WEBVTT - Bloomberg Surveillance TV: March 27, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.400 with Lisa Bromwitz and am Marie Hordern. Join us each 0:00:18.480 --> 0:00:21.360 day for insight from the best in markets, economics, and 0:00:21.400 --> 0:00:24.720 geopolitics from our global headquarters in New York City. We 0:00:24.760 --> 0:00:27.400 are live on Bloomberg Television weekday mornings from six to 0:00:27.480 --> 0:00:31.000 nine am Eastern. Subscribe to the podcast on Apple, Spotify 0:00:31.200 --> 0:00:33.479 or anywhere else you listen, and as always on the 0:00:33.479 --> 0:00:36.800 Bloomberg Terminal and the Bloomberg Business app. Here's the take 0:00:36.840 --> 0:00:39.360 from Monica to censor of JP Morgan Private Bank, writing, 0:00:39.360 --> 0:00:42.120 We've been constructive on risk assets the last couple of years, 0:00:42.440 --> 0:00:46.320 and we remain cautiously optimistic. We believe the volatility, though 0:00:46.680 --> 0:00:50.000 is back. Trade policy remains rightly the primary source of 0:00:50.080 --> 0:00:53.680 investor uncertainty. Monica joins us now for more. Monica, good morning, 0:00:53.760 --> 0:00:55.720 Good morning. How do you respond to the latest announcement. 0:00:56.360 --> 0:00:59.880 It's very frustrating. It is very hard in my seat 0:01:00.160 --> 0:01:01.880 to try to predict what's going to happen, and that's 0:01:01.920 --> 0:01:04.080 what my job is, help people figure out the future 0:01:04.120 --> 0:01:06.280 and how to invest around that and you just hear 0:01:06.319 --> 0:01:09.160 all this noise and just doesn't feel like liberation Day 0:01:09.240 --> 0:01:11.760 is going to be clarity day. And so I think 0:01:11.880 --> 0:01:13.319 a week from now, we're still going to have a 0:01:13.319 --> 0:01:16.200 lot of questions. There will still be uncertainty, there will 0:01:16.200 --> 0:01:18.360 still be volatility, and so the most important thing for 0:01:18.440 --> 0:01:21.600 many people I work with is just diversify, have a plan, 0:01:21.840 --> 0:01:23.360 and get ready for more bumps. 0:01:23.440 --> 0:01:24.959 You still see a path though for the s and P. 0:01:25.040 --> 0:01:27.600 Five hundred to go to sixty four fifty by the 0:01:27.680 --> 0:01:29.839 end of the year, that that still is your base case. 0:01:30.000 --> 0:01:32.080 At the high end of that range is. 0:01:32.080 --> 0:01:34.120 Predicate on earnings growth, and this is the challenge, like 0:01:34.319 --> 0:01:38.679 what does this do to corporate spending behavior, consumer behavior? 0:01:38.720 --> 0:01:40.960 We don't know yet. We're still we had a really 0:01:41.000 --> 0:01:43.360 strong quarter last quarter earnings. We'll see in a few 0:01:43.360 --> 0:01:45.040 weeks as we start to get their earnings again if 0:01:45.040 --> 0:01:45.640 this continues. 0:01:45.720 --> 0:01:47.960 What do you make of Neil Kashkari's point that the 0:01:48.160 --> 0:01:51.520 uncertainty and the kit to consumer sentiment that we're seeing 0:01:51.600 --> 0:01:55.800 around the sort of on and off tariff announcements itself 0:01:55.800 --> 0:01:58.760 will be potentially more punitive to growth than even the 0:01:58.800 --> 0:02:01.720 tariffs themselves. What point do you say Okay, this has 0:02:01.760 --> 0:02:03.680 gone on long enough that you can't make it up 0:02:03.720 --> 0:02:06.800 by providing some clarity on Liberation Day postponed. 0:02:07.120 --> 0:02:08.880 Yeah, I think the next few weeks are going to 0:02:08.960 --> 0:02:11.040 be critical because if we don't get any sort of 0:02:11.600 --> 0:02:14.280 calming around these headlines, I do think you start to 0:02:14.280 --> 0:02:17.960 worry with this seeping more permanently into consumer psyche investor psyche. 0:02:18.040 --> 0:02:20.560 Right now, investors are saying this might just be a 0:02:20.680 --> 0:02:24.760 negotiating tactic. It's noise, it's not gonna it's transitory, to 0:02:24.840 --> 0:02:27.760 use that tricky word. But the longer this goes on, 0:02:28.160 --> 0:02:30.200 the more I agree with him that this will have 0:02:30.200 --> 0:02:32.760 a permanent impact on people. Most clients I work with 0:02:32.880 --> 0:02:34.480 are still saying, I can deal with this. Let's just 0:02:34.520 --> 0:02:36.120 wait out the next few weeks and then I'll move 0:02:36.120 --> 0:02:36.680 and then I'll decide. 0:02:37.040 --> 0:02:38.720 Just to ask a least's line of questioning, are we 0:02:38.760 --> 0:02:40.880 putting so much faith in the Fed's ability to respond 0:02:40.880 --> 0:02:44.080 to downside risk of growth with a potential inflation we 0:02:44.160 --> 0:02:44.639 spill over? 0:02:45.120 --> 0:02:47.280 At this point, we still believe the FED put is there, 0:02:47.400 --> 0:02:50.360 But again, there's just so many moving pieces, and I 0:02:50.480 --> 0:02:52.360 need to see the most important thing for me in 0:02:52.360 --> 0:02:55.360 the equity call is how their earnings look. The other 0:02:55.440 --> 0:02:58.080 question then becomes one evaluation because with this much uncertainty, 0:02:58.240 --> 0:02:59.840 is anyone willing to pay twenty times for you? 0:03:00.360 --> 0:03:00.640 How much? 0:03:00.639 --> 0:03:02.239 I think that's the concern. It could be eighteen or 0:03:02.280 --> 0:03:03.919 seventeen and then suddenly you're down fifteen. 0:03:03.919 --> 0:03:05.840 We'll just pick upon that the valueition point. How much? 0:03:05.840 --> 0:03:08.560 If this story, have we already discounts it in the US? 0:03:08.800 --> 0:03:10.760 I think we think we've discounted what we see right now, 0:03:10.760 --> 0:03:13.239 which is the chaos. Right so you've had valuations come in. 0:03:13.520 --> 0:03:15.800 But again, if this is more persistent and this continues 0:03:15.800 --> 0:03:17.959 into the summer, then I think there's a real question 0:03:18.000 --> 0:03:20.120 about is twenty times the right number? And that's what 0:03:20.160 --> 0:03:23.000 our valuation is predicated on that kind of multiple, you 0:03:23.000 --> 0:03:25.760 have to start questioning that if we're still grappling with 0:03:25.760 --> 0:03:27.440 these kind of headlines come May in June. 0:03:27.560 --> 0:03:30.280 At the end of last year, people are questioning valuations 0:03:30.360 --> 0:03:33.080 on a bond yield a basis saying if bond yields 0:03:33.080 --> 0:03:36.320 continue to remain sticky or go higher, then it starts 0:03:36.320 --> 0:03:39.080 to raise the risk reward and going from bonds to stocks. 0:03:39.520 --> 0:03:41.480 At this point, what you're seeing is that bonds on 0:03:41.520 --> 0:03:44.600 a day like yesterday actually lost value, yields rose, And 0:03:44.640 --> 0:03:48.120 it goes to the question of toggling between inflation and growth. 0:03:48.120 --> 0:03:50.400 At what point does that become a hampering factor to 0:03:50.480 --> 0:03:51.520 valuations as well? 0:03:52.280 --> 0:03:53.840 I think it is. I think that's sort of where 0:03:53.840 --> 0:03:56.320 you're already starting to see. And the big risk of 0:03:56.320 --> 0:03:58.360 the outside of earnings is one of growth, and we 0:03:58.560 --> 0:04:00.560 are trying to put a pencils aroun around what does 0:04:00.600 --> 0:04:02.160 this look like from a terror standpoint, How does that 0:04:02.200 --> 0:04:04.200 impact growth in a year when we're talking about kind 0:04:04.200 --> 0:04:06.760 of two percent real GDP growth, this could be significant 0:04:06.760 --> 0:04:09.160 if these are permanent, if they are broader, if you 0:04:09.200 --> 0:04:12.200 see retaliations from you know, counterparts around the world, and 0:04:12.240 --> 0:04:14.160 that's just a little bit scary because two percent growth 0:04:14.200 --> 0:04:16.960 is one thing. One percent is very different. And then again, 0:04:17.080 --> 0:04:19.080 what does that still over due to earnings and everything else? 0:04:19.160 --> 0:04:21.159 At that point, what does diversification mean? 0:04:22.279 --> 0:04:25.080 You know, for years, equities were the game in town, 0:04:25.160 --> 0:04:27.800 right it was all growth rates were low. You had 0:04:27.839 --> 0:04:30.200 the AI tailwind, and by the way, that still exists, 0:04:30.480 --> 0:04:32.880 but the challenge and becomes people are probably still too 0:04:32.920 --> 0:04:36.000 far over their skis in broad risk assets, probably too 0:04:36.040 --> 0:04:37.920 focus on the US I still have a lot of 0:04:37.960 --> 0:04:40.039 people who have too much probably private exposure. They haven't 0:04:40.080 --> 0:04:41.880 been a lot of exits, and so like I'm seeing 0:04:41.920 --> 0:04:44.440 a lot of risk and in one bucket, we've been 0:04:44.480 --> 0:04:48.040 really advocating move into some safer parts, move into fixed income. 0:04:48.279 --> 0:04:49.000 I continued a. 0:04:49.040 --> 0:04:50.960 Ton of calls on gold goal is of twenty eight 0:04:50.960 --> 0:04:52.880 percent last year. People still want to buy more because 0:04:52.920 --> 0:04:54.960 of saying, how do I diversify outside the US, how 0:04:54.960 --> 0:04:57.880 do I have something that's a buffer my portfolio? And lastly, 0:04:58.279 --> 0:05:01.520 hedge funds looking for uncorrel returns. I couldn't get anyone 0:05:01.560 --> 0:05:03.280 to talk about hedgehness for years. Now they want to 0:05:03.279 --> 0:05:05.880 talk about hedgehunes again. So it's it's interesting since I 0:05:05.920 --> 0:05:08.239 was old as new, like this playbook became very boring 0:05:08.240 --> 0:05:09.520 for a while. Now you have all the tools again. 0:05:09.800 --> 0:05:11.880 Yeah, and you've seen some spill over the places like Europe, 0:05:11.920 --> 0:05:14.120 even China as well. Equity markets there have stout as 0:05:14.160 --> 0:05:16.560 pick up. Do you think mainply we're whistling past the 0:05:16.560 --> 0:05:18.520 graveyard and places like Europe. 0:05:19.040 --> 0:05:21.840 I you know, just saying Europe is cheap is a 0:05:21.920 --> 0:05:24.360 dangerous game. But there are certainly pockets where I think 0:05:24.360 --> 0:05:26.960 there's opportunity, and so even in the US this has 0:05:26.960 --> 0:05:28.800 become a stock pickers market, So I would argue the 0:05:28.839 --> 0:05:31.320 same thing. In Europe. We still are constructive on Japan. 0:05:31.360 --> 0:05:34.120 There's still you know, evaluation story there, you have reforms 0:05:34.120 --> 0:05:36.680 still continuing. So I think you should be looking more 0:05:36.720 --> 0:05:38.719 outside of the US. Again, most of my clients are 0:05:38.720 --> 0:05:40.840 still heavily weighted to the US from an equity perspective. 0:05:41.360 --> 0:05:43.240 Also on the fixed income side, we're looking at em 0:05:43.279 --> 0:05:46.000 credit to try to gain get diversification outside of the 0:05:46.080 --> 0:05:46.440 US dollar. 0:05:46.560 --> 0:05:46.760 Lacey. 0:05:46.800 --> 0:05:48.760 European equities down today with down a half of one 0:05:48.760 --> 0:05:50.760 percent on the Docks, but that's where the app performance 0:05:50.800 --> 0:05:52.440 has been over the previous few months. 0:05:52.480 --> 0:05:54.040 Yeah, but to your point, the reason why the Dacks 0:05:54.080 --> 0:05:56.520 is down is in part because German auto manufactures are 0:05:56.520 --> 0:05:58.200 going to be very hard hit by some of these 0:05:58.240 --> 0:06:00.359 twenty five percent tariffs and are going to have to 0:06:00.400 --> 0:06:03.000 really shift some of their supply chains. Considering how much 0:06:03.000 --> 0:06:05.200 of their business is done in the United States. Have 0:06:05.279 --> 0:06:07.200 we fully priced the hit to the rest of the 0:06:07.200 --> 0:06:09.680 world from tariffs implemented in the United States. 0:06:09.720 --> 0:06:11.200 This is the argument that Michael Hahnt of Bank of 0:06:11.200 --> 0:06:13.359 America made on Friday going into the weekend that the 0:06:13.360 --> 0:06:15.280 sell off that we've seen in US secuaries was more 0:06:15.320 --> 0:06:18.000 about deep Seak and Doge than it was about tariffs. 0:06:18.200 --> 0:06:20.159 That for him and many others too, we haven't seen 0:06:20.200 --> 0:06:22.760 the tariff trade really realized just yet. 0:06:22.560 --> 0:06:24.200 And we don't really have a full understanding of what 0:06:24.240 --> 0:06:26.640 the terariff trade really means because it's got a lot 0:06:26.640 --> 0:06:28.560 of hair on it right now with the uncertainty as 0:06:28.560 --> 0:06:30.240 well as some of the tip for tag and what 0:06:30.400 --> 0:06:32.719 negotiations there are. I remember when this week was supposed 0:06:32.760 --> 0:06:35.480 to be a negotiation week and suddenly now is something else. 0:06:35.520 --> 0:06:36.840 It was the Europeans were here. 0:06:36.839 --> 0:06:38.960 That makes us square here I know, people were hopeful, 0:06:39.000 --> 0:06:40.960 and here we are. Monica is good to see you. 0:06:41.000 --> 0:06:42.960 Thanks for dropping by. Monica is sents her there, JP 0:06:43.080 --> 0:06:56.120 Morgan Private Bank. Don Schneider of Piper Sandler writing the 0:06:56.160 --> 0:06:59.000 announcement of the twenty five percent tariff on autoast today 0:06:59.040 --> 0:07:02.080 shows Trump is to get on with the broader trade agenda. 0:07:02.400 --> 0:07:05.039 Auto tariffs are a core part of the industrial policy 0:07:05.080 --> 0:07:07.919 and revenue agenda. Much more to come. Don't join us 0:07:07.960 --> 0:07:10.440 now for more done? How much more to come? Over 0:07:10.440 --> 0:07:14.680 the next week or so. 0:07:13.240 --> 0:07:16.000 I think a meaningful amount is coming, even if it's 0:07:16.040 --> 0:07:18.000 not over the next week. I mean, what we've seen 0:07:18.240 --> 0:07:20.520 so far is about a half a percent of GDP 0:07:20.920 --> 0:07:23.680 in tariff revenue that's been announced. 0:07:23.760 --> 0:07:24.760 We have now the. 0:07:24.800 --> 0:07:28.160 Highest effective teriff rate since we've had since the nineteen forties, 0:07:28.160 --> 0:07:30.480 when you add up to twenty percent tariffs on China, 0:07:30.880 --> 0:07:34.000 twenty five percent on steel and aluminum and derivative products, 0:07:34.040 --> 0:07:39.000 twenty five percent on autos, and then reciprocal tariffs are forthcoming. 0:07:39.000 --> 0:07:40.640 I think we've heard those are going to be dialed 0:07:40.680 --> 0:07:44.240 back considerably, but it's important to keep in mind that 0:07:44.280 --> 0:07:46.360 we have all of the products specific tariffs that are 0:07:46.400 --> 0:07:51.000 still coming, whether it ranges from pharmaceuticals, semiconductors, copper lumber. 0:07:51.040 --> 0:07:52.280 So there's much more to come. 0:07:52.320 --> 0:07:53.760 Don't We've seen this movie before. 0:07:54.000 --> 0:07:57.880 Only a month ago auto tariffs Canada, Mexico and then 0:07:57.920 --> 0:08:00.480 we found out they were exempt under usm and I 0:08:00.480 --> 0:08:03.360 was watching that news conference yesterday desperately waiting for a 0:08:03.440 --> 0:08:04.559 journalist to ask the question. 0:08:04.680 --> 0:08:05.600 The question never came. 0:08:05.840 --> 0:08:07.920 Have we got a decent understanding of whether those auto 0:08:08.000 --> 0:08:10.760 exports from those countries to the United States are exempt 0:08:11.080 --> 0:08:12.000 under USMCI? 0:08:13.480 --> 0:08:15.800 It sounds like a pro portion of when will be 0:08:15.840 --> 0:08:19.640 the value added that's attributable to US production, if it's 0:08:19.640 --> 0:08:23.280 still coming from Canada Mexico will will be exempt. Takes 0:08:23.320 --> 0:08:26.760 time to implement that. My sense is where at least 0:08:26.800 --> 0:08:29.200 I group things into kind of four different buckets. China 0:08:29.320 --> 0:08:32.440 is its own trade war, Canada and Mexico is another. 0:08:32.679 --> 0:08:37.120 Product specific tariffs is another, and then finally reciprocal terrafts 0:08:37.120 --> 0:08:39.840 I think with in the case of Canada and Mexico, 0:08:40.000 --> 0:08:42.559 Trump's end goal, I think is to rewrite the USMCA 0:08:42.640 --> 0:08:45.000 on much more favorable terms to the US and he's 0:08:45.080 --> 0:08:49.800 in particular fixated on auto production. So you know, just 0:08:49.840 --> 0:08:52.319 like what happened previously, you had twenty five percent terraffs 0:08:52.360 --> 0:08:55.120 in Canada Mexico that then said, well, it's only going 0:08:55.200 --> 0:08:59.040 to be twenty five percent on non USMCA compliant goods. 0:08:59.080 --> 0:09:01.520 Maybe that ends up being something like thirty percent of 0:09:01.559 --> 0:09:05.000 all goods end up being tariffed under those rates. 0:09:05.240 --> 0:09:06.520 I think that's still you know, a. 0:09:06.480 --> 0:09:09.560 Bargaining chip going forward that eventually those can either roll 0:09:09.559 --> 0:09:12.360 off and be replaced by reciprocal tariffs or by a 0:09:12.400 --> 0:09:13.480 rewrite of US MCA. 0:09:14.320 --> 0:09:16.840 Do you think there's still room for negotiation, given that 0:09:16.880 --> 0:09:20.400 President Trump said yesterday about the tariffs on autos in particular, 0:09:20.679 --> 0:09:22.400 this is permanent one. 0:09:23.800 --> 0:09:28.360 I think, you know, there's two objectives. One is used 0:09:28.440 --> 0:09:31.320 tariffs to achieve non trade concessions, and they can range 0:09:31.559 --> 0:09:33.120 you know, a lot of different things you see from 0:09:33.120 --> 0:09:38.040 federal legal immigration, whether it's digital service taxes, even the 0:09:38.080 --> 0:09:41.000 acquisition of TikTok. But then the other is true revenue 0:09:41.000 --> 0:09:44.160 and industrial policy. And I think anytime Trump is threatening 0:09:44.160 --> 0:09:46.920 tariffs on a product, there really isn't much negotiation to 0:09:47.040 --> 0:09:50.320 be had. He's saying clearly, this is a critical industry. 0:09:50.640 --> 0:09:52.720 We can't be reliant on other sport. We have to 0:09:52.760 --> 0:09:54.720 make it in the US. So I think in the 0:09:54.760 --> 0:09:57.079 case of product teriffs, there there aren't really going to 0:09:57.120 --> 0:09:59.880 be any exemptions where there's no real negotiations either. 0:10:00.040 --> 0:10:02.800 I'm glad you went there, don Yesterday there was also 0:10:03.120 --> 0:10:06.040 this from President Trump. I view it as reducing taxes 0:10:06.080 --> 0:10:08.480 and also reducing debt. Talking about the tariffs and the 0:10:08.480 --> 0:10:11.240 revenue from them. Within a fairly short period of time, 0:10:11.320 --> 0:10:12.959 I think we're going to have a balance sheet that's 0:10:12.960 --> 0:10:16.160 going to be outstanding from a practical point of view 0:10:16.200 --> 0:10:19.520 don how much could to revenue from terrafs head toward 0:10:19.640 --> 0:10:22.880 offsetting the deficit that is set to potentially climb by 0:10:22.880 --> 0:10:24.680 three trillion dollars of the next decade. 0:10:25.200 --> 0:10:27.480 Here, so I think about it. Last year, we had 0:10:27.480 --> 0:10:29.800 have six and a half percent of GDP deficit. Six 0:10:29.880 --> 0:10:32.800 point four of that is our primary deficit excluding interest 0:10:32.880 --> 0:10:36.080 costs three interest costs are three point one percent. If 0:10:36.120 --> 0:10:39.319 all we did was extend the twenty seventeen tax cuts, 0:10:39.320 --> 0:10:41.720 by the end of Trump's term, we had that seven. 0:10:41.480 --> 0:10:43.120 And a half percent of GDP deficit. 0:10:43.200 --> 0:10:47.240 So there's structural upward pressure on spending from entitlements while 0:10:47.320 --> 0:10:50.320 revenues stay flat as the share of GDP and interest 0:10:50.360 --> 0:10:51.640 costs continue to grow. 0:10:52.440 --> 0:10:54.720 What we he's announced so far is basically. 0:10:54.400 --> 0:10:56.960 A half a percent of GDP and tariffs that may 0:10:57.000 --> 0:11:00.160 go up to maybe seventy basis points maybe higher that 0:11:00.240 --> 0:11:02.679 will subtract for growth basically. 0:11:02.200 --> 0:11:05.200 One for one. So you will reduce economic growth. 0:11:05.880 --> 0:11:09.400 His tax and economic package, muiltch, you will include spending 0:11:09.400 --> 0:11:14.040 increases on defense, border security, spending cuts on things like medicaid, 0:11:14.440 --> 0:11:17.640 and then tax cuts. I think leaves us with roughly 0:11:17.720 --> 0:11:19.800 six and a half percent of GDP. Deficit, and then 0:11:19.840 --> 0:11:22.480 tariffs give us a little downside from there, so we're 0:11:22.520 --> 0:11:24.800 kind of getting pulled maybe closer to six percent if 0:11:24.840 --> 0:11:27.360 there's not that big of a growth hit. So I 0:11:27.400 --> 0:11:30.240 don't think this fundamentally changes the trajectory of the deficit. 0:11:30.240 --> 0:11:31.880 We're going to muddle along and it's kind of six 0:11:31.920 --> 0:11:36.040 percent of GDP deficit area for the next couple of years. 0:11:36.160 --> 0:11:37.920 Does it give more breathing room down to some of 0:11:37.960 --> 0:11:40.640 the Republican representatives who been pushing back against some of 0:11:40.679 --> 0:11:44.400 the proposals and some of the debt ceiling extension and 0:11:44.480 --> 0:11:48.920 raising the debt ceiling on concerns about an expanding deficit. 0:11:48.960 --> 0:11:51.160 I mean, can they point to some of the revenue 0:11:51.200 --> 0:11:55.080 that was being raised by tariffs as an offset to 0:11:55.280 --> 0:11:57.679 justify their vote. 0:11:58.360 --> 0:12:01.000 I don't think so. I mean, of course you could. 0:12:01.120 --> 0:12:04.240 I think the people who are most concerned about the deficit, 0:12:04.320 --> 0:12:07.440 you know, say Freedom Caucus members, what they're really concerned 0:12:07.440 --> 0:12:10.880 about is spending. They want spending cuts, and you know 0:12:10.880 --> 0:12:13.920 they're not necessarily going to be placated by tariff revenues 0:12:14.000 --> 0:12:17.840 or likewise, consider Rand Paul in the Senate, you know, libertarian, 0:12:18.200 --> 0:12:19.760 he is very he doesn't want to vote for a 0:12:19.800 --> 0:12:23.000 debtlimiting pre six, et cetera. And he doesn't like tariff. 0:12:23.080 --> 0:12:25.160 So I think for the members that it really is 0:12:25.200 --> 0:12:28.240 important to help who are most concerned about the deficit. 0:12:28.280 --> 0:12:32.360 Tariff revenue doesn't really help. And I'd say secondarily, if 0:12:32.360 --> 0:12:35.280 we are using tariffs as a tool to bring, you know, 0:12:35.360 --> 0:12:38.280 on shoring and production back to the US, generating a 0:12:38.320 --> 0:12:40.640 lot of revenue from that would be suggestive of US 0:12:40.720 --> 0:12:43.920 not on shoring that production and continuing to buy from overseas. 0:12:43.960 --> 0:12:46.680 So if they truly do work, they wouldn't generate a 0:12:46.679 --> 0:12:47.360 lot of revenue. 0:12:47.559 --> 0:12:50.160 I don't I appreciate the update and your reaction to 0:12:50.200 --> 0:12:51.600 the announcement yesterday afternoon. 0:12:51.640 --> 0:12:52.840 Dun Schneider that of. 0:13:02.800 --> 0:13:05.920 President Trump's executive order sending shares of GM Ford a 0:13:06.000 --> 0:13:09.360 stellantislower This morning, Danives of Webbush writing, in our view, 0:13:09.360 --> 0:13:11.959 these initial tariffs, if they hold in their current form, 0:13:12.200 --> 0:13:14.680 would be a hurricane like headwind to foreign and many 0:13:14.800 --> 0:13:18.240 US auto makers and ultimately push the average price of 0:13:18.320 --> 0:13:22.240 cars of five K to ten K. Dan joins us 0:13:22.280 --> 0:13:24.280 now for more, Dan, welcome to the program. Let's just 0:13:24.280 --> 0:13:26.840 start with the basics from the top. Who's most exposed 0:13:27.080 --> 0:13:28.199 in the United States. 0:13:28.679 --> 0:13:30.960 Well, I mean four GM stilanas, right. 0:13:31.000 --> 0:13:33.200 I mean, I think part of the problem there is 0:13:33.240 --> 0:13:36.680 that even if you make it in the US, I 0:13:36.720 --> 0:13:38.880 mean you're talking a lot of times forty to fifty 0:13:38.920 --> 0:13:42.680 parts could be from outside the United States. And I 0:13:42.679 --> 0:13:45.760 think you have thirty thousand parts in a typical vehicle. 0:13:46.160 --> 0:13:48.600 So I think that's what when it comes to Detroit, 0:13:48.760 --> 0:13:51.559 I mean, this is a gut punge to the three 0:13:51.679 --> 0:13:55.000 one three if this actually holds in this forum. 0:13:55.559 --> 0:13:58.040 Let's assume it holds Dan. Where does it leave Tesla. 0:13:58.160 --> 0:14:01.320 Let's do some single name work it make for them? 0:14:01.840 --> 0:14:04.040 Well, even though their cars are built in US. 0:14:04.040 --> 0:14:07.720 In terms of Texas in California, when it comes to parts. 0:14:07.920 --> 0:14:10.960 I mean, you still have a good amount. 0:14:10.679 --> 0:14:13.880 Of parts that come from outside the US, and I 0:14:13.960 --> 0:14:15.400 think that that's what must talk about it. 0:14:15.400 --> 0:14:19.920 And in terms of downstream, no one is unexposed. When 0:14:19.960 --> 0:14:20.720 it comes down to this. 0:14:20.800 --> 0:14:23.080 You have half the cars that have been imported into 0:14:23.120 --> 0:14:26.760 the US twenty twenty four are imported from outside the US, 0:14:26.800 --> 0:14:30.240 but the ones that are made in US they still 0:14:30.760 --> 0:14:33.320 I mean, you have forty percent of engines that are 0:14:33.320 --> 0:14:36.160 basically essentially have parts built from Japan and Korea. And 0:14:36.160 --> 0:14:38.080 that's why what I can tell you is talking to 0:14:38.160 --> 0:14:42.000 many in Detroit last night, Europe overnight. I mean, the 0:14:42.120 --> 0:14:44.760 view is that this isn't almost i'll say, a non starter. 0:14:45.240 --> 0:14:49.280 It would be a backbreaker for the auto industry globally. 0:14:50.240 --> 0:14:52.960 What you see right now is some estimates talking about 0:14:53.000 --> 0:14:57.240 forty percent of total operating profits for Hyundai and Kiya combined, 0:14:57.280 --> 0:15:00.880 for example, is one kind of here that some auto 0:15:00.920 --> 0:15:05.240 manufacturers would be taking if this were the final negotiation, 0:15:05.600 --> 0:15:08.200 if we took President trumpet his word that this is 0:15:08.320 --> 0:15:11.560 a permanent one, that there is no room for negotiation. 0:15:12.280 --> 0:15:15.640 How barisshed would you be on the names of auto manufacturers? 0:15:16.200 --> 0:15:19.240 Okay, I mean if this held and it wasn't in Penal, 0:15:19.280 --> 0:15:22.560 and it was in pen and it actually got enacted, 0:15:23.280 --> 0:15:26.600 it would be an army getting Like you know, I 0:15:26.640 --> 0:15:30.760 think tariff for the auto industry. Others could could sort 0:15:30.760 --> 0:15:33.240 of would be less exposed. But at least my old 0:15:33.280 --> 0:15:35.800 point is is that it would take three to four 0:15:35.880 --> 0:15:37.200 years to build a new factory. 0:15:37.720 --> 0:15:41.080 So the reality is in terms of this and. 0:15:41.120 --> 0:15:46.400 Actually how US car companies meet parts, it's just I 0:15:46.760 --> 0:15:49.240 view it as untenable and that sort of the street 0:15:49.280 --> 0:15:52.560 reaction you see more exposed to GM four to whittle 0:15:52.600 --> 0:15:55.840 on Tesla. I think investors are looking at this being like, look, 0:15:55.880 --> 0:16:00.280 the supply chain basically almost makes this impossible to actually 0:16:00.320 --> 0:16:04.000 get some of these parts, even from US built parts 0:16:04.120 --> 0:16:06.680 because there's no factories, which is. 0:16:06.600 --> 0:16:08.920 The reason why I keep going back to this is 0:16:09.000 --> 0:16:13.800 permanent one In response to someone asking President Trump is 0:16:13.840 --> 0:16:17.240 their room to negotiate? Where is the room to negotiate 0:16:17.360 --> 0:16:19.720 on the edges? Based in the rhetoric that you've heard. 0:16:20.560 --> 0:16:23.160 Look, and I think that continues to be the uncertainty. 0:16:23.280 --> 0:16:25.600 I think maybe the overall mark reaction is okay, there 0:16:25.680 --> 0:16:28.440 still needs to be some sort of negotiation because the 0:16:28.560 --> 0:16:31.840 reality is, Hey, building in the US, but fifty percent 0:16:32.560 --> 0:16:35.320 parts are from Fearn, and there's sometimes there's parts that 0:16:35.360 --> 0:16:36.760 you can't even get in the US. 0:16:36.920 --> 0:16:39.000 How do you build a factor It takes three years. 0:16:39.160 --> 0:16:41.440 So I think that's part of the you know, the 0:16:41.440 --> 0:16:44.320 devil's in the details here. It sounds great, but I 0:16:44.320 --> 0:16:47.080 think that's why the reality is, especially when it comes 0:16:47.120 --> 0:16:52.120 to GM ford stillanis. I mean, there's so many scenarios 0:16:52.120 --> 0:16:54.920 that they've sort of been, you know, going through, but 0:16:54.960 --> 0:16:57.840 the reality is this cannot happen overnight. I mean would 0:16:57.880 --> 0:17:01.880 take years. I mean ouron it would take three years 0:17:02.240 --> 0:17:05.040 to move ten percent of the supply chain fully within 0:17:05.080 --> 0:17:07.200 the US, within the auto industry. 0:17:07.440 --> 0:17:10.440 Down that word negotiation. Let's break some life into that 0:17:10.600 --> 0:17:13.760 negotiation between who. There was this interesting moment in the 0:17:13.760 --> 0:17:16.720 briefing when the President was asked about Tesla and Elon Musk, 0:17:16.760 --> 0:17:17.800 had you spoken to him? 0:17:18.119 --> 0:17:19.520 And the President said no, I hadn't. 0:17:19.520 --> 0:17:22.119 That would be a conflict of interest, which begs the question, 0:17:22.320 --> 0:17:25.320 who's speaking on behalf of Tesla, who's doing the negotiating, 0:17:25.520 --> 0:17:27.640 who's doing the lompying of the US government? 0:17:28.200 --> 0:17:30.320 And remember, like you know, there was that letter that 0:17:30.359 --> 0:17:33.560 Tesla had that was unsigned, and I think that book 0:17:33.600 --> 0:17:37.960 it adds another complexity for Musk and Tesla because with 0:17:38.040 --> 0:17:40.160 everything we talk about with Dige and all the political 0:17:40.240 --> 0:17:42.920 blowback and the third rail issue and everything we've seen 0:17:42.960 --> 0:17:47.160 in Tesla, the reality is when it comes to negotiation 0:17:47.400 --> 0:17:49.639 or at least having sort of you know, someone that 0:17:49.720 --> 0:17:54.120 has to save for Tesla, they're actually at a disadvantage 0:17:54.240 --> 0:17:56.320 because of Musk in this situation. 0:17:56.720 --> 0:17:57.960 That's the irony of it all. 0:17:58.480 --> 0:18:01.720 You've said it on the story. Still bullish on the name, 0:18:01.920 --> 0:18:04.399 but sow it on the story. What needs to happen 0:18:04.400 --> 0:18:06.760 over the next month to turn this around for the stalk. 0:18:07.680 --> 0:18:09.480 I mean must needs to take a step back. I 0:18:09.520 --> 0:18:10.400 thought last week. 0:18:10.359 --> 0:18:13.000 Was a huge step in the right direction in terms 0:18:13.080 --> 0:18:16.160 of the all hands meeting. We've talked about arm's length, 0:18:16.320 --> 0:18:18.240 in terms of when it comes to Douge. You need 0:18:18.280 --> 0:18:21.240 to balance in terms of being CEO of Tesla and 0:18:21.400 --> 0:18:25.520 Douge because you know, it's a moment of truth from 0:18:25.600 --> 0:18:29.600 Musk and Tesla and this is a political symbol that 0:18:29.640 --> 0:18:33.160 Tesla's become. It's a third rail issue and that continues 0:18:33.200 --> 0:18:36.080 to be our view. It's about balance, not him getting 0:18:36.080 --> 0:18:38.199 out of Douge. There needs to be a balance. But 0:18:38.280 --> 0:18:40.200