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Trump Tariffs Shock Supply Chains · Bloomberg Intelligence

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Speaker 2: Let's go a little technology here.
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Speaker 3: You're thinking about some of the big tech names and
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Speaker 3: how are they going to deal in the world where
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Speaker 3: tariffs are going to be higher on a global scalue.
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Speaker 2: Think about some of these big tech.
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Speaker 3: Firms and they sell their hardware and software and services everywhere,
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Speaker 3: so they are truly global rok Rana joints as Bloomberg
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Speaker 3: Intelligence Technology and US. What's the tech call in a
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Speaker 3: higher tariff world on roun.
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Speaker 4: Oh, it's so bad right now. I mean, look at Apple.
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Speaker 4: I mean it's really surprising that Datchain. You know, they
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Speaker 4: rocked up so much on China. Now that's going to
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Speaker 4: have a massive impact on Apple. Most of the problem
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Speaker 4: exam made there. You know, you can cut it and
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Speaker 4: slice it in any way. They cannot offset the margin risk.
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Speaker 4: The iPhone sales are going to be traumatically impacted in
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Speaker 4: the second half most likely, you know, it's going to
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Speaker 4: be will see how China reacts to this. China accounts
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Speaker 4: for twenty percent of sales for Apple, so the local population,
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Speaker 4: you know, let's see if they're going to go with
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Speaker 4: local brands. I mean, it's just a big mess for
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Speaker 4: Apple frankly at this point. But when we look at
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Speaker 4: the other vendors, when you look at the software companies,
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Speaker 4: which even though they don't have the direct exposure to China,
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Speaker 4: I think when you look at an economic slowdown like this,
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Speaker 4: you're going to see breaks on technology spending and by default,
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Speaker 4: you know a lot of what these guys sell to
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Speaker 4: the market. We looked at growth estimates as of December
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Speaker 4: thirty first, the top fifty software companies, they had a
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Speaker 4: median growth rate of thirteen point two percent two days ago.
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Speaker 2: We looked at it.
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Speaker 4: People have not brought their numbers down, it's only it's
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Speaker 4: still twelve point four percent. So we think that number
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Speaker 4: gets cut down by quite a bit over the next
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Speaker 4: you know, one month when.
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Speaker 5: It off and that's not in the stocks yet.
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Speaker 4: That's I can't tell whether that's on the stocks or not,
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Speaker 4: but it's definitely not in the cell side estimates. Consensus
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Speaker 4: out there.
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Speaker 5: Well, here's what I wanted to kind of pull back
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Speaker 5: a little bit. We talked about this with Mike sort
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Speaker 5: of what the headline and tariff risk is and then
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Speaker 5: what the actual fundamentals of the tech industry. And that
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Speaker 5: brings us to the news that Microsoft, that Bloomberg broke,
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Speaker 5: is pulled back on a bunch of data projects, right,
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Speaker 5: and there was a whole list right, UK, Indonesia, Australia, Illinois,
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Speaker 5: North Dakota, Wisconsin, et cetera. Is So, how do you
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Speaker 5: read that?
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Speaker 6: Like, is that a sign that.
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Speaker 5: We're pairing back everything and it's.
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Speaker 4: All over or what? No, how do I read that?
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Speaker 4: I will wait for sut there to make his comments
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Speaker 4: on the conference call, because there is a very's likelihood
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Speaker 4: that he may say, listen, I'm happy to lease that
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Speaker 4: same amount, just not build it. So from that point,
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Speaker 4: it's okay with me, because they're still seeing the inference
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Speaker 4: coming in and they still going to spend the money.
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Speaker 4: These are just deciding not to build it themselves, which
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Speaker 4: is fair. I mean, it's you know, either rent or buy.
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Speaker 4: I mean it's you know, it's it's up to them.
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Speaker 4: So I think those are going to be the most
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Speaker 4: critical comments but it's tough for me to see how
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Speaker 4: any executive can give any decent guidance into going into
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Speaker 4: you know, this particular environment. Uh, you know the later
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Speaker 4: this month.
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Speaker 5: So important rent versus by Okay, this is why I
3:15
Speaker 5: had that tutorial with Anorat. This is why you got
3:16
Speaker 5: to do a call. You got to call them up
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Speaker 5: after the show for half an hour, yep, and then
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Speaker 5: you will understand all things.
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Speaker 2: Tom keen watching the show here trying to learn tell.
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Speaker 5: Us that he doesn't have the tail.
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Speaker 2: Front exactly exactly.
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Speaker 5: Okay, So then if it is just a tariff impact,
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Speaker 5: then if that's really like what is rocking these docks,
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Speaker 5: which companies are most exposed? Like which software companies are
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Speaker 5: going to be hurt the hardest?
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Speaker 6: See?
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Speaker 4: I think Apples the one, you know, we talked about it.
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Speaker 2: But then you have to look at it where.
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Speaker 4: The valuations are still higher than pre pandemic levels. You know,
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Speaker 4: look at somebody like a Shopify. It's down huge today
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Speaker 4: because that evaluations a bit high. So it's now they
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Speaker 4: have a lot of DOGE exposure as well. So there
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Speaker 4: is a there are names out there that are that
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Speaker 4: are far more you know, on on that value range.
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Speaker 4: Where far more expensive than historical loans.
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Speaker 3: Again, so but we're not making a valuation call here, No, No,
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Speaker 3: we areble because there's.
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Speaker 2: Still risks to estimates.
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Speaker 4: It is probably a massive risks to estimates, and we
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Speaker 4: don't know where the growth is going to be in
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Speaker 4: the second half right now, and we have seen in
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Speaker 4: the past recessions things drive up very quickly.
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Speaker 5: How's actual demand for iPhones? This might seem like an
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Speaker 5: insanely rudimentary question right now based on all we're dealing with,
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Speaker 5: but what's the underlying move there?
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Speaker 4: If you were to ignore everything on the taraff side,
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Speaker 4: The demand was just in line with what it has
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Speaker 4: been in the last two to three years. So we
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Speaker 4: are not seeing a major spike in demand. Although in
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Speaker 4: some Western countries where they have launched app launched Apple Intelligence,
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Speaker 4: they have seen some improvement, but China has still been
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Speaker 4: weak and that has been the big story with Apple
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Speaker 4: and what we were hoping by the end of this
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Speaker 4: year fiscal year this, you know, September October, when they
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Speaker 4: launched the next phone, Apple Intelligence, will be in all
4:55
Speaker 4: the major regions. The new phone form factor come out,
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Speaker 4: that slim iPhone seventeen that Goeman talks about and all
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Speaker 4: of that creates a new excitement. But I mean everything
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Speaker 4: is fair game at this point.
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Speaker 3: All right, an Ron appreciate that on our run does
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Speaker 3: all the technology stuff for Bloomberg Intelligence in our studio.
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Speaker 2: How big is that?
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Speaker 3: I mean, that's because you got your big AI conference, essuy,
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Speaker 3: which was extraordinary successful. I stopped by a few times.
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Speaker 2: The room was packed. It's really going to be actually
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Speaker 2: for yeah, yeah, exactly.
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Speaker 6: I learned things.
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Speaker 2: Yeah, you learned things. So it's good stuff.
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Speaker 5: our Bloomberg Intelligence folks. They cover two thousand companies and
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Speaker 5: one hundred and thirty industries all around the world. Let's
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Speaker 5: pick up them. What John Tucker was just talking about
5:56
Speaker 5: in terms of Stilantis temporarily halting some production Canada and
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Speaker 5: Mexico forward already offering steep discounts to keep customers coming
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Speaker 5: into the showrooms. Volkswagon warning dealers it's going to tack
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Speaker 5: on import fees to the vehicles it ships to the
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Speaker 5: US because today those twenty five percent tariffs and imported
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Speaker 5: cards are already on the docket joining US now. Steve Man,
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Speaker 5: Bloomberg Intelligence, Global Autos and Research analysts, can you walk
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Speaker 5: us through these kind of ripple effects, right, like steep
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Speaker 5: discounts getting them into the showroom, like Volkswagen doing import fees,
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Speaker 5: Like what does that roll out to look like?
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Speaker 7: Yeah, I was just having some costs this morning with
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Speaker 7: some clients and that was the big question. You know,
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Speaker 7: how much of that tariff costs can they pass down
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Speaker 7: on to the consumers. It's a big debate. It really
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Speaker 7: depends on the automakers. But in general, uh, you know,
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Speaker 7: I think the automakers will have to eat that cost
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Speaker 7: because you know, we're actually facing a downturn in the
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Speaker 7: auto industry. Inventories are high. If you look at delinquency
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Speaker 7: rates on auto loans, they're at a very high rate
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Speaker 7: over in the last few years. So I don't think
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Speaker 7: consumers are are willing to open up the purse strings
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Speaker 7: any further.
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Speaker 3: So, Steve, why are Ford and General Motors down? This
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Speaker 3: is my dumb question of the day. Wouldn't the domestic
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Speaker 3: automakers be positive today while the internationals would be down
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Speaker 3: because of the terriffs. Aren't these tarfts designed to protect
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Speaker 3: the domestic auto manufacturers.
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Speaker 7: Yeah, Trump's announcement of reciprocal tarofts. You know it gave
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Speaker 7: well quote unquote reprieve or exemption on autos not really
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Speaker 7: right because they are announced to twenty five percent tariff
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Speaker 7: last week, nothing more additional. I guess, so, I guess
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Speaker 7: you're right. I mean, no news is good news at
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Speaker 7: the moment. But I think you know, I think you
7:51
Speaker 7: know the stocks have trying it down quite a bit
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Speaker 7: since last week already. But it's not done yet, right,
7:57
Speaker 7: because there's May third another deadline on auto tariffs. That's
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Speaker 7: when they're going to announce. How are the parts that
8:06
Speaker 7: do not meet the U s m c A or
8:08
Speaker 7: not just US MSA that do not meet the US
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Speaker 7: content rule quote quote unquote US content rule will apply
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Speaker 7: to to auto parts.
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Speaker 5: But to that point, it's just currently the tar tariffs
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Speaker 5: are in place for already made cars coming into the US.
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Speaker 5: We get the auto parts one, as you point out,
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Speaker 5: coming in May. Third, Are you surprised at Ford sort
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Speaker 5: of lowering and offering discounts to get people in their
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Speaker 5: showrooms right now? Like that would feel like the opposite
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Speaker 5: of what you would expect with tariffs in plays.
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Speaker 8: Yeah.
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Speaker 7: Uh, you know, this is what I said earlier. I
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Speaker 7: think the automakers will have to eat this. Uh that's
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Speaker 7: now they're going to have to lower the costs. Uh, well,
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Speaker 7: definitely not raise the cost But like I said earlier too,
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Speaker 7: they're you know, it's coming in a bad time where
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Speaker 7: inventories are at you know, pre COVID levels really, so
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Speaker 7: you know, they're you know, and the consumers are not
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Speaker 7: buying as many cars as they they would, So they're
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Speaker 7: going to have to not only eat it, but I
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Speaker 7: have to, like in this case, for we'll have to
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Speaker 7: even cut prices.
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Speaker 3: What does this mean for the transition to electric vehicles?
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Speaker 2: Because it felt like for.
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Speaker 3: The US OE ms they were almost doing it begrudgingly
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Speaker 3: because they kind of had to. The market was going there.
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Speaker 3: They didn't really want to. The economics weren't there. Now
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Speaker 3: I've got pressure on my core business. Does that slow
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Speaker 3: down do you think? Or is that going to impact
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Speaker 3: the move towards EV's.
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Speaker 7: There's always been a debate. Right now evs are battery
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Speaker 7: evs are about eight nine percent you know, penetration in
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Speaker 7: the US market. There's debate in terms of if that's
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Speaker 7: going to grow. But I think that's where in this segment,
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Speaker 7: that's where we actually will see clearer winner and losers.
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Speaker 7: I actually think the the pure place, the Rivians, the Lucid,
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Speaker 7: and the Tesla will be clear winners because if you
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Speaker 7: look at the legacy automakers, they're actually building a lot
10:00
Speaker 7: of these evs in Mexico to bring down costs. They
10:03
Speaker 7: offer a more attractive, attractive prices for consumer. But now
10:08
Speaker 7: with these tarraffs, you know, you know, g now they're
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Speaker 7: going to have to raise prices on EV's, not really
10:14
Speaker 7: cut prices to bring in consumer. And you know, unfortunately
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Speaker 7: GM was actually on our way uh to to profitability
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Speaker 7: on EV's and that's gonna you know, these terrors are
10:23
Speaker 7: going to derail that that effort.
10:25
Speaker 5: Do you really think that we're going to see uh
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Speaker 5: for more like GM build more auto plants in the US.
10:31
Speaker 5: Is that actually gonna happen.
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Speaker 7: I think with the global tariffs, with the auto terrafts
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Speaker 7: plus the reciprocal taroffs, it's actually up ending this supply
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Speaker 7: chain that's that's been put in place since nineteen sixty five,
10:45
Speaker 7: you know, first kind of auto agree between US and Canada,
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Speaker 7: which was called the autopack.
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Speaker 2: This whole. These these rors are up ending that.
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Speaker 7: And I do think that the US, these US automakers
11:00
Speaker 7: will bring vehicle assembly back, and it's going to have
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Speaker 7: a ripple effect because they're going to force a lot
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Speaker 7: of the suppliers to also come back to the US
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Speaker 7: as well. So it's it's, uh, we don't exactly know
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Speaker 7: how much it will cost. We've made some estimates can
11:16
Speaker 7: cost up towards of over four billion dollars just to
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Speaker 7: bring just to you know, construct a new plant, a
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Speaker 7: green field plant in the one greenfield plant.
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Speaker 2: In the US.
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Speaker 3: They talked about, have any of the companies that you
11:29
Speaker 3: covered they talked about were willing to make that investment.
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Speaker 7: Have not, But I bet there's gonna be a lot
11:35
Speaker 7: of questions during the earnings costs talk about it.
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Speaker 5: Though at this point they got to talk about it,
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Speaker 5: which company think is best points to actually do that
11:43
Speaker 5: if they were to pour some billions into that.
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Speaker 7: I still think the US automakers will actually, relatively speaking,
11:50
Speaker 7: will be better off than say the Europeans, uh, and
11:54
Speaker 7: some of the Asians like South Korea, South Korean, because
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Speaker 7: the US auto and the US automakers do have additional
12:03
Speaker 7: capacity in the US that they actually can bring that capacity,
12:08
Speaker 7: shift that production back into the US where the Europeans
12:12
Speaker 7: and some day Asians will have to build greenfield sites
12:15
Speaker 7: which could cost about four billion dollars for a plant.
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Speaker 3: Wow, And I'll build it in Tennessee or South Carolina
12:22
Speaker 3: or Alabama one of the non Union states.
12:24
Speaker 2: And there you go. They've already done that. All right,
12:25
Speaker 2: Steve Man, thanks so much for joining U.
12:27
Speaker 3: Steve Man, he's a global autos and industrials research channels
12:30
Speaker 3: for Bloomberg Intelligence, actually in New York City here today
12:34
Speaker 3: and I'm believte Sure Studio. I know so many people
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Speaker 3: can say.
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Speaker 5: on YouTube as well. Let's go to another area and
13:04
Speaker 5: sector that will obviously be quite impacted by tariffs, and
13:07
Speaker 5: that is shipping. Lee clas Cow as Boomberg Intelligence and
13:10
Speaker 5: your Transportland and Shipping analyst. So Lee, if I gain
13:13
Speaker 5: this out, I see a couple of things. One, trade
13:15
Speaker 5: flows re route, so the shippers are still doing stuff,
13:18
Speaker 5: they're just doing stuff in different directions. Or we see
13:21
Speaker 5: trade really start to shut down. What's your base case?
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Speaker 8: What we've been saying for a while that tariffs are
13:29
Speaker 8: not good for the freight markets, and the reason for
13:31
Speaker 8: that is obviously they're inflationary and the consumer is a
13:34
Speaker 8: big part of the US economy, so it's going to
13:37
Speaker 8: have an impact on things that we import. So it's
13:39
Speaker 8: going to impact companies like Maersk and how Hug, Lloyd
13:42
Speaker 8: and Costco those are marine shipping lines because they'll be
13:46
Speaker 8: hauling less containers from Asia to the United States. It'll
13:50
Speaker 8: impact railroads. It's as Union Pacific and CSX because still
13:55
Speaker 8: be hauling less freight. It'll impact truckload carriers and LTR
14:00
Speaker 8: carriers and also is going to obviously impact the parcel
14:02
Speaker 8: carriers like FedEx and ups. And we're kind of seeing
14:05
Speaker 8: that in the market right now. The Dow Joant Transports down,
14:09
Speaker 8: you know, over seven percent. Well the general markets down
14:12
Speaker 8: around four percent right now. So you know, these are
14:15
Speaker 8: highly cyclical names and they're really uh, you know, the
14:21
Speaker 8: demand really goes with where the economy is going. And
14:24
Speaker 8: what this is telling us is that it's going to
14:25
Speaker 8: be hit to the economy. What was announced yesterday after
14:29
Speaker 8: the close out of the White House.
14:32
Speaker 3: So Lee, I spoke with our one of our favorite
14:36
Speaker 3: transportation anols earlier this morning, Tony Hatchet.
14:38
Speaker 2: Now we get to speak to Lee Glasgow. So this
14:40
Speaker 2: is a good day. Say, how does that hurt? Now
14:42
Speaker 2: to my faves two of my faves.
14:44
Speaker 3: I worked for Tony way way way back in the day,
14:47
Speaker 3: and I.
14:47
Speaker 2: Work with Lee at BI. So it's all good. Lee.
14:50
Speaker 3: I mean, if you're CSX or Union Pacific, you're kind
14:54
Speaker 3: of just waiting to see what your customers, like Ford
14:56
Speaker 3: Motor Company or the the farmers are going to tell
14:59
Speaker 3: you about what they need in terms of demand. Are
15:01
Speaker 3: you hearing anything now about bookings or any of that
15:04
Speaker 3: kind of stuff.
15:06
Speaker 8: I mean, what we're seeing so you know, obviously, what
15:09
Speaker 8: we're seeing in the liner market is a couple of
15:11
Speaker 8: the liners have announced blank sailings. And what that means
15:15
Speaker 8: is that they're either going to you know, skip a
15:19
Speaker 8: port or they're just going to discontinue a whole loop
15:23
Speaker 8: of a ship going from Asia to the US and
15:26
Speaker 8: back to Asia. So we're starting to see that now.
15:28
Speaker 8: When we actually saw container rates Transpacific container rates actually
15:34
Speaker 8: spike a little bit this week and that's really been
15:36
Speaker 8: driven on that and and some general rate increases. So
15:39
Speaker 8: we are starting to see that. And then you know,
15:41
Speaker 8: have to remember there was a lot of pull forward
15:44
Speaker 8: to demand ahead of these towers, right and so what
15:47
Speaker 8: that's going to do is that means inventories are full
15:50
Speaker 8: right now, and so that's going to create very difficult
15:52
Speaker 8: comps in the second half of the year. And you know,
15:55
Speaker 8: when we were seeing intermodal volumes up mid to high
15:58
Speaker 8: single digits, uh, you know, you could see that going
16:02
Speaker 8: to declines in the second half. So and that's you know,
16:05
Speaker 8: intermodal impacts railroads. So all the railroads. So you know,
16:09
Speaker 8: we mentioned you Pacific, and it also impacts Norfolk Southern
16:13
Speaker 8: and Berkshire Hathaway's Burlington Northern. Also impacts big players in
16:17
Speaker 8: the emobile business like Hub Group or JB. Hunter or Schneider.
16:20
Speaker 8: So you know, the impact to the tariffs are really
16:24
Speaker 8: going to be felt for transportation companies. And that's all
16:28
Speaker 8: assuming that these tarists stick. Right if tomorrow the President
16:32
Speaker 8: wakes up and says, I forget about it. You know, uh,
16:35
Speaker 8: the then game on, right, it's like that Wayne's World scene,
16:39
Speaker 8: you know, a game off, game on. So so you know,
16:42
Speaker 8: we we we could be you know, back to normal
16:46
Speaker 8: because you know, what we were really banking on this
16:48
Speaker 8: year was a freight recovery for the truckload sector and
16:51
Speaker 8: kind of the truckload sector also, uh does impact other
16:55
Speaker 8: aspects of the freight economy, and that recovery really seems
16:59
Speaker 8: down to be pushed out a lot further than what
17:02
Speaker 8: we thought three months ago. You know, when President Trump
17:05
Speaker 8: you know, got into the White House, and you know,
17:07
Speaker 8: we thought that this was going to release all these
17:09
Speaker 8: animal spirits and you know, low taxes, low regulation, that's
17:12
Speaker 8: going to be great for the economy. But then now
17:15
Speaker 8: we have the risk of tariffs, and you know the
17:18
Speaker 8: end game is going to be interesting. So you know
17:21
Speaker 8: a company like Nike, they manufacture a lot of sneakers
17:24
Speaker 8: in Vietnam, but you know, an average sneaker worker. I
17:28
Speaker 8: just looked us up on the internet, so hopefully this
17:30
Speaker 8: is right. You know, they make something like two hundred
17:33
Speaker 8: and fifty dollars a month. I mean that that manufacturing
17:36
Speaker 8: is not going to come to the United States. So
17:38
Speaker 8: what are the goals of these tariffs?
17:40
Speaker 7: Right?
17:40
Speaker 8: Because you know, to bring that to the United States.
17:44
Speaker 8: You know obviously it's twenty dollars an hour, forty hours
17:47
Speaker 8: a week. That that's a lot more than two hundred
17:50
Speaker 8: and fifty dollars a month.
17:52
Speaker 5: But yes, to be sure, and I think that everyone
17:54
Speaker 5: doesn't necessarily know how what would the end goal is.
17:57
Speaker 5: Here's my really silly question. And I'm just looking in
17:59
Speaker 5: the ship like MARSK or any of the actual shippers.
18:02
Speaker 5: If we're rerouting goods in a less efficient route, for example,
18:07
Speaker 5: does that actually mean that they make more money or no?
18:11
Speaker 8: Yes so so near so the near term vent any
18:14
Speaker 8: disruption is good for the shipping markets and transports and
18:18
Speaker 8: free forwarders, but that that that good part is very
18:23
Speaker 8: short lived. Uh, And so you know we're not we're
18:27
Speaker 8: not going to see all of a sudden sneakers manufacture
18:29
Speaker 8: in Eastern Europe. It's just that's where they're manufactured. So
18:34
Speaker 8: they're just going to be coming in and they're just
18:36
Speaker 8: going to be more expensive and we're just going to
18:38
Speaker 8: buy less of them. So it's not like we're not
18:40
Speaker 8: talking about like the Red C crisis where the SEUs
18:43
Speaker 8: Canal is pretty much shut down to the container liner market,
18:46
Speaker 8: or you know, droughts in the Panama Canal or a
18:49
Speaker 8: war in Ukraine. Those really impacted trade flows. It's going
18:55
Speaker 8: to take a long time to change where things are manufactured.
19:00
Speaker 8: Sure now on the dry bulk side and the tanker side,
19:04
Speaker 8: I mean that could get a little more disrupted, but
19:07
Speaker 8: a lot of those commodities are kind of exempt already,
19:10
Speaker 8: so they may not really be impacted as much as
19:13
Speaker 8: really contain a lot of market.
19:15
Speaker 5: Gully with barely class GA Bloomberg Intelligence, Thanks a lot.
19:19
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19:33
Speaker 5: Because let's get to some of the stocks definitely on
19:35
Speaker 5: the move. That's Nike.
19:37
Speaker 2: We were off huge here.
19:39
Speaker 5: I mean, this is the lowest level we've seen since
19:41
Speaker 5: November of twenty seventeen, the worst selloff since June of
19:44
Speaker 5: last year. Punham Goyle is senior US e Commerce and
19:47
Speaker 5: retail analyst at Bloomberg Intelligence. Punham this is a completely
19:51
Speaker 5: unfair question. But where is the bottom or the revaluation
19:54
Speaker 5: for the stock here?
19:56
Speaker 6: I guess it depends on how are they going to
20:00
Speaker 6: on these prices? Right, So, you know, a fifty four
20:03
Speaker 6: percent tariff on China, forty six percent on Vietnam, where
20:07
Speaker 6: Nike makes fifty percent of its footwear. These are big,
20:11
Speaker 6: big numbers. There's no way they can absorb even half
20:16
Speaker 6: of this. These companies have laser thin profit margins, you know,
20:21
Speaker 6: high single digits, operating margins, low double digits maybe at
20:25
Speaker 6: best for some of them. It's just something they can't absorb.
20:28
Speaker 6: So prices will rise to the consumer and the consumer
20:32
Speaker 6: will pull back. And that's where we struggle because inventory
20:36
Speaker 6: will pile up again. If you talk specifically about Nike.
20:39
Speaker 6: Nike's in a position today where they need to get
20:41
Speaker 6: rid of excess inventory, and that's been the push that
20:44
Speaker 6: they've been pushing for the last two quarters.
20:46
Speaker 5: We're just kind of getting it together.
20:47
Speaker 6: Yeah, exactly. So now this happens, So does the problem
20:53
Speaker 6: become worse? I think so. I think as prices rise,
20:57
Speaker 6: consumers fall back. Now there's more inventory that needs to
21:00
Speaker 6: be disposed. And it's just the surple effect that they
21:03
Speaker 6: can't escape. So things are going to get much uglier
21:06
Speaker 6: before they get better, or we think even if they
21:08
Speaker 6: can get better.
21:10
Speaker 3: So from the last I guess terariff scenario of several
21:14
Speaker 3: years ago plunam, did we learn any lessons? There were
21:19
Speaker 3: the retailers able to.
21:21
Speaker 2: Pass long price increases?
21:23
Speaker 3: Where they did they end up taking it in the margin?
21:27
Speaker 2: What did they do?
21:28
Speaker 6: So in the last round there were ways to offset it.
21:31
Speaker 6: So what happened in the last round was it was
21:33
Speaker 6: only China that had the tariffs, So retailers shifted production
21:37
Speaker 6: out of China into Vietnam, into Cambodia, into Bangladesh, and
21:42
Speaker 6: they were able to diversify that cost exposure, but they
21:45
Speaker 6: didn't bring production to the US. Today, there's no place
21:49
Speaker 6: to really diversify it and bringing it back to the
21:52
Speaker 6: US is I think impossible. I mean, we don't have
21:55
Speaker 6: the infrastructure, We don't have the skilled labor to do
21:58
Speaker 6: this anytime soon yet alone years.
22:01
Speaker 5: Right, So that's the whole point. It's like they already
22:03
Speaker 5: did this and then they have to like do it again,
22:06
Speaker 5: Like where would they go? What other companies? I knew
22:09
Speaker 5: Nike is getting hit really hard. You gave the incredible
22:12
Speaker 5: statistics in terms of how much they make overseas and essay, Vietnam,
22:17
Speaker 5: what other country? What other companies are going to be
22:19
Speaker 5: hit as hard?
22:21
Speaker 6: So every company that manufacturers in Asia will be hit.
22:26
Speaker 6: There's really no escape here. All Birds a very small company.
22:30
Speaker 6: One hundred percent of their footwear is made in Vietnam.
22:33
Speaker 6: Oh Adidas thirty nine percent. Lulu Lemon, which before yesterday
22:38
Speaker 6: did escape the TERRAF front because they did not manufacture
22:42
Speaker 6: in China. Now they have forty percent of their manufacturing
22:46
Speaker 6: in China in Vietnam. I'm sorry, so they're exposed to now.
22:50
Speaker 6: So it's really everyone apparel. We are a net importer
22:54
Speaker 6: of apparel and footwear. We don't make it here. We
22:57
Speaker 6: don't make enough here to say we can bring it
23:00
Speaker 6: back here. It's in Asia, and the Asian countries across
23:04
Speaker 6: the board have very high tariffs on them, which is
23:07
Speaker 6: going to impact pricing and costs and margin.
23:11
Speaker 2: Are there any brands I don't know how to? I mean,
23:16
Speaker 2: are there companies that are going to be winners here?
23:19
Speaker 3: Maybe they're that they're they're all American manufacturing and so
23:23
Speaker 3: on and goods, and they.
23:24
Speaker 6: Are, but they don't manufacture anything. So think about the
23:28
Speaker 6: resale companies right when you go and these are much
23:30
Speaker 6: smaller companies, but when you go to a throat up,
23:32
Speaker 6: when you go to a poshmark, when you go to
23:34
Speaker 6: an eBay, they're selling stuff that already existed in the marketplace.
23:38
Speaker 6: So as consumers seek these deep value do they start
23:41
Speaker 6: thrifting More possible. It just depends on how high prices
23:45
Speaker 6: will go and how consumers will pull back. But these
23:48
Speaker 6: values driven companies that offer deep, deep discounts, whether it's
23:52
Speaker 6: the off price even to some extent as inventory piles,
23:56
Speaker 6: or whether it's like a Walmart which offers just better pricing,
24:00
Speaker 6: we'll see consumers trade down, we'll see consumers full back,
24:04
Speaker 6: and we'll see consumers seek discount. It's a traditional retail cycle,
24:08
Speaker 6: but this time it's just big. The impact is really
24:11
Speaker 6: big on retailers.
24:12
Speaker 5: And that's why the TJX is of the world right
24:14
Speaker 5: with the resale. So if you have the extra inventory,
24:16
Speaker 5: where does it go TJX? And then that rams up
24:19
Speaker 5: their own inventory and availability for customers.
24:21
Speaker 3: Under Rummer down sixteen percent today via I mean, these
24:24
Speaker 3: are American companies just getting hammered.
24:27
Speaker 5: One of them. Get my scan in Theodore secondhand on
24:30
Speaker 5: Poshmark cheaper than what they are now. It's a whole thing.
24:33
Speaker 2: Oh, it's a whole thing. Put it on. What I'm
24:35
Speaker 2: talking about, all right?
24:36
Speaker 5: Put them, thanks a lot, put them. Goyle a senior
24:37
Speaker 5: US e commerce and retailing list at Bloomberg Intelligence. Joining us.
24:41
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25:06
Speaker 8: Yeahm