April 4, 2025 • 22 mins
The Trump administration’s tariffs and negotiations over acquiring TikTok are among key catalysts that BI litigation and policy analysts are watching this week. The team discussed what happens next with respect to the “Liberation Day” tariffs President Donald Trump announced on April 2 and the impacts it could have on companies like Nike, Levis, and Stellantis. The team also analyzed the legal issues surrounding the use of the International Economic Emergency Powers Act (IEEPA) to justify the tariffs. We closed with an update on TikTok and the April 5 deadline for its sale or ban in the US.
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Episode Transcript
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Speaker 1 (00:14):
Hello, and welcome to the Votes and Verdicts podcasts hosted
by the Litigation and Policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we have
(00:36):
outlooks on more than ninety industries and one hundred market indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today we'll be looking at
the litigation and policy catalysts that we're watching this week
or that have been making news this week, and that
we think will impact companies across a number of different sectors.
(00:57):
My name is Elliott Stein. I'm an analyst with the
Bloomberg Intelligence covering litigation in the financial sector, and I'll
be your host for today, April third, twenty twenty five.
I'm delighted today to be joined by a handful of
my colleagues on the Litigation and Policy team, and as always,
you can find all of our research on the Bloomberg
terminal at BI go and more specifically on our dashboard
(01:19):
bi space laws.
Speaker 2 (01:21):
Go. All right, we got to start with tarriffs.
Speaker 1 (01:26):
Obviously, today's April third, yesterday was Liberation Day, and President
Trump made his announcement in the Rose Garden regarding the
various tariffs. By the way, yesterday was Liberation Day. Today
I just found out as National Burrito Day, so I
just had a burrito for lunch. Somewhat of a less
controversial day, I suppose. But talking about the tariffs, you know,
(01:50):
I think they were labeled as reciprocal tariffs. I'm not
really sure that's the appropriate term based on what we saw,
because the tariffs that he identified for each of the
countries isn't really the teriff rates that those countries are
imposing on imports. It's really more some sort of proxy
for trade deficits that the US has with those countries. So,
(02:16):
you know, with that said, I also thought it was
interesting that, you know, the market reaction to the press
conference was interesting because at first he sort of talked
about a ten percent base tariff, and you know, the
market reacted.
Speaker 2 (02:33):
Relatively positively to that, and then he started getting into.
Speaker 1 (02:36):
The much higher numbers that he rolled out for a
lot of other countries, and the market then took a
turn downward. But having said all that, Nathan, let me
bring you in first. You know, did anything surprise you
from the announcement yesterday? And how do you see this
plane out going forward?
Speaker 3 (02:57):
Yeah?
Speaker 4 (02:57):
So obviously I think a lot of people were surprised
by the breath of the tariff. I mean, I think
most people knew that something was going to happen. I
mean President Trump had hyped it up to an a
certain extent. But I think when you think about things
like targeting Vietnam, Cambodia, I mean, if you looked at
what the reciprocal tariff rates were, obviously those countries were exposed.
(03:18):
But I don't think anybody really anticipated that this formula
of going looking at our trade imbalances and in balance
and just essentially saying half of it, you know.
Speaker 3 (03:27):
So I think that certainly was a surprise.
Speaker 4 (03:29):
We've gotten certainly calls from folks saying, look, is this
going to be a one to two months endeavor or
is this going to be a one to two quarter
endeavor or a one to two year endeavor? And you know,
it's hard to say. You know, I would say that,
you know, go back to President Trump gold. You know,
it really is to boost US manufacturing and to drive
change within the global economy where the United States begins
(03:50):
to produce a lot more of those goods. You can't
do that over one to two months, you can't do
that over to one to two quarters, and subsequently you
probably couldn't even do that over one to two years.
But you know, on the same side or on the
different side. You know, Eric Trump, the President's son, just
said a few hours ago that my father, in knowing him,
and I'm paraphrasing here here, you want to be one
(04:10):
of the first countries to call President Trump to make
a deal.
Speaker 3 (04:13):
You don't want to be one of the last.
Speaker 4 (04:15):
So I think that you know where we go from
here is that President Trump has always said he's crystal clear.
Speaker 3 (04:21):
About he's willing to make a deal.
Speaker 4 (04:23):
You know what that deal looks like obviously depends on
what other countries offer and so forth. But we're going
to be in this period of negotiation where this period
where negotiations continue to take place, and you're just going
to have to be susceptible to headline ri I mean,
it's one of those things where you know, and I
apologize to the listeners right now, because I don't think
(04:44):
anybody in Washington truly knows where we're going here. But
I think it's one of those things where you have
to look at the supply chain, you have to look
at the exposures. You know, a lot of our colleagues
in Blueberg Intelligence did some great work over the night.
They've put out notes, like in China where, for example,
a lot of chi these equities, you know, shielded from this.
Chinese etailers because of the deminimistics inclusion are not. Japanese
(05:08):
industrials were down eighteen percent. If you look at Mike
Dean's note from Europe, the Mercedes and BMW, two companies
that do have US exposure, are you know, more exposed
to this than you know, something like Portions and Ferrari.
So I think for the if you're listening and you're
trying to figure out how do I manage this tariff
to debate, I would go with the idea that President
(05:30):
Trump loves to negotiate. Got to pay attention to the
new cycles, see if there's anything there, and then you
got to look at the supply chains because you know,
obviously if this does stick around one to two quarters
or one to two years.
Speaker 3 (05:42):
There's going to be a massive ruption disruption ahead.
Speaker 1 (05:44):
Yeah, and I'm glad you flagged all the various research
coming out of BI and all of that.
Speaker 2 (05:49):
If you have a.
Speaker 1 (05:50):
Terminal subscription is available at BI Spased tariffs, like all
the research, we have a terrorist matrix that you can
sort by industry and company and impact. So I mean
Nathan the April and not. You know, most of these
tarists don't go into effect until April ninth, at least
saw the individual country ones. You know, do you expect
sixty countries to basically pick up the phone before then
(06:13):
and try to have a negotiation with the administration.
Speaker 4 (06:16):
Well, I don't anticipate the Donald McDonald island. I heard
in McDonald Island, which has a bunch of penguins on it.
I don't anticipate they are going to be the ones negotiating.
But for all the big countries, absolutely, you know. You
know Howard Lutnick was on Bloomberg Television this morning, and
again I'm paraphrasing here, he said, look.
Speaker 3 (06:34):
We've been on the phone.
Speaker 4 (06:35):
We've been talking with countries before this announcement. After this announcement,
would not surprise me to see starting maybe tomorrow April fourth,
or maybe over the weekend, special deals being cut. I mean,
that's just the type of negotiation that we the president.
Speaker 3 (06:49):
We have. Also thing that I learned today that if
you're looking at the retail industry.
Speaker 4 (06:54):
And if you you know, obviously have exposure to that,
you know, Nike's down, Lululemon is down, and so forth.
But I was reading Mary Ross Gilbert's reports that she
put out. She's one of our retail analysts based in LA.
Can you guess the two US companies retail companies clothing
companies that have less than five percent exposure.
Speaker 3 (07:14):
To China, Levi's and Carters.
Speaker 4 (07:17):
So if you are a if you have a young
children right now, you know, Carters may actually be one
of your companies that you'll be fine shopping at.
Speaker 1 (07:26):
Right right on, Jean's I'm more lucky brand kind of guy,
but maybe I'll switch. I don't know where those are made. Actually,
all right, thanks Nathan Holly, Let's bring you in. So
you've been writing about that, You've done a lot of
work sort of corral and all the various research across
BI into a comprehensive terrorst support but you've also looked
(07:48):
at the legality of some of the statutes that are
being invoked to support these tariffs. And I just want
to read the headline you put out this morning, Liberation Day,
tariffs on thin legal ice, yet may clear hurdles, So
(08:08):
you know, you're sort of telling us where you're going there,
But I'm curious to get your thoughts on it if
you can elaborate on that headline.
Speaker 2 (08:14):
I know they're using AIPA, the.
Speaker 1 (08:16):
International Emergency Economic Powers Act, but like, what's the economic
emergency that they're citing.
Speaker 2 (08:21):
And how well will it hold up legally.
Speaker 5 (08:24):
Trump is saying that there's a trade deficit, and this
trade deficit has caused all kinds of problems, so it's
reduced domestic manufacturing and that's her job growth and had
wide scale implications on the economy. In the executive order
he put out when he was imposing these tariffs even
brought up the opiod crisis and how the loss of
(08:45):
jobs in the US due to manufacturing reduction has caused
the opioid crisis. So he's and he's also said that
trade deficits lead to you know, lower manufacturing as well
as in defense industries. So he's brought up that, and
he's said that the military were suffering militarily, We're not ready,
(09:07):
and so bringing back these jobs and bringing back manufacturing
to the US helps all kinds of things, including defense
and security with global supply chains. So that's the emergency
he's cited. Obviously, this has never been done before. So
there was one other time when the precursor Statute to
(09:30):
ABO was used to impose tariffs, and that was by
Nixon in nineteen seventy one, and he did that in
response to so he imposed ten percent tariffs on all
duty able goods, and he said that the emergency was
that there was a balance of payments deficit. But there
it seems like the emergency was more acute because the
(09:52):
US could not provide dollars if if I'm sorry, could
not provide gold if other countries cashed in their dollars.
So that seems like a more and more acute emergency,
and also was it arose pretty suddenly here? The emergency
has been developing, according to that order of the executive
(10:14):
Order in which he imposes terrorfs over many many.
Speaker 1 (10:17):
Years, because he's ciding like trade deficits that have been
around for decades.
Speaker 5 (10:23):
Exactly, So it remains to be seen whether a court
would say, yes, indeed, this is an emergency.
Speaker 1 (10:29):
So you think it's a weaker argument than the one
that supported Nixon's terraces in the seventies, but you still
but your headline suggests that will still hold up.
Speaker 5 (10:40):
I do think it's weaker, But in this space, courts
have been extremely reluctant to the second that gets the
president when it comes to tariff powers, and they've been
extremely reluctant to second guests the president when it comes
to declarations of emergency. Those are two things that he's
declared that he's used here, the teriff power and declaration
of emergency, and in both of those the situations that
(11:01):
the courts have been pretty hands off. But I will
say that declarations of emergencies, you know, aren't declared willy nilly.
There's only you know, a handful of times that we
that they've been declared. So so that's why I say
this is on thin ice, because you know, he's doing
something that's unprecedented, sweeping in scope, and doesn't have a
(11:24):
lot of support in the law. But if you look
at the precedent, there's never been a tariff that was
struck down. That was a ruling striking down the tarff
that was upheld on appeal.
Speaker 1 (11:34):
Interesting, although always the first, you know, for for everything.
But well, but you know, having said all that, have
you seen any rumblings of a lawsuit as any country
or company or trade organization said they're going to challenge this.
Speaker 5 (11:52):
I haven't seen any rumblings that country or or a
trade organization rather is going to challenge this in the
US courts. There may be challenges that have been filed
in the wto the World Trade Organization, but I haven't
seen those yet.
Speaker 1 (12:09):
Okay, well, well, keep our eyes out, as they say,
stay tuned. All right, So let's thanks Holly. Let's switch
to TikTok, which was also heavily in the news yesterday.
Let's bring in Matt Schattenhelm, our TMT policy and litigation analyst.
He's been covering the TikTok saga for what feels like
(12:30):
a lifetime, but I suppose it's only like six to
twelve months at this point. Matt, I liked, how you
know yesterday you were on TV and or radio talking
about the TikTok ban and the April fifth expiration of
the band's extension or the extension to avoid the ban, essentially.
Speaker 2 (12:52):
The extension to make a deal.
Speaker 1 (12:53):
And while you were on TV, there were red headlines
that came across the terminal and the TV screen about
Amazon making the last minute bid to buy TikTok. I
don't know if they were if that bid is solely
them buying the whole thing. Because then there was also
news about a number of investors who were known about
(13:13):
eighty percent of the company while ByteDance would lease the
algorithm to them. So I don't know a lot of
news came out on this yesterday. Why don't you tell
us what you're thinking and how you see this playing out,
you know, in advance of April fifth and after that.
Speaker 6 (13:28):
Yeah, so many moving parts on this, Elliott, And you
have to love when those red headlines hit live when
you're on the air. But yeah, so where we stand is,
as you said, the law, the band law took effect
January nineteenth. President Trump adopted this executive order telling companies
(13:48):
don't worry about that law for seventy five days. That
takes us to April fifth, So something needs to happen
by Saturday. And there were reports of these meetings in
the office yesterday, and and these offers flowing in from
from Amazon and others.
Speaker 7 (14:07):
Uh.
Speaker 6 (14:07):
You know, the way the law operates is the idea
would be that byte Dance would divest to a company
not located in China. Uh and and and then there's
an argument does that include the algorithm? Is there is
byte Dance entitled to hold on to the algorithm or not?
(14:27):
And and so I think, you know, some of the
reportings suggest that they're trying to do a workaround on
that where byte Dance would would remain affiliated with with
any sort of company going forward. And and so there
I think there are going to be serious questions about
whether any sort of announcement coming out of the Trump
administration in the next couple of days is compliant with
(14:50):
the law. But I think the larger question is sort of,
you know, similar to Holly's discussion with you earlier, is
how much is the law really going to matter here?
Is anyone ever going to enforce the law or insist
that it's followed in a strict way. And at this moment,
given where we've been for the last two to three months,
(15:11):
I don't really see anyone standing up and insisting on
a strict reading of the law, A lot of that
political courage we saw to stand up to TikTok over
the past year sort of has disappeared, and lawmakers who
are once very bold in speaking out against TikTok and
the risks suddenly aren't as bold.
Speaker 1 (15:34):
Sorry, are you saying that this idea of bite Dance
leasing the algorithm to investors in TikTok may not be
fully compliant with the statute as Congress you know wrote it.
So that's my first question, Like, how does effidence the statute?
Speaker 6 (15:52):
Yeah, so the law defines a qualified divestiture as one
that the President determined means precludes the establishment of any
operational relationship between the new US entity and the formerly
affiliated entity. I think they would still be affiliated technically,
(16:14):
but if we if we had, if we want to
call it a formerly affiliated entity, bye dance. And then
that says including there can be no cooperation with respect
the operation of the algorithm. So no cooperation.
Speaker 2 (16:28):
So yeah, hard to see how some sort of leasing agreement.
Speaker 6 (16:33):
Yeah, at least sounds like cooperation. And this came up
in the Supreme Court argument. Justice Soda Mayor was was
was pushing on this exact provision and saying, well, maybe
that provision violates the First Amendment, and maybe we.
Speaker 7 (16:47):
Should sever that provision.
Speaker 6 (16:48):
And even the Slicter General was willing to say, oh yeah, okay.
She was trying to defend the whole law, and she's like, okay,
you could cut out that piece. The Supreme Court never
cut out that piece. The whole thing is the law.
And and so the question, though, again is right now,
no one's really insisting that, hey, hey, President Trump isn't
exactly following the law here. Is anyone going to take
(17:11):
a different tune after April fifth, after Trump trumpets this
you know, new new deal that he's he's worked out.
I'm not sure that anyone's going to stand up and
insist on a strict reading of this law.
Speaker 1 (17:25):
Do you think users would have standing to sue if,
let's say they enter that agreement by Dan Sleas's the algorithm.
I feel like that would be a stronger case for
users of the app to sue, more so than now
while the law isn't being enforced at all, or maybe not,
I don't know.
Speaker 2 (17:44):
I don't know if you've thought about that.
Speaker 6 (17:46):
I've always thought that, you know, a tricky thing here
is standing. Who can who can show they're injured in fact?
And and and you know, can can satisfy the standing test.
I've always thought users had the best case to say,
you know, a TikTok user that that says, this law
was enacted to protect me as a TikTok user, and
(18:06):
it's intended to force a sale to a company that
doesn't have a tie to China, doesn't let my data,
you know, be interconnected with with a company there. You know,
I think they have a fairly plausible case that they're
harmed when we ignore the terms of those laws and
keep their data going back to exactly where it shouldn't go.
(18:28):
And I think if this arrangement continues, I think they
they would still have a plausible case.
Speaker 7 (18:34):
It's not a slam dunk.
Speaker 6 (18:35):
A court could say, look, that's not enough for standing,
but I think it's it's plausible and and so. And
the risk here isn't really for the new entity that
buys TikTok. The risk here is for Apple and Google
and the other companies that host TikTok. All of all
of those companies face liability of five thousand dollars per
(18:55):
TikTok user. So you get to astronomical numbers if this law,
you know, if this arrangement isn't legal, right, and.
Speaker 1 (19:05):
That's only a government find right, that doesn't contemplate a
private right of action.
Speaker 6 (19:09):
Right exactly. So the enforcement is the attorney general, and
she has President Trump directed his attorney attorney general to
write a letter saying these companies are not you know,
defining the law. They that literally to say that they
are following the law. And I don't know how she
wrote that letter, but and it hasn't been released publicly,
(19:31):
but that's been their approach so far.
Speaker 7 (19:33):
And the question can that continue?
Speaker 6 (19:35):
Something needs to happen after April fifth, because that first
executive order runs through that date. So I think we'll
see an extension of the extent of the executive order
to allow for more negotiation and the finalization of some
sort of deal. But even that, as we talked about,
might not comply with the law. Congress might need to
(19:57):
bless that new arrangement. And that's going to be an
interesting question.
Speaker 1 (20:01):
And you haven't seen any I mean, there's been no
indication from Congress as to you know, how they feel
about all this.
Speaker 7 (20:08):
No, nothing clear.
Speaker 6 (20:09):
You know, you see an occasional comment from some lawmakers
who are more concerned about the risks of ties to China.
But and then, you know, I think about Chuck Schumer's
comments closer to January nineteenth. Suddenly, you know, previously was
very bold on we have to support this band sort
of won a little softer and said let's work out
(20:30):
a deal. And so, you know, not real clear direction
from lawmakers. And it's just fascinating because when you think
about last year when this law passed this past with
overwhelming bipartisan support, it passed one committee fifty to zero,
and you know, and it's just remarkable how much that
(20:52):
has changed. Now President Trump comes out and says he
has a warm spot in his heart for the app
because it helped him win the election, and all of
a sudd and no one talks about the risks anymore.
And it's it's just a fascinating, you know, study on
our on our politics. But I think that it's it's
it's where we are right now. And so I'm not
(21:13):
sure that there will be the political will to insist
on the law that the lawmakers adopt.
Speaker 1 (21:18):
Right and to bring it all full circle, maybe this
all ties back into tariff negotiations too. I think President
Trump has even floated that idea that if China's not
willing to sell, maybe he reduces their tariffs and then they,
you know, are more inclined to sell the app.
Speaker 7 (21:34):
It's very possible.
Speaker 6 (21:36):
And you know, I think he's sort of given up
a lot of his leverage under the TikTok law itself
by you know, letting the letting the app continue to operate.
So the you know, so he has to look for
other sources of leverage and tariffs is a logical one.
Speaker 1 (21:51):
Yeah, all right, I think we'll leave it there, so
you'll be watching after that on April fifth. I think
April fifth is also when the ten percent baseline tariffs
take effect before the April nine individual tariffs, So a
lot happening in April, but we will leave it there.
We'll wrap up this episode of Votes and Verdicts. As always,
thank you to the listener for listening. If you have
(22:11):
any questions about any of the matters we discuss on
this episode, please don't hesitate to reach out to us
at your convenience. As a reminder, you can find all
of our research on the Bloomberg terminal at big or
on our litigation and policy dashboard at BI laws Go,
and we encourage you to listen to other episodes of
Votes and Verdicts on whatever platform you like to get
(22:32):
your favorite podcasts. Thank you again for listening, and have
a great day.
Hello, and welcome to the Votes and Verdicts podcasts hosted
by the Litigation and Policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we have
(00:36):
outlooks on more than ninety industries and one hundred market indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today we'll be looking at
the litigation and policy catalysts that we're watching this week
or that have been making news this week, and that
we think will impact companies across a number of different sectors.
(00:57):
My name is Elliott Stein. I'm an analyst with the
Bloomberg Intelligence covering litigation in the financial sector, and I'll
be your host for today, April third, twenty twenty five.
I'm delighted today to be joined by a handful of
my colleagues on the Litigation and Policy team, and as always,
you can find all of our research on the Bloomberg
terminal at BI go and more specifically on our dashboard
(01:19):
bi space laws.
Speaker 2 (01:21):
Go. All right, we got to start with tarriffs.
Speaker 1 (01:26):
Obviously, today's April third, yesterday was Liberation Day, and President
Trump made his announcement in the Rose Garden regarding the
various tariffs. By the way, yesterday was Liberation Day. Today
I just found out as National Burrito Day, so I
just had a burrito for lunch. Somewhat of a less
controversial day, I suppose. But talking about the tariffs, you know,
(01:50):
I think they were labeled as reciprocal tariffs. I'm not
really sure that's the appropriate term based on what we saw,
because the tariffs that he identified for each of the
countries isn't really the teriff rates that those countries are
imposing on imports. It's really more some sort of proxy
for trade deficits that the US has with those countries. So,
(02:16):
you know, with that said, I also thought it was
interesting that, you know, the market reaction to the press
conference was interesting because at first he sort of talked
about a ten percent base tariff, and you know, the
market reacted.
Speaker 2 (02:33):
Relatively positively to that, and then he started getting into.
Speaker 1 (02:36):
The much higher numbers that he rolled out for a
lot of other countries, and the market then took a
turn downward. But having said all that, Nathan, let me
bring you in first. You know, did anything surprise you
from the announcement yesterday? And how do you see this
plane out going forward?
Speaker 3 (02:57):
Yeah?
Speaker 4 (02:57):
So obviously I think a lot of people were surprised
by the breath of the tariff. I mean, I think
most people knew that something was going to happen. I
mean President Trump had hyped it up to an a
certain extent. But I think when you think about things
like targeting Vietnam, Cambodia, I mean, if you looked at
what the reciprocal tariff rates were, obviously those countries were exposed.
(03:18):
But I don't think anybody really anticipated that this formula
of going looking at our trade imbalances and in balance
and just essentially saying half of it, you know.
Speaker 3 (03:27):
So I think that certainly was a surprise.
Speaker 4 (03:29):
We've gotten certainly calls from folks saying, look, is this
going to be a one to two months endeavor or
is this going to be a one to two quarter
endeavor or a one to two year endeavor? And you know,
it's hard to say. You know, I would say that,
you know, go back to President Trump gold. You know,
it really is to boost US manufacturing and to drive
change within the global economy where the United States begins
(03:50):
to produce a lot more of those goods. You can't
do that over one to two months, you can't do
that over to one to two quarters, and subsequently you
probably couldn't even do that over one to two years.
But you know, on the same side or on the
different side. You know, Eric Trump, the President's son, just
said a few hours ago that my father, in knowing him,
and I'm paraphrasing here here, you want to be one
(04:10):
of the first countries to call President Trump to make
a deal.
Speaker 3 (04:13):
You don't want to be one of the last.
Speaker 4 (04:15):
So I think that you know where we go from
here is that President Trump has always said he's crystal clear.
Speaker 3 (04:21):
About he's willing to make a deal.
Speaker 4 (04:23):
You know what that deal looks like obviously depends on
what other countries offer and so forth. But we're going
to be in this period of negotiation where this period
where negotiations continue to take place, and you're just going
to have to be susceptible to headline ri I mean,
it's one of those things where you know, and I
apologize to the listeners right now, because I don't think
(04:44):
anybody in Washington truly knows where we're going here. But
I think it's one of those things where you have
to look at the supply chain, you have to look
at the exposures. You know, a lot of our colleagues
in Blueberg Intelligence did some great work over the night.
They've put out notes, like in China where, for example,
a lot of chi these equities, you know, shielded from this.
Chinese etailers because of the deminimistics inclusion are not. Japanese
(05:08):
industrials were down eighteen percent. If you look at Mike
Dean's note from Europe, the Mercedes and BMW, two companies
that do have US exposure, are you know, more exposed
to this than you know, something like Portions and Ferrari.
So I think for the if you're listening and you're
trying to figure out how do I manage this tariff
to debate, I would go with the idea that President
(05:30):
Trump loves to negotiate. Got to pay attention to the
new cycles, see if there's anything there, and then you
got to look at the supply chains because you know,
obviously if this does stick around one to two quarters
or one to two years.
Speaker 3 (05:42):
There's going to be a massive ruption disruption ahead.
Speaker 1 (05:44):
Yeah, and I'm glad you flagged all the various research
coming out of BI and all of that.
Speaker 2 (05:49):
If you have a.
Speaker 1 (05:50):
Terminal subscription is available at BI Spased tariffs, like all
the research, we have a terrorist matrix that you can
sort by industry and company and impact. So I mean
Nathan the April and not. You know, most of these
tarists don't go into effect until April ninth, at least
saw the individual country ones. You know, do you expect
sixty countries to basically pick up the phone before then
(06:13):
and try to have a negotiation with the administration.
Speaker 4 (06:16):
Well, I don't anticipate the Donald McDonald island. I heard
in McDonald Island, which has a bunch of penguins on it.
I don't anticipate they are going to be the ones negotiating.
But for all the big countries, absolutely, you know. You
know Howard Lutnick was on Bloomberg Television this morning, and
again I'm paraphrasing here, he said, look.
Speaker 3 (06:34):
We've been on the phone.
Speaker 4 (06:35):
We've been talking with countries before this announcement. After this announcement,
would not surprise me to see starting maybe tomorrow April fourth,
or maybe over the weekend, special deals being cut. I mean,
that's just the type of negotiation that we the president.
Speaker 3 (06:49):
We have. Also thing that I learned today that if
you're looking at the retail industry.
Speaker 4 (06:54):
And if you you know, obviously have exposure to that,
you know, Nike's down, Lululemon is down, and so forth.
But I was reading Mary Ross Gilbert's reports that she
put out. She's one of our retail analysts based in LA.
Can you guess the two US companies retail companies clothing
companies that have less than five percent exposure.
Speaker 3 (07:14):
To China, Levi's and Carters.
Speaker 4 (07:17):
So if you are a if you have a young
children right now, you know, Carters may actually be one
of your companies that you'll be fine shopping at.
Speaker 1 (07:26):
Right right on, Jean's I'm more lucky brand kind of guy,
but maybe I'll switch. I don't know where those are made. Actually,
all right, thanks Nathan Holly, Let's bring you in. So
you've been writing about that, You've done a lot of
work sort of corral and all the various research across
BI into a comprehensive terrorst support but you've also looked
(07:48):
at the legality of some of the statutes that are
being invoked to support these tariffs. And I just want
to read the headline you put out this morning, Liberation Day,
tariffs on thin legal ice, yet may clear hurdles, So
(08:08):
you know, you're sort of telling us where you're going there,
But I'm curious to get your thoughts on it if
you can elaborate on that headline.
Speaker 2 (08:14):
I know they're using AIPA, the.
Speaker 1 (08:16):
International Emergency Economic Powers Act, but like, what's the economic
emergency that they're citing.
Speaker 2 (08:21):
And how well will it hold up legally.
Speaker 5 (08:24):
Trump is saying that there's a trade deficit, and this
trade deficit has caused all kinds of problems, so it's
reduced domestic manufacturing and that's her job growth and had
wide scale implications on the economy. In the executive order
he put out when he was imposing these tariffs even
brought up the opiod crisis and how the loss of
(08:45):
jobs in the US due to manufacturing reduction has caused
the opioid crisis. So he's and he's also said that
trade deficits lead to you know, lower manufacturing as well
as in defense industries. So he's brought up that, and
he's said that the military were suffering militarily, We're not ready,
(09:07):
and so bringing back these jobs and bringing back manufacturing
to the US helps all kinds of things, including defense
and security with global supply chains. So that's the emergency
he's cited. Obviously, this has never been done before. So
there was one other time when the precursor Statute to
(09:30):
ABO was used to impose tariffs, and that was by
Nixon in nineteen seventy one, and he did that in
response to so he imposed ten percent tariffs on all
duty able goods, and he said that the emergency was
that there was a balance of payments deficit. But there
it seems like the emergency was more acute because the
(09:52):
US could not provide dollars if if I'm sorry, could
not provide gold if other countries cashed in their dollars.
So that seems like a more and more acute emergency,
and also was it arose pretty suddenly here? The emergency
has been developing, according to that order of the executive
(10:14):
Order in which he imposes terrorfs over many many.
Speaker 1 (10:17):
Years, because he's ciding like trade deficits that have been
around for decades.
Speaker 5 (10:23):
Exactly, So it remains to be seen whether a court
would say, yes, indeed, this is an emergency.
Speaker 1 (10:29):
So you think it's a weaker argument than the one
that supported Nixon's terraces in the seventies, but you still
but your headline suggests that will still hold up.
Speaker 5 (10:40):
I do think it's weaker, But in this space, courts
have been extremely reluctant to the second that gets the
president when it comes to tariff powers, and they've been
extremely reluctant to second guests the president when it comes
to declarations of emergency. Those are two things that he's
declared that he's used here, the teriff power and declaration
of emergency, and in both of those the situations that
(11:01):
the courts have been pretty hands off. But I will
say that declarations of emergencies, you know, aren't declared willy nilly.
There's only you know, a handful of times that we
that they've been declared. So so that's why I say
this is on thin ice, because you know, he's doing
something that's unprecedented, sweeping in scope, and doesn't have a
(11:24):
lot of support in the law. But if you look
at the precedent, there's never been a tariff that was
struck down. That was a ruling striking down the tarff
that was upheld on appeal.
Speaker 1 (11:34):
Interesting, although always the first, you know, for for everything.
But well, but you know, having said all that, have
you seen any rumblings of a lawsuit as any country
or company or trade organization said they're going to challenge this.
Speaker 5 (11:52):
I haven't seen any rumblings that country or or a
trade organization rather is going to challenge this in the
US courts. There may be challenges that have been filed
in the wto the World Trade Organization, but I haven't
seen those yet.
Speaker 1 (12:09):
Okay, well, well, keep our eyes out, as they say,
stay tuned. All right, So let's thanks Holly. Let's switch
to TikTok, which was also heavily in the news yesterday.
Let's bring in Matt Schattenhelm, our TMT policy and litigation analyst.
He's been covering the TikTok saga for what feels like
(12:30):
a lifetime, but I suppose it's only like six to
twelve months at this point. Matt, I liked, how you
know yesterday you were on TV and or radio talking
about the TikTok ban and the April fifth expiration of
the band's extension or the extension to avoid the ban, essentially.
Speaker 2 (12:52):
The extension to make a deal.
Speaker 1 (12:53):
And while you were on TV, there were red headlines
that came across the terminal and the TV screen about
Amazon making the last minute bid to buy TikTok. I
don't know if they were if that bid is solely
them buying the whole thing. Because then there was also
news about a number of investors who were known about
(13:13):
eighty percent of the company while ByteDance would lease the
algorithm to them. So I don't know a lot of
news came out on this yesterday. Why don't you tell
us what you're thinking and how you see this playing out,
you know, in advance of April fifth and after that.
Speaker 6 (13:28):
Yeah, so many moving parts on this, Elliott, And you
have to love when those red headlines hit live when
you're on the air. But yeah, so where we stand is,
as you said, the law, the band law took effect
January nineteenth. President Trump adopted this executive order telling companies
(13:48):
don't worry about that law for seventy five days. That
takes us to April fifth, So something needs to happen
by Saturday. And there were reports of these meetings in
the office yesterday, and and these offers flowing in from
from Amazon and others.
Speaker 7 (14:07):
Uh.
Speaker 6 (14:07):
You know, the way the law operates is the idea
would be that byte Dance would divest to a company
not located in China. Uh and and and then there's
an argument does that include the algorithm? Is there is
byte Dance entitled to hold on to the algorithm or not?
(14:27):
And and so I think, you know, some of the
reportings suggest that they're trying to do a workaround on
that where byte Dance would would remain affiliated with with
any sort of company going forward. And and so there
I think there are going to be serious questions about
whether any sort of announcement coming out of the Trump
administration in the next couple of days is compliant with
(14:50):
the law. But I think the larger question is sort of,
you know, similar to Holly's discussion with you earlier, is
how much is the law really going to matter here?
Is anyone ever going to enforce the law or insist
that it's followed in a strict way. And at this moment,
given where we've been for the last two to three months,
(15:11):
I don't really see anyone standing up and insisting on
a strict reading of the law, A lot of that
political courage we saw to stand up to TikTok over
the past year sort of has disappeared, and lawmakers who
are once very bold in speaking out against TikTok and
the risks suddenly aren't as bold.
Speaker 1 (15:34):
Sorry, are you saying that this idea of bite Dance
leasing the algorithm to investors in TikTok may not be
fully compliant with the statute as Congress you know wrote it.
So that's my first question, Like, how does effidence the statute?
Speaker 6 (15:52):
Yeah, so the law defines a qualified divestiture as one
that the President determined means precludes the establishment of any
operational relationship between the new US entity and the formerly
affiliated entity. I think they would still be affiliated technically,
(16:14):
but if we if we had, if we want to
call it a formerly affiliated entity, bye dance. And then
that says including there can be no cooperation with respect
the operation of the algorithm. So no cooperation.
Speaker 2 (16:28):
So yeah, hard to see how some sort of leasing agreement.
Speaker 6 (16:33):
Yeah, at least sounds like cooperation. And this came up
in the Supreme Court argument. Justice Soda Mayor was was
was pushing on this exact provision and saying, well, maybe
that provision violates the First Amendment, and maybe we.
Speaker 7 (16:47):
Should sever that provision.
Speaker 6 (16:48):
And even the Slicter General was willing to say, oh yeah, okay.
She was trying to defend the whole law, and she's like, okay,
you could cut out that piece. The Supreme Court never
cut out that piece. The whole thing is the law.
And and so the question, though, again is right now,
no one's really insisting that, hey, hey, President Trump isn't
exactly following the law here. Is anyone going to take
(17:11):
a different tune after April fifth, after Trump trumpets this
you know, new new deal that he's he's worked out.
I'm not sure that anyone's going to stand up and
insist on a strict reading of this law.
Speaker 1 (17:25):
Do you think users would have standing to sue if,
let's say they enter that agreement by Dan Sleas's the algorithm.
I feel like that would be a stronger case for
users of the app to sue, more so than now
while the law isn't being enforced at all, or maybe not,
I don't know.
Speaker 2 (17:44):
I don't know if you've thought about that.
Speaker 6 (17:46):
I've always thought that, you know, a tricky thing here
is standing. Who can who can show they're injured in fact?
And and and you know, can can satisfy the standing test.
I've always thought users had the best case to say,
you know, a TikTok user that that says, this law
was enacted to protect me as a TikTok user, and
(18:06):
it's intended to force a sale to a company that
doesn't have a tie to China, doesn't let my data,
you know, be interconnected with with a company there. You know,
I think they have a fairly plausible case that they're
harmed when we ignore the terms of those laws and
keep their data going back to exactly where it shouldn't go.
(18:28):
And I think if this arrangement continues, I think they
they would still have a plausible case.
Speaker 7 (18:34):
It's not a slam dunk.
Speaker 6 (18:35):
A court could say, look, that's not enough for standing,
but I think it's it's plausible and and so. And
the risk here isn't really for the new entity that
buys TikTok. The risk here is for Apple and Google
and the other companies that host TikTok. All of all
of those companies face liability of five thousand dollars per
(18:55):
TikTok user. So you get to astronomical numbers if this law,
you know, if this arrangement isn't legal, right, and.
Speaker 1 (19:05):
That's only a government find right, that doesn't contemplate a
private right of action.
Speaker 6 (19:09):
Right exactly. So the enforcement is the attorney general, and
she has President Trump directed his attorney attorney general to
write a letter saying these companies are not you know,
defining the law. They that literally to say that they
are following the law. And I don't know how she
wrote that letter, but and it hasn't been released publicly,
(19:31):
but that's been their approach so far.
Speaker 7 (19:33):
And the question can that continue?
Speaker 6 (19:35):
Something needs to happen after April fifth, because that first
executive order runs through that date. So I think we'll
see an extension of the extent of the executive order
to allow for more negotiation and the finalization of some
sort of deal. But even that, as we talked about,
might not comply with the law. Congress might need to
(19:57):
bless that new arrangement. And that's going to be an
interesting question.
Speaker 1 (20:01):
And you haven't seen any I mean, there's been no
indication from Congress as to you know, how they feel
about all this.
Speaker 7 (20:08):
No, nothing clear.
Speaker 6 (20:09):
You know, you see an occasional comment from some lawmakers
who are more concerned about the risks of ties to China.
But and then, you know, I think about Chuck Schumer's
comments closer to January nineteenth. Suddenly, you know, previously was
very bold on we have to support this band sort
of won a little softer and said let's work out
(20:30):
a deal. And so, you know, not real clear direction
from lawmakers. And it's just fascinating because when you think
about last year when this law passed this past with
overwhelming bipartisan support, it passed one committee fifty to zero,
and you know, and it's just remarkable how much that
(20:52):
has changed. Now President Trump comes out and says he
has a warm spot in his heart for the app
because it helped him win the election, and all of
a sudd and no one talks about the risks anymore.
And it's it's just a fascinating, you know, study on
our on our politics. But I think that it's it's
it's where we are right now. And so I'm not
(21:13):
sure that there will be the political will to insist
on the law that the lawmakers adopt.
Speaker 1 (21:18):
Right and to bring it all full circle, maybe this
all ties back into tariff negotiations too. I think President
Trump has even floated that idea that if China's not
willing to sell, maybe he reduces their tariffs and then they,
you know, are more inclined to sell the app.
Speaker 7 (21:34):
It's very possible.
Speaker 6 (21:36):
And you know, I think he's sort of given up
a lot of his leverage under the TikTok law itself
by you know, letting the letting the app continue to operate.
So the you know, so he has to look for
other sources of leverage and tariffs is a logical one.
Speaker 1 (21:51):
Yeah, all right, I think we'll leave it there, so
you'll be watching after that on April fifth. I think
April fifth is also when the ten percent baseline tariffs
take effect before the April nine individual tariffs, So a
lot happening in April, but we will leave it there.
We'll wrap up this episode of Votes and Verdicts. As always,
thank you to the listener for listening. If you have
(22:11):
any questions about any of the matters we discuss on
this episode, please don't hesitate to reach out to us
at your convenience. As a reminder, you can find all
of our research on the Bloomberg terminal at big or
on our litigation and policy dashboard at BI laws Go,
and we encourage you to listen to other episodes of
Votes and Verdicts on whatever platform you like to get
(22:32):
your favorite podcasts. Thank you again for listening, and have
a great day.
Host
Elliott Stein
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