May 12, 2025 • 44 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
The US and China will temporarily lower tariffs on each other’s products in a dramatic ratcheting down of trade tensions that buys the world’s two largest economies three months to work toward a broader agreement.
The combined 145% US levies on most Chinese imports will be reduced to 30% including the rate tied to fentanyl by May 14, while the 125% Chinese duties on US goods will drop to 10%, according to a joint statement and from officials in a briefing Monday in Geneva.
“Both sides agree we do not want a generalized decoupling,” Treasury Secretary Scott Bessent said in a Bloomberg Television interview Monday. “The US is going to do a strategic decoupling in terms of the items that we discovered during Covid were of national security interests — whether it’s semiconductors, medicine, steel,” he said.
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, Kailey and Bloomberg Senior Editor Michael Shepard speak with:
- Bloomberg Washington Correspondent Tyler Kendall.
- Bloomberg Economics Chief US Economist Anna Wong.
- Yale University Professor of China Studies Samm Sacks.
- Bloomberg Politics Contributors Rick Davis and Jeanne Sheehan Zaino.
- Bloomberg Contributor and Former Republican Congressman Patrick McHenry.
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Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:25):
Obviously like what they heard out of Geneva and the
White House, Today's the US has confirmed that progress was
made in talks with China and Switzerland over the weekend.
In fact, tariff's going much lower than perhaps initially anticipated.
Remember at the end of last week President Trump was
talking about an eighty percent tariff on China, seeming right, Mike,
And instead what we get is the US taking from
(00:45):
one hundred and forty five percent all the way down
to thirty percent, and China goes from one twenty five
to ten.
Speaker 3 (00:50):
And that's with the prospect of going even lower if
the FENTANNL tariffs are removed or reduced, if there's some
sort of sign of progress there with China. So there
was a lot left open there, and they even left
open the prospect of extending this ninety day pause. You
can't quite call it a deal, but it certainly is
as you put a truce or a moment of daytut
(01:11):
in this confrontation over tree with the world's second largest economy.
Speaker 2 (01:14):
Yeah, and of course President Trump took his moment to
tout this truth if that's what we want to go
with here. He spoke from the White House earlier today.
Speaker 4 (01:22):
In addition, yesterday we achieved a total reset with China
after productive talks in Geneva. Both sides now agreed to
reduce the tariffs imposed after April second to ten percent
for ninety days as negotiators continue in the largest structural issues.
The relationship is very, very good. I'll speak to Presidency
(01:44):
maybe at the end of the week. We have some
other things we're doing.
Speaker 2 (01:50):
A total reset is how the President describes this. So
let's get more from the White House where we find
Bloomberg's Tyler Kendall on this Monday. But Tyler, to Mike's point,
this isn't yet a deal. We're still going to be
negotiating in this ninety day window. So this reset is
not yet final.
Speaker 5 (02:06):
Right exactly, Kaylie. While it is a de escalation to
give the sides time to negotiate at the end of
the day, We're going to have to see how long
that lasts and if both sides can agree on a
finalized trade deal, because once Wednesday rolls around, that ninety
day pause goes into effect, and then from there the
countdown clock really is on now. Treasury Secretary Scott Besant
was asked earlier today what would it take to keep
(02:28):
tensions low after that ninety days. He said, ultimately it
would be good dialogue in good faith, but did confirm
to Bloomberg Television that at this point it is implausible
that tariffs would drop below that floor of ten percent. Importantly,
both sides here are really trying to highlight that they
have created what they have called a mechanism to keep
talks going, and as you're about to hear, the Treasury
(02:48):
Secretary told Bloomberg TV that this is going to be
important for negotiations going forward.
Speaker 6 (02:54):
China was the only country who escalated their tariffs in
response to our reciprocal tarot level, so that resulted in
an unfortunate escalation. So we now have a mechanism to
deal with that. Neither side wants a generalized de coupling.
The US is going to do a strategic decoupling.
Speaker 5 (03:20):
That reminds us that there's still a lot of negotiations
to have and some big differences on the table. A
few different threads that we're watching here, Kley and Mike,
one including a purchase agreements going forward. Both the Treasury
Secretary and the President today said that the Phase one
China deal could be used as a templates or we're
going to be watching when it comes to US ag
imports into China if that could make its way into
any sort of purchase agreements and what sort of enforcement
(03:41):
mechanisms would look like. The second, of course, is fetanyl.
As Mike had mentioned that twenty percent of that thirty
percent tariff is tied directly to the United States feentanyl concerns.
President Trump said that he believes China will act in
good faith on curbing fentanyl flows and the ingredients used
to make the drugs into the United States amid allegations
that they are contributing to the drug trafficking. And then,
(04:02):
of course, lastly, are those non a tariff barriers that
we're watching very closely. China did confirm earlier today that
they're going to remove non tariff counter measures. We have
taken that to mean that they are expected to suspend
or lift some of those heightened export controls on critical
minerals that came since April. Second, We're going to have
to see how these negotiations shake out. President Trump did
say earlier today he could hold a call with Chinese
(04:24):
President Jijingping as soon as this week.
Speaker 2 (04:27):
All right, wonder where that's going to fit in the schedule,
as he has a busy few days in the Middle
East ahead of im. Bloomberg's Tyler Kendall, thank you so much,
And we want to take a look through the economic
lens of what difference these tariff changes really will make
between the US and China, and turned to Anna Wong.
She's our chief US economist at Bloomberg Economics and is
here with Mike and I in our Washington.
Speaker 5 (04:45):
D C.
Speaker 2 (04:45):
Studio. So, Anna, obviously, thirty percent is a whole lot
lower than one hundred and forty five percent. But I
know you've been watching cargo volumes. We've seen this massive
trade drop off between the US and China already. How
much is going to be revived by still an incredibly
high thirty percent terrify.
Speaker 7 (05:02):
Yes, Kelly, Actually, we put out a note last Friday
that showed that in fact, container ships leaving China has
increased in the first week of May, and we connected
the dots. We think that several of the US retailers,
after a meeting of President Trump in late April, has
resumed their order and the ships carrying those orders potentially
(05:22):
have already been setting sail to the US, arriving today
starting today, with many of those ships arriving on the twentieth.
And this was why we had thought that, in fact,
they need to cut the tariff this week because those
ships carrying Walmart and Target goods are arriving. So if
you believe that that was the concerns about empty shells
was what motivated this cut. It also means that as
(05:44):
this ninety day comes to an end basically by mid August,
which covers the peak shipping period ahead of holiday seasons,
the stakes for escalating actually would reduce because you know,
the holidays is assured there won't be empty shelves, and
so Trump could easily re escalate again. And I just
(06:07):
think that what we saw this weekend is not consistent
with Trump's negotiation style, which is not straight, straight lined
down with the tariff fright. It usually comprises of escalation
and then some de escalation in the escalation back again
until a final deal is reached.
Speaker 3 (06:25):
To what extent does this reflect a recognition on both sides,
not just here in Washington, but also in Beijing, that
the economic risk of carrying out this tip for economic
trade war to the level it reached was just so
dangerous to the economies of both countries.
Speaker 7 (06:44):
That hits the nail on the head exactly. And the
reason why I think the US and China negotiations came
out and say that they've found agreement very quickly is
that the agreement is that they do not want the
worst case scenario, which is for trade to enter the
embargo state at the peak shipping season. Most of the
shipping in the holiday season, which accounts for over forty
(07:05):
percent of sales revenues for any US firms, happen from
now to end of August. So this is a critical
period that I think US and China both easily found
agreement on to not disrupt. But beyond that, who knows well.
Speaker 2 (07:21):
Obviously none of us can predict the future, including Federal
Reserve policy makers. Hence why they keep emphasizing patients we've
seen today in the aftermath of this truce being reached
and the expectations for rate cuts being taken down this year.
Now I think just fifty five basis points are priced in.
Does this make a material difference in the amount of
easing you expect us to see?
Speaker 7 (07:41):
Yes, So, I mean our base case has been for
only twenty five BIPs of rate cut this year, so
we were already lower than the rest of the market.
But right now what you could immediately see is that
the MAZE jobs report and June's jobs report would not
be as bad as in this situation where container volume
couldntinue to drop, because we're now already seeing this week
(08:02):
container volume is rising in the port of la and
with a lot more firms planning to front run in
this ninety day reprief period, it means that the logistics
sector just would not shed as much job as we thought.
So there you have May and June's payer all being
not as you know, possibly not negative as what it
(08:23):
could have been had, you know, the plunge in the
container ships continue on it.
Speaker 3 (08:29):
There is a lot for the two sides to get
through over the next several weeks. Is ninety days going
to be enough to lock this in given how detailed
that fine print.
Speaker 7 (08:39):
Is going to be not at all, not at all exactly.
That's why I thought the ninety day reprief is more
of a holiday Let's get through this holiday season first.
Let's make sure that not a lot of small businesses
are going bankrupt in the US and China. Factories are
not all going out of business because the US and
China's tariff problem, trade barriers, this problem goes really deep
(09:01):
and it takes years. Even in the Phase one deal,
it took a whole year, and during that year President
Trump was kind of fluctuating whether they should take it
or not.
Speaker 2 (09:11):
Well to the point you were making earlier, these things
tend to be a rollercoaster with this particular President. Anawon
of Bloomberg Economics, thank you so much for joining us.
And of course we have to keep in mind that
Scott Bessen, the Treasury Secretary, has said previously a full
deal with China could take two to three years, so
we have to keep that in mind. We want to
get more on that now and turn to Sam Sacks,
professor of China studies at Yale University. He was joining
(09:34):
us on Bloomberg TV and Radio Professor sax Welcome to
balance of power when we consider how different a place
we are and now compared to before these talks beginning
in Geneva over the weekend, from one hundred and forty
five percent and one hundred and twenty five percent respectively,
down to thirty and ten percent. Yes, both sides took
tariffs down by an equal amount. But do you actually
(09:55):
see this as a truce, that is that is equal
or did China actually kind of come out the winner here.
Speaker 8 (10:02):
It's too soon to know. Both sides have essentially agreed
that talking is happening, and they couldn't even get that
basic point straight between the two of them. We were
engaged in this long game of chicken where Trump was
insisting that she wanted a deal and she didn't want
to look weak, potentially facing a president's Lensky moment in
(10:22):
the White House. So the fact that they have agreed
to announce that talks are beginning itself is a stabilizing factor,
but it tells us nothing about what the nature of
any agreement actually will look like.
Speaker 3 (10:35):
Professor Sachs, what is the significance of the two sides
actually putting together a joint statement there is a lot
of optics in every trade negotiation, of course, but with
China the optics count even more. What do you make
of this after just two days of discussions between the
two sides.
Speaker 8 (10:55):
Both sides want a deal, that's the bottom line, and
I think it's come from a a place of political
and economic weakness in both countries. What the joint statement
says so far doesn't actually tell us anything. By and large,
the statements are identical in Chinese and English, with the
exception of some word choicing. I think whether or not
(11:18):
they can get to a joint public agreement once we
get into the really hard issues like what would a
purchase agreement look like? What does fentanyl cooperation entail? The
Chinese side desperately wants the US to lift export controls.
I don't see that happening. The US side desperately wants
the Chinese to undertake deep reforms in its economy. I
(11:40):
don't see that happening. So once we get to the
harder part of the negotiation, I think having this kind
of joint communicate is going to be increasingly difficult and
could actually stall out altogether depending on what happens.
Speaker 2 (11:53):
Well, as you tell a professor about what the US
wants to see in terms of changes really to the
structure of the Chinese economy. And this isn't unique to
the Trump administration. The Biden administration under Treasury Secretary Janeyellen
talked about this plenty as well, concern over China's manufacturing
over capacity and the idea that it's flooding the market
globally with cheap goods. What incentive does China have to
(12:15):
actually change that practice? Can the US really force that?
Speaker 8 (12:21):
The incentive is going to have to come from internal sources,
And something that often happens is you'll have interlockutors in
China will use outside pressure from the US to force
changes to the domestic economy that politically wouldn't be possible
without an external US forcing event. But it needs to
come from the inside. So one thing we know about
(12:44):
the lead of the of the Chinese delegation right now,
the Vice Premier Hoo, he's somewhat more he's less of
a reformer than the interlocutor for the first round of talks, Leoha,
And so this is someone who's a staunch advocate of
a state led economy, not of more market liberalizations. And
so I think that's going to be another factor that's
(13:05):
going to make these kind of deep reforms more challenging.
But we have to remember she didn't. Ping is under
tremendous pressure right now in terms of Chinese jobs, Chinese
businesses in the private sector, and so this is going
to be something that's going to get them to the
negotiating table, not necessarily because the US is compelling them to.
It has to come from within.
Speaker 3 (13:27):
Professor Sachs. One thing that came up this morning during
our conversation with Scott Bessett, the Treasury Secretary, was a
new baseline perhaps for tariffs. And we'll have a listen
to this, and I'd like to follow up a question
about it afterward. Let's bring them in.
Speaker 9 (13:45):
Are you saying that tariff rates will only go up
from here? If this really is a floor of ten
percent on the Chinese side and thirty percent on the
US side.
Speaker 6 (13:56):
I'm not saying that they're going to go up, but
it would be implausible that they would go below ten.
Speaker 3 (14:07):
Professor sax, How does this reset the US China trade
relationship when it comes to tariffs If we're talking now
about a baseline that could perhaps go a little bit higher.
Speaker 8 (14:19):
You know, we don't really know yet. I think they're
just trying to send a signal to consumers, to voters,
to US stock markets. On the Trump administration side, today,
the stock market rally was a huge political win and
Trump wants to take credit for that. So I think
that's what this baseline signaling is really about. But until again,
until we get into the nitty gritty, it's unclear. Now
(14:40):
could China just go back to the ten percent baseline
and be the same treated the same essentially as the
other countries that are all in the process of potentially
looking for deals or not. It's possible, but I think
the idea is there's going to be for it's going
to be impossible to fully recover to before Liberation Day.
We're not going to go back to that at And
(15:00):
it's a question of how far we're going to go.
Is this just going to be strategic sectors or is
this going to be a sort of wholesale trade embargo.
And I think we're we're looking now at a more narrow,
narrow tailored decoupling. But what that means again, what is
the US side actually going to offer up here?
Speaker 10 (15:18):
Is really what we have to watch Professor Sachs.
Speaker 3 (15:21):
What sort of signal is this sending to other US
trading partners that are also locked in their own negotiations
with the Trump administration even as we speak.
Speaker 8 (15:33):
I think that you know, they don't want No one
wants to have a I think no one wants to
be like China in this situation. So maybe it opens
the door to more deal making. If China was the
most intractable, I think we could potentially see a flood
of other deals, maybe looking like the US, UK or Mexico.
But China certainly has always been the elephant in the
(15:55):
room and set the tenor for others to come.
Speaker 2 (16:00):
Can we consider trading partners in Asia, specifically which the
administration has put a lot of emphasis and prioritization on India, Japan,
South Korea? How does that also influence ultimately how reliant
the US actually will be on China for trade and
for goods going forward.
Speaker 8 (16:17):
This gets at the question what does the Trump administration
actually want? Do they want to close the loopholes for example,
that have just squeezed trade and exports to places like India, Vietnam, Mexico.
Because what happened is you have manufacturing diversification. No longer
can export from China. Let's shift those supply chains to Vietnam, Indonesia, India.
(16:40):
But then all of a sudden, those tariffs were just
as high. So if the goal here is to gen
is to reshore US manufacturing and restore America's place in
those supply chains, I think we're going to still see
significant pressure on some of those other parts of the world.
But at the same time, the US is not going
to want to alienate key trading partners at a moment
(17:01):
when it wants to sort of bandwagon, it wants out
East Asian countries, for example, to come on board and
be an economic counterweight to China.
Speaker 2 (17:11):
All right, Professor Sam Sachs of Yale University, where she
is a professor of China Studies, thank you so much
for being here on Bloomberg TV and radio. And it
was interesting, Mike to hear the Treasury Secretary Scott Besson
in his interview on Bloomberg Surveillance earlier, characterizing what the
US is trying to do here as being a strategic
decoupling from China. The prior administration didn't want to use
(17:32):
the decoupling language at all, but I guess this one
is looking at it in the.
Speaker 3 (17:35):
Target, but in a few areas. And they talked about pharmaceuticals,
and they also talked about semiconductors, and that, of course
is an area of key contention, and Professor Sachs even
brought that up in passing. And it is crucial to
note the differences between the two sides, including with export
controls over sales of US ships through China.
Speaker 2 (17:54):
Yep, those non tariff barriers. We keep hearing about our
non tariff mechanisms or what have you. Export controls theoretically
fall into that. So we'll continue to follow this story
here on Balance of Power. But up next we have
to turn to other geopolitics as well, as President Trump
makes tracks to the Middle East and potentially has a
visit to Turkey that could happen. We'll have the details
next here on Bloomberg.
Speaker 1 (18:16):
You're listening to the Bloomberg Balance of Power podcasts. Catch
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Speaker 2 (18:35):
Welcome back to Balance of Power on Bloomberg TV and Radio.
I am Kayley Lines alongside Mike Shephard here in Washington, where,
of course we've been following a number of stories that
broke over the weekend, but perhaps none sent the city
quite as a buzz as the reporting from ABC that
hit yesterday that the government and Royal family of Cutter,
where President Trump is visiting on his trip to the
(18:57):
Middle East this weekend, was preparing to offer him for
free a luxury Boeing seven forty seven jumbo jet for
him to effectively use as the new Air Force one.
This is something the President himself has confirmed and talked
about from the White House earlier today.
Speaker 4 (19:13):
I think it's a great gesture from Guitar. I appreciated
very much. I would never be one to turn down
that kind of an offer. I think it was a
gesture because of the fact that we have helped and
continue to We will continue to all of those countries,
Saudi Arabia, uae Qatar, and others. We keep them safe.
(19:36):
If it wasn't for us, they probably wouldn't exist right now.
And I think this was just a gesture of good faith.
Speaker 2 (19:43):
And Mike. We should note that the President says this
is not a gift to him personally, it's a gift
specifically to the US Defense Department. But when we're talking
about the size of this gift, this is an airplane
that costs hundreds of millions of dollars. There are massive
legal and ethical questions around.
Speaker 3 (19:59):
Thistrategic questions too. What would the government of Cutter want
in return or perhaps expect in return, Not even so
much as a quid pro quo per se, but if
they are offering something, eventually they might want something in return.
And the question remains, what is it? Is it perhaps
an easing of restrictions on access to nvidio chips? Is
(20:20):
it something else? Is it just a better understanding with
the US. And the President sought to make clear that
he would not be using this luxury jumbo jet after
he left offices, ABC had reported, but nonetheless it did
raise the question about whether this was some sort of
emolument which is prohibited above a very nominal level to him.
Speaker 2 (20:42):
So we want to get into this now because it's
a fascinating story and there's other topics to discuss around
it too, and turn to our political panel. Bloomberg Politics
contributors Rick Davis and Genie Shanzano are with us Rick
of course stonecard Stone Court, Capital partner and Republican strategists.
Genie democratic analyst and senior Democracy Fellow at the Center
for the Study of the Presidency and Congress, Jeanie. I
(21:03):
was struck by the reaction of Laura Lumer, who of
course is somewhat of a diehard for the President of fact,
in her critique of this gifted airplane, she mentioned that
she would take a bullet for President Trump to use
her words, but even she doesn't like the notion of
this very expensive gift from a foreign government. And I
wonder if you think that backlash maybe enough to make
(21:25):
this not happen.
Speaker 9 (21:27):
It absolutely could be. It's Laura Lumer, very close to
the president. It is Ari Fleischer, He's on Fox News
all the time. There are other conservative Republicans who have
come out and said, no, mister President, do not do this.
And of course, while you and Mike were talking about this,
I'm thinking what happened to mayde in America. We can't
(21:49):
have dolls and pencils made overseas, but he can have
a plane. I mean, you know, putting aside the real
serious consequential security issues, the constitutional issues, the legal questions.
What about made in America, mister President, I guess that's
gone by the wayside when it comes to his jumbo jet.
Speaker 3 (22:07):
Well, Rick, is there anybody in the President's inner circle
who might be in a position to actually talk him
out of this? He really made it seem like a
done deal and it would be pretty hard to turn
it down on his way to Cutter to meet with
the leaders there.
Speaker 11 (22:23):
Yeah, let me think Susie Wiles talking him out of
a four hundred million dollar gift.
Speaker 12 (22:27):
Now, don't think so.
Speaker 11 (22:29):
Look, it is a Boeing jet. It was made in America.
I mean, we got a piece of that. Although maybe
designed and outfitted and Cutter, this is going to be
a story that lasts a while because even though very
generous gift by Cutter, I mean, you know, very inappropriate
for the President to say, yes, we still he can't
(22:49):
fly on that thing until it's outfitted with all the
most stead of the art electronics, redundancy in every facet
of it, and significant alterations to its ability to.
Speaker 12 (23:04):
Defend against an attack.
Speaker 11 (23:06):
These are all the reasons why the current new air
Force one is slow to get going because there are
a lot of changes all that's got to be done
to this plane before he flies in it for one hour,
and that is a new charge to the American taxpayer.
The reason it's going to the Department Offense is because
they have the budget to actually retrofit it. So you know,
(23:29):
it's going to be a story we're going to be
talking about all summer long because someone's going to.
Speaker 12 (23:32):
Say, Gee, how much did that cost the American.
Speaker 11 (23:35):
Taxpayer to retrofit in addition to the new one that
we're building before the end of the administration.
Speaker 2 (23:42):
It's an excellent point, Rick, And obviously this story is
going to be kept in the news at least for
this week because President Trump is going to be spending
time in Cutter this week and Saudi Arabia and the UAE.
He is on board the current Air Force one heading
to the Middle East right now. And Rick, I wonder
what outcome you really expect from this first big trip
abroad of his second administration, not focusing necessarily on geopolitical
(24:06):
issues or regional conflict. Instead, we understand he's mostly there
to try to secure money investments into the United States.
This just about deal making.
Speaker 12 (24:16):
Yeah, I think a lot of it is.
Speaker 11 (24:17):
I was actually on the president's trip to Saudi Arabia
in May of twenty seventeen, when you know, he basically
was trying to reopen Saudi Arabia for investment in foreign
direct investment into the United States and that worked for
a little while, but the Biden administration kind of chilled
that out. So I think this is to retro start
(24:39):
that right, get it going again. Let's get those Saudi dollars,
the UAE cutter dollars, you know, get the GCC into
investing in the United States. And I'm sure there'll be
questions with these folks about price of oil.
Speaker 12 (24:53):
How much pumping's going on.
Speaker 11 (24:55):
Nothing is more obsessive to Donald Trump than the price
of a gallon of gasoline, and these folks in the
Middle East have a lot to do with that. So
my guess is the one thing that's probably not going
to be a news story, and it'd be interesting if
it was, is whether or not he can convince the
Saudis to enter into an Abraham accord, and something he
was very proud of in his first term with Israel,
(25:18):
but it just seems Israel's not on this agenda this.
Speaker 3 (25:21):
Week, Genie, how critical is it for the president to
show continued progress when it comes to those investments. He
started really on his first full day in office announcing
that kind of an economic push from abroad into the US.
He'll remember that big Softgate AI Data center announcement, and
from there it's been off to the races. How much
(25:42):
more are we looking for and how much more will
he be able to follow through with all of it?
Speaker 9 (25:49):
Yeah, you know, I think the concern of many of
us is the question of whether this is about investment
in the United States or investment in Donald Trump, his companies,
his his family, Steve Whitcoff's family. I mean, you know,
he is famously not going to Israel this trip. He
is going to cut our He is going to Saudi Arabia.
(26:11):
These are places where just in the last few weeks
and months, his sons have talked about deals they have
struck in the interest of the Trump family and the
Trump business. They have talked about this golf agreement. They
have talked about this crypto agreement that was made and
that they have benefited from. So yes, I mean, if
(26:32):
the focus is on investment in the US, that is
absolutely something to be welcome. But I think the concern here,
just like the concern about the airplane, is is this
really about the US and what's in the interest of
US security or is it about Donald Trump and his
family and friends. And you see real evidence if you
(26:52):
just look at where they've been traveling and what they've
been posting that a lot of the focus is on
the latter.
Speaker 2 (26:59):
Unfortunately, Rick, I want to return to where you ended
your last answer, as you mentioned Israel perhaps not being
as much in focus, and we should point out that
today back in Israeli territories, the last living American Israeli
hostage that was being held by hamas a Don Alexander.
This appears to be a release that was essentially negotiated
(27:20):
singularly without necessarily Israel being involved. And whether you're looking
at this particular instance knowing there are still remaining hostages
in Gaza, whether you look at the kind of truth
that has been gotten to by the US and the
who thies the US talking to Iran, all of it
kind of paints a picture of President Trump being, if
(27:41):
not at odds, at the very least not as an
alignment with the Netnyahu government. As was thought when he
came into office, Is he still the best friend Israel's
ever had?
Speaker 11 (27:51):
You know, I think he's still probably the best friend
Israel's ever had. But I'm just not sure bb Netnyah,
who's going to think of him as the best friend
he's ever had?
Speaker 12 (28:01):
You you've you, you struck a good court.
Speaker 6 (28:03):
Uh.
Speaker 11 (28:03):
Donald Trump's out doing his own deals with the hoodies
and and and with with the Hamas, and and and
the realities. You'd never hear about that beautiful UH development
in Gaza anymore. That was a real lift to uh
Bibing Nyahu's war plans to be able to clean that
out and actually move Palestinians out of there. Uh So,
so much of that early, you know, first month in office,
(28:27):
when UH there seemed to be an incredible link between
the two countries and the two presidents, has seemed to
pretty much vanish. Now there are other priorities, And it
doesn't mean that the President has lost his affinity for
uh for.
Speaker 12 (28:42):
The Prime Minister.
Speaker 11 (28:43):
But the reality of it is is that this was
a week where you would have thought the President would
have ended his Middle East tour in Jerusalem a big
victory lap based on his relationship with the Israeli people
and with Bibi nt Yahoo, but didn't seem to come pass.
Speaker 3 (29:02):
Genie without about a minute left. We also may see
the President take a detour to Turkey for talks on Ukraine.
How much pressure is he under to deliver and show
some more progress there.
Speaker 9 (29:14):
Yeah, he's under a lot of pressure, a lot of
it self imposed because we're long past his twenty four
to forty eight hour window mic for him to get
this deal done. But weirdly over the weekend he seems
to be negotiating with Zelensky on his own. I mean,
Putin seems to be out of it. He's saying, do Zelenski,
you know, just just make a deal just you know,
and the war yourself, don't wait for Putin. So I
(29:36):
think Zelensky has done the right thing saying he's going
to go to Istanbul, invited Putin to come. It doesn't
look like Putin will come, and that will open him
up to continue to get support militarily, intelligence and otherwise
from the US as Putin continues to be the sort
of problem in these negotiations, not Zelensky.
Speaker 2 (29:57):
All right, Genie Shanzano and Rick Davis, our Political Panel
on this Monday, Thanks for being here as always on
Balance of Power and still Ahead, will be joined by
the former Chair of the House Financial Services Committee, Patrick
McHenry as we turn our focus to Congress in the
budget reconciliation package, what exactly is going to be in
these tax cuts. We'll have the details ahead here on Bloomberg.
Speaker 1 (30:19):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App. Listen
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 2 (30:36):
Kicking off the week in Washington, which is going to
be a very big one for Republicans in the House
of Representatives specifically, is tomorrow, about twenty four hours from now. Actually,
two key markups are going to happen in crucial House committees,
the Energy and Commerce Committee, which has released a bill
that includes what the Comreational Budget Office says is more
than eight hundred and eighty billion dollars in cost savings,
(30:57):
in part because nearly fourteen million people could get kicked
off metakid roles in the next decade. Then there's the
ways and means Committee, which of course is charged with
outlining the broad tax package, all the tax cuts the
president wants, and perhaps trying to find a number that
is going to make the Salt Caucus happy. According to
our reporting here at Bloomberg Today, the number they're looking
at for married couples in high tax states at California
(31:19):
and New York thirty thousand dollars, so you remove the
marriage penalty. It's up from ten thousand, but it still
might not be enough. Mike Shephard for some of those
Salt cock his members who've been pushing for numbers more
than double that, Well.
Speaker 3 (31:30):
That's right, and Mike Johnson can't afford to lose too
many votes given the margin in the House right now,
and everything is riding on this, the big beautiful bill
we've heard the President talk about so much, and there
is a lot more than just salt going into this.
We're also looking at some of his campaign priorities, including
exempting Social Security income and exempting tax exempting tip income as.
Speaker 10 (31:53):
Well from taxes.
Speaker 3 (31:54):
So we're going to be looking for a lot and
lawmakers have a lot of angels to stand on the
head of a pen here.
Speaker 12 (32:00):
Yeah, they do.
Speaker 2 (32:00):
Keeping in mind they want to do this in just
a handful of legislative days, as the Speaker wants to
see this thing passed on the floor by Memorial Day.
So we want to get into this wider reconciliation process
now and turn to someone who was in of course
the House of Representatives until recently, former Republican Congressman from
North Carolina and former chair of the House Financial Services Committee,
now Bloomberg contributor as well. Patrick McHenry is here with
(32:22):
us in Washington. Welcome. So when we consider this Salt
issue in particular, knowing that there are a number of
moderate members who make or break the House majority who
are going to have a very difficult time with this
considering their constituencies, is this actually what is going to
make or break an ultimate floor vote.
Speaker 10 (32:40):
Absolutely so.
Speaker 13 (32:41):
The Salt Caucus has been hard at work for years
on this. The reason why we're able to pass the
original Tax Cuts and Jobs Action in twenty seventeen is
because we overcame those votes, those Republicans from Salt States
New York being the biggest and the loudest group of
Republican legislators here. The Salt does not model out as
(33:05):
a Senate problem at all, there are no Republican senators
from states where the state and local tax is a
big issue for ratepayers. New York holds the balance for Republicans,
and they're the majority makers in the House Representatives.
Speaker 10 (33:20):
They gave us the majority.
Speaker 13 (33:21):
Three years ago and in last year, and so they
need to be taken care of. They need to be
taken care of in a way that's sufficient for their constituents.
They can't go home and say, you know, I raise
your taxes. That's not a good message for Republicans anywhere,
but most especially in state like New York. So you
have really competent, smart legislators here. The question of whether
(33:42):
or not thirty thousand is going to be sufficient for them,
we're going to see, and we're going to see in
a very public way. These are the most public Republicans
in the House Representatives.
Speaker 12 (33:52):
They are allowed.
Speaker 10 (33:53):
They know how mike law, they know.
Speaker 13 (33:55):
How to get media attention, they know how to draw
attention the issues they care about and draw people in.
So we're going to be drawn in and we're going
to be live with them every step of the way.
Speaker 3 (34:06):
Based on your experience, what sounds like a level that
will get these members over into the yes column.
Speaker 10 (34:12):
So this is the difficulty of negotiating on this.
Speaker 13 (34:15):
More is the number, right, So you say a number
and they say more, and eventually we'll find that number.
I don't think it's going to be a round number
at the end of the day. It will be something
different than what we tend to do in the Congress,
which is like a nice round number.
Speaker 10 (34:32):
So we're going to see this.
Speaker 13 (34:33):
I don't think this is a fully big product coming
out of the committee.
Speaker 2 (34:37):
Well, and I guess the markup will we be revealing.
We've heard tell that it's going to go into way
late in the night tomorrow and something we'll have to
continue to follow throughout the week. I also want to
talk about what's going to get marked up in the
Energy and Commerce Committee though, because of course medicaid was
the other massive question they have, according to the Congressional
Budget Office, come up with a package here that is
actually going to save more than they were charged with,
(34:58):
saving more than the eight hundred and eighty billion dollars,
but the cost of doing so is potentially thirteen point
seven million people losing their benefits over the next decade.
Senator Josh Holly, a Republican, says this argument is both
morally wrong and politically suicidal. Do you see this as
political suicide if it passes?
Speaker 13 (35:15):
No, because savings to healthcare programs does not necessarily mean
those that benefit from the healthcare program get less of it.
It may mean that somebody in the middle has their
wonderful profit box that it gets goreed. And so we
see this with payment issues through CMS. This is a
(35:37):
very standard challenge with health care policy is that they
always go back to a number of people that are
directly benefited, and it never is the case. So let's
step back. What is the package that House Republicans are
proposing here? First, Brett Guthrie is the chair of the
Energy and Commerce Committee. He is an expert in healthcare policy.
He has worked with as their members to dial in
(35:59):
this space the civics of the policy that they think
will have the greatest savings to the taxpayer and the
least amount of harm to those that benefit from these
healthcare programs.
Speaker 10 (36:09):
Number one.
Speaker 13 (36:10):
Number two, they're going to reform these programs so you
have better delivery and better quality of those that are
getting healthcare benefits through Medicaid. So I think some of
these things are quite sensible. And I think the shock
and a number of people getting thrown out, thrown off
of the plan, I think it will not end up
that way.
Speaker 10 (36:31):
I think it'll be a much set.
Speaker 13 (36:33):
Of sharper outcomes that will be beneficial to the taxpayer
and to the public.
Speaker 3 (36:37):
Are the work requirements that are being discussed right now
even practical? Will people be able to follow through and
follow all the steps necessary to continue qualifying if they
are put in a position of having to make sure
that they verify employment receive Medicaid benefits?
Speaker 13 (36:55):
Traditionally, Yes, those people that are receiving these benefits tend
to be experts in how to receive these benefits. So
let's step back on work requirements. Republicans have been for
work requirements for our social safety net for generations.
Speaker 10 (37:11):
This is not a new set of policies.
Speaker 13 (37:13):
And in fact, this work requirement we put in place
for food stamps during the debt sealing negotiations two years
ago at this time that got a two thirds majority
in the House the Senate and signed by Joe Biden.
Some of these work requirements are not right wing policy
(37:34):
or some ideal set of right wing policy. Some of
them just very practical things that could be achieved in
a bipartisan vote.
Speaker 2 (37:43):
Just because you mentioned the debt ceiling, we also should
point out on Friday, the Treasury Secretary send a letter
to the Speaker that says, you need to get that
thing raised before the August recess, because at that point
is when the Treasury might no longer be able to
meet its obligations. Does that timeframe make you nervous? If
the debt ceiling raising mechanism is to be the reconciliation package.
Speaker 10 (38:02):
It makes me nervous.
Speaker 13 (38:03):
But as a congressional leader, it is the welcome sign
that there's an end date for the pain and suffering
of going through the reconciliation process. We saw this with
a Biden administration trying to do two reconciliation bills, and
it drug on for months and months and months.
Speaker 10 (38:18):
We have an end date now, and if you want to.
Speaker 13 (38:21):
Leave town as a Congressional Republican, you better get your
stuff together in the month of July or you're going
to be sitting here roasting in the month of August.
Speaker 12 (38:30):
I think that.
Speaker 13 (38:32):
It condences the timeline that is a good thing for
the safety and health and happiness of the American people.
Speaker 3 (38:39):
Chairman, does The need for speed, though, mean perhaps that
the president may have to let go of one or
two of the big priorities he outlined during the campaign,
And we were just talking about this in the open
exempting Social Security income and tipped income. Does something have
to give? As the push and chuve gets more intense.
Speaker 13 (39:00):
I think what you see from this administration. I think
what you see from this president he's going to get
his way with congressional Republicans. He didn't make fifty campaign
pledges on tax policy. He made two or three. He's
going to get those two or three.
Speaker 2 (39:14):
Something else that he talked about a lot on the
campaign trail as being a super pro crypto president. He
wants to make the US the bitcoin capital of the world.
He seemed widely supportive of legislative efforts on the hill,
and yet we saw one of those efforts fail on
the Senate floor last week, as the stable coin bill
failed to get adequate support. Knowing you spent a lot
of your time leading the Financial Services Committee on this issue,
(39:35):
what is that signal to you, not just about the
future of stable coin legislation, but if you can't do that,
what hope is there of getting something on market structure.
Speaker 13 (39:42):
Oh, that's right, So this is the easier go of it.
A stable coin is a payment mechanism. We have a
payments regulatory regime. We haven't defined what is a payment
stable coin in federal law yet. It is a very
simple undertaking for a stable coin bill. Market structure is
a little more complex because we're talking about a a
new decentralized object and various pieces of technology that do
(40:04):
different things. Right, so it's defining the Internet. Well, the
Internet is many things and many layers to it. It's
harder do that one bill. So market structure is the
thing that is necessary for crypto to flourish here in
the United States. The Pavement sample Coin bill that the
Senate has worked on, they marked it up, welcome signed
for the Senate Banking Committee commitment. Senator Scott for his
(40:26):
adept handling of this, and Senator Haggerty and Lumus and
jail Brand.
Speaker 10 (40:30):
They did a fabulous job. But you have almost all Republicans.
Speaker 13 (40:33):
Together on crypto, and you have a remnant of Senate
Democratic members. So you have ten to fifteen pro crypto
Democratic senators and they're fighting against the base of their party,
especially the ranking member of the Senate Banking Committee, who
is a real problem crypto. Well, what they understand is
(40:54):
that crypto is popular. They want to be for it.
They also want to get bludgeoned by their fellow Democrat.
It has been a very tough set of politics for
these Senate Democrats to be pro crypto. What we'll see
though this week, maybe even next week, but probably this week,
is they'll come to terms with a reasonable set of
policies and they'll have enough cover from their colleagues, Democratic
(41:15):
colleagues that they can do this. I think they need
a little political cover, frankly, to come to a regionable spot, and.
Speaker 10 (41:21):
That's what we got last week.
Speaker 3 (41:23):
Chairman, speaking of political cover on crypto, what are you
expecting from the White House in its policy blueprint? From
David Sachs on cryptocurrencies and digital coin? Are you expecting
this to really shape things on Capitol Hill?
Speaker 10 (41:36):
I think these products are largely baked.
Speaker 13 (41:39):
We spent four years crafting the market Structure bill we
passed out of the House with a two thirds majority.
Speaker 10 (41:44):
I think it's going to look a lot like that.
Speaker 13 (41:46):
The key attributes, though for a market structure bill are
the definition of decentralization.
Speaker 10 (41:53):
Is it narrowly controlled. If it's narrowly controlled, that's not decentralized.
Speaker 12 (41:57):
We have a.
Speaker 10 (41:57):
Regime for that. United States, it's undersecurities law.
Speaker 13 (42:00):
Good luck, right, go try it out the sec You
don't need a new regime for that. If you're truly
decentralized and you don't have a neuro group controlling, you
need to have your own regulatory regime. That's our baked in.
That's understood from all branches. Everybody's engaged in this. The
second piece of this is the classification based off of
the technology.
Speaker 10 (42:21):
What does this token do?
Speaker 13 (42:23):
We should regulate it based off of its functionality and
its purpose, and those two things are baked into all
these bills. A Democratic Republican over this Congress and the
previous congresses.
Speaker 10 (42:35):
So I think it's going to be baked in, and
I think we'll get.
Speaker 13 (42:38):
To I think we'll get to a reasonable outcome, but
with some drama to get a market structure bill, and
that's going to take longer, perhaps July, maybe into the fall.
Speaker 10 (42:47):
Before that's resulved.
Speaker 2 (42:48):
We only have a minute left. So this is going
to be unfair, and I apologize in advance, but today
we're seeing a massive market rally on the US and
China taking their terror freates on each other lower after
talks in Geneva over this past weekend. Was it the
Trump administration that really is the one that blinked here?
Speaker 13 (43:05):
It's unclear yet, and I think there's a lot of
there's a rally and hope. Hope is not reality, right,
Hope is not well it is today actually, But Hope
is not a set of policies, and it's not a tariff.
We have to actually see the finer details of the outcome.
And if this gets resolved soon in a permanent way,
(43:26):
that is going to be long term good for the
United States and our trading partners. And the longer it takes,
we're just extending paying.
Speaker 2 (43:32):
All right, Well, we have a ninety day window to start.
Speaker 10 (43:34):
We'll see where we are.
Speaker 2 (43:35):
By August Bloomberg contributor and former House Financial Services Chair
Patrick with Henry, thank you so much for joining us.
Speaker 10 (43:46):
Thanks for listening to the Balance of Power podcast.
Speaker 6 (43:49):
Make sure to subscribe if you haven't already, at Apple,
Spotify
Speaker 11 (43:52):
Or wherever you get your podcasts, and you can find
us live every weekday from Washington, DC at noontime Eastern
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Speaker 2 (00:25):
Obviously like what they heard out of Geneva and the
White House, Today's the US has confirmed that progress was
made in talks with China and Switzerland over the weekend.
In fact, tariff's going much lower than perhaps initially anticipated.
Remember at the end of last week President Trump was
talking about an eighty percent tariff on China, seeming right, Mike,
And instead what we get is the US taking from
(00:45):
one hundred and forty five percent all the way down
to thirty percent, and China goes from one twenty five
to ten.
Speaker 3 (00:50):
And that's with the prospect of going even lower if
the FENTANNL tariffs are removed or reduced, if there's some
sort of sign of progress there with China. So there
was a lot left open there, and they even left
open the prospect of extending this ninety day pause. You
can't quite call it a deal, but it certainly is
as you put a truce or a moment of daytut
(01:11):
in this confrontation over tree with the world's second largest economy.
Speaker 2 (01:14):
Yeah, and of course President Trump took his moment to
tout this truth if that's what we want to go
with here. He spoke from the White House earlier today.
Speaker 4 (01:22):
In addition, yesterday we achieved a total reset with China
after productive talks in Geneva. Both sides now agreed to
reduce the tariffs imposed after April second to ten percent
for ninety days as negotiators continue in the largest structural issues.
The relationship is very, very good. I'll speak to Presidency
(01:44):
maybe at the end of the week. We have some
other things we're doing.
Speaker 2 (01:50):
A total reset is how the President describes this. So
let's get more from the White House where we find
Bloomberg's Tyler Kendall on this Monday. But Tyler, to Mike's point,
this isn't yet a deal. We're still going to be
negotiating in this ninety day window. So this reset is
not yet final.
Speaker 5 (02:06):
Right exactly, Kaylie. While it is a de escalation to
give the sides time to negotiate at the end of
the day, We're going to have to see how long
that lasts and if both sides can agree on a
finalized trade deal, because once Wednesday rolls around, that ninety
day pause goes into effect, and then from there the
countdown clock really is on now. Treasury Secretary Scott Besant
was asked earlier today what would it take to keep
(02:28):
tensions low after that ninety days. He said, ultimately it
would be good dialogue in good faith, but did confirm
to Bloomberg Television that at this point it is implausible
that tariffs would drop below that floor of ten percent. Importantly,
both sides here are really trying to highlight that they
have created what they have called a mechanism to keep
talks going, and as you're about to hear, the Treasury
(02:48):
Secretary told Bloomberg TV that this is going to be
important for negotiations going forward.
Speaker 6 (02:54):
China was the only country who escalated their tariffs in
response to our reciprocal tarot level, so that resulted in
an unfortunate escalation. So we now have a mechanism to
deal with that. Neither side wants a generalized de coupling.
The US is going to do a strategic decoupling.
Speaker 5 (03:20):
That reminds us that there's still a lot of negotiations
to have and some big differences on the table. A
few different threads that we're watching here, Kley and Mike,
one including a purchase agreements going forward. Both the Treasury
Secretary and the President today said that the Phase one
China deal could be used as a templates or we're
going to be watching when it comes to US ag
imports into China if that could make its way into
any sort of purchase agreements and what sort of enforcement
(03:41):
mechanisms would look like. The second, of course, is fetanyl.
As Mike had mentioned that twenty percent of that thirty
percent tariff is tied directly to the United States feentanyl concerns.
President Trump said that he believes China will act in
good faith on curbing fentanyl flows and the ingredients used
to make the drugs into the United States amid allegations
that they are contributing to the drug trafficking. And then,
(04:02):
of course, lastly, are those non a tariff barriers that
we're watching very closely. China did confirm earlier today that
they're going to remove non tariff counter measures. We have
taken that to mean that they are expected to suspend
or lift some of those heightened export controls on critical
minerals that came since April. Second, We're going to have
to see how these negotiations shake out. President Trump did
say earlier today he could hold a call with Chinese
(04:24):
President Jijingping as soon as this week.
Speaker 2 (04:27):
All right, wonder where that's going to fit in the schedule,
as he has a busy few days in the Middle
East ahead of im. Bloomberg's Tyler Kendall, thank you so much,
And we want to take a look through the economic
lens of what difference these tariff changes really will make
between the US and China, and turned to Anna Wong.
She's our chief US economist at Bloomberg Economics and is
here with Mike and I in our Washington.
Speaker 5 (04:45):
D C.
Speaker 2 (04:45):
Studio. So, Anna, obviously, thirty percent is a whole lot
lower than one hundred and forty five percent. But I
know you've been watching cargo volumes. We've seen this massive
trade drop off between the US and China already. How
much is going to be revived by still an incredibly
high thirty percent terrify.
Speaker 7 (05:02):
Yes, Kelly, Actually, we put out a note last Friday
that showed that in fact, container ships leaving China has
increased in the first week of May, and we connected
the dots. We think that several of the US retailers,
after a meeting of President Trump in late April, has
resumed their order and the ships carrying those orders potentially
(05:22):
have already been setting sail to the US, arriving today
starting today, with many of those ships arriving on the twentieth.
And this was why we had thought that, in fact,
they need to cut the tariff this week because those
ships carrying Walmart and Target goods are arriving. So if
you believe that that was the concerns about empty shells
was what motivated this cut. It also means that as
(05:44):
this ninety day comes to an end basically by mid August,
which covers the peak shipping period ahead of holiday seasons,
the stakes for escalating actually would reduce because you know,
the holidays is assured there won't be empty shelves, and
so Trump could easily re escalate again. And I just
(06:07):
think that what we saw this weekend is not consistent
with Trump's negotiation style, which is not straight, straight lined
down with the tariff fright. It usually comprises of escalation
and then some de escalation in the escalation back again
until a final deal is reached.
Speaker 3 (06:25):
To what extent does this reflect a recognition on both sides,
not just here in Washington, but also in Beijing, that
the economic risk of carrying out this tip for economic
trade war to the level it reached was just so
dangerous to the economies of both countries.
Speaker 7 (06:44):
That hits the nail on the head exactly. And the
reason why I think the US and China negotiations came
out and say that they've found agreement very quickly is
that the agreement is that they do not want the
worst case scenario, which is for trade to enter the
embargo state at the peak shipping season. Most of the
shipping in the holiday season, which accounts for over forty
(07:05):
percent of sales revenues for any US firms, happen from
now to end of August. So this is a critical
period that I think US and China both easily found
agreement on to not disrupt. But beyond that, who knows well.
Speaker 2 (07:21):
Obviously none of us can predict the future, including Federal
Reserve policy makers. Hence why they keep emphasizing patients we've
seen today in the aftermath of this truce being reached
and the expectations for rate cuts being taken down this year.
Now I think just fifty five basis points are priced in.
Does this make a material difference in the amount of
easing you expect us to see?
Speaker 7 (07:41):
Yes, So, I mean our base case has been for
only twenty five BIPs of rate cut this year, so
we were already lower than the rest of the market.
But right now what you could immediately see is that
the MAZE jobs report and June's jobs report would not
be as bad as in this situation where container volume
couldntinue to drop, because we're now already seeing this week
(08:02):
container volume is rising in the port of la and
with a lot more firms planning to front run in
this ninety day reprief period, it means that the logistics
sector just would not shed as much job as we thought.
So there you have May and June's payer all being
not as you know, possibly not negative as what it
(08:23):
could have been had, you know, the plunge in the
container ships continue on it.
Speaker 3 (08:29):
There is a lot for the two sides to get
through over the next several weeks. Is ninety days going
to be enough to lock this in given how detailed
that fine print.
Speaker 7 (08:39):
Is going to be not at all, not at all exactly.
That's why I thought the ninety day reprief is more
of a holiday Let's get through this holiday season first.
Let's make sure that not a lot of small businesses
are going bankrupt in the US and China. Factories are
not all going out of business because the US and
China's tariff problem, trade barriers, this problem goes really deep
(09:01):
and it takes years. Even in the Phase one deal,
it took a whole year, and during that year President
Trump was kind of fluctuating whether they should take it
or not.
Speaker 2 (09:11):
Well to the point you were making earlier, these things
tend to be a rollercoaster with this particular President. Anawon
of Bloomberg Economics, thank you so much for joining us.
And of course we have to keep in mind that
Scott Bessen, the Treasury Secretary, has said previously a full
deal with China could take two to three years, so
we have to keep that in mind. We want to
get more on that now and turn to Sam Sacks,
professor of China studies at Yale University. He was joining
(09:34):
us on Bloomberg TV and Radio Professor sax Welcome to
balance of power when we consider how different a place
we are and now compared to before these talks beginning
in Geneva over the weekend, from one hundred and forty
five percent and one hundred and twenty five percent respectively,
down to thirty and ten percent. Yes, both sides took
tariffs down by an equal amount. But do you actually
(09:55):
see this as a truce, that is that is equal
or did China actually kind of come out the winner here.
Speaker 8 (10:02):
It's too soon to know. Both sides have essentially agreed
that talking is happening, and they couldn't even get that
basic point straight between the two of them. We were
engaged in this long game of chicken where Trump was
insisting that she wanted a deal and she didn't want
to look weak, potentially facing a president's Lensky moment in
(10:22):
the White House. So the fact that they have agreed
to announce that talks are beginning itself is a stabilizing factor,
but it tells us nothing about what the nature of
any agreement actually will look like.
Speaker 3 (10:35):
Professor Sachs, what is the significance of the two sides
actually putting together a joint statement there is a lot
of optics in every trade negotiation, of course, but with
China the optics count even more. What do you make
of this after just two days of discussions between the
two sides.
Speaker 8 (10:55):
Both sides want a deal, that's the bottom line, and
I think it's come from a a place of political
and economic weakness in both countries. What the joint statement
says so far doesn't actually tell us anything. By and large,
the statements are identical in Chinese and English, with the
exception of some word choicing. I think whether or not
(11:18):
they can get to a joint public agreement once we
get into the really hard issues like what would a
purchase agreement look like? What does fentanyl cooperation entail? The
Chinese side desperately wants the US to lift export controls.
I don't see that happening. The US side desperately wants
the Chinese to undertake deep reforms in its economy. I
(11:40):
don't see that happening. So once we get to the
harder part of the negotiation, I think having this kind
of joint communicate is going to be increasingly difficult and
could actually stall out altogether depending on what happens.
Speaker 2 (11:53):
Well, as you tell a professor about what the US
wants to see in terms of changes really to the
structure of the Chinese economy. And this isn't unique to
the Trump administration. The Biden administration under Treasury Secretary Janeyellen
talked about this plenty as well, concern over China's manufacturing
over capacity and the idea that it's flooding the market
globally with cheap goods. What incentive does China have to
(12:15):
actually change that practice? Can the US really force that?
Speaker 8 (12:21):
The incentive is going to have to come from internal sources,
And something that often happens is you'll have interlockutors in
China will use outside pressure from the US to force
changes to the domestic economy that politically wouldn't be possible
without an external US forcing event. But it needs to
come from the inside. So one thing we know about
(12:44):
the lead of the of the Chinese delegation right now,
the Vice Premier Hoo, he's somewhat more he's less of
a reformer than the interlocutor for the first round of talks, Leoha,
And so this is someone who's a staunch advocate of
a state led economy, not of more market liberalizations. And
so I think that's going to be another factor that's
(13:05):
going to make these kind of deep reforms more challenging.
But we have to remember she didn't. Ping is under
tremendous pressure right now in terms of Chinese jobs, Chinese
businesses in the private sector, and so this is going
to be something that's going to get them to the
negotiating table, not necessarily because the US is compelling them to.
It has to come from within.
Speaker 3 (13:27):
Professor Sachs. One thing that came up this morning during
our conversation with Scott Bessett, the Treasury Secretary, was a
new baseline perhaps for tariffs. And we'll have a listen
to this, and I'd like to follow up a question
about it afterward. Let's bring them in.
Speaker 9 (13:45):
Are you saying that tariff rates will only go up
from here? If this really is a floor of ten
percent on the Chinese side and thirty percent on the
US side.
Speaker 6 (13:56):
I'm not saying that they're going to go up, but
it would be implausible that they would go below ten.
Speaker 3 (14:07):
Professor sax, How does this reset the US China trade
relationship when it comes to tariffs If we're talking now
about a baseline that could perhaps go a little bit higher.
Speaker 8 (14:19):
You know, we don't really know yet. I think they're
just trying to send a signal to consumers, to voters,
to US stock markets. On the Trump administration side, today,
the stock market rally was a huge political win and
Trump wants to take credit for that. So I think
that's what this baseline signaling is really about. But until again,
until we get into the nitty gritty, it's unclear. Now
(14:40):
could China just go back to the ten percent baseline
and be the same treated the same essentially as the
other countries that are all in the process of potentially
looking for deals or not. It's possible, but I think
the idea is there's going to be for it's going
to be impossible to fully recover to before Liberation Day.
We're not going to go back to that at And
(15:00):
it's a question of how far we're going to go.
Is this just going to be strategic sectors or is
this going to be a sort of wholesale trade embargo.
And I think we're we're looking now at a more narrow,
narrow tailored decoupling. But what that means again, what is
the US side actually going to offer up here?
Speaker 10 (15:18):
Is really what we have to watch Professor Sachs.
Speaker 3 (15:21):
What sort of signal is this sending to other US
trading partners that are also locked in their own negotiations
with the Trump administration even as we speak.
Speaker 8 (15:33):
I think that you know, they don't want No one
wants to have a I think no one wants to
be like China in this situation. So maybe it opens
the door to more deal making. If China was the
most intractable, I think we could potentially see a flood
of other deals, maybe looking like the US, UK or Mexico.
But China certainly has always been the elephant in the
(15:55):
room and set the tenor for others to come.
Speaker 2 (16:00):
Can we consider trading partners in Asia, specifically which the
administration has put a lot of emphasis and prioritization on India, Japan,
South Korea? How does that also influence ultimately how reliant
the US actually will be on China for trade and
for goods going forward.
Speaker 8 (16:17):
This gets at the question what does the Trump administration
actually want? Do they want to close the loopholes for example,
that have just squeezed trade and exports to places like India, Vietnam, Mexico.
Because what happened is you have manufacturing diversification. No longer
can export from China. Let's shift those supply chains to Vietnam, Indonesia, India.
(16:40):
But then all of a sudden, those tariffs were just
as high. So if the goal here is to gen
is to reshore US manufacturing and restore America's place in
those supply chains, I think we're going to still see
significant pressure on some of those other parts of the world.
But at the same time, the US is not going
to want to alienate key trading partners at a moment
(17:01):
when it wants to sort of bandwagon, it wants out
East Asian countries, for example, to come on board and
be an economic counterweight to China.
Speaker 2 (17:11):
All right, Professor Sam Sachs of Yale University, where she
is a professor of China Studies, thank you so much
for being here on Bloomberg TV and radio. And it
was interesting, Mike to hear the Treasury Secretary Scott Besson
in his interview on Bloomberg Surveillance earlier, characterizing what the
US is trying to do here as being a strategic
decoupling from China. The prior administration didn't want to use
(17:32):
the decoupling language at all, but I guess this one
is looking at it in the.
Speaker 3 (17:35):
Target, but in a few areas. And they talked about pharmaceuticals,
and they also talked about semiconductors, and that, of course
is an area of key contention, and Professor Sachs even
brought that up in passing. And it is crucial to
note the differences between the two sides, including with export
controls over sales of US ships through China.
Speaker 2 (17:54):
Yep, those non tariff barriers. We keep hearing about our
non tariff mechanisms or what have you. Export controls theoretically
fall into that. So we'll continue to follow this story
here on Balance of Power. But up next we have
to turn to other geopolitics as well, as President Trump
makes tracks to the Middle East and potentially has a
visit to Turkey that could happen. We'll have the details
next here on Bloomberg.
Speaker 1 (18:16):
You're listening to the Bloomberg Balance of Power podcasts. Catch
us live weekdays at noon and five pm e's durn
on Apple Cocklay and Android Auto with the Bloomberg Business app.
You can also listen live on Amazon Alexa from our
flagship New York station, just Say Alexa played Bloomberg eleven thirty.
Speaker 2 (18:35):
Welcome back to Balance of Power on Bloomberg TV and Radio.
I am Kayley Lines alongside Mike Shephard here in Washington, where,
of course we've been following a number of stories that
broke over the weekend, but perhaps none sent the city
quite as a buzz as the reporting from ABC that
hit yesterday that the government and Royal family of Cutter,
where President Trump is visiting on his trip to the
(18:57):
Middle East this weekend, was preparing to offer him for
free a luxury Boeing seven forty seven jumbo jet for
him to effectively use as the new Air Force one.
This is something the President himself has confirmed and talked
about from the White House earlier today.
Speaker 4 (19:13):
I think it's a great gesture from Guitar. I appreciated
very much. I would never be one to turn down
that kind of an offer. I think it was a
gesture because of the fact that we have helped and
continue to We will continue to all of those countries,
Saudi Arabia, uae Qatar, and others. We keep them safe.
(19:36):
If it wasn't for us, they probably wouldn't exist right now.
And I think this was just a gesture of good faith.
Speaker 2 (19:43):
And Mike. We should note that the President says this
is not a gift to him personally, it's a gift
specifically to the US Defense Department. But when we're talking
about the size of this gift, this is an airplane
that costs hundreds of millions of dollars. There are massive
legal and ethical questions around.
Speaker 3 (19:59):
Thistrategic questions too. What would the government of Cutter want
in return or perhaps expect in return, Not even so
much as a quid pro quo per se, but if
they are offering something, eventually they might want something in return.
And the question remains, what is it? Is it perhaps
an easing of restrictions on access to nvidio chips? Is
(20:20):
it something else? Is it just a better understanding with
the US. And the President sought to make clear that
he would not be using this luxury jumbo jet after
he left offices, ABC had reported, but nonetheless it did
raise the question about whether this was some sort of
emolument which is prohibited above a very nominal level to him.
Speaker 2 (20:42):
So we want to get into this now because it's
a fascinating story and there's other topics to discuss around
it too, and turn to our political panel. Bloomberg Politics
contributors Rick Davis and Genie Shanzano are with us Rick
of course stonecard Stone Court, Capital partner and Republican strategists.
Genie democratic analyst and senior Democracy Fellow at the Center
for the Study of the Presidency and Congress, Jeanie. I
(21:03):
was struck by the reaction of Laura Lumer, who of
course is somewhat of a diehard for the President of fact,
in her critique of this gifted airplane, she mentioned that
she would take a bullet for President Trump to use
her words, but even she doesn't like the notion of
this very expensive gift from a foreign government. And I
wonder if you think that backlash maybe enough to make
(21:25):
this not happen.
Speaker 9 (21:27):
It absolutely could be. It's Laura Lumer, very close to
the president. It is Ari Fleischer, He's on Fox News
all the time. There are other conservative Republicans who have
come out and said, no, mister President, do not do this.
And of course, while you and Mike were talking about this,
I'm thinking what happened to mayde in America. We can't
(21:49):
have dolls and pencils made overseas, but he can have
a plane. I mean, you know, putting aside the real
serious consequential security issues, the constitutional issues, the legal questions.
What about made in America, mister President, I guess that's
gone by the wayside when it comes to his jumbo jet.
Speaker 3 (22:07):
Well, Rick, is there anybody in the President's inner circle
who might be in a position to actually talk him
out of this? He really made it seem like a
done deal and it would be pretty hard to turn
it down on his way to Cutter to meet with
the leaders there.
Speaker 11 (22:23):
Yeah, let me think Susie Wiles talking him out of
a four hundred million dollar gift.
Speaker 12 (22:27):
Now, don't think so.
Speaker 11 (22:29):
Look, it is a Boeing jet. It was made in America.
I mean, we got a piece of that. Although maybe
designed and outfitted and Cutter, this is going to be
a story that lasts a while because even though very
generous gift by Cutter, I mean, you know, very inappropriate
for the President to say, yes, we still he can't
(22:49):
fly on that thing until it's outfitted with all the
most stead of the art electronics, redundancy in every facet
of it, and significant alterations to its ability to.
Speaker 12 (23:04):
Defend against an attack.
Speaker 11 (23:06):
These are all the reasons why the current new air
Force one is slow to get going because there are
a lot of changes all that's got to be done
to this plane before he flies in it for one hour,
and that is a new charge to the American taxpayer.
The reason it's going to the Department Offense is because
they have the budget to actually retrofit it. So you know,
(23:29):
it's going to be a story we're going to be
talking about all summer long because someone's going to.
Speaker 12 (23:32):
Say, Gee, how much did that cost the American.
Speaker 11 (23:35):
Taxpayer to retrofit in addition to the new one that
we're building before the end of the administration.
Speaker 2 (23:42):
It's an excellent point, Rick, And obviously this story is
going to be kept in the news at least for
this week because President Trump is going to be spending
time in Cutter this week and Saudi Arabia and the UAE.
He is on board the current Air Force one heading
to the Middle East right now. And Rick, I wonder
what outcome you really expect from this first big trip
abroad of his second administration, not focusing necessarily on geopolitical
(24:06):
issues or regional conflict. Instead, we understand he's mostly there
to try to secure money investments into the United States.
This just about deal making.
Speaker 12 (24:16):
Yeah, I think a lot of it is.
Speaker 11 (24:17):
I was actually on the president's trip to Saudi Arabia
in May of twenty seventeen, when you know, he basically
was trying to reopen Saudi Arabia for investment in foreign
direct investment into the United States and that worked for
a little while, but the Biden administration kind of chilled
that out. So I think this is to retro start
(24:39):
that right, get it going again. Let's get those Saudi dollars,
the UAE cutter dollars, you know, get the GCC into
investing in the United States. And I'm sure there'll be
questions with these folks about price of oil.
Speaker 12 (24:53):
How much pumping's going on.
Speaker 11 (24:55):
Nothing is more obsessive to Donald Trump than the price
of a gallon of gasoline, and these folks in the
Middle East have a lot to do with that. So
my guess is the one thing that's probably not going
to be a news story, and it'd be interesting if
it was, is whether or not he can convince the
Saudis to enter into an Abraham accord, and something he
was very proud of in his first term with Israel,
(25:18):
but it just seems Israel's not on this agenda this.
Speaker 3 (25:21):
Week, Genie, how critical is it for the president to
show continued progress when it comes to those investments. He
started really on his first full day in office announcing
that kind of an economic push from abroad into the US.
He'll remember that big Softgate AI Data center announcement, and
from there it's been off to the races. How much
(25:42):
more are we looking for and how much more will
he be able to follow through with all of it?
Speaker 9 (25:49):
Yeah, you know, I think the concern of many of
us is the question of whether this is about investment
in the United States or investment in Donald Trump, his companies,
his his family, Steve Whitcoff's family. I mean, you know,
he is famously not going to Israel this trip. He
is going to cut our He is going to Saudi Arabia.
(26:11):
These are places where just in the last few weeks
and months, his sons have talked about deals they have
struck in the interest of the Trump family and the
Trump business. They have talked about this golf agreement. They
have talked about this crypto agreement that was made and
that they have benefited from. So yes, I mean, if
(26:32):
the focus is on investment in the US, that is
absolutely something to be welcome. But I think the concern here,
just like the concern about the airplane, is is this
really about the US and what's in the interest of
US security or is it about Donald Trump and his
family and friends. And you see real evidence if you
(26:52):
just look at where they've been traveling and what they've
been posting that a lot of the focus is on
the latter.
Speaker 2 (26:59):
Unfortunately, Rick, I want to return to where you ended
your last answer, as you mentioned Israel perhaps not being
as much in focus, and we should point out that
today back in Israeli territories, the last living American Israeli
hostage that was being held by hamas a Don Alexander.
This appears to be a release that was essentially negotiated
(27:20):
singularly without necessarily Israel being involved. And whether you're looking
at this particular instance knowing there are still remaining hostages
in Gaza, whether you look at the kind of truth
that has been gotten to by the US and the
who thies the US talking to Iran, all of it
kind of paints a picture of President Trump being, if
(27:41):
not at odds, at the very least not as an
alignment with the Netnyahu government. As was thought when he
came into office, Is he still the best friend Israel's
ever had?
Speaker 11 (27:51):
You know, I think he's still probably the best friend
Israel's ever had. But I'm just not sure bb Netnyah,
who's going to think of him as the best friend
he's ever had?
Speaker 12 (28:01):
You you've you, you struck a good court.
Speaker 6 (28:03):
Uh.
Speaker 11 (28:03):
Donald Trump's out doing his own deals with the hoodies
and and and with with the Hamas, and and and
the realities. You'd never hear about that beautiful UH development
in Gaza anymore. That was a real lift to uh
Bibing Nyahu's war plans to be able to clean that
out and actually move Palestinians out of there. Uh So,
so much of that early, you know, first month in office,
(28:27):
when UH there seemed to be an incredible link between
the two countries and the two presidents, has seemed to
pretty much vanish. Now there are other priorities, And it
doesn't mean that the President has lost his affinity for
uh for.
Speaker 12 (28:42):
The Prime Minister.
Speaker 11 (28:43):
But the reality of it is is that this was
a week where you would have thought the President would
have ended his Middle East tour in Jerusalem a big
victory lap based on his relationship with the Israeli people
and with Bibi nt Yahoo, but didn't seem to come pass.
Speaker 3 (29:02):
Genie without about a minute left. We also may see
the President take a detour to Turkey for talks on Ukraine.
How much pressure is he under to deliver and show
some more progress there.
Speaker 9 (29:14):
Yeah, he's under a lot of pressure, a lot of
it self imposed because we're long past his twenty four
to forty eight hour window mic for him to get
this deal done. But weirdly over the weekend he seems
to be negotiating with Zelensky on his own. I mean,
Putin seems to be out of it. He's saying, do Zelenski,
you know, just just make a deal just you know,
and the war yourself, don't wait for Putin. So I
(29:36):
think Zelensky has done the right thing saying he's going
to go to Istanbul, invited Putin to come. It doesn't
look like Putin will come, and that will open him
up to continue to get support militarily, intelligence and otherwise
from the US as Putin continues to be the sort
of problem in these negotiations, not Zelensky.
Speaker 2 (29:57):
All right, Genie Shanzano and Rick Davis, our Political Panel
on this Monday, Thanks for being here as always on
Balance of Power and still Ahead, will be joined by
the former Chair of the House Financial Services Committee, Patrick
McHenry as we turn our focus to Congress in the
budget reconciliation package, what exactly is going to be in
these tax cuts. We'll have the details ahead here on Bloomberg.
Speaker 1 (30:19):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App. Listen
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 2 (30:36):
Kicking off the week in Washington, which is going to
be a very big one for Republicans in the House
of Representatives specifically, is tomorrow, about twenty four hours from now. Actually,
two key markups are going to happen in crucial House committees,
the Energy and Commerce Committee, which has released a bill
that includes what the Comreational Budget Office says is more
than eight hundred and eighty billion dollars in cost savings,
(30:57):
in part because nearly fourteen million people could get kicked
off metakid roles in the next decade. Then there's the
ways and means Committee, which of course is charged with
outlining the broad tax package, all the tax cuts the
president wants, and perhaps trying to find a number that
is going to make the Salt Caucus happy. According to
our reporting here at Bloomberg Today, the number they're looking
at for married couples in high tax states at California
(31:19):
and New York thirty thousand dollars, so you remove the
marriage penalty. It's up from ten thousand, but it still
might not be enough. Mike Shephard for some of those
Salt cock his members who've been pushing for numbers more
than double that, Well.
Speaker 3 (31:30):
That's right, and Mike Johnson can't afford to lose too
many votes given the margin in the House right now,
and everything is riding on this, the big beautiful bill
we've heard the President talk about so much, and there
is a lot more than just salt going into this.
We're also looking at some of his campaign priorities, including
exempting Social Security income and exempting tax exempting tip income as.
Speaker 10 (31:53):
Well from taxes.
Speaker 3 (31:54):
So we're going to be looking for a lot and
lawmakers have a lot of angels to stand on the
head of a pen here.
Speaker 12 (32:00):
Yeah, they do.
Speaker 2 (32:00):
Keeping in mind they want to do this in just
a handful of legislative days, as the Speaker wants to
see this thing passed on the floor by Memorial Day.
So we want to get into this wider reconciliation process
now and turn to someone who was in of course
the House of Representatives until recently, former Republican Congressman from
North Carolina and former chair of the House Financial Services Committee,
now Bloomberg contributor as well. Patrick McHenry is here with
(32:22):
us in Washington. Welcome. So when we consider this Salt
issue in particular, knowing that there are a number of
moderate members who make or break the House majority who
are going to have a very difficult time with this
considering their constituencies, is this actually what is going to
make or break an ultimate floor vote.
Speaker 10 (32:40):
Absolutely so.
Speaker 13 (32:41):
The Salt Caucus has been hard at work for years
on this. The reason why we're able to pass the
original Tax Cuts and Jobs Action in twenty seventeen is
because we overcame those votes, those Republicans from Salt States
New York being the biggest and the loudest group of
Republican legislators here. The Salt does not model out as
(33:05):
a Senate problem at all, there are no Republican senators
from states where the state and local tax is a
big issue for ratepayers. New York holds the balance for Republicans,
and they're the majority makers in the House Representatives.
Speaker 10 (33:20):
They gave us the majority.
Speaker 13 (33:21):
Three years ago and in last year, and so they
need to be taken care of. They need to be
taken care of in a way that's sufficient for their constituents.
They can't go home and say, you know, I raise
your taxes. That's not a good message for Republicans anywhere,
but most especially in state like New York. So you
have really competent, smart legislators here. The question of whether
(33:42):
or not thirty thousand is going to be sufficient for them,
we're going to see, and we're going to see in
a very public way. These are the most public Republicans
in the House Representatives.
Speaker 12 (33:52):
They are allowed.
Speaker 10 (33:53):
They know how mike law, they know.
Speaker 13 (33:55):
How to get media attention, they know how to draw
attention the issues they care about and draw people in.
So we're going to be drawn in and we're going
to be live with them every step of the way.
Speaker 3 (34:06):
Based on your experience, what sounds like a level that
will get these members over into the yes column.
Speaker 10 (34:12):
So this is the difficulty of negotiating on this.
Speaker 13 (34:15):
More is the number, right, So you say a number
and they say more, and eventually we'll find that number.
I don't think it's going to be a round number
at the end of the day. It will be something
different than what we tend to do in the Congress,
which is like a nice round number.
Speaker 10 (34:32):
So we're going to see this.
Speaker 13 (34:33):
I don't think this is a fully big product coming
out of the committee.
Speaker 2 (34:37):
Well, and I guess the markup will we be revealing.
We've heard tell that it's going to go into way
late in the night tomorrow and something we'll have to
continue to follow throughout the week. I also want to
talk about what's going to get marked up in the
Energy and Commerce Committee though, because of course medicaid was
the other massive question they have, according to the Congressional
Budget Office, come up with a package here that is
actually going to save more than they were charged with,
(34:58):
saving more than the eight hundred and eighty billion dollars,
but the cost of doing so is potentially thirteen point
seven million people losing their benefits over the next decade.
Senator Josh Holly, a Republican, says this argument is both
morally wrong and politically suicidal. Do you see this as
political suicide if it passes?
Speaker 13 (35:15):
No, because savings to healthcare programs does not necessarily mean
those that benefit from the healthcare program get less of it.
It may mean that somebody in the middle has their
wonderful profit box that it gets goreed. And so we
see this with payment issues through CMS. This is a
(35:37):
very standard challenge with health care policy is that they
always go back to a number of people that are
directly benefited, and it never is the case. So let's
step back. What is the package that House Republicans are
proposing here? First, Brett Guthrie is the chair of the
Energy and Commerce Committee. He is an expert in healthcare policy.
He has worked with as their members to dial in
(35:59):
this space the civics of the policy that they think
will have the greatest savings to the taxpayer and the
least amount of harm to those that benefit from these
healthcare programs.
Speaker 10 (36:09):
Number one.
Speaker 13 (36:10):
Number two, they're going to reform these programs so you
have better delivery and better quality of those that are
getting healthcare benefits through Medicaid. So I think some of
these things are quite sensible. And I think the shock
and a number of people getting thrown out, thrown off
of the plan, I think it will not end up
that way.
Speaker 10 (36:31):
I think it'll be a much set.
Speaker 13 (36:33):
Of sharper outcomes that will be beneficial to the taxpayer
and to the public.
Speaker 3 (36:37):
Are the work requirements that are being discussed right now
even practical? Will people be able to follow through and
follow all the steps necessary to continue qualifying if they
are put in a position of having to make sure
that they verify employment receive Medicaid benefits?
Speaker 13 (36:55):
Traditionally, Yes, those people that are receiving these benefits tend
to be experts in how to receive these benefits. So
let's step back on work requirements. Republicans have been for
work requirements for our social safety net for generations.
Speaker 10 (37:11):
This is not a new set of policies.
Speaker 13 (37:13):
And in fact, this work requirement we put in place
for food stamps during the debt sealing negotiations two years
ago at this time that got a two thirds majority
in the House the Senate and signed by Joe Biden.
Some of these work requirements are not right wing policy
(37:34):
or some ideal set of right wing policy. Some of
them just very practical things that could be achieved in
a bipartisan vote.
Speaker 2 (37:43):
Just because you mentioned the debt ceiling, we also should
point out on Friday, the Treasury Secretary send a letter
to the Speaker that says, you need to get that
thing raised before the August recess, because at that point
is when the Treasury might no longer be able to
meet its obligations. Does that timeframe make you nervous? If
the debt ceiling raising mechanism is to be the reconciliation package.
Speaker 10 (38:02):
It makes me nervous.
Speaker 13 (38:03):
But as a congressional leader, it is the welcome sign
that there's an end date for the pain and suffering
of going through the reconciliation process. We saw this with
a Biden administration trying to do two reconciliation bills, and
it drug on for months and months and months.
Speaker 10 (38:18):
We have an end date now, and if you want to.
Speaker 13 (38:21):
Leave town as a Congressional Republican, you better get your
stuff together in the month of July or you're going
to be sitting here roasting in the month of August.
Speaker 12 (38:30):
I think that.
Speaker 13 (38:32):
It condences the timeline that is a good thing for
the safety and health and happiness of the American people.
Speaker 3 (38:39):
Chairman, does The need for speed, though, mean perhaps that
the president may have to let go of one or
two of the big priorities he outlined during the campaign,
And we were just talking about this in the open
exempting Social Security income and tipped income. Does something have
to give? As the push and chuve gets more intense.
Speaker 13 (39:00):
I think what you see from this administration. I think
what you see from this president he's going to get
his way with congressional Republicans. He didn't make fifty campaign
pledges on tax policy. He made two or three. He's
going to get those two or three.
Speaker 2 (39:14):
Something else that he talked about a lot on the
campaign trail as being a super pro crypto president. He
wants to make the US the bitcoin capital of the world.
He seemed widely supportive of legislative efforts on the hill,
and yet we saw one of those efforts fail on
the Senate floor last week, as the stable coin bill
failed to get adequate support. Knowing you spent a lot
of your time leading the Financial Services Committee on this issue,
(39:35):
what is that signal to you, not just about the
future of stable coin legislation, but if you can't do that,
what hope is there of getting something on market structure.
Speaker 13 (39:42):
Oh, that's right, So this is the easier go of it.
A stable coin is a payment mechanism. We have a
payments regulatory regime. We haven't defined what is a payment
stable coin in federal law yet. It is a very
simple undertaking for a stable coin bill. Market structure is
a little more complex because we're talking about a a
new decentralized object and various pieces of technology that do
(40:04):
different things. Right, so it's defining the Internet. Well, the
Internet is many things and many layers to it. It's
harder do that one bill. So market structure is the
thing that is necessary for crypto to flourish here in
the United States. The Pavement sample Coin bill that the
Senate has worked on, they marked it up, welcome signed
for the Senate Banking Committee commitment. Senator Scott for his
(40:26):
adept handling of this, and Senator Haggerty and Lumus and
jail Brand.
Speaker 10 (40:30):
They did a fabulous job. But you have almost all Republicans.
Speaker 13 (40:33):
Together on crypto, and you have a remnant of Senate
Democratic members. So you have ten to fifteen pro crypto
Democratic senators and they're fighting against the base of their party,
especially the ranking member of the Senate Banking Committee, who
is a real problem crypto. Well, what they understand is
(40:54):
that crypto is popular. They want to be for it.
They also want to get bludgeoned by their fellow Democrat.
It has been a very tough set of politics for
these Senate Democrats to be pro crypto. What we'll see
though this week, maybe even next week, but probably this week,
is they'll come to terms with a reasonable set of
policies and they'll have enough cover from their colleagues, Democratic
(41:15):
colleagues that they can do this. I think they need
a little political cover, frankly, to come to a regionable spot, and.
Speaker 10 (41:21):
That's what we got last week.
Speaker 3 (41:23):
Chairman, speaking of political cover on crypto, what are you
expecting from the White House in its policy blueprint? From
David Sachs on cryptocurrencies and digital coin? Are you expecting
this to really shape things on Capitol Hill?
Speaker 10 (41:36):
I think these products are largely baked.
Speaker 13 (41:39):
We spent four years crafting the market Structure bill we
passed out of the House with a two thirds majority.
Speaker 10 (41:44):
I think it's going to look a lot like that.
Speaker 13 (41:46):
The key attributes, though for a market structure bill are
the definition of decentralization.
Speaker 10 (41:53):
Is it narrowly controlled. If it's narrowly controlled, that's not decentralized.
Speaker 12 (41:57):
We have a.
Speaker 10 (41:57):
Regime for that. United States, it's undersecurities law.
Speaker 13 (42:00):
Good luck, right, go try it out the sec You
don't need a new regime for that. If you're truly
decentralized and you don't have a neuro group controlling, you
need to have your own regulatory regime. That's our baked in.
That's understood from all branches. Everybody's engaged in this. The
second piece of this is the classification based off of
the technology.
Speaker 10 (42:21):
What does this token do?
Speaker 13 (42:23):
We should regulate it based off of its functionality and
its purpose, and those two things are baked into all
these bills. A Democratic Republican over this Congress and the
previous congresses.
Speaker 10 (42:35):
So I think it's going to be baked in, and
I think we'll get.
Speaker 13 (42:38):
To I think we'll get to a reasonable outcome, but
with some drama to get a market structure bill, and
that's going to take longer, perhaps July, maybe into the fall.
Speaker 10 (42:47):
Before that's resulved.
Speaker 2 (42:48):
We only have a minute left. So this is going
to be unfair, and I apologize in advance, but today
we're seeing a massive market rally on the US and
China taking their terror freates on each other lower after
talks in Geneva over this past weekend. Was it the
Trump administration that really is the one that blinked here?
Speaker 13 (43:05):
It's unclear yet, and I think there's a lot of
there's a rally and hope. Hope is not reality, right,
Hope is not well it is today actually, But Hope
is not a set of policies, and it's not a tariff.
We have to actually see the finer details of the outcome.
And if this gets resolved soon in a permanent way,
(43:26):
that is going to be long term good for the
United States and our trading partners. And the longer it takes,
we're just extending paying.
Speaker 2 (43:32):
All right, Well, we have a ninety day window to start.
Speaker 10 (43:34):
We'll see where we are.
Speaker 2 (43:35):
By August Bloomberg contributor and former House Financial Services Chair
Patrick with Henry, thank you so much for joining us.
Speaker 10 (43:46):
Thanks for listening to the Balance of Power podcast.
Speaker 6 (43:49):
Make sure to subscribe if you haven't already, at Apple,
Spotify
Speaker 11 (43:52):
Or wherever you get your podcasts, and you can find
us live every weekday from Washington, DC at noontime Eastern
at Bloomberg car
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