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Surprise US-China trade deal sends markets surging · The Financial Exchange Show

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  Speaker 1: and Mike Armstrong.
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  Speaker 2: Monday, Monday Monday here on the Financial Exchange, Chuck, Mike
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  Speaker 2: and talker with you, and we've got a pretty darn
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  Speaker 2: significant rally taking place across all major US equity markets
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  Speaker 2: on the back of the announcement earlier this morning by
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  Speaker 2: I think it was Scott Besst and his counterpart with
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  Speaker 2: China who originally had it during the nine am Geneva
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  Speaker 2: Time press conference that they put out that terrorfrates between
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  Speaker 2: the US and China are coming down significantly effective immediately.
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  Speaker 2: Big thing that we're seeing each side stepping their terifrate
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  Speaker 2: down by one hundred and fifteen percent, which I know
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  Speaker 2: sounds like it's above the theoretical maximum, but it's the
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  Speaker 2: percentage charged on goods that they're coming down by. So
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  Speaker 2: the US reduced its terrorfrate on imports from China from
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  Speaker 2: one hundred and forty five percent, which was a de
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  Speaker 2: facto embargo, down to thirty percent. China in turn reduced
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  Speaker 2: its tariff rate from one hundred and twenty five percent
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  Speaker 2: down to ten percent, with both sides agreeing to a
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  Speaker 2: ninety day pause and further talks before taking any additional action.
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  Speaker 3: So I think some context is helpful for how investors
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  Speaker 3: and analysts were thinking about these talks going into this weekend.
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  Speaker 3: On Friday, we talked a little bit about it. The
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  Speaker 3: I would say kind of forecast out there ranged anywhere
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  Speaker 3: from hey, these could land in the fifty to eighty
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  Speaker 3: percent range when these talks are over, if there's some
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  Speaker 3: negotiation done, And the conversation we were having was, well,
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  Speaker 3: what it fits extreme to the other directions, Well.
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  Speaker 2: We talked about this. We said, look that you have to,
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  Speaker 2: you know, consider possibilities outside of what the market is
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  Speaker 2: pricing in. On the downside, it was, hey, what happens
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  Speaker 2: if they storm out of the room and there's no
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  Speaker 2: progress and we still hundred and forty five percent? And
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  Speaker 2: on the upside, I think we said, look, the best
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  Speaker 2: case scenario is probably getting to twenty percent, which was
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  Speaker 2: where they were before April tewcond So when you say,
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  Speaker 2: look we ended up at thirty percent, it's pretty darn
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  Speaker 2: close to the best case scenario that we were discussing.
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  Speaker 2: We said, look, we're not sure that this is particularly likely,
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  Speaker 2: but you have to consider that this could happen. And
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  Speaker 2: sure enough, that's that's what you ended up seeing here.
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  Speaker 2: So I think when we talk about this, I'm less
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  Speaker 2: concerned with like what actually went on during the negotiations,
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  Speaker 2: just because I don't think it's particularly relevant or useful.
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  Speaker 2: I also don't think we'll ever know, So no, you know,
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  Speaker 2: expeculating on like, oh, like how did this? Who cares?
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  Speaker 2: I think the important thing is, look, what is the
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  Speaker 2: actual impact to the US economy at this point and
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  Speaker 2: where do things go from here? And I gotta tell
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  Speaker 2: you there's there's a lot of meat that we can
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  Speaker 2: discuss in here. So first be obviously, you go from
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  Speaker 2: one hundred and forty five percent, where companies are like, no,
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  Speaker 2: we can't ship anything like that's that's kind of ludicrous
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  Speaker 2: for us to even consider doing this. Uh So you
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  Speaker 2: go from there down to a thirty percent teriff rate,
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  Speaker 2: which from talking with people who again are you know,
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  Speaker 2: importers of stuff from China, they say, yeah, it's not
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  Speaker 2: gonna be as comfortable as you know where things were before,
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  Speaker 2: you know, zero and then up to ten and then
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  Speaker 2: up to twenty percent. But okay, I can figure out
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  Speaker 2: how to run a business with tariffs at thirty percent,
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  Speaker 2: even if my margins are impacted.
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  Speaker 3: Yeah, let's give this an example here, because again, I
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  Speaker 3: think these get framed incorrectly in terms of how they
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  Speaker 3: actually work. Very infrequently are we actually individually you and
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  Speaker 3: I buying products from China to be shipped directly from
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  Speaker 3: there to US. Usually it was through an intermediary who's
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  Speaker 3: buying supplies to either finish manufacturing in the United States
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  Speaker 3: or you know, build a finished product in China that
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  Speaker 3: they doc on shelves here in the US. So you've
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  Speaker 3: talked about a lot your friend with the board game company,
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  Speaker 3: and I'm just gonna assume that his board games cost
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  Speaker 3: fifty bucks and twenty one twenty one dollars.
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  Speaker 2: To make board games to make twenty one dollars to make.
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  Speaker 2: So yeah, I fifty people.
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  Speaker 3: So I guess because because I mean, you know, we're
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  Speaker 3: not talking about Monopoly. We're talking about like board games
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  Speaker 3: and games that you know, people are passionate about, and
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  Speaker 3: they're small.
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  Speaker 2: Kind of niche games.
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  Speaker 3: So I'm assuming that retail for what like fifty six
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  Speaker 3: So he is a higher end board game manufacturer. So
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  Speaker 3: we're talking stuff that is low triple digits, got it?
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  Speaker 2: Okay? So sells for one hundred costs twenty to make,
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  Speaker 2: let's call it. Yeah.
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  Speaker 3: So previously that teriff rate was bringing the cost to
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  Speaker 3: manufacture in the fifty to sixty range.
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  Speaker 2: Yes. And and by the way, I like because I
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  Speaker 2: have numbers from him on like you went around and
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  Speaker 2: like shopped this around. He was like, look, if I
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  Speaker 2: wanted to make in the United States, it'd be ninety
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  Speaker 2: three dollars for me to make it in the US.
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  Speaker 2: And that's before handling any of you know, the shipping,
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  Speaker 2: the selling to like yadie, like there would there would
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  Speaker 2: be no profit for me if I were to do
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  Speaker 2: that likewise at twenty dollars, you know, and you take
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  Speaker 2: that up to a sixty dollars production cost. Again, think
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  Speaker 2: about most companies. Their margins are not eighty ninety percent.
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  Speaker 2: Margins usually are somewhere in the five to fifteen percent
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  Speaker 2: range for most companies that are selling goods. So in
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  Speaker 2: his case was basically, look, I'm gonna go from making
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  Speaker 2: you know, ten percent on these to losing twenty to
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  Speaker 2: thirty percent on every item that I sell. Right with
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  Speaker 2: a tear. If at thirty percent, it's still probably assuming
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  Speaker 2: that he eats all of the cost, which he's not
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  Speaker 2: going to still eats through probably somewhere in the ballpark
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  Speaker 2: of sixty to seventy percent of his profit right when
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  Speaker 2: it's all said and done, is profitably be reduced by
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  Speaker 2: somewhere around twenty to thirty percent as a result of this.
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  Speaker 3: Yeah, and again, so you're if you're cost of manufacturer
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  Speaker 3: twenty bucks, you're bringing that up to twenty seven dollars
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  Speaker 3: once you include the tariff passing along seven dollars a
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  Speaker 3: price increase to a you know, a game that costs
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  Speaker 3: one hundred twenty bucks, let's call it. That's you know,
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  Speaker 3: even if you're just passing along half of it, it's something,
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  Speaker 3: but it is probably not detrimental to the buyer.
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  Speaker 2: So this is something where you look at this and
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  Speaker 2: you say, okay, so these these importers of goods from
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  Speaker 2: China are going to if there's still you know, alive.
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  Speaker 2: Because again, there are some companies that didn't plan, you know,
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  Speaker 2: or didn't have the wherewithal to be able to even stomach,
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  Speaker 2: you know, a four to five week situation like this.
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  Speaker 2: So you have some that might have gone out of business,
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  Speaker 2: not I don't know how many. I don't know you
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  Speaker 2: know exactly which ones, but the ones that are around
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  Speaker 2: will say, okay, we're gonna spool our factories back up.
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  Speaker 2: We're gonna get things loaded onto ships, and we're gonna
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  Speaker 2: get you know, everything moving. Now you've got the additional
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  Speaker 2: costs that you've got to pay because of the tariff.
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  Speaker 2: That's part one, Part two. Remember a lot of people
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  Speaker 2: paused factory production in China at the outset of this.
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  Speaker 2: When you start those productions back up, A, probably not
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  Speaker 2: gonna be back up to full speed right away. B.
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  Speaker 2: You better believe that all of those you know, big
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  Speaker 2: old container ships that you know used to be coming
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  Speaker 2: from China have since been rerouted to Okay, there's more
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  Speaker 2: imports coming from Vietnam and Thailand, so great. Now we
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  Speaker 2: got to get these ships back to China so they
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  Speaker 2: can bring this stuff. And there's a lot more coming
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  Speaker 2: because companies are gonna want to front run tariffs. The
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  Speaker 2: people that I've talked to are saying that freight rates
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  Speaker 2: are expected to go up anywhere from fifty to one
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  Speaker 2: hundred and fifty percent, depending on the route and exactly
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  Speaker 2: how much demand comes through. So where you land with
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  Speaker 2: this is yeah, you're still gonna see some sporadic disruptions
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  Speaker 2: of different goods and things like that that probably roll
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  Speaker 2: through the course of the summer and into the fall
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  Speaker 2: and maybe even early winter. It's it's like anytime that
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  Speaker 2: you have a situation like this, you're not going to
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  Speaker 2: have anything right back to how it was. Any of
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  Speaker 2: those catastrophic situations are taken off the table here. But
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  Speaker 2: the stuff that's going to be coming back in now
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  Speaker 2: has a bunch of additional costs that's attached to it.
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  Speaker 2: So the way that you deal with that is either
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  Speaker 2: you eat it yourself, you pass it on to consumers,
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  Speaker 2: probably some combination in both cases. What does that do
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  Speaker 2: to corporate margins? And then what does it do to inflation?
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  Speaker 2: And how do those things impact the US economy? You know,
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  Speaker 2: those are kind of the next thing that we worry
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  Speaker 2: about now. It's not because this is like all dooming goom,
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  Speaker 2: but these are real things that we're going to be
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  Speaker 2: seeing and having to deal with right now. They're real
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  Speaker 2: costs that are being born either by companies or buy
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  Speaker 2: and buyers of their goods.
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  Speaker 3: So as happened on April ninth, which was the rollback
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  Speaker 3: of what was April second, again it was liberation Liberation Day,
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  Speaker 3: is there a rollback of Liberation Day or at least
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  Speaker 3: a significant portion of it. This seems to be a
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  Speaker 3: rollback of one of the worst case scenarios for US
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  Speaker 3: China trade, as well as trade for some other countries.
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  Speaker 3: And that's kind of where I want to dig.
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  Speaker 2: In a little bit.
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  Speaker 3: Is we seem to have we now have set a
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  Speaker 3: ninety day tariff rate for the United States in China.
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  Speaker 3: I want to talk a little bit about that context
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  Speaker 3: and what it might mean for trade and developments with
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  Speaker 3: other countries whom we are going to negotiate over the
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  Speaker 3: course of the next ninety days. Because China is unlikely
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  Speaker 3: to be the last announcement on this front, so quick
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  Speaker 3: break and tackle that next.
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  Speaker 2: Here on the Financial Exchange.
• 10:35
  Speaker 1: Market volatility is at its highest point since the pandemic.
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  Speaker 1: Keep it here for the most comprehensive coverage of the
• 10:41
  Speaker 1: global trade war. This is the Financial Exchange Radio Network.
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  Speaker 2: Mike, when we talk about the step down in terrace
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  Speaker 2: between the US and China that was announced this morning,
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  Speaker 2: you had some other kind of surrounding topics that you
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  Speaker 2: wanted to touch on as well.
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  Speaker 3: Yeah, I guess I just wonder how this frames future
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  Speaker 3: conversations that are had with other countries. I certainly think
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  Speaker 3: in some of the easier to negotiate countries, even those
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  Speaker 3: with a significant trade and balance with the United States,
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  Speaker 3: it's tough for me to envision a scenario where the
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  Speaker 3: rate of tariffs goes above thirty percent now for say
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  Speaker 3: India or Vietnam or Japan. I mean, maybe I'm misreading
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  Speaker 3: the situation, but if we've gotten to this thirty percent
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  Speaker 3: level with China, it's difficult for me to envision a
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  Speaker 3: scenario where country is other than like Iran or North
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  Speaker 3: Korea that we don't trade with anyway, have teriff rates
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  Speaker 3: that are substantially higher.
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  Speaker 2: Well, I think this is It's one where you could
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  Speaker 2: probably see whatever happens with China as the ceiling. I
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  Speaker 2: think the question is where is that ceiling? Like, is
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  Speaker 2: there a compelling case that it's lower? Quite honestly, there is,
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  Speaker 2: based on what Scott Beston said today, which is, hey,
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  Speaker 2: like we're seeing, you know, some progress on fentanyl, and
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  Speaker 2: obviously twenty percent of this thirty percent that's there is specifically,
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  Speaker 2: but that the US is singled out because of fentanyl.
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  Speaker 2: You could see a case where the US has you know,
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  Speaker 2: the same teriff rate on China as the UK three
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  Speaker 2: months from now, six months from now, or something along
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  Speaker 2: those lines. I'm not saying that's right or wrong, or
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  Speaker 2: that I agree with it. I'm just laying out the
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  Speaker 2: pos because again, you have to consider the range of possibilities,
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  Speaker 2: is all that I'm saying. On the other side of things,
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  Speaker 2: the April second originally announced tariff rate would have taken
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  Speaker 2: tariff's on China up to fifty four percent. Is that
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  Speaker 2: still a possibility If things go badly. Sure, So I
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  Speaker 2: think there's a range of kind of where that maximum is.
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  Speaker 2: But this gets back to something that I said on
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  Speaker 2: April third, immediately after, which is, look, this is not
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  Speaker 2: the end of tariff uncertainty. No, it's the beginning. And
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  Speaker 2: right now this is a continuation of that, simply because
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  Speaker 2: I don't think there is any sense in my mind
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  Speaker 2: that we have seen the final numbers for any country,
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  Speaker 2: simply because I don't know that there are any final numbers, Mike,
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  Speaker 2: I'm pretty close to comfortable that we've reached the final numbers.
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  Speaker 2: With the UK, I'm not. I think they could go lower. Yeah,
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  Speaker 2: I like, if you want, if you right now said hey,
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  Speaker 2: for countries X, Y and Z, where do you think
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  Speaker 2: these can go over the next year. I think the
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  Speaker 2: UK can go lower. I think Vietnam can go lower.
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  Speaker 2: I think Malaysia Thailand can go lower. I think the
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  Speaker 2: EU could go higher. I think China could go either
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  Speaker 2: higher or lower. Like there's a wide range, like you
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  Speaker 2: go through country by country, and I don't think we
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  Speaker 2: are at the final number anywhere, because I don't think
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  Speaker 2: there is a final number. That's a constant negotiation. And
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  Speaker 2: this gets to my I think where I've landed on this,
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  Speaker 2: which is Hey, if that is the case, then until
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  Speaker 2: you get to something that is not country by country
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  Speaker 2: but instead sector by sector, I don't think you are
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  Speaker 2: going to be seeing anything in terms of a meaningful
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  Speaker 2: shift to producing.
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  Speaker 3: Stuff back in the US agreed there, which you're not
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  Speaker 3: going to build a giant auto facility right.
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  Speaker 2: Now because you have no idea what tariffs. You're gonna
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  Speaker 2: wait for more clarity. Yeah, there's no incentive to do
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  Speaker 2: that here. And by the way, it's also been clear
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  Speaker 2: that even in those key areas, those are even open
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  Speaker 2: for negotiations. See what happened with the auto parts piece
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  Speaker 2: of auto tariffs and how that was pushed back and
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  Speaker 2: could be you know, delayed further. So in fact, in
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  Speaker 2: the very short term, you're gonna see what might be
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  Speaker 2: considered the exact opposite of manufacturing in the United States.
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  Speaker 2: Because if you are Chuck's friend who makes board games,
• 15:30
  Speaker 2: or if you are any business at all right now,
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  Speaker 2: you this morning at seven am sent a bunch of
• 15:37
  Speaker 2: notices to your Chinese suppliers saying, load up those boats
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  Speaker 2: as fast as you possibly can. I want this stuff
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  Speaker 2: in the country. I want more, you know, I want
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  Speaker 2: triple my order. I'm borrowing money from the bank to
• 15:47
  Speaker 2: be able to triple my order or from whoever I
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  Speaker 2: can in order to get this stuff into the United
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  Speaker 2: States in the next ninety days. Pay the tariff that
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  Speaker 2: I know is going to be thirty percent. And again,
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  Speaker 2: why is that the opposite of manufacturing in the United States. Well,
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  Speaker 2: because you are again not even considering moving that elsewhere.
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  Speaker 2: You're not considering it moving it to India, Mexico, Vietnam.
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  Speaker 2: Right now, you are purely saying, buy me the rest
• 16:12
  Speaker 2: of this year's supplies of this stuff, whatever I can
• 16:15
  Speaker 2: afford and whatever I think I can sell, and give
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  Speaker 2: me a chance to think through what I want to
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  Speaker 2: do next. Yeah, and get it all into the US.
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  Speaker 2: So I think where I'm landing on this quite honestly,
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  Speaker 2: in terms of again, I you listen to what people say,
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  Speaker 2: and I think that's informative too, but it's I always
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  Speaker 2: pay attention to what people do. The piece that is
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  Speaker 2: apparent right now is that this is something that the
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  Speaker 2: Trump administration wants to do as a revenue raiser. I
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  Speaker 2: think that's pretty clear. And here's the thing, Mike. If
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  Speaker 2: they don't, then let's ask kind of the big question
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  Speaker 2: what is the point, because here's the thing, the tariffs
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  Speaker 2: have not been in place long enough to do anything.
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  Speaker 2: From a restoring perspective, Yeah, the step down in China
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  Speaker 2: was bigger than people thought, which to me at least suggests, hey,
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  Speaker 2: they don't want to target, they don't want some kind of,
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  Speaker 2: you know, more direct confrontation with China. I'm not even
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  Speaker 2: saying militarily, even economically, like you you could have easily
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  Speaker 2: gone down to fifty percent or fifty four where you're
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  Speaker 2: like wherever you wanted to there. The rest of the
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  Speaker 2: reciprocal tariff rates are still paused for you know, another
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  Speaker 2: sixty days at this point, and so if it's not
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  Speaker 2: about raising revenue, what is it about.
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  Speaker 3: So I think that that might be the optimistic view
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  Speaker 3: that hey, this is the goal, which is to raise
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  Speaker 3: revenue to offset taxes, and I think that most certainly
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  Speaker 3: from an investor perspective, that's one of the better.
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  Speaker 2: Case scenarios you can have out of all of this.
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  Speaker 3: I think, you know, ideally, from the stock market perspective,
• 17:55
  Speaker 3: you just want the free trade. But if the tariff
• 17:59
  Speaker 3: revenue as a goal to offset tax decreases is one
• 18:05
  Speaker 3: of the end goals here, then that looks pretty attractive
• 18:07
  Speaker 3: from a market perspective. The pessimistic viewpoint would be, there's
• 18:13
  Speaker 3: a vast difference of opinion within the White House as
• 18:16
  Speaker 3: to what the end goals are here, and they're just
• 18:18
  Speaker 3: reacting kind of weak to week to what markets tell them,
• 18:21
  Speaker 3: and that's that would be a concerning avenue if that
• 18:24
  Speaker 3: were what's going on here, And frankly, there's a little
• 18:27
  Speaker 3: bit of evidence of that. On April ninth, the evidence
• 18:31
  Speaker 3: was not that the Trump administration had a big change
• 18:35
  Speaker 3: of heart. The evidence was that bond investors forced them
• 18:38
  Speaker 3: to change their policy very rapidly. And the read that
• 18:43
  Speaker 3: I had was Okay, well did anyone think of this
• 18:45
  Speaker 3: ahead of time?
• 18:47
  Speaker 2: And the answer is seemingly no. So I think this
• 18:50
  Speaker 2: is why again like trying to like pay attention to, hey,
• 18:52
  Speaker 2: what is in place and what does it say about
• 18:55
  Speaker 2: where they want to go? The piece that's still intact is, hey,
• 18:58
  Speaker 2: they want to raise some revenue. They've come out repeatedly saying, look,
• 19:01
  Speaker 2: the ten percent you know, global baseline tariff is going
• 19:04
  Speaker 2: to be in place and we're not changing that. That's
• 19:07
  Speaker 2: the baseline from which you have to negotiate on the
• 19:10
  Speaker 2: piece that I think is challenging. That is okay. Like
• 19:13
  Speaker 2: if if you view China and personally I do as
• 19:17
  Speaker 2: kind of the country with the worst trade offenses out there.
• 19:21
  Speaker 2: If thirty is the theoretical maximum, that's a pretty narrow
• 19:24
  Speaker 2: range that you're giving yourself on anything you know in
• 19:28
  Speaker 2: the future. Let's take a quick break. When we come back,
• 19:31
  Speaker 2: We've got Wall Street Watch after this.
• 19:40
  Speaker 1: Like us on Facebook and follow us on Twitter. Act
• 19:43
  Speaker 1: TFE show. Breaking business news is always first right here
• 19:47
  Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
• 19:52
  Speaker 1: Street Watch a complete look at what's moving markets so
• 19:55
  Speaker 1: far today right here on the Financial Exchange Radio Network.
• 20:00
  Speaker 4: Are surging this morning after the US and China agree
• 20:03
  Speaker 4: to substantial tariff cuts for ninety days after constructive talks
• 20:07
  Speaker 4: in Switzerland over the weekend. Treasury Secretary Scott Besson also
• 20:11
  Speaker 4: said he expects to meet with Chinese officials again in
• 20:14
  Speaker 4: the coming weeks to get rolling on a more fulsome agreement.
• 20:18
  Speaker 4: At the moment, the Dow is up by over two percent,
• 20:21
  Speaker 4: or eight hundred and eighty nine points, SMP five hundred
• 20:24
  Speaker 4: up two point three percent or one hundred and thirty
• 20:27
  Speaker 4: four points. And the NASDAC now up three point two
• 20:30
  Speaker 4: percent or five hundred and seventy four points. Russell two
• 20:33
  Speaker 4: thousands up three point four percent, ten year Treasure reeled
• 20:36
  Speaker 4: up by six basis points, now at four point four
• 20:39
  Speaker 4: to three percent, and crude oil is up three percent today,
• 20:44
  Speaker 4: trading just below sixty three dollars a barrel. Big tech
• 20:48
  Speaker 4: sector rallying today on the heels of this tariff news. Amazon,
• 20:52
  Speaker 4: which sells many Chinese made products, up by seven percent,
• 20:55
  Speaker 4: Tesla up by five percent, in chip maker and video
• 20:58
  Speaker 4: up by over three percent. Apple also seeing gains today,
• 21:02
  Speaker 4: up over five percent. Separately, the Wall Street Journal is
• 21:05
  Speaker 4: reporting that the iPhone maker is weighing price increases for
• 21:09
  Speaker 4: its fall lineup, a step it is seeking to couple
• 21:12
  Speaker 4: with new features in design changes. The report adds that
• 21:15
  Speaker 4: Apple is determined to avoid any scenario in which it
• 21:18
  Speaker 4: appears to attribute price increases to tariffs on goods from China,
• 21:22
  Speaker 4: where most devices are assembled. Meanwhile, retailers also seeing big
• 21:26
  Speaker 4: gains on the heels of the tariff news. Restoration hardware
• 21:29
  Speaker 4: up seventeen percent, Best Buy up seven percent higher, five
• 21:34
  Speaker 4: Below up nineteen percent, and Home Depot trading three percent higher.
• 21:39
  Speaker 2: Elsewhere.
• 21:39
  Speaker 4: Several drug makers seeing attention today after President Trump yesterday
• 21:43
  Speaker 4: said he will sign an executive order today that would
• 21:46
  Speaker 4: reduce prescription drug costs almost immediately by thirty to eighty
• 21:51
  Speaker 4: percent to match prices paid by several other countries. ELI
• 21:54
  Speaker 4: Lilly and Johnson Johnson down by about a quarter percent,
• 21:57
  Speaker 4: while Pfizer is actually up by two per in. Shares
• 22:01
  Speaker 4: of Kindly MD rocketing over four hundred and fifty percent
• 22:05
  Speaker 4: after the healthcare company announced a merger with Nakamoto Holdings,
• 22:09
  Speaker 4: a bitcoin investment company founded by David Bailey, a key
• 22:12
  Speaker 4: cryptocurrency advisor to President Trump. Tucker Silvan, that's Wallstreet.
• 22:17
  Speaker 2: Watch anything else we want to talk about as it
• 22:20
  Speaker 2: relates to the US China step down in tariffs.
• 22:26
  Speaker 3: It's going to make its way into the theme of
• 22:27
  Speaker 3: the show all day today. So but now I don't
• 22:30
  Speaker 3: think I have any other major takeaways. There's gonna be
• 22:34
  Speaker 3: a rush to goods from China. Uh, there's going to
• 22:37
  Speaker 3: be really busy ports, really big busy container ships all
• 22:41
  Speaker 3: coming into the US at the same time. It'd be interesting, Actually,
• 22:44
  Speaker 3: I bet we were probably going to see some of
• 22:46
  Speaker 3: what we saw during COVID. Remember when there were all
• 22:49
  Speaker 3: those ships hanging out in the ports of Seattle and
• 22:52
  Speaker 3: la and all those places waiting to get unloaded. We're
• 22:56
  Speaker 3: probably going to see that how long does it take
• 22:58
  Speaker 3: for those ships to move?
• 23:00
  Speaker 2: So? Well, here's the thing. So remember a lot of
• 23:04
  Speaker 2: these factories in China have been shut down to this point.
• 23:07
  Speaker 2: You gotta spoo them back up, which probably takes a
• 23:09
  Speaker 2: week or two.
• 23:10
  Speaker 3: But there are some ships that are there are some
• 23:12
  Speaker 3: containers that were ready to leave port.
• 23:14
  Speaker 2: There might not be ships there though. That's the thing,
• 23:16
  Speaker 2: Like the ships are. The ships are sitting there saying
• 23:19
  Speaker 2: if if you are Maresk, who is you know, one
• 23:22
  Speaker 2: of the five companies that basically carries like ninety percent
• 23:25
  Speaker 2: of all goods around the world. You're sitting there and
• 23:27
  Speaker 2: you're like, Okay, I got this boat that carries two
• 23:30
  Speaker 2: thousand containers. Am I gonna have it sit in Shanghai
• 23:36
  Speaker 2: waiting for containers that may or may not be loaded. No,
• 23:39
  Speaker 2: I'm gonna send it to Thailand and pick up something,
• 23:42
  Speaker 2: you know in the interim. Now, the problem is the
• 23:44
  Speaker 2: interim becomes Okay, I sent the boat to Thailand, it
• 23:47
  Speaker 2: takes three days to get there. Then I got to
• 23:49
  Speaker 2: load it for a few days, then it goes over
• 23:50
  Speaker 2: to the US for twenty days, comes back twenty more.
• 23:53
  Speaker 2: So it's like it's fifty days before that boat gets
• 23:55
  Speaker 2: back to Shanghai. Yep. So like this this is the
• 23:58
  Speaker 2: problem that you end up with. And this is why
• 24:02
  Speaker 2: you kind of sit here and you look out at
• 24:04
  Speaker 2: you know what's coming, and you go, oh, my goodness,
• 24:07
  Speaker 2: there's going to be so much stuff that is coming
• 24:10
  Speaker 2: in if you are a because here's the thing, if
• 24:14
  Speaker 2: you are a company, right now, like there's two different
• 24:16
  Speaker 2: ways that you can look at this, by the way,
• 24:18
  Speaker 2: and I think we'll see like both of these in
• 24:20
  Speaker 2: different respects. On one hand, you go, I need to
• 24:23
  Speaker 2: get everything I can right now because who knows where
• 24:25
  Speaker 2: these will go. On the other, you sit there and
• 24:27
  Speaker 2: you go, you know what, I waited thirty days and
• 24:30
  Speaker 2: they lowered the teriff weight from one hundred and forty
• 24:32
  Speaker 2: five to thirty. Maybe I'll wait at the ninety and
• 24:35
  Speaker 2: it'll go down to ten. It's a risk. I'm not
• 24:39
  Speaker 2: saying it isn't. Yeah, but like you can see the
• 24:42
  Speaker 2: thinking on it. You can.
• 24:45
  Speaker 3: Has there been any announcement on those who paid the
• 24:49
  Speaker 3: one forty five no refunding interesting.
• 24:52
  Speaker 2: Now, there weren't that many because it was basically like
• 24:54
  Speaker 2: the last week or so that you add, you know,
• 24:56
  Speaker 2: a smattering of ships that were coming through that way,
• 24:59
  Speaker 2: So there weren't that many. But in any case, like
• 25:04
  Speaker 2: you're just gonna see a ton of demand for transportation
• 25:07
  Speaker 2: services for anything related to stuff coming from China. Now
• 25:12
  Speaker 2: here's the other thing again, just kind of like thinking
• 25:15
  Speaker 2: through this. Let's say that I'm Vietnam. I know that
• 25:18
  Speaker 2: I can't be a country, but let's say that I
• 25:20
  Speaker 2: am a senior government official from Vietnam, because I don't
• 25:24
  Speaker 2: know how my my mountains would feel, you know, because
• 25:27
  Speaker 2: of this. But what I do know is, hey, if
• 25:29
  Speaker 2: I'm Vietnam and I see, okay, so you had one
• 25:32
  Speaker 2: weekend of talks with China and you reduce their tariff
• 25:35
  Speaker 2: rate by effectively like eighty percent, you know, from almost
• 25:39
  Speaker 2: one hundred and fifty down to thirty. I'm sitting here
• 25:42
  Speaker 2: and I go, what are you gonna do for me?
• 25:45
  Speaker 2: I'm sitting here at ten right now as Vietnam you
• 25:50
  Speaker 2: told me I was gonna be it. I forget what
• 25:51
  Speaker 2: the Vietnamese tariff rate was. I believe it was like
• 25:54
  Speaker 2: North It was really seven, or it was somewhere around
• 25:56
  Speaker 2: like forty five or fifty. And I sit there and
• 25:59
  Speaker 2: I go, Okay, So, like, what can I negotiate? Where
• 26:03
  Speaker 2: are you? You've got Lutnik saying the lowest I can
• 26:07
  Speaker 2: get to is ten, which is where I am. I
• 26:11
  Speaker 2: was at, like forty and change or fifty and change
• 26:13
  Speaker 2: somewhere in there. What am I trying to negotiate here?
• 26:17
  Speaker 3: Right, especially in the context of one of the theories of
• 26:20
  Speaker 3: how you could negotiate good trade deals with the likes
• 26:22
  Speaker 3: of Vietnam, would be hey, make you know, make them choose, right,
• 26:26
  Speaker 3: who do you want to be a partner with US
• 26:28
  Speaker 3: or China? This new deal that you've announced is not
• 26:31
  Speaker 3: going to be paired.
• 26:32
  Speaker 2: Why do I have to choose?
• 26:33
  Speaker 3: Yeah, this is not going to be paired with a
• 26:35
  Speaker 3: bunch of tough negotiations with Japan, Vietnam, Malaysia saying hey,
• 26:40
  Speaker 3: either stop routing orders, stop doing all the stuff you're
• 26:43
  Speaker 3: doing to support China, or you're going to face massive tariffs.
• 26:47
  Speaker 3: Like no, we are working towards reconciliation with China as
• 26:50
  Speaker 3: part of this deal. So therefore, I don't think that
• 26:53
  Speaker 3: any of those are going to be faced with some
• 26:55
  Speaker 3: tough stance on China.
• 26:57
  Speaker 2: So I think that that becomes something that's complicated. But
• 26:59
  Speaker 2: the piece that I think is interesting on this piece
• 27:02
  Speaker 2: in the the in the Bloomberg, that's what they call it.
• 27:05
  Speaker 2: US retailers are focing post tariff spending disorder. Okay, let
• 27:10
  Speaker 2: me let me think about like what that is. And
• 27:13
  Speaker 2: the subheadline is where you know, they kind of start
• 27:16
  Speaker 2: to get into it. The trade agreement between the US
• 27:18
  Speaker 2: and China is good news, but American consumers are likely
• 27:20
  Speaker 2: to remain hesitant.
• 27:22
  Speaker 3: So can we talk about what we think we saw
• 27:25
  Speaker 3: when it came to hesitant consumers because I can only
• 27:27
  Speaker 3: point to like maybe three areas of hesitation on the
• 27:32
  Speaker 3: part of consumer.
• 27:32
  Speaker 2: Yeah. The places that we sawt were in travel related stuff.
• 27:35
  Speaker 3: So hotels and airlines yep. And fast food restaurants.
• 27:40
  Speaker 2: Yes, those are two things.
• 27:41
  Speaker 1: Was their third?
• 27:42
  Speaker 2: Oh, hotels, airlines and fast food go. Yeah. Those other
• 27:45
  Speaker 2: than that like auto sales good up, No meaningful shift
• 27:49
  Speaker 2: and trend for things like electronics or home improvement supplies
• 27:53
  Speaker 2: or stuff like that. Nicer restaurants fine, some of them.
• 27:57
  Speaker 2: Others like you got into like that mid range and
• 27:59
  Speaker 2: like Chipotle and the those guys were struggling. Sure, you
• 28:02
  Speaker 2: know Starbucks was struggling, but they've been struggling, so like,
• 28:04
  Speaker 2: who knows if it's anything unique to this Starbucks tariffs? Yeah,
• 28:08
  Speaker 2: problem So I mean exactly, Starbucks has been in a
• 28:11
  Speaker 2: black hole, suck for like five years now, so I
• 28:14
  Speaker 2: don't think you can really tie anything to it.
• 28:16
  Speaker 3: So I severely doubt that tariffs led to people consuming
• 28:21
  Speaker 3: less fast food. Correct, There's just no there's no line
• 28:26
  Speaker 3: that you can draw between the two. What you can say,
• 28:29
  Speaker 3: and this is you know reasonable, Hey, the lower end consumer,
• 28:33
  Speaker 3: it's completely tapped out. But that's not that's not a
• 28:35
  Speaker 3: teriff related thing, right. Could you make an argument that
• 28:40
  Speaker 3: tariffs and the market reaction to them was affecting travel
• 28:46
  Speaker 3: on airlines, hotels, airbnbs, and verbos? I would argue yeses.
• 28:51
  Speaker 3: I think, especially when you talk about foreign travel into
• 28:53
  Speaker 3: the United States, when you're looking at bookings of airbnbs
• 28:56
  Speaker 3: and verbos from Canadian citizens, for example, that's pretty clearly
• 29:00
  Speaker 3: signaled the downturn, and I don't think this is going
• 29:02
  Speaker 3: to reverse that. But on the other hand.
• 29:06
  Speaker 2: The stories about Canadians boycotting US goods was before all.
• 29:09
  Speaker 3: Yes, Chinese visitors to the US are not a massive
• 29:13
  Speaker 3: tourism block that we are. That we are usually concerned
• 29:16
  Speaker 3: about the other stuff that we were seeing on that end.
• 29:21
  Speaker 3: I just don't know that this is what reverses it.
• 29:25
  Speaker 3: I mean, certainly, I think if you are a business
• 29:28
  Speaker 3: owner who is pulling back on corporate travel, maybe you
• 29:31
  Speaker 3: greenlight it now after this these announcements. But Europeans aren't
• 29:36
  Speaker 3: going to be suddenly more excited to come back to
• 29:37
  Speaker 3: the United States. I don't know where this ultimately drives
• 29:42
  Speaker 3: any of those items.
• 29:43
  Speaker 2: I think this gets me to kind of where I
• 29:45
  Speaker 2: am with the economic data the next few months right now.
• 29:50
  Speaker 2: Have no idea what the heck we're going to see.
• 29:51
  Speaker 2: Like the first again, the sub headline here the trade
• 29:54
  Speaker 2: agreement between the US and China's good news, but American
• 29:56
  Speaker 2: consumers likely to remain hesitant. Even if they were hesitant,
• 29:59
  Speaker 2: I don't know they would remain hesitant. I don't know
• 30:04
  Speaker 2: that that's even a fact that you have an evidence.
• 30:06
  Speaker 3: I think you'll start to see fewer pulled guidance why.
• 30:12
  Speaker 3: I think basically that company, So here's what will happen.
• 30:15
  Speaker 2: Can you have fewer pulled guidances when we have two
• 30:18
  Speaker 2: sets of ninety day windows that we have to get through.
• 30:20
  Speaker 3: Because I think you'll basically give guidance saying, well, if
• 30:23
  Speaker 3: we assume the tariffs stay where they are now, then
• 30:25
  Speaker 3: this is our guidance. The guidance might not be terribly useful,
• 30:28
  Speaker 3: but it'll be better than companies saying we don't have
• 30:30
  Speaker 3: any guidance.
• 30:33
  Speaker 2: Maybe. I mean, why, here's the thing. If you've already
• 30:35
  Speaker 2: pulled it, you're gonna put it back in. What's what's
• 30:39
  Speaker 2: the upside to you? Like, if if you've already pulled
• 30:41
  Speaker 2: your guidance, what's the upside now to putting it back in?
• 30:47
  Speaker 2: There is none? Like the only thing that can happen
• 30:50
  Speaker 2: if you're right. Okay, great, you're right anyways, and your
• 30:53
  Speaker 2: stock will you know, do what it does if you're wrong,
• 30:56
  Speaker 2: Why would people trust your guidance? Again? Yeah, So I
• 31:01
  Speaker 2: don't know. I kind of look at it, and again
• 31:04
  Speaker 2: I just view the next few months. We're gonna have
• 31:06
  Speaker 2: data that's all over the place. You're gonna have some
• 31:08
  Speaker 2: things that are showing massive spikes and activity. You're gonna
• 31:12
  Speaker 2: have some things again, people loaded up on cars before
• 31:15
  Speaker 2: all these tariffs. By the way, the twenty five percent
• 31:17
  Speaker 2: imported auto tariffs still in effect yep, so like and
• 31:22
  Speaker 2: those are stacked by the way. So here's the funny thing.
• 31:25
  Speaker 2: You buy a car, like you buy a volks you
• 31:29
  Speaker 2: buy a BMW right now that's not made in the US,
• 31:32
  Speaker 2: which are like most of their sedans because they it's
• 31:34
  Speaker 2: not like economically feasible to do that. Here, you buy
• 31:37
  Speaker 2: a BMW five series right now, you're paying a higher
• 31:40
  Speaker 2: tariff rate than you are in a sweatshirt from China. Likewise,
• 31:44
  Speaker 2: you buy a land Rover or Jaguar from the UK.
• 31:47
  Speaker 3: You're facing a lower tariff than if you import, if
• 31:51
  Speaker 3: you buy a Ford from Canada.
• 31:53
  Speaker 2: So like, there's there's all kinds of weird stuff right now.
• 31:57
  Speaker 2: And this is why I say, like the data is
• 31:58
  Speaker 2: gonna be all kinds of weird. You're gonna have some
• 32:01
  Speaker 2: things that look like they're going through the roof for
• 32:03
  Speaker 2: the next couple of months, and things like auto sales
• 32:06
  Speaker 2: that have been pulled over, pulled forward like what happened.
• 32:09
  Speaker 2: Would anyone be surprised if auto sales decline it like
• 32:11
  Speaker 2: a five or six percent seasonally adjusted rate. No, because
• 32:15
  Speaker 2: they're just reversing what they did the last couple months.
• 32:17
  Speaker 2: Market's last peaked in February. Let's take a quick break.
• 32:20
  Speaker 3: I want to talk about some contexts in terms of
• 32:21
  Speaker 3: where markets are right now, because big daily swing. Obviously
• 32:25
  Speaker 3: on the China US Trade News. We'll cover markets next
• 32:28
  Speaker 3: here on the Financial Exchange.
• 32:30
  Speaker 1: The global trade war is in full swing. How long
• 32:33
  Speaker 1: will it last? Is anyone's gas? Keep it here for
• 32:36
  Speaker 1: the most up to date information plus breaking news every
• 32:39
  Speaker 1: day right here on the Financial Exchange Radio Network. Find
• 32:44
  Speaker 1: daily interviews and full shows of the Financial Exchange on
• 32:47
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• 32:50
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• 32:53
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• 33:03
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• 33:29
  Speaker 2: That's visit USBI dot com. Chuck.
• 33:31
  Speaker 3: We were talking a little bit before about just markets
• 33:33
  Speaker 3: and contextualizing where we have gone so far this year.
• 33:37
  Speaker 3: So S and P five hundred is basically now flat
• 33:40
  Speaker 3: for the year. We started January two at fifty eight seven.
• 33:44
  Speaker 2: Flat for the year.
• 33:45
  Speaker 3: It's flat since the election. Flat since the election. Now
• 33:49
  Speaker 3: we are in the election. The gap between the day
• 33:52
  Speaker 3: of the election in the day after the high for
• 33:54
  Speaker 3: markets was reached February nineteenth, were a couple percentage points
• 33:58
  Speaker 3: off of that all time high. A couple We're about
• 34:01
  Speaker 3: five okay, yeah, so five percentage points off of that
• 34:04
  Speaker 3: all time high reached in mid February. And there's a
• 34:09
  Speaker 3: number of different ways to read that. I tend to
• 34:11
  Speaker 3: think that the recession risk is still higher than it
• 34:14
  Speaker 3: was on election day markets again taking an optimistic viewpoint
• 34:20
  Speaker 3: here of where tariffs go, where tax rates go, presumably,
• 34:24
  Speaker 3: and a whole slew of number of different things. But
• 34:27
  Speaker 3: for some context, that's where things have gone. Obviously, at
• 34:30
  Speaker 3: their worst, we were off about twenty percent on the
• 34:33
  Speaker 3: market downturn on the S and P five hundred, and
• 34:35
  Speaker 3: so what worries me is the same thing that I've
• 34:39
  Speaker 3: been talking about for a while, which is the average
• 34:41
  Speaker 3: retail investor with this type of whiplash historically has gotten
• 34:45
  Speaker 3: pretty badly hurt because they tend to react a lot faster.
• 34:49
  Speaker 3: They tend to selwyn news is bad, buy win news
• 34:53
  Speaker 3: is good. And if you're finding yourself, I guess in
• 34:57
  Speaker 3: that position of second guessing your own moves today, which
• 35:00
  Speaker 3: everybody is.
• 35:01
  Speaker 2: I don't think anybody.
• 35:02
  Speaker 3: I don't think most people thought that Terifridge were going
• 35:04
  Speaker 3: to come down to thirty percent on China. But if
• 35:06
  Speaker 3: you are second guessing your moves when it comes to
• 35:09
  Speaker 3: your portfolio, please give the folks at Armstrong Advisory Group
• 35:12
  Speaker 3: call it eight hundred three nine three for zero zero one.
• 35:16
  Speaker 3: Let us provide a little bit of context to how
• 35:18
  Speaker 3: we manage money here at Armstrong, how we manage clients
• 35:21
  Speaker 3: expectations as well as their overall financial plan. That number
• 35:25
  Speaker 3: once again for the Armstrong Advisory Group, eight hundred three
• 35:28
  Speaker 3: nine three for zero zero one.
• 35:30
  Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
• 35:33
  Speaker 1: registered investment advisor. Nothing in the ad or in any
• 35:35
  Speaker 1: Armstrong guide a specific financial, legal or tax advice. Consult
• 35:39
  Speaker 1: your own financial, tax, and estate planning advisors before making
• 35:41
  Speaker 1: any investment decisions. Armstrong may contact you to offer investment
• 35:44
  Speaker 1: advisory services.
• 35:46
  Speaker 2: H let's see, do we want to talk about Apple? Sure?
• 35:49
  Speaker 2: Tim Cook's got to be pretty happy today, especially because
• 35:53
  Speaker 2: in the Wall Street Journal with an exclusive, Apple is
• 35:56
  Speaker 2: weighing price increases for its fall iPhone lineup, uh, but
• 36:00
  Speaker 2: not blaming tariffs for doing So.
• 36:04
  Speaker 3: Okay, okay, interesting mix that you're gonna have to you know,
• 36:08
  Speaker 3: thread the needle there on, Timmy, But how are you
• 36:10
  Speaker 3: gonna do it?
• 36:13
  Speaker 2: Well, here's the thing, Like, this is what it comes
• 36:17
  Speaker 2: back to. Companies either have to eat these tariffs or
• 36:23
  Speaker 2: they got to pass on price increases or some combination
• 36:25
  Speaker 2: of both.
• 36:26
  Speaker 3: Well, and furthermore, I don't think that Apple is now
• 36:28
  Speaker 3: subject to thirty percent tariffs.
• 36:30
  Speaker 2: So they're not on the smartphones, but there are still
• 36:33
  Speaker 2: things that they have to import, Like there still is
• 36:35
  Speaker 2: stuff that they have to bring in from child Like
• 36:39
  Speaker 2: you know, if they're making stuff somewhere else, they might
• 36:41
  Speaker 2: still have to bring in you know, rare earth's from
• 36:43
  Speaker 2: China to make you know, ye this and whatever it
• 36:45
  Speaker 2: might be. So and and look, moving production to India
• 36:49
  Speaker 2: is not free You can't just yep. You don't just
• 36:52
  Speaker 2: say hey, let me take this production over here and
• 36:55
  Speaker 2: move it over here like you're you're not playing a
• 36:59
  Speaker 2: video game. There's actual costs of doing so.
• 37:02
  Speaker 3: That said, I can't think of anyone outside the administration
• 37:06
  Speaker 3: that I would guess has a better.
• 37:10
  Speaker 2: Direct line and.
• 37:13
  Speaker 3: Educated guests on where terraffs will land for a number
• 37:17
  Speaker 3: of different countries than Tim Cook at Apple right now. No,
• 37:20
  Speaker 3: he's a number one connected person outside of those working
• 37:24
  Speaker 3: in the White House.
• 37:26
  Speaker 2: He might even be more connected than people working in
• 37:29
  Speaker 2: the White House, many of them. Yeah, quite possibly. Tim Cook.
• 37:33
  Speaker 2: We talked about you know, remember Tim Cook was Apple
• 37:36
  Speaker 2: COO for what maybe ten fifteen years before he took
• 37:40
  Speaker 2: over for Steve Jobs after he passed. Yeah, when we
• 37:44
  Speaker 2: talk about logistics and specifically like the logistics and operations
• 37:49
  Speaker 2: of running a major tech manufacturer, boils down to one thing.
• 37:54
  Speaker 2: How close of a relationship do you have with the
• 37:56
  Speaker 2: Chinese government. I'm not saying that's good or bad. I'm
• 37:59
  Speaker 2: just saying that it's what it is. And the amount
• 38:02
  Speaker 2: of sway that someone like Tim Cook has and the
• 38:05
  Speaker 2: amount of information he gathers is second to none. In
• 38:10
  Speaker 2: my opinion. Let's take a quick break here. We got
• 38:12
  Speaker 2: our two coming up in just a little bit.