1 00:00:02,640 --> 00:00:05,320 Speaker 1: Welcome to the Bloomberg Penl podcast. I'm Paul Swinge. You. 2 00:00:05,360 --> 00:00:07,680 Speaker 1: Along with my co host Lisa brahma Witz. Each day 3 00:00:07,720 --> 00:00:10,240 Speaker 1: we bring you the most noteworthy and useful interviews for 4 00:00:10,280 --> 00:00:12,520 Speaker 1: you and your money. Whether at the grocery store or 5 00:00:12,560 --> 00:00:15,480 Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple 6 00:00:15,520 --> 00:00:17,959 Speaker 1: podcast or wherever you listen to podcasts, as well as 7 00:00:17,960 --> 00:00:24,560 Speaker 1: at Bloomberg dot com. President Trump announced via tweet a 8 00:00:24,600 --> 00:00:27,840 Speaker 1: five percent terrafon all imports from Mexico unless it takes 9 00:00:27,920 --> 00:00:32,040 Speaker 1: quote decisive measures to stem migrants entering the US. To 10 00:00:32,080 --> 00:00:34,200 Speaker 1: get a sense of what this means for the US 11 00:00:34,360 --> 00:00:37,960 Speaker 1: Mexican relationship, returned to Duncan Wood. Duncan is director of 12 00:00:38,040 --> 00:00:40,920 Speaker 1: the Mexico Institute at the Wilson Center based in Washington, 13 00:00:41,000 --> 00:00:43,519 Speaker 1: d C. Duncan, thank you so much for joining us. 14 00:00:43,560 --> 00:00:45,400 Speaker 1: I guess let's start off with just a sense of 15 00:00:45,760 --> 00:00:49,160 Speaker 1: how significant is this move by President Trump to impose 16 00:00:49,240 --> 00:00:52,879 Speaker 1: these tariffs potentially. I think it's hugely significant, um in 17 00:00:52,920 --> 00:00:55,920 Speaker 1: the sense, well in two senses. First of all, what's 18 00:00:55,920 --> 00:00:58,960 Speaker 1: going to mean for the bilateral relationship and for the 19 00:00:59,080 --> 00:01:02,320 Speaker 1: generally positive two relations that have existed so far between 20 00:01:03,000 --> 00:01:07,160 Speaker 1: Trump and President Lopoes or Ador in Mexico. And secondly, 21 00:01:07,200 --> 00:01:09,840 Speaker 1: I think it's hugely significant in terms of domestic politics 22 00:01:09,840 --> 00:01:12,200 Speaker 1: here in the United States. Um, this is going to 23 00:01:12,280 --> 00:01:19,240 Speaker 1: have broad, far reaching and perhaps unpredicted UH consequences for 24 00:01:19,240 --> 00:01:23,360 Speaker 1: for the election in so Duncan. President Trump said that 25 00:01:23,400 --> 00:01:25,800 Speaker 1: if he imposes her up, some Mexico companies will leave 26 00:01:25,800 --> 00:01:29,720 Speaker 1: that country to avoid paying them. Do you agree. I 27 00:01:29,720 --> 00:01:32,240 Speaker 1: actually don't think that that's that's the case, at least 28 00:01:32,240 --> 00:01:34,200 Speaker 1: in the short term. I think that what we're going 29 00:01:34,280 --> 00:01:37,240 Speaker 1: to see is we're going to see a rather vigorous 30 00:01:37,280 --> 00:01:41,759 Speaker 1: response from the Mexican government retaliatory tariffs which will hit 31 00:01:42,400 --> 00:01:47,400 Speaker 1: United States agricultural exporters in particular, and that will bring 32 00:01:47,960 --> 00:01:51,840 Speaker 1: first of all, the the US Senate to pressure the president. 33 00:01:52,200 --> 00:01:54,200 Speaker 1: And secondly, I think the President is going to have 34 00:01:54,240 --> 00:01:58,600 Speaker 1: to accept that this may be in fact counterproductive. But 35 00:01:58,800 --> 00:02:00,680 Speaker 1: you know, one of the things that Exco has going 36 00:02:00,680 --> 00:02:03,680 Speaker 1: for it right now is that Mexico is often seen 37 00:02:03,720 --> 00:02:07,280 Speaker 1: as being an alternative to China in terms of producing 38 00:02:07,320 --> 00:02:10,359 Speaker 1: for export to the United States due to the trade 39 00:02:10,360 --> 00:02:12,959 Speaker 1: tensions that exist between the US and China. Right now, 40 00:02:13,680 --> 00:02:17,840 Speaker 1: Mexico has been benefiting enormously. If these tariffs are applied 41 00:02:17,919 --> 00:02:20,480 Speaker 1: in the you know, not just in a short term way, 42 00:02:20,520 --> 00:02:22,800 Speaker 1: but in the long term as a long term measure, 43 00:02:22,840 --> 00:02:24,160 Speaker 1: then I think we're going to see that that will 44 00:02:24,200 --> 00:02:28,200 Speaker 1: obviously compromise Mexican competitiveness, but to try to delink the 45 00:02:28,240 --> 00:02:31,080 Speaker 1: Mexican and US economies at this point in time, where 46 00:02:31,080 --> 00:02:34,640 Speaker 1: we see a North American manufacturing platform that is highly 47 00:02:34,720 --> 00:02:37,520 Speaker 1: integrated supply chains that have been built up over a 48 00:02:37,520 --> 00:02:41,000 Speaker 1: period of thirty years, it's just unreasonable to think that 49 00:02:41,000 --> 00:02:43,639 Speaker 1: that's going to be the case. And in many areas 50 00:02:43,760 --> 00:02:45,720 Speaker 1: of the of the U S economy, we're going to 51 00:02:45,800 --> 00:02:50,720 Speaker 1: see prices going up for US goods that depend upon 52 00:02:50,880 --> 00:02:55,120 Speaker 1: imports of parts from Mexico. And that's going to compromise 53 00:02:55,160 --> 00:02:59,120 Speaker 1: not just the h the consumers in here in the 54 00:02:59,200 --> 00:03:01,079 Speaker 1: United States who are going to pay more for their goods, 55 00:03:01,160 --> 00:03:03,919 Speaker 1: but it's also going to compromise the competitiveness of American 56 00:03:04,000 --> 00:03:07,200 Speaker 1: firms as they try to compete in the global economy. So, Duncan, 57 00:03:07,240 --> 00:03:10,240 Speaker 1: one of the questions is, you know, for will these 58 00:03:10,480 --> 00:03:13,880 Speaker 1: teriffs move Mexico to act as a president once do 59 00:03:13,880 --> 00:03:17,120 Speaker 1: you think they will be effective? There's a serious problem 60 00:03:17,120 --> 00:03:20,160 Speaker 1: in the logic here, and that is that Mexico could 61 00:03:20,200 --> 00:03:23,640 Speaker 1: do more if it wanted to. Mexico is already doing 62 00:03:23,680 --> 00:03:27,240 Speaker 1: an enormous amount. Between January and March of this year, 63 00:03:27,720 --> 00:03:32,520 Speaker 1: Mexico has been deporting ever increasing numbers of Central Americans. 64 00:03:32,840 --> 00:03:35,760 Speaker 1: So between January and March of this year, they deported 65 00:03:35,800 --> 00:03:40,800 Speaker 1: around twenty two thousand Central Americans from Mexican territory. If 66 00:03:40,840 --> 00:03:43,360 Speaker 1: we look back over the last five years, Mexico has 67 00:03:43,400 --> 00:03:47,160 Speaker 1: deported more Central Americans from Mexican territory than the US 68 00:03:47,240 --> 00:03:51,680 Speaker 1: has from US territory. So Mexico is already doing a lot. Secondly, 69 00:03:51,760 --> 00:03:56,360 Speaker 1: Mexico does not have scare spare resources to apply to 70 00:03:56,560 --> 00:03:58,960 Speaker 1: this these kind of programs, and the United States is 71 00:03:59,000 --> 00:04:01,320 Speaker 1: not offering any and of aid in the past. I mean, 72 00:04:01,320 --> 00:04:03,200 Speaker 1: particularly if we go back to two thousand and fourteen, 73 00:04:03,440 --> 00:04:06,600 Speaker 1: when the United States pressured Mexico to implement something called 74 00:04:06,600 --> 00:04:09,440 Speaker 1: the Plan Fronterra sor or the or their Southern Border Plan. 75 00:04:09,840 --> 00:04:15,560 Speaker 1: The United States provided enormous amounts of financial, um logistical 76 00:04:15,640 --> 00:04:18,360 Speaker 1: and technical aid to enable them to do that. This 77 00:04:18,480 --> 00:04:21,760 Speaker 1: is just a cold demand on the part of of 78 00:04:21,800 --> 00:04:24,719 Speaker 1: President Trump that the Mexicans can do more. Mexico is 79 00:04:24,720 --> 00:04:28,680 Speaker 1: already in um a period of fiscal austerity they called 80 00:04:28,720 --> 00:04:32,880 Speaker 1: actually republican austerity there, and the president is desperately trying 81 00:04:32,920 --> 00:04:37,360 Speaker 1: to to to balance his budget, so there's not a 82 00:04:37,360 --> 00:04:40,159 Speaker 1: lot of spare resources available. So I don't see how 83 00:04:40,200 --> 00:04:43,039 Speaker 1: they could possibly do more. And here's the problem is that, 84 00:04:43,080 --> 00:04:46,400 Speaker 1: in fact, it may result in less willingness on the 85 00:04:46,440 --> 00:04:49,440 Speaker 1: part of the Mexican government to continue collaborating with the 86 00:04:49,520 --> 00:04:53,840 Speaker 1: United States. So, duncan, I'm trying to understand the legality 87 00:04:54,240 --> 00:04:58,680 Speaker 1: of putting these tariffs on goods coming from Mexico given 88 00:04:58,680 --> 00:05:01,960 Speaker 1: the current trade agreement in place, because President Trump is 89 00:05:02,000 --> 00:05:04,360 Speaker 1: not doing it for that, he's saying he's doing it 90 00:05:04,440 --> 00:05:09,320 Speaker 1: because of what he's basically for the immigration issues. Does 91 00:05:09,360 --> 00:05:12,800 Speaker 1: this sort of violate any provisions within the existing agreements? 92 00:05:13,839 --> 00:05:19,320 Speaker 1: So um, the President has powers under under U S 93 00:05:19,400 --> 00:05:23,719 Speaker 1: Law to enact economic measures for reasons of a natural 94 00:05:23,880 --> 00:05:27,000 Speaker 1: national emergency, and so that's really what he's that's the 95 00:05:27,520 --> 00:05:31,520 Speaker 1: justification that he's using here. Mexico will say that this 96 00:05:31,600 --> 00:05:34,440 Speaker 1: is actually a violation of the NAFTA. There's also a 97 00:05:34,520 --> 00:05:38,200 Speaker 1: violation of w t O law, and Mexico will use 98 00:05:38,200 --> 00:05:42,920 Speaker 1: that as their justification for enacting retaliatory tariffs. UM. Now 99 00:05:42,920 --> 00:05:45,160 Speaker 1: the United States will president will say that he is 100 00:05:45,200 --> 00:05:48,440 Speaker 1: justified according to US law. But we've already heard Senator 101 00:05:48,520 --> 00:05:51,400 Speaker 1: Chuck grass Lee come out and say that he believes 102 00:05:51,440 --> 00:05:54,120 Speaker 1: that the President has exceeded his powers here. So this 103 00:05:54,160 --> 00:05:57,719 Speaker 1: will clearly become a congressional fight as well. And that's 104 00:05:57,720 --> 00:05:59,839 Speaker 1: where I see that the President is probably going to 105 00:06:00,320 --> 00:06:04,960 Speaker 1: find that he's on on on week or on firm ground. UM. 106 00:06:05,000 --> 00:06:09,680 Speaker 1: And particularly we see pressure mounting up in rural constituencies, 107 00:06:09,760 --> 00:06:14,440 Speaker 1: amongst amongst farmers in particular, a constituency that he desperately 108 00:06:14,480 --> 00:06:17,880 Speaker 1: needs for his re election bid in twenty duncan Ultimately, 109 00:06:17,960 --> 00:06:21,159 Speaker 1: what do you think this trade issue, these tariff issue, 110 00:06:21,320 --> 00:06:23,080 Speaker 1: what effect will have on this U S m c 111 00:06:23,240 --> 00:06:26,680 Speaker 1: A deal, the greater broader deal. Well, it it muddies 112 00:06:26,680 --> 00:06:30,200 Speaker 1: the waters here in the United States because it's just 113 00:06:30,279 --> 00:06:32,400 Speaker 1: another issue. I mean, we had just got rid of 114 00:06:32,760 --> 00:06:35,640 Speaker 1: Section to thirty two tariffs on aluminum steel that was 115 00:06:35,680 --> 00:06:39,479 Speaker 1: seen as being a major sticking point to getting Canada 116 00:06:39,520 --> 00:06:42,480 Speaker 1: and Mexico to ratify the treaty from their From their end, 117 00:06:43,120 --> 00:06:45,719 Speaker 1: we know that there is enormous tension between the White 118 00:06:45,720 --> 00:06:50,359 Speaker 1: House and Speaker Pelosi, and Speaker Pelosi seems very reluctant 119 00:06:50,360 --> 00:06:53,440 Speaker 1: to move ahead at this point with a ratification process 120 00:06:53,480 --> 00:06:57,400 Speaker 1: here in the United States UM. And now with these measures, 121 00:06:57,600 --> 00:07:00,480 Speaker 1: I think we're just going to see that in Mexico 122 00:07:01,320 --> 00:07:05,640 Speaker 1: the Congress which had begun considering UM the U. S. M. 123 00:07:05,720 --> 00:07:08,560 Speaker 1: C Adrian Agreement there, which is has the status of 124 00:07:08,560 --> 00:07:10,239 Speaker 1: a treaty in Mexico, it is not just an agreement, 125 00:07:10,320 --> 00:07:13,840 Speaker 1: is actually a treaty. They call it the Mexico United 126 00:07:13,880 --> 00:07:19,360 Speaker 1: States Canada Treaty, their t mech UM that requires approval 127 00:07:19,400 --> 00:07:23,360 Speaker 1: by the Mexican Senate. And whilst there was generally a 128 00:07:23,400 --> 00:07:27,160 Speaker 1: positive attitude towards ratification after the repeal of the Section 129 00:07:27,200 --> 00:07:29,960 Speaker 1: two tariffs, now I can see that this is going 130 00:07:29,960 --> 00:07:32,960 Speaker 1: to generate a backlash there and a lot of people 131 00:07:33,280 --> 00:07:35,600 Speaker 1: within the Mexican political system. We're going to say, why 132 00:07:35,640 --> 00:07:38,640 Speaker 1: would we sign a free trade deal with a partner 133 00:07:38,720 --> 00:07:43,080 Speaker 1: that is going to continually find another excuse to punish 134 00:07:43,160 --> 00:07:46,480 Speaker 1: US UM using tariffs for things over which we have 135 00:07:46,640 --> 00:07:49,360 Speaker 1: very little control. Duncan would thank you so much for 136 00:07:49,400 --> 00:07:52,200 Speaker 1: being with us and breaking it down. Duncan Wood, director 137 00:07:52,240 --> 00:07:55,640 Speaker 1: of the Mexico Institute at the Wilson Center in Washington, 138 00:07:55,840 --> 00:08:13,640 Speaker 1: d C. Well, Lisa, I have to admit that I 139 00:08:13,680 --> 00:08:17,480 Speaker 1: was not aware how many cars and car parts we 140 00:08:17,720 --> 00:08:21,360 Speaker 1: import from Mexico. But it's a lot, like a real lot. 141 00:08:21,560 --> 00:08:23,680 Speaker 1: So it al us explained how big it is. We 142 00:08:23,760 --> 00:08:26,840 Speaker 1: welcome Alan Baum. He's a principal, that's a technico cf 143 00:08:26,920 --> 00:08:30,200 Speaker 1: a term. Alan Baun principle from Bauman Associates. He joins 144 00:08:30,280 --> 00:08:32,880 Speaker 1: us from West Bloomfield, Michigan. So I'm sure he knows 145 00:08:32,920 --> 00:08:35,480 Speaker 1: a thing or two about cars. So Alan, just give 146 00:08:35,559 --> 00:08:40,160 Speaker 1: us some history as to why Mexico is such a 147 00:08:40,200 --> 00:08:43,720 Speaker 1: big supplier of autos to the U. S Well. The 148 00:08:43,720 --> 00:08:46,760 Speaker 1: the obvious one, of course is cost, the lower cost 149 00:08:46,840 --> 00:08:50,280 Speaker 1: of labor, but it's also trade, and of course in 150 00:08:50,320 --> 00:08:53,440 Speaker 1: this case it's trade, not the way the President is 151 00:08:53,480 --> 00:08:57,400 Speaker 1: talking about it, but the Mexican trade laws with the 152 00:08:57,480 --> 00:09:00,520 Speaker 1: rest of the world. They have a lot of no 153 00:09:00,720 --> 00:09:07,480 Speaker 1: tariff agreements, and so companies from Japan, from Germany, from Korea, 154 00:09:07,960 --> 00:09:11,199 Speaker 1: uh flock as well as of course the US flock 155 00:09:11,600 --> 00:09:15,600 Speaker 1: to Mexico in order to provide vehicles not just to 156 00:09:16,000 --> 00:09:19,120 Speaker 1: North America but to the world. So one thing I'm 157 00:09:19,120 --> 00:09:23,280 Speaker 1: I'm struggling to understand. Could Forward and General Motors both 158 00:09:23,320 --> 00:09:26,520 Speaker 1: of their shares Downgental Motors four point three percent to 159 00:09:26,600 --> 00:09:30,240 Speaker 1: climb this morning? Could they just shift their supply chains 160 00:09:30,440 --> 00:09:35,080 Speaker 1: out of Mexico, avoid the tariffs, avoid the political fallout, Uh, 161 00:09:35,080 --> 00:09:38,000 Speaker 1: and you know, perhaps increased costs a bit, but immunize 162 00:09:38,040 --> 00:09:42,480 Speaker 1: themselves from these types of trading certainties. And of course 163 00:09:42,480 --> 00:09:46,760 Speaker 1: the answer is no. If they could, that would mean 164 00:09:46,760 --> 00:09:52,040 Speaker 1: they were running extremely inefficient plants, having the capability to 165 00:09:52,160 --> 00:09:56,080 Speaker 1: move from one plant in one country to another. Uh. 166 00:09:56,160 --> 00:09:59,680 Speaker 1: The whole system is, of course tied together. Uh. And 167 00:10:00,280 --> 00:10:04,560 Speaker 1: even that's even true with their suppliers. Even if they said, Okay, 168 00:10:04,720 --> 00:10:07,160 Speaker 1: we're gonna stick with the same suppliers because we know 169 00:10:07,240 --> 00:10:09,560 Speaker 1: those are good companies, but we just want you to 170 00:10:09,640 --> 00:10:13,280 Speaker 1: move to plants outside of Mexico, again, that would be 171 00:10:13,520 --> 00:10:17,280 Speaker 1: very poor management on the part of their supply base. So, Ellen, 172 00:10:17,679 --> 00:10:20,360 Speaker 1: given what you know about these automakers in the current 173 00:10:20,360 --> 00:10:24,360 Speaker 1: competitive landscape, how do you think the automakers if these 174 00:10:24,360 --> 00:10:26,720 Speaker 1: tariffs do go through, and maybe they go through, and 175 00:10:26,720 --> 00:10:30,640 Speaker 1: maybe the highest levels that the president is proposing, to 176 00:10:30,679 --> 00:10:32,720 Speaker 1: what extent do you think they will pass along price 177 00:10:33,200 --> 00:10:35,600 Speaker 1: increases versus you know, trying to eat it in the margin. 178 00:10:35,679 --> 00:10:38,080 Speaker 1: I mean, how do you think they'll react? Well, As 179 00:10:38,120 --> 00:10:42,920 Speaker 1: with any product, it's based upon what the consumer will bear. Uh. 180 00:10:42,960 --> 00:10:47,199 Speaker 1: And so if we're talking about crossovers and and uh 181 00:10:47,520 --> 00:10:51,680 Speaker 1: sport utility vehicles and trucks, which are more popular with consumers, 182 00:10:51,720 --> 00:10:54,160 Speaker 1: perhaps they'll be able to pass some of it along 183 00:10:54,720 --> 00:10:57,760 Speaker 1: with respect to cars that are a harder sell right now, 184 00:10:58,240 --> 00:11:01,520 Speaker 1: they're not selling without the tariffs, they wouldn't sell very 185 00:11:01,559 --> 00:11:05,360 Speaker 1: well with them. UH. So it'll be a case by 186 00:11:05,400 --> 00:11:09,280 Speaker 1: case decision. And it's also a very short term decision. 187 00:11:09,640 --> 00:11:14,240 Speaker 1: You know. The way these tariffs, proposed tariffs are are posited, uh, 188 00:11:14,280 --> 00:11:18,880 Speaker 1: they would go up uh on a monthly basis. So 189 00:11:19,080 --> 00:11:22,120 Speaker 1: what you might do uh and this would be very 190 00:11:22,160 --> 00:11:26,120 Speaker 1: disruptive and very expensive, but you might do it anyway. UH. 191 00:11:26,280 --> 00:11:28,120 Speaker 1: Normally you have a little bit of a pause in 192 00:11:28,200 --> 00:11:33,600 Speaker 1: production uh in the summertime, both for UH for for 193 00:11:34,280 --> 00:11:37,400 Speaker 1: updating your plants. Obviously to give your workers a little 194 00:11:37,400 --> 00:11:40,280 Speaker 1: bit of a break to do some maintenance. Maybe you 195 00:11:40,400 --> 00:11:43,959 Speaker 1: defer all that and you just keep plugging. UH. And 196 00:11:44,280 --> 00:11:47,880 Speaker 1: July and August are oftentimes when when things slow down 197 00:11:47,920 --> 00:11:51,800 Speaker 1: when changes are made. Uh. The the even worse situation 198 00:11:51,960 --> 00:11:55,000 Speaker 1: for general motors. For example, there in the middle of 199 00:11:55,040 --> 00:11:59,760 Speaker 1: a changeover in Mexico for their new pickup trucks. Uh 200 00:11:59,800 --> 00:12:03,560 Speaker 1: and uh so they are a little bit down anyway. 201 00:12:03,960 --> 00:12:07,040 Speaker 1: Uh and they're ramping up. So this couldn't come at 202 00:12:07,040 --> 00:12:11,080 Speaker 1: a worse time. So if both automakers and suppliers said 203 00:12:11,520 --> 00:12:13,520 Speaker 1: we're not going to stop in July, we're not going 204 00:12:13,559 --> 00:12:17,440 Speaker 1: to stop in August. Uh. There are people jumping out 205 00:12:17,440 --> 00:12:21,199 Speaker 1: of windows, I'm sure uh in uh in a number 206 00:12:21,240 --> 00:12:24,640 Speaker 1: of places. Hopefully they're not on a high floor. Um 207 00:12:24,679 --> 00:12:27,800 Speaker 1: to to try to figure that all out. So Ellen, 208 00:12:27,840 --> 00:12:30,080 Speaker 1: does anyone benefit from me? I mean I was thinking 209 00:12:30,120 --> 00:12:33,200 Speaker 1: this morning, perhaps used car values will go up in 210 00:12:33,200 --> 00:12:35,880 Speaker 1: the wake of this. Is there anything? Is there anyone 211 00:12:35,920 --> 00:12:39,680 Speaker 1: who's gonna sort of cash in a little Uh? That's 212 00:12:39,720 --> 00:12:45,000 Speaker 1: certainly possible. Um And for example, Ford H doesn't import 213 00:12:45,120 --> 00:12:48,560 Speaker 1: fully built up F one fifties or or super duties 214 00:12:48,640 --> 00:12:53,439 Speaker 1: from Mexico, whereas f C A and GM do uh 215 00:12:53,480 --> 00:12:57,160 Speaker 1: their own products obviously, uh So so those are those 216 00:12:57,160 --> 00:13:01,840 Speaker 1: are slight differences there. Uh. There are some suppliers that 217 00:13:02,120 --> 00:13:06,480 Speaker 1: perhaps don't have as much of a base in Mexico. Uh. 218 00:13:06,559 --> 00:13:09,199 Speaker 1: Then there are companies like Matulsa, which is a Mexican 219 00:13:09,240 --> 00:13:14,400 Speaker 1: based company that supplies North America. Obviously they've got huge issues. 220 00:13:14,600 --> 00:13:18,679 Speaker 1: I mean, let's let's carry this forward. We're talking three 221 00:13:18,720 --> 00:13:22,680 Speaker 1: point nine million vehicles a year built in Mexico, two 222 00:13:22,720 --> 00:13:28,240 Speaker 1: point six million engines, and one point eight million transmissions. 223 00:13:28,320 --> 00:13:32,000 Speaker 1: So uh, the question becomes, uh, you know, how does 224 00:13:32,080 --> 00:13:36,199 Speaker 1: and and these parts go back and forth? Uh? The 225 00:13:36,280 --> 00:13:39,880 Speaker 1: issue apparently is there's no credit when you export something 226 00:13:39,920 --> 00:13:42,439 Speaker 1: from the US, but when you bring it back as 227 00:13:42,480 --> 00:13:46,800 Speaker 1: a fully assembled product, is it is the tariff on 228 00:13:46,840 --> 00:13:51,439 Speaker 1: the entire thing? Even more, is this even legal? And 229 00:13:51,520 --> 00:13:54,280 Speaker 1: I'm not a lawyer, which means I'm not a trade lawyer. 230 00:13:54,520 --> 00:13:57,199 Speaker 1: But there are side letters in the new U S 231 00:13:57,400 --> 00:14:00,839 Speaker 1: m c A. Some people believe those great those side 232 00:14:00,920 --> 00:14:04,200 Speaker 1: letters are already in effect, and those side letters might 233 00:14:04,360 --> 00:14:08,000 Speaker 1: make these tips illegal. Yeah, obviously we would have to 234 00:14:08,040 --> 00:14:10,720 Speaker 1: go through a court process for that. Alan Baum, thank 235 00:14:10,760 --> 00:14:13,120 Speaker 1: you so much for being with us. Great Great Insight 236 00:14:13,240 --> 00:14:17,000 Speaker 1: Alabama's principle for Baum and Associates, a Michigan based research 237 00:14:17,040 --> 00:14:36,640 Speaker 1: firm focused on automotive industries. We're getting more of a 238 00:14:36,720 --> 00:14:40,040 Speaker 1: sense of how China plans to retaliate against the U 239 00:14:40,160 --> 00:14:43,360 Speaker 1: S when it comes to the escalating trade tensions, Possible 240 00:14:43,440 --> 00:14:46,800 Speaker 1: curbs on rare earth exports to the United States in 241 00:14:46,880 --> 00:14:51,520 Speaker 1: certain key economic areas, and unreliable entities list joining us 242 00:14:51,520 --> 00:14:55,000 Speaker 1: now to discuss what these mean for a potential trade deal, 243 00:14:55,120 --> 00:14:58,680 Speaker 1: is Mike McDonald, chief economist for financial products at Bloomberg 244 00:14:59,240 --> 00:15:02,160 Speaker 1: here in our a greater active broker studios. How likely 245 00:15:02,200 --> 00:15:03,680 Speaker 1: is it, Mike there, we're actually gonna get a trade 246 00:15:03,720 --> 00:15:06,080 Speaker 1: deal at this point? Okay, So it's my view. Uh, 247 00:15:06,120 --> 00:15:09,680 Speaker 1: you know, I had been optimistic previously on this show. Um, 248 00:15:09,800 --> 00:15:12,080 Speaker 1: subsequently my baseline, I don't. I don't think we're going 249 00:15:12,120 --> 00:15:17,360 Speaker 1: to get a deal at this point. Um, I would 250 00:15:17,400 --> 00:15:23,160 Speaker 1: say being optimistic alright, So what changed for you? So? 251 00:15:23,360 --> 00:15:26,200 Speaker 1: I mean I think that you know, when when we 252 00:15:26,240 --> 00:15:29,000 Speaker 1: first heard, you know, three or four weeks ago, and 253 00:15:29,000 --> 00:15:30,440 Speaker 1: we all thought there was going to be a deal, 254 00:15:30,520 --> 00:15:33,760 Speaker 1: we thought that there had been alignment into views, concessions 255 00:15:33,760 --> 00:15:35,480 Speaker 1: hadn't made, there was going to be signing. I think 256 00:15:35,520 --> 00:15:39,160 Speaker 1: what actually happened was there was fundamental differences that weren't 257 00:15:39,160 --> 00:15:42,480 Speaker 1: being aired. Primarily, Uh, you know, I think from the 258 00:15:42,560 --> 00:15:45,400 Speaker 1: Chinese perspective, they came in to negotiate a trade deal, 259 00:15:46,000 --> 00:15:49,160 Speaker 1: and they left the negotiations feeling like they were negotiating 260 00:15:49,320 --> 00:15:52,160 Speaker 1: terms of surrender and not actually a trade deal. And 261 00:15:52,240 --> 00:15:55,080 Speaker 1: it seemed like the two sides were immovable in terms 262 00:15:55,080 --> 00:15:56,400 Speaker 1: of what they were going to agree on. And I 263 00:15:56,440 --> 00:15:59,800 Speaker 1: think some of the core points were, um the Chinese 264 00:16:00,160 --> 00:16:02,200 Speaker 1: that they were going to bend to the will of 265 00:16:02,240 --> 00:16:04,960 Speaker 1: the US negotiators, and once they signed the deal, the 266 00:16:05,000 --> 00:16:07,840 Speaker 1: tariffs that were in place, we're going to remain in 267 00:16:07,880 --> 00:16:10,880 Speaker 1: place until they felt they had accomplished enough to justify 268 00:16:10,920 --> 00:16:13,480 Speaker 1: the removal of their tariffs. And I think that's something 269 00:16:13,520 --> 00:16:17,000 Speaker 1: that they were just unwilling to agree with and sign uh. 270 00:16:17,000 --> 00:16:19,200 Speaker 1: And I don't think the US negotiators were willing to 271 00:16:19,280 --> 00:16:21,600 Speaker 1: change their view on that. Uh. And then if you 272 00:16:21,640 --> 00:16:24,400 Speaker 1: think about I think what happened in Mexico. You know, 273 00:16:24,440 --> 00:16:27,400 Speaker 1: if you were to ask me that probability question yesterday, 274 00:16:27,400 --> 00:16:28,880 Speaker 1: maybe I would have gone a little bit higher. But 275 00:16:28,920 --> 00:16:31,240 Speaker 1: now you have to put yourself in the perspective of 276 00:16:31,280 --> 00:16:34,880 Speaker 1: the Chinese. So even if they did sign a trade deal, 277 00:16:35,120 --> 00:16:38,000 Speaker 1: look at what happened with Mexico. So the Chinese are 278 00:16:38,000 --> 00:16:40,320 Speaker 1: worried that they're going to remain a punching bag of 279 00:16:40,360 --> 00:16:44,520 Speaker 1: Trump's going into the election. So they have a trade deal, tariffs, 280 00:16:44,520 --> 00:16:47,400 Speaker 1: they're gone. All of a sudden, something happens and they 281 00:16:47,400 --> 00:16:49,560 Speaker 1: get a tweet saying, you know, we're putting tariffs on 282 00:16:49,680 --> 00:16:52,120 Speaker 1: for a reason. Why, Oh that is actually unrelated to 283 00:16:52,160 --> 00:16:54,760 Speaker 1: the trade deal that we signed. It's this is punitive 284 00:16:54,840 --> 00:16:58,040 Speaker 1: for some other action that's taking place. I see. So 285 00:16:58,280 --> 00:17:00,640 Speaker 1: I guess then if that's if you're as case at 286 00:17:00,640 --> 00:17:03,200 Speaker 1: this point is that no trade deal will get uh, 287 00:17:03,800 --> 00:17:06,639 Speaker 1: we'll get we'll get done at this point, then play 288 00:17:06,680 --> 00:17:10,040 Speaker 1: out what happens. I mean, the unreliable entities list from China, 289 00:17:10,200 --> 00:17:14,480 Speaker 1: the rare Earth's curves, the you know, walk us through 290 00:17:14,520 --> 00:17:17,560 Speaker 1: what this means. Yeah, I mean, I wrote on Bloomberg Opinion, 291 00:17:17,640 --> 00:17:19,440 Speaker 1: I wrote something over a year ago at this point 292 00:17:19,520 --> 00:17:23,600 Speaker 1: talking about the potential repercussions of targeting Chinese tech companies, 293 00:17:23,640 --> 00:17:26,919 Speaker 1: and the repercussions wouldn't just end at tariffs. Uh, it 294 00:17:26,960 --> 00:17:30,359 Speaker 1: would be China beginning to target US companies that it 295 00:17:30,400 --> 00:17:33,119 Speaker 1: has some control over, either that do business in China 296 00:17:33,240 --> 00:17:35,000 Speaker 1: or have some sort of production in China. So I 297 00:17:35,040 --> 00:17:38,439 Speaker 1: think this is a step in that direction. Right in 298 00:17:38,480 --> 00:17:40,959 Speaker 1: the U S. We you know, there's checks and balances 299 00:17:41,040 --> 00:17:43,919 Speaker 1: and and and certain um processes that have to be 300 00:17:43,960 --> 00:17:46,400 Speaker 1: followed to go after a company. China is much more 301 00:17:46,480 --> 00:17:48,640 Speaker 1: command economy, run out of the center. So if there's 302 00:17:48,640 --> 00:17:50,800 Speaker 1: something they want to pass that restricts a company from 303 00:17:50,840 --> 00:17:53,720 Speaker 1: doing business in that country, it's a lot easier to 304 00:17:53,800 --> 00:17:55,600 Speaker 1: do than it would be here. So they have a 305 00:17:55,640 --> 00:17:58,239 Speaker 1: lot of they can move quicker on that front. UH. 306 00:17:58,320 --> 00:18:01,520 Speaker 1: And as you see the UH trade war escalate outside 307 00:18:01,520 --> 00:18:05,280 Speaker 1: of just tariffs, UH, this is going to continue to progress. 308 00:18:05,320 --> 00:18:07,520 Speaker 1: And now we've seen actually the trade war go beyond 309 00:18:07,640 --> 00:18:10,720 Speaker 1: China to also now move to Mexico, who again you know, 310 00:18:10,840 --> 00:18:13,280 Speaker 1: just had this trade deal agreed with the US, but 311 00:18:13,320 --> 00:18:16,360 Speaker 1: it didn't seem to matter. Alright, So, Mike, it appears 312 00:18:16,359 --> 00:18:18,680 Speaker 1: at President Trump and President She are going to meet 313 00:18:18,720 --> 00:18:21,560 Speaker 1: at the G twenty coming up. Any reason to have 314 00:18:21,640 --> 00:18:24,000 Speaker 1: some optimism that if you just put these two in 315 00:18:24,040 --> 00:18:26,240 Speaker 1: a room, that maybe they can paper over some of 316 00:18:26,280 --> 00:18:28,320 Speaker 1: these bigger issues here. I mean, it's hard to see 317 00:18:28,359 --> 00:18:30,680 Speaker 1: that right now. If if you think back to last year, 318 00:18:30,720 --> 00:18:33,040 Speaker 1: it was a similar meeting that they had in Argentina 319 00:18:33,359 --> 00:18:35,679 Speaker 1: that kind of kicked the can on the problem. But 320 00:18:35,800 --> 00:18:41,160 Speaker 1: the differences seem so fundamental. Without one side um seismically 321 00:18:41,280 --> 00:18:44,199 Speaker 1: changing their beliefs, it's hard to see a deal. So 322 00:18:44,240 --> 00:18:46,359 Speaker 1: maybe there's the the can gets kicked a little bit. 323 00:18:46,400 --> 00:18:49,159 Speaker 1: But I'm not overly optimistic. You know, there's there's a 324 00:18:49,240 --> 00:18:51,440 Speaker 1: chance something could happen, but you know, I factored that 325 00:18:51,480 --> 00:18:54,560 Speaker 1: into my baseline view. Do you think that this is 326 00:18:54,600 --> 00:18:57,479 Speaker 1: going to kick the global economy into recession? Well, I 327 00:18:57,520 --> 00:19:00,840 Speaker 1: think that, you know, the market is certainly justified to 328 00:19:00,920 --> 00:19:04,440 Speaker 1: begin pricing in rate cuts by the Fed, especially now 329 00:19:04,440 --> 00:19:07,560 Speaker 1: with this Mexico x escalation. If you have you know, 330 00:19:07,680 --> 00:19:10,800 Speaker 1: if you combine Mexican in Chinese imports to the US, 331 00:19:10,960 --> 00:19:13,600 Speaker 1: you're talking about something like a third of all imports, 332 00:19:13,600 --> 00:19:16,439 Speaker 1: and you're putting that at a tariff. A lot of 333 00:19:16,440 --> 00:19:18,640 Speaker 1: these are consumer goods, a lot of these are inputs 334 00:19:18,640 --> 00:19:22,280 Speaker 1: to supply chain. So yeah, there's there's a really meaningful 335 00:19:22,400 --> 00:19:24,879 Speaker 1: risk that you could enter at least a mild recession 336 00:19:24,960 --> 00:19:27,800 Speaker 1: if this goes full throttle. And I'm just looking at 337 00:19:27,840 --> 00:19:29,760 Speaker 1: the w I r P function as I do ten 338 00:19:29,960 --> 00:19:31,840 Speaker 1: every day, it seems like but now it's all the 339 00:19:31,880 --> 00:19:33,959 Speaker 1: way up to about a nine chance of a rate 340 00:19:33,960 --> 00:19:36,080 Speaker 1: cut by the year end. Does that seem kind of 341 00:19:36,080 --> 00:19:41,560 Speaker 1: reasonable from your perspective with with the recent escalation. Um, yeah, 342 00:19:41,760 --> 00:19:43,919 Speaker 1: I mean it's if this, if they follow through and 343 00:19:44,000 --> 00:19:46,160 Speaker 1: you know that. The thing is, I think people realize 344 00:19:46,200 --> 00:19:49,040 Speaker 1: that it's not trust rhetoric, there's action being put behind it. 345 00:19:49,080 --> 00:19:51,359 Speaker 1: Now we've seen the tariffs with China, we need to 346 00:19:51,359 --> 00:19:53,880 Speaker 1: see what happens with Mexico. There seems to be a 347 00:19:53,920 --> 00:19:58,080 Speaker 1: big misunderstanding who's actually paying for these tariffs. Obviously was 348 00:19:58,119 --> 00:20:00,320 Speaker 1: paying for these The importers are paying for them. So 349 00:20:00,359 --> 00:20:03,360 Speaker 1: I mean it's it's it's it's a tax. It is 350 00:20:03,520 --> 00:20:05,200 Speaker 1: a tax on importers. I mean there was a point 351 00:20:05,240 --> 00:20:07,240 Speaker 1: in time where there was no income tax in this country. 352 00:20:07,320 --> 00:20:11,679 Speaker 1: The only tax was tariffs. Um, in my time, before 353 00:20:11,680 --> 00:20:13,760 Speaker 1: all of our time. Alright, So alright, well, Mike, we'll 354 00:20:13,760 --> 00:20:15,159 Speaker 1: follow up on this because I'm sure this is a 355 00:20:15,200 --> 00:20:18,440 Speaker 1: story that will just keep developing. Mike McDonagh, chief economist 356 00:20:18,480 --> 00:20:20,880 Speaker 1: for Financial Products for Bloomberg joinius here in our Bloomberg 357 00:20:20,880 --> 00:20:23,560 Speaker 1: eleven three oh studios. Thanks so much. My takeaway is 358 00:20:24,160 --> 00:20:28,760 Speaker 1: a ten chance of trade negotiations between China in the US. 359 00:20:28,840 --> 00:20:33,320 Speaker 1: That's optimistic that's that's optimistic, Mike. Yeah, that's optimistic, Mike. Alright, Mike, 360 00:20:33,680 --> 00:20:51,080 Speaker 1: thanks very much. Potential tariffs on Mexico are also rattling markets. 361 00:20:51,440 --> 00:20:54,240 Speaker 1: Take an additional perspective, we turned to Mark Chandler Marcus, 362 00:20:54,280 --> 00:20:57,960 Speaker 1: I'm managing partner in chief market strategist for Bannockburn Global 363 00:20:58,040 --> 00:21:00,520 Speaker 1: Forex based in New York City. Market so much for 364 00:21:00,600 --> 00:21:04,560 Speaker 1: joining US. How disruptive do you think these new potential 365 00:21:04,600 --> 00:21:08,160 Speaker 1: tariffs on Mexico could be for the U? S economy? Yeah? 366 00:21:08,160 --> 00:21:10,000 Speaker 1: I don't think that the real danger in the short 367 00:21:10,080 --> 00:21:12,440 Speaker 1: run of the US economy per se. It's not good 368 00:21:12,760 --> 00:21:14,840 Speaker 1: in a sense that you know, last year, the US 369 00:21:14,880 --> 00:21:17,440 Speaker 1: economy is doing so well because we got tax cuts, 370 00:21:17,480 --> 00:21:20,040 Speaker 1: and this year were getting tax increases and it's import 371 00:21:20,119 --> 00:21:23,439 Speaker 1: tax increases. But I think that the disruption is I 372 00:21:23,440 --> 00:21:25,560 Speaker 1: think it could affect the UH. You know, we were 373 00:21:25,560 --> 00:21:29,399 Speaker 1: just beginning the legislative process for ratification of the NAFTA 374 00:21:29,440 --> 00:21:32,400 Speaker 1: two point oh deal. I think that puts this at risk. 375 00:21:32,440 --> 00:21:34,679 Speaker 1: And if if you think about the other trade partners 376 00:21:34,720 --> 00:21:36,840 Speaker 1: we have, I mean, what can they take away from this? 377 00:21:36,880 --> 00:21:39,440 Speaker 1: It means that even a pending trade agreement with Mexico 378 00:21:40,000 --> 00:21:43,560 Speaker 1: is not enough to save them from from such a 379 00:21:43,640 --> 00:21:48,320 Speaker 1: surprise and tariffs. And so I think it's a questions. 380 00:21:48,359 --> 00:21:52,720 Speaker 1: I think, uh, other countries willingness to take US negotiations 381 00:21:52,720 --> 00:21:55,600 Speaker 1: seriously if the US can still prepare ups on on 382 00:21:55,720 --> 00:21:58,880 Speaker 1: on Mexico despite having a free trade agreement, their free 383 00:21:58,880 --> 00:22:00,920 Speaker 1: trade agreement in the works, because we still have the 384 00:22:00,960 --> 00:22:03,840 Speaker 1: first and after of course. Yeah, so this of course 385 00:22:03,880 --> 00:22:06,520 Speaker 1: brings us to China, because China and the US have 386 00:22:06,640 --> 00:22:09,280 Speaker 1: been mired and ongoing discussions about how to resolve their 387 00:22:09,320 --> 00:22:12,960 Speaker 1: trade differences in the dispute there. Uh it what doesn't 388 00:22:13,000 --> 00:22:17,879 Speaker 1: mean for emerging markets right now that the prospect of 389 00:22:17,920 --> 00:22:22,960 Speaker 1: a US China trade deal looks increasingly remote. Yeah, I 390 00:22:23,040 --> 00:22:25,560 Speaker 1: thought that Mexico would have been one of the beneficiaries 391 00:22:26,280 --> 00:22:29,000 Speaker 1: some countries, some and we see this right, some companies 392 00:22:29,119 --> 00:22:31,520 Speaker 1: trying to move out of China, recognizing that the US 393 00:22:31,560 --> 00:22:35,240 Speaker 1: and China might be in for sustained economic tension, do 394 00:22:35,240 --> 00:22:38,200 Speaker 1: they want to move production closer to the US. Mexico 395 00:22:38,280 --> 00:22:42,640 Speaker 1: is an obvious choice. In fact, since March Mexican, Uh, 396 00:22:42,840 --> 00:22:46,000 Speaker 1: the US imports more from Mexico and it does from China. 397 00:22:46,560 --> 00:22:49,240 Speaker 1: And so I think that for a lot of emerging markets. 398 00:22:49,240 --> 00:22:51,160 Speaker 1: I mean other emerging markets might stand to benefit. Now, 399 00:22:51,320 --> 00:22:54,560 Speaker 1: maybe those countries in East Asia or maybe some other 400 00:22:54,600 --> 00:22:59,280 Speaker 1: places in South America. Central America could be a beneficiary too. 401 00:22:59,359 --> 00:23:01,080 Speaker 1: If Mexico is sort of like you have to raise 402 00:23:01,200 --> 00:23:05,120 Speaker 1: questions about the tariffts at Mexico can faith So, Mark, 403 00:23:05,160 --> 00:23:07,680 Speaker 1: what does this mean? I guess you know these trade 404 00:23:07,720 --> 00:23:11,000 Speaker 1: tensions with China now Mexico cannot be good for emerging 405 00:23:11,040 --> 00:23:13,560 Speaker 1: market investing. What are your thoughts as you think about 406 00:23:13,600 --> 00:23:17,320 Speaker 1: some of the emerging markets given what's going on. Yeah, 407 00:23:17,400 --> 00:23:19,320 Speaker 1: I think that's the remarkable thing. Really, it's not really 408 00:23:19,359 --> 00:23:23,440 Speaker 1: all emerging markets. Look what's happened. Uh Turkey, the Turkish lawyer, 409 00:23:23,480 --> 00:23:25,720 Speaker 1: I think the strongest currency. I think it's up almost 410 00:23:25,760 --> 00:23:30,040 Speaker 1: six percent since it bottomed in a couple of weeks ago. Uh. 411 00:23:30,160 --> 00:23:34,840 Speaker 1: Indonesia has been upgraded by SMP just last night, and 412 00:23:35,440 --> 00:23:38,719 Speaker 1: with the re election and some political stability. Uh So, 413 00:23:38,760 --> 00:23:41,360 Speaker 1: I think that there are some opportunities and emerging markets. 414 00:23:41,480 --> 00:23:44,600 Speaker 1: I don't I won't think it's across the board as 415 00:23:44,240 --> 00:23:48,520 Speaker 1: a negative, especially with the combination of falling interest rates 416 00:23:48,560 --> 00:23:53,240 Speaker 1: and countries looking for like booster competitiveness. Company they're gonna 417 00:23:53,240 --> 00:23:56,440 Speaker 1: be leading China. So I want to talk also than 418 00:23:56,840 --> 00:24:00,240 Speaker 1: about where the havens are. So perhaps people are looking 419 00:24:00,280 --> 00:24:03,879 Speaker 1: at where if the riskiest spots are in light of 420 00:24:03,920 --> 00:24:07,159 Speaker 1: some of these increasing trade tensions. When it comes to 421 00:24:07,200 --> 00:24:10,760 Speaker 1: haven currency, the yen has been the spot, and yet 422 00:24:10,800 --> 00:24:13,159 Speaker 1: the dollar is getting a bit more of a bid. 423 00:24:13,400 --> 00:24:15,720 Speaker 1: Do you think the yen will retain its position? Really? 424 00:24:15,800 --> 00:24:19,119 Speaker 1: Is the currency of choice? Well, funny they say that. 425 00:24:19,400 --> 00:24:21,560 Speaker 1: I kind of think of how it works two ways. 426 00:24:21,640 --> 00:24:24,879 Speaker 1: I think to like channels. One channel is that a 427 00:24:24,920 --> 00:24:28,679 Speaker 1: lot of institutions will use the yen, and the Swiss 428 00:24:28,680 --> 00:24:32,600 Speaker 1: Frank is a funding currency to buy riskier asset because 429 00:24:32,600 --> 00:24:35,040 Speaker 1: as retailer investors, people want to have the askt that 430 00:24:35,119 --> 00:24:38,600 Speaker 1: they buy go up. But on the institutional level, you're 431 00:24:38,600 --> 00:24:40,920 Speaker 1: only not only playing for the higher asset that you're buying, 432 00:24:40,920 --> 00:24:43,520 Speaker 1: but you're also trying to reduce your funding costs. And 433 00:24:43,560 --> 00:24:46,119 Speaker 1: so the end of the Swiss frank typically funding currencies 434 00:24:46,800 --> 00:24:49,200 Speaker 1: like the dollar, and so an emerging markets call under 435 00:24:49,200 --> 00:24:53,400 Speaker 1: pressure risk assets come under pressure those those structured positions 436 00:24:53,400 --> 00:24:56,960 Speaker 1: have to be unwound at the same time. UH short 437 00:24:57,040 --> 00:25:00,280 Speaker 1: term speculators recognize this kind of pattern, and they also 438 00:25:00,320 --> 00:25:03,600 Speaker 1: pour into a long Ganner long Swiss Frank positions when 439 00:25:03,600 --> 00:25:07,159 Speaker 1: the risk appetites Wayne. So I think that the Yen 440 00:25:07,240 --> 00:25:09,520 Speaker 1: and the Swiss Franks still had that function. But it 441 00:25:10,200 --> 00:25:13,199 Speaker 1: looks like what's happening. You know, the UH was driving 442 00:25:13,200 --> 00:25:15,639 Speaker 1: down the US yield is showing you that the money 443 00:25:15,680 --> 00:25:18,000 Speaker 1: is still coming into the US or in some cases 444 00:25:18,000 --> 00:25:20,399 Speaker 1: staying in the US. When we're talking about our ten 445 00:25:20,480 --> 00:25:24,200 Speaker 1: year bond yield below the lower end of the stead 446 00:25:24,280 --> 00:25:27,160 Speaker 1: funds trading range. The stead funds, you know, their target range. 447 00:25:27,640 --> 00:25:31,520 Speaker 1: And we see this in some other countries too. In Australia, 448 00:25:31,760 --> 00:25:34,720 Speaker 1: the ten year bond yield has found below their cash rage, 449 00:25:34,720 --> 00:25:37,640 Speaker 1: which they might cut as early as next week. So Mark, 450 00:25:37,720 --> 00:25:40,600 Speaker 1: just real quickly, what is your sense about the rest 451 00:25:40,600 --> 00:25:43,760 Speaker 1: of Latin America's what's happening potentially in Mexico that bleed 452 00:25:43,880 --> 00:25:45,880 Speaker 1: over either positively or negatively into some of the other 453 00:25:46,119 --> 00:25:49,399 Speaker 1: Latin American countries. Well, I think that Columbia might be 454 00:25:49,760 --> 00:25:54,640 Speaker 1: interesting alternative for companies who want to locate UH near 455 00:25:54,680 --> 00:25:58,639 Speaker 1: the US, But now we're scared of Mexico UH because 456 00:25:58,640 --> 00:26:01,200 Speaker 1: of the because of these latest things. I think that Colombia, 457 00:26:01,640 --> 00:26:04,919 Speaker 1: Brazil's got its own story. Brazil's kind of interesting, especially 458 00:26:05,000 --> 00:26:06,960 Speaker 1: for those people are looking at those rare earth stories 459 00:26:07,000 --> 00:26:10,560 Speaker 1: that I think Brazil has the second largest reserves of 460 00:26:10,720 --> 00:26:14,119 Speaker 1: those rare earths, but they've got this pension reform issue 461 00:26:14,160 --> 00:26:17,000 Speaker 1: going and so yeah, I I really think that the 462 00:26:17,359 --> 00:26:19,960 Speaker 1: WILL focus is going to be really on these on 463 00:26:20,040 --> 00:26:22,679 Speaker 1: these trade issues, like you say, Mexico and maybe some 464 00:26:22,920 --> 00:26:25,640 Speaker 1: spill over some other countries could benefit, but I think 465 00:26:25,640 --> 00:26:28,760 Speaker 1: that's not really the heart of the issue. Mark Chandler, 466 00:26:28,800 --> 00:26:30,919 Speaker 1: thank you so much for being with us. Mark Chandler, 467 00:26:30,960 --> 00:26:35,199 Speaker 1: Managing partner in chief market strategist at Bannockburn Global for X, 468 00:26:35,480 --> 00:26:37,680 Speaker 1: thanks for listening to the Bloomberg P and L podcast. 469 00:26:37,880 --> 00:26:40,480 Speaker 1: You can subscribe and listen to interviews at Apple Podcasts 470 00:26:40,560 --> 00:26:43,639 Speaker 1: or whatever podcast platform you prefer. Paul Sweeney, I'm on 471 00:26:43,680 --> 00:26:46,639 Speaker 1: Twitter at pt Sweeney. I'm Lisa Bramwoods. I'm on Twitter 472 00:26:46,720 --> 00:26:49,359 Speaker 1: at Lisa bramwo Woods. One before the podcast, you can 473 00:26:49,400 --> 00:26:51,760 Speaker 1: always catch us worldwide on Bloomberg Radio.