July 23, 2025 • 45 mins
- Scott Bessent, Treasury Secretary of the United States
- Howard Lutnick, Commerce Secretary of the United States
- Jack Caffrey, Portfolio Manager at JPMorgan
- Jill Ford, Co-Head: Equity Capital Markets at Wells Fargo
Scott Bessent, Treasury Secretary of the United States, joins to discuss President Trump's economic priorities and the future of Fed Chair Jay Powell. Howard Lutnick, Commerce Secretary of the United States, discusses reaching a trade deal with Japan and progress on trade deals ahead of the August 1 deadline. Jack Caffrey, Portfolio Manager at JPMorgan, offers his equity outlook as tariff and trade clarity come into focus. Jill Ford, Co-Head: Equity Capital Markets at Wells Fargo, talks deal making and business health across the US.
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App.
Speaker 3 (00:36):
I'm joined by the US Treasury Secretary Scott Bessett this
morning on the heels of this agreement the President announced
last night last week, you joined me, John and Lisa,
and you said you were going to Japan.
Speaker 4 (00:47):
For the World Expert, wasn't really going to be focused
on trade.
Speaker 5 (00:50):
You came back.
Speaker 4 (00:51):
The President had a seventy five minute meeting as well
last night with the trade negotiator. You were in the room,
and he got this deal with you alongside him over
the finish line. And even though the reporting at Washington
that actually the discussions with Japan were quite difficult, what
changed in the last twenty four hours.
Speaker 6 (01:08):
Look, Anne Marie, we had some discussions about the overall
US Japan relationship, which was one of the strongest in
the world when I was in Tokyo and Osaka, and
then we got back.
Speaker 7 (01:21):
There are elections on Sunday.
Speaker 6 (01:23):
LEDP did slightly better than expected. They don't have a majority.
Japanese government was ready to deal, and as president, only
President Trump could do. He brought the Japanese trade delegation
into the Oval and had a very fulsome negotiation with them,
(01:43):
and I tell you they're tough negotiators for President Trump's tougher.
Speaker 5 (01:47):
Well, there's a.
Speaker 4 (01:48):
Photo circulating on Twitter from Dan Scavino and you actually
see a sharpie x out of some what looks like
preliminary deals for even more concessions with Japan. I want
to ask you about this fifteen percent tariff free. Is
that the new floor now for trading partners when you're
going into these negotiations.
Speaker 6 (02:06):
Well, I think it's very important to note that fifteen
percent for Japan for reciprocal terrorists for autos, that is
a different kind of deal. But because the Japanese proposed
a very innovative solution, we've been working with them for months,
the trade team, myself, Ambassador Greer, Secretary Lutnik, and they
(02:30):
came to US with the idea of a Japan US
partnership where they are going to provide equity, credit guarantees
and funding for major projects.
Speaker 7 (02:41):
In the US.
Speaker 6 (02:43):
So they got the fifteen percent rate because they were
willing to provide this innovative financing mechanism.
Speaker 4 (02:51):
There's a lot of Japanese FDI into the United States already.
Speaker 5 (02:55):
Is this new capital?
Speaker 7 (02:56):
Oh no, this is all new capital.
Speaker 6 (02:58):
This is all new capital, and it is going to
be targeted at the strategic industries. The President Trump and
this administration believe that we have to de risk on
During COVID, we saw our vulnerabilities, whether it was in
medicine semiconductors. So we are going all in over the
(03:19):
next few years to de risk our supply chains and
this deal, thanks to President Trump, is going to be
part of that.
Speaker 4 (03:27):
When it comes to the fifteen percent rate on autos,
this means that Toyota is basically paying a cheaper rate
than say GM if they have inputs from other countries.
Still they're still at the twenty five percent auto rate.
Do you see the auto rate leveling out to something
lower than twenty five percent.
Speaker 7 (03:44):
We'll have to see.
Speaker 6 (03:46):
And again those are just GM components. There's also the
US NCA, the portion of any autos assembled in the US,
and then of course GM and especially Ford. I think
Ford has the largest US production. You're building in the US,
there are no.
Speaker 4 (04:04):
Tariffs, so when it comes to what's next, we know
the EU negotiators are in town. This fifteen percent rate
feels like potentially a floor.
Speaker 5 (04:14):
Could anyone get below fifteen percent?
Speaker 4 (04:16):
Is the European Union still trying for ten percent minimum
baseline tariff?
Speaker 7 (04:20):
Well?
Speaker 6 (04:20):
Again, the fifteen percent is a result of this very
innovative package that the Japanese came with and your President
Trump being able to push them to do even more so.
Speaker 5 (04:33):
Has Russels come up with anything innovative?
Speaker 6 (04:36):
Not yet, But again, talks are going better than they
had been. I think that we are making good progress
with the EU. But as I've said before, Emory and
the EU has a collective action problem twenty seven countries.
Great thing about dealing with the Japanese. I've been going
to Japan since nineteen ninety. I think this weekend my
(05:00):
fifty second trip, and the Japanese government moves of one entity.
They're highly organized across all level of government.
Speaker 4 (05:08):
So you say that talks are going better, we just
have a story hitting the terminal this morning from our
colleagues in Europe that the European Union is readying one
hundred billion dollars euros. If there is no deal in place,
they will impose thirty percent tariffs on those one hundred
billion euros worth of goods.
Speaker 5 (05:25):
Do you think we're going to get to that place.
Speaker 6 (05:27):
I think it's a negotiating tactic and it's what I
would do if I were in their place. But Amory,
remember we are the deficit nation. They're the surplus nations,
so any kind of a escalation in trade problems will
always hit them worse.
Speaker 4 (05:44):
I want to also talk about what's going on with China.
You're going to Stockholm Monday Tuesday to meet with your
Chinese counterparts. Are we going to continuously see the discussions
revolve around where Earth's and export controls or they're going
to be other items on the table.
Speaker 7 (05:59):
I think we're in.
Speaker 6 (06:00):
A very good place with China now and we can
start moving on to bigger discussions. As I've said many times,
there is a potential for a big, beautiful rebalancing between
the US and China. President Trump is committed to bringing
back precision manufacturing to the US and as we become
(06:22):
more of a manufacturing economy, China is highly imbalanced. They
account for thirty percent of all the manufacturing output in
the world. That's not sustainable. We believe they should become
more of a consumption economy. If they are willing to
go down that route, then we could actually do it together.
(06:42):
And then there are lots of other things we can
talk about, whether it's them buying sanctioned Russian or Iranian oil,
a number of security things, and so a purchasing agreement.
Speaker 4 (06:57):
From Trump's first administration, he had to deal with China
on the Phase one purchasing agreement on agriculture.
Speaker 6 (07:03):
Well, again, that's another way that we could bring this
in balance relationship into balance. So we will be talking
about purchasing agreements, especially ag and to refresh everyone's memory,
we had the purchase agreements. Chinese lived up to the
purchase agreements during President Trump's final year in office, and
(07:28):
then the Biden administration didn't enforce those purchase agreements. So
we're going to let bygones be bygones. We're going to
look forward, and I think we can come up with
some very interesting purchasing agreements. As you know, President Trump
is committed to the American farmers.
Speaker 4 (07:45):
Well, looking forward, you told me John and Lisa last week.
The market doesn't need to worry about August twelfth. That's
the deadline for this current dayton between Washington and Beijing.
Speaker 5 (07:55):
What's the new deadline going to be?
Speaker 6 (07:57):
Well again, I think that we could roll it forward,
maybe in a ninety day increment. And I think the
good news here is that we are back on track
with the Chinese negotiations. On April second, President Trump told countries,
(08:19):
here's your reciprocal rate. But that was the ceiling if
you do not escalate. If you don't escalate, this is
the max. The Chinese chose to escalate. But now we
both sides have de escalated, and I think we can
get into a very good cadence of regular meetings with them.
And look, we're the two largest economies in the world.
(08:40):
We do not want to decouple with the Chinese. We
just need to de risk part of our supply chain.
Speaker 4 (08:46):
Does regular incremental meetings include a meeting between President Trump
and Shijiping this fall.
Speaker 6 (08:52):
I do know that a party chair she has invited
President Trump to visit China. I don't know. I don't
have dates on that. I don't know if the President's accepted.
I know they have a fantastic relationship on a personal level,
which I think forms the basis of everything between the
US and China.
Speaker 4 (09:12):
Local reports in China, we're talking about the two meeting
on the sidelines of the APAX summit in South Korea
this fall at the end of October early November, or
maybe President Trump going to China first. Could we see
a meeting that soon? You think a meeting within this
year can happen.
Speaker 6 (09:27):
Again, I'm not privy to the President's travel schedule beyond September,
so we'll see.
Speaker 4 (09:33):
Nothing before a meeting with Chighing paid before September.
Speaker 7 (09:36):
Nothing before Labor Day.
Speaker 4 (09:37):
So in the last week, I do want to go
through something that's going on with China. They've imposed exit
bands on a Wells Fargo banker, a commerce department employee,
and according to Microsoft, they hacked into their software. Will
you address these actions at the talks in Stockholm.
Speaker 6 (09:52):
We're going to address a whole host of things, and
you know, obviously things like that will be on the
agenda with my Chinese counterpart.
Speaker 4 (10:03):
You had said to me last week that the Nvidia
H twenty chip was potentially a chip in negotiations, a
mosaic part of the deal. Do you think China is
doing this for leverage at the trade table?
Speaker 6 (10:15):
Absolutely not, absolutely not, because again, the H twenty, while
it is an advanced chip, is not one of the
most advanced chip. I think if we were to think
about the Nvidia stack, the HP would be something fourth
fifth down the stack. And my understanding is that Huawei
(10:40):
can produce something with similar advocacy.
Speaker 4 (10:43):
China's malicious behavior, even just in the past week, even
targeting a commerce department employee, do you think they're doing
this to have leverage with the United States?
Speaker 6 (10:53):
Well, I can tell you in Stockholm it's not going
to give them any leverage with me. And it's a big,
sprawling bureaucracy, and sometimes I think we may see the
arrests may have been in a province, the central government
may not be aware of it. So you know, I
would highly doubt that something at that level they have
(11:18):
wanted to engage with the US. We are engaging with
them and I think both sides want to move forward
in a productive way.
Speaker 5 (11:26):
But you'll raise these issues.
Speaker 4 (11:28):
Yes, So now that the administration is getting trade deals
across the finish line Japan, Indonesia, Philippines yesterday, you say
the European Union potentially in sight.
Speaker 5 (11:37):
Do you think the Federal.
Speaker 4 (11:39):
Reserve is going to have enough clarity by September to
cut interest rates?
Speaker 6 (11:43):
Again, I'm not really sure what the Federal Reserve is
looking at because thus far, we have not seen, or
we've seen very little, if any price pressures from the tariffs,
and if we were to see, those wouldn't be inflationary,
be a one time price adjustment. So again, I think
(12:05):
that their analysis of tariffs is a bit off.
Speaker 5 (12:10):
Well.
Speaker 4 (12:10):
Governor Waller made this exact case to us on surveillance
on Friday, and it sounds like he might dissent at
this meeting. He also said the President hasn't called him yet.
He's one of these names that are circulating around. Could
he replace FED chair J Powell? Is he a name
you're looking at? Have you reached out to him?
Speaker 6 (12:29):
I think there are a lot of strong candidates, including
several who are on the main board and perhaps regional
bank presidents.
Speaker 4 (12:38):
So are there other names outside of Kevin Hassett, Kevin Walsh,
Christopher Waller and you yourself has been circulating.
Speaker 6 (12:46):
There's a long list, and like I said, there's some
great candidates.
Speaker 4 (12:51):
And have you reached out to everyone on both those lists.
Speaker 6 (12:54):
I'm not going to talk about the process, but we
are getting the process underway. Obviously it's going to be
President Trump's decision and we're not in a rush.
Speaker 5 (13:06):
So oh, you're not in a rush.
Speaker 4 (13:07):
But the President continuously says he wants to get rid
of the FED chair J Powell. Mahmade Larian yesterday said
he should resign.
Speaker 5 (13:14):
Do you think J. Powell should step down to protect
the institution?
Speaker 7 (13:19):
Couple of things.
Speaker 6 (13:20):
One, the President said he is not going to fire
Chair Palell. I was somewhat surprised that Muhammad al Arian
came out and said that. And what I've come out
and said is that I believe that it would do
Chair Palell a favor, and he would be doing the
institution of favor if he did an internal review. Separate
(13:45):
monetary policy from everything else. And this is something that
Larry Summers and I agree on, is this mission creep
from the FED is endangering their independence of monetary policy.
So all these other things they're engaging in could threaten
monetary policy. So it is a big, sprawling institution. The
(14:09):
central budget for the Board is up four x since
two thousand and four, and every institution needs to examine themselves.
Speaker 5 (14:21):
But you want the.
Speaker 4 (14:21):
Man that you guys don't think is doing a good
job to run that review.
Speaker 7 (14:26):
What's up?
Speaker 4 (14:27):
You want the man J Powell, which you and a
president don't think is doing a very good.
Speaker 5 (14:31):
Job to run the review of the institution.
Speaker 6 (14:33):
Well, I think that it could be a committee, it
could be a group. They could invite outside experts. In
the Bank of England after the twenty twenty two rape hike,
Shock went back and did a very good examination of
(14:55):
what went wrong with monetary policy that brought in outside experts.
You know, I think an internal review would be a
good start, and if the internal review didn't look like
it was serious, then maybe they could be an external review.
Speaker 4 (15:09):
Have you communicated this directly with J Powell? Do you
guys continuously have your once a week breakfast lunches either
at the Fed or the Treasury.
Speaker 6 (15:19):
I gave a speech on Monday night on Bank deregulation,
bank regulation, the future of regulation, which is, aside from
monetary policy, I think the most important thing for the economy.
The FED is one of three regulators. There's the FED,
the Office of Control of the Currency which sits under Treasury,
and the FDIC. And I believe that all three of
(15:45):
those should have important voices. And I believe that the
regulation has been much too stringent. Since the Great Financial Crisis,
we are seeing this big build up outside the regulated
financial system. I think I saw something two days ago.
The private credit is up ten XM not saying it's
a financial stability problem, but I am saying that there's
(16:09):
a regulatory arbitrage going on. But that was a long
way of saying I saw a chair pale at that speech.
Speaker 4 (16:16):
And your lunches in breakfast continue always, so you have
a good relationship with him.
Speaker 5 (16:20):
At the moment, we.
Speaker 7 (16:21):
Have continuing communication.
Speaker 4 (16:23):
Last time you were on, you also talked about the
potential next FED chair. You said his or her nomination
is Governor Bowman also in the running.
Speaker 7 (16:32):
Again I'm not going to name names, but.
Speaker 6 (16:36):
There are good candidates. As I said on the board
at their several female regional bank presidents and then there
are some fantastic women outside the FED.
Speaker 4 (16:49):
There's also Governor Kugler's chair that is open in January.
Speaker 5 (16:55):
Have you started that process.
Speaker 6 (16:58):
It's a simultaneous process. The Coogler chair is a fourteen
year seat, so we'll be looking at that also. And again,
I think we have some very good candidates.
Speaker 5 (17:12):
Given you just saw J. Powell.
Speaker 4 (17:14):
Has he yet to tell you whether or not he
is going to leave the board his governor seat by
before twenty twenty eight?
Speaker 6 (17:23):
He hasn't yet. My belief is that he will, and
I think that it would be very good for the
institution for him to do it, and I think it'd
be very good for him personally to do it.
Speaker 4 (17:33):
The President once said that he goes out and rile's
financial markets and then he sends you his Treasury secretary
out to calm things. Things are pretty calm today. But
when it comes to the FED chair, I know you
love college basketball, and you talk about the president being
Bobby Knight, and I know you love Dean Smith. Are
you guys playing this good cop bad cop when it
(17:54):
comes to talking about the FED talking about J.
Speaker 5 (17:57):
Powell?
Speaker 7 (17:58):
Not at all, Marie.
Speaker 6 (18:00):
The reason I think that I'm to the extent I'm
able to calm the markets, and that doesn't always happen.
I was in the investment business for thirty five forty years.
But I think more importantly than that, I understand what
President Trump is doing, and a lot of times he's
one to three steps ahead of the market. And as
(18:24):
you know better than anyone, the market wants instant explanations.
They want they want clarity, they want immediate gratification. So
I think that I am able to as a former practitioner,
I think about when President Trump tells me what his
goals are, I think about what is the best way
(18:46):
for me to give good framing to market participants for
them to understand what he's doing. Because he always has
a plan, it's not always obvious.
Speaker 4 (18:58):
So you are communityating almost the strategic ambiguity that he
likes to operate from well.
Speaker 6 (19:06):
And I'm also trying to explain that there is a
plan because look, these letters went out, everyone was, oh
my gosh, these are high rates, and I think the
president created maximum negotiating leverage, and the market actually took
(19:27):
it pretty well, took it pretty well.
Speaker 4 (19:30):
Just to finish on that final point, then, do you
think he's more in boldened to go for higher rates
with trading partners. Now, given the market is not pushing back.
Speaker 6 (19:39):
Well, I think he's created a lot of leverage because
he's created an ab situation. He is able to go
to the trading partners and say, look, I am happy
to take in this tariff income if you don't want
to negotiate.
Speaker 7 (19:55):
This is a high rate.
Speaker 6 (19:57):
But the US is taking a massive amount tariff income.
We had the first June budget surplus since twenty fifteen
last month. We reported it this month, and so we
are taking in substantial income. So President Trump is creating
(20:17):
this leverage by saying, if you don't want to negotiate
with me, I've sent you a letter with a high rate.
You have at the high rate, or come and negotiate
in better fashion. Because I'll tell you what was fascinating
for me, and this was President Trump at his best.
At his best was the Indonesians came with what I
(20:38):
thought was a very good offer out of the Blox.
President Trump kept pushing them. He raised the reciprocal rate
when he sent them the letter, and five iterations later,
the Indonesian trade deal was greatly improved, turned into a
great deal for both Sides.
Speaker 5 (20:58):
Secretary Scott Besson, Thank you so much for your time
this morning.
Speaker 2 (21:11):
Jill Ford, co head of equity capital Markets for wels Fonco,
expects activity to pick up in the second half of
twenty twenty five.
Speaker 8 (21:17):
Joe joins us now for more joke and morning. Good morning.
Market's wide open. Is it healthy?
Speaker 2 (21:21):
Is the kind of activity that you're across right now
what you would describe as healthy?
Speaker 9 (21:26):
Well, I would say, you know, IPO volumes have certainly
been lackluster for the first six months of this year,
particularly contrasted versus all the expectations post the election late
last year. We are starting to see signs of life
within the equity capital markets, and particularly with IPOs. They
are pricing well, they're trading well, buyers are making money.
They're looking outwards now as we get more clarity with
(21:49):
these with these tariff deals, they're looking for new ideas
as opposed to hunkering down and trading what they know,
and that's really really healthy for the IPO market.
Speaker 5 (21:58):
So I'm optimistic.
Speaker 9 (21:59):
There are lots of IPOs coming. Many IBOs came in June,
there are many more coming in July, and the fall
is looking pretty good as well.
Speaker 2 (22:07):
The typical lifespan of a company is obviously shifted. They're
staying private for a whole lot longer. Can you describe
to us as to why why they're not going public?
Are they push factors or pull factors? You just see
people sucked into private markets and stank there because the
options available to them are so good.
Speaker 9 (22:21):
You know, a lot of it is driven by the
companies that own them, the private equity sponsors. They are
very unemotional about when they sell things. They want to
sell at full value. They want to realize the full
value that they that they deserve for their assets. And
when IPO markets have larger than normal IPO discounts, they're
going to sit back and say, what are my other options?
(22:42):
And there's lots of options for treading water. I can
give you a whole list of ways that private equity
firms have decided to keep their companies private longer. The
flip side is when they do come out, they're more mature.
They have acted almost like a private company for longer.
The management teams have become accustomed to managing expenses, not
(23:03):
growth for growth sake. So you're getting a higher quality
company that is coming out.
Speaker 1 (23:07):
It also indicates that they see the market is frothy
enough to handle some of the potential valuations that they
would like to see for those exits that they might
not be getting in previous markets. The market's been opened
a long time, it's just not at the price that
they want. And I wonder if it tells you something
about where we are in markets that a lot of
companies are starting to say, Okay, if we're not going
to pull the trigger now, i'm not sure when we can.
Speaker 9 (23:27):
You know two things at play here. The first one
is the IPO market as a cohort for twenty twenty
five is up close to fifty percent. Now, there's a
couple of high flyers in there that are driving it higher,
but versus the average fifteen percent pop, that's really meaningful
for people's portfolios. The second thing that's going on is
that people are starting to realize the queue is getting
(23:50):
so large we couldn't cycle through it in a single year.
You know, the IPO backlog right now is about two
hundred companies or so that have filed. Confidently, there's probably
another two to three hundred companies beyond that or IPO
worthy who have not yet gone through that process. So
if you take an average IPO year of call it
(24:10):
seventy five to one hundred IPOs, you're looking at several
years to try to clear this queue. Do you want
to be in the front of the queue or do
you want to be in the.
Speaker 1 (24:17):
Back of We keep hearing this, the idea of the
backlog building and the idea of the pipeline is full.
It's just a matter of what you're going to pull
the trigger. And I wonder if the tariff levels that
we've gotten overnight are enough enough certainty, especially when paired
with the legislative certainty that we've seen in Washington, d
C for a lot more companies to pull the trigger.
Speaker 9 (24:35):
Well, I do think that IPOs love boring, right.
Speaker 5 (24:38):
They don't want volatility.
Speaker 9 (24:39):
They're out for seven to eight days of market exposure.
And the great news is that over the last few
months we've started to see the market shrug off a
lot of that newsflow right, And so with continued clarity
on tariffs, A, we've got a calmer market hopefully, But
b CEOs and CFOs are going to be able to
forecast their business more accurate.
Speaker 5 (25:00):
If you can't forecast.
Speaker 9 (25:01):
Your business because of tariffs here, there, and everywhere in
your supply chain, you're really going to struggle to give
people comfort to come into a new and eam. So
those two things are at play and we're starting, hopefully
to be on the road to more clarity around that.
Speaker 2 (25:15):
Joe, could we finish on the resilience of corporate America?
This has been an ongoing theme now for the last
several months. You talked about the big batslhard and battle
tested once they became public companies. Can you reflect on
your experience of just how resilient corporate America actually is.
The ability to borrow a frase from my good friends Tik,
to adapt and to adjust.
Speaker 9 (25:34):
No question twenty twenty one. We obviously saw a lot
of nonsense go on and a bit of a bubble
and then very very little activity in the years following.
I think companies have had to learn to be much
more prudent, conservative, to manage not just growth, but to
manage margins if they're not profitable, to have a bridge
towards near term profitability, and overall that's created a really
(25:57):
healthy backdrop.
Speaker 7 (25:58):
You know.
Speaker 9 (25:58):
The other thing to focus in on is the health
of the consumer. Right if your consumer's not healthy. It's
now the right time to be going public. As the
consumer also appears to be very resilient. We're seeing those
corporations that are have them as customers become even more
resilient and healthy. And so we're optimistic through the the
(26:19):
second half of twenty twenty five and certainly well into
twenty twenty six. As it released to IPO volumes.
Speaker 8 (26:24):
Joe, this was great. It's going to catch up. Thanks
for the update.
Speaker 2 (26:26):
Joe full Dent of Wells Fonco's if you were more
Street this morning, Jack Caffrey of JP Morgan Rights and
the Rally suggests traders are expecting another positive quarter of
earnings and sales upside against full costs.
Speaker 8 (26:46):
Jack joins us now for more. Jack and Mornick, good morning.
How low is the bar.
Speaker 7 (26:51):
It?
Speaker 10 (26:52):
You know, as you were talking right before you cut
to me, it's very almost stock specific. I mean, earlier
this week we heard from you know, a semiconductor company
that sells to the auto industry. They were down six percent.
Last night we heard the update from Texas Instruments. Good numbers,
weak guidance. They're down nine percent. This morning. Doesn't feel
like it's supposed to be shocking after what we'd heard
(27:13):
earlier in the week, And at the same time you're
seeing names but the average companies up one percent the
day after their report. So on the whole things are
quite nice. But the fact is there are a lot
of potholes and seeming land mines that people are still
stepping on as we work our way through this. And
I think at some point over the next month, we're
going to be spending more of our time talking less
about twenty twenty five and the very modest expectations for
(27:35):
twenty twenty five and talking about how things accelerate so
dramatically into twenty twenty six that hopeful we get policy
certainty at some point or policy consistency.
Speaker 8 (27:46):
Is that all you want, just consistency.
Speaker 7 (27:48):
I just want to know what the.
Speaker 10 (27:48):
Rules are and then then I think I think ultimately
US companies are exceptional at driving profitability once they understand
what they're going to operate under. If we went back
to the first Trump administration, a lot of focus on
trying to get tax policy and then you created a
trade war within days later, and for the most part,
companies sat on their hands in terms of thinking about
(28:10):
their investment. Today, now we actually have some tax clarity.
That's the good news. Ideally we'll get some trade clarity
that might lead to actually understanding where investments go. But
at the same time, I think I and other investors
thought that perhaps when you looked at where prior budgets
were allocating capital in terms of trying to think about
(28:31):
subsidies and goals, a lot of that's not been thrown
up as you've ripped up parts of the goal of electrication,
say in the One Big Beautiful Bill. So I don't
know if the battery complex of Georgia makes as much sense,
if the ev manufacturing in Tennessee makes quite as much
sense on a go forward basis, if the cost structure
underwriting those investments is as durable as we initially.
Speaker 5 (28:54):
Thought on a broad market basis.
Speaker 1 (28:55):
Have we priced in a certainty before we've gotten it?
Speaker 10 (29:00):
Kind of feels like it when you think about you know,
implied volatility effectively at year lows. If you look at
put buying that's running at sort of year lows, if
you average it not only one day's number, but smooth
that out. If you look at corporate credit spreads again,
you know, at fifty two week lows. So for the
most part, I think risk markets are saying we got this,
(29:23):
and I think that's where things get trickier, especially as
we go into the next month or so when look
coward to the does tend to be a little bit
punkier overall, and people try to go on vacation.
Speaker 1 (29:33):
Right, well, this is sort of by the rumor and
sell the news. And a question about whether you agree
with Julian Emmanuel over at EVERCOREI s I when he
came out earlier and he said he sees the next
seven the next move inequity is to be something like
seven to thirteen percent lower. Do you agree with that?
Speaker 10 (29:47):
Having not read the note, I'm not sure what he
was looking to.
Speaker 1 (29:52):
I think on a theoretical basis, agree with good lower.
Speaker 10 (29:56):
I think I think you know now next CA at
sixty days, I think it's going to be hard to
get a big rally unless you get something truly dramatic
in the way of blowout sorts of news. I think
underpinning that, though you know, we're looking for a mid
teens growth in earnings coming out of the MAC seven,
I think the trick is that the forlorn four ninety
(30:18):
three we're supposed to have earnings growth of like three
or four percent for the course of this year. That
accelerates the twelve percent next year. So actually the momentum
in earnings is shifting away from the mac seven into
the forlorn and I think that speaks to a stable,
growing economy. And ultimately, I think maybe we spend too
much time talking about the economy. Does this look at
(30:39):
the consumer. The consumer continues to work, the consumer continues
to spend, and I think that's really the flywheel that
people really need to pay the most attention to, because
it's set stable consumer spending that's driving the earnings and
cash flow that underpins their transition to AI. You know,
when you think about who the capital spenders are versus
who the capital providers are, it's the consumer keep working
(31:00):
and spending every dollar they get.
Speaker 2 (31:02):
Oh, by Lisa, that's seven percent call at Judy in
seven to fifteen, whatever it was to me. There's a
common theme I think for a lot of the analysts
who are making this call at the moment is that
they want to buy it. So they'll say, like, you know,
I expect the equity markets to have a draw down
and maybe ten percent, but ultimately want to buy. The
dep heard the same thing from Mike Wilson and Morgan
Stanley exactly the same, so the same thing from Goldman Sacks.
(31:22):
They said, we anticipate a less favorable growth inflation mix
in the second half, challenging the Goldilocks scenario. Still neutral
and still moderately positive on stocks over a twelve month
time arise, and I see that on repeat across Wall Street.
Speaker 5 (31:33):
Yeah, how person is it?
Speaker 1 (31:34):
Can you get when ultimately you're talking about a draw
down that's going to be a great opportunity, Please please
sell off so that we can buy it?
Speaker 5 (31:40):
Raises this question.
Speaker 10 (31:41):
I mean, let's remember also that we also have a
FED that's planning to cut. The debate might be do
they cut in July or are they cutting in September?
But the Fed is trying to be our friend. They
are actually moving in a direction that tends to be
risk supportive. And so, you know, having started my having
started as a strategist and having to live by trying
to get the timing right, you know, I appreciate being
(32:03):
a portfolio manager and getting to step a little bit
away from the noise and be like, what's the main thing,
and let's focus on the main thing. The direction remains,
you know, a growing economy, growing earnings and cash getting returned.
Less cash probably gets returned to us as investors going forward.
When you think about the mass of investment demands that
we're starting to try to underwrite, and I think that's
(32:25):
going to make things, you know, perhaps a bit trickier
and where you have to deliver versus you it would
be nice if you delivered and.
Speaker 2 (32:30):
A boss through jacentristrits. As you say, Jack, appreciate your time,
Jack Caffrey, a JP.
Speaker 4 (32:35):
Nolton And with another negotiator that was at that table,
the president last night, Commerce Secretary Howard Lutnik. I want
to pick up on this idea and good morning, thanks
for joining us. I want to pick up this idea
of innovative financing mechanisms and this five hundred and fifty
(32:58):
billion dollar five and the Japanese are going to be
investing into what exactly is that fund going to look like?
Speaker 11 (33:05):
So the Japanese are going to give America the ability
to choose the projects, to side the projects, and execute
the projects. So let's say we want to build generic pharmaceuticals, right,
we don't make antibiotics in America, so the President says,
let's go make antibiotics in America. The Japanese will finance
(33:26):
the project. They will finance the project, and then we'll
give it to an operator whill run it, and the
profits will be split ninety percent to the taxpayers in
the United States of America and ten percent to the Japanese.
So they basically bought down their tower freight by this
commitment of we will back what you, the President want,
(33:47):
and you America want to build in America that are
key to national security concerns, will back that, and therefore
we'll be on your side.
Speaker 4 (33:55):
The Prime Minister Sheiba says, these are loan guarantees.
Speaker 5 (33:58):
Is it more than that. Of course it's more than that.
Speaker 11 (34:01):
It's equity loans and loan guarantees. They have to deliver
the project. So we say, let's build semiconductors. We want
to build one hundred billion dollar worth of semiconductor fabs
is what you call them, because we want to make
those chips in America. The Japanese will finance that whole project.
They've got to put down equity loans.
Speaker 5 (34:22):
Whatever they want to do.
Speaker 11 (34:23):
They have to deliver the hundred billion.
Speaker 4 (34:25):
Or Japanese companies.
Speaker 11 (34:27):
Oh no, no, anybody does it. It's the Japanese or
the financer. They're the banker, they're not the operator. It's
not Japanese companies. So when people get confused, this isn't
like a Japanese company like you know, like Toyota coming
in and building a factory.
Speaker 7 (34:43):
No, that's Toyota.
Speaker 11 (34:44):
This is literally America is saying we want to build
generic pharmaceuticals, semiconductors, critical minerals.
Speaker 2 (34:53):
Here.
Speaker 5 (34:53):
This exists.
Speaker 4 (34:54):
Now, like, what can we think of a model afters That's.
Speaker 11 (34:56):
Why you have someone like me who joins the government.
I mean, this was my the idea in January. So
I started because the Japanese are never going to really
open their market the way Donald Trump wants them to
open it. I mean open it, open it, you know.
So what's happened is they had to come up with
another way to really make it work and the tariff
model work. So I suggested to them a four hundred
(35:19):
billion dollar fund where they would give to the president
and they would give to America the financing to go
build out your whatever you think for national security, go
build it, will back you.
Speaker 7 (35:33):
And that's the model.
Speaker 4 (35:34):
It reports the Prime minister, though maybe resigning. Could this
deal transcend domestic politics in Japan?
Speaker 11 (35:40):
Of course, I mean it's vital. You saw what happened
to their car companies. They were all up more than
ten percent today. So a twenty five percent tariff delivers
what Donald Trump said, build it in America. A fifteen
percent is right on the edge to write on the
edge of the Japanese car manufacturers can still produce in Japan.
(36:01):
And that's what the Japanese wanted to buy. They wanted
to buy that line where they could stay in Japan
for some cars build of course huge amounts here. But
also what they did is they'll invest and give Donald
Trump the tools to invest in America.
Speaker 4 (36:16):
That fifteen percent tariff on autos is huge for Japan.
Do you see the entire auto tariff, that sectoral tariff
coming down from twenty five percent to fifteen percent, Because
for some inputs, this would mean Toyota has a fifteen
percent rate, but GM still has a twenty five percent rate.
Speaker 11 (36:31):
Well, GM doesn't have a twenty five percent rate unless
they build certainly.
Speaker 5 (36:35):
Important South Korea.
Speaker 11 (36:36):
Or well, okay, if you're building, if you're building South Korea,
that's a South Korea thing, and if you're importing from
South Korea, that's a South Korea thing. So Europe is
now paying twenty five percent, South Korea is paying twenty
five percent. The Japanese have bought, if you will, by
giving a huge investment to Donald Trump in America. They
bought the ability to be down to fifteen percent. And
(36:58):
Donald Trump can then really vest in America on the
projects that he thinks are the most important for America.
And we'll see what happens with Europe. We'll see what
happens with South Korea. But right now Donald Trump has
put the pressure on them. Let's be clear, Well, this
is model the pressure on them.
Speaker 5 (37:16):
Is this a model for Brussels?
Speaker 7 (37:18):
It could be.
Speaker 11 (37:18):
I mean, that's up to them to negotiate. Right, are
they willing to open their market? I don't think. I
don't think anybody. Europe's not going to go and give
us a trillion dollars too.
Speaker 4 (37:28):
Well, can they get below fifteen percent?
Speaker 5 (37:30):
Or is fifteen percent now.
Speaker 7 (37:31):
The floor right for autos?
Speaker 5 (37:33):
Would I would know?
Speaker 4 (37:35):
Forcipical tariff for the European.
Speaker 5 (37:37):
Union, I don't think that they're willing to accept.
Speaker 11 (37:40):
I don't think big countries can get low like that,
I think. I think small countries have a possibility of
being low, and that's up to the president to decide.
But larger countries will have a hard time with that.
Speaker 5 (37:51):
They will have a hard time.
Speaker 4 (37:52):
So to be clear, with the European Union right now
and the trade negotiations are in Washington, I know you're
talking to them every single day. The rate floor that
they would have to accept is fifteen percent what Japan accepted.
Speaker 11 (38:03):
I think what everybody in the world has seen is
Donald Trump. So I'm the table center, if you will, right.
I set the table right. I organize things. I structure things.
You know, there was a picture that the President posted
over his shoulder with the big board. That of course
I created the big board and put it there. But
the answer is the negotiator in chief of the United
(38:25):
States of America is sitting behind the desk. You know,
Donald Trump is sitting there created negotiating.
Speaker 4 (38:30):
The also created the board on Liberation Day and we
saw the sky high terrafs.
Speaker 5 (38:34):
You created last night's board.
Speaker 4 (38:35):
I'm trying to understand from you what the European board
is going to look like. So if say this's a
fifteen percent across the board rate. What can the Europeans
be buying that can assuage the concerns of the president.
Speaker 5 (38:47):
Are you talking about LNG purchases?
Speaker 4 (38:49):
Is there agricultural purchases.
Speaker 11 (38:51):
The Europeans have a twenty trillion dollar economy, right, we
have just under thirty trillion, and the Chinese and the
Europeans are similar in size at about twenty trillion dollars.
So if they say to the President, we will open
our market to you like Maro, and I mean really
open it, meaning we will take us cars like think
(39:13):
of what the Japanese did. They said, we will take
us cars based on US standards. So you don't have
to make a different car. You can take the car
you're make in Detroit, put it on a boat, and
send it. If the Europeans will accept that, and they
will accept really really accepting US products in Europe, that's
a giant. That's hundreds of billions of dollars of export
(39:36):
opportunity for Americans. That's going to move the President because
he's going to say that opportunity for Americans is so great.
That's what well we've been We've been talking about it
four months. I mean, holy moly, I can't. I can't tell.
Speaker 4 (39:52):
They're saying they're going to retaliate if they don't get
a deal owns.
Speaker 11 (39:56):
I understand. Then the President wrote them a letter saying,
if you don't get a deal, and we're charging.
Speaker 4 (40:00):
You thirty periating tactics out in public.
Speaker 7 (40:03):
Well, of course it is.
Speaker 11 (40:04):
I mean, Donald Trump writes a letter and says, if
you don't make a deal, it's thirty percent. And the
thing about Donald Trump is he's dead serious. If you
don't make a deal, it's thirty percent. Now that puts
the pressure on them right to say, Okay, that's my alternative.
They want to get a deal done, for sure, they
want to get a deal done. But does Donald Trump
want to get a deal done? How much does he
(40:25):
value the fact that they open their market? Do they
completely open their market, because that's what he's looking for.
I think they will. I think they will really really
open their market, and I mean open it, which is
something the United States of America has never had the
idea that Donald Trump is opening the world's markets for Americans.
The ranchers, the fishermen, right are farmers. I mean, these
(40:49):
are amazing opportunities that no one in the world has
ever seen. We have Stockholm syndrome.
Speaker 7 (40:55):
Right.
Speaker 11 (40:55):
The world has so held us off for so long.
Can't even imagine a world where we can export freely
the way everybody.
Speaker 7 (41:04):
Else exports to us.
Speaker 11 (41:05):
And that world is coming. That's what Donald Trump calls
the Golden Age. That's what it calls. Our ability to
export to the world the way they treat us, we
can now finally treat them.
Speaker 4 (41:16):
You're gonna have to step away from the Europeans though,
potentially for a moment next week, because I believe you're
going to be headed to the Stockholm talks with China. Yes,
So what we saw with China and this administration, Jensen
Wang had a conversation with the president. I imagine you
were there when it comes to the Nvidia H twenty chips.
What did Jensen Wang say to you and the president
that gave him the green light to start selling those
(41:37):
H twenties back into China.
Speaker 11 (41:39):
Well, the H twenties were open during Biden, So Biden said, really, well, they.
Speaker 4 (41:44):
Were developed during Biden because.
Speaker 7 (41:46):
They were so China.
Speaker 11 (41:48):
We were actually sold to China, and then we came
in and we said, whoa, whoa, whoa, that's a pretty
powerful chip. In April, and we held that back and
that was then held back, and now we had the
whole magnet, which is very exciting. We're trying to make
sure that magnets are being delivered to our producers, which
was the deal, and these have export controls on them,
(42:10):
and they'll come off. As the Chinese deliver their magnets,
then the H twenties will come off. But it is
logical since they were free to sell last time, it
seems reasonable that we'll get to me.
Speaker 5 (42:21):
You said they were a powerful chip.
Speaker 4 (42:23):
Are you concerned about national security issues when it comes
to allowing the Chinese now to.
Speaker 5 (42:28):
Get their hands on the H twenty, Well, the.
Speaker 11 (42:31):
H twenty was the third best chip in the world,
and now it's the fourth best, right because the Blackwell
is the best. There's an H two hundred and H
one hundred, so in H twenty is the fourth best chip.
And I think the President has decided that if things
are going well with China that they can buy them.
So I think that decision has been made. We are
putting on the licensing mechanism and we are getting that going.
(42:53):
But the President has decided that the Chinese can buy them.
But that's in a balanced way with the Chinese delivering
on the deal that we made with them, and they're
delivering rare earths to American manufacturers.
Speaker 4 (43:04):
So when you sit across from Chinese counterparts next week,
what do you plan to discuss with them? Is loosening
export controls?
Speaker 5 (43:11):
More export controls on the table.
Speaker 11 (43:13):
I think what we talk about is there's a line
right below the line. We are giant economies. We should
trade with each other. Right, they want to buy our produce,
They want to buy our vegetables, right, they need They
don't grow everything. They don't have the bread basket of
America that we have, so they want to buy those products.
And you know what, there's lots of things that they
(43:33):
make that we want to buy that we want inexpensive
things on our shelves.
Speaker 5 (43:37):
So let's talk below the line.
Speaker 11 (43:39):
Let's open the market better in China and let us
sell more things in China. And then at the line
where we're competitive. You know where is that line? Where
above that line, they're not going to sell us their
hypersonic missiles and we're not selling them our best chips.
Those two things are not happening because they're a competitor.
They are a competitor, and what we're really going to
(44:00):
discuss is where's that line? Are the h twenties above
the line below the line? That's really nuanced and that's discussion.
But of course would we like to buy baby clothes
that are inexpensive? Of course we would figure that makes
perfect sense. So let's open the market down here, right,
We're never opening the market up here, And what do
we discuss?
Speaker 5 (44:21):
We discussed that line.
Speaker 11 (44:22):
Of what's over it and what's under it? But do
we want more of this them selling it to us
and not selling it to them? The president and President
Sheif from China agreed that they would like to do
more business there, So we're going to talk about opening
their market more for things that make sense to open it.
And we're really going to discuss the areas that maybe
we should really be addressing.
Speaker 5 (44:43):
Is that yes or is that no? One area? I
just want to finish on this.
Speaker 4 (44:46):
I'm curious if you're going to address directly because it's
the commerce department and employee of yours is facing an
exit ban right now from China.
Speaker 5 (44:53):
Do any update on this?
Speaker 11 (44:55):
It's unbelievable, right, so he has there was an employee
of Bars He's a Chinese nasal who was working in
the patent office and he went home and he was
arrested and they're holding his passport.
Speaker 7 (45:07):
I mean, it's so.
Speaker 11 (45:07):
I give that to the State Department, and the State
Department deals with that, but it is it is outrageous, baby,
It's just outrageous, baby.
Speaker 4 (45:15):
Secretary Verylatina, thank you so much for your time this morning.
Speaker 2 (45:18):
This is the Bloomberg Surveillance Podcast, bringing you the best
in markets, economics, and geopolitics. You can watch the show
live on Bloomberg TV weekday mornings from six am to
nine am Eastern. Subscribe to the podcast on Apple, Spotify,
or anywhere else you listen, and as always on the
Bloomberg Terminal and the Bloomberg Business out
Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and Amrie Hordern. Join us each day
for insight from the best in markets, economics, and geopolitics
from our global headquarters in New York City. We are
live on Bloomberg Television weekday mornings from six to nine
am Eastern. Subscribe to the podcast on Apple, Spotify or
anywhere else you listen, and as always on the Bloomberg
(00:34):
Terminal and the Bloomberg Business App.
Speaker 3 (00:36):
I'm joined by the US Treasury Secretary Scott Bessett this
morning on the heels of this agreement the President announced
last night last week, you joined me, John and Lisa,
and you said you were going to Japan.
Speaker 4 (00:47):
For the World Expert, wasn't really going to be focused
on trade.
Speaker 5 (00:50):
You came back.
Speaker 4 (00:51):
The President had a seventy five minute meeting as well
last night with the trade negotiator. You were in the room,
and he got this deal with you alongside him over
the finish line. And even though the reporting at Washington
that actually the discussions with Japan were quite difficult, what
changed in the last twenty four hours.
Speaker 6 (01:08):
Look, Anne Marie, we had some discussions about the overall
US Japan relationship, which was one of the strongest in
the world when I was in Tokyo and Osaka, and
then we got back.
Speaker 7 (01:21):
There are elections on Sunday.
Speaker 6 (01:23):
LEDP did slightly better than expected. They don't have a majority.
Japanese government was ready to deal, and as president, only
President Trump could do. He brought the Japanese trade delegation
into the Oval and had a very fulsome negotiation with them,
(01:43):
and I tell you they're tough negotiators for President Trump's tougher.
Speaker 5 (01:47):
Well, there's a.
Speaker 4 (01:48):
Photo circulating on Twitter from Dan Scavino and you actually
see a sharpie x out of some what looks like
preliminary deals for even more concessions with Japan. I want
to ask you about this fifteen percent tariff free. Is
that the new floor now for trading partners when you're
going into these negotiations.
Speaker 6 (02:06):
Well, I think it's very important to note that fifteen
percent for Japan for reciprocal terrorists for autos, that is
a different kind of deal. But because the Japanese proposed
a very innovative solution, we've been working with them for months,
the trade team, myself, Ambassador Greer, Secretary Lutnik, and they
(02:30):
came to US with the idea of a Japan US
partnership where they are going to provide equity, credit guarantees
and funding for major projects.
Speaker 7 (02:41):
In the US.
Speaker 6 (02:43):
So they got the fifteen percent rate because they were
willing to provide this innovative financing mechanism.
Speaker 4 (02:51):
There's a lot of Japanese FDI into the United States already.
Speaker 5 (02:55):
Is this new capital?
Speaker 7 (02:56):
Oh no, this is all new capital.
Speaker 6 (02:58):
This is all new capital, and it is going to
be targeted at the strategic industries. The President Trump and
this administration believe that we have to de risk on
During COVID, we saw our vulnerabilities, whether it was in
medicine semiconductors. So we are going all in over the
(03:19):
next few years to de risk our supply chains and
this deal, thanks to President Trump, is going to be
part of that.
Speaker 4 (03:27):
When it comes to the fifteen percent rate on autos,
this means that Toyota is basically paying a cheaper rate
than say GM if they have inputs from other countries.
Still they're still at the twenty five percent auto rate.
Do you see the auto rate leveling out to something
lower than twenty five percent.
Speaker 7 (03:44):
We'll have to see.
Speaker 6 (03:46):
And again those are just GM components. There's also the
US NCA, the portion of any autos assembled in the US,
and then of course GM and especially Ford. I think
Ford has the largest US production. You're building in the US,
there are no.
Speaker 4 (04:04):
Tariffs, so when it comes to what's next, we know
the EU negotiators are in town. This fifteen percent rate
feels like potentially a floor.
Speaker 5 (04:14):
Could anyone get below fifteen percent?
Speaker 4 (04:16):
Is the European Union still trying for ten percent minimum
baseline tariff?
Speaker 7 (04:20):
Well?
Speaker 6 (04:20):
Again, the fifteen percent is a result of this very
innovative package that the Japanese came with and your President
Trump being able to push them to do even more so.
Speaker 5 (04:33):
Has Russels come up with anything innovative?
Speaker 6 (04:36):
Not yet, But again, talks are going better than they
had been. I think that we are making good progress
with the EU. But as I've said before, Emory and
the EU has a collective action problem twenty seven countries.
Great thing about dealing with the Japanese. I've been going
to Japan since nineteen ninety. I think this weekend my
(05:00):
fifty second trip, and the Japanese government moves of one entity.
They're highly organized across all level of government.
Speaker 4 (05:08):
So you say that talks are going better, we just
have a story hitting the terminal this morning from our
colleagues in Europe that the European Union is readying one
hundred billion dollars euros. If there is no deal in place,
they will impose thirty percent tariffs on those one hundred
billion euros worth of goods.
Speaker 5 (05:25):
Do you think we're going to get to that place.
Speaker 6 (05:27):
I think it's a negotiating tactic and it's what I
would do if I were in their place. But Amory,
remember we are the deficit nation. They're the surplus nations,
so any kind of a escalation in trade problems will
always hit them worse.
Speaker 4 (05:44):
I want to also talk about what's going on with China.
You're going to Stockholm Monday Tuesday to meet with your
Chinese counterparts. Are we going to continuously see the discussions
revolve around where Earth's and export controls or they're going
to be other items on the table.
Speaker 7 (05:59):
I think we're in.
Speaker 6 (06:00):
A very good place with China now and we can
start moving on to bigger discussions. As I've said many times,
there is a potential for a big, beautiful rebalancing between
the US and China. President Trump is committed to bringing
back precision manufacturing to the US and as we become
(06:22):
more of a manufacturing economy, China is highly imbalanced. They
account for thirty percent of all the manufacturing output in
the world. That's not sustainable. We believe they should become
more of a consumption economy. If they are willing to
go down that route, then we could actually do it together.
(06:42):
And then there are lots of other things we can
talk about, whether it's them buying sanctioned Russian or Iranian oil,
a number of security things, and so a purchasing agreement.
Speaker 4 (06:57):
From Trump's first administration, he had to deal with China
on the Phase one purchasing agreement on agriculture.
Speaker 6 (07:03):
Well, again, that's another way that we could bring this
in balance relationship into balance. So we will be talking
about purchasing agreements, especially ag and to refresh everyone's memory,
we had the purchase agreements. Chinese lived up to the
purchase agreements during President Trump's final year in office, and
(07:28):
then the Biden administration didn't enforce those purchase agreements. So
we're going to let bygones be bygones. We're going to
look forward, and I think we can come up with
some very interesting purchasing agreements. As you know, President Trump
is committed to the American farmers.
Speaker 4 (07:45):
Well, looking forward, you told me John and Lisa last week.
The market doesn't need to worry about August twelfth. That's
the deadline for this current dayton between Washington and Beijing.
Speaker 5 (07:55):
What's the new deadline going to be?
Speaker 6 (07:57):
Well again, I think that we could roll it forward,
maybe in a ninety day increment. And I think the
good news here is that we are back on track
with the Chinese negotiations. On April second, President Trump told countries,
(08:19):
here's your reciprocal rate. But that was the ceiling if
you do not escalate. If you don't escalate, this is
the max. The Chinese chose to escalate. But now we
both sides have de escalated, and I think we can
get into a very good cadence of regular meetings with them.
And look, we're the two largest economies in the world.
(08:40):
We do not want to decouple with the Chinese. We
just need to de risk part of our supply chain.
Speaker 4 (08:46):
Does regular incremental meetings include a meeting between President Trump
and Shijiping this fall.
Speaker 6 (08:52):
I do know that a party chair she has invited
President Trump to visit China. I don't know. I don't
have dates on that. I don't know if the President's accepted.
I know they have a fantastic relationship on a personal level,
which I think forms the basis of everything between the
US and China.
Speaker 4 (09:12):
Local reports in China, we're talking about the two meeting
on the sidelines of the APAX summit in South Korea
this fall at the end of October early November, or
maybe President Trump going to China first. Could we see
a meeting that soon? You think a meeting within this
year can happen.
Speaker 6 (09:27):
Again, I'm not privy to the President's travel schedule beyond September,
so we'll see.
Speaker 4 (09:33):
Nothing before a meeting with Chighing paid before September.
Speaker 7 (09:36):
Nothing before Labor Day.
Speaker 4 (09:37):
So in the last week, I do want to go
through something that's going on with China. They've imposed exit
bands on a Wells Fargo banker, a commerce department employee,
and according to Microsoft, they hacked into their software. Will
you address these actions at the talks in Stockholm.
Speaker 6 (09:52):
We're going to address a whole host of things, and
you know, obviously things like that will be on the
agenda with my Chinese counterpart.
Speaker 4 (10:03):
You had said to me last week that the Nvidia
H twenty chip was potentially a chip in negotiations, a
mosaic part of the deal. Do you think China is
doing this for leverage at the trade table?
Speaker 6 (10:15):
Absolutely not, absolutely not, because again, the H twenty, while
it is an advanced chip, is not one of the
most advanced chip. I think if we were to think
about the Nvidia stack, the HP would be something fourth
fifth down the stack. And my understanding is that Huawei
(10:40):
can produce something with similar advocacy.
Speaker 4 (10:43):
China's malicious behavior, even just in the past week, even
targeting a commerce department employee, do you think they're doing
this to have leverage with the United States?
Speaker 6 (10:53):
Well, I can tell you in Stockholm it's not going
to give them any leverage with me. And it's a big,
sprawling bureaucracy, and sometimes I think we may see the
arrests may have been in a province, the central government
may not be aware of it. So you know, I
would highly doubt that something at that level they have
(11:18):
wanted to engage with the US. We are engaging with
them and I think both sides want to move forward
in a productive way.
Speaker 5 (11:26):
But you'll raise these issues.
Speaker 4 (11:28):
Yes, So now that the administration is getting trade deals
across the finish line Japan, Indonesia, Philippines yesterday, you say
the European Union potentially in sight.
Speaker 5 (11:37):
Do you think the Federal.
Speaker 4 (11:39):
Reserve is going to have enough clarity by September to
cut interest rates?
Speaker 6 (11:43):
Again, I'm not really sure what the Federal Reserve is
looking at because thus far, we have not seen, or
we've seen very little, if any price pressures from the tariffs,
and if we were to see, those wouldn't be inflationary,
be a one time price adjustment. So again, I think
(12:05):
that their analysis of tariffs is a bit off.
Speaker 5 (12:10):
Well.
Speaker 4 (12:10):
Governor Waller made this exact case to us on surveillance
on Friday, and it sounds like he might dissent at
this meeting. He also said the President hasn't called him yet.
He's one of these names that are circulating around. Could
he replace FED chair J Powell? Is he a name
you're looking at? Have you reached out to him?
Speaker 6 (12:29):
I think there are a lot of strong candidates, including
several who are on the main board and perhaps regional
bank presidents.
Speaker 4 (12:38):
So are there other names outside of Kevin Hassett, Kevin Walsh,
Christopher Waller and you yourself has been circulating.
Speaker 6 (12:46):
There's a long list, and like I said, there's some
great candidates.
Speaker 4 (12:51):
And have you reached out to everyone on both those lists.
Speaker 6 (12:54):
I'm not going to talk about the process, but we
are getting the process underway. Obviously it's going to be
President Trump's decision and we're not in a rush.
Speaker 5 (13:06):
So oh, you're not in a rush.
Speaker 4 (13:07):
But the President continuously says he wants to get rid
of the FED chair J Powell. Mahmade Larian yesterday said
he should resign.
Speaker 5 (13:14):
Do you think J. Powell should step down to protect
the institution?
Speaker 7 (13:19):
Couple of things.
Speaker 6 (13:20):
One, the President said he is not going to fire
Chair Palell. I was somewhat surprised that Muhammad al Arian
came out and said that. And what I've come out
and said is that I believe that it would do
Chair Palell a favor, and he would be doing the
institution of favor if he did an internal review. Separate
(13:45):
monetary policy from everything else. And this is something that
Larry Summers and I agree on, is this mission creep
from the FED is endangering their independence of monetary policy.
So all these other things they're engaging in could threaten
monetary policy. So it is a big, sprawling institution. The
(14:09):
central budget for the Board is up four x since
two thousand and four, and every institution needs to examine themselves.
Speaker 5 (14:21):
But you want the.
Speaker 4 (14:21):
Man that you guys don't think is doing a good
job to run that review.
Speaker 7 (14:26):
What's up?
Speaker 4 (14:27):
You want the man J Powell, which you and a
president don't think is doing a very good.
Speaker 5 (14:31):
Job to run the review of the institution.
Speaker 6 (14:33):
Well, I think that it could be a committee, it
could be a group. They could invite outside experts. In
the Bank of England after the twenty twenty two rape hike,
Shock went back and did a very good examination of
(14:55):
what went wrong with monetary policy that brought in outside experts.
You know, I think an internal review would be a
good start, and if the internal review didn't look like
it was serious, then maybe they could be an external review.
Speaker 4 (15:09):
Have you communicated this directly with J Powell? Do you
guys continuously have your once a week breakfast lunches either
at the Fed or the Treasury.
Speaker 6 (15:19):
I gave a speech on Monday night on Bank deregulation,
bank regulation, the future of regulation, which is, aside from
monetary policy, I think the most important thing for the economy.
The FED is one of three regulators. There's the FED,
the Office of Control of the Currency which sits under Treasury,
and the FDIC. And I believe that all three of
(15:45):
those should have important voices. And I believe that the
regulation has been much too stringent. Since the Great Financial Crisis,
we are seeing this big build up outside the regulated
financial system. I think I saw something two days ago.
The private credit is up ten XM not saying it's
a financial stability problem, but I am saying that there's
(16:09):
a regulatory arbitrage going on. But that was a long
way of saying I saw a chair pale at that speech.
Speaker 4 (16:16):
And your lunches in breakfast continue always, so you have
a good relationship with him.
Speaker 5 (16:20):
At the moment, we.
Speaker 7 (16:21):
Have continuing communication.
Speaker 4 (16:23):
Last time you were on, you also talked about the
potential next FED chair. You said his or her nomination
is Governor Bowman also in the running.
Speaker 7 (16:32):
Again I'm not going to name names, but.
Speaker 6 (16:36):
There are good candidates. As I said on the board
at their several female regional bank presidents and then there
are some fantastic women outside the FED.
Speaker 4 (16:49):
There's also Governor Kugler's chair that is open in January.
Speaker 5 (16:55):
Have you started that process.
Speaker 6 (16:58):
It's a simultaneous process. The Coogler chair is a fourteen
year seat, so we'll be looking at that also. And again,
I think we have some very good candidates.
Speaker 5 (17:12):
Given you just saw J. Powell.
Speaker 4 (17:14):
Has he yet to tell you whether or not he
is going to leave the board his governor seat by
before twenty twenty eight?
Speaker 6 (17:23):
He hasn't yet. My belief is that he will, and
I think that it would be very good for the
institution for him to do it, and I think it'd
be very good for him personally to do it.
Speaker 4 (17:33):
The President once said that he goes out and rile's
financial markets and then he sends you his Treasury secretary
out to calm things. Things are pretty calm today. But
when it comes to the FED chair, I know you
love college basketball, and you talk about the president being
Bobby Knight, and I know you love Dean Smith. Are
you guys playing this good cop bad cop when it
(17:54):
comes to talking about the FED talking about J.
Speaker 5 (17:57):
Powell?
Speaker 7 (17:58):
Not at all, Marie.
Speaker 6 (18:00):
The reason I think that I'm to the extent I'm
able to calm the markets, and that doesn't always happen.
I was in the investment business for thirty five forty years.
But I think more importantly than that, I understand what
President Trump is doing, and a lot of times he's
one to three steps ahead of the market. And as
(18:24):
you know better than anyone, the market wants instant explanations.
They want they want clarity, they want immediate gratification. So
I think that I am able to as a former practitioner,
I think about when President Trump tells me what his
goals are, I think about what is the best way
(18:46):
for me to give good framing to market participants for
them to understand what he's doing. Because he always has
a plan, it's not always obvious.
Speaker 4 (18:58):
So you are communityating almost the strategic ambiguity that he
likes to operate from well.
Speaker 6 (19:06):
And I'm also trying to explain that there is a
plan because look, these letters went out, everyone was, oh
my gosh, these are high rates, and I think the
president created maximum negotiating leverage, and the market actually took
(19:27):
it pretty well, took it pretty well.
Speaker 4 (19:30):
Just to finish on that final point, then, do you
think he's more in boldened to go for higher rates
with trading partners. Now, given the market is not pushing back.
Speaker 6 (19:39):
Well, I think he's created a lot of leverage because
he's created an ab situation. He is able to go
to the trading partners and say, look, I am happy
to take in this tariff income if you don't want
to negotiate.
Speaker 7 (19:55):
This is a high rate.
Speaker 6 (19:57):
But the US is taking a massive amount tariff income.
We had the first June budget surplus since twenty fifteen
last month. We reported it this month, and so we
are taking in substantial income. So President Trump is creating
(20:17):
this leverage by saying, if you don't want to negotiate
with me, I've sent you a letter with a high rate.
You have at the high rate, or come and negotiate
in better fashion. Because I'll tell you what was fascinating
for me, and this was President Trump at his best.
At his best was the Indonesians came with what I
(20:38):
thought was a very good offer out of the Blox.
President Trump kept pushing them. He raised the reciprocal rate
when he sent them the letter, and five iterations later,
the Indonesian trade deal was greatly improved, turned into a
great deal for both Sides.
Speaker 5 (20:58):
Secretary Scott Besson, Thank you so much for your time
this morning.
Speaker 2 (21:11):
Jill Ford, co head of equity capital Markets for wels Fonco,
expects activity to pick up in the second half of
twenty twenty five.
Speaker 8 (21:17):
Joe joins us now for more joke and morning. Good morning.
Market's wide open. Is it healthy?
Speaker 2 (21:21):
Is the kind of activity that you're across right now
what you would describe as healthy?
Speaker 9 (21:26):
Well, I would say, you know, IPO volumes have certainly
been lackluster for the first six months of this year,
particularly contrasted versus all the expectations post the election late
last year. We are starting to see signs of life
within the equity capital markets, and particularly with IPOs. They
are pricing well, they're trading well, buyers are making money.
They're looking outwards now as we get more clarity with
(21:49):
these with these tariff deals, they're looking for new ideas
as opposed to hunkering down and trading what they know,
and that's really really healthy for the IPO market.
Speaker 5 (21:58):
So I'm optimistic.
Speaker 9 (21:59):
There are lots of IPOs coming. Many IBOs came in June,
there are many more coming in July, and the fall
is looking pretty good as well.
Speaker 2 (22:07):
The typical lifespan of a company is obviously shifted. They're
staying private for a whole lot longer. Can you describe
to us as to why why they're not going public?
Are they push factors or pull factors? You just see
people sucked into private markets and stank there because the
options available to them are so good.
Speaker 9 (22:21):
You know, a lot of it is driven by the
companies that own them, the private equity sponsors. They are
very unemotional about when they sell things. They want to
sell at full value. They want to realize the full
value that they that they deserve for their assets. And
when IPO markets have larger than normal IPO discounts, they're
going to sit back and say, what are my other options?
(22:42):
And there's lots of options for treading water. I can
give you a whole list of ways that private equity
firms have decided to keep their companies private longer. The
flip side is when they do come out, they're more mature.
They have acted almost like a private company for longer.
The management teams have become accustomed to managing expenses, not
(23:03):
growth for growth sake. So you're getting a higher quality
company that is coming out.
Speaker 1 (23:07):
It also indicates that they see the market is frothy
enough to handle some of the potential valuations that they
would like to see for those exits that they might
not be getting in previous markets. The market's been opened
a long time, it's just not at the price that
they want. And I wonder if it tells you something
about where we are in markets that a lot of
companies are starting to say, Okay, if we're not going
to pull the trigger now, i'm not sure when we can.
Speaker 9 (23:27):
You know two things at play here. The first one
is the IPO market as a cohort for twenty twenty
five is up close to fifty percent. Now, there's a
couple of high flyers in there that are driving it higher,
but versus the average fifteen percent pop, that's really meaningful
for people's portfolios. The second thing that's going on is
that people are starting to realize the queue is getting
(23:50):
so large we couldn't cycle through it in a single year.
You know, the IPO backlog right now is about two
hundred companies or so that have filed. Confidently, there's probably
another two to three hundred companies beyond that or IPO
worthy who have not yet gone through that process. So
if you take an average IPO year of call it
(24:10):
seventy five to one hundred IPOs, you're looking at several
years to try to clear this queue. Do you want
to be in the front of the queue or do
you want to be in the.
Speaker 1 (24:17):
Back of We keep hearing this, the idea of the
backlog building and the idea of the pipeline is full.
It's just a matter of what you're going to pull
the trigger. And I wonder if the tariff levels that
we've gotten overnight are enough enough certainty, especially when paired
with the legislative certainty that we've seen in Washington, d
C for a lot more companies to pull the trigger.
Speaker 9 (24:35):
Well, I do think that IPOs love boring, right.
Speaker 5 (24:38):
They don't want volatility.
Speaker 9 (24:39):
They're out for seven to eight days of market exposure.
And the great news is that over the last few
months we've started to see the market shrug off a
lot of that newsflow right, And so with continued clarity
on tariffs, A, we've got a calmer market hopefully, But
b CEOs and CFOs are going to be able to
forecast their business more accurate.
Speaker 5 (25:00):
If you can't forecast.
Speaker 9 (25:01):
Your business because of tariffs here, there, and everywhere in
your supply chain, you're really going to struggle to give
people comfort to come into a new and eam. So
those two things are at play and we're starting, hopefully
to be on the road to more clarity around that.
Speaker 2 (25:15):
Joe, could we finish on the resilience of corporate America?
This has been an ongoing theme now for the last
several months. You talked about the big batslhard and battle
tested once they became public companies. Can you reflect on
your experience of just how resilient corporate America actually is.
The ability to borrow a frase from my good friends Tik,
to adapt and to adjust.
Speaker 9 (25:34):
No question twenty twenty one. We obviously saw a lot
of nonsense go on and a bit of a bubble
and then very very little activity in the years following.
I think companies have had to learn to be much
more prudent, conservative, to manage not just growth, but to
manage margins if they're not profitable, to have a bridge
towards near term profitability, and overall that's created a really
(25:57):
healthy backdrop.
Speaker 7 (25:58):
You know.
Speaker 9 (25:58):
The other thing to focus in on is the health
of the consumer. Right if your consumer's not healthy. It's
now the right time to be going public. As the
consumer also appears to be very resilient. We're seeing those
corporations that are have them as customers become even more
resilient and healthy. And so we're optimistic through the the
(26:19):
second half of twenty twenty five and certainly well into
twenty twenty six. As it released to IPO volumes.
Speaker 8 (26:24):
Joe, this was great. It's going to catch up. Thanks
for the update.
Speaker 2 (26:26):
Joe full Dent of Wells Fonco's if you were more
Street this morning, Jack Caffrey of JP Morgan Rights and
the Rally suggests traders are expecting another positive quarter of
earnings and sales upside against full costs.
Speaker 8 (26:46):
Jack joins us now for more. Jack and Mornick, good morning.
How low is the bar.
Speaker 7 (26:51):
It?
Speaker 10 (26:52):
You know, as you were talking right before you cut
to me, it's very almost stock specific. I mean, earlier
this week we heard from you know, a semiconductor company
that sells to the auto industry. They were down six percent.
Last night we heard the update from Texas Instruments. Good numbers,
weak guidance. They're down nine percent. This morning. Doesn't feel
like it's supposed to be shocking after what we'd heard
(27:13):
earlier in the week, And at the same time you're
seeing names but the average companies up one percent the
day after their report. So on the whole things are
quite nice. But the fact is there are a lot
of potholes and seeming land mines that people are still
stepping on as we work our way through this. And
I think at some point over the next month, we're
going to be spending more of our time talking less
about twenty twenty five and the very modest expectations for
(27:35):
twenty twenty five and talking about how things accelerate so
dramatically into twenty twenty six that hopeful we get policy
certainty at some point or policy consistency.
Speaker 8 (27:46):
Is that all you want, just consistency.
Speaker 7 (27:48):
I just want to know what the.
Speaker 10 (27:48):
Rules are and then then I think I think ultimately
US companies are exceptional at driving profitability once they understand
what they're going to operate under. If we went back
to the first Trump administration, a lot of focus on
trying to get tax policy and then you created a
trade war within days later, and for the most part,
companies sat on their hands in terms of thinking about
(28:10):
their investment. Today, now we actually have some tax clarity.
That's the good news. Ideally we'll get some trade clarity
that might lead to actually understanding where investments go. But
at the same time, I think I and other investors
thought that perhaps when you looked at where prior budgets
were allocating capital in terms of trying to think about
(28:31):
subsidies and goals, a lot of that's not been thrown
up as you've ripped up parts of the goal of electrication,
say in the One Big Beautiful Bill. So I don't
know if the battery complex of Georgia makes as much sense,
if the ev manufacturing in Tennessee makes quite as much
sense on a go forward basis, if the cost structure
underwriting those investments is as durable as we initially.
Speaker 5 (28:54):
Thought on a broad market basis.
Speaker 1 (28:55):
Have we priced in a certainty before we've gotten it?
Speaker 10 (29:00):
Kind of feels like it when you think about you know,
implied volatility effectively at year lows. If you look at
put buying that's running at sort of year lows, if
you average it not only one day's number, but smooth
that out. If you look at corporate credit spreads again,
you know, at fifty two week lows. So for the
most part, I think risk markets are saying we got this,
(29:23):
and I think that's where things get trickier, especially as
we go into the next month or so when look
coward to the does tend to be a little bit
punkier overall, and people try to go on vacation.
Speaker 1 (29:33):
Right, well, this is sort of by the rumor and
sell the news. And a question about whether you agree
with Julian Emmanuel over at EVERCOREI s I when he
came out earlier and he said he sees the next
seven the next move inequity is to be something like
seven to thirteen percent lower. Do you agree with that?
Speaker 10 (29:47):
Having not read the note, I'm not sure what he
was looking to.
Speaker 1 (29:52):
I think on a theoretical basis, agree with good lower.
Speaker 10 (29:56):
I think I think you know now next CA at
sixty days, I think it's going to be hard to
get a big rally unless you get something truly dramatic
in the way of blowout sorts of news. I think
underpinning that, though you know, we're looking for a mid
teens growth in earnings coming out of the MAC seven,
I think the trick is that the forlorn four ninety
(30:18):
three we're supposed to have earnings growth of like three
or four percent for the course of this year. That
accelerates the twelve percent next year. So actually the momentum
in earnings is shifting away from the mac seven into
the forlorn and I think that speaks to a stable,
growing economy. And ultimately, I think maybe we spend too
much time talking about the economy. Does this look at
(30:39):
the consumer. The consumer continues to work, the consumer continues
to spend, and I think that's really the flywheel that
people really need to pay the most attention to, because
it's set stable consumer spending that's driving the earnings and
cash flow that underpins their transition to AI. You know,
when you think about who the capital spenders are versus
who the capital providers are, it's the consumer keep working
(31:00):
and spending every dollar they get.
Speaker 2 (31:02):
Oh, by Lisa, that's seven percent call at Judy in
seven to fifteen, whatever it was to me. There's a
common theme I think for a lot of the analysts
who are making this call at the moment is that
they want to buy it. So they'll say, like, you know,
I expect the equity markets to have a draw down
and maybe ten percent, but ultimately want to buy. The
dep heard the same thing from Mike Wilson and Morgan
Stanley exactly the same, so the same thing from Goldman Sacks.
(31:22):
They said, we anticipate a less favorable growth inflation mix
in the second half, challenging the Goldilocks scenario. Still neutral
and still moderately positive on stocks over a twelve month
time arise, and I see that on repeat across Wall Street.
Speaker 5 (31:33):
Yeah, how person is it?
Speaker 1 (31:34):
Can you get when ultimately you're talking about a draw
down that's going to be a great opportunity, Please please
sell off so that we can buy it?
Speaker 5 (31:40):
Raises this question.
Speaker 10 (31:41):
I mean, let's remember also that we also have a
FED that's planning to cut. The debate might be do
they cut in July or are they cutting in September?
But the Fed is trying to be our friend. They
are actually moving in a direction that tends to be
risk supportive. And so, you know, having started my having
started as a strategist and having to live by trying
to get the timing right, you know, I appreciate being
(32:03):
a portfolio manager and getting to step a little bit
away from the noise and be like, what's the main thing,
and let's focus on the main thing. The direction remains,
you know, a growing economy, growing earnings and cash getting returned.
Less cash probably gets returned to us as investors going forward.
When you think about the mass of investment demands that
we're starting to try to underwrite, and I think that's
(32:25):
going to make things, you know, perhaps a bit trickier
and where you have to deliver versus you it would
be nice if you delivered and.
Speaker 2 (32:30):
A boss through jacentristrits. As you say, Jack, appreciate your time,
Jack Caffrey, a JP.
Speaker 4 (32:35):
Nolton And with another negotiator that was at that table,
the president last night, Commerce Secretary Howard Lutnik. I want
to pick up on this idea and good morning, thanks
for joining us. I want to pick up this idea
of innovative financing mechanisms and this five hundred and fifty
(32:58):
billion dollar five and the Japanese are going to be
investing into what exactly is that fund going to look like?
Speaker 11 (33:05):
So the Japanese are going to give America the ability
to choose the projects, to side the projects, and execute
the projects. So let's say we want to build generic pharmaceuticals, right,
we don't make antibiotics in America, so the President says,
let's go make antibiotics in America. The Japanese will finance
(33:26):
the project. They will finance the project, and then we'll
give it to an operator whill run it, and the
profits will be split ninety percent to the taxpayers in
the United States of America and ten percent to the Japanese.
So they basically bought down their tower freight by this
commitment of we will back what you, the President want,
(33:47):
and you America want to build in America that are
key to national security concerns, will back that, and therefore
we'll be on your side.
Speaker 4 (33:55):
The Prime Minister Sheiba says, these are loan guarantees.
Speaker 5 (33:58):
Is it more than that. Of course it's more than that.
Speaker 11 (34:01):
It's equity loans and loan guarantees. They have to deliver
the project. So we say, let's build semiconductors. We want
to build one hundred billion dollar worth of semiconductor fabs
is what you call them, because we want to make
those chips in America. The Japanese will finance that whole project.
They've got to put down equity loans.
Speaker 5 (34:22):
Whatever they want to do.
Speaker 11 (34:23):
They have to deliver the hundred billion.
Speaker 4 (34:25):
Or Japanese companies.
Speaker 11 (34:27):
Oh no, no, anybody does it. It's the Japanese or
the financer. They're the banker, they're not the operator. It's
not Japanese companies. So when people get confused, this isn't
like a Japanese company like you know, like Toyota coming
in and building a factory.
Speaker 7 (34:43):
No, that's Toyota.
Speaker 11 (34:44):
This is literally America is saying we want to build
generic pharmaceuticals, semiconductors, critical minerals.
Speaker 2 (34:53):
Here.
Speaker 5 (34:53):
This exists.
Speaker 4 (34:54):
Now, like, what can we think of a model afters That's.
Speaker 11 (34:56):
Why you have someone like me who joins the government.
I mean, this was my the idea in January. So
I started because the Japanese are never going to really
open their market the way Donald Trump wants them to
open it. I mean open it, open it, you know.
So what's happened is they had to come up with
another way to really make it work and the tariff
model work. So I suggested to them a four hundred
(35:19):
billion dollar fund where they would give to the president
and they would give to America the financing to go
build out your whatever you think for national security, go
build it, will back you.
Speaker 7 (35:33):
And that's the model.
Speaker 4 (35:34):
It reports the Prime minister, though maybe resigning. Could this
deal transcend domestic politics in Japan?
Speaker 11 (35:40):
Of course, I mean it's vital. You saw what happened
to their car companies. They were all up more than
ten percent today. So a twenty five percent tariff delivers
what Donald Trump said, build it in America. A fifteen
percent is right on the edge to write on the
edge of the Japanese car manufacturers can still produce in Japan.
(36:01):
And that's what the Japanese wanted to buy. They wanted
to buy that line where they could stay in Japan
for some cars build of course huge amounts here. But
also what they did is they'll invest and give Donald
Trump the tools to invest in America.
Speaker 4 (36:16):
That fifteen percent tariff on autos is huge for Japan.
Do you see the entire auto tariff, that sectoral tariff
coming down from twenty five percent to fifteen percent, Because
for some inputs, this would mean Toyota has a fifteen
percent rate, but GM still has a twenty five percent rate.
Speaker 11 (36:31):
Well, GM doesn't have a twenty five percent rate unless
they build certainly.
Speaker 5 (36:35):
Important South Korea.
Speaker 11 (36:36):
Or well, okay, if you're building, if you're building South Korea,
that's a South Korea thing, and if you're importing from
South Korea, that's a South Korea thing. So Europe is
now paying twenty five percent, South Korea is paying twenty
five percent. The Japanese have bought, if you will, by
giving a huge investment to Donald Trump in America. They
bought the ability to be down to fifteen percent. And
(36:58):
Donald Trump can then really vest in America on the
projects that he thinks are the most important for America.
And we'll see what happens with Europe. We'll see what
happens with South Korea. But right now Donald Trump has
put the pressure on them. Let's be clear, Well, this
is model the pressure on them.
Speaker 5 (37:16):
Is this a model for Brussels?
Speaker 7 (37:18):
It could be.
Speaker 11 (37:18):
I mean, that's up to them to negotiate. Right, are
they willing to open their market? I don't think. I
don't think anybody. Europe's not going to go and give
us a trillion dollars too.
Speaker 4 (37:28):
Well, can they get below fifteen percent?
Speaker 5 (37:30):
Or is fifteen percent now.
Speaker 7 (37:31):
The floor right for autos?
Speaker 5 (37:33):
Would I would know?
Speaker 4 (37:35):
Forcipical tariff for the European.
Speaker 5 (37:37):
Union, I don't think that they're willing to accept.
Speaker 11 (37:40):
I don't think big countries can get low like that,
I think. I think small countries have a possibility of
being low, and that's up to the president to decide.
But larger countries will have a hard time with that.
Speaker 5 (37:51):
They will have a hard time.
Speaker 4 (37:52):
So to be clear, with the European Union right now
and the trade negotiations are in Washington, I know you're
talking to them every single day. The rate floor that
they would have to accept is fifteen percent what Japan accepted.
Speaker 11 (38:03):
I think what everybody in the world has seen is
Donald Trump. So I'm the table center, if you will, right.
I set the table right. I organize things. I structure things.
You know, there was a picture that the President posted
over his shoulder with the big board. That of course
I created the big board and put it there. But
the answer is the negotiator in chief of the United
(38:25):
States of America is sitting behind the desk. You know,
Donald Trump is sitting there created negotiating.
Speaker 4 (38:30):
The also created the board on Liberation Day and we
saw the sky high terrafs.
Speaker 5 (38:34):
You created last night's board.
Speaker 4 (38:35):
I'm trying to understand from you what the European board
is going to look like. So if say this's a
fifteen percent across the board rate. What can the Europeans
be buying that can assuage the concerns of the president.
Speaker 5 (38:47):
Are you talking about LNG purchases?
Speaker 4 (38:49):
Is there agricultural purchases.
Speaker 11 (38:51):
The Europeans have a twenty trillion dollar economy, right, we
have just under thirty trillion, and the Chinese and the
Europeans are similar in size at about twenty trillion dollars.
So if they say to the President, we will open
our market to you like Maro, and I mean really
open it, meaning we will take us cars like think
(39:13):
of what the Japanese did. They said, we will take
us cars based on US standards. So you don't have
to make a different car. You can take the car
you're make in Detroit, put it on a boat, and
send it. If the Europeans will accept that, and they
will accept really really accepting US products in Europe, that's
a giant. That's hundreds of billions of dollars of export
(39:36):
opportunity for Americans. That's going to move the President because
he's going to say that opportunity for Americans is so great.
That's what well we've been We've been talking about it
four months. I mean, holy moly, I can't. I can't tell.
Speaker 4 (39:52):
They're saying they're going to retaliate if they don't get
a deal owns.
Speaker 11 (39:56):
I understand. Then the President wrote them a letter saying,
if you don't get a deal, and we're charging.
Speaker 4 (40:00):
You thirty periating tactics out in public.
Speaker 7 (40:03):
Well, of course it is.
Speaker 11 (40:04):
I mean, Donald Trump writes a letter and says, if
you don't make a deal, it's thirty percent. And the
thing about Donald Trump is he's dead serious. If you
don't make a deal, it's thirty percent. Now that puts
the pressure on them right to say, Okay, that's my alternative.
They want to get a deal done, for sure, they
want to get a deal done. But does Donald Trump
want to get a deal done? How much does he
(40:25):
value the fact that they open their market? Do they
completely open their market, because that's what he's looking for.
I think they will. I think they will really really
open their market, and I mean open it, which is
something the United States of America has never had the
idea that Donald Trump is opening the world's markets for Americans.
The ranchers, the fishermen, right are farmers. I mean, these
(40:49):
are amazing opportunities that no one in the world has
ever seen. We have Stockholm syndrome.
Speaker 7 (40:55):
Right.
Speaker 11 (40:55):
The world has so held us off for so long.
Can't even imagine a world where we can export freely
the way everybody.
Speaker 7 (41:04):
Else exports to us.
Speaker 11 (41:05):
And that world is coming. That's what Donald Trump calls
the Golden Age. That's what it calls. Our ability to
export to the world the way they treat us, we
can now finally treat them.
Speaker 4 (41:16):
You're gonna have to step away from the Europeans though,
potentially for a moment next week, because I believe you're
going to be headed to the Stockholm talks with China. Yes,
So what we saw with China and this administration, Jensen
Wang had a conversation with the president. I imagine you
were there when it comes to the Nvidia H twenty chips.
What did Jensen Wang say to you and the president
that gave him the green light to start selling those
(41:37):
H twenties back into China.
Speaker 11 (41:39):
Well, the H twenties were open during Biden, So Biden said, really, well, they.
Speaker 4 (41:44):
Were developed during Biden because.
Speaker 7 (41:46):
They were so China.
Speaker 11 (41:48):
We were actually sold to China, and then we came
in and we said, whoa, whoa, whoa, that's a pretty
powerful chip. In April, and we held that back and
that was then held back, and now we had the
whole magnet, which is very exciting. We're trying to make
sure that magnets are being delivered to our producers, which
was the deal, and these have export controls on them,
(42:10):
and they'll come off. As the Chinese deliver their magnets,
then the H twenties will come off. But it is
logical since they were free to sell last time, it
seems reasonable that we'll get to me.
Speaker 5 (42:21):
You said they were a powerful chip.
Speaker 4 (42:23):
Are you concerned about national security issues when it comes
to allowing the Chinese now to.
Speaker 5 (42:28):
Get their hands on the H twenty, Well, the.
Speaker 11 (42:31):
H twenty was the third best chip in the world,
and now it's the fourth best, right because the Blackwell
is the best. There's an H two hundred and H
one hundred, so in H twenty is the fourth best chip.
And I think the President has decided that if things
are going well with China that they can buy them.
So I think that decision has been made. We are
putting on the licensing mechanism and we are getting that going.
(42:53):
But the President has decided that the Chinese can buy them.
But that's in a balanced way with the Chinese delivering
on the deal that we made with them, and they're
delivering rare earths to American manufacturers.
Speaker 4 (43:04):
So when you sit across from Chinese counterparts next week,
what do you plan to discuss with them? Is loosening
export controls?
Speaker 5 (43:11):
More export controls on the table.
Speaker 11 (43:13):
I think what we talk about is there's a line
right below the line. We are giant economies. We should
trade with each other. Right, they want to buy our produce,
They want to buy our vegetables, right, they need They
don't grow everything. They don't have the bread basket of
America that we have, so they want to buy those products.
And you know what, there's lots of things that they
(43:33):
make that we want to buy that we want inexpensive
things on our shelves.
Speaker 5 (43:37):
So let's talk below the line.
Speaker 11 (43:39):
Let's open the market better in China and let us
sell more things in China. And then at the line
where we're competitive. You know where is that line? Where
above that line, they're not going to sell us their
hypersonic missiles and we're not selling them our best chips.
Those two things are not happening because they're a competitor.
They are a competitor, and what we're really going to
(44:00):
discuss is where's that line? Are the h twenties above
the line below the line? That's really nuanced and that's discussion.
But of course would we like to buy baby clothes
that are inexpensive? Of course we would figure that makes
perfect sense. So let's open the market down here, right,
We're never opening the market up here, And what do
we discuss?
Speaker 5 (44:21):
We discussed that line.
Speaker 11 (44:22):
Of what's over it and what's under it? But do
we want more of this them selling it to us
and not selling it to them? The president and President
Sheif from China agreed that they would like to do
more business there, So we're going to talk about opening
their market more for things that make sense to open it.
And we're really going to discuss the areas that maybe
we should really be addressing.
Speaker 5 (44:43):
Is that yes or is that no? One area? I
just want to finish on this.
Speaker 4 (44:46):
I'm curious if you're going to address directly because it's
the commerce department and employee of yours is facing an
exit ban right now from China.
Speaker 5 (44:53):
Do any update on this?
Speaker 11 (44:55):
It's unbelievable, right, so he has there was an employee
of Bars He's a Chinese nasal who was working in
the patent office and he went home and he was
arrested and they're holding his passport.
Speaker 7 (45:07):
I mean, it's so.
Speaker 11 (45:07):
I give that to the State Department, and the State
Department deals with that, but it is it is outrageous, baby,
It's just outrageous, baby.
Speaker 4 (45:15):
Secretary Verylatina, thank you so much for your time this morning.
Speaker 2 (45:18):
This is the Bloomberg Surveillance Podcast, bringing you the best
in markets, economics, and geopolitics. You can watch the show
live on Bloomberg TV weekday mornings from six am to
nine am Eastern. Subscribe to the podcast on Apple, Spotify,
or anywhere else you listen, and as always on the
Bloomberg Terminal and the Bloomberg Business out
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.
The Breakfast Club
The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy, Jess Hilarious, And Charlamagne Tha God!
Crime Junkie
Does hearing about a true crime case always leave you scouring the internet for the truth behind the story? Dive into your next mystery with Crime Junkie. Every Monday, join your host Ashley Flowers as she unravels all the details of infamous and underreported true crime cases with her best friend Brit Prawat. From cold cases to missing persons and heroes in our community who seek justice, Crime Junkie is your destination for theories and stories you won’t hear anywhere else. Whether you're a seasoned true crime enthusiast or new to the genre, you'll find yourself on the edge of your seat awaiting a new episode every Monday. If you can never get enough true crime... Congratulations, you’ve found your people. Follow to join a community of Crime Junkies! Crime Junkie is presented by audiochuck Media Company.