms, how many trucks will get in, how many
Speaker 8: crossings will be opened, distribution points so that people would
Speaker 8: receive help of water distribution for the Gazan people, so
Speaker 8: waste management, a lot of a lot of issues. We
Speaker 8: reached an agreement and we really need to see also
Speaker 8: this agreement put in practice the implementation and I'm glad
Speaker 8: to hear that already today there were improvements like fuel
Speaker 8: getting to the hospitals and you know, the situation being
Speaker 8: a bit improved.
Speaker 1: Right.
Speaker 7: Ukraine's intelligence says that Loos is prepared to stand up
Speaker 7: to fifty troops to a place in Russia for mining operations.
Speaker 7: Given that certain love is here in Asia, and to
Speaker 7: what extent are you worried that he is here to
Speaker 7: beef up recruitment for the war in Russia in Ukraine.
Speaker 8: Well, of course Laos has denied this, and we will
Speaker 8: have a meeting also with representatives from LAOS to ask
Speaker 8: because we also give a lot of development aid to
Speaker 8: Laos and they, you know, they are supporting Russia's war,
Speaker 8: which is an existential threat to Europe. Then we have
Speaker 8: to look into our arrangements. It just can't be that
Speaker 8: getting you know, support from US and at the same
Speaker 8: time undermining US.
Speaker 7: Okay, just very quickly, we know that Miamar's junta has
Speaker 7: been squarely under Moscow's orbit as well. The cup's chief
Speaker 7: traveled to Russia and Belarus as well. Any insight as
Speaker 7: to what sort of cooperation is underway that could support
Speaker 7: Russia's war machine.
Speaker 8: Well, of course we are worried about all these steps,
Speaker 8: and it's clear if we look at the bigger picture
Speaker 8: that these autocratic rulers are really teaming up, which is
Speaker 8: dangerous for everybody. And that's why we really need to
Speaker 8: stand up for the international law, international rules, face order
Speaker 8: and defend it. With the countries that share the same values.
Speaker 8: All right, thank you so much.
Speaker 7: There was Kaya Kalas that e US top diplomat speaking
Speaker 7: to be here at the qual Long for a Convention
Speaker 7: center at the AS Foreign Minister's meeting.
Speaker 2: Listenne Summers a child swap writing. Second quarter earnings calls
Speaker 2: are critical to assess how companies are handling tariffs in
Speaker 2: terms of pass through and or profit margin compression.
Speaker 3: A place to say that.
Speaker 2: Listeners back with us for more Listen and welcome back
Speaker 2: to the program. We've got to pick up on down
Speaker 2: to rare lines. They seem to have some clarity and
Speaker 2: some confidence for the future. Do you think we'll see
Speaker 2: a repeat of that through this earning season?
Speaker 9: Well, John, I heard you earlier. I think you're absolutely
Speaker 9: right that, certainly within the airline space, it's going to
Speaker 9: be difficult for any other airlines that might have withdrawn
Speaker 9: guidance or provided a really wide range or scenario analysis
Speaker 9: to not narrow that in a little bit. But I
Speaker 9: found the use of the word stable a little bit
Speaker 9: odd or at odds with what has been a pretty
Speaker 9: unstable backdrop, particularly from a tariff's perspective. So I think
Speaker 9: I also heard you earlier. I think the passage of
Speaker 9: the budget builds is good in the sense that you've
Speaker 9: got that surety from a corporate tax extension standpoint, from
Speaker 9: an expensing and depreciation standpoint, But it is still a
Speaker 9: kind of whack a mole environment from a tariff perspective.
Speaker 9: So I wouldn't describe the backdrop as stable broadly, Lazen.
Speaker 6: Maybe not in the headline stance, but from an economic stance,
Speaker 6: our consumer is getting as tired from all of the
Speaker 6: headlines in the headline roulette as some of the trading parts.
Speaker 3: Seem to be getting.
Speaker 6: This idea that people are getting used to this environment
Speaker 6: of uncertainty, looking at their paychecks, looking at the fact
Speaker 6: that the economy keeps grinding along, and developing a level
Speaker 6: of certainty in that well.
Speaker 9: Except that, I think, Lisa, you pointed out earlier, we
Speaker 9: have a bifurcation. I think we may be using the
Speaker 9: K letter again to describe the backdrop, particularly as it
Speaker 9: relates to the consumer, because you are seeing pressure on
Speaker 9: some of the lower end consumers, inclusive of now that
Speaker 9: there's no more moratorium on the reporting of student loan delinquencies.
Speaker 9: They've shot through the roof that feeds into credit scores,
Speaker 9: credit availability, access to other forms of loans. You see
Speaker 9: it in the retail sales data that have been generally weaker.
Speaker 9: The next report coming up in the next week is important.
Speaker 9: You also saw the downward revision to Q one GDP.
Speaker 9: A big, pretty hefty chunk of that was a consumption
Speaker 9: revision lower. So I think there is still some resilience,
Speaker 9: but it's more up the income spectrum. I think where
Speaker 9: you're seeing the pressure most acutely is down the income spectrum.
Speaker 9: Now to mention the fact that within inflation data, the
Speaker 9: non discretionary components, the needs components. That's where inflation has
Speaker 9: been stickiest on the high side and added pressure for
Speaker 9: lower end consumers because more of their spending goes into
Speaker 9: those needs buckets.
Speaker 6: This really raises a sort of a deep question about
Speaker 6: the stock market and the sort of cyclicals versus defensives
Speaker 6: that we've been talking about, and what is defensive at
Speaker 6: a time where the big tech names seem to be
Speaker 6: in vulnerable to any potential changes in the broader economy.
Speaker 6: I just wonder keen cyclicals rally on the heels of
Speaker 6: just the high income consumer again and again, or are
Speaker 6: you going to start to see what you're talking about,
Speaker 6: that ke shaped economy play out in a much more
Speaker 6: significant way in the upcoming earnings quarters.
Speaker 9: Well, I think what I would guess what happened throughout
Speaker 9: second quarter earning season is a bit of a continuation
Speaker 9: of what we have seen in re and quarters, where
Speaker 9: the beats don't get rewarded anywhere near to the same
Speaker 9: degree that the misses get hit. So I think there
Speaker 9: is still that sensitivity, but I do think we are
Speaker 9: going to get more meat put on the bones in
Speaker 9: terms of what the strategy is, what the pricing strategy.
Speaker 9: We know that a lot of companies built up a
Speaker 9: massive amount of inventories at a low cost basis insteadsibly
Speaker 9: giving them an opportunity to kind of experiment with price increases.
Speaker 9: So I think we're going to our analysts are going
Speaker 9: to be asking pretty pointed questions about pricing strategy, about
Speaker 9: profit margins. In terms of the cyclical ap performance, I mean,
Speaker 9: industrials is by far the best performing sector this year,
Speaker 9: up thirteen or fourteen percent, besting even technology and communication
Speaker 9: services also at play here, and what's doing well ore
Speaker 9: sectors and industries that have a high portion of their
Speaker 9: revenue growth coming from overseas sources, and that's where weeker
Speaker 9: dollar has come into play, and also why a sector
Speaker 9: like tech is really pulling up the revisions ratio, the
Speaker 9: positive revisions ratio. The weaker dollar has been a big
Speaker 9: part of that, Liza.
Speaker 5: When it comes to strategies, we're all aware of the
Speaker 5: Trump put that was really prevalent as well in Trump's
Speaker 5: first administration.
Speaker 1: But you're pondering something new, the Trump call.
Speaker 2: What is that?
Speaker 9: Well, the notion, of course of the Trump put was
Speaker 9: and we saw it come into play on April night,
Speaker 9: that if there's enough weakness that kicks into the market.
Speaker 9: In the case of that first week in April, it
Speaker 9: wasn't just in the equity market. You saw the spike
Speaker 9: and bond yields, you saw the crush and the dollar.
Speaker 9: That combination sent a message to the administration woe, hence
Speaker 9: the announcement of the ninety ish delay for the reciprocal tariffs.
Speaker 9: But I think the open question that maybe we're getting
Speaker 9: a little bit of an answer to is if you
Speaker 9: get enough resilience in economic data, labor market data, you
Speaker 9: don't start to see a move higher with any meaning
Speaker 9: magnitude in the inflation data and the stock market trading
Speaker 9: at all time highs? Does that behold in the administration
Speaker 9: to sort of press forward with tariffs? So just the
Speaker 9: opposite way to think about it from an optioned lingo.
Speaker 2: Perspective raises big questions about August one Lazan as always
Speaker 2: perfect framing of things. Lizanne sunders there a child swamp
Speaker 2: on the latest in the equity market. Let's stick with
Speaker 2: the US consumer Bank for America releasing its monthly Consumer Checkpoint,
Speaker 2: highlighting ongoing softness into the summer months. The report finding
Speaker 2: spending rebounded in June but didn't fully offset declines in
Speaker 2: both April and May. Joining us now to discuss is
Speaker 2: Liz Everett Chris Berkley, head of Bank for America Institute,
Speaker 2: Let's got to see you.
Speaker 3: Great to be here.
Speaker 2: Let's just talk about where we are right now and
Speaker 2: also where we've been over the last few months, because
Speaker 2: this has been very confusing. We had this big pull
Speaker 2: forward and now we feel like we've had some payback.
Speaker 3: Where are we now?
Speaker 1: So I think it depends on if we're looking at
Speaker 1: services or if we're looking at retail. If we're looking
Speaker 1: at retail and we're looking at durables, things like electronics,
Speaker 1: things like furniture. We are still seeing spending kind of
Speaker 1: decline in those categories because you've got the payback from
Speaker 1: the tariff by ahead. But for the first time in
Speaker 1: frankly a long time, we actually saw what drove the
Speaker 1: consumer spending up in June was retail spending, and it
Speaker 1: was in the you know, things like gas. Some of
Speaker 1: that was pricing, but it was really broad based other
Speaker 1: than things like electronics and furniture. But grocery spending was up.
Speaker 1: General merchandise was up, clothing was up. That's what's driving
Speaker 1: the spending. Interestingly, also services services spending was actually down,
Speaker 1: just a little bit down about one tenths in June.
Speaker 1: But what breaking that down People are pulling back on
Speaker 1: discretionary on travel, and we can get into that because
Speaker 1: you're gonna want me to scare the circle with delta, yes, right, yeah,
Speaker 1: right away. So travel spending travel categories like airlines did decline.
Speaker 1: But if you delve into what drives total spending, right,
Speaker 1: it's the number of households that are spending, it's the
Speaker 1: average transaction size, and it's the number of transactions they're
Speaker 1: making a month, right, what we saw. When you break
Speaker 1: that down, there are certain households, and we can get
Speaker 1: into which ones, lower income households who are pulling back
Speaker 1: completely from making purchases in travel if we look at
Speaker 1: other categories, discrectionary categories like restaurants. On the other hand,
Speaker 1: again same analysis, you're seeing fewer but some households pull
Speaker 1: back completely.
Speaker 3: So we have fewer.
Speaker 1: Households making a transaction at all, but the people who
Speaker 1: are still going out to eat are going out more often,
Speaker 1: went out more often in June and paid more. So
Speaker 1: you've got a little bit of a disconnect. And it's
Speaker 1: kind of a tale of two cities.
Speaker 6: We've been talking about the K shaped economy and it
Speaker 6: seems to be just sort of widening the gap between
Speaker 6: the haves and the have nots, and 're seeing people
Speaker 6: who have the money to spend spend more and the
Speaker 6: people who don't spend less and less. And I just
Speaker 6: wonder if this is analogous to what we've seen over
Speaker 6: the past few years, or if this is almost an
Speaker 6: acceleration of that trend, if it feels unsustainable, if you
Speaker 6: can give us a sense of historically what this trend
Speaker 6: is heading.
Speaker 1: Towards, so there is a disconnect, and I think the
Speaker 1: best way to understand what's happening is to look at
Speaker 1: the labor market. The labor market on its whole has
Speaker 1: been very strong, but digging in again by income higher
Speaker 1: income households. Last month, we look at the money actually
Speaker 1: coming into accounts that accelerated third month in a row.
Speaker 1: It's just shy of three percent. Lower income households actually
Speaker 1: decelerated a little bit. They're still up, there's still up
Speaker 1: one point six percent, but that's down from one point
Speaker 1: eight percent. So you're seeing this difference. That being said,
Speaker 1: we go back a year two years, what was happening
Speaker 1: lower income households, we're having double digit income gains that's
Speaker 1: come down, whereas hir income households is particularly you know,
Speaker 1: a year eighteen months ago when we saw a lot
Speaker 1: of tech layoffs, hiringcome households had negative wage growth. Now
Speaker 1: they're coming up, and then they're also supported by hiringcome.
Speaker 1: Households having more invested in the markets are also being
Speaker 1: supported by that. So I think that's kind of the
Speaker 1: explanation for why the consumers behaving the way that it is.
Speaker 1: It comes down to the labor When you say lower
Speaker 1: income households are pulling back. Yeah, what's the reasoning you
Speaker 1: find behind it? Is it because their wages are not
Speaker 1: keeping up with inflation? Or is it actually this concern
Speaker 1: about policy in Washington, tariffs and the like. So one
Speaker 1: of the things we do at Bank of American Students
Speaker 1: we don't actually ask people what they think, because we
Speaker 1: find that when they tell us what they're doing, it
Speaker 1: doesn't necessarily align with what they say, So we look
Speaker 1: at what they are actually doing. So I can't tell
Speaker 1: you why they're doing it, specifically why they think they're
Speaker 1: doing it, but I but what I can tell you
Speaker 1: is that looking at the breakdown in where people are
Speaker 1: spending non discretionary spending item rents, insurance, utilities, those are
Speaker 1: growing faster than inflation. They're taking up a bigger piece
Speaker 1: of people's budget. And now that wages are growing, they're
Speaker 1: still growing, but growing more slowly, not keeping up. That's
Speaker 1: where I think the disconnect is.
Speaker 2: The refocus on necessities sort of seems to.
Speaker 6: Be which doesn't speak well to their ability to withstand
Speaker 6: any further increases, but also the idea that higher income
Speaker 6: households are seeing an acceleration and income at the same
Speaker 6: time you're seeing a deceleration and lower income that is
Speaker 6: different though what we saw in the immediate post pandemic reality.
Speaker 2: The case shaped economy has been a thing this morning,
Speaker 2: hasn't it ites?
Speaker 6: And I just wonder how sustainable that is. And it
Speaker 6: is a political issue as well.
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