1 00:00:09,720 --> 00:00:12,880 Speaker 1: Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keen with 2 00:00:13,560 --> 00:00:16,520 Speaker 1: David Gura. Daily we bring you insight from the best 3 00:00:16,560 --> 00:00:22,279 Speaker 1: of economics, finance, investment, and international relations. Find Bloomberg Surveillance 4 00:00:22,320 --> 00:00:27,000 Speaker 1: on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course, 5 00:00:27,320 --> 00:00:33,520 Speaker 1: on the Bloomberg We Get Things Out with Ellen Senter, 6 00:00:33,600 --> 00:00:36,000 Speaker 1: chief US Economists at Morgan Stanley. Any number of ways 7 00:00:36,000 --> 00:00:38,080 Speaker 1: we could go here, great to have you with us. 8 00:00:38,159 --> 00:00:40,479 Speaker 1: Let me start with the op ed in the Washington 9 00:00:40,479 --> 00:00:42,120 Speaker 1: Post that this morning. As I mentioned, we're gonna hear 10 00:00:42,159 --> 00:00:44,520 Speaker 1: from the Secretary of Commerce a little later on the show. 11 00:00:44,560 --> 00:00:48,040 Speaker 1: He wrote a piece about NAFTA rules, in particular, I 12 00:00:48,080 --> 00:00:52,040 Speaker 1: wonder what your senses of this administration's trade policy at 13 00:00:52,040 --> 00:00:55,160 Speaker 1: this point. We're approaching the third round of NAFTA renegotiations 14 00:00:55,320 --> 00:00:57,280 Speaker 1: at this point, what's your sense of the policy and 15 00:00:57,320 --> 00:00:59,840 Speaker 1: how things are going, particularly when it comes to to NAFTA. 16 00:01:00,400 --> 00:01:02,680 Speaker 1: I think, you know, David, it feels like we're finally 17 00:01:02,720 --> 00:01:05,319 Speaker 1: getting to the meat of some of these policies, whereas 18 00:01:05,360 --> 00:01:08,600 Speaker 1: before we were we were guessing at first for for 19 00:01:08,760 --> 00:01:11,560 Speaker 1: quite some time of what what Trump's policies would be like. 20 00:01:12,120 --> 00:01:14,200 Speaker 1: UM and then we got used to this sort of 21 00:01:14,520 --> 00:01:18,200 Speaker 1: threatened with a big stick, um and get get you know, 22 00:01:18,319 --> 00:01:22,640 Speaker 1: basically what you wanted, but but big threats. UM. Now 23 00:01:22,680 --> 00:01:26,040 Speaker 1: it feels like with wilber Ross um, you know, hitting 24 00:01:26,080 --> 00:01:28,760 Speaker 1: the ground running, getting to the meat of it, getting 25 00:01:28,800 --> 00:01:30,960 Speaker 1: to the heart of things. I think this is where 26 00:01:30,959 --> 00:01:33,759 Speaker 1: where some of the worries come back, will come back 27 00:01:33,800 --> 00:01:38,200 Speaker 1: after some relief for the Mexican pay. So let's say, uh, 28 00:01:38,240 --> 00:01:42,679 Speaker 1: because we're starting to see details that actually could make 29 00:01:42,760 --> 00:01:45,559 Speaker 1: it into a new NAFTA. Yeah, the piece is called 30 00:01:45,560 --> 00:01:47,760 Speaker 1: a NAFTA rules are killing our jobs. And he closes 31 00:01:47,800 --> 00:01:50,560 Speaker 1: with with the strong statement. He said that things are 32 00:01:50,600 --> 00:01:52,280 Speaker 1: going to change into President Trump. And this is only 33 00:01:52,320 --> 00:01:55,280 Speaker 1: just the beginning, rules of origin, just the beginning. Uh, 34 00:01:55,440 --> 00:01:57,560 Speaker 1: there's a go ahead. I can tell you that that 35 00:01:57,720 --> 00:01:59,720 Speaker 1: you know, I was. I was working at the State 36 00:01:59,760 --> 00:02:03,360 Speaker 1: of x is UM when NAFTA went in, and um, 37 00:02:03,440 --> 00:02:08,320 Speaker 1: we we benefited and continue to benefit immensely from all 38 00:02:08,360 --> 00:02:10,359 Speaker 1: of the NAFTA trade corridors that come right up through 39 00:02:10,360 --> 00:02:14,440 Speaker 1: the state. UM. The longest interstate UM in the country 40 00:02:14,480 --> 00:02:16,960 Speaker 1: I thirty five comes right up through the center of 41 00:02:17,000 --> 00:02:20,120 Speaker 1: Texas and is the main vein of NAFTA and all 42 00:02:20,160 --> 00:02:23,480 Speaker 1: of the ancillary businesses that popped up along the way, 43 00:02:23,880 --> 00:02:28,200 Speaker 1: supporting all of the the motor vehicle manufacturing on both 44 00:02:28,240 --> 00:02:30,920 Speaker 1: sides of the of the border. There has just been 45 00:02:30,919 --> 00:02:33,480 Speaker 1: a boon for the state. UM. And I think some 46 00:02:33,520 --> 00:02:36,639 Speaker 1: of that we get we get lost in just looking 47 00:02:36,680 --> 00:02:41,000 Speaker 1: at net trade numbers, UM and thinking that it's that 48 00:02:41,080 --> 00:02:44,120 Speaker 1: it's not good policy. That doesn't mean it's not dated. Um. 49 00:02:44,160 --> 00:02:45,880 Speaker 1: And certainly I would be a fan of looking at 50 00:02:45,880 --> 00:02:51,119 Speaker 1: any trade policy that's twentysoone years old. UM. But I'm 51 00:02:51,120 --> 00:02:53,000 Speaker 1: not I'm not sure that there's a whole lot that 52 00:02:53,040 --> 00:02:55,160 Speaker 1: needs to be done there. You mentioned that the trade data. 53 00:02:55,240 --> 00:02:57,120 Speaker 1: Let me just ask you about that in particular. We've 54 00:02:57,120 --> 00:02:59,280 Speaker 1: heard all of the rhetoric, and we wonder what might 55 00:02:59,400 --> 00:03:02,120 Speaker 1: or might not happened. We've been beginning to see changes 56 00:03:02,320 --> 00:03:04,480 Speaker 1: in the trade data itself as a result of the 57 00:03:04,520 --> 00:03:09,080 Speaker 1: administration's policies. Uh, not as a result of the administration's policies. 58 00:03:09,120 --> 00:03:12,040 Speaker 1: But yes, we are seeing much better net trade data. UM. 59 00:03:12,160 --> 00:03:16,280 Speaker 1: The are our leading indicator of global trade started turning 60 00:03:16,320 --> 00:03:19,560 Speaker 1: up sharply last summer. That's not a Trump trade that's 61 00:03:19,560 --> 00:03:22,200 Speaker 1: well before the election. UM. And on the back of that, 62 00:03:22,280 --> 00:03:25,760 Speaker 1: we could see that global growth was strengthening. UH. You know, 63 00:03:26,080 --> 00:03:27,959 Speaker 1: think about this, the first time we've ever been in 64 00:03:28,000 --> 00:03:32,359 Speaker 1: a situation where central banks, major banks like Morgan Stanley 65 00:03:32,440 --> 00:03:35,520 Speaker 1: other banks around the globe constantly were advising upward their 66 00:03:35,520 --> 00:03:38,560 Speaker 1: forecast for global growth. We started seeing it come through 67 00:03:38,800 --> 00:03:41,840 Speaker 1: UH in strong demand for U S exports. UH. And 68 00:03:41,880 --> 00:03:45,000 Speaker 1: then we've had stronger demand domestically this year, and so 69 00:03:45,040 --> 00:03:48,360 Speaker 1: it's just been a nice cocktail for net trade and 70 00:03:48,360 --> 00:03:50,480 Speaker 1: it's been one of the biggest sources of upside surprise 71 00:03:50,520 --> 00:03:53,560 Speaker 1: for GDP this year, completely off the edge. Good morning everyone. 72 00:03:53,640 --> 00:03:57,240 Speaker 1: David gerin Tom Keane was less traffic and John Tucker, 73 00:03:57,520 --> 00:03:59,840 Speaker 1: there is less traffic when you brought the hormor in 74 00:03:59,880 --> 00:04:03,600 Speaker 1: the morning right off the UN General Assembly meetings still 75 00:04:03,640 --> 00:04:07,320 Speaker 1: taking place, but there are fewer big muckety MUCKs in town. 76 00:04:07,520 --> 00:04:13,320 Speaker 1: So just me, but you know, just something out of 77 00:04:13,400 --> 00:04:18,000 Speaker 1: left field, which is what are our import dynamics right now? 78 00:04:18,120 --> 00:04:22,360 Speaker 1: We always talk export this that n X is exports, 79 00:04:22,480 --> 00:04:26,400 Speaker 1: less imports. What's the imports story right now? So imports 80 00:04:26,400 --> 00:04:29,240 Speaker 1: have been tracking about in line with our expectations this year. 81 00:04:29,279 --> 00:04:31,640 Speaker 1: So no real surprise at all because the consumer has 82 00:04:31,640 --> 00:04:35,679 Speaker 1: been pretty steady this year as well. Uh and uh, 83 00:04:35,800 --> 00:04:40,200 Speaker 1: and so it's really the net trade truly is better 84 00:04:40,680 --> 00:04:44,320 Speaker 1: because of exports growing about twice the pace that we 85 00:04:44,320 --> 00:04:47,680 Speaker 1: had originally forecasted this year. So it's really been that 86 00:04:47,760 --> 00:04:51,520 Speaker 1: global story UM showing through for the US. It gives 87 00:04:51,520 --> 00:04:55,039 Speaker 1: you a pop on exports against predicted imports, and that 88 00:04:55,120 --> 00:04:57,120 Speaker 1: gives you a little bit of a g d P pop. 89 00:04:57,120 --> 00:04:59,440 Speaker 1: Does it get you to three No, it doesn't get 90 00:04:59,480 --> 00:05:01,480 Speaker 1: you to three percent? And I know that. You know, 91 00:05:01,520 --> 00:05:03,480 Speaker 1: I've spent a good deal of time talking about this. 92 00:05:03,560 --> 00:05:05,640 Speaker 1: You know, it is just with with growth in our 93 00:05:05,720 --> 00:05:09,200 Speaker 1: labor force and productivity as low as it is, it 94 00:05:09,360 --> 00:05:12,880 Speaker 1: is just not possible to sustain three growth. You can 95 00:05:12,960 --> 00:05:16,040 Speaker 1: have quarters where we hit it UM, but sustain that 96 00:05:16,160 --> 00:05:18,880 Speaker 1: kind of growth. No, I'm here with Ellen Sentner, Morgan 97 00:05:18,920 --> 00:05:20,280 Speaker 1: Stanley and Ellen. Let me ask you about the FED 98 00:05:20,360 --> 00:05:22,560 Speaker 1: meeting we had this week, particularly about the Fed's view 99 00:05:22,640 --> 00:05:25,240 Speaker 1: of the US economy. How in line is that with 100 00:05:25,240 --> 00:05:26,599 Speaker 1: with your view? Do do you think you're all on 101 00:05:26,600 --> 00:05:30,080 Speaker 1: the same page. Yeah, they're pretty upbeat. I mean this 102 00:05:30,160 --> 00:05:34,880 Speaker 1: is the first time ever since they began submitting forecasts 103 00:05:35,240 --> 00:05:37,799 Speaker 1: that they have not had to revise downward their growth 104 00:05:37,839 --> 00:05:40,440 Speaker 1: forecast this year. In fact, they've revised them upward. And 105 00:05:40,440 --> 00:05:42,400 Speaker 1: they're not the only global central bank that was in 106 00:05:42,400 --> 00:05:45,680 Speaker 1: that position. So it's been an extraordinary story. Um. We 107 00:05:45,720 --> 00:05:49,560 Speaker 1: saw a little bit better growth numbers yet again in 108 00:05:49,600 --> 00:05:53,560 Speaker 1: the out of this latest meeting. So even even Governor 109 00:05:53,600 --> 00:05:57,840 Speaker 1: Brainerd unknown Dove on the FED that's that said, I'm 110 00:05:57,880 --> 00:06:01,640 Speaker 1: I find low inflation troubling. She still spent the first 111 00:06:01,640 --> 00:06:04,359 Speaker 1: part of her speech talking about how upbeat she is 112 00:06:04,400 --> 00:06:07,680 Speaker 1: about the economy. I mean, it's it's it's undeniable. It 113 00:06:07,760 --> 00:06:12,560 Speaker 1: really is this complete disconnect between inflation and the economy. Um. 114 00:06:12,600 --> 00:06:14,520 Speaker 1: And I'm glad to see that there are those on 115 00:06:14,560 --> 00:06:17,880 Speaker 1: the FED that are not being lulled into doing nothing 116 00:06:18,440 --> 00:06:21,800 Speaker 1: on policy just because inflation is low. Inflation is low 117 00:06:21,880 --> 00:06:25,000 Speaker 1: right now, as Tom and I have discussed this morning, Uh, 118 00:06:25,040 --> 00:06:28,840 Speaker 1: for structural reasons. Uh. And so it should not low 119 00:06:28,880 --> 00:06:31,719 Speaker 1: inflation should not inform you that there's a ton of 120 00:06:31,720 --> 00:06:34,360 Speaker 1: slack still left in the economy. That's when you make 121 00:06:34,440 --> 00:06:37,880 Speaker 1: when you get the jump condition to tangible inflation, I 122 00:06:37,880 --> 00:06:41,080 Speaker 1: get the idea leading lagging and you're just to wait, wait, wait, 123 00:06:41,680 --> 00:06:47,880 Speaker 1: but but when when would you envision tangible blended servicing 124 00:06:47,920 --> 00:06:51,640 Speaker 1: goods inflation. I would envision it on the back of 125 00:06:51,720 --> 00:06:55,880 Speaker 1: much stronger productivity numbers, because wage growth will also rise 126 00:06:56,000 --> 00:06:59,800 Speaker 1: on the back of that. I also um uh in 127 00:07:00,360 --> 00:07:03,000 Speaker 1: as the unemployment rate falls further, Yes, it has to 128 00:07:03,080 --> 00:07:06,120 Speaker 1: fall further. I mean at four point four, we're just 129 00:07:06,400 --> 00:07:09,040 Speaker 1: not close enough to NEHRU. I disagree with the Fed. 130 00:07:09,120 --> 00:07:11,920 Speaker 1: I don't think that we're below nehru or full employment. 131 00:07:12,640 --> 00:07:14,360 Speaker 1: So you are going to make some news here. You're 132 00:07:14,360 --> 00:07:17,160 Speaker 1: predicting we go unto four percent unemployment rate, and we 133 00:07:17,200 --> 00:07:19,200 Speaker 1: have a select few looking for three and a half 134 00:07:19,520 --> 00:07:23,040 Speaker 1: or even three point zero percent unemployment rate. Job growth 135 00:07:23,040 --> 00:07:27,160 Speaker 1: has been so robust, surprisingly robust this late in the cycle. 136 00:07:27,320 --> 00:07:30,040 Speaker 1: It needs too slow. If it does not slow, you 137 00:07:30,200 --> 00:07:33,760 Speaker 1: very quickly get down to a sub for unemployment rate. Uh. 138 00:07:34,320 --> 00:07:38,040 Speaker 1: You have that published number. No, we're not publishing. Some 139 00:07:38,520 --> 00:07:43,000 Speaker 1: were making we've got four do something. We're I'm saying 140 00:07:43,040 --> 00:07:45,560 Speaker 1: it could come downtime. You're gonna get me in trouble. 141 00:07:45,760 --> 00:07:47,680 Speaker 1: But we have a forecast that we are at four 142 00:07:47,720 --> 00:07:50,040 Speaker 1: one next year. Now. The FED brought their forecast down 143 00:07:50,040 --> 00:07:53,520 Speaker 1: to that as well. UH. In September, UM but it's 144 00:07:53,560 --> 00:07:57,520 Speaker 1: not difficult to envision a sub for number if job 145 00:07:57,520 --> 00:08:00,720 Speaker 1: growth does not slow. We have forecast to job growth 146 00:08:00,760 --> 00:08:03,440 Speaker 1: is slowing because we do have a forecast for better productivity, 147 00:08:04,240 --> 00:08:07,080 Speaker 1: which which means you don't have to create as many 148 00:08:07,200 --> 00:08:10,480 Speaker 1: jobs to generate as much g d p UM. But 149 00:08:11,160 --> 00:08:16,360 Speaker 1: they fed while while yelling Um and her her dwindling 150 00:08:16,400 --> 00:08:21,000 Speaker 1: counterparts on the board, Um believe in that the Phillips 151 00:08:21,040 --> 00:08:23,280 Speaker 1: curve is pretty much dead right now. They do believe 152 00:08:23,320 --> 00:08:25,560 Speaker 1: in the non linearity of the Phillips curve that it 153 00:08:25,640 --> 00:08:28,480 Speaker 1: does exert itself very late in the cycle when the 154 00:08:28,520 --> 00:08:31,160 Speaker 1: unemployment rate has fallen that low, and there is strong 155 00:08:31,280 --> 00:08:36,080 Speaker 1: evidence of that. Uh. And so we just haven't gotten there. Okay, 156 00:08:36,280 --> 00:08:38,839 Speaker 1: Stevid gern toom Keen on a Friday, trying to get smarter, 157 00:08:38,920 --> 00:08:40,720 Speaker 1: trying to get into the weekend reading. We're doing that 158 00:08:40,800 --> 00:08:44,320 Speaker 1: with Ellen Zentner of Morgan Stanley. Ellen, you know the 159 00:08:44,320 --> 00:08:48,960 Speaker 1: book and you know the wonderful and quiet and esteem 160 00:08:49,000 --> 00:08:54,359 Speaker 1: Dale Jorgensen of Harvard long Ago and Far Away Information 161 00:08:54,440 --> 00:08:58,480 Speaker 1: Technology and the American Growth Resurgence, which was a courageous 162 00:08:58,520 --> 00:09:02,600 Speaker 1: book which said, okay, who really invests? And it was 163 00:09:02,760 --> 00:09:07,920 Speaker 1: hyper granular. It was remarkable. Is a snapshot into this 164 00:09:08,040 --> 00:09:11,760 Speaker 1: thing a million years ago called technology? That book is 165 00:09:11,840 --> 00:09:15,600 Speaker 1: dead given where we are today. If Jorgensen was to 166 00:09:15,640 --> 00:09:18,360 Speaker 1: write that book today, what would you find out about 167 00:09:18,559 --> 00:09:24,520 Speaker 1: use of technology in American investment? Well, it's it's grown. 168 00:09:24,559 --> 00:09:28,040 Speaker 1: I mean, it's diffused across the economy. Um. I think 169 00:09:28,160 --> 00:09:31,960 Speaker 1: what we've also seen though, was that the productivity miracle 170 00:09:32,000 --> 00:09:35,640 Speaker 1: of the late nineties early two thousand's, that was the anomaly, 171 00:09:35,840 --> 00:09:40,680 Speaker 1: that was the outlier. Um. And you know, while technology 172 00:09:40,720 --> 00:09:44,280 Speaker 1: is diffused and become more broad based around the economy, 173 00:09:44,360 --> 00:09:49,040 Speaker 1: it results in a lot of non marketable or non 174 00:09:49,240 --> 00:09:55,959 Speaker 1: GDP uh productivity. Right. So it's not productivity in the 175 00:09:56,000 --> 00:09:58,679 Speaker 1: traditional way we think of it. It's it's David, when 176 00:09:58,679 --> 00:10:01,360 Speaker 1: you're sitting around, you know, doing the one click buy 177 00:10:01,440 --> 00:10:05,040 Speaker 1: on Amazon in the evening, it saves you more time, right, 178 00:10:05,040 --> 00:10:07,280 Speaker 1: it makes your life nicer. And so it doesn't translate 179 00:10:07,280 --> 00:10:09,960 Speaker 1: to g d P, but it but there's an amenity 180 00:10:10,040 --> 00:10:12,640 Speaker 1: factor there. It makes our lives nicer. Okay, it makes 181 00:10:12,640 --> 00:10:14,760 Speaker 1: our lives nicer if we're the elites, et cetera. That 182 00:10:14,880 --> 00:10:17,560 Speaker 1: what I'm getting at here, folks, is that we're diffused, 183 00:10:17,559 --> 00:10:20,000 Speaker 1: which is from Jean Clautriche the idea of only in 184 00:10:20,040 --> 00:10:23,280 Speaker 1: the US do we diffuse as quickly and as lou 185 00:10:23,400 --> 00:10:28,240 Speaker 1: Alexander over it, Namura brilliantly wrote, technology helps a group 186 00:10:29,120 --> 00:10:32,800 Speaker 1: and technology hurts a group, which those groups is winning 187 00:10:32,880 --> 00:10:35,959 Speaker 1: Right now, Tim Cook wants me to believe technology is 188 00:10:36,000 --> 00:10:39,400 Speaker 1: helping us all. A lot of our listeners don't agree. Well, 189 00:10:39,440 --> 00:10:44,160 Speaker 1: the the early and the and the broad adopters of 190 00:10:44,280 --> 00:10:47,880 Speaker 1: technology is who it benefits. And they also happened to 191 00:10:47,920 --> 00:10:51,079 Speaker 1: be the same ones that invest uh in that type 192 00:10:51,080 --> 00:10:53,880 Speaker 1: of technology um and so they're gaining the wealth from 193 00:10:53,880 --> 00:10:56,320 Speaker 1: that technology, but they're also gaining from the use of 194 00:10:56,360 --> 00:11:00,640 Speaker 1: that technology. And rural areas, lower middle and lower income 195 00:11:00,720 --> 00:11:05,080 Speaker 1: families with less access UM and less means to enjoy 196 00:11:05,200 --> 00:11:07,800 Speaker 1: that technology, they are the ones that that miss out. 197 00:11:08,320 --> 00:11:10,120 Speaker 1: I want to ask you about immigration here in last 198 00:11:10,120 --> 00:11:11,760 Speaker 1: few minutes that we have Tim Cook, the CEO of 199 00:11:11,760 --> 00:11:13,679 Speaker 1: Apple Tom alluding to Apple just a moment ago. Speaking 200 00:11:13,679 --> 00:11:15,880 Speaker 1: at the Bloomberg Global Business Form a little earlier this week, 201 00:11:15,880 --> 00:11:17,760 Speaker 1: he made a point that's it really resonated with me. 202 00:11:17,800 --> 00:11:20,360 Speaker 1: He said, if he were leading a country, he wanted 203 00:11:20,360 --> 00:11:23,600 Speaker 1: to attract the best talent possible by doing that from wherever, 204 00:11:24,440 --> 00:11:26,120 Speaker 1: that's going to create jobs. What do we know about 205 00:11:26,120 --> 00:11:30,840 Speaker 1: the interplay of immigration the creation of jobs in countries? Oh, David, 206 00:11:30,880 --> 00:11:33,840 Speaker 1: don't get me started. The uh you know that it's 207 00:11:33,920 --> 00:11:37,160 Speaker 1: it's it's been so long overdue that we overhaul our 208 00:11:37,200 --> 00:11:41,480 Speaker 1: immigration policies around skilled labor um to fill positions that 209 00:11:41,520 --> 00:11:44,199 Speaker 1: we can't fill. And the unfortunately thing is is that 210 00:11:44,280 --> 00:11:48,040 Speaker 1: the faults run deep on both the Democrat within the 211 00:11:48,040 --> 00:11:52,240 Speaker 1: Democratic Party and the Republican Party, UM, who don't want 212 00:11:52,280 --> 00:11:55,280 Speaker 1: to deal with that as a line item unless they 213 00:11:55,280 --> 00:11:57,040 Speaker 1: only want to deal with it if it's part of 214 00:11:57,040 --> 00:12:00,960 Speaker 1: a broader immigration reform, which no one can agree on. UM, 215 00:12:01,040 --> 00:12:05,480 Speaker 1: and it's just an egregious error. UM. I don't care 216 00:12:05,800 --> 00:12:09,760 Speaker 1: if we put someone from outside of the US in 217 00:12:09,800 --> 00:12:12,200 Speaker 1: a seat that we can't feel, and they send three 218 00:12:12,280 --> 00:12:15,360 Speaker 1: quarters of their pay back to their home country, they 219 00:12:15,360 --> 00:12:18,200 Speaker 1: still have to pay rent here in the US. We 220 00:12:18,280 --> 00:12:21,040 Speaker 1: get income taxes from them here in the US. Maybe 221 00:12:21,040 --> 00:12:23,320 Speaker 1: they buy home and we get property taxes from they 222 00:12:23,400 --> 00:12:27,080 Speaker 1: spend there at the grocery store. We get something, right now, 223 00:12:27,080 --> 00:12:30,120 Speaker 1: we get nothing if we don't feel that seat. Dovetail 224 00:12:30,200 --> 00:12:32,320 Speaker 1: that with what we're seeing when it comes to tax 225 00:12:32,360 --> 00:12:34,480 Speaker 1: reform as well. You talk about the the impulse to 226 00:12:34,480 --> 00:12:37,440 Speaker 1: do something comprehensive, but the inability to do something comprehensive 227 00:12:37,440 --> 00:12:40,160 Speaker 1: when it comes to immigration reform. Are we seeing the 228 00:12:40,200 --> 00:12:41,880 Speaker 1: same thing when it comes to to tax from How 229 00:12:41,960 --> 00:12:44,360 Speaker 1: optimistic are you that the word comprehensive is going to 230 00:12:44,440 --> 00:12:47,280 Speaker 1: proceed a tax reform as the as the months we're 231 00:12:47,280 --> 00:12:52,200 Speaker 1: on here, Well, Um, genuinely comprehensive is what both sides 232 00:12:52,240 --> 00:12:55,360 Speaker 1: want to do. Like genuinely they are working. Tax policy 233 00:12:55,360 --> 00:12:57,320 Speaker 1: writers are working behind the scenes to try and get 234 00:12:57,400 --> 00:13:00,640 Speaker 1: something UH done. But we will see tax form live 235 00:13:00,679 --> 00:13:04,000 Speaker 1: and die ten times before it gets past, and we're 236 00:13:04,040 --> 00:13:06,480 Speaker 1: calling it more of something like tax relief rather than 237 00:13:06,520 --> 00:13:09,880 Speaker 1: tax reform. It will have to go through the reconciliation process. 238 00:13:09,880 --> 00:13:11,960 Speaker 1: There's no way around it, and so it will sunset 239 00:13:12,000 --> 00:13:14,760 Speaker 1: in ten years. UM. We think something like a phase 240 00:13:14,920 --> 00:13:18,199 Speaker 1: get a phased in corporate tax rate UH dropped to 241 00:13:18,240 --> 00:13:22,160 Speaker 1: about but the corporate side will have to be revenue neutral, 242 00:13:22,200 --> 00:13:23,959 Speaker 1: so you're gonna have to give up some other things 243 00:13:23,960 --> 00:13:28,000 Speaker 1: for that as well, like immediate expensing. UM. On the 244 00:13:28,040 --> 00:13:31,880 Speaker 1: personal side, you get some condensing of the brackets. UM. 245 00:13:32,240 --> 00:13:35,760 Speaker 1: Uh phase out some of the deductions at the higher 246 00:13:35,800 --> 00:13:39,040 Speaker 1: income levels, but all of its sunsets after after ten 247 00:13:39,160 --> 00:13:41,640 Speaker 1: years UM and so I we're not calling it reform. 248 00:13:41,640 --> 00:13:45,920 Speaker 1: We're calling it um uh, you know, tax relieve. But 249 00:13:46,000 --> 00:13:48,079 Speaker 1: we do think we get something done, but in that 250 00:13:48,120 --> 00:13:51,400 Speaker 1: critical March April period next year when typically Congress is 251 00:13:51,440 --> 00:13:53,679 Speaker 1: forced to do something. Allison there, thank you so much 252 00:13:53,679 --> 00:13:57,440 Speaker 1: for the time to chief economists for Morgan Stanley. UH 253 00:13:57,480 --> 00:14:01,200 Speaker 1: with terrific respective and again way out front on more 254 00:14:01,360 --> 00:14:16,560 Speaker 1: tepid glide path to economic growth in America. How serious 255 00:14:16,600 --> 00:14:20,080 Speaker 1: should we take the possibility of a hydrogen bomb test 256 00:14:20,360 --> 00:14:24,080 Speaker 1: in the Pacific? I am not in the Department of 257 00:14:24,160 --> 00:14:27,440 Speaker 1: Defense or National Security, so I can't really judge that. 258 00:14:27,920 --> 00:14:31,000 Speaker 1: I think you should take very seriously the new sanctions. 259 00:14:31,520 --> 00:14:36,640 Speaker 1: These are unprecedentedly severe, and I think they'll work. I 260 00:14:36,680 --> 00:14:41,320 Speaker 1: think they'll have a big impact because China yesterday came 261 00:14:41,320 --> 00:14:45,000 Speaker 1: out with their very strong statement that their central bank 262 00:14:45,120 --> 00:14:48,280 Speaker 1: is going to cut off the Chinese banks from dealing 263 00:14:48,320 --> 00:14:52,240 Speaker 1: with North Korea. China has been the main trade partner 264 00:14:52,360 --> 00:14:56,440 Speaker 1: for North Korea, followed by Russia and then some very 265 00:14:56,480 --> 00:15:00,600 Speaker 1: small ones. You cut off the currency flows, shooting off 266 00:15:00,680 --> 00:15:04,600 Speaker 1: these rockets as rocketman is want to do. That's a 267 00:15:04,600 --> 00:15:08,040 Speaker 1: pretty expensive hobby. I gotta get cash from somewhere because 268 00:15:08,080 --> 00:15:11,520 Speaker 1: I think a lot of those parts must be important. So, 269 00:15:11,560 --> 00:15:14,160 Speaker 1: as you suggest, China is key to having leverage on 270 00:15:14,280 --> 00:15:17,000 Speaker 1: North Korea, as the President has said time and again 271 00:15:17,040 --> 00:15:19,240 Speaker 1: as a proclamator. At the same time, you have an 272 00:15:19,240 --> 00:15:22,840 Speaker 1: agenda at the sectary of commerce with China when its 273 00:15:22,880 --> 00:15:26,360 Speaker 1: contempts to trade. How much is that complicated what you 274 00:15:26,400 --> 00:15:29,360 Speaker 1: can accomplish in the trade area because we also need 275 00:15:29,400 --> 00:15:31,960 Speaker 1: their help in the geopolitical area. Does that limit what 276 00:15:32,040 --> 00:15:34,600 Speaker 1: you can get done with China? Well, the a number 277 00:15:34,640 --> 00:15:38,120 Speaker 1: one priority of the President is to protect the American people. 278 00:15:38,720 --> 00:15:42,400 Speaker 1: So everything has to be focused number one and that. 279 00:15:43,040 --> 00:15:46,560 Speaker 1: But I'm going over to China this weekend, in fact 280 00:15:46,600 --> 00:15:49,840 Speaker 1: tomorrow morning, and so we'll see where we are on 281 00:15:49,960 --> 00:15:52,320 Speaker 1: the other subjects. Well, where are we on the other 282 00:15:52,320 --> 00:15:55,440 Speaker 1: subjects because after the Mara Lago meeting with President g 283 00:15:55,960 --> 00:15:58,400 Speaker 1: there was a bilateral process put in place that you've 284 00:15:58,440 --> 00:16:00,960 Speaker 1: come on our program and talked about. Uh, there were 285 00:16:01,000 --> 00:16:04,400 Speaker 1: meetings in Washington that we're expected bear fruit, for example 286 00:16:04,440 --> 00:16:08,960 Speaker 1: on steel didn't happen. Where is that process, Is it stalled? 287 00:16:09,080 --> 00:16:10,880 Speaker 1: Is it behind where you thought it would be at 288 00:16:10,920 --> 00:16:14,520 Speaker 1: this point. Now, the difference is that the first hundred 289 00:16:14,560 --> 00:16:19,280 Speaker 1: days was low hanging fruit, the livestock thing, where we're 290 00:16:19,360 --> 00:16:22,800 Speaker 1: very grateful for it, and well, it's very important. It 291 00:16:22,880 --> 00:16:27,080 Speaker 1: had been kicked around for fourteen years, so making that 292 00:16:27,160 --> 00:16:31,000 Speaker 1: into a reality was much simpler than some of the 293 00:16:31,040 --> 00:16:35,320 Speaker 1: bigger issues like global over capacity and basic metals like 294 00:16:35,440 --> 00:16:40,480 Speaker 1: intellectual property rights. Those are tough issues, much more central issues, 295 00:16:40,680 --> 00:16:44,840 Speaker 1: much bigger dollar denominated. So it shouldn't be too surprising 296 00:16:45,200 --> 00:16:48,680 Speaker 1: that as you get too harder and more complicated issues 297 00:16:48,680 --> 00:16:51,720 Speaker 1: and bigger ones, that it takes a little longer secretyros. 298 00:16:52,080 --> 00:16:56,560 Speaker 1: Beijing offers a cup steal over capacity by by quite 299 00:16:56,600 --> 00:16:59,600 Speaker 1: a significant amount. And according to reports, the President rejected 300 00:16:59,600 --> 00:17:02,000 Speaker 1: the deal deal that you endorsed. Why didn't he like 301 00:17:02,080 --> 00:17:05,880 Speaker 1: the deal? Well, it's more complicated than that. We were 302 00:17:05,960 --> 00:17:10,280 Speaker 1: rethinking through the whole approach to the trade relations with 303 00:17:10,480 --> 00:17:14,920 Speaker 1: China and um if you notice he very quickly followed 304 00:17:14,920 --> 00:17:18,800 Speaker 1: that up with the three or one initiative and intellectual 305 00:17:18,840 --> 00:17:22,120 Speaker 1: property rights. So it was a question of picking timing 306 00:17:22,160 --> 00:17:25,280 Speaker 1: and priorities. Well, let's deal with the intellectual property rights 307 00:17:25,280 --> 00:17:27,320 Speaker 1: a little bit later. Let's deal with still right now. 308 00:17:27,440 --> 00:17:30,119 Speaker 1: The President is reportedly sat in the Oval Office and said, 309 00:17:30,359 --> 00:17:33,359 Speaker 1: I want tariffs. Why is he not getting the tariffs? 310 00:17:33,400 --> 00:17:35,919 Speaker 1: Secretary Ross, why is no one around him delivering the 311 00:17:35,920 --> 00:17:39,680 Speaker 1: tariffs that he wants to see? Well, you're you're talking 312 00:17:39,720 --> 00:17:43,000 Speaker 1: about rumors of what went on in the White House, 313 00:17:43,040 --> 00:17:46,320 Speaker 1: So I'm not really going to comment on those. But 314 00:17:46,520 --> 00:17:50,639 Speaker 1: on steel, he has announced publicly that he wants that 315 00:17:51,520 --> 00:17:55,760 Speaker 1: two thirty two report delayed until we get through the 316 00:17:55,800 --> 00:17:58,760 Speaker 1: tax thing, because we don't want to interfere with the 317 00:17:58,880 --> 00:18:03,080 Speaker 1: legislative agenda. The text thing is the single most important 318 00:18:03,119 --> 00:18:07,720 Speaker 1: thing on our plate right now, because that plus regulatory 319 00:18:07,840 --> 00:18:12,800 Speaker 1: reform is what it really drive jobs back, drive job 320 00:18:12,920 --> 00:18:16,920 Speaker 1: creation here and help the balance of payments. Sexually, Ross 321 00:18:16,960 --> 00:18:19,080 Speaker 1: that the President is not asking for taris. That's not 322 00:18:19,119 --> 00:18:21,840 Speaker 1: what he's asking for. I didn't say that. What I 323 00:18:21,920 --> 00:18:26,359 Speaker 1: said is you're commenting on someone's You can an official 324 00:18:26,400 --> 00:18:28,480 Speaker 1: to confirm whether that's true or not it's the President 325 00:18:28,520 --> 00:18:32,199 Speaker 1: asking for taris or not. Well, I don't really comment 326 00:18:32,440 --> 00:18:38,840 Speaker 1: on allegedly leaked information. I'm sorry, But but aside from that, 327 00:18:39,359 --> 00:18:43,320 Speaker 1: forget whatever reports, Um what kind of tariffs would be 328 00:18:43,720 --> 00:18:47,680 Speaker 1: acceptable to the White House. Well, the report hasn't been 329 00:18:47,720 --> 00:18:51,600 Speaker 1: formally issued, and the report will provide the president with 330 00:18:51,680 --> 00:18:55,280 Speaker 1: some options. So once he's had a chance to digest 331 00:18:55,320 --> 00:18:58,320 Speaker 1: the report, then we'll know exactly what it is he 332 00:18:58,560 --> 00:19:01,760 Speaker 1: comes up with. So we are talking with overass the 333 00:19:01,800 --> 00:19:05,840 Speaker 1: secondary commerce for Bloomberg Radio and Television. Um, let's talk 334 00:19:05,840 --> 00:19:08,199 Speaker 1: about all those proceedings that seemed to be pending at 335 00:19:08,200 --> 00:19:09,840 Speaker 1: the moment. It's not just the two three two, there's 336 00:19:09,840 --> 00:19:12,159 Speaker 1: a three oh one. There are various proceedings that we 337 00:19:12,320 --> 00:19:14,920 Speaker 1: frankly have been expecting some action on before this. Now 338 00:19:14,960 --> 00:19:17,720 Speaker 1: we may have been mistaken, But should we wait until 339 00:19:17,800 --> 00:19:21,159 Speaker 1: tax reform is actually enacted before we see progress on 340 00:19:21,200 --> 00:19:24,639 Speaker 1: any of those matters? Well, and two thirty two, the 341 00:19:24,680 --> 00:19:29,280 Speaker 1: policy decision has been made to postpone that until the 342 00:19:29,280 --> 00:19:33,560 Speaker 1: tax bill. The three oh one is a different kind 343 00:19:33,600 --> 00:19:38,600 Speaker 1: of a thing. Uh. It's easier from the congressional relations 344 00:19:38,680 --> 00:19:42,080 Speaker 1: point of view to deal with the intellectual property issue 345 00:19:42,520 --> 00:19:46,120 Speaker 1: than to deal with these steal issues. So I wouldn't 346 00:19:46,160 --> 00:19:49,640 Speaker 1: put that in the same category. But that's in the 347 00:19:49,640 --> 00:19:53,760 Speaker 1: early stages. Remember, the President just directed it, and I 348 00:19:53,920 --> 00:19:58,440 Speaker 1: pr while it's a huge and hugely important issue. It's 349 00:19:58,480 --> 00:20:02,760 Speaker 1: also very very comple x and especially what complex is 350 00:20:02,840 --> 00:20:05,920 Speaker 1: figuring out what remedies. So let's move to n after 351 00:20:06,119 --> 00:20:09,280 Speaker 1: for a second. Um, what percentage do you want to 352 00:20:09,280 --> 00:20:11,199 Speaker 1: see from the rules of origin? What would you be 353 00:20:11,240 --> 00:20:14,920 Speaker 1: happy with? What percentage of the rules of origin? What? 354 00:20:14,920 --> 00:20:17,680 Speaker 1: What percentage would you be happy with? What's more complicated 355 00:20:17,720 --> 00:20:21,280 Speaker 1: than that, it's the definition of the products as well. 356 00:20:21,400 --> 00:20:24,400 Speaker 1: One of the problems with the existing rules of origin. 357 00:20:24,840 --> 00:20:29,600 Speaker 1: Take it on autos, for example, they've listed exact parts 358 00:20:29,640 --> 00:20:33,480 Speaker 1: to which the percentages applied. Now at the time, that 359 00:20:33,640 --> 00:20:37,399 Speaker 1: sounded like a very good, very precise thing. Problem is, 360 00:20:37,440 --> 00:20:41,320 Speaker 1: automotive technology has moved on, so a lot of those 361 00:20:41,359 --> 00:20:45,240 Speaker 1: parts aren't even used anymore, and a lot of electronic 362 00:20:45,359 --> 00:20:49,440 Speaker 1: parts that didn't exist back when after was started are 363 00:20:49,480 --> 00:20:53,000 Speaker 1: now very important to the mix of the car. And 364 00:20:53,040 --> 00:20:56,440 Speaker 1: so you've seen in the editorial front and that ahead 365 00:20:56,480 --> 00:21:00,640 Speaker 1: in the Washington Post today, the US kind ten has 366 00:21:00,720 --> 00:21:06,280 Speaker 1: gone down quite appreciatively, and the non Mexican, non US, 367 00:21:06,440 --> 00:21:10,800 Speaker 1: non Canada component, namely China and the rest of Asia, 368 00:21:11,080 --> 00:21:14,439 Speaker 1: has gone up quite considerably. Because I just don't understand, 369 00:21:14,480 --> 00:21:16,920 Speaker 1: because you mentioned the taxes are obviously front and center 370 00:21:16,960 --> 00:21:19,320 Speaker 1: to the agenda for growth and everything. Okay, so then 371 00:21:19,359 --> 00:21:21,159 Speaker 1: you're an automaker in the US and you get a 372 00:21:21,200 --> 00:21:23,199 Speaker 1: tax rate that's better, and you're happy about that. But 373 00:21:23,200 --> 00:21:25,440 Speaker 1: on the flip side, you're gonna have to make more 374 00:21:25,480 --> 00:21:27,560 Speaker 1: products in the US with US made steel, and that 375 00:21:27,600 --> 00:21:29,720 Speaker 1: winds up hurting your margins and hurting your earnings. Like, 376 00:21:29,920 --> 00:21:32,760 Speaker 1: I don't understand how you square those two things. Well, 377 00:21:32,800 --> 00:21:37,000 Speaker 1: they're not precise trade offs as such, but US industry 378 00:21:37,200 --> 00:21:41,120 Speaker 1: encompasses a lot more than just the US automakers. That's 379 00:21:41,160 --> 00:21:44,679 Speaker 1: that's number one. We think that if we get the 380 00:21:44,760 --> 00:21:47,800 Speaker 1: kind of tax relief that we want, and we get 381 00:21:47,840 --> 00:21:51,800 Speaker 1: another one percentage increase in the growth rate of the 382 00:21:51,920 --> 00:21:55,399 Speaker 1: g d P, that adds ten trillion dollars to the 383 00:21:55,480 --> 00:22:00,840 Speaker 1: economy over ten years, adds three trillion dollars to the 384 00:22:00,880 --> 00:22:04,840 Speaker 1: federal tax for revenues. Those are staggering numbers that dwarfs 385 00:22:05,359 --> 00:22:08,560 Speaker 1: anything one could do with trade. Actually, RUSS want to 386 00:22:08,600 --> 00:22:10,959 Speaker 1: get a handle on how you think about economics at 387 00:22:10,960 --> 00:22:16,000 Speaker 1: the moment. Do you believe in comparative advantage? Sure, because 388 00:22:16,040 --> 00:22:19,200 Speaker 1: at the moment we're defining relationships with countries pretty much 389 00:22:19,200 --> 00:22:21,800 Speaker 1: through the prism of a trade deficit or a trade 390 00:22:21,800 --> 00:22:25,639 Speaker 1: surplus tride surplus good, tried deficit bad. Why are we 391 00:22:25,720 --> 00:22:28,040 Speaker 1: looking at it that way? Well, I think that's a 392 00:22:28,080 --> 00:22:31,680 Speaker 1: little bit of an over a simplification. There are some 393 00:22:31,800 --> 00:22:35,480 Speaker 1: causes of trade deficit that we don't mind. For example, 394 00:22:36,080 --> 00:22:40,280 Speaker 1: we still are not energy independent. We therefore have to 395 00:22:40,400 --> 00:22:44,520 Speaker 1: import oil. That's about a hundred and sixty five billion 396 00:22:44,560 --> 00:22:48,240 Speaker 1: a year on the negative side of trade. Well, that 397 00:22:48,400 --> 00:22:51,560 Speaker 1: isn't anybody's fault. And if we choose to buy it 398 00:22:51,600 --> 00:22:54,720 Speaker 1: from Canada versus buying it from somewhere else, if you rust, 399 00:22:54,800 --> 00:22:56,679 Speaker 1: let me jump in. Then outside of energy, is there 400 00:22:56,680 --> 00:22:59,600 Speaker 1: a trade deficit right now that you do actually think 401 00:22:59,680 --> 00:23:03,200 Speaker 1: is just fit. I think that we will probably end 402 00:23:03,280 --> 00:23:06,200 Speaker 1: up with a trade deficit now with an individual country 403 00:23:06,200 --> 00:23:08,679 Speaker 1: at an economic relationship with that individual country that you 404 00:23:08,720 --> 00:23:12,240 Speaker 1: do actually think is justified based on comparative advantage. I 405 00:23:12,280 --> 00:23:15,840 Speaker 1: don't think any of them is a hundred percent justified 406 00:23:15,920 --> 00:23:20,000 Speaker 1: because all of the other countries have highly protectionist measures. 407 00:23:20,560 --> 00:23:25,080 Speaker 1: It's not part of competitive advantage or natural advantage to 408 00:23:25,200 --> 00:23:29,320 Speaker 1: put a twenty five percent tariff barrier on cars. That's 409 00:23:29,359 --> 00:23:35,280 Speaker 1: not and that's not a fundamental advantage. That's protectionism. What's 410 00:23:35,320 --> 00:23:39,560 Speaker 1: been weird is the US is actually the least protectionist 411 00:23:39,960 --> 00:23:43,240 Speaker 1: of the major countries, but we haven't done a very 412 00:23:43,280 --> 00:23:47,639 Speaker 1: good job with the rhetoric. China, Japan, and Europe do 413 00:23:47,720 --> 00:23:51,040 Speaker 1: a wonderful job talking free trade. Which said in Mexico 414 00:23:51,240 --> 00:23:53,800 Speaker 1: is a protectionist country because most people would define it 415 00:23:53,840 --> 00:23:57,040 Speaker 1: as an incredibly open economy. Would you define Mexico is 416 00:23:57,040 --> 00:24:01,440 Speaker 1: a protectionist economy? Mexico, the reason that they have so 417 00:24:01,520 --> 00:24:05,760 Speaker 1: many free trade agreements is that their basic tariff structure 418 00:24:05,880 --> 00:24:09,280 Speaker 1: is quite high. It's much higher than ours, and that's 419 00:24:09,320 --> 00:24:13,240 Speaker 1: one of the structural disadvantages we have in going to 420 00:24:13,520 --> 00:24:18,160 Speaker 1: a new free trade agreement, say with Europe or with Japan. 421 00:24:18,840 --> 00:24:23,280 Speaker 1: We've given away so much on a unilateral basis, there's 422 00:24:23,280 --> 00:24:26,960 Speaker 1: not much increment to give them. Take Europe. Europe charges 423 00:24:27,000 --> 00:24:30,800 Speaker 1: ten percent tariff on autos, We charge two and a half. 424 00:24:31,440 --> 00:24:33,000 Speaker 1: How am I going to get How are we going 425 00:24:33,040 --> 00:24:36,240 Speaker 1: to get them to drop a ten percent tariff just 426 00:24:36,359 --> 00:24:39,159 Speaker 1: to get relief from two and a half, you'd have 427 00:24:39,240 --> 00:24:44,680 Speaker 1: to trade off some other industry. So our unilateral disarmament, 428 00:24:44,720 --> 00:24:47,960 Speaker 1: if you will, in the trade area actually is an 429 00:24:47,960 --> 00:24:52,640 Speaker 1: impediment to making trade freer globally because we don't have 430 00:24:52,680 --> 00:24:59,120 Speaker 1: that much ability to trade down TARIFFSA screen very specific 431 00:24:59,160 --> 00:25:01,760 Speaker 1: questions and have to one, when do you expect we'll 432 00:25:01,800 --> 00:25:06,199 Speaker 1: see a new deal? Okay, that needs to be somewhere 433 00:25:06,200 --> 00:25:11,560 Speaker 1: close to year end for several reasons. The Mexican presidential 434 00:25:11,560 --> 00:25:16,439 Speaker 1: election is July next year, Canadian provincial elections are around 435 00:25:16,520 --> 00:25:20,600 Speaker 1: the same time. Mid term elections here are in November, 436 00:25:21,160 --> 00:25:25,720 Speaker 1: and our Trade Promotion Authority expires in July. And given 437 00:25:25,720 --> 00:25:29,160 Speaker 1: the nature of Congress nowadays, we don't know whether that's 438 00:25:29,160 --> 00:25:32,280 Speaker 1: even going to be renewed. So as you move into 439 00:25:32,320 --> 00:25:36,600 Speaker 1: two thousand eighteen, it will get progressively more difficult to 440 00:25:36,640 --> 00:25:40,280 Speaker 1: get a deal. So timing there's no magic silver bullet 441 00:25:40,320 --> 00:25:43,480 Speaker 1: to December thirty one, but more or less around the 442 00:25:43,600 --> 00:25:46,000 Speaker 1: end of the year. So second question, if you get 443 00:25:46,040 --> 00:25:48,920 Speaker 1: out of that new deal realistically, what you can expect 444 00:25:49,080 --> 00:25:52,280 Speaker 1: how many jobs will it add the United States? Tens 445 00:25:52,280 --> 00:25:56,320 Speaker 1: of thousands, maybe a hundred thousand. And third question, what 446 00:25:56,440 --> 00:25:59,840 Speaker 1: will be the increased cost to automakers? The price has 447 00:25:59,880 --> 00:26:03,800 Speaker 1: to go up. Well, autos are not the only one, right, 448 00:26:03,840 --> 00:26:05,960 Speaker 1: but it's important. When you sat in your piece. It 449 00:26:06,080 --> 00:26:08,600 Speaker 1: is an important one, but for example, there are other 450 00:26:08,720 --> 00:26:12,560 Speaker 1: things that can help reduce the deficit. Mexico has to 451 00:26:12,640 --> 00:26:16,640 Speaker 1: import l n G. They already import some from US. 452 00:26:17,119 --> 00:26:20,600 Speaker 1: Importing l n G would be a good help. Mexico 453 00:26:20,720 --> 00:26:23,840 Speaker 1: imports a lot of food products from US. They also 454 00:26:23,880 --> 00:26:28,160 Speaker 1: import some from elsewhere, importing a higher percentage from US, 455 00:26:28,400 --> 00:26:35,920 Speaker 1: but also helped the trade deficit that well, the wall 456 00:26:36,040 --> 00:26:40,399 Speaker 1: is a separate topic. It relates more to border security, 457 00:26:40,920 --> 00:26:44,600 Speaker 1: and I think that it's clear that border security is 458 00:26:44,680 --> 00:26:48,600 Speaker 1: becoming important. But you know a very interesting thing, with 459 00:26:48,760 --> 00:26:54,280 Speaker 1: all the enhanced search procedures on the airlines, tourism to 460 00:26:54,400 --> 00:26:58,159 Speaker 1: the US is actually up. There were naysayers who was 461 00:26:58,240 --> 00:27:01,119 Speaker 1: saying when we put into all these new screenings and 462 00:27:01,200 --> 00:27:05,040 Speaker 1: would kill tourism. Tourism is up. Fo, that's a very 463 00:27:05,080 --> 00:27:08,399 Speaker 1: healthy growth. Secretary Roster, Before we let you go, one 464 00:27:08,440 --> 00:27:12,239 Speaker 1: final question from myself. Stephen Bannon says, we're in an 465 00:27:12,280 --> 00:27:15,920 Speaker 1: economic war with China. Do you think we're an economic 466 00:27:15,920 --> 00:27:18,359 Speaker 1: war with China the United States? Well, I think we 467 00:27:18,440 --> 00:27:21,679 Speaker 1: in effect have been at least in economic battles with 468 00:27:21,800 --> 00:27:25,480 Speaker 1: them for quite a little while. That's why the deficit 469 00:27:25,600 --> 00:27:29,879 Speaker 1: is so big. The differences. Now we're trying to readdress it. 470 00:27:30,000 --> 00:27:32,880 Speaker 1: So you define it as a Warn't no, I say 471 00:27:32,920 --> 00:27:35,720 Speaker 1: there are at least trade battles that are going on. 472 00:27:36,359 --> 00:27:39,520 Speaker 1: Where you draw the line between a series of individual 473 00:27:39,560 --> 00:27:43,680 Speaker 1: battles in a war, I don't think is terribly important. 474 00:27:43,760 --> 00:27:47,400 Speaker 1: I think what is important we feel that the deficit 475 00:27:47,560 --> 00:27:51,400 Speaker 1: with them is too big. Our trade deficit essentially has 476 00:27:51,440 --> 00:27:56,640 Speaker 1: two components, one geographic that's called China, one product that's 477 00:27:56,680 --> 00:28:00,800 Speaker 1: called automotive. We fix those two, you fix a lot 478 00:28:00,840 --> 00:28:03,720 Speaker 1: of the trade deficit. So it's a final question, Secretary Rus, 479 00:28:03,720 --> 00:28:06,520 Speaker 1: you're going to Asia next week. What do you hope 480 00:28:06,560 --> 00:28:09,840 Speaker 1: to come back with? Should we expect an announcement? Oh? 481 00:28:09,920 --> 00:28:12,560 Speaker 1: I don't every want to anticipate an announcement from the 482 00:28:12,640 --> 00:28:16,480 Speaker 1: single trip. These are far more complicated things. But what 483 00:28:16,920 --> 00:28:20,000 Speaker 1: do you hope to come back with? Well, I'm not 484 00:28:20,119 --> 00:28:24,879 Speaker 1: just going to China, I'm also going to Thailand to Laos. 485 00:28:25,640 --> 00:28:30,160 Speaker 1: So it's it's for several purposes. One is to talk 486 00:28:30,240 --> 00:28:33,600 Speaker 1: about the specifics with those countries, and the other is 487 00:28:33,640 --> 00:28:39,440 Speaker 1: to make clear the message we're not forsaking Asia. The 488 00:28:39,720 --> 00:28:43,640 Speaker 1: Chinese and some others have been advancing the theory maybe 489 00:28:43,640 --> 00:28:48,080 Speaker 1: we're giving up on Asia. We're not okay us converse 490 00:28:48,080 --> 00:28:50,520 Speaker 1: Secretary Wilbert Ross, thank you very much for being with us. 491 00:28:50,680 --> 00:28:53,200 Speaker 1: Thank you, good to talk with you, Jonathan. He comes 492 00:28:53,200 --> 00:28:54,760 Speaker 1: with a much bigger once ranch than he used to. 493 00:28:55,960 --> 00:28:57,880 Speaker 1: What we used to fly solo and so many of 494 00:28:57,960 --> 00:29:16,760 Speaker 1: that become a protected species. David Rubinstein joining us here 495 00:29:16,760 --> 00:29:18,719 Speaker 1: on our phone lines. It's his show on Bloomberg Television 496 00:29:18,720 --> 00:29:21,040 Speaker 1: and bloom Brigradio in its third season. In this episode, 497 00:29:21,040 --> 00:29:24,720 Speaker 1: he sits down with a less Moonvez, the CEO of CBS, 498 00:29:24,800 --> 00:29:26,720 Speaker 1: and so I say, David, great to speak with you. 499 00:29:26,760 --> 00:29:29,120 Speaker 1: Supice to say, less Moonvez has attracted a lot of 500 00:29:29,160 --> 00:29:31,640 Speaker 1: praise for how he's helmed this company. What is it 501 00:29:31,640 --> 00:29:36,160 Speaker 1: about his leadership of CBS that's proved to be so promising? Well, 502 00:29:36,200 --> 00:29:39,120 Speaker 1: he's really helped turn the company around in many ways. 503 00:29:39,160 --> 00:29:42,960 Speaker 1: When he went there, it was having some problems, let's say, 504 00:29:43,280 --> 00:29:46,760 Speaker 1: and he's now dramatically increased the stock price, dramatically increased 505 00:29:46,760 --> 00:29:49,120 Speaker 1: the market value. And how do you do it? Well, 506 00:29:49,160 --> 00:29:51,640 Speaker 1: he's a very engaging person. He's a good leader, but 507 00:29:51,720 --> 00:29:54,720 Speaker 1: he has a ability to pick shows that do well 508 00:29:55,280 --> 00:30:00,440 Speaker 1: and his picking of shows like uh um, Uh, let's 509 00:30:00,440 --> 00:30:05,160 Speaker 1: say c S I s UM, which is a uh 510 00:30:05,680 --> 00:30:08,960 Speaker 1: kind of drama show, Big Bang Theory, a comedy show. 511 00:30:09,360 --> 00:30:11,560 Speaker 1: He picks these shows and they do quite well. So 512 00:30:11,920 --> 00:30:15,000 Speaker 1: he's a uh got the ability to do things that 513 00:30:15,040 --> 00:30:17,440 Speaker 1: everybody wish they had in that business, which is identify 514 00:30:17,560 --> 00:30:20,080 Speaker 1: shows go on the air and stay for quite a while. 515 00:30:20,200 --> 00:30:26,080 Speaker 1: David Gurr, could you see a Survivor episode Survivor David Rubinson, Well, 516 00:30:26,120 --> 00:30:28,320 Speaker 1: that's another one that's actually on that one he uh 517 00:30:28,520 --> 00:30:30,920 Speaker 1: he was was first presented him. He thought it wasn't 518 00:30:30,920 --> 00:30:33,040 Speaker 1: gonna work, But now I think you think it's been 519 00:30:33,080 --> 00:30:35,360 Speaker 1: on eighteen years or so and he actually did green 520 00:30:35,440 --> 00:30:38,160 Speaker 1: light it. So um, he's he's got a very good 521 00:30:38,240 --> 00:30:40,360 Speaker 1: ability to figure out what the American people want to watch. 522 00:30:40,360 --> 00:30:42,400 Speaker 1: And he goes back to the collective memory and you've got, 523 00:30:42,560 --> 00:30:46,440 Speaker 1: brilliantly within the show the idea of the certitude David, 524 00:30:46,480 --> 00:30:49,600 Speaker 1: that we knew that Viacom would be the juggernaut and 525 00:30:49,720 --> 00:30:53,440 Speaker 1: CBS was was I love LuSE I remember CBS? Is 526 00:30:53,520 --> 00:30:57,920 Speaker 1: I love Lucy reruns? I mean that's all it was. Well, look, 527 00:30:58,440 --> 00:31:02,960 Speaker 1: when Viacom was purchase CBS, people thought that together the 528 00:31:02,960 --> 00:31:04,960 Speaker 1: two companies would do well. But it turned out there 529 00:31:05,000 --> 00:31:07,640 Speaker 1: were some difference as they split the two Viacom and 530 00:31:07,640 --> 00:31:10,360 Speaker 1: CBS were split again and was thought, as you just suggested, 531 00:31:10,400 --> 00:31:12,200 Speaker 1: that CBS wouldn't grow that well and it was a 532 00:31:12,200 --> 00:31:14,880 Speaker 1: slow growth company, Viacom would be a rocket. But it 533 00:31:14,920 --> 00:31:18,600 Speaker 1: turned out to be somewhat the opposite. So unless as 534 00:31:18,880 --> 00:31:21,760 Speaker 1: is well liked. He's got a very good personality. I've 535 00:31:21,760 --> 00:31:23,320 Speaker 1: gotten to know him over the years because as the 536 00:31:23,360 --> 00:31:25,560 Speaker 1: chairman of the Kenny Center I worked with him on 537 00:31:25,640 --> 00:31:30,920 Speaker 1: the Kenny Center Honors, which are broadcast by CBS and um. 538 00:31:30,960 --> 00:31:32,920 Speaker 1: You know, he just has the ability to to really 539 00:31:33,080 --> 00:31:36,600 Speaker 1: figure out what shows are going to work. How good dude. Well. 540 00:31:37,200 --> 00:31:39,320 Speaker 1: On the subject of Vicom, I remember last summer there 541 00:31:39,360 --> 00:31:42,200 Speaker 1: was so so much speculation that these two companies would 542 00:31:42,240 --> 00:31:44,400 Speaker 1: come together, Viacom and CBS. I wonder if he said 543 00:31:44,440 --> 00:31:47,040 Speaker 1: anything about that. There was speculation that he was talking 544 00:31:47,040 --> 00:31:50,560 Speaker 1: to Sherry Redstone about the prospect of this happening. Ultimately, 545 00:31:50,640 --> 00:31:53,280 Speaker 1: that deal didn't happen. We didn't talk about it on 546 00:31:53,320 --> 00:31:55,600 Speaker 1: the interview. We talked about almost everything else. We didn't 547 00:31:55,600 --> 00:31:58,000 Speaker 1: talk about that, but it's clear that he didn't want 548 00:31:58,040 --> 00:32:00,120 Speaker 1: to do it. Clear I think from reading the US 549 00:32:00,120 --> 00:32:02,360 Speaker 1: accounts that he just felt he's got a very good 550 00:32:02,360 --> 00:32:05,080 Speaker 1: company and he felt that maybe if he merged it 551 00:32:05,120 --> 00:32:08,240 Speaker 1: with the Viacom it would hurt CBS. So he wasn't 552 00:32:08,240 --> 00:32:10,360 Speaker 1: that interested in it, I believe, but I didn't ask 553 00:32:10,440 --> 00:32:14,320 Speaker 1: him about that on the show. Um, clearly he's a 554 00:32:14,400 --> 00:32:18,280 Speaker 1: person that has some challenges ahead of them in the 555 00:32:18,360 --> 00:32:20,840 Speaker 1: sense that CBS, while it's done quite well and is 556 00:32:20,880 --> 00:32:23,320 Speaker 1: a very good company, it still has a very small 557 00:32:23,400 --> 00:32:26,400 Speaker 1: market capitalization compared to the people now coming into this business. 558 00:32:26,640 --> 00:32:31,960 Speaker 1: So Apple, Um, Facebook, Uh, Netflix, these all have bigger 559 00:32:32,000 --> 00:32:33,680 Speaker 1: market caps and they can spend a lot of money. 560 00:32:33,680 --> 00:32:36,719 Speaker 1: So now CBS to compete for talent has to probably 561 00:32:37,000 --> 00:32:40,960 Speaker 1: spend more money. David Rubensen help then with the idea 562 00:32:41,040 --> 00:32:44,440 Speaker 1: that CBS needs distribution, Well, how do you perceive and 563 00:32:44,480 --> 00:32:46,480 Speaker 1: I don't mean to look at the transactions of Carlisle, 564 00:32:46,880 --> 00:32:49,760 Speaker 1: but how do you see the media industry playing out 565 00:32:50,200 --> 00:32:54,960 Speaker 1: around this odd thing called distribution. Well, clearly, distribution used 566 00:32:55,000 --> 00:32:59,920 Speaker 1: to be broadcasting shows over the air, then it became cable, 567 00:33:00,320 --> 00:33:04,440 Speaker 1: but now it's largely streaming and over computers and mobile 568 00:33:04,440 --> 00:33:07,520 Speaker 1: phone devices, and as a result of the industry has 569 00:33:07,560 --> 00:33:10,480 Speaker 1: been upended a bit. Now less would say, well, having 570 00:33:10,480 --> 00:33:12,920 Speaker 1: the ability to have good talent, to pick good shows 571 00:33:13,240 --> 00:33:14,719 Speaker 1: and putting them on the air is still a very 572 00:33:14,760 --> 00:33:17,000 Speaker 1: good business. And he has a very good eye for 573 00:33:17,040 --> 00:33:19,640 Speaker 1: that and here for that. But there's no doubt that 574 00:33:19,680 --> 00:33:22,160 Speaker 1: in the future when you have Apple, which has maybe 575 00:33:22,160 --> 00:33:25,920 Speaker 1: two fifty billion dollars in cash, with Facebook, and and 576 00:33:25,920 --> 00:33:28,719 Speaker 1: and Amazon, with these large market capps, they can afford 577 00:33:28,760 --> 00:33:30,959 Speaker 1: to buy the best talent, and in time they can 578 00:33:30,960 --> 00:33:33,520 Speaker 1: afford to buy you know, even maybe CBS. I don't 579 00:33:33,560 --> 00:33:36,160 Speaker 1: and CBS isn't for sale, and and and and so forth. 580 00:33:36,200 --> 00:33:39,200 Speaker 1: But but you know, you have to wonder whether smaller 581 00:33:39,240 --> 00:33:42,120 Speaker 1: companies can survive in the business of when they're giants 582 00:33:42,160 --> 00:33:44,640 Speaker 1: out there. What do you have to say about sports? 583 00:33:44,880 --> 00:33:47,000 Speaker 1: I remember talking with him briefly at sun Valley at 584 00:33:47,000 --> 00:33:49,120 Speaker 1: the Allen Company conference this summer, David das lab as 585 00:33:49,160 --> 00:33:51,480 Speaker 1: well just about the price of sports, how expensive it's become. 586 00:33:51,480 --> 00:33:54,480 Speaker 1: This is still hugely important to CBS is bottom line. Yes, 587 00:33:54,680 --> 00:33:58,240 Speaker 1: sports are very uh prestigious to have. But for example, 588 00:33:58,240 --> 00:34:00,400 Speaker 1: he mentioned the Masters and the Masters they actually have 589 00:34:00,440 --> 00:34:03,480 Speaker 1: no advertising on it because that's the deal with the Masters. 590 00:34:03,640 --> 00:34:07,040 Speaker 1: The Augusta National Club. So it's it's uh prestigious to 591 00:34:07,080 --> 00:34:08,799 Speaker 1: have and maybe has other benefits, but they don't make 592 00:34:08,840 --> 00:34:11,000 Speaker 1: a lot of money on that football. He said, you 593 00:34:11,080 --> 00:34:13,880 Speaker 1: have to have football, NFL football, you have to have it, 594 00:34:13,960 --> 00:34:17,480 Speaker 1: and basically, Um, it's a big draw for advertisers, but 595 00:34:17,560 --> 00:34:19,879 Speaker 1: because you have to pay such large fact fees through 596 00:34:19,960 --> 00:34:22,319 Speaker 1: the NFL, you don't make that much money on it. 597 00:34:22,360 --> 00:34:25,200 Speaker 1: But in the end he's certainly was happy to have it. David, 598 00:34:25,280 --> 00:34:29,200 Speaker 1: thank you for attending our Global Business Forum the other day. 599 00:34:29,280 --> 00:34:31,680 Speaker 1: What was what What was your takeaway from it? There 600 00:34:31,760 --> 00:34:35,640 Speaker 1: was the usual effort towards I guess thought leadership in that, 601 00:34:35,760 --> 00:34:39,520 Speaker 1: but there's always a certain insight that surprises. What surprised 602 00:34:39,560 --> 00:34:43,200 Speaker 1: you within the conversations you had. I think the business 603 00:34:43,239 --> 00:34:49,919 Speaker 1: community is somewhat worried that Washington does seem dysfunctional, yes, 604 00:34:50,320 --> 00:34:52,880 Speaker 1: and Congresses doesn't seem to be able to pass laws 605 00:34:53,239 --> 00:34:55,320 Speaker 1: um the way they're supposed to. So there's some concern 606 00:34:55,360 --> 00:34:58,160 Speaker 1: about that. And obviously there's concerned about what's going on 607 00:34:58,280 --> 00:35:02,120 Speaker 1: in North Korea, and so there's some concern about that. Generally, 608 00:35:02,320 --> 00:35:04,759 Speaker 1: Um Bloomberg was able to attract I think it was 609 00:35:04,840 --> 00:35:07,120 Speaker 1: forty heads of state and two ceo. So it was 610 00:35:07,120 --> 00:35:10,239 Speaker 1: a very good UH conference that really fulfilled the gap 611 00:35:10,320 --> 00:35:12,520 Speaker 1: that it was left from the Clinton Globe Initiative. And 612 00:35:12,520 --> 00:35:14,960 Speaker 1: the Clinton Globe Initiative ended at the end of last year, 613 00:35:15,520 --> 00:35:18,399 Speaker 1: and UH this conference really now has filled that gap, 614 00:35:18,400 --> 00:35:20,640 Speaker 1: and it brings together people during u N Week. So 615 00:35:20,719 --> 00:35:22,360 Speaker 1: you have heads of state here, you have to have 616 00:35:22,400 --> 00:35:24,879 Speaker 1: many heads of state coming, and you also have many 617 00:35:24,960 --> 00:35:27,600 Speaker 1: CEOs and and so this conference is a kind of 618 00:35:27,640 --> 00:35:30,480 Speaker 1: a sister conference to to a lot of things that 619 00:35:30,480 --> 00:35:32,480 Speaker 1: are happening in New York at that time. David a 620 00:35:32,520 --> 00:35:33,719 Speaker 1: real pleasure to talk to you. Treat to talk to 621 00:35:33,760 --> 00:35:35,880 Speaker 1: you two times in one week. That's David Rubinstein at 622 00:35:35,880 --> 00:35:38,040 Speaker 1: the Carlisle Group, the host of the Dave Rubinstein Show, 623 00:35:38,080 --> 00:35:40,880 Speaker 1: Peer to Peer Conversations with which areas on Bloomberg Television 624 00:35:40,880 --> 00:35:43,439 Speaker 1: and Bloomberg Radio on radio at five pm at Wall 625 00:35:43,480 --> 00:35:46,399 Speaker 1: Street time on Friday evenings, multiple times on Saturday. Airs 626 00:35:46,400 --> 00:35:49,719 Speaker 1: on television on Wednesday's in the evening Saturday at nine 627 00:35:49,719 --> 00:35:51,640 Speaker 1: a m. And one pm. Sunday at ten am and 628 00:35:51,680 --> 00:35:53,440 Speaker 1: two thirty pm. Of course, you can check it out 629 00:35:53,480 --> 00:35:56,680 Speaker 1: online at Bloomberg dot com. Again, this week season three, 630 00:35:56,719 --> 00:35:59,200 Speaker 1: episode eight, he sits down with Les Moonvez, the CEO 631 00:35:59,480 --> 00:36:11,520 Speaker 1: of cb US. Thanks for listening to the Bloomberg Surveillance Podcast. 632 00:36:11,960 --> 00:36:17,160 Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or 633 00:36:17,280 --> 00:36:21,600 Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom Keene, 634 00:36:21,680 --> 00:36:26,040 Speaker 1: David Gura is at David Gura. Before the podcast, you 635 00:36:26,080 --> 00:36:29,360 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio