WEBVTT - Kyiv’s Brazen Drone Strike on Nuclear Bombers Alarms Moscow 0:00:02.520 --> 0:00:10.560 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg Business 0:00:10.560 --> 0:00:14.720 Weekdaily reporting from the magazine that helps global leaders stay 0:00:14.760 --> 0:00:18.800 ahead with insight on the people, companies, and trends shaping 0:00:18.840 --> 0:00:23.760 today's complex economy. Plus global business, finance and tech news 0:00:23.800 --> 0:00:27.800 as it happens. The Bloomberg Business Week Daily Podcast with 0:00:27.960 --> 0:00:31.760 Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.200 --> 0:00:34.199 Our focus shifts now to the latest development when it 0:00:34.200 --> 0:00:37.960 comes to Russia's invasion of Ukraine. The two countries wrapped 0:00:38.000 --> 0:00:40.760 up a second round of talks, these happening in Istanbul, 0:00:40.840 --> 0:00:42.800 but they failed to bring the two sides closer to 0:00:42.920 --> 0:00:45.040 ending the war. They laid the groundwork for a new 0:00:45.080 --> 0:00:48.560 exchange of prisoners. However, the Russian delegation handed over peace 0:00:48.600 --> 0:00:52.000 proposals that include Kiev surrendering control of territory it still 0:00:52.040 --> 0:00:55.040 holds in four partially occupied regions. This according to a 0:00:55.120 --> 0:00:58.720 Ukrainian official. We did also hear from the Ukrainian Defense 0:00:58.760 --> 0:01:02.880 Minister who said that Key demanded an unconditional truce for more. 0:01:02.880 --> 0:01:05.240 We bring in doctor angelas Stent. She's senior fellow at 0:01:05.240 --> 0:01:09.360 the Brookings Institution. She's also former National Intelligence Officer for 0:01:09.480 --> 0:01:12.120 Russia and Your Asia at the National Intelligence Council. She 0:01:12.160 --> 0:01:13.960 also served in the Office of Policy and Planning at 0:01:13.959 --> 0:01:16.200 the US Department of State, and she's author of the 0:01:16.200 --> 0:01:18.479 book that came out in twenty nineteen. It's called Putin's World, 0:01:18.560 --> 0:01:21.400 Russia against the West and with the Rush. She joins 0:01:21.480 --> 0:01:24.440 us from Washington, DC, Doctor Stent, good to see you. 0:01:24.480 --> 0:01:26.560 It's been about a month since we last connected. I 0:01:26.560 --> 0:01:30.280 do want to start with peace negotiations, but before that 0:01:30.400 --> 0:01:32.760 kind of get to the context of what happened over 0:01:32.800 --> 0:01:37.160 the weekend, the drone attack, so called Operations Spiderweb. Russia 0:01:37.160 --> 0:01:40.640 and Ukraine are each saying different things about what exactly happened, 0:01:40.680 --> 0:01:43.840 the damage, what was destroyed. Zelenski did say that about 0:01:43.880 --> 0:01:46.679 a third of the strategic cruise missile carriers at airfields 0:01:47.120 --> 0:01:52.120 were hit. How does this complicate negotiations, Well. 0:01:51.960 --> 0:01:55.800 I think you may remember that President Trump told the 0:01:55.840 --> 0:01:59.200 President Zelensky at that unfortunate meeting in the Oval Office 0:01:59.320 --> 0:02:02.680 that Ukraine quote unquote had no cards. I think this 0:02:02.920 --> 0:02:05.640 was really an amazing operation. It had been planned for 0:02:05.640 --> 0:02:09.320 one and a half years, we heard from the President Zelenski, 0:02:09.600 --> 0:02:12.360 and it shows that Ukraine does have some cards. It 0:02:12.440 --> 0:02:16.600 was capable of destroying these Russian strategic bombers that were 0:02:16.639 --> 0:02:20.720 being used to hail bombs on civilian and targets and 0:02:20.800 --> 0:02:26.840 infrastructure in Ukraine. And these, by the way, are old 0:02:26.880 --> 0:02:30.040 Soviet era planes and they can't be replaced, so it'll 0:02:30.040 --> 0:02:33.000 take Russia some time to rebuild to acquire some more 0:02:33.000 --> 0:02:37.200 of these strategic bombers. It doesn't necessarily change the course 0:02:37.200 --> 0:02:40.560 of the whole war, but it certainly shows that Ukraine 0:02:40.639 --> 0:02:43.240 can fight back, that it's very good at this kind 0:02:43.280 --> 0:02:48.239 of advanced warfare, using the drones and trucks if you're 0:02:48.240 --> 0:02:51.519 like the Trojan trucks as they've been called, and really 0:02:51.600 --> 0:02:56.480 apparently taking the Russians and everyone else by surprise. But 0:02:56.680 --> 0:03:01.560 as you said, you know today's talks, they exchange agreed 0:03:01.600 --> 0:03:04.839 to exchange more prisoners, which is very important. But there's 0:03:04.880 --> 0:03:09.160 been absolutely no more progress made on approaching a ceasefire, 0:03:09.480 --> 0:03:13.560 any kind of an end to the fighting than that was, 0:03:13.720 --> 0:03:15.760 you know, when President Trump first took office. 0:03:16.120 --> 0:03:18.919 I want to get to that ceasefire, but just briefly, 0:03:19.880 --> 0:03:23.040 were there are there. I'm wondering if there's geopolitical implications 0:03:23.560 --> 0:03:27.280 of this attack beyond just how it affects Russia's war 0:03:27.320 --> 0:03:31.720 with Ukraine, but how this could potentially affect Russia's relationships 0:03:31.760 --> 0:03:33.640 with other countries. 0:03:34.320 --> 0:03:38.400 Well, it has major implications for warfare in general. Some 0:03:38.400 --> 0:03:41.280 people are now saying that what Ukrainian really did was 0:03:41.320 --> 0:03:44.120 to help NATO, because it makes it less likely at 0:03:44.200 --> 0:03:47.440 least that in the immediate future, Russia would be able 0:03:47.480 --> 0:03:51.040 to attack a DATO member. But it has implications even 0:03:51.320 --> 0:03:53.920 for the United States. I mean, if you can now 0:03:54.200 --> 0:03:58.320 destroy planes and other military hardware through the use of 0:03:58.400 --> 0:04:01.520 drones like that, people are going to have to rethink 0:04:02.040 --> 0:04:05.080 where they position things and how they conduct warfare. So 0:04:05.320 --> 0:04:09.720 it potentially has major implications really for the way that 0:04:09.880 --> 0:04:12.160 countries fight wars in the twenty first century. 0:04:12.240 --> 0:04:14.560 But this was a difficult thing for Ukraine to pull off. 0:04:14.600 --> 0:04:16.760 I mean, some of the reporting around it indicates that 0:04:16.880 --> 0:04:20.360 this was over a year in planning processes. They were 0:04:20.360 --> 0:04:23.360 able to get drones into the country and then have 0:04:23.440 --> 0:04:28.120 them take off simultaneously to attack different strategic assets of 0:04:28.160 --> 0:04:30.719 the country. This is not an easy thing to do, 0:04:30.760 --> 0:04:31.600 doctor sten. 0:04:32.640 --> 0:04:34.440 No, no, no, I mean it took a lot of 0:04:34.480 --> 0:04:39.480 meticulous planning. Obviously, the Ukrainians had people inside Russia who 0:04:39.600 --> 0:04:42.479 helped with this. President Zelenski last night and his address 0:04:42.560 --> 0:04:45.320 said that some of these people were located very close 0:04:45.400 --> 0:04:50.120 to a major headquarters for the Russian domestic intelligence services. 0:04:50.720 --> 0:04:52.600 But it just shows you that this is a war 0:04:52.880 --> 0:04:56.279 that partly resembles World War One and trench warfare, but 0:04:56.320 --> 0:04:59.280 it is also a very high tech, twenty first century, 0:04:59.320 --> 0:05:02.680 cutting edge type of warfare, of which we will see 0:05:02.680 --> 0:05:03.440 more in the future. 0:05:04.720 --> 0:05:07.440 So where does this leave us now? Because the two 0:05:07.520 --> 0:05:11.280 nations spoke today, but it doesn't seem like they're any 0:05:11.320 --> 0:05:13.799 closer to making progress towards a ceasefire. 0:05:14.720 --> 0:05:17.560 No they are not. I mean Vadimia Putin is not 0:05:17.720 --> 0:05:21.160 interested in a ceasefire at the moment. Russia has been 0:05:21.200 --> 0:05:24.800 taking incrementally more territory in the past few months. It's 0:05:24.839 --> 0:05:29.599 also sustained very high numbers of casualties as it takes 0:05:29.600 --> 0:05:32.720 this territory. But he is, I think determined to continue 0:05:32.760 --> 0:05:35.159 with this war. Most people believe it's going to go 0:05:35.240 --> 0:05:37.960 on at least for this year, if not into next year. 0:05:38.800 --> 0:05:42.280 But the negotiations will continue because Putin has understood that 0:05:42.320 --> 0:05:46.440 if Russia doesn't take part in negotiations, than the prospects 0:05:46.440 --> 0:05:51.520 for improving US Russian relations, which President Trumpet promised him 0:05:52.440 --> 0:05:55.640 go down significantly. So I think we'll see. I know 0:05:55.720 --> 0:05:59.640 they've already said they're going to have another negotiation, not 0:05:59.760 --> 0:06:02.800 in a not too distant future. They may continue to 0:06:02.839 --> 0:06:06.919 talk about these humanitarian issues again, very important issues, the 0:06:06.960 --> 0:06:10.960 exchange of prisoners, particularly disabled ones. But that doesn't mean 0:06:10.960 --> 0:06:13.080 that the fighting is going to stop anytime soon. 0:06:13.800 --> 0:06:16.480 Doctor Stam, We're getting a question from some folks who 0:06:16.520 --> 0:06:21.960 are watching listening right now, want your view on over 0:06:22.000 --> 0:06:24.200 three years in on your four of this war, when 0:06:24.240 --> 0:06:26.839 many thought it would last a couple of weeks, what 0:06:27.240 --> 0:06:30.479 you view as the original cause of this war. 0:06:31.960 --> 0:06:34.919 The original cause of this war is that Vladimir Putin 0:06:35.200 --> 0:06:38.440 has never accepted the collapse of the Soviet Union. He 0:06:38.480 --> 0:06:42.479 has never accepted that Ukrainians are a separate people, that 0:06:42.560 --> 0:06:45.360 they should have a separate country. He believes that they 0:06:45.400 --> 0:06:48.920 should be part of Russia. He wrote that explicitly in 0:06:48.960 --> 0:06:53.159 a July twenty twenty one five thousand word essay that 0:06:53.240 --> 0:06:56.839 he penned about Ukraine. So the root cause of the 0:06:56.880 --> 0:07:00.560 war is that the Russia believes and the Putin believes, 0:07:00.600 --> 0:07:03.440 that it should control Ukraine and that Ukraine shouldn't have 0:07:03.520 --> 0:07:09.280 any choice in moving westward, in joining Western institutions. So 0:07:09.680 --> 0:07:12.040 that's the original cause of the war. A lot of 0:07:12.080 --> 0:07:15.520 the discussion we hear about NATO enlargement causing it, that's 0:07:15.560 --> 0:07:17.560 not the cause of the war. I mean, the reason 0:07:17.600 --> 0:07:21.280 that Putin didn't like NATO, didn't want NATO to enlarge 0:07:21.320 --> 0:07:23.480 is because if Ukraine had been a member of NATO 0:07:24.040 --> 0:07:26.240 and Russia had attacked Ukraine, then it would have been 0:07:26.320 --> 0:07:31.080 involved potentially in a large scale, possibly nuclear war with NATO. 0:07:31.360 --> 0:07:33.480 So that's not NATO is not the root cause of 0:07:33.520 --> 0:07:37.240 the war. It's Putin's desire and the desire of many 0:07:37.280 --> 0:07:40.160 people around him to reconquer Ukraine. 0:07:40.800 --> 0:07:43.320 Doctor Sten, you know, we started the interview by you 0:07:43.400 --> 0:07:46.360 saying that this drone strike over the weekend was proof 0:07:46.400 --> 0:07:50.040 that Ukraine does indeed have the cards. Do they have 0:07:50.120 --> 0:07:54.560 the cards to force Russia to negotiate in a way 0:07:54.600 --> 0:07:59.000 that does not include actually giving up part of its 0:07:59.160 --> 0:08:00.000 Ukraine's owned territory. 0:08:01.440 --> 0:08:03.960 So I would say they do not have those cards. 0:08:04.600 --> 0:08:06.760 I think what they had the cards is to make 0:08:06.840 --> 0:08:10.840 Russia understand that it's going to be more difficult as 0:08:10.880 --> 0:08:13.680 the fight goes on. But I think the only way 0:08:13.680 --> 0:08:18.520 to get the Russians to negotiate more seriously would be 0:08:18.720 --> 0:08:22.640 two things. One, there is a fairly robust sanctions bill 0:08:22.680 --> 0:08:26.600 that eighty one senators bipartisan in the Senate support, and 0:08:26.640 --> 0:08:29.400 that Senators Graham and Bloomothal who were just in Kiev, 0:08:29.480 --> 0:08:33.440 said that they would possibly pass this week. Hasn't happened yet, 0:08:33.440 --> 0:08:36.040 we'll see, but they would be Those would be very 0:08:36.080 --> 0:08:39.680 punishing sanctions on Russia. And it would be for the 0:08:39.720 --> 0:08:45.400 Trump administration to resume supplying Ukraine with the weapons and 0:08:45.440 --> 0:08:49.760 the financial assistance it needs to continue fighting Russia in 0:08:49.800 --> 0:08:52.199 such a way that Putin might have to understand that 0:08:52.280 --> 0:08:55.520 his maximum demands cannot be met and that he would 0:08:55.559 --> 0:08:58.760 be willing to make some compromises in the demands that 0:08:58.760 --> 0:08:59.720 the Russians are making. 0:09:00.679 --> 0:09:04.559 Just thirty seconds, but what's your current thinking on how 0:09:04.600 --> 0:09:05.319 the war ends. 0:09:07.559 --> 0:09:11.439 Eventually, it will end in a negotiation, and there will 0:09:11.440 --> 0:09:14.040 be a negotiation clearly where both sides will have to 0:09:14.080 --> 0:09:17.800 compromise and both sides will have to move back from 0:09:17.800 --> 0:09:21.160 their maximum demands. But I think neither side is at 0:09:21.160 --> 0:09:26.120 the situation yet where they're willing to make those compromises. 0:09:26.640 --> 0:09:29.160 Doctor stan always appreciate you taking the time in joining 0:09:29.240 --> 0:09:32.280 us here on a Bloomberg Business Weekdaily. Doctor Angela Stent, 0:09:32.559 --> 0:09:35.800 Senior Fellow at the Brookings Institution, also the author of 0:09:35.840 --> 0:09:38.480 the twenty nineteen book Putin's World, Russia. 0:09:38.160 --> 0:09:40.720 Against the West and with the Rest. 0:09:42.240 --> 0:09:46.240 You're listening to the Bloomberg Business Weekdaily Podcast. Catch us 0:09:46.320 --> 0:09:49.760 live weekday afternoons from two to five pm Eastern. Listen 0:09:49.800 --> 0:09:53.360 on Applecarplay and Android Auto with the Bloomberg Business app, 0:09:53.520 --> 0:09:56.120 or watch us live on YouTube. 0:09:57.360 --> 0:10:00.360 President Donald Trump and Chinese President Shiji Ping are likely 0:10:00.440 --> 0:10:02.680 to speak this week, the White House said, as the 0:10:02.679 --> 0:10:05.920 world's two largest economies remain locked in trade at turmoil. 0:10:06.320 --> 0:10:09.120 From where we bring in Jennifer Welch, Bloomberg Economics Chief 0:10:09.280 --> 0:10:10.480 geoeconomics analyst. 0:10:10.520 --> 0:10:11.839 She joins us from Washington. 0:10:11.960 --> 0:10:13.600 Jennifer, I just want to start with the lay of 0:10:13.640 --> 0:10:17.160 the land right now, because we're a little over a 0:10:17.200 --> 0:10:21.160 month away from the end of this ninety day pause 0:10:21.240 --> 0:10:24.840 that the President had laid out for every country that 0:10:24.880 --> 0:10:28.400 it's negotiating with around the world. What is the average 0:10:28.440 --> 0:10:32.360 tariff rate that we should keep in mind for goods 0:10:32.360 --> 0:10:34.560 that are coming from China into the US right now. 0:10:36.160 --> 0:10:38.959 Well, the moment, the US effective terif rate on China 0:10:39.080 --> 0:10:41.960 is closer to forty percent with the ninety day pause 0:10:42.080 --> 0:10:45.360 on the higher reciprocal tariffs that came into play after 0:10:45.440 --> 0:10:48.920 April second, after the tip for tap between Washington and Beijing. 0:10:49.559 --> 0:10:53.960 But as the calls lead up has indicated, those wheels 0:10:53.960 --> 0:10:56.480 are starting to fall off of that truth and we 0:10:56.559 --> 0:10:58.840 might see tensions come to a boil well before that 0:10:58.960 --> 0:11:01.200 ninety day period is to end. And I think the 0:11:01.320 --> 0:11:04.360 threatening there is whether or not terror rates are going 0:11:04.400 --> 0:11:07.600 to go back up again once that ninety day truth ends, 0:11:07.760 --> 0:11:10.680 will there be an extension of it to allow for 0:11:10.720 --> 0:11:13.600 a larger deal on trade. At the moment, the lines 0:11:13.640 --> 0:11:14.959 are pointing pretty negative. 0:11:15.400 --> 0:11:17.280 You know, I was sitting in the studio with Tom 0:11:17.360 --> 0:11:20.280 Kane doing Bloomberg surveillance a couple of weeks ago, and 0:11:20.559 --> 0:11:22.839 in one single day we spoke to two analysts and 0:11:22.880 --> 0:11:26.079 this was before this was before the ninety day truce. 0:11:26.760 --> 0:11:29.360 We spoke to two analysts who told us that within 0:11:29.440 --> 0:11:31.160 weeks we were going to see empty shelves here in 0:11:31.160 --> 0:11:35.240 the US. It doesn't seem like that has materialized. Yes, 0:11:35.280 --> 0:11:39.040 there's been a pause at this point. Are you based 0:11:39.040 --> 0:11:40.760 on the research that you see the folks that you 0:11:40.840 --> 0:11:43.720 talk to, are you seeing that still a concern given 0:11:43.760 --> 0:11:45.679 that so much of what we buy in the US 0:11:45.760 --> 0:11:48.280 comes from China. 0:11:48.360 --> 0:11:51.280 I think the ninety day pause allowed for companies that 0:11:51.360 --> 0:11:56.600 had already been surging orders in advance of Liberation Day, 0:11:56.640 --> 0:12:00.400 anticipating that terrorists were going to go up, allows them 0:12:00.440 --> 0:12:03.360 to continue to make orders and through at least this 0:12:03.520 --> 0:12:06.440 ninety day period. So it has bought some space, and 0:12:06.440 --> 0:12:09.680 it has bought some time. They are facing higher prices, 0:12:09.720 --> 0:12:12.360 but they are not facing the kinds of exorbitant prices 0:12:12.360 --> 0:12:15.040 at one hundred and forty five percent teriffreight that we 0:12:15.040 --> 0:12:19.000 were in mad to late April that would have made 0:12:19.240 --> 0:12:22.400 many of those orders cost prohibitive. So I think it 0:12:22.480 --> 0:12:24.600 has bought some space, and that's why we haven't seen 0:12:24.640 --> 0:12:27.800 empty shells. We may still see price pikes though, because 0:12:27.800 --> 0:12:31.040 that's thirty eight percent effective terriff. That's a high rate, 0:12:31.880 --> 0:12:35.480 higher certainly than where we were before a second. But 0:12:35.559 --> 0:12:37.840 I think it has avoided some of the shortages that 0:12:37.880 --> 0:12:41.280 we're concerned about before this truce was reached in Geneva. 0:12:42.160 --> 0:12:47.720 I'm wondering if in your observations these you know maybe 0:12:47.760 --> 0:12:51.559 some cracks in the trade truce beginning to show how 0:12:51.640 --> 0:12:55.160 much of that is just a normal part of a 0:12:55.240 --> 0:12:59.720 negotiation between two of the world's largest economies. 0:13:01.440 --> 0:13:04.000 I think given the experience of the first years China 0:13:04.040 --> 0:13:06.439 trade war at this point in time, I would say 0:13:06.720 --> 0:13:09.480 history suggest that this isn't surprising. In that trade war, 0:13:09.760 --> 0:13:13.000 we saw multiple what I would call potential off MPs 0:13:13.040 --> 0:13:15.839 where both parties had the opportunity to take a step 0:13:15.880 --> 0:13:20.000 down from trade tension, that were either bypassed or only 0:13:20.080 --> 0:13:22.600 lasted a temporary period of time. And we also saw 0:13:22.720 --> 0:13:26.440 multiple rounds of escalation and tit for tat even when 0:13:26.440 --> 0:13:29.079 it seemed likely that the two parties are maybe reaching 0:13:29.640 --> 0:13:32.880 an agreement of stories. Ultimately, it took two years from 0:13:32.920 --> 0:13:35.840 the initiation of tariffs to the conclusion of the deal 0:13:35.880 --> 0:13:37.720 in the form of the Phase one deal and that 0:13:37.840 --> 0:13:41.480 trade war for terrorists to come down, and even then 0:13:41.640 --> 0:13:44.400 the Phase one deal didn't last very long before attension 0:13:44.400 --> 0:13:47.680 starts to psych again. I think that helps explain the 0:13:47.720 --> 0:13:51.040 backdround for today's trade talks, where there's deep levels of 0:13:51.080 --> 0:13:54.480 distrust on both sides. Both sides, as you're applying, are 0:13:54.600 --> 0:13:57.520 still looking to gain leverage even though they've agreed to 0:13:57.520 --> 0:14:00.520 this truce, and that's probably part of the reason Beijing 0:14:00.559 --> 0:14:04.120 has been slow to peel back these expert controls on 0:14:04.559 --> 0:14:06.959 rare earth and other critical minerals of the US has 0:14:06.960 --> 0:14:10.280 complained about. That's leverage that Beijing wants to continue to 0:14:10.320 --> 0:14:15.000 retain in addition to the administrative challenges appealing back expert controls, 0:14:15.200 --> 0:14:17.400 and on the US side, there are a number of 0:14:17.480 --> 0:14:19.680 stats in the United States wants to take as part 0:14:19.680 --> 0:14:23.040 of its competition with China outside the trade domain. And 0:14:23.080 --> 0:14:26.160 from Washington's perspective, a trade truth doesn't mean that a 0:14:26.200 --> 0:14:29.400 degree to pause all of that. But from Beijing's perspective, 0:14:29.640 --> 0:14:32.280 I'm not going to agree to something in the trade 0:14:32.320 --> 0:14:35.400 arena when you're hitting me on expert controls or on 0:14:35.480 --> 0:14:37.960 student pieces. At the same time. 0:14:39.640 --> 0:14:44.520 House White House Press Secretary Caroline Lovett told reporters today 0:14:45.200 --> 0:14:47.640 that I'm just going to quote it. I can confirm 0:14:47.680 --> 0:14:50.920 that the two leaders will likely talk this week. Of course, 0:14:51.120 --> 0:14:54.880 referring to Trump and Chinese President Jiji and paying this 0:14:54.920 --> 0:14:58.360 would be the first time since they spoke, correct since 0:14:58.760 --> 0:15:01.520 Trump took office. What would this mean. 0:15:03.280 --> 0:15:05.080 It would be the first time that we know of 0:15:05.200 --> 0:15:08.840 they've spoken since he took office. President Trump has indicated 0:15:08.880 --> 0:15:10.920 that they spoke at some other point in time, but 0:15:11.160 --> 0:15:13.720 he hasn't provided specifics of it, and there was never 0:15:13.720 --> 0:15:15.680 a readout from it, so we don't really know if 0:15:15.680 --> 0:15:19.840 that call ever happened. I think it's highly unlikely that Beijing, 0:15:19.920 --> 0:15:22.360 in this atmosphere would agree to a leader level call. 0:15:22.400 --> 0:15:25.840 From Beijing's perspective, that's just incredibly risky. They don't want 0:15:25.840 --> 0:15:28.160 to put President Being in a position where he could 0:15:28.160 --> 0:15:30.600 be embarrassed or surprised in the way that some other 0:15:30.640 --> 0:15:34.040 foreign leaders in meeting or talking with Trump happened. Their 0:15:34.440 --> 0:15:37.040 preferred mo is for the leaders to meet and to 0:15:37.160 --> 0:15:40.400 talk once they have something to announce, which usually requires 0:15:40.440 --> 0:15:43.640 more progress thant working levels. Obviously, that flies in the 0:15:43.640 --> 0:15:46.560 face of President Trump's preferred approach, where he likes to 0:15:46.600 --> 0:15:49.440 work things out with his counterparts, and that often is 0:15:49.560 --> 0:15:53.240 a faster path to resolving differences. And so if a 0:15:53.240 --> 0:15:55.640 phone call happens this week, I think that is a 0:15:55.680 --> 0:15:59.240 good thing for trade negotiations. That probably will help restart 0:15:59.280 --> 0:16:02.320 momentum or at least clear the error in a way 0:16:02.320 --> 0:16:04.560 in which these tensions are kind of boiling on the 0:16:04.560 --> 0:16:07.200 back burner, But I think a call is unlikely, and 0:16:07.200 --> 0:16:09.880 what that means is that tensions could continue to boil 0:16:10.000 --> 0:16:13.960 because they're only being addressed really at lower levels, and 0:16:14.320 --> 0:16:16.880 it would take a higher level engagement to put them 0:16:16.920 --> 0:16:18.520 to rest or at least to put them into the 0:16:18.560 --> 0:16:21.200 background to the point where they're not interfering with talks further. 0:16:21.720 --> 0:16:25.400 So my anticipation is, despite what the White House Press 0:16:25.760 --> 0:16:28.400 Secretary saide, I'd be very surprised if a phone called, 0:16:28.440 --> 0:16:30.800 did it happen, And I'd be, as a result, very 0:16:30.800 --> 0:16:33.160 surprised if we had a quick resolution to this current 0:16:33.160 --> 0:16:38.440 period of tividual first of decision kind of containing the 0:16:38.520 --> 0:16:40.480 left things boil and works them out. 0:16:40.360 --> 0:16:41.520 At the lower levels. 0:16:42.200 --> 0:16:44.320 Hey, Jennifer, we're going to try to fix your mic 0:16:44.360 --> 0:16:46.320 a little bit. But Emily, one thing that I wanted 0:16:46.320 --> 0:16:48.440 to talk about with Jennifer we've got a couple minutes left, 0:16:48.480 --> 0:16:52.200 hoping we can fix the connection is who has leverage 0:16:52.200 --> 0:16:54.800 in this negotiation. I mean, China has the rare earth 0:16:55.040 --> 0:16:58.520 capacity for refining these rare earth elements. We've talked about 0:16:58.520 --> 0:17:01.400 that with Jodo quite a bit, and Gracelyn Baskren over 0:17:01.400 --> 0:17:05.520 at the Centerer for Strategic and international studies. They also 0:17:05.640 --> 0:17:08.919 have the stuff that we want to buy as consumers, 0:17:08.960 --> 0:17:11.639 but we have the consumers, Jennifer, I want to go 0:17:11.680 --> 0:17:13.120 back to you and bring you back in here. Who 0:17:13.119 --> 0:17:15.159 has the leverage when it comes to this negotiation. 0:17:16.920 --> 0:17:20.080 So in a sense, both sides have leverage. Obviously from 0:17:20.119 --> 0:17:24.240 the US perspective, they are China's single largest market in 0:17:24.280 --> 0:17:26.879 the world, and there are very limited options for Beijing 0:17:27.000 --> 0:17:30.720 to shift those goods to other locations. At the same time, 0:17:30.760 --> 0:17:34.480 manufacturing is increasingly a very important part of the Chinese economy. 0:17:34.480 --> 0:17:37.040 It has been for decades, but especially in light of 0:17:37.040 --> 0:17:39.440 their property bubble and some of the other challenges that 0:17:39.480 --> 0:17:42.520 they have had with consumer sentiment. At this moment in time, 0:17:42.560 --> 0:17:45.840 with their other economic weaknesses, manufacturing becomes an even more 0:17:45.880 --> 0:17:49.480 important part of China's growth hopes. On the other hand, 0:17:49.720 --> 0:17:51.879 for the US, the weakness is really in terms of 0:17:51.960 --> 0:17:54.840 consumer dependence on Chinese goods that there aren't a lot 0:17:54.880 --> 0:17:58.040 of alternative options or it is certainly not within US 0:17:58.080 --> 0:18:01.320 consumers price preferences, and so both sides are going to 0:18:01.320 --> 0:18:04.399 face incredible pain here if terrists resume. Higher levels for 0:18:04.560 --> 0:18:07.840 China will be in the form of dropped exports, as 0:18:07.880 --> 0:18:10.160 a result, the impact it's likely to have on factories, 0:18:10.200 --> 0:18:13.480 and in course of that and impact on jobs. On 0:18:13.520 --> 0:18:15.040 the US side, it's going to be in terms of 0:18:15.119 --> 0:18:17.800 much higher prices for US consumers, to the point where 0:18:17.840 --> 0:18:20.320 some goods might not be available and there aren't ready 0:18:20.320 --> 0:18:23.959 alternatives for those goods. So both sides certainly have an 0:18:23.960 --> 0:18:26.760 incentive to avoid a return to higher attentions here. But 0:18:26.840 --> 0:18:31.520 at the same time, the depth and deep persistence of 0:18:31.520 --> 0:18:34.880 these trade tensions against the backdrop of distress makes avoiding 0:18:35.000 --> 0:18:36.920 that outcome a real challenge. 0:18:37.160 --> 0:18:41.679 Jennifer Welch, Bloomberg Economics Chief geoeconomics analyst, joining us this 0:18:41.720 --> 0:18:43.040 afternoon from Washington. 0:18:45.720 --> 0:18:47.720 I'll bet you let me drive. Oh no, no, no, no, 0:18:48.240 --> 0:18:55.240 this is not a toy, honey, please hovels. I want 0:18:55.240 --> 0:18:55.639 to try it. 0:18:57.840 --> 0:19:03.639 It's a good question, good tribes, this is the drive 0:19:03.680 --> 0:19:04.800 to the clothes. 0:19:04.760 --> 0:19:07.320 Punk's amusing well, Trier run to dawn. 0:19:07.480 --> 0:19:10.520 On Bloomberg Radio, and look at that. 0:19:10.880 --> 0:19:14.160 We're just about nineteen minutes from the close of equity trading, 0:19:14.200 --> 0:19:17.000 as we just heard from Jordan Fitzgerald, about three tens 0:19:17.040 --> 0:19:18.919 of one percent. But a strong day for tech right now. 0:19:18.960 --> 0:19:21.520 The NASDAC Hire by six tens of one percent. 0:19:21.600 --> 0:19:22.679 The Dow is flat. 0:19:23.440 --> 0:19:25.680 Let's bring in Allan Zaffern. He's co founder and managing 0:19:25.720 --> 0:19:29.399 partner at i EQ Capital about thirty six point eight 0:19:29.480 --> 0:19:32.520 billion dollars in assets under management. He joins us once 0:19:32.520 --> 0:19:36.320 again from Foster City, California. Good to have you back 0:19:36.400 --> 0:19:41.120 on the program. We haven't spoken since Wow, just after 0:19:41.200 --> 0:19:45.000 the tariff pause, so mid April twenty or no, yeah, 0:19:45.520 --> 0:19:47.280 just after the tariff pause, I should say, Allen, it's 0:19:47.280 --> 0:19:49.119 been quite a while since we've last spoken with you. 0:19:50.600 --> 0:19:53.800 Good to have you with us this afternoon. That's exactly 0:19:53.880 --> 0:19:56.159 where I want to start, because we're gonna get to 0:19:56.200 --> 0:19:58.240 the FED in a minute. We're going to get to 0:19:58.480 --> 0:20:02.639 sort of acid allocation. Now, maybe it's different than a 0:20:02.720 --> 0:20:07.359 few months ago, but with regard to US trade negotiations, 0:20:07.880 --> 0:20:09.600 in your view, how do you thinks stand right now? 0:20:11.240 --> 0:20:12.920 Well, first of all, Tim and anially, thanks for having 0:20:12.920 --> 0:20:16.680 me on the show. Look, it's unclear. Right on the 0:20:16.760 --> 0:20:21.639 one hand, our administration is talking to China and arguing 0:20:21.680 --> 0:20:24.000 that they're going to delay the imposition of some of 0:20:24.040 --> 0:20:26.480 these terrorists. But then the next thing you hear is 0:20:26.560 --> 0:20:29.480 there's again conversations about maybe it's not going to be 0:20:29.600 --> 0:20:32.160 so easy. So the last we heard is President Trump 0:20:32.160 --> 0:20:36.000 will talk with the head of China later this week, 0:20:36.080 --> 0:20:40.120 and the intention is to get the conversations back on track. 0:20:40.200 --> 0:20:42.480 If you have the two largest economies in the globe 0:20:42.600 --> 0:20:46.879 not acting well with one another, clearly that's a negative globally. 0:20:47.000 --> 0:20:49.960 And so I think on a short term basis, where 0:20:50.000 --> 0:20:54.280 this market is headed. Stock market is measuring the ability 0:20:54.400 --> 0:20:58.280 of our administration to get its way to some degree 0:20:58.359 --> 0:21:02.679 with some imposition to terifts while not being too problematic 0:21:02.920 --> 0:21:06.200 or hurtful to other countries administrations, so that we can 0:21:06.280 --> 0:21:09.960 work out face saving agreements on both sides of the 0:21:10.080 --> 0:21:13.360 oceans or both sides of the country. So that's that's 0:21:13.440 --> 0:21:16.040 the game. Are we going to find some middle ground 0:21:16.359 --> 0:21:18.800 that enables the US to argue it's one in the 0:21:18.920 --> 0:21:22.160 imposition of some tariffs for the benefit of protecting our 0:21:23.080 --> 0:21:25.680 domestic industries, but to the same token in a way 0:21:25.760 --> 0:21:29.840 such that other countries administrations can have face saving agreements 0:21:29.920 --> 0:21:32.800 on behalf of their own cities. That's the game to 0:21:32.880 --> 0:21:34.399 play right now in terms of tariffs. 0:21:34.880 --> 0:21:37.479 I saw a note this morning. I'm blanking on who 0:21:38.119 --> 0:21:41.639 who wrote it, but the analyst was mentioning how it 0:21:41.840 --> 0:21:47.960 seems like markets aren't reacting as strongly on Monday mornings 0:21:48.119 --> 0:21:53.439 when we get news over the weekend about US China relations, 0:21:53.840 --> 0:21:56.240 which we did get this weekend. It's not like we 0:21:56.359 --> 0:22:00.720 saw a massive drop coming in Monday morning. What do 0:22:00.800 --> 0:22:04.040 you make of that? Are are investors getting tired of 0:22:05.960 --> 0:22:08.760 all of the headlines about tariffs and the trade war? 0:22:08.880 --> 0:22:13.280 Are or are there actually real developments here that kind 0:22:13.320 --> 0:22:16.480 of signal meaningful progress that could be good for the 0:22:16.640 --> 0:22:17.359