May 2, 2025 • 53 mins
President Donald Trump’s first 100 days in office have brought major tariff, tax and regulatory actions that have roiled global markets and diplomacy. Bloomberg Intelligence analysts hosted a webinar on May 1 to discuss how these evolving policies will shape sectors, markets and companies — from banks like Bank of America and Citigroup, retailers like Walmart and Kroger as well as technology providers Apple and Google — through the remainder of 2025.
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Episode Transcript
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Speaker 1 (00:15):
Hi.
Speaker 2 (00:15):
My name is Nathan Dean. I am a senior policy
analyst with Bloomberg Intelligence located in.
Speaker 1 (00:18):
The Washington DC Bureau.
Speaker 2 (00:20):
Thank you very much for joining us today on our
episode of Votes and Verdicts, where we are going to
replay a webinar that we hosted on May first, where
we discussed President Trump's first hundred days of his administration,
what we can see for the next hundred days of
the administration, what we can see for the rest of
the year, and all the policies that we are tracking
out of Washington that impacts our portfolio of companies, sectors, markets,
(00:41):
and essentially everything else. Again, thank you very much for listening,
and we wish you a great episode. Okay, I think
this is a good time to start our recording. Let's
go ahead and get started. Thank you, and good morning
and good afternoon. My name is Nathan Dean. I am
a senior policy analyst with Bloomberg Intelligence here in the
world Washington, DC Bureau. I want to say thank you
(01:02):
very much for taking the time out of your day
to join us on our webinar about President Trump's first
hundred days of his administration and what can we see
over the next one hundred days and throughout the rest
of the year, and really with the theme of what's
impacting an investor's portfolio and the markets and the sectors
and the companies that are in that portfolio. This is
going to be an interactive session, so we definitely want
you to use the Q and A button in the
(01:23):
Zoom chat. We will answer your questions as they come in,
otherwise we'll answer them at the end of the webinar. Additionally,
Bloomberg Intelligence is the equity research division of the Bloomberg Terminal.
We cover over two thousand companies, credits, companies, currencies, markets, essentially,
if it's in your portfolio, we cover it and you
can find all of this at Bigo. And then finally,
(01:45):
this is going to be also released as a podcast.
The Bloomberg Intelligence has several podcasts, but most of the
individuals on this team contribute to the podcast known as
Votes and Verdicts. We'll be putting in the chat for
the Zoom the Apple and Spotify links. If you're viewing
this on the Bloomberg Terminal, or if you're doing this
after the fact and you obviously have any questions, or
if you want to get a copy of that podcast.
(02:07):
Please contact me. My name is Nathan Dean. Again, I
am ending tent at Bloomberg dot net. And again, if
there's any questions you have after this, we will certainly
entertain those. Just please give ahead and give me that
Just send that email to me. Joining me on the
call today, we have Elliott Stein, Matthew Shettennhelm, Dwayne Wright,
Holly From and Andrew Silverman. Each one of us is
going to be talking about different areas that we cover.
(02:30):
But what I'd like to do is first kick this
off with a little bit of a discussion of just
remember every single time that Elliott or Matt or Andrew
or Holly or Dwayne or I we mentioned something, you
can largely bucket this into one of three ways of
things getting done in Washington. This is one of the
things we tell our clients at all the at the
initial stages of how to determine how to conduct policy analysises.
(02:54):
Are things getting done via executive orders? Are things getting
done via legislation? Or are things getting done via regulation
or in this case and the Trump administration, deregulation. Each
has its own pluses and minuses. Executive orders within the
first one hundred days President Trump has exceeded many of
his earlier predecessors in terms of reaching out and actually
conducting executive orders and executive memos. But if you look
(03:17):
at what President Trump is trying to do right now,
he's trying to stick within the areas of the power
of the presidency is more powerful, namely things like trade,
national security, foreign relations, and tariffs. And so, as Holly
will discuss a little bit later, you'll see a lot
of what's happening in the tariff space falls under the
executive order bucket. When it comes to legislation, obviously, in
(03:38):
the United States, the House needs to pass a bill,
the Senate needs to pass the identical bill comes together,
it goes to the President's desk. Legislation doesn't happen very
often these days, but it does happen. And so as
Dwayne and Andrew and I will be talking about when
you talk about Reconciliation bill, this is coming through the
legislative hat. Obviously, a lot of things are going to happen.
Things are happening right now as we speak. When it
(03:58):
comes to markups, legislation is going to happen. And then
the final pillar is regulation or in this case, deregulation.
When Treasury Secretary Scott Bessett spoken his press conference earlier
this week, he talked about deregulation, and there was a
lot of sentiment coming into the markets about deregulation, especially
in the financial services space. But I would argue there's
really no magic wand where you can just wave and
(04:19):
say poof, go forth and deregulate. Now the energy sector
is a little bit different. There are more There is
more energy deregulation under the Executive Order branch that we
can talk about later if you'd like. But for most
of deregulation, it has to follow a process, the Administrative
Procedure Act. It long story short is it takes time.
It takes about a year. And so I think a
(04:40):
lot of the proposals for deregulation that we'll be talking
about later today will come out in the second half
of this year, but ultimately will be finalized in twenty
twenty six, in twenty twenty seven.
Speaker 1 (04:49):
So to kick things off, I want to talk.
Speaker 2 (04:51):
About the one quote unquote, the one big beautiful bill
that President Trump is talking about and that the House
committees are marking up as we speak.
Speaker 1 (04:58):
Now.
Speaker 2 (04:59):
This is the for to extend the twenty seventeen Tax
Cuts and Jobs Act. And Andrew's going to talk a
little bit more about the provisions of this bill. Dune's
going to talk a little bit more of the healthcare
and the Medicaid cuts as part of this bill. But
at a high level, what you need to know is
this is that this is a five point three trillion
dollar bill. The bulk of it, approximately three point eight
to three point nine trillion of that goes to extending
(05:20):
the Trump Bera tax cuts from twenty seventeen. Now there's
an additional one point five trillion in terms of no
taxes on tips, no taxes on security, no taxes on
Social Security, the three ideas that are routinely announced from
the White House. But the question is what do you
have to pay to offset in order to get this
package to go forward. Now, there's a different variety of theories,
(05:42):
and I don't we can do an entire hour on
this bill. But what you need to know is there's
four main pillars that we're looking at from this bill's perspective.
The first is the deficit. You know, if you decide
to follow the Senate plan where you use the current
you know, the current cost of this is current policy.
You know, there is a chance of the deficit could
go up significantly as a part of this bill. And
(06:02):
again we'll can get in this as the Q and
A if you'd like. But then the other aspects of
this there are stamp benefits formerly known as trout stamps, Medicaid,
and also the Inflation Reduction Act. Those are the three
main areas that Republicans are targeting with some other stuff,
but those are the main three areas that we're focusing
on in terms of how to pay for that, and
we'll talk about each one of that in one of
(06:24):
our each one of our specific remarks. Now, Treasury Secretary
Scott Besson put out the deadline of July fourth, saying
this is the date in which he wants to get
this done. I think that's a little bit too fast.
But the reality here is is that there is no
deadline until December thirty first, twenty twenty five, when the
individual tax cuts increase from that twenty seventeen bill. But
(06:47):
there is a deadline from the standpoint that there is
a language in this bill to raise the debt ceiling
by five trillion dollars, and so you have to watch
out for the quote unquote X date when the debt
ceiling runs out, meaning when Treasury no longer can use
extraordinary measures to pay its obligations. That is effectively the
real deadline that the Republicans are racing here. And when
you talk to our chief rate strategist, Ira Jersey, you know,
(07:09):
the thought here is is that that X date will
probably come in the late July August timeframe, So I
wouldn't be surprised if this is wrapped up before the
August recess. July fourth may be a little bit tight,
but the reason why they want to do July fourth
is because the Republicans want to go back to their
barbecues and be able to say that they've done this.
They've saved you know, the tax increases and they've cut
taxes even further, and you know, Speaker Mike Johnson has
(07:31):
done it pretty I would argue, pretty excellent job and
keeping the Republicans on track in the House, so you know,
you will see momentum. It just in my mind has
maybe asked the site a little bit later. So with
that being said, and giving you a more broad macro
overview of what's going on in the rest Conciliation Bill.
I want to turn to Andrew. So, you know, Andrew,
you sent me a whole host of questions and we
(07:53):
could have our own webinar on all of the revisions
that are in this bill, all the provisions that you've
been talking about. But the question I want to start
off with is, Okay, do you have any high level
thoughts of how we're approaching this reconciliation bill?
Speaker 1 (08:06):
What are your thinking about? What are you focused on?
Speaker 2 (08:08):
And then secondly, you know, there's been a ton of
tax news over the last one hundred days.
Speaker 1 (08:13):
You know, out of all the things.
Speaker 2 (08:14):
That you've covered, what are probably the one major thing
that the audience member share would like to know?
Speaker 3 (08:19):
Yeah, So what I'm focused on with regard to the
tax bill is whether or not the current policy baseline.
You mentioned this briefly, the current policy baseline is going
to fly with not only the Senate parliamentarian but also the.
Speaker 4 (08:37):
Deficit hawks in the House.
Speaker 3 (08:40):
If the if the Republicans themselves can't accept basically putting
all of this on the credit card, the you know,
the whatever whatever it is for and a half six
you know, trillion dollars of spending on the credit card,
then that it's going to be really hard to get
this through because you'll need to find that much that
the six tollion dollars of revenue raisers UH in order
(09:04):
to get it through. So I think I think that's
probably going to be the biggest sticking point, you know,
besides all the other obvious things. You know, how are
they going to how are they going to do no
tax on tips? How are they going to do no
tax on Social Security? How are they going to resolve
the state and local tax deduction issue? But yeah, I
mean there have also been just a ton of other
(09:28):
tax developments in the past one hundred days. I mean,
on the very first day of his administration, President Trump
signed an executive order basically pulling us entirely out of
the global tax system that that Biden had had.
Speaker 4 (09:45):
Pushed us into.
Speaker 3 (09:47):
If you remember, Secretary Yellen had actually come up with
one of the main pillars of that tax agreement. And
so in the same order, Trump said that the OECD's
agenda discriminatory, threatening retal, He was threatening retality tory measures
from from the United States, and Treasury Secretary Bessett said
(10:11):
actually that that the digital services tax that a lot
of countries in Europe and even Canada has are a
major sticking point in the trade negotiation. So the global
tax issues and the trade issues that sort of gotten
all rolled up into one. The other interesting thing that's
been happening in tax world is all of the developments
(10:33):
at the i r S. We've actually had five ir
S commissioners since the beginning of the year. We had
Danny Wirfol who was a Biden's IRS Commissioner, and then
he was succeeded by Doug O'Donnell, and then he retired,
and then we got Melanie Krause, but she was only
in office for about two months before she uh resigned
(10:56):
after being excluded from an agreement between Treasury and Homeland
Security that she wasn't privy to. And then we got
acting Commissioner Gary Shipley, who is apparently appointed on Elon
Musk's recommendation, but then he was removed after only a
couple of days, and we got a new acting commissioner
who is Michael Falkender and he's the current acting commissioner.
(11:19):
And meanwhile, Trump's IRS Commissioner nominee Billy Long has not
made any progress towards confirmation at all. And you know,
maybe that's because he doesn't have a whole lot of
tax background. Maybe maybe folks are questioning whether he is
the right person for the position.
Speaker 4 (11:38):
Also, he's faced ethical scrutiny.
Speaker 3 (11:41):
He is accused of soliciting donations to repay personal loans
and has also been accused of promoting fake tax credits.
Speaker 4 (11:51):
So that's a big issue.
Speaker 3 (11:55):
And then the Department of Government Efficiency has targeted the
IRS and the agency was agents of the agency were
offered an early retirement program and some thirty two thousand
employees actually took them up on that. They dose came
(12:16):
back and said about ten percent of those people couldn't
actually take the offer because they were critical positions within
the IRS. And then the Trump administrations also sort of
escalated tensions with Ivy League universities, threatening their five oh
one C three tax status if they don't back down
on DEI and accusations of anti Semitism. Removing that tax
(12:38):
exemption could actually allow schools to lobby and express their
personal opinions or even go public like Capella and Australia universities.
But then losing that tax exemption would also mean that
donors to universities would not be able to get a
deduction for their for their donations. And of course another
(12:59):
big part of that is that if these institutions become taxable,
they could become liable for property taxes as well. So
Bloomberg actually did an estimate that if Harvard loses its
tax exemption, it could have to pay four hundred and
sixty five million dollars a year in taxes. So a
lot happening on the tax front, and obviously much more
(13:21):
to go on once the tax bill really gets underway
later on this month the next month.
Speaker 2 (13:27):
So it almost sounds like we're at that that meme
on Twitter where Harvard needs to spin off the university
and just concentrate on its endowment anyway.
Speaker 1 (13:36):
Joke, I joke.
Speaker 2 (13:37):
So, Andrew, a question I have for you is is
that we have a lot of folks on this call
that are from New York, New Jersey, Virginia, probably California.
You know where I'm going with this salt deduction, state
and local tax current caps at ten thousand, Where do
you see it coming out after the end of this
reconciliation bill.
Speaker 3 (13:56):
Well, so we heard that the original proposal was to
raise it to twenty five thousand dollars, and the Salt Caucus,
the so called Salt Caucus, the folks from New York
and California and New Jersey said twenty five thousand dollars
was not nearly enough. They wanted it to be at
least thirty thousand dollars, but some of them are even
saying they wanted to be sixty thousand or more. I
(14:17):
think it's going to be higher than it is today, certainly,
and probably more than twenty five thousand dollars. Thirty thousand
dollars seems about right, maybe a bit more. But in
return for that, it sounds like what Congress wants to
do is put a cap on the state and local
tax seduction of corporations, which is very controversial.
Speaker 4 (14:38):
But yeah, I think it's going to change.
Speaker 3 (14:41):
Whether or not that means that there's going to be
some sort of income threshold to be able to take
this state and local tax seduction for individuals, that remains
to be seen, but it's definitely going to change in
the bill.
Speaker 4 (14:53):
I think that's for sure.
Speaker 2 (14:54):
And then the last question I have for you before
we talked to Dwain about healthcare, is prisoner Trump likes
to talk about lowering the corporate tax rate. You know,
current corporate tax rate permanent twenty one percent. Is there
any chance that the corporate tax rate is lowered as
part of this process?
Speaker 4 (15:10):
So there are two answers to that question.
Speaker 3 (15:13):
The corporate tax rate as a whole came down from
thirty five percent to twenty one percent, and that's permanent,
and so it doesn't snap back in twenty twenty six
to thirty five percent. It stays at twenty one percent.
There's been some discussion, especially in the House, actually of
raising the corporate tax rate up a bit in order
(15:34):
to pay for some of these things, and I could
even see that ending up in the House bill. Now
whether or not the Senate will go for that, I'm
not so sure. But there's also that fifteen percent tax
rate for domestic production, which I think is definitely going
to be part of the final bill that the House
and the Senate adopt. But I think that's actually pretty limited.
(15:54):
I think that the cost of that reduction is only
between one hundred and two hundred million dollars. Comparatively, that's
not a whole lot of cash. So certainly the domestic
production rate of fifteen percent, I think that's quite likely
to be in the final bill, but lowering the corporate
tax rate as a whole is probably unlikely, and raising
(16:14):
it also unlikely, but more likely than reducing it further
from twenty one percent.
Speaker 5 (16:21):
Broadly great, Well.
Speaker 2 (16:23):
Thank you, Andrew. So let's turn to Dwayne. Dwayne right,
my neighbor of two desks over. Dwayne, let's talk about healthcare.
The question I have for you is is that there's
been a lot of focus on tariffs, you know, but
President Trump has also set the tone for drug makers
in his first one hundred days.
Speaker 1 (16:40):
He's sent some signals.
Speaker 2 (16:42):
You were talking about signals the other day about policy
action down the road. What can we expect and how
could these policy changes be implemented?
Speaker 6 (16:49):
Yeah, thanks Nathan. So, I think we have to start
from the premise that Trump isn't necessarily a fan of
the pharmaceutical industry out of concerns of high drug prices,
at least as they compare to those overseas. And so
when we look at his first term, there was a
lot of focus on setting US prices to those paid overseas.
(17:13):
Those efforts failed, but he didn't have the Inflation Reduction
Act at that time, and he does now, and while
prices paid overseas aren't a factor for setting prices within
the IRAS negotiation program, it's quite possible he could look
to what's being paid elsewhere for domestic prices.
Speaker 5 (17:35):
Now, I think.
Speaker 6 (17:37):
There's some good news and bad news as we think
about this from the standpoint of drum makers. Yes, he
had the way the law is written, there is a
ceiling on the drug price, but there isn't a floor.
But when you think about some of the policy changes
that the truck manufacturers and other advocates wanted to make,
(17:58):
he does seem open to them. One of them is
the so called pill penalty, where if you have a
biologic that's been on the market for thirteen years and
it's one of a at a high cost Medicare or
I use Medicare drug, it is dense subject to IRA
negotiation program. But if you have a small molecule, it's
(18:20):
subject after nine years. He's indicated he's open to changing
that or fixing that. While he didn't say equalizing them
or setting small molecules to biologics, I think the assumption
is that we wouldn't see biologics come down. This probably
also opens the door to other changes within the IRA.
(18:41):
When you think about the orphan drug exemption and how
narrow that is right now, expanding that seems to be
on the table, and I think the door is open
after the CEO. I think the question now is how
does this all get done. We've always looked at the
Reconciliation Bill as the most likely opportunity for these changes,
(19:02):
since he can't do them on his own. Republicans had
signals some potential changes would be in the mix. The
repeal options off the table because that's just not something
that Trump seems to be in favor of, especially since
they're defending it in court. So I think there's a
high likelihood of some of those changes now. The downside
(19:24):
is while he's promoted some more flexibility within the IRA,
he's also signaled that he'd like to expand opportunities for
lowering drug prices for some high cost drugs outside of
the IRA. So we can think back to his most
favor Nations Plan, which is targeted more towards Part B
(19:45):
drugs that could come into play through regulations, specifically through
the Centers for Medicare and Medicaid Innovation, which Biden has
used himself to test new payment models. So I think
some good news, some bad news, but we shall see
how some of this bad news plays out, if it's
if it's broad in scope, if it's narrow, how many
(20:06):
drugs get swept in, and what the ultimate.
Speaker 5 (20:09):
Impact on companies is.
Speaker 6 (20:10):
So more to come over the coming months in terms
of regulations there.
Speaker 2 (20:15):
So I think one of the biggest questions. In fact,
the Republicans are over at the White House as we
speak talking about.
Speaker 1 (20:22):
This what happens to Medicaid?
Speaker 2 (20:24):
You know, the Republicans want to cut almost eight hundred
billion dollars from Medicaid as a way to help pay
for these tax extensions. What's your outlook on Medicaid?
Speaker 6 (20:34):
Radical transformation of the Medicaid program has long been a
goal for Republicans. I think the challenges the rubber meets
the road, and you realize how many of your constituents
actually rely on the Medicaid program and changes could lead
to significant increase in the uninsured in your own district.
And now that a lot more Republicans are attuned to that,
(20:57):
some of the bigger changes that have been proposed that
would help Republicans meet their spending targets or savings targets
of roughlyion eight hundred and eighty billion dollars within one committee.
It's very hard to do within one program without impacting access,
and so what the ultimate number is remains to be seen.
(21:20):
I think there are some low hanging fruit that Republicans
won't go after, such as work requirements. It's long been
a policy goal for them to impose or implement work requirements,
even those studies show most people on Medicaid are in
fact working or their caregivers, et cetera. We could probably
see some other changes relating to state provider taxes, which
(21:43):
is a mechanism for states to tax providers and then
send that money back and get a federal match, and
it actually inflates the amount of money that the Feds
are spending. I think we could see a cutback in that.
I don't know if it's necessarily going to be in
a limit nation of it, and there may be some
other pieces, but I think the key that Republicans are
(22:05):
the key message from Republicans that we're not going to
do anything that's going to force people to lose access
to covers. Now, the big question will be if you're
still reducing federal spending for Medicaid. States will then have
the option they can fill in the holes, they can
reduce benefits, or they can just cut coverage for some
(22:28):
of those optional beneficiaries. That's probably going to be the
narrative where it's going to be up to states to
figure it out. And so while eight hundred and eighty
billion dollars is always the headline number, I'd be surprised
if Republicans are able to get to half of that at.
Speaker 5 (22:45):
The end of the day.
Speaker 2 (22:47):
And we just had a question come in on the
healthcare piece. Someone I asked this to you, and again
remind you, everybody you can send in questions. Will there
be any meaningful shift of drug manufacturing back to the
United States? That was a vulnerability in the COVID era.
It seems like on target for on shoring.
Speaker 6 (23:02):
I give CEO drug manufacturers or drug maker CEOs a
lot of credit for a lot of the work they've
done over the past three months four months, making the
trick down to mar A Lago and really getting to
getting into the presidence here about the industry, the supply chains,
and how you can't really do a one size fits
(23:25):
all approach to the It's this tariff experiment. They've also
done a good job of promoting touting their domestic investments.
I think I think I saw a number that was
something like over one hundred billion dollars worth of commitments
in on shoring or manufacturing or whatever you want to
call it. And so you know, at the end of
(23:48):
the day, what they can do they will do. You know,
I think that's going to be up to individual companies,
but it really just show how complicated the the supply
chain is when you talk about APIs raw materials to
finished products. And also keep in mind that one of
(24:09):
Trump's key goals, and you can go back to his
first term, was how do we promote more generic competition
by a similar competition to help lower drug prices? Nine
of US scripts are generics, and so a one size
fits all tap approach doesn't work. And you know, when
(24:29):
we think about the low margins for those products, it's
hard to necessarily envision white scale return to the US
or to the US of these manufacturers. So I think
it's going to be company by company, case by case,
and we will see some of that, and that may
actually blunt some of the any more future tariffs who
(24:52):
are at least big tariffs coming in for this sector.
Speaker 1 (24:56):
Great, Thank you, Dwayne.
Speaker 2 (24:57):
And I should also say that if you have a terminal,
put out an excellent note yesterday that explains a lot
more of this in greater detail, specifically focus signing on
drug makers. So contact Dwayne or contact myself and I'll
put you in touch with Dwayne and we'll get you
that note. So let's turn over to Holly. Holly has
had the busiest job since January twentieth because she is
(25:17):
our expert on tariffs. Holly, you know, I could go
a thousand different ways in terms of this question, but
I guess the best way for me to frame this
is is that what's the status of tariff's today? And
can you give us an update on all these numerous
lawsuits that have been against the Trump administration when it
comes to tariffs, because you know, I covered the legislative side,
(25:39):
and you know, even though you know we saw a
resolution fail that's more yesterday, that's very indicative of what
I think will happen in terms of any other types
of legislation that tries to claw back President Trump's authority.
Speaker 1 (25:52):
What's your what's your take on this?
Speaker 7 (25:54):
So sure, So in the first one, hundred days we
saw the Trump stration imposed a slew of new tariffs,
and these include tariffs on China, which started at ten
percent on February fourth and escalated up to one hundred
and forty five percent over the course of two months.
The first twenty percent of those terrafts were based on
the President's determination that there was a national emergency with
(26:16):
respect to illicit drugs fentanyls specifically crossing the border, and
documented migrants. The next thirty four percent was imposed in
a subsequent order establishing reciprocal terrafs, which I'll get into
in a minute, and those escalated based on retaliatory tariffs
imposed on US goods by China. So now there is
a minimum one hundred and forty five percent tariff on
(26:37):
goods from China, but the administration has indicated those rates
may come down substantially. The President also imposed twenty five
percent tariffs on goods from Canada and Mexico based on
the same emergency the legal drugs and migration. Those tariffs
were subsequently paused for a month until March fourth, and
then exemptions were granted for goods qualifying for preferential treatment
under the US CMA or US Canada Mexico agreement, so
(27:01):
called universal and reciprocal tariffs announced to April second, were
to go into effect April fifth and ninth, respectively, And
the basis for those terrifts was a deemed emergency with
respect to trade deficits. So what the President said was
that the US was being treated unfairly with respect to
trade barriers like terriffs, taxes, treatment of intellectual property, and
other trade practices of countries directed at the US, And
(27:24):
so he said to balance that trade deficit, he would
impose tariff's high at fifty percent on some countries with
the highest Dean trade as almost fifty percent on the
countries with the highest Dean trade barriers, and ten percent
everywhere else. And that ten percent was called the universal
tarraf or baseline terraf. That universal teriff wanted to effect
April fifth, but one day before reciprocal terrorifts, those were
(27:47):
the pretty high terriffs were to go into effect, the
President pause them for ninety days until July ninth, and
instead impose the baseline terraf on everyone. All those terriffs were,
by the way, imposed the executive order which he talked
about earlier. It's they cited as the basis. The statutory
basis for the tariffs the International Emergency Economic Powers Act
(28:07):
or IEPA, which allows the President to regulate imports if
he determines there's a national emergency that presents an unusual
and extraordinary threat to national security or the economy. The
President has also imposed twenty five percent terrafs on steel
and aluminum that went into effect March twelfth and autos
that went into effect April third, and those were imposed
(28:28):
based on his Commerce Departments determination that imports threatened to
impair national security, and he used section two thirty two
of the Trade Expansion Act, which addresses imports threatening national security.
The auto tariffs don't apply the goods qualifying for preferential
treatment under the USCMA, and he also great exceptions for
steel and aluminum that can fly with USCMA just this week.
(28:51):
So I think something that's interesting that's about the basis
for these terraffs is that in cases where the President
didn't have a pre existing investigation that was agency investigation
that was pried by statute, he used AIPA, the Emergency
Powers Act, which allowed him to impose terriffs by proclamation immediately,
and in cases where he had an existing agency investigation determination.
(29:14):
He used Section two thirty two of the Trade Expansion Act,
so that section requires an agency investigation. And in the
case of steel and aluminum, he already had that investigation
done from when he was president in twenty eighteen, so
you rely on that old investigation was able to do
things right away. So the trend tiers sort of he's
doing things as quickly as possible. In addition to the
(29:36):
tariffs that have been implemented, because we talked about as
some of us have talked about earlier, he's also threatened
sector specific terrorists, like on pharmaceuticals and semiconductors, which were
exempted from prior executive orders. And if anyone would like
to see a chart that tracks the teriffs and subsequent
action that has been taken, we have a tracker which
is available on bi's tariff dashboard and the tariff reports specifically.
(30:01):
So at least seven lawsuits have been filed in federal
course around the country and the US International Trade Court
or USC arguing that the tariffs Trump has imposed under
AIVA or unlawful. The lawsuits are you pretty much the
same thing with slight variation. First, they say that the
statute the present relied on APA does not authorize terrafs
because the word tariffs is not even mentioned in AIPA,
(30:25):
and other statutes that do authorize terrorists provide very structured
and reticulated schemes to impose terrafs. Most of them require
some input from Congress or some oversight, and AIPA has
requires very relatively little congressional oversight. Second, they say that
if AEPA does allow terrifts, it only does so when
there's a national emergency that poses an unusual and extraordinary
(30:49):
threat to national security or the economy, and the trade
deficits cited as a basis for the reciprocal teriffs is
not an unusual and extraordinary threat. In fact, it's been
in existence for fifty years. As a President mentioned in
the order, it's been a persistent problem. It is not
an emergency. And with respect to illicit drugs cited as
the authority for terifs on Mexico, China and Canada, the
(31:11):
challengers say the terroffs aren't necessary to deal with that emergency,
so the government cannot explain how a twenty five percent tariff,
for example, on avocados addresses the drugs crossing the order. Finally,
challengers argue that if Ayipa does authorize the tariffs, then
Congress unconstitutionally delegated its powers to the president. So we've
(31:31):
said that these terrffs will be upheld because we think
Ayapa's granted power to the president to quote regulate imports
encompasses the power to impose tariffs. We doubt that the
court will wait into what constitutes an emergency under the Act,
and we don't think a court will find the law
on constitutionally delegates power because it provides what's called an
intelligible intelligible principle to the president. Those are guardrails around
(31:55):
using this power, which is that there must be an emergency.
And in the one case in which two Supreme Court
justices indicated they may want to revisit the so called
non delegation doctrine, which if applied, could potentially make us
un constitutional, the justice is noted an exception for cases
where Congress and the President's powers typically overlap and specifically
(32:17):
mention the area of foreign affairs, which this is. So
we don't think the court will want to redefine the
non delegation doctrine in this case. But we think the
issue is close because AIBA has never been used to
impose avalorum duties as is being used here. It's been
used to impose embargoes on countries when, for example, the
(32:39):
country is violating US policy with regard to human rights
or drug traffic and things of that nature. Closest example
we have is when Nixon imposed ten percent surcharged on
all dutiable goods. And this example, by the way, has
been raised in the papers on these various motions which
I'll talk about and the litigations. The close example is
(33:00):
when Nixon imposes ten percent duty, and he did so
to address the balance of payments crisis. He used at
his predecessor statute that tariff was upheld, but there the
emergency was more acute. The tariffs only lasted a couple
of months, and they were more circumscribe and scale. So
what's happening now with the lawsuits? As I mentioned, there
(33:21):
are than seven lawsuits filed, at least seven so just
recently on April twenty second, the uscit where several of
these lawsuits are filed, considered and rejected a t ro
O request. So challengers had asked the court for a
preliminary injunction and to immediately hault reciprocal terriffs and grant
a tro The Court of International Trade found that challengers
(33:43):
did not show a likelihood of immediate irreparable harm and
so rejected on that basis, but didn't go to the
merits of the case and didn't address the preliminary injunction motion.
And the reason the court didn't find irreparable harm or
immediate irreparable harm is because none of the challengers had
said they hate anything or we're about to. So now
what's happening is there's a hearing on the PI motion
(34:05):
and summary judgment motion that was filed in conjunction with
the preliminary injunction motion, and that is before the US
International Trade Court. That hearing will be held May thirteenth.
Challengers and other lawsuits have also filed preliminary injunction motions.
One motion has been filed in a case before different court,
the Federal Court in Washington, d C. And there was
a hearing on that motion and the government and the
(34:27):
government's motion to transfer the case to the Court of
International Trade on May twenty seven. That hearing will be
held on me twenty seven. We could get more guidance
on those motions at the hearing in May, and in
fact we said these motions could be decided into Q.
Speaker 1 (34:42):
Great, thank you, Holli.
Speaker 2 (34:43):
And you know we can do an entire hour on tariffs,
and so if you want to have more conversations with that,
just reach out to us and we'll get Elliott Holly
myself on the.
Speaker 1 (34:51):
On the call, will get whoever we'll have that I
really want. You know, we got a couple questions.
Speaker 2 (34:56):
I want to share my screen real quickly because I
think it's easier to answer the questions through this di
screen share.
Speaker 1 (35:02):
Okay, so the question we got of.
Speaker 2 (35:05):
Was I hear the effective terif rate is likely to
go from three percent to fifteen percent. This is WSL politics,
and you can see here the realized effective tariff right
from February twenty twenty five. He is a little bit higher,
but for all US partners it's around two point three
one percent right now, but you can see here in
China it goes up to twelve point ninety three percent.
So this is actually updated fairly often.
Speaker 1 (35:28):
Now.
Speaker 2 (35:28):
The other thing I'm just going to highlight is if
we go to BI tariffs, you know we have this
all the information, all of our research is located here,
but we do want to highlight the US Tariff Impact Matrix.
This allows you to go company by company to actually
identify what is the blended tariff rate estimate? What is
the US price height estimate in order to meet that tariff?
(35:48):
Is there a global price estimate? And he goes all
the way in terms of cost of goods sold and
so forth. And then if you click on this little
box right here, like for example, if we're going to
pick on Amber, Crombie and Fitch, you click on that box,
it takes you to the research note. So just one
of the highlight that's something that's pretty we're pretty proud of.
So let's take this conversation away from tariffs and put
(36:09):
it back on TMT or not back on TMT.
Speaker 1 (36:13):
But let's talk to Matt Shetenhelm.
Speaker 2 (36:14):
So, Matt, back in April, we had a Senate hearing
confirmation hearing for a couple of commissioners.
Speaker 1 (36:22):
What can you tell us what's going on in the
TMP space.
Speaker 8 (36:24):
Yeah, things are just getting started with respect to changes
in TMT regulation under the Trumpet administration. As you said,
the Senate Commerce Committee confirmed at the at the committee level.
Two of Trump's nominees in April Ariel Roth for the
nt i A the National Telecommunications and Information Administration, and
(36:48):
just yesterday Olivia trustee at the Federal Communications Commission. And
what that will mean is that that that I think
the significant changes in TMT regulation he can start to
happen once they're in place. Now they still need full
Senate confirmation, but that should follow pretty quickly after their
recent approval at the committee level.
Speaker 5 (37:10):
So look for these things to get started.
Speaker 8 (37:12):
Let me give you five five things to watch over
the next quarter in terms of opportunities and risks for
TMT companies. One, broadcast deregulation is very likely big opportunity
for broadcast companies here. Brendan Carr at the FCC has
called this a break glass moment for broadcasters, an emergency situation.
(37:36):
Broadcasters have been subject to restraints for decades that they're
competitors now mostly Internet based competitors don't face and it's
been a significant impediment potentially on the business. When the
broadcasters can really benefit from economies of scale by buying
more stations across the United States, these FCC rules significantly
(38:03):
limit that. Brendan Carr once he gets a majority of
Republicans at the FCC is likely to move ahead with
a couple rule makings that are going to cut away
at those limits for the first time. The most significant
of those is a cap on how many households broadcasters
can reach. Right now, they can only reach thirty nine
(38:23):
percent of US households, with a little add on to
that due to a discount. The NAB is pushing the FCC,
let's get rid of that cap entirely. Let's let broadcasters
reach the entire United States. And I think there could
be willingness from this FCC to go there. So a
major impact for companies like Nextstar, Sinclair Tegna, and that's
(38:47):
all likely to start in the second quarter of this
year as the FCC launches those rule makings. Number two
broadmand funding looking to be significantly changed. NTIA is a
ministering a forty two billion dollar program for broadband companies.
The Biden administration had gotten far down the road with that,
(39:08):
but no money had been passed out yet. Now, with
Ariel Roth likely to take over soon, we've seen pretty
clear signals that there's going to be a shift away
from using that forty two billion dollars for fiber and
instead shifting it to satellite and other wireless applications, at
(39:30):
least to a larger extent. So it's a negative for
cable companies that provide fiber that might be able to
get some of that funding. It's a positive for starlink
and satellite companies. Zero point three. Brendan Carr is likely
to go after big tech companies, going after what's known
(39:51):
as their Section two thirty liability shield. Cars made a
big deal about what he calls the censorship cartel, the
idea that the these these big tech companies are censoring
user content, and his tool to go after that is
going to be Section two thirty. This is the shield
(40:11):
that keeps big tech companies from being sued every time
something bad happens in the world because of something that
someone posted on the Internet. And Brendan Carr is potentially
going to take aim at that shield and cut away
at it in order to discourage the censorship that he's
so concerned about. So the devil will be in the
(40:33):
details of that. The FCC can't change the law, can't
change Section two thirty, which is in a federal statute.
But what it can do is cheerlead the courts or
Congress to make changes to that shield. That could be
very material to the companies because it would open the
(40:54):
floodgates to litigation against big tech companies if the right
changes are made to Section two thirty. So look for
that to launch as soon as Olivia Trustee joins the FCC.
Point four wireless carriers. Right now, the FCC can't auction spectrum.
They lost the authority to hold spectrum auctions because it
(41:16):
expired and Congress hasn't been able to renew that authority.
Nathan talked earlier about this big, beautiful reconciliation bill that's
coming together, and there's a big push to try to
restore that FCC auction authority in that bill, and I
think there's a real possibility that the wireless industry sees
movement in that direction. That's worth watching. And then lastly,
(41:39):
point five TikTok is still an issue with enormous uncertainty
and risk for a number of companies. Currently, President Trump
has extended his pause on the law through mid June.
I think it's June nineteenth, and so what I'm watching
(42:00):
for there is pushback from legislators. I'm watching for lawsuits filed.
It's it's all, you know, enormous limbo situation because it's
not supposed to work this way.
Speaker 5 (42:12):
The law is on the books right now.
Speaker 8 (42:14):
Normally executive orders can't undo laws, and so there's enormous risk,
enormous opportunity depending on how this plays out over the
next couple of months, So worth watching, especially around June
when when that deadline is set to expire.
Speaker 5 (42:28):
With that let me yeah, go ahead, Nathan.
Speaker 2 (42:30):
Yeah, And Matt, where can where's the best place to
get your research if they want to follow the TikTok stuff?
Speaker 8 (42:36):
Yeah, you can go to my bio is the best
way on on on the Bloomberg terminal and BI laws
is you.
Speaker 5 (42:44):
Know you can?
Speaker 1 (42:44):
You can.
Speaker 5 (42:45):
You can get to my stuff through there as well.
Speaker 2 (42:47):
Okay, and for for the terminal subscribers, just remember BI
laws is where all of our research at the more
topical level goes and it includes a couple of our matrices. So, elliot,
I'm going to bring you into the conversation to talk
about President Trump versus FED Chairman Jerome Powell. President Trump
versus Jerome Powell. Can he fire the FED chairman?
Speaker 9 (43:07):
Well, he certainly has made those threats. Sometimes he makes
them more aggressively and then other times he draws them back.
But you know, what has been particularly striking I think
in the first one hundred days of the Trump administration
has been how many commissioners at federal agencies that he's fired.
And that includes agencies like the National Labor Relations Board,
(43:31):
the Merriage Systems Protection Board, the Federal Trade Commission just
recently fired two commissioners from the National Credit Union Administrator.
You know, most of these agencies don't really we don't
follow them. They don't really affect our companies. Some do,
like the FTC. But I've been following the cases that
the fired commissioners have brought against the administration because of
(43:53):
the reason that you mentioned. You know, what does that
mean for Trump's legal ability to fire FED chairs Own
Powell or other governors of the Federal Reserve Board. Long
story short, and I'll explain why. But at the end
of the day, I think if Trump were to fire
Powell or another Federal Reserve Board governor, I think and
the case then went up to the Supreme Court, I
(44:16):
think the Supreme Court would probably allow Trump to terminate
them without cause. But it's obviously an unsettled area of law.
It's one we're watching closely. And the issue in the
case really is that the statutes that govern these agencies
say that the president needs cause to fire these commissioners,
and causes generally thought to mean either, you know, some
(44:38):
sort of malfeasance or neglect or inefficiency. Trump, President Trump,
you know, has taken the position that the four cause
requirements are unconstitutional because they impinge on his ability, his
authority to run the executive branch as he deems fit
under Article two of the Constitution. And so the case
(45:00):
that have been filed by these other terminated commissioners really
centers around a nineteen thirty five Supreme Court case called
Humphrey's Executor, which involved the firing of an FTC commissioner
at the time, and the court in that case, you know,
about ninety years ago, said that the four cause removal
restrictions are fine, they're constitutional, and that the firing in
(45:22):
that case was improper. But more recently we've had a
few cases, including one involving the CFPB director and one
involving the FHFA director, where the Supreme Court has narrowed
how it interprets Humphrey's executor and so in the last
few years, the Supreme Court has said that the application
(45:43):
of Humphrey's executors should be limited to agencies that don't
wield executive power. What that means is that where an
agency does wield executive power, the president can fire those
commissioners without any cause, so for any reason at will.
So what is executive power? And the Supreme Court essentially
(46:05):
has identified two hallmarks of executive power. One is rule
making authority and one is the power to bring enforcement actions.
And we think this is where the Federal Reserve governors
would run into some problems if they're terminated, because you know,
most people think of the FED as setting monetary policy,
(46:27):
but the FED does more than that, right, it makes rules,
it can bring enforcement actions. You know, think of Wells
Fargo and its asset cap for example. So you know,
we think the fact that the FED does do these
two things, rule making and enforcement actions, means that if
(46:48):
this were litigated, the Supreme Court would find that the
FED does wield executive power, and that would make their
board members subject to the President's ability to fire them
for any reason that he wants. So where are we
in terms of some of the other cases that are percolating,
sort of the most advanced are in terms of, you know,
(47:10):
procedural posture, are cases involving the NRB and the MSPB,
the National Labor Relations Board, and the Merit Systems Protection Board.
And in these cases we're seeing judges rule on these
cases largely along political lines. Judges appointed by Democrats say
that Humphrey's executor applies and that the commissioners have for
(47:30):
cause protection. Conversely, judges appointed by Republicans say that Humphrey's
executor doesn't apply really because the FTC ninety years ago
didn't really wield executive authority in the way that it
does now, and so as a result, judges appointed by
Republicans have largely allowed President Trump to remove the commissioners
(47:52):
at will. These cases are now just starting to get
to the Supreme Court, mostly on sort of arcane procedure issues.
Speaker 4 (48:00):
But we should get more.
Speaker 9 (48:01):
Clarity on the merits and the substance in the coming weeks.
But at the end of the day, I think the
biggest obstacle to Trump firing Powell is going to be
the market's reaction and not the law.
Speaker 2 (48:13):
Great thank you, Elliott, so you know this is a
I'm going to ask if we have any more questions,
please feel free to put them in the chat. I'm
going to talk a little bit about financial regulation, but
I should also add that if you do not have
a terminal, uh, definitely follow us on LinkedIn, because we
do put some of our analyzes out there on LinkedIn
after they've gone on the terminal in terms of either
(48:35):
videos or calls or so forth. So definitely look us
up because I was looking. You know, I was listening
to Elliott and Holly about some of the litigation cases,
and I think we have a couple of more we
I think we have a sizeable group from Washington on
this call. So if you want to get involved in
the legal side of this, Matt, Holly, you know Elliott,
definitely follow us on LinkedIn because you know you'll get a.
Speaker 1 (48:54):
Lot more intel that way.
Speaker 2 (48:56):
So the last thing I want to talk about is
we wait for more questions to come in. Is financial
regulation in crypto. So when it comes to financial regulation,
you know, Secretary of the Treasury Scott Bessett said that
he's going to effectively take over deregulation. But remember there's
no magic wand you can't just go forth and say deregulate.
You have to follow this rulemaking process, and in many
cases you need to have the agency leadership in place,
(49:17):
such as Jonathan Gold who is the nominee for the
Office of the Control or the Currency, Michelle Bowman the
nominee to be the FED Vice Chair for supervision over
at the Federal Reserve. And so you need those nominees
to be put in place to really kickstart that process.
But when it comes to banks in particular, I really
think there's a couple of areas of focus. The first
is stress tests. Now the bank's annual stress test. I
(49:38):
think there's two proposals that are coming out. One's already
come out, it is fairly benign. But the next proposal
I think is going to come out later this year
that tries to open up these stress tests and make
them more transparent. The second thing is the g SIB surcharge.
This is an additional capital requirement surcharge, and we think
the Federal Reserve is going to want to take another
look at that. And then another thing on the capital
side is the Bosel three endgame. This is a rule
(50:00):
that the Democratic era, the Biden era regulators tried to
implement under former FUA ad Vice Chair Michael Barr that
would have raised capital requirements for the big banks, so
like Banked America at JP Morgan and so forth, up
to nineteen percent. Now we think it's most likely going
to be capital neutral because we think that if the
bottle three in game is finalized, which probably will come
(50:20):
out later this year beginning of next year, most likely
will be capital neutral. And then finally, Secretary Bessett loves
to talk about what's this thing called the supplementally supplementary
leverage ratio or for the big banks perspective, the enhanced
SLR or the ESLR, And we think really what's going
to happen here is is that there's going to be
a changing of the ESR methodology, probably put it more
(50:41):
on line with international standards. And then we do think
that there's going to be a separate carve out for treasury.
So if you're in the fixed income space, I've done
some work on this, IRA Jersey, our rate strategist has
done some work on this, and our credit analyst, Arnold
Kakuda has done some work on this, so we can
carefully get you those notes if you're interested about the SOLR.
But moving on banks and a little bit going down
to the crypto side, I would just state that there's
(51:03):
really a couple of there's a congressional viewpoint here and
there's a legislative viewpoint here. The congressional side is there
are two bills that are being debated. When is a
stable cooin only bill. I think this is going to
pass before the August recess. Essentially what allows stable cooin
issuers to operate and register with authorities in the United States.
I think the ultimate package will essentially say that if
you are a large stable cooin issuer, you have to
(51:25):
register with the FEDS, if you're a small one, you
have to register with state authorities, and you have to
have one hundred percent of your stable coins backed by
high quality liquid assets. I think that's fairly easy, and
in fact, I did the Senate vote Senate count vote
the other day. I think they got the votes in
the Senate, so I don't think philbuster comes into play.
The more challenging aspect is this crypto market structure bill.
This is what they've tried over the last couple of years,
(51:47):
and even though there's some optimism effect just yesterday we
saw the White House come out and say that they
want to get this done by.
Speaker 1 (51:52):
The August recess.
Speaker 2 (51:53):
I'm not exactly sure they can do that, so we're
going to have to wait and see what that bill
looks like. It's mostly going to be modeled off of
a bill last year called the Financial Innovation of Technology
Act or the FIT, but I think that one is
going to have to be a little bit more, you know,
it needs more time to cook. And that's the one
that declares this is what is security and therefore it
goes under the SEC, and this is what a commodity
and therefore goes under what is the Commodity futurest Trading Commission.
(52:16):
But then you also have the regulatory side, and I
would just say in the regulatory side, you know, just
remember when you hear Chairman Paul Ekins over at the
SEC say, then they're going to want to take a
look at crypto and they're going to do things in crypto. Yes,
they can loosen up enforcement risk, which is what they've
already done. But the SEC only has authority for what's
under the SEC's jurisdiction, and that is securities. And when
you have a lot of the crypto place, saying that
(52:37):
things like bitcoin are a commodity that falls outside the
SEC's jurisdiction. So I do think you are going to
need Congress to ultimately come together and pass a package.
So with that, I'm going to say thank you very
much for your time. We really appreciate your time joining us.
The last thing I'll just say is is that unfortunately
our anti trust colleagues couldn't make it. They actually had
(52:58):
to be in court today. But if you have any
interest in antitrust enforcement or anti trust or M and A,
our colleagues Jennifer Ree and Justin TERESI are going to
have a deep dive. What we call it a deep dive.
It's like a sixty to seventy page PDF, and we
can certainly send these to you if you want to
get a copy of them. We have one on tariffs,
we have one on the Infliction Reduction Act. I think
Andrew is working on one, I think Dwayne is working
(53:19):
on one essential we all have worked on one before.
So we can certainly get you a copy of these.
But this report's going to come out in the next
couple weeks. Talking about M and A enforcement, They're going
to update this quarterly, so if you do have any
questions on that, please get in touch with us. So
with that, I'm going to say thank you very much
for your time. We really appreciate it and we wish
you have a great week.
Speaker 1 (53:37):
Thank you,
Hi.
Speaker 2 (00:15):
My name is Nathan Dean. I am a senior policy
analyst with Bloomberg Intelligence located in.
Speaker 1 (00:18):
The Washington DC Bureau.
Speaker 2 (00:20):
Thank you very much for joining us today on our
episode of Votes and Verdicts, where we are going to
replay a webinar that we hosted on May first, where
we discussed President Trump's first hundred days of his administration,
what we can see for the next hundred days of
the administration, what we can see for the rest of
the year, and all the policies that we are tracking
out of Washington that impacts our portfolio of companies, sectors, markets,
(00:41):
and essentially everything else. Again, thank you very much for listening,
and we wish you a great episode. Okay, I think
this is a good time to start our recording. Let's
go ahead and get started. Thank you, and good morning
and good afternoon. My name is Nathan Dean. I am
a senior policy analyst with Bloomberg Intelligence here in the
world Washington, DC Bureau. I want to say thank you
(01:02):
very much for taking the time out of your day
to join us on our webinar about President Trump's first
hundred days of his administration and what can we see
over the next one hundred days and throughout the rest
of the year, and really with the theme of what's
impacting an investor's portfolio and the markets and the sectors
and the companies that are in that portfolio. This is
going to be an interactive session, so we definitely want
you to use the Q and A button in the
(01:23):
Zoom chat. We will answer your questions as they come in,
otherwise we'll answer them at the end of the webinar. Additionally,
Bloomberg Intelligence is the equity research division of the Bloomberg Terminal.
We cover over two thousand companies, credits, companies, currencies, markets, essentially,
if it's in your portfolio, we cover it and you
can find all of this at Bigo. And then finally,
(01:45):
this is going to be also released as a podcast.
The Bloomberg Intelligence has several podcasts, but most of the
individuals on this team contribute to the podcast known as
Votes and Verdicts. We'll be putting in the chat for
the Zoom the Apple and Spotify links. If you're viewing
this on the Bloomberg Terminal, or if you're doing this
after the fact and you obviously have any questions, or
if you want to get a copy of that podcast.
(02:07):
Please contact me. My name is Nathan Dean. Again, I
am ending tent at Bloomberg dot net. And again, if
there's any questions you have after this, we will certainly
entertain those. Just please give ahead and give me that
Just send that email to me. Joining me on the
call today, we have Elliott Stein, Matthew Shettennhelm, Dwayne Wright,
Holly From and Andrew Silverman. Each one of us is
going to be talking about different areas that we cover.
(02:30):
But what I'd like to do is first kick this
off with a little bit of a discussion of just
remember every single time that Elliott or Matt or Andrew
or Holly or Dwayne or I we mentioned something, you
can largely bucket this into one of three ways of
things getting done in Washington. This is one of the
things we tell our clients at all the at the
initial stages of how to determine how to conduct policy analysises.
(02:54):
Are things getting done via executive orders? Are things getting
done via legislation? Or are things getting done via regulation
or in this case and the Trump administration, deregulation. Each
has its own pluses and minuses. Executive orders within the
first one hundred days President Trump has exceeded many of
his earlier predecessors in terms of reaching out and actually
conducting executive orders and executive memos. But if you look
(03:17):
at what President Trump is trying to do right now,
he's trying to stick within the areas of the power
of the presidency is more powerful, namely things like trade,
national security, foreign relations, and tariffs. And so, as Holly
will discuss a little bit later, you'll see a lot
of what's happening in the tariff space falls under the
executive order bucket. When it comes to legislation, obviously, in
(03:38):
the United States, the House needs to pass a bill,
the Senate needs to pass the identical bill comes together,
it goes to the President's desk. Legislation doesn't happen very
often these days, but it does happen. And so as
Dwayne and Andrew and I will be talking about when
you talk about Reconciliation bill, this is coming through the
legislative hat. Obviously, a lot of things are going to happen.
Things are happening right now as we speak. When it
(03:58):
comes to markups, legislation is going to happen. And then
the final pillar is regulation or in this case, deregulation.
When Treasury Secretary Scott Bessett spoken his press conference earlier
this week, he talked about deregulation, and there was a
lot of sentiment coming into the markets about deregulation, especially
in the financial services space. But I would argue there's
really no magic wand where you can just wave and
(04:19):
say poof, go forth and deregulate. Now the energy sector
is a little bit different. There are more There is
more energy deregulation under the Executive Order branch that we
can talk about later if you'd like. But for most
of deregulation, it has to follow a process, the Administrative
Procedure Act. It long story short is it takes time.
It takes about a year. And so I think a
(04:40):
lot of the proposals for deregulation that we'll be talking
about later today will come out in the second half
of this year, but ultimately will be finalized in twenty
twenty six, in twenty twenty seven.
Speaker 1 (04:49):
So to kick things off, I want to talk.
Speaker 2 (04:51):
About the one quote unquote, the one big beautiful bill
that President Trump is talking about and that the House
committees are marking up as we speak.
Speaker 1 (04:58):
Now.
Speaker 2 (04:59):
This is the for to extend the twenty seventeen Tax
Cuts and Jobs Act. And Andrew's going to talk a
little bit more about the provisions of this bill. Dune's
going to talk a little bit more of the healthcare
and the Medicaid cuts as part of this bill. But
at a high level, what you need to know is
this is that this is a five point three trillion
dollar bill. The bulk of it, approximately three point eight
to three point nine trillion of that goes to extending
(05:20):
the Trump Bera tax cuts from twenty seventeen. Now there's
an additional one point five trillion in terms of no
taxes on tips, no taxes on security, no taxes on
Social Security, the three ideas that are routinely announced from
the White House. But the question is what do you
have to pay to offset in order to get this
package to go forward. Now, there's a different variety of theories,
(05:42):
and I don't we can do an entire hour on
this bill. But what you need to know is there's
four main pillars that we're looking at from this bill's perspective.
The first is the deficit. You know, if you decide
to follow the Senate plan where you use the current
you know, the current cost of this is current policy.
You know, there is a chance of the deficit could
go up significantly as a part of this bill. And
(06:02):
again we'll can get in this as the Q and
A if you'd like. But then the other aspects of
this there are stamp benefits formerly known as trout stamps, Medicaid,
and also the Inflation Reduction Act. Those are the three
main areas that Republicans are targeting with some other stuff,
but those are the main three areas that we're focusing
on in terms of how to pay for that, and
we'll talk about each one of that in one of
(06:24):
our each one of our specific remarks. Now, Treasury Secretary
Scott Besson put out the deadline of July fourth, saying
this is the date in which he wants to get
this done. I think that's a little bit too fast.
But the reality here is is that there is no
deadline until December thirty first, twenty twenty five, when the
individual tax cuts increase from that twenty seventeen bill. But
(06:47):
there is a deadline from the standpoint that there is
a language in this bill to raise the debt ceiling
by five trillion dollars, and so you have to watch
out for the quote unquote X date when the debt
ceiling runs out, meaning when Treasury no longer can use
extraordinary measures to pay its obligations. That is effectively the
real deadline that the Republicans are racing here. And when
you talk to our chief rate strategist, Ira Jersey, you know,
(07:09):
the thought here is is that that X date will
probably come in the late July August timeframe, So I
wouldn't be surprised if this is wrapped up before the
August recess. July fourth may be a little bit tight,
but the reason why they want to do July fourth
is because the Republicans want to go back to their
barbecues and be able to say that they've done this.
They've saved you know, the tax increases and they've cut
taxes even further, and you know, Speaker Mike Johnson has
(07:31):
done it pretty I would argue, pretty excellent job and
keeping the Republicans on track in the House, so you know,
you will see momentum. It just in my mind has
maybe asked the site a little bit later. So with
that being said, and giving you a more broad macro
overview of what's going on in the rest Conciliation Bill.
I want to turn to Andrew. So, you know, Andrew,
you sent me a whole host of questions and we
(07:53):
could have our own webinar on all of the revisions
that are in this bill, all the provisions that you've
been talking about. But the question I want to start
off with is, Okay, do you have any high level
thoughts of how we're approaching this reconciliation bill?
Speaker 1 (08:06):
What are your thinking about? What are you focused on?
Speaker 2 (08:08):
And then secondly, you know, there's been a ton of
tax news over the last one hundred days.
Speaker 1 (08:13):
You know, out of all the things.
Speaker 2 (08:14):
That you've covered, what are probably the one major thing
that the audience member share would like to know?
Speaker 3 (08:19):
Yeah, So what I'm focused on with regard to the
tax bill is whether or not the current policy baseline.
You mentioned this briefly, the current policy baseline is going
to fly with not only the Senate parliamentarian but also the.
Speaker 4 (08:37):
Deficit hawks in the House.
Speaker 3 (08:40):
If the if the Republicans themselves can't accept basically putting
all of this on the credit card, the you know,
the whatever whatever it is for and a half six
you know, trillion dollars of spending on the credit card,
then that it's going to be really hard to get
this through because you'll need to find that much that
the six tollion dollars of revenue raisers UH in order
(09:04):
to get it through. So I think I think that's
probably going to be the biggest sticking point, you know,
besides all the other obvious things. You know, how are
they going to how are they going to do no
tax on tips? How are they going to do no
tax on Social Security? How are they going to resolve
the state and local tax deduction issue? But yeah, I
mean there have also been just a ton of other
(09:28):
tax developments in the past one hundred days. I mean,
on the very first day of his administration, President Trump
signed an executive order basically pulling us entirely out of
the global tax system that that Biden had had.
Speaker 4 (09:45):
Pushed us into.
Speaker 3 (09:47):
If you remember, Secretary Yellen had actually come up with
one of the main pillars of that tax agreement. And
so in the same order, Trump said that the OECD's
agenda discriminatory, threatening retal, He was threatening retality tory measures
from from the United States, and Treasury Secretary Bessett said
(10:11):
actually that that the digital services tax that a lot
of countries in Europe and even Canada has are a
major sticking point in the trade negotiation. So the global
tax issues and the trade issues that sort of gotten
all rolled up into one. The other interesting thing that's
been happening in tax world is all of the developments
(10:33):
at the i r S. We've actually had five ir
S commissioners since the beginning of the year. We had
Danny Wirfol who was a Biden's IRS Commissioner, and then
he was succeeded by Doug O'Donnell, and then he retired,
and then we got Melanie Krause, but she was only
in office for about two months before she uh resigned
(10:56):
after being excluded from an agreement between Treasury and Homeland
Security that she wasn't privy to. And then we got
acting Commissioner Gary Shipley, who is apparently appointed on Elon
Musk's recommendation, but then he was removed after only a
couple of days, and we got a new acting commissioner
who is Michael Falkender and he's the current acting commissioner.
(11:19):
And meanwhile, Trump's IRS Commissioner nominee Billy Long has not
made any progress towards confirmation at all. And you know,
maybe that's because he doesn't have a whole lot of
tax background. Maybe maybe folks are questioning whether he is
the right person for the position.
Speaker 4 (11:38):
Also, he's faced ethical scrutiny.
Speaker 3 (11:41):
He is accused of soliciting donations to repay personal loans
and has also been accused of promoting fake tax credits.
Speaker 4 (11:51):
So that's a big issue.
Speaker 3 (11:55):
And then the Department of Government Efficiency has targeted the
IRS and the agency was agents of the agency were
offered an early retirement program and some thirty two thousand
employees actually took them up on that. They dose came
(12:16):
back and said about ten percent of those people couldn't
actually take the offer because they were critical positions within
the IRS. And then the Trump administrations also sort of
escalated tensions with Ivy League universities, threatening their five oh
one C three tax status if they don't back down
on DEI and accusations of anti Semitism. Removing that tax
(12:38):
exemption could actually allow schools to lobby and express their
personal opinions or even go public like Capella and Australia universities.
But then losing that tax exemption would also mean that
donors to universities would not be able to get a
deduction for their for their donations. And of course another
(12:59):
big part of that is that if these institutions become taxable,
they could become liable for property taxes as well. So
Bloomberg actually did an estimate that if Harvard loses its
tax exemption, it could have to pay four hundred and
sixty five million dollars a year in taxes. So a
lot happening on the tax front, and obviously much more
(13:21):
to go on once the tax bill really gets underway
later on this month the next month.
Speaker 2 (13:27):
So it almost sounds like we're at that that meme
on Twitter where Harvard needs to spin off the university
and just concentrate on its endowment anyway.
Speaker 1 (13:36):
Joke, I joke.
Speaker 2 (13:37):
So, Andrew, a question I have for you is is
that we have a lot of folks on this call
that are from New York, New Jersey, Virginia, probably California.
You know where I'm going with this salt deduction, state
and local tax current caps at ten thousand, Where do
you see it coming out after the end of this
reconciliation bill.
Speaker 3 (13:56):
Well, so we heard that the original proposal was to
raise it to twenty five thousand dollars, and the Salt Caucus,
the so called Salt Caucus, the folks from New York
and California and New Jersey said twenty five thousand dollars
was not nearly enough. They wanted it to be at
least thirty thousand dollars, but some of them are even
saying they wanted to be sixty thousand or more. I
(14:17):
think it's going to be higher than it is today, certainly,
and probably more than twenty five thousand dollars. Thirty thousand
dollars seems about right, maybe a bit more. But in
return for that, it sounds like what Congress wants to
do is put a cap on the state and local
tax seduction of corporations, which is very controversial.
Speaker 4 (14:38):
But yeah, I think it's going to change.
Speaker 3 (14:41):
Whether or not that means that there's going to be
some sort of income threshold to be able to take
this state and local tax seduction for individuals, that remains
to be seen, but it's definitely going to change in
the bill.
Speaker 4 (14:53):
I think that's for sure.
Speaker 2 (14:54):
And then the last question I have for you before
we talked to Dwain about healthcare, is prisoner Trump likes
to talk about lowering the corporate tax rate. You know,
current corporate tax rate permanent twenty one percent. Is there
any chance that the corporate tax rate is lowered as
part of this process?
Speaker 4 (15:10):
So there are two answers to that question.
Speaker 3 (15:13):
The corporate tax rate as a whole came down from
thirty five percent to twenty one percent, and that's permanent,
and so it doesn't snap back in twenty twenty six
to thirty five percent. It stays at twenty one percent.
There's been some discussion, especially in the House, actually of
raising the corporate tax rate up a bit in order
(15:34):
to pay for some of these things, and I could
even see that ending up in the House bill. Now
whether or not the Senate will go for that, I'm
not so sure. But there's also that fifteen percent tax
rate for domestic production, which I think is definitely going
to be part of the final bill that the House
and the Senate adopt. But I think that's actually pretty limited.
(15:54):
I think that the cost of that reduction is only
between one hundred and two hundred million dollars. Comparatively, that's
not a whole lot of cash. So certainly the domestic
production rate of fifteen percent, I think that's quite likely
to be in the final bill, but lowering the corporate
tax rate as a whole is probably unlikely, and raising
(16:14):
it also unlikely, but more likely than reducing it further
from twenty one percent.
Speaker 5 (16:21):
Broadly great, Well.
Speaker 2 (16:23):
Thank you, Andrew. So let's turn to Dwayne. Dwayne right,
my neighbor of two desks over. Dwayne, let's talk about healthcare.
The question I have for you is is that there's
been a lot of focus on tariffs, you know, but
President Trump has also set the tone for drug makers
in his first one hundred days.
Speaker 1 (16:40):
He's sent some signals.
Speaker 2 (16:42):
You were talking about signals the other day about policy
action down the road. What can we expect and how
could these policy changes be implemented?
Speaker 6 (16:49):
Yeah, thanks Nathan. So, I think we have to start
from the premise that Trump isn't necessarily a fan of
the pharmaceutical industry out of concerns of high drug prices,
at least as they compare to those overseas. And so
when we look at his first term, there was a
lot of focus on setting US prices to those paid overseas.
(17:13):
Those efforts failed, but he didn't have the Inflation Reduction
Act at that time, and he does now, and while
prices paid overseas aren't a factor for setting prices within
the IRAS negotiation program, it's quite possible he could look
to what's being paid elsewhere for domestic prices.
Speaker 5 (17:35):
Now, I think.
Speaker 6 (17:37):
There's some good news and bad news as we think
about this from the standpoint of drum makers. Yes, he
had the way the law is written, there is a
ceiling on the drug price, but there isn't a floor.
But when you think about some of the policy changes
that the truck manufacturers and other advocates wanted to make,
(17:58):
he does seem open to them. One of them is
the so called pill penalty, where if you have a
biologic that's been on the market for thirteen years and
it's one of a at a high cost Medicare or
I use Medicare drug, it is dense subject to IRA
negotiation program. But if you have a small molecule, it's
(18:20):
subject after nine years. He's indicated he's open to changing
that or fixing that. While he didn't say equalizing them
or setting small molecules to biologics, I think the assumption
is that we wouldn't see biologics come down. This probably
also opens the door to other changes within the IRA.
(18:41):
When you think about the orphan drug exemption and how
narrow that is right now, expanding that seems to be
on the table, and I think the door is open
after the CEO. I think the question now is how
does this all get done. We've always looked at the
Reconciliation Bill as the most likely opportunity for these changes,
(19:02):
since he can't do them on his own. Republicans had
signals some potential changes would be in the mix. The
repeal options off the table because that's just not something
that Trump seems to be in favor of, especially since
they're defending it in court. So I think there's a
high likelihood of some of those changes now. The downside
(19:24):
is while he's promoted some more flexibility within the IRA,
he's also signaled that he'd like to expand opportunities for
lowering drug prices for some high cost drugs outside of
the IRA. So we can think back to his most
favor Nations Plan, which is targeted more towards Part B
(19:45):
drugs that could come into play through regulations, specifically through
the Centers for Medicare and Medicaid Innovation, which Biden has
used himself to test new payment models. So I think
some good news, some bad news, but we shall see
how some of this bad news plays out, if it's
if it's broad in scope, if it's narrow, how many
(20:06):
drugs get swept in, and what the ultimate.
Speaker 5 (20:09):
Impact on companies is.
Speaker 6 (20:10):
So more to come over the coming months in terms
of regulations there.
Speaker 2 (20:15):
So I think one of the biggest questions. In fact,
the Republicans are over at the White House as we
speak talking about.
Speaker 1 (20:22):
This what happens to Medicaid?
Speaker 2 (20:24):
You know, the Republicans want to cut almost eight hundred
billion dollars from Medicaid as a way to help pay
for these tax extensions. What's your outlook on Medicaid?
Speaker 6 (20:34):
Radical transformation of the Medicaid program has long been a
goal for Republicans. I think the challenges the rubber meets
the road, and you realize how many of your constituents
actually rely on the Medicaid program and changes could lead
to significant increase in the uninsured in your own district.
And now that a lot more Republicans are attuned to that,
(20:57):
some of the bigger changes that have been proposed that
would help Republicans meet their spending targets or savings targets
of roughlyion eight hundred and eighty billion dollars within one committee.
It's very hard to do within one program without impacting access,
and so what the ultimate number is remains to be seen.
(21:20):
I think there are some low hanging fruit that Republicans
won't go after, such as work requirements. It's long been
a policy goal for them to impose or implement work requirements,
even those studies show most people on Medicaid are in
fact working or their caregivers, et cetera. We could probably
see some other changes relating to state provider taxes, which
(21:43):
is a mechanism for states to tax providers and then
send that money back and get a federal match, and
it actually inflates the amount of money that the Feds
are spending. I think we could see a cutback in that.
I don't know if it's necessarily going to be in
a limit nation of it, and there may be some
other pieces, but I think the key that Republicans are
(22:05):
the key message from Republicans that we're not going to
do anything that's going to force people to lose access
to covers. Now, the big question will be if you're
still reducing federal spending for Medicaid. States will then have
the option they can fill in the holes, they can
reduce benefits, or they can just cut coverage for some
(22:28):
of those optional beneficiaries. That's probably going to be the
narrative where it's going to be up to states to
figure it out. And so while eight hundred and eighty
billion dollars is always the headline number, I'd be surprised
if Republicans are able to get to half of that at.
Speaker 5 (22:45):
The end of the day.
Speaker 2 (22:47):
And we just had a question come in on the
healthcare piece. Someone I asked this to you, and again
remind you, everybody you can send in questions. Will there
be any meaningful shift of drug manufacturing back to the
United States? That was a vulnerability in the COVID era.
It seems like on target for on shoring.
Speaker 6 (23:02):
I give CEO drug manufacturers or drug maker CEOs a
lot of credit for a lot of the work they've
done over the past three months four months, making the
trick down to mar A Lago and really getting to
getting into the presidence here about the industry, the supply chains,
and how you can't really do a one size fits
(23:25):
all approach to the It's this tariff experiment. They've also
done a good job of promoting touting their domestic investments.
I think I think I saw a number that was
something like over one hundred billion dollars worth of commitments
in on shoring or manufacturing or whatever you want to
call it. And so you know, at the end of
(23:48):
the day, what they can do they will do. You know,
I think that's going to be up to individual companies,
but it really just show how complicated the the supply
chain is when you talk about APIs raw materials to
finished products. And also keep in mind that one of
(24:09):
Trump's key goals, and you can go back to his
first term, was how do we promote more generic competition
by a similar competition to help lower drug prices? Nine
of US scripts are generics, and so a one size
fits all tap approach doesn't work. And you know, when
(24:29):
we think about the low margins for those products, it's
hard to necessarily envision white scale return to the US
or to the US of these manufacturers. So I think
it's going to be company by company, case by case,
and we will see some of that, and that may
actually blunt some of the any more future tariffs who
(24:52):
are at least big tariffs coming in for this sector.
Speaker 1 (24:56):
Great, Thank you, Dwayne.
Speaker 2 (24:57):
And I should also say that if you have a terminal,
put out an excellent note yesterday that explains a lot
more of this in greater detail, specifically focus signing on
drug makers. So contact Dwayne or contact myself and I'll
put you in touch with Dwayne and we'll get you
that note. So let's turn over to Holly. Holly has
had the busiest job since January twentieth because she is
(25:17):
our expert on tariffs. Holly, you know, I could go
a thousand different ways in terms of this question, but
I guess the best way for me to frame this
is is that what's the status of tariff's today? And
can you give us an update on all these numerous
lawsuits that have been against the Trump administration when it
comes to tariffs, because you know, I covered the legislative side,
(25:39):
and you know, even though you know we saw a
resolution fail that's more yesterday, that's very indicative of what
I think will happen in terms of any other types
of legislation that tries to claw back President Trump's authority.
Speaker 1 (25:52):
What's your what's your take on this?
Speaker 7 (25:54):
So sure, So in the first one, hundred days we
saw the Trump stration imposed a slew of new tariffs,
and these include tariffs on China, which started at ten
percent on February fourth and escalated up to one hundred
and forty five percent over the course of two months.
The first twenty percent of those terrafts were based on
the President's determination that there was a national emergency with
(26:16):
respect to illicit drugs fentanyls specifically crossing the border, and
documented migrants. The next thirty four percent was imposed in
a subsequent order establishing reciprocal terrafs, which I'll get into
in a minute, and those escalated based on retaliatory tariffs
imposed on US goods by China. So now there is
a minimum one hundred and forty five percent tariff on
(26:37):
goods from China, but the administration has indicated those rates
may come down substantially. The President also imposed twenty five
percent tariffs on goods from Canada and Mexico based on
the same emergency the legal drugs and migration. Those tariffs
were subsequently paused for a month until March fourth, and
then exemptions were granted for goods qualifying for preferential treatment
under the US CMA or US Canada Mexico agreement, so
(27:01):
called universal and reciprocal tariffs announced to April second, were
to go into effect April fifth and ninth, respectively, And
the basis for those terrifts was a deemed emergency with
respect to trade deficits. So what the President said was
that the US was being treated unfairly with respect to
trade barriers like terriffs, taxes, treatment of intellectual property, and
other trade practices of countries directed at the US, And
(27:24):
so he said to balance that trade deficit, he would
impose tariff's high at fifty percent on some countries with
the highest Dean trade as almost fifty percent on the
countries with the highest Dean trade barriers, and ten percent
everywhere else. And that ten percent was called the universal
tarraf or baseline terraf. That universal teriff wanted to effect
April fifth, but one day before reciprocal terrorifts, those were
(27:47):
the pretty high terriffs were to go into effect, the
President pause them for ninety days until July ninth, and
instead impose the baseline terraf on everyone. All those terriffs were,
by the way, imposed the executive order which he talked
about earlier. It's they cited as the basis. The statutory
basis for the tariffs the International Emergency Economic Powers Act
(28:07):
or IEPA, which allows the President to regulate imports if
he determines there's a national emergency that presents an unusual
and extraordinary threat to national security or the economy. The
President has also imposed twenty five percent terrafs on steel
and aluminum that went into effect March twelfth and autos
that went into effect April third, and those were imposed
(28:28):
based on his Commerce Departments determination that imports threatened to
impair national security, and he used section two thirty two
of the Trade Expansion Act, which addresses imports threatening national security.
The auto tariffs don't apply the goods qualifying for preferential
treatment under the USCMA, and he also great exceptions for
steel and aluminum that can fly with USCMA just this week.
(28:51):
So I think something that's interesting that's about the basis
for these terraffs is that in cases where the President
didn't have a pre existing investigation that was agency investigation
that was pried by statute, he used AIPA, the Emergency
Powers Act, which allowed him to impose terriffs by proclamation immediately,
and in cases where he had an existing agency investigation determination.
(29:14):
He used Section two thirty two of the Trade Expansion Act,
so that section requires an agency investigation. And in the
case of steel and aluminum, he already had that investigation
done from when he was president in twenty eighteen, so
you rely on that old investigation was able to do
things right away. So the trend tiers sort of he's
doing things as quickly as possible. In addition to the
(29:36):
tariffs that have been implemented, because we talked about as
some of us have talked about earlier, he's also threatened
sector specific terrorists, like on pharmaceuticals and semiconductors, which were
exempted from prior executive orders. And if anyone would like
to see a chart that tracks the teriffs and subsequent
action that has been taken, we have a tracker which
is available on bi's tariff dashboard and the tariff reports specifically.
(30:01):
So at least seven lawsuits have been filed in federal
course around the country and the US International Trade Court
or USC arguing that the tariffs Trump has imposed under
AIVA or unlawful. The lawsuits are you pretty much the
same thing with slight variation. First, they say that the
statute the present relied on APA does not authorize terrafs
because the word tariffs is not even mentioned in AIPA,
(30:25):
and other statutes that do authorize terrorists provide very structured
and reticulated schemes to impose terrafs. Most of them require
some input from Congress or some oversight, and AIPA has
requires very relatively little congressional oversight. Second, they say that
if AEPA does allow terrifts, it only does so when
there's a national emergency that poses an unusual and extraordinary
(30:49):
threat to national security or the economy, and the trade
deficits cited as a basis for the reciprocal teriffs is
not an unusual and extraordinary threat. In fact, it's been
in existence for fifty years. As a President mentioned in
the order, it's been a persistent problem. It is not
an emergency. And with respect to illicit drugs cited as
the authority for terifs on Mexico, China and Canada, the
(31:11):
challengers say the terroffs aren't necessary to deal with that emergency,
so the government cannot explain how a twenty five percent tariff,
for example, on avocados addresses the drugs crossing the order. Finally,
challengers argue that if Ayipa does authorize the tariffs, then
Congress unconstitutionally delegated its powers to the president. So we've
(31:31):
said that these terrffs will be upheld because we think
Ayapa's granted power to the president to quote regulate imports
encompasses the power to impose tariffs. We doubt that the
court will wait into what constitutes an emergency under the Act,
and we don't think a court will find the law
on constitutionally delegates power because it provides what's called an
intelligible intelligible principle to the president. Those are guardrails around
(31:55):
using this power, which is that there must be an emergency.
And in the one case in which two Supreme Court
justices indicated they may want to revisit the so called
non delegation doctrine, which if applied, could potentially make us
un constitutional, the justice is noted an exception for cases
where Congress and the President's powers typically overlap and specifically
(32:17):
mention the area of foreign affairs, which this is. So
we don't think the court will want to redefine the
non delegation doctrine in this case. But we think the
issue is close because AIBA has never been used to
impose avalorum duties as is being used here. It's been
used to impose embargoes on countries when, for example, the
(32:39):
country is violating US policy with regard to human rights
or drug traffic and things of that nature. Closest example
we have is when Nixon imposed ten percent surcharged on
all dutiable goods. And this example, by the way, has
been raised in the papers on these various motions which
I'll talk about and the litigations. The close example is
(33:00):
when Nixon imposes ten percent duty, and he did so
to address the balance of payments crisis. He used at
his predecessor statute that tariff was upheld, but there the
emergency was more acute. The tariffs only lasted a couple
of months, and they were more circumscribe and scale. So
what's happening now with the lawsuits? As I mentioned, there
(33:21):
are than seven lawsuits filed, at least seven so just
recently on April twenty second, the uscit where several of
these lawsuits are filed, considered and rejected a t ro
O request. So challengers had asked the court for a
preliminary injunction and to immediately hault reciprocal terriffs and grant
a tro The Court of International Trade found that challengers
(33:43):
did not show a likelihood of immediate irreparable harm and
so rejected on that basis, but didn't go to the
merits of the case and didn't address the preliminary injunction motion.
And the reason the court didn't find irreparable harm or
immediate irreparable harm is because none of the challengers had
said they hate anything or we're about to. So now
what's happening is there's a hearing on the PI motion
(34:05):
and summary judgment motion that was filed in conjunction with
the preliminary injunction motion, and that is before the US
International Trade Court. That hearing will be held May thirteenth.
Challengers and other lawsuits have also filed preliminary injunction motions.
One motion has been filed in a case before different court,
the Federal Court in Washington, d C. And there was
a hearing on that motion and the government and the
(34:27):
government's motion to transfer the case to the Court of
International Trade on May twenty seven. That hearing will be
held on me twenty seven. We could get more guidance
on those motions at the hearing in May, and in
fact we said these motions could be decided into Q.
Speaker 1 (34:42):
Great, thank you, Holli.
Speaker 2 (34:43):
And you know we can do an entire hour on tariffs,
and so if you want to have more conversations with that,
just reach out to us and we'll get Elliott Holly
myself on the.
Speaker 1 (34:51):
On the call, will get whoever we'll have that I
really want. You know, we got a couple questions.
Speaker 2 (34:56):
I want to share my screen real quickly because I
think it's easier to answer the questions through this di
screen share.
Speaker 1 (35:02):
Okay, so the question we got of.
Speaker 2 (35:05):
Was I hear the effective terif rate is likely to
go from three percent to fifteen percent. This is WSL politics,
and you can see here the realized effective tariff right
from February twenty twenty five. He is a little bit higher,
but for all US partners it's around two point three
one percent right now, but you can see here in
China it goes up to twelve point ninety three percent.
So this is actually updated fairly often.
Speaker 1 (35:28):
Now.
Speaker 2 (35:28):
The other thing I'm just going to highlight is if
we go to BI tariffs, you know we have this
all the information, all of our research is located here,
but we do want to highlight the US Tariff Impact Matrix.
This allows you to go company by company to actually
identify what is the blended tariff rate estimate? What is
the US price height estimate in order to meet that tariff?
(35:48):
Is there a global price estimate? And he goes all
the way in terms of cost of goods sold and
so forth. And then if you click on this little
box right here, like for example, if we're going to
pick on Amber, Crombie and Fitch, you click on that box,
it takes you to the research note. So just one
of the highlight that's something that's pretty we're pretty proud of.
So let's take this conversation away from tariffs and put
(36:09):
it back on TMT or not back on TMT.
Speaker 1 (36:13):
But let's talk to Matt Shetenhelm.
Speaker 2 (36:14):
So, Matt, back in April, we had a Senate hearing
confirmation hearing for a couple of commissioners.
Speaker 1 (36:22):
What can you tell us what's going on in the
TMP space.
Speaker 8 (36:24):
Yeah, things are just getting started with respect to changes
in TMT regulation under the Trumpet administration. As you said,
the Senate Commerce Committee confirmed at the at the committee level.
Two of Trump's nominees in April Ariel Roth for the
nt i A the National Telecommunications and Information Administration, and
(36:48):
just yesterday Olivia trustee at the Federal Communications Commission. And
what that will mean is that that that I think
the significant changes in TMT regulation he can start to
happen once they're in place. Now they still need full
Senate confirmation, but that should follow pretty quickly after their
recent approval at the committee level.
Speaker 5 (37:10):
So look for these things to get started.
Speaker 8 (37:12):
Let me give you five five things to watch over
the next quarter in terms of opportunities and risks for
TMT companies. One, broadcast deregulation is very likely big opportunity
for broadcast companies here. Brendan Carr at the FCC has
called this a break glass moment for broadcasters, an emergency situation.
(37:36):
Broadcasters have been subject to restraints for decades that they're
competitors now mostly Internet based competitors don't face and it's
been a significant impediment potentially on the business. When the
broadcasters can really benefit from economies of scale by buying
more stations across the United States, these FCC rules significantly
(38:03):
limit that. Brendan Carr once he gets a majority of
Republicans at the FCC is likely to move ahead with
a couple rule makings that are going to cut away
at those limits for the first time. The most significant
of those is a cap on how many households broadcasters
can reach. Right now, they can only reach thirty nine
(38:23):
percent of US households, with a little add on to
that due to a discount. The NAB is pushing the FCC,
let's get rid of that cap entirely. Let's let broadcasters
reach the entire United States. And I think there could
be willingness from this FCC to go there. So a
major impact for companies like Nextstar, Sinclair Tegna, and that's
(38:47):
all likely to start in the second quarter of this
year as the FCC launches those rule makings. Number two
broadmand funding looking to be significantly changed. NTIA is a
ministering a forty two billion dollar program for broadband companies.
The Biden administration had gotten far down the road with that,
(39:08):
but no money had been passed out yet. Now, with
Ariel Roth likely to take over soon, we've seen pretty
clear signals that there's going to be a shift away
from using that forty two billion dollars for fiber and
instead shifting it to satellite and other wireless applications, at
(39:30):
least to a larger extent. So it's a negative for
cable companies that provide fiber that might be able to
get some of that funding. It's a positive for starlink
and satellite companies. Zero point three. Brendan Carr is likely
to go after big tech companies, going after what's known
(39:51):
as their Section two thirty liability shield. Cars made a
big deal about what he calls the censorship cartel, the
idea that the these these big tech companies are censoring
user content, and his tool to go after that is
going to be Section two thirty. This is the shield
(40:11):
that keeps big tech companies from being sued every time
something bad happens in the world because of something that
someone posted on the Internet. And Brendan Carr is potentially
going to take aim at that shield and cut away
at it in order to discourage the censorship that he's
so concerned about. So the devil will be in the
(40:33):
details of that. The FCC can't change the law, can't
change Section two thirty, which is in a federal statute.
But what it can do is cheerlead the courts or
Congress to make changes to that shield. That could be
very material to the companies because it would open the
(40:54):
floodgates to litigation against big tech companies if the right
changes are made to Section two thirty. So look for
that to launch as soon as Olivia Trustee joins the FCC.
Point four wireless carriers. Right now, the FCC can't auction spectrum.
They lost the authority to hold spectrum auctions because it
(41:16):
expired and Congress hasn't been able to renew that authority.
Nathan talked earlier about this big, beautiful reconciliation bill that's
coming together, and there's a big push to try to
restore that FCC auction authority in that bill, and I
think there's a real possibility that the wireless industry sees
movement in that direction. That's worth watching. And then lastly,
(41:39):
point five TikTok is still an issue with enormous uncertainty
and risk for a number of companies. Currently, President Trump
has extended his pause on the law through mid June.
I think it's June nineteenth, and so what I'm watching
(42:00):
for there is pushback from legislators. I'm watching for lawsuits filed.
It's it's all, you know, enormous limbo situation because it's
not supposed to work this way.
Speaker 5 (42:12):
The law is on the books right now.
Speaker 8 (42:14):
Normally executive orders can't undo laws, and so there's enormous risk,
enormous opportunity depending on how this plays out over the
next couple of months, So worth watching, especially around June
when when that deadline is set to expire.
Speaker 5 (42:28):
With that let me yeah, go ahead, Nathan.
Speaker 2 (42:30):
Yeah, And Matt, where can where's the best place to
get your research if they want to follow the TikTok stuff?
Speaker 8 (42:36):
Yeah, you can go to my bio is the best
way on on on the Bloomberg terminal and BI laws
is you.
Speaker 5 (42:44):
Know you can?
Speaker 1 (42:44):
You can.
Speaker 5 (42:45):
You can get to my stuff through there as well.
Speaker 2 (42:47):
Okay, and for for the terminal subscribers, just remember BI
laws is where all of our research at the more
topical level goes and it includes a couple of our matrices. So, elliot,
I'm going to bring you into the conversation to talk
about President Trump versus FED Chairman Jerome Powell. President Trump
versus Jerome Powell. Can he fire the FED chairman?
Speaker 9 (43:07):
Well, he certainly has made those threats. Sometimes he makes
them more aggressively and then other times he draws them back.
But you know, what has been particularly striking I think
in the first one hundred days of the Trump administration
has been how many commissioners at federal agencies that he's fired.
And that includes agencies like the National Labor Relations Board,
(43:31):
the Merriage Systems Protection Board, the Federal Trade Commission just
recently fired two commissioners from the National Credit Union Administrator.
You know, most of these agencies don't really we don't
follow them. They don't really affect our companies. Some do,
like the FTC. But I've been following the cases that
the fired commissioners have brought against the administration because of
(43:53):
the reason that you mentioned. You know, what does that
mean for Trump's legal ability to fire FED chairs Own
Powell or other governors of the Federal Reserve Board. Long
story short, and I'll explain why. But at the end
of the day, I think if Trump were to fire
Powell or another Federal Reserve Board governor, I think and
the case then went up to the Supreme Court, I
(44:16):
think the Supreme Court would probably allow Trump to terminate
them without cause. But it's obviously an unsettled area of law.
It's one we're watching closely. And the issue in the
case really is that the statutes that govern these agencies
say that the president needs cause to fire these commissioners,
and causes generally thought to mean either, you know, some
(44:38):
sort of malfeasance or neglect or inefficiency. Trump, President Trump,
you know, has taken the position that the four cause
requirements are unconstitutional because they impinge on his ability, his
authority to run the executive branch as he deems fit
under Article two of the Constitution. And so the case
(45:00):
that have been filed by these other terminated commissioners really
centers around a nineteen thirty five Supreme Court case called
Humphrey's Executor, which involved the firing of an FTC commissioner
at the time, and the court in that case, you know,
about ninety years ago, said that the four cause removal
restrictions are fine, they're constitutional, and that the firing in
(45:22):
that case was improper. But more recently we've had a
few cases, including one involving the CFPB director and one
involving the FHFA director, where the Supreme Court has narrowed
how it interprets Humphrey's executor and so in the last
few years, the Supreme Court has said that the application
(45:43):
of Humphrey's executors should be limited to agencies that don't
wield executive power. What that means is that where an
agency does wield executive power, the president can fire those
commissioners without any cause, so for any reason at will.
So what is executive power? And the Supreme Court essentially
(46:05):
has identified two hallmarks of executive power. One is rule
making authority and one is the power to bring enforcement actions.
And we think this is where the Federal Reserve governors
would run into some problems if they're terminated, because you know,
most people think of the FED as setting monetary policy,
(46:27):
but the FED does more than that, right, it makes rules,
it can bring enforcement actions. You know, think of Wells
Fargo and its asset cap for example. So you know,
we think the fact that the FED does do these
two things, rule making and enforcement actions, means that if
(46:48):
this were litigated, the Supreme Court would find that the
FED does wield executive power, and that would make their
board members subject to the President's ability to fire them
for any reason that he wants. So where are we
in terms of some of the other cases that are percolating,
sort of the most advanced are in terms of, you know,
(47:10):
procedural posture, are cases involving the NRB and the MSPB,
the National Labor Relations Board, and the Merit Systems Protection Board.
And in these cases we're seeing judges rule on these
cases largely along political lines. Judges appointed by Democrats say
that Humphrey's executor applies and that the commissioners have for
(47:30):
cause protection. Conversely, judges appointed by Republicans say that Humphrey's
executor doesn't apply really because the FTC ninety years ago
didn't really wield executive authority in the way that it
does now, and so as a result, judges appointed by
Republicans have largely allowed President Trump to remove the commissioners
(47:52):
at will. These cases are now just starting to get
to the Supreme Court, mostly on sort of arcane procedure issues.
Speaker 4 (48:00):
But we should get more.
Speaker 9 (48:01):
Clarity on the merits and the substance in the coming weeks.
But at the end of the day, I think the
biggest obstacle to Trump firing Powell is going to be
the market's reaction and not the law.
Speaker 2 (48:13):
Great thank you, Elliott, so you know this is a
I'm going to ask if we have any more questions,
please feel free to put them in the chat. I'm
going to talk a little bit about financial regulation, but
I should also add that if you do not have
a terminal, uh, definitely follow us on LinkedIn, because we
do put some of our analyzes out there on LinkedIn
after they've gone on the terminal in terms of either
(48:35):
videos or calls or so forth. So definitely look us
up because I was looking. You know, I was listening
to Elliott and Holly about some of the litigation cases,
and I think we have a couple of more we
I think we have a sizeable group from Washington on
this call. So if you want to get involved in
the legal side of this, Matt, Holly, you know Elliott,
definitely follow us on LinkedIn because you know you'll get a.
Speaker 1 (48:54):
Lot more intel that way.
Speaker 2 (48:56):
So the last thing I want to talk about is
we wait for more questions to come in. Is financial
regulation in crypto. So when it comes to financial regulation,
you know, Secretary of the Treasury Scott Bessett said that
he's going to effectively take over deregulation. But remember there's
no magic wand you can't just go forth and say deregulate.
You have to follow this rulemaking process, and in many
cases you need to have the agency leadership in place,
(49:17):
such as Jonathan Gold who is the nominee for the
Office of the Control or the Currency, Michelle Bowman the
nominee to be the FED Vice Chair for supervision over
at the Federal Reserve. And so you need those nominees
to be put in place to really kickstart that process.
But when it comes to banks in particular, I really
think there's a couple of areas of focus. The first
is stress tests. Now the bank's annual stress test. I
(49:38):
think there's two proposals that are coming out. One's already
come out, it is fairly benign. But the next proposal
I think is going to come out later this year
that tries to open up these stress tests and make
them more transparent. The second thing is the g SIB surcharge.
This is an additional capital requirement surcharge, and we think
the Federal Reserve is going to want to take another
look at that. And then another thing on the capital
side is the Bosel three endgame. This is a rule
(50:00):
that the Democratic era, the Biden era regulators tried to
implement under former FUA ad Vice Chair Michael Barr that
would have raised capital requirements for the big banks, so
like Banked America at JP Morgan and so forth, up
to nineteen percent. Now we think it's most likely going
to be capital neutral because we think that if the
bottle three in game is finalized, which probably will come
(50:20):
out later this year beginning of next year, most likely
will be capital neutral. And then finally, Secretary Bessett loves
to talk about what's this thing called the supplementally supplementary
leverage ratio or for the big banks perspective, the enhanced
SLR or the ESLR, And we think really what's going
to happen here is is that there's going to be
a changing of the ESR methodology, probably put it more
(50:41):
on line with international standards. And then we do think
that there's going to be a separate carve out for treasury.
So if you're in the fixed income space, I've done
some work on this, IRA Jersey, our rate strategist has
done some work on this, and our credit analyst, Arnold
Kakuda has done some work on this, so we can
carefully get you those notes if you're interested about the SOLR.
But moving on banks and a little bit going down
to the crypto side, I would just state that there's
(51:03):
really a couple of there's a congressional viewpoint here and
there's a legislative viewpoint here. The congressional side is there
are two bills that are being debated. When is a
stable cooin only bill. I think this is going to
pass before the August recess. Essentially what allows stable cooin
issuers to operate and register with authorities in the United States.
I think the ultimate package will essentially say that if
you are a large stable cooin issuer, you have to
(51:25):
register with the FEDS, if you're a small one, you
have to register with state authorities, and you have to
have one hundred percent of your stable coins backed by
high quality liquid assets. I think that's fairly easy, and
in fact, I did the Senate vote Senate count vote
the other day. I think they got the votes in
the Senate, so I don't think philbuster comes into play.
The more challenging aspect is this crypto market structure bill.
This is what they've tried over the last couple of years,
(51:47):
and even though there's some optimism effect just yesterday we
saw the White House come out and say that they
want to get this done by.
Speaker 1 (51:52):
The August recess.
Speaker 2 (51:53):
I'm not exactly sure they can do that, so we're
going to have to wait and see what that bill
looks like. It's mostly going to be modeled off of
a bill last year called the Financial Innovation of Technology
Act or the FIT, but I think that one is
going to have to be a little bit more, you know,
it needs more time to cook. And that's the one
that declares this is what is security and therefore it
goes under the SEC, and this is what a commodity
and therefore goes under what is the Commodity futurest Trading Commission.
(52:16):
But then you also have the regulatory side, and I
would just say in the regulatory side, you know, just
remember when you hear Chairman Paul Ekins over at the
SEC say, then they're going to want to take a
look at crypto and they're going to do things in crypto. Yes,
they can loosen up enforcement risk, which is what they've
already done. But the SEC only has authority for what's
under the SEC's jurisdiction, and that is securities. And when
you have a lot of the crypto place, saying that
(52:37):
things like bitcoin are a commodity that falls outside the
SEC's jurisdiction. So I do think you are going to
need Congress to ultimately come together and pass a package.
So with that, I'm going to say thank you very
much for your time. We really appreciate your time joining us.
The last thing I'll just say is is that unfortunately
our anti trust colleagues couldn't make it. They actually had
(52:58):
to be in court today. But if you have any
interest in antitrust enforcement or anti trust or M and A,
our colleagues Jennifer Ree and Justin TERESI are going to
have a deep dive. What we call it a deep dive.
It's like a sixty to seventy page PDF, and we
can certainly send these to you if you want to
get a copy of them. We have one on tariffs,
we have one on the Infliction Reduction Act. I think
Andrew is working on one, I think Dwayne is working
(53:19):
on one essential we all have worked on one before.
So we can certainly get you a copy of these.
But this report's going to come out in the next
couple weeks. Talking about M and A enforcement, They're going
to update this quarterly, so if you do have any
questions on that, please get in touch with us. So
with that, I'm going to say thank you very much
for your time. We really appreciate it and we wish
you have a great week.
Speaker 1 (53:37):
Thank you,
Host
Elliott Stein
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