WEBVTT - China Retaliation On Tariffs Could Punish Supply Chains 0:00:05.800 --> 0:00:08.720 Welcome to the Bloomberg p m L Podcast. I'm pim Fox. 0:00:08.760 --> 0:00:11.560 Along with my co host Lisa Abramowitz. Each day we 0:00:11.640 --> 0:00:15.120 bring you the most important, noteworthy, and useful interviews for 0:00:15.200 --> 0:00:17.840 you and your money, whether you're at the grocery store 0:00:17.960 --> 0:00:20.720 or the trading floor. Find the Bloomberg p m L 0:00:20.840 --> 0:00:31.800 Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Earlier today, 0:00:31.880 --> 0:00:35.640 President Donald Trump said tariffs have put the United States 0:00:35.640 --> 0:00:39.400 in a very strong bargaining position, with billions of dollars 0:00:39.400 --> 0:00:43.640 and jobs flowing into our country, and yet cost increases 0:00:43.680 --> 0:00:47.919 have thus far been almost unnoticeable. If countries will not 0:00:48.040 --> 0:00:51.720 make fair deals with US, they will be tariff That's 0:00:51.720 --> 0:00:56.320 according to President Donald Trump's tweet earlier today. Here to 0:00:56.360 --> 0:00:59.400 help us understand this issue is Brad Setser. He is 0:00:59.600 --> 0:01:04.040 the Senior Fellow for International Economics the Council of Foreign Relations, 0:01:04.040 --> 0:01:07.679 and he joins us now, Brad, do tariffs put the 0:01:07.760 --> 0:01:11.640 United States in a stronger bargaining position. Let's say visavi 0:01:11.760 --> 0:01:16.800 the Chinese, so they present China. They present China with 0:01:16.840 --> 0:01:22.000 a choice. China will, if it wants to avoid Trump's concessions, 0:01:22.080 --> 0:01:26.200 have to make some concessions of its own. I think 0:01:26.240 --> 0:01:29.360 the difficulty is that it is from the Chinese point 0:01:29.360 --> 0:01:31.080 of view, and I think from the point of view 0:01:31.120 --> 0:01:35.160 of most outside observers a little unclear precisely what Trump 0:01:35.200 --> 0:01:39.400 wants from China. So in that sense, uh, the US 0:01:39.480 --> 0:01:44.680 bargaining position is weakened by the lack of clarity about 0:01:44.760 --> 0:01:50.960 US negotiating goals. Right your expertise laws in balance of payments, 0:01:51.200 --> 0:01:54.200 and right now I'm struck by the fact that markets 0:01:54.240 --> 0:01:58.960 are really not responding to these potential additional two hundillion 0:01:58.960 --> 0:02:02.640 dollars of tariffs. What would the practical effect of them be. 0:02:06.040 --> 0:02:12.080 I mean, they would be a significant friction to about 0:02:12.240 --> 0:02:17.280 half of US trade with China, so total, you know, 0:02:17.520 --> 0:02:21.120 looking back last year, total US mports from China were 0:02:21.120 --> 0:02:26.640 about we've put tariffs on fifty billion already. You add 0:02:26.840 --> 0:02:30.000 two billion to that, and you've careft about half of 0:02:30.120 --> 0:02:34.560 trade with China. The tariff level though that has been 0:02:34.600 --> 0:02:40.160 floated on the two is and it's hard to get 0:02:40.800 --> 0:02:44.959 a major shock out of a ten taraff on two billion. 0:02:45.040 --> 0:02:48.480 You just work through the math. If everybody pays it, 0:02:48.480 --> 0:02:52.520 it's about a twenty billion dollar tax that goes to 0:02:52.560 --> 0:02:57.000 the U. S. Treasury presumably paid for by some combination 0:02:57.040 --> 0:03:01.200 of US consumers and US businesses. Uh. And that's just 0:03:01.639 --> 0:03:07.440 not on a scale large enough to generate major macroeconomic shocks. 0:03:07.880 --> 0:03:12.760 There certainly will be some sectoral complications, and I suspect 0:03:13.080 --> 0:03:16.720 that there may be more pain associated with the coming 0:03:16.800 --> 0:03:21.799 Chinese retaliation. Brad. If let's say that Chinese negotiators were 0:03:21.800 --> 0:03:26.240 to call Brad Setzer and ask him, what do you 0:03:26.280 --> 0:03:30.400 really believe the administration wants from these trade talks? How 0:03:30.400 --> 0:03:36.120 would you respond? I would say that there are there 0:03:36.160 --> 0:03:40.400 seemed to be at least three schools of camp within 0:03:40.440 --> 0:03:43.520 the Trump administration. I think there's a camp within the 0:03:43.520 --> 0:03:50.080 Trump administration that believes the tariffs are preferable to almost 0:03:50.120 --> 0:03:54.760 any plausible deal. They want to put a tariff on 0:03:54.880 --> 0:03:59.400 trade with China to encourage US firms to to relocate 0:03:59.440 --> 0:04:03.360 their supply chains, reorganize their supply chains, and become less 0:04:03.400 --> 0:04:07.560 dependent on China. So the goal, in some sense is 0:04:07.720 --> 0:04:11.840 less to change Chinese behavior and more to convince US 0:04:11.960 --> 0:04:16.880 firms to restructure their supply chains and at least move 0:04:16.960 --> 0:04:19.960 them out of China, if not move them to the US. 0:04:20.120 --> 0:04:22.279 I think there's a second school of thought within the 0:04:22.320 --> 0:04:28.000 administration that wants to see substantive changes to the policies 0:04:28.000 --> 0:04:35.719 known as China China's industrial policy, it's tech transfer policies, 0:04:36.040 --> 0:04:39.920 the set of techniques that China is using to build 0:04:39.960 --> 0:04:46.039 out advanced manufacturing industries like aircraft, like semiconductors, like high 0:04:46.160 --> 0:04:50.360 end medical equipment, And they want meaningful changes there, although 0:04:50.360 --> 0:04:54.760 they haven't articulated precisely what kind of changes would be enough. 0:04:55.279 --> 0:04:57.240 And then I think there's a third camp that just 0:04:57.279 --> 0:05:01.080 wants a deal, that doesn't want h tariffs and is 0:05:01.160 --> 0:05:08.280 looking to in some sense come up within an optical victory. Yeah, Brad, 0:05:08.400 --> 0:05:12.840 you said that probably the bigger impact on businesses will 0:05:12.880 --> 0:05:18.720 come from China's potential retaliatory moves. What would those be, Well, 0:05:18.800 --> 0:05:23.280 China's threaten China's already put white substantial tariffs on US 0:05:23.279 --> 0:05:27.800 slating exports UH in response to the to the first round, 0:05:27.839 --> 0:05:32.240 to the fifty billion in tariffs, China has threatened sixty 0:05:32.240 --> 0:05:36.560 billion and additional tariffs if the US goes ahead with 0:05:36.640 --> 0:05:42.039 the UH. The sixty billion presumably would be at a 0:05:42.080 --> 0:05:44.320 slight you know, at the ten percent rate, that was 0:05:44.360 --> 0:05:47.920 probably not prohibitive. And I would guess my sense at 0:05:47.960 --> 0:05:51.360 least is that China's best targets were included in the 0:05:51.480 --> 0:05:55.680 fifty billion initial list. But nonetheless there's going to be 0:05:57.000 --> 0:06:02.440 a likely tariffs on most inputs that the usls to China, 0:06:03.000 --> 0:06:06.680 and that at the margin, if possible, creates an intentive 0:06:06.760 --> 0:06:11.279 to substitute away from US make goods. Brad Setzer, thank 0:06:11.320 --> 0:06:13.520 you so much for being with us. Really a pleasure 0:06:13.520 --> 0:06:16.160 having you as always. Broad Setser is the Steven A. 0:06:16.279 --> 0:06:19.040 Tannenbaum Senior Fellow for International Economics of the Council of 0:06:19.080 --> 0:06:23.240 Foreign Relations. He also is the former Deputy Assistant Secretary 0:06:23.279 --> 0:06:26.880 for International Economic Analysis in the U. S. Treasury Department 0:06:26.920 --> 0:06:30.320 from two thousand and eleven to two thousand and fifteen. 0:06:42.200 --> 0:06:45.479 How do you put together a market outlook that takes 0:06:45.560 --> 0:06:51.600 into into consequence the efforts of trade negotiators, the change 0:06:51.600 --> 0:06:55.240 in interest rates, and also changes in the valuation of 0:06:55.279 --> 0:06:57.680 different equity sectors. Well, one thing you do is you 0:06:57.800 --> 0:07:01.039 turn to Denise Chisholm, the sector strategy just in portfolio 0:07:01.080 --> 0:07:05.800 manager for for Fidelity Investments based in Boston, but joins 0:07:05.839 --> 0:07:08.000 us here in our eleven trio studios. Den He's thanks 0:07:08.000 --> 0:07:11.720 for coming in. Much appreciated. Now, Um I was thinking 0:07:11.760 --> 0:07:15.160 about your approach and I thought, wow, okay, So here's 0:07:15.160 --> 0:07:19.240 like a checklist. You take a variety of different measures 0:07:19.680 --> 0:07:22.160 and you put them all together to try to get 0:07:22.200 --> 0:07:25.560 some kind of holistic vision of the market, and then 0:07:25.720 --> 0:07:29.840 from that you extract what you believe to be tradeable ideas. 0:07:29.960 --> 0:07:32.119 And if you could just explain some of the things 0:07:32.120 --> 0:07:34.200 that go into your thinking, yeah, I think to boil 0:07:34.240 --> 0:07:38.240 it down, I do historical probability analysis on data, right, 0:07:38.280 --> 0:07:41.960 so constantly asking the question, hey, whatever theory you have, 0:07:42.120 --> 0:07:46.280 whatever thesis you have, is that really true historically? And 0:07:46.320 --> 0:07:48.720 if you ask that enough times and you do the 0:07:48.760 --> 0:07:51.880 work enough times, that can actually inform your investment opinion 0:07:52.120 --> 0:07:55.120 only you overall market and then on individual equity sectors. 0:07:55.200 --> 0:07:57.440 All right, So let's get down to what's going on today. 0:07:57.640 --> 0:08:01.000 We see a little bit of softness light of the 0:08:01.040 --> 0:08:04.320 headline saying that President Trump is set to impose tem 0:08:04.360 --> 0:08:07.440 percent tariffs and two billion dollars additional goods from China. 0:08:07.880 --> 0:08:10.880 The markets aren't down nearly as much as I would expect, 0:08:10.960 --> 0:08:14.320 given the fact that that seems like a lot. It's 0:08:14.560 --> 0:08:17.320 take again, like using historical data to inform a view 0:08:17.400 --> 0:08:20.080 rather than just giving you my opinion, this is fascinating. 0:08:20.160 --> 0:08:23.480 So if you plot world trade and nominal dollars and 0:08:23.520 --> 0:08:25.000 you look at it on a year in your basis, 0:08:25.000 --> 0:08:28.080 we have that data going back to publicly available data, 0:08:28.280 --> 0:08:31.360 and you said, I have perfect foresight and I know 0:08:31.480 --> 0:08:34.000 that it's going to contract, which is a bottom quartile event. 0:08:34.360 --> 0:08:36.600 You would be shocked to see that if I quartile 0:08:36.679 --> 0:08:39.760 that out, that's actually the highest probability of an advancing 0:08:39.800 --> 0:08:43.040 equity market with the highest average returns. So that to 0:08:43.160 --> 0:08:46.320 me means one of two things. One is that the 0:08:46.320 --> 0:08:51.720 equity market actually discounts this in advance, or two that 0:08:51.840 --> 0:08:56.160 the backdrop is actually more important and can overwhelm the 0:08:56.240 --> 0:09:00.319 individual univariate variable of global trade, which I think we 0:09:00.400 --> 0:09:04.520 have both situations going on currently. When you said backdrop, 0:09:04.960 --> 0:09:07.520 what do you mean by that? That backdrop, now that's 0:09:07.520 --> 0:09:10.840 a great question. By backdrop, I mean the corporate profit recovery. 0:09:11.120 --> 0:09:13.760 So I think we are in year two of what 0:09:13.880 --> 0:09:16.720 could be a four to six year long durable profit 0:09:16.760 --> 0:09:19.400 recovery because we had a contraction on a global earning 0:09:19.440 --> 0:09:23.920 basis in and you're seeing now estimates do something that 0:09:23.960 --> 0:09:27.040 they rarely do historically, which usually as you start the year, 0:09:27.120 --> 0:09:29.360 they start out very optimistic and then over the course 0:09:29.400 --> 0:09:32.000 of the year they come down. You're seeing something that 0:09:32.080 --> 0:09:34.920 you're seeing them do a hook up, right, So that 0:09:34.960 --> 0:09:38.240 tells you two things. One is that analysts are underestimating 0:09:38.280 --> 0:09:41.800 the durability this recovery and underestimating earnings. And to it 0:09:41.840 --> 0:09:45.440 means the valuation levels that we're seeing all those forward 0:09:45.520 --> 0:09:48.920 numbers are actually more solidified, meaning that now at sixteen 0:09:49.040 --> 0:09:53.000 times next year's earnings were at bottom quartile valuation levels. 0:09:53.000 --> 0:09:56.360 Since when you look at historical data, how much do 0:09:56.400 --> 0:09:59.720 you factor in other countries and what's going on with 0:10:00.080 --> 0:10:03.280 um other than just the United States? Because there's been 0:10:03.320 --> 0:10:06.880 this existential question hanging over the markets, how much longer 0:10:06.920 --> 0:10:09.280 can the US diverge from the rest of the world. 0:10:09.280 --> 0:10:11.559 It seems to be in a worse position. No, I 0:10:11.600 --> 0:10:14.000 think that that's definitely true. So I do look on 0:10:14.000 --> 0:10:16.319 a global basis, right, So I look at Europe, I 0:10:16.360 --> 0:10:18.679 look at Japan, and I look at emerging markets and 0:10:18.679 --> 0:10:21.080 what you see historically and again it can always be 0:10:21.200 --> 0:10:23.640 that this time is different. But what you see historically 0:10:23.720 --> 0:10:27.120 is that the US being strong drags other countries and 0:10:27.200 --> 0:10:31.640 regions up, meaning it lowers the probability of a crisis 0:10:31.679 --> 0:10:34.200 that comes back to the U S stock market. So 0:10:34.240 --> 0:10:37.560 you can actually see this divergence on a relative basis 0:10:37.600 --> 0:10:40.200 for quite some time. Speak a little bit more if 0:10:40.200 --> 0:10:43.960 you can about corporate profits. So if you look at 0:10:44.000 --> 0:10:47.480 that recession that we saw in two thousand sixteen, right, 0:10:48.760 --> 0:10:51.400 what I think fascinates me is that most people think, oh, 0:10:51.440 --> 0:10:53.600 it wasn't that big of a deal. It was just 0:10:53.720 --> 0:10:56.199 really energy and materials. And then actually when you look 0:10:56.240 --> 0:10:58.480 at the data, that wasn't the case. At the then 0:10:59.320 --> 0:11:01.840 ten gigs sectors that we saw at the time, you 0:11:01.920 --> 0:11:05.480 had a median stock earning this contraction in seven out 0:11:05.520 --> 0:11:08.480 of those ten sectors. So it was very diffuse, and 0:11:08.520 --> 0:11:11.200 actually on a diffusion basis, it was as much of 0:11:11.240 --> 0:11:16.480 a contraction as we saw in the recession of So 0:11:16.520 --> 0:11:18.760 if you just step back and say, forget the corporate 0:11:18.760 --> 0:11:21.480 tax reform that we put in place, let's just look 0:11:21.480 --> 0:11:24.559 at what an average corporate profit recovery looks like. You 0:11:24.679 --> 0:11:27.440 actually see that it lasts four years. Now, the range 0:11:27.480 --> 0:11:29.560 is pretty wide. It goes between two and six. But 0:11:29.640 --> 0:11:32.200 then of the forty five variables I looked at, and 0:11:32.200 --> 0:11:33.760 it's not all the variables in the world, but it's 0:11:33.760 --> 0:11:35.600 the forty five one. It doesn't correlate to the FED 0:11:35.679 --> 0:11:39.199 raising interest rates. It actually correlates to the starting point 0:11:39.240 --> 0:11:42.760 in bank credit, and that's delinquencies a percentaive overall loans 0:11:43.040 --> 0:11:45.480 bad bad assets as a percentage of assets. However you'd 0:11:45.520 --> 0:11:48.920 like to to quantify it just thirty seconds. I'm curious 0:11:48.920 --> 0:11:52.000 from your perspective, do you think that the tax reform 0:11:52.040 --> 0:11:55.520 brought forward profits and that they're likely to dwindle out 0:11:55.559 --> 0:11:57.440 and that this could be a different period of time 0:11:57.440 --> 0:12:00.760 than the past because of that. So again, there's not 0:12:00.840 --> 0:12:03.400 much data on this. We have six instances in history, right, 0:12:03.440 --> 0:12:07.160 but what you see is exactly history saying confirming what 0:12:07.240 --> 0:12:09.440 we have seen, which is corporate profits turned the year 0:12:09.520 --> 0:12:14.240 before corporate tax reform hits because of that investor optimism 0:12:14.360 --> 0:12:18.040 or I should say that CEO optimism, and it becomes sticky. Right, 0:12:18.080 --> 0:12:21.000 So in history you don't historically see the dwindling, it 0:12:21.000 --> 0:12:24.160 actually sticks really really interesting. Thank you so much for 0:12:24.200 --> 0:12:26.960 being with us, Thanks for having me. Denise Chisholm. She 0:12:27.200 --> 0:12:29.679 is a sector at strategist at Fidelity. Taking a look 0:12:29.720 --> 0:12:32.800 at those historical data points and putting them all together 0:12:33.040 --> 0:12:37.079 saying that perhaps analysts are underestimating just how strong it's 0:12:37.120 --> 0:12:40.160 recovery will be and how long it will last. Him 0:12:40.160 --> 0:12:43.839 really interesting. Yes, that's a bulk case for stocks. Yeah, 0:12:43.880 --> 0:12:46.439 despite the calls for a recession from a number of 0:12:46.480 --> 0:13:02.680 different firms, I want to turn our focus to self 0:13:02.880 --> 0:13:05.040 driving cars. A lot of people thought that this would 0:13:05.080 --> 0:13:09.400 be the future of driving and the car sharing economy. 0:13:09.480 --> 0:13:12.920 But there's a major problem. They can't handle rain or 0:13:13.000 --> 0:13:16.360 sleet or snow. Joining us now, Kyle Stock, Senior correspondent 0:13:16.400 --> 0:13:19.320 for Bloomberg News. I thought your story was fascinating, Kyle, 0:13:19.640 --> 0:13:22.280 thank you so much for joining us. So, just how 0:13:23.240 --> 0:13:28.560 enable unable are these cars able to handle weather? Yeah, 0:13:28.679 --> 0:13:33.520 it's it's tricky. They're making very slow progress on this front. Um, 0:13:33.559 --> 0:13:37.120 there's other things that people thought were going to be 0:13:37.200 --> 0:13:42.120 major stumbling blocks, like epics or other human drivers or algorithms. Um, 0:13:42.240 --> 0:13:44.840 those are all approving a little bit more easy to 0:13:44.920 --> 0:13:48.920 deal with. So, Kyle, let's get this straight. When the 0:13:48.960 --> 0:13:54.440 weather is perfect and there's no traffic, driverless automobiles might 0:13:54.480 --> 0:13:59.920 actually work just fine. But at those moments when it's cloudy, rain, 0:14:00.000 --> 0:14:03.080 any snowy, or there's a lot of traffic or a 0:14:03.080 --> 0:14:07.760 lot of congestion, that's when there might be trouble exactly. 0:14:08.000 --> 0:14:11.079 I mean, there's a reason why they're testing all these 0:14:11.120 --> 0:14:14.560 things in Phoenix for the most Partum, it's pretty sunny 0:14:14.559 --> 0:14:18.600 most of the time. Oh my goodness. I mean, honestly, 0:14:18.920 --> 0:14:21.560 on one hand, it's sort of shocking that this is 0:14:21.600 --> 0:14:23.480 such a big obstacle at a time when so many 0:14:23.480 --> 0:14:26.600 people are considering in a very serious way a mass 0:14:26.640 --> 0:14:29.080 adoption of self driving vehicles and a lot of money 0:14:29.120 --> 0:14:31.960 being thrown at this topic. Absolutely, I want to talk 0:14:32.000 --> 0:14:35.320 about where the opportunities are given that this problem is 0:14:35.720 --> 0:14:38.160 definitely being worked on by a lot of startups with 0:14:38.200 --> 0:14:41.360 a lot of sensor companies that are looking for ways 0:14:41.440 --> 0:14:44.320 to address it. Can you can you talk to that please? Yeah. 0:14:44.360 --> 0:14:46.560 I mean there's there's definitely a hardware play and a 0:14:46.600 --> 0:14:49.800 software play, so you know, the engineers are tuning the 0:14:49.840 --> 0:14:53.840 software to sort of help help the sensors make better 0:14:53.880 --> 0:14:57.960 sense of the world when there's rain or fog or snow. Um. 0:14:58.080 --> 0:15:01.200 But then they're also you know, building these these sensors. 0:15:02.000 --> 0:15:06.760 Way Moo, the leading self driving company, is build its 0:15:06.800 --> 0:15:10.280 own sensors. So they say they're iterating every time they 0:15:10.360 --> 0:15:13.040 make a new version of the product. And one of 0:15:13.080 --> 0:15:14.720 the companies I talked to is out of m i 0:15:14.800 --> 0:15:19.040 T called Waves Sense, and they have an entirely new approach. 0:15:19.080 --> 0:15:25.560 They're doing a ground penetrating radar literally looking under the road, um, 0:15:25.600 --> 0:15:29.120 to keep the car on track so they don't need 0:15:29.160 --> 0:15:31.480 to worry about whatever is happening on top of the 0:15:31.520 --> 0:15:35.760 road in terms of weather. Kyle disabused me of my 0:15:35.920 --> 0:15:38.040 idea here, But I don't think the issue has to 0:15:38.120 --> 0:15:40.720 do with driverless automobiles. It has to do with traffic. 0:15:41.400 --> 0:15:43.360 If you're if they if you're able to drive in 0:15:43.440 --> 0:15:47.560 traffic free conditions, driving is kind of fun, isn't it. 0:15:48.080 --> 0:15:50.920 It sure is? Yeah, And well, the other interesting thing 0:15:51.040 --> 0:15:54.560 is I think we're almost holding sort of these robot 0:15:54.640 --> 0:15:58.640 vehicles to a higher standard. We expect them to be 0:15:58.640 --> 0:16:01.760 better than human drivers. And there's a lot of weather 0:16:01.840 --> 0:16:05.280 when I'm not comfortable driving. I won't speak for you, Pim, 0:16:05.320 --> 0:16:08.320 but um, we want them to get us there, and 0:16:08.520 --> 0:16:11.840 you know, yeah, right, And the idea is, you know, 0:16:11.880 --> 0:16:15.240 when it's inclement weather, slow down. Well, hold on a second, 0:16:15.360 --> 0:16:17.280 I take a step back here, because your story said 0:16:17.280 --> 0:16:19.400 that even a dusting of snow would be a problem, 0:16:19.440 --> 0:16:22.040 and anything more than that, So I think that that 0:16:22.080 --> 0:16:23.920 would be just fine for you, Pim, to go out 0:16:24.000 --> 0:16:26.200 driving in a little bit more than a dusting of snow. 0:16:26.760 --> 0:16:29.480 But I do want to talk about the incredible investment, 0:16:29.520 --> 0:16:32.040 as Pim mentioned earlier that a lot of major car 0:16:32.120 --> 0:16:35.920 companies are making in autonomous vehicles. If you have such 0:16:35.960 --> 0:16:38.880 fundamental problems as this at a time when people do 0:16:39.040 --> 0:16:42.160 hold robots at a higher standard, does it suggest that 0:16:42.200 --> 0:16:44.640 perhaps our hopes are a little bit further along than 0:16:44.680 --> 0:16:47.960 the actuality when it comes to these cars. Yeah, I 0:16:47.960 --> 0:16:50.560 think that's fair to say. But it's just the opportunity 0:16:50.600 --> 0:16:54.040 to market is so huge. Um, you know the ride 0:16:54.320 --> 0:16:59.120 they're talking about a seven trillion dollar rideshare business that. Um, 0:16:59.200 --> 0:17:01.720 you know, these company Ace and the the investors behind 0:17:01.760 --> 0:17:05.240 them are dreaming big. So even if they're just even 0:17:05.280 --> 0:17:08.760 if they can operate only in a perfect sunny day, 0:17:08.800 --> 0:17:12.679 it still makes sense to really be be charging for this. 0:17:12.840 --> 0:17:19.080 If you're a company like Ford or Uber or Weymo. Um, Kyle, 0:17:19.119 --> 0:17:21.920 I would just say all people who have been stuck 0:17:22.119 --> 0:17:25.359 in one of those automated people movers at an airport, 0:17:25.440 --> 0:17:28.479 please raise your hand at one point or other, listening 0:17:28.520 --> 0:17:33.040 to the to the music play over and over again. Yeah, 0:17:33.280 --> 0:17:35.680 this is is Do you feel that there's gonna be 0:17:35.720 --> 0:17:37.600 a shakeout from this? I mean, you can use a 0:17:37.600 --> 0:17:40.760 lot of the technology in cars that are driven by 0:17:40.840 --> 0:17:44.040 human beings, of course, whether that's blind spot warning or 0:17:44.760 --> 0:17:48.280 you know, breaking technology, which is all great, But I mean, 0:17:48.280 --> 0:17:49.679 do you think that people are going to sort of, 0:17:49.720 --> 0:17:51.679 as Leasa said, kind of pair back a little of 0:17:51.720 --> 0:17:56.560 this science fiction. I think the timeline will be adjusted. Um. 0:17:56.600 --> 0:17:59.520 I think rather than a shakeout, though, what you're going 0:17:59.560 --> 0:18:01.800 to see this is not something we've talked about a lot, 0:18:02.320 --> 0:18:06.880 is a rollout based on geography. So the irony here 0:18:06.960 --> 0:18:08.879 is that some of the tech centers of the world, 0:18:09.359 --> 0:18:13.600 San Francisco and Seattle specifically, might be the last places 0:18:13.640 --> 0:18:16.960 to get self driving vehicles. You're going to see them 0:18:17.000 --> 0:18:20.639 in the Sunbelt, You're gonna see him in Florida. Um. 0:18:20.720 --> 0:18:24.120 One of the analysts I spoke with said, basically, when 0:18:24.119 --> 0:18:27.040 they these cars do show up in a place like Boston, 0:18:27.160 --> 0:18:31.040 they'll be bespoke versions, so they'll have twice as many sensors, 0:18:31.160 --> 0:18:35.199 will be totally over over engineered just to deal with 0:18:35.240 --> 0:18:38.840 the heavy weather in a way that they won't be um, 0:18:38.960 --> 0:18:42.720 you know in uh in Georgia. Right, all right, well, 0:18:42.720 --> 0:18:45.520 we gotta leave it there, but thanks very much. Kyle Stock, 0:18:45.560 --> 0:18:49.320 our senior correspondent for Bloomberg News, talking about self driving 0:18:49.359 --> 0:18:52.240 automobiles and whether they can really handle the rain, the 0:18:52.359 --> 0:19:08.399 sleet or the snow. Will find out. Oil prices have 0:19:08.600 --> 0:19:14.240 been rather stable considering the backdrop of hurricanes and typhoons 0:19:14.280 --> 0:19:18.119 and other situations, but perhaps some traitors are not taking 0:19:18.160 --> 0:19:22.280 into account. November four, that is an important date when 0:19:22.480 --> 0:19:26.080 sanctions will go into effect on Iran. Here to talk 0:19:26.119 --> 0:19:29.240 about that, Dr Ellen at Wald, president of Transversal Consulting 0:19:29.440 --> 0:19:31.640 and a non residency your fellow at the Atlantic Council's 0:19:31.680 --> 0:19:34.760 Global Energy Center, as well as Toby Harshaw, editor at 0:19:34.880 --> 0:19:39.320 Bloomberg Opinion. Uh. Dr Wald, let's start with you. Why 0:19:39.440 --> 0:19:43.199 is November four such an important date? November four is 0:19:43.359 --> 0:19:46.080 d date at which these sanctions are going to go 0:19:46.160 --> 0:19:49.119 into effect, and now that it's the middle of September, 0:19:49.640 --> 0:19:52.320 we are really looking to see how the dominoes are 0:19:52.320 --> 0:19:55.040 going to fall when it comes to the sanctions. Which 0:19:55.040 --> 0:19:58.920 countries are actually going to stop importing Iranian oil and 0:19:59.080 --> 0:20:02.080 which countries are planning to continue and right now it 0:20:02.160 --> 0:20:06.240 looks like China, India, and Turkey are still importing lots 0:20:06.240 --> 0:20:09.600 of Iranian oil. But also surprisingly we now have data 0:20:09.680 --> 0:20:14.280 that shows that Italy and Spain and possibly even Greece 0:20:14.520 --> 0:20:18.760 are still importing oil from Iran even though it's now 0:20:18.840 --> 0:20:22.399 the middle of September. Toby Harshaw, I want you to 0:20:22.440 --> 0:20:24.840 come in on this topic of Iran, but ed in 0:20:25.280 --> 0:20:28.560 what's going on with their economy. About six of the 0:20:28.560 --> 0:20:33.359 Iranian economy is centrally planned. It's basically dominated by the 0:20:33.400 --> 0:20:37.719 oil and gas industry. Yeah, and it's dominated by UH 0:20:38.720 --> 0:20:44.000 UH the Iranian Guards, which are supposedly a military force, 0:20:44.040 --> 0:20:47.280 but they become the most dominant force in the economy. UM. 0:20:47.359 --> 0:20:52.200 There's no overestimating the effect that oil has on their economy. 0:20:52.280 --> 0:20:55.080 The question is with their exports, how much of that 0:20:55.160 --> 0:20:58.439 money they can bring back UH. Last time, with the 0:20:58.480 --> 0:21:02.040 sanctions UH, the money was held in escrow by countries 0:21:02.080 --> 0:21:05.159 like India and China, and Iran could only use the 0:21:05.160 --> 0:21:08.840 money to to buy products in those countries and have 0:21:08.920 --> 0:21:11.439 them sent back. And they were actually buying products in 0:21:11.520 --> 0:21:14.560 China that they didn't even really need. So as Allen 0:21:14.600 --> 0:21:16.840 will tell us that's one of the big questions about 0:21:16.880 --> 0:21:20.320 how these sanctions are reinstated this time around. So Ellen 0:21:20.560 --> 0:21:22.879 just to talk a little bit about plugging the holes 0:21:22.920 --> 0:21:26.840 and sort of creating a more airtight system of sanctions. 0:21:27.240 --> 0:21:31.480 I'm wondering if the US administration can do that successfully, 0:21:31.520 --> 0:21:34.159 what would the effect be on the oil market, on 0:21:34.200 --> 0:21:36.640 the price of crude in a way that perhaps people 0:21:36.680 --> 0:21:40.080 aren't factoring in right now. Well, if the US can 0:21:40.240 --> 0:21:44.240 really enforce these sanctions to the maximum to plug these holes. 0:21:44.280 --> 0:21:48.600 There have been holes in terms of Iran's exporting of 0:21:48.800 --> 0:21:51.160 content thates, which is a very light type of crude 0:21:51.160 --> 0:21:55.560 oil that some people see as or or classify as 0:21:55.560 --> 0:21:58.439 crude oil and other people don't technically classify it as 0:21:58.440 --> 0:22:01.119 crude oil. But if they can ug all of these holes, 0:22:01.160 --> 0:22:05.320 if they can really get the Iranian exports down, I 0:22:05.320 --> 0:22:08.600 would say, buy one point five million barrels wave they 0:22:08.600 --> 0:22:11.000 can eliminate that from the market, then we could really 0:22:11.040 --> 0:22:14.439 be in for some serious tightening in the oil market, 0:22:14.680 --> 0:22:17.480 mostly because at the same time we're also seeing continued 0:22:17.560 --> 0:22:22.119 drops from Venezuela. US production isn't increasing at quite the 0:22:22.240 --> 0:22:24.040 rate that we thought it was going to be and 0:22:24.080 --> 0:22:27.560 so the question is really can Russia and Saudi Arabia, 0:22:27.640 --> 0:22:30.119 the two countries that have the most spare capacity, can 0:22:30.160 --> 0:22:34.520 they really increase to combat these drops. And then the 0:22:34.560 --> 0:22:37.480 other question is if they can, will they And that's 0:22:37.480 --> 0:22:42.000 all going to come down to that December three Opeque meeting. 0:22:42.680 --> 0:22:44.439 So in other words, if they don't, that means the 0:22:44.480 --> 0:22:48.720 price of crude could rise substantially. It could rise substantially, 0:22:48.720 --> 0:22:52.240 But there's there's also the speculation effect. So even if 0:22:52.280 --> 0:22:55.439 we we do have enough crude oil to go around, 0:22:55.720 --> 0:22:58.960 there's always this effect of people thinking that we don't 0:22:59.000 --> 0:23:01.920 necessarily have an enough and that can push the prices up. 0:23:02.080 --> 0:23:04.560 There's also the matter of the right type of crude oil. 0:23:04.800 --> 0:23:08.240 Do we have enough heavy crude coming in? That's really 0:23:08.320 --> 0:23:10.840 kind of a hot commodity now because there's so much 0:23:11.320 --> 0:23:13.680 there's kind of an overflow of light crude coming out 0:23:13.800 --> 0:23:17.000 from the US and and from from fracking, So we 0:23:17.040 --> 0:23:18.879 need to have the right type of crude. So crude 0:23:19.119 --> 0:23:22.119 quality matters, as people like to say, But there's also 0:23:22.200 --> 0:23:25.840 the issue of um demand and what one of the 0:23:25.880 --> 0:23:29.960 interesting things on the horizon is that OPEC has recently 0:23:30.000 --> 0:23:33.720 revised its demand figures, So they think that demand is 0:23:33.720 --> 0:23:36.760 actually going to um to be less than they thought 0:23:36.920 --> 0:23:41.040 in en and that could actually kind of arrest some 0:23:41.200 --> 0:23:44.840 of the higher crew prices. Toby, maybe just to add 0:23:44.880 --> 0:23:48.360 your thoughts about what's happening to the Iranian economy as 0:23:48.400 --> 0:23:53.240 a result of these UH sanctions and additional sanctions, I 0:23:53.320 --> 0:23:56.359 just want to note it's about eight two million people, 0:23:56.640 --> 0:24:02.160 that's the population of Iran and unemployment. If you look 0:24:02.160 --> 0:24:05.800 at unemployment levels, maybe fifteen to twenty nine, about a 0:24:05.960 --> 0:24:09.960 quarter of the potential workforce is out of work. Yeah, 0:24:10.000 --> 0:24:14.400 and it always depends who's who's compiling those statistics. Uh. 0:24:14.840 --> 0:24:18.080 If anything, that's probably higher. The inflation statistic put out 0:24:18.160 --> 0:24:21.200 by the Iranian government is an absolute joke. Um, it's 0:24:21.359 --> 0:24:24.720 vastly higher than whatever they're going to say. So the 0:24:24.840 --> 0:24:30.920 combination of high inflation, high unemployment, and now additional sanctions, 0:24:31.440 --> 0:24:36.359 will it have the intended effect on the Iranian government? UM? 0:24:36.600 --> 0:24:38.320 I don't see it as having much of an effect 0:24:38.320 --> 0:24:41.400 at all. Um. I don't think they have much choice 0:24:41.800 --> 0:24:45.160 except to, uh, you know, to bear it, to buckle up, 0:24:45.200 --> 0:24:48.119 and and it's going to happen. Um. The it's a 0:24:48.119 --> 0:24:51.800