1
00:00:02,720 --> 00:00:10,160
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Canadians are always greaming

2
00:00:10,240 --> 00:00:12,920
Speaker 1: up a lot of ways to ruin our lives.

3
00:00:13,520 --> 00:00:18,240
Speaker 2: The metric system for the love of God, Chelseius really

4
00:00:18,400 --> 00:00:20,160
Speaker 2: young Rider.

5
00:00:20,960 --> 00:00:21,880
Speaker 3: Of course, I'm right.

6
00:00:21,960 --> 00:00:23,360
Speaker 1: It was crazy abousts.

7
00:00:30,400 --> 00:00:33,760
Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,

8
00:00:34,120 --> 00:00:36,919
Speaker 2: and that was a reminder of a satirical comedy from

9
00:00:36,960 --> 00:00:40,400
Speaker 2: thirty years ago, a rare foray into feature filmmaking by

10
00:00:40,440 --> 00:00:44,120
Speaker 2: the documentary maker Michael Moore. It revolves around a clearly

11
00:00:44,159 --> 00:00:47,879
Speaker 2: absurd fictional scenario where a US president decides to overcome

12
00:00:47,920 --> 00:00:54,640
Speaker 2: failing approval ratings by inciting a mad conflict with Canada.

13
00:00:59,160 --> 00:01:01,920
Speaker 2: Welcome to Trump. It's the Bloomberg podcast that looks at

14
00:01:01,960 --> 00:01:05,040
Speaker 2: the economic world of Donald Trump, how he's already shaped

15
00:01:05,040 --> 00:01:07,319
Speaker 2: the global economy, and what on earth is going to

16
00:01:07,319 --> 00:01:12,880
Speaker 2: happen next. We're taking a moment to digest the flurry

17
00:01:12,880 --> 00:01:17,160
Speaker 2: of tariff news this weekend, involving two of America's closest neighbors.

18
00:01:17,360 --> 00:01:21,760
Speaker 2: The threats, the negotiations, the pauses. We've had all of it,

19
00:01:21,800 --> 00:01:23,760
Speaker 2: and in Canada's case, we've also had a flurry of

20
00:01:23,800 --> 00:01:27,520
Speaker 2: hastily produced footage of helicopters at the border. Our goal

21
00:01:27,840 --> 00:01:30,080
Speaker 2: isn't to retread all of that ground, but to answer

22
00:01:30,120 --> 00:01:33,920
Speaker 2: a bigger question in his onslaught of tariff threats and

23
00:01:33,959 --> 00:01:38,360
Speaker 2: trade wars, what exactly is Donald Trump trying to accomplish.

24
00:01:38,840 --> 00:01:40,640
Speaker 2: We've got some of the best minds on the subject

25
00:01:40,680 --> 00:01:43,000
Speaker 2: with us this week to talk that through making his

26
00:01:43,080 --> 00:01:46,560
Speaker 2: Trump and Nomic's debut. Sean Donnan joins US. Sean is

27
00:01:46,600 --> 00:01:49,080
Speaker 2: a senior writer with Bloomberg. He reports on the US

28
00:01:49,080 --> 00:01:52,880
Speaker 2: and global economies, and before joining US, he spent feels

29
00:01:52,920 --> 00:01:56,280
Speaker 2: like half a lifetime covering trade for the Financial Times. Sean,

30
00:01:56,320 --> 00:01:58,080
Speaker 2: you must feel like you've already worked a five day

31
00:01:58,080 --> 00:01:59,480
Speaker 2: week and it's only Tuesday.

32
00:02:00,160 --> 00:02:02,720
Speaker 1: It's been a day or two of work.

33
00:02:02,800 --> 00:02:05,160
Speaker 2: Con we'll get into some of the lessons that you've

34
00:02:05,200 --> 00:02:07,760
Speaker 2: learned in the long hours, but you've certainly had to

35
00:02:07,760 --> 00:02:10,519
Speaker 2: write many words on it. And we have Trumponomics regular

36
00:02:10,560 --> 00:02:13,960
Speaker 2: Anna Wong, chief US economists at Bloomberg Economics. She's worked

37
00:02:14,000 --> 00:02:16,000
Speaker 2: at the FED and did serve in the Trump White

38
00:02:16,040 --> 00:02:19,200
Speaker 2: House in twenty nineteen and twenty twenty on se comment

39
00:02:19,400 --> 00:02:22,679
Speaker 2: at the Council of Economic Advisors and it's brilliant to

40
00:02:22,720 --> 00:02:24,679
Speaker 2: have you back. And I'm trying to know what you've

41
00:02:24,720 --> 00:02:26,399
Speaker 2: made of the last few days, but we'll get into

42
00:02:26,440 --> 00:02:28,960
Speaker 2: that in a minute. Thanks for joining us, Hi, glad

43
00:02:29,000 --> 00:02:32,800
Speaker 2: to be here. So on Monday, North America came within

44
00:02:32,919 --> 00:02:36,200
Speaker 2: hours of a multi billion dollar trade war, a trade

45
00:02:36,240 --> 00:02:39,000
Speaker 2: war that could yet swing a wrecking ball through the

46
00:02:39,040 --> 00:02:42,160
Speaker 2: economies of Mexico and Canada and in the process raise

47
00:02:42,240 --> 00:02:46,520
Speaker 2: questions about that regional compact which sits at the foundation

48
00:02:46,680 --> 00:02:51,440
Speaker 2: of America's global competitiveness and economic power. Now it's true,

49
00:02:51,480 --> 00:02:54,200
Speaker 2: President Trump has agreed to delay the twenty five percent

50
00:02:54,280 --> 00:02:57,640
Speaker 2: tariffs on his neighbors that he had threatened after both

51
00:02:57,680 --> 00:03:00,480
Speaker 2: Canada and Mexico agreed to take tougher measures to combat

52
00:03:00,639 --> 00:03:04,000
Speaker 2: migration and drug trafficking at the border. But Trump's ten

53
00:03:04,040 --> 00:03:06,960
Speaker 2: percent tariffs on China did take effect, and the Chinese

54
00:03:06,960 --> 00:03:10,840
Speaker 2: government did retaliate already with tariff's on natural gas, goal

55
00:03:10,840 --> 00:03:13,440
Speaker 2: and other products, and also a curious threat of an

56
00:03:13,480 --> 00:03:17,000
Speaker 2: anti monopoly investigation against Google, which doesn't do a whole

57
00:03:17,000 --> 00:03:20,560
Speaker 2: lot of business in China. Sean, I was quoting there

58
00:03:20,600 --> 00:03:22,919
Speaker 2: from a piece that you wrote. Was thinking about all

59
00:03:22,919 --> 00:03:26,000
Speaker 2: the economic relationships at stake in this war. From your

60
00:03:26,040 --> 00:03:29,440
Speaker 2: reporting this weekend, what have we learned about President Trump's

61
00:03:29,560 --> 00:03:32,600
Speaker 2: trade strategy? Are we clearer or are we more confused?

62
00:03:33,040 --> 00:03:35,040
Speaker 1: I think we're more confused. And I think that's partly

63
00:03:35,080 --> 00:03:39,200
Speaker 1: because the trade policy has colliding goals as you kind

64
00:03:39,200 --> 00:03:42,640
Speaker 1: of look at what Trump has threatened through the campaign

65
00:03:42,920 --> 00:03:46,280
Speaker 1: and in recent weeks and what some of his advisors,

66
00:03:46,280 --> 00:03:49,720
Speaker 1: people like Howard Latning, the incoming Commerce Secretary and Scott Bessant,

67
00:03:50,840 --> 00:03:54,160
Speaker 1: the Treasury Secretary, has said. There are really three goals

68
00:03:54,800 --> 00:03:58,520
Speaker 1: to tariffs under this new Trump administration. One is that

69
00:03:58,640 --> 00:04:02,200
Speaker 1: kind of art of the deal, that very familiar piece

70
00:04:02,280 --> 00:04:04,520
Speaker 1: that we had from the first Trump administration of using

71
00:04:04,640 --> 00:04:09,160
Speaker 1: terroriffs to extract leverage and some kind of concessions from

72
00:04:09,440 --> 00:04:11,680
Speaker 1: trading partners. We've already seen that play out in the

73
00:04:11,720 --> 00:04:14,920
Speaker 1: last few days with Canaban, Mexico, and we are seeing

74
00:04:14,920 --> 00:04:18,280
Speaker 1: a kind of supercharged version of that. In effect, Trump

75
00:04:18,520 --> 00:04:21,880
Speaker 1: over the last few days kind of threatened nuclear war

76
00:04:21,920 --> 00:04:24,360
Speaker 1: against his neighbors and got him to add a few

77
00:04:24,400 --> 00:04:26,800
Speaker 1: more border guards in response, and you know, and the

78
00:04:26,839 --> 00:04:29,760
Speaker 1: trade equivalent of nuclear war. The second goal that he

79
00:04:29,839 --> 00:04:32,200
Speaker 1: has is this kind of rebalancing trade. That's the familiar

80
00:04:32,200 --> 00:04:34,960
Speaker 1: one from going back to twenty fifteen, this whole idea

81
00:04:35,000 --> 00:04:37,760
Speaker 1: that trade deficits, that the US has, whether its major

82
00:04:37,800 --> 00:04:40,839
Speaker 1: trading partners are unfair, and that you need to rebalance

83
00:04:40,880 --> 00:04:42,960
Speaker 1: trade with them, and tariffs are a tool to do that.

84
00:04:43,320 --> 00:04:45,599
Speaker 1: And then the third one is a new one kind

85
00:04:45,600 --> 00:04:48,240
Speaker 1: of this cycle, and that's the idea of revenues. Trump

86
00:04:48,680 --> 00:04:51,520
Speaker 1: starting in the campaign, has talked about the billions of

87
00:04:51,560 --> 00:04:55,920
Speaker 1: dollars he can raise with tariffs. In fact, Republicans on

88
00:04:56,120 --> 00:04:59,680
Speaker 1: Capitol Hill were very quickly pointing to the billions of

89
00:04:59,680 --> 00:05:02,800
Speaker 1: dollars and revenues that would come from these tariffs on Canada, Mexico,

90
00:05:02,839 --> 00:05:06,760
Speaker 1: and China as a positive thing. But if you are

91
00:05:07,040 --> 00:05:12,000
Speaker 1: using tariffs as leverage and you don't expect to really

92
00:05:12,279 --> 00:05:14,640
Speaker 1: deploy them, that doesn't make them a very reliable source

93
00:05:14,680 --> 00:05:19,880
Speaker 1: of revenue. Likewise, if you're trying to rebalance trade, inevitably

94
00:05:19,960 --> 00:05:22,800
Speaker 1: you're going to reduce the amount of imports that which

95
00:05:22,839 --> 00:05:26,160
Speaker 1: are subject to tariffs, which again makes the tariffs a

96
00:05:26,240 --> 00:05:29,320
Speaker 1: less reliable source of revenues. What you kind of end

97
00:05:29,400 --> 00:05:31,960
Speaker 1: up with is a phenomenon that we saw during the

98
00:05:31,960 --> 00:05:34,640
Speaker 1: first Trump Trade wars in twenty sixteen, and that is

99
00:05:34,680 --> 00:05:40,080
Speaker 1: this huge uncertainty around Trump's trade policy and its goals

100
00:05:40,120 --> 00:05:43,480
Speaker 1: and where it's going. And that is probably the most

101
00:05:43,560 --> 00:05:48,200
Speaker 1: toxic thing for the economy because businesses really then stop

102
00:05:48,800 --> 00:05:52,520
Speaker 1: making investments, they stop hiring, and you start to get

103
00:05:52,520 --> 00:05:55,680
Speaker 1: a slowed down, not just in Canada and Mexico, which

104
00:05:55,720 --> 00:05:59,400
Speaker 1: would get hit hard by tariffs, but in the US economy.

105
00:06:00,200 --> 00:06:03,359
Speaker 2: Just to feel the pain of global businesses trying to

106
00:06:03,440 --> 00:06:05,839
Speaker 2: think about the implications of this for their supply chains.

107
00:06:06,000 --> 00:06:08,800
Speaker 2: In the first term, you got the message loud and

108
00:06:08,839 --> 00:06:12,240
Speaker 2: clear from Donald Trump, be careful of putting all your

109
00:06:12,240 --> 00:06:15,520
Speaker 2: eggs in the China basket tick that was kind of

110
00:06:15,640 --> 00:06:19,120
Speaker 2: underscored under President Biden. But with the addition that you

111
00:06:19,160 --> 00:06:22,560
Speaker 2: could be friend shoring, you could be orienting your production

112
00:06:22,680 --> 00:06:25,280
Speaker 2: to the friends of the US. Of course, if you're

113
00:06:25,360 --> 00:06:30,360
Speaker 2: now questioning whether friends is a safe strategy, and unless

114
00:06:30,400 --> 00:06:32,279
Speaker 2: you think, oh, well, we should just take everything into

115
00:06:32,320 --> 00:06:34,560
Speaker 2: the US, well not if you want to export, right,

116
00:06:34,600 --> 00:06:37,600
Speaker 2: because you're going to get retaliation potentially from these other countries.

117
00:06:37,640 --> 00:06:40,720
Speaker 2: So I think that uncertainty must be enormous at this stage.

118
00:06:40,760 --> 00:06:45,040
Speaker 2: But Anna, we've spoken to you during the transition, about

119
00:06:45,080 --> 00:06:48,240
Speaker 2: how you thought the administration would approach trade, having seen

120
00:06:48,279 --> 00:06:53,000
Speaker 2: it close up, how the tariffs unfolded in that first term,

121
00:06:53,040 --> 00:06:54,919
Speaker 2: and you know the degree to which it was actually

122
00:06:55,000 --> 00:06:58,440
Speaker 2: quite strategic and careful about the economic consequences. What have

123
00:06:58,480 --> 00:07:00,919
Speaker 2: you been thinking about that as you saw some of

124
00:07:00,960 --> 00:07:03,000
Speaker 2: these threats come out of the out of the White

125
00:07:03,040 --> 00:07:04,279
Speaker 2: House in the last week or so.

126
00:07:04,760 --> 00:07:08,080
Speaker 3: Yeah, So, Stephanie, my view about what the end game

127
00:07:08,279 --> 00:07:12,200
Speaker 3: of this trade war, version two is has evolved in

128
00:07:12,240 --> 00:07:15,080
Speaker 3: the times since we spoke. You know, if you asked

129
00:07:15,080 --> 00:07:18,480
Speaker 3: me two months ago, I thought that with Kevin has

130
00:07:18,520 --> 00:07:21,560
Speaker 3: to come returning to the White House, that we have

131
00:07:21,680 --> 00:07:25,720
Speaker 3: a voice there that would strongly advocate for a targeted

132
00:07:25,800 --> 00:07:29,040
Speaker 3: approach toward tariff. But since then we have seen Trump

133
00:07:29,120 --> 00:07:32,160
Speaker 3: announce the twenty five percent in Canada, and that made

134
00:07:32,200 --> 00:07:36,240
Speaker 3: me paid more attention to what the rhetoric not just

135
00:07:36,320 --> 00:07:40,000
Speaker 3: of Trump, but of people like Scott Bestant and also

136
00:07:40,240 --> 00:07:43,680
Speaker 3: people who are holding key economic advisor's role in this

137
00:07:43,720 --> 00:07:47,160
Speaker 3: White House. I think what's different about this version two

138
00:07:47,440 --> 00:07:52,360
Speaker 3: trade war is that Trump he's thinking about creating his legacy.

139
00:07:52,400 --> 00:07:54,320
Speaker 3: He's not going to run for a re election again.

140
00:07:54,800 --> 00:07:57,400
Speaker 3: So what is the end game, right. So I think

141
00:07:57,840 --> 00:08:00,320
Speaker 3: at the end of the day, his approach the time

142
00:08:00,360 --> 00:08:05,160
Speaker 3: around is actually very close to the theoretical underpinnings of

143
00:08:05,200 --> 00:08:09,200
Speaker 3: the old trade war literature and the academic literature. So

144
00:08:09,480 --> 00:08:12,840
Speaker 3: forget what you read about the impact of trade war

145
00:08:13,000 --> 00:08:17,120
Speaker 3: starting in twenty eighteen or thereafter, because the academic literature

146
00:08:17,400 --> 00:08:21,520
Speaker 3: from that point on was completely dominated by discussions of

147
00:08:21,560 --> 00:08:24,280
Speaker 3: who bore the cost of trade war? But before that,

148
00:08:24,440 --> 00:08:27,800
Speaker 3: in the even twenty to thirty years before that, that

149
00:08:27,960 --> 00:08:33,439
Speaker 3: was a very calm and boring literature on optimal tariffs,

150
00:08:33,880 --> 00:08:36,680
Speaker 3: on how to think about trade war, and from a

151
00:08:36,720 --> 00:08:41,000
Speaker 3: game theoretical perspective, and I think that the game theory

152
00:08:41,040 --> 00:08:44,079
Speaker 3: look of terriff is exactly how Trump thinks about it.

153
00:08:44,280 --> 00:08:47,000
Speaker 3: If you think about US China trade war, it's actually

154
00:08:47,040 --> 00:08:52,640
Speaker 3: a prisoner's dilemma's game. And in this game, the Nash equilibrium,

155
00:08:52,679 --> 00:08:57,000
Speaker 3: which is the outcome where two countries are not cooperating,

156
00:08:57,480 --> 00:09:01,320
Speaker 3: and this is the outcome where given the opponent's strategy,

157
00:09:01,600 --> 00:09:05,000
Speaker 3: what is your best choice? The nashquilibrium is actually a

158
00:09:05,040 --> 00:09:09,120
Speaker 3: trade war outcome. In this outcome, both countries are worse off.

159
00:09:09,480 --> 00:09:14,160
Speaker 3: But if US is able to impose unilateral taros without

160
00:09:14,480 --> 00:09:20,520
Speaker 3: inviting one for one retaliation, the US actually wins. From

161
00:09:20,760 --> 00:09:25,160
Speaker 3: Donald Trump's perspective, the past twenty years of trade liberalization

162
00:09:25,400 --> 00:09:30,079
Speaker 3: has been in that matrix where you have US committing

163
00:09:30,160 --> 00:09:33,920
Speaker 3: to free trade and China cheating and not committing to

164
00:09:34,200 --> 00:09:38,480
Speaker 3: free trade, and the payoff in that stage is actually

165
00:09:38,960 --> 00:09:41,959
Speaker 3: bad for US, good for China. And so I think

166
00:09:42,000 --> 00:09:45,440
Speaker 3: he is trying to use this trade war basically remove

167
00:09:45,559 --> 00:09:50,080
Speaker 3: us from the cooperative equilibrium where you have these institutions

168
00:09:50,080 --> 00:09:55,239
Speaker 3: like WTO and GATT which are monitoring and enforcing cooperation.

169
00:09:55,880 --> 00:09:59,080
Speaker 3: He broke them all, moved that away from that co

170
00:09:59,360 --> 00:10:03,880
Speaker 3: cooperative of equilibrium, get us to the non cooperative equilibrium,

171
00:10:03,880 --> 00:10:08,080
Speaker 3: which is the mutually destructive everybody trade war equlobrim. But

172
00:10:08,240 --> 00:10:12,080
Speaker 3: from his perspective, as long as the retaliation is not

173
00:10:12,200 --> 00:10:15,840
Speaker 3: one on one, US overall relatively one. And this is

174
00:10:15,840 --> 00:10:20,080
Speaker 3: what's very interesting about these executive orders he started recently.

175
00:10:20,160 --> 00:10:24,040
Speaker 3: It has a retaliation escalation class we have not seen

176
00:10:24,080 --> 00:10:28,599
Speaker 3: this before, which is that if the foreign partner retaliate

177
00:10:28,640 --> 00:10:32,280
Speaker 3: in a response, then US will ratcheted up, move us

178
00:10:32,280 --> 00:10:35,800
Speaker 3: into that matrix payoff where US on net is relatively

179
00:10:36,120 --> 00:10:37,480
Speaker 3: more well off than the partners.

180
00:10:37,840 --> 00:10:41,560
Speaker 2: I can see how that might apply to China, But

181
00:10:41,679 --> 00:10:45,120
Speaker 2: to have this threat of twenty five percent tariffs hanging

182
00:10:45,160 --> 00:10:50,200
Speaker 2: over those trading partners, which could quite clearly have produced retaliation.

183
00:10:50,360 --> 00:10:53,200
Speaker 2: Canada announced the retaliation it was going to do if

184
00:10:53,280 --> 00:10:57,920
Speaker 2: these tariffs went into force. Just assuming that it's going

185
00:10:58,000 --> 00:11:00,840
Speaker 2: to be unilateral seems pretty one. Yeah.

186
00:11:00,840 --> 00:11:04,640
Speaker 3: I mean, I see the threats on Canadian and Mexican

187
00:11:04,720 --> 00:11:09,679
Speaker 3: goods as a sequel to the first administration. Recall that

188
00:11:09,760 --> 00:11:12,559
Speaker 3: in the first administration it was also a very close

189
00:11:12,600 --> 00:11:15,840
Speaker 3: call with Mexico. He threatened to use the same powers

190
00:11:15,880 --> 00:11:20,840
Speaker 3: in twenty nineteen on Mexico also on concerns about immigration,

191
00:11:21,360 --> 00:11:24,240
Speaker 3: but that was also averted in the last minute. And

192
00:11:24,400 --> 00:11:26,960
Speaker 3: at the time, I was also working at the FED,

193
00:11:27,040 --> 00:11:32,040
Speaker 3: and I remember the International Finance Division. We were very

194
00:11:32,280 --> 00:11:37,319
Speaker 3: worried about the tariffs on automakers coming from Mexico and Canada.

195
00:11:37,440 --> 00:11:39,960
Speaker 3: And I think it remains to be seen whether he

196
00:11:40,040 --> 00:11:44,120
Speaker 3: is truly serious about the tariffs on our neighbor, because

197
00:11:44,440 --> 00:11:46,840
Speaker 3: that is the piece that does not make sense to me.

198
00:11:47,480 --> 00:11:50,960
Speaker 3: And now actually things makes more sense that he decided

199
00:11:51,000 --> 00:11:52,240
Speaker 3: to delay those tariffs.

200
00:11:52,480 --> 00:11:55,200
Speaker 2: It makes more sense if if it was all about

201
00:11:55,240 --> 00:11:59,959
Speaker 2: posturing and the fact that he quite likes trolling justin true.

202
00:12:00,280 --> 00:12:01,840
Speaker 2: I mean, there is an element of that which it

203
00:12:01,920 --> 00:12:04,600
Speaker 2: just seems to have been quite performative.

204
00:12:04,920 --> 00:12:07,360
Speaker 1: What we've forgotten about the last few days is that

205
00:12:07,960 --> 00:12:10,760
Speaker 1: the US just imposed a ten percent tariff on all

206
00:12:10,880 --> 00:12:15,920
Speaker 1: imports from China, including consumer goods that it stayed away

207
00:12:16,040 --> 00:12:19,640
Speaker 1: from tariffing during the first Trump administration because it was

208
00:12:19,679 --> 00:12:23,920
Speaker 1: so worried about the impact on US consumers and inflation

209
00:12:24,000 --> 00:12:26,480
Speaker 1: here in the United States. It's kind of hadn't done that,

210
00:12:26,679 --> 00:12:29,480
Speaker 1: and that is enormous in its own right. If we

211
00:12:29,559 --> 00:12:33,319
Speaker 1: had set aside the Canada and Mexico things, if those

212
00:12:33,360 --> 00:12:35,720
Speaker 1: threats had never happened, and what we had seen over

213
00:12:35,720 --> 00:12:38,400
Speaker 1: the last few days was simply a ten percent tariff

214
00:12:38,520 --> 00:12:42,760
Speaker 1: on all goods from China, the alarm bells would be

215
00:12:42,840 --> 00:12:47,000
Speaker 1: ringing all over the place. The pairing of these things

216
00:12:46,679 --> 00:12:50,960
Speaker 1: has kind of hidden this momentous action. I think the

217
00:12:51,040 --> 00:12:57,959
Speaker 1: whole idea of Trump using leverage and hinges on kind

218
00:12:58,000 --> 00:13:01,200
Speaker 1: of his credibility right. And one of the things that

219
00:13:01,200 --> 00:13:03,720
Speaker 1: we've seen just in the first two weeks of his

220
00:13:03,760 --> 00:13:09,800
Speaker 1: administration is his willingness to go to extreme threats in

221
00:13:09,920 --> 00:13:17,160
Speaker 1: terms of economic warfare for relatively small fights. And you know,

222
00:13:17,200 --> 00:13:19,600
Speaker 1: the biggest example of that was Columbia, where we had

223
00:13:19,600 --> 00:13:23,360
Speaker 1: this kind of nine hour trade war where the President

224
00:13:23,360 --> 00:13:26,800
Speaker 1: of the United States essentially threatened not just tariffs but

225
00:13:27,000 --> 00:13:31,679
Speaker 1: kind of Iran level sanctions on an ally with which

226
00:13:31,840 --> 00:13:36,960
Speaker 1: the US has a free trade agreement over two planes

227
00:13:37,360 --> 00:13:41,360
Speaker 1: over essentially a diplomatic skirmish in you know, in the end,

228
00:13:41,640 --> 00:13:44,560
Speaker 1: and it wasn't so that the Colombians were refusing to

229
00:13:44,760 --> 00:13:48,600
Speaker 1: accept these planes with deportees, is that they just wanted

230
00:13:48,640 --> 00:13:50,960
Speaker 1: the deportees not to be shackled while they were on

231
00:13:51,000 --> 00:13:55,199
Speaker 1: board these planes and treated more humanely. So, I mean,

232
00:13:55,360 --> 00:13:57,640
Speaker 1: it's kind of this willingness to escalate. And it's the

233
00:13:57,640 --> 00:14:00,199
Speaker 1: same thing with Canada and Mexico. I'm going to blow

234
00:14:00,280 --> 00:14:04,600
Speaker 1: up one of the greatest regional alliances in the world,

235
00:14:05,040 --> 00:14:08,600
Speaker 1: a real source of US competitiveness. As you said earlier

236
00:14:08,640 --> 00:14:11,440
Speaker 1: on this is and this is what Trump himself said

237
00:14:11,440 --> 00:14:14,720
Speaker 1: when you signed the US MCA. This is you know, Canada,

238
00:14:14,840 --> 00:14:17,480
Speaker 1: Mexico and the US against the rest of the world.

239
00:14:17,679 --> 00:14:20,160
Speaker 1: This is how you compete with China. And to blow

240
00:14:20,200 --> 00:14:23,400
Speaker 1: that all up over Yes, there's you know, there's a

241
00:14:23,520 --> 00:14:26,880
Speaker 1: horrible tragedy around fentanyl deaths and in the United States,

242
00:14:26,960 --> 00:14:30,400
Speaker 1: and you know, the migration issues at the southern border

243
00:14:30,400 --> 00:14:33,080
Speaker 1: in particular have been very real politically here in the

244
00:14:33,200 --> 00:14:36,920
Speaker 1: United States. And that's a core campaign promise for President Trump.

245
00:14:37,160 --> 00:14:40,760
Speaker 1: But to threaten what he threatened on the economic side

246
00:14:40,800 --> 00:14:44,560
Speaker 1: to address these issues that are non economic in many

247
00:14:44,560 --> 00:14:49,320
Speaker 1: ways is really you start to wonder, Okay, where do

248
00:14:49,360 --> 00:14:51,240
Speaker 1: you go next? And then if you play that out

249
00:14:51,560 --> 00:14:54,040
Speaker 1: to other trading partners, right, he has put the EU,

250
00:14:54,160 --> 00:14:59,040
Speaker 1: the European Union in his sites now for for a tariff. Now,

251
00:14:59,280 --> 00:15:03,600
Speaker 1: the EU response, there is no easy way out for

252
00:15:03,640 --> 00:15:07,000
Speaker 1: them in putting ten thousand extra border guards at the

253
00:15:07,000 --> 00:15:09,320
Speaker 1: border at the EU. That's not what Donald Trump is

254
00:15:09,320 --> 00:15:12,560
Speaker 1: going to look for. So how you know, how damaging

255
00:15:12,640 --> 00:15:14,120
Speaker 1: is that going to be? You know, the EU in

256
00:15:14,520 --> 00:15:18,960
Speaker 1: the US trade is almost a trillion dollars annually. It's

257
00:15:18,960 --> 00:15:21,600
Speaker 1: actually bigger than the trade with Canada and Mexico. But

258
00:15:21,640 --> 00:15:23,680
Speaker 1: these two countries have two and a half trillion dollars

259
00:15:23,720 --> 00:15:28,680
Speaker 1: each in foreign direct investment in their economies. If you

260
00:15:28,760 --> 00:15:31,800
Speaker 1: go here in the first two weeks, there's nowhere to

261
00:15:31,840 --> 00:15:32,880
Speaker 1: go up from here.

262
00:15:33,560 --> 00:15:36,000
Speaker 3: If it's going up and it's not sustainable, it's going

263
00:15:36,080 --> 00:15:39,040
Speaker 3: to go down at some point. And the part where

264
00:15:39,480 --> 00:15:42,680
Speaker 3: he decide to de escalate is the part where he's

265
00:15:42,720 --> 00:15:45,800
Speaker 3: ready to make a deal. At that point he's going

266
00:15:45,840 --> 00:15:48,920
Speaker 3: to I think the endgame is for him to seek

267
00:15:49,400 --> 00:15:53,800
Speaker 3: negotiations with all trade partners, where he kind of like

268
00:15:53,880 --> 00:15:57,400
Speaker 3: Phase one deal with China, except with everybody, including EU.

269
00:15:57,880 --> 00:16:00,320
Speaker 3: Because with EU, as John said, there's no board. It's

270
00:16:00,320 --> 00:16:04,120
Speaker 3: not a national security issue. It's more of a commercial issue.

271
00:16:04,160 --> 00:16:07,200
Speaker 3: And Trump had the same attitude toward EU in the

272
00:16:07,200 --> 00:16:10,320
Speaker 3: first trade war. He did not change at all. He

273
00:16:10,440 --> 00:16:13,960
Speaker 3: picked on the same type of sectors and the same

274
00:16:14,040 --> 00:16:16,360
Speaker 3: countries as he did in the first trade war.

275
00:16:16,960 --> 00:16:19,640
Speaker 1: I think there's another thing at play here which we

276
00:16:19,720 --> 00:16:21,480
Speaker 1: need to think about, and that is that he doesn't

277
00:16:21,520 --> 00:16:25,040
Speaker 1: yet have his economic and trade team in place, and

278
00:16:25,480 --> 00:16:30,560
Speaker 1: that the advisors who were in the room with Donald

279
00:16:30,560 --> 00:16:34,560
Speaker 1: Trump as he marched towards these tariffs at the weekend

280
00:16:35,040 --> 00:16:39,520
Speaker 1: were those his most hawkish advisors, Peter Navarro, Stephen Miller.

281
00:16:39,680 --> 00:16:43,600
Speaker 1: That's what we've been hearing. And these are the people

282
00:16:43,840 --> 00:16:48,400
Speaker 1: who are true believers in tariffs and play to also

283
00:16:48,480 --> 00:16:52,080
Speaker 1: to the impulsive side of Donald Trump to that kind

284
00:16:52,080 --> 00:16:56,480
Speaker 1: of testosterone driven You are the strongest man on the block,

285
00:16:57,680 --> 00:17:00,680
Speaker 1: you know, make them bend your way. And by the way,

286
00:17:00,720 --> 00:17:04,240
Speaker 1: these tariffs are great. These are magical tools that will

287
00:17:04,560 --> 00:17:07,520
Speaker 1: bring manufacturing jobs back to the Nish, which, by the way,

288
00:17:07,520 --> 00:17:10,000
Speaker 1: the data doesn't show actually happening in the first Trump

289
00:17:10,000 --> 00:17:13,560
Speaker 1: in series, and he doesn't yet have in place. Howard Lutnik,

290
00:17:13,600 --> 00:17:17,960
Speaker 1: his Commerce secretary, who when he nominated him, Trump said

291
00:17:18,000 --> 00:17:21,520
Speaker 1: would be leading his trade in terariff strategy. Scott Bessen

292
00:17:21,720 --> 00:17:26,040
Speaker 1: was strangely absent from the conversations about this over the

293
00:17:26,080 --> 00:17:29,399
Speaker 1: last few days, and his trade representative Jamison Greer, this

294
00:17:29,520 --> 00:17:34,719
Speaker 1: is your trade negotiator, This is kind of your tariff lawyer.

295
00:17:35,480 --> 00:17:37,840
Speaker 1: Is hasn't yet had his confirmation hearing yet.

296
00:17:37,960 --> 00:17:41,760
Speaker 3: I disagree, Sean. I think if the trade team were

297
00:17:42,160 --> 00:17:45,360
Speaker 3: better in place than what we see right now, he

298
00:17:45,440 --> 00:17:49,040
Speaker 3: would have gone even more hawkish. I think the lack

299
00:17:49,080 --> 00:17:53,080
Speaker 3: of staff in the USTR right now is actually impeding

300
00:17:53,119 --> 00:17:57,000
Speaker 3: the implementation of tariffs. It could have gone faster. On

301
00:17:57,040 --> 00:17:59,600
Speaker 3: the other hand, I think that the lack of voice

302
00:17:59,680 --> 00:18:04,399
Speaker 3: coming from Scott Bessens in this round is trees to

303
00:18:04,840 --> 00:18:08,320
Speaker 3: what happened with that Washington Post leak a couple of

304
00:18:08,359 --> 00:18:08,920
Speaker 3: weeks ago.

305
00:18:09,119 --> 00:18:11,119
Speaker 2: That was the one saying it was going to be phased,

306
00:18:11,200 --> 00:18:14,400
Speaker 2: And yeah, there was pushedback from that from the White House.

307
00:18:14,480 --> 00:18:17,359
Speaker 3: Right when I saw that leak, I thought that these

308
00:18:17,400 --> 00:18:22,760
Speaker 3: trade moderate moderating influence like Scott Bessend and Kevin Hassett

309
00:18:22,800 --> 00:18:24,040
Speaker 3: must be losing ground.

310
00:18:24,400 --> 00:18:28,200
Speaker 1: But that's really interesting in the context of Trump's broader goal,

311
00:18:28,320 --> 00:18:31,440
Speaker 1: which is to bring about this economic golden age in America.

312
00:18:32,200 --> 00:18:35,320
Speaker 1: The reason Scott Besson would want to phase in any

313
00:18:35,400 --> 00:18:38,600
Speaker 1: tariffs is because he would want to moderate the impact

314
00:18:38,640 --> 00:18:42,199
Speaker 1: on the US economy, spread it out over time, and

315
00:18:42,280 --> 00:18:47,399
Speaker 1: because he sees restoring growth or boosting growth in the

316
00:18:47,480 --> 00:18:52,679
Speaker 1: United States as a key element. It's also, you know,

317
00:18:52,760 --> 00:18:55,040
Speaker 1: we get back to the revenue piece. Scott Besson has

318
00:18:55,080 --> 00:18:59,560
Speaker 1: talked about using terrorists to offset tax scots, raising a trillion,

319
00:18:59,600 --> 00:19:04,480
Speaker 1: maybe two trillion dollars over ten years from tariffs to

320
00:19:05,000 --> 00:19:09,919
Speaker 1: offset the four trillion dollar plus costs of extending the

321
00:19:10,240 --> 00:19:14,159
Speaker 1: twenty seventeen tax cuts if you don't have a methodical plan,

322
00:19:14,960 --> 00:19:18,080
Speaker 1: and they actually did lay that out on day one

323
00:19:18,200 --> 00:19:21,560
Speaker 1: in executive order that Trump signed it, which he ordered

324
00:19:21,640 --> 00:19:24,080
Speaker 1: up all of these reports and setting in April first

325
00:19:24,119 --> 00:19:26,600
Speaker 1: deadline and really ordered up this let's go out there

326
00:19:26,600 --> 00:19:28,720
Speaker 1: and study and come up with a plan. And he

327
00:19:29,160 --> 00:19:31,639
Speaker 1: literally ripped that up when he threw out these tariffs

328
00:19:31,640 --> 00:19:33,240
Speaker 1: on Canada, Mexico and China.

329
00:19:33,920 --> 00:19:36,240
Speaker 2: Sean, you made a good point earlier that although we

330
00:19:36,400 --> 00:19:41,520
Speaker 2: maybe missed something quite important with the across the board

331
00:19:41,640 --> 00:19:45,439
Speaker 2: ten percent tariffs on China because of all the fireworks

332
00:19:45,480 --> 00:19:49,240
Speaker 2: over the much bigger threat that was then withdrawn against

333
00:19:49,359 --> 00:19:54,960
Speaker 2: Canada and Mexico, the ten percent tariffs potentially do fit

334
00:19:55,760 --> 00:20:00,520
Speaker 2: in the approach to this strategy, which actually the President

335
00:20:00,560 --> 00:20:03,920
Speaker 2: Trump outlined to our editor in chief last summer when

336
00:20:04,359 --> 00:20:09,040
Speaker 2: they faced with exactly the tension that you raised earlier. Sean,

337
00:20:09,080 --> 00:20:11,280
Speaker 2: that if you if you want to change the trading system,

338
00:20:11,280 --> 00:20:13,600
Speaker 2: you're not going to raise money because importers will have

339
00:20:13,640 --> 00:20:16,600
Speaker 2: moved to the US, so you don't have or will

340
00:20:16,600 --> 00:20:18,199
Speaker 2: have the production will have moved to the US. So

341
00:20:18,240 --> 00:20:20,960
Speaker 2: then you stop making money if you've successfully changed the economy.

342
00:20:20,960 --> 00:20:23,040
Speaker 2: And he said, very interestingly, he said, well, there's some

343
00:20:23,080 --> 00:20:25,439
Speaker 2: things where you just have a low tariff and you're

344
00:20:25,520 --> 00:20:29,800
Speaker 2: raising money, but you don't change behavior. And then other

345
00:20:29,800 --> 00:20:31,800
Speaker 2: things where you really just want to being the production

346
00:20:31,880 --> 00:20:34,679
Speaker 2: back to the US, you have very high tariffs. So

347
00:20:35,359 --> 00:20:37,760
Speaker 2: but with these ten percent tariffs, if that's the case

348
00:20:38,480 --> 00:20:41,760
Speaker 2: and that approach, President Trump is willing to have a

349
00:20:41,760 --> 00:20:46,239
Speaker 2: lot of US consumers and US companies lose out and

350
00:20:46,320 --> 00:20:50,480
Speaker 2: pay quite clearly those tariffs. This weekend we had what

351
00:20:50,960 --> 00:20:54,280
Speaker 2: was I think a perfectly sensible change to reduce that

352
00:20:54,760 --> 00:20:57,680
Speaker 2: or get rid of that day Minimus exception from tariffs,

353
00:20:58,560 --> 00:21:02,320
Speaker 2: which had provided such a capacity for Timu and Sheen

354
00:21:02,400 --> 00:21:07,000
Speaker 2: and other Chinese producers to send goods sort of under

355
00:21:07,000 --> 00:21:11,520
Speaker 2: the radar to the US was eight hundred dollars ceiling

356
00:21:11,720 --> 00:21:16,040
Speaker 2: on sort of tariff free imports. And if you're there'd

357
00:21:16,080 --> 00:21:19,080
Speaker 2: be a lot of Trump supporters who are buying a

358
00:21:19,080 --> 00:21:20,720
Speaker 2: lot of things from Sheen and Timu who are going

359
00:21:20,800 --> 00:21:23,520
Speaker 2: to see that instantly, and that doesn't feel like that's

360
00:21:23,560 --> 00:21:25,720
Speaker 2: going to go away. And equally, there's a lot of

361
00:21:25,760 --> 00:21:28,280
Speaker 2: importers who are going to be paying these tariffs. I mean,

362
00:21:28,320 --> 00:21:31,439
Speaker 2: he's he wanted to create the External Revenue Service to

363
00:21:31,520 --> 00:21:34,240
Speaker 2: create this to collect the tariffs, because we all know

364
00:21:34,280 --> 00:21:37,320
Speaker 2: they're paid by US importers, not by the other countries.

365
00:21:37,600 --> 00:21:40,320
Speaker 2: So and have you sort of changed your view on

366
00:21:41,280 --> 00:21:45,440
Speaker 2: the costs that the political blowback that this president might

367
00:21:45,440 --> 00:21:46,240
Speaker 2: be willing to take.

368
00:21:47,200 --> 00:21:50,320
Speaker 3: Yeah, so I so you know that ten percent universal

369
00:21:50,359 --> 00:21:54,720
Speaker 3: tariff on Chinese goods, So that now covers the list

370
00:21:54,960 --> 00:21:58,680
Speaker 3: for A and four B in the first trade war,

371
00:21:58,840 --> 00:22:02,520
Speaker 3: which is comprised mainly of consumption goods. In the first

372
00:22:02,560 --> 00:22:07,800
Speaker 3: trade war, the Trump administration largely spared the Chinese consumption goods,

373
00:22:08,240 --> 00:22:13,920
Speaker 3: but basically effectively this ten percent raised the list for

374
00:22:14,160 --> 00:22:16,120
Speaker 3: A back to the pre phase one.

375
00:22:16,440 --> 00:22:19,359
Speaker 2: Can we translate that he's imposing it on consumer goods

376
00:22:19,840 --> 00:22:22,080
Speaker 2: in a way that they didn't in the first administration.

377
00:22:22,560 --> 00:22:27,280
Speaker 3: So in the first administration, he left the consumption goods

378
00:22:27,280 --> 00:22:32,000
Speaker 3: from China intact until spring of twenty nineteen. Then he

379
00:22:32,040 --> 00:22:35,399
Speaker 3: created two list four A and four B. And these

380
00:22:35,440 --> 00:22:38,879
Speaker 3: two lists he planned to slap on fifteen percent on

381
00:22:39,000 --> 00:22:41,800
Speaker 3: List four A, which is like a couple hundred billions

382
00:22:41,840 --> 00:22:44,920
Speaker 3: of Chinese consumption good and he did it. And then

383
00:22:45,119 --> 00:22:48,560
Speaker 3: immediately what you saw back then is that the economy

384
00:22:48,640 --> 00:22:54,440
Speaker 3: started slowing very visibly. Fixed business investment immediately start falling,

385
00:22:55,000 --> 00:22:59,680
Speaker 3: and manufacturing employment immediately start falling. And this was after

386
00:22:59,800 --> 00:23:03,720
Speaker 3: that for a list, and then that was in the

387
00:23:03,800 --> 00:23:07,280
Speaker 3: de escalatory phase of that first trade war. I think

388
00:23:07,359 --> 00:23:11,760
Speaker 3: that we're going to start seeing the impact on investment,

389
00:23:11,920 --> 00:23:16,240
Speaker 3: primarily in stock market once that ten percent Chinese trade

390
00:23:16,280 --> 00:23:20,120
Speaker 3: tariffs start to be effect in the next couple of months.

391
00:23:20,280 --> 00:23:22,399
Speaker 1: And just to put that in context, that kind of

392
00:23:22,440 --> 00:23:25,760
Speaker 1: list for A and four B from the first Trumpet musition.

393
00:23:26,040 --> 00:23:30,840
Speaker 1: We're talking about smartphones, we're talking about toys, we're talking furnitures, furniture,

394
00:23:31,080 --> 00:23:34,520
Speaker 1: we're talking about all of the cheap stuff from China

395
00:23:34,520 --> 00:23:37,040
Speaker 1: and America. Really by right, and we're.

396
00:23:37,119 --> 00:23:39,399
Speaker 2: And to be clear that trade is that made on

397
00:23:39,600 --> 00:23:42,200
Speaker 2: economic by ten percent or is ten percent low enough

398
00:23:42,200 --> 00:23:44,240
Speaker 2: for it to continue, but just be more expensive?

399
00:23:44,400 --> 00:23:45,359
Speaker 1: Probably low enough for it.

400
00:23:46,440 --> 00:23:49,640
Speaker 3: Yes, I mean, I mean the trade elasticity from between

401
00:23:50,359 --> 00:23:54,320
Speaker 3: US Chinese trade flow is approximately, by my estimation, one

402
00:23:54,320 --> 00:23:57,840
Speaker 3: point five to three, which means that a ten percent

403
00:23:58,160 --> 00:24:02,080
Speaker 3: increase in terraff will reduce trade flows by either fifteen

404
00:24:02,160 --> 00:24:04,240
Speaker 3: percent to thirty percent over time.

405
00:24:04,520 --> 00:24:08,360
Speaker 2: Okay, last question to you, Anna, were amazed it's taken

406
00:24:08,440 --> 00:24:09,719
Speaker 2: us this long to get to the FED for any

407
00:24:09,760 --> 00:24:12,399
Speaker 2: Bloomberg podcast. I mean, it's it's pretty much mandatory that

408
00:24:12,440 --> 00:24:13,840
Speaker 2: we have to talk about the FED at some point.

409
00:24:14,160 --> 00:24:16,760
Speaker 2: One of the things that was said over the weekend is,

410
00:24:17,040 --> 00:24:19,480
Speaker 2: whatever happens, this puts pay to any idea that there's

411
00:24:19,520 --> 00:24:21,919
Speaker 2: going to be any interest rate cuts from the Federal

412
00:24:21,960 --> 00:24:25,920
Speaker 2: Reserve this year, and if anything, they're going to be

413
00:24:26,280 --> 00:24:30,600
Speaker 2: more concerned about inflation looking going forward. Is what's your

414
00:24:30,680 --> 00:24:32,720
Speaker 2: take on if you just say, we've now got a

415
00:24:32,720 --> 00:24:34,879
Speaker 2: lot of we've got more uncertainty than we thought and

416
00:24:34,920 --> 00:24:38,639
Speaker 2: maybe some new theories about what's going on with Donald

417
00:24:38,640 --> 00:24:41,680
Speaker 2: Trump's trade policy, what are the FED thinking? Anna?

418
00:24:42,560 --> 00:24:45,760
Speaker 3: I think in the fact you have Powell and the others,

419
00:24:46,240 --> 00:24:50,080
Speaker 3: and from the past two press conference I've heard that Powell,

420
00:24:50,200 --> 00:24:54,000
Speaker 3: in fact is a very UH has reviewed as a

421
00:24:54,119 --> 00:24:58,560
Speaker 3: very good grasp of the objective findings in the trade literature,

422
00:24:58,640 --> 00:25:03,120
Speaker 3: which is that number one matters how broad these tariffs are,

423
00:25:03,400 --> 00:25:06,720
Speaker 3: what goods are going to be tariffs, how much retaliation

424
00:25:06,840 --> 00:25:09,440
Speaker 3: there's going to be, and there's just not enough information

425
00:25:09,760 --> 00:25:16,040
Speaker 3: on that. However, within the set arsenal of economic modeling tools,

426
00:25:16,720 --> 00:25:20,320
Speaker 3: they could see two outcomes from trade war. Is at

427
00:25:20,400 --> 00:25:23,640
Speaker 3: first is either the burden of the trade war will

428
00:25:23,680 --> 00:25:27,359
Speaker 3: show up in inflation as higher inflation. That's what every

429
00:25:27,600 --> 00:25:32,840
Speaker 3: obviously what everybody automatically default to the view. However, the

430
00:25:32,920 --> 00:25:36,840
Speaker 3: second view is that if the adjustment turns out to

431
00:25:36,840 --> 00:25:40,800
Speaker 3: be through squeezing profit margins, and the impact on our

432
00:25:40,840 --> 00:25:45,040
Speaker 3: trade partners like China, EU and Canada Mexico turns out

433
00:25:45,080 --> 00:25:49,160
Speaker 3: to be more dire than the impact on US, then

434
00:25:49,800 --> 00:25:54,000
Speaker 3: the global manufacturing cycle with slows, and ultimately the burden

435
00:25:54,440 --> 00:25:57,800
Speaker 3: of the tariffs would be not showing up in higher

436
00:25:57,920 --> 00:26:01,480
Speaker 3: US inflation, but rather in lower real come through lower

437
00:26:01,520 --> 00:26:06,879
Speaker 3: employment and lower wages. And so I think that the

438
00:26:07,400 --> 00:26:12,000
Speaker 3: Fed's optimal response really depends on which of these two

439
00:26:12,240 --> 00:26:17,879
Speaker 3: economic outcomes prevail. Obviously, if inflation spikes, then the FED

440
00:26:17,920 --> 00:26:20,359
Speaker 3: will have to you know, keep frais on hold or

441
00:26:20,400 --> 00:26:23,919
Speaker 3: even hike. However, I don't think that's not my baseline,

442
00:26:24,200 --> 00:26:28,160
Speaker 3: because in order for the economy the inflation to rise

443
00:26:28,200 --> 00:26:32,960
Speaker 3: by that much in response to teriffs, you basically need

444
00:26:33,000 --> 00:26:38,200
Speaker 3: to have inflation expectations be unanchored, and even that's the

445
00:26:38,240 --> 00:26:42,320
Speaker 3: worst of inflation. In twenty twenty two, Powell was adamant

446
00:26:42,480 --> 00:26:46,760
Speaker 3: that all the market indicators, the monitors suggest that inflation

447
00:26:46,920 --> 00:26:50,119
Speaker 3: expectations are very well anchored in the US. In the

448
00:26:50,160 --> 00:26:54,080
Speaker 3: past pressor. He also mentioned that through anecdotes and discussion

449
00:26:54,200 --> 00:26:56,760
Speaker 3: with firms, all the firms are telling them that they

450
00:26:56,800 --> 00:26:59,520
Speaker 3: have no pricing power, So how is it that the

451
00:26:59,600 --> 00:27:02,879
Speaker 3: terriffs could be packed completely passed through to consumer prices.

452
00:27:03,040 --> 00:27:06,199
Speaker 3: So that leads to the second most likely outcome in

453
00:27:06,240 --> 00:27:09,919
Speaker 3: my point of view, which is lower real income over time.

454
00:27:10,320 --> 00:27:13,800
Speaker 3: And the optimal FED policy in response to lower real

455
00:27:13,840 --> 00:27:18,600
Speaker 3: income and a higher unemployment rate is actually to lower

456
00:27:18,640 --> 00:27:19,400
Speaker 3: FED funds rate.

457
00:27:19,720 --> 00:27:22,080
Speaker 1: And I would just point out that we have and

458
00:27:22,160 --> 00:27:24,520
Speaker 1: a lot of FED policy makers were there in twenty

459
00:27:24,600 --> 00:27:29,399
Speaker 1: nineteen when they faced the first Trump trade wars and

460
00:27:29,440 --> 00:27:31,680
Speaker 1: the impacts, and we spent some time looking back through

461
00:27:32,000 --> 00:27:34,919
Speaker 1: the transcripts of those meetings, which were just released in January,

462
00:27:35,440 --> 00:27:38,040
Speaker 1: and one of the things you see is the policy

463
00:27:38,040 --> 00:27:43,879
Speaker 1: makers focusing on a collapse in manufacturing employment, a fallen

464
00:27:43,960 --> 00:27:49,840
Speaker 1: industrial production, a stalling in business investment in the United States,

465
00:27:49,840 --> 00:27:53,560
Speaker 1: and then this impact of uncertainty, and that leads to

466
00:27:53,640 --> 00:27:57,600
Speaker 1: a slowing economy in twenty nineteen. And in twenty nineteen,

467
00:27:57,680 --> 00:27:59,760
Speaker 1: the FED started cutting rates and actually went on cut

468
00:27:59,840 --> 00:28:00,720
Speaker 1: rate three times.

469
00:28:00,920 --> 00:28:02,560
Speaker 2: And that goes to the point that he might think

470
00:28:02,600 --> 00:28:04,439
Speaker 2: it's good news to have lower rates, but not if

471
00:28:04,440 --> 00:28:06,760
Speaker 2: it's for the wrong reasons in his view, not the

472
00:28:06,840 --> 00:28:09,640
Speaker 2: economic weakness. Well, thank you very much, guys. I sort

473
00:28:09,640 --> 00:28:13,639
Speaker 2: of feel like Trumpnomics sometimes is more on the Trump

474
00:28:13,640 --> 00:28:15,760
Speaker 2: and more on the politics. So we've had some real

475
00:28:15,840 --> 00:28:19,320
Speaker 2: oronomics in this episode, which I quite appreciate. Thinking about

476
00:28:19,320 --> 00:28:21,840
Speaker 2: the models for what's going on, I think we're still

477
00:28:21,880 --> 00:28:25,240
Speaker 2: stuck with the fundamental question, does Donald Trump really want

478
00:28:25,240 --> 00:28:27,640
Speaker 2: to change the global economy or just like the real

479
00:28:27,720 --> 00:28:31,640
Speaker 2: estate developer that he is, extract the maximum financial return

480
00:28:31,800 --> 00:28:35,720
Speaker 2: from America's prime real estate within it. Whatever he's trying

481
00:28:35,760 --> 00:28:39,040
Speaker 2: to achieve, we want to think about what economic costs

482
00:28:39,080 --> 00:28:40,920
Speaker 2: might be occurred along the way, and I suspect both

483
00:28:40,960 --> 00:28:42,760
Speaker 2: of you will be back to help me answer that question.

484
00:28:46,640 --> 00:28:49,480
Speaker 2: But in the meantime, thanks for listening to trump Andomics.

485
00:28:49,800 --> 00:28:51,760
Speaker 2: It was hosted by me Stephanie Flanders, and I was

486
00:28:51,800 --> 00:28:55,800
Speaker 2: joined by Annawong and Sean Donald. Trumpnomics is produced by

487
00:28:55,800 --> 00:28:58,800
Speaker 2: Summer Saudi and Moses and with help from Chris Martlou.

488
00:28:59,280 --> 00:29:02,920
Speaker 2: Sound designed by Blake Maple's, with special thanks to Bloomberg, Kilbrooks,

489
00:29:02,960 --> 00:29:09,480
Speaker 2: Amy Morris and Nathan Hager. Brendan Francis Newnan is our

490
00:29:09,520 --> 00:29:12,560
Speaker 2: executive producer and to help others find this show, please

491
00:29:12,640 --> 00:29:15,760
Speaker 2: rate it highly and review it wherever you find your

492
00:29:15,800 --> 00:29:16,240
Speaker 2: podcast