Latest / Trumponomics / What Happens If Trump Doesn't Pull Back on His Trade War?

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What Happens If Trump Doesn't Pull Back on His Trade War? · Trumponomics

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 2: The administration is very nimble and flexible, and Trump himself
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Speaker 2: he has a sense of how hard to push the economy,
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Speaker 2: and he tends to pull back from the brain if
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Speaker 2: things get really bad. At this moment, the hard data
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Speaker 2: are not causing them to want to pull back.
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Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
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Speaker 3: and welcome to Trump Economics, the podcast that looks at
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Speaker 3: the economic world of Donald Trump, how he's already shaped
0:45
Speaker 3: the global economy and what on earth is going to
0:48
Speaker 3: happen next. And this week, after a lot of discussions
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Speaker 3: and conversations with people, I wanted to sort of step
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Speaker 3: back and come back to our correspondence and economy to
1:00
Speaker 3: ask where are we in Donald Trump's trade war. We're
1:07
Speaker 3: taping this on Tuesday, June third, and just this morning,
1:10
Speaker 3: the OECD, the Organization for Economic Cooperation and Development, released
1:14
Speaker 3: a fresh warning that the US president's trade policies have
1:18
Speaker 3: formerly tipped the world economy into a downturn. I thought
1:22
Speaker 3: that gave us an excuse if we needed one, to
1:24
Speaker 3: consider where things stand in Donald Trump's war on the
1:28
Speaker 3: old fashioned global trading system. What impact it's had on
1:31
Speaker 3: the real economy so far, particularly in the US, and
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Speaker 3: how that court challenged last week to Trump's whole tariff
1:39
Speaker 3: strategy has added another layer of uncertainty. With me is
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Speaker 3: Anna Wong, chief US economist for Bloomberg Economics, who many
1:49
Speaker 3: of you have heard many times before. Before she worked
1:52
Speaker 3: for US, she worked at the Federal Reserve Board, the
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Speaker 3: US Treasury, and the White House Council of Economic Advisors
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Speaker 3: during Donald Trump's first term. Josh Wingrove also a regular
2:02
Speaker 3: senior reporter for Bloomberg who covers the White House. Josh Anna,
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Speaker 3: always great to have you. I think the last time
2:11
Speaker 3: we had both of you on it was a very
2:12
Speaker 3: good conversation. Looking forward to it, Josh, we will talk
2:15
Speaker 3: about that sort of bombshell International Trade Court ruling last
2:20
Speaker 3: week in a little bit. But taking that to one side,
2:24
Speaker 3: just remind us where we are in the various ceasefire
2:27
Speaker 3: pauses negotiations in this trade war.
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Speaker 1: Well, as we sit here, we have about a month
2:35
Speaker 1: until the expiration of several deadlines that that court case
2:39
Speaker 1: is going to intersect with. But we also have tariffs
2:41
Speaker 1: in place right We've got tariff's on steel, aluminum, autos,
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Speaker 1: auto parts, coming on several other products that are enacted
2:51
Speaker 1: under different authorities that are not touched by that ruling.
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Speaker 1: In our scene is much more legally durable. Those are
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Speaker 1: not going anywhere. No one really thinks they're going anywhere.
3:00
Speaker 3: That they're going up.
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Speaker 1: In some cases, Trump is announced exactly steal and aluminum.
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Speaker 1: The aluminum one in particular, seemed like kind of on
3:05
Speaker 1: a whim, will double this week to fifty percent from
3:08
Speaker 1: twenty five percent. Let's assume for a moment that those
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Speaker 1: court cases are not successful and those tariffs remain in place.
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Speaker 1: Those are that's a battle over AIPA authorities. That's what
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Speaker 1: Trump is used to pain with the broadest brush possible
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Speaker 1: and hit every country with tariffs of at least ten percent.
3:26
Speaker 1: The deadline of July ninth means those go up from
3:29
Speaker 1: ten if you don't have a deal. So for those
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Speaker 1: about five dozen countries including the EU as a block,
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Speaker 1: including China including others, they would snap back up if
3:38
Speaker 1: there's no deal.
3:39
Speaker 3: To those rates that were on the big sort of
3:41
Speaker 3: menu board that he had in them.
3:43
Speaker 1: Or somewhere in between. It's it's murky, and it's I
3:45
Speaker 1: think deliberately murky. But up not ten is the point.
3:49
Speaker 1: So they're threatening, saying, hey, make a deal now, or
3:52
Speaker 1: you're going to have a number higher than ten come July.
3:55
Speaker 1: Of course, the other countries, you know, basically all of
3:58
Speaker 1: them are sending signs of you know, fusion, hesitation. Some
4:01
Speaker 1: are looking at the court ruling and wondering why they
4:03
Speaker 1: would play their best cards right now when it's just
4:05
Speaker 1: so uncertain what authority Trump has.
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Speaker 3: We had all those claims about how many countries the
4:10
Speaker 3: US would do deals with in that ninety day period
4:14
Speaker 3: sort of went up every time they talked about it,
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Speaker 3: but I think it was like seventy or something, seventy
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Speaker 3: two or something. Anyway, just remind us how many of
4:21
Speaker 3: those have actually been done.
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Speaker 1: One, we've got one deal with the UK group.
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Speaker 3: Well, and actually, if you're sitting in the UK now,
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Speaker 3: you would say even that has not actually been sorted out.
4:30
Speaker 3: So Josh has reminded us that this is an unholy mess.
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Speaker 3: And we could definitely spend another twenty minutes talking about
4:36
Speaker 3: the variation. But Anna, obviously a lot of the focus,
4:40
Speaker 3: or a lot of the interest is on how all
4:43
Speaker 3: this activity and the tariffs that are already in place
4:47
Speaker 3: is affecting the real economy. Talk us through the economic
4:50
Speaker 3: impact that we're actually seeing so far.
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Speaker 2: Yeah, so the trade war version two genuinely started in February,
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Speaker 2: so now we have basically three months worth of price
5:03
Speaker 2: data and activity data to engage its impact. So in
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Speaker 2: these three months, generally what happened is we see deflation
5:11
Speaker 2: or even disinflation. For example, in the April inflation number,
5:17
Speaker 2: Powells prefer inflation gauge is supercore. Actually saw deflation, So
5:22
Speaker 2: what's going on there? It turns out that the services
5:26
Speaker 2: categories are particularly discretionary services categories like travel, airfares, hotels,
5:34
Speaker 2: car rentals are all going down. So basically the decrease
5:40
Speaker 2: income optimism and general pessimism of economy is directly and
5:46
Speaker 2: immediately translating to lower demand for these goods and as
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Speaker 2: a result overwhelms whatever tariffs passed through in the goods
5:55
Speaker 2: sector in terms of inflation impact. So on net inflation
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Speaker 2: impact has in disinflation.
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Speaker 3: So disinflation is when you just have a fall in
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Speaker 3: the inflation rate, and deflation is when prices are falling.
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Speaker 3: I mean, the headline from what you're saying is we
6:09
Speaker 3: all expected inflation, but actually so far, because this kind
6:13
Speaker 3: of supply side shock also affects confidence and activity, that
6:19
Speaker 3: effect is actually more visible than the inflation effects.
6:21
Speaker 2: Sor right correct so far, yes, But.
6:24
Speaker 3: In terms of expectations, I think we are seeing people
6:28
Speaker 3: expecting inflation to pick up as a result of tariffs.
6:31
Speaker 3: And of course Donald Trump would claim that economics in
6:34
Speaker 3: the real world works differently from people expect and he's
6:37
Speaker 3: kind of proven that by doing things that were supposed
6:39
Speaker 3: to be very costly and have actually done all right.
6:41
Speaker 3: And I'd have to say, listening to you so far,
6:44
Speaker 3: you know, everyone said there was going to be inflation. No,
6:46
Speaker 3: inflation's gone down. Everyone said that the economy be really hurt. Well,
6:50
Speaker 3: if you look through the kind of ups and downs
6:52
Speaker 3: of the first two quarters, which are very distorted by
6:55
Speaker 3: this import activity, the economy doesn't seem to have been
6:58
Speaker 3: very adversely affect And in fact, everyone predicted the dollar
7:01
Speaker 3: would go up as a result of tariffs, and in
7:03
Speaker 3: fact it's gone down significantly.
7:05
Speaker 2: So that was very surprising that.
7:11
Speaker 3: So he's right, the colnivists just don't know anything, and
7:14
Speaker 3: he can reinvent the rules.
7:17
Speaker 2: And Stephany is too early. It's also too early in
7:20
Speaker 2: the game going back to the import front running, so
7:23
Speaker 2: we have until July where nothing happened. Everything can carry
7:27
Speaker 2: on as usual. However, after this front running is over,
7:32
Speaker 2: the question is will the firms restock at higher prices?
7:36
Speaker 2: And if they do, then ultimately the firms will have
7:40
Speaker 2: to decide should they pass it through or should they
7:42
Speaker 2: just eat those in terms of profit compression. So the
7:45
Speaker 2: firms did not need to have that stark choice right now.
7:49
Speaker 2: We are not in that period. And this is why
7:52
Speaker 2: you have FED Governor Chris Waller talking about how it's
7:56
Speaker 2: kind of hard to see what is truly what truly
8:00
Speaker 2: how is it impacting inflation until after July.
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Speaker 1: I just wanted to signal this banana was But also
8:06
Speaker 1: note that like Trump is bragging about this, right they're
8:08
Speaker 1: they're bragging.
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Speaker 3: Probably it's not Biden's economy anymore.
8:12
Speaker 1: Right Exactly, they are bragging about low gasoline prices, which
8:16
Speaker 1: by the way, are at a rate where US drilling
8:18
Speaker 1: is heavily disincentivized. There are signs of uncertainty, if not
8:23
Speaker 1: even pullback that Trump is looking at a political positive.
8:28
Speaker 1: So they are celebrating these things even if you look
8:30
Speaker 1: at the trade data and think, well this is kind
8:33
Speaker 1: of like a crash diet, right if I stop eating
8:36
Speaker 1: for a month and might bemidrops. Like, is that is that, like,
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Speaker 1: you know, harbinger of a long term thing or is
8:41
Speaker 1: that just me making bold choices? So we'll see how
8:44
Speaker 1: this shakes out. But like Trump is and his allies
8:47
Speaker 1: are proud of this. They are boasting about this. He
8:51
Speaker 1: loves the tariff revenue. He believes it is driving domestic
8:55
Speaker 1: investment in factories. And I think that people maybe still
8:59
Speaker 1: haven't really wrap their head around how an evangelist he
9:03
Speaker 1: is on this tariff issue. When the question of like
9:06
Speaker 1: legal flights and are these teriffs going to stay or not?
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Speaker 1: So everyone you talk to around Donald Trump, he loves tariffs.
9:12
Speaker 1: There's going to be tariffs. If it's not this authority,
9:15
Speaker 1: it'll be another. It's going to be bumpy, but they're
9:19
Speaker 1: going to be there.
9:19
Speaker 3: Yeah. On the trade thing, it reminds me there was
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Speaker 3: that old learn about I. I've been training my donkey
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Speaker 3: to not need any food, just as I'd trained him
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Speaker 3: to not need any food Adoly died. So we might
9:28
Speaker 3: see that on the trade front. But Anna Josh is mentioning,
9:32
Speaker 3: I guess there's a sort of macro micro thing because
9:35
Speaker 3: macro we're still not seeing some of the impacts that
9:39
Speaker 3: we might have expected to see. And you've said too
9:41
Speaker 3: early to say, but you know, micro, we also have
9:45
Speaker 3: a lot of stories and we have a lot of
9:47
Speaker 3: reports from companies who are doing their sort of earnings
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Speaker 3: forecasts and things saying this is really affecting our ability
9:55
Speaker 3: to get components, or at least we're having to really
9:57
Speaker 3: think about rethink how we make stuff. I mean, how
10:01
Speaker 3: much are we seeing that in terms of changing the
10:03
Speaker 3: way companies are operating.
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Speaker 2: Yeah, I think that's the surprising part to me personally.
10:09
Speaker 2: So ISM Manufacturing just release their semi annual survey that
10:16
Speaker 2: asks manufacturing firms what are their plans in the next
10:19
Speaker 2: six months, And interestingly, there are a pretty substantial list
10:25
Speaker 2: of US industries that's reporting they're going to increase the
10:29
Speaker 2: operation capacity in the US. And some of those industries
10:34
Speaker 2: would surprise you because it's for example, it's things like Apparels.
10:38
Speaker 2: I mean, why would one think that US would be
10:41
Speaker 2: bringing back Apparels. And we also know that Apparels was
10:44
Speaker 2: one of the most hardest hit by these terraffs on
10:47
Speaker 2: China and Vietnam.
10:49
Speaker 3: So that would be the answer, but you wouldn't necessarily
10:51
Speaker 3: expect the US to do it. But it has been
10:54
Speaker 3: the sector that's been hit particularly.
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Speaker 2: Hard, exactly exactly, and the metals industries where seeing some
11:01
Speaker 2: increase in employment in the metals industry, which is consistent
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Speaker 2: with what we saw in twenty nineteen and twenty eighteen too.
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Speaker 3: I mean, just one of my questions for you was,
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Speaker 3: are the administration worried about the economic impacts we're seeing
11:14
Speaker 3: as you've just said, they're actually quite excited so far
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Speaker 3: about some of the positive impacts.
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Speaker 1: I think that for them it is always sort of
11:21
Speaker 1: two steps forward, one step back. They're excited until they
11:24
Speaker 1: have to have, for instance, a somewhat hasty cease fire
11:28
Speaker 1: with China in Geneva, right like, everything's going great until
11:32
Speaker 1: we have these hastily arranged and deals to claw everything
11:36
Speaker 1: back and take the pressure off the market. So I
11:39
Speaker 1: think that's sort of where they're at. They continue to
11:43
Speaker 1: project sort of a Trumpian confidence, if you will, but
11:48
Speaker 1: constantly the pressures to come back from it are just
11:52
Speaker 1: going to be there. So I think the question is
11:53
Speaker 1: like with the EU with Japan, with South Korea, with
11:55
Speaker 1: major trading partners on which there really has not been
11:58
Speaker 1: a lot of progress locations of progress. What happens if
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Speaker 1: there's no deal, like how high does Trump go to snap?
12:05
Speaker 3: At the same time, we had a lot of noise
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Speaker 3: about China's going back on its side of the bargain
12:11
Speaker 3: with this deal, and we had the sort of very
12:15
Speaker 3: rapid fire thing around doubling the steel and anominum tariffs.
12:19
Speaker 3: So how did you read any of that? Insofar as
12:22
Speaker 3: there is an underlying strategy.
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Speaker 1: On the China thing, I think it is teeing up well.
12:28
Speaker 1: As we sit here, we expect to be or at
12:30
Speaker 1: least the Americans expect to be a call between President
12:32
Speaker 1: and She and President Trump at some point this week.
12:35
Speaker 1: All they've said is this week, a couple of officials
12:37
Speaker 1: have said it publicly. We just don't know when that
12:39
Speaker 1: will be. Those complaints appear to be heavily linked to
12:43
Speaker 1: export controls around critical minerals that the Americans said publicly
12:47
Speaker 1: would be like, you know, flowing freely, and China just
12:51
Speaker 1: had a different view on that. So, whether it is
12:54
Speaker 1: China renegging or an outcome that is different than the
12:57
Speaker 1: publicly stated desired outcome of the Americans, is that open question.
13:01
Speaker 1: I think on the steel aluminum, I mean, I don't
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Speaker 1: It's difficult not to see it as like a reaction
13:08
Speaker 1: to the court ruling. He almost felt like he wanted
13:09
Speaker 1: to flex his muscle and you know, enact Terris where
13:12
Speaker 1: he could. And we should note, of course that they
13:14
Speaker 1: renounced at US steel in the context of him celebrating
13:18
Speaker 1: the sale of US steel to Japanese, the Japanese company
13:21
Speaker 1: Nipon Steel, which he's not framing as a sale, but
13:24
Speaker 1: essentially he's flipped his view on it. He used to
13:26
Speaker 1: oppose it, he campaigned against it. Now he's blessing it
13:28
Speaker 1: with certain you know, strings attached. So he's he's sort
13:32
Speaker 1: of like washing down the reversal with oh, by the way,
13:36
Speaker 1: I'm giving you more tariffs, which for Nipon Steel is
13:38
Speaker 1: probably not bad because now they've got a great foothold
13:41
Speaker 1: in the American industry and they will be terror free
13:43
Speaker 1: for stuff made at US steel.
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Speaker 3: Anna. You know, Josh has mentioned that at least it
13:47
Speaker 3: may have an impact on other countries that you've now
13:50
Speaker 3: got this legal uncertainty around a lot of the tariffs
13:54
Speaker 3: that we're using. The AIPA legislation. The idea of an
13:57
Speaker 3: emergency that gives the president exceptional power. They push back
14:02
Speaker 3: on that, but how significant do you think that ruling is?
14:05
Speaker 3: Do you think it really sort of casts a question
14:07
Speaker 3: mark over all of these things.
14:09
Speaker 2: No, So, first of all, they're going through all the
14:11
Speaker 2: appeal options, and I think that the odds for a
14:14
Speaker 2: successful appeal is pretty high given that there is a
14:18
Speaker 2: president with Nixon's case. So in the nineteen seventies, Nixon
14:22
Speaker 2: also invoked the predecessor of IEPA's power, also presidential powers
14:27
Speaker 2: to impose a ten percent tariff, and he was also
14:31
Speaker 2: challenged by the Trade Court, but then he won the
14:35
Speaker 2: appeal because citing that the Trading with Enemy Act grants
14:39
Speaker 2: the president emergency powers. Odds are decent for him to
14:43
Speaker 2: win an appeal. In second even if he doesn't win,
14:46
Speaker 2: all he needs is to buy some time until he
14:50
Speaker 2: can switch over to these other options such as section
14:54
Speaker 2: three three eight, one, two to two, which allow him
14:56
Speaker 2: to immediately impose fifteen to fifty percent on anything immediately,
15:02
Speaker 2: and then he could use Section two thirty two and
15:05
Speaker 2: three or one, which takes longer, and all those are
15:07
Speaker 2: already in motion. So basically, I just think that ultimately
15:12
Speaker 2: the equal abround tariff, the endgame terroriff is still about
15:16
Speaker 2: fifteen percent in our baseline.
15:19
Speaker 3: Josh, is there actually an expectation that this could put
15:21
Speaker 3: an end to at least a chunk of the terriffs.
15:23
Speaker 1: I think they're not popping champagne yet. I think the
15:26
Speaker 1: most powerful sort of counterforce to Trump's tariffs have been
15:28
Speaker 1: the people that have done it sort of out of
15:30
Speaker 1: the public eye and have fought it in court rather
15:34
Speaker 1: than on the airwaves. So I think the silence is conspicuous.
15:38
Speaker 1: And I agree with Anna about the other powers here.
15:42
Speaker 1: But if I can offer the sort of contrarian take here,
15:45
Speaker 1: I mean Section one twenty two is capped at fifteen
15:48
Speaker 1: percent for one hundred and fifty days, so lower, much
15:51
Speaker 1: lower than he wants to go with some of these countries.
15:53
Speaker 1: Section three thirty eight, that's the fifty percent power that
15:56
Speaker 1: Anna referenced. It's never been enacted, it's been threatened, been used,
16:00
Speaker 1: So like the legal footing of that is by definition untested.
16:05
Speaker 1: Section two thirty two. They're already doing several investigations. There
16:08
Speaker 1: are only so many people you can fit in the
16:10
Speaker 1: tiny USTR buildings across from the eo B Friction three
16:14
Speaker 1: oh one, those take a long time as well. There
16:16
Speaker 1: are trade offs to this. There's a reason they used
16:19
Speaker 1: AIPA in the first place, or tried to use it
16:21
Speaker 1: in the first place. If they do pivot to these
16:23
Speaker 1: other authorities, they all come with sort of caveats that
16:27
Speaker 1: will either limit the height or term, or be unlegally
16:33
Speaker 1: questionable or untested in their own authority, or just simply,
16:36
Speaker 1: you know, pile more straws onto the camel's back at
16:39
Speaker 1: USTR and force all these investigations which, if not done properly,
16:42
Speaker 1: will be legally vulnerable. The whole point of view of
16:45
Speaker 1: two three two is that you've got to dot your
16:47
Speaker 1: eyes and cross your t's and then you get a
16:48
Speaker 1: pretty iron cloud terraff authority. If they start fast tracking it,
16:51
Speaker 1: they risk not doing that. So there's there's there's clouds
16:54
Speaker 1: on the horizon.
16:55
Speaker 3: One thing that I thought was just worth mentioning, although
16:58
Speaker 3: that really deserves its own episode, is various clauses in
17:03
Speaker 3: the tax bill which seem to kind of extend the
17:06
Speaker 3: trade war or at least open a new front for
17:11
Speaker 3: Trumpian attax on the global trading and financial system, which
17:18
Speaker 3: is these clauses which would impose sort of punitive or
17:22
Speaker 3: much higher taxes on individuals and companies investing in or
17:27
Speaker 3: holding US assets, but who come from countries that are
17:31
Speaker 3: considered to have discriminatory or unfair tax regimes, regimes that
17:35
Speaker 3: are unfair to the US. You know, it's just another
17:38
Speaker 3: stick to beat other countries with, using the leverage of
17:42
Speaker 3: other countries' desire to invest in the US in various ways. Anna,
17:47
Speaker 3: There's been a lot of chatter about this, a lot
17:49
Speaker 3: of discussion and analysis on Wall Street. Does this constitute
17:54
Speaker 3: a sort of new front in Donald Trump's trade war?
17:58
Speaker 3: Do you take it seriously?
18:00
Speaker 2: Read to me that it's very much targeting EU. And
18:03
Speaker 2: we have known for a while that the Trump administration
18:07
Speaker 2: sees EU's non tear of trade barriers as almost as
18:12
Speaker 2: severe as China's barriers. So I think this is in
18:17
Speaker 2: part a way to get at the Digital services tax
18:20
Speaker 2: and the tax on intangibles, because even in the first
18:23
Speaker 2: Trump administration was very much against this, and yet OECD
18:28
Speaker 2: also has been supporting these DST and taxes on intangible
18:33
Speaker 2: and these taxes have been collected for almost like at
18:37
Speaker 2: least six years now. So I think it will be
18:40
Speaker 2: very hard to negotiate with EU on reducing these DST taxes,
18:46
Speaker 2: which disproportionately affect US tech firms. I mean, there's a
18:50
Speaker 2: reason why many of these tech firms are supporting the
18:54
Speaker 2: Trump administration this time around. So I just think that
18:57
Speaker 2: this is a very specific country targeting bill as opposed
19:02
Speaker 2: to a very broad range taxing on international inflows.
19:06
Speaker 3: I guess it's a chilling effect. I mean, we've talked
19:08
Speaker 3: in the past about how investors were so overexposed to
19:13
Speaker 3: some extent or sort of disproportionately invested in the US
19:16
Speaker 3: after years and years of the US doing better than
19:18
Speaker 3: other people other countries, that it doesn't take much for
19:22
Speaker 3: them to think, oh, I should tilt in the other direction.
19:25
Speaker 3: It should take some money out or reallocate. If that
19:28
Speaker 3: brings down the dollar, then made the administrations happy about that.
19:31
Speaker 3: But at some level, it's also going to constitute a
19:34
Speaker 3: decline in investment flows into the US, which he's supposed
19:37
Speaker 3: to you know, he wants to see more investments. Josh,
19:40
Speaker 3: do you think this clause is going to go through
19:42
Speaker 3: and do you think that it could be potentially quite damaging.
19:46
Speaker 1: All indications are that it will go through, but you know,
19:49
Speaker 1: we're still waiting to see what the final PI looks
19:53
Speaker 1: like once they rebake it in the Senate and send
19:55
Speaker 1: it back to the House. They're still working with pretty
19:58
Speaker 1: skinny margins here, but there's not been a lot about
20:01
Speaker 1: cry about it. The Republican outcry has been focused on
20:05
Speaker 1: other things. And so yeah, I think that ultimately Congress
20:10
Speaker 1: is going to start trying to hand Trump more tools,
20:13
Speaker 1: which is a change in tune from you in a
20:16
Speaker 1: couple of months ago when Republican senators were objecting implicitly
20:21
Speaker 1: or explicitly to Trump's sort of capturing of teriff authorities
20:26
Speaker 1: that had historically rested more with Congress. So we'll see,
20:30
Speaker 1: remember the clock sticking in Congress, right, They want to
20:32
Speaker 1: sign this thing on July fourth, Independence Day, of course,
20:35
Speaker 1: so we can go from Liberation Day to Independence Day,
20:38
Speaker 1: which is fined for the tariff deadline. So I think
20:41
Speaker 1: you're going to see rhetorically a lot of continued sort
20:45
Speaker 1: of chest beating from the President and from the Republican administration.
20:50
Speaker 3: And I guess that's a positive for the President if
20:53
Speaker 3: he actually gets some tools that are not sort of
20:56
Speaker 3: questioned in the court and are legislated. And people have
20:59
Speaker 3: said all along, if you really want to do these things,
21:00
Speaker 3: you need to get Congress to legislate and give you
21:03
Speaker 3: the power explicitly. But is it also a reflection that
21:07
Speaker 3: the administration's not managing to do what it wanted to
21:10
Speaker 3: do with the tools it had. Do you think they
21:12
Speaker 3: feel like they're winning?
21:14
Speaker 2: So? I think that the administration is very nimble and flexible,
21:20
Speaker 2: and Trump himself be as a sense of how hard
21:24
Speaker 2: to push the economy, and he tends to pull back
21:27
Speaker 2: from the brink if things get really bad, as we
21:30
Speaker 2: could see in April, because the administration, the nec Kevin
21:34
Speaker 2: has it and stuff, doesn't do talk to CEOs of
21:38
Speaker 2: companies in the real economy.
21:39
Speaker 3: So I think that.
21:41
Speaker 2: They know that there's danger in there in their moments
21:45
Speaker 2: of diceiness. But right now, at this moment, and I
21:50
Speaker 2: do think it's reasonable to talk in moments because these
21:53
Speaker 2: things change day by day. At this moment, the hard
21:57
Speaker 2: data are not causing them to want pulled back. And
22:01
Speaker 2: this view may change this Friday with the non farm payrolls.
22:05
Speaker 2: If non farm payrolls, for example, shows really steep drop,
22:10
Speaker 2: then you would see Trump pouting a call of presidency immediately.
22:15
Speaker 2: And personally, I think there has been the whole taco trade.
22:20
Speaker 2: Trump always chickens out. I think Wall Street is too
22:24
Speaker 2: complacent on peak tariff. Having passed, my own interpretation of
22:30
Speaker 2: why there was a Geneva agreement between you Os and
22:33
Speaker 2: China is that the CEOs, Walmart and Target were very convinsing.
22:38
Speaker 2: The fear of empty shelves caused Trump to want to
22:42
Speaker 2: continue this trade for now until August, which is the
22:46
Speaker 2: end of this ninety day pause, to fill the shelf
22:49
Speaker 2: of the US to make sure that we get past
22:52
Speaker 2: the holiday season. And I think China would easily agree
22:55
Speaker 2: to because when you think about a game theoretic way
22:58
Speaker 2: of having a war, when both sides can agree the
23:01
Speaker 2: stakes are too high, it's very easy to find a
23:03
Speaker 2: low hanging fruit. Okay, we agree, but after this peak
23:07
Speaker 2: shipping season is over, stakes are down again. They could
23:10
Speaker 2: have another tariff for until all the way until next
23:15
Speaker 2: March and then settle down once they're about to get
23:19
Speaker 2: into peak shipping season.
23:20
Speaker 3: And when you say peak, you mean that's Christmas season.
23:22
Speaker 3: So you need to get all the toys on the shelves.
23:25
Speaker 2: Yes, because empty shells are politically very unpopular, and so
23:30
Speaker 2: I do not interpret the de escalation so far as
23:34
Speaker 2: a taco trade. I actually would interpret as one of
23:38
Speaker 2: the ebbs and tides of Trump's negotiation style. And what
23:43
Speaker 2: we saw in Geneva is very uncharacteristic of him. It
23:46
Speaker 2: is very uncharacteristic of him to immediately cave so soon.
23:51
Speaker 2: I think what we saw is that he was pushed
23:53
Speaker 2: to the brink, he pulled back, and then once things
23:55
Speaker 2: settle in a couple of months, I think there's a
23:58
Speaker 2: good chance that we'll see these China tariffs rise that again,
24:04
Speaker 2: increase again.
24:05
Speaker 3: Josh, it's interesting because you've got Anna's I think will
24:08
Speaker 3: we talked about how the economic impact so far was
24:10
Speaker 3: not necessarily as negative as people are thought, and that
24:14
Speaker 3: has produced a sort of feeling in the administration potentially
24:17
Speaker 3: that at least on the domestic front, things are not
24:22
Speaker 3: going too badly, but internationally, you'd have to say the
24:27
Speaker 3: rest of the world seems to be doing pretty well
24:29
Speaker 3: so far. I mean, and we talked at the beginning,
24:31
Speaker 3: there's no very few deals done, and that sort of
24:35
Speaker 3: back and forth with the Chinese over whether or not
24:38
Speaker 3: there would even be a call between President she and
24:41
Speaker 3: Donald Trump seems to me kind of symbolic of the
24:43
Speaker 3: fact that China seems to have the upper hand in
24:47
Speaker 3: that particular conversation, and my colleagues in Beijing and Hong
24:50
Speaker 3: Kong are absolutely convinced that she will not want to
24:53
Speaker 3: do a call or be very reluctant to do a
24:55
Speaker 3: call this week, because that's not the way the Chinese work.
24:58
Speaker 3: They want to have everything nailed down before or they
25:01
Speaker 3: do a call, So the optics of that can't be
25:05
Speaker 3: comfortable for the administration.
25:07
Speaker 1: Yeah, the Chinese have calculated that they have the luxury
25:11
Speaker 1: of patients here and the Americans are betting that the
25:15
Speaker 1: American market is enough of a carrot on the stick
25:18
Speaker 1: that eventually those strategies will converge. But I agree with that,
25:22
Speaker 1: and right now we're not primed for a long time
25:25
Speaker 1: truce anytime soon. I think we'll see sort of fits
25:28
Speaker 1: and starts on this. And remember we all had a
25:31
Speaker 1: panic about a month ago when Trump exampted a bunch
25:33
Speaker 1: of consumer electronics from those Chinese tariffs. That's only because
25:36
Speaker 1: he wants to hit them with another tariff, and so
25:39
Speaker 1: in the meantime he could announce his two three to
25:41
Speaker 1: two tariff on iPhones, on computer monitors, on everything. With
25:46
Speaker 1: the semiconductor chip in it that hits China in a
25:50
Speaker 1: different way. So you know, there are multiple fronts on
25:53
Speaker 1: this trade war, where each settles on an e given month,
25:57
Speaker 1: I think remains unclear. I totally agree that the view
26:01
Speaker 1: of the retailers and the political impact that empty shelves
26:04
Speaker 1: would have on it. And Trump got a lot of
26:06
Speaker 1: blowback for saying like, maybe kids will have two dollars
26:09
Speaker 1: instead of fifteen dollars, and you know, you can have
26:10
Speaker 1: one pencil instead of fifty pencils. It's kind of that
26:14
Speaker 1: he did instick Landing on that one, and he's got
26:16
Speaker 1: blowback on it, so I think he will be sensitive
26:17
Speaker 1: to that. But I also think that when it comes
26:20
Speaker 1: to appetite among lawmakers, who have of course been very
26:24
Speaker 1: deferential to Trump, to say the least, lawmakers in Washington
26:27
Speaker 1: are keen to reset the relationship with China on both
26:31
Speaker 1: sides of the aisle, Trump has a lot more leash
26:34
Speaker 1: when it comes to a fight with China that he
26:36
Speaker 1: does with the rest of the world. So I think
26:38
Speaker 1: we continue to see China on a separate track from
26:40
Speaker 1: the rest of his trade front.
26:42
Speaker 3: So I can't help thinking that we will have to
26:44
Speaker 3: take stock of the trade more many more times before
26:48
Speaker 3: we're done. But I feel like we have some interesting
26:51
Speaker 3: takeaways on just where the economy is, even if we
26:55
Speaker 3: do think there's a lot more coming down the track.
26:57
Speaker 3: Josh Waen Grove, Ana Wong, thank you so much, thank you,
27:01
Speaker 3: thank you, thank you for listening to Trumpanomics from Bloomberg.
27:17
Speaker 3: It was hosted by me Stephanie Flanders, and I was
27:20
Speaker 3: joined this week by our chief US economist, Anna Wong
27:23
Speaker 3: and senior White House reporter Josh Wingrove. Trumpomics is produced
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