Latest / Bloomberg Intelligence / New China Tariffs Would Quickly Hurt Economy: Hufbauer

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New China Tariffs Would Quickly Hurt Economy: Hufbauer · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
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  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: or the trading floor. Find the Bloomberg P and L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Nafter
• 0:33
  Speaker 1: renegotiations with Mexico and Canada, how are those two countries
• 0:39
  Speaker 1: dealing with demands from the United States. Here to tell
• 0:42
  Speaker 1: us more is Gary Clyde Huffbauer, non Resident Senior Fellow
• 0:46
  Speaker 1: for the Peterson Institute for International Economics. Joining us from Washington.
• 0:51
  Speaker 1: Gary Huffbauer, What exactly are the sticking points between the
• 0:56
  Speaker 1: United States and Canada UH? There are three. First of all,
• 1:02
  Speaker 1: the United States President Trump wants Canada to dramatically increase
• 1:08
  Speaker 1: access for the US dairy farmers, and Canada has a
• 1:12
  Speaker 1: rather protected so called supply management system. Secondly, President Trump
• 1:19
  Speaker 1: wants to get rid of UH, an arbitration system for
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  Speaker 1: handling or for reviewing anti dumping and countervating duty cases,
• 1:29
  Speaker 1: and that UH. Canadians have described that as a red
• 1:33
  Speaker 1: line and Thirdly, Uh, the agreement with Mexico provides for
• 1:40
  Speaker 1: a review in six years and possible termination in sixteen years,
• 1:47
  Speaker 1: and the Canadians strongly prefer an indefinite life of the
• 1:52
  Speaker 1: new agreement. So those are the three big sticking points. Dairy,
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  Speaker 1: as a senior fellow at the Peterson Institute, you often
• 2:02
  Speaker 1: Peterson Institute is is often thought of as putting forward
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  Speaker 1: a pro trade, pro free trade type of agenda, and
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  Speaker 1: I'm curious on your perspective coming from that, given your
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  Speaker 1: experience as a Deputy Assistant Secretary for International Trade and
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  Speaker 1: Investment Policy at the U s. Trejury in the nineteen seventies. Uh,
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  Speaker 1: I'm just wondering, is there a corollary to the time
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  Speaker 1: that we're living in in terms of the anti free
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  Speaker 1: trade sentiment in your in your experience. Oh, oh yes,
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  Speaker 1: this is a very strong anti free trade mood after
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  Speaker 1: about sixty years of progressive pre er trade by both
• 2:40
  Speaker 1: by the United States and other countries. But this particular
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  Speaker 1: agreement is reading a backward step and a big backward
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  Speaker 1: step in terms of of preer trade in three important
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  Speaker 1: sectors autos. Firstly, um textiles to some extent, and then
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  Speaker 1: steal and Alma because a side agreement here will put
• 3:02
  Speaker 1: quotas on imports of steel and aluminum from Mexico and
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  Speaker 1: possibly from Canada as well. So those are those are
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  Speaker 1: steps backwards. Guard do you believe the technology and innovation
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  Speaker 1: will and I I guess it is a pun trump
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  Speaker 1: the the the the sort of conflict that you just
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  Speaker 1: described having to do with free trade. That the fact
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  Speaker 1: that you can move money as well as material all
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  Speaker 1: around the world with a click of a button, is
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  Speaker 1: that going to make it much more difficult to kind
• 3:33
  Speaker 1: of enforce trade restrictions. It does, It does, And you
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  Speaker 1: can also add the digital revolution note we're in, which
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  Speaker 1: is really a big pathway to freer trade. But the
• 3:48
  Speaker 1: comp administration just to its best to plug, you know,
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  Speaker 1: loopholes that might be created by technology. And in the
• 3:56
  Speaker 1: auto industry they've they've really put all out to well
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  Speaker 1: to restrict and we haven't seen the end of it,
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  Speaker 1: because after this agreement is reached, they will try to
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  Speaker 1: reach agreements with Europe and Japan restricting US auto imports
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  Speaker 1: from those two areas as well. So you know, you're right,
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  Speaker 1: technology is liberalizing and then the uh, the administration is
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  Speaker 1: trying to catch up with some more thumbs in the
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  Speaker 1: in the dyke, Gary, do you think that this wave
• 4:27
  Speaker 1: of protection ism, an anti free trade sentiment stems from
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  Speaker 1: a failure in free trade to accomplish certain things that
• 4:35
  Speaker 1: people were hoping for. Uh, well that's what they say,
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  Speaker 1: but that's not in fact what's happening. What's happening, going
• 4:43
  Speaker 1: back to the technology point, is that technology is is
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  Speaker 1: replacing labor and a lot of different sectors, a lot
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  Speaker 1: of different labor activities, not only blue collar, but but
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  Speaker 1: white collar as well. And uh, that's having an effect
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  Speaker 1: on average weight grow. Politicians need something to blame that on.
• 5:03
  Speaker 1: So hey, blame it on the foreigner. That's the simple politics. Um,
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  Speaker 1: so it's not free trade, its technology, which is with
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  Speaker 1: its uh you know, rough spots, which is causing having
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  Speaker 1: most of his angst speak if you can about the
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  Speaker 1: US Mexico agreement as you know it, what are some
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  Speaker 1: of the good and what are some of the bad points.
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  Speaker 1: The good points are lifted from the Transpacific Partnership Agreement, which,
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  Speaker 1: as you know, President Trump rejected right on his first
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  Speaker 1: day in office. So digital trade. Actually, they are very
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  Speaker 1: pro liberalization and digital trade, and that's important to the
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  Speaker 1: United States, which is a digital superpower. Intellectual property protections, uh,
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  Speaker 1: and there are some good features there searting from the
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  Speaker 1: standpoint of US companies. Biologic data gets protected for ten years, uh,
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  Speaker 1: copyrights for life of creative plus seventy five years, and
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  Speaker 1: a lot of strong stuff on enforcement. There will be
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  Speaker 1: a chapter on state on enterprises. That's that's a modest
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  Speaker 1: issue with Mexico. Obviously it's a big issue with China.
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  Speaker 1: And this chapter meant to be a template. There will
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  Speaker 1: be something on currency again, more a template for China
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  Speaker 1: talks going forward in for Mexico today. So those are
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  Speaker 1: all you know, those are all good things and uh,
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  Speaker 1: the administration needs to be congratulated who are modernizing in
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  Speaker 1: those respects. Gary, you were quoted in a recent article
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  Speaker 1: in Axis saying that if Trump President Trump imposes fresh
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  Speaker 1: TIFFs and two billion dollars in Chinese goods, uh, that
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  Speaker 1: will trigger a trade war with huge financial repercussions because
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  Speaker 1: China will not back down. One key question as we
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  Speaker 1: look at markets, how long will it take for those
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  Speaker 1: financial repercussions? How long will it take for those to
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  Speaker 1: be felt in the United States once this trade work
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  Speaker 1: gets going. Oh, the finance markets move ahead of the
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  Speaker 1: real markets, and then it will happen, I think, very quickly.
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  Speaker 1: And China is not Mexico. I mean, Mexico is is
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  Speaker 1: in very difficult situation. It's a weak country compared to
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  Speaker 1: the United States. China is not going to back down.
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  Speaker 1: China is going to go with kit for tax. So
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  Speaker 1: if Trump does two undred billion, will's another billion. They'll
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  Speaker 1: start restricting US companies doing business in China. Caterpillar, uh mowing,
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  Speaker 1: you name it, They'll restrict them. So I think the
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  Speaker 1: financial repercussions from that will happen within you know, within
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  Speaker 1: a week or two or even quicker and in a
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  Speaker 1: few days. And it's because of those financial repercussions that
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  Speaker 1: I remain skeptical. Even though Trump keeps saying it's gonna
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  Speaker 1: go after the Chinese, that he will do it riar
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  Speaker 1: to the November election, I just can't see this as
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  Speaker 1: being good politics for the Republicans come November. Gary, thank
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  Speaker 1: you so much for being with us today. Hey, thanks
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  Speaker 1: a lot. Take care, Take care. Gary. Clyde Huffbauer is
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  Speaker 1: nonresident Senior Fellow at the Peterson Institute for International Economics
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  Speaker 1: in Washington, d C. He has a pretty deep knowledge
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  Speaker 1: of all things having to do with trade. I mean,
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  Speaker 1: I just want to give you some sense of what
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  Speaker 1: this background is. He was the Deputy Assist and Secretary
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  Speaker 1: of International Trade and Investment Policy at the US Treasury
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  Speaker 1: and Director of the International Tax Staff at the U
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  Speaker 1: S Treasury during the nineteen seventies. Talking of Ford, It's
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  Speaker 1: created credit rating was lowered yesterday by Moody's Investors Service,
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  Speaker 1: And I want to bring in Tad Ravelle, chief investment
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  Speaker 1: officer for fixed income at TCW Group. Tad, You're the
• 9:02
  Speaker 1: perfect person to have on given the fact that Ford
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  Speaker 1: was just downgraded one notch above the junk rating, the
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  Speaker 1: highest junk rating, and Ford has a ton of debt.
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  Speaker 1: Is this a buying opportunity for you since prices on
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  Speaker 1: the debt are falling, are falling or is it a
• 9:19
  Speaker 1: selling a sort of need to sell kind of moment. Well,
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  Speaker 1: in our view, the market I think is beginning to
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  Speaker 1: maybe more properly priced the risk associated with Ford. As
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  Speaker 1: you point out, they have a lot of debt. I
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  Speaker 1: believe Ford the company has about ninety billion in long
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  Speaker 1: term debt and as you also pointed out, Moody's dropped
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  Speaker 1: the rating to the lowest level of investment grade, the
• 9:43
  Speaker 1: b A A three, and they also indicated a negative outlook,
• 9:46
  Speaker 1: which means that officially, or according to the usual way
• 9:49
  Speaker 1: people look at these things, for it is a perspective
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  Speaker 1: fallen angel it makes any additional missteps, that runs the
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  Speaker 1: risk of being junked in terms of its rating by
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  Speaker 1: by Moodies. There's about a hundred twenty basis points um
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  Speaker 1: of spread currently in that Forward trades wider to General Motors. UH.
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  Speaker 1: Given our inclination and our our belief about the relative
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  Speaker 1: merits of the two businesses, we would rather express a
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  Speaker 1: view in the autos in the General Motors name rather
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  Speaker 1: than the Ford name. Hold on a second, have you
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  Speaker 1: are you actively selling Forward in order to buy General
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  Speaker 1: Motors or you just aren't buying any Ford and are
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  Speaker 1: adding General Motors. We actually have we we have repositioned
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  Speaker 1: ourselves to emphasize General Motors at the expense of Ford
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  Speaker 1: in the portfolios. We we haven't done it so much reactively,
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  Speaker 1: I think we we have held to the view that
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  Speaker 1: General Motors has made some more difficult choices. It's made
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  Speaker 1: it the tougher decisions, and as a result, it's in
• 10:45
  Speaker 1: a better position visa v. Ford. But of course it
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  Speaker 1: should be pointed out that there tends to be a
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  Speaker 1: significant amount of correlation in the way General Motors and
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  Speaker 1: Ford trade with one another. That correlation has broken down
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  Speaker 1: recently with the widening out in the Ford spreads, and
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  Speaker 1: as I indicated, I think that that's that's that is
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  Speaker 1: a fair market reaction. It is not, in our in
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  Speaker 1: our view, a proper time to be adding for it exposure,
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  Speaker 1: given its prospective risk profile and the potentiality of it
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  Speaker 1: becoming a fallen angel. It would become a rather large
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  Speaker 1: fallen angel. By the way, Ted Ravell speak about the
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  Speaker 1: sales by corporate holders of bonds, and I'm thinking of
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  Speaker 1: companies such as Apple and Oracle. They were big bond buyers.
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  Speaker 1: Now they seem to be big bond sellers. What happens
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  Speaker 1: when they sell well, we saw some of that happen
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  Speaker 1: in the first quarter of this year. As you quite
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  Speaker 1: rightly pointed out, the large cash piles that some of
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  Speaker 1: these large tech franchises held, many of which were being
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  Speaker 1: held in effect in overseas. Types of accounts were um
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  Speaker 1: were largely or significant amounts of them were liquidated in
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  Speaker 1: the first quarter this year. So what had been a
• 12:01
  Speaker 1: long accumulation process mostly of short term corporate debt, turned
• 12:05
  Speaker 1: into a buying opportunity actually in the first quarter of
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  Speaker 1: this year as those positions that came into the marketplace.
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  Speaker 1: I don't think that we've seen much activity over the
• 12:18
  Speaker 1: course of the last couple of quarters. However, as I said,
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  Speaker 1: that was a really early two thou eighteen type of event.
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  Speaker 1: But I think if we look at the more general
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  Speaker 1: question about, uh, what is the direction the next direction
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  Speaker 1: of the corporate bond market, in our view, it's a
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  Speaker 1: it's going to a bad place that you're in a
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  Speaker 1: late cycle type of environment. Yeah, you're in a late
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  Speaker 1: cycle type of environment. There's a very high level of
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  Speaker 1: leverage that exists in the corporate bond market. Generally. There
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  Speaker 1: are other forms of market internals, if that's the word
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  Speaker 1: for it, that are probably bear watching, and they have
• 12:49
  Speaker 1: been um they have been mentioned by a number of folk.
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  Speaker 1: But UH Moody's for instance, called out the percent of
• 12:58
  Speaker 1: issue ince in the the loan market that has now
• 13:01
  Speaker 1: become covenant light. This is obviously a new phenomenon or
• 13:05
  Speaker 1: a phenomenon that is representative only of this cycle, and
• 13:08
  Speaker 1: it means that the types of bank loans that are
• 13:11
  Speaker 1: widely syndicated and trading in the capital markets are particularly
• 13:15
  Speaker 1: risky the hold on but leverage loans are different than
• 13:19
  Speaker 1: fixing come debt. And I'm just wondering, I mean, have
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  Speaker 1: you gotten rid of your leverage loan exposure almost entirely?
• 13:25
  Speaker 1: I would you see the same risk in the high
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  Speaker 1: old bond market? Well? Um, right, So, technically speaking, what
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  Speaker 1: you say is correct that leverage loans are not strictly
• 13:35
  Speaker 1: speaking bonds. Um. However, they are an alternative form of
• 13:39
  Speaker 1: financing that exists for leveraged companies. So leverage companies generally
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  Speaker 1: speaking have a choice as to whether or not they
• 13:47
  Speaker 1: prefer to access the high old bond market or the
• 13:50
  Speaker 1: leverage loan market. In that sense, they are actually close
• 13:54
  Speaker 1: siblings of one another. Um. So, I guess what I
• 13:58
  Speaker 1: would put forward is that many of the dynamics as
• 14:01
  Speaker 1: underwriting standards have softened loosened in the leverage loan market.
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  Speaker 1: Something comparable has also occurred in the high yield market.
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  Speaker 1: The fact that credit is is so accessible and on
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  Speaker 1: such poor terms from the point of view of a lender,
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  Speaker 1: in our opinion, is a very significant red flag in
• 14:18
  Speaker 1: the context, as they mentioned, a moment ago of a
• 14:21
  Speaker 1: late cycle environment where leverage is already high and the
• 14:24
  Speaker 1: potentiality for a growth recession or a generalized slow down
• 14:30
  Speaker 1: definitionally is rising. Okay, so just twenty seconds, are you
• 14:33
  Speaker 1: buying emerging markets in the sell off? Not yet? Uh?
• 14:38
  Speaker 1: The If you look at the longer term spreads of
• 14:41
  Speaker 1: the emerging market asset class, while the spreads are wider,
• 14:44
  Speaker 1: it is still based upon the historical spread levels, still
• 14:48
  Speaker 1: fairly tight. And um, I think the dynamics that we've
• 14:52
  Speaker 1: seen over the course of the last several weeks should
• 14:54
  Speaker 1: give one quite a bit of pause in an environment
• 14:56
  Speaker 1: of quantitative tightening. What is seems to be occurring as
• 14:59
  Speaker 1: a the weaker borrowers are being revealed in the market.
• 15:02
  Speaker 1: So what we've seen so far, of course is Turkey,
• 15:04
  Speaker 1: Argentina and more recently Indonesia. There may be others. Thanks
• 15:08
  Speaker 1: very much for being whether US tad revels the Chief
• 15:11
  Speaker 1: Investment Officer for Fixed Income for TCW, helping to manage
• 15:16
  Speaker 1: more than a hundred and eighty billion dollars. How satisfied
• 15:35
  Speaker 1: are you with your job? Gad Levanon is the Conference
• 15:39
  Speaker 1: Board's Chief US economist, and he's here to discuss their
• 15:42
  Speaker 1: new survey just in time for Labor Day. It is
• 15:46
  Speaker 1: called the Labor Day Survey of US employees overall are
• 15:50
  Speaker 1: satisfied with their job. Gad, thanks very much for coming
• 15:53
  Speaker 1: into the studio. What are some of the big takeaways
• 15:56
  Speaker 1: from this report? Well, I think the main takeaway it's
• 16:00
  Speaker 1: seven years in a road that we're seeing an improvement
• 16:03
  Speaker 1: in jobs, in job satisfaction, and I think a lot
• 16:06
  Speaker 1: of it is related to the improving labor market. We're
• 16:10
  Speaker 1: seeing improvement in satisfaction, especially in components related to the
• 16:15
  Speaker 1: labor market like job security and wages, and so as
• 16:20
  Speaker 1: long as the labor market continues to improve, I think
• 16:23
  Speaker 1: we'll see stronger job satisfaction. It's interesting to me that
• 16:27
  Speaker 1: there's job satisfaction with wages when we look at the
• 16:30
  Speaker 1: real wages that haven't gone up at all in the
• 16:33
  Speaker 1: past year. In fact, by some measures have gone down
• 16:36
  Speaker 1: if you counter and inflation, So can you square these
• 16:39
  Speaker 1: two Well, there are a lot of wage measures, and
• 16:43
  Speaker 1: some of them tell different stories from others. But I
• 16:46
  Speaker 1: think it is true that the overall wages are not
• 16:49
  Speaker 1: accelerating as one would expect given how tied the labor market.
• 16:53
  Speaker 1: But if you look at wages for blue color versus
• 16:56
  Speaker 1: white color workers, you do see an interesting gap. Dere's
• 17:00
  Speaker 1: In blue color and low paid services occupations you see
• 17:03
  Speaker 1: already a significant acceleration in wages, but in white color
• 17:08
  Speaker 1: the hiring hyping professionals and management positions there you don't
• 17:13
  Speaker 1: see as much wage growth. Yet this is fascinating to
• 17:17
  Speaker 1: me because a lot of people think of it as
• 17:18
  Speaker 1: being the other way around, right, that the wealth gap
• 17:21
  Speaker 1: between rich and poor has been widening. That you can
• 17:24
  Speaker 1: see this with respect to what's been going on with
• 17:26
  Speaker 1: those who can invest in stocks who who can't um
• 17:29
  Speaker 1: But what you're saying is from a wage perspective, that
• 17:32
  Speaker 1: is not the case in the last two or three years.
• 17:35
  Speaker 1: That's not the case. And I know it is contrary
• 17:38
  Speaker 1: to to what a lot of people you know and
• 17:43
  Speaker 1: and what was the case for many decades. But now
• 17:45
  Speaker 1: there are several factors that are really tightened in labor
• 17:48
  Speaker 1: markets for blue color and low paid services occupations. One
• 17:52
  Speaker 1: of them is the fact that the US labor force
• 17:56
  Speaker 1: is becoming more and more educated, and fewer people are
• 17:59
  Speaker 1: willing to take those blue color low paying services jobs.
• 18:03
  Speaker 1: Yet they're sharing. Employment is continuing to go up or
• 18:07
  Speaker 1: continuing to remain the same, so fewer people are interested
• 18:12
  Speaker 1: in those jobs even though they're growing rapidly. That's one thing.
• 18:16
  Speaker 1: The second is the disability and developments in the United States.
• 18:21
  Speaker 1: There have been a huge increase in the share of
• 18:23
  Speaker 1: people who are saying that they are not in the
• 18:26
  Speaker 1: labor force because of disability, and almost all of them
• 18:29
  Speaker 1: are concentrated in the less educated population, so people with
• 18:34
  Speaker 1: no high school degree. But even with high school degree
• 18:37
  Speaker 1: and some college it's almost no none of that is
• 18:40
  Speaker 1: happening in the population with a college degree. God. There
• 18:45
  Speaker 1: are twenty three survey components what people say about their
• 18:50
  Speaker 1: commute to and from their place of work. So as
• 18:55
  Speaker 1: a New Yorker, you will probably be surprised that this
• 18:58
  Speaker 1: is one of the top ranking elements. So most people
• 19:01
  Speaker 1: are more satisfied with their commute than other parts of
• 19:06
  Speaker 1: their job. It's probably not people in the New York area,
• 19:09
  Speaker 1: but in other parts of the country people are pretty
• 19:12
  Speaker 1: satisfied with their commute. How do you get to work?
• 19:15
  Speaker 1: How do you get to work? I walk mostly and
• 19:19
  Speaker 1: take one stop subway or a tramp from Roosevelt Island
• 19:23
  Speaker 1: so for me, I can't complain about my compunity. He's
• 19:26
  Speaker 1: one of those three. I would never complain. I want
• 19:30
  Speaker 1: to know about job disappointment. What's the greatest disappointment that
• 19:33
  Speaker 1: people are expressing in the survey? People don't like their bones.
• 19:39
  Speaker 1: They don't like a promotion policy because you know, I
• 19:44
  Speaker 1: think part of it is that more than fifty percent
• 19:47
  Speaker 1: of people think that they are above average, so they
• 19:50
  Speaker 1: think they can do better. But you can only promote
• 19:54
  Speaker 1: so many people, and so that's something that people are
• 19:56
  Speaker 1: unhappy about. They're unhappy with their training opportunity, is with
• 20:00
  Speaker 1: the performance review process. Those are some of the things
• 20:03
  Speaker 1: that people are unhappy. But when we talk about training programs,
• 20:07
  Speaker 1: because there's been a lot of focus on that recently,
• 20:09
  Speaker 1: how to retrain employees who might have outdated skills to
• 20:12
  Speaker 1: make them more compatible with what's needed today. What types
• 20:16
  Speaker 1: of training are we talking about? I mean, is it
• 20:17
  Speaker 1: with computer software? Is it with understanding the assembly of
• 20:22
  Speaker 1: new components? I mean, what what? What training are we
• 20:24
  Speaker 1: talking here? I mean the question is just general training.
• 20:28
  Speaker 1: But I suspect there aren't a good statistics about training.
• 20:33
  Speaker 1: But kind of common knowledge is that companies are over
• 20:37
  Speaker 1: time spending less on training because they don't want to
• 20:39
  Speaker 1: commit resources to workers who may live in a year
• 20:43
  Speaker 1: or two. So that's um. I think it's across the board.
• 20:49
  Speaker 1: Are there any spots that are less bright than with
• 20:51
  Speaker 1: the seems which is a unabashedly positive rosy report. Well,
• 20:56
  Speaker 1: I think if you compare the results now too when
• 21:01
  Speaker 1: we began doing the survey in the mid eighties, and
• 21:05
  Speaker 1: you see that it's a level difference in the last
• 21:08
  Speaker 1: decade or even more. Job satisfaction is much lower than
• 21:11
  Speaker 1: it used to be in the eighties, for example, and
• 21:14
  Speaker 1: I think that that's probably not We're not going to
• 21:17
  Speaker 1: go back to the eighties. I think that the kind
• 21:19
  Speaker 1: of fundamental relationship between employees and employers changed significantly during
• 21:25
  Speaker 1: that time. And for example, if in the past you
• 21:29
  Speaker 1: didn't lay off people unless there was a crisis in
• 21:32
  Speaker 1: the company, now layoffs are part of the regular toolbox
• 21:36
  Speaker 1: of companies, so there is much less loyalty from the
• 21:40
  Speaker 1: employer side and from the employee side, and that I
• 21:44
  Speaker 1: think reduces job satisfaction. God love and and thank you
• 21:48
  Speaker 1: so much for being with us chief Economist for North
• 21:51
  Speaker 1: America for the conference Board in New York. Him. I
• 21:55
  Speaker 1: am really interested in the idea that blue collar workers
• 21:58
  Speaker 1: are seeing much faster wage gains than white color workers.
• 22:01
  Speaker 1: I feel like that is not something we hear a lot,
• 22:02
  Speaker 1: and I feel like it is an important thing to
• 22:04
  Speaker 1: recognize fry finding an electrician or a slumber. Well, this
• 22:08
  Speaker 1: is what it goes to. Very interesting. Well, yesterday Bloomberg
• 22:26
  Speaker 1: got a chance to sit down with the President Donald
• 22:30
  Speaker 1: Trump in the Oval Office, our own Margaret Tulla, Jennifer Jacobs,
• 22:34
  Speaker 1: and John Michael Thwaite interviewing President Donald Trump. Here to
• 22:38
  Speaker 1: tell us more about that and the president's Labor Day
• 22:41
  Speaker 1: weekend perhaps is to Larudipa. He is our Bloomberg White
• 22:46
  Speaker 1: House correspondent. To lou what do you think the biggest
• 22:50
  Speaker 1: takeaway from the interview was? Wow? That It's a hard question.
• 22:54
  Speaker 1: This was a great interview by my colleagues Jennifer Jacobs,
• 22:57
  Speaker 1: Margaret Talive and our editor in chief John Michele the
• 23:00
  Speaker 1: and they covered so much ground in about an hour.
• 23:02
  Speaker 1: It's hard to know what the biggest takeaway might be.
• 23:04
  Speaker 1: I think his remarks on the w t O, the
• 23:07
  Speaker 1: President basically saying that if the w t O, the
• 23:11
  Speaker 1: World Trade Organization does not shape up that he would
• 23:14
  Speaker 1: be willing to move the U s out of the
• 23:16
  Speaker 1: w t O. If you were actually to follow up
• 23:18
  Speaker 1: on that, that would be a pretty major bombshell in
• 23:21
  Speaker 1: US trade policy and US foreign policy. He also commented
• 23:25
  Speaker 1: about Europe and the European Union, saying that the Europeans
• 23:29
  Speaker 1: are just as bad as China on trade and that
• 23:31
  Speaker 1: he is willing to potentially put car tariffs on the
• 23:35
  Speaker 1: Europeans if they do not accede to his various requests.
• 23:38
  Speaker 1: So uh, there were so much groundcovered, but the trade
• 23:41
  Speaker 1: comments were pretty remarkable, and it shows that the President
• 23:46
  Speaker 1: is moving full speed ahead in this trade war. Just
• 23:48
  Speaker 1: to sort of give some context to that, auto stocks
• 23:51
  Speaker 1: in Europe are down one and a half percent today
• 23:54
  Speaker 1: following those comments. There was a little bit of optimism
• 23:58
  Speaker 1: yesterday sort of baked into these share that perhaps there
• 24:01
  Speaker 1: would be some kind of agreement between the US and
• 24:03
  Speaker 1: Europe after Europe offered to drop all tariffs of the
• 24:05
  Speaker 1: US did the same, President Trump rebuffing that in our interview.
• 24:10
  Speaker 1: So definitely moving markets to this morning. One thing that
• 24:13
  Speaker 1: I'm wondering is about the capital gains aspect of the interview.
• 24:17
  Speaker 1: The idea that President Trump is entertaining allowing people to
• 24:22
  Speaker 1: pay taxes on inflation adjusted returns for their equity portfolios. Basically,
• 24:27
  Speaker 1: this would amount to what would most likely be a
• 24:29
  Speaker 1: tax cut for the wealthier individuals in the country. What
• 24:34
  Speaker 1: kind of attraction is that getting today as you speak
• 24:37
  Speaker 1: to other representatives and other people around the White House. Yeah,
• 24:41
  Speaker 1: it's still very much in a holding pattern as the
• 24:44
  Speaker 1: research is done by the administration. They're looking at whether
• 24:47
  Speaker 1: or not they can do this unilaterally and not go
• 24:50
  Speaker 1: through Congress. President Trump and the interview said that he
• 24:53
  Speaker 1: is looking at this very strongly and he views it
• 24:55
  Speaker 1: as a stimulus for the economy. So he talked about
• 24:58
  Speaker 1: it in the very positive terms. But he did say
• 25:00
  Speaker 1: that he's gonna wait. He's gonna see if his administration
• 25:03
  Speaker 1: can look into it and do some research and report
• 25:06
  Speaker 1: back to him about both whether he can do it
• 25:09
  Speaker 1: unilaterally and secondly, whether it would be a good idea. Obviously,
• 25:11
  Speaker 1: there's a budget crunch with tax cuts that went into
• 25:14
  Speaker 1: place last year, so this would reduce the amount of
• 25:16
  Speaker 1: revenue coming into the US treasury, but it is another
• 25:20
  Speaker 1: tax cut that he could offer to his supporters and say,
• 25:23
  Speaker 1: you know, I continued cutting taxes even without Congress after
• 25:27
  Speaker 1: passing a major tax cut last year. So it's something
• 25:30
  Speaker 1: that he's looking at. Uh, the administration is looking at
• 25:33
  Speaker 1: whether or not he can do this. Congress hasn't really
• 25:36
  Speaker 1: weighed in very much. They are in support of tax
• 25:39
  Speaker 1: cuts generally, but generally they like them to be done
• 25:41
  Speaker 1: through the legislative branch and not through the executive branch.
• 25:45
  Speaker 1: And there's could be some a little bit of a
• 25:47
  Speaker 1: battle over the power of the purse, which Congress believes
• 25:50
  Speaker 1: that it it has. This has never been done through regulation before,
• 25:53
  Speaker 1: so there might be some consternation in Congress about if
• 25:57
  Speaker 1: the President were to do this through executive order, it
• 25:59
  Speaker 1: could be un on through regulations by the next president. So, Lou,
• 26:02
  Speaker 1: we're currently monitoring comments by Canada's Foreign Minister, Christopher Freeland.
• 26:09
  Speaker 1: She's speaking with reporters in Washington currently saying that Canada
• 26:14
  Speaker 1: is looking for a good trade deal, not just any
• 26:18
  Speaker 1: trade deal. Have you heard anything from any of your
• 26:22
  Speaker 1: sources about the tone of those meetings which are continuing. Yeah,
• 26:27
  Speaker 1: it's very much touch and go. I mean, one hour
• 26:30
  Speaker 1: you might hear that they're getting close to a deal.
• 26:32
  Speaker 1: Like the President said in the interview yesterday, he thinks
• 26:34
  Speaker 1: they're close, and then the next hour you hear that
• 26:37
  Speaker 1: the negotiations have been very tense. We actually have heard
• 26:40
  Speaker 1: that the negotiations in the last twelve the twenty four
• 26:43
  Speaker 1: hours have been pretty tense. They're getting down to the
• 26:45
  Speaker 1: nitty gritty, and it really could go either way. The
• 26:49
  Speaker 1: Canadians are not going to accept what they would say
• 26:52
  Speaker 1: might be a bad deal, even though the President believes
• 26:56
  Speaker 1: that that he has all the cards and he has
• 26:58
  Speaker 1: the upper hand in this negotiates, and the Canadians they
• 27:01
  Speaker 1: are saying they're going to drive a hard bargain and
• 27:03
  Speaker 1: they are not just going to walk away with any deal.
• 27:05
  Speaker 1: Even though the President believes that today is the deadline.
• 27:08
  Speaker 1: They are going to continue negotiating as as long as
• 27:11
  Speaker 1: they can to get as many concessions as they can.
• 27:14
  Speaker 1: But there are some pretty pretty hard sticking points that
• 27:17
  Speaker 1: will be difficult for the US and the Canadians to
• 27:20
  Speaker 1: to agree on in such a short period of time,
• 27:22
  Speaker 1: and how they can spin it for their constituents saying
• 27:24
  Speaker 1: that they got the best deal possible. To Lou Alaronapa,
• 27:27
  Speaker 1: thank you so much for being with us. To Lou Alaronopos,
• 27:30
  Speaker 1: White House Correspondent, for Bloomberg News, which had an exclusive
• 27:33
  Speaker 1: interview yesterday with President Trump, a wide ranging interview. There
• 27:38
  Speaker 1: are a number of stories on the Bloomberg terminal and
• 27:40
  Speaker 1: on Bloomberg dot com. Check them out. Thanks for listening
• 27:48
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 27:51
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 27:54
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 27:58
  Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo. It's
• 28:02
  Speaker 1: one before the podcast. You can always catch us worldwide
• 28:05
  Speaker 1: on Blueberg Radio.