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What to know about the trade deal between the US and UK · The Financial Exchange Show

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Speaker 2: Chuck, Mike and Tucker with you here, and top story
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Speaker 2: today is basically, as we speak right now, we are
1:19
Speaker 2: expecting to get some details surrounding the trade deal between
1:26
Speaker 2: the United States and the United Kingdom. And Mike, we
1:30
Speaker 2: don't know anything yet. Again, I expect that we'll be
1:33
Speaker 2: updating this kind of as we go during the hour here,
1:37
Speaker 2: but i'll quote here from the Wall Street Journal and
1:39
Speaker 2: the Financial Times and Bloomberg of Hall had similar reporting
1:43
Speaker 2: on this.
1:45
Speaker 3: Here's the quote.
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Speaker 2: The UK is hoping to get a reduction in the
1:48
Speaker 2: twenty five percent tariffs the US is levying on steel
1:51
Speaker 2: and automobiles, but the baseline ten percent tariff will likely
1:54
Speaker 2: remain in place, officials say. In return, Britain is offering
1:57
Speaker 2: concessions on a digital tax levies on big US tech companies,
2:02
Speaker 2: according to officials with the matter and also specifically talking
2:08
Speaker 2: the UK has indicated this morning that this is not
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Speaker 2: a comprehensive deal encompassing all aspects of trade between the countries,
2:18
Speaker 2: but really a preliminary agreement on these couple of areas,
2:22
Speaker 2: with the idea that they'll continue talking in the future.
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Speaker 4: Yeah, So the press conference was supposed to occur at
2:28
Speaker 4: ten am Eastern. We are seven minutes past. We will
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Speaker 4: see and keep updated as things keep going here. But
2:35
Speaker 4: what would you be looking for if we're going to
2:37
Speaker 4: treat this as some sort of canary in the coal
2:40
Speaker 4: mine about future negotiations with other I guess non Chinese countries.
2:45
Speaker 4: When we come to tariffs the United States and the
2:48
Speaker 4: United Kingdom, this seems like low hanging fruit. We don't
2:52
Speaker 4: have much of a trade deficit with the UK, like
2:54
Speaker 4: we do not have a trade deficit with any trade deficit.
2:57
Speaker 2: We run a surplus of eleven point eight billion dollars
3:00
Speaker 2: last year.
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Speaker 4: So seems pretty easy to get a trade deal done
3:03
Speaker 4: based on how the Trump administration prioritized countries that they
3:08
Speaker 4: were going to hit with reciprocal tariffs. So is there
3:12
Speaker 4: anything to learn from this if it's a you know,
3:15
Speaker 4: even if it's an all encompassing trade deal, that it
3:17
Speaker 4: covers many items and even does away with the ten
3:20
Speaker 4: percent baseline terrafs, which it doesn't seem likely today.
3:23
Speaker 2: Well, I think, look, whatever happens with that ten percent
3:25
Speaker 2: is going to be the only thing that matters. Nothing
3:27
Speaker 2: else here is important, quite honestly, Like, here's the deal.
3:31
Speaker 2: If you look at how much US the US imports
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Speaker 2: about ten billion dollars in cars from the UK, range Rovers, Jaguars,
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Speaker 2: things like that. The US exports a billion dollars in
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Speaker 2: autos to the UK. Like that's like that's like a
3:51
Speaker 2: day of Toyota sales in the US.
3:53
Speaker 3: YEP.
3:55
Speaker 2: The UK digital service tax costs about eight hundred million
3:59
Speaker 2: dollars in a given year for US companies, and the
4:03
Speaker 2: US imports about five hundred million dollars of steel from
4:06
Speaker 2: the UK. So like that stuff in and of itself,
4:10
Speaker 2: quite honestly, does not matter at least to the US.
4:13
Speaker 2: To the UK, it's it's it's a bigger deal just
4:15
Speaker 2: because the UK economy is significantly smaller, and so getting
4:20
Speaker 2: some kind of waiver on those auto export taxes to
4:23
Speaker 2: the US the auto tariffs to the US is meaningful
4:26
Speaker 2: for them.
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Speaker 3: But as far as hey.
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Speaker 2: Like, how is this going to affect the US economy,
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Speaker 2: the answer is it's it's not like it's it's there's
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Speaker 2: there's nothing there.
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Speaker 4: The I think the bigger piece of this is, you
4:39
Speaker 4: know markets were up in pre markets close to one percent.
4:42
Speaker 4: They've since come back down to earth s and p
4:44
Speaker 4: right now up about a third of a percent. But
4:47
Speaker 4: the question in my mind is can you use this
4:50
Speaker 4: as any sort of framework for other countries? And the
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Speaker 4: indication would be probably not, because we run a surplus
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Speaker 4: with the UK and just about every other country that
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Speaker 4: we're going to be negotiating with, we run a trade deficit,
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Speaker 4: which seems to be the defining issue that the Trump
5:04
Speaker 4: administration is focusing on.
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Speaker 2: So I think, yes, if you're trying to be like,
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Speaker 2: can can this be like the exact temple with the answers?
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Speaker 2: Probably know. But here's the piece that I do think
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Speaker 2: is going to be instructive. We run a trade surplus
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Speaker 2: with the United Kingdom. We send them eighty billion dollars
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Speaker 2: in goods, we bring back sixty eight billion dollars in goods,
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Speaker 2: So we've got a trade surplus with them. If the
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Speaker 2: ten percent baseline tariff stays in place on a partner
5:35
Speaker 2: that we have a trade surplus with the question that
5:39
Speaker 2: I do think is worth asking, and where I think
5:41
Speaker 2: you get some answers, is, hey, what happens to the
5:44
Speaker 2: countries that we do not have a trade surplus with?
5:48
Speaker 4: You would think an excess of ten then.
5:51
Speaker 2: Does you gotta imagine the UK for multiple different reasons,
5:56
Speaker 2: is going to have a better deal than just about
5:59
Speaker 2: every other country out there, most notably like the trade situation.
6:04
Speaker 3: So I guess I look at.
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Speaker 2: It and I go, okay, if this is kind of
6:08
Speaker 2: the baseline that we have for I mean, here's the thing.
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Speaker 2: If if you had one hundred and eighty countries where
6:14
Speaker 2: we were trading like we were with the UK, would
6:19
Speaker 2: would there be any complaint like the not? Like, there's
6:24
Speaker 2: there's no way that you you get there. You wouldn't
6:26
Speaker 2: have any issue with any any trade deficit because there
6:30
Speaker 2: simply wouldn't be one. So I think the question then is, Okay,
6:34
Speaker 2: so you've got a country like Japan who's running a
6:37
Speaker 2: seventy billion dollar trade deficit. Well, Japan's running a circles,
6:41
Speaker 2: but the US is running a seventy billion dollar trade
6:43
Speaker 2: deficit with Japan?
6:46
Speaker 3: How do we square that circle?
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Speaker 2: You know, how much more complex does it have to be?
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Speaker 2: And maybe this is why you have Treasury Secretary Bessett
6:53
Speaker 2: involved in these negotiations as opposed to just the US
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Speaker 2: Trade Representative. There's very lovely currency components that play into
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Speaker 2: some of these and those things get you know, pretty
7:02
Speaker 2: complicated and pretty complex. So it's not to say that
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Speaker 2: you won't get something done. But I keep coming back
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Speaker 2: to the tariff piece, and I go the President multiple
7:10
Speaker 2: times this week, and these are quotes I keep coming
7:13
Speaker 2: back to. Has said something of the equivalent of, Hey,
7:18
Speaker 2: we have, you know, a product that we're selling, and
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Speaker 2: we're going to set the price and you're either going
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Speaker 2: to accept it or you're you're not going to be
7:25
Speaker 2: able to do business with us. And the price that
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Speaker 2: he's viewing is that that teriff rate. And so I
7:31
Speaker 2: guess what I'm getting at here is, Hey, the UK
7:34
Speaker 2: because of its trade deficit, the shared you know, the
7:38
Speaker 2: long history between the two countries. I mean again dating
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Speaker 2: back to literally the United States being a colony of
7:45
Speaker 2: or multiple colonies of the UK originally, and then you know,
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Speaker 2: fighting together in World War One and World War two,
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Speaker 2: when Gulf War one and the War on terram like,
7:54
Speaker 2: you can go through all of this shared history and
7:56
Speaker 2: basically say there's maybe one or two other countries that
8:02
Speaker 2: you can consider to have as advantageous a position both
8:06
Speaker 2: from a you know, a similarity perspective, a shared history perspective,
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Speaker 2: and a trade perspective. If this is the best one
8:16
Speaker 2: that you get, then hey, what's it going to look
8:18
Speaker 2: like for other countries and how do they get those
8:21
Speaker 2: you know, over the hump, and what are the things
8:23
Speaker 2: that you're able to actually get there? I think those
8:26
Speaker 2: are the questions that are interesting for me to ask.
8:28
Speaker 2: And so, you know, the assumption that I think everyone
8:32
Speaker 2: on Wall Street is working at right now is that
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Speaker 2: the baseline ten percent tariffs are going to stay in place,
8:39
Speaker 2: and something's going to happen on China, probably down into
8:41
Speaker 2: the fifty percent range.
8:43
Speaker 3: That's kind of the.
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Speaker 2: Where where people are working from. That's gotten markets to
8:47
Speaker 2: this point, and so I think the question in the
8:51
Speaker 2: set up here is, hey, if there's anything that is
8:53
Speaker 2: better than that, great, you know, you've got the potential
8:55
Speaker 2: for you know, improvement. But there's also the likelihood if
8:59
Speaker 2: this is the best deal that the UK can negotiate.
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Speaker 4: There's no way that France, Germany, Japan and others can
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Speaker 4: neotiate the same deal.
9:05
Speaker 3: Then no.
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Speaker 2: I mean, like you look at you know, Mexico and Canada,
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Speaker 2: which respectively run one hundred and seventy billion and sixty
9:14
Speaker 2: three billion dollar deficits with the US, and you sit
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Speaker 2: there and go, okay, like, how's that going to work.
9:20
Speaker 2: So I think those are the questions that are that
9:22
Speaker 2: are interesting to sort through and you know, try to
9:25
Speaker 2: inform where things are going. But I think the working
9:27
Speaker 2: assumption that's out there for most people ten percent staying
9:31
Speaker 2: in place something extra on China, but probably not the
9:34
Speaker 2: one forty five that's there. And obviously we'll have to
9:37
Speaker 2: see how things go over the weekend, if we get
9:39
Speaker 2: any movement in that rate over the weekend, or if
9:42
Speaker 2: this is kind of a prelude to something that is
9:44
Speaker 2: you know, further down the line in you know, later
9:47
Speaker 2: this month or as we get into the summer with China.
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Speaker 4: The other question I would have about the UK deal
9:51
Speaker 4: they just inked a the UK did with inked a
9:54
Speaker 4: new deal with India on trade and other you know,
9:58
Speaker 4: immigration type issues. I'm interested to see Scott Besen's been
10:01
Speaker 4: kind of dangling this carrot out in front of other
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Speaker 4: countries of hey, join with us on penalties on trade
10:07
Speaker 4: with China and we can negotiate a better deal. Is
10:10
Speaker 4: there any mention of that in a deal with the UK?
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Speaker 4: I kind of doubt it, but that would be kind
10:15
Speaker 4: of the only circumstance I could envision where that ten
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Speaker 4: percent baseline starts disappearing.
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Speaker 2: And that's one where, by the way, negotiations with the
10:22
Speaker 2: EU become really complicated because the EU, and specifically Germany
10:28
Speaker 2: to a significant extent, there's some significant political capture there
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Speaker 2: by China, and I think that you would get significant
10:37
Speaker 2: pushback from the EU, which could make that one of
10:39
Speaker 2: the more difficult negotiations potentially, if that is a sticking
10:44
Speaker 2: point there. So I think that that's something that bears
10:48
Speaker 2: watching as we get more details. But again still no
10:52
Speaker 2: specifics you know, that have been hammered out or any
10:56
Speaker 2: not hammered out, but that have been made available publicly
10:58
Speaker 2: yet and we'll have to see what we get over
11:00
Speaker 2: the course of the day, and then I think all
11:03
Speaker 2: eyes continue to be the reporting from Charlie Gasperino from
11:06
Speaker 2: Fox Business. India is kind of next in the cube,
11:09
Speaker 2: but obviously with everything going on right now between India
11:11
Speaker 2: and Pakistan, that seems to have slowed things down at
11:15
Speaker 2: the moment, and so I think, you know, that's another
11:17
Speaker 2: one that you would expect to see in short order. Australia,
11:21
Speaker 2: South Korea, Japan, They're all kind of in that next
11:24
Speaker 2: group that you would say, Okay, these are the ones
11:26
Speaker 2: that you should have, you know, the easiest deals to
11:30
Speaker 2: potentially work or the easiest frameworks to establish, and we'll
11:33
Speaker 2: have to see what we get there. Anything else on
11:37
Speaker 2: the UK one that you want to touch on, Mike.
11:39
Speaker 4: No, but there's been some news out of the EU.
11:42
Speaker 4: Let's take quick break and cover how they are preparing
11:44
Speaker 4: for negotiations with the US. Next here on the Financial Exchange.
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Speaker 2: All right, let's talk a little bit about the state
12:52
Speaker 2: of negotiations between the US and EU as it relates
12:55
Speaker 2: to trade. Basically, all the reporting there hasn't really been
12:59
Speaker 2: any progress to the point, not really a ton of conversation,
13:01
Speaker 2: it sounds like, but it does appear that things are
13:05
Speaker 2: set to ramp up with some talks in the next
13:08
Speaker 2: week or two, and the EU unveiling this morning. I
13:14
Speaker 2: guess it was, you know, kind of midday their time,
13:18
Speaker 2: a whole set of different additional tariffs that they would
13:24
Speaker 2: put in place if they're not able to get these
13:27
Speaker 2: negotiations to a satisfactory place. So pretty much saying, hey,
13:31
Speaker 2: we want to, you know, try to get something done,
13:32
Speaker 2: but if we can't, here's what we're gonna do. And
13:35
Speaker 2: it's not gonna be a whole lot of fun for you.
13:37
Speaker 2: What are they proposing?
13:38
Speaker 4: Yeah, so this is unsurprising. And by the way, you know,
13:41
Speaker 4: just because they are listing this out, I don't take
13:43
Speaker 4: this as bad news about the direction of these negotiations.
13:46
Speaker 3: If you are the EU.
13:48
Speaker 4: You are not going to sit on the sideline and
13:50
Speaker 4: go into these negotiations with no bargaining power. You have
13:53
Speaker 4: to do something like this. Correct the list of things
13:56
Speaker 4: that they mentioned big ones anyway, cars obviously, planes makes
14:01
Speaker 4: some sense. You manufacture your air buses in France. We're
14:04
Speaker 4: not going to import any Boeing planes, or we're gonna
14:06
Speaker 4: hit them with tariffs if we do. Bourbon has been
14:10
Speaker 4: a constant source of targeting by the EU and other
14:13
Speaker 4: countries over tariffs several times now. So those, you know,
14:18
Speaker 4: are a number of the different items that would be
14:20
Speaker 4: looked at. But like you mentioned, Chuck, it'd be targeting
14:23
Speaker 4: about one hundred and eight billion dollars of US goods
14:27
Speaker 4: that would be looked at for reciprocal tariffs in the
14:29
Speaker 4: event that they cannot make this all move along. By
14:33
Speaker 4: their own study, they said that in terms of the
14:37
Speaker 4: European made goods that would be facing tariffs coming into
14:40
Speaker 4: the United States, they're looking at duties on some five
14:42
Speaker 4: hundred and fifty billion euro worth of goods. So this
14:45
Speaker 4: is a smaller basket because frankly, there's fewer goods that
14:49
Speaker 4: go into the EU from the US than the other direction.
14:52
Speaker 4: I don't know, unsurprising and you know, just kind of
14:55
Speaker 4: to me is part of the negotiation tactic. Hey, we're
14:59
Speaker 4: going to go after some of the most critical items
15:01
Speaker 4: that the US is able to export to US.
15:05
Speaker 2: Yeah, and just to give some color on the trade
15:07
Speaker 2: deficit that the US has with the EU, the US
15:11
Speaker 2: exports about three hundred and seventy billion dollars worth of
15:13
Speaker 2: goods to the EU. We import about six hundred and
15:16
Speaker 2: five billions, So in total, there's about a trillion dollars
15:19
Speaker 2: in trade between the two countries. But it's kewed, you know,
15:22
Speaker 2: call it like sixty two to thirty eight percent in
15:25
Speaker 2: favor of goods heading from the EU versus goods heading
15:28
Speaker 2: from the United States. So yeah, look, I don't think
15:32
Speaker 2: that the publication of this list says anything about the
15:34
Speaker 2: fact that things are good or bad.
15:36
Speaker 3: As you noted, it's much more.
15:38
Speaker 2: Hey, if someone you know, places a punitive measure on you,
15:42
Speaker 2: in order to start negotiations, you basically have to say, Okay,
15:46
Speaker 2: here's what we're going to do to you. Otherwise you're
15:47
Speaker 2: just negotiating against yourself.
15:49
Speaker 4: It's the Roosevelt theory speak softly, carry a big stick.
15:52
Speaker 2: So I think that this is gonna be something that
15:55
Speaker 2: we'll see how things go over the next few weeks
15:58
Speaker 2: or so and whether we start to see some signs
16:00
Speaker 2: of progress there.
16:01
Speaker 3: But look, if the ask from.
16:04
Speaker 2: The Trump administration, which I think one of them is
16:06
Speaker 2: going to be, hey, we need you to, you know,
16:10
Speaker 2: focus on detaching yourself somewhat from Chinese supply chains, there
16:16
Speaker 2: are all kinds of signs that that's going to be
16:18
Speaker 2: a really tough putt with the EU because China is
16:20
Speaker 2: absolutely deeply embedded into the EU economy now, and furthermore,
16:27
Speaker 2: you know, has significant influence amongst different political groups within
16:33
Speaker 2: the EU as well, to the point where you know,
16:36
Speaker 2: with a number of things that happen, you kind of
16:38
Speaker 2: look at you like, man, this is this really does
16:40
Speaker 2: not seem to be in Europe's best interest in a
16:42
Speaker 2: lot of cases, but instead in China's best interest. And
16:45
Speaker 2: so I think this could be one of the tougher
16:48
Speaker 2: negotiations if that is a sticking.
16:51
Speaker 3: Point for the Trump administration.
16:52
Speaker 4: Yeah, I gotta tell you, Chuck, I mean, as big
16:54
Speaker 4: of a deal that is for the EU, think about
16:56
Speaker 4: countries like Vietnam, Japan and Australia and the the forget
17:01
Speaker 4: about like ties, the utter reliance that those countries have
17:05
Speaker 4: on the Chinese economy for employment and just everything that
17:10
Speaker 4: they do. Maybe Australia a little bit to a lesser degree,
17:13
Speaker 4: but those ties are so more, so, much more than
17:19
Speaker 4: what we experience with EU, UK, et cetera. That, yes,
17:24
Speaker 4: these negotiations with the EU would be a challenge, but
17:28
Speaker 4: when you dive into some of those Asian countries, it
17:30
Speaker 4: is even more significant than So I do wonder about
17:34
Speaker 4: the ability for the United States to drive that wedge.
17:38
Speaker 4: It's going to be significantly challenging.
17:40
Speaker 2: Yeah, and just as an example Vietnam. So if you
17:44
Speaker 2: go through and look at you know, the data, Oni,
17:48
Speaker 2: So let's look at the EU first. So the European Union,
17:51
Speaker 2: in terms of their largest exports, twenty one percent of
17:55
Speaker 2: EU exports go to the US, fourteen percent go to
17:59
Speaker 2: the UK, and then eight and a half percent go
18:01
Speaker 2: to China. In terms of you imports by country, if
18:06
Speaker 2: you looking at hey like where do you know where
18:08
Speaker 2: do they bring stuff in from? Biggest import by far
18:11
Speaker 2: as China. They bring in twenty two percent of all
18:13
Speaker 2: their imports from China, fourteen percent from the United States,
18:16
Speaker 2: seven percent from the UK. If you go and take
18:20
Speaker 2: a look at Vietnam, just to get like the scale
18:24
Speaker 2: of this, Vietnam eighteen percent of their exports are to China,
18:27
Speaker 2: So it's a bigger chunk than the EU.
18:29
Speaker 3: It's it's effectively more than double.
18:32
Speaker 2: And from an import perspective, that's also the case. Thirty
18:36
Speaker 2: seven percent of Vietnamese imports come from China, next closest
18:41
Speaker 2: to South Korea at seventeen then Japan at seven point two.
18:44
Speaker 2: So yeah, this is something where again I think you're
18:49
Speaker 2: gonna have with some of these other countries, you know,
18:53
Speaker 2: specifically like Vietnam, Thailand, Malaysia, Cambodia. Part of the challenge
18:58
Speaker 2: that the US is going to have and to gociating
19:00
Speaker 2: there is I do think it's twofold as it relates
19:02
Speaker 2: to China. The first, hey, stop your reliance on them.
19:06
Speaker 2: But the second is stop you know, the flow of
19:09
Speaker 2: stuff coming from China that's being relabeled as being in
19:12
Speaker 2: your country. It's gonna be a big one too, potentially,
19:15
Speaker 2: big Ten's take a quick break here. When we come back,
19:21
Speaker 2: we're gonna do a little bit of Wall Street Watch
19:23
Speaker 2: and then talk a little bit about those US China
19:27
Speaker 2: talks that are slated to start this weekend, and how'd
19:31
Speaker 2: they get on how they kind of get on course
19:33
Speaker 2: to meet Anyways, we'll discuss that when we return.
19:39
Speaker 1: Like us on Facebook and follow us on Twitter at
19:42
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19:47
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19:52
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19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
20:00
Speaker 5: Are in positive territory as Wall Street aweights official details
20:03
Speaker 5: of a new trade deal between the US and the UK.
20:07
Speaker 5: News conference was supposed to start at ten o'clock, but
20:11
Speaker 5: hasn't started yet to this moment, so we're still awaiting
20:15
Speaker 5: that press conference. Investors are also digesting yesterday's commentary from
20:20
Speaker 5: the Federal Reserve in Jerome Powell. Right now, the Dow
20:24
Speaker 5: is up by over two thirds of a percent, or
20:26
Speaker 5: two hundred and eighty points. S and P five hundred
20:29
Speaker 5: also up by two thirds of percent or thirty five points,
20:32
Speaker 5: and the Nasdaq is up just over three quarters of
20:35
Speaker 5: a percent or one hundred and thirty nine points. Rusted
20:38
Speaker 5: two thousand is up by seven tenths of a percent
20:40
Speaker 5: or thirteen points. Tenure Treasure Reill left by four basis
20:44
Speaker 5: points now at four point three to two percent. In
20:46
Speaker 5: crude oil up two and a half percent higher today
20:49
Speaker 5: training a fifty nine dollars in fifty one cents a barrel.
20:52
Speaker 5: FOURD announced price increases for three of its popular vehicles
20:56
Speaker 5: due to tariff uncertainty, including twenty twenty five models of
21:00
Speaker 5: the Maverick, Broncos Sport and Mocke built after May second.
21:05
Speaker 5: The Detroit automaker said the new prices would increase anywhere
21:08
Speaker 5: between six hundred and two thousand dollars a vehicle, depending
21:12
Speaker 5: on the features. FOURD shares are up by half a percent. Meanwhile,
21:17
Speaker 5: beer brewer Molson Cores slash its annual outlooks, citing intensified
21:21
Speaker 5: overseas competition and consumers economic woes. However, its competitor Anheuser
21:27
Speaker 5: Busch InBev posted better than expected earnings. Molson down by
21:32
Speaker 5: five percent, while bud stock is up by two percent.
21:35
Speaker 5: Shopify's shares are down by two percent despite the commerce
21:39
Speaker 5: technology platform beating revenue expectations for the first quarter. However,
21:44
Speaker 5: it did post a wider quarterly net loss. Chip maker
21:48
Speaker 5: arm Holding sinking by five percent after the company posted
21:51
Speaker 5: weaker than expected guidance for the current quarter. App Love
21:55
Speaker 5: and stock jumping by fourteen percent after the AAI powered
21:59
Speaker 5: marketing platform posted stronger than expected first quarter earnings, boosted
22:03
Speaker 5: by its ad business, and also announced the sale of
22:06
Speaker 5: its mobile gaming business. And Krispy Kreme pulled its annual
22:09
Speaker 5: guidance and said it would stop paying dividends, citing a
22:13
Speaker 5: challenging environment, sending shares in Krispy Kreme down by nineteen percent.
22:19
Speaker 5: I'm Tucker Silva. That's Wall Street.
22:20
Speaker 3: Watch, Mike.
22:22
Speaker 2: We got a piece in the Wall Street Journal. The
22:24
Speaker 2: headline is fentonyl crisis provided opening for US China trade talks.
22:28
Speaker 2: And again, just kind of a nice little background piece
22:31
Speaker 2: that I think gives us a little bit of insight
22:34
Speaker 2: into how we got to the point where the two
22:37
Speaker 2: sides are going to be sitting down for a chat
22:39
Speaker 2: in Switzerland this weekend.
22:41
Speaker 4: Yeah, it does not appear that this would have necessarily
22:44
Speaker 4: happened without this opening. And the point here is that
22:49
Speaker 4: China does participate in the illegal The governments does not,
22:54
Speaker 4: but manufacturers in China and gangs export the components too
22:58
Speaker 4: Mexican cartels allegedly who then ship the stuff into the
23:02
Speaker 4: United States. And both China and the United States seem
23:05
Speaker 4: to agree that this is a not easy to resolve problem,
23:09
Speaker 4: but at least a problem that most can agree on
23:12
Speaker 4: should be addressed. And who knows if it actually leads
23:16
Speaker 4: to anything, but certainly is an opening door for two
23:19
Speaker 4: countries that seemingly do want to find a path for
23:23
Speaker 4: de escalation while being able to save face with their citizens.
23:26
Speaker 4: Is that Do you think that that's a fair categorization
23:29
Speaker 4: of where we are now with US and China trade?
23:32
Speaker 4: I think so, but we're all guessing at this stage.
23:37
Speaker 4: But that seems to be the read that most are
23:41
Speaker 4: painting here is Yeah, both countries see that they're going
23:45
Speaker 4: to be doing harm to their own economies by keeping
23:48
Speaker 4: things where they are right now, which is effectively an
23:51
Speaker 4: embargo on all but about one fifth to one quarter
23:55
Speaker 4: of goods coming in and out of those countries. And
23:59
Speaker 4: I think both i'd see how problematic that would be.
24:01
Speaker 4: So I'm not really optimistic about where these negotiations lead
24:06
Speaker 4: to this weekend, but it's an encouraging sign of progress,
24:11
Speaker 4: I guess, I'll say.
24:12
Speaker 3: Yeah.
24:12
Speaker 2: So I think in these like rather than being like, hey,
24:15
Speaker 2: here's you know, what's going to happen. You kind of
24:17
Speaker 2: think of it in terms of, Okay, best case, base case,
24:21
Speaker 2: and worst case scenario, and what are the probabilities of
24:23
Speaker 2: those absolute best case scenario, Like, what's the.
24:27
Speaker 3: Best thing that could happen this weekend?
24:30
Speaker 2: You go back to twenty percent blanket tariffs on China,
24:33
Speaker 2: China removes you know, all tariffs, maybe even down to
24:36
Speaker 2: like twenty percent on the US, and you go from there,
24:39
Speaker 2: and you could even say, Okay, we're going to make
24:42
Speaker 2: this retroactive back to April ninth.
24:44
Speaker 3: So hey, companies, if you've.
24:45
Speaker 2: Paid tariffs, applied for a rebate to the Customs and
24:50
Speaker 2: Border Patrol, Okay, that's best case scenario, yep one in
24:55
Speaker 2: twenty yeah, five ten percent chance something like that case
25:00
Speaker 2: in pretty much what I think everyone is pricing in. Okay,
25:03
Speaker 2: tariffs are gonna be taken down to somewhere in that
25:05
Speaker 2: fifty percent range. Maybe China does something similar, agrees to
25:09
Speaker 2: future conversations. I'd say the market's probably pricing in like
25:13
Speaker 2: an eighty ninety percent chance.
25:15
Speaker 3: Of that worst case scenario.
25:19
Speaker 2: Sunday night, we really don't like each other anymore, and
25:24
Speaker 2: we're gonna maintain these tariffs because these talks were not constructive,
25:27
Speaker 2: and we are not scheduling further ones at this time.
25:30
Speaker 4: Yep.
25:30
Speaker 2: That'd be your worst case, you know, like that that's
25:32
Speaker 2: your worst case scenario. Again, maybe like five to fifteen
25:36
Speaker 2: percent chance. And by the way, what we may end
25:38
Speaker 2: up getting could be a combination of these in different
25:41
Speaker 2: respects as well. It could be, Okay, we're lowering our
25:45
Speaker 2: baseline rate on tariffs to fifty, but in some national
25:47
Speaker 2: security areas, we're gonna keep it at one forty five,
25:50
Speaker 2: and we're gonna go, you know, make this retroactive to
25:53
Speaker 2: April ninth. So like you can get things that cross
25:55
Speaker 2: over as well. But when you start getting into like
25:58
Speaker 2: all those different contortions and everything, it's kind of like,
26:01
Speaker 2: what are we doing here? We're not there, so let's
26:03
Speaker 2: just let it play out and see what happens.
26:04
Speaker 4: Yep.
26:05
Speaker 2: So that's that's kind of where we are, I think.
26:07
Speaker 2: But I think we'll know a lot more after this weekend.
26:11
Speaker 2: Obviously at the you know, obviously like wha.
26:15
Speaker 4: Meetings are occurring this weekend, so we will know more
26:17
Speaker 4: after this weekend.
26:18
Speaker 2: On Monday, the bolt call would be, I think we're
26:20
Speaker 2: gonna know less after this weekend.
26:22
Speaker 4: To Michael, Yeah, that would be that would be an
26:24
Speaker 4: interesting one.
26:25
Speaker 2: So I think the the piece that that then matters is, Okay,
26:33
Speaker 2: what do these different tariff levels mean for business in
26:36
Speaker 2: the US if it goes back to twenty and this
26:38
Speaker 2: is from you know people that I know that are
26:41
Speaker 2: you know, big importers from China. If it goes back
26:44
Speaker 2: to twenty, call up your boats, get your ships on
26:47
Speaker 2: the water, get your factories moving. We're bringing all that
26:50
Speaker 2: stuff over because we can figure out how to eat twenty.
26:53
Speaker 2: It might be uncomfortable, but you can figure out how
26:56
Speaker 2: to eat twenty.
26:57
Speaker 4: Well, I mean small businesses can at least afford it.
26:59
Speaker 3: Right.
27:00
Speaker 4: It's not a question right now of companies entirely just
27:04
Speaker 4: saying oh, like U should we pay the one forty
27:06
Speaker 4: five should we wait and see? It's literally a question
27:10
Speaker 4: of hey, if we have to pay a tariff of
27:11
Speaker 4: one hundred and forty five percent on these goods that
27:13
Speaker 4: we're bringing over, we can't find alone even to go
27:17
Speaker 4: and afford it. So it's it's a non issue.
27:20
Speaker 2: So if you come in like best case scenario, which
27:22
Speaker 2: is twenty, you say, okay, like stuff's gonna be coming.
27:25
Speaker 3: But here's the other piece.
27:26
Speaker 2: Then if everyone in their grandma's calling their factories in
27:29
Speaker 2: China and calling up their logistics people, what does that
27:32
Speaker 2: do to cost? Hint, it doesn't move them down right,
27:35
Speaker 2: you know, the estimates that I've heard from you know,
27:39
Speaker 2: people that are in this business are hey, if this
27:43
Speaker 2: is if you do get that best case scenario, shipping
27:46
Speaker 2: costs might go up anywhere from double to triple in
27:52
Speaker 2: some cases, and shipping times may go up anywhere from
27:56
Speaker 2: like fifty to one hundred and fifty percent, right, because
27:58
Speaker 2: there's gonna be this huge backlog of people trying to
28:01
Speaker 2: get stuff out, and there's only so many ships out
28:03
Speaker 2: there that carry this stuff. Like you, you don't just
28:05
Speaker 2: have a whole bunch of spare ships floating around because
28:08
Speaker 2: that's not really something that makes the shippers any money.
28:12
Speaker 2: And it's a very concentrated industry shipping stuff from China.
28:15
Speaker 2: There's only a few companies that basically control the vast
28:18
Speaker 2: majority of that market. So even in that best case scenario,
28:22
Speaker 2: it's still gonna add some some cost and time. Middle scenario, Okay,
28:27
Speaker 2: tariffs go to fifty there are still some companies that
28:30
Speaker 2: are gonna say, we can't do this.
28:31
Speaker 3: We can't make it work. Some will say, yes, we can.
28:34
Speaker 2: It's kind of like your middle ground, and you probably
28:36
Speaker 2: don't see any dramatic, you know, increase in production costs
28:40
Speaker 2: and shipping times just because I think that kind of
28:43
Speaker 2: gets you to a middle ground there. But it's gonna
28:45
Speaker 2: be because some companies are saying no, we're not gonna
28:47
Speaker 2: do this, and some are gonna say, hey, let's order
28:49
Speaker 2: more in case things get worse, right, And if it's
28:52
Speaker 2: still at one forty five, then you've got effectively, you know,
28:55
Speaker 2: you know, this blockade with with China basically like this
28:59
Speaker 2: defect embargo. And if that's the case, you're not going
29:04
Speaker 2: to really see any change, if anything, you might get
29:06
Speaker 2: worse if that, if you know, from there, just because
29:09
Speaker 2: companies may have been you know, trying to produce stuff
29:12
Speaker 2: and shipping it saying okay, maybe by the time it
29:14
Speaker 2: gets to the US the situation will be better, and
29:17
Speaker 2: if you don't see improvement, they might stop doing.
29:19
Speaker 3: That is the case that you can make.
29:21
Speaker 2: Yeah, just trying to you know, work this all out
29:24
Speaker 2: in front of you know, everyone listening.
29:27
Speaker 3: How I do most things.
29:28
Speaker 2: I guess let's take a quick break here. When we
29:31
Speaker 2: come back we did have a FED meeting yesterday. We'll
29:34
Speaker 2: talk about what they said, what they did, and what
29:37
Speaker 2: it means for the global economy.
29:40
Speaker 1: The global trade war is in full swing. How long
29:43
Speaker 1: will it last? Is anyone's gas? Keep it here for
29:46
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29:49
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30:00
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30:04
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30:12
Speaker 3: Mike, Yesterday we had a FED meeting.
30:14
Speaker 2: I advertised it as the least consequential and least important
30:19
Speaker 2: FED meeting in quite a while, and I think that's
30:24
Speaker 2: basically what we got. The market didn't really react to it,
30:26
Speaker 2: and some kudos to Jay Powell for, you know, sticking
30:30
Speaker 2: to his script and not really saying anything crazy other
30:34
Speaker 2: than I think the one thing that we learned is, look,
30:35
Speaker 2: there's a pretty high bar for the FED to do
30:37
Speaker 2: anything at the June meeting, even the July one would
30:40
Speaker 2: require a pretty meaningful shift in either the unemployment or
30:45
Speaker 2: inflation data before then. And so I think the one
30:49
Speaker 2: thing that we did get here is, hey, barring some
30:52
Speaker 2: kind of significant shift in the data in the next
30:54
Speaker 2: month or two, you're basically on hold until September.
30:57
Speaker 4: Yeah, it looks like it. The the next meeting in June,
31:01
Speaker 4: I think has an eighty percent probability of nothing being done.
31:04
Speaker 4: It's a little bit less clear when you get out
31:07
Speaker 4: to that. What do we have a late July meeting then?
31:10
Speaker 3: Ah?
31:11
Speaker 2: Yeah, So the July meeting is on the thirtieth, like
31:14
Speaker 2: as almost as lay as it can be.
31:15
Speaker 4: So, you know, the term weight was used some twenty
31:20
Speaker 4: two times, or different versions of the word weight. Waiting
31:24
Speaker 4: holding off was a lot during this meeting, Mike. So
31:29
Speaker 4: I would agree with you, Chuck. I do think that
31:31
Speaker 4: this is the correct course for j. Powell to take.
31:34
Speaker 4: That said, I think it is inevitable that he faces
31:37
Speaker 4: criticism not only from President Trump but from others on
31:41
Speaker 4: the fact that they waited in you know, twenty twenty
31:44
Speaker 4: one and twenty twenty two to do anything in the
31:46
Speaker 4: face of inflation and got it wrong. I'm looking at
31:49
Speaker 4: the I'm looking at the transcript from the June twenty
31:53
Speaker 4: twenty one press conference. At this press conference, year over
31:56
Speaker 4: year PCE inflation was already up over three percent and
32:00
Speaker 4: would continue on up through twenty twenty two to up
32:02
Speaker 4: over five percent. And the very first thing they say
32:05
Speaker 4: today the Federal Open Market Committee kept interest rates near
32:08
Speaker 4: zero and maintained our asset purchases, and they would continue
32:11
Speaker 4: to do so for quite some time thereafter. How I
32:16
Speaker 4: guess how susceptible are they to this criticism and is
32:19
Speaker 4: it a reasonable one that Hey, look, you held off
32:23
Speaker 4: last time we were facing a change in the economy.
32:25
Speaker 4: You completely missed it, and maybe you're doing so now.
32:30
Speaker 2: So I'm a big believer in not fighting the last war, yep,
32:34
Speaker 2: because there's no two points in economic history that are
32:38
Speaker 2: the exact same. And I guess the counterpoint to what
32:43
Speaker 2: you said in what I would say is, hey, back
32:46
Speaker 2: in you know the spring of twenty was it twenty
32:49
Speaker 2: four or twenty three? I can't remember. Well, Actually two examples.
32:53
Speaker 2: One spring of twenty three, Silicon Valley Bank blows up.
32:57
Speaker 2: You got every tech body out there saying, oh, the
33:02
Speaker 2: Fed's got a cut, like this is bad, like Bob,
33:05
Speaker 2: and the FED said, no, you idiots, like this was bad.
33:09
Speaker 2: You know this was a bank run because you guys
33:11
Speaker 2: made a run on the bank. In a private chat,
33:14
Speaker 2: and told everyone to pull their money out, and you
33:16
Speaker 2: caused a few other banks to fail in the process,
33:18
Speaker 2: but it's not affecting the overall trajectory of the economy.
33:21
Speaker 3: And by the way, they.
33:22
Speaker 2: Were right, and then they contained it other things. I
33:27
Speaker 2: forget which year it was it, whether it was twenty
33:29
Speaker 2: I think it was twenty four. Remember Q one of
33:31
Speaker 2: twenty four when we got those couple of hot inflation
33:34
Speaker 2: prints and the FED said, and Jake Powell was asked
33:38
Speaker 2: about this a lot. He's like, we're gonna look through this.
33:41
Speaker 2: This is not something that we think is a meaningful
33:44
Speaker 2: shift and trend.
33:44
Speaker 3: We're gonna look through this.
33:46
Speaker 2: And sure enough, inflation has continued to come down to
33:49
Speaker 2: the point where now you got PCE and core PCE.
33:52
Speaker 2: You know, in the mid to high twos, they're still
33:54
Speaker 2: not exactly where the FED wants, but they've gotten better.
33:57
Speaker 2: And so you know that the FED said, no, we're
33:59
Speaker 2: not hike rates because of this. So I think that
34:03
Speaker 2: we can look at it and this gets it my
34:05
Speaker 2: overall view of this j Powell Fed, which is they
34:07
Speaker 2: got it really wrong in late twenty one and all
34:12
Speaker 2: of twenty two, I think twenty three and twenty four.
34:15
Speaker 3: They kind of did very well.
34:17
Speaker 2: Maybe not AA plus but B plus a minus after
34:21
Speaker 2: you know, getting a D for the prior two years, right.
34:25
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35:18
Speaker 4: Tuller. The President is currently addressing the nation on tariff's,
35:22
Speaker 4: specifically a trade deal with the UK. Do we have
35:25
Speaker 4: any ability to.
35:27
Speaker 5: Yeah, I mean it's a couple of minutes here, but
35:29
Speaker 5: yeah we can.
35:29
Speaker 4: Yeah. Let's let's let's go live briefly to the President
35:33
Speaker 4: Trump's press conference on trade with the UK, and we'll
35:36
Speaker 4: be right back.
35:37
Speaker 6: You know, I'm a security blanket and that's very important
35:40
Speaker 6: and we feel very very comfortable with that because it's
35:43
Speaker 6: been a great ally, truly one of our great allies.
35:46
Speaker 6: I mean a lot of people say our greatest ally.
35:48
Speaker 6: I don't want to insult people by saying that, but
35:51
Speaker 6: I can say it's certainly one of our greatest and
35:54
Speaker 6: right at the top. And they're the first one we're
35:56
Speaker 6: talking about. And by the way, we have many meetings
35:59
Speaker 6: play today and tomorrow, and every country wants to be
36:03
Speaker 6: making deals. And we have a meeting as you know,
36:07
Speaker 6: Scott will be going over to Switzerland on Saturday, and
36:10
Speaker 6: that'll be very very interesting. Let's find out. I think
36:14
Speaker 6: they want to make a deal very badly too. Both
36:17
Speaker 6: countries have agreed that the economic security is national secured
36:20
Speaker 6: and we'll be working together as allies to ensure that
36:23
Speaker 6: we have a strong industrial base, appropriate export controls and
36:27
Speaker 6: protections for key technologies and industries like steel. Steel is
36:31
Speaker 6: a big factor. Both countries will become stronger with steel
36:35
Speaker 6: and things necessary for military. You know, we used to
36:38
Speaker 6: build ships and other things literally at a level that
36:41
Speaker 6: nobody's ever seen, and haven't we've eased up, and I
36:46
Speaker 6: would say that the UK certainly eased up, but now
36:48
Speaker 6: we're going to be uneasing both and we work together
36:51
Speaker 6: once again. I want to thank Prime Minister Storm. He's
36:53
Speaker 6: been terrific for his partnership in this matter. The special
36:57
Speaker 6: relationship and external bond, it's really external and an internal
37:01
Speaker 6: bunt between our two countries will soon be stronger than
37:04
Speaker 6: ever before, and we really do we have a great relationship.
37:08
Speaker 6: I want to just say that the representatives of UK
37:11
Speaker 6: have been so professional and it's been an honor doing
37:15
Speaker 6: business with all of them, and in particular the Prime Minister.
37:18
Speaker 6: And i'd like to introduce him now to say a
37:21
Speaker 6: few words. Mister Prime Minister, please take it away.
37:26
Speaker 7: Thank you, mister President at Donald And this is a
37:31
Speaker 7: really fantastic historic day in which we can announce this
37:35
Speaker 7: deal between our two great countries, and I think it's
37:38
Speaker 7: a real tribute to the history that we have of
37:43
Speaker 7: working so closely together. Can I pay tribute Donald to
37:46
Speaker 7: your negotiating team as well, particularly Howard and Jamison, who've
37:50
Speaker 7: done an incredible job, a very professional job, and my
37:54
Speaker 7: team as well to negotiating teams have worked at pace
37:58
Speaker 7: now for weeks to bring.
38:01
Speaker 4: We unfortunately have a hard break that we need to
38:03
Speaker 4: take now. But we'll be back in just a few
38:05
Speaker 4: minutes with a recap on the press conference on the
38:07
Speaker 4: US UK trade deal. Quick break. We'll be right back
38:10
Speaker 4: on the Financial Exchange