April 3, 2025 • 49 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
President Donald Trump imposed the steepest American tariffs in a century as he steps up his campaign to reshape the global economy, sparking threats of retaliation and a selloff in markets around the world.
Trump announced Wednesday he will apply at least a 10% tariff on all exporters to the US, with even higher duties on some 60 nations, to counter large trade imbalances with the US. That includes some of the country’s biggest trading partners, such as China — which now faces a tariff of well above 50% on many goods — as well as the European Union, Japan and Vietnam.
“For years, hard-working American citizens were forced to sit on the sidelines as other nations got rich and powerful, much of it at our expense,” Trump said during an event in the White House Rose Garden to unveil the so-called reciprocal tariffs. “Now it’s our turn to prosper.”
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 International Economics and Policy Correspondent Michael McKee.
- Port City Brewing Company Founder Bill Butcher.
- Former Republican Senator Pat Toomey of Pennsylvania.
- Bloomberg Politics Contributors Rick Davis and Jeanne Sheehan Zaino.
- Founder of Ashton Analytics and Specialist in US-China Trade and Economics Anna Ashton.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
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):
Wall Street gives a big f to the tariff regime
rolled out yesterday by President Donald Trump. It's my job
here today, I guess to tell you how bad everything is.
Speaker 3 (00:35):
You see the vis Look at this.
Speaker 2 (00:37):
I guess that's the one thing that's up twenty six percent,
backup of twenty seven Even crypto is lower as we consider.
I guess a bunch of retirees or near retirees celebrating
the fact that their bond holdings finally went up. Maybe
I could find some silver lining here with Michael McKee,
but I kind of doubt it. I don't even have questions.
Speaker 4 (00:59):
For for you.
Speaker 3 (01:00):
Mike. It's great to have you.
Speaker 2 (01:01):
I mean, you must be the busiest guy in the
room today. Bloomberg International Economics and Policy correspondent pretty much
says it all here, and Michael was with us as
soon as we heard from the President. Last evening on
our extended balance of power and joins us now from
New York. Michael, I want to bring it back in
time to what we heard in the Rose Garden yesterday.
Speaker 3 (01:19):
Listen, this is Liberation Day.
Speaker 5 (01:23):
I will sign a historic executive order instituting reciprocal tariffs.
China sixty seven percent. We're going to be charging a
discounted reciprocal tariff of thirty four percent. European Union, they're
very tough. We're going to charge him twenty percent. Taiwan
we're going to charge them thirty two percent. Japan, we're
charging him twenty four percent. We will impose a twenty
(01:44):
five percent tariff for no far and made automobiles. We
will establish a minimum baseline tariff of ten percent. Promises made,
Promise is kept.
Speaker 3 (01:55):
Whoever made that gets a cold star. James. Can I
get like a big board?
Speaker 2 (01:59):
I feel like a big board like that that can
kind of hug onto it and read on the air.
If you're with us on YouTube, they're surely going to
start Saturday Night Live with the cold open.
Speaker 3 (02:10):
Trump holding the board right.
Speaker 2 (02:12):
All the things that have been super imposed on that
board on social media can keep you busy for a
long time. But if you're the White House, this was
a raving success. They put up a really slick produced
video on the website, guys in hard hats, motorcycle jackets,
union members hugging, laughing, clapping in the Rose Garden as
(02:32):
the President finally.
Speaker 3 (02:35):
Got deliberation day.
Speaker 2 (02:38):
Michael McKee does this for a living and actually understands
the global economic order. Michael, I'm not sure where to
start other than this reaction on Wall Street. You know,
it's been said the bond market is the best economist.
Is that the case today?
Speaker 6 (02:54):
Well, they're certainly reflecting the views of people on Wall
Street and the idea that we probably are headed for
recession if these teariffs stay on. But I'll give you
a great starting point, Joe. What we're worried about here
is price is going up because the President's put on
a big tax on imports. All of the espresso coffee
(03:16):
pods we buy are made in Switzerland, which now has
a thirty two percent tax on it. And yesterday on Amazon,
a pack of fifty Starbucks and espresso pods was seventeen dollars.
Today they're twenty eight dollars. So this is going to
happen over and over again.
Speaker 3 (03:36):
Is that amazing?
Speaker 4 (03:36):
Though?
Speaker 2 (03:36):
How quickly this is happening. Aren't there some supplies left over?
Or if you're trying to keep your margins intact, you
justight prices now.
Speaker 6 (03:45):
Well, I'm sure that it will happen to varying effects
at varying times. In a e commerce world, you can
adjust prices immediately, so a lot of products we might
see that happen. Things at the grocery store take a
little bit longer, but anything we get like fruits and vegetables,
the timing for the president is pretty good because we're
(04:05):
going to be switching over to US made stuff. But
we get so much from South America and from Mexico
that those could go up in prices fairly quickly. And
of course there will be people who free ride on
this and just raise prices even if their goods are
not imported. So this is a sort of disaster in
the making. You can call it an own goal, you
(04:26):
can call it whatever you want, but it's not going
to be good news for the US economy.
Speaker 2 (04:31):
If you're a massive retailer like Walmart, not only can
you pressure your suppliers, but you can find different places
in the store to maybe hike prices and kind of
spread things around a little bit before you dump it
on the product that has actually been impacted directly by
the tariff. If you're a small business owner, it's a
lot different. Michael, We're going to have one coming up here,
the founder of Port City Brewing. It's a great and
(04:54):
award winning brewery and Alexandria, Virginia right across the Potomac
from here, and he's having trou getting bottles. The kegs
are coming from Germany. The malt is coming from Canada.
If you're a business operator like that, let's say you
know you need a gave from Mexico or whatever it is, you.
Speaker 3 (05:10):
Have no choice based on the product that you make.
Speaker 2 (05:14):
Do you have any choice other than to pass it
along to the consumer.
Speaker 6 (05:18):
No, you don't, really, especially if you're a small business
that doesn't have big margins where you can absorb something.
And the problem for a lot of people is there
are things that are not made in the United State.
We're not growing a gave, you know, so they got
to go somewhere else. And a lot of the malt
comes from overseas, from Belgium, So there's a real problem
(05:40):
for many businesses here. They're going to just have to
pass these prices along and hope Americans accept them. And
we saw with the post COVID period that people didn't
accept them, but they had to pay them. And we
may be in that situation again, which will create a
lot of unhappiness. It'll be interesting or scary to see
(06:02):
whether people blame companies or whether the blame is focused
on the White House Mark Carney.
Speaker 2 (06:09):
Of course, the Canadian Prime Minister spoke a short time ago.
We actually got some news putting a twenty five percent
retaliatory tariff on US made vehicles in response to what
happened yesterday. We heard from the Prime Minister. Here's what
he said.
Speaker 7 (06:21):
Three sets, three different sets of US tariffs remain in
place and will continue to pose significant threats to Canadian
workers and Canadian businesses. And while they have been imposed
under different premises, some things are consistent. They are all unjustified, unwarranted,
(06:47):
and in our judgment, misguided.
Speaker 2 (06:51):
Michael, I know that you're not just an economist or
an economic expert. You're also very sensitive to the political
side of this story. You understand politics in Washington. When
you hear a remark like that. This is the Prime Minister,
by the way, who was told by Doug Ford, as
he explained to us on Balance of Power last evening,
he asked the Prime Minister not to respond.
Speaker 3 (07:11):
The trains left the station.
Speaker 4 (07:12):
Here.
Speaker 2 (07:13):
Politically, what happened in the last twenty four hours to
our standing in the world.
Speaker 6 (07:18):
Well, our standing in the world plunged. It was already
bad given the run up to this and the way
the world's been reacting to everything that the President has done,
particularly on the defense side, but now it just cripples
us with an awful lot of people. Part of that
is also the uncertainty because we don't know what mister
(07:38):
Trump wants out of this. He wants to bring factories home,
in which case you need to leave these tariffs on
forever because otherwise companies are just going to wait it out.
Or is it a subject to negotiation situation where countries
can do what mister Ford suggested and not retaliate and
try to negotiate something down and get the tariffs lifted.
(07:59):
It's really hard to know what's going on here. In
terms of Canada. There are a couple other things that
the President is talking about. Tariffing that would have a
big impact. One is pharmaceuticals and the other is lumber.
Lumber of course a long running dispute with the United States.
But Bloomberg wrote a story the other day it was
kind of fascinating. There is an ingredient that goes into
(08:21):
toilet paper that comes from Canadian softwood, and something like
thirty thirty five percent of all the toilet paper in
the United States is made from this stuff. And if
it goes up in price, you're gonna be paying a
lot more for toilet paper, or you're gonna have shortages,
and that'll get people's attention.
Speaker 2 (08:38):
Yeah, get ready for the sandpaper ladies and gentlemen. Boy,
what's the FED doing right now, Mike McKee in our
last minute? Do they have the spreadsheets all over the
floor and the green visors out or are they drinking
at Bobby Vans?
Speaker 6 (08:52):
Well, I assume they have the spreadsheets and green visors,
although Bobby Vans might be more fun. That's pretty much
what's going on all over on Wall Street. All of
the economists and analysts are trying to analyze what it
means for the economies and the companies they follow. The
FED is doing the same to try to trace through
what the impacts will be, not just the first impacts,
(09:12):
not just you go to the store and pay more
for toilet paper, but how does that affect other products
and other purchases you might make down the road. The
feeling is, according to JP Borgan Chase, that people's disposable
income is going to go negative in the next quarter
and people are going to just pull back on spending.
And the Fed we'll have to decide is inflation a
(09:33):
bigger danger or growth a bigger danger.
Speaker 2 (09:36):
One of the most important voices you'll hear today on Bloomberg,
Michael McKee. Great to have you back, sir, Bloomberg International
Economics and Policy correspondent, with some real context, some real
perspective on what the heck is happening here and how
little we still know about what happens next, how long
these tariffs stay in place, and what deals might emerge.
Bill Butcher, we talked about him on the way in
(09:56):
from Alexandria, Virginia.
Speaker 3 (09:58):
Next right here on Bloomberg.
Speaker 1 (10:02):
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 play Bloomberg eleven thirty with.
Speaker 3 (10:21):
Not great news on our markets today.
Speaker 2 (10:22):
Following what we heard from President Trump last evening, we
knew it was going to be bad if you were
with us at the extended edition of Balance of Power
last evening, the futures fell out of bed even worse
since actual trading has begun. Today is the world wakes
up to this new reality. We're glad you're with us
today on Bloomberg Radio ninety nine point one in Washington, DC,
(10:45):
on the satellite radio channel one twenty one, and on YouTube,
where you can find us right now search Bloomberg Business
News Live. You should get up on YouTube for this
next conversation because I think it's an important one. You
don't have to look that far. The fact of the
matter is outside of Washington, d C. Or that far
even here in the Federal City. To find the immediate
(11:06):
impact of the President's actions yesterday, you get the car,
drive about nine miles down the river from d C,
where some guys like me live in Alexandria, Virginia.
Speaker 3 (11:19):
There's a company that is.
Speaker 2 (11:21):
The longest operating brewery in the Metro DC area award
winning they got Small Brewery of the Year in twenty fifteen,
the Port City Brewing Company. The reason why this stuff
is so good is because of the sourcing that is
involved in crafting this craft beer.
Speaker 3 (11:39):
I want you to think about this now.
Speaker 2 (11:41):
With all the tariffs that we've talked about, the reciprocals
the steel and aluminum Canada, Mexico. Imagine you're making your
beer in Alexandria. You get your malt from Canada, you
get your bottle caps from Mexico. Kegs made of steel
(12:01):
come from Germany. What's that going to do to the
price of a six pack? That is the reality right
now for Bill Butcher, the founder of the Port City
Brewing Company, who I'm glad to say is with us
right now. Bill, I'm really glad you could join us.
Speaker 4 (12:14):
Thanks for being here with you.
Speaker 3 (12:17):
How do you get out of this mess?
Speaker 8 (12:20):
We're still sorting through it. You know, it's hard to say.
You know, the mall comes from Canada, as you said,
the bottle caps are from Mexico. It looks like there's
a carve out in these tariffs for the US NCA,
which should provide some relief, but there's still questions. You know,
we get our cans from Ball, so they're manufactured in
(12:43):
the US. However, we don't know the source of the aluminum,
if the aluminum could be coming from Canada, could be
coming from wherever. So we haven't heard anything from our
can supplier on how this is going to affect our prices.
But I feel that it is going to affect our prices,
and not in a good way.
Speaker 2 (13:00):
Well, and make it even more complicated. I understand that
you're having trouble finding bottles now because the big guys,
the big brewers, are sucking up all the glass because
they don't want to have to use more expensive aluminum
for cans.
Speaker 4 (13:12):
What do you do with that exactly?
Speaker 8 (13:15):
You know, we thought we were somewhat shielded from the
aluminum tariff because most of our package beer seventy percent
of our package beer goes into bottles, so we thought
we'd be okay on that front. However, about three weeks
ago I was informed by our bottle supplier that they
would not be able to supply us with bottles beyond
March thirty first. So we've been in a frantic search
(13:36):
for a new bottle supplier, and so we haven't sorted
that out yet.
Speaker 4 (13:42):
We have two shipments on the road.
Speaker 8 (13:44):
That we had already ordered before we got cut off,
so we've got a little bit of wiggle room there,
but we need to figure out something pretty quickly.
Speaker 3 (13:53):
Boy, that's for sure. How long have you been in
business in Alexandria.
Speaker 8 (13:56):
We opened fourteen years ago, in twenty eleven, and you know,
we've never seen anything like this. And I was talking
to our bottle supplier a couple of weeks ago and
he was telling, explaining to me that he doesn't have
an answer for us. He's been in the business for
thirty five years, and he said he's never seen anything
like this either.
Speaker 3 (14:15):
So here's the problem.
Speaker 2 (14:17):
As I'm assuming for you, the reason why your beer
works is because of all of the elements that I've
already described. I'm guessing you cannot just simply replace that malt,
for instance, that is critical to the taste and body
of your beer.
Speaker 4 (14:33):
What do you do with that exactly?
Speaker 8 (14:35):
Yeah, the malt that we use, it's a very specific
strain of pilsner malt. It's barley that's grown in Canada
and it likes the colder climate in Canada and that's
why we use it because it's the best quality in
the world. And our brewers, you know, they know what
they're doing. As you said, we've won multiple awards for
(14:56):
our beers, and it's because our brewers look the world
over for the best ingredients to make the styles of
beer that we want. So, you know, there's a lot
that goes into our supply chain and it's just really
been frustrating the past few weeks because our entire supply
chain has been thrown into chaos.
Speaker 2 (15:16):
Well, so this leaves businesses like yours in a really
peculiar spot, and it's partly why we wanted to talk
to you.
Speaker 4 (15:23):
Bill.
Speaker 3 (15:24):
You're an American company.
Speaker 2 (15:26):
This beer is made in America, but it's special because
of the ingredients that happen to come from some other places.
You could also have an American beer company trying to
make a Mexican style beer. You can't do that in
Saint Louis, Right, If you're making a gave, the reason
why it is special is because of where it is from.
(15:46):
So if your back is against the wall here, what
does that mean for a price of a six pack
of beer? Because it sounds like you can't change any
of these.
Speaker 8 (15:53):
That's true, and you know it affects not just us,
but you know, we are a main street business and
there's nine one thousand small independent breweries in the US,
and most of us are faced with this issue because
we do have a global supply chain. So you know,
if our costs go up, we need to pass that
(16:15):
along to the consumer. Unfortunately, and the way it works
in the United States with alcoholic beverages, there's a.
Speaker 4 (16:20):
Three tier distribution system.
Speaker 8 (16:22):
There's the supplier, there's the wholesaler, and the wholesaler sells
to license retailers and that's mandated by the federal government
that we can't sell direct to consumers. We have to
use this three tier system, and each tier has their
own margins and markups for the products. So if we're
a six pack of beer that currently sells for twelve
(16:44):
ninety nine, if we have to increase our price by
say twenty percent, by the time each tier of the
distribution system takes their markup, it could hit the shelf
at eighteen ninety nine.
Speaker 2 (16:56):
Wow, a six pack for eighteen It is good beer bill.
Somebody is going to pay that, right, just not as
many as your fear. Could this put you out of this?
Speaker 8 (17:04):
I mean even at twelve ninety nine. I mean, our
beer obviously is a premium product. It's a high quality,
full flavored beer, and people are willing to pay a
little bit more for something of higher quality.
Speaker 4 (17:17):
But there are limits to that, you know.
Speaker 8 (17:20):
And I'm certain that if our beer is hitting the
shelf at these inflated prices, then things are going to
slow down.
Speaker 2 (17:28):
Well, you're part of a community, of course, It's not
just you. I know that there's a brewer's association. I'm
guessing you don't have the influence of the lobbying money though,
of an anheuser Bush to dial up the White House.
How do you deliver a message? How do you push
back on any of this or can't?
Speaker 8 (17:42):
Yeah, Well, our Brewers Association has been active, and our
CEO has been He's traveled from Boulder, Colorado, to DC
several times since the beginning of the year, and so
we are trying to get our message out. You're right,
we don't have the millions that the big brewers have,
but you know, we are a main street business and
(18:03):
we are involved with our elected representatives. And I've reached
out to our senators, our US senators as well as
our Congress representatives, to let them know what our concerns
are and let them know that there's real that there's
real danger here that for the negative effects that are
going to occur with our business bill.
Speaker 3 (18:25):
Butcher, I want to meet you in person.
Speaker 2 (18:26):
This is a great story and it's a really interesting
local business here in our great little city of Alexandria.
Pay a visit sometime. It sounds like business owners could
use you.
Speaker 1 (18:39):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm e's tern
on Apple Coarclay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 9 (18:56):
We want to add the voice now of someone else, who,
of course pays close attention to the issues. The former
ranking member of the Senate Banking Committee, former Republican Senator
from the state of Pennsylvania, Pat Toomey, is here with
us on Bloomberg TV and Radio. Welcome back to Balance
of Power. Senator. It's always good to have you. If
we could just be completely candid here, when you saw
the figures presented in the Rose Garden yesterday. What was
(19:18):
the first thought that went through your head.
Speaker 10 (19:22):
I thought that he is carrying through on what he
has always dreamed of doing. I spent four years arguing
with President Trump about trade, about deficits, about tariffs during
his first term, and it became clear to me that
he has some very, very deeply held views. They're completely mistaken,
in my judgment, but they are very deeply held. And
(19:45):
at the heart of it is this notion that if
you have a trade deficit with another country, the amount
of that deficit is the measure of the amount that
they're basically ripping you off. And he uses that terminology.
He speaks that way all the time. It of course,
makes no economic sense whatsoever. The trade deficit just means
(20:05):
our consumers happen to buy more products from that country
than their consumers buy from US. Any number of completely
reasonable reasons for that, but none of them are acceptable
to Donald Trump. I think that worldview is kind of
at the heart of this. I expect that there would
be some very severe tariffs. I of course had no
(20:27):
idea exactly what levels would be imposed on which countries.
You can see that was a pretty arbitrary and capricious approach,
but I'm not really shocked by the magnitude.
Speaker 2 (20:39):
What does this mean for business in Pennsylvania, Senator, It's
good to have you back, by the way, and I
realized you could have different answers here. We talked to
a local brewer in the Washington, DC area who's perplexed
as back as against the wall because most of the
materials he's using are suddenly now being tariffed. Or for
a steel mill in Pennsylvania might have a different answer.
Speaker 10 (20:59):
Yeah, So there will be pockets of industries and companies
that will benefit from these protective tariffs. They won't have
to deal with competition, they can raise their prices, they
don't have to innovate as much. Americans may be kind
of forced to buy from them. So there will be
some that will have that benefit, but by far the
(21:21):
overwhelming majority will be the losers. Just think about the
steel and alluminitive tariffs that the President imposed in his
first term. There's been a lot of research done on
the effect of those tariffs, and the conclusion is for
every job that was saved in the steel making industry,
there were probably eight to ten jobs lost among companies
(21:42):
that use steal. There's many, many times more industries that
use these materials than the primary maker, and that downstream
damage is very, very hard. Here's another thing to think about.
Something like forty percent of American imports are in puts
for American manufacturers. So what we're doing with these sweeping
(22:05):
across the board tariffs is we are systematically making American
manufacturers less competitive because we're raising the prices they have
to pay for the components of their products. The rest
of the world isn't going through that, and so we
will be able to competitive disadvantage. This is going to
manifest itself in many ways. It's certainly going to be
higher prices for consumers. There's going to be jobs loss.
(22:27):
We've already seen announcements today of companies that are laying
off workers. That's going to accelerate, and over time it
means a lower standard of living for Americans until finally,
you know, better sense takes hold and the process starts
to online. But that can be a very difficult then
who knows how long that takes.
Speaker 5 (22:49):
Well.
Speaker 9 (22:49):
But the White House is arguing, Senator that this really
is just step one of President Trump's economic plan. We
still have tax cuts that they'll try to push through
by the end of this year that they argue will
help liven the economy. Obviously, your former chamber is taking
steps to try to advance that legislative path forward in
the next twenty four hours or so, as we expect
(23:10):
a vote rama to happen. To what extent will friendlier
tax policy be able to offset the negative impacts you
were just discussing.
Speaker 10 (23:18):
Yeah, So, look, I think there's three categories in which
the administration is likely to pursue, and in fact is pursuing,
really good economic policy. Curbing federal spending. The federal government
spent way too much money, and that'd be very good
for our economy overall, if they're successful in curbing federal spending.
Rolling back regulation. There's wildly excessive regulation. The bid administration
(23:39):
was very, very problematic with what it imposed across the economy.
That rollback it is constructive and it is pro growth.
Energy dominance is really good for the economy. It's I
think it's impossible probably at this point to quantify the
relative components, but keep in mind, on tax policy, I
(24:00):
am one hundred percent in favor of making permanent the
twenty seventeen tax reform, that's a very heavy lift. If
we can get that done, that just maintains the status quo.
That's just an extension of current policy. So there's not
like a big surge to grow that comes from continuing
current policy.
Speaker 4 (24:17):
Right.
Speaker 10 (24:18):
What you do is you avoid a very damaging tax increase.
But I really think that these tariffs are going to
do a lot of damage.
Speaker 2 (24:30):
I know you're watching these markets, Senator, some thing's never change.
You consider the negative wealth effect that this could have. Yeah,
I wonder how worried you are about the potential impact
on consumer spending or if this market keeps dropping. If
that's the one thing that can change Donald Trump's course
on this, I.
Speaker 10 (24:52):
Would hazard a guess that at some point it would.
But if we're down fifteen percent on and then nask
and I'm not sure where we are at the moment.
It's been pretty volatile, as you know, but ten fifteen
percent declines, I doubt that would change his mind. I
think it's going to have to manifest itself in the
(25:13):
real economy. I think we're going to have to see
the CPI prints that are accelerating. I think we're going
to have to see the layoffs and see the factories
closing because they're no longer competitive. I think that's going
to have to happen before the President decides he's looking
for an off ramp because he really believes that in
(25:34):
buying things from other countries is really bad for us
and he wants to curb that.
Speaker 9 (25:40):
Well, what about your former colleagues in the Senate or
in the House for that matter, do you expect if
they're getting they're seeing the you know, financial markets, getting
calls from constituents that they could maybe try to push back.
We already saw the passage of a resolution, with the
help of four Republicans, of a Democratic resolution condemning the
Canada terrace. Specifically, Senator Grassly is co sponsoring legislation that
(26:02):
would see Congress having to approve tariffs within sixty days
or them be nullified. Are you expecting more to materialize.
Speaker 10 (26:09):
On that front. Yes, I just don't know how long
that's going to take. You know, that's one of the
many disturbing ironies of this. Of course, all of this
is completely inconsistent with the constitutional assignment of responsibility for
trade to Congress. The president doesn't have this authority, and
yet we sit on the edge of our seats, wondering
(26:30):
what the latest whim is from the President who's exercising
an authority that, in my view, he doesn't have. I think,
you know, a lot of Republican voters have the view
that the president's only been in office for a couple
of months. We've got to give him his opportunity, have
him enact his agenda, and give him the benefit of
(26:51):
the doubt. I think that will only last for so long.
And when that starts to turn, because people see really
rapidly rising prices, obb is jeopardized, they're hearing about layoffs
and the other adverse effects, then it's going to be
obvious to members of Congress that this is a very
problematic road we're on, and they may want to find
(27:12):
a way to begin to reverse some of these effects.
But I think it's going to have to show up
in the real economy first. Unfortunately, I think it will
show up in the rail economy.
Speaker 2 (27:24):
Really good to have you back, Senator, I know you're
going to miss Washington when the voter ramas get going
again a little bit later this week, potentially in the Senate.
Pats to whome former Republican Senator from Pennsylvania. As we
assemble our political panel, We're glad to have Rick Davis
back with us in Jeanie Shanzano Bloomberg Politics Contributors. Rick
is our Republican strategists and partner at Stone Court Capital.
(27:45):
Genie is our Democratic analyst and political science professor at
Iona University. Rick, you might have heard Pat Toomey talking
a little while ago. You used to work around Pat
Toomey in the Senate in your time with Senator John McCain,
an old line republic who doesn't have a lot of
love for tariffs, and his point was that a ten
percent correction in the markets is not going to move
(28:06):
Donald Trump. We're going to need to see this born
out in the actual economy.
Speaker 3 (28:10):
Do you agree.
Speaker 11 (28:12):
Yeah?
Speaker 12 (28:13):
Look, I think certainly for political purposes, the economy is
what's going to impact people's opinions, right, I mean, they're
going to give Donald Trump some time. Donald Trump has
a lot of sort of tolerance for pain. He's not
running again, regardless of some of the news stories this week,
and so the political calculus for him is a little
(28:34):
bit easier for the rest of the Republican Party and
especially those mainstream Republicans that have a real focus on
the economy, and the reality for them is, you know,
higher prices, less growth, those kinds of things that come
along with these kinds of big terrif regimes are going
to slow the economy to a point where it's going
(28:55):
to be hard to go home in eighteen months when
you're pitching people to vote for your party in the
midterms and say that somehow they're supposed to be better off
today than they were when Donald Trump took office, going
to be.
Speaker 4 (29:10):
A hard sell.
Speaker 9 (29:13):
Well, especially Genie, when the White House is specifically casting
this policy is something that is intended to help the
United States in the longer term, not necessarily the shorter term.
The kind of investments they are hoping to draw, our
big investments into infrastructure and workforces, things that will take
some time to actually materialize. Does this administration run the
risk of, even if everything works out as optimally as
(29:34):
they are hoping in terms of American manufacturing, that much
like Joe Biden with many of the legislative accomplishments during
his administration, he's not actually going to be around to
see it.
Speaker 13 (29:46):
Yeah, And that's absolutely the reality of leadership, right. So
much of what you do at the moment, takes time
to implement and execute, and you're not there to witness
the fruits of all of your labor. But the reality
is it is very difficult to imagine that any of
what they are talking about from the positive perspective actually
(30:08):
comes to fruition. And this is a very sort of
scary part of where we find ourselves. And I thought
your discussion with Senator Toomey was so important. Donald Trump
is deeply committed to something that all the research, all
the facts, all the best minds look at, from Freedman
to Solo, they all say that tariffs at this degree,
(30:32):
blanket tariffs are a loser. And you know, he's heard
it from some Republicans yesterday, including Rand Paul, who urged
his fellow Republicans to look back and to see that
when this was tried by President Trump's favorite McKinley, the
loss and the seats on their side was dramatic. And
I think that's where we have to focus, is that
(30:54):
we have Republicans in Congress tolerating a power by this president.
None of us knew until yesterday that we were in
an emergency that could allow the President to do what
he did. Yesterday. The Constitution says Congress is in control.
The president has taken control because they are not doing
(31:17):
their jobs. And the question is when are they going
to wake up and say, in a system of separated powers,
one man who is devoted to something cannot change one
hundred years of tax policy and trade policy. That's the
real question the eighty percent of these GOP folks in
the Senate, in the House, who are tolerating what has
happened here.
Speaker 2 (31:37):
Straightforward question from a terminal user, Rick, why does no
one talk about the tariffs on the US for fifty
years and only on the counter tariffs that we just
put on them now?
Speaker 12 (31:50):
Well, I think arguably, certainly recent history indicates that we
have prospered on a global basis with them. I don't
think it's actually held back the US economy for whatever reason.
The US economy has grown by a significally larger Morgin
(32:10):
margin than Europe and China and other countries on a
GDP basis. Per capita, our wealth has substantially increased over
the last few decades compared to the rest of the world.
I mean, to be honest, sure there are trade deficits
in all these countries that Donald Trump slapped tariffs on
(32:32):
but it's hard to quantify how somehow those things have
been holding the US economy back. They haven't. The US
economy prior to January twentieth has been roaring. It's been
the envy of the rest of the world. And to
be honest, I think this ter phraseme, based on what
we're seeing today and expect expected by economists we have
(32:57):
on these programs, it will probably reduce the growth of
these economies ours and others that we trade with substantially
over the next few quarters.
Speaker 9 (33:08):
Well, but Rick, to your point on the strength of
the economy, isn't one of the reasons that President Trump
got elected was because a lot of that base of
support came from people who were not necessarily feeling the
economy was working for them.
Speaker 12 (33:20):
Well, yeah, I mean, look, I mean the economy when
we talk about the politics of the economy, it's not
an even playing field, right, I mean, the economy has
not been great for people live in rural areas and
don't have college educations and they voted for Donald Trump.
And the economy has been great for people who live
in cities and suburbs and have college educations, and they
(33:42):
all voted for Joe Biden. So the reality is our
country is as divided economically as it is politically. And
some political observers will tell you that's why it's divided
is because we have a haves and have not. That's
both geographic, educational, and financial.
Speaker 2 (34:00):
Weigh in on that genieus half the country you are about
to have its day.
Speaker 13 (34:05):
I'm not so sure. I mean, you know, you look
at you know, the loss of jobs in a state
like Michigan. They haven't all gone overseas. Many of them
have gone to the south of the United States. They
haven't all gone overseas. Many of them have been wiped
out by technology. So there are a lot of complicated
factors here. And to set up protections. We all want
(34:28):
workers to have a vibrant, full, healthy, and robust economic future.
But to set up a protectionist mechanism where you protect
workers and businesses from competition from overseas has long been
understood to hurt both consumers but also workers and the
(34:49):
future of the US economy as well. So, you know,
I think we have to be very very careful about
looking at a problem. Donald Trump is right, there is
a problem. People have been in pain but he was
hired or elected to lower prices, lower inflation, and start
to ensure that the very strong unemployment numbers that he
(35:12):
inherited remain and help people transition to a new economy.
He's not doing any of that. He's going back to
the gilded age as a mercantile and saying we're going
to set up barriers. It didn't work for McKinley, that's
why he abandoned it in the late eighteen hundreds, and
it's not going to work for Donald Trump unfortunately.
Speaker 9 (35:34):
Well so if his solution to the problem is not
the right one, Genie, And certainly you're seeing Democrats quick
to come out and say that what is the proper
solution that Democrats should now be pushing instead, and what's
their real power to do?
Speaker 13 (35:46):
So, Yeah, they don't have a lot of power right now.
Obviously they haven't won many elections. But you're also hearing
this from Republicans. And I would just point again to
the four who voted yesterday, and the answer is, it's
going to be a long term commitment to both free
trade use of targeted tariffs if we need to, and
(36:08):
President Trump did that in his first term. But what
you don't do is step up one day and impose
huge tariffs on one hundred and eighty five countries around
the world, including our closest allies, and expect that is
going to be in either our security or our economic
benefit long term. So there are solutions out there, but
(36:28):
it takes working together, and it takes an understanding of
the economic system. And that's the concern about many people
is that Donald Trump's view of the world in this
regard is not supported by any of the research or evidence.
Speaker 9 (36:43):
All right, Jeanie Shanzano and Rick Davis, our signature political panel,
both of them Bloomberg Politics contributors, thank you so much
for joining us as we work through some of the
domestic political ramifications of this tariff decision from President Trump,
and also here on Bloomberg TV and Radio. Keep on
top of the market ramifications, which certainly are severe. Today
we are off of session lows, but still down roughly
four percentage points on the S and P five hundred,
(37:05):
even more so for the Nasdaq one hundred, down four
and a half percent. Basically, Joe, the only safe place
to go if you want to hide somewhere today is
in the bond market. The ten year yield down nine
basis points. We are just around four three.
Speaker 2 (37:18):
At least some bond heavy retirement accounts are feeling a
little bit richer today. We're going to be looking at
the price of oil coming up as well. Mike mcgloan
from Bloomberg Intelligence, our commodity strategists, will be with us
to get to the bottom of this next.
Speaker 3 (37:30):
On Bloomberg TV and Radio.
Speaker 1 (37:33):
You're listening to the Bloomberg Balance of Power podcasts. 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 Play Bloomberg eleven thirty.
Speaker 2 (37:52):
With our focus now on the price of oil also
lower today WDTI West Texas intermediate crude futures down over
six percent. At the moment, we're hovering just above sixty
seven dollars a barrel, and we wanted to get more
into this with an expert, Mike mcloan back with us
from Bloomberg Intelligence. He is the senior commodity strategist in Mike.
We had news today from Opek a larger than expected
(38:16):
oil supply hike coming in May. How much of this
price movement has to do with OPEK versus the tariffs.
Speaker 11 (38:23):
OPEC's part of it, Joe.
Speaker 14 (38:24):
We've been waiting for OBEC to come on supply for
almost two years.
Speaker 11 (38:27):
It's just a matter of time.
Speaker 14 (38:29):
The key thing that's happening is we have an oversupplied
market on the back of that big pumping prices when
Russia invaded Ukraine, Krudeau.
Speaker 11 (38:36):
Got up to one thirty.
Speaker 14 (38:38):
That's sud the seeds of prices going lower, which they
always do every time crude o gets set high. It's
gone back down to about forty dollars a barrow. This
is the last twenty years. That's my base case. I
think it's still going there. It has a good reason
to do it, and it's the main one of the
main goals of the Trump administration.
Speaker 11 (38:54):
There's lower energy prices. They have pre existing trends in
their favor. So let's look at this.
Speaker 14 (38:58):
The average price of gasoline the country is around three
dollars and twenty cents a gallon. By the time we
get to midterms, I'll bet it'll be two bucks.
Speaker 9 (39:07):
Wow, that would be something pretty incredible. I'd like to
ask you as well about copper futures down about four
percent today. The White House did say yesterday that copper
tariffs could still be coming. Mike mcgloan, what impact will
that have if we're considering existing supply and any constraints
that cod e merge if there's heavy duties in place.
Speaker 11 (39:26):
Well, hello, Kayley, we've priced for the extremes.
Speaker 14 (39:28):
The high for copper this year was five dollars and
thirty seven cents a pound. Last year's high was around
five dollars and twenty cents a pound. It was resolved
down the four dollars a pound. I think it's going
the same way. Prices of copper and London are closer
to four dollars and twenty cents right now. We're going
that way. Just a question of how long it takes.
So the market got way over extended. The futures from
(39:49):
the US versus London got the most stressed ever.
Speaker 11 (39:52):
Now we're going back down.
Speaker 14 (39:53):
But the key thing is copper is the you know,
doctor copper, it's very high correlation with economic activity in
the rest of the world. Having a face US tariffs
means more pressure lower for copper.
Speaker 2 (40:04):
What's going on with gold Mike, was it just up
too far, too fast? I thought this was the safe
aving exactly.
Speaker 11 (40:10):
Well, nothing like a good bull market that gets stretched.
Speaker 14 (40:12):
I think what gold did is got a little expended
above three thousand dollars announce it's there now.
Speaker 11 (40:17):
That's probably support.
Speaker 14 (40:18):
The way I look at gold is it's still very
cheap versus the US stock market.
Speaker 11 (40:22):
So you see what matters.
Speaker 14 (40:22):
Stock market going down gold and continue to go higher.
But it's the most expensive ever versus the bond market.
And we have data going back on fifty years. So
I think if gold, if this continues, the next big
trade is Gold's bullish, but it might pass some of
that bullish baton to US treasury bonds.
Speaker 9 (40:38):
Well, yeah, certainly bullish for treasuries today down fourteen basis
points on the two year, nine on the ten year.
Mike McLoone, who covers commodities for US at Bloomberg Intelligence,
thank you so much as always for joining us and
reminding us that for Copper it might not just be
about tariffs, but that it also is a gross story
Doctor Copper. To his point, we know copper has always
historically been incredibly linked with the gross outlook in China. Specifically,
(41:01):
and China of course arguably hardest hit from these new
tariff policies from the.
Speaker 2 (41:06):
Is when you add in as well the slow down
apparently an investment in data center, the slowdown in EV
sales at some point, which we're sending copper prices higher,
there's a kind of a confusing market here, all of
a sudden.
Speaker 9 (41:18):
Yeah, certainly, And I wonder how confusing things are in
Beijing right now as they consider the tariff rates with
which they will currently be dealing, but also perhaps what
opportunities it creates for China as the US is turning
further away from existing trading partners. And we want to
get into this now with Anna Ashton. She's founder of
Ashton Analytics, also a specialist in US China trade and economics.
(41:40):
Welcome back to Bloomberg TV and Radio. Anna. When we
just consider the level of the levey that the Trump
administration has now set for China, keeping in mind the
twenty percent tariffs related to fentanyl are still in place,
layer on top of that thirty four percent bringing us
to fifty four percent, is the Chinese economy equipped to
handle tariffs of this magnitude.
Speaker 15 (42:01):
Well, thanks, Kaylie, and I Before I even try to
answer that question, I want to add that not necessarily
factored into.
Speaker 11 (42:09):
To that math by most.
Speaker 15 (42:11):
People yet is the fact that there already are, you know,
an average eighteen percent tariffs on most Chinese imports into
the United States prior to the twenty percent that the
Trump administration added for this new thirty four percent, so
it's actually more like seventy two percent. And there's the
(42:32):
threat of twenty five percent tariffs on China because it
buys venezuela and oil, which we don't know when that
might take effect, but that would bring it up to
ninety seven percent. And then of course there are the
sectoral tariffs which will affect China as well. So these
are really potentially quite high, and obviously they will have
(42:55):
a significant effect, a negative effect on the Chinese economy
because there's very little likelihood that Chinese manufacturers are going
to be able to absorb this, nor does the Chinese
government seem willing to allow that, and so this is painful,
but it does create opportunities, one of them being that
it just plays right into China's foreign policy line that
(43:20):
it is the protector of the international trading system and
international trade rules.
Speaker 2 (43:27):
So what's the retaliation China calling this typical bullying, Beijing
promising to retaliate.
Speaker 3 (43:33):
How will it so?
Speaker 15 (43:35):
What we've seen so far, Jough is some retaliatory tariffs,
strategic ones, including on US agriculture products and US gas,
and I expect that we would see maybe those tariffs
would be increased, perhaps there would be additional tariffs applied
(43:55):
strategically to other imports from the US. And then, of
course we'll see China rely on the rest of its
playbook of things that it can do to retaliate, the
playbook that it's been developing since the first Trump administration,
which will probably include more announcements about export restrictions or
(44:16):
licensing requirements for exports of critical minerals. It'll probably include
addition of more US companies to the Unreliable Entity list.
It might include other pressure on specific US companies that
are trying to operate in the China market.
Speaker 9 (44:34):
Well, so if they're retaliating against the US. I do wonder,
to the point you were making on opportunities created here, Ana,
if it's going to be enticing other trading partners, who
is most likely to have a favorable view toward a
trading relationship with China as they're facing this pain from
the US. Is it other manufacturing countries or at least
(44:54):
where a lot of manufacturing has gone, like Vietnam and
India which are now facing high terraff rates European Union?
Speaker 15 (45:00):
Is it all of the above? I think to some
extent you could say that it's all of the above.
That this will to the extent that the competition between
the US and China and perceptions of China's increasing aggression
and you know, territorial claims around its periphery, to the
(45:22):
extent that that has been something that other countries have
been more and more convinced of in the last eight years,
we may see a lot of those countries start to
revise that assessment and look at China as perhaps a
partner that is more amenable to relatively free trading than
(45:42):
the United States. Is I really am curious about how
this will play out in the Asia Pacific region because
of what you mentioned, the fact thats tariffs that have
been announced for countries like Vietnam are even higher than
the tariffs that have been announced China, and of course,
a lot of the manufacturing that was producing goods for
(46:05):
the US market has moved to places like Vietnam in
recent years, So that's really going to hurt those countries,
and it likely will undermine their sense that the US
is a reliable partner, which could in turn undermine US
security objectives in the region.
Speaker 2 (46:20):
And you may have heard President Trump tie tariffs against
China to a potential sale of TikTok within the last week.
And we've got a deadline that's fast approaching in this
potential sale, while we don't have anything real to talk
about yet, has been sucking up a lot of oxygen
here in Washington, d C. Have you heard of, or
(46:41):
could you conceive of, any deal in which tariffs against
China are lowered in some sort of deal for Beijing
to sign off on the sale of TikTok here in
the US.
Speaker 15 (46:55):
Gosh, Joe, maybe these are really really significant tariff threats,
So I wouldn't rule out the possibility. Prior to these
tariff threats, I would have said, there's no way that
Beijing is going to make a deal. You know, my
sources have been quite emphatic that the government has no
interest in allowing the US to acquire TikTok's algorithm. But
(47:20):
it's possible that this would cause Beijing to reconsider to
some extent. I still think that it's doubtful, though, because
you know, it's not really China's mo to bow to
US pressure like that, and so far China hasn't been
(47:41):
particularly positively responsive to other moves by this administration to
ratchet up pressure.
Speaker 9 (47:50):
Just quickly, Anna, we only have a minute left here.
But do you expect we could see some currency activity
on the part of China when it comes to manipulating
the yuan, because currency manipul is one of those non
terror farriers the White House was alluding to yesterday.
Speaker 11 (48:05):
It is.
Speaker 15 (48:05):
And then at the same time, when you look at
how the when you look at the numbers that the
White House produced estimating what the total average tariffs of
these other trading partners are on the US, you know,
it's sort of a head scratcher. And it doesn't look
like there was a formula involved that you know, clearly
(48:30):
took into account the effects on the US of different
kinds of tariff and non tariff barriers. It looks like,
I mean, most people have speculated that they basically took
the balance of trade between the US and any given
bilateral partner and divided it by the value of the
imports from that country. So there are questions about exactly
(48:53):
what countries could you and negotiations with the US to
make this better. But maybe you know devaluing currency, it's
one of them.
Speaker 2 (49:03):
Anna Ashton, great to have you with us of all
days today and a founder of Ashton Analytics. 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
(49:24):
every weekday from Washington, DC at noontime Eastern at Bloomberg
dot com.
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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(00:20):
you get your podcasts, or watch us live on YouTube.
Speaker 2 (00:25):
Wall Street gives a big f to the tariff regime
rolled out yesterday by President Donald Trump. It's my job
here today, I guess to tell you how bad everything is.
Speaker 3 (00:35):
You see the vis Look at this.
Speaker 2 (00:37):
I guess that's the one thing that's up twenty six percent,
backup of twenty seven Even crypto is lower as we consider.
I guess a bunch of retirees or near retirees celebrating
the fact that their bond holdings finally went up. Maybe
I could find some silver lining here with Michael McKee,
but I kind of doubt it. I don't even have questions.
Speaker 4 (00:59):
For for you.
Speaker 3 (01:00):
Mike. It's great to have you.
Speaker 2 (01:01):
I mean, you must be the busiest guy in the
room today. Bloomberg International Economics and Policy correspondent pretty much
says it all here, and Michael was with us as
soon as we heard from the President. Last evening on
our extended balance of power and joins us now from
New York. Michael, I want to bring it back in
time to what we heard in the Rose Garden yesterday.
Speaker 3 (01:19):
Listen, this is Liberation Day.
Speaker 5 (01:23):
I will sign a historic executive order instituting reciprocal tariffs.
China sixty seven percent. We're going to be charging a
discounted reciprocal tariff of thirty four percent. European Union, they're
very tough. We're going to charge him twenty percent. Taiwan
we're going to charge them thirty two percent. Japan, we're
charging him twenty four percent. We will impose a twenty
(01:44):
five percent tariff for no far and made automobiles. We
will establish a minimum baseline tariff of ten percent. Promises made,
Promise is kept.
Speaker 3 (01:55):
Whoever made that gets a cold star. James. Can I
get like a big board?
Speaker 2 (01:59):
I feel like a big board like that that can
kind of hug onto it and read on the air.
If you're with us on YouTube, they're surely going to
start Saturday Night Live with the cold open.
Speaker 3 (02:10):
Trump holding the board right.
Speaker 2 (02:12):
All the things that have been super imposed on that
board on social media can keep you busy for a
long time. But if you're the White House, this was
a raving success. They put up a really slick produced
video on the website, guys in hard hats, motorcycle jackets,
union members hugging, laughing, clapping in the Rose Garden as
(02:32):
the President finally.
Speaker 3 (02:35):
Got deliberation day.
Speaker 2 (02:38):
Michael McKee does this for a living and actually understands
the global economic order. Michael, I'm not sure where to
start other than this reaction on Wall Street. You know,
it's been said the bond market is the best economist.
Is that the case today?
Speaker 6 (02:54):
Well, they're certainly reflecting the views of people on Wall
Street and the idea that we probably are headed for
recession if these teariffs stay on. But I'll give you
a great starting point, Joe. What we're worried about here
is price is going up because the President's put on
a big tax on imports. All of the espresso coffee
(03:16):
pods we buy are made in Switzerland, which now has
a thirty two percent tax on it. And yesterday on Amazon,
a pack of fifty Starbucks and espresso pods was seventeen dollars.
Today they're twenty eight dollars. So this is going to
happen over and over again.
Speaker 3 (03:36):
Is that amazing?
Speaker 4 (03:36):
Though?
Speaker 2 (03:36):
How quickly this is happening. Aren't there some supplies left over?
Or if you're trying to keep your margins intact, you
justight prices now.
Speaker 6 (03:45):
Well, I'm sure that it will happen to varying effects
at varying times. In a e commerce world, you can
adjust prices immediately, so a lot of products we might
see that happen. Things at the grocery store take a
little bit longer, but anything we get like fruits and vegetables,
the timing for the president is pretty good because we're
(04:05):
going to be switching over to US made stuff. But
we get so much from South America and from Mexico
that those could go up in prices fairly quickly. And
of course there will be people who free ride on
this and just raise prices even if their goods are
not imported. So this is a sort of disaster in
the making. You can call it an own goal, you
(04:26):
can call it whatever you want, but it's not going
to be good news for the US economy.
Speaker 2 (04:31):
If you're a massive retailer like Walmart, not only can
you pressure your suppliers, but you can find different places
in the store to maybe hike prices and kind of
spread things around a little bit before you dump it
on the product that has actually been impacted directly by
the tariff. If you're a small business owner, it's a
lot different. Michael, We're going to have one coming up here,
the founder of Port City Brewing. It's a great and
(04:54):
award winning brewery and Alexandria, Virginia right across the Potomac
from here, and he's having trou getting bottles. The kegs
are coming from Germany. The malt is coming from Canada.
If you're a business operator like that, let's say you
know you need a gave from Mexico or whatever it is, you.
Speaker 3 (05:10):
Have no choice based on the product that you make.
Speaker 2 (05:14):
Do you have any choice other than to pass it
along to the consumer.
Speaker 6 (05:18):
No, you don't, really, especially if you're a small business
that doesn't have big margins where you can absorb something.
And the problem for a lot of people is there
are things that are not made in the United State.
We're not growing a gave, you know, so they got
to go somewhere else. And a lot of the malt
comes from overseas, from Belgium, So there's a real problem
(05:40):
for many businesses here. They're going to just have to
pass these prices along and hope Americans accept them. And
we saw with the post COVID period that people didn't
accept them, but they had to pay them. And we
may be in that situation again, which will create a
lot of unhappiness. It'll be interesting or scary to see
(06:02):
whether people blame companies or whether the blame is focused
on the White House Mark Carney.
Speaker 2 (06:09):
Of course, the Canadian Prime Minister spoke a short time ago.
We actually got some news putting a twenty five percent
retaliatory tariff on US made vehicles in response to what
happened yesterday. We heard from the Prime Minister. Here's what
he said.
Speaker 7 (06:21):
Three sets, three different sets of US tariffs remain in
place and will continue to pose significant threats to Canadian
workers and Canadian businesses. And while they have been imposed
under different premises, some things are consistent. They are all unjustified, unwarranted,
(06:47):
and in our judgment, misguided.
Speaker 2 (06:51):
Michael, I know that you're not just an economist or
an economic expert. You're also very sensitive to the political
side of this story. You understand politics in Washington. When
you hear a remark like that. This is the Prime Minister,
by the way, who was told by Doug Ford, as
he explained to us on Balance of Power last evening,
he asked the Prime Minister not to respond.
Speaker 3 (07:11):
The trains left the station.
Speaker 4 (07:12):
Here.
Speaker 2 (07:13):
Politically, what happened in the last twenty four hours to
our standing in the world.
Speaker 6 (07:18):
Well, our standing in the world plunged. It was already
bad given the run up to this and the way
the world's been reacting to everything that the President has done,
particularly on the defense side, but now it just cripples
us with an awful lot of people. Part of that
is also the uncertainty because we don't know what mister
(07:38):
Trump wants out of this. He wants to bring factories home,
in which case you need to leave these tariffs on
forever because otherwise companies are just going to wait it out.
Or is it a subject to negotiation situation where countries
can do what mister Ford suggested and not retaliate and
try to negotiate something down and get the tariffs lifted.
(07:59):
It's really hard to know what's going on here. In
terms of Canada. There are a couple other things that
the President is talking about. Tariffing that would have a
big impact. One is pharmaceuticals and the other is lumber.
Lumber of course a long running dispute with the United States.
But Bloomberg wrote a story the other day it was
kind of fascinating. There is an ingredient that goes into
(08:21):
toilet paper that comes from Canadian softwood, and something like
thirty thirty five percent of all the toilet paper in
the United States is made from this stuff. And if
it goes up in price, you're gonna be paying a
lot more for toilet paper, or you're gonna have shortages,
and that'll get people's attention.
Speaker 2 (08:38):
Yeah, get ready for the sandpaper ladies and gentlemen. Boy,
what's the FED doing right now, Mike McKee in our
last minute? Do they have the spreadsheets all over the
floor and the green visors out or are they drinking
at Bobby Vans?
Speaker 6 (08:52):
Well, I assume they have the spreadsheets and green visors,
although Bobby Vans might be more fun. That's pretty much
what's going on all over on Wall Street. All of
the economists and analysts are trying to analyze what it
means for the economies and the companies they follow. The
FED is doing the same to try to trace through
what the impacts will be, not just the first impacts,
(09:12):
not just you go to the store and pay more
for toilet paper, but how does that affect other products
and other purchases you might make down the road. The
feeling is, according to JP Borgan Chase, that people's disposable
income is going to go negative in the next quarter
and people are going to just pull back on spending.
And the Fed we'll have to decide is inflation a
(09:33):
bigger danger or growth a bigger danger.
Speaker 2 (09:36):
One of the most important voices you'll hear today on Bloomberg,
Michael McKee. Great to have you back, sir, Bloomberg International
Economics and Policy correspondent, with some real context, some real
perspective on what the heck is happening here and how
little we still know about what happens next, how long
these tariffs stay in place, and what deals might emerge.
Bill Butcher, we talked about him on the way in
(09:56):
from Alexandria, Virginia.
Speaker 3 (09:58):
Next right here on Bloomberg.
Speaker 1 (10:02):
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 play Bloomberg eleven thirty with.
Speaker 3 (10:21):
Not great news on our markets today.
Speaker 2 (10:22):
Following what we heard from President Trump last evening, we
knew it was going to be bad if you were
with us at the extended edition of Balance of Power
last evening, the futures fell out of bed even worse
since actual trading has begun. Today is the world wakes
up to this new reality. We're glad you're with us
today on Bloomberg Radio ninety nine point one in Washington, DC,
(10:45):
on the satellite radio channel one twenty one, and on YouTube,
where you can find us right now search Bloomberg Business
News Live. You should get up on YouTube for this
next conversation because I think it's an important one. You
don't have to look that far. The fact of the
matter is outside of Washington, d C. Or that far
even here in the Federal City. To find the immediate
(11:06):
impact of the President's actions yesterday, you get the car,
drive about nine miles down the river from d C,
where some guys like me live in Alexandria, Virginia.
Speaker 3 (11:19):
There's a company that is.
Speaker 2 (11:21):
The longest operating brewery in the Metro DC area award
winning they got Small Brewery of the Year in twenty fifteen,
the Port City Brewing Company. The reason why this stuff
is so good is because of the sourcing that is
involved in crafting this craft beer.
Speaker 3 (11:39):
I want you to think about this now.
Speaker 2 (11:41):
With all the tariffs that we've talked about, the reciprocals
the steel and aluminum Canada, Mexico. Imagine you're making your
beer in Alexandria. You get your malt from Canada, you
get your bottle caps from Mexico. Kegs made of steel
(12:01):
come from Germany. What's that going to do to the
price of a six pack? That is the reality right
now for Bill Butcher, the founder of the Port City
Brewing Company, who I'm glad to say is with us
right now. Bill, I'm really glad you could join us.
Speaker 4 (12:14):
Thanks for being here with you.
Speaker 3 (12:17):
How do you get out of this mess?
Speaker 8 (12:20):
We're still sorting through it. You know, it's hard to say.
You know, the mall comes from Canada, as you said,
the bottle caps are from Mexico. It looks like there's
a carve out in these tariffs for the US NCA,
which should provide some relief, but there's still questions. You know,
we get our cans from Ball, so they're manufactured in
(12:43):
the US. However, we don't know the source of the aluminum,
if the aluminum could be coming from Canada, could be
coming from wherever. So we haven't heard anything from our
can supplier on how this is going to affect our prices.
But I feel that it is going to affect our prices,
and not in a good way.
Speaker 2 (13:00):
Well, and make it even more complicated. I understand that
you're having trouble finding bottles now because the big guys,
the big brewers, are sucking up all the glass because
they don't want to have to use more expensive aluminum
for cans.
Speaker 4 (13:12):
What do you do with that exactly?
Speaker 8 (13:15):
You know, we thought we were somewhat shielded from the
aluminum tariff because most of our package beer seventy percent
of our package beer goes into bottles, so we thought
we'd be okay on that front. However, about three weeks
ago I was informed by our bottle supplier that they
would not be able to supply us with bottles beyond
March thirty first. So we've been in a frantic search
(13:36):
for a new bottle supplier, and so we haven't sorted
that out yet.
Speaker 4 (13:42):
We have two shipments on the road.
Speaker 8 (13:44):
That we had already ordered before we got cut off,
so we've got a little bit of wiggle room there,
but we need to figure out something pretty quickly.
Speaker 3 (13:53):
Boy, that's for sure. How long have you been in
business in Alexandria.
Speaker 8 (13:56):
We opened fourteen years ago, in twenty eleven, and you know,
we've never seen anything like this. And I was talking
to our bottle supplier a couple of weeks ago and
he was telling, explaining to me that he doesn't have
an answer for us. He's been in the business for
thirty five years, and he said he's never seen anything
like this either.
Speaker 3 (14:15):
So here's the problem.
Speaker 2 (14:17):
As I'm assuming for you, the reason why your beer
works is because of all of the elements that I've
already described. I'm guessing you cannot just simply replace that malt,
for instance, that is critical to the taste and body
of your beer.
Speaker 4 (14:33):
What do you do with that exactly?
Speaker 8 (14:35):
Yeah, the malt that we use, it's a very specific
strain of pilsner malt. It's barley that's grown in Canada
and it likes the colder climate in Canada and that's
why we use it because it's the best quality in
the world. And our brewers, you know, they know what
they're doing. As you said, we've won multiple awards for
(14:56):
our beers, and it's because our brewers look the world
over for the best ingredients to make the styles of
beer that we want. So, you know, there's a lot
that goes into our supply chain and it's just really
been frustrating the past few weeks because our entire supply
chain has been thrown into chaos.
Speaker 2 (15:16):
Well, so this leaves businesses like yours in a really
peculiar spot, and it's partly why we wanted to talk
to you.
Speaker 4 (15:23):
Bill.
Speaker 3 (15:24):
You're an American company.
Speaker 2 (15:26):
This beer is made in America, but it's special because
of the ingredients that happen to come from some other places.
You could also have an American beer company trying to
make a Mexican style beer. You can't do that in
Saint Louis, Right, If you're making a gave, the reason
why it is special is because of where it is from.
(15:46):
So if your back is against the wall here, what
does that mean for a price of a six pack
of beer? Because it sounds like you can't change any
of these.
Speaker 8 (15:53):
That's true, and you know it affects not just us,
but you know, we are a main street business and
there's nine one thousand small independent breweries in the US,
and most of us are faced with this issue because
we do have a global supply chain. So you know,
if our costs go up, we need to pass that
(16:15):
along to the consumer. Unfortunately, and the way it works
in the United States with alcoholic beverages, there's a.
Speaker 4 (16:20):
Three tier distribution system.
Speaker 8 (16:22):
There's the supplier, there's the wholesaler, and the wholesaler sells
to license retailers and that's mandated by the federal government
that we can't sell direct to consumers. We have to
use this three tier system, and each tier has their
own margins and markups for the products. So if we're
a six pack of beer that currently sells for twelve
(16:44):
ninety nine, if we have to increase our price by
say twenty percent, by the time each tier of the
distribution system takes their markup, it could hit the shelf
at eighteen ninety nine.
Speaker 2 (16:56):
Wow, a six pack for eighteen It is good beer bill.
Somebody is going to pay that, right, just not as
many as your fear. Could this put you out of this?
Speaker 8 (17:04):
I mean even at twelve ninety nine. I mean, our
beer obviously is a premium product. It's a high quality,
full flavored beer, and people are willing to pay a
little bit more for something of higher quality.
Speaker 4 (17:17):
But there are limits to that, you know.
Speaker 8 (17:20):
And I'm certain that if our beer is hitting the
shelf at these inflated prices, then things are going to
slow down.
Speaker 2 (17:28):
Well, you're part of a community, of course, It's not
just you. I know that there's a brewer's association. I'm
guessing you don't have the influence of the lobbying money though,
of an anheuser Bush to dial up the White House.
How do you deliver a message? How do you push
back on any of this or can't?
Speaker 8 (17:42):
Yeah, Well, our Brewers Association has been active, and our
CEO has been He's traveled from Boulder, Colorado, to DC
several times since the beginning of the year, and so
we are trying to get our message out. You're right,
we don't have the millions that the big brewers have,
but you know, we are a main street business and
(18:03):
we are involved with our elected representatives. And I've reached
out to our senators, our US senators as well as
our Congress representatives, to let them know what our concerns
are and let them know that there's real that there's
real danger here that for the negative effects that are
going to occur with our business bill.
Speaker 3 (18:25):
Butcher, I want to meet you in person.
Speaker 2 (18:26):
This is a great story and it's a really interesting
local business here in our great little city of Alexandria.
Pay a visit sometime. It sounds like business owners could
use you.
Speaker 1 (18:39):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm e's tern
on Apple Coarclay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 9 (18:56):
We want to add the voice now of someone else, who,
of course pays close attention to the issues. The former
ranking member of the Senate Banking Committee, former Republican Senator
from the state of Pennsylvania, Pat Toomey, is here with
us on Bloomberg TV and Radio. Welcome back to Balance
of Power. Senator. It's always good to have you. If
we could just be completely candid here, when you saw
the figures presented in the Rose Garden yesterday. What was
(19:18):
the first thought that went through your head.
Speaker 10 (19:22):
I thought that he is carrying through on what he
has always dreamed of doing. I spent four years arguing
with President Trump about trade, about deficits, about tariffs during
his first term, and it became clear to me that
he has some very, very deeply held views. They're completely mistaken,
in my judgment, but they are very deeply held. And
(19:45):
at the heart of it is this notion that if
you have a trade deficit with another country, the amount
of that deficit is the measure of the amount that
they're basically ripping you off. And he uses that terminology.
He speaks that way all the time. It of course,
makes no economic sense whatsoever. The trade deficit just means
(20:05):
our consumers happen to buy more products from that country
than their consumers buy from US. Any number of completely
reasonable reasons for that, but none of them are acceptable
to Donald Trump. I think that worldview is kind of
at the heart of this. I expect that there would
be some very severe tariffs. I of course had no
(20:27):
idea exactly what levels would be imposed on which countries.
You can see that was a pretty arbitrary and capricious approach,
but I'm not really shocked by the magnitude.
Speaker 2 (20:39):
What does this mean for business in Pennsylvania, Senator, It's
good to have you back, by the way, and I
realized you could have different answers here. We talked to
a local brewer in the Washington, DC area who's perplexed
as back as against the wall because most of the
materials he's using are suddenly now being tariffed. Or for
a steel mill in Pennsylvania might have a different answer.
Speaker 10 (20:59):
Yeah, So there will be pockets of industries and companies
that will benefit from these protective tariffs. They won't have
to deal with competition, they can raise their prices, they
don't have to innovate as much. Americans may be kind
of forced to buy from them. So there will be
some that will have that benefit, but by far the
(21:21):
overwhelming majority will be the losers. Just think about the
steel and alluminitive tariffs that the President imposed in his
first term. There's been a lot of research done on
the effect of those tariffs, and the conclusion is for
every job that was saved in the steel making industry,
there were probably eight to ten jobs lost among companies
(21:42):
that use steal. There's many, many times more industries that
use these materials than the primary maker, and that downstream
damage is very, very hard. Here's another thing to think about.
Something like forty percent of American imports are in puts
for American manufacturers. So what we're doing with these sweeping
(22:05):
across the board tariffs is we are systematically making American
manufacturers less competitive because we're raising the prices they have
to pay for the components of their products. The rest
of the world isn't going through that, and so we
will be able to competitive disadvantage. This is going to
manifest itself in many ways. It's certainly going to be
higher prices for consumers. There's going to be jobs loss.
(22:27):
We've already seen announcements today of companies that are laying
off workers. That's going to accelerate, and over time it
means a lower standard of living for Americans until finally,
you know, better sense takes hold and the process starts
to online. But that can be a very difficult then
who knows how long that takes.
Speaker 5 (22:49):
Well.
Speaker 9 (22:49):
But the White House is arguing, Senator that this really
is just step one of President Trump's economic plan. We
still have tax cuts that they'll try to push through
by the end of this year that they argue will
help liven the economy. Obviously, your former chamber is taking
steps to try to advance that legislative path forward in
the next twenty four hours or so, as we expect
(23:10):
a vote rama to happen. To what extent will friendlier
tax policy be able to offset the negative impacts you
were just discussing.
Speaker 10 (23:18):
Yeah, So, look, I think there's three categories in which
the administration is likely to pursue, and in fact is pursuing,
really good economic policy. Curbing federal spending. The federal government
spent way too much money, and that'd be very good
for our economy overall, if they're successful in curbing federal spending.
Rolling back regulation. There's wildly excessive regulation. The bid administration
(23:39):
was very, very problematic with what it imposed across the economy.
That rollback it is constructive and it is pro growth.
Energy dominance is really good for the economy. It's I
think it's impossible probably at this point to quantify the
relative components, but keep in mind, on tax policy, I
(24:00):
am one hundred percent in favor of making permanent the
twenty seventeen tax reform, that's a very heavy lift. If
we can get that done, that just maintains the status quo.
That's just an extension of current policy. So there's not
like a big surge to grow that comes from continuing
current policy.
Speaker 4 (24:17):
Right.
Speaker 10 (24:18):
What you do is you avoid a very damaging tax increase.
But I really think that these tariffs are going to
do a lot of damage.
Speaker 2 (24:30):
I know you're watching these markets, Senator, some thing's never change.
You consider the negative wealth effect that this could have. Yeah,
I wonder how worried you are about the potential impact
on consumer spending or if this market keeps dropping. If
that's the one thing that can change Donald Trump's course
on this, I.
Speaker 10 (24:52):
Would hazard a guess that at some point it would.
But if we're down fifteen percent on and then nask
and I'm not sure where we are at the moment.
It's been pretty volatile, as you know, but ten fifteen
percent declines, I doubt that would change his mind. I
think it's going to have to manifest itself in the
(25:13):
real economy. I think we're going to have to see
the CPI prints that are accelerating. I think we're going
to have to see the layoffs and see the factories
closing because they're no longer competitive. I think that's going
to have to happen before the President decides he's looking
for an off ramp because he really believes that in
(25:34):
buying things from other countries is really bad for us
and he wants to curb that.
Speaker 9 (25:40):
Well, what about your former colleagues in the Senate or
in the House for that matter, do you expect if
they're getting they're seeing the you know, financial markets, getting
calls from constituents that they could maybe try to push back.
We already saw the passage of a resolution, with the
help of four Republicans, of a Democratic resolution condemning the
Canada terrace. Specifically, Senator Grassly is co sponsoring legislation that
(26:02):
would see Congress having to approve tariffs within sixty days
or them be nullified. Are you expecting more to materialize.
Speaker 10 (26:09):
On that front. Yes, I just don't know how long
that's going to take. You know, that's one of the
many disturbing ironies of this. Of course, all of this
is completely inconsistent with the constitutional assignment of responsibility for
trade to Congress. The president doesn't have this authority, and
yet we sit on the edge of our seats, wondering
(26:30):
what the latest whim is from the President who's exercising
an authority that, in my view, he doesn't have. I think,
you know, a lot of Republican voters have the view
that the president's only been in office for a couple
of months. We've got to give him his opportunity, have
him enact his agenda, and give him the benefit of
(26:51):
the doubt. I think that will only last for so long.
And when that starts to turn, because people see really
rapidly rising prices, obb is jeopardized, they're hearing about layoffs
and the other adverse effects, then it's going to be
obvious to members of Congress that this is a very
problematic road we're on, and they may want to find
(27:12):
a way to begin to reverse some of these effects.
But I think it's going to have to show up
in the real economy first. Unfortunately, I think it will
show up in the rail economy.
Speaker 2 (27:24):
Really good to have you back, Senator, I know you're
going to miss Washington when the voter ramas get going
again a little bit later this week, potentially in the Senate.
Pats to whome former Republican Senator from Pennsylvania. As we
assemble our political panel, We're glad to have Rick Davis
back with us in Jeanie Shanzano Bloomberg Politics Contributors. Rick
is our Republican strategists and partner at Stone Court Capital.
(27:45):
Genie is our Democratic analyst and political science professor at
Iona University. Rick, you might have heard Pat Toomey talking
a little while ago. You used to work around Pat
Toomey in the Senate in your time with Senator John McCain,
an old line republic who doesn't have a lot of
love for tariffs, and his point was that a ten
percent correction in the markets is not going to move
(28:06):
Donald Trump. We're going to need to see this born
out in the actual economy.
Speaker 3 (28:10):
Do you agree.
Speaker 11 (28:12):
Yeah?
Speaker 12 (28:13):
Look, I think certainly for political purposes, the economy is
what's going to impact people's opinions, right, I mean, they're
going to give Donald Trump some time. Donald Trump has
a lot of sort of tolerance for pain. He's not
running again, regardless of some of the news stories this week,
and so the political calculus for him is a little
(28:34):
bit easier for the rest of the Republican Party and
especially those mainstream Republicans that have a real focus on
the economy, and the reality for them is, you know,
higher prices, less growth, those kinds of things that come
along with these kinds of big terrif regimes are going
to slow the economy to a point where it's going
(28:55):
to be hard to go home in eighteen months when
you're pitching people to vote for your party in the
midterms and say that somehow they're supposed to be better off
today than they were when Donald Trump took office, going
to be.
Speaker 4 (29:10):
A hard sell.
Speaker 9 (29:13):
Well, especially Genie, when the White House is specifically casting
this policy is something that is intended to help the
United States in the longer term, not necessarily the shorter term.
The kind of investments they are hoping to draw, our
big investments into infrastructure and workforces, things that will take
some time to actually materialize. Does this administration run the
risk of, even if everything works out as optimally as
(29:34):
they are hoping in terms of American manufacturing, that much
like Joe Biden with many of the legislative accomplishments during
his administration, he's not actually going to be around to
see it.
Speaker 13 (29:46):
Yeah, And that's absolutely the reality of leadership, right. So
much of what you do at the moment, takes time
to implement and execute, and you're not there to witness
the fruits of all of your labor. But the reality
is it is very difficult to imagine that any of
what they are talking about from the positive perspective actually
(30:08):
comes to fruition. And this is a very sort of
scary part of where we find ourselves. And I thought
your discussion with Senator Toomey was so important. Donald Trump
is deeply committed to something that all the research, all
the facts, all the best minds look at, from Freedman
to Solo, they all say that tariffs at this degree,
(30:32):
blanket tariffs are a loser. And you know, he's heard
it from some Republicans yesterday, including Rand Paul, who urged
his fellow Republicans to look back and to see that
when this was tried by President Trump's favorite McKinley, the
loss and the seats on their side was dramatic. And
I think that's where we have to focus, is that
(30:54):
we have Republicans in Congress tolerating a power by this president.
None of us knew until yesterday that we were in
an emergency that could allow the President to do what
he did. Yesterday. The Constitution says Congress is in control.
The president has taken control because they are not doing
(31:17):
their jobs. And the question is when are they going
to wake up and say, in a system of separated powers,
one man who is devoted to something cannot change one
hundred years of tax policy and trade policy. That's the
real question the eighty percent of these GOP folks in
the Senate, in the House, who are tolerating what has
happened here.
Speaker 2 (31:37):
Straightforward question from a terminal user, Rick, why does no
one talk about the tariffs on the US for fifty
years and only on the counter tariffs that we just
put on them now?
Speaker 12 (31:50):
Well, I think arguably, certainly recent history indicates that we
have prospered on a global basis with them. I don't
think it's actually held back the US economy for whatever reason.
The US economy has grown by a significally larger Morgin
(32:10):
margin than Europe and China and other countries on a
GDP basis. Per capita, our wealth has substantially increased over
the last few decades compared to the rest of the world.
I mean, to be honest, sure there are trade deficits
in all these countries that Donald Trump slapped tariffs on
(32:32):
but it's hard to quantify how somehow those things have
been holding the US economy back. They haven't. The US
economy prior to January twentieth has been roaring. It's been
the envy of the rest of the world. And to
be honest, I think this ter phraseme, based on what
we're seeing today and expect expected by economists we have
(32:57):
on these programs, it will probably reduce the growth of
these economies ours and others that we trade with substantially
over the next few quarters.
Speaker 9 (33:08):
Well, but Rick, to your point on the strength of
the economy, isn't one of the reasons that President Trump
got elected was because a lot of that base of
support came from people who were not necessarily feeling the
economy was working for them.
Speaker 12 (33:20):
Well, yeah, I mean, look, I mean the economy when
we talk about the politics of the economy, it's not
an even playing field, right, I mean, the economy has
not been great for people live in rural areas and
don't have college educations and they voted for Donald Trump.
And the economy has been great for people who live
in cities and suburbs and have college educations, and they
(33:42):
all voted for Joe Biden. So the reality is our
country is as divided economically as it is politically. And
some political observers will tell you that's why it's divided
is because we have a haves and have not. That's
both geographic, educational, and financial.
Speaker 2 (34:00):
Weigh in on that genieus half the country you are about
to have its day.
Speaker 13 (34:05):
I'm not so sure. I mean, you know, you look
at you know, the loss of jobs in a state
like Michigan. They haven't all gone overseas. Many of them
have gone to the south of the United States. They
haven't all gone overseas. Many of them have been wiped
out by technology. So there are a lot of complicated
factors here. And to set up protections. We all want
(34:28):
workers to have a vibrant, full, healthy, and robust economic future.
But to set up a protectionist mechanism where you protect
workers and businesses from competition from overseas has long been
understood to hurt both consumers but also workers and the
(34:49):
future of the US economy as well. So, you know,
I think we have to be very very careful about
looking at a problem. Donald Trump is right, there is
a problem. People have been in pain but he was
hired or elected to lower prices, lower inflation, and start
to ensure that the very strong unemployment numbers that he
(35:12):
inherited remain and help people transition to a new economy.
He's not doing any of that. He's going back to
the gilded age as a mercantile and saying we're going
to set up barriers. It didn't work for McKinley, that's
why he abandoned it in the late eighteen hundreds, and
it's not going to work for Donald Trump unfortunately.
Speaker 9 (35:34):
Well so if his solution to the problem is not
the right one, Genie, And certainly you're seeing Democrats quick
to come out and say that what is the proper
solution that Democrats should now be pushing instead, and what's
their real power to do?
Speaker 13 (35:46):
So, Yeah, they don't have a lot of power right now.
Obviously they haven't won many elections. But you're also hearing
this from Republicans. And I would just point again to
the four who voted yesterday, and the answer is, it's
going to be a long term commitment to both free
trade use of targeted tariffs if we need to, and
(36:08):
President Trump did that in his first term. But what
you don't do is step up one day and impose
huge tariffs on one hundred and eighty five countries around
the world, including our closest allies, and expect that is
going to be in either our security or our economic
benefit long term. So there are solutions out there, but
(36:28):
it takes working together, and it takes an understanding of
the economic system. And that's the concern about many people
is that Donald Trump's view of the world in this
regard is not supported by any of the research or evidence.
Speaker 9 (36:43):
All right, Jeanie Shanzano and Rick Davis, our signature political panel,
both of them Bloomberg Politics contributors, thank you so much
for joining us as we work through some of the
domestic political ramifications of this tariff decision from President Trump,
and also here on Bloomberg TV and Radio. Keep on
top of the market ramifications, which certainly are severe. Today
we are off of session lows, but still down roughly
four percentage points on the S and P five hundred,
(37:05):
even more so for the Nasdaq one hundred, down four
and a half percent. Basically, Joe, the only safe place
to go if you want to hide somewhere today is
in the bond market. The ten year yield down nine
basis points. We are just around four three.
Speaker 2 (37:18):
At least some bond heavy retirement accounts are feeling a
little bit richer today. We're going to be looking at
the price of oil coming up as well. Mike mcgloan
from Bloomberg Intelligence, our commodity strategists, will be with us
to get to the bottom of this next.
Speaker 3 (37:30):
On Bloomberg TV and Radio.
Speaker 1 (37:33):
You're listening to the Bloomberg Balance of Power podcasts. 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 Play Bloomberg eleven thirty.
Speaker 2 (37:52):
With our focus now on the price of oil also
lower today WDTI West Texas intermediate crude futures down over
six percent. At the moment, we're hovering just above sixty
seven dollars a barrel, and we wanted to get more
into this with an expert, Mike mcloan back with us
from Bloomberg Intelligence. He is the senior commodity strategist in Mike.
We had news today from Opek a larger than expected
(38:16):
oil supply hike coming in May. How much of this
price movement has to do with OPEK versus the tariffs.
Speaker 11 (38:23):
OPEC's part of it, Joe.
Speaker 14 (38:24):
We've been waiting for OBEC to come on supply for
almost two years.
Speaker 11 (38:27):
It's just a matter of time.
Speaker 14 (38:29):
The key thing that's happening is we have an oversupplied
market on the back of that big pumping prices when
Russia invaded Ukraine, Krudeau.
Speaker 11 (38:36):
Got up to one thirty.
Speaker 14 (38:38):
That's sud the seeds of prices going lower, which they
always do every time crude o gets set high. It's
gone back down to about forty dollars a barrow. This
is the last twenty years. That's my base case. I
think it's still going there. It has a good reason
to do it, and it's the main one of the
main goals of the Trump administration.
Speaker 11 (38:54):
There's lower energy prices. They have pre existing trends in
their favor. So let's look at this.
Speaker 14 (38:58):
The average price of gasoline the country is around three
dollars and twenty cents a gallon. By the time we
get to midterms, I'll bet it'll be two bucks.
Speaker 9 (39:07):
Wow, that would be something pretty incredible. I'd like to
ask you as well about copper futures down about four
percent today. The White House did say yesterday that copper
tariffs could still be coming. Mike mcgloan, what impact will
that have if we're considering existing supply and any constraints
that cod e merge if there's heavy duties in place.
Speaker 11 (39:26):
Well, hello, Kayley, we've priced for the extremes.
Speaker 14 (39:28):
The high for copper this year was five dollars and
thirty seven cents a pound. Last year's high was around
five dollars and twenty cents a pound. It was resolved
down the four dollars a pound. I think it's going
the same way. Prices of copper and London are closer
to four dollars and twenty cents right now. We're going
that way. Just a question of how long it takes.
So the market got way over extended. The futures from
(39:49):
the US versus London got the most stressed ever.
Speaker 11 (39:52):
Now we're going back down.
Speaker 14 (39:53):
But the key thing is copper is the you know,
doctor copper, it's very high correlation with economic activity in
the rest of the world. Having a face US tariffs
means more pressure lower for copper.
Speaker 2 (40:04):
What's going on with gold Mike, was it just up
too far, too fast? I thought this was the safe
aving exactly.
Speaker 11 (40:10):
Well, nothing like a good bull market that gets stretched.
Speaker 14 (40:12):
I think what gold did is got a little expended
above three thousand dollars announce it's there now.
Speaker 11 (40:17):
That's probably support.
Speaker 14 (40:18):
The way I look at gold is it's still very
cheap versus the US stock market.
Speaker 11 (40:22):
So you see what matters.
Speaker 14 (40:22):
Stock market going down gold and continue to go higher.
But it's the most expensive ever versus the bond market.
And we have data going back on fifty years. So
I think if gold, if this continues, the next big
trade is Gold's bullish, but it might pass some of
that bullish baton to US treasury bonds.
Speaker 9 (40:38):
Well, yeah, certainly bullish for treasuries today down fourteen basis
points on the two year, nine on the ten year.
Mike McLoone, who covers commodities for US at Bloomberg Intelligence,
thank you so much as always for joining us and
reminding us that for Copper it might not just be
about tariffs, but that it also is a gross story
Doctor Copper. To his point, we know copper has always
historically been incredibly linked with the gross outlook in China. Specifically,
(41:01):
and China of course arguably hardest hit from these new
tariff policies from the.
Speaker 2 (41:06):
Is when you add in as well the slow down
apparently an investment in data center, the slowdown in EV
sales at some point, which we're sending copper prices higher,
there's a kind of a confusing market here, all of
a sudden.
Speaker 9 (41:18):
Yeah, certainly, And I wonder how confusing things are in
Beijing right now as they consider the tariff rates with
which they will currently be dealing, but also perhaps what
opportunities it creates for China as the US is turning
further away from existing trading partners. And we want to
get into this now with Anna Ashton. She's founder of
Ashton Analytics, also a specialist in US China trade and economics.
(41:40):
Welcome back to Bloomberg TV and Radio. Anna. When we
just consider the level of the levey that the Trump
administration has now set for China, keeping in mind the
twenty percent tariffs related to fentanyl are still in place,
layer on top of that thirty four percent bringing us
to fifty four percent, is the Chinese economy equipped to
handle tariffs of this magnitude.
Speaker 15 (42:01):
Well, thanks, Kaylie, and I Before I even try to
answer that question, I want to add that not necessarily
factored into.
Speaker 11 (42:09):
To that math by most.
Speaker 15 (42:11):
People yet is the fact that there already are, you know,
an average eighteen percent tariffs on most Chinese imports into
the United States prior to the twenty percent that the
Trump administration added for this new thirty four percent, so
it's actually more like seventy two percent. And there's the
(42:32):
threat of twenty five percent tariffs on China because it
buys venezuela and oil, which we don't know when that
might take effect, but that would bring it up to
ninety seven percent. And then of course there are the
sectoral tariffs which will affect China as well. So these
are really potentially quite high, and obviously they will have
(42:55):
a significant effect, a negative effect on the Chinese economy
because there's very little likelihood that Chinese manufacturers are going
to be able to absorb this, nor does the Chinese
government seem willing to allow that, and so this is painful,
but it does create opportunities, one of them being that
it just plays right into China's foreign policy line that
(43:20):
it is the protector of the international trading system and
international trade rules.
Speaker 2 (43:27):
So what's the retaliation China calling this typical bullying, Beijing
promising to retaliate.
Speaker 3 (43:33):
How will it so?
Speaker 15 (43:35):
What we've seen so far, Jough is some retaliatory tariffs,
strategic ones, including on US agriculture products and US gas,
and I expect that we would see maybe those tariffs
would be increased, perhaps there would be additional tariffs applied
(43:55):
strategically to other imports from the US. And then, of
course we'll see China rely on the rest of its
playbook of things that it can do to retaliate, the
playbook that it's been developing since the first Trump administration,
which will probably include more announcements about export restrictions or
(44:16):
licensing requirements for exports of critical minerals. It'll probably include
addition of more US companies to the Unreliable Entity list.
It might include other pressure on specific US companies that
are trying to operate in the China market.
Speaker 9 (44:34):
Well, so if they're retaliating against the US. I do wonder,
to the point you were making on opportunities created here, Ana,
if it's going to be enticing other trading partners, who
is most likely to have a favorable view toward a
trading relationship with China as they're facing this pain from
the US. Is it other manufacturing countries or at least
(44:54):
where a lot of manufacturing has gone, like Vietnam and
India which are now facing high terraff rates European Union?
Speaker 15 (45:00):
Is it all of the above? I think to some
extent you could say that it's all of the above.
That this will to the extent that the competition between
the US and China and perceptions of China's increasing aggression
and you know, territorial claims around its periphery, to the
(45:22):
extent that that has been something that other countries have
been more and more convinced of in the last eight years,
we may see a lot of those countries start to
revise that assessment and look at China as perhaps a
partner that is more amenable to relatively free trading than
(45:42):
the United States. Is I really am curious about how
this will play out in the Asia Pacific region because
of what you mentioned, the fact thats tariffs that have
been announced for countries like Vietnam are even higher than
the tariffs that have been announced China, and of course,
a lot of the manufacturing that was producing goods for
(46:05):
the US market has moved to places like Vietnam in
recent years, So that's really going to hurt those countries,
and it likely will undermine their sense that the US
is a reliable partner, which could in turn undermine US
security objectives in the region.
Speaker 2 (46:20):
And you may have heard President Trump tie tariffs against
China to a potential sale of TikTok within the last week.
And we've got a deadline that's fast approaching in this
potential sale, while we don't have anything real to talk
about yet, has been sucking up a lot of oxygen
here in Washington, d C. Have you heard of, or
(46:41):
could you conceive of, any deal in which tariffs against
China are lowered in some sort of deal for Beijing
to sign off on the sale of TikTok here in
the US.
Speaker 15 (46:55):
Gosh, Joe, maybe these are really really significant tariff threats,
So I wouldn't rule out the possibility. Prior to these
tariff threats, I would have said, there's no way that
Beijing is going to make a deal. You know, my
sources have been quite emphatic that the government has no
interest in allowing the US to acquire TikTok's algorithm. But
(47:20):
it's possible that this would cause Beijing to reconsider to
some extent. I still think that it's doubtful, though, because
you know, it's not really China's mo to bow to
US pressure like that, and so far China hasn't been
(47:41):
particularly positively responsive to other moves by this administration to
ratchet up pressure.
Speaker 9 (47:50):
Just quickly, Anna, we only have a minute left here.
But do you expect we could see some currency activity
on the part of China when it comes to manipulating
the yuan, because currency manipul is one of those non
terror farriers the White House was alluding to yesterday.
Speaker 11 (48:05):
It is.
Speaker 15 (48:05):
And then at the same time, when you look at
how the when you look at the numbers that the
White House produced estimating what the total average tariffs of
these other trading partners are on the US, you know,
it's sort of a head scratcher. And it doesn't look
like there was a formula involved that you know, clearly
(48:30):
took into account the effects on the US of different
kinds of tariff and non tariff barriers. It looks like,
I mean, most people have speculated that they basically took
the balance of trade between the US and any given
bilateral partner and divided it by the value of the
imports from that country. So there are questions about exactly
(48:53):
what countries could you and negotiations with the US to
make this better. But maybe you know devaluing currency, it's
one of them.
Speaker 2 (49:03):
Anna Ashton, great to have you with us of all
days today and a founder of Ashton Analytics. 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
(49:24):
every weekday from Washington, DC at noontime Eastern at Bloomberg
dot com.
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