August 12, 2025 • 33 mins
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Underlying US inflation accelerated in July though the cost of tariff-exposed goods didn’t rise as much as feared, boosting expectations that Federal Reserve officials will lower interest rates when they meet next month.
The core consumer price index, which excludes the often volatile food and energy categories, increased 0.3% from June, the strongest pace since the start of the year, according to Bureau of Labor Statistics data out Tuesday. That was in line with economists’ forecasts, as was the overall CPI on a monthly basis.
The pickup in the core CPI was fueled by services prices. Excluding energy, they climbed the most since the start of the year. Airfares jumped by the most in three years, while medical care and recreation also advanced. Goods prices, excluding food and energy commodities, rose at a tame pace. Some categories exposed to tariffs, such as toys, sporting goods and household furnishings and supplies, continued to increase, albeit at a slower pace than the prior month. Meantime, used car prices rebounded from a series of declines.
The reacceleration in services costs, after months of more subdued prints, underscores the lingering difficulties in taming inflation. Economists and policymakers have been largely concerned about rising goods prices given President Donald Trump’s sweeping tariffs, but a pickup in consumer demand could fuel services inflation.
Today's show features:
- Pooja Sriram, Vice President of US Economics Research at Barclays, on the latest US inflation print and Bloomberg TV Radio International Economics and Policy Correspondent Mike McKee on Federal Reserve and White House news
- Shehzad Qazi, Chief Operating Officer and Managing Director of China Beige Book, on China’s response to what it calls US “protectionist measures,” and Bloomberg Economics Geo-Economic Analyst for Latin America Jimena Zuniga on
Brazil seeking support from BRICS partners for a joint response to US tariffs. - Bloomberg News Treasury Reporter Daniel Flatley and Bloomberg New Economy Reporter Editorial Director Erik Schatzker on their Bloomberg Big Take and upcoming Businessweek cover story on Treasury Secretary Scott Bessent
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Episode Transcript
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Speaker 1 (00:00):
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 1 (00:32):
Carol Masser, along with David Ger. Tim is out on assignment.
We'll be back tomorrow. So, hey, we want to talk
a little bit about the inflation report, because David, as
you mentioned at the top, I mean, it really did
feel like investors like what we.
Speaker 3 (00:44):
Got that there wasn't any kind of big surprise here.
Speaker 4 (00:46):
Yeah, just to give everyone an update on what we
did learn. The core consumer price index, excluding that often
volatile food and energy categories, increased byo point three percent
from June from the month before. That's according to the
Bureau of Labor Statistics data that was released this morning,
largely in line with what economists were forecasting Carol, and
on an annual basis, it picked up to three point one.
Speaker 1 (01:05):
Percent, so of those wereew okay, not worse than could
have been let's get more on the release, the outlook
for US inflation and really FED policy.
Speaker 3 (01:12):
With US is Bloomberg TV and Radio.
Speaker 1 (01:14):
International economics and policy correspondent, of course are Michael McKee.
Speaker 3 (01:18):
He's here in studio. And also with US is Poojam Stream.
Speaker 1 (01:21):
She's vice president of US Economics Research over at Barkley's.
She's joining us from New York City. Welcome, Welcome to
both of you. So, Mike, for those who maybe I
don't know, slept in on this Tuesday, what do we
need to me not you? Mike, what do we need
to know about the inflation print this morning?
Speaker 5 (01:38):
Well, I think what you want to say is don't
count your chickens before they're priced, because there is some
evidence of tariff passed through in these numbers. There's maybe
some evidence that Chris Waller's right that it's a one
time increase, because we saw things that went up in
price last month because of tariff's come down. So it
(02:00):
may be a one off, but it may be a
continuing one off that pushes inflation higher because you saw
things like used cars go up half a percent. New
car prices which had been declining, are now flat, which
the President claimed as a victory. But then you look
at the profit margins for the automakers in the second
(02:22):
quarter and they were all minuscule or negative because they're
absorbing it and they're not going to continue to do that.
So there is no proof that the tariff issue is
over in these numbers. And the other aspect of it
is services prices have gone up. They went up more
(02:44):
than anticipated. So that's something that doesn't have to do
with tariffs, but is a concern to economists, and it'll
obviously be something that FED wants to watch.
Speaker 4 (02:53):
Could you pick up on that if you would. I
was looking bad back in a recent note that you
wrote before these numbers came out this morning, and you
said that while firms tend to raise prices, they've been
restorting to other mitigation measures. First, what did these data
this morning tell you about the way the economy has
been reacting? Is reacting to the presence trade policies?
Speaker 2 (03:11):
Yeah?
Speaker 6 (03:11):
Sure, a great question. You know, the release this morning
was to us a pretty mixed bag. What was interesting
is a lot of the acceleration that we saw in
core CPI came from the core services component. Core goods
prices were up. Inflation. Was you know, on the core
good side, still a point two percent, very similar to
(03:33):
what we saw in June. But really the increases in prices,
they're not as broad based as one would have expected.
Speaker 3 (03:40):
Now.
Speaker 6 (03:41):
To be clear, we think it's too soon for us
to conclude that the tariff passed through is not happening
or is more muted. We do think there are a
couple of things that could have happened in July which
just made the core good side of the report look
a little softer. One is, you know, if you remember,
July was a big motion period. We did have an
(04:02):
Amazon Prime Day event that lasted longer than usual, and
we had similar promotions from retailers like Walmart and Target.
So it's plausible that we just had you know, slightly
lower looking prices this July, you know, than we did
last July. And if you look at some of the
details within categories, that seems to corroborate with this narrative.
(04:24):
But I also will allude to what Mike McKee pointed
out earlier. We are seeing signs of early tariff passed
through already in the economy. Within the CPI release itself,
We've been flagging for a while that household furnishing prices,
for example, are up three percent just year to date.
This is very different from how prices historically have behaved.
(04:48):
Something very similar can be said about appliances in the US.
So I just think tariff effects are in train, and
while today's report may not suggest that we're seeing much
pid of effects, I just think it's too soon for
us to dismiss that effect altogether.
Speaker 4 (05:04):
Mike, let me ask you, if I could, about housing.
We look to these data for some indication of those
costs as well. We have for many months. Now, what
is it telling you about the state of the housing
market in the US today.
Speaker 5 (05:15):
Well, we're not saying price declines, but certainly the price
increases have leveled off. This is the third month in
a row that owner's equivalent rent was up three tenths
of eight percent, and on a year over year basis,
we see slight declines here in home prices. We're seeing
in the more immediate data that the case shillers and
(05:35):
things like that, that home prices are not rising as
fast because at this point people have give it up
on selling, it appears, and so they're not raising prices
because it's a seller's market. But let's see what happens
going forward. The interesting question is going to be how
does the housing market recover. Is a FED rate cut
(05:56):
or two going to be enough? How much does it
have to go down before people get out there and
start buying again.
Speaker 1 (06:05):
One thing I wanted to ask both of you, and Mike,
let me start with you first, is that I think
I heard it on surveillance this morning, the idea or
the concept of it's not just the number and where
it goes to, but the percentage of the increase or decrease.
Speaker 3 (06:16):
So when we think.
Speaker 1 (06:18):
About that, I mean, I know the numbers came in line,
but what we've seen in terms of trends in inflation,
are we seeing it continue to kind of move down
in a significant way like that percentage change.
Speaker 5 (06:33):
Use if you have a Bloomberg go ahead and put
in cpiyoy index GP and graphic. And in the last
two and a half three months, the inflation arrow has
changed from going down into the right to going up
and to the right. It's not been a huge change yet,
(06:54):
and we don't know for sure that that's going to
happen or if it's just going to come to you
to steadily rise, but it definitely shows the inflation trajectory
has changed.
Speaker 1 (07:05):
All right, So let's cut to the chase. What does
this mean for the Fed? Pooja weigh in on this.
I know Mike tends to say, and he's always right
about this, that like there's a lot more data come
in our way before the next FED meeting.
Speaker 3 (07:16):
So has this changed anything for J. Powell and company? Well,
I think not.
Speaker 6 (07:22):
The Barclays baseline for a while now has been one
rate cut and all the way at the end of
the year in December. Now we're looking quite out of consensus, admittedly,
but we think, you know, there is a lot of
data to come. Nothing in this inflation print to us
was you know, was suggestive of inflation being more muted
(07:45):
or the tariff.
Speaker 3 (07:46):
Effects are not coming.
Speaker 6 (07:48):
So we do think that, you know, the next employment
report is going to be the big one to watch
out for. Also, we're going to hear from Chair Powell
at Jackson Hall and so we think those would be
good signals to watch for. But right now we maintain
our call the Fed is in rush to cut rights
and we have a call for December.
Speaker 3 (08:08):
Mike's getting is you mentioned?
Speaker 2 (08:11):
Mike lights up?
Speaker 4 (08:12):
You can't see it.
Speaker 7 (08:12):
On the getting ready.
Speaker 4 (08:15):
But Mike, how are you sort of thinking about the
way this influence is FED decision making going forward? The
report today, and of course sort of what this might
tell us about the PCE report coming up little bit later.
Speaker 5 (08:24):
Well, I think it puts them in the category of
if we get the same numbers that we've gotten, and
by that I mean inflation numbers and the another round
of bad jobs numbers, the FED might be more inclined
to cut. But when you parse who the voters are
and what they've said since the last FED meeting, you
got about two people who think they should go down,
(08:46):
two people who think they should not, and two people
who are undecided. The rest have yet to weigh in.
So we will hear more over the next couple of weeks,
including from the chair, and we'll see where they are
going into September. But again it's there's another jobs report,
and another CPI report, and a PCE inflation report, and
so there's a lot of information to come that will
(09:08):
help decide what's going to happen. The odds are now
ninety six percent that they cut in September, but I
wouldn't put money into that market right now.
Speaker 1 (09:18):
I feel like I've seen this movie before, expectations that
change very quickly on a data point.
Speaker 3 (09:23):
Michael McKee, thank you so much.
Speaker 1 (09:24):
I always appreciate it, And of course Pujirium, vice president
of Yous Economics Research at Barkley's Hey. Coming up later
next week, do join us for our live coverage from JACKSONHLL.
We'll be on the ground in Wyoming, Well, we meaning
Mike and team covering the Kansas City Fed's Annual Economic
Policy Symposium and highly anticipated.
Speaker 3 (09:41):
Remarks from fedscher J. Powell.
Speaker 1 (09:43):
All happens and starts Wednesday, August twentieth, and finishes up
with a special edition of Bloomberg Surveillance. Tom Keene, Lisa Bromoitz,
and the one and only Mike McKee will all be
part of that special Starting at nine am Eastern on Friday.
Speaker 2 (09:56):
You are 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 4 (10:10):
David Gura in for Tim Stenovak, who's on assignment with
Carol Masser here on Bloomberg Business Week, and we got
news yesterday from the White House that Presdon Trump has
decided to extend that ninety day pause yet again on
those heightened tariffs on China. China very much in focus
here in the US, of course, as we wait to
see sort of what happens with those trade talks, but
also playing an incredibly important role around the world. We
(10:31):
saw the Brazilian President Lula de Silva speaking with the
Chinese leader, exchanging their views on international affairs. President she
calling for coordinated efforts against unilateralism and protectionism. News today
also that India and China set to resume direct flight
connections as soon as next month. And we're seeing oil
playing a critical role here as the contours of this
(10:52):
trade war continue to come into Folks, it does feel like,
in a way, many parts of the world are moving
on and increasingly away from the US. Let's get to
a roundtable now to understand China's goals here, what they're
thinking in terms of the role they're playing in the world.
US very clear of course about wanting a higher tariff world.
For those looking to sell into the US should at
Kazi Joints as Chief operating Officer Managment director at the
(11:14):
China BAIG book here with us in the studio and
from our bureau in Buenos Aires, Aminasuniga with US geoeconomic
analysts for Latin America at Bloomberg Economics and should sood.
Let me start with you and maybe just give us
your sense of how China is thinking about all this.
We've had a series of three meetings now Geneva, London, Stockholm.
The pause continues here as we get perilously close. I
(11:35):
think to the Christmas holiday, when people are going to
be buying a lot of gifts and are going to
be very worried if a lot of these tariffs come
to pass. How is China thinking about the kind of
trajectory of these negotiations with the US.
Speaker 8 (11:46):
You know, when the year began, we would have thought
that their primary objective was to bring the tariff levels
down and negotiate just about trade. But what we've learned
is that they are much more concerned about US exp
controls because that is ultimately what hurts them far more
than even tariffs do. Because they have ways to get
around the tariffs, and so what they've done is they've
(12:09):
used their chokehold on rare. It's minerals and magnets and
forced compelled really the administration to relent and roll back
US expert controls while also bringing down the tariffs. So
two wins for Shujinping in the last several months.
Speaker 1 (12:24):
But what kind of relationship do you think he wants
with the United States going forward?
Speaker 8 (12:29):
Well, he'd love nothing more than to be able to
sell as much as possible and be able to import
the things they care about, the most advanced technology, not
just ships, but across the board. Right, that's in an
ideal world. Now, that's probably not what he's getting right away,
but he's getting pretty close to it. I don't think
he feels a pressure to do anything more. I don't
think he feels a pressure today to say I'm going
(12:51):
to pledge like Japan and Europe did you know five
hundred billion dollars worth of investment, or I'm going to
pledge to buy all this US agricultural output the way
I did in the past. I think they've demonstrated she specifically,
we've got a lot of leverage and we don't need
to play ball. If you don't feel like I do.
Speaker 1 (13:07):
Think it's interesting that they want all the high tech,
and yet Beijing is urging what local companies to avoid
using in Vidia's H twenty processors, particularly for government related purposes.
So yes, but there's always caveat, Hamena, come on in
on this because in the meantime, Latin America is watching
very closely, I'm sure, and remind us of the relationship
that already exists with China across Latin America and maybe
(13:31):
what they hope to even solidify even further.
Speaker 9 (13:35):
Thank you, Carol. Yes, you know, g and Lula just
talked and they said the relationship is as strong as ever.
But so far the support from China to Brazil seems
to have been largely rhetorical. Right. They have said they
(13:56):
have shared views on multila journalism and unilateralism on behalf
of the US condemning that, and China has been very
keen on jumping on this collective criticism of the US.
But even though Trump's tarifsts may be giving bricks the
(14:16):
blog that Brazil and China have, along with India, Russia
and other smaller partners, even though Trump tariffs seemed to
be giving it some mortar, it's still far from operating
as a block and it's not really coordinating a response,
a collective response to the Trump tariffs.
Speaker 4 (14:33):
Him man on that note, do you anticipate that's likely
to happen? I remember that moment a few months ago
when there was a meeting of the bricks countries. There
was this tacit threat that they were going to work
more closely together in opposition to what the United States
was doing. President Trump, clearly irritated agitated by that threatned
even more punitive sanctions, more tariffs on those bricks countries.
(14:54):
As a result of that. What would the catalyst be
that would get them to do more than, as you say,
talk about presenting a more united front against the United States.
Speaker 9 (15:04):
I think there are two main issues that are blocking
a more integrated response, more coordinating response. One is the
very diverse membership of the group in general, and also
with respect to the Trump tariffs, they're facing slightly different issues,
although they are becoming increasingly closer in the sense that,
for example, now Brazil and India are similarly targeted, but
(15:27):
for example, Russia has so far not been targeted with tariffs,
although they have other issues with the US, of course,
but the key thing is that China doesn't really need
the blogs as much as the other members of the
blog need China or would benefit from a coordinating response
with China. As Jas just said, China has a lot
(15:47):
of leverage, has demonstrated has a lot of leverage to
push back without offering any dramatic concessions as other countries
have done. Uh and the US has back down. So
China does not really need to have the collective weight
and have took the bricks block to stand up to Trump.
If it did, however, it could really expand its geopolitical cloud,
(16:12):
and it would mean the bricks would function more as
a block. But so far, I think China is very
focused on its national interest and as long as as
it can stand up to Trump on its own and
it has the leveraged to do it, it is unlikely
to compromise its national interest to expand the bricks theft.
Speaker 3 (16:31):
We're talking with.
Speaker 1 (16:32):
Him in a Suniga geoeconomic analyst for Latin America out
there in our Buenos Aires Bureau, and also with us
Shazad Kazi, chief operating Officer, Managing Director China Basebook and Studio.
Speaker 3 (16:43):
All right, so let's shift a little bit.
Speaker 1 (16:45):
To China and India, which I think is kind of
interesting and you know, just a little headline. As David mentioned,
that looks like Indian China set to resume direct flight
connections as soon as next month, according to those familiar,
as they look to kind of reset their political ties
as the US and in India after years and years
of working on improving that relationship, seem to have taken
(17:05):
some steps back China and India.
Speaker 3 (17:07):
What's China's goal there?
Speaker 8 (17:08):
Well, I think, you know, they have an incredibly complex
relationship because whereas they trade, it is absolutely not They
have very serious national security concerns about each other, more
specifically India with regards to China, and of course are
constantly having these bottles battles rather than skirmishes at the border,
long running problems there. So you know, I think I
think the trader.
Speaker 3 (17:29):
Is any of this real or is it just for show?
Speaker 8 (17:31):
I think it's real to the extent that they want
to do business with each other, but it's not it
doesn't go towards you know, anything beyond that. I mean India.
So let's be clear, India does not want to be
seen as a country that's going to counterbalance China and
all the rest on behalf of the US. It wants
to be seen as a power in its own merit,
on its own right. But by that token though, still,
they also don't want to blow up their business relationship
(17:52):
with China. This is far more complex than I think
traditional models of geopolitics would suggest.
Speaker 4 (17:57):
You know, we were talking about sort of the the
gap that might be left if the training relationship has
ruined between the United States and China. How confident is
China that it could get, yes, the rare earths, the
critical minerals exported to other countries if the US isn't
able to buy them. I guess what I'm saying is
how sure they are in their ability to pivot to
other markets if the US is no longer what it
has been.
Speaker 8 (18:18):
So they demonstrated, I think that everybody is desperate for
Chinese rare arts. And if you remember what they did
was briefly they said export controls on more or less everyone,
so that they could prevent us from transshipping those rare
ets right into the US the way. You know, obviously
China takes advantage of transhipment. So I think I don't
know if that's really the big concern, because there's such
(18:39):
desperation given the chokehold that they have as a sole
supplier really of most of these things, including some really
critical things like samarium, which you need for weapons development,
and how dependent we are on that and by the way,
they are not letting that out human.
Speaker 1 (18:51):
I also wonder, you know, if some great deal happens
between the US and China, after you know, the delays
are done, you know, we'll Latin America as a whole
or specific countries be like, okay, missed opportunity. You know,
we're out because we understand the importance of that US
China relationship, and especially if they if China gets better
(19:12):
terms in terms of tariffs.
Speaker 9 (19:13):
Finally, what do you mean we're out?
Speaker 3 (19:16):
Sorry?
Speaker 1 (19:17):
Well, meaning that they won't necessarily have such an open
door perhaps or the conversation lines you know, between China
and Latin America might go away if ultimately the US
trade deal and tariff deal that they come together with
China is not as onerous as maybe has been put
out before that ultimately US and China come to terms
(19:38):
that are good for both sides. So does that China
kind of back off again from Latin America.
Speaker 9 (19:44):
Yeah, in a way, I think that China is very
present in Latin America if you think of it outside Mexico,
who exports eighty percent of its schoods towards the US.
China is the main markets or most of the are bigger,
biggest economies, including Brazil, Argentina and tile Peru. And so
(20:08):
I don't think that Latin America can choose between the
US and China. For Latin America, the best would be
not to have to choose, and for a while it
cultivated positive pragmatic relationships with both with both markets that
are important not only in terms of trade, but also
in terms of financing and in terms of tourism. Both
(20:30):
both markets are critical to region in different respects depending
on the country. If having to choose, a lot of
countries would not we try to push back a lot
not to be not to have to choose. They would
continue to trade with China, they would continue to have
financial ties, and they would like try to push back
(20:51):
on this on this on the US because China is
now almost as important or more important for many of
these countries as the US is.
Speaker 8 (21:00):
Any last thoughts just real quickly, well, look, China's going
to be a big player, which is why I think
when Secretary Rubio took over. His big focus initially was
supposed to be to push back on China right here
in the Western hemisphere. That feels like years ago at
this point, but it's an important objective, I think.
Speaker 3 (21:16):
All right, So appreciate both of you.
Speaker 1 (21:18):
Shazad Kazi, Chief Operating Officer Maaging Director of China bagebook
right here in studio and then out there at our
Buenos Aires bureau for Bloomberg News him and a Suniga
geoeconomic analyst for Latin America.
Speaker 2 (21:32):
This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3 (21:49):
Well, he holds one of the most.
Speaker 1 (21:50):
Important jobs in the Trump administration. Is off and out
about talking about the president's policies. Another individual who hails
from the world of financial markets before taking the job
in Washington. We are talking about US Treasury Secretary Scott Besson,
who is the subject of the latest issue of Bloomberg BusinessWeek.
It's the cover story it's on the Bloomberg Two, at
Bloomberg dot com, Slash BusinessWeek, and on newsstands. He talked,
(22:13):
we're talking about mister Bessett, the two key members of
our Bloomberg team about tariff's deficits and President Trump's economic
plan with us as Bloomberg News US Treasury Reporter Dan
Flatley out there in our DC bureau and Bloomberg New
Economy reporter editorial director and Bloomberg business Week Getthered at Large,
Eric Shaftsker, Eric here in our studio. Eric, I want
to start with you deep dive, so much detailed, pretty incredible.
(22:37):
Your first impression of actually sitting down and talking with
the Treasury Secretary.
Speaker 10 (22:42):
Oh boy, Well, I've had the good fortune of seeing
him a couple of times since he became the Treasury Secretary.
I would say, more than anything else, and I'm curious
to know if Dan feels the same way that he
was remarkably at ease. This is someone and that it
truly is a point worth making, because this is somebody
who came from a totally different background, who had no
(23:04):
experience in Washington, who knew nothing about how to navigate
political waters, and yet only seven months into the job.
He's sitting there at the Treasury Department feeling like or
at least exuding an aura of calm and control in
a way that wasn't a foregone conclusion. If you had
(23:25):
the background that he had, you ran a small, relatively
small hedge fund, certainly not that many people at the most.
Over the course of his career, he probably oversaw three
hundred people at Soros Fund Management when he was the
chief Investment Officer twenty eleven to twenty fifteen. Here he's
got a department of one hundred thousand people, and as
we explain in this story, it is the department of everything.
He is responsible not just for the things that Treasury
(23:48):
is typically responsible for, but so many other things as well,
including trade negotiations, acting IRS commissioner, shepherding the one big
beautiful bill through Congress. You name, it's on his plate.
Speaker 4 (24:00):
Dan, I'm curious if you want to respond to that
sort of how you found the treasuresector, But also I'm
interested in how he sees his role, yes within the department,
but in the administration as well, that the president has
a varied economic team, folks from different backgrounds. He's taking
advice from from all of them. What's the role of
Treasury sectory Scott Besson in, Yes, advising the president, but
(24:21):
setting his economic agenda as well.
Speaker 7 (24:25):
Yeah, you know, it's it's a great question, and I
agree with Eric. You know, he definitely seemed at ease
when we were speaking with him. And one of the
things that I noticed he goes on TV a lot,
and he's very careful sometimes about what he says on TV.
Occasionally he gets himself into some trouble with some of
his public remarks, including on TV. But he was much
(24:47):
more at ease, much more relaxed. One of the things
that I said to him was, you know, you must
you must feel very well prepared for your role in
terms of macroeconomic policy and and and that aspect of it,
given your background. But what about the political dimension? And
he sort of gestured over to this table that he
had set up in his office with a white tablecloth
that he said he brought from home where he brings
(25:10):
in members of Congress to have lunch or breakfast with him.
And he said, that's one of the things that he's
been trying to work on, is congressional relations. And that's
something that came into play with Steve Mnusian when he
was Treasury Secretary with the pandemic, where he really needed
to rely on Democrats to get a lot of those
(25:30):
sort of stimulus bills through, and Bessett hasn't had to
do that yet because Republicans have control of both houses
of Congress and there hasn't been a crisis of that
level certainly during his time in office. But he may
need to rely on on some Democrats at some point
in the future. And so he mentioned that he has
members of both parties there with him at times, So
(25:54):
I think that was interesting. And then you know how
he sees his role. I think, you know, he told
us he gives a president options and outcomes, and he
also helps manage the narrative, which is I think one
of the things that's very interesting to observe. How he
does go out a lot, a lot more than some
other secretaries in the past and talks about what the
president is trying to do. And I think markets seem
(26:16):
to like that. Whether he can keep that up over
the course of his tenure, we'll see, but that seems
to be a big part of his role right now.
Speaker 1 (26:24):
Well, you know, it's something that you made reference to
about how comfortable he was, because it's something that David
and I both kind of seized on, like in reading
your story about when he's on air, Eric, it is
very halting his speech, and you've got none of that no,
when you guys sat with him. So it makes me wonder,
is he just being so careful because he knows the
(26:45):
president's watching?
Speaker 10 (26:46):
Well, he's being careful, I would say, for a couple
of reasons, yes, maybe three reasons. Yes, he knows the
president's watching. Yes, he doesn't have a lot of time
in which to make those remarks. We give him plenty
of airtime and others do as well, but it's not
as much time as Dan and I had. It's not
as free flowing a conversation. It tends to be a
conversation that's much more responsive to or concerning news and
(27:11):
something that may have happened ten minutes ago or where
the markets are trading right now. Dan and I had
a relatively unique opportunity to talk to the present, to
talk to excuse me, to the Treasury secretary without any
of those pressures on his mind, and so he was
able to express himself much more in a sense, in
his own words, the way he would express himself if
(27:32):
he were having a conversation, I hesitate to say, with
a friend, but not under the glare of the television
lights and a rat tat tat interview that you typically
get when you're certainly being questioned by multiple parties.
Speaker 4 (27:45):
You take us through his childhood in South Carolina, born
of this family that's been there for a very long time,
his centuries nicknamed by the Secret Services Swampbox after Francis Marion,
the American General. I'm curious sort of if you could
you tell us a bit more about his back in finance, because,
as you both mentioned, Wall Street seems to have warmed him.
They seem as kind of a bultwork against some of
(28:05):
the president's worst impulses. Perhaps was how did he make
a name for himself on Wall Street? What's his specialty?
Was it in currencies? Was it in macro? Beacro? How
is he known on Wall Street?
Speaker 7 (28:15):
For this?
Speaker 10 (28:16):
It's important first of all to say that it's in macro.
He was a macro fund manager, which means he translates
his view of global economics into bets on bonds, currencies, commodities, equities,
whatever the case may be. A lot of it relative
value bets among different currencies, that kind of thing. That's
what he specialized in. That's what he learned at the
(28:37):
knee of both George Soros and Stan Ruckenmiller. Stan Druckenmiller,
for all of the fame George Soros has earned, Stan
Druckenmiller his chief investment officer at Quantum May and at
Soros Fund Management, maybe the greatest investor in modern history
is a man who, you know, whether he was managing
other people's money or managing his own money, has never
had a down year. That, as much as anything, is
(28:59):
what made Scott Besson famous. He was the understudy to
the mentee of Stan Druckenmeller, and of course he ran
two firms of his own, best in capital First he
then went back to Soros Fund Management as the chief
investment officer overseeing George Soros's twenty five billion dollar portfolio,
and then in twenty late twenty fifteen early twenty sixteen
(29:20):
he started Key Square Group, which is where he was
until effectively he became the Treasury nominee. It's a peculiar
place to have come from in finance. It does prepare
him in a unique way. For the demands of the
Treasury Secretary's job, because he thought about global markets and
the interrelationship between policy and market response in a way
(29:44):
that say, along short equity fund manager never has to,
and so that is an important thing to recognize about
his background. It would have been Stephen Minuchin, for example,
came from a very different tradition. He was a little
bit more of an He was special in operations when
he was at Golden Sachs, and then when he started
his own investing operation, he was more of an opportunist,
(30:09):
spent more of his time on credit, as you may remember,
took over Indiemac, you know when that bank failed after
the financial crisis, financed Hollywood films, a very different kind
of a mindset. He had his own views, of course
about how to be the Treasury Secretary, but he didn't
have the background and the immersion in global markets and
(30:31):
world affairs that best and has had his entire career.
Speaker 1 (30:34):
We're talking with Eric Schaftsker, editorial director for Bloomberg New Economy,
also editor at large for Bloomberg BusinessWeek here and studio,
and Dan Flatley out there in our Washington DC Bureau.
Dan as US Treasury reporter for Bloomberg News. So it
kind of begs, and you guys write this in the
story that he was a private guy. So I'm curious, Dan,
does he like the job, does he feel conflicted in
(30:55):
terms of the president's policies.
Speaker 3 (30:57):
Or that's not his job.
Speaker 1 (30:59):
It's just to maybe layout scenarios for the president.
Speaker 9 (31:03):
Yeah.
Speaker 7 (31:03):
No, it's a great question. I mean on the privacy point.
You know, it's very interesting because he sort of mentioned
to us this sort of old line about, you know,
a gentleman should never should only have his name in
the paper three times when he's born, when he gets married,
and when he dies, and so he's.
Speaker 3 (31:20):
Such a southern old gentleman. But go ahead, go ahead.
Speaker 7 (31:23):
Yeah, I mean, it's you know, but it was very
interesting because it was very apparent, I think to us,
and I think Eric would agree with me that that's
sort of how he lived his life up to the
point where he decided, Hey, I'm going to make a
play for being Donald Trump's Treasury secretary. And it didn't
happen overnight. You know, he told us that he got
interested in the Trump campaign in twenty sixteen. He thought
(31:48):
about potentially raising his hand for a position in the
first Trump administration, but was conflicted because he had just
started his own hedge fund, Key Square Group, and he
was very cautious about, you know, wanting to be seen
as overly political, although he did give a million dollars
to Trump's first inauguration, which he said he sort of
(32:08):
smoothed over with the clients by saying it was the
people's inauguration. But over time he got more and more
interested in politics, and he sort of took us through
his journey, so to speak, and some of the things
that he saw that he was concerned about. Of course,
he made mention of the Biden administration's policies, but he
also talked about the idea that people don't trust either
(32:30):
political party anymore and that he sees himself as playing
a role, you know, smaller than the president's of course,
but still a significant role in terms of trying to
shore up the system, so to speak. And again, like
I said before, it's an active experiment. Whether it works
at the end of the day is an open question.
Speaker 3 (32:50):
All right.
Speaker 1 (32:50):
I wish we had another twenty minutes to go, but
I highly recommend everybody check out the story. Eric Dan,
You guys, rock Eric Schatzger and Dan Sally so appreciate.
This is the cover of the new issue of Bloomberg
Business Week. You can find it too on the Bloomberg
and at Bloomberg dot com.
Speaker 2 (33:05):
This is the Bloomberg BusinessWeek 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
(33:25):
and always on the Bloomberg terminal.
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 1 (00:32):
Carol Masser, along with David Ger. Tim is out on assignment.
We'll be back tomorrow. So, hey, we want to talk
a little bit about the inflation report, because David, as
you mentioned at the top, I mean, it really did
feel like investors like what we.
Speaker 3 (00:44):
Got that there wasn't any kind of big surprise here.
Speaker 4 (00:46):
Yeah, just to give everyone an update on what we
did learn. The core consumer price index, excluding that often
volatile food and energy categories, increased byo point three percent
from June from the month before. That's according to the
Bureau of Labor Statistics data that was released this morning,
largely in line with what economists were forecasting Carol, and
on an annual basis, it picked up to three point one.
Speaker 1 (01:05):
Percent, so of those wereew okay, not worse than could
have been let's get more on the release, the outlook
for US inflation and really FED policy.
Speaker 3 (01:12):
With US is Bloomberg TV and Radio.
Speaker 1 (01:14):
International economics and policy correspondent, of course are Michael McKee.
Speaker 3 (01:18):
He's here in studio. And also with US is Poojam Stream.
Speaker 1 (01:21):
She's vice president of US Economics Research over at Barkley's.
She's joining us from New York City. Welcome, Welcome to
both of you. So, Mike, for those who maybe I
don't know, slept in on this Tuesday, what do we
need to me not you? Mike, what do we need
to know about the inflation print this morning?
Speaker 5 (01:38):
Well, I think what you want to say is don't
count your chickens before they're priced, because there is some
evidence of tariff passed through in these numbers. There's maybe
some evidence that Chris Waller's right that it's a one
time increase, because we saw things that went up in
price last month because of tariff's come down. So it
(02:00):
may be a one off, but it may be a
continuing one off that pushes inflation higher because you saw
things like used cars go up half a percent. New
car prices which had been declining, are now flat, which
the President claimed as a victory. But then you look
at the profit margins for the automakers in the second
(02:22):
quarter and they were all minuscule or negative because they're
absorbing it and they're not going to continue to do that.
So there is no proof that the tariff issue is
over in these numbers. And the other aspect of it
is services prices have gone up. They went up more
(02:44):
than anticipated. So that's something that doesn't have to do
with tariffs, but is a concern to economists, and it'll
obviously be something that FED wants to watch.
Speaker 4 (02:53):
Could you pick up on that if you would. I
was looking bad back in a recent note that you
wrote before these numbers came out this morning, and you
said that while firms tend to raise prices, they've been
restorting to other mitigation measures. First, what did these data
this morning tell you about the way the economy has
been reacting? Is reacting to the presence trade policies?
Speaker 2 (03:11):
Yeah?
Speaker 6 (03:11):
Sure, a great question. You know, the release this morning
was to us a pretty mixed bag. What was interesting
is a lot of the acceleration that we saw in
core CPI came from the core services component. Core goods
prices were up. Inflation. Was you know, on the core
good side, still a point two percent, very similar to
(03:33):
what we saw in June. But really the increases in prices,
they're not as broad based as one would have expected.
Speaker 3 (03:40):
Now.
Speaker 6 (03:41):
To be clear, we think it's too soon for us
to conclude that the tariff passed through is not happening
or is more muted. We do think there are a
couple of things that could have happened in July which
just made the core good side of the report look
a little softer. One is, you know, if you remember,
July was a big motion period. We did have an
(04:02):
Amazon Prime Day event that lasted longer than usual, and
we had similar promotions from retailers like Walmart and Target.
So it's plausible that we just had you know, slightly
lower looking prices this July, you know, than we did
last July. And if you look at some of the
details within categories, that seems to corroborate with this narrative.
(04:24):
But I also will allude to what Mike McKee pointed
out earlier. We are seeing signs of early tariff passed
through already in the economy. Within the CPI release itself,
We've been flagging for a while that household furnishing prices,
for example, are up three percent just year to date.
This is very different from how prices historically have behaved.
(04:48):
Something very similar can be said about appliances in the US.
So I just think tariff effects are in train, and
while today's report may not suggest that we're seeing much
pid of effects, I just think it's too soon for
us to dismiss that effect altogether.
Speaker 4 (05:04):
Mike, let me ask you, if I could, about housing.
We look to these data for some indication of those
costs as well. We have for many months. Now, what
is it telling you about the state of the housing
market in the US today.
Speaker 5 (05:15):
Well, we're not saying price declines, but certainly the price
increases have leveled off. This is the third month in
a row that owner's equivalent rent was up three tenths
of eight percent, and on a year over year basis,
we see slight declines here in home prices. We're seeing
in the more immediate data that the case shillers and
(05:35):
things like that, that home prices are not rising as
fast because at this point people have give it up
on selling, it appears, and so they're not raising prices
because it's a seller's market. But let's see what happens
going forward. The interesting question is going to be how
does the housing market recover. Is a FED rate cut
(05:56):
or two going to be enough? How much does it
have to go down before people get out there and
start buying again.
Speaker 1 (06:05):
One thing I wanted to ask both of you, and Mike,
let me start with you first, is that I think
I heard it on surveillance this morning, the idea or
the concept of it's not just the number and where
it goes to, but the percentage of the increase or decrease.
Speaker 3 (06:16):
So when we think.
Speaker 1 (06:18):
About that, I mean, I know the numbers came in line,
but what we've seen in terms of trends in inflation,
are we seeing it continue to kind of move down
in a significant way like that percentage change.
Speaker 5 (06:33):
Use if you have a Bloomberg go ahead and put
in cpiyoy index GP and graphic. And in the last
two and a half three months, the inflation arrow has
changed from going down into the right to going up
and to the right. It's not been a huge change yet,
(06:54):
and we don't know for sure that that's going to
happen or if it's just going to come to you
to steadily rise, but it definitely shows the inflation trajectory
has changed.
Speaker 1 (07:05):
All right, So let's cut to the chase. What does
this mean for the Fed? Pooja weigh in on this.
I know Mike tends to say, and he's always right
about this, that like there's a lot more data come
in our way before the next FED meeting.
Speaker 3 (07:16):
So has this changed anything for J. Powell and company? Well,
I think not.
Speaker 6 (07:22):
The Barclays baseline for a while now has been one
rate cut and all the way at the end of
the year in December. Now we're looking quite out of consensus, admittedly,
but we think, you know, there is a lot of
data to come. Nothing in this inflation print to us
was you know, was suggestive of inflation being more muted
(07:45):
or the tariff.
Speaker 3 (07:46):
Effects are not coming.
Speaker 6 (07:48):
So we do think that, you know, the next employment
report is going to be the big one to watch
out for. Also, we're going to hear from Chair Powell
at Jackson Hall and so we think those would be
good signals to watch for. But right now we maintain
our call the Fed is in rush to cut rights
and we have a call for December.
Speaker 3 (08:08):
Mike's getting is you mentioned?
Speaker 2 (08:11):
Mike lights up?
Speaker 4 (08:12):
You can't see it.
Speaker 7 (08:12):
On the getting ready.
Speaker 4 (08:15):
But Mike, how are you sort of thinking about the
way this influence is FED decision making going forward? The
report today, and of course sort of what this might
tell us about the PCE report coming up little bit later.
Speaker 5 (08:24):
Well, I think it puts them in the category of
if we get the same numbers that we've gotten, and
by that I mean inflation numbers and the another round
of bad jobs numbers, the FED might be more inclined
to cut. But when you parse who the voters are
and what they've said since the last FED meeting, you
got about two people who think they should go down,
(08:46):
two people who think they should not, and two people
who are undecided. The rest have yet to weigh in.
So we will hear more over the next couple of weeks,
including from the chair, and we'll see where they are
going into September. But again it's there's another jobs report,
and another CPI report, and a PCE inflation report, and
so there's a lot of information to come that will
(09:08):
help decide what's going to happen. The odds are now
ninety six percent that they cut in September, but I
wouldn't put money into that market right now.
Speaker 1 (09:18):
I feel like I've seen this movie before, expectations that
change very quickly on a data point.
Speaker 3 (09:23):
Michael McKee, thank you so much.
Speaker 1 (09:24):
I always appreciate it, And of course Pujirium, vice president
of Yous Economics Research at Barkley's Hey. Coming up later
next week, do join us for our live coverage from JACKSONHLL.
We'll be on the ground in Wyoming, Well, we meaning
Mike and team covering the Kansas City Fed's Annual Economic
Policy Symposium and highly anticipated.
Speaker 3 (09:41):
Remarks from fedscher J. Powell.
Speaker 1 (09:43):
All happens and starts Wednesday, August twentieth, and finishes up
with a special edition of Bloomberg Surveillance. Tom Keene, Lisa Bromoitz,
and the one and only Mike McKee will all be
part of that special Starting at nine am Eastern on Friday.
Speaker 2 (09:56):
You are 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 4 (10:10):
David Gura in for Tim Stenovak, who's on assignment with
Carol Masser here on Bloomberg Business Week, and we got
news yesterday from the White House that Presdon Trump has
decided to extend that ninety day pause yet again on
those heightened tariffs on China. China very much in focus
here in the US, of course, as we wait to
see sort of what happens with those trade talks, but
also playing an incredibly important role around the world. We
(10:31):
saw the Brazilian President Lula de Silva speaking with the
Chinese leader, exchanging their views on international affairs. President she
calling for coordinated efforts against unilateralism and protectionism. News today
also that India and China set to resume direct flight
connections as soon as next month. And we're seeing oil
playing a critical role here as the contours of this
(10:52):
trade war continue to come into Folks, it does feel like,
in a way, many parts of the world are moving
on and increasingly away from the US. Let's get to
a roundtable now to understand China's goals here, what they're
thinking in terms of the role they're playing in the world.
US very clear of course about wanting a higher tariff world.
For those looking to sell into the US should at
Kazi Joints as Chief operating Officer Managment director at the
(11:14):
China BAIG book here with us in the studio and
from our bureau in Buenos Aires, Aminasuniga with US geoeconomic
analysts for Latin America at Bloomberg Economics and should sood.
Let me start with you and maybe just give us
your sense of how China is thinking about all this.
We've had a series of three meetings now Geneva, London, Stockholm.
The pause continues here as we get perilously close. I
(11:35):
think to the Christmas holiday, when people are going to
be buying a lot of gifts and are going to
be very worried if a lot of these tariffs come
to pass. How is China thinking about the kind of
trajectory of these negotiations with the US.
Speaker 8 (11:46):
You know, when the year began, we would have thought
that their primary objective was to bring the tariff levels
down and negotiate just about trade. But what we've learned
is that they are much more concerned about US exp
controls because that is ultimately what hurts them far more
than even tariffs do. Because they have ways to get
around the tariffs, and so what they've done is they've
(12:09):
used their chokehold on rare. It's minerals and magnets and
forced compelled really the administration to relent and roll back
US expert controls while also bringing down the tariffs. So
two wins for Shujinping in the last several months.
Speaker 1 (12:24):
But what kind of relationship do you think he wants
with the United States going forward?
Speaker 8 (12:29):
Well, he'd love nothing more than to be able to
sell as much as possible and be able to import
the things they care about, the most advanced technology, not
just ships, but across the board. Right, that's in an
ideal world. Now, that's probably not what he's getting right away,
but he's getting pretty close to it. I don't think
he feels a pressure to do anything more. I don't
think he feels a pressure today to say I'm going
(12:51):
to pledge like Japan and Europe did you know five
hundred billion dollars worth of investment, or I'm going to
pledge to buy all this US agricultural output the way
I did in the past. I think they've demonstrated she specifically,
we've got a lot of leverage and we don't need
to play ball. If you don't feel like I do.
Speaker 1 (13:07):
Think it's interesting that they want all the high tech,
and yet Beijing is urging what local companies to avoid
using in Vidia's H twenty processors, particularly for government related purposes.
So yes, but there's always caveat, Hamena, come on in
on this because in the meantime, Latin America is watching
very closely, I'm sure, and remind us of the relationship
that already exists with China across Latin America and maybe
(13:31):
what they hope to even solidify even further.
Speaker 9 (13:35):
Thank you, Carol. Yes, you know, g and Lula just
talked and they said the relationship is as strong as ever.
But so far the support from China to Brazil seems
to have been largely rhetorical. Right. They have said they
(13:56):
have shared views on multila journalism and unilateralism on behalf
of the US condemning that, and China has been very
keen on jumping on this collective criticism of the US.
But even though Trump's tarifsts may be giving bricks the
(14:16):
blog that Brazil and China have, along with India, Russia
and other smaller partners, even though Trump tariffs seemed to
be giving it some mortar, it's still far from operating
as a block and it's not really coordinating a response,
a collective response to the Trump tariffs.
Speaker 4 (14:33):
Him man on that note, do you anticipate that's likely
to happen? I remember that moment a few months ago
when there was a meeting of the bricks countries. There
was this tacit threat that they were going to work
more closely together in opposition to what the United States
was doing. President Trump, clearly irritated agitated by that threatned
even more punitive sanctions, more tariffs on those bricks countries.
(14:54):
As a result of that. What would the catalyst be
that would get them to do more than, as you say,
talk about presenting a more united front against the United States.
Speaker 9 (15:04):
I think there are two main issues that are blocking
a more integrated response, more coordinating response. One is the
very diverse membership of the group in general, and also
with respect to the Trump tariffs, they're facing slightly different issues,
although they are becoming increasingly closer in the sense that,
for example, now Brazil and India are similarly targeted, but
(15:27):
for example, Russia has so far not been targeted with tariffs,
although they have other issues with the US, of course,
but the key thing is that China doesn't really need
the blogs as much as the other members of the
blog need China or would benefit from a coordinating response
with China. As Jas just said, China has a lot
(15:47):
of leverage, has demonstrated has a lot of leverage to
push back without offering any dramatic concessions as other countries
have done. Uh and the US has back down. So
China does not really need to have the collective weight
and have took the bricks block to stand up to Trump.
If it did, however, it could really expand its geopolitical cloud,
(16:12):
and it would mean the bricks would function more as
a block. But so far, I think China is very
focused on its national interest and as long as as
it can stand up to Trump on its own and
it has the leveraged to do it, it is unlikely
to compromise its national interest to expand the bricks theft.
Speaker 3 (16:31):
We're talking with.
Speaker 1 (16:32):
Him in a Suniga geoeconomic analyst for Latin America out
there in our Buenos Aires Bureau, and also with us
Shazad Kazi, chief operating Officer, Managing Director China Basebook and Studio.
Speaker 3 (16:43):
All right, so let's shift a little bit.
Speaker 1 (16:45):
To China and India, which I think is kind of
interesting and you know, just a little headline. As David mentioned,
that looks like Indian China set to resume direct flight
connections as soon as next month, according to those familiar,
as they look to kind of reset their political ties
as the US and in India after years and years
of working on improving that relationship, seem to have taken
(17:05):
some steps back China and India.
Speaker 3 (17:07):
What's China's goal there?
Speaker 8 (17:08):
Well, I think, you know, they have an incredibly complex
relationship because whereas they trade, it is absolutely not They
have very serious national security concerns about each other, more
specifically India with regards to China, and of course are
constantly having these bottles battles rather than skirmishes at the border,
long running problems there. So you know, I think I
think the trader.
Speaker 3 (17:29):
Is any of this real or is it just for show?
Speaker 8 (17:31):
I think it's real to the extent that they want
to do business with each other, but it's not it
doesn't go towards you know, anything beyond that. I mean India.
So let's be clear, India does not want to be
seen as a country that's going to counterbalance China and
all the rest on behalf of the US. It wants
to be seen as a power in its own merit,
on its own right. But by that token though, still,
they also don't want to blow up their business relationship
(17:52):
with China. This is far more complex than I think
traditional models of geopolitics would suggest.
Speaker 4 (17:57):
You know, we were talking about sort of the the
gap that might be left if the training relationship has
ruined between the United States and China. How confident is
China that it could get, yes, the rare earths, the
critical minerals exported to other countries if the US isn't
able to buy them. I guess what I'm saying is
how sure they are in their ability to pivot to
other markets if the US is no longer what it
has been.
Speaker 8 (18:18):
So they demonstrated, I think that everybody is desperate for
Chinese rare arts. And if you remember what they did
was briefly they said export controls on more or less everyone,
so that they could prevent us from transshipping those rare
ets right into the US the way. You know, obviously
China takes advantage of transhipment. So I think I don't
know if that's really the big concern, because there's such
(18:39):
desperation given the chokehold that they have as a sole
supplier really of most of these things, including some really
critical things like samarium, which you need for weapons development,
and how dependent we are on that and by the way,
they are not letting that out human.
Speaker 1 (18:51):
I also wonder, you know, if some great deal happens
between the US and China, after you know, the delays
are done, you know, we'll Latin America as a whole
or specific countries be like, okay, missed opportunity. You know,
we're out because we understand the importance of that US
China relationship, and especially if they if China gets better
(19:12):
terms in terms of tariffs.
Speaker 9 (19:13):
Finally, what do you mean we're out?
Speaker 3 (19:16):
Sorry?
Speaker 1 (19:17):
Well, meaning that they won't necessarily have such an open
door perhaps or the conversation lines you know, between China
and Latin America might go away if ultimately the US
trade deal and tariff deal that they come together with
China is not as onerous as maybe has been put
out before that ultimately US and China come to terms
(19:38):
that are good for both sides. So does that China
kind of back off again from Latin America.
Speaker 9 (19:44):
Yeah, in a way, I think that China is very
present in Latin America if you think of it outside Mexico,
who exports eighty percent of its schoods towards the US.
China is the main markets or most of the are bigger,
biggest economies, including Brazil, Argentina and tile Peru. And so
(20:08):
I don't think that Latin America can choose between the
US and China. For Latin America, the best would be
not to have to choose, and for a while it
cultivated positive pragmatic relationships with both with both markets that
are important not only in terms of trade, but also
in terms of financing and in terms of tourism. Both
(20:30):
both markets are critical to region in different respects depending
on the country. If having to choose, a lot of
countries would not we try to push back a lot
not to be not to have to choose. They would
continue to trade with China, they would continue to have
financial ties, and they would like try to push back
(20:51):
on this on this on the US because China is
now almost as important or more important for many of
these countries as the US is.
Speaker 8 (21:00):
Any last thoughts just real quickly, well, look, China's going
to be a big player, which is why I think
when Secretary Rubio took over. His big focus initially was
supposed to be to push back on China right here
in the Western hemisphere. That feels like years ago at
this point, but it's an important objective, I think.
Speaker 3 (21:16):
All right, So appreciate both of you.
Speaker 1 (21:18):
Shazad Kazi, Chief Operating Officer Maaging Director of China bagebook
right here in studio and then out there at our
Buenos Aires bureau for Bloomberg News him and a Suniga
geoeconomic analyst for Latin America.
Speaker 2 (21:32):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern on Apple car
Play and the 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 3 (21:49):
Well, he holds one of the most.
Speaker 1 (21:50):
Important jobs in the Trump administration. Is off and out
about talking about the president's policies. Another individual who hails
from the world of financial markets before taking the job
in Washington. We are talking about US Treasury Secretary Scott Besson,
who is the subject of the latest issue of Bloomberg BusinessWeek.
It's the cover story it's on the Bloomberg Two, at
Bloomberg dot com, Slash BusinessWeek, and on newsstands. He talked,
(22:13):
we're talking about mister Bessett, the two key members of
our Bloomberg team about tariff's deficits and President Trump's economic
plan with us as Bloomberg News US Treasury Reporter Dan
Flatley out there in our DC bureau and Bloomberg New
Economy reporter editorial director and Bloomberg business Week Getthered at Large,
Eric Shaftsker, Eric here in our studio. Eric, I want
to start with you deep dive, so much detailed, pretty incredible.
(22:37):
Your first impression of actually sitting down and talking with
the Treasury Secretary.
Speaker 10 (22:42):
Oh boy, Well, I've had the good fortune of seeing
him a couple of times since he became the Treasury Secretary.
I would say, more than anything else, and I'm curious
to know if Dan feels the same way that he
was remarkably at ease. This is someone and that it
truly is a point worth making, because this is somebody
who came from a totally different background, who had no
(23:04):
experience in Washington, who knew nothing about how to navigate
political waters, and yet only seven months into the job.
He's sitting there at the Treasury Department feeling like or
at least exuding an aura of calm and control in
a way that wasn't a foregone conclusion. If you had
(23:25):
the background that he had, you ran a small, relatively
small hedge fund, certainly not that many people at the most.
Over the course of his career, he probably oversaw three
hundred people at Soros Fund Management when he was the
chief Investment Officer twenty eleven to twenty fifteen. Here he's
got a department of one hundred thousand people, and as
we explain in this story, it is the department of everything.
He is responsible not just for the things that Treasury
(23:48):
is typically responsible for, but so many other things as well,
including trade negotiations, acting IRS commissioner, shepherding the one big
beautiful bill through Congress. You name, it's on his plate.
Speaker 4 (24:00):
Dan, I'm curious if you want to respond to that
sort of how you found the treasuresector, But also I'm
interested in how he sees his role, yes within the department,
but in the administration as well, that the president has
a varied economic team, folks from different backgrounds. He's taking
advice from from all of them. What's the role of
Treasury sectory Scott Besson in, Yes, advising the president, but
(24:21):
setting his economic agenda as well.
Speaker 7 (24:25):
Yeah, you know, it's it's a great question, and I
agree with Eric. You know, he definitely seemed at ease
when we were speaking with him. And one of the
things that I noticed he goes on TV a lot,
and he's very careful sometimes about what he says on TV.
Occasionally he gets himself into some trouble with some of
his public remarks, including on TV. But he was much
(24:47):
more at ease, much more relaxed. One of the things
that I said to him was, you know, you must
you must feel very well prepared for your role in
terms of macroeconomic policy and and and that aspect of it,
given your background. But what about the political dimension? And
he sort of gestured over to this table that he
had set up in his office with a white tablecloth
that he said he brought from home where he brings
(25:10):
in members of Congress to have lunch or breakfast with him.
And he said, that's one of the things that he's
been trying to work on, is congressional relations. And that's
something that came into play with Steve Mnusian when he
was Treasury Secretary with the pandemic, where he really needed
to rely on Democrats to get a lot of those
(25:30):
sort of stimulus bills through, and Bessett hasn't had to
do that yet because Republicans have control of both houses
of Congress and there hasn't been a crisis of that
level certainly during his time in office. But he may
need to rely on on some Democrats at some point
in the future. And so he mentioned that he has
members of both parties there with him at times, So
(25:54):
I think that was interesting. And then you know how
he sees his role. I think, you know, he told
us he gives a president options and outcomes, and he
also helps manage the narrative, which is I think one
of the things that's very interesting to observe. How he
does go out a lot, a lot more than some
other secretaries in the past and talks about what the
president is trying to do. And I think markets seem
(26:16):
to like that. Whether he can keep that up over
the course of his tenure, we'll see, but that seems
to be a big part of his role right now.
Speaker 1 (26:24):
Well, you know, it's something that you made reference to
about how comfortable he was, because it's something that David
and I both kind of seized on, like in reading
your story about when he's on air, Eric, it is
very halting his speech, and you've got none of that no,
when you guys sat with him. So it makes me wonder,
is he just being so careful because he knows the
(26:45):
president's watching?
Speaker 10 (26:46):
Well, he's being careful, I would say, for a couple
of reasons, yes, maybe three reasons. Yes, he knows the
president's watching. Yes, he doesn't have a lot of time
in which to make those remarks. We give him plenty
of airtime and others do as well, but it's not
as much time as Dan and I had. It's not
as free flowing a conversation. It tends to be a
conversation that's much more responsive to or concerning news and
(27:11):
something that may have happened ten minutes ago or where
the markets are trading right now. Dan and I had
a relatively unique opportunity to talk to the present, to
talk to excuse me, to the Treasury secretary without any
of those pressures on his mind, and so he was
able to express himself much more in a sense, in
his own words, the way he would express himself if
(27:32):
he were having a conversation, I hesitate to say, with
a friend, but not under the glare of the television
lights and a rat tat tat interview that you typically
get when you're certainly being questioned by multiple parties.
Speaker 4 (27:45):
You take us through his childhood in South Carolina, born
of this family that's been there for a very long time,
his centuries nicknamed by the Secret Services Swampbox after Francis Marion,
the American General. I'm curious sort of if you could
you tell us a bit more about his back in finance, because,
as you both mentioned, Wall Street seems to have warmed him.
They seem as kind of a bultwork against some of
(28:05):
the president's worst impulses. Perhaps was how did he make
a name for himself on Wall Street? What's his specialty?
Was it in currencies? Was it in macro? Beacro? How
is he known on Wall Street?
Speaker 7 (28:15):
For this?
Speaker 10 (28:16):
It's important first of all to say that it's in macro.
He was a macro fund manager, which means he translates
his view of global economics into bets on bonds, currencies, commodities, equities,
whatever the case may be. A lot of it relative
value bets among different currencies, that kind of thing. That's
what he specialized in. That's what he learned at the
(28:37):
knee of both George Soros and Stan Ruckenmiller. Stan Druckenmiller,
for all of the fame George Soros has earned, Stan
Druckenmiller his chief investment officer at Quantum May and at
Soros Fund Management, maybe the greatest investor in modern history
is a man who, you know, whether he was managing
other people's money or managing his own money, has never
had a down year. That, as much as anything, is
(28:59):
what made Scott Besson famous. He was the understudy to
the mentee of Stan Druckenmeller, and of course he ran
two firms of his own, best in capital First he
then went back to Soros Fund Management as the chief
investment officer overseeing George Soros's twenty five billion dollar portfolio,
and then in twenty late twenty fifteen early twenty sixteen
(29:20):
he started Key Square Group, which is where he was
until effectively he became the Treasury nominee. It's a peculiar
place to have come from in finance. It does prepare
him in a unique way. For the demands of the
Treasury Secretary's job, because he thought about global markets and
the interrelationship between policy and market response in a way
(29:44):
that say, along short equity fund manager never has to,
and so that is an important thing to recognize about
his background. It would have been Stephen Minuchin, for example,
came from a very different tradition. He was a little
bit more of an He was special in operations when
he was at Golden Sachs, and then when he started
his own investing operation, he was more of an opportunist,
(30:09):
spent more of his time on credit, as you may remember,
took over Indiemac, you know when that bank failed after
the financial crisis, financed Hollywood films, a very different kind
of a mindset. He had his own views, of course
about how to be the Treasury Secretary, but he didn't
have the background and the immersion in global markets and
(30:31):
world affairs that best and has had his entire career.
Speaker 1 (30:34):
We're talking with Eric Schaftsker, editorial director for Bloomberg New Economy,
also editor at large for Bloomberg BusinessWeek here and studio,
and Dan Flatley out there in our Washington DC Bureau.
Dan as US Treasury reporter for Bloomberg News. So it
kind of begs, and you guys write this in the
story that he was a private guy. So I'm curious, Dan,
does he like the job, does he feel conflicted in
(30:55):
terms of the president's policies.
Speaker 3 (30:57):
Or that's not his job.
Speaker 1 (30:59):
It's just to maybe layout scenarios for the president.
Speaker 9 (31:03):
Yeah.
Speaker 7 (31:03):
No, it's a great question. I mean on the privacy point.
You know, it's very interesting because he sort of mentioned
to us this sort of old line about, you know,
a gentleman should never should only have his name in
the paper three times when he's born, when he gets married,
and when he dies, and so he's.
Speaker 3 (31:20):
Such a southern old gentleman. But go ahead, go ahead.
Speaker 7 (31:23):
Yeah, I mean, it's you know, but it was very
interesting because it was very apparent, I think to us,
and I think Eric would agree with me that that's
sort of how he lived his life up to the
point where he decided, Hey, I'm going to make a
play for being Donald Trump's Treasury secretary. And it didn't
happen overnight. You know, he told us that he got
interested in the Trump campaign in twenty sixteen. He thought
(31:48):
about potentially raising his hand for a position in the
first Trump administration, but was conflicted because he had just
started his own hedge fund, Key Square Group, and he
was very cautious about, you know, wanting to be seen
as overly political, although he did give a million dollars
to Trump's first inauguration, which he said he sort of
(32:08):
smoothed over with the clients by saying it was the
people's inauguration. But over time he got more and more
interested in politics, and he sort of took us through
his journey, so to speak, and some of the things
that he saw that he was concerned about. Of course,
he made mention of the Biden administration's policies, but he
also talked about the idea that people don't trust either
(32:30):
political party anymore and that he sees himself as playing
a role, you know, smaller than the president's of course,
but still a significant role in terms of trying to
shore up the system, so to speak. And again, like
I said before, it's an active experiment. Whether it works
at the end of the day is an open question.
Speaker 3 (32:50):
All right.
Speaker 1 (32:50):
I wish we had another twenty minutes to go, but
I highly recommend everybody check out the story. Eric Dan,
You guys, rock Eric Schatzger and Dan Sally so appreciate.
This is the cover of the new issue of Bloomberg
Business Week. You can find it too on the Bloomberg
and at Bloomberg dot com.
Speaker 2 (33:05):
This is the Bloomberg BusinessWeek 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
(33:25):
and always on the Bloomberg terminal.
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Tim Stenovec
Carol Massar
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