Latest / Trumponomics / In Spain, the Olive's Loss Is Aluminum's Gain

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In Spain, the Olive's Loss Is Aluminum's Gain · Trumponomics

• 0:04
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:07
  Speaker 1: global economy to you. But we've talked before about whether
• 0:16
  Speaker 1: Donald Trump's trade warders could have any winners. In fact,
• 0:20
  Speaker 1: we're going to get an update later on one of
• 0:21
  Speaker 1: them Vietnam. But one clear loser has been Spanish olive farmers.
• 0:26
  Speaker 1: Their exports to the US were hit with a big
• 0:28
  Speaker 1: tariff last year. You probably didn't hear about it over
• 0:32
  Speaker 1: all the talk about trade wars with China and Mexico,
• 0:34
  Speaker 1: but it was very big news in southern Spain. Farmers
• 0:38
  Speaker 1: there are hurting from the tariff. But Europe's aluminium industry
• 0:42
  Speaker 1: is having a bumper year despite or even because of
• 0:46
  Speaker 1: U S tariffs in their sector. Later on, I'm going
• 0:49
  Speaker 1: to be discussing the many unintended consequences of Trump's trade
• 0:52
  Speaker 1: wars with Bloomberg's trades are Brendan Murray. I'll also be
• 0:56
  Speaker 1: asking Economics Executive editor Simon Kennedy how wish feel about
• 1:00
  Speaker 1: the political pressure being piled onto US Federal Reserve Chair
• 1:04
  Speaker 1: j Pow and many other central banks. But first, Jeanette
• 1:07
  Speaker 1: Newman from Bloomberg's Madrid bureau has this taste of southern Spain.
• 1:22
  Speaker 1: But really this is a bar in restaurant in southern Spain.
• 1:30
  Speaker 1: It's a local favorite called Casa Pedro. About twenty ham
• 1:34
  Speaker 1: legs hang on a wall behind the bar. Beneath the hammon,
• 1:38
  Speaker 1: a large earthenware pot is filled with olives, which the
• 1:41
  Speaker 1: waiters scoop out and serve with a glass of beer
• 1:44
  Speaker 1: or wine. The restaurant is an agricultural town called puende
• 1:48
  Speaker 1: Hanel with a population of thirty thousand. While I wait
• 1:51
  Speaker 1: to meet the farmer all the interviewing, I start talking
• 1:54
  Speaker 1: with three men sitting nearby and asked them what they
• 1:56
  Speaker 1: think about the American tariffs on Spanish olives Atuna. One
• 2:09
  Speaker 1: of them is Jose Rome, a man in his late
• 2:11
  Speaker 1: sixties who grew up here. It's clear from our chat
• 2:14
  Speaker 1: that the tariffs are economically harmful, and they're also in
• 2:17
  Speaker 1: a front to a product that's a symbol of the
• 2:19
  Speaker 1: region and its culture and IMMAs Here in Andalusia, there
• 2:26
  Speaker 1: are a lot of areas where olives are the most
• 2:28
  Speaker 1: important agricultural product above everything else, and also our culture
• 2:33
  Speaker 1: revolves around the olive. It generates a lot of work
• 2:37
  Speaker 1: to harvest and produce and later consumed. I meet the
• 2:46
  Speaker 1: farmer Jose Luis. He says Trump's tariffs have caused his
• 2:49
  Speaker 1: profits to plunge by about one third. But for a
• 2:53
  Speaker 1: loser in the international trade wars, he certainly looks upbeat.
• 2:57
  Speaker 1: He's thirty seven years old and tall, with a sunny
• 3:00
  Speaker 1: personality and easy smile. There is yeah, we have back.
• 3:10
  Speaker 1: We had to his farms driving through southern Spain's endless
• 3:13
  Speaker 1: horizon of olive trees. Olives are a huge industry in Spain.
• 3:18
  Speaker 1: The country is the world's top exporter of olive oil
• 3:20
  Speaker 1: and olives, but for years the olive industry in California
• 3:25
  Speaker 1: accused Spanish growers of selling on the cheap to win
• 3:28
  Speaker 1: market share in the US. Their complaints largely fell on
• 3:32
  Speaker 1: deaf ears until President Donald Trump tara tremendous tariffs high,
• 3:39
  Speaker 1: extremely high taramendously high tariffs. His administration slapped a thirty
• 3:44
  Speaker 1: five percent tariff on black Spanish table olives in August
• 3:47
  Speaker 1: two eighteen. We're talking about the black olives and Americans
• 3:50
  Speaker 1: love on their pizzas, salads, and nachos. Washington accused the
• 3:54
  Speaker 1: table olive industry of getting unfair subsidies from the Spanish
• 3:57
  Speaker 1: government and the European Union span shallive growers like Jos Luise,
• 4:01
  Speaker 1: we're furious. They say the US is just trying to
• 4:05
  Speaker 1: undermine a competitor. Everybody more than depressed, are angry because
• 4:11
  Speaker 1: they say, why for US? What we have to do
• 4:14
  Speaker 1: back offer a cheap product? Why only for the USA?
• 4:19
  Speaker 1: If it's to Russia, Okay, I understand the company so
• 4:22
  Speaker 1: or if if we are to Cheeta but to China.
• 4:24
  Speaker 1: But for the USA, what we have to do back
• 4:27
  Speaker 1: offer product with boot price. European officials have taken the
• 4:33
  Speaker 1: tariff case to the World Trade Organization, but while that
• 4:37
  Speaker 1: case slowly works its way through the courts, Jos Luis
• 4:40
  Speaker 1: and other farmers have seen their profits plummet. US imports
• 4:44
  Speaker 1: of Spanish table olives have fallen by around forty five
• 4:47
  Speaker 1: since the taribs were put in place. US buyers have
• 4:50
  Speaker 1: turned to other countries like Morocco and Egypt to fill
• 4:52
  Speaker 1: the void. Despite his frustration, Jose Luis remains hopeful that
• 4:57
  Speaker 1: the executives at the cooperative the biases all of will
• 5:00
  Speaker 1: eventually find new export markets beyond the US, or that
• 5:03
  Speaker 1: the tariffs will be lifted. As we drive on dirt
• 5:06
  Speaker 1: roads through his olive groves, Jose Luise tells me can't
• 5:09
  Speaker 1: do much to cut costs. He has to keep pruning
• 5:12
  Speaker 1: and tending his trees, otherwise they won't produce as many
• 5:16
  Speaker 1: olives in the future. If the tariffs remain in place
• 5:19
  Speaker 1: for several more years, though, Jose Luis says he will
• 5:22
  Speaker 1: have to replace his olive trees with other crops. But
• 5:24
  Speaker 1: if you had to move to almond trees or walnut trees,
• 5:29
  Speaker 1: that would mean ripping up by the roots these olive
• 5:33
  Speaker 1: trees that have been on your farm for forty years.
• 5:38
  Speaker 1: The end saying the thing my family, it doesn't pay
• 5:44
  Speaker 1: the bills. Spanish olive growers are also worried whether these
• 5:48
  Speaker 1: tariffs are the end of Trump's trade war with Spain
• 5:51
  Speaker 1: or just the beginning. I met Gabrieltre and Sado, head
• 5:55
  Speaker 1: of research for a Spanish agricultural cooperative group, at his
• 5:58
  Speaker 1: offices back in Madrid. Earlier this year, the Trump administration
• 6:03
  Speaker 1: said the EU was unfairly subsidizing air Bus, the maker
• 6:06
  Speaker 1: of big jets for many airlines. The administration threatened to
• 6:10
  Speaker 1: retaliate by hiking tariffs on all kinds of European exports,
• 6:13
  Speaker 1: such as you guessed it olive oil and all different
• 6:17
  Speaker 1: kinds of olives, not just table olives. We don't know
• 6:20
  Speaker 1: exactly how Trump is going to read on that, because
• 6:23
  Speaker 1: he has said a lot of things, but now he
• 6:26
  Speaker 1: has doing those things he has said two years ago.
• 6:28
  Speaker 1: So of course marketing will continue, but with one of
• 6:33
  Speaker 1: the bigger let's say players in the wall out of
• 6:37
  Speaker 1: the rules, so it's after it is quite big for
• 6:40
  Speaker 1: the time. So tariffs are bad news for Spain's olive producers,
• 6:55
  Speaker 1: which President Trump might say is good news for American
• 6:58
  Speaker 1: olive growers. But what's happening in the European aluminum market
• 7:02
  Speaker 1: shows that in tariff battles it's not always so clear
• 7:05
  Speaker 1: cut who will be the loser and who will be
• 7:07
  Speaker 1: the winner. Trump also slapped tariffs on aluminum imports from Europe,
• 7:12
  Speaker 1: but instead of crushing profits, business with the US is booming.
• 7:17
  Speaker 1: What's going on It's a bit complicated. I spoke with
• 7:21
  Speaker 1: get Girtz, director General of European Aluminum an Industry Association
• 7:25
  Speaker 1: in Brussels, about the tariffs. First question, that's a negatively
• 7:29
  Speaker 1: affect the European aluminium trade? In the answers may be surprising, No,
• 7:37
  Speaker 1: um and and why is it because the export UM
• 7:42
  Speaker 1: to the US did not stop as the US UM
• 7:46
  Speaker 1: did not does not have enough domestic production for the
• 7:50
  Speaker 1: time being to satisfy the demand, so therefore continued to
• 7:54
  Speaker 1: import aluminium from from Europe, but but also from other
• 7:58
  Speaker 1: regions UM despite teriffs. It turns out that European exporters
• 8:03
  Speaker 1: benefited because aluminum from China, another big producer, was also
• 8:08
  Speaker 1: being hit by Trump tariffs, and the Chinese aluminum had
• 8:11
  Speaker 1: become even more expensive than the metal from Europe. So
• 8:15
  Speaker 1: American demand for European aluminum surge, tariffs and all but
• 8:20
  Speaker 1: the Chinese pivoted and began to sell their products in Europe.
• 8:23
  Speaker 1: That's driven down prices in Europe. So the good times
• 8:27
  Speaker 1: might not last. It may be helpful and there are
• 8:31
  Speaker 1: some companies that have a have a nice extra market UM,
• 8:36
  Speaker 1: but on the mid term, long term UM, this will
• 8:40
  Speaker 1: change and we need to come back to the level
• 8:43
  Speaker 1: playing field. Both the winners and losers of Trump's trade
• 8:47
  Speaker 1: battle say they have learned a similar lesson. Washington isn't
• 8:51
  Speaker 1: a reliable partner. Tomas, an agricultural economist in Madrid, tells
• 8:58
  Speaker 1: a story about how even short term tradespats can have
• 9:02
  Speaker 1: long term and unforeseen consequences. In the nineteen seventies, the
• 9:07
  Speaker 1: US was the world's main producer of soybeans. When a
• 9:10
  Speaker 1: sudden shift in the market in nineteen seventy three caused
• 9:13
  Speaker 1: prices to surge, the US reacted by putting in place
• 9:16
  Speaker 1: a temporary ban on its soybean exports. Even though the
• 9:19
  Speaker 1: band was short lived, countries that relied on American exports
• 9:23
  Speaker 1: were angry that suddenly they couldn't buy the soybeans they needed.
• 9:27
  Speaker 1: America's trading partners learned an important lesson Garcia, Scott says,
• 9:31
  Speaker 1: and took steps to make sure that their businesses wouldn't
• 9:34
  Speaker 1: be thrown into turmoil again by a surprise US export ban.
• 9:38
  Speaker 1: All the rest of the world understood that the American
• 9:41
  Speaker 1: were not reliever. What the what the rest of the
• 9:45
  Speaker 1: would have done. The Japanese, for instance, look at where
• 9:48
  Speaker 1: where could I found another place to produce sociers. They
• 9:52
  Speaker 1: discover that in Latin America, in Brazil, in Argentina, there
• 9:59
  Speaker 1: were a wonderful a place where where they could they
• 10:02
  Speaker 1: could plan see you, and they finance the development of
• 10:06
  Speaker 1: the soya industry in all Latin America. Today, Latin America
• 10:11
  Speaker 1: is a major player of the market, so little by little,
• 10:16
  Speaker 1: over the next couple of decades, America began to lose
• 10:19
  Speaker 1: its near monopoly status in the soybean market. Economists say
• 10:24
  Speaker 1: we can also expect the tariffs on Spanish table olives
• 10:27
  Speaker 1: and European aluminum to have unexpected effects in those markets.
• 10:31
  Speaker 1: So while it seems like the tear of battles have
• 10:33
  Speaker 1: already been dragging on for a long time, it's fair
• 10:36
  Speaker 1: to expect that Trump's trade policies are going to ripple
• 10:38
  Speaker 1: through the world in surprising ways for decades to come.
• 10:42
  Speaker 1: Trade is based on confidence. You are reliable. I round you,
• 10:48
  Speaker 1: you round me. I import from you, you import from me.
• 10:50
  Speaker 1: That is rules. We respect the rules. We don't change
• 10:53
  Speaker 1: the rule, understanding together, and so on. As soon as
• 10:56
  Speaker 1: you start changing the rules, this we left consequence for
• 11:03
  Speaker 1: Bloomberg News and Janette Numan. So the lesson of that
• 11:11
  Speaker 1: report is the start of a trade war, it strikes me,
• 11:14
  Speaker 1: is a lot easier to predict than the end. And
• 11:17
  Speaker 1: if you decide to punish your trading partners for relying
• 11:19
  Speaker 1: on your goods, well, then you shouldn't be surprised if
• 11:22
  Speaker 1: they try very hard to avoid being in that position again.
• 11:25
  Speaker 1: So I wanted to broaden the discussion a bit, and
• 11:28
  Speaker 1: I've called in Brendan Murray. Bloomberg's trades are who we've
• 11:32
  Speaker 1: spoken to before. He has the job of pulling together
• 11:35
  Speaker 1: everything that's happening around the world with Donald Trump's trade wars.
• 11:39
  Speaker 1: Although we'll hear of it later. It's not just Donald
• 11:41
  Speaker 1: Trump who has been waging trade wars recently. And I
• 11:45
  Speaker 1: should say we're doing this by phone, so the quality
• 11:47
  Speaker 1: might not be up to our usual standards. And Brendan,
• 11:50
  Speaker 1: thank you very much for doing this. Um just remind
• 11:54
  Speaker 1: me we heard there from some Spanish producers and how
• 11:59
  Speaker 1: they've been affect did in different ways by American tariffs.
• 12:04
  Speaker 1: But that's olives an aluminium. But there are other threats
• 12:08
  Speaker 1: that President Trump has made which haven't gone anyway yet
• 12:11
  Speaker 1: on autos, for example. What's the state of play when
• 12:15
  Speaker 1: it comes to the White House versus Europe? Right, So
• 12:18
  Speaker 1: the US and the European trade negotiators haven't even really
• 12:22
  Speaker 1: started their talks yet. They're basically at a stalemate before
• 12:26
  Speaker 1: the before they've even started. Uh, the the US wants
• 12:29
  Speaker 1: agriculture to be part of the part of part of
• 12:32
  Speaker 1: the discussions, and Europe is saying no way, not when
• 12:35
  Speaker 1: we're not negotiating on on the agricultural industry. So what
• 12:39
  Speaker 1: the What the Trump administration has as as leverage over
• 12:43
  Speaker 1: Europeans is the threat of auto teriffs. Now, this is
• 12:46
  Speaker 1: basically the nuclear option when uh considering the German economy,
• 12:52
  Speaker 1: the French economy, the UK economy all tied into it
• 12:56
  Speaker 1: to a great extent to manufacturing automobiles and partic killers.
• 13:00
  Speaker 1: So this is the big unknown, and a lot of
• 13:03
  Speaker 1: economists are would expect the economic effects of that to
• 13:07
  Speaker 1: be to be fairly widespread and painful for for both
• 13:10
  Speaker 1: Europe and the US. Really, and we've had the economy,
• 13:13
  Speaker 1: our economists have gone into in great detail, particularly how
• 13:17
  Speaker 1: how German companies could be affected. But it does seem
• 13:20
  Speaker 1: like the President is wary of of pressing that nuclear button.
• 13:24
  Speaker 1: I mean, those tariffs have been delayed quite a few
• 13:27
  Speaker 1: times now, they have and and they're still they still
• 13:30
  Speaker 1: could be a couple of months off yet. But he's
• 13:33
  Speaker 1: he's he's he's made a lot of threats with with
• 13:36
  Speaker 1: with these big kinds of tariff moves and not followed through.
• 13:39
  Speaker 1: So so there's no guarantee, but it definitely is the
• 13:42
  Speaker 1: big uncertainty hanging over really the European manufacturing industries and
• 13:48
  Speaker 1: and the US manufacturers as well. And we were as
• 13:52
  Speaker 1: we pulled together some of the stories for this chat,
• 13:54
  Speaker 1: I realized that we could probably have an entire series
• 13:56
  Speaker 1: of podcasts devoted to the unintended consequence of trade wars.
• 14:01
  Speaker 1: But while I was very struck with moving away from
• 14:04
  Speaker 1: Europe for a second, is we heard a bit about
• 14:06
  Speaker 1: the aluminium or aluminium story there from the standpoint of Spain.
• 14:12
  Speaker 1: But I was struck by a story we had that
• 14:15
  Speaker 1: the tariffs, the U S tarifs seemed to have actually
• 14:18
  Speaker 1: speeded up the decline of some of these old steel
• 14:20
  Speaker 1: mills in the US, which Donald Trump was saying he
• 14:24
  Speaker 1: wanted to help. How how does that work, Brendan, How
• 14:26
  Speaker 1: is it that the inefficient steel manufacturers in the US
• 14:30
  Speaker 1: have actually been damaged by tariffs? Well, what we're finding
• 14:34
  Speaker 1: out is that trade wars really create winners and losers.
• 14:37
  Speaker 1: And it's if you're if you're directing tariffs at an
• 14:40
  Speaker 1: industry as specific as steel, uh, you know you're going
• 14:44
  Speaker 1: to create winners and losers within that industry, not just
• 14:46
  Speaker 1: you're not going to save the whole industry. So so
• 14:49
  Speaker 1: the weak ones have have have gone out of business essentially,
• 14:54
  Speaker 1: and and those jobs have gone away, and some of
• 14:56
  Speaker 1: them have the bigger, stronger ones have vibed and hired people,
• 15:01
  Speaker 1: but the net effect seems to be kind of a wash.
• 15:05
  Speaker 1: When you look at, you know, the overall attempt to
• 15:07
  Speaker 1: revive the American steel industry, it's it's it's not a
• 15:10
  Speaker 1: widespread success. And I was really struck by this because
• 15:13
  Speaker 1: I guess the dynamic is that the tariffs encouraged US
• 15:18
  Speaker 1: producers to crank up production, but at the same time
• 15:22
  Speaker 1: as actually we then saw global demand fall off, so
• 15:24
  Speaker 1: the price fell. So the old steel mills that were
• 15:27
  Speaker 1: not very profitable even at the higher prices that they're
• 15:31
  Speaker 1: now going faster out of business, even the ones that
• 15:34
  Speaker 1: that Donald Trump might might have stood up in and said, oh,
• 15:36
  Speaker 1: I'm going to save those jobs. I was very strukely.
• 15:39
  Speaker 1: The U s U. S Steel Inc. Has lost seventy
• 15:42
  Speaker 1: of its value since the tariffs were announced. I mean
• 15:45
  Speaker 1: that is not really sounding like the Donald Trump playbook. Yeah,
• 15:49
  Speaker 1: when you start messing around with the forces are supplying
• 15:53
  Speaker 1: demand like that, you never really know what's how the
• 15:55
  Speaker 1: outcome is going to be. And I think that's that's
• 15:58
  Speaker 1: definitely played out in the in the American steel industry.
• 16:00
  Speaker 1: And it'll be interesting to see, of course, Pennsylvania and
• 16:04
  Speaker 1: Ohio or big or big states where you know, Donald
• 16:07
  Speaker 1: Trump depends on his political support, and these are also
• 16:10
  Speaker 1: big places where where steel is manufactured. So it'll be
• 16:13
  Speaker 1: interesting to see if the if that you know, those
• 16:16
  Speaker 1: kind of muted outcomes that he's seen, you know, play
• 16:20
  Speaker 1: a play into into the outcomes that he sees on
• 16:22
  Speaker 1: election day. No, I think that's right. So guess what
• 16:25
  Speaker 1: one thing that economists always say about trade wars that
• 16:28
  Speaker 1: you can have unintended consequences. Probably the other thing that's
• 16:31
  Speaker 1: the most common thing that economists say is that there
• 16:34
  Speaker 1: isn't there are no winners in trade wars, only losers,
• 16:37
  Speaker 1: but we should We tried to help the podcast listeners
• 16:41
  Speaker 1: a few months ago that there was a winner from
• 16:43
  Speaker 1: Donald Trump's trade wars between China, which was Vietnam. And
• 16:46
  Speaker 1: we had a very interesting piece about how Vietnam producers
• 16:50
  Speaker 1: were benefiting from having some production pushed their way by
• 16:56
  Speaker 1: by the tariffs against China. People trying to get around
• 16:59
  Speaker 1: the tariffs. Now, of course it turns out that they're
• 17:01
  Speaker 1: also going to be slapped with tariffs by President Trump.
• 17:05
  Speaker 1: So what the White House noticed that Vietnam was doing
• 17:07
  Speaker 1: quite well out of these tariffs. Well, that's what the
• 17:10
  Speaker 1: White House does is notice trade surpluses, and Vietnam's swelled
• 17:14
  Speaker 1: to levels that got it noticed for all the wrong
• 17:17
  Speaker 1: reasons really, uh, and the Commerce Department recently just put
• 17:22
  Speaker 1: tariffs on certain Vietnamese products that it suspected were being
• 17:27
  Speaker 1: redirected from places like South Korea and Taiwan and trying
• 17:31
  Speaker 1: to get around the tariffs in China to the to
• 17:35
  Speaker 1: the disadvantage of US industry. So uh, yeah, Vietnam, you know,
• 17:39
  Speaker 1: had its had its run there as a winner, but
• 17:41
  Speaker 1: it quickly got got a wake up call that you know,
• 17:44
  Speaker 1: the US is watching and it and it watches trade surpluses,
• 17:47
  Speaker 1: and Vietnam's had swelled quite a good amount. And I
• 17:50
  Speaker 1: was quite struck. I mean, this is one of those
• 17:51
  Speaker 1: things where on the Bloomberg Tunnel you have is amazingly
• 17:54
  Speaker 1: named functions like this one called Ahoy, which tracks all
• 17:58
  Speaker 1: of the big containers ships traveling across the world and
• 18:01
  Speaker 1: what's inside them and where are they going, and we
• 18:03
  Speaker 1: had through one of those functions and something else we've
• 18:06
  Speaker 1: spotted that there was what was it was a six
• 18:08
  Speaker 1: hundred and six hundred and fifty six percent jump in
• 18:11
  Speaker 1: solar cell imports from to the US from Vietnam relative
• 18:17
  Speaker 1: to a year ago. Basically, it looks like a lot
• 18:19
  Speaker 1: of the solar cells that were coming in from China
• 18:22
  Speaker 1: have just started going via Vietnam. I mean, we're not
• 18:25
  Speaker 1: completely sure, but that's what it looks like, yeah, exactly.
• 18:28
  Speaker 1: I mean one of the other industries that we've seen
• 18:31
  Speaker 1: affected a lot is electronics, and and uh, you know,
• 18:34
  Speaker 1: countries like Taiwan and South Korea are really disproportionately damaged
• 18:39
  Speaker 1: in situations like this. So the trade war is is
• 18:42
  Speaker 1: really creating a lot of distortions and and redirecting flows
• 18:47
  Speaker 1: that you know have been in place for years, and
• 18:49
  Speaker 1: particularly in Asia where supply chains are so integrated. So
• 18:54
  Speaker 1: there's a there's a lot of interesting things playing out
• 18:56
  Speaker 1: right now. And like you said, at the outset, it's
• 18:58
  Speaker 1: really too it's very difficult to predict where this is going.
• 19:01
  Speaker 1: And I guess we shouldn't end before mentioning that there's
• 19:04
  Speaker 1: a whole other trade wall that's that started in the
• 19:06
  Speaker 1: last in the last few days or last week between
• 19:10
  Speaker 1: Korea and Japan, which could end up having a much
• 19:13
  Speaker 1: more immediate effect on the semiconductor industry and some of
• 19:17
  Speaker 1: these crucial components which are in all of our iPhones
• 19:20
  Speaker 1: and laptops. So what's going on there? So Japan has
• 19:24
  Speaker 1: basically is threatening to impose export restrictions on certain products
• 19:29
  Speaker 1: that it sends to South Korea. South Korea needs these
• 19:32
  Speaker 1: products where its semiconductor industry, Samsung in particular and LG
• 19:36
  Speaker 1: TV screens really rely on these very high tech inputs,
• 19:41
  Speaker 1: and Japan is basically saying we're gonna We're gonna make
• 19:45
  Speaker 1: it more difficult and expensive for you to get those products. Now,
• 19:48
  Speaker 1: a lot of people say this is in retaliation for
• 19:50
  Speaker 1: this generation's old dispute between Japan and Korea dating back
• 19:56
  Speaker 1: to the colonization of the Korean peninsula. So what this
• 19:59
  Speaker 1: seems to be is a bit of this a creep
• 20:02
  Speaker 1: of the Trump strategy of you know, using trade tariffs,
• 20:07
  Speaker 1: export restrictions to achieve political goals, in this case, sort
• 20:12
  Speaker 1: of retaliation for Korea in this long running dispute. So
• 20:16
  Speaker 1: a lot of people we talked to See this is
• 20:17
  Speaker 1: a real kind of worrying sign when a country like Japan,
• 20:21
  Speaker 1: and you know, industrialized country that you know, espouses free
• 20:24
  Speaker 1: trade starts to start to throw tariffs and export restrictions
• 20:28
  Speaker 1: around for political reasons. So it's really something to watch. Yeah,
• 20:32
  Speaker 1: if we should remember that the numbers involved here it
• 20:35
  Speaker 1: could be pretty large. I mean, the two Korean companies
• 20:38
  Speaker 1: who have been most hammered by the Samsung and another
• 20:41
  Speaker 1: company that's less well known, I guess Heinix. They account
• 20:44
  Speaker 1: for six of the world's memory chip making capacity, so
• 20:47
  Speaker 1: that's they're sitting in all those iPhones and sitting in
• 20:50
  Speaker 1: a lot of of laptops. So this is one of
• 20:52
  Speaker 1: those funny ones we don't it's sort of come out
• 20:54
  Speaker 1: from left field. We're not it's the US measures that
• 20:58
  Speaker 1: are in the headlines, but that we could end up
• 21:00
  Speaker 1: having an impact on the global economy. Absolutely, And these
• 21:04
  Speaker 1: two economies, South Korea and Japan are already being buffeted
• 21:07
  Speaker 1: by some damaging trade numbers from the U S. China dispute,
• 21:12
  Speaker 1: So if you get them going at it with tariffs
• 21:15
  Speaker 1: and export restrictions, they can take it to a whole
• 21:17
  Speaker 1: another level of of you know, economic damage. There are
• 21:21
  Speaker 1: so many signs to this to keep track of. We're
• 21:23
  Speaker 1: still going to be keeping our eye out for potential
• 21:26
  Speaker 1: other winners, unexpected winners from trade wars. I think Bangladesh
• 21:30
  Speaker 1: is now potentially on our list, And I guess we
• 21:33
  Speaker 1: should remind people that there is now a newsletter that
• 21:36
  Speaker 1: you're in charge of random which anyone can sign up for,
• 21:39
  Speaker 1: which allows you to keep tracks of some of these
• 21:42
  Speaker 1: that's right, It's called Terms of Trade. And we try
• 21:45
  Speaker 1: to take a look and pull together all these disparate
• 21:48
  Speaker 1: stories that are going on and try to connect all
• 21:50
  Speaker 1: these dots to make sense of of what's really complicated
• 21:55
  Speaker 1: and difficult to follow story. But hopefully we can make it, uh,
• 21:59
  Speaker 1: you know, a lot more understandable, plenty of dots. Well,
• 22:02
  Speaker 1: I'm sure we'll be talking again, Brendan, but thanks very
• 22:04
  Speaker 1: much for that. Thanks. The former Governor of the Bank
• 22:14
  Speaker 1: of England, Irving King, used to say central bankers should
• 22:17
  Speaker 1: aim to be boring. We found out this week that
• 22:20
  Speaker 1: the next head of the European Central Bank isn't going
• 22:23
  Speaker 1: to be boring. It's going to be the first woman,
• 22:25
  Speaker 1: Christine Leguard, now running the International Monetary Fund. But actually
• 22:29
  Speaker 1: most of the excitement recently around central bankers has not
• 22:34
  Speaker 1: been about anything they've done. It's been about pesky politicians
• 22:38
  Speaker 1: putting a lot of pressure on them and in some
• 22:40
  Speaker 1: cases actually sacking them. Simon Kennedy runs all of our
• 22:45
  Speaker 1: economic reporters for Bloomberg. I wanted to talk to you
• 22:48
  Speaker 1: about it. Simon. Tell us what's happened in the last week.
• 22:51
  Speaker 1: I mean, we had a pretty what you might call
• 22:53
  Speaker 1: outrageous Donald Trump tweet about the Federal Reserve chair. But
• 22:58
  Speaker 1: on that same weekend you also had the Turkish central
• 23:01
  Speaker 1: banker being sacked. So yes, to two themes over the
• 23:04
  Speaker 1: last few days have come to a fresh peak. If
• 23:07
  Speaker 1: you were like Donald Trump again tweeting his disappointment in
• 23:11
  Speaker 1: a FED chairman Jerome Powell, who he of course appointed
• 23:14
  Speaker 1: to the job, suggesting the December rate hike that the
• 23:17
  Speaker 1: Fed introduced should never have taken place. And then just
• 23:22
  Speaker 1: on the in the early hours of Saturday morning, you
• 23:24
  Speaker 1: have President in Turkey firing his central banker who has
• 23:28
  Speaker 1: has resisted cutting interest rates as as deeply as the
• 23:33
  Speaker 1: President has wanted there. So both in those two stories
• 23:35
  Speaker 1: you have a real suggestion that the independence of central
• 23:39
  Speaker 1: banks is in question. I guess what was I mean?
• 23:41
  Speaker 1: The tweet said something like, our biggest problem is the
• 23:44
  Speaker 1: Federal Reserve. It doesn't have a clue. I guess. The
• 23:48
  Speaker 1: striking thing about both these cases although it's but they're
• 23:50
  Speaker 1: obviously the situation of the American Central Bank is very
• 23:53
  Speaker 1: different from the Turkish Central Bank, but neither of them
• 23:55
  Speaker 1: have caused a big market flutter. It seems to be.
• 24:00
  Speaker 1: You can imagine in the past, if there had really
• 24:03
  Speaker 1: been a question mark about the independence of the central bank,
• 24:06
  Speaker 1: you would have had at least bond investors react, And
• 24:09
  Speaker 1: we really haven't seen that much of that. You've seen
• 24:11
  Speaker 1: that in the Lira, but in the US the market
• 24:13
  Speaker 1: kind of shrugged it off. Joone Pal's done a pretty
• 24:17
  Speaker 1: good job of communicating where he stands, just just today
• 24:20
  Speaker 1: in testimony in Congress, talking about the importance of independence
• 24:25
  Speaker 1: but saying that that should be twinned with transparency, trying
• 24:28
  Speaker 1: to explain what the Federal Reserve is up to. But
• 24:32
  Speaker 1: at the same time, Donald Trump is a is probably
• 24:35
  Speaker 1: going to get his way, whether the feder acknowledges that
• 24:38
  Speaker 1: or not. The political pressure may not pay off, but
• 24:40
  Speaker 1: the economic pressure may pay off. With the Fed looking
• 24:43
  Speaker 1: to cut rates in July. I mean, that's what's quite
• 24:46
  Speaker 1: striking is that you have although the Federal Reserve Chairman
• 24:52
  Speaker 1: and others would would be very clear that they're still independent,
• 24:56
  Speaker 1: and they're not listening to them, not reading the tweets
• 24:58
  Speaker 1: or certainly not following following the advice. And I noticed
• 25:01
  Speaker 1: that the FED chair in his statement to Congress had
• 25:05
  Speaker 1: not previously talked about the independence of the Central Bank,
• 25:08
  Speaker 1: but has mentioned it repeatedly since February, which seems like
• 25:11
  Speaker 1: a bit of a reference to the tweets. But despite
• 25:15
  Speaker 1: all that, as you say, they have actually changed their
• 25:17
  Speaker 1: tune dramatically almost since the President started complaining about the
• 25:22
  Speaker 1: interest rate rises. So it's it's slightly awkward for FED.
• 25:25
  Speaker 1: Do you think it loses a bit of credibility from
• 25:27
  Speaker 1: the perception that it might be reacting to him a
• 25:30
  Speaker 1: little bit? And Joachim Fells, a global strategist at PIMCO,
• 25:34
  Speaker 1: made a similar point just the other day and saying
• 25:36
  Speaker 1: that the Fed's in a no win situation either it
• 25:41
  Speaker 1: cut rates and is viewed as has suggested that it's
• 25:45
  Speaker 1: it's it can bow to political pressure or at least
• 25:48
  Speaker 1: rates unchanged, and kind of stands tall against the White House,
• 25:51
  Speaker 1: but in doing so perhaps leaves the economy at risk.
• 25:54
  Speaker 1: So it's it's in a bit of a no win situation,
• 25:56
  Speaker 1: which which leaves j power to kind of maintain this
• 25:59
  Speaker 1: line that he'll do what's in the interest of the
• 26:04
  Speaker 1: of the U. S. Economy and repeat that he plans
• 26:08
  Speaker 1: to stay the court. I was I was struck with
• 26:10
  Speaker 1: a very different perspective on this. I was just recently
• 26:13
  Speaker 1: got back from from Russia and there was a big
• 26:15
  Speaker 1: conference that the Bank of Russia was holding, and it
• 26:18
  Speaker 1: was striking that there was a lot of concern there
• 26:22
  Speaker 1: that they all these conversations about oh, what should the
• 26:26
  Speaker 1: Federal Reserve, shouldn't be so focused on inflation, and you know,
• 26:29
  Speaker 1: all the political pressure on the Federal Reserve and talk
• 26:32
  Speaker 1: about other central banks needing to be more focused on
• 26:35
  Speaker 1: growth and maybe even a bit less independent. That's bad
• 26:39
  Speaker 1: news if you're the Russian Central Bank or any central
• 26:41
  Speaker 1: bank in an emerging market economy that's still fighting the
• 26:44
  Speaker 1: old battle, still has a fair bit of inflation to
• 26:46
  Speaker 1: deal with, and still has question marks about their independence.
• 26:51
  Speaker 1: But thanks Simon, I think we will no doubt be
• 26:54
  Speaker 1: hearing more from the Fed. And I hope more from you.
• 26:57
  Speaker 1: Thank you, m thanks for listening to Stephanomics. We'll be
• 27:07
  Speaker 1: back next week with more on the ground insight into
• 27:09
  Speaker 1: the global economy. In the meantime, you can find us
• 27:12
  Speaker 1: on the Bloomberg Terminal, website, app, or wherever you get
• 27:15
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• 27:17
  Speaker 1: to rate and review this show so it can reach
• 27:20
  Speaker 1: more people. And for more news and analysis from Bloomberg Economics,
• 27:23
  Speaker 1: you can also follow as Economics on Twitter and also
• 27:27
  Speaker 1: find me on at my Stephanomics. This episode was reported
• 27:31
  Speaker 1: by Jeanette Newman and produced by Magnus Henderson and Scott Lamb.
• 27:35
  Speaker 1: Special thanks to Brendan Murray, Simon Kennedy and Devin Leonard.
• 27:39
  Speaker 1: Our executive producer is Scott Lamban, and the head of
• 27:42
  Speaker 1: Bloomberg Podcasts is Francesca Levy.