Speaker 1: Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene
Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,
Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,
Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg. So
Speaker 1: let's just start with the White House, Mary go round.
Speaker 1: McMaster is out and John Bolton is in as the
Speaker 1: President's National Security Advisor. What does it mean for foreign
Speaker 1: policy going forward from here? I'm pleased to say here
Speaker 1: in New York is Dantana Boum, p WC Global Sanctions Leader,
Speaker 1: and he joins us around the table right here, right now, Dan,
Speaker 1: talk to me about the latest moves in the White
Speaker 1: House and the significance of them for you. I give up.
Speaker 1: I mean this is this used to be really easy
Speaker 1: to try and predict what was going to happen. Next.
Speaker 1: You've got a new incoming National Security advisor who, you know,
Speaker 1: we're reminded, does not need confirmation by the Senate, who
Speaker 1: has some rather extreme views on dealings with hostile nations
Speaker 1: around the world historically. Well, let's let's be a little
Speaker 1: bit more blunt here. Uh, this is somebody who has
Speaker 1: been for war on many occasions as one of the
Speaker 1: architects behind the Iraq war. Um, is this sort of
Speaker 1: a sign that President Trump is planning to threaten military
Speaker 1: action somewhere? Yeah, I mean, that's that's obviously what this
Speaker 1: looks like we could be headed towards. I think there's
Speaker 1: still enough moderates that exist within the government that hopefully
Speaker 1: that's not the case. I mean, you look at the
Speaker 1: Iran deal. With Pompeo replacing Tillerson, that already put the
Speaker 1: Iran deal at risk. Um Bolton has been extremely anti
Speaker 1: the Iran deal. In fact, wanted to preemptively attack Iran
Speaker 1: North Korea as well. It wasn't really up for negotiating sations.
Speaker 1: Who was up for a more preemptive strike. All of
Speaker 1: these are really complicating what was already a fairly tense
Speaker 1: situation to begin with. Down Do you believe there's an
Speaker 1: intellectual framework for for shaping the people around the president
Speaker 1: right now? Because if there is, most people say all
Speaker 1: roads lead to Iran. Rex Tillison had a difference over
Speaker 1: a run with the President the United States. Hr McMaster
Speaker 1: also having that difference with the president. Another one that's
Speaker 1: really in focus now will be Mattest, the Defense Secretary,
Speaker 1: because he also has a different opinion on Iran, So
Speaker 1: to all roads lead to Iran or is this something else?
Speaker 1: It's unclear what the strategy is. The only thing I
Speaker 1: take comfort in is the civil servants that are a
Speaker 1: Treasury and State for the most part, still remained from
Speaker 1: prior administration. So the people that are actually executing the
Speaker 1: underlying work, a lot of them are still there. Obviously,
Speaker 1: the revolving door of people making direction for the plans
Speaker 1: have been changing pretty rapidly over the last year. But
Speaker 1: I want to believe there's some sort of a strategy here.
Speaker 1: I mean, we're there's so many fronts that this administration
Speaker 1: is trying to cover off on now, between Iran, Russia,
Speaker 1: and North Korea, now who knows potentially Cuba. I mean,
Speaker 1: it is absolute whiplash trying to manage all of this
Speaker 1: and try and look for some sort of cogent theme here.
Speaker 1: There are so many different ways we could go this morning. Um,
Speaker 1: we could talk about some of the market action and
Speaker 1: the risk aversion. Now, we could talk about the tariffs
Speaker 1: with China, and we're gonna get to all of those things.
Speaker 1: I do just want to get your thoughts on the
Speaker 1: j c p o A with Iran, the Joint Comprehensive
Speaker 1: Plan of Action. Talk to me about the next scheduled
Speaker 1: event where the President could really make a difference here,
Speaker 1: because it feels like we're gravitate, gravitating towards a moment
Speaker 1: where he might move to rip that up. So may
Speaker 1: is the next scheduled waivers to further extend the sanctions
Speaker 1: relief with the j c p o A. And already
Speaker 1: it's been I mean, every time the waivers have come up,
Speaker 1: it's been spoken about in terms of, you know, this
Speaker 1: is the worst deal ever and it will never go ahead.
Speaker 1: And every time the waivers have been extended, I have
Speaker 1: some doubts this time that that may be the case.
Speaker 1: I mean, the other complicating factor is due to other
Speaker 1: things that the Iranian regime has been doing, the EU
Speaker 1: has been looking at applying additional sound actions unrelated to
Speaker 1: the j c p o A, but additional sanctions on Iran,
Speaker 1: and Iran is just kind of sitting back looking at this,
Speaker 1: wondering what did we actually sign up for to begin with.
Speaker 1: So you advise companies and wondering what are they asking
Speaker 1: you what are they calling you up right now about?
Speaker 1: So we get a lot of calls about looking at
Speaker 1: the risks to enter Iran globally, and obviously, as an
Speaker 1: American I'm restricted in the support that I can provide,
Speaker 1: but as a global organization, we try to look at,
Speaker 1: you know, how do you ring fence U s, nationals,
Speaker 1: how do you apply a framework to understand the risk
Speaker 1: that you're entering. Especially with Iran and the snap backed
Speaker 1: provisions of the j c P o A, there's a
Speaker 1: possibility that within sixty days of the sanctions being lift
Speaker 1: being reimposed that a company might have to exit. So
Speaker 1: everyone that goes in needs to have an exit strategy,
Speaker 1: and that's the basic advice that we're advising. How problematic
Speaker 1: is it with the turnover to come up with some
Speaker 1: kind of predictable path for these companies. It's it's impossible
Speaker 1: at this point, and it really has slowed the growth
Speaker 1: of entry into Iran. There were obviously billions of dollars
Speaker 1: of deals announced in the wake of the j c
Speaker 1: P away in the aviation and automotive industry. Now we
Speaker 1: are seeing a lot more hesitancy by our clients around
Speaker 1: the world as they're looking at Iran entry. They're asking
Speaker 1: the question of what exactly do we do next, and
Speaker 1: they're honest answers. It's really unclear what the next step
Speaker 1: is for our listeners, just churning in. At the momentum,
Speaker 1: the market actions follows were down just seventy eight on
Speaker 1: the down, negative five or six points on the SMP
Speaker 1: five hundreds, So following yesterday's route, we are bouncing off
Speaker 1: the lows in terms of futures, a bit of risk
Speaker 1: aversion in the FX market with a stronger Japanese Yeah,
Speaker 1: dollyan at one of five and treasury stable here after
Speaker 1: yesterday's big bit. The tenuere treasury yield as follows at
Speaker 1: two point eight two percent, so a little bit of
Speaker 1: calm coming through to this market in the last I
Speaker 1: would say, the last one hour, Lisa, Yeah, although there
Speaker 1: still are some pretty big losers. You can see that
Speaker 1: Facebook share is still down ahead of open. You can
Speaker 1: see that ten Cent has been really absolutely penalized, so
Speaker 1: a lot of red to down. It's at Lesa's question
Speaker 1: and important question about what you're advising companies at the moment.
Speaker 1: You talked about companies around the world. I imagine if
Speaker 1: you're a European company looking to do business in a
Speaker 1: place like Iran. Now, even you were thinking, I don't
Speaker 1: know what to do, because even if I was an
Speaker 1: American company, I would be very very hesitant. But as
Speaker 1: a European company, the US has up the agreement. Is
Speaker 1: that a place you want to make an investment right now,
Speaker 1: and as a US company, with the exception of foreign
Speaker 1: organized subsidiaries, you're essentially iced out of the market. For
Speaker 1: the European companies, the challenges and continues to be the
Speaker 1: ability to finance any transactions with Iran, because there's no
Speaker 1: major bank in the world that will really touch the business.
Speaker 1: And that's been the case even after the deal was
Speaker 1: put in place, even after pressure from the UK and
Speaker 1: US governments to establish banking relationships. Because of so many
Speaker 1: banks being penalized over the years, many of your gun
Speaker 1: shy about re entering a market and potentially putting a
Speaker 1: bull's eye on their back. A lot of people will
Speaker 1: wake up this morning they'll see the Chinese retaliating with
Speaker 1: arrists from the arrists that the United States introduced just yesterday.
Speaker 1: They proposed in the last twenty four hours, What has
Speaker 1: changed for US foreign policy? If and I think it's sold.
Speaker 1: I mean, we're moving very rapidly to an isolation isolationist
Speaker 1: approach to how we're dealing with the world. I mean,
Speaker 1: we have a trade war with China now that's looming.
Speaker 1: We have actual wars with Iran and North Korea that
Speaker 1: are on the table. I mean, there's a lot of
Speaker 1: legitimate threats. But the way in which we are handling
Speaker 1: some of these actions in a somewhat unilateral matter is
Speaker 1: com complicating our perception in the world. Just push back
Speaker 1: a little bit. China's measure in response to the US
Speaker 1: was pretty minor. What do you make that? I think
Speaker 1: similar to how a lot of countries deal with response
Speaker 1: in a more responsible manner. I mean, this is obviously
Speaker 1: not the just the opening salvo. I think what China
Speaker 1: is responsive with three billion dollars and tariffs against US
Speaker 1: imports um is really just the beginning. It's going to
Speaker 1: slowly but surely kind of ratchet up the pressure on
Speaker 1: US companies, and obviously China is a massive trading partner
Speaker 1: to the US. You can't start with the big bang necessarily,
Speaker 1: although some administrations might believe otherwise. But I think this
Speaker 1: is just the beginning. Dantana Bum. It's been great to
Speaker 1: have you with us in a studio here in New York,
Speaker 1: and it's great to catch up view the p WC
Speaker 1: Global Sanctions Leader. Fantastic guests we can bring in right now.
Speaker 1: Really caught my attention on Twitter yesterday evening. Ian Bremer,
Speaker 1: Eurisia Group founder and an authority on global geopolitical risk,
Speaker 1: tweeting the following yesterday evening probably the worst biggest single
Speaker 1: day for geopolitical risks since I started Eurisia Group in
Speaker 1: nineteen and that's a stunning statement. Give us the y Well,
Speaker 1: first of all, you have the decision to take fifty
Speaker 1: billion dollars of terroiffs against China, which they will react
Speaker 1: to in the context of a big transition towards a
Speaker 1: more confrontational relationship with the Chinese. Elevation of Peter Navarro Um,
Speaker 1: the decision to signs law a bill, a travel bill
Speaker 1: on Taiwan that will lead to a direct exchanges of
Speaker 1: high level officials. That's a red line for the Chinese.
Speaker 1: So the most important bilateral relationship in the world taking
Speaker 1: a marks turn to the negative real tipping point there Um,
Speaker 1: and the appointment of John Bolton uh to National Security Advisor,
Speaker 1: one of the most outspoken Hawks arguing for preemption against
Speaker 1: North Korea, ripping up the Iran deal, much stronger himself
Speaker 1: on China as well. But the issue is that this
Speaker 1: is happening in the context of a global environment that
Speaker 1: is already unwinding a geopolitical recession, where the US doesn't
Speaker 1: have the kind of influence internationally that it has historically
Speaker 1: and is much more prone towards miscalculation. Where nine eleven
Speaker 1: obviously a much more dramatic shock, but it happened in
Speaker 1: the context of a u US that was clearly a
Speaker 1: global leader, with an awful lot of allies behind this,
Speaker 1: and so it's a consequence there wasn't nearly listened impact
Speaker 1: on geopolitical environment. Yeah, I was going to say, and
Speaker 1: I think a lot of people would have read that
Speaker 1: and said, what about two thousand and one? What about
Speaker 1: the invasion of a rug? But your point quite clearly
Speaker 1: in a G zero world, in the context of that,
Speaker 1: that makes it a lot more fragile at the moment.
Speaker 1: Something else you've also warned about Ian before the departure
Speaker 1: of the last twenty four hours was how significant the
Speaker 1: departure of HR McMaster would be for this administration. Just
Speaker 1: talk me through why and walk me through the domino
Speaker 1: effect from here. How you think this evolves. Well, you
Speaker 1: have people now around Trump that are more enabling of
Speaker 1: of Trump. Before with Chillerson, with McMaster, with Gary Cohne,
Speaker 1: you had people who may not have had enormous influence
Speaker 1: over Trump, but they were willing to strongly say when
Speaker 1: they believed that Trump was wrong. They were largely moderating influences,
Speaker 1: and they were analytically fairly sharp. Um, so they actually
Speaker 1: knew a fair amount about the world. They had a
Speaker 1: fair amount of expertise. Um. You're losing a lot of
Speaker 1: that with their replacements now. But you're also enabling. You're
Speaker 1: enabling with people that are not willing to tell Trump
Speaker 1: when he's wrong. They're willing to support his instincts, and
Speaker 1: they're also intrinsically more hawkish, more prone towards escalation. Trump
Speaker 1: himself has made his presidency more about ripping up the
Speaker 1: deal with Iran and more importantly, more about North Korea.
Speaker 1: We had a lot of presidents Democrat and Republican ended
Speaker 1: have known that North Korea was getting worse, but they
Speaker 1: didn't want to engage very much themselves, because they knew
Speaker 1: that it was going to be very hard to fix
Speaker 1: and the downside was going to be great. Trump's ability
Speaker 1: to fix North Korea, his expertise is certainly no greater
Speaker 1: than previous presidents. He's much more risk acceptance. So there
Speaker 1: is a possibility of a diplomatic breakthrough, but there's also
Speaker 1: a much greater chance that we end up with in
Speaker 1: a war. And I do think that the recent appointment,
Speaker 1: capped off most importantly by Bolton's accession to get Security Advisor,
Speaker 1: makes the likelihood of direct military conflicts, specifically with the
Speaker 1: Koreans and also potentially between the US and Iran or
Speaker 1: Israel and Iran, much more likely than it was twenty
Speaker 1: four hours ago. Some pretty frightening words so far, though,
Speaker 1: as John pointed out earlier, it's really sentiments sentiment shift,
Speaker 1: and one that that's negative because the actions taken so
Speaker 1: far haven't been in themselves that extreme. What to you
Speaker 1: will signal a market escalation that moves us much closer
Speaker 1: to some kind of military altercation. Well, first of all,
Speaker 1: yesterday did right, I mean, you know the fact that
Speaker 1: you have a seven plus point hit to the markets.
Speaker 1: When's the last time that that happened directly as a
Speaker 1: result of presidential action. That was a market move of choice, uh,
Speaker 1: not the reaction to a global recession or you know,
Speaker 1: sort of a bubble bursting um. And so I do
Speaker 1: think that combined, as I said, with Taiwan, combined with
Speaker 1: the escalation of Peter Navarro, one of the most anti
Speaker 1: China hawks that again has been in a high level
Speaker 1: position in any administration in decades, has set the Chinese
Speaker 1: off on the market spot for the first time. Reacting
Speaker 1: to that is you know, the markets have been very
Speaker 1: complacent with geopolitical risks over the past year, in part
Speaker 1: because the baseline economics are doing well. This is the
Speaker 1: first time that Trump has taken action that really moves
Speaker 1: in a very different direction. I don't expect the markets
Speaker 1: to react on issues like North Korea or Iran until
Speaker 1: you see a direct shock. The corporations will. They're starting
Speaker 1: to put plans in place in terms of what they
Speaker 1: would do if there was a massive supply chain shock
Speaker 1: or oil prices would a spike over a hundred briefly,
Speaker 1: or even if they had to get their ex paths
Speaker 1: out of situations. Every corporation, major corporation we advise as
Speaker 1: talking about that now, but the markets are much more
Speaker 1: short term and they don't necessarily plan for escalated tail risk,
Speaker 1: which are the kinds of things we're seeing all over
Speaker 1: the world right now geopolitically so and it's a really
Speaker 1: good point. Typically we just consider those things at how risk.
Speaker 1: I want to talk to you about what you consider
Speaker 1: to be the base case right now? In the eighth
Speaker 1: of John Bolton. We now have a national security advisor
Speaker 1: in the White House that couldn't even get confirmed by
Speaker 1: a Republican controlled Senate as the US Ambassador to the
Speaker 1: u N under George W. Bush. We have John Bolton
Speaker 1: as the National Security advisor individual that has written our
Speaker 1: pets about striking Iran and striking North Korea. Do you
Speaker 1: just consider it inevitable? Now? Is your base case that
Speaker 1: that j c p o A, the Joint Comprehensive Plan
Speaker 1: of Action, the agreement with Iran just gets torn up.
Speaker 1: It's it's probably a base case. It wasn't Again, twenty
Speaker 1: four hours ago, I think Trump had said he wanted
Speaker 1: to do it, but there was a lot of pushback
Speaker 1: from people around him, as well as from Europeans and
Speaker 1: even American allies. Like the Staudis and the Iranians who
Speaker 1: are no fan of the Iran deal, recognized that if
Speaker 1: Trump ripped it up, that the U s would be
Speaker 1: isolated to be that by themselves, you know, it caused
Speaker 1: more problems than it was worth. They didn't want tougher
Speaker 1: sanctions by the Americans against Iran, but on different issues
Speaker 1: on IRUN solistic missile program, on the support for terrorist
Speaker 1: organizations has below others around the region. Now, I think
Speaker 1: that the baseline, the spite effect is going to continue
Speaker 1: to be an enormous amount of pressure against Trump to
Speaker 1: do this. I do think the baseline is that the
Speaker 1: j c p o A, the irandeal goes away or
Speaker 1: the Americans rip it up. And I think part of
Speaker 1: the reason for that is because the pressure on Trump
Speaker 1: himself the Mueller investigation um the which is clearly going
Speaker 1: much longer than the inspected expected. You saw the departure
Speaker 1: of his top attorney just in the past forty hours
Speaker 1: because he wasn't listening to him. Trump's expectations around that
Speaker 1: investigation clearly were much more rose tinted um as he
Speaker 1: comes to realize that the starks sharks are circling his
Speaker 1: behavior has become more erratic, he has lashed out more.
Speaker 1: I do think that the Bolton appointment is part of that.
Speaker 1: Do you think that amid the White House turmoil, the
Speaker 1: China tariffs and the US tariffs are just noise. No,
Speaker 1: they're not noise because unlike Caribs against American allies, where
Speaker 1: there's very strong pushback from those advising Trump and his
Speaker 1: major funders, all of the Republicans you know, sort of
Speaker 1: governors and senators and the rest, on China, there actually
Speaker 1: is a strong desire among many advising and supporting Trump.
Speaker 1: The Chinese are engaged in unfair practices. They're not providing
Speaker 1: reciprocal market access to the Americans. This is getting worse
Speaker 1: and the Americans need to do something about it. The
Speaker 1: problem is that Trump's policies are not very strategic, They're
Speaker 1: not very directed. As I mentioned, they also include Taiwan
Speaker 1: issues which are not linked, but which the Chinese will
Speaker 1: see is pushing them in the corner. And also, the
Speaker 1: Americans don't have allies on their side because of the
Speaker 1: symbolic efforts against NAFTA and willingness to put allies on
Speaker 1: notice on aluminium steel if they don't get the Americans
Speaker 1: a better deal pulling out of the trans specific partnership
Speaker 1: earlier in Trump presidency. All of this makes American policy
Speaker 1: against China more unilateral, when if you want to take
Speaker 1: a tough line against China, you want it to be
Speaker 1: more multilateral, more strategic. And it's been great to catch
Speaker 1: out with you, a friend of the program, and we
Speaker 1: always appreciate your insight on all of these issues that
Speaker 1: dominate the agenda currently, the geopolitical issues very much at
Speaker 1: the front and center as we close out the trading week.
Speaker 1: Ian Bremer, really appreciate your time. Thank you, sir, that
Speaker 1: you raise a group founder joining us on the latest
Speaker 1: movements in the White House and that trade battle between
Speaker 1: China and the United States. I want to bring in
Speaker 1: a kind of hack that is d F E. D
Speaker 1: and F Man head of research and kinda thank you
Speaker 1: so much for being with us. Let's start with those teriffs,
Speaker 1: the US imposing terroriffs on China, China retaliating. How much
Speaker 1: is this just noise at this point? Not really the
Speaker 1: biggest measures that could have been taken? Uh? And and
Speaker 1: sort of how are you how are you suggesting that
Speaker 1: clients play this? Yeah, this is this is very much
Speaker 1: a measured approach, and actually it is in a spot
Speaker 1: to the previous um steel and a million times. There's
Speaker 1: not at all in retaliation of the one we heard yesterday,
Speaker 1: which was about five the big one. So this is
Speaker 1: China basically picking in tiny little um areas which such
Speaker 1: as wine and dry fruits, pork bellies, some steel. These
Speaker 1: are not going to really impact China's economy very much
Speaker 1: or the industry. Indeed, um we're talking for the on
Speaker 1: the agriculture, on the fruit space, probably one billion. They
Speaker 1: have a lot more to give if they needed to
Speaker 1: really negotiate their way through. I think they're putting that
Speaker 1: in their backside of their pocket right now. Kind of
Speaker 1: at the moment, there is an annual export from the
Speaker 1: United States to China totaling about a hundred and thirty
Speaker 1: billion dollars, the retaliation from the Chinese totaling about three
Speaker 1: billion dollars worth of goods. Kind Of, you can hardly
Speaker 1: call it a trade war year, can we? No? Definitely not,
Speaker 1: And I think China doesn't want to. They've all they've
Speaker 1: you know, shooting the undershooting pain. They've been showing they
Speaker 1: want They've been taking every opportunity when the US rhetoric
Speaker 1: has been a little bit surprising or maybe provocative. They've
Speaker 1: tried to show that, look, we're responsible world leader. That's
Speaker 1: a position they're very much trying to covet and um
Speaker 1: and and enhance upon um. So. No, they don't want
Speaker 1: a global trade war. Actually, China doesn't really need their
Speaker 1: Their economy is so strong and their intra Asia trade
Speaker 1: is so big. They doesn't. They don't. They actually won't
Speaker 1: lose so much if there was a big trade war
Speaker 1: between ton in the US. So this is um so
Speaker 1: they won't lose if you think in a big way.
Speaker 1: You know, I just wanna read you a comment by
Speaker 1: an analyst regarding some of these tariffs. This can turn
Speaker 1: ugly on a global scale very quickly, in synchronous global
Speaker 1: growth or not. Markets are right to be pricing in
Speaker 1: a more subdued outlook. I'm just wondering, first of all,
Speaker 1: whether you agree with this this from I M G.
Speaker 1: Asia Pacific chief Economist Robert Carnell. And second of all,
Speaker 1: are you watching us? I mean, at what point will
Speaker 1: you change your expectations for commodity prices based on some
Speaker 1: of this, uh, this trade scuffle action? Say so, First
Speaker 1: of all, the US has given thirty days to consult
Speaker 1: on on what on what they're going to actually do
Speaker 1: whether and so they're actually going to go ahead and
Speaker 1: do all these tariffs. So thirty days a long time.
Speaker 1: The China's come up with a small retaliation. It's again
Speaker 1: it's not a retaliate, it's more of a going do
Speaker 1: this because we could do this. UM. They haven't really
Speaker 1: taken on the big guns out we've already seen with
Speaker 1: the EU. Trumpet said we're going to put tires on
Speaker 1: EU steal. Those are those are not not going to happen.
Speaker 1: Japan still exampt so in study days a lot could happen,
Speaker 1: and I personally think it will be toned down by
Speaker 1: the by when it when it comes to it. UM.
Speaker 1: In terms of impact on commodity prices, right now, it's
Speaker 1: risk off because the mere thought of a global trade
Speaker 1: war UM is not good for global economic growth, which
Speaker 1: in turn is not good for commodities such as iron, ore, steel,
Speaker 1: energy UM. Less so on agriculture, But agriculture is potentially,
Speaker 1: for me the biggest one which China could use against
Speaker 1: UM the US on soybeans if they needed to. Yeah,
Speaker 1: so D please elaborate on that in terms of what
Speaker 1: exactly do you expect the price action on soybeans and
Speaker 1: grains to be should dis escalate, So the trade between
Speaker 1: US soybeans to China is equivalent of about fourteen billion dollars,
Speaker 1: So that's huge UM. And right now the US has
Speaker 1: already been starting from pretty four years of falling prices
Speaker 1: for soybeans. Libviously, they've enjoyed a bit of a resurgence
Speaker 1: because Argentina, one of the big producers UM, has had
Speaker 1: a very bad crop. There's been a drop there. But
Speaker 1: if the US were to lose the China a third
Speaker 1: of US UM so it's a third of Chinese imports
Speaker 1: come from the US on soybeans. That's a big market UM.
Speaker 1: If they were to lose that, then they would have
Speaker 1: to look for alternative markets. But no one can quite
Speaker 1: compete with China on that kind of a scale. So
Speaker 1: you would see UM initial adjustment and prices lower in
Speaker 1: order to attract other buyers, but that would be a
Speaker 1: huge loss for China for the US of China would
Speaker 1: disappear kind of I'm trying to understand the framework for
Speaker 1: through which the administration is viewing this trade issue. I
Speaker 1: understand that overall, very very disappointed by the massive trade
Speaker 1: deficit between China and the United States, and they would
Speaker 1: like to adjust that, and quite clearly that's what they're
Speaker 1: looking to do. But I'm trying to understand what they're
Speaker 1: ultimately targeting because the Common Secretary Wilbur Ross often talked
Speaker 1: about the theft of American genius and trying to target
Speaker 1: intellectual property. But as I look at some of the
Speaker 1: terrorists that have been unveiled, there on a whole load
Speaker 1: of everything, whether it steals, whether it's agriculture we're now
Speaker 1: talking about at the moment, now we're having this discussion
Speaker 1: about intellectual property as well. Is this a blanket effort
Speaker 1: from this administration or is it somewhat targeted? What's your read,
Speaker 1: Kona interesting? Um, I feel it's just a very strong
Speaker 1: message Trump to be fair. He when he was campaigning
Speaker 1: to become president, he did say he didn mention this
Speaker 1: unfair trade advantage that China has over the US, and
Speaker 1: that he was going to at some point when if
Speaker 1: you were elected, he would try and redress that. So
Speaker 1: this is I suppose his first attempt to do that. Um.
Speaker 1: Like I mentioned, I think what will actually end up happening,
Speaker 1: will could be a lot less. Um. I think it's
Speaker 1: widespread because they want to see what will stick and
Speaker 1: what will not and what the reactions will be. You
Speaker 1: kind of have to hit all areas before you see
Speaker 1: where the pain is. And I think once you get
Speaker 1: the various US industry lobby saying no, you can't that
Speaker 1: we will be impacted this way, that's when they'll start
Speaker 1: picking and choosing and narrowing it down to a little
Speaker 1: too smaller subset. Could I imagine that you're getting a
Speaker 1: number of calls from your clients, what's their main question
Speaker 1: you're up to? Right? It would be commodity prices? What's
Speaker 1: the outlook? And my first answer to that would be, um,
Speaker 1: it's it's risk off right now, there's general uncertainty. Um,
Speaker 1: we just have to watch it. It's it's we just
Speaker 1: have to watch this how it pants. I genuinely feel
Speaker 1: China will continue to take a very measured approach um. Economically,
Speaker 1: they it was not a catastrophe for them to take
Speaker 1: this hit on a on what the US is proposing,
Speaker 1: so they don't necessarily to retali it in a big way. Um,
Speaker 1: And they could end up looking like the through the
Speaker 1: Responsible Party here who's advocating free trade. It's something that
Speaker 1: they've been trying to just stance that we're trying to
Speaker 1: push for a while. So it may not end up
Speaker 1: being a full learned global trade war, which some people
Speaker 1: are expecting. Kind of been greatly catch up with you
Speaker 1: a d n F manhead of a research talking about
Speaker 1: a risk off moving commodities. President Donald Trump tweets that
Speaker 1: he is considering a veto of the one point three
Speaker 1: trillion dollar spending bill it had previously one final passage
Speaker 1: by Congress this morning. It reverses his administration's previous statements,
Speaker 1: and of course it raises the prospect that he'll be
Speaker 1: able to shut down the government because of a failure
Speaker 1: to get a deal. Here to tell us more about
Speaker 1: this is Steve Bell. He is at the Bipartisan Policy Center.
Speaker 1: He's a senior advisor. And I'm wondering, Steve, you know,
Speaker 1: as someone who has worked previously in government for Pete Domenici,
Speaker 1: New Mexico's storied senator, and really you're familiar with the
Speaker 1: ongoing budget debates that take place in Congress. Is this
Speaker 1: unprecedented for a president too? In a sense not necessarily
Speaker 1: just politicize the issue, but to turn it into a
Speaker 1: public relations campaign absolutely. You know you mentioned I used
Speaker 1: to be used to work for a Chairman Diminage when
Speaker 1: I was staff director of the Budget Committee. That was
Speaker 1: a long time ago, but um, just to give you
Speaker 1: my age away, I was here from Nick. I've been
Speaker 1: here since Nixon was president, and I have never seen, uh,
Speaker 1: something like this occur. What I suspect is happening is
Speaker 1: this democrats. Democrats are crowing that they got the best
Speaker 1: of the deal. And in the Senate a majority of
Speaker 1: Democrats voted for this bill. Many Republicans voted against it,
Speaker 1: and so Democrats are saying, see, we got what we wanted.
Speaker 1: He didn't get money for his wall. Uh, he didn't
Speaker 1: get some other things he wanted. Made him give some
Speaker 1: money for the for the under you for for the
Speaker 1: for apartment, for the tunnel, and so they're bragging about it,
Speaker 1: and that's got to make him very unhappy. Steve. I'm
Speaker 1: just wondering where this leaves Republican congressmen who are trying
Speaker 1: to actually get this done and avoid a government shutdown. Uh.
Speaker 1: There is a report out that they basically followed his
Speaker 1: talking points that he had distributed earlier. So what does
Speaker 1: this mean about the negotiations going forward in the likelihood
Speaker 1: of a shutdown in the in the near term future.
Speaker 1: I don't think he's going to veto it because most
Speaker 1: of the members of Congress are now out back home,
Speaker 1: because we have a two week recess coming up. Number one,
Speaker 1: number two. I just don't think there's going to be
Speaker 1: any credibility anymore when he says he's going to do
Speaker 1: this or that, or when Mark short or others who
Speaker 1: represent him on the Hill say this is what the
Speaker 1: president is going to do. When you put out a
Speaker 1: statement of administration policy and the President himself says, I'll
Speaker 1: sign this bill despite some misgivings, and he tells the
Speaker 1: Speaker of the House that he can say that and
Speaker 1: then changes his mind, he really has hurt his credibility.
Speaker 1: I'm not sure this president understands the ramifications of that.
Speaker 1: UM I said simply that no one's going to believe
Speaker 1: what he says anymore. UM the you know you already
Speaker 1: have some questions based upon earlier differences of of one
Speaker 1: day he said this and one day he said the next.
Speaker 1: Like Mr McConnell, the Majority leader in the Senator said
Speaker 1: something about that. Paul Ryan was saying last night, good
Speaker 1: I got the President to sign this. A lot of
Speaker 1: folks now feel embarrassed, and it's going to make it
Speaker 1: more difficult for the President to get things done on
Speaker 1: the Hill though. I got to be honest with you,
Speaker 1: this may be the last thing that passes this year
Speaker 1: of any significance. Steve Bell, a quote from Mick Mulvaney,
Speaker 1: the White House budget director, says, let's cut to the chase.
Speaker 1: Is the President going to sign the bill? The answer
Speaker 1: is yes? Why because it funds his priorities? Does this
Speaker 1: now damage the credibility of mc mulveney Mr Mulvaney's credibilities
Speaker 1: or any damage because he has not produced a budget
Speaker 1: yet that has received even a hearing on Capitol Hill
Speaker 1: in the last two years or last fifteen months. Um.
Speaker 1: But this further, this further damages it. Um. The notion
Speaker 1: that this funds his priorities other than defense is really
Speaker 1: quite in striking contrast to the budget he set up here.
Speaker 1: He wanted deep cuts and all the domestic programs they're
Speaker 1: going to be increases of around fifty billion. Uh. He
Speaker 1: wanted money for the wall in the area of eighteen billion.
Speaker 1: He got about one point five billion, but that's scattered
Speaker 1: between the wall and additional border agents. He wanted no money,
Speaker 1: uh for the tunnel, and he had to give five
Speaker 1: million plus for that. So all in all, let's be
Speaker 1: honest about it, this was not a victory for the
Speaker 1: president except in the area where there was vast bipartisan support,
Speaker 1: and that was in military spending increases. So, Steve, since
Speaker 1: you have so much experience and actually crafting these things
Speaker 1: and understanding the negotiations back and forth, have you had
Speaker 1: a chance to really look at the details of this
Speaker 1: bill and what kind of filler or sort of pet
Speaker 1: projects were financed through it. Can you give us a
Speaker 1: sense of that? You know, I'm not gonna lie. I
Speaker 1: haven't reades. I've read some summaries that were put out
Speaker 1: on the on the on the twelve. This this huge
Speaker 1: bill comprises twelve different individual bills. But you just take
Speaker 1: a look when you fixed taxes twice in their low
Speaker 1: income tax credit and a mistake in the tax bill
Speaker 1: that was signed last December that would have hurt farmers.
Speaker 1: So you've got a hodgepodge of everything in here. And
Speaker 1: as we look at it, we will find more favors,
Speaker 1: more deals. I think the big deals that weren't cut,
Speaker 1: for example, giving subsidies to keep the Obamacare machinery running well,
Speaker 1: a promise that was made to Senator Collins, they just
Speaker 1: simply didn't do it. And uh that probably is not
Speaker 1: made Senator Collins of Maine, a Republican, very happy. But
Speaker 1: it's the things that didn't happen. There's no there's no
Speaker 1: immigration of kind of language and here at all. And
Speaker 1: so I think, as I said at the beginning, this
Speaker 1: is going to damage his credibility pretty pretty seriously. And
Speaker 1: I don't think, uh, the appointment of John Bolton, by
Speaker 1: the way, helps any because now people are gonna wonder
Speaker 1: about Dolly, what you're gonna do on around nuclear deer
Speaker 1: or what's he going. So I think this really does
Speaker 1: hurt his relationship with Congress, and I think especially embarrasses
Speaker 1: the Speaker of the House, Paul Ryan. What do you
Speaker 1: think this does to the Republicans in the upcoming mid
Speaker 1: term elections? I think it hurts. I think we've already
Speaker 1: seen in two or three elections where Democrats have performed
Speaker 1: much better than we had anticipated or that history would indicate,
Speaker 1: and if you take a look at the retirements that
Speaker 1: have already occurred in the House, especially and some of
Speaker 1: the retirements we anticipate based upon the election in Pennsylvania
Speaker 1: eighteen where the Democrat one for the first time in many,
Speaker 1: many years. Um, I think you're seeing a lot of nervousness.
Speaker 1: And I think Republicans right now are pretty concerned that
Speaker 1: the tax cut, while it was a positive, is not
Speaker 1: as much a positive in the election coming up as
Speaker 1: they had hoped, and that Trump, with this kind of
Speaker 1: back and forth behavior, may be a bigger burden than
Speaker 1: they had feared. The Nonpartisan Committee for a Responsible Federal
Speaker 1: Budget projects that the United States will run two trillion
Speaker 1: dollar annual budget deficits by twenty seven. Oh yes, Oh,
Speaker 1: I mean, you know, we did a calculation here last
Speaker 1: year and we said in f y eight, four years
Speaker 1: earlier than the Congressional Office projected, we would have a
Speaker 1: trillion dollar deficit in f y eighteen. So I think
Speaker 1: it is eminently possible, especially if you consider we haven't
Speaker 1: had a recession or anything else, eminently possible that we'll
Speaker 1: run a two trillion dollar deficit within four or five years.
Speaker 1: And this is let's be honest. In peacetime during expansion,
Speaker 1: since we've been keeping records, this is the first time
Speaker 1: we've had such dramatic increases in deficits. That keep that
Speaker 1: in mind. We're an expansion and we're not at war
Speaker 1: in any significant global war, and yet we're still running
Speaker 1: huge deficits. I want to bring you a new tweet
Speaker 1: from Senator Rand Paul, a notable fiscal conservative and contrarian.
Speaker 1: He just tweeted out minutes ago. I agree the real
Speaker 1: Donald Trump should veto this sad excuse for legislation because
Speaker 1: it's one point three trillion dollars in spending that farthes
Speaker 1: is almost no one read, just real quickly. Do you
Speaker 1: agree with that? Yes, no one. Look, the chief clerk
Speaker 1: for the Appropriations Committee used to work for me. Hard
Speaker 1: working guys. I don't think even the staff has read
Speaker 1: all of pages. Yeah. Well, Steve Bell, thank you so
Speaker 1: much for taking the time. It's wonderful to get your
Speaker 1: expertise and insight at a time of a lot of uncertainty,
Speaker 1: at least politically. Steve Bell of the Bipartisan Policy Center,
Speaker 1: he is a senior adviser there, but he has a
Speaker 1: storied history in Congress, and even on Wall Street at
Speaker 1: Salomon Brothers. He was the staff director of the Senate
Speaker 1: Budget Committee from one until nineties six. Thanks for listening
Speaker 1: to the Bloomberg Surveillance podcast. Subscribe and listen to interviews
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Speaker 1: I'm on Twitter at Tom Keane before the podcast. You
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