April 22, 2025 • 32 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
US Treasury Secretary Scott Bessent told a closed-door investor summit Tuesday that the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate.
That de-escalation will come in the very near future, Bessent said during an event hosted by JPMorgan Chase & Co. in Washington, which wasn’t open to the public or media. He characterized the current situation as essentially a trade embargo, according to people who attended the session.
Bessent said that it was not the US’s goal to decouple from China and that the current status quo of 145% tariffs on Chinese goods by the US and 125% tariffs on US products by China was not sustainable. He expressed optimism that tensions could cool in the coming months, which would bring relief to markets, but cautioned that a larger deal could take longer.
Bloomberg Washington Correspondents Joe Mathieu and Kailey Leinz deliver insight and analysis on the latest headlines from the White House and Capitol Hill, including conversations with influential lawmakers and key figures in politics and policy. On this edition, Joe and Kailey speak with:
- Bloomberg White House Correspondent Kate Sullivan.
- Bloomberg Politics Contributor Rick Davis and ROKK Solutions Partner Kristen Hawn.
- Bloomberg International Economics and Policy Correspondent Michael McKee.
- EIU Chief Economist Constance Hunter.
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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(00:20):
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Speaker 2 (00:25):
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twenty one. Bessett sees de escalation with China reads the
(00:47):
headline situation unsustainable even though that is the very situation
that this White House asked for, with China trying as
ever to get Beijing to the table. We're watching shares
of Tesla, by the way, Charlie pointed that out, not
only because of the implications when it comes to China, right,
everyone's going to be looking at Nike, be looking at
(01:08):
Tesla also with earnings in the cards, will we hear
from Elon Musk in the conference call? That's one question
we have in one stock that we are watching here
as we project to the after hour session in the
meantime at the White House, it's damage control, right, sat
here at this very time yesterday and we spent two
hours talking about Pete Hegseth a second signal chat, of course,
(01:33):
sharing what he says are not war plans with his wife,
brother and others. And then the departure of four people
who he hired shown the door for being alleged leakers. Now,
what do you do in a world like this? We
already told you that the president was standing behind his man.
He said so at the Easter egg Roll of all places, yesterday.
Speaker 3 (01:52):
But you got to get out in the.
Speaker 2 (01:53):
Media, right, And of course, when you want to do
that in the Trump administration, you tend to go to
Fox News. Pete Hegseth showed up on Fox and Friends
the morning to make his case.
Speaker 4 (02:01):
Listen, I said, repeatedly, no one's texting war plans. You
know why I said that, because I'm in the bowels
of the Pentagon every single day. Just ten minutes ago,
I was looking at actual war plans of things that
were ongoing or pending things to happen because that's on
a regular basis on classified systems. That's my job for
the war fighters, for the president the United States. I
(02:22):
look at war plans every single day. What was shared
over signal then and now, however you characterize it, was
informal unclassified coordinations.
Speaker 2 (02:34):
Informal unclassified coordinations that also included, of course, the type
of aircraft, the Fa eighteen fighter jets that were used
and when they were going to be in position, which
has raised a lot of questions about the security surrounding
this whole conversation.
Speaker 3 (02:50):
Yes see, see, however you want to characterize it, he.
Speaker 2 (02:53):
Essentially blamed the agency as well being a house of
leakers and trying to block the Trump agenda.
Speaker 3 (03:00):
Is this helped to put this to bed?
Speaker 2 (03:01):
I don't know, but this is where we start with
Kate Sullivan, part of our growing team covering this Trump
administration Bloomberg White House correspondent, Kate, it's great to see you.
Speaker 3 (03:09):
Thanks for coming in, thanks for having me.
Speaker 2 (03:11):
So we got the first attempt here to tamp this down,
and by the way, not the first time for Hegseth
himself following the first signal chat following his confirmation hearings,
which a lot of people said that he was da.
This White House isn't budget though, right He's still got
the support.
Speaker 3 (03:26):
Of the president, that's right.
Speaker 5 (03:28):
I mean we heard Trump yesterday, so and with Trump right,
he's firmly behind you until he's not. Okay, we will
see how this plays out, but for right now, we
definitely are hearing Trump and the White House stand behind him.
I think also it's important to remember how much political
capital the president spent on getting heg Seth confirmed.
Speaker 6 (03:48):
I think that's a factor here.
Speaker 5 (03:50):
As we're sort of looking at this because the Hegseth
confirmation battle was the hardest one and it's the one
that Trump really got personally involved with, and he spent
a lot of his own, you know, capital and influence
on this. So I think having hag Seth leave just
a few months into the administration would be sort of
a you know, admission that there was a mistake there
(04:11):
when it's not something we see very often from the nights.
Speaker 3 (04:14):
On brand for Donald Trump.
Speaker 2 (04:16):
We're not even out one hundred days yet, right, we're
about ninety one days. I think today he doesn't want
that headline didn't get through the first one hundred days.
You wonder if that milestone means something to him, but
it also could weaken Pete hag Seth in the long
term internally, could it not.
Speaker 5 (04:31):
Yes, And I think we're seeing the Pentagon right now,
really internal turmoil.
Speaker 6 (04:36):
I know you've you've covered.
Speaker 5 (04:37):
This on this show, but you know, what we saw
from Hegseth this morning was a really defiant in the
face of all this. You know, as you mentioned, he's
been through news cycles like this before, but he's he's
very defiant. He's blamed the media, which is something that
this present and this White House and this administration, it's
it's something that they revert to sort of reflexively a lot.
Speaker 6 (05:01):
I will say that.
Speaker 5 (05:02):
It's it's as watching those clips from this morning, you know,
it is interesting he did not deny the existence.
Speaker 3 (05:08):
I'm glad you mentioned.
Speaker 6 (05:08):
Yeah, I was gonna say, he did not deny the existence.
Speaker 2 (05:11):
Of it, called it old news. So apparently he thought
we already knew about it.
Speaker 5 (05:15):
Right and so and and it was you know, shared
with his brother and his wife among other people, sensitive information.
He says that it was unclassified. And you know, I
think also it's the venue for for where he did
this this defiant sort of you know as he's defending himself.
I also just want to note that, you know, he
(05:36):
went on Fox and Friends on Fox. Hegseth is a
former Fox News host. He was appearing with his colleagues.
He not only was a Fox host, but he was
a former Fox and Friends weekend host. So so very
friendly format.
Speaker 2 (05:50):
And the franchise well kill Brian, kill me. The who
did this interview at one point referred to how difficult
it is. You're trying to just keep the world under control,
and we know what a hard job that.
Speaker 3 (06:00):
So they clearly wanted him to have a friendly environment.
Speaker 6 (06:03):
That's right, That's right.
Speaker 2 (06:04):
I wonder if he advanced the story at all here,
because you're right, he acknowledged essentially that this was real,
that this signal chat was true. He did not deny it.
He also made reference to media coordination. Was he preparing
to send you coordinates on this?
Speaker 3 (06:18):
What was that a reference to?
Speaker 5 (06:21):
I believe you know there's this sense, and you heard
Caroline Love say this too, that the way they're framing this,
the way the White House is framing is that there's
a lot of opposition within the Pentagon to heg Seth himself,
and they're trying to say, you know, there are people
there who are just working against and trying to sabotage Hegseeth.
(06:44):
Heg Seth mentioned in the interview this morning, this investigation
that they're doing on the leaks. We saw the senior
aides depart in recent days and he's also there. Was
it was interesting to me he was trying to really
distance himself from those people. But some of the saying,
you know, just that these as if they weren't close
to him at all, but some of these people have
(07:05):
been in his orbit, have been close advisors to him
for a long time.
Speaker 6 (07:08):
So that was interesting to me.
Speaker 5 (07:10):
But overall, just this this sense of, you know, everything
is sort of the deep state, as you know Trump
likes to talk about, and that there's this sort of
overarching effort to undermine his efforts personally, the.
Speaker 2 (07:23):
Calls coming from inside the house, even though he brought
in the four people who were fired us. Yes, yeah,
we talked about quite a bit yesterday and by the
way we understand, there could be more. This John Elliott
who has shown the door or guests found the door himself,
depending on who you ask. If he wasn't in charge,
he wasn't going to run do anything in the Press office,
he says, the more bombshells to follow. So we'll park
that for a minute. The fact of the matter is, Kate,
(07:45):
this has taking our eye off the ball on tariffs
and a lot of the other stories that you've been
covering at the White House. The President does have an event.
It's set for four o'clock. The new SEC chair, well,
we think he'll make some news. He want to bring
the press pool in. I mean, this happens every day.
Right you go to work, it says close press, then
all of a sudden you're in the Oval office.
Speaker 6 (08:02):
That happened.
Speaker 5 (08:02):
That actually happened to me on Friday, Doctor oz Is
swearing in was supposed to be close pressed, and then
they opened it up, and it was actually a great
opportunity to ask Trump those you know, whenever they do
open it up and whenever you do bring reporters into
the Oval offices, it's a really important opportunity to ask
the president questions directly.
Speaker 3 (08:21):
Tends to move the markets on a lot of times.
Speaker 6 (08:23):
That's exactly right.
Speaker 5 (08:24):
And so you know, I'm not sure about later today
exactly what's going to come out of that, but you know,
if there are opportunities for questions or if there are
reporters in the room, and or even if we're just
waiting for a readout. I think, yeah, definitely there could be.
Speaker 2 (08:36):
Is the life of a White House correspondent. You're hearing
about it in real time. We only have a minute left, Kate.
There was news from the White House of the President
in fact on truth Social had a phone call with
Benjamin Netanya, who, well, Israel be the first country to
cut a deal on tariffs?
Speaker 6 (08:49):
You know, we we don't know, is the short answer.
Speaker 5 (08:52):
But I think net nya who you know, made a
big show to come in person to talk to Trump.
I think a lot of people in Israel, a lot
of officials were really surprised by that seventeen percent tariff.
I think that they thought that because of some of
the overtures that they had made and some of the
you know, how they'd been handling this, that it wouldn't
(09:13):
be quite so high. So the White House has said
that they are actively considering, like on paper, proposals from
fifteen different nations, and so we will see if Israel
is one of the first, or if they do.
Speaker 6 (09:25):
Some kind of a batch of them. But yeah, we're not.
Speaker 3 (09:29):
Sure yet, you need to go to Rome.
Speaker 2 (09:30):
First President will be attending the papal funeral on Saturday.
Kate Sullivan, thank you so much for being with us,
Bloomberg White House Correspondent. Don't be a stranger. This conversation
isn't going to end anytime soon.
Speaker 1 (09:43):
You're listening to the Bloomberg Balance of Power podcasts. Catch
us live weekdays at noon and five pm e's durn
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You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa They Bloomberg eleven thirty.
Speaker 2 (10:02):
The pandemic is officially over at the Department of Education
April twenty one. Just yesterday, word went out from the agency.
The debt collector will soon be calling Department of Education
to begin federal student loan collections and other actions, it
says to help borrowers get back into repayment collections to
(10:24):
restart May fifth Struggling borrowers urge to act now. When
you look at the statement here from the Department of Education, quote,
there will not be any mass loan forgiveness unquote, remembering
more than forty two million people. This affects a lot
of people hold student loans from the federal government. They
(10:46):
total more than one point six trillion dollars in debt.
According to the Department, more than five million holders of
student loans have not made a repayment in the past year,
and so the phone call are going to start coming
in at the beginning of next month. That is where
we start our conversation with our political panel A lot
to cover today with Rick Davis, Bloomberg Politics contributor, Republican
(11:08):
strategist and partner at Stone Court Capital. And if you're
with us on YouTube, you see kristin hand, Democratic strategists,
partner at Rock Solutions. Great to see you both, Kristen,
Welcome back. We talked a lot about loan forgiveness in
the Biden administration. I guess this is the other side
of the coin.
Speaker 7 (11:26):
Yeah, I mean, I think that we were going through
a pandemic. There was the loan forgiveness and then there
was the delay, you know, with having people repay their loans. Now,
the people who have had loan forgiveness there there has
been a bit of whiplash from administration to administration with
these policies. So we need to take that into account
when we're thinking about people's planning and ability to repay
(11:49):
these loans. That said, you know, those those commitments should
be honored to the people whose loans have already been forgiven.
You know, I'm not that we're not asking people to
pay the money back right now, but who have been forgiven.
But I do think, you know, we're moving on from
the pandemic. It was a really tough time. People were
(12:09):
struggling financially, you know, due to circumstances beyond their control.
But we're getting back to a more normal economy and
people should pay back their loans, you know. That said,
I think if our economy dives into a recession due
to some of the President's policies, people might have more
problems problems doing that. But you know, asking people to
(12:32):
start making payments on their loans, maybe it should have
been a little bit more of a lee time is
not a bad thing.
Speaker 3 (12:39):
What do you think about this rick?
Speaker 2 (12:40):
More than five million holders of student loans have not
made a repayment in the past year. Is that because
of the language that was coming out of the Biden
White House stand by for forgiveness.
Speaker 8 (12:53):
It's hard to tell what was the motivation, whether it
was their own economic circumstances, whether they thought they could
get away with not repaying any of the loans.
Speaker 9 (13:04):
Or whether or not. This is sort of typical for
the loan program. I mean, I don't know how many.
Speaker 8 (13:10):
Say deadbeat loan holders are typical even before the pandemic hit.
I mean, it is kind of the end of the
last pandemic refuge put into place back in twenty twenty,
so it makes sense that we'd finally get this done.
I'd say the whiplash that we've been talking about on
(13:32):
this program is.
Speaker 9 (13:34):
Really what happened to Joe Biden.
Speaker 8 (13:36):
He kept trying to give relief to student loanholders and
the courts told him no twice.
Speaker 9 (13:42):
And so that era is over.
Speaker 8 (13:44):
You won't see the president trying to find ways to
create debt relief by folks who hold these loans. If anything,
turning these over to debt collectors is going to cause
you know, legitimate misery and if they.
Speaker 9 (14:02):
Don't pay, they could wind up having wages garnished and
things like that.
Speaker 8 (14:05):
So this is entering a whole new cycle. You know,
elections have consequences. Well, folks, guess what your debt is due.
Speaker 2 (14:15):
Yeah, that's right, and some nine million could find themselves
in default here once we get past May fifth if
payments aren't made. Kristen, did Joe Biden confuse a lot
of voters to think they didn't have to pay their
loans anymore?
Speaker 7 (14:30):
Here?
Speaker 2 (14:30):
What do you make of the numbers that we're seeing here?
Do you, as a Democrat regret that being a major
pillar of the Biden administration? He came back time and
again shot down by the Supreme Court and made this
a major priority for his administration. Remember the save plan
that's been frozen by the court since August. Was it
a waste of time?
Speaker 10 (14:52):
Not true of waste, It was a waste time.
Speaker 7 (14:54):
I know a number of people who, you know, working
government service on Capitol Hill in the agencies who really
have benefited from some of that loan forgiveness and put
it to good use and done good work and even
gone back to work for the government. So, you know,
I don't think it was all loss. I think communicating
(15:14):
it to the American public should have been a pillar
of what we were doing. I'm not sure about that,
but you know, communicating it better, you know, certainly it
could have been better. But like I said, when you
have that's the problem, when you have these executive orders,
no matter what they are. Like I said, it's like
whiplash from one administration to the next. Same thing with
(15:37):
our foreign policy and our trade policy, you know, only
long lasting. You know, change comes through a Biparson compromise
and goes through the legislative process.
Speaker 10 (15:47):
So this will continue to go back and forth.
Speaker 7 (15:49):
I think when you see and confuse the American people
when you see, you know, these eos taking effect.
Speaker 2 (15:56):
Now I don't know how many Harvard students we're talking
about here, Rick, but there is news about Harvard and
its federal funding, which is something that we've talked about
quite a bit lately, as the administration moves to cut
off some two billion dollars in grants two point two billion,
and so Harvard, maybe no surprise, is suing suing the
US agencies involved here and top officials for freezing the funding,
(16:20):
creating a real standoff.
Speaker 3 (16:21):
Here is the first school to say no.
Speaker 2 (16:24):
And now to sue, Rick, you may not be surprised
by this, but can Harvard win?
Speaker 8 (16:30):
You know, Look, I mean they've got a case to
be made at Harvard. The administration is even admitted that
the letter they sent to Harvard require wing, you know,
basically an overseer for their programs and management of the university,
was a mistake.
Speaker 9 (16:46):
But it's not like they've.
Speaker 8 (16:47):
Resented any of these threats, right, It's not like they said, oh,
forget about it, that nine billion dollars were good for it.
And so, you know, Harvard is being precautious and going
to the courts. I mean, just like we were just
talking about, you know, Joe Biden's challenges with the courts
on his student own program. Donald Trump's been challenged by
the courts on virtually every EEO he's submitted. And maybe
(17:11):
we're just in this litigious kind of rule by legal fiat,
and you know, I'm just going to do whatever I
want to do as an administration, regardless of way the
rules work, ignoring the idea of a bipartisan compromise on
Capitol Hill to get things done, which christ and Han's right,
that's the way to actually govern. But yeah, this is
(17:32):
this is a very similar thing where now Harvard's going
to say, we're calling your cards. You know, if you've
got an ason there, and you better show it because
otherwise we're actually going to make it harder.
Speaker 9 (17:42):
In the future for the administration to take on universities.
Speaker 2 (17:46):
Well, of course, you know the story, well, Kristin. The
administration claims that Harvard failed to enforce civil rights laws
to protect Jewish students. The lawsuit reads, the government has
not and cannot identify any rational connection between anti Semitism
concerns and the medical, scientific, technological, and other research that
it has frozen that aims to save American lives, foster
(18:08):
American success, preserve American security, and maintain America's position as
a global leader in innovation. If Harvard wins this lawsuit,
will that be the precedent for every other university we're
talking about here, Columbia and so on.
Speaker 7 (18:24):
I mean, I think you're looking at a lot of
universities across the board, and yes, I mean certainly, if
Harvard wins, the legal precedent would be very important for
like they said, I mean you're looking at I mean,
a lot of the research and development r and D
that comes out of the United States of America is
born at our colleges and universities. It's not just Harvard,
(18:45):
it's in you know, states all over this country. On
any number of different in any number of different areas. So,
you know, I think that it would be an important
legal precedent to be set.
Speaker 10 (18:57):
If Harvard wins this, that's.
Speaker 2 (18:59):
The end of this drive by the White House. If
Harvard wins here, Rick right, what happens to Columbia, Northwestern
Cornell and the rest.
Speaker 8 (19:09):
Well, If Harvard wins, Columbia is going to have a
lot of you know, sort of regrets that they cut
it deer the trumpet station and there are you know,
one hundred university presidents have just signed, you know, a
compact to talk about how the government should stay out
of their business basically, so you are seeing this.
Speaker 9 (19:27):
Sort of coalition get created.
Speaker 8 (19:31):
I mean, obviously we got thousands of universities in the
United States, but when you start seeing universities working together
like this, you realize that, you know, there are constituencies for.
Speaker 9 (19:43):
For the way things have been working.
Speaker 8 (19:45):
And look, I've always thought it was kind of an
odd thing to attack universities over their poor management of
keeping their campuses free of anti Semitism when so much
of what you're talking about impacting them has nothing to
do with that kind of an issue. I mean, the
congressional hearings I thought did a better job of creating
(20:07):
change with the universities after the Spring uprisings on these
university campuses, because they changed the leadership. They didn't do
a good job of managing their universities, and so they
got a new they got a new president.
Speaker 9 (20:20):
And I thought that.
Speaker 8 (20:21):
Was particularly useful role for Congress to show that these
are universities that were poorly managed, but to actually get
into the nitty gritty of deciding what programs are going
to teach.
Speaker 9 (20:34):
Yeah, that's a even.
Speaker 8 (20:36):
For Americans who aren't that happy with liberal teachings at
the universities, that's probably step too far.
Speaker 3 (20:43):
You do wonder what the real end goal is here.
Speaker 2 (20:46):
Kristen Linda McMahon, secretary at least for now Department of
Education while it exists, was on the other network this
morning said that the letter that they sent to Harvard,
the demand letter, was quote a point of negotiation and
since she hopes the university would come back to the table.
Speaker 3 (21:04):
So is this just like the tariffs?
Speaker 7 (21:07):
I was about to say, I think that you have
to think about in any negotiation who you are negotiating with,
and clearly Harvard is taking a very strong stand and
defending their activities and their research and everything that they
have to offer. And they know that they're setting a
(21:30):
precedent for other colleges and universities with major departments like
this across the country. So I think they may have
overplayed their cards a little bit here.
Speaker 2 (21:41):
Well, I'll tell you it's an interesting day with you
talk about the whiplash, the back and forth and the uncertainty.
It's an up day on Wall Street. It's whipping higher
here after what we heard from Scott Bessen, and we'll
get into that a little bit more in our next hour.
Speaker 1 (21:58):
You're listening to the Bloomberg bellth of Power podcast Ketch
us live weekdays at noon and five pm. E's den
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Listen on demand wherever you get your podcasts, or watch
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Speaker 11 (22:14):
Let's talk about the economic outlook changing that we got
from the IMF today as it downgrades its global growth
forecasts and big hit to the forecast specifically for the
US and China, given the circumstances with which we were
just discussing. We heard from the IMF Chief Economist Pierre
Olivier Gorenshaw about the forecast earlier today.
Speaker 12 (22:33):
Beyond the abrupt increasing tariffs, the surge in policy and
certainty is a major driver of the economic outlook. If sustained,
the increasing trade tensions and uncertainty will slow global growth significantly.
Speaker 11 (22:50):
So let's get more into this now with Bloomberg International
Economics and Policy correspondent Michael McKee, who is here with
us in Washington. And when we consider the uncertainty in
this forecast, we also have to consider the time at
which these forecasts were made April fourth, is what assumptions
they were using tariffs that stood as they were on
that day. We have seen a mass of escalation in
the tariffs between the US and China since then, So
(23:11):
when they're issuing warnings about growth being downgraded for the
US and China, there's actually plenty of room for that
to get worse.
Speaker 13 (23:18):
Mike, Yeah, And that was their second goal, estimating what
was going to happen to the global economy, because they'd
already started preparing and then when Trump announced the tariffs,
they had to throw all that out and start over again.
They did several different scenarios, and the one that we
are all talking about is what they're calling the reference scenario.
It's sort of their baseline at this point. But obviously
(23:39):
things are going to change because we have no idea
as of today what the tariffs are going to be.
But you're right, they do forecast a big drop in growth,
not only for the US and China but for the world.
The US takes it on the chin by almost a
full percentage point, down to one point five percent growth
this year. That's from their forecast in jail, So in
(24:00):
two months we've lost a percentage point and the Chinese
they say, well, grow just three point two percent. As
you know, they don't seem to like the idea of
going below five percent, even if they have to kind
of massage the numbers.
Speaker 2 (24:13):
Gornishaw says, we are entering a new era. The global
economic system that has operated for the last eighty years
is being reset. How long does it take for a
new era to be set.
Speaker 13 (24:24):
Well, we'd all love to know. And part of the
problem there is what is Donald Trump going to do?
And then how long is it going to take him?
And then what does he continue to do? At some
point does he say, Okay, this is it, We're going
ahead with tariffs. At some point does he say, Okay,
we've accomplished what we want. Maybe he makes trade deals
(24:45):
instead of doing tariffs. So nobody really knows what's going
to happen. I think that the bottom line for what
Pierre Leivier is saying is that nobody can trust the.
Speaker 9 (24:54):
United States anymore.
Speaker 3 (24:55):
And it used to be that.
Speaker 9 (24:55):
The US was the load star.
Speaker 13 (24:57):
Everybody followed what the US was doing, But now people
can't do that, so they have to prepare. Central banks
have to prepare, Legislators have to prepare and try to
figure out what works best for their country absent any
idea what the US is going to do.
Speaker 11 (25:13):
Well on your point on central Bankspike, it stands out
to me that the growth figures the IMF release today
the worst since two thousand and nine, or since COVID,
second worst since two thousand and nine, times at which
we were seeing central banks respond to these massive economic
issues by easing policy. And yet, at least for the
Federal Reserve, they don't necessarily find themselves in a place
right now where they're eager to ease policy because of
(25:34):
inflationary risks that are out there, the response will be
different this day.
Speaker 13 (25:37):
The IMFA is forecasting that inflation is going to go
up in the United States not much, in the rest
of the world a little bit because it'll be somewhat
disinflationary since the economies of all these countries are going
to slow. But in the US we're going to slow,
but we're also going to see faster inflation, which leaves
the US in this awful position that Jay Powell was
talking about last week of what do you do. Do
(26:00):
you raise rates to choke off inflation, in which case
you make the slowdown worse or vice versa. So at
this point, the IMF view was, we really don't know
what's going to happen, but whatever it is, it's not
going to be good.
Speaker 2 (26:15):
Bloomberg's Michael McKee with us in Washington. Nice to have
you in the Capitol for a couple of days. We're
going to have a lot to talk about with mister McKee,
as we had the voice of Constance Hunter, chief economist
Eiu Constance.
Speaker 3 (26:26):
It's great to have you with us here on Bloomberg
TV and Radio.
Speaker 2 (26:28):
The IMF forecast that we're talking about increases the odds
of a recession here in the US to forty percent,
up from twenty seven in October.
Speaker 3 (26:38):
Where are you.
Speaker 14 (26:40):
We're much higher than that, I would say, closer to
eighty percent. And that's because the level of uncertainty that
we're seeing is so significantly high. I mean, it is
higher than the global financial crisis. It is higher than
when the US debt was downgraded in twenty eleven, and
higher than any previous recession going back to the eighties
(27:02):
when this index was created. So we think that that
means that there is a significant reduction in capex.
Speaker 15 (27:12):
We hear that from our clients.
Speaker 14 (27:14):
We also are starting to see signs that you're seeing
discretionary spending pullback on the part of consumers, and of
course that leads to a vicious circle where you see
pewer and pure jobs growth eventually a negative jobs print.
And so we're actually our baseline forecast is for negative
zero point one percent growth for all of twenty twenty
(27:34):
five for the US.
Speaker 11 (27:37):
So considering that a picture you're painting constance, it doesn't
look like a very optimistic one for the US economy.
I wonder what you made when President Trumpy yesterday spoke
on True Social about the calls for preemptive cuts from
the federal Reserve. He obviously think inserts rates need to
go down now. Is there a case to be made
for that view if there is indeed such a dour
(27:59):
outlook ahead of US.
Speaker 14 (28:00):
Yes, well, as Mike Key pointed out, and we've been saying,
the US is going to import inflation and export disinflation
deflation to the rest of the world. And so I
think what we're seeing from the President is perhaps the
setting up of escapegoat or someone to blame, saying, oh, well,
(28:22):
we wouldn't have this slowdown on growth if the FED
just acted sooner. And of course, whatever happens, we will
never have the counterfactual. But we do know that if
the FED were cut to cut too soon, it would
risk igniting inflation. We think that risk is somewhat mitigated
because of what we're seeing in terms of the behavior
(28:43):
of the tenure rates, right. We even with Scott Assn's
comments today, we don't see the tenure rallying all that much.
And so if the FED were to cut too soon,
right and that risk of inflation gets elevated, you're going
to see tenure rates go up. So it's not clear
that that would actually help the economy that much. Where
(29:05):
it really could serve to un anchor inflation expectations.
Speaker 15 (29:09):
So we think not.
Speaker 14 (29:10):
Only is the FED going to be so called fashionably late,
but we think, given their dual mandate, they are constitutionally
or I should say congressionally mandated to be a little
bit late, and they're likely not to cut rates until
June or so.
Speaker 3 (29:26):
Constance.
Speaker 2 (29:26):
You mentioned Scott Besson's remarks earlier today prompting quite a rally.
I just wonder what you make of what he said.
Wall Street is finding a positive spin on this. The
status quo here apparently not sustainable. But if the Treasury
Secretary is calling for de escalation, does that mean that
the reciprocal tariffs didn't work.
Speaker 10 (29:49):
Well?
Speaker 15 (29:49):
Of That's an interesting question.
Speaker 14 (29:52):
I mean, I would say it depends on what from
whose perspective?
Speaker 15 (29:57):
And how are we defined working?
Speaker 2 (29:58):
Right?
Speaker 14 (29:59):
Like, if you're a China uh and you and this
is going to really hurt your economy, and you've put
on retaliatory tariffs, and now the US is saying we're
gonna we're gonna walk back some of our side of
the tariffs, then I guess from China's perspective it did work.
Speaker 15 (30:17):
From our perspective, did it work? What are we trying
to achieve.
Speaker 14 (30:21):
You know, there's been a lot of muddle communication with
regard to what are these tariffs trying to achieve. Are
they a revenue generator? Are they supposed to reduce imports
and reduce our deficits, in which case they would not
be generating as much revenue. Are they supposed to bring
manufacturing back to the United States or bring manufacturing to
the United States. It's not clear that that that is
(30:45):
necessarily the one of the goals, and if it is,
we are we import so many intermediate goods that are
part of our manufacturing process that tariffs are not really going.
Speaker 15 (30:54):
To help facilitate that occurring.
Speaker 14 (30:58):
Is it a wan perone type policy where we're saying
we actually want to make everything in the United States
and we're not going to be integrated with the rest
of the world at all. We know that's not a
terribly successful policy tract to take. So it's kind of
unclear when we say work, what is the ultimate objective
of the tariffs and what is the ordering in which
(31:18):
we should rank the various objectives that have been thrown
out by the administration.
Speaker 6 (31:23):
Constance.
Speaker 11 (31:24):
We just have a minute left here, But when you
look at the bond market right now. What do you
see and how worried about it are you?
Speaker 15 (31:32):
I see an increase in term premium.
Speaker 14 (31:34):
I see the sell off as being part of a
global reallocation out of US assets, and what we see
day to day, of course, is the liquid assets.
Speaker 15 (31:44):
But we're also going.
Speaker 14 (31:45):
To begin to see, and we are already beginning to
see in terms of real estate, the selling of less
liquid assets, and so that increase in term premium is
going to prove, I think, very expensive if we continue
along this direction.
Speaker 11 (32:00):
All right, Constant's great to have you on Bloomberg TV
and Radio. Constant Centers, chief economist at EIU joining us
here on balance of power as we consider this downgraded growth.
Speaker 6 (32:09):
Outlook and how it is timed.
Speaker 11 (32:11):
With the words of Scott Besten, though not technically on
the record, not in public, not in front of the media,
just sources saying that he views the tariffs with China
is unsustainable. He thinks there will be a de escalation.
The problem is, Joe, no one is seemingly taking that
first de escalatory step at this point.
Speaker 2 (32:26):
That is the problem. You have to pick up the
phone and have a meeting at some point. Coming off
our highs, so the S and P five hundred still
up one hundred points. Thanks for listening to the Balance
of Power podcast. Make sure to subscribe if you haven't already,
at Apple, Spotify, or wherever you get your podcasts, and
you can find us live every weekday from Washington, DC
(32:47):
at noontime Eastern at Bloomberg dot com.
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Balance of Power podcast. Catch us live weekdays at
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Auto with the Bloomberg Business App. Listen on demand wherever
(00:20):
you get your podcasts, or watch us live on YouTube.
Speaker 2 (00:25):
Big Headline crossing the terminal just as we take air
at high noon. It happens every day. That's why you
listen and watch on YouTube. Search Bloomberg Business News Live.
We'll be there with our live stream when you arrive.
Also on Bloomberg Radio nationwide on Sirius XM Channel one
twenty one. Bessett sees de escalation with China reads the
(00:47):
headline situation unsustainable even though that is the very situation
that this White House asked for, with China trying as
ever to get Beijing to the table. We're watching shares
of Tesla, by the way, Charlie pointed that out, not
only because of the implications when it comes to China, right,
everyone's going to be looking at Nike, be looking at
(01:08):
Tesla also with earnings in the cards, will we hear
from Elon Musk in the conference call? That's one question
we have in one stock that we are watching here
as we project to the after hour session in the
meantime at the White House, it's damage control, right, sat
here at this very time yesterday and we spent two
hours talking about Pete Hegseth a second signal chat, of course,
(01:33):
sharing what he says are not war plans with his wife,
brother and others. And then the departure of four people
who he hired shown the door for being alleged leakers. Now,
what do you do in a world like this? We
already told you that the president was standing behind his man.
He said so at the Easter egg Roll of all places, yesterday.
Speaker 3 (01:52):
But you got to get out in the.
Speaker 2 (01:53):
Media, right, And of course, when you want to do
that in the Trump administration, you tend to go to
Fox News. Pete Hegseth showed up on Fox and Friends
the morning to make his case.
Speaker 4 (02:01):
Listen, I said, repeatedly, no one's texting war plans. You
know why I said that, because I'm in the bowels
of the Pentagon every single day. Just ten minutes ago,
I was looking at actual war plans of things that
were ongoing or pending things to happen because that's on
a regular basis on classified systems. That's my job for
the war fighters, for the president the United States. I
(02:22):
look at war plans every single day. What was shared
over signal then and now, however you characterize it, was
informal unclassified coordinations.
Speaker 2 (02:34):
Informal unclassified coordinations that also included, of course, the type
of aircraft, the Fa eighteen fighter jets that were used
and when they were going to be in position, which
has raised a lot of questions about the security surrounding
this whole conversation.
Speaker 3 (02:50):
Yes see, see, however you want to characterize it, he.
Speaker 2 (02:53):
Essentially blamed the agency as well being a house of
leakers and trying to block the Trump agenda.
Speaker 3 (03:00):
Is this helped to put this to bed?
Speaker 2 (03:01):
I don't know, but this is where we start with
Kate Sullivan, part of our growing team covering this Trump
administration Bloomberg White House correspondent, Kate, it's great to see you.
Speaker 3 (03:09):
Thanks for coming in, thanks for having me.
Speaker 2 (03:11):
So we got the first attempt here to tamp this down,
and by the way, not the first time for Hegseth
himself following the first signal chat following his confirmation hearings,
which a lot of people said that he was da.
This White House isn't budget though, right He's still got
the support.
Speaker 3 (03:26):
Of the president, that's right.
Speaker 5 (03:28):
I mean we heard Trump yesterday, so and with Trump right,
he's firmly behind you until he's not. Okay, we will
see how this plays out, but for right now, we
definitely are hearing Trump and the White House stand behind him.
I think also it's important to remember how much political
capital the president spent on getting heg Seth confirmed.
Speaker 6 (03:48):
I think that's a factor here.
Speaker 5 (03:50):
As we're sort of looking at this because the Hegseth
confirmation battle was the hardest one and it's the one
that Trump really got personally involved with, and he spent
a lot of his own, you know, capital and influence
on this. So I think having hag Seth leave just
a few months into the administration would be sort of
a you know, admission that there was a mistake there
(04:11):
when it's not something we see very often from the nights.
Speaker 3 (04:14):
On brand for Donald Trump.
Speaker 2 (04:16):
We're not even out one hundred days yet, right, we're
about ninety one days. I think today he doesn't want
that headline didn't get through the first one hundred days.
You wonder if that milestone means something to him, but
it also could weaken Pete hag Seth in the long
term internally, could it not.
Speaker 5 (04:31):
Yes, And I think we're seeing the Pentagon right now,
really internal turmoil.
Speaker 6 (04:36):
I know you've you've covered.
Speaker 5 (04:37):
This on this show, but you know, what we saw
from Hegseth this morning was a really defiant in the
face of all this. You know, as you mentioned, he's
been through news cycles like this before, but he's he's
very defiant. He's blamed the media, which is something that
this present and this White House and this administration, it's
it's something that they revert to sort of reflexively a lot.
Speaker 6 (05:01):
I will say that.
Speaker 5 (05:02):
It's it's as watching those clips from this morning, you know,
it is interesting he did not deny the existence.
Speaker 3 (05:08):
I'm glad you mentioned.
Speaker 6 (05:08):
Yeah, I was gonna say, he did not deny the existence.
Speaker 2 (05:11):
Of it, called it old news. So apparently he thought
we already knew about it.
Speaker 5 (05:15):
Right and so and and it was you know, shared
with his brother and his wife among other people, sensitive information.
He says that it was unclassified. And you know, I
think also it's the venue for for where he did
this this defiant sort of you know as he's defending himself.
I also just want to note that, you know, he
(05:36):
went on Fox and Friends on Fox. Hegseth is a
former Fox News host. He was appearing with his colleagues.
He not only was a Fox host, but he was
a former Fox and Friends weekend host. So so very
friendly format.
Speaker 2 (05:50):
And the franchise well kill Brian, kill me. The who
did this interview at one point referred to how difficult
it is. You're trying to just keep the world under control,
and we know what a hard job that.
Speaker 3 (06:00):
So they clearly wanted him to have a friendly environment.
Speaker 6 (06:03):
That's right, That's right.
Speaker 2 (06:04):
I wonder if he advanced the story at all here,
because you're right, he acknowledged essentially that this was real,
that this signal chat was true. He did not deny it.
He also made reference to media coordination. Was he preparing
to send you coordinates on this?
Speaker 3 (06:18):
What was that a reference to?
Speaker 5 (06:21):
I believe you know there's this sense, and you heard
Caroline Love say this too, that the way they're framing this,
the way the White House is framing is that there's
a lot of opposition within the Pentagon to heg Seth himself,
and they're trying to say, you know, there are people
there who are just working against and trying to sabotage Hegseeth.
(06:44):
Heg Seth mentioned in the interview this morning, this investigation
that they're doing on the leaks. We saw the senior
aides depart in recent days and he's also there. Was
it was interesting to me he was trying to really
distance himself from those people. But some of the saying,
you know, just that these as if they weren't close
to him at all, but some of these people have
(07:05):
been in his orbit, have been close advisors to him
for a long time.
Speaker 6 (07:08):
So that was interesting to me.
Speaker 5 (07:10):
But overall, just this this sense of, you know, everything
is sort of the deep state, as you know Trump
likes to talk about, and that there's this sort of
overarching effort to undermine his efforts personally, the.
Speaker 2 (07:23):
Calls coming from inside the house, even though he brought
in the four people who were fired us. Yes, yeah,
we talked about quite a bit yesterday and by the
way we understand, there could be more. This John Elliott
who has shown the door or guests found the door himself,
depending on who you ask. If he wasn't in charge,
he wasn't going to run do anything in the Press office,
he says, the more bombshells to follow. So we'll park
that for a minute. The fact of the matter is, Kate,
(07:45):
this has taking our eye off the ball on tariffs
and a lot of the other stories that you've been
covering at the White House. The President does have an event.
It's set for four o'clock. The new SEC chair, well,
we think he'll make some news. He want to bring
the press pool in. I mean, this happens every day.
Right you go to work, it says close press, then
all of a sudden you're in the Oval office.
Speaker 6 (08:02):
That happened.
Speaker 5 (08:02):
That actually happened to me on Friday, Doctor oz Is
swearing in was supposed to be close pressed, and then
they opened it up, and it was actually a great
opportunity to ask Trump those you know, whenever they do
open it up and whenever you do bring reporters into
the Oval offices, it's a really important opportunity to ask
the president questions directly.
Speaker 3 (08:21):
Tends to move the markets on a lot of times.
Speaker 6 (08:23):
That's exactly right.
Speaker 5 (08:24):
And so you know, I'm not sure about later today
exactly what's going to come out of that, but you know,
if there are opportunities for questions or if there are
reporters in the room, and or even if we're just
waiting for a readout. I think, yeah, definitely there could be.
Speaker 2 (08:36):
Is the life of a White House correspondent. You're hearing
about it in real time. We only have a minute left, Kate.
There was news from the White House of the President
in fact on truth Social had a phone call with
Benjamin Netanya, who, well, Israel be the first country to
cut a deal on tariffs?
Speaker 6 (08:49):
You know, we we don't know, is the short answer.
Speaker 5 (08:52):
But I think net nya who you know, made a
big show to come in person to talk to Trump.
I think a lot of people in Israel, a lot
of officials were really surprised by that seventeen percent tariff.
I think that they thought that because of some of
the overtures that they had made and some of the
you know, how they'd been handling this, that it wouldn't
(09:13):
be quite so high. So the White House has said
that they are actively considering, like on paper, proposals from
fifteen different nations, and so we will see if Israel
is one of the first, or if they do.
Speaker 6 (09:25):
Some kind of a batch of them. But yeah, we're not.
Speaker 3 (09:29):
Sure yet, you need to go to Rome.
Speaker 2 (09:30):
First President will be attending the papal funeral on Saturday.
Kate Sullivan, thank you so much for being with us,
Bloomberg White House Correspondent. Don't be a stranger. This conversation
isn't going to end anytime soon.
Speaker 1 (09:43):
You're listening to the Bloomberg Balance of Power podcasts. Catch
us live weekdays at noon and five pm e's durn
on Apple Cockley and Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station. Just say Alexa They Bloomberg eleven thirty.
Speaker 2 (10:02):
The pandemic is officially over at the Department of Education
April twenty one. Just yesterday, word went out from the agency.
The debt collector will soon be calling Department of Education
to begin federal student loan collections and other actions, it
says to help borrowers get back into repayment collections to
(10:24):
restart May fifth Struggling borrowers urge to act now. When
you look at the statement here from the Department of Education, quote,
there will not be any mass loan forgiveness unquote, remembering
more than forty two million people. This affects a lot
of people hold student loans from the federal government. They
(10:46):
total more than one point six trillion dollars in debt.
According to the Department, more than five million holders of
student loans have not made a repayment in the past year,
and so the phone call are going to start coming
in at the beginning of next month. That is where
we start our conversation with our political panel A lot
to cover today with Rick Davis, Bloomberg Politics contributor, Republican
(11:08):
strategist and partner at Stone Court Capital. And if you're
with us on YouTube, you see kristin hand, Democratic strategists,
partner at Rock Solutions. Great to see you both, Kristen,
Welcome back. We talked a lot about loan forgiveness in
the Biden administration. I guess this is the other side
of the coin.
Speaker 7 (11:26):
Yeah, I mean, I think that we were going through
a pandemic. There was the loan forgiveness and then there
was the delay, you know, with having people repay their loans. Now,
the people who have had loan forgiveness there there has
been a bit of whiplash from administration to administration with
these policies. So we need to take that into account
when we're thinking about people's planning and ability to repay
(11:49):
these loans. That said, you know, those those commitments should
be honored to the people whose loans have already been forgiven.
You know, I'm not that we're not asking people to
pay the money back right now, but who have been forgiven.
But I do think, you know, we're moving on from
the pandemic. It was a really tough time. People were
(12:09):
struggling financially, you know, due to circumstances beyond their control.
But we're getting back to a more normal economy and
people should pay back their loans, you know. That said,
I think if our economy dives into a recession due
to some of the President's policies, people might have more
problems problems doing that. But you know, asking people to
(12:32):
start making payments on their loans, maybe it should have
been a little bit more of a lee time is
not a bad thing.
Speaker 3 (12:39):
What do you think about this rick?
Speaker 2 (12:40):
More than five million holders of student loans have not
made a repayment in the past year. Is that because
of the language that was coming out of the Biden
White House stand by for forgiveness.
Speaker 8 (12:53):
It's hard to tell what was the motivation, whether it
was their own economic circumstances, whether they thought they could
get away with not repaying any of the loans.
Speaker 9 (13:04):
Or whether or not. This is sort of typical for
the loan program. I mean, I don't know how many.
Speaker 8 (13:10):
Say deadbeat loan holders are typical even before the pandemic hit.
I mean, it is kind of the end of the
last pandemic refuge put into place back in twenty twenty,
so it makes sense that we'd finally get this done.
I'd say the whiplash that we've been talking about on
(13:32):
this program is.
Speaker 9 (13:34):
Really what happened to Joe Biden.
Speaker 8 (13:36):
He kept trying to give relief to student loanholders and
the courts told him no twice.
Speaker 9 (13:42):
And so that era is over.
Speaker 8 (13:44):
You won't see the president trying to find ways to
create debt relief by folks who hold these loans. If anything,
turning these over to debt collectors is going to cause
you know, legitimate misery and if they.
Speaker 9 (14:02):
Don't pay, they could wind up having wages garnished and
things like that.
Speaker 8 (14:05):
So this is entering a whole new cycle. You know,
elections have consequences. Well, folks, guess what your debt is due.
Speaker 2 (14:15):
Yeah, that's right, and some nine million could find themselves
in default here once we get past May fifth if
payments aren't made. Kristen, did Joe Biden confuse a lot
of voters to think they didn't have to pay their
loans anymore?
Speaker 7 (14:30):
Here?
Speaker 2 (14:30):
What do you make of the numbers that we're seeing here?
Do you, as a Democrat regret that being a major
pillar of the Biden administration? He came back time and
again shot down by the Supreme Court and made this
a major priority for his administration. Remember the save plan
that's been frozen by the court since August. Was it
a waste of time?
Speaker 10 (14:52):
Not true of waste, It was a waste time.
Speaker 7 (14:54):
I know a number of people who, you know, working
government service on Capitol Hill in the agencies who really
have benefited from some of that loan forgiveness and put
it to good use and done good work and even
gone back to work for the government. So, you know,
I don't think it was all loss. I think communicating
(15:14):
it to the American public should have been a pillar
of what we were doing. I'm not sure about that,
but you know, communicating it better, you know, certainly it
could have been better. But like I said, when you
have that's the problem, when you have these executive orders,
no matter what they are. Like I said, it's like
whiplash from one administration to the next. Same thing with
(15:37):
our foreign policy and our trade policy, you know, only
long lasting. You know, change comes through a Biparson compromise
and goes through the legislative process.
Speaker 10 (15:47):
So this will continue to go back and forth.
Speaker 7 (15:49):
I think when you see and confuse the American people
when you see, you know, these eos taking effect.
Speaker 2 (15:56):
Now I don't know how many Harvard students we're talking
about here, Rick, but there is news about Harvard and
its federal funding, which is something that we've talked about
quite a bit lately, as the administration moves to cut
off some two billion dollars in grants two point two billion,
and so Harvard, maybe no surprise, is suing suing the
US agencies involved here and top officials for freezing the funding,
(16:20):
creating a real standoff.
Speaker 3 (16:21):
Here is the first school to say no.
Speaker 2 (16:24):
And now to sue, Rick, you may not be surprised
by this, but can Harvard win?
Speaker 8 (16:30):
You know, Look, I mean they've got a case to
be made at Harvard. The administration is even admitted that
the letter they sent to Harvard require wing, you know,
basically an overseer for their programs and management of the university,
was a mistake.
Speaker 9 (16:46):
But it's not like they've.
Speaker 8 (16:47):
Resented any of these threats, right, It's not like they said, oh,
forget about it, that nine billion dollars were good for it.
And so, you know, Harvard is being precautious and going
to the courts. I mean, just like we were just
talking about, you know, Joe Biden's challenges with the courts
on his student own program. Donald Trump's been challenged by
the courts on virtually every EEO he's submitted. And maybe
(17:11):
we're just in this litigious kind of rule by legal fiat,
and you know, I'm just going to do whatever I
want to do as an administration, regardless of way the
rules work, ignoring the idea of a bipartisan compromise on
Capitol Hill to get things done, which christ and Han's right,
that's the way to actually govern. But yeah, this is
(17:32):
this is a very similar thing where now Harvard's going
to say, we're calling your cards. You know, if you've
got an ason there, and you better show it because
otherwise we're actually going to make it harder.
Speaker 9 (17:42):
In the future for the administration to take on universities.
Speaker 2 (17:46):
Well, of course, you know the story, well, Kristin. The
administration claims that Harvard failed to enforce civil rights laws
to protect Jewish students. The lawsuit reads, the government has
not and cannot identify any rational connection between anti Semitism
concerns and the medical, scientific, technological, and other research that
it has frozen that aims to save American lives, foster
(18:08):
American success, preserve American security, and maintain America's position as
a global leader in innovation. If Harvard wins this lawsuit,
will that be the precedent for every other university we're
talking about here, Columbia and so on.
Speaker 7 (18:24):
I mean, I think you're looking at a lot of
universities across the board, and yes, I mean certainly, if
Harvard wins, the legal precedent would be very important for
like they said, I mean you're looking at I mean,
a lot of the research and development r and D
that comes out of the United States of America is
born at our colleges and universities. It's not just Harvard,
(18:45):
it's in you know, states all over this country. On
any number of different in any number of different areas. So,
you know, I think that it would be an important
legal precedent to be set.
Speaker 10 (18:57):
If Harvard wins this, that's.
Speaker 2 (18:59):
The end of this drive by the White House. If
Harvard wins here, Rick right, what happens to Columbia, Northwestern
Cornell and the rest.
Speaker 8 (19:09):
Well, If Harvard wins, Columbia is going to have a
lot of you know, sort of regrets that they cut
it deer the trumpet station and there are you know,
one hundred university presidents have just signed, you know, a
compact to talk about how the government should stay out
of their business basically, so you are seeing this.
Speaker 9 (19:27):
Sort of coalition get created.
Speaker 8 (19:31):
I mean, obviously we got thousands of universities in the
United States, but when you start seeing universities working together
like this, you realize that, you know, there are constituencies for.
Speaker 9 (19:43):
For the way things have been working.
Speaker 8 (19:45):
And look, I've always thought it was kind of an
odd thing to attack universities over their poor management of
keeping their campuses free of anti Semitism when so much
of what you're talking about impacting them has nothing to
do with that kind of an issue. I mean, the
congressional hearings I thought did a better job of creating
(20:07):
change with the universities after the Spring uprisings on these
university campuses, because they changed the leadership. They didn't do
a good job of managing their universities, and so they
got a new they got a new president.
Speaker 9 (20:20):
And I thought that.
Speaker 8 (20:21):
Was particularly useful role for Congress to show that these
are universities that were poorly managed, but to actually get
into the nitty gritty of deciding what programs are going
to teach.
Speaker 9 (20:34):
Yeah, that's a even.
Speaker 8 (20:36):
For Americans who aren't that happy with liberal teachings at
the universities, that's probably step too far.
Speaker 3 (20:43):
You do wonder what the real end goal is here.
Speaker 2 (20:46):
Kristen Linda McMahon, secretary at least for now Department of
Education while it exists, was on the other network this
morning said that the letter that they sent to Harvard,
the demand letter, was quote a point of negotiation and
since she hopes the university would come back to the table.
Speaker 3 (21:04):
So is this just like the tariffs?
Speaker 7 (21:07):
I was about to say, I think that you have
to think about in any negotiation who you are negotiating with,
and clearly Harvard is taking a very strong stand and
defending their activities and their research and everything that they
have to offer. And they know that they're setting a
(21:30):
precedent for other colleges and universities with major departments like
this across the country. So I think they may have
overplayed their cards a little bit here.
Speaker 2 (21:41):
Well, I'll tell you it's an interesting day with you
talk about the whiplash, the back and forth and the uncertainty.
It's an up day on Wall Street. It's whipping higher
here after what we heard from Scott Bessen, and we'll
get into that a little bit more in our next hour.
Speaker 1 (21:58):
You're listening to the Bloomberg bellth of Power podcast Ketch
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Speaker 11 (22:14):
Let's talk about the economic outlook changing that we got
from the IMF today as it downgrades its global growth
forecasts and big hit to the forecast specifically for the
US and China, given the circumstances with which we were
just discussing. We heard from the IMF Chief Economist Pierre
Olivier Gorenshaw about the forecast earlier today.
Speaker 12 (22:33):
Beyond the abrupt increasing tariffs, the surge in policy and
certainty is a major driver of the economic outlook. If sustained,
the increasing trade tensions and uncertainty will slow global growth significantly.
Speaker 11 (22:50):
So let's get more into this now with Bloomberg International
Economics and Policy correspondent Michael McKee, who is here with
us in Washington. And when we consider the uncertainty in
this forecast, we also have to consider the time at
which these forecasts were made April fourth, is what assumptions
they were using tariffs that stood as they were on
that day. We have seen a mass of escalation in
the tariffs between the US and China since then, So
(23:11):
when they're issuing warnings about growth being downgraded for the
US and China, there's actually plenty of room for that
to get worse.
Speaker 13 (23:18):
Mike, Yeah, And that was their second goal, estimating what
was going to happen to the global economy, because they'd
already started preparing and then when Trump announced the tariffs,
they had to throw all that out and start over again.
They did several different scenarios, and the one that we
are all talking about is what they're calling the reference scenario.
It's sort of their baseline at this point. But obviously
(23:39):
things are going to change because we have no idea
as of today what the tariffs are going to be.
But you're right, they do forecast a big drop in growth,
not only for the US and China but for the world.
The US takes it on the chin by almost a
full percentage point, down to one point five percent growth
this year. That's from their forecast in jail, So in
(24:00):
two months we've lost a percentage point and the Chinese
they say, well, grow just three point two percent. As
you know, they don't seem to like the idea of
going below five percent, even if they have to kind
of massage the numbers.
Speaker 2 (24:13):
Gornishaw says, we are entering a new era. The global
economic system that has operated for the last eighty years
is being reset. How long does it take for a
new era to be set.
Speaker 13 (24:24):
Well, we'd all love to know. And part of the
problem there is what is Donald Trump going to do?
And then how long is it going to take him?
And then what does he continue to do? At some
point does he say, Okay, this is it, We're going
ahead with tariffs. At some point does he say, Okay,
we've accomplished what we want. Maybe he makes trade deals
(24:45):
instead of doing tariffs. So nobody really knows what's going
to happen. I think that the bottom line for what
Pierre Leivier is saying is that nobody can trust the.
Speaker 9 (24:54):
United States anymore.
Speaker 3 (24:55):
And it used to be that.
Speaker 9 (24:55):
The US was the load star.
Speaker 13 (24:57):
Everybody followed what the US was doing, But now people
can't do that, so they have to prepare. Central banks
have to prepare, Legislators have to prepare and try to
figure out what works best for their country absent any
idea what the US is going to do.
Speaker 11 (25:13):
Well on your point on central Bankspike, it stands out
to me that the growth figures the IMF release today
the worst since two thousand and nine, or since COVID,
second worst since two thousand and nine, times at which
we were seeing central banks respond to these massive economic
issues by easing policy. And yet, at least for the
Federal Reserve, they don't necessarily find themselves in a place
right now where they're eager to ease policy because of
(25:34):
inflationary risks that are out there, the response will be
different this day.
Speaker 13 (25:37):
The IMFA is forecasting that inflation is going to go
up in the United States not much, in the rest
of the world a little bit because it'll be somewhat
disinflationary since the economies of all these countries are going
to slow. But in the US we're going to slow,
but we're also going to see faster inflation, which leaves
the US in this awful position that Jay Powell was
talking about last week of what do you do. Do
(26:00):
you raise rates to choke off inflation, in which case
you make the slowdown worse or vice versa. So at
this point, the IMF view was, we really don't know
what's going to happen, but whatever it is, it's not
going to be good.
Speaker 2 (26:15):
Bloomberg's Michael McKee with us in Washington. Nice to have
you in the Capitol for a couple of days. We're
going to have a lot to talk about with mister McKee,
as we had the voice of Constance Hunter, chief economist
Eiu Constance.
Speaker 3 (26:26):
It's great to have you with us here on Bloomberg
TV and Radio.
Speaker 2 (26:28):
The IMF forecast that we're talking about increases the odds
of a recession here in the US to forty percent,
up from twenty seven in October.
Speaker 3 (26:38):
Where are you.
Speaker 14 (26:40):
We're much higher than that, I would say, closer to
eighty percent. And that's because the level of uncertainty that
we're seeing is so significantly high. I mean, it is
higher than the global financial crisis. It is higher than
when the US debt was downgraded in twenty eleven, and
higher than any previous recession going back to the eighties
(27:02):
when this index was created. So we think that that
means that there is a significant reduction in capex.
Speaker 15 (27:12):
We hear that from our clients.
Speaker 14 (27:14):
We also are starting to see signs that you're seeing
discretionary spending pullback on the part of consumers, and of
course that leads to a vicious circle where you see
pewer and pure jobs growth eventually a negative jobs print.
And so we're actually our baseline forecast is for negative
zero point one percent growth for all of twenty twenty
(27:34):
five for the US.
Speaker 11 (27:37):
So considering that a picture you're painting constance, it doesn't
look like a very optimistic one for the US economy.
I wonder what you made when President Trumpy yesterday spoke
on True Social about the calls for preemptive cuts from
the federal Reserve. He obviously think inserts rates need to
go down now. Is there a case to be made
for that view if there is indeed such a dour
(27:59):
outlook ahead of US.
Speaker 14 (28:00):
Yes, well, as Mike Key pointed out, and we've been saying,
the US is going to import inflation and export disinflation
deflation to the rest of the world. And so I
think what we're seeing from the President is perhaps the
setting up of escapegoat or someone to blame, saying, oh, well,
(28:22):
we wouldn't have this slowdown on growth if the FED
just acted sooner. And of course, whatever happens, we will
never have the counterfactual. But we do know that if
the FED were cut to cut too soon, it would
risk igniting inflation. We think that risk is somewhat mitigated
because of what we're seeing in terms of the behavior
(28:43):
of the tenure rates, right. We even with Scott Assn's
comments today, we don't see the tenure rallying all that much.
And so if the FED were to cut too soon,
right and that risk of inflation gets elevated, you're going
to see tenure rates go up. So it's not clear
that that would actually help the economy that much. Where
(29:05):
it really could serve to un anchor inflation expectations.
Speaker 15 (29:09):
So we think not.
Speaker 14 (29:10):
Only is the FED going to be so called fashionably late,
but we think, given their dual mandate, they are constitutionally
or I should say congressionally mandated to be a little
bit late, and they're likely not to cut rates until
June or so.
Speaker 3 (29:26):
Constance.
Speaker 2 (29:26):
You mentioned Scott Besson's remarks earlier today prompting quite a rally.
I just wonder what you make of what he said.
Wall Street is finding a positive spin on this. The
status quo here apparently not sustainable. But if the Treasury
Secretary is calling for de escalation, does that mean that
the reciprocal tariffs didn't work.
Speaker 10 (29:49):
Well?
Speaker 15 (29:49):
Of That's an interesting question.
Speaker 14 (29:52):
I mean, I would say it depends on what from
whose perspective?
Speaker 15 (29:57):
And how are we defined working?
Speaker 2 (29:58):
Right?
Speaker 14 (29:59):
Like, if you're a China uh and you and this
is going to really hurt your economy, and you've put
on retaliatory tariffs, and now the US is saying we're
gonna we're gonna walk back some of our side of
the tariffs, then I guess from China's perspective it did work.
Speaker 15 (30:17):
From our perspective, did it work? What are we trying
to achieve.
Speaker 14 (30:21):
You know, there's been a lot of muddle communication with
regard to what are these tariffs trying to achieve. Are
they a revenue generator? Are they supposed to reduce imports
and reduce our deficits, in which case they would not
be generating as much revenue. Are they supposed to bring
manufacturing back to the United States or bring manufacturing to
the United States. It's not clear that that that is
(30:45):
necessarily the one of the goals, and if it is,
we are we import so many intermediate goods that are
part of our manufacturing process that tariffs are not really going.
Speaker 15 (30:54):
To help facilitate that occurring.
Speaker 14 (30:58):
Is it a wan perone type policy where we're saying
we actually want to make everything in the United States
and we're not going to be integrated with the rest
of the world at all. We know that's not a
terribly successful policy tract to take. So it's kind of
unclear when we say work, what is the ultimate objective
of the tariffs and what is the ordering in which
(31:18):
we should rank the various objectives that have been thrown
out by the administration.
Speaker 6 (31:23):
Constance.
Speaker 11 (31:24):
We just have a minute left here, But when you
look at the bond market right now. What do you
see and how worried about it are you?
Speaker 15 (31:32):
I see an increase in term premium.
Speaker 14 (31:34):
I see the sell off as being part of a
global reallocation out of US assets, and what we see
day to day, of course, is the liquid assets.
Speaker 15 (31:44):
But we're also going.
Speaker 14 (31:45):
To begin to see, and we are already beginning to
see in terms of real estate, the selling of less
liquid assets, and so that increase in term premium is
going to prove, I think, very expensive if we continue
along this direction.
Speaker 11 (32:00):
All right, Constant's great to have you on Bloomberg TV
and Radio. Constant Centers, chief economist at EIU joining us
here on balance of power as we consider this downgraded growth.
Speaker 6 (32:09):
Outlook and how it is timed.
Speaker 11 (32:11):
With the words of Scott Besten, though not technically on
the record, not in public, not in front of the media,
just sources saying that he views the tariffs with China
is unsustainable. He thinks there will be a de escalation.
The problem is, Joe, no one is seemingly taking that
first de escalatory step at this point.
Speaker 2 (32:26):
That is the problem. You have to pick up the
phone and have a meeting at some point. Coming off
our highs, so the S and P five hundred still
up one hundred points. Thanks for listening to the Balance
of Power podcast. Make sure to subscribe if you haven't already,
at Apple, Spotify, or wherever you get your podcasts, and
you can find us live every weekday from Washington, DC
(32:47):
at noontime Eastern at Bloomberg dot com.
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