May 29, 2025 • 29 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
A federal appeals court offered President Donald Trump a temporary reprieve from a ruling threatening to throw out the bulk of his sweeping tariff agenda, offering at least some hope to a White House now facing substantial new restrictions on its effort to rewrite the global trading order.
The administration celebrated the order from the US Court of Appeals for the Federal Circuit as validating its vow to aggressively challenge a ruling issued Wednesday night by the Court of International Trade blocking sweeping parts of Trump’s tariffs over his use of the International Emergency Economic Powers Act, or IEEPA.
“I can assure you, American people, that the Trump tariff agenda is alive, well, healthy, and will be implemented to protect you, to save your jobs and your factories,” trade adviser Peter Navarro told reporters on Thursday.
Even as Navarro celebrated the temporary stay, the possibility that the appeals court could ultimately back the original ruling and block Trump’s tariff policy hung heavy over the White House. Separately, a second federal judge declared a number of Trump’s levies enacted using emergency powers unlawful, but limited his decision to the family-owned business that sued and delayed the order from taking effect for 14 days to allow the Justice Department time to appeal.
Today's show features:
- Bloomberg News US Legal Reporter Erik Larson and Jimmy Gurulé, Professor of Law at Notre Dame Law School and Founder and Director of the Exoneration Justice Clinic
- Elizabeth Economy, Hargrove Senior Fellow and co-chair of the Program on the US, China, and the World at Stanford University’s Hoover Institution
- Dr. David Kelly, Chief Global Strategist and Head of the Global Market Insights Strategy Team for J.P. Morgan Asset Management
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business, finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio.
Speaker 3 (00:32):
Just to remind everybody, if you're just joining us here
on Bloomberg Business Weekdaily, our top story here on this Thursday,
a federal appeals court temporarily pausing that ruling against President
Trump's global tariffs while weighing a longer lasting hold on
the sweeping decision, with the administration bag to take the
matter to the US Supreme Court if necessary.
Speaker 4 (00:50):
It's something we've been talking with our own Eric Larson about.
Speaker 5 (00:53):
You know.
Speaker 1 (00:53):
As Eric was speaking to us, we were hearing from
White House Senior Counselor for Trade and Manufacturing, Peter Navarro.
He was outside the White House speaking to reporters. He
said the administration quote fully expected a favorable ruling on tariffs.
He also said that he got calls from countries this
morning and talks are continuing, he said, the court told
us to go do it another way. And finally, Carol,
(01:14):
he said he will hear in the next day or
two from the US Trade representative.
Speaker 4 (01:18):
All right, it's a fluid story.
Speaker 1 (01:19):
We will we will hear rather from the US Trade
Representative Jameison Greer.
Speaker 3 (01:22):
All right, So we're going to be keeping on top
of this. We want to continue the conversation. Still with
us is Bloomberg News US legal reporter Eric Larson right
here in our Bloomberg Interactive Brokers studio. Joining the conversation
is Jimmy gurrollat He's professor of law, founder and director
of Exoneration Justice Clinic. Concurrent professor of Political Sciences is
at Notre Dame Law School. Joining us on the phone.
Speaker 4 (01:43):
Jimmy, We've been.
Speaker 3 (01:44):
Talking with our Eric Larson, who has been covering this
for us, especially as the news has been developing. What's
your take on this latest legal action, the appeals court
allowing the Trump tariffs to stay in effect at least
for now.
Speaker 5 (01:59):
We very fluid and dynamic situation, to say the least,
with respect to the original ruling yesterday by the Federal
Court of International Trade. My census to the court got
it right, because the Trump administration has based the terriffs
on something called the International Emergency Economic Powers Actor i EPA.
(02:23):
And when I worked at the Treasury Department as Under
Secretary for Enforcement, one of the offices that I was
responsible for overseeing is the Office of Foreign Assets Controller OPAC,
and OPHAK is responsible for supervising and implementing the government's
economic sanctions programs based on IEPA. And so I'm very
(02:47):
familiar with the IEPA Statute and what it permits. And
there's nothing in the IEPA Statute that authorizes the use
of tariffs under the under the statute, And you know,
the statute basically authorizes or gives the president some very
(03:08):
broad sweeping powers to impose economic sanctions. But again, at
the same time, in order to trigger the use of
those economic sanctions, the president must declare a national emergency,
and this national emergency must involve an unusual and extraordinary
(03:29):
threat to the national security, foreign policy, or the economy
of the United States that originates in whole, are in
substantial part outside the United States. And so here I
think there's two issues. You know, one is does the
it is there in fact such an unusual and extraordinary
threat the national security, foreign policy, or the economy of
(03:53):
the United States. What is the nature of that threat?
Is the nature of that threat a trade deficit? Does
a trade deposite constitute an unusual or an extraordinary threat
to the US economy? Here, I think the lower court
concluded no, that a trade deficit doesn't rise to this
level of an unusual or extraordinary threat. In the case
(04:16):
of Canada, I think the threat was different, and I
think the claim was that Canada wasn't doing an an
adequate job of protecting its borders, supervising its borders, and
as a result, fetanol was coming into the United States.
But here I believe that the amount of fetanol percentage
(04:37):
wise is coming from Canada is a very minuscule number,
maybe one percent. And so again it kind of strange
credulity to think that that constitutes an unusual or extraordinary
threat that would justify the use of these I want.
Speaker 1 (04:55):
To jump in because I think Peter Navarrow of the
White House weighed in on that a little and called
it an emergency in a different way that what he said,
and these were not his words exactly, but the gist
of what he said this morning to our surveillance team
was it's an emergency here in the United States because
it's affecting the working age population here and US workers
(05:16):
are dying as a result, So it's an economic emergency.
Is that a legal argument?
Speaker 5 (05:21):
No? I think you've got to focus, you know, on
the target, and here, you know, the target of the tariffs.
We just focus on Canada and the and the Feedanyl crisis.
You know, they're they're here. Is is is Canada responsible
for this? It is that the feedanyl is coming across
(05:43):
the Canadian border. Does it rise to the level of
a unusual and extraordinary threat to the national security? So
it's not just that that it kills Americans. I mean
that that's not the test. You know. The test is
does it affect national security? Does it constitute and a
new an extraordinary threat to US national security?
Speaker 6 (06:03):
I actually have a quick question, if you don't mind.
You mentioned earlier that the International Emergency Economic Powers Act
doesn't even mention tariffs, and of course that was one
of the arguments that was used in court. Given that,
why was Trump even trying to use or is he
still trying to use this law to issue tariffs when
(06:24):
it's not even envisions in what's not an envisioned by Congress.
Speaker 5 (06:28):
I think it's a misuse of the statue. I think
it's probably a very that the Trump administration is interpreting
the statute quite broadly and that if there is such
a threat to national security of the economy or foreign policy,
that the president can implement any type of economic sanctions.
(06:53):
I think it's a very broad reading of the statute.
But the statute is very specific. I mean, it does indicate,
for example, the blocking and freezing of assets, preventing financial transactions,
and so it's very explicit, and with respect to the
language of the statute, tariffs is not included in the
tech Okay, all right.
Speaker 3 (07:14):
So appreciate it ongoing and I'm sure there'll be more
headlines on it. Our thanks to Jimmy Gourlay, professor of
law and founder director of the Exoneration Justice Clinic, also
concurrent professor of political science at Notre Dame Law School,
and of course who we lean on, Eric Larson, Bloomberg
News US legal reporter for the ins and outs of
all of this in coming What's next?
Speaker 4 (07:35):
Eric, Thank you so much as well.
Speaker 2 (07:37):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
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Speaker 3 (07:51):
So we talked earlier about the setback for President Trump
and his tarror push. Those actions and threats of higher tariffs,
as you know, have yet to be settled. We might
get some more clarity. We'll see what happens tomorrow with
maybe the Trump administration asking the Supreme Court to weigh in.
I got to say some already saying the train has
left the station when it comes to the US China relationship, the.
Speaker 4 (08:12):
Impact that this kind of back.
Speaker 3 (08:13):
And forth that we've seen not just in the second
Trump administration tim but what we've seen over the last
few years.
Speaker 1 (08:19):
Let's bring in Elizabeth Economy. She's Hargrove Senior Fellow and
co chair of the Program on the US, China and
the World at the Hoover Institution at Stanford University. She's
author of many books, most recently The World According to China.
She joins US from New York City. When it comes
to the relationship between the US and China, the Trump
administration this week announcing it would start revoking those Chinese
(08:40):
student visas, while also introducing new restrictions on the sales
of chip design software and reportedly some jet engine parts
to China. How would you describe the phase of a
trade war or a trade negotiation that we're in with China.
Speaker 7 (08:53):
I think we're still in the trade war. We had
a tariff pause a few weeks ago after Treasury Secretary
of Vescent and USTR Career met with their Chinese counterparts,
and we had that you know, terrific lowering, reducing of
the tariff levels on both sides, and I think that
led everybody to breathe a big sigh of relief, and
(09:15):
we thought, you know, maybe we were going to have
stability in the relationship moving forward at least, you know,
for the next ninety days, and perhaps some movement toward
an actual you know, negotiation and agreement. But I think
the Trump administration really divorced that set of discussions and
negotiations from everything else that they wanted to get done
with China. And I think what we've seen now is
(09:36):
that means you know, no cessation of tough measures, whether
as you mentioned, is continuing you know, export controls or
now this revocation of student visas. So I think we're
still in the midst of trade war, We're in the
midst of a significant strategic decoupling, and all we had
really was as a tariff pause.
Speaker 3 (09:57):
Hey, you know, Elizabeth, what does the world look like
with an increasingly decoupled US in China?
Speaker 7 (10:03):
I mean, I think it, you know, it's going to
be complicated. I think it's not going to be as
straightforward as some people might imagine, with you know, the
US and its allies and partners on one side in
China and it's it's you know, partners on another side
because it doesn't actually have any formal allies except for
North Korea. So so I think it's not going to
be that simple. And I think we've seen evidence of that,
(10:23):
you know, where President Trump went to the Middle East
and came back with all these big announcements of new
trade arrangements and investments and defense deals. And we just
saw China this past week do the exact same thing
and bring the you know, countries from Southeast Asia into
it and try to sort of bridge from the Middle
East to Southeast Asia sort of new trade and investment relations.
(10:45):
And so I think it's going to be you know,
everybody out to try to compete for partners and allies
and strike the best deals. But there's not going to
be that sort of decoupling of the world that I
think probably the Trump administration has in its mind, because
you know, for many and for most countries, quite frankly,
China is their largest trading partner, right and while they
(11:07):
don't want to lose the US market, they're also not
willing to sacrifice their trade and investment ties with China.
Speaker 3 (11:13):
So what happened to the argument that we've said, Okay,
there's tensions, but let's not forget people.
Speaker 4 (11:19):
These two countries, the two largest economies in the world.
They still kind of need each other. Is that still
the case?
Speaker 7 (11:25):
I think within the Trump administration there's a range of opinions,
and I think it you know, goes from somebody like
Peter Navarro, who would be perfectly happy to have not
just a strategic decoupling, but really a complete decoupling of
the two economies. I think the sort of on the
national security side, most of the cabinet members are quite
hawkish when it comes to China.
Speaker 4 (11:47):
And then I think there are.
Speaker 7 (11:47):
Some in the administration and maybe Treasury Secretary Besant, maybe
Commerce Secretary a Lutnik, who see the benefits of trade
and investment with China, and have made very clear that,
you know, while the relationsationship is challenged, they want to
continue to engage. They don't see anything past a strategic decoupling.
They're not looking and I think Secretary Besset made that clear.
(12:09):
They're not looking for a complete decoupling of the relationship.
Speaker 5 (12:12):
But it is fraught, and a.
Speaker 7 (12:14):
Lot of that has to do not just with what
the Trump administration is trying to do now, but what
with what Stietenping has been doing, you know, for twelve
years as General secretary of the Communist Party and president
of the country, which is really challenging the United States,
challenging the liberal rules based international order on issues like
you know, pushing to have the dedollarization of the global economy,
(12:35):
pushing for the end of the US let Alliance system,
pushing for a whole new definition of human rights. So
there are some pretty substantive ways in which our two
countries are in real conflict, but that doesn't mean we
shouldn't continue to try to find areas of common ground
and common purpose, and that, frankly, is what is entirely
missing from this administration.
Speaker 1 (12:55):
I'm trying to understand, and I think a lot of
US are trying to understand the position that China can
negotiate from right now. On the one hand, you know,
there's a consumer in China that's under pressure, the property
crisis there, the economy has been under pressure going really
back to COVID. But at the same time, what we've
learned is that in recent years, the country's made incredible
strides when it comes to driverlest car technology, EV technology
(13:20):
and some of the really high tech stuff that in
fact the US is trying to prevent the proliferation of
in China. What can you tell us about the position
of strength or weakness that China can negotiate from right now?
Speaker 7 (13:32):
Yeah, I mean, I think it was a fundamental miscalculation
on the part of the Trump administration when they first
began these negotiations, the sort of an assumption that, in fact,
because we import so much more from China than China
imports from US, that somehow we had all the leverage.
But the truth is, first of all, we have a
much greater single source source dependency on China.
Speaker 5 (13:55):
For certain goods.
Speaker 7 (13:55):
So about thirty percent of the goods that we import
from China, we are reliant for China for seventy percent
or more of those goods. Globally, China doesn't have that
with the United States. We've already seen China has spent
four years now or more moving away from the United States,
reducing their trade dependence since twenty nineteen, reducing their trade
(14:17):
dependence on the United States from about nineteen percent to
now fourteen percent. You know, are soybeans right, even after
the tariff pause, China is not back to purchasing the
same level soybeans for American farmers. Brazil is more competitive,
so they're purchasing their soybeans from Brazil. So one of
the big dangers of this Trump launched tariff war is
(14:39):
that China was already on a path to its own
form of strategic decoupling, and now it's just accelerated that process.
So I think we misjudged right their dependence, their reliance
on us. As you suggested, the Chinese economy is troubled.
It has been since COVID. It hasn't bounced back. But
(15:00):
China has the ability to suppress right the people in
ways that the US government does not, and at the
same time, their entire innovation and manufactured advanced manufacturing ecosystem
has just taken off after the past four years. And
so you're really dealing with two different Chinese economies, and
for the sake of the tarraf war, we should be
focused on the one that's most competitive in that tech
(15:22):
and innovation space. And so we really need to focus
on what we should be doing at home, investing in
ourselves and moving ourselves forward, as opposed to simply trying
to look backwards and trip China up with these tariffs.
Speaker 3 (15:35):
Yeah, it's a tech terriff war, right, we should remind
everybody that. Also this week the administration seeking to block
Huawei Technologies from selling advanced AI chips anywhere in the world,
prompting an angry rebuke from Beijing. Elizabeth, It is about
tech and tariffs.
Speaker 4 (15:52):
It's also though we had this.
Speaker 3 (15:53):
Week the Trump Administration announcing it would start revoking Chinese
student visas. So there's also that aspect that's going on.
Who loses in that restriction, the US Beijing?
Speaker 4 (16:07):
Everybody.
Speaker 7 (16:09):
Yeah, I mean, I think both sides lose, just like
the terraform, both sides lose. I mean, you know, truth
be told, there are reasons to be concerned about some students,
some Chinese students in the United States. And we saw
a number of years ago where the US sent back
a thousand Chinese students and postdocs who you know, had
(16:30):
affiliations with Chinese military and technology universities and institutes, who
were probably placed here by the Chinese government to access,
you know, advanced intellectual property from the labs that they
were working in, so they weren't real graduate students or postdocs.
We want to make sure that doesn't happen anymore. That
being said, you know, the vast majority of Chinese students
(16:53):
are here to learn, to take advantage of the openness
and the and the outstanding education that American institutions provide.
You know, a lot of the students that come here
in the stemfields end up staying and contributing in an
outsized way to our own innovation ecosystem. I don't think
we want to punish, you know, these students. I think
(17:16):
what we need to do is take our time and
figure out how to use a scalpel to review them
before they get here and keep out the bad elements.
But let in the vast majority of Chinese students who
are such important contributors to to you know, our own
success moving forward.
Speaker 1 (17:34):
We're speaking with Elizabeth Economy Hargrove, Senior Fellow and co
chair of the Program on the US, China and the
World at the Hoover Institution at Stanford University. She's written
many books, including The World according to China. Given your
expertise in the area, I'm just curious from your perspective,
how you think we, as the United States, or if
you were advising the Trump administration how we should handle
(17:58):
the relationship with China. What would you do.
Speaker 4 (18:01):
That's a big.
Speaker 7 (18:02):
Question, I mean to be Frank, I served in the
Biden administration in the Department of Commerce as a senior
advisor to Secretary of Romando for China, and so I
actually think the Biden administration strategy was a pretty good one, right,
because it focused on first investing at home and making
sure that our own innovation and manuf advanced manufacturing, you know,
(18:24):
was up to speed. Chips and Science Act, the Inflation
Reduction Act, the Bipartisan Infrastructural Law, all of these were
about making sure that the US was able to compete
with China in the twenty first century. You know, we
also had a vision that was important to work with
our allies and partners. And you know, because nothing that
we do alone is going to be sufficient to compete
(18:45):
with China. If we put an export control, you know,
on a certain technology, odds are high that one or
other of our allies might also have something similar. We
need them on board to put controls on those same
technologies if in fact, they're not going to end up backfilling, right,
so that just our industry suffer and somebody else makes money.
(19:06):
But the way the Trump administration is operating, it's hardly
likely that our allies and partners are going to be
excited to work with us, because.
Speaker 4 (19:13):
You know, we're everything we're doing in.
Speaker 7 (19:15):
China, or not everything, but a lot of things we're
doing in China were also doing to them. And then
there was there was an element of modernizing our defensive
economic tools so that we could protect ourselves, you know,
our national economic security. So yes, let's think about making
sure we're not too dependent on China for critical minerals
and rare earth elements and the processing of those things.
(19:37):
Let's make sure we're not too dependent on them for
any critical technologies for you know, personal protective equipment that
we needed during COVID. I think that's smart policy, and
the Trump administration is going to continue that.
Speaker 4 (19:48):
Elizabeth also tried.
Speaker 7 (19:50):
To maintain channels of communication and to continue to try
to find areas where we could work with China because
through all of this, right, we don't want this conflict
to devolve into kinetic conflict. And if we're not talking,
if we're not trying to work together, the likelihood of
that happening just increases.
Speaker 3 (20:07):
Your book The World according to China that was out
about three and a half four years ago.
Speaker 4 (20:12):
I believe right twenty twenty one, when you look at the.
Speaker 3 (20:15):
Next fifty years, one hundred years, is it going to
be better for China or better for the US.
Speaker 4 (20:20):
And forgive me, but just about thirty five seconds here.
Speaker 7 (20:23):
Okay, you know I'm always going to be bullish on
the United States. So I think, if we get it right,
and I think if.
Speaker 4 (20:30):
You set your heart speaking or your head.
Speaker 7 (20:33):
Speaking, yeah, no, you know, I think listen, China has
some pretty fundamental challenges and we haven't had a chance
to talk about these on this particular show, but there
are some deep seated, deep rooted issues that the Chinese
government is confronting. Yeah, we only lose if we continue
to do what we're doing right now, which is we
do some certainty and chaos into the system.
Speaker 3 (20:54):
Elizabeth Economy, Thank you so much, so appreciated.
Speaker 2 (20:58):
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Speaker 1 (21:16):
All right, the earning season is not done, as we know,
and we even have more earnings coming next week. I
think it's fair to say that investors are dealing eight
a lot or dealing with a lot right now when
it comes to this market, just to try to keep
up when it comes to trade. The latest is a
federal appeals court has temporarily blocked a ruling that threatened
to throw out the bulk of President Donald Trump's tariff agenda.
(21:37):
Offers some hope to the White House. That's just one
of the issues that investors are facing. Watching all of
this and what it means for investors is Doctor David Kelly,
Chief of Global strategist and head of a global market
insights strategy team at JP Morgan Asset Management. The whole
firm has about three point six trillion dollars in assets
under management. David joins us here in the Bloomberg Interactive
(21:57):
Brokers studio. I was kind of joking that you needed
a law degree to understand the back and forth with
the different courts in the last twenty four hours that
we've heard from. But one thing that I think has
become clear is that it didn't seem like investors or
traders actually bought the idea of some sort of reprieve
from these tariffs. We saw initially with futures last night
(22:19):
shoot way higher when this decision came out or when
this ruling came out, but then that faded and it
didn't even get much of a reprieve early in the morning.
Speaker 8 (22:28):
Well, and I think that makes sense. I mean, first
of all, investors are just suffering from incredible tariff whiplash.
I mean, we've got we have somebody on my team
whose job it is every day to try and figure
out the effect of average tariff rate the United States
is deploying on our imposing on everybody else, and Mary
Park does a good job, but she's the hardest working person.
Speaker 1 (22:50):
Of my team and just trying to keep So what
do you guys see, Beau, our Bloomberg Economics team is
basically roughly thirteen what they're set.
Speaker 8 (22:58):
That's where we're ending up to course, that assumes the same.
You don't allow for change in the volumes of trade,
and we know the volume trade will be impacted by this,
but it is. And I think that's the important point
because you know where were we at the start of
the year. We're about two and a half percent and
nowur thirteen percent, and so yes, the market didn't bounce
off of the idea that maybe this all gets blocked,
(23:19):
But even if it did get blocked, to me, why
should we be up year to date? I mean, if
you think about the economy we came into this year,
we had a we had a good economy, but we
also had a lot of optimism after the election. And
since then we've had sort of the Doge cuts, We've
had all this controversy around immigration, We've had you know, budgets,
a budget proposal which looks like it's going to expand
(23:41):
the deficits in twenty twenty six, twenty twenty seven. And
most of all, we've got all these tariffs which are
throwing sand in the gears of global trade, and all
the uncertainty that's coming from all of this, and all
that is still weighing on the market. So the market
should not be higher than it was at the start
of the year. And I think maybe if you don't know,
if we don't bounce off every little piece of relief,
it's because you know, this picture overall is still pretty.
Speaker 3 (24:04):
Uncertain, right, Uncertainty still rules, you know what I think about.
And David, You've got a PhD at an MA in
economics from Michigan State University, BA in economics from University
College Dublin. In the Republican of Ireland, I studied economics.
I keep thinking about the cross section of economics and markets,
and I'm wondering if the global economy is still as
(24:25):
intertwined as it was.
Speaker 4 (24:26):
Are we kind of opening up a new chapter on that.
Speaker 8 (24:29):
I think there's a I think other countries are more
dependent upon global trade than we are. The United States
only imports about fifteen percent of its GDP at exports
about eleven percent. If you go to place like the Eurozone,
or the UK or Japan, those numbers are much much higher.
So what happens in the United States is actually mostly
about the United States. But still, these tariffs do push
(24:50):
up prices, and they do slower exports, and they do
add uncertainty, particularly for global US companies, because even though
the US economy is pretty domestic, all of these companies
are not that domestic, and it's difficult for all of them.
Speaker 1 (25:03):
A couple of truths about our economy. One is it's
powered by consumers and it's powered by services. Given that
the average tariff rate is really five x since the
beginning of the year, what does that do to consumers?
Speaker 8 (25:17):
It punches them, but it doesn't fell them. I mean,
it is, it is, it's it's definitely a negative. But
we have the most resilient consumers in the world. I mean,
unless you melt the plastic, they will keep on spending.
And I think we've but we've seen that. I mean,
even you know, even in the first quarter with all
this going on, consumer spending was rising. I think it's
(25:38):
going to rise again in the second quarter, not not
that fast, but consumers try to put on the headphones
and ignore it, and so we're still seeing that. So
I think that's one of the big advantages of the US.
And of course we have had huge gains in wealth
from the last few years. People can spend some of that.
I think people try to just drown out the noise
(25:58):
coming out of Washington as much as possible.
Speaker 3 (26:00):
But help me out because often when we see debt levels,
consumer debt levels go up, and then we're looking at
whether the ability of consumers to actually pay it. I mean,
we get concerned, we get worried because there is a
point where right your debt becomes potentially for a household problematic,
or that debt is so much and mortgage rates are still.
Speaker 4 (26:18):
Higher than they were. That like, people don't do these
kinds of things.
Speaker 8 (26:23):
It's a dragon the economy, but it's not it's not fatal.
The thing about debt, of course, is the rats would
you finance it? Correct And two thirds of US household
debt is mortgages, and those mortgages got locked in at
three points something percent a few years ago. Now that
is a huge problem for people trying to buy a
house right now because that mortgage is not available and
(26:44):
is not going to be available right But it also
means that that the actual debt service ratio, the percentage
of disposable income that people are using to service or debt,
is way down from where it was before the Great
Financial Crisis, and it's still not that high. So, you know,
people talk about credit card debt, but credit card debt
is actually a pretty small part of overall consumer debt.
So overall, you know, we're seeing, yes, there is some
(27:07):
strain from increased increased credit card debt and increased slow
increase in delinquencies, but it's nothing like before the Great
Financial Crisis.
Speaker 1 (27:14):
We're going to get payrolls next week for the month
of May. I'm curious about the view that you have
when it comes to hard data and if we're going
to start to see cracks appear in hard data. We
haven't seen that yet.
Speaker 8 (27:26):
Well, we will see a little. We saw a pretty
ugly unemployment claims number this morning, you know, two hundred
and forty thousand was a little high, and the number
on continuing claims over one point nine million was also
a little high. But I think we're still at the
early stages of this.
Speaker 5 (27:41):
You know.
Speaker 8 (27:41):
One of the things that helps the American coming makes
it resilient as consumers. Of course, The other thing that's
really helping right now is businesses don't want delay workers
off because it was so hard to hire them. You
go back to March train training, we had twelve million
job openings and gradually they fill the positions and know
they still don't have all the people they want, and
so until they see the white the eyes of recession,
(28:01):
they don't want to fire them. And I think that
that is holding down layoffs. Now, what we don't know
is what it's doing to hiring, because we do think
that there's a bit of a hiring freezer, a hiring
slowdown going on, and the question is how fast does
that feed in to the to the numbers. But we're
just that's an unanswered question, right.
Speaker 3 (28:18):
Labor hoarding real, right, but it doesn't mean companies are
inclined to hire more people.
Speaker 8 (28:23):
And it's very important because what people don't realize is
just how dynamic the labor market is. If if you
look at that job Openings and Labor Turnover report in
the United States, we hire about sixty five million people
in a year. About sixty two million people leave a
job for three million dollar three million job game, but
sixty five million that is two hundred and fifty thousand
people fill out a new w W four form every
(28:46):
single day. If you just pull back on that just
a little bit. Right now, we're going to pause. Then
suddenly got to got an employment problem. And that's what
I think the next two job supports will tell us.
Speaker 3 (28:56):
We will be watching David Kelly, Chief Global Strategist, head
of the Global Market Insight Strate GTeam over at JP
Morgan Asset Management.
Speaker 4 (29:02):
Right here in studio. You're listening and watching Bloomberg.
Speaker 2 (29:05):
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(29:25):
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Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
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Speaker 3 (00:32):
Just to remind everybody, if you're just joining us here
on Bloomberg Business Weekdaily, our top story here on this Thursday,
a federal appeals court temporarily pausing that ruling against President
Trump's global tariffs while weighing a longer lasting hold on
the sweeping decision, with the administration bag to take the
matter to the US Supreme Court if necessary.
Speaker 4 (00:50):
It's something we've been talking with our own Eric Larson about.
Speaker 5 (00:53):
You know.
Speaker 1 (00:53):
As Eric was speaking to us, we were hearing from
White House Senior Counselor for Trade and Manufacturing, Peter Navarro.
He was outside the White House speaking to reporters. He
said the administration quote fully expected a favorable ruling on tariffs.
He also said that he got calls from countries this
morning and talks are continuing, he said, the court told
us to go do it another way. And finally, Carol,
(01:14):
he said he will hear in the next day or
two from the US Trade representative.
Speaker 4 (01:18):
All right, it's a fluid story.
Speaker 1 (01:19):
We will we will hear rather from the US Trade
Representative Jameison Greer.
Speaker 3 (01:22):
All right, So we're going to be keeping on top
of this. We want to continue the conversation. Still with
us is Bloomberg News US legal reporter Eric Larson right
here in our Bloomberg Interactive Brokers studio. Joining the conversation
is Jimmy gurrollat He's professor of law, founder and director
of Exoneration Justice Clinic. Concurrent professor of Political Sciences is
at Notre Dame Law School. Joining us on the phone.
Speaker 4 (01:43):
Jimmy, We've been.
Speaker 3 (01:44):
Talking with our Eric Larson, who has been covering this
for us, especially as the news has been developing. What's
your take on this latest legal action, the appeals court
allowing the Trump tariffs to stay in effect at least
for now.
Speaker 5 (01:59):
We very fluid and dynamic situation, to say the least,
with respect to the original ruling yesterday by the Federal
Court of International Trade. My census to the court got
it right, because the Trump administration has based the terriffs
on something called the International Emergency Economic Powers Actor i EPA.
(02:23):
And when I worked at the Treasury Department as Under
Secretary for Enforcement, one of the offices that I was
responsible for overseeing is the Office of Foreign Assets Controller OPAC,
and OPHAK is responsible for supervising and implementing the government's
economic sanctions programs based on IEPA. And so I'm very
(02:47):
familiar with the IEPA Statute and what it permits. And
there's nothing in the IEPA Statute that authorizes the use
of tariffs under the under the statute, And you know,
the statute basically authorizes or gives the president some very
(03:08):
broad sweeping powers to impose economic sanctions. But again, at
the same time, in order to trigger the use of
those economic sanctions, the president must declare a national emergency,
and this national emergency must involve an unusual and extraordinary
(03:29):
threat to the national security, foreign policy, or the economy
of the United States that originates in whole, are in
substantial part outside the United States. And so here I
think there's two issues. You know, one is does the
it is there in fact such an unusual and extraordinary
threat the national security, foreign policy, or the economy of
(03:53):
the United States. What is the nature of that threat?
Is the nature of that threat a trade deficit? Does
a trade deposite constitute an unusual or an extraordinary threat
to the US economy? Here, I think the lower court
concluded no, that a trade deficit doesn't rise to this
level of an unusual or extraordinary threat. In the case
(04:16):
of Canada, I think the threat was different, and I
think the claim was that Canada wasn't doing an an
adequate job of protecting its borders, supervising its borders, and
as a result, fetanol was coming into the United States.
But here I believe that the amount of fetanol percentage
(04:37):
wise is coming from Canada is a very minuscule number,
maybe one percent. And so again it kind of strange
credulity to think that that constitutes an unusual or extraordinary
threat that would justify the use of these I want.
Speaker 1 (04:55):
To jump in because I think Peter Navarrow of the
White House weighed in on that a little and called
it an emergency in a different way that what he said,
and these were not his words exactly, but the gist
of what he said this morning to our surveillance team
was it's an emergency here in the United States because
it's affecting the working age population here and US workers
(05:16):
are dying as a result, So it's an economic emergency.
Is that a legal argument?
Speaker 5 (05:21):
No? I think you've got to focus, you know, on
the target, and here, you know, the target of the tariffs.
We just focus on Canada and the and the Feedanyl crisis.
You know, they're they're here. Is is is Canada responsible
for this? It is that the feedanyl is coming across
(05:43):
the Canadian border. Does it rise to the level of
a unusual and extraordinary threat to the national security? So
it's not just that that it kills Americans. I mean
that that's not the test. You know. The test is
does it affect national security? Does it constitute and a
new an extraordinary threat to US national security?
Speaker 6 (06:03):
I actually have a quick question, if you don't mind.
You mentioned earlier that the International Emergency Economic Powers Act
doesn't even mention tariffs, and of course that was one
of the arguments that was used in court. Given that,
why was Trump even trying to use or is he
still trying to use this law to issue tariffs when
(06:24):
it's not even envisions in what's not an envisioned by Congress.
Speaker 5 (06:28):
I think it's a misuse of the statue. I think
it's probably a very that the Trump administration is interpreting
the statute quite broadly and that if there is such
a threat to national security of the economy or foreign policy,
that the president can implement any type of economic sanctions.
(06:53):
I think it's a very broad reading of the statute.
But the statute is very specific. I mean, it does indicate,
for example, the blocking and freezing of assets, preventing financial transactions,
and so it's very explicit, and with respect to the
language of the statute, tariffs is not included in the
tech Okay, all right.
Speaker 3 (07:14):
So appreciate it ongoing and I'm sure there'll be more
headlines on it. Our thanks to Jimmy Gourlay, professor of
law and founder director of the Exoneration Justice Clinic, also
concurrent professor of political science at Notre Dame Law School,
and of course who we lean on, Eric Larson, Bloomberg
News US legal reporter for the ins and outs of
all of this in coming What's next?
Speaker 4 (07:35):
Eric, Thank you so much as well.
Speaker 2 (07:37):
You're listening to the Bloomberg Business Weekdaily podcast. Catch US
Live weekday afternoons from two to five pm Eastern. Listen
on Apple CarPlay and Android Auto with the Bloomberg Business app,
or watch US Live on YouTube.
Speaker 3 (07:51):
So we talked earlier about the setback for President Trump
and his tarror push. Those actions and threats of higher tariffs,
as you know, have yet to be settled. We might
get some more clarity. We'll see what happens tomorrow with
maybe the Trump administration asking the Supreme Court to weigh in.
I got to say some already saying the train has
left the station when it comes to the US China relationship, the.
Speaker 4 (08:12):
Impact that this kind of back.
Speaker 3 (08:13):
And forth that we've seen not just in the second
Trump administration tim but what we've seen over the last
few years.
Speaker 1 (08:19):
Let's bring in Elizabeth Economy. She's Hargrove Senior Fellow and
co chair of the Program on the US, China and
the World at the Hoover Institution at Stanford University. She's
author of many books, most recently The World According to China.
She joins US from New York City. When it comes
to the relationship between the US and China, the Trump
administration this week announcing it would start revoking those Chinese
(08:40):
student visas, while also introducing new restrictions on the sales
of chip design software and reportedly some jet engine parts
to China. How would you describe the phase of a
trade war or a trade negotiation that we're in with China.
Speaker 7 (08:53):
I think we're still in the trade war. We had
a tariff pause a few weeks ago after Treasury Secretary
of Vescent and USTR Career met with their Chinese counterparts,
and we had that you know, terrific lowering, reducing of
the tariff levels on both sides, and I think that
led everybody to breathe a big sigh of relief, and
(09:15):
we thought, you know, maybe we were going to have
stability in the relationship moving forward at least, you know,
for the next ninety days, and perhaps some movement toward
an actual you know, negotiation and agreement. But I think
the Trump administration really divorced that set of discussions and
negotiations from everything else that they wanted to get done
with China. And I think what we've seen now is
(09:36):
that means you know, no cessation of tough measures, whether
as you mentioned, is continuing you know, export controls or
now this revocation of student visas. So I think we're
still in the midst of trade war, We're in the
midst of a significant strategic decoupling, and all we had
really was as a tariff pause.
Speaker 3 (09:57):
Hey, you know, Elizabeth, what does the world look like
with an increasingly decoupled US in China?
Speaker 7 (10:03):
I mean, I think it, you know, it's going to
be complicated. I think it's not going to be as
straightforward as some people might imagine, with you know, the
US and its allies and partners on one side in
China and it's it's you know, partners on another side
because it doesn't actually have any formal allies except for
North Korea. So so I think it's not going to
be that simple. And I think we've seen evidence of that,
(10:23):
you know, where President Trump went to the Middle East
and came back with all these big announcements of new
trade arrangements and investments and defense deals. And we just
saw China this past week do the exact same thing
and bring the you know, countries from Southeast Asia into
it and try to sort of bridge from the Middle
East to Southeast Asia sort of new trade and investment relations.
(10:45):
And so I think it's going to be you know,
everybody out to try to compete for partners and allies
and strike the best deals. But there's not going to
be that sort of decoupling of the world that I
think probably the Trump administration has in its mind, because
you know, for many and for most countries, quite frankly,
China is their largest trading partner, right and while they
(11:07):
don't want to lose the US market, they're also not
willing to sacrifice their trade and investment ties with China.
Speaker 3 (11:13):
So what happened to the argument that we've said, Okay,
there's tensions, but let's not forget people.
Speaker 4 (11:19):
These two countries, the two largest economies in the world.
They still kind of need each other. Is that still
the case?
Speaker 7 (11:25):
I think within the Trump administration there's a range of opinions,
and I think it you know, goes from somebody like
Peter Navarro, who would be perfectly happy to have not
just a strategic decoupling, but really a complete decoupling of
the two economies. I think the sort of on the
national security side, most of the cabinet members are quite
hawkish when it comes to China.
Speaker 4 (11:47):
And then I think there are.
Speaker 7 (11:47):
Some in the administration and maybe Treasury Secretary Besant, maybe
Commerce Secretary a Lutnik, who see the benefits of trade
and investment with China, and have made very clear that,
you know, while the relationsationship is challenged, they want to
continue to engage. They don't see anything past a strategic decoupling.
They're not looking and I think Secretary Besset made that clear.
(12:09):
They're not looking for a complete decoupling of the relationship.
Speaker 5 (12:12):
But it is fraught, and a.
Speaker 7 (12:14):
Lot of that has to do not just with what
the Trump administration is trying to do now, but what
with what Stietenping has been doing, you know, for twelve
years as General secretary of the Communist Party and president
of the country, which is really challenging the United States,
challenging the liberal rules based international order on issues like
you know, pushing to have the dedollarization of the global economy,
(12:35):
pushing for the end of the US let Alliance system,
pushing for a whole new definition of human rights. So
there are some pretty substantive ways in which our two
countries are in real conflict, but that doesn't mean we
shouldn't continue to try to find areas of common ground
and common purpose, and that, frankly, is what is entirely
missing from this administration.
Speaker 1 (12:55):
I'm trying to understand, and I think a lot of
US are trying to understand the position that China can
negotiate from right now. On the one hand, you know,
there's a consumer in China that's under pressure, the property
crisis there, the economy has been under pressure going really
back to COVID. But at the same time, what we've
learned is that in recent years, the country's made incredible
strides when it comes to driverlest car technology, EV technology
(13:20):
and some of the really high tech stuff that in
fact the US is trying to prevent the proliferation of
in China. What can you tell us about the position
of strength or weakness that China can negotiate from right now?
Speaker 7 (13:32):
Yeah, I mean, I think it was a fundamental miscalculation
on the part of the Trump administration when they first
began these negotiations, the sort of an assumption that, in fact,
because we import so much more from China than China
imports from US, that somehow we had all the leverage.
But the truth is, first of all, we have a
much greater single source source dependency on China.
Speaker 5 (13:55):
For certain goods.
Speaker 7 (13:55):
So about thirty percent of the goods that we import
from China, we are reliant for China for seventy percent
or more of those goods. Globally, China doesn't have that
with the United States. We've already seen China has spent
four years now or more moving away from the United States,
reducing their trade dependence since twenty nineteen, reducing their trade
(14:17):
dependence on the United States from about nineteen percent to
now fourteen percent. You know, are soybeans right, even after
the tariff pause, China is not back to purchasing the
same level soybeans for American farmers. Brazil is more competitive,
so they're purchasing their soybeans from Brazil. So one of
the big dangers of this Trump launched tariff war is
(14:39):
that China was already on a path to its own
form of strategic decoupling, and now it's just accelerated that process.
So I think we misjudged right their dependence, their reliance
on us. As you suggested, the Chinese economy is troubled.
It has been since COVID. It hasn't bounced back. But
(15:00):
China has the ability to suppress right the people in
ways that the US government does not, and at the
same time, their entire innovation and manufactured advanced manufacturing ecosystem
has just taken off after the past four years. And
so you're really dealing with two different Chinese economies, and
for the sake of the tarraf war, we should be
focused on the one that's most competitive in that tech
(15:22):
and innovation space. And so we really need to focus
on what we should be doing at home, investing in
ourselves and moving ourselves forward, as opposed to simply trying
to look backwards and trip China up with these tariffs.
Speaker 3 (15:35):
Yeah, it's a tech terriff war, right, we should remind
everybody that. Also this week the administration seeking to block
Huawei Technologies from selling advanced AI chips anywhere in the world,
prompting an angry rebuke from Beijing. Elizabeth, It is about
tech and tariffs.
Speaker 4 (15:52):
It's also though we had this.
Speaker 3 (15:53):
Week the Trump Administration announcing it would start revoking Chinese
student visas. So there's also that aspect that's going on.
Who loses in that restriction, the US Beijing?
Speaker 4 (16:07):
Everybody.
Speaker 7 (16:09):
Yeah, I mean, I think both sides lose, just like
the terraform, both sides lose. I mean, you know, truth
be told, there are reasons to be concerned about some students,
some Chinese students in the United States. And we saw
a number of years ago where the US sent back
a thousand Chinese students and postdocs who you know, had
(16:30):
affiliations with Chinese military and technology universities and institutes, who
were probably placed here by the Chinese government to access,
you know, advanced intellectual property from the labs that they
were working in, so they weren't real graduate students or postdocs.
We want to make sure that doesn't happen anymore. That
being said, you know, the vast majority of Chinese students
(16:53):
are here to learn, to take advantage of the openness
and the and the outstanding education that American institutions provide.
You know, a lot of the students that come here
in the stemfields end up staying and contributing in an
outsized way to our own innovation ecosystem. I don't think
we want to punish, you know, these students. I think
(17:16):
what we need to do is take our time and
figure out how to use a scalpel to review them
before they get here and keep out the bad elements.
But let in the vast majority of Chinese students who
are such important contributors to to you know, our own
success moving forward.
Speaker 1 (17:34):
We're speaking with Elizabeth Economy Hargrove, Senior Fellow and co
chair of the Program on the US, China and the
World at the Hoover Institution at Stanford University. She's written
many books, including The World according to China. Given your
expertise in the area, I'm just curious from your perspective,
how you think we, as the United States, or if
you were advising the Trump administration how we should handle
(17:58):
the relationship with China. What would you do.
Speaker 4 (18:01):
That's a big.
Speaker 7 (18:02):
Question, I mean to be Frank, I served in the
Biden administration in the Department of Commerce as a senior
advisor to Secretary of Romando for China, and so I
actually think the Biden administration strategy was a pretty good one, right,
because it focused on first investing at home and making
sure that our own innovation and manuf advanced manufacturing, you know,
(18:24):
was up to speed. Chips and Science Act, the Inflation
Reduction Act, the Bipartisan Infrastructural Law, all of these were
about making sure that the US was able to compete
with China in the twenty first century. You know, we
also had a vision that was important to work with
our allies and partners. And you know, because nothing that
we do alone is going to be sufficient to compete
(18:45):
with China. If we put an export control, you know,
on a certain technology, odds are high that one or
other of our allies might also have something similar. We
need them on board to put controls on those same
technologies if in fact, they're not going to end up backfilling, right,
so that just our industry suffer and somebody else makes money.
(19:06):
But the way the Trump administration is operating, it's hardly
likely that our allies and partners are going to be
excited to work with us, because.
Speaker 4 (19:13):
You know, we're everything we're doing in.
Speaker 7 (19:15):
China, or not everything, but a lot of things we're
doing in China were also doing to them. And then
there was there was an element of modernizing our defensive
economic tools so that we could protect ourselves, you know,
our national economic security. So yes, let's think about making
sure we're not too dependent on China for critical minerals
and rare earth elements and the processing of those things.
(19:37):
Let's make sure we're not too dependent on them for
any critical technologies for you know, personal protective equipment that
we needed during COVID. I think that's smart policy, and
the Trump administration is going to continue that.
Speaker 4 (19:48):
Elizabeth also tried.
Speaker 7 (19:50):
To maintain channels of communication and to continue to try
to find areas where we could work with China because
through all of this, right, we don't want this conflict
to devolve into kinetic conflict. And if we're not talking,
if we're not trying to work together, the likelihood of
that happening just increases.
Speaker 3 (20:07):
Your book The World according to China that was out
about three and a half four years ago.
Speaker 4 (20:12):
I believe right twenty twenty one, when you look at the.
Speaker 3 (20:15):
Next fifty years, one hundred years, is it going to
be better for China or better for the US.
Speaker 4 (20:20):
And forgive me, but just about thirty five seconds here.
Speaker 7 (20:23):
Okay, you know I'm always going to be bullish on
the United States. So I think, if we get it right,
and I think if.
Speaker 4 (20:30):
You set your heart speaking or your head.
Speaker 7 (20:33):
Speaking, yeah, no, you know, I think listen, China has
some pretty fundamental challenges and we haven't had a chance
to talk about these on this particular show, but there
are some deep seated, deep rooted issues that the Chinese
government is confronting. Yeah, we only lose if we continue
to do what we're doing right now, which is we
do some certainty and chaos into the system.
Speaker 3 (20:54):
Elizabeth Economy, Thank you so much, so appreciated.
Speaker 2 (20:58):
This is the Bloomberg Is This Week Daily podcast. Listen
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Speaker 1 (21:16):
All right, the earning season is not done, as we know,
and we even have more earnings coming next week. I
think it's fair to say that investors are dealing eight
a lot or dealing with a lot right now when
it comes to this market, just to try to keep
up when it comes to trade. The latest is a
federal appeals court has temporarily blocked a ruling that threatened
to throw out the bulk of President Donald Trump's tariff agenda.
(21:37):
Offers some hope to the White House. That's just one
of the issues that investors are facing. Watching all of
this and what it means for investors is Doctor David Kelly,
Chief of Global strategist and head of a global market
insights strategy team at JP Morgan Asset Management. The whole
firm has about three point six trillion dollars in assets
under management. David joins us here in the Bloomberg Interactive
(21:57):
Brokers studio. I was kind of joking that you needed
a law degree to understand the back and forth with
the different courts in the last twenty four hours that
we've heard from. But one thing that I think has
become clear is that it didn't seem like investors or
traders actually bought the idea of some sort of reprieve
from these tariffs. We saw initially with futures last night
(22:19):
shoot way higher when this decision came out or when
this ruling came out, but then that faded and it
didn't even get much of a reprieve early in the morning.
Speaker 8 (22:28):
Well, and I think that makes sense. I mean, first
of all, investors are just suffering from incredible tariff whiplash.
I mean, we've got we have somebody on my team
whose job it is every day to try and figure
out the effect of average tariff rate the United States
is deploying on our imposing on everybody else, and Mary
Park does a good job, but she's the hardest working person.
Speaker 1 (22:50):
Of my team and just trying to keep So what
do you guys see, Beau, our Bloomberg Economics team is
basically roughly thirteen what they're set.
Speaker 8 (22:58):
That's where we're ending up to course, that assumes the same.
You don't allow for change in the volumes of trade,
and we know the volume trade will be impacted by this,
but it is. And I think that's the important point
because you know where were we at the start of
the year. We're about two and a half percent and
nowur thirteen percent, and so yes, the market didn't bounce
off of the idea that maybe this all gets blocked,
(23:19):
But even if it did get blocked, to me, why
should we be up year to date? I mean, if
you think about the economy we came into this year,
we had a we had a good economy, but we
also had a lot of optimism after the election. And
since then we've had sort of the Doge cuts, We've
had all this controversy around immigration, We've had you know, budgets,
a budget proposal which looks like it's going to expand
(23:41):
the deficits in twenty twenty six, twenty twenty seven. And
most of all, we've got all these tariffs which are
throwing sand in the gears of global trade, and all
the uncertainty that's coming from all of this, and all
that is still weighing on the market. So the market
should not be higher than it was at the start
of the year. And I think maybe if you don't know,
if we don't bounce off every little piece of relief,
it's because you know, this picture overall is still pretty.
Speaker 3 (24:04):
Uncertain, right, Uncertainty still rules, you know what I think about.
And David, You've got a PhD at an MA in
economics from Michigan State University, BA in economics from University
College Dublin. In the Republican of Ireland, I studied economics.
I keep thinking about the cross section of economics and markets,
and I'm wondering if the global economy is still as
(24:25):
intertwined as it was.
Speaker 4 (24:26):
Are we kind of opening up a new chapter on that.
Speaker 8 (24:29):
I think there's a I think other countries are more
dependent upon global trade than we are. The United States
only imports about fifteen percent of its GDP at exports
about eleven percent. If you go to place like the Eurozone,
or the UK or Japan, those numbers are much much higher.
So what happens in the United States is actually mostly
about the United States. But still, these tariffs do push
(24:50):
up prices, and they do slower exports, and they do
add uncertainty, particularly for global US companies, because even though
the US economy is pretty domestic, all of these companies
are not that domestic, and it's difficult for all of them.
Speaker 1 (25:03):
A couple of truths about our economy. One is it's
powered by consumers and it's powered by services. Given that
the average tariff rate is really five x since the
beginning of the year, what does that do to consumers?
Speaker 8 (25:17):
It punches them, but it doesn't fell them. I mean,
it is, it is, it's it's definitely a negative. But
we have the most resilient consumers in the world. I mean,
unless you melt the plastic, they will keep on spending.
And I think we've but we've seen that. I mean,
even you know, even in the first quarter with all
this going on, consumer spending was rising. I think it's
(25:38):
going to rise again in the second quarter, not not
that fast, but consumers try to put on the headphones
and ignore it, and so we're still seeing that. So
I think that's one of the big advantages of the US.
And of course we have had huge gains in wealth
from the last few years. People can spend some of that.
I think people try to just drown out the noise
(25:58):
coming out of Washington as much as possible.
Speaker 3 (26:00):
But help me out because often when we see debt levels,
consumer debt levels go up, and then we're looking at
whether the ability of consumers to actually pay it. I mean,
we get concerned, we get worried because there is a
point where right your debt becomes potentially for a household problematic,
or that debt is so much and mortgage rates are still.
Speaker 4 (26:18):
Higher than they were. That like, people don't do these
kinds of things.
Speaker 8 (26:23):
It's a dragon the economy, but it's not it's not fatal.
The thing about debt, of course, is the rats would
you finance it? Correct And two thirds of US household
debt is mortgages, and those mortgages got locked in at
three points something percent a few years ago. Now that
is a huge problem for people trying to buy a
house right now because that mortgage is not available and
(26:44):
is not going to be available right But it also
means that that the actual debt service ratio, the percentage
of disposable income that people are using to service or debt,
is way down from where it was before the Great
Financial Crisis, and it's still not that high. So, you know,
people talk about credit card debt, but credit card debt
is actually a pretty small part of overall consumer debt.
So overall, you know, we're seeing, yes, there is some
(27:07):
strain from increased increased credit card debt and increased slow
increase in delinquencies, but it's nothing like before the Great
Financial Crisis.
Speaker 1 (27:14):
We're going to get payrolls next week for the month
of May. I'm curious about the view that you have
when it comes to hard data and if we're going
to start to see cracks appear in hard data. We
haven't seen that yet.
Speaker 8 (27:26):
Well, we will see a little. We saw a pretty
ugly unemployment claims number this morning, you know, two hundred
and forty thousand was a little high, and the number
on continuing claims over one point nine million was also
a little high. But I think we're still at the
early stages of this.
Speaker 5 (27:41):
You know.
Speaker 8 (27:41):
One of the things that helps the American coming makes
it resilient as consumers. Of course, The other thing that's
really helping right now is businesses don't want delay workers
off because it was so hard to hire them. You
go back to March train training, we had twelve million
job openings and gradually they fill the positions and know
they still don't have all the people they want, and
so until they see the white the eyes of recession,
(28:01):
they don't want to fire them. And I think that
that is holding down layoffs. Now, what we don't know
is what it's doing to hiring, because we do think
that there's a bit of a hiring freezer, a hiring
slowdown going on, and the question is how fast does
that feed in to the to the numbers. But we're
just that's an unanswered question, right.
Speaker 3 (28:18):
Labor hoarding real, right, but it doesn't mean companies are
inclined to hire more people.
Speaker 8 (28:23):
And it's very important because what people don't realize is
just how dynamic the labor market is. If if you
look at that job Openings and Labor Turnover report in
the United States, we hire about sixty five million people
in a year. About sixty two million people leave a
job for three million dollar three million job game, but
sixty five million that is two hundred and fifty thousand
people fill out a new w W four form every
(28:46):
single day. If you just pull back on that just
a little bit. Right now, we're going to pause. Then
suddenly got to got an employment problem. And that's what
I think the next two job supports will tell us.
Speaker 3 (28:56):
We will be watching David Kelly, Chief Global Strategist, head
of the Global Market Insight Strate GTeam over at JP
Morgan Asset Management.
Speaker 4 (29:02):
Right here in studio. You're listening and watching Bloomberg.
Speaker 2 (29:05):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business App.
You can also watch us live every weekday on YouTube
(29:25):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
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