WEBVTT - Single Best Idea with Tom Keene: Michael Darda & Elizabeth Economy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Single best idea and front center is still tariffs. Michael

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<v Speaker 2>Darta joins from Off Capital to get right to it.

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<v Speaker 2>The linking here of tariffs in your own pals future.

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<v Speaker 2>It's uncertain. Let's listen.

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<v Speaker 1>There is some risk that the interaction between tariffs and

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<v Speaker 1>monetary policy could create some problems. And really it would

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<v Speaker 1>be that the tariff disruption lowers the neutral rate, and

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<v Speaker 1>if the FED is tardy in lowering the policy rate,

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<v Speaker 1>the business cycle soft landing could slip away. Now that

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<v Speaker 1>these tariffs have been scaled back and moderated, that risk

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<v Speaker 1>has declined, and the risk of the FED potentially falling

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<v Speaker 1>behind the curve is also declined. I'm pretty comfortable with

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<v Speaker 1>where the FED is right now. If you look at

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<v Speaker 1>bondmar inflation expectations, they've been low and stable, consistent with

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<v Speaker 1>price stability. Nominal wage growth, which is not going to

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<v Speaker 1>be affected on a first order impact from the tariffs,

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<v Speaker 1>perfect running right in line with price stability. So the

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<v Speaker 1>FED has the flexibility to move if need be. But

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<v Speaker 1>with the tariff threat being scaled back, then there's going

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<v Speaker 1>to be less need for the FED to move. I

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<v Speaker 1>still think they will ultimately lower rates, but they're going

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<v Speaker 1>to want to see a few months of the hard data,

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<v Speaker 1>in my opinion, before they start to move, and that

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<v Speaker 1>could put us into July.

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<v Speaker 2>Perhaps, just brilliant Michael Darter there a roth capital let

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<v Speaker 2>me explain the inside the baseball. Two thirds of the

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<v Speaker 2>way through that comment, I can't say enough about how

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<v Speaker 2>economics over the recent thirty years, I'll say, and this,

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<v Speaker 2>of course is with the recent death of Wayne Angel

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<v Speaker 2>of Kansas City, who was notorious in the eighties, has

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<v Speaker 2>become a real analysis inflation adjusted. Darta does that, but

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<v Speaker 2>he also refuses to ignore the top line statistics. What

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<v Speaker 2>are called nominal. Nominal is basically real, say GDP or

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<v Speaker 2>real wage plus inflation. And the reason I have an

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<v Speaker 2>affinity for nominal is because that's what my audience lives.

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<v Speaker 2>The audience, is a general statement, doesn't live in the

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<v Speaker 2>real environment, the inflation adjusted environment. So for Darta there

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<v Speaker 2>to talk about the nominal wage is just absolutely critical

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<v Speaker 2>with us today. What a pleasure to speak to Elizabeth

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<v Speaker 2>Economy all over wonderful books from the River runs Black.

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<v Speaker 2>She's at the Hoover Institution in Stanford now after her

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<v Speaker 2>public service to Secretary Romando and Commerce Elizabeth Economy on

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<v Speaker 2>this trade war and China.

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<v Speaker 3>I'm not sure there was any real win in this.

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<v Speaker 3>I think China demonstrated that yes, it could go toe

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<v Speaker 3>to toe with the United States, but both sides, you know,

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<v Speaker 3>reduce the tariffs. You know, China had called for the

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<v Speaker 3>United States to completely erase the tariffs before it even

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<v Speaker 3>sat down at the table. I think people have forgotten that,

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<v Speaker 3>and the administration didn't do that. They did come to

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<v Speaker 3>the table with, you know, a pretty concrete proposal on

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<v Speaker 3>how to control the feedanyl precursor exports that has been

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<v Speaker 3>so central to the Trump administration, and they took off

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<v Speaker 3>all of the non tariff sort of punishments that they

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<v Speaker 3>had put on the administration, things like the export controls

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<v Speaker 3>on critical minerals and rare earths. In terms of where

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<v Speaker 3>China goes next, I think what we've seen already is

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<v Speaker 3>that China is going to move very aggressively to diversify

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<v Speaker 3>their exports away from the United States. You know, in part,

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<v Speaker 3>there was a twenty percent drop in Chinese exports to

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<v Speaker 3>the US. There was a twenty percent increase in Chinese

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<v Speaker 3>exports to Southeast Asia over the past month or so,

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<v Speaker 3>and even I think in the sort of low margin factories,

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<v Speaker 3>apparel boys, et cetera, they're all talking about how to move,

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<v Speaker 3>how to reduce their dependence on the US market. So

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<v Speaker 3>I think we've really introduced a pretty significant new factor

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<v Speaker 3>into the Chinese thinking about the dependence of the United

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<v Speaker 3>I mean about the liability of the United States. I

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<v Speaker 3>think that's the big next thing for China.

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<v Speaker 2>Elizabeth Economy there from the Hoover Institution, Hargo Fellow out

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<v Speaker 2>at Stanford, much more to talk about here through a

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<v Speaker 2>busy week. It'll be an interesting Friday, to say the least,

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<v Speaker 2>across the nation on your commute, Bloomberg Surveillance, and again

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<v Speaker 2>on podcasts out there at all the different podcast services,

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<v Speaker 2>but particularly on YouTube podcasts. It's a single best idea

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<v Speaker 1>Seven