1 00:00:00,080 --> 00:00:13,040 Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene 2 00:00:13,480 --> 00:00:17,560 Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment, 3 00:00:18,000 --> 00:00:23,520 Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 4 00:00:23,600 --> 00:00:32,879 Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. So 5 00:00:33,000 --> 00:00:35,000 Speaker 1: let's just start with the White House, Mary go round. 6 00:00:35,800 --> 00:00:39,519 Speaker 1: McMaster is out and John Bolton is in as the 7 00:00:39,560 --> 00:00:43,120 Speaker 1: President's National Security Advisor. What does it mean for foreign 8 00:00:43,200 --> 00:00:45,879 Speaker 1: policy going forward from here? I'm pleased to say here 9 00:00:45,920 --> 00:00:49,680 Speaker 1: in New York is Dantana Boum, p WC Global Sanctions Leader, 10 00:00:49,680 --> 00:00:52,639 Speaker 1: and he joins us around the table right here, right now, Dan, 11 00:00:52,840 --> 00:00:55,240 Speaker 1: talk to me about the latest moves in the White 12 00:00:55,320 --> 00:00:58,720 Speaker 1: House and the significance of them for you. I give up. 13 00:00:59,040 --> 00:01:01,080 Speaker 1: I mean this is this used to be really easy 14 00:01:01,120 --> 00:01:03,080 Speaker 1: to try and predict what was going to happen. Next. 15 00:01:04,080 --> 00:01:08,280 Speaker 1: You've got a new incoming National Security advisor who, you know, 16 00:01:08,360 --> 00:01:11,600 Speaker 1: we're reminded, does not need confirmation by the Senate, who 17 00:01:11,640 --> 00:01:16,319 Speaker 1: has some rather extreme views on dealings with hostile nations 18 00:01:16,360 --> 00:01:18,880 Speaker 1: around the world historically. Well, let's let's be a little 19 00:01:18,920 --> 00:01:21,960 Speaker 1: bit more blunt here. Uh, this is somebody who has 20 00:01:22,120 --> 00:01:24,760 Speaker 1: been for war on many occasions as one of the 21 00:01:24,840 --> 00:01:27,840 Speaker 1: architects behind the Iraq war. Um, is this sort of 22 00:01:27,880 --> 00:01:32,399 Speaker 1: a sign that President Trump is planning to threaten military 23 00:01:32,400 --> 00:01:38,120 Speaker 1: action somewhere? Yeah, I mean, that's that's obviously what this 24 00:01:38,319 --> 00:01:40,959 Speaker 1: looks like we could be headed towards. I think there's 25 00:01:41,000 --> 00:01:44,480 Speaker 1: still enough moderates that exist within the government that hopefully 26 00:01:44,600 --> 00:01:46,160 Speaker 1: that's not the case. I mean, you look at the 27 00:01:46,200 --> 00:01:49,800 Speaker 1: Iran deal. With Pompeo replacing Tillerson, that already put the 28 00:01:49,840 --> 00:01:53,400 Speaker 1: Iran deal at risk. Um Bolton has been extremely anti 29 00:01:53,480 --> 00:01:56,240 Speaker 1: the Iran deal. In fact, wanted to preemptively attack Iran 30 00:01:56,720 --> 00:02:00,240 Speaker 1: North Korea as well. It wasn't really up for negotiating sations. 31 00:02:00,280 --> 00:02:03,080 Speaker 1: Who was up for a more preemptive strike. All of 32 00:02:03,120 --> 00:02:05,760 Speaker 1: these are really complicating what was already a fairly tense 33 00:02:05,800 --> 00:02:08,040 Speaker 1: situation to begin with. Down Do you believe there's an 34 00:02:08,040 --> 00:02:11,440 Speaker 1: intellectual framework for for shaping the people around the president 35 00:02:11,520 --> 00:02:13,760 Speaker 1: right now? Because if there is, most people say all 36 00:02:13,840 --> 00:02:16,640 Speaker 1: roads lead to Iran. Rex Tillison had a difference over 37 00:02:16,639 --> 00:02:19,519 Speaker 1: a run with the President the United States. Hr McMaster 38 00:02:19,600 --> 00:02:22,399 Speaker 1: also having that difference with the president. Another one that's 39 00:02:22,400 --> 00:02:25,320 Speaker 1: really in focus now will be Mattest, the Defense Secretary, 40 00:02:25,320 --> 00:02:28,040 Speaker 1: because he also has a different opinion on Iran, So 41 00:02:28,080 --> 00:02:30,320 Speaker 1: to all roads lead to Iran or is this something else? 42 00:02:31,240 --> 00:02:33,720 Speaker 1: It's unclear what the strategy is. The only thing I 43 00:02:33,800 --> 00:02:36,400 Speaker 1: take comfort in is the civil servants that are a 44 00:02:36,440 --> 00:02:39,160 Speaker 1: Treasury and State for the most part, still remained from 45 00:02:39,240 --> 00:02:42,480 Speaker 1: prior administration. So the people that are actually executing the 46 00:02:42,560 --> 00:02:45,239 Speaker 1: underlying work, a lot of them are still there. Obviously, 47 00:02:45,760 --> 00:02:49,120 Speaker 1: the revolving door of people making direction for the plans 48 00:02:49,160 --> 00:02:52,000 Speaker 1: have been changing pretty rapidly over the last year. But 49 00:02:52,240 --> 00:02:54,760 Speaker 1: I want to believe there's some sort of a strategy here. 50 00:02:55,760 --> 00:02:58,520 Speaker 1: I mean, we're there's so many fronts that this administration 51 00:02:58,600 --> 00:03:01,240 Speaker 1: is trying to cover off on now, between Iran, Russia, 52 00:03:01,240 --> 00:03:04,440 Speaker 1: and North Korea, now who knows potentially Cuba. I mean, 53 00:03:04,480 --> 00:03:07,360 Speaker 1: it is absolute whiplash trying to manage all of this 54 00:03:07,400 --> 00:03:09,600 Speaker 1: and try and look for some sort of cogent theme here. 55 00:03:09,680 --> 00:03:12,080 Speaker 1: There are so many different ways we could go this morning. Um, 56 00:03:12,160 --> 00:03:13,840 Speaker 1: we could talk about some of the market action and 57 00:03:13,840 --> 00:03:15,840 Speaker 1: the risk aversion. Now, we could talk about the tariffs 58 00:03:15,880 --> 00:03:17,760 Speaker 1: with China, and we're gonna get to all of those things. 59 00:03:18,040 --> 00:03:19,520 Speaker 1: I do just want to get your thoughts on the 60 00:03:19,600 --> 00:03:22,200 Speaker 1: j c p o A with Iran, the Joint Comprehensive 61 00:03:22,200 --> 00:03:24,960 Speaker 1: Plan of Action. Talk to me about the next scheduled 62 00:03:24,960 --> 00:03:27,880 Speaker 1: event where the President could really make a difference here, 63 00:03:27,919 --> 00:03:30,960 Speaker 1: because it feels like we're gravitate, gravitating towards a moment 64 00:03:31,000 --> 00:03:33,480 Speaker 1: where he might move to rip that up. So may 65 00:03:33,680 --> 00:03:37,720 Speaker 1: is the next scheduled waivers to further extend the sanctions 66 00:03:37,760 --> 00:03:40,200 Speaker 1: relief with the j c p o A. And already 67 00:03:40,240 --> 00:03:42,800 Speaker 1: it's been I mean, every time the waivers have come up, 68 00:03:42,840 --> 00:03:45,200 Speaker 1: it's been spoken about in terms of, you know, this 69 00:03:45,240 --> 00:03:47,600 Speaker 1: is the worst deal ever and it will never go ahead. 70 00:03:47,680 --> 00:03:49,920 Speaker 1: And every time the waivers have been extended, I have 71 00:03:50,040 --> 00:03:52,040 Speaker 1: some doubts this time that that may be the case. 72 00:03:52,640 --> 00:03:54,920 Speaker 1: I mean, the other complicating factor is due to other 73 00:03:55,000 --> 00:03:57,880 Speaker 1: things that the Iranian regime has been doing, the EU 74 00:03:57,960 --> 00:04:01,000 Speaker 1: has been looking at applying additional sound actions unrelated to 75 00:04:01,000 --> 00:04:03,600 Speaker 1: the j c p o A, but additional sanctions on Iran, 76 00:04:04,160 --> 00:04:06,400 Speaker 1: and Iran is just kind of sitting back looking at this, 77 00:04:06,440 --> 00:04:08,840 Speaker 1: wondering what did we actually sign up for to begin with. 78 00:04:09,160 --> 00:04:12,640 Speaker 1: So you advise companies and wondering what are they asking 79 00:04:12,640 --> 00:04:14,760 Speaker 1: you what are they calling you up right now about? 80 00:04:15,080 --> 00:04:18,480 Speaker 1: So we get a lot of calls about looking at 81 00:04:18,480 --> 00:04:22,440 Speaker 1: the risks to enter Iran globally, and obviously, as an 82 00:04:22,440 --> 00:04:25,440 Speaker 1: American I'm restricted in the support that I can provide, 83 00:04:25,480 --> 00:04:27,920 Speaker 1: but as a global organization, we try to look at, 84 00:04:27,920 --> 00:04:29,880 Speaker 1: you know, how do you ring fence U s, nationals, 85 00:04:29,880 --> 00:04:33,400 Speaker 1: how do you apply a framework to understand the risk 86 00:04:33,480 --> 00:04:37,360 Speaker 1: that you're entering. Especially with Iran and the snap backed 87 00:04:37,360 --> 00:04:39,640 Speaker 1: provisions of the j c P o A, there's a 88 00:04:39,640 --> 00:04:42,799 Speaker 1: possibility that within sixty days of the sanctions being lift 89 00:04:43,000 --> 00:04:46,160 Speaker 1: being reimposed that a company might have to exit. So 90 00:04:46,360 --> 00:04:48,800 Speaker 1: everyone that goes in needs to have an exit strategy, 91 00:04:48,839 --> 00:04:51,880 Speaker 1: and that's the basic advice that we're advising. How problematic 92 00:04:52,000 --> 00:04:54,719 Speaker 1: is it with the turnover to come up with some 93 00:04:54,800 --> 00:04:58,720 Speaker 1: kind of predictable path for these companies. It's it's impossible 94 00:04:58,760 --> 00:05:01,080 Speaker 1: at this point, and it really has slowed the growth 95 00:05:01,320 --> 00:05:04,640 Speaker 1: of entry into Iran. There were obviously billions of dollars 96 00:05:04,640 --> 00:05:06,440 Speaker 1: of deals announced in the wake of the j c 97 00:05:06,600 --> 00:05:09,760 Speaker 1: P away in the aviation and automotive industry. Now we 98 00:05:09,839 --> 00:05:12,719 Speaker 1: are seeing a lot more hesitancy by our clients around 99 00:05:12,760 --> 00:05:15,960 Speaker 1: the world as they're looking at Iran entry. They're asking 100 00:05:15,960 --> 00:05:18,200 Speaker 1: the question of what exactly do we do next, and 101 00:05:18,279 --> 00:05:21,239 Speaker 1: they're honest answers. It's really unclear what the next step 102 00:05:21,320 --> 00:05:23,359 Speaker 1: is for our listeners, just churning in. At the momentum, 103 00:05:23,400 --> 00:05:25,520 Speaker 1: the market actions follows were down just seventy eight on 104 00:05:25,600 --> 00:05:27,560 Speaker 1: the down, negative five or six points on the SMP 105 00:05:27,720 --> 00:05:30,920 Speaker 1: five hundreds, So following yesterday's route, we are bouncing off 106 00:05:30,920 --> 00:05:32,680 Speaker 1: the lows in terms of futures, a bit of risk 107 00:05:32,680 --> 00:05:35,800 Speaker 1: aversion in the FX market with a stronger Japanese Yeah, 108 00:05:35,839 --> 00:05:38,640 Speaker 1: dollyan at one of five and treasury stable here after 109 00:05:38,720 --> 00:05:41,680 Speaker 1: yesterday's big bit. The tenuere treasury yield as follows at 110 00:05:41,720 --> 00:05:44,120 Speaker 1: two point eight two percent, so a little bit of 111 00:05:44,120 --> 00:05:46,200 Speaker 1: calm coming through to this market in the last I 112 00:05:46,240 --> 00:05:49,240 Speaker 1: would say, the last one hour, Lisa, Yeah, although there 113 00:05:49,320 --> 00:05:51,560 Speaker 1: still are some pretty big losers. You can see that 114 00:05:51,560 --> 00:05:54,320 Speaker 1: Facebook share is still down ahead of open. You can 115 00:05:54,360 --> 00:05:57,359 Speaker 1: see that ten Cent has been really absolutely penalized, so 116 00:05:57,400 --> 00:05:59,839 Speaker 1: a lot of red to down. It's at Lesa's question 117 00:05:59,839 --> 00:06:02,560 Speaker 1: and important question about what you're advising companies at the moment. 118 00:06:02,839 --> 00:06:05,080 Speaker 1: You talked about companies around the world. I imagine if 119 00:06:05,080 --> 00:06:07,840 Speaker 1: you're a European company looking to do business in a 120 00:06:07,880 --> 00:06:10,880 Speaker 1: place like Iran. Now, even you were thinking, I don't 121 00:06:10,920 --> 00:06:12,600 Speaker 1: know what to do, because even if I was an 122 00:06:12,600 --> 00:06:14,680 Speaker 1: American company, I would be very very hesitant. But as 123 00:06:14,720 --> 00:06:17,320 Speaker 1: a European company, the US has up the agreement. Is 124 00:06:17,320 --> 00:06:19,080 Speaker 1: that a place you want to make an investment right now, 125 00:06:19,320 --> 00:06:21,880 Speaker 1: and as a US company, with the exception of foreign 126 00:06:21,960 --> 00:06:24,800 Speaker 1: organized subsidiaries, you're essentially iced out of the market. For 127 00:06:24,880 --> 00:06:28,400 Speaker 1: the European companies, the challenges and continues to be the 128 00:06:28,440 --> 00:06:31,520 Speaker 1: ability to finance any transactions with Iran, because there's no 129 00:06:31,600 --> 00:06:34,240 Speaker 1: major bank in the world that will really touch the business. 130 00:06:34,600 --> 00:06:36,640 Speaker 1: And that's been the case even after the deal was 131 00:06:36,680 --> 00:06:38,760 Speaker 1: put in place, even after pressure from the UK and 132 00:06:38,920 --> 00:06:43,040 Speaker 1: US governments to establish banking relationships. Because of so many 133 00:06:43,040 --> 00:06:45,120 Speaker 1: banks being penalized over the years, many of your gun 134 00:06:45,200 --> 00:06:47,560 Speaker 1: shy about re entering a market and potentially putting a 135 00:06:47,600 --> 00:06:49,520 Speaker 1: bull's eye on their back. A lot of people will 136 00:06:49,520 --> 00:06:52,960 Speaker 1: wake up this morning they'll see the Chinese retaliating with 137 00:06:53,160 --> 00:06:56,640 Speaker 1: arrists from the arrists that the United States introduced just yesterday. 138 00:06:56,680 --> 00:07:00,440 Speaker 1: They proposed in the last twenty four hours, What has 139 00:07:00,520 --> 00:07:03,200 Speaker 1: changed for US foreign policy? If and I think it's sold. 140 00:07:03,560 --> 00:07:07,919 Speaker 1: I mean, we're moving very rapidly to an isolation isolationist 141 00:07:07,920 --> 00:07:10,200 Speaker 1: approach to how we're dealing with the world. I mean, 142 00:07:10,240 --> 00:07:13,640 Speaker 1: we have a trade war with China now that's looming. 143 00:07:13,680 --> 00:07:16,520 Speaker 1: We have actual wars with Iran and North Korea that 144 00:07:16,560 --> 00:07:18,360 Speaker 1: are on the table. I mean, there's a lot of 145 00:07:18,440 --> 00:07:21,360 Speaker 1: legitimate threats. But the way in which we are handling 146 00:07:21,400 --> 00:07:24,760 Speaker 1: some of these actions in a somewhat unilateral matter is 147 00:07:24,880 --> 00:07:28,360 Speaker 1: com complicating our perception in the world. Just push back 148 00:07:28,360 --> 00:07:31,480 Speaker 1: a little bit. China's measure in response to the US 149 00:07:31,840 --> 00:07:35,640 Speaker 1: was pretty minor. What do you make that? I think 150 00:07:35,920 --> 00:07:39,080 Speaker 1: similar to how a lot of countries deal with response 151 00:07:39,120 --> 00:07:41,480 Speaker 1: in a more responsible manner. I mean, this is obviously 152 00:07:41,520 --> 00:07:44,160 Speaker 1: not the just the opening salvo. I think what China 153 00:07:44,240 --> 00:07:48,200 Speaker 1: is responsive with three billion dollars and tariffs against US 154 00:07:48,280 --> 00:07:51,720 Speaker 1: imports um is really just the beginning. It's going to 155 00:07:51,880 --> 00:07:55,080 Speaker 1: slowly but surely kind of ratchet up the pressure on 156 00:07:55,240 --> 00:07:58,280 Speaker 1: US companies, and obviously China is a massive trading partner 157 00:07:58,360 --> 00:08:01,680 Speaker 1: to the US. You can't start with the big bang necessarily, 158 00:08:01,720 --> 00:08:05,920 Speaker 1: although some administrations might believe otherwise. But I think this 159 00:08:06,000 --> 00:08:08,560 Speaker 1: is just the beginning. Dantana Bum. It's been great to 160 00:08:08,600 --> 00:08:10,520 Speaker 1: have you with us in a studio here in New York, 161 00:08:10,520 --> 00:08:12,520 Speaker 1: and it's great to catch up view the p WC 162 00:08:12,840 --> 00:08:30,680 Speaker 1: Global Sanctions Leader. Fantastic guests we can bring in right now. 163 00:08:30,840 --> 00:08:34,480 Speaker 1: Really caught my attention on Twitter yesterday evening. Ian Bremer, 164 00:08:34,559 --> 00:08:39,000 Speaker 1: Eurisia Group founder and an authority on global geopolitical risk, 165 00:08:39,200 --> 00:08:43,240 Speaker 1: tweeting the following yesterday evening probably the worst biggest single 166 00:08:43,320 --> 00:08:46,520 Speaker 1: day for geopolitical risks since I started Eurisia Group in 167 00:08:46,679 --> 00:08:52,160 Speaker 1: nineteen and that's a stunning statement. Give us the y Well, 168 00:08:52,559 --> 00:08:56,480 Speaker 1: first of all, you have the decision to take fifty 169 00:08:56,480 --> 00:08:59,920 Speaker 1: billion dollars of terroiffs against China, which they will react 170 00:09:00,000 --> 00:09:03,720 Speaker 1: to in the context of a big transition towards a 171 00:09:03,800 --> 00:09:08,200 Speaker 1: more confrontational relationship with the Chinese. Elevation of Peter Navarro Um, 172 00:09:08,320 --> 00:09:12,800 Speaker 1: the decision to signs law a bill, a travel bill 173 00:09:12,960 --> 00:09:15,559 Speaker 1: on Taiwan that will lead to a direct exchanges of 174 00:09:15,640 --> 00:09:17,800 Speaker 1: high level officials. That's a red line for the Chinese. 175 00:09:17,800 --> 00:09:20,680 Speaker 1: So the most important bilateral relationship in the world taking 176 00:09:20,679 --> 00:09:24,160 Speaker 1: a marks turn to the negative real tipping point there Um, 177 00:09:24,240 --> 00:09:29,319 Speaker 1: and the appointment of John Bolton uh to National Security Advisor, 178 00:09:29,920 --> 00:09:34,520 Speaker 1: one of the most outspoken Hawks arguing for preemption against 179 00:09:34,600 --> 00:09:38,080 Speaker 1: North Korea, ripping up the Iran deal, much stronger himself 180 00:09:38,160 --> 00:09:40,319 Speaker 1: on China as well. But the issue is that this 181 00:09:40,400 --> 00:09:43,599 Speaker 1: is happening in the context of a global environment that 182 00:09:43,720 --> 00:09:47,560 Speaker 1: is already unwinding a geopolitical recession, where the US doesn't 183 00:09:47,600 --> 00:09:51,320 Speaker 1: have the kind of influence internationally that it has historically 184 00:09:51,440 --> 00:09:55,079 Speaker 1: and is much more prone towards miscalculation. Where nine eleven 185 00:09:55,120 --> 00:09:58,920 Speaker 1: obviously a much more dramatic shock, but it happened in 186 00:09:58,920 --> 00:10:01,120 Speaker 1: the context of a u US that was clearly a 187 00:10:01,120 --> 00:10:03,640 Speaker 1: global leader, with an awful lot of allies behind this, 188 00:10:04,000 --> 00:10:07,360 Speaker 1: and so it's a consequence there wasn't nearly listened impact 189 00:10:07,360 --> 00:10:09,680 Speaker 1: on geopolitical environment. Yeah, I was going to say, and 190 00:10:09,720 --> 00:10:11,000 Speaker 1: I think a lot of people would have read that 191 00:10:11,120 --> 00:10:13,080 Speaker 1: and said, what about two thousand and one? What about 192 00:10:13,120 --> 00:10:15,840 Speaker 1: the invasion of a rug? But your point quite clearly 193 00:10:15,960 --> 00:10:18,240 Speaker 1: in a G zero world, in the context of that, 194 00:10:18,240 --> 00:10:20,600 Speaker 1: that makes it a lot more fragile at the moment. 195 00:10:20,679 --> 00:10:25,240 Speaker 1: Something else you've also warned about Ian before the departure 196 00:10:25,240 --> 00:10:27,439 Speaker 1: of the last twenty four hours was how significant the 197 00:10:27,480 --> 00:10:31,920 Speaker 1: departure of HR McMaster would be for this administration. Just 198 00:10:32,120 --> 00:10:35,080 Speaker 1: talk me through why and walk me through the domino 199 00:10:35,120 --> 00:10:38,480 Speaker 1: effect from here. How you think this evolves. Well, you 200 00:10:38,600 --> 00:10:43,240 Speaker 1: have people now around Trump that are more enabling of 201 00:10:43,240 --> 00:10:49,160 Speaker 1: of Trump. Before with Chillerson, with McMaster, with Gary Cohne, 202 00:10:49,640 --> 00:10:52,880 Speaker 1: you had people who may not have had enormous influence 203 00:10:53,080 --> 00:10:55,880 Speaker 1: over Trump, but they were willing to strongly say when 204 00:10:55,920 --> 00:10:59,640 Speaker 1: they believed that Trump was wrong. They were largely moderating influences, 205 00:11:00,000 --> 00:11:04,080 Speaker 1: and they were analytically fairly sharp. Um, so they actually 206 00:11:04,160 --> 00:11:06,240 Speaker 1: knew a fair amount about the world. They had a 207 00:11:06,240 --> 00:11:09,640 Speaker 1: fair amount of expertise. Um. You're losing a lot of 208 00:11:09,679 --> 00:11:13,480 Speaker 1: that with their replacements now. But you're also enabling. You're 209 00:11:13,600 --> 00:11:16,000 Speaker 1: enabling with people that are not willing to tell Trump 210 00:11:16,000 --> 00:11:18,320 Speaker 1: when he's wrong. They're willing to support his instincts, and 211 00:11:18,320 --> 00:11:23,880 Speaker 1: they're also intrinsically more hawkish, more prone towards escalation. Trump 212 00:11:24,000 --> 00:11:28,000 Speaker 1: himself has made his presidency more about ripping up the 213 00:11:28,040 --> 00:11:31,600 Speaker 1: deal with Iran and more importantly, more about North Korea. 214 00:11:31,840 --> 00:11:34,120 Speaker 1: We had a lot of presidents Democrat and Republican ended 215 00:11:34,160 --> 00:11:35,920 Speaker 1: have known that North Korea was getting worse, but they 216 00:11:35,920 --> 00:11:38,480 Speaker 1: didn't want to engage very much themselves, because they knew 217 00:11:38,679 --> 00:11:40,320 Speaker 1: that it was going to be very hard to fix 218 00:11:40,320 --> 00:11:42,840 Speaker 1: and the downside was going to be great. Trump's ability 219 00:11:42,880 --> 00:11:45,600 Speaker 1: to fix North Korea, his expertise is certainly no greater 220 00:11:45,640 --> 00:11:49,040 Speaker 1: than previous presidents. He's much more risk acceptance. So there 221 00:11:49,120 --> 00:11:52,440 Speaker 1: is a possibility of a diplomatic breakthrough, but there's also 222 00:11:52,480 --> 00:11:54,199 Speaker 1: a much greater chance that we end up with in 223 00:11:54,280 --> 00:11:56,559 Speaker 1: a war. And I do think that the recent appointment, 224 00:11:56,920 --> 00:12:01,000 Speaker 1: capped off most importantly by Bolton's accession to get Security Advisor, 225 00:12:01,360 --> 00:12:05,120 Speaker 1: makes the likelihood of direct military conflicts, specifically with the 226 00:12:05,200 --> 00:12:08,280 Speaker 1: Koreans and also potentially between the US and Iran or 227 00:12:08,400 --> 00:12:11,680 Speaker 1: Israel and Iran, much more likely than it was twenty 228 00:12:11,679 --> 00:12:15,120 Speaker 1: four hours ago. Some pretty frightening words so far, though, 229 00:12:15,160 --> 00:12:18,679 Speaker 1: as John pointed out earlier, it's really sentiments sentiment shift, 230 00:12:18,880 --> 00:12:21,240 Speaker 1: and one that that's negative because the actions taken so 231 00:12:21,320 --> 00:12:24,920 Speaker 1: far haven't been in themselves that extreme. What to you 232 00:12:24,960 --> 00:12:28,560 Speaker 1: will signal a market escalation that moves us much closer 233 00:12:28,960 --> 00:12:33,040 Speaker 1: to some kind of military altercation. Well, first of all, 234 00:12:33,120 --> 00:12:35,400 Speaker 1: yesterday did right, I mean, you know the fact that 235 00:12:35,480 --> 00:12:38,280 Speaker 1: you have a seven plus point hit to the markets. 236 00:12:38,600 --> 00:12:41,440 Speaker 1: When's the last time that that happened directly as a 237 00:12:41,520 --> 00:12:46,240 Speaker 1: result of presidential action. That was a market move of choice, uh, 238 00:12:46,360 --> 00:12:49,200 Speaker 1: not the reaction to a global recession or you know, 239 00:12:49,240 --> 00:12:52,080 Speaker 1: sort of a bubble bursting um. And so I do 240 00:12:52,200 --> 00:12:55,040 Speaker 1: think that combined, as I said, with Taiwan, combined with 241 00:12:55,040 --> 00:12:58,200 Speaker 1: the escalation of Peter Navarro, one of the most anti 242 00:12:58,320 --> 00:13:00,960 Speaker 1: China hawks that again has been in a high level 243 00:13:01,000 --> 00:13:05,720 Speaker 1: position in any administration in decades, has set the Chinese 244 00:13:05,720 --> 00:13:08,040 Speaker 1: off on the market spot for the first time. Reacting 245 00:13:08,080 --> 00:13:09,720 Speaker 1: to that is you know, the markets have been very 246 00:13:09,720 --> 00:13:13,680 Speaker 1: complacent with geopolitical risks over the past year, in part 247 00:13:13,720 --> 00:13:17,160 Speaker 1: because the baseline economics are doing well. This is the 248 00:13:17,240 --> 00:13:19,839 Speaker 1: first time that Trump has taken action that really moves 249 00:13:19,880 --> 00:13:22,760 Speaker 1: in a very different direction. I don't expect the markets 250 00:13:22,800 --> 00:13:26,160 Speaker 1: to react on issues like North Korea or Iran until 251 00:13:26,280 --> 00:13:30,320 Speaker 1: you see a direct shock. The corporations will. They're starting 252 00:13:30,320 --> 00:13:32,840 Speaker 1: to put plans in place in terms of what they 253 00:13:32,880 --> 00:13:35,240 Speaker 1: would do if there was a massive supply chain shock 254 00:13:35,400 --> 00:13:38,120 Speaker 1: or oil prices would a spike over a hundred briefly, 255 00:13:38,480 --> 00:13:39,960 Speaker 1: or even if they had to get their ex paths 256 00:13:39,960 --> 00:13:43,160 Speaker 1: out of situations. Every corporation, major corporation we advise as 257 00:13:43,240 --> 00:13:45,760 Speaker 1: talking about that now, but the markets are much more 258 00:13:45,760 --> 00:13:49,440 Speaker 1: short term and they don't necessarily plan for escalated tail risk, 259 00:13:49,640 --> 00:13:51,679 Speaker 1: which are the kinds of things we're seeing all over 260 00:13:51,720 --> 00:13:53,920 Speaker 1: the world right now geopolitically so and it's a really 261 00:13:53,920 --> 00:13:56,600 Speaker 1: good point. Typically we just consider those things at how risk. 262 00:13:56,640 --> 00:13:58,240 Speaker 1: I want to talk to you about what you consider 263 00:13:58,320 --> 00:14:00,200 Speaker 1: to be the base case right now? In the eighth 264 00:14:00,240 --> 00:14:03,520 Speaker 1: of John Bolton. We now have a national security advisor 265 00:14:03,559 --> 00:14:06,400 Speaker 1: in the White House that couldn't even get confirmed by 266 00:14:06,480 --> 00:14:09,880 Speaker 1: a Republican controlled Senate as the US Ambassador to the 267 00:14:09,960 --> 00:14:12,840 Speaker 1: u N under George W. Bush. We have John Bolton 268 00:14:12,840 --> 00:14:15,360 Speaker 1: as the National Security advisor individual that has written our 269 00:14:15,400 --> 00:14:19,120 Speaker 1: pets about striking Iran and striking North Korea. Do you 270 00:14:19,160 --> 00:14:22,160 Speaker 1: just consider it inevitable? Now? Is your base case that 271 00:14:22,160 --> 00:14:24,720 Speaker 1: that j c p o A, the Joint Comprehensive Plan 272 00:14:24,800 --> 00:14:28,480 Speaker 1: of Action, the agreement with Iran just gets torn up. 273 00:14:28,520 --> 00:14:31,560 Speaker 1: It's it's probably a base case. It wasn't Again, twenty 274 00:14:31,560 --> 00:14:33,840 Speaker 1: four hours ago, I think Trump had said he wanted 275 00:14:33,840 --> 00:14:35,240 Speaker 1: to do it, but there was a lot of pushback 276 00:14:35,280 --> 00:14:37,680 Speaker 1: from people around him, as well as from Europeans and 277 00:14:37,680 --> 00:14:40,160 Speaker 1: even American allies. Like the Staudis and the Iranians who 278 00:14:40,200 --> 00:14:42,680 Speaker 1: are no fan of the Iran deal, recognized that if 279 00:14:42,680 --> 00:14:44,520 Speaker 1: Trump ripped it up, that the U s would be 280 00:14:44,560 --> 00:14:46,640 Speaker 1: isolated to be that by themselves, you know, it caused 281 00:14:46,640 --> 00:14:48,720 Speaker 1: more problems than it was worth. They didn't want tougher 282 00:14:48,800 --> 00:14:51,880 Speaker 1: sanctions by the Americans against Iran, but on different issues 283 00:14:51,880 --> 00:14:54,560 Speaker 1: on IRUN solistic missile program, on the support for terrorist 284 00:14:54,680 --> 00:14:58,880 Speaker 1: organizations has below others around the region. Now, I think 285 00:14:58,960 --> 00:15:01,480 Speaker 1: that the baseline, the spite effect is going to continue 286 00:15:01,520 --> 00:15:03,560 Speaker 1: to be an enormous amount of pressure against Trump to 287 00:15:03,560 --> 00:15:05,880 Speaker 1: do this. I do think the baseline is that the 288 00:15:06,000 --> 00:15:08,640 Speaker 1: j c p o A, the irandeal goes away or 289 00:15:08,680 --> 00:15:11,560 Speaker 1: the Americans rip it up. And I think part of 290 00:15:11,600 --> 00:15:13,760 Speaker 1: the reason for that is because the pressure on Trump 291 00:15:13,840 --> 00:15:18,600 Speaker 1: himself the Mueller investigation um the which is clearly going 292 00:15:18,720 --> 00:15:22,600 Speaker 1: much longer than the inspected expected. You saw the departure 293 00:15:23,240 --> 00:15:25,640 Speaker 1: of his top attorney just in the past forty hours 294 00:15:25,680 --> 00:15:29,040 Speaker 1: because he wasn't listening to him. Trump's expectations around that 295 00:15:29,120 --> 00:15:33,800 Speaker 1: investigation clearly were much more rose tinted um as he 296 00:15:33,920 --> 00:15:36,800 Speaker 1: comes to realize that the starks sharks are circling his 297 00:15:36,920 --> 00:15:39,680 Speaker 1: behavior has become more erratic, he has lashed out more. 298 00:15:40,000 --> 00:15:42,320 Speaker 1: I do think that the Bolton appointment is part of that. 299 00:15:42,800 --> 00:15:45,400 Speaker 1: Do you think that amid the White House turmoil, the 300 00:15:45,560 --> 00:15:51,080 Speaker 1: China tariffs and the US tariffs are just noise. No, 301 00:15:51,160 --> 00:15:56,400 Speaker 1: they're not noise because unlike Caribs against American allies, where 302 00:15:56,400 --> 00:16:00,120 Speaker 1: there's very strong pushback from those advising Trump and his 303 00:16:00,240 --> 00:16:04,160 Speaker 1: major funders, all of the Republicans you know, sort of 304 00:16:04,200 --> 00:16:07,400 Speaker 1: governors and senators and the rest, on China, there actually 305 00:16:07,440 --> 00:16:11,640 Speaker 1: is a strong desire among many advising and supporting Trump. 306 00:16:11,720 --> 00:16:14,960 Speaker 1: The Chinese are engaged in unfair practices. They're not providing 307 00:16:14,960 --> 00:16:18,000 Speaker 1: reciprocal market access to the Americans. This is getting worse 308 00:16:18,080 --> 00:16:20,560 Speaker 1: and the Americans need to do something about it. The 309 00:16:20,760 --> 00:16:24,600 Speaker 1: problem is that Trump's policies are not very strategic, They're 310 00:16:24,600 --> 00:16:28,640 Speaker 1: not very directed. As I mentioned, they also include Taiwan 311 00:16:28,720 --> 00:16:31,640 Speaker 1: issues which are not linked, but which the Chinese will 312 00:16:31,680 --> 00:16:33,800 Speaker 1: see is pushing them in the corner. And also, the 313 00:16:34,160 --> 00:16:37,320 Speaker 1: Americans don't have allies on their side because of the 314 00:16:37,360 --> 00:16:42,320 Speaker 1: symbolic efforts against NAFTA and willingness to put allies on 315 00:16:42,440 --> 00:16:45,200 Speaker 1: notice on aluminium steel if they don't get the Americans 316 00:16:45,200 --> 00:16:47,760 Speaker 1: a better deal pulling out of the trans specific partnership 317 00:16:47,840 --> 00:16:51,680 Speaker 1: earlier in Trump presidency. All of this makes American policy 318 00:16:51,680 --> 00:16:54,280 Speaker 1: against China more unilateral, when if you want to take 319 00:16:54,280 --> 00:16:56,040 Speaker 1: a tough line against China, you want it to be 320 00:16:56,080 --> 00:16:59,200 Speaker 1: more multilateral, more strategic. And it's been great to catch 321 00:16:59,280 --> 00:17:00,680 Speaker 1: out with you, a friend of the program, and we 322 00:17:00,680 --> 00:17:03,480 Speaker 1: always appreciate your insight on all of these issues that 323 00:17:03,520 --> 00:17:06,399 Speaker 1: dominate the agenda currently, the geopolitical issues very much at 324 00:17:06,400 --> 00:17:09,120 Speaker 1: the front and center as we close out the trading week. 325 00:17:09,160 --> 00:17:11,280 Speaker 1: Ian Bremer, really appreciate your time. Thank you, sir, that 326 00:17:11,320 --> 00:17:14,439 Speaker 1: you raise a group founder joining us on the latest 327 00:17:14,440 --> 00:17:17,399 Speaker 1: movements in the White House and that trade battle between 328 00:17:17,480 --> 00:17:30,639 Speaker 1: China and the United States. I want to bring in 329 00:17:30,680 --> 00:17:33,240 Speaker 1: a kind of hack that is d F E. D 330 00:17:33,480 --> 00:17:36,560 Speaker 1: and F Man head of research and kinda thank you 331 00:17:36,600 --> 00:17:40,520 Speaker 1: so much for being with us. Let's start with those teriffs, 332 00:17:40,840 --> 00:17:45,440 Speaker 1: the US imposing terroriffs on China, China retaliating. How much 333 00:17:45,640 --> 00:17:48,880 Speaker 1: is this just noise at this point? Not really the 334 00:17:48,880 --> 00:17:51,879 Speaker 1: biggest measures that could have been taken? Uh? And and 335 00:17:51,920 --> 00:17:53,560 Speaker 1: sort of how are you how are you suggesting that 336 00:17:53,640 --> 00:17:57,200 Speaker 1: clients play this? Yeah, this is this is very much 337 00:17:57,240 --> 00:18:00,200 Speaker 1: a measured approach, and actually it is in a spot 338 00:18:00,200 --> 00:18:04,480 Speaker 1: to the previous um steel and a million times. There's 339 00:18:04,520 --> 00:18:07,199 Speaker 1: not at all in retaliation of the one we heard yesterday, 340 00:18:07,240 --> 00:18:12,239 Speaker 1: which was about five the big one. So this is 341 00:18:12,320 --> 00:18:16,359 Speaker 1: China basically picking in tiny little um areas which such 342 00:18:16,400 --> 00:18:23,480 Speaker 1: as wine and dry fruits, pork bellies, some steel. These 343 00:18:23,520 --> 00:18:27,160 Speaker 1: are not going to really impact China's economy very much 344 00:18:27,280 --> 00:18:30,040 Speaker 1: or the industry. Indeed, um we're talking for the on 345 00:18:30,080 --> 00:18:33,400 Speaker 1: the agriculture, on the fruit space, probably one billion. They 346 00:18:33,440 --> 00:18:35,439 Speaker 1: have a lot more to give if they needed to 347 00:18:35,480 --> 00:18:37,840 Speaker 1: really negotiate their way through. I think they're putting that 348 00:18:37,880 --> 00:18:40,199 Speaker 1: in their backside of their pocket right now. Kind of 349 00:18:40,200 --> 00:18:42,919 Speaker 1: at the moment, there is an annual export from the 350 00:18:42,960 --> 00:18:45,920 Speaker 1: United States to China totaling about a hundred and thirty 351 00:18:45,960 --> 00:18:49,720 Speaker 1: billion dollars, the retaliation from the Chinese totaling about three 352 00:18:49,760 --> 00:18:52,800 Speaker 1: billion dollars worth of goods. Kind Of, you can hardly 353 00:18:52,800 --> 00:18:55,840 Speaker 1: call it a trade war year, can we? No? Definitely not, 354 00:18:55,920 --> 00:18:58,560 Speaker 1: And I think China doesn't want to. They've all they've 355 00:18:58,600 --> 00:19:01,440 Speaker 1: you know, shooting the undershooting pain. They've been showing they 356 00:19:01,480 --> 00:19:04,679 Speaker 1: want They've been taking every opportunity when the US rhetoric 357 00:19:04,720 --> 00:19:07,800 Speaker 1: has been a little bit surprising or maybe provocative. They've 358 00:19:07,800 --> 00:19:11,880 Speaker 1: tried to show that, look, we're responsible world leader. That's 359 00:19:12,080 --> 00:19:14,359 Speaker 1: a position they're very much trying to covet and um 360 00:19:14,480 --> 00:19:18,560 Speaker 1: and and enhance upon um. So. No, they don't want 361 00:19:18,600 --> 00:19:21,520 Speaker 1: a global trade war. Actually, China doesn't really need their 362 00:19:21,680 --> 00:19:25,439 Speaker 1: Their economy is so strong and their intra Asia trade 363 00:19:25,560 --> 00:19:28,760 Speaker 1: is so big. They doesn't. They don't. They actually won't 364 00:19:28,760 --> 00:19:30,639 Speaker 1: lose so much if there was a big trade war 365 00:19:30,720 --> 00:19:34,240 Speaker 1: between ton in the US. So this is um so 366 00:19:34,680 --> 00:19:36,800 Speaker 1: they won't lose if you think in a big way. 367 00:19:37,560 --> 00:19:40,880 Speaker 1: You know, I just wanna read you a comment by 368 00:19:40,960 --> 00:19:43,880 Speaker 1: an analyst regarding some of these tariffs. This can turn 369 00:19:44,000 --> 00:19:47,240 Speaker 1: ugly on a global scale very quickly, in synchronous global 370 00:19:47,280 --> 00:19:50,239 Speaker 1: growth or not. Markets are right to be pricing in 371 00:19:50,440 --> 00:19:53,960 Speaker 1: a more subdued outlook. I'm just wondering, first of all, 372 00:19:54,080 --> 00:19:55,800 Speaker 1: whether you agree with this this from I M G. 373 00:19:56,000 --> 00:19:59,920 Speaker 1: Asia Pacific chief Economist Robert Carnell. And second of all, 374 00:20:00,240 --> 00:20:02,520 Speaker 1: are you watching us? I mean, at what point will 375 00:20:02,560 --> 00:20:06,960 Speaker 1: you change your expectations for commodity prices based on some 376 00:20:07,040 --> 00:20:11,000 Speaker 1: of this, uh, this trade scuffle action? Say so, First 377 00:20:11,000 --> 00:20:13,879 Speaker 1: of all, the US has given thirty days to consult 378 00:20:14,359 --> 00:20:16,760 Speaker 1: on on what on what they're going to actually do 379 00:20:16,800 --> 00:20:18,359 Speaker 1: whether and so they're actually going to go ahead and 380 00:20:18,359 --> 00:20:20,920 Speaker 1: do all these tariffs. So thirty days a long time. 381 00:20:21,359 --> 00:20:24,080 Speaker 1: The China's come up with a small retaliation. It's again 382 00:20:24,119 --> 00:20:26,040 Speaker 1: it's not a retaliate, it's more of a going do 383 00:20:26,160 --> 00:20:29,120 Speaker 1: this because we could do this. UM. They haven't really 384 00:20:29,160 --> 00:20:31,280 Speaker 1: taken on the big guns out we've already seen with 385 00:20:31,320 --> 00:20:35,320 Speaker 1: the EU. Trumpet said we're going to put tires on 386 00:20:35,520 --> 00:20:38,439 Speaker 1: EU steal. Those are those are not not going to happen. 387 00:20:39,160 --> 00:20:42,280 Speaker 1: Japan still exampt so in study days a lot could happen, 388 00:20:42,440 --> 00:20:44,800 Speaker 1: and I personally think it will be toned down by 389 00:20:44,840 --> 00:20:47,439 Speaker 1: the by when it when it comes to it. UM. 390 00:20:47,640 --> 00:20:50,440 Speaker 1: In terms of impact on commodity prices, right now, it's 391 00:20:50,600 --> 00:20:54,080 Speaker 1: risk off because the mere thought of a global trade 392 00:20:54,080 --> 00:20:57,320 Speaker 1: war UM is not good for global economic growth, which 393 00:20:57,359 --> 00:21:01,080 Speaker 1: in turn is not good for commodities such as iron, ore, steel, 394 00:21:01,440 --> 00:21:07,040 Speaker 1: energy UM. Less so on agriculture, But agriculture is potentially, 395 00:21:07,080 --> 00:21:10,119 Speaker 1: for me the biggest one which China could use against 396 00:21:10,240 --> 00:21:13,640 Speaker 1: UM the US on soybeans if they needed to. Yeah, 397 00:21:13,720 --> 00:21:16,320 Speaker 1: so D please elaborate on that in terms of what 398 00:21:16,520 --> 00:21:19,359 Speaker 1: exactly do you expect the price action on soybeans and 399 00:21:19,440 --> 00:21:24,960 Speaker 1: grains to be should dis escalate, So the trade between 400 00:21:26,359 --> 00:21:29,920 Speaker 1: US soybeans to China is equivalent of about fourteen billion dollars, 401 00:21:29,960 --> 00:21:34,639 Speaker 1: So that's huge UM. And right now the US has 402 00:21:34,680 --> 00:21:38,120 Speaker 1: already been starting from pretty four years of falling prices 403 00:21:38,119 --> 00:21:41,200 Speaker 1: for soybeans. Libviously, they've enjoyed a bit of a resurgence 404 00:21:41,200 --> 00:21:44,760 Speaker 1: because Argentina, one of the big producers UM, has had 405 00:21:44,760 --> 00:21:47,119 Speaker 1: a very bad crop. There's been a drop there. But 406 00:21:47,560 --> 00:21:51,120 Speaker 1: if the US were to lose the China a third 407 00:21:51,119 --> 00:21:55,040 Speaker 1: of US UM so it's a third of Chinese imports 408 00:21:55,080 --> 00:21:58,760 Speaker 1: come from the US on soybeans. That's a big market UM. 409 00:21:58,800 --> 00:22:01,639 Speaker 1: If they were to lose that, then they would have 410 00:22:01,680 --> 00:22:04,119 Speaker 1: to look for alternative markets. But no one can quite 411 00:22:04,160 --> 00:22:06,520 Speaker 1: compete with China on that kind of a scale. So 412 00:22:06,880 --> 00:22:10,959 Speaker 1: you would see UM initial adjustment and prices lower in 413 00:22:11,040 --> 00:22:13,639 Speaker 1: order to attract other buyers, but that would be a 414 00:22:13,720 --> 00:22:16,400 Speaker 1: huge loss for China for the US of China would 415 00:22:16,440 --> 00:22:19,520 Speaker 1: disappear kind of I'm trying to understand the framework for 416 00:22:19,760 --> 00:22:22,320 Speaker 1: through which the administration is viewing this trade issue. I 417 00:22:22,400 --> 00:22:27,080 Speaker 1: understand that overall, very very disappointed by the massive trade 418 00:22:27,080 --> 00:22:29,840 Speaker 1: deficit between China and the United States, and they would 419 00:22:29,840 --> 00:22:31,680 Speaker 1: like to adjust that, and quite clearly that's what they're 420 00:22:31,680 --> 00:22:33,560 Speaker 1: looking to do. But I'm trying to understand what they're 421 00:22:33,640 --> 00:22:37,200 Speaker 1: ultimately targeting because the Common Secretary Wilbur Ross often talked 422 00:22:37,240 --> 00:22:39,760 Speaker 1: about the theft of American genius and trying to target 423 00:22:39,800 --> 00:22:42,240 Speaker 1: intellectual property. But as I look at some of the 424 00:22:42,320 --> 00:22:44,680 Speaker 1: terrorists that have been unveiled, there on a whole load 425 00:22:44,680 --> 00:22:48,040 Speaker 1: of everything, whether it steals, whether it's agriculture we're now 426 00:22:48,040 --> 00:22:50,280 Speaker 1: talking about at the moment, now we're having this discussion 427 00:22:50,280 --> 00:22:53,640 Speaker 1: about intellectual property as well. Is this a blanket effort 428 00:22:53,880 --> 00:22:57,240 Speaker 1: from this administration or is it somewhat targeted? What's your read, 429 00:22:57,320 --> 00:23:03,800 Speaker 1: Kona interesting? Um, I feel it's just a very strong 430 00:23:03,880 --> 00:23:07,320 Speaker 1: message Trump to be fair. He when he was campaigning 431 00:23:07,320 --> 00:23:10,399 Speaker 1: to become president, he did say he didn mention this 432 00:23:10,560 --> 00:23:13,919 Speaker 1: unfair trade advantage that China has over the US, and 433 00:23:13,920 --> 00:23:15,359 Speaker 1: that he was going to at some point when if 434 00:23:15,359 --> 00:23:17,240 Speaker 1: you were elected, he would try and redress that. So 435 00:23:17,280 --> 00:23:20,480 Speaker 1: this is I suppose his first attempt to do that. Um. 436 00:23:20,520 --> 00:23:24,360 Speaker 1: Like I mentioned, I think what will actually end up happening, 437 00:23:24,400 --> 00:23:27,800 Speaker 1: will could be a lot less. Um. I think it's 438 00:23:27,840 --> 00:23:30,199 Speaker 1: widespread because they want to see what will stick and 439 00:23:30,240 --> 00:23:33,000 Speaker 1: what will not and what the reactions will be. You 440 00:23:33,119 --> 00:23:35,160 Speaker 1: kind of have to hit all areas before you see 441 00:23:35,200 --> 00:23:37,360 Speaker 1: where the pain is. And I think once you get 442 00:23:37,440 --> 00:23:40,280 Speaker 1: the various US industry lobby saying no, you can't that 443 00:23:40,359 --> 00:23:43,000 Speaker 1: we will be impacted this way, that's when they'll start 444 00:23:43,000 --> 00:23:44,960 Speaker 1: picking and choosing and narrowing it down to a little 445 00:23:45,000 --> 00:23:48,320 Speaker 1: too smaller subset. Could I imagine that you're getting a 446 00:23:48,400 --> 00:23:50,760 Speaker 1: number of calls from your clients, what's their main question 447 00:23:53,440 --> 00:23:55,760 Speaker 1: you're up to? Right? It would be commodity prices? What's 448 00:23:55,800 --> 00:23:58,640 Speaker 1: the outlook? And my first answer to that would be, um, 449 00:23:59,520 --> 00:24:03,879 Speaker 1: it's it's risk off right now, there's general uncertainty. Um, 450 00:24:03,920 --> 00:24:06,080 Speaker 1: we just have to watch it. It's it's we just 451 00:24:06,119 --> 00:24:08,399 Speaker 1: have to watch this how it pants. I genuinely feel 452 00:24:08,600 --> 00:24:12,960 Speaker 1: China will continue to take a very measured approach um. Economically, 453 00:24:13,280 --> 00:24:16,680 Speaker 1: they it was not a catastrophe for them to take 454 00:24:16,760 --> 00:24:20,000 Speaker 1: this hit on a on what the US is proposing, 455 00:24:20,359 --> 00:24:24,000 Speaker 1: so they don't necessarily to retali it in a big way. Um, 456 00:24:24,000 --> 00:24:26,080 Speaker 1: And they could end up looking like the through the 457 00:24:26,119 --> 00:24:29,679 Speaker 1: Responsible Party here who's advocating free trade. It's something that 458 00:24:29,720 --> 00:24:31,600 Speaker 1: they've been trying to just stance that we're trying to 459 00:24:31,640 --> 00:24:34,359 Speaker 1: push for a while. So it may not end up 460 00:24:34,359 --> 00:24:36,800 Speaker 1: being a full learned global trade war, which some people 461 00:24:36,800 --> 00:24:39,040 Speaker 1: are expecting. Kind of been greatly catch up with you 462 00:24:39,080 --> 00:24:42,240 Speaker 1: a d n F manhead of a research talking about 463 00:24:42,280 --> 00:25:01,720 Speaker 1: a risk off moving commodities. President Donald Trump tweets that 464 00:25:01,720 --> 00:25:04,720 Speaker 1: he is considering a veto of the one point three 465 00:25:04,800 --> 00:25:08,919 Speaker 1: trillion dollar spending bill it had previously one final passage 466 00:25:09,040 --> 00:25:13,720 Speaker 1: by Congress this morning. It reverses his administration's previous statements, 467 00:25:14,080 --> 00:25:16,520 Speaker 1: and of course it raises the prospect that he'll be 468 00:25:16,560 --> 00:25:19,080 Speaker 1: able to shut down the government because of a failure 469 00:25:19,119 --> 00:25:21,760 Speaker 1: to get a deal. Here to tell us more about 470 00:25:21,800 --> 00:25:26,560 Speaker 1: this is Steve Bell. He is at the Bipartisan Policy Center. 471 00:25:26,600 --> 00:25:29,639 Speaker 1: He's a senior advisor. And I'm wondering, Steve, you know, 472 00:25:29,760 --> 00:25:34,760 Speaker 1: as someone who has worked previously in government for Pete Domenici, 473 00:25:35,400 --> 00:25:40,560 Speaker 1: New Mexico's storied senator, and really you're familiar with the 474 00:25:40,640 --> 00:25:45,760 Speaker 1: ongoing budget debates that take place in Congress. Is this 475 00:25:45,920 --> 00:25:50,720 Speaker 1: unprecedented for a president too? In a sense not necessarily 476 00:25:50,720 --> 00:25:53,639 Speaker 1: just politicize the issue, but to turn it into a 477 00:25:53,680 --> 00:26:00,240 Speaker 1: public relations campaign absolutely. You know you mentioned I used 478 00:26:00,240 --> 00:26:02,680 Speaker 1: to be used to work for a Chairman Diminage when 479 00:26:02,680 --> 00:26:04,879 Speaker 1: I was staff director of the Budget Committee. That was 480 00:26:04,920 --> 00:26:07,720 Speaker 1: a long time ago, but um, just to give you 481 00:26:07,840 --> 00:26:09,639 Speaker 1: my age away, I was here from Nick. I've been 482 00:26:09,640 --> 00:26:13,639 Speaker 1: here since Nixon was president, and I have never seen, uh, 483 00:26:13,800 --> 00:26:18,840 Speaker 1: something like this occur. What I suspect is happening is 484 00:26:18,880 --> 00:26:22,600 Speaker 1: this democrats. Democrats are crowing that they got the best 485 00:26:22,600 --> 00:26:26,199 Speaker 1: of the deal. And in the Senate a majority of 486 00:26:26,240 --> 00:26:30,760 Speaker 1: Democrats voted for this bill. Many Republicans voted against it, 487 00:26:31,440 --> 00:26:34,959 Speaker 1: and so Democrats are saying, see, we got what we wanted. 488 00:26:35,000 --> 00:26:37,960 Speaker 1: He didn't get money for his wall. Uh, he didn't 489 00:26:37,960 --> 00:26:41,399 Speaker 1: get some other things he wanted. Made him give some 490 00:26:41,480 --> 00:26:43,919 Speaker 1: money for the for the under you for for the 491 00:26:44,400 --> 00:26:47,320 Speaker 1: for apartment, for the tunnel, and so they're bragging about it, 492 00:26:47,320 --> 00:26:50,840 Speaker 1: and that's got to make him very unhappy. Steve. I'm 493 00:26:50,880 --> 00:26:54,720 Speaker 1: just wondering where this leaves Republican congressmen who are trying 494 00:26:54,760 --> 00:26:59,400 Speaker 1: to actually get this done and avoid a government shutdown. Uh. 495 00:26:59,440 --> 00:27:03,000 Speaker 1: There is a report out that they basically followed his 496 00:27:03,119 --> 00:27:06,200 Speaker 1: talking points that he had distributed earlier. So what does 497 00:27:06,240 --> 00:27:09,200 Speaker 1: this mean about the negotiations going forward in the likelihood 498 00:27:09,440 --> 00:27:11,760 Speaker 1: of a shutdown in the in the near term future. 499 00:27:12,880 --> 00:27:14,880 Speaker 1: I don't think he's going to veto it because most 500 00:27:14,880 --> 00:27:18,000 Speaker 1: of the members of Congress are now out back home, 501 00:27:18,560 --> 00:27:21,480 Speaker 1: because we have a two week recess coming up. Number one, 502 00:27:22,000 --> 00:27:23,760 Speaker 1: number two. I just don't think there's going to be 503 00:27:23,800 --> 00:27:27,520 Speaker 1: any credibility anymore when he says he's going to do 504 00:27:27,560 --> 00:27:30,680 Speaker 1: this or that, or when Mark short or others who 505 00:27:30,680 --> 00:27:33,399 Speaker 1: represent him on the Hill say this is what the 506 00:27:33,400 --> 00:27:34,879 Speaker 1: president is going to do. When you put out a 507 00:27:34,920 --> 00:27:39,359 Speaker 1: statement of administration policy and the President himself says, I'll 508 00:27:39,400 --> 00:27:43,080 Speaker 1: sign this bill despite some misgivings, and he tells the 509 00:27:43,119 --> 00:27:45,600 Speaker 1: Speaker of the House that he can say that and 510 00:27:45,640 --> 00:27:49,760 Speaker 1: then changes his mind, he really has hurt his credibility. 511 00:27:50,080 --> 00:27:53,840 Speaker 1: I'm not sure this president understands the ramifications of that. 512 00:27:54,720 --> 00:27:59,040 Speaker 1: UM I said simply that no one's going to believe 513 00:27:59,080 --> 00:28:03,800 Speaker 1: what he says anymore. UM the you know you already 514 00:28:03,800 --> 00:28:09,120 Speaker 1: have some questions based upon earlier differences of of one 515 00:28:09,160 --> 00:28:11,080 Speaker 1: day he said this and one day he said the next. 516 00:28:11,440 --> 00:28:14,160 Speaker 1: Like Mr McConnell, the Majority leader in the Senator said 517 00:28:14,200 --> 00:28:18,320 Speaker 1: something about that. Paul Ryan was saying last night, good 518 00:28:18,359 --> 00:28:20,959 Speaker 1: I got the President to sign this. A lot of 519 00:28:21,000 --> 00:28:24,679 Speaker 1: folks now feel embarrassed, and it's going to make it 520 00:28:24,720 --> 00:28:27,520 Speaker 1: more difficult for the President to get things done on 521 00:28:27,560 --> 00:28:29,680 Speaker 1: the Hill though. I got to be honest with you, 522 00:28:30,200 --> 00:28:32,720 Speaker 1: this may be the last thing that passes this year 523 00:28:32,760 --> 00:28:38,320 Speaker 1: of any significance. Steve Bell, a quote from Mick Mulvaney, 524 00:28:38,480 --> 00:28:42,880 Speaker 1: the White House budget director, says, let's cut to the chase. 525 00:28:43,280 --> 00:28:45,520 Speaker 1: Is the President going to sign the bill? The answer 526 00:28:45,600 --> 00:28:50,320 Speaker 1: is yes? Why because it funds his priorities? Does this 527 00:28:50,600 --> 00:28:57,000 Speaker 1: now damage the credibility of mc mulveney Mr Mulvaney's credibilities 528 00:28:57,080 --> 00:28:59,720 Speaker 1: or any damage because he has not produced a budget 529 00:28:59,800 --> 00:29:02,560 Speaker 1: yet that has received even a hearing on Capitol Hill 530 00:29:02,600 --> 00:29:06,360 Speaker 1: in the last two years or last fifteen months. Um. 531 00:29:06,400 --> 00:29:10,400 Speaker 1: But this further, this further damages it. Um. The notion 532 00:29:10,440 --> 00:29:14,440 Speaker 1: that this funds his priorities other than defense is really 533 00:29:15,000 --> 00:29:18,240 Speaker 1: quite in striking contrast to the budget he set up here. 534 00:29:18,720 --> 00:29:21,240 Speaker 1: He wanted deep cuts and all the domestic programs they're 535 00:29:21,240 --> 00:29:24,320 Speaker 1: going to be increases of around fifty billion. Uh. He 536 00:29:24,400 --> 00:29:27,880 Speaker 1: wanted money for the wall in the area of eighteen billion. 537 00:29:28,400 --> 00:29:30,960 Speaker 1: He got about one point five billion, but that's scattered 538 00:29:31,000 --> 00:29:35,880 Speaker 1: between the wall and additional border agents. He wanted no money, 539 00:29:36,240 --> 00:29:39,040 Speaker 1: uh for the tunnel, and he had to give five 540 00:29:39,920 --> 00:29:43,600 Speaker 1: million plus for that. So all in all, let's be 541 00:29:43,640 --> 00:29:46,400 Speaker 1: honest about it, this was not a victory for the 542 00:29:46,440 --> 00:29:50,640 Speaker 1: president except in the area where there was vast bipartisan support, 543 00:29:50,680 --> 00:29:53,720 Speaker 1: and that was in military spending increases. So, Steve, since 544 00:29:53,760 --> 00:29:56,680 Speaker 1: you have so much experience and actually crafting these things 545 00:29:56,720 --> 00:30:00,440 Speaker 1: and understanding the negotiations back and forth, have you had 546 00:30:00,440 --> 00:30:03,400 Speaker 1: a chance to really look at the details of this 547 00:30:03,520 --> 00:30:05,880 Speaker 1: bill and what kind of filler or sort of pet 548 00:30:05,920 --> 00:30:08,480 Speaker 1: projects were financed through it. Can you give us a 549 00:30:08,480 --> 00:30:11,440 Speaker 1: sense of that? You know, I'm not gonna lie. I 550 00:30:11,440 --> 00:30:14,680 Speaker 1: haven't reades. I've read some summaries that were put out 551 00:30:15,240 --> 00:30:18,400 Speaker 1: on the on the on the twelve. This this huge 552 00:30:18,480 --> 00:30:22,760 Speaker 1: bill comprises twelve different individual bills. But you just take 553 00:30:22,760 --> 00:30:25,120 Speaker 1: a look when you fixed taxes twice in their low 554 00:30:25,160 --> 00:30:28,760 Speaker 1: income tax credit and a mistake in the tax bill 555 00:30:28,800 --> 00:30:32,760 Speaker 1: that was signed last December that would have hurt farmers. 556 00:30:32,800 --> 00:30:35,840 Speaker 1: So you've got a hodgepodge of everything in here. And 557 00:30:35,880 --> 00:30:38,560 Speaker 1: as we look at it, we will find more favors, 558 00:30:39,440 --> 00:30:43,080 Speaker 1: more deals. I think the big deals that weren't cut, 559 00:30:43,440 --> 00:30:49,400 Speaker 1: for example, giving subsidies to keep the Obamacare machinery running well, 560 00:30:49,880 --> 00:30:52,280 Speaker 1: a promise that was made to Senator Collins, they just 561 00:30:52,320 --> 00:30:55,880 Speaker 1: simply didn't do it. And uh that probably is not 562 00:30:55,960 --> 00:30:59,560 Speaker 1: made Senator Collins of Maine, a Republican, very happy. But 563 00:30:59,640 --> 00:31:02,360 Speaker 1: it's the things that didn't happen. There's no there's no 564 00:31:02,520 --> 00:31:06,800 Speaker 1: immigration of kind of language and here at all. And 565 00:31:06,840 --> 00:31:10,680 Speaker 1: so I think, as I said at the beginning, this 566 00:31:10,760 --> 00:31:15,760 Speaker 1: is going to damage his credibility pretty pretty seriously. And 567 00:31:16,080 --> 00:31:19,120 Speaker 1: I don't think, uh, the appointment of John Bolton, by 568 00:31:19,160 --> 00:31:21,400 Speaker 1: the way, helps any because now people are gonna wonder 569 00:31:21,400 --> 00:31:24,280 Speaker 1: about Dolly, what you're gonna do on around nuclear deer 570 00:31:24,360 --> 00:31:26,760 Speaker 1: or what's he going. So I think this really does 571 00:31:26,880 --> 00:31:30,800 Speaker 1: hurt his relationship with Congress, and I think especially embarrasses 572 00:31:31,080 --> 00:31:33,520 Speaker 1: the Speaker of the House, Paul Ryan. What do you 573 00:31:33,520 --> 00:31:36,200 Speaker 1: think this does to the Republicans in the upcoming mid 574 00:31:36,280 --> 00:31:40,000 Speaker 1: term elections? I think it hurts. I think we've already 575 00:31:40,000 --> 00:31:44,640 Speaker 1: seen in two or three elections where Democrats have performed 576 00:31:45,280 --> 00:31:48,800 Speaker 1: much better than we had anticipated or that history would indicate, 577 00:31:49,280 --> 00:31:51,200 Speaker 1: and if you take a look at the retirements that 578 00:31:51,200 --> 00:31:54,320 Speaker 1: have already occurred in the House, especially and some of 579 00:31:54,320 --> 00:31:58,520 Speaker 1: the retirements we anticipate based upon the election in Pennsylvania 580 00:31:58,600 --> 00:32:01,200 Speaker 1: eighteen where the Democrat one for the first time in many, 581 00:32:01,240 --> 00:32:05,640 Speaker 1: many years. Um, I think you're seeing a lot of nervousness. 582 00:32:05,680 --> 00:32:09,960 Speaker 1: And I think Republicans right now are pretty concerned that 583 00:32:10,040 --> 00:32:13,600 Speaker 1: the tax cut, while it was a positive, is not 584 00:32:13,720 --> 00:32:16,320 Speaker 1: as much a positive in the election coming up as 585 00:32:16,360 --> 00:32:20,400 Speaker 1: they had hoped, and that Trump, with this kind of 586 00:32:20,400 --> 00:32:22,840 Speaker 1: back and forth behavior, may be a bigger burden than 587 00:32:22,880 --> 00:32:27,720 Speaker 1: they had feared. The Nonpartisan Committee for a Responsible Federal 588 00:32:27,840 --> 00:32:31,720 Speaker 1: Budget projects that the United States will run two trillion 589 00:32:31,840 --> 00:32:37,840 Speaker 1: dollar annual budget deficits by twenty seven. Oh yes, Oh, 590 00:32:37,840 --> 00:32:40,360 Speaker 1: I mean, you know, we did a calculation here last 591 00:32:40,400 --> 00:32:43,400 Speaker 1: year and we said in f y eight, four years 592 00:32:43,440 --> 00:32:46,760 Speaker 1: earlier than the Congressional Office projected, we would have a 593 00:32:46,760 --> 00:32:50,200 Speaker 1: trillion dollar deficit in f y eighteen. So I think 594 00:32:50,240 --> 00:32:55,040 Speaker 1: it is eminently possible, especially if you consider we haven't 595 00:32:55,040 --> 00:32:58,760 Speaker 1: had a recession or anything else, eminently possible that we'll 596 00:32:58,840 --> 00:33:02,520 Speaker 1: run a two trillion dollar deficit within four or five years. 597 00:33:02,560 --> 00:33:08,040 Speaker 1: And this is let's be honest. In peacetime during expansion, 598 00:33:09,000 --> 00:33:12,000 Speaker 1: since we've been keeping records, this is the first time 599 00:33:12,400 --> 00:33:16,440 Speaker 1: we've had such dramatic increases in deficits. That keep that 600 00:33:16,520 --> 00:33:19,320 Speaker 1: in mind. We're an expansion and we're not at war 601 00:33:19,720 --> 00:33:23,600 Speaker 1: in any significant global war, and yet we're still running 602 00:33:23,760 --> 00:33:27,680 Speaker 1: huge deficits. I want to bring you a new tweet 603 00:33:27,760 --> 00:33:33,400 Speaker 1: from Senator Rand Paul, a notable fiscal conservative and contrarian. 604 00:33:33,520 --> 00:33:37,120 Speaker 1: He just tweeted out minutes ago. I agree the real 605 00:33:37,160 --> 00:33:40,840 Speaker 1: Donald Trump should veto this sad excuse for legislation because 606 00:33:40,880 --> 00:33:44,440 Speaker 1: it's one point three trillion dollars in spending that farthes 607 00:33:44,600 --> 00:33:47,640 Speaker 1: is almost no one read, just real quickly. Do you 608 00:33:47,640 --> 00:33:52,800 Speaker 1: agree with that? Yes, no one. Look, the chief clerk 609 00:33:52,840 --> 00:33:55,640 Speaker 1: for the Appropriations Committee used to work for me. Hard 610 00:33:55,720 --> 00:33:59,000 Speaker 1: working guys. I don't think even the staff has read 611 00:33:59,080 --> 00:34:02,640 Speaker 1: all of pages. Yeah. Well, Steve Bell, thank you so 612 00:34:02,720 --> 00:34:04,880 Speaker 1: much for taking the time. It's wonderful to get your 613 00:34:04,920 --> 00:34:08,799 Speaker 1: expertise and insight at a time of a lot of uncertainty, 614 00:34:08,840 --> 00:34:12,760 Speaker 1: at least politically. Steve Bell of the Bipartisan Policy Center, 615 00:34:12,800 --> 00:34:14,759 Speaker 1: he is a senior adviser there, but he has a 616 00:34:14,840 --> 00:34:18,279 Speaker 1: storied history in Congress, and even on Wall Street at 617 00:34:18,520 --> 00:34:22,200 Speaker 1: Salomon Brothers. He was the staff director of the Senate 618 00:34:22,200 --> 00:34:33,360 Speaker 1: Budget Committee from one until nineties six. Thanks for listening 619 00:34:33,440 --> 00:34:38,000 Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews 620 00:34:38,000 --> 00:34:43,240 Speaker 1: on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. 621 00:34:43,800 --> 00:34:47,160 Speaker 1: I'm on Twitter at Tom Keane before the podcast. You 622 00:34:47,160 --> 00:34:50,560 Speaker 1: can always catch us worldwide. I'm Bloomberg Radio.