May 23, 2025 • 38 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
President Donald Trump dug in on his threat to impose a 50% tariff on the European Union and said a potential 25% charge on imported Apple Inc. smartphones would also apply to Samsung Corp. devices if they do not move production to the US.
Trump said Friday in a social media post that the higher charge on the EU would start on June 1 because “our discussions with them are going nowhere,” adding that he saw the bloc as “very difficult to deal with.”
The president later downplayed the EU’s ability to broker a lower rate, complaining about its trade practices and negotiating tactics and stating “I’m not looking for a deal. I mean, we’ve set the deal. It’s at 50%.”
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's Tyler Kendall.
- US Fleet Forces Commander Admiral Daryl Caudle.
- Bloomberg Politics Contributors Rick Davis and Jeanne Sheehan Zaino.
- Former House Financial Services Committee Chairman and Bloomberg Contributor Patrick McHenry.
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Transcript
Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:25):
It isn't a quiet Friday here in Washington. It seems
we never get to have one of those these days,
even ahead of a holiday weekend, at least, while President
Trump is active on True Social with new threats of
tariffs twenty five percent potentially on Apple if they don't
make their iPhones in the United States, and fifty percent
be threatened to be implemented on all goods coming out
of the European Union. Next Sunday, as the President on
(00:48):
True Social, Joe describes the European Union as having been
very difficult to work with on a trade deal, and
he says discussions with them are going nowhere.
Speaker 3 (00:56):
Yeah.
Speaker 4 (00:57):
Scott Bessen has made similar remarks here into The European
Union's trade chief will have a call today with Jamison
Greer that's set for later this afternoon, according to a
European Commission spokesperson. So you wonder if this is bluster
ahead of a meeting, or if we're really trying to
get the gears turning on something here that could land
at fifty percent. We may be buying more wine this
(01:19):
weekend ahead of that taking effects.
Speaker 2 (01:22):
Yeah, well, remember when he was threatening a much higher
than fifty percent. I think it was too tariff on
wine and champagne.
Speaker 4 (01:27):
Thank you, were negotiating with ourselves at this point. Let's
go to the White House to get details on this.
Bloomberg's Tyler Kendall is on the north lawn with more Tyler.
Speaker 5 (01:35):
Yeah, hey, Joe, Well, this really is setting the tone
ahead of this call that we're still expecting to happen
between the EU's trade chief and the USTR Gmis and Greer.
Keep in mind that earlier this week, Bloomberg News had
reported that the EU floated a new proposal to the
US when it came to trade, including that both countries
could gradually lower their tariffs down to zero when it
comes to certain agricultural products and industrial goods. Appear as
(01:58):
though that that really wasn't enough to move the needle here.
As President Trump outlined this morning, he thinks that no
progress has been made in terms of trade talks with
the European Union, and there's a few different complicating factors.
In fact, the Treasury Secretary Scott best And outlined one
of them earlier today on Bloomberg Television, saying, one of
the biggest issues is that the EU has to negotiate
as a block.
Speaker 6 (02:18):
I think the President was getting frustrated with the EU.
You know the problem with EU. I've said several times
they have a collective action problem. They're twenty seven countries,
they all have different needs. The Germans they are interested
in cars of French and agriculture, so and then you
have Brussels negotiating with them.
Speaker 5 (02:40):
That can also make it difficult to address some of
this White House's demands when it comes to what they
like to call those non monetary trade barriers. President Trump
highlighted them and his post on truth Social earlier today,
including the that value added taxes, which the European Union
really has said is fair and that isn't going to
really be up for negotiations when it comes to trade talk.
(03:01):
So we're going to have to see how this develops.
Of course, Joe and Kelly, if this escalation did go
into effect, it would be a pretty big one. Bloomberg
Economics estimates that if that fifty percent tariff went into play,
it would ultimately cut EU exports to the US by
more than half.
Speaker 2 (03:17):
All right, Bloomberg's Tyler Kendall live on the White House
North Lawn here on Bloomberg TV and Radio. Thank you
so much. As we are tracking this from here in Washington,
we also have our eyes on New York today really
all week. As Joe mentioned earlier, it's Fleet Week in
New York and up there for the festivities and joining
us now for an interview here on Balance of Powers.
Admiral Darryl Caddle, Commander of the US Fleet Forces Command.
(03:41):
He's with us from our headquarters up in New York City. Admiral,
thank you so much for your time. Obviously, Fleetweek is
about showing off and honoring the service members who serve
on these vessels. But I do want to ask you
about the size of the fleet as we begin our
conversation here, as we look at specifically the Harrison with China.
(04:01):
The US Navy as of now has two hundred and
ninety six ships in its fleet. China's is on pace
to surpass four hundred this year. Is there any way
for us to possibly catch up.
Speaker 7 (04:12):
Well, first of all, thank you for having me. I
really do appreciate it being on balance of power. I
just love the title of the show and being a
Navy commander and having a chance to talk with you today. Kaylee,
You know, I get this question a lot about the
difference in size of the Chinese fleet versus the US fleet,
shipbuilding capacity differences, and I just want to assure you
(04:34):
and others that will be listening that I don't worry
about it too much. You know, we do consider China
to be our pacing threat. We are concerned with our
shipbuilding capacity, but you know, there is nothing that beats
the quality of the US Navy warship. There's nothing that
beats our capability, our technology, and most of all our
(04:55):
sailors that are on board and crew those ships. That
just really is our true advantage. So while you know
we are playing a bit of catch up on shipbuilding capacity,
I don't think a strategy for the US should be
trying to match that. It's really, you know, our ability
to have quality over quantity is really a better strategy
(05:16):
for how we fight.
Speaker 4 (05:18):
Well, it's interesting, Admiral, and we do welcome you to
the program. It's great to see here as we look
at the parative ships kicking off Fleet Week in the Hudson.
It does bring that technology right in front of a
lot of people who might not be as familiar with
it as those who are.
Speaker 3 (05:33):
In the defense space.
Speaker 4 (05:35):
The shipbuilding capacity, though of the US, is something that
the Trump administration has addressed with an executive order calling
for the revitalization of shipbuilding.
Speaker 3 (05:43):
What is it that we need?
Speaker 7 (05:45):
Well, I'm thrilled that the Trump administration has done it.
The President is really emphasizing it. You know, this is
commercial shipping, this is navy shipping, this is all types
where the US has really divested in that capability, not
so much well our war shows, but incommercial shipping.
Speaker 8 (06:01):
So, first of all, you know.
Speaker 7 (06:02):
That capacity does need to increase, and we need to
become more self sufficient and our own you know, maritime
services and not be so reliant on international building. But
you know, from our warships in particular, we have a
lot of ships on contract and we are working hard
to emphasize with those defense industrial partners that build those
for US to actually deliver.
Speaker 8 (06:22):
Those on time and get back on track.
Speaker 7 (06:25):
As well as the maintenance contracts that we have those
need to improve in their performance as well.
Speaker 8 (06:30):
So this emphasis on this and putting some heat and.
Speaker 7 (06:32):
Light on the shipbuilding industry and our industrial partners that
work with US is extremely important for the US to
exercise our power projection globally.
Speaker 8 (06:43):
I think.
Speaker 9 (06:45):
Well, Admiral.
Speaker 2 (06:45):
Here in Washington, we were tracking yesterday the passage of
the so called One Big Beautiful Bill in the House
of Representatives that has a lot of President Trump's priorities
in it, but also included an additional one hundred and
fifty billion dollars in defense spending. Knowing that this has
been ministration has outlined other objectives, including the building out
of this so called Golden Dome. Are you expecting the
fleet to directly benefit from that additional funding? Is that
(07:09):
funding frankly adequate or is more needed?
Speaker 8 (07:12):
Well? I do think it's adequate.
Speaker 7 (07:14):
I really am very appreciative of the administration emphasizing defense
spending and getting the budgets right. You know, my job
at US Fleet Forces, our Atlantic Fleet really emphasizes readiness
and readiness costs and to have a military that's expeditionary
like the Navy, you know, on call, ready to go
worldwide globally requires a high level of readiness, and that's
(07:38):
across our ordnance capacities, our parts supplies, and of course
the training of our sailors. So I think the budget's
appropriate and the Navy's going to get a part of that,
and that's going to help us sustain that. I do
think the Golden Dome and particular what you mentioned that
the Navy will also be a major player in that
as well. Now, the Navy is what protect our homeland
(08:01):
from its two approaches, the Atlantic and the Pacific, and
so the threats don't just come from intercontinental ballistic missiles.
They can also come from submarine launch cruise missiles, and
that's where the Navy plays a prominent role in making
sure that our homeland is protected against those threats.
Speaker 4 (08:18):
Well, as we consider readiness, Admiral, we have to talk
about recruitment. It's something that we have heard this White
House and the Defense Secretary talk about quite a bit.
You're aiming to recruit a little over forty thousand new
sailors this year. In twenty twenty five, the Naval Institute says,
you're seeing the highest recruitment numbers in two decades.
Speaker 3 (08:34):
Will you exceed that goal.
Speaker 8 (08:37):
So we are already exceeding that.
Speaker 7 (08:39):
We had a banner year last year, and you know,
a little over forty thousand last year.
Speaker 8 (08:44):
We got that goal this year. Right now we're on pace.
We are four.
Speaker 7 (08:48):
Thousand sailors over where we were last year, and so
we are enjoying record recruitment and the recruiters across the
country just doing an incredible job to do that.
Speaker 8 (08:58):
It's very hard work.
Speaker 7 (09:00):
You know, we are all in the same demand for
this talent in our country, and when only less than
one percent of everyone in our country serves, you can
imagine a population of those that can do what we
do for a living is quite small. And across the
armed forces, we're all in demand for those. So I'm
very proud of our Navy recruiters to achieve that. I
would also mention to you that our retention is at
(09:21):
a record high. So when we get folks in, they
really enjoy what they're doing in the Navy, and I
think that's tied to our incredible mission and the Navy
is out there, they're way team, and so I think
we're enjoying record retention as well. When you combine those
we're going to put a real dentt in some of
the gaps at sea that we have had over the
last few years and really chip away at that to
(09:41):
get our wholeness back with respect to manning our ships.
Speaker 2 (09:46):
I feel like I should disclose a admiral that I
am the daughter of a naval eighty eator and I
know that he loved nothing more than flying at fourteens.
He spent a lot of time on these very vessels
we're talking about themselves, but I want to talk about
active service members who are finding that they have had
their deployments on carriers and other supportive vessels extended, specifically
(10:07):
in the Red Sea, as the US has been engaged
up until recently with Hoothy's and Iranian proxy, that of
course was quite disruptive in the Red Sea in particular
in recent years. The Truman is now heading home. But
as we considered the multiple F eighteens that actually fell
off that carrier, tens of millions of dollars in aircraft lost,
(10:29):
was there an over deployment problem with the Truman or
with anyone else stationed in the Red Seas? That why
a truce had to be reached with the Houthis.
Speaker 8 (10:38):
You know all great questions.
Speaker 7 (10:39):
You know, our carrier strike groups project power and dominating
control sea lanes like no other thing there is. I mean,
that's why the president, you know, in the crisis happens,
where's the nearest aircraft carrier in the nearest strike group,
and so high demand for aircraft carriers because of that
and our force structure currently, you know, we have a
(11:00):
you know, essentially about a three point zero presence worldwide
globally all the time, and so we shoot for about
a seven month deployment, So every thirty six month, we'd
like to see our carriers and the strike group cruisers
and destroyers deploy for about seven months every thirty six months.
When those get delayed, that does take a toll on
our readiness. It makes the return maintenance availabilities as we
(11:23):
call the maintenance periods longer. It's harder on the ships.
It's hard to recoup from that extended deployment. From the
impact it has on that readiness level, you know, it
impacts people's lives as well. People think they're coming back
at seven month point and they get back at the
eight to nine month point. They had weddings plan and
trips plan, and that kind of thing. So there's quality
of life impacts as well. But make no mistake about it,
(11:46):
there is no bigger compliment on Earth.
Speaker 8 (11:49):
Than to act to be extended.
Speaker 7 (11:51):
To know you are the force across the joint force
that the President and the Secretary of Defense needs to
be there to ensure we are deterring a girl making
sure the ceilings and communication remain open. And these sailors
wilfully and understand that we communicate that to them, and
they put their life on hold to do those extensions.
Speaker 8 (12:12):
With regarding the loss of aircraft.
Speaker 7 (12:14):
On board the extension of the Truman that those are
not related in any way. When you fly thousands of
combat sorties on occasion, there are going to be material failures.
There are going to be things that happen in real
combat that's happening in the Red Sea. It's going to
result in some combat losses of those aircraft.
Speaker 8 (12:34):
And when those happen.
Speaker 7 (12:35):
And if there's human mistakes, they get thoroughly investigated. We
look hard into that, we hold people accountable if that's necessary,
But most importantly, we learn and we grow as a force,
and we put those lessons learned back into the system.
On each training cycle, to make sure we're understanding what
we're wrong, to make sure we never make those mistakes again.
Speaker 8 (12:55):
And I don't want you to think.
Speaker 7 (12:56):
That being extended had anything to do with the loss
of the F eighteens.
Speaker 4 (13:00):
Well, we appreciate your answering that question, Admiral. They've been
busy out there, certainly according to the Pentagon, and what
you're telling us now, a massive drawdown in missiles, specifically
in rockets. What do we need how much have we
expended in what do we need to replenish the munitions
used against Yemen?
Speaker 7 (13:18):
Well, you know, high end munitions like standard missile series
Standard missile two s M two, SM six, SM three,
The missiles we shoot from our destroyers and cruisers are
our critical offensive and defensive weapons, and they're expensive and
we like to make sure when we expend one of
those that it's against the target that really it required
(13:40):
that level of capability to take out. So because of that,
when you know low calls drolls are being shot at
our ships one way UAVs if you will, you know,
we don't. We want to make sure we have matched
the right response capability weapon system against that threat. So
the Ford Strike Group, which is about the replace to Truman.
(14:01):
It's still finishing up its final deployment preparations. We'll be
deploying with a couple new missile systems. You can think
about missiles about the size of a hell fire missile.
There are two program of records that call the Coyote
and the road Runner missile systems that they'll be on
our destroyers. That missile is significantly cheaper, has great standoff capability,
(14:21):
and be the first time we've employed them, and that
strike group will be certified to actually use.
Speaker 8 (14:27):
That weapon system. Now, what that does is saves.
Speaker 7 (14:31):
Our main weapons battery and so with the offensive weapons
that we're having to use typically to defend ourselves, that
won't be as needed. So we're really happy about that.
It's more cost effective, it's more appropriate, and the ship's
captains have a lot of confidence they can defend them
ships properly with a lower cost weapon system.
Speaker 4 (14:50):
The really interesting Admiral Darryl Caudle with US live from
World Headquarters in New York in Manhattan for Fleetweek. He's
the commander of the US Fleet Forces comand admir a
really great pleasure to talk with you.
Speaker 3 (15:01):
We'd love to do it again.
Speaker 4 (15:02):
At some point here on Bloomberg, and congratulations to the
more than one thousand midshipmen graduating the Naval Academy today,
just up the road from where we are in Annapolis,
Go Navy.
Speaker 3 (15:13):
Go well with the daughter of a naval aviator. I'm
Joe Matthew. Did we learn a lot there that was
pretty good?
Speaker 2 (15:18):
Yeah, it was a great conversation and we still have
more of them ahead here on Balance of Power. On
Bloomberg TV and radio.
Speaker 1 (15:26):
You're listening to the Bloomberg Balance of Power Podcast. Catch
us live weekdays at noon and five pm Eastern on
Apple Cocklay 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 played Bloomberg eleven thirty.
Speaker 2 (15:45):
The Treasury Secretary Scott best Of telling Bloomberg earlier today
that we could see a number of trade deals in
the coming weeks, but perhaps President Trump isn't convinced one
of those will be the European Union? Is He today
threatens a fifty percent tariff on the EU effective June first,
and says discussions with them are going nowhere.
Speaker 4 (16:02):
This was quite the deep dive with the Treasury Secretary
and they spoke for about a half an hour. Talked
about a lot of what's happening in Washington right now,
but we do want to bring you into the conversation
specific to terrorists because it was today that President Trump
threatened this fifty percent levee against the EU.
Speaker 3 (16:19):
Reaction from the Treasury Secretary. Let's watch and listen.
Speaker 6 (16:23):
We have substantial revenue coming in now, and there is
at some point there's an equilibrium rate let's call it
a laughter curve for tariffs. So and I think we
will reach that rate. The other thing that's happening is
a lot of their tariff barriers or non tariff trade barriers.
(16:45):
A lot of these non tariff trade barriers are coming down,
so friction's decreasing there. And again, because we don't know
where these tariff negotiations are going to end up, they
won't end up being scored. But it's several hundred million
dollars a year, several hundred billion dollars a year of
revenue that will be used. For every one hundred billion,
(17:09):
that's one hundred billion less the bonds that Treasury has
to issue.
Speaker 10 (17:12):
When you talk about uncertainty and getting more certainty because
the tax bill. Some of the uncertainty, A lot of
it is because of tariffs right now, because we're not
exactly sure we're going to end up. Do you have
a sense when the economic community, the business community will
get better certainty on tariffs.
Speaker 6 (17:27):
Well, we've done the ninety day pause. As I mentioned
several times, we have eighteen important trading partners, So what
everyone should really focus on are those. We've done a
deal with the UK. My sense is over the next
couple of weeks we're going to have several large deals announced.
We have put a pause and a ninety day pause
(17:51):
with China. I expect that we will be negotiating in
person with them again. And then the President today when
we initiated the pause, the pause and the ten percent
are moving down from the April second rate to the
(18:11):
ten percent level was contingent on countries or trading blocks
coming and negotiating in good faith, and I think the
President was getting frustrated with the EU. You know the
problem with EU. I've said several times they have a
collective action problem. They're twenty seven countries, they all have
different needs. The Germans, they are interested in cars of
(18:33):
French and agriculture, so and then you have Brussels negotiating
with them.
Speaker 2 (18:41):
The Treasury Secretary Scott Bessett in conversation with Bloomberg Wall
Street Week host David Weston. You can of course find
that on Wall Street Week later tonight, but also on
the Bloomberg terminal and online. Interesting to hear the Treasury
Secretary specifically calling out the fact that this is a
multi nation block we're talking about when it comes to
the European Union, in particular twenty seven and countries have
to agree, maybe making these negotiations harder. Of course, President
(19:04):
Trump in his true Social post contending today that that
block was formed for the primary purpose of taking advantage
of the United States on trade. He has repeatedly made
this claim, Joe, even though it's not necessarily actually accurate.
Speaker 4 (19:17):
You wonder how all this plays into the meeting today
that our US trade representative will have with Trade minister
for the European Union that'll take place apparently this afternoon.
A lot of this is said to be bluster or
a negotiating tactic. Now we're at fifty percent. We'll see
where we are tomorrow. The markets seem to be taking
this so far instride.
Speaker 2 (19:36):
Yeah, so let's play it to our political panel now.
Rick Davis and Jeanie Shanzano Bloomberg Politics contributors are both
with US Rick is stone Court Capital partner and Republican strategists.
Genie are democratic analyst and senior Democracy fellow at the
Center for the Study of the Presidency and Congress. Rick,
when we look at the market reaction, which is Joe
rightly points out largely a shrug today, are we getting
to the point where no one is actually taking these
(19:58):
tariff threats from the president as seri as they were,
knowing how frequently they are walked back to have been
proven essentially, is just negotiating tactics.
Speaker 8 (20:07):
Yeah.
Speaker 11 (20:08):
I think to a large degree, the shock appeal to
the market is over. There is a sensibility that what
Donald Trump says on day one is not necessarily what
goes into effect day ninety and so I think there's
some reasoning there's some rational actors now starting to look
at this and saying, Okay, we now have a pattern.
Speaker 8 (20:30):
We're going to follow the pattern rather than the rhetoric.
And by the way, that was.
Speaker 11 (20:35):
Smart money in his first term. It wasn't what he said.
You had to wait and see what he actually did.
And so I think we're just sort of now relearned
the Trump's cycle and people are starting to adjust to that.
I would say, what's interesting about the latest conversation with
the secretary is this notion that they're now applying sort
(20:57):
of the Laugher curve to tariffs. Arthur Laffer, popularized in
the Reagan administration for his work around tax cuts, is
basically got the theory that there's a certain level of
tariff that gets you the most revenue. And so the
question is what do we think those levels are and
is that what Donald Trump is trying to achieve. So
(21:20):
I guess it's just wait and see what happens. But
this next G seven meeting is going to say a
lot about where we are with European tariffs.
Speaker 4 (21:27):
I'm sure, what do you think about this genie? It's
not a very useful negotiating tact if if it's not
taken seriously. Wall Street is giving its answer here does
the President become the boy who cried tariff?
Speaker 9 (21:42):
You know, I think he'd be very frustrated to hear
this conversation. And that's how it's being taken on Wall Street,
you know. And I think one of the dangers with
Donald Trump is he will frequently do what you don't
expect him to do, so he very well could pull
the trigger on some of this. I think it's very
curious though, and interesting that when Georgia Maloney was over
(22:04):
here not just a few weeks ago, as the representative
of the EU Block, we really believed that those conversations
were going well. But we can hear both from the
President and also Scott Besson that they are frustrated. And
of course, as we all know, when you are negotiating
with a federation states with wildly different interests, it is very,
(22:27):
very complicated. But it's hard for me to believe that
either Scott Besson or the President could be surprised that
Germany and France and Italy and all the other EU
countries have very different interests. That's what makes this complicated,
and which is why most people don't pull the trigger
on this kind of thing and then negotiate. They do
this in a more methodical manner than the President has
(22:49):
been keen on doing so far.
Speaker 5 (22:53):
Well.
Speaker 2 (22:54):
Of course, it's not just countries that are play here,
it's specific companies as well. Genie is it's not just
a fifty percent here if he's threatened on the European Union,
but also twenty five percent on Apple if they don't
make their iPhones in the United States. Knowing, Tim Cook
personally donated to his inaugural committee. He attended the inauguration.
(23:14):
He's met with Trump at the White House. President Trump
has told us repeatedly he's been in conversations with Tim
Cook as all of that. For nothing. Is no tech
company able to ingratiate itself enough for the President to
feel that they can still make their products anywhere but
the United States of America.
Speaker 9 (23:33):
Yeah, poor Tim Cook. And he was actually at the
White House on Tuesday. I actually shouldn't say poor Tim Cook.
I don't think he's not poor. But you know, he's
been trying to ingratiate himself, even as I mentioned on Tuesday,
he was there. But as we recall, when the President
was in the Middle East, he vocally said he still
has a little problem with Tim Cook. And that was
(23:54):
his building all over India, and he said, I don't
want him building there, I want him building here. Of course,
that is far easier said than done, and so you know,
I think the question now is does Tim Cook do
Apple try to wait out this president? Because the idea
that they could move manufacturing over here and kick it
(24:14):
up in the way the President and you know, people
at the Commerce Secretary would like to see is very,
very difficult to believe. In fact, some of the reports
say that if that happened, we'd all be paying thirty
five hundred dollars or more for an iPhone. I can't
do it, Kaylee, I just can't do it, So please
don't do that to us.
Speaker 12 (24:33):
Ye.
Speaker 3 (24:34):
You know, we talked to Bloomberg's Mark Erman about this.
Speaker 4 (24:36):
Our Apple reporter, who's dropping more scoops than anybody on
this company, wouldn't even try to put a number on it.
Ricky said it was unquantifiable. He also called it a
pipe dream and never going to happen. The idea of
Apple moving its manufacturing base here. You mentioned earlier though,
that if we did do that, it's not going to
be the army of millions of people turning screws into phones,
(24:59):
as Howard Lutton said at one point. It's going to
be likely AI driven robotic manufacturing that makes that even
feasible to take place. Here in the US, but it's
coming at the same time that the president is trying
to ban international students from going to Harvard.
Speaker 3 (25:15):
How do you get both?
Speaker 11 (25:17):
Yeah, that's the thing. I think they're mutually exclusive. You've
got to have people who have that technical skill if
you want to have manufacturing of these kind of technical lives.
And by the way, we need that for everything else
we're doing. We're not even talking about quantum computing or AI.
We're just talking about manufacturing. But when you go to Detroit,
(25:37):
when you go to around the country where people are manufacturing,
it's robotics that matter, it's AI that matters. It's not
you know, sort of the typical labor that we're used to.
I've been to a fox Con manufacturing facility. I mean,
it's very few people and a lot of mechanical activity
going on, all of which coordinated through you know, very
(25:59):
very sophisticated computer programming. So unless we have that capacity,
we are never going to be able to achieve the
kind of quote second Industrial Revolution that Donald Trump wants.
But it still doesn't satisfy the fundamental supply chain needs
and where we're going to find all the component parts
to this. So we are a long way away from
(26:21):
putting up a sophisticated and well equipped and supplied Apple
manufacturing facility here. But look what Tim Cook has learned
is you can rent Donald Trump, but you can't buy him.
Speaker 4 (26:35):
Well, you wonder how quiet the White House is going
to be if the likes of Tim Cook and Jensen
Wong can't get a favorable treatment after coming to kiss
the ring. Rick Davis and Genie Shanzano thank you as always.
Speaker 1 (26:49):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business apps and
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 4 (27:06):
Welcome to the Friday edition of Balance and Power. It's
great to have you here at the threshold of what
I hope is a long weekend for you, Memorial Day
weekend straight ahead.
Speaker 3 (27:13):
And if you're a lawmaker, you're just getting home.
Speaker 4 (27:16):
Reconnecting with the family, marching in parades, maybe holding a
couple of town hall meetings.
Speaker 3 (27:22):
I don't know.
Speaker 4 (27:23):
We'll find out because there'll be plenty of tape next
week if they do. As the Reconciliation bill, or the
beautiful bill goes from the House to the Senate. We've
been talking about this for a couple of days. It
was this time yesterday we had just the recent passage
of the bill in the House, and now a lot
of questions about what the Senate will do after this
very careful balancing act. Mike Johnson threads the needle again,
(27:44):
only to have the whole thing torn up in the Senate,
or so they say, we're going to find out together.
There are Republicans in the Senate who don't want the
cuts to Medicaid spending will pose the repeal of IRA
clean energy tax credits. Some of them want deeper spending cuts.
Ask Mike Crapo, he wants the tax cuts to be permanent.
That's going to cost more. Nobody likes the salt cap.
(28:07):
We keep hearing, and so what it will be like
this weekend to be a lawmaker back home, as we said,
maybe going to the local barbecue, hearing from voters on this,
knowing that a lot of things just agreed upon could
soon change. Really delighted to let you know that the
Chairman is with us here on the Friday edition to
talk this out. A man who knows a lot more
(28:28):
about holding the gavel than most people walking the earth.
Speaker 3 (28:31):
Patrick McHenry, the former chair.
Speaker 4 (28:32):
Of the House Financial Services Committee, former Speaker pro tem
Bloomberg contributor. I'm proud to say now, Congressman, welcome to
the family. I haven't had a chance to say that.
That's really exciting for us.
Speaker 3 (28:43):
Are you a gas or charcoal guy?
Speaker 12 (28:48):
Gas out of convenience, But if I had more time, charcoal.
Speaker 3 (28:52):
The right answer. What is it going to be like
for Republican lawmakers going home?
Speaker 4 (28:56):
Will they be celebrated in their home districts for getting
this done?
Speaker 12 (29:00):
Yes? The fact that this was such a grueling process
made the outcome even more joyous for Republicans and the
Republican base. This is a set of aggressive spending cuts
over the over the tenure window that this bill is
written for. It extends the tax cuts and Jobs Acts.
(29:20):
President Trump's first term key domestic initiative. You know that
really gave him the the the economic narrative that led
him back to the presidency in the second term. So,
you know, key to the Trump narrative and a massive
success for the President's leadership team in the House Representatives.
Speaker Johnson and Scalise and Emmer and the work that
(29:45):
they put in with Chairman Jason Smith in the House.
So I mean real kudos to them on pulling off
what was an arduous, difficult, narrow outcome, but a decisive one.
Speaker 3 (29:55):
Yeah, a rabit out of a hat. I keep hearing.
Speaker 4 (29:59):
You know what it's like, though, Congressman to sit in
the House and look next door to the Senate and wonder, well, God,
what are they going to do? And do they care
about the balancing act that the feet that we just
pulled off? You heard the list I just ran through,
from medicaid to the IRA to salts. What kind of
changes do you really expect?
Speaker 12 (30:17):
Well, so, the salt cap is purely a House initiative
because there are no Republican centers that represent states where
the salt deduction is a driving political force. The balance
of power in the House for Republicans are Republicans from
blue states like New Jersey and New York that were
(30:38):
instrumental in crafting the salt compromise or raise the ten
thousand dollars cap to forty thousand dollars. There's a science
behind it, there's art in the art of the possible
and legislation.
Speaker 11 (30:49):
You're also going.
Speaker 12 (30:50):
To see a series play with the Biden era clean
energy tax credits. You saw this with nuclear. Nuclear has
a very long runway for that sunset it. It's a
very popular tax credit to get more nuclear, more nuclear
options in our electricity grid. But the other initiatives have
(31:10):
different phase outs. Because of the political potency in Republican
members districts that voted for this bill, we're going to
see the Senate with a different set of equities on
those tax credits. There's gonna be a lot of play there.
There's going to be a significant amount of play for
other provisions related to salt, like how pass throughs use
(31:31):
the salt deduction or able to use the salt deduction.
You're going to see significant movement in sort of a
secondary set of tax issues for corporations. So there's a
lot of play here. But I think about eighty percent
of the bill it will be the same before this
goes to the President's desk.
Speaker 3 (31:52):
Well, all right, that's great.
Speaker 4 (31:54):
Patrick McHenry says, eighty percent of the bill, does Chip
Roy vote for that?
Speaker 12 (31:59):
Well, what I'm saying is eighty percent will be the same.
The Senate will accept that so okay, So.
Speaker 3 (32:09):
Torture will it be I guess when it comes back
to the House.
Speaker 12 (32:12):
Oh, quite torture. No, it's just so what happens is
after you make a compromise like this out of the House,
just grolling every every provision that you made changes to
to get somebody's vote is highly important to that member
and to your one vote majority to get it out
of the House. One vote margin to get out of
(32:34):
the House. So any change here does have huge political
risk for passage. The way that the presidency, though which
we saw bring was brought to bear on the House
of Representatives, meant that maybe people did have serious disagreements,
maybe there are really fractious, nasty meetings for months. But
(32:55):
the President closed the deal and his helpmate in this
is Speaker Johnson, and they closed the deal and got
a bill out of the House. So what what will
be What will happen now is that the US Senate
will have to act before the fourth of July recess
in order to meet a timeline that is dictated by
(33:17):
the dead ceiling deadline UH, which which means the Congress
needs to have this bill, this tax bill, which is
largely extension of the current code frankly with a number
of spending cuts attached to it and some small small
changes to the code. They have to they have to
get the bill through the Senate before the fourth of
July in order to have that bill to the present's
(33:38):
desk by the end of July. This is a very
tough task in a in a in a Congress with
wide majorities for for the party in power, and these
are not wide majorities for House and Senate Republicans.
Speaker 4 (33:51):
So what will be k Street's posture over the course
of June, and what will it be like to be
a lawmaker sitting by the phone.
Speaker 12 (34:00):
This is where you make your bones. This is where
legislators earn their keep. This is this is your paycheck
for the whole Congress. You got to get the president's
signature legislative item through the Congress with with the main
points of his domestic agenda. The defense plus up is
(34:22):
a big part of this conversation. In this bill, and
the spending cuts and all the tax provisions that the
President pledged in the campaign are in this bill. It
is go time. And if you're a lobbyist on K Street,
you're not making summer plans because your summer just got
sucked away by the House and the Senate grinding this
(34:44):
thing out, and it will be a hell of a
nasty grind.
Speaker 4 (34:49):
Wow, what's the money maker on K Street? Is it
the clean energy tax credits? The incentives?
Speaker 12 (34:56):
I think yes, I think that's a It's a huge
driver of the conversation, serious driver of the conversation. There's
so much that that the Bidy administration put into the code,
and there's so much economic interest aligned with those provisions.
Speaker 11 (35:12):
Some of them are.
Speaker 12 (35:12):
Being significantly used, others are not used as much. But
the political potency across red states and which will matter
for the US Senate Republicans and red districts across the country,
these things do matter, and frankly, they're largely popular with
(35:34):
the voting populace and the business community. So it makes
it really a challenging thing to bring fiscal discipline at
the same time that you have very popular provisions you
have to take away in order to get some fiscal
discipline back into into this bill.
Speaker 4 (35:53):
As a man who's actually held the gavel stood of
the speaker's rostrum, you know as well as we do
that this didn't need to just be a one vote
margin could have had a couple more Republicans. What do
you do when you're holding the gavel and Andrew Garbarino
falls asleep in the back of the room. Are you
telling me nobody could wake him up?
Speaker 12 (36:15):
There are a couple of folks that slept across the
last two weeks in Congress, some Democratic members, some Republican members.
I don't begrudge them for this, but you know, sure
is embarrassing.
Speaker 8 (36:32):
Sure is embarrassing.
Speaker 12 (36:34):
Having said that, Eah, I mean I didn't have a
problem with falling asleep in my early going in Congress.
Had a problem with my mouth, and I would say
things would get me in trouble. So far, better to
fall asleep than to sleep laboratory things.
Speaker 4 (36:53):
Fair enough, if you're with us on YouTube, you saw
a great reaction. I'm not sure anyone on the radio. Congressman,
do they get this before we hit the debt limit?
In other words, this will remain part of the package.
Speaker 12 (37:05):
Yes, And the way to think of this bill is
that it's I mentioned this. It's an extension of the
current code. They're taking as base text, the Tax Cuts
and Jobs Act of twenty seventeen. In twenty seventeen, we
created a whole new tax regime. We didn't use any
of the previous tax code. So what you're talking about
(37:27):
here is a set of changes that are modest in scope.
You can look at them online and you can see
what the provisions, and you can actually see for yourself
the provisions that they're altering and changing or adding, and
they're adding, for instance, no tax on tips, a few
(37:47):
other items at the president's pledged in the campaign. But
it's not a dramatic set of new things added to
the code. It's revisions down, not really a great deal
of additions too. So I think they can get it done.
I think they can get it done by the end
of July. But it is going to be a long, hot, nasty,
cool summer for a House Republicans.
Speaker 4 (38:09):
We're so glad that you're going to be along for
the ride, though. This is fantastic. Bloomberg contributor Patrick McHenry
I said it out loud only on Bloomberg. 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 at noontime Eastern at bloomberg
(38:31):
dot com.
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Balance of Power podcast. Catch us live weekdays at
noon and five pm Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (00:25):
It isn't a quiet Friday here in Washington. It seems
we never get to have one of those these days,
even ahead of a holiday weekend, at least, while President
Trump is active on True Social with new threats of
tariffs twenty five percent potentially on Apple if they don't
make their iPhones in the United States, and fifty percent
be threatened to be implemented on all goods coming out
of the European Union. Next Sunday, as the President on
(00:48):
True Social, Joe describes the European Union as having been
very difficult to work with on a trade deal, and
he says discussions with them are going nowhere.
Speaker 3 (00:56):
Yeah.
Speaker 4 (00:57):
Scott Bessen has made similar remarks here into The European
Union's trade chief will have a call today with Jamison
Greer that's set for later this afternoon, according to a
European Commission spokesperson. So you wonder if this is bluster
ahead of a meeting, or if we're really trying to
get the gears turning on something here that could land
at fifty percent. We may be buying more wine this
(01:19):
weekend ahead of that taking effects.
Speaker 2 (01:22):
Yeah, well, remember when he was threatening a much higher
than fifty percent. I think it was too tariff on
wine and champagne.
Speaker 4 (01:27):
Thank you, were negotiating with ourselves at this point. Let's
go to the White House to get details on this.
Bloomberg's Tyler Kendall is on the north lawn with more Tyler.
Speaker 5 (01:35):
Yeah, hey, Joe, Well, this really is setting the tone
ahead of this call that we're still expecting to happen
between the EU's trade chief and the USTR Gmis and Greer.
Keep in mind that earlier this week, Bloomberg News had
reported that the EU floated a new proposal to the
US when it came to trade, including that both countries
could gradually lower their tariffs down to zero when it
comes to certain agricultural products and industrial goods. Appear as
(01:58):
though that that really wasn't enough to move the needle here.
As President Trump outlined this morning, he thinks that no
progress has been made in terms of trade talks with
the European Union, and there's a few different complicating factors.
In fact, the Treasury Secretary Scott best And outlined one
of them earlier today on Bloomberg Television, saying, one of
the biggest issues is that the EU has to negotiate
as a block.
Speaker 6 (02:18):
I think the President was getting frustrated with the EU.
You know the problem with EU. I've said several times
they have a collective action problem. They're twenty seven countries,
they all have different needs. The Germans they are interested
in cars of French and agriculture, so and then you
have Brussels negotiating with them.
Speaker 5 (02:40):
That can also make it difficult to address some of
this White House's demands when it comes to what they
like to call those non monetary trade barriers. President Trump
highlighted them and his post on truth Social earlier today,
including the that value added taxes, which the European Union
really has said is fair and that isn't going to
really be up for negotiations when it comes to trade talk.
(03:01):
So we're going to have to see how this develops.
Of course, Joe and Kelly, if this escalation did go
into effect, it would be a pretty big one. Bloomberg
Economics estimates that if that fifty percent tariff went into play,
it would ultimately cut EU exports to the US by
more than half.
Speaker 2 (03:17):
All right, Bloomberg's Tyler Kendall live on the White House
North Lawn here on Bloomberg TV and Radio. Thank you
so much. As we are tracking this from here in Washington,
we also have our eyes on New York today really
all week. As Joe mentioned earlier, it's Fleet Week in
New York and up there for the festivities and joining
us now for an interview here on Balance of Powers.
Admiral Darryl Caddle, Commander of the US Fleet Forces Command.
(03:41):
He's with us from our headquarters up in New York City. Admiral,
thank you so much for your time. Obviously, Fleetweek is
about showing off and honoring the service members who serve
on these vessels. But I do want to ask you
about the size of the fleet as we begin our
conversation here, as we look at specifically the Harrison with China.
(04:01):
The US Navy as of now has two hundred and
ninety six ships in its fleet. China's is on pace
to surpass four hundred this year. Is there any way
for us to possibly catch up.
Speaker 7 (04:12):
Well, first of all, thank you for having me. I
really do appreciate it being on balance of power. I
just love the title of the show and being a
Navy commander and having a chance to talk with you today. Kaylee,
You know, I get this question a lot about the
difference in size of the Chinese fleet versus the US fleet,
shipbuilding capacity differences, and I just want to assure you
(04:34):
and others that will be listening that I don't worry
about it too much. You know, we do consider China
to be our pacing threat. We are concerned with our
shipbuilding capacity, but you know, there is nothing that beats
the quality of the US Navy warship. There's nothing that
beats our capability, our technology, and most of all our
(04:55):
sailors that are on board and crew those ships. That
just really is our true advantage. So while you know
we are playing a bit of catch up on shipbuilding capacity,
I don't think a strategy for the US should be
trying to match that. It's really, you know, our ability
to have quality over quantity is really a better strategy
(05:16):
for how we fight.
Speaker 4 (05:18):
Well, it's interesting, Admiral, and we do welcome you to
the program. It's great to see here as we look
at the parative ships kicking off Fleet Week in the Hudson.
It does bring that technology right in front of a
lot of people who might not be as familiar with
it as those who are.
Speaker 3 (05:33):
In the defense space.
Speaker 4 (05:35):
The shipbuilding capacity, though of the US, is something that
the Trump administration has addressed with an executive order calling
for the revitalization of shipbuilding.
Speaker 3 (05:43):
What is it that we need?
Speaker 7 (05:45):
Well, I'm thrilled that the Trump administration has done it.
The President is really emphasizing it. You know, this is
commercial shipping, this is navy shipping, this is all types
where the US has really divested in that capability, not
so much well our war shows, but incommercial shipping.
Speaker 8 (06:01):
So, first of all, you know.
Speaker 7 (06:02):
That capacity does need to increase, and we need to
become more self sufficient and our own you know, maritime
services and not be so reliant on international building. But
you know, from our warships in particular, we have a
lot of ships on contract and we are working hard
to emphasize with those defense industrial partners that build those
for US to actually deliver.
Speaker 8 (06:22):
Those on time and get back on track.
Speaker 7 (06:25):
As well as the maintenance contracts that we have those
need to improve in their performance as well.
Speaker 8 (06:30):
So this emphasis on this and putting some heat and.
Speaker 7 (06:32):
Light on the shipbuilding industry and our industrial partners that
work with US is extremely important for the US to
exercise our power projection globally.
Speaker 8 (06:43):
I think.
Speaker 9 (06:45):
Well, Admiral.
Speaker 2 (06:45):
Here in Washington, we were tracking yesterday the passage of
the so called One Big Beautiful Bill in the House
of Representatives that has a lot of President Trump's priorities
in it, but also included an additional one hundred and
fifty billion dollars in defense spending. Knowing that this has
been ministration has outlined other objectives, including the building out
of this so called Golden Dome. Are you expecting the
fleet to directly benefit from that additional funding? Is that
(07:09):
funding frankly adequate or is more needed?
Speaker 8 (07:12):
Well? I do think it's adequate.
Speaker 7 (07:14):
I really am very appreciative of the administration emphasizing defense
spending and getting the budgets right. You know, my job
at US Fleet Forces, our Atlantic Fleet really emphasizes readiness
and readiness costs and to have a military that's expeditionary
like the Navy, you know, on call, ready to go
worldwide globally requires a high level of readiness, and that's
(07:38):
across our ordnance capacities, our parts supplies, and of course
the training of our sailors. So I think the budget's
appropriate and the Navy's going to get a part of that,
and that's going to help us sustain that. I do
think the Golden Dome and particular what you mentioned that
the Navy will also be a major player in that
as well. Now, the Navy is what protect our homeland
(08:01):
from its two approaches, the Atlantic and the Pacific, and
so the threats don't just come from intercontinental ballistic missiles.
They can also come from submarine launch cruise missiles, and
that's where the Navy plays a prominent role in making
sure that our homeland is protected against those threats.
Speaker 4 (08:18):
Well, as we consider readiness, Admiral, we have to talk
about recruitment. It's something that we have heard this White
House and the Defense Secretary talk about quite a bit.
You're aiming to recruit a little over forty thousand new
sailors this year. In twenty twenty five, the Naval Institute says,
you're seeing the highest recruitment numbers in two decades.
Speaker 3 (08:34):
Will you exceed that goal.
Speaker 8 (08:37):
So we are already exceeding that.
Speaker 7 (08:39):
We had a banner year last year, and you know,
a little over forty thousand last year.
Speaker 8 (08:44):
We got that goal this year. Right now we're on pace.
We are four.
Speaker 7 (08:48):
Thousand sailors over where we were last year, and so
we are enjoying record recruitment and the recruiters across the
country just doing an incredible job to do that.
Speaker 8 (08:58):
It's very hard work.
Speaker 7 (09:00):
You know, we are all in the same demand for
this talent in our country, and when only less than
one percent of everyone in our country serves, you can
imagine a population of those that can do what we
do for a living is quite small. And across the
armed forces, we're all in demand for those. So I'm
very proud of our Navy recruiters to achieve that. I
would also mention to you that our retention is at
(09:21):
a record high. So when we get folks in, they
really enjoy what they're doing in the Navy, and I
think that's tied to our incredible mission and the Navy
is out there, they're way team, and so I think
we're enjoying record retention as well. When you combine those
we're going to put a real dentt in some of
the gaps at sea that we have had over the
last few years and really chip away at that to
(09:41):
get our wholeness back with respect to manning our ships.
Speaker 2 (09:46):
I feel like I should disclose a admiral that I
am the daughter of a naval eighty eator and I
know that he loved nothing more than flying at fourteens.
He spent a lot of time on these very vessels
we're talking about themselves, but I want to talk about
active service members who are finding that they have had
their deployments on carriers and other supportive vessels extended, specifically
(10:07):
in the Red Sea, as the US has been engaged
up until recently with Hoothy's and Iranian proxy, that of
course was quite disruptive in the Red Sea in particular
in recent years. The Truman is now heading home. But
as we considered the multiple F eighteens that actually fell
off that carrier, tens of millions of dollars in aircraft lost,
(10:29):
was there an over deployment problem with the Truman or
with anyone else stationed in the Red Seas? That why
a truce had to be reached with the Houthis.
Speaker 8 (10:38):
You know all great questions.
Speaker 7 (10:39):
You know, our carrier strike groups project power and dominating
control sea lanes like no other thing there is. I mean,
that's why the president, you know, in the crisis happens,
where's the nearest aircraft carrier in the nearest strike group,
and so high demand for aircraft carriers because of that
and our force structure currently, you know, we have a
(11:00):
you know, essentially about a three point zero presence worldwide
globally all the time, and so we shoot for about
a seven month deployment, So every thirty six month, we'd
like to see our carriers and the strike group cruisers
and destroyers deploy for about seven months every thirty six months.
When those get delayed, that does take a toll on
our readiness. It makes the return maintenance availabilities as we
(11:23):
call the maintenance periods longer. It's harder on the ships.
It's hard to recoup from that extended deployment. From the
impact it has on that readiness level, you know, it
impacts people's lives as well. People think they're coming back
at seven month point and they get back at the
eight to nine month point. They had weddings plan and
trips plan, and that kind of thing. So there's quality
of life impacts as well. But make no mistake about it,
(11:46):
there is no bigger compliment on Earth.
Speaker 8 (11:49):
Than to act to be extended.
Speaker 7 (11:51):
To know you are the force across the joint force
that the President and the Secretary of Defense needs to
be there to ensure we are deterring a girl making
sure the ceilings and communication remain open. And these sailors
wilfully and understand that we communicate that to them, and
they put their life on hold to do those extensions.
Speaker 8 (12:12):
With regarding the loss of aircraft.
Speaker 7 (12:14):
On board the extension of the Truman that those are
not related in any way. When you fly thousands of
combat sorties on occasion, there are going to be material failures.
There are going to be things that happen in real
combat that's happening in the Red Sea. It's going to
result in some combat losses of those aircraft.
Speaker 8 (12:34):
And when those happen.
Speaker 7 (12:35):
And if there's human mistakes, they get thoroughly investigated. We
look hard into that, we hold people accountable if that's necessary,
But most importantly, we learn and we grow as a force,
and we put those lessons learned back into the system.
On each training cycle, to make sure we're understanding what
we're wrong, to make sure we never make those mistakes again.
Speaker 8 (12:55):
And I don't want you to think.
Speaker 7 (12:56):
That being extended had anything to do with the loss
of the F eighteens.
Speaker 4 (13:00):
Well, we appreciate your answering that question, Admiral. They've been
busy out there, certainly according to the Pentagon, and what
you're telling us now, a massive drawdown in missiles, specifically
in rockets. What do we need how much have we
expended in what do we need to replenish the munitions
used against Yemen?
Speaker 7 (13:18):
Well, you know, high end munitions like standard missile series
Standard missile two s M two, SM six, SM three,
The missiles we shoot from our destroyers and cruisers are
our critical offensive and defensive weapons, and they're expensive and
we like to make sure when we expend one of
those that it's against the target that really it required
(13:40):
that level of capability to take out. So because of that,
when you know low calls drolls are being shot at
our ships one way UAVs if you will, you know,
we don't. We want to make sure we have matched
the right response capability weapon system against that threat. So
the Ford Strike Group, which is about the replace to Truman.
(14:01):
It's still finishing up its final deployment preparations. We'll be
deploying with a couple new missile systems. You can think
about missiles about the size of a hell fire missile.
There are two program of records that call the Coyote
and the road Runner missile systems that they'll be on
our destroyers. That missile is significantly cheaper, has great standoff capability,
(14:21):
and be the first time we've employed them, and that
strike group will be certified to actually use.
Speaker 8 (14:27):
That weapon system. Now, what that does is saves.
Speaker 7 (14:31):
Our main weapons battery and so with the offensive weapons
that we're having to use typically to defend ourselves, that
won't be as needed. So we're really happy about that.
It's more cost effective, it's more appropriate, and the ship's
captains have a lot of confidence they can defend them
ships properly with a lower cost weapon system.
Speaker 4 (14:50):
The really interesting Admiral Darryl Caudle with US live from
World Headquarters in New York in Manhattan for Fleetweek. He's
the commander of the US Fleet Forces comand admir a
really great pleasure to talk with you.
Speaker 3 (15:01):
We'd love to do it again.
Speaker 4 (15:02):
At some point here on Bloomberg, and congratulations to the
more than one thousand midshipmen graduating the Naval Academy today,
just up the road from where we are in Annapolis,
Go Navy.
Speaker 3 (15:13):
Go well with the daughter of a naval aviator. I'm
Joe Matthew. Did we learn a lot there that was
pretty good?
Speaker 2 (15:18):
Yeah, it was a great conversation and we still have
more of them ahead here on Balance of Power. On
Bloomberg TV and radio.
Speaker 1 (15:26):
You're listening to the Bloomberg Balance of Power Podcast. Catch
us live weekdays at noon and five pm Eastern on
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flagship New York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 2 (15:45):
The Treasury Secretary Scott best Of telling Bloomberg earlier today
that we could see a number of trade deals in
the coming weeks, but perhaps President Trump isn't convinced one
of those will be the European Union? Is He today
threatens a fifty percent tariff on the EU effective June first,
and says discussions with them are going nowhere.
Speaker 4 (16:02):
This was quite the deep dive with the Treasury Secretary
and they spoke for about a half an hour. Talked
about a lot of what's happening in Washington right now,
but we do want to bring you into the conversation
specific to terrorists because it was today that President Trump
threatened this fifty percent levee against the EU.
Speaker 3 (16:19):
Reaction from the Treasury Secretary. Let's watch and listen.
Speaker 6 (16:23):
We have substantial revenue coming in now, and there is
at some point there's an equilibrium rate let's call it
a laughter curve for tariffs. So and I think we
will reach that rate. The other thing that's happening is
a lot of their tariff barriers or non tariff trade barriers.
(16:45):
A lot of these non tariff trade barriers are coming down,
so friction's decreasing there. And again, because we don't know
where these tariff negotiations are going to end up, they
won't end up being scored. But it's several hundred million
dollars a year, several hundred billion dollars a year of
revenue that will be used. For every one hundred billion,
(17:09):
that's one hundred billion less the bonds that Treasury has
to issue.
Speaker 10 (17:12):
When you talk about uncertainty and getting more certainty because
the tax bill. Some of the uncertainty, A lot of
it is because of tariffs right now, because we're not
exactly sure we're going to end up. Do you have
a sense when the economic community, the business community will
get better certainty on tariffs.
Speaker 6 (17:27):
Well, we've done the ninety day pause. As I mentioned
several times, we have eighteen important trading partners, So what
everyone should really focus on are those. We've done a
deal with the UK. My sense is over the next
couple of weeks we're going to have several large deals announced.
We have put a pause and a ninety day pause
(17:51):
with China. I expect that we will be negotiating in
person with them again. And then the President today when
we initiated the pause, the pause and the ten percent
are moving down from the April second rate to the
(18:11):
ten percent level was contingent on countries or trading blocks
coming and negotiating in good faith, and I think the
President was getting frustrated with the EU. You know the
problem with EU. I've said several times they have a
collective action problem. They're twenty seven countries, they all have
different needs. The Germans, they are interested in cars of
(18:33):
French and agriculture, so and then you have Brussels negotiating
with them.
Speaker 2 (18:41):
The Treasury Secretary Scott Bessett in conversation with Bloomberg Wall
Street Week host David Weston. You can of course find
that on Wall Street Week later tonight, but also on
the Bloomberg terminal and online. Interesting to hear the Treasury
Secretary specifically calling out the fact that this is a
multi nation block we're talking about when it comes to
the European Union, in particular twenty seven and countries have
to agree, maybe making these negotiations harder. Of course, President
(19:04):
Trump in his true Social post contending today that that
block was formed for the primary purpose of taking advantage
of the United States on trade. He has repeatedly made
this claim, Joe, even though it's not necessarily actually accurate.
Speaker 4 (19:17):
You wonder how all this plays into the meeting today
that our US trade representative will have with Trade minister
for the European Union that'll take place apparently this afternoon.
A lot of this is said to be bluster or
a negotiating tactic. Now we're at fifty percent. We'll see
where we are tomorrow. The markets seem to be taking
this so far instride.
Speaker 2 (19:36):
Yeah, so let's play it to our political panel now.
Rick Davis and Jeanie Shanzano Bloomberg Politics contributors are both
with US Rick is stone Court Capital partner and Republican strategists.
Genie are democratic analyst and senior Democracy fellow at the
Center for the Study of the Presidency and Congress. Rick,
when we look at the market reaction, which is Joe
rightly points out largely a shrug today, are we getting
to the point where no one is actually taking these
(19:58):
tariff threats from the president as seri as they were,
knowing how frequently they are walked back to have been
proven essentially, is just negotiating tactics.
Speaker 8 (20:07):
Yeah.
Speaker 11 (20:08):
I think to a large degree, the shock appeal to
the market is over. There is a sensibility that what
Donald Trump says on day one is not necessarily what
goes into effect day ninety and so I think there's
some reasoning there's some rational actors now starting to look
at this and saying, Okay, we now have a pattern.
Speaker 8 (20:30):
We're going to follow the pattern rather than the rhetoric.
And by the way, that was.
Speaker 11 (20:35):
Smart money in his first term. It wasn't what he said.
You had to wait and see what he actually did.
And so I think we're just sort of now relearned
the Trump's cycle and people are starting to adjust to that.
I would say, what's interesting about the latest conversation with
the secretary is this notion that they're now applying sort
(20:57):
of the Laugher curve to tariffs. Arthur Laffer, popularized in
the Reagan administration for his work around tax cuts, is
basically got the theory that there's a certain level of
tariff that gets you the most revenue. And so the
question is what do we think those levels are and
is that what Donald Trump is trying to achieve. So
(21:20):
I guess it's just wait and see what happens. But
this next G seven meeting is going to say a
lot about where we are with European tariffs.
Speaker 4 (21:27):
I'm sure, what do you think about this genie? It's
not a very useful negotiating tact if if it's not
taken seriously. Wall Street is giving its answer here does
the President become the boy who cried tariff?
Speaker 9 (21:42):
You know, I think he'd be very frustrated to hear
this conversation. And that's how it's being taken on Wall Street,
you know. And I think one of the dangers with
Donald Trump is he will frequently do what you don't
expect him to do, so he very well could pull
the trigger on some of this. I think it's very
curious though, and interesting that when Georgia Maloney was over
(22:04):
here not just a few weeks ago, as the representative
of the EU Block, we really believed that those conversations
were going well. But we can hear both from the
President and also Scott Besson that they are frustrated. And
of course, as we all know, when you are negotiating
with a federation states with wildly different interests, it is very,
(22:27):
very complicated. But it's hard for me to believe that
either Scott Besson or the President could be surprised that
Germany and France and Italy and all the other EU
countries have very different interests. That's what makes this complicated,
and which is why most people don't pull the trigger
on this kind of thing and then negotiate. They do
this in a more methodical manner than the President has
(22:49):
been keen on doing so far.
Speaker 5 (22:53):
Well.
Speaker 2 (22:54):
Of course, it's not just countries that are play here,
it's specific companies as well. Genie is it's not just
a fifty percent here if he's threatened on the European Union,
but also twenty five percent on Apple if they don't
make their iPhones in the United States. Knowing, Tim Cook
personally donated to his inaugural committee. He attended the inauguration.
(23:14):
He's met with Trump at the White House. President Trump
has told us repeatedly he's been in conversations with Tim
Cook as all of that. For nothing. Is no tech
company able to ingratiate itself enough for the President to
feel that they can still make their products anywhere but
the United States of America.
Speaker 9 (23:33):
Yeah, poor Tim Cook. And he was actually at the
White House on Tuesday. I actually shouldn't say poor Tim Cook.
I don't think he's not poor. But you know, he's
been trying to ingratiate himself, even as I mentioned on Tuesday,
he was there. But as we recall, when the President
was in the Middle East, he vocally said he still
has a little problem with Tim Cook. And that was
(23:54):
his building all over India, and he said, I don't
want him building there, I want him building here. Of course,
that is far easier said than done, and so you know,
I think the question now is does Tim Cook do
Apple try to wait out this president? Because the idea
that they could move manufacturing over here and kick it
(24:14):
up in the way the President and you know, people
at the Commerce Secretary would like to see is very,
very difficult to believe. In fact, some of the reports
say that if that happened, we'd all be paying thirty
five hundred dollars or more for an iPhone. I can't
do it, Kaylee, I just can't do it, So please
don't do that to us.
Speaker 12 (24:33):
Ye.
Speaker 3 (24:34):
You know, we talked to Bloomberg's Mark Erman about this.
Speaker 4 (24:36):
Our Apple reporter, who's dropping more scoops than anybody on
this company, wouldn't even try to put a number on it.
Ricky said it was unquantifiable. He also called it a
pipe dream and never going to happen. The idea of
Apple moving its manufacturing base here. You mentioned earlier though,
that if we did do that, it's not going to
be the army of millions of people turning screws into phones,
(24:59):
as Howard Lutton said at one point. It's going to
be likely AI driven robotic manufacturing that makes that even
feasible to take place. Here in the US, but it's
coming at the same time that the president is trying
to ban international students from going to Harvard.
Speaker 3 (25:15):
How do you get both?
Speaker 11 (25:17):
Yeah, that's the thing. I think they're mutually exclusive. You've
got to have people who have that technical skill if
you want to have manufacturing of these kind of technical lives.
And by the way, we need that for everything else
we're doing. We're not even talking about quantum computing or AI.
We're just talking about manufacturing. But when you go to Detroit,
(25:37):
when you go to around the country where people are manufacturing,
it's robotics that matter, it's AI that matters. It's not
you know, sort of the typical labor that we're used to.
I've been to a fox Con manufacturing facility. I mean,
it's very few people and a lot of mechanical activity
going on, all of which coordinated through you know, very
(25:59):
very sophisticated computer programming. So unless we have that capacity,
we are never going to be able to achieve the
kind of quote second Industrial Revolution that Donald Trump wants.
But it still doesn't satisfy the fundamental supply chain needs
and where we're going to find all the component parts
to this. So we are a long way away from
(26:21):
putting up a sophisticated and well equipped and supplied Apple
manufacturing facility here. But look what Tim Cook has learned
is you can rent Donald Trump, but you can't buy him.
Speaker 4 (26:35):
Well, you wonder how quiet the White House is going
to be if the likes of Tim Cook and Jensen
Wong can't get a favorable treatment after coming to kiss
the ring. Rick Davis and Genie Shanzano thank you as always.
Speaker 1 (26:49):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
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Speaker 4 (27:06):
Welcome to the Friday edition of Balance and Power. It's
great to have you here at the threshold of what
I hope is a long weekend for you, Memorial Day
weekend straight ahead.
Speaker 3 (27:13):
And if you're a lawmaker, you're just getting home.
Speaker 4 (27:16):
Reconnecting with the family, marching in parades, maybe holding a
couple of town hall meetings.
Speaker 3 (27:22):
I don't know.
Speaker 4 (27:23):
We'll find out because there'll be plenty of tape next
week if they do. As the Reconciliation bill, or the
beautiful bill goes from the House to the Senate. We've
been talking about this for a couple of days. It
was this time yesterday we had just the recent passage
of the bill in the House, and now a lot
of questions about what the Senate will do after this
very careful balancing act. Mike Johnson threads the needle again,
(27:44):
only to have the whole thing torn up in the Senate,
or so they say, we're going to find out together.
There are Republicans in the Senate who don't want the
cuts to Medicaid spending will pose the repeal of IRA
clean energy tax credits. Some of them want deeper spending cuts.
Ask Mike Crapo, he wants the tax cuts to be permanent.
That's going to cost more. Nobody likes the salt cap.
(28:07):
We keep hearing, and so what it will be like
this weekend to be a lawmaker back home, as we said,
maybe going to the local barbecue, hearing from voters on this,
knowing that a lot of things just agreed upon could
soon change. Really delighted to let you know that the
Chairman is with us here on the Friday edition to
talk this out. A man who knows a lot more
(28:28):
about holding the gavel than most people walking the earth.
Speaker 3 (28:31):
Patrick McHenry, the former chair.
Speaker 4 (28:32):
Of the House Financial Services Committee, former Speaker pro tem
Bloomberg contributor. I'm proud to say now, Congressman, welcome to
the family. I haven't had a chance to say that.
That's really exciting for us.
Speaker 3 (28:43):
Are you a gas or charcoal guy?
Speaker 12 (28:48):
Gas out of convenience, But if I had more time, charcoal.
Speaker 3 (28:52):
The right answer. What is it going to be like
for Republican lawmakers going home?
Speaker 4 (28:56):
Will they be celebrated in their home districts for getting
this done?
Speaker 12 (29:00):
Yes? The fact that this was such a grueling process
made the outcome even more joyous for Republicans and the
Republican base. This is a set of aggressive spending cuts
over the over the tenure window that this bill is
written for. It extends the tax cuts and Jobs Acts.
(29:20):
President Trump's first term key domestic initiative. You know that
really gave him the the the economic narrative that led
him back to the presidency in the second term. So,
you know, key to the Trump narrative and a massive
success for the President's leadership team in the House Representatives.
Speaker Johnson and Scalise and Emmer and the work that
(29:45):
they put in with Chairman Jason Smith in the House.
So I mean real kudos to them on pulling off
what was an arduous, difficult, narrow outcome, but a decisive one.
Speaker 3 (29:55):
Yeah, a rabit out of a hat. I keep hearing.
Speaker 4 (29:59):
You know what it's like, though, Congressman to sit in
the House and look next door to the Senate and wonder, well, God,
what are they going to do? And do they care
about the balancing act that the feet that we just
pulled off? You heard the list I just ran through,
from medicaid to the IRA to salts. What kind of
changes do you really expect?
Speaker 12 (30:17):
Well, so, the salt cap is purely a House initiative
because there are no Republican centers that represent states where
the salt deduction is a driving political force. The balance
of power in the House for Republicans are Republicans from
blue states like New Jersey and New York that were
(30:38):
instrumental in crafting the salt compromise or raise the ten
thousand dollars cap to forty thousand dollars. There's a science
behind it, there's art in the art of the possible
and legislation.
Speaker 11 (30:49):
You're also going.
Speaker 12 (30:50):
To see a series play with the Biden era clean
energy tax credits. You saw this with nuclear. Nuclear has
a very long runway for that sunset it. It's a
very popular tax credit to get more nuclear, more nuclear
options in our electricity grid. But the other initiatives have
(31:10):
different phase outs. Because of the political potency in Republican
members districts that voted for this bill, we're going to
see the Senate with a different set of equities on
those tax credits. There's gonna be a lot of play there.
There's going to be a significant amount of play for
other provisions related to salt, like how pass throughs use
(31:31):
the salt deduction or able to use the salt deduction.
You're going to see significant movement in sort of a
secondary set of tax issues for corporations. So there's a
lot of play here. But I think about eighty percent
of the bill it will be the same before this
goes to the President's desk.
Speaker 3 (31:52):
Well, all right, that's great.
Speaker 4 (31:54):
Patrick McHenry says, eighty percent of the bill, does Chip
Roy vote for that?
Speaker 12 (31:59):
Well, what I'm saying is eighty percent will be the same.
The Senate will accept that so okay, So.
Speaker 3 (32:09):
Torture will it be I guess when it comes back
to the House.
Speaker 12 (32:12):
Oh, quite torture. No, it's just so what happens is
after you make a compromise like this out of the House,
just grolling every every provision that you made changes to
to get somebody's vote is highly important to that member
and to your one vote majority to get it out
of the House. One vote margin to get out of
(32:34):
the House. So any change here does have huge political
risk for passage. The way that the presidency, though which
we saw bring was brought to bear on the House
of Representatives, meant that maybe people did have serious disagreements,
maybe there are really fractious, nasty meetings for months. But
(32:55):
the President closed the deal and his helpmate in this
is Speaker Johnson, and they closed the deal and got
a bill out of the House. So what what will
be What will happen now is that the US Senate
will have to act before the fourth of July recess
in order to meet a timeline that is dictated by
(33:17):
the dead ceiling deadline UH, which which means the Congress
needs to have this bill, this tax bill, which is
largely extension of the current code frankly with a number
of spending cuts attached to it and some small small
changes to the code. They have to they have to
get the bill through the Senate before the fourth of
July in order to have that bill to the present's
(33:38):
desk by the end of July. This is a very
tough task in a in a in a Congress with
wide majorities for for the party in power, and these
are not wide majorities for House and Senate Republicans.
Speaker 4 (33:51):
So what will be k Street's posture over the course
of June, and what will it be like to be
a lawmaker sitting by the phone.
Speaker 12 (34:00):
This is where you make your bones. This is where
legislators earn their keep. This is this is your paycheck
for the whole Congress. You got to get the president's
signature legislative item through the Congress with with the main
points of his domestic agenda. The defense plus up is
(34:22):
a big part of this conversation. In this bill, and
the spending cuts and all the tax provisions that the
President pledged in the campaign are in this bill. It
is go time. And if you're a lobbyist on K Street,
you're not making summer plans because your summer just got
sucked away by the House and the Senate grinding this
(34:44):
thing out, and it will be a hell of a
nasty grind.
Speaker 4 (34:49):
Wow, what's the money maker on K Street? Is it
the clean energy tax credits? The incentives?
Speaker 12 (34:56):
I think yes, I think that's a It's a huge
driver of the conversation, serious driver of the conversation. There's
so much that that the Bidy administration put into the code,
and there's so much economic interest aligned with those provisions.
Speaker 11 (35:12):
Some of them are.
Speaker 12 (35:12):
Being significantly used, others are not used as much. But
the political potency across red states and which will matter
for the US Senate Republicans and red districts across the country,
these things do matter, and frankly, they're largely popular with
(35:34):
the voting populace and the business community. So it makes
it really a challenging thing to bring fiscal discipline at
the same time that you have very popular provisions you
have to take away in order to get some fiscal
discipline back into into this bill.
Speaker 4 (35:53):
As a man who's actually held the gavel stood of
the speaker's rostrum, you know as well as we do
that this didn't need to just be a one vote
margin could have had a couple more Republicans. What do
you do when you're holding the gavel and Andrew Garbarino
falls asleep in the back of the room. Are you
telling me nobody could wake him up?
Speaker 12 (36:15):
There are a couple of folks that slept across the
last two weeks in Congress, some Democratic members, some Republican members.
I don't begrudge them for this, but you know, sure
is embarrassing.
Speaker 8 (36:32):
Sure is embarrassing.
Speaker 12 (36:34):
Having said that, Eah, I mean I didn't have a
problem with falling asleep in my early going in Congress.
Had a problem with my mouth, and I would say
things would get me in trouble. So far, better to
fall asleep than to sleep laboratory things.
Speaker 4 (36:53):
Fair enough, if you're with us on YouTube, you saw
a great reaction. I'm not sure anyone on the radio. Congressman,
do they get this before we hit the debt limit?
In other words, this will remain part of the package.
Speaker 12 (37:05):
Yes, And the way to think of this bill is
that it's I mentioned this. It's an extension of the
current code. They're taking as base text, the Tax Cuts
and Jobs Act of twenty seventeen. In twenty seventeen, we
created a whole new tax regime. We didn't use any
of the previous tax code. So what you're talking about
(37:27):
here is a set of changes that are modest in scope.
You can look at them online and you can see
what the provisions, and you can actually see for yourself
the provisions that they're altering and changing or adding, and
they're adding, for instance, no tax on tips, a few
(37:47):
other items at the president's pledged in the campaign. But
it's not a dramatic set of new things added to
the code. It's revisions down, not really a great deal
of additions too. So I think they can get it done.
I think they can get it done by the end
of July. But it is going to be a long, hot, nasty,
cool summer for a House Republicans.
Speaker 4 (38:09):
We're so glad that you're going to be along for
the ride, though. This is fantastic. Bloomberg contributor Patrick McHenry
I said it out loud only on Bloomberg. 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 at noontime Eastern at bloomberg
(38:31):
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