June 27, 2025 • 26 mins
- Chris Wright, US Secretary: Energy
- Tobin Marcus, Head: Policy & Politics at Wolfe Research
- Marissa Adams, Head: Global Trade Solutions at HSBC
- Alejandra Grindal, Chief Economist at Ned Davis Research
Chris Wright, US Secretary: Energy, joins to discuss the outlook for energy and oil following the US' intervention into the Israel-Iran conflict. Tobin Marcus, Head: Policy & Politics at Wolfe Research, discusses the latest on the US tax bill going through Congress. Marissa Adams, Head: Global Trade Solutions at HSBC, on recent US trade negotiations and whether more deals can continue to come through. Alejandra Grindal, Chief Economist at Ned Davis Research, reacts to today's and this week's eco data.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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(00:33):
Bloomberg Terminal and the Bloomberg Business App. Joining us now
to discuss the state of energy, not just domestically but worldwide,
the seventeenth United States Secretary of Energy, Chris Right, Mister Secretary,
welcome back to the program sir, looking forward to an
in dev conversation with you about what you cover every
single day. So, first of all, just on a run
so we can deal with that. What is the current
stance of the US officially on the use and import
(00:55):
of the running crude?
Speaker 3 (00:58):
Oh, the sanctions are still in pl no change there.
I think the Trump what President Trump was referring to
there is Hey, if we make a large piece and
sanctions come off, aron can flourish.
Speaker 2 (01:11):
If you could a decent understanding the miss the Secretary
of just how much of running crud is being consumed
and impulsive already as things stand, despite the sanctions.
Speaker 3 (01:21):
We do so, a RAM produces about three and a
half million barrels a day, and they've been import they've
been exporting about one and a half million barrels of
oil a day, and the maximum pressure campaign that President
Trump did in his last term tamp that down to
only one hundred or two hundred thousand barrels a day.
They cut off ninety percent of it. That was a
possible strategy here as well, but hadn't been implemented yet.
(01:43):
We tried to give negotiations a chance see if we
can do it without maximum pressure.
Speaker 4 (01:48):
So is maximum pressure still on the table or is
the ad ministration walking away from that?
Speaker 3 (01:55):
Well, the goal right now, of course, is to get
a peace deal, is to get peace into the middle
and spread the focus on commerce not conflict. So no,
it's not actively being discussed right now, but the situation
is still dynamic there. We want to see peace, prosperity
and security as the future of the Middle East.
Speaker 4 (02:12):
When it comes to what's going on in Iran as well.
In terms of the IAEA, the Foreign Minister said yesterday
that basically they have no plans to having the Director
General Raphael Grossy in Iran and doesn't sound like they're
willing to give the inspectors the space, time and access
they need to look at these nuclear facilities.
Speaker 5 (02:29):
What is the United States response to that?
Speaker 3 (02:33):
Yeah, look, this is early on.
Speaker 5 (02:35):
This is early on.
Speaker 3 (02:37):
Iran has just had most of its nuclear program entirely
devastated by Israel and the United States. They're a little
bit humbled, they're a little bit shell shocked right now.
So yeah, I wouldn't put too much weight on those words,
but a final peace steal certainly has to have confidence
in a dismantlement of the Iranian nuclear program and that
people can have security it won't be resurrected in the future.
Speaker 4 (02:58):
You deal with a lot of nuclear at the Energy
Department before the US strikes, but after the Israeli strikes.
Raphael Grossi told us that the IAEA cannot verify with
the four hundred kilograms of sixty percent enriched uranium in
Isfahan was currently where it was?
Speaker 5 (03:16):
Was it still there? Do the Irradians take it out?
Speaker 4 (03:18):
Doesn't the IAEA need to go in and verify where
this enriched uranium is.
Speaker 3 (03:26):
I think that's quite likely part of a future negotiation
or a future deal.
Speaker 2 (03:30):
Miss the Secretary. Of course, this is just one part
of the conversaction and energy right now. I can tell
you earlier on this morning, there's a report that you
might have seen that came from reuts As. Actually the
Administraction is readying a package of executive actions aimed a
boosting energy supply to power the US expansion of artificial energy.
Mister Secretary, what can you share with this this morning?
Speaker 3 (03:49):
Yeah, Look, artificial intelligence is an incredibly exciting development that's coming.
It is going to revolutionize not just our economy but
our health drug discovery, but it also plays huge role
in national defense, which is why I've compared it to
the Manhattan Project. It's critical, it'll be transformative, and we
must lead. We cannot be second place in AI. And
(04:10):
to do that, we have the scientist, we have the capital.
You have to have a huge growth in US electricity production.
So we need to get the morass in the way
that's really hobbled the American energy system for the last
four years, and we got to unleash American investment in
American capitalism. That's going to take building a lot of
new power generation.
Speaker 6 (04:29):
Mister Secretary, to build on that idea, what type of
energy production are you looking at? I know that New
York State was just looking at potentially creating a new
nuclear energy plan.
Speaker 5 (04:40):
Is that one of the paths of travel.
Speaker 6 (04:42):
That you think is going to be pivotal for the
United States?
Speaker 3 (04:47):
Absolutely, look to have a secure power glided into power AI.
You need ninety nine point percent of the time on
power and so that today our biggest source of reliable
power today by far as natural gas. Our second biggest
source is nuclear, and our third biggest source right behind
that is coal. So those are the three keys to
(05:08):
the future of our electricity grid. Nuclear we haven't built
much for a while, so I was thrilled to see
the governor's announcement embracing nuclear in New York. We have
the governors of Tennessee and Georgia and Virginia passionate about
getting new nuclear built in their states. So yes, one
of our goals in this administration is is to launch
the American nuclear renaissance.
Speaker 6 (05:28):
Mister Secretary, how do you encourage this type of investment
at a time where the goal of the President has
also been to lower prices. And we've seen this particularly
in the energy space, where the President has been very
vocal about the desire to see energy prices lower. And
this has led to a number of oil rigs in
the shell patch to be taken offline because it isn't
profitable for a lot of these companies to be producing
(05:51):
as much as they used to.
Speaker 5 (05:52):
How do you sort of square that circle?
Speaker 3 (05:56):
Yes, yeah, prices are supply and demand. Prices are supply
and demand. But what we're doing in the administration is
everything possible to lower the cost to produce energy in
the United States. Cheaper to produce a barrel of oil
or an mcf and natural gas, you know, or a
ton of coal or a kilo one hour of electricity
from nuclear plants. So that's deregulatory, that's common sense regulation
(06:18):
focused on health and safety and the environment, but not
the nonsense that just burdens burdens energy producers. Nuclear will
be a little bit more expensive at the start, but
I think that cost will be borne by hyperscalers. They
want to see nuclear rearrives and they'll sign higher power
purchase agreements to help kickstart nuclear we need to grow
(06:39):
the energy supply and keep cost down. You're right, that's
a challenge. You're right to bring that issue up, and
that's what I work on seven days a week.
Speaker 2 (06:47):
Let's get at the regulatory burden. We're lucky to have
someone in your seat that's actually ran an energy company
in this country. As you know, permitting it is really
difficult across many dimensions. You have to go state by
state and the things you can do at the executive
level to make this a lot easier. Could you describe
those kind of things.
Speaker 3 (07:06):
That there are a number of things, and it is
why we created the National Energy Dominance Council. That's really
to bring people leaders from all different agencies that impact
the ability to build things in our country together and
say what We talked to producers and say, you know,
why aren't you building that? And they'll give us a
list of seven things. It'll take us seven years, and
(07:26):
we're really worried about this one and that one. So
we dive into those issues and say how can we
simplify that. But I'll highlight a Supreme Court decision from
just a few weeks ago on to get more oil
out of Utah via train that've been held up for
years through suits over NEPA, and the Supreme Court ruled
eight to zero. Every Supreme Court justice involved in the
(07:48):
case said, yes, we need to put NEPA back in
its box. It's to check to make sure the environment's
being considered. It's not to have years long, endless delays
because if you delay something, you make it more uncertain,
more expensive, and simply less things get built.
Speaker 2 (08:03):
Miss the Secretary, appreciate your time, sir, as always to
break down the situation. Hopefully we can engage on this
conversation again, Chris. Right there, the Energy Secretary of the
United States, Tobin Marcus of All for Research, joins us
now for more. Tobin, welcome to the program. I just
(08:25):
want to pick up on the language, the words used
by the COMMA secretary. How would lot mak we inked
the deal? What's the deal? Do you have any details whatsoever?
Speaker 7 (08:34):
This seems to be the third time for the giving
this particular deal because it seems to be a solidification
of the framework to get back to the Geneva and
census that was reached about two months ago. So it's
good to have that lockdown. But it does not really
look to me like that's delivering any kind of incremental
relief or incremental steps forward. It's just solidifying the set
(08:54):
of understandings that was required to keep the trading relationship
from going further off track in terms of access to
RARR earths on their side and the rollback of some
of the incremental export controls on our side.
Speaker 4 (09:04):
I was at those talks in London. I still can't
get from this administration and idea of what the language
looks like. Who signed it. The Chinese say earlier this
morning the US side will correspondingly cancel a series of
restrictive measures taken against China, which measures.
Speaker 7 (09:20):
So it seems from my perspective that the Chinese have
been primarily focused on the further expansion of export controls
and took place after the Geneva meeting. So certainly the
restrictions on natural gas liquids, on aerospace, on EA software,
those are I think are clearly in the set of
things that are going to be rolled off. The initial
vote of contention from the Chinese side was this declaration
(09:43):
that anyone using baway send chips is in violation of
US export controls, that the uside characterized as a restatement
of existing policy, and the Chinese side characterized as incremental
expansion of export control. So that, in my mind is
the question. I don't think that the US has committed
to rolling that back, but that I think is sort
of the final piece of wiggle room in how we
(10:04):
understand this.
Speaker 5 (10:05):
This isn't a trade deal.
Speaker 4 (10:06):
This is just an understanding of some of the de
escalation we've seen in these talks in Geneva and London.
So where does this leave the relationship more long term,
for more of a comprehensive agreement.
Speaker 7 (10:17):
It still looks very challenging to me. I think that
the bullish narrative in markets immediately after the Geneva meeting
was we've come down to thirty but of that thirty,
twenty percent is FEDYL related, and that should be an
easy thing for the Chinese side to alleviate Trump's concern
on you know, this is an authoritarian society, Well like
we should just think that they can flip a switch
(10:38):
and do whatever they need to do on export controls
on tentinal precursors to satisfy the US side. I think
that's easier said than done, even to the extent that
they can fully lay our substantive concerns, you know. I
mean there have been multiple rounds of headlines from Boomberg
among others about Vietnam aiming towards a twenty to twenty
five percent teriff rate in their talks.
Speaker 5 (10:58):
Even if we've.
Speaker 7 (10:58):
Reached a deal, that's what the to look consist of,
and we're taking Vietnam to twenty five, it does not
really make sense to take off that twenty percent Fennel
tariff and China at ten. It would be very upside
down to go after Vietnam, where the main concerns have
been around them as sort of an outlet for Chinese
industrial over capacity and transshipping and so forth, and hit
them harder than China itself. So I think we have
(11:19):
a long way to go. I mean, the Chinese love
slow delivered to mechanisms, and that's what we have in
place now. And I think these talks will drag out
for quite a while longer before we get further inco
mentally easy.
Speaker 5 (11:28):
Isn't that Tobin?
Speaker 6 (11:29):
Kind of what we expect across the board, that this
is going to be a process and they're going to
be frameworks that are going to be announced on July ninth.
Speaker 5 (11:35):
That will then kick the can down the road.
Speaker 6 (11:37):
And right now the market is banking on escalate to
de escalate, as John was talking about when it came
to a run, but also when it comes to trade
deals and what the path forward is likely to be
for the president.
Speaker 7 (11:48):
Yeah, so I think I am less optimistic about exactly
what these deals are going to deliver in terms of
market relevant relief than I think sort of hull blue
about deals in general and deal making as an enter
would suggest, you know, latnux indication that there's going to
be ten of these deals, and now we'll see they've
been teasing a bunch of deals right around the corner
for about two months now. But even if deals get
(12:10):
rolled out, I mean, again in Vietnam being in my
mind sort of the easiest or most important example, we
seem to be aiming towards a significant increase in reciprocal
terriff rates in that set of talks. So if we
roll out that deal, that's not like good news for
the market, it's not good news for I need to
take one name that was mentioned just a moment ago,
(12:30):
and similarly elsewhere, you know, like the sectoral tariffs have
been the sticking point primarily with Japan, with India to
some extent, they will be a huge sticking point with
the EU, although those talks are not quite as far along.
It doesn't really look to me like the US side
is going to give on those. And so if we
get a bunch of deals that don't drop the sectoral tariffs,
I don't really think that this represents a big kind
(12:50):
of dubbish impulse for markets.
Speaker 2 (12:54):
Type and appreciate your time and your opinion, Thank you, sir,
type of Marcus there before Free said it's not just
this morning the White House announcing imminem plans assigned trade
agreements with ten countries, with the focus now shifting to
the European Union. Marissa Adams of HSBC stand constructive, writing,
(13:17):
we have entered a new era for trade. We don't
expect things to go back to the way they were, Marissa,
joints is now for more. Marissa, good morning, it's going.
Speaker 1 (13:24):
To see you. Good morning.
Speaker 5 (13:25):
Thanks for having me.
Speaker 2 (13:26):
You've said this before. Trade doesn't stand still, but it
has changed. Can you just walk us all through how
it's changed.
Speaker 1 (13:32):
Yeah, And it's really interesting because we did see disruption
through the pandemic.
Speaker 5 (13:37):
You know, we've seen a different.
Speaker 1 (13:38):
Period of negotiations, but really posts April second, it's changed
that I am at both on the supply side and
the demand side. Now we've see these ten percent baseline
tariffs that are now in place, and I think it
is really clear. I always want to keep reminding people
they're there, so whilst we have a lot of negotiations,
ten percent is actually in place. But what's really changed
is the speed of negotiations. And you know, we've heard
(14:00):
this morning around the China deal. The Indian trade negotiators
are in DC this week. There's optimism around you deal,
and I think that this is actually quite a positive
sign that quite quickly we're looking to come to agreements. Now,
I would say there are deals in principle, they're not
free trade agreements, and free trade agreements, as we know,
take five to ten multiple years to really get down
to the nitty gritty detail. But at least this is
(14:21):
a positive sign that we're getting to some certainty For corporates.
Speaker 2 (14:24):
What are you seeing from individual corporations at the moment,
what are they doing. We've been having this debate with
economists and maybe it's better to have this debate with you.
Are you seeing them take the hit on margins, pass
it on to consumers, something in between? What are they doing?
Speaker 1 (14:34):
So it really depends sector bisector, and I think the
one industry where we've seen at the most is in
consumer retail. They have shorter order cycles, the lower margins,
So what we're seeing there is that some of them
are actually taking a hit to their bottom line. We've
seen a few companies come out this week around that.
The numbers, though still are fairly small, and I think
ten percent is something that co corporates can absorb. When
it starts to get to twenty five, thirty, forty fifty,
(14:57):
that's at a stage where even if you want to
compress your margins are going to have past pass costs
on to consumers.
Speaker 6 (15:02):
How much confidence do they have in terms of where
tariffs are going to be the highest i e. China,
that they're actually moving production. How quickly is that happening?
Speaker 1 (15:09):
And it's a really good question in the sense that
it depends if you are a shorter industry or a
longer order industry. So we've seen in the tech industry,
as an example, a lot of investment in semiconductors here
in the United States. But a factory isn't built overnight.
So we've got those commitments there, but five to six
seven years.
Speaker 5 (15:25):
To build a factory.
Speaker 1 (15:26):
You're only going to do that once you know there
is a certain path around how much more it will
cost to come on shore. And again, margins is key.
So some of those high margin tech industry tech businesses
in the OEMs, they can afford to come back to
the US. If you're in the ones that are a
little bit narrow, you're still having to compete with OEMs
in Asia for the ultimate end game. So that's where
it becomes a bit of a challenge. So we've seen movement,
(15:47):
and even over the past three four years there was
a lot of movement into Latin America into Canada's trading partners,
but even that is still five six seven years away
from really being fully up and in production.
Speaker 6 (15:58):
John alluded to this earlier, and it's a really good point,
the idea that ahead of any kind of tariff, there
was a stockpiling of goods at prices pre tariff, and
so we haven't really seen the ramifications either when it
comes to margins or when it comes to consumer pricing,
when does that run out?
Speaker 5 (16:14):
I mean, how long is that runway?
Speaker 1 (16:16):
Yeah, and Q one data actually, you know, you look
at Q one data, really strong results. The wto trade
index at quite a significant high that's seen, and that
is really due to that front loading. I think we'll
start to see some of the effects in Q four,
But industry by industry, So if you look at the
healthcare industry, I've been in New York this week speaking
to a lot of pharmaceutical companies and they have long
term contracts, so they are locked in for a year
(16:38):
and a half two years for some of that production,
so they may not actually see it for quite a time.
Same thing with the energy sector, where you have long
term energy sector contracts, but anything that is shorter order
and where they're able to adjust, they will. Now one
of your guests earlier was talking about the fact that
exporters don't really seem to be taking the hit at
this stage. That also might start to change because as
you're starting to negotiate with those suppliers, is there a
(16:59):
stage fore you you know, you've got to get them
to lower their prices a little bit to offset the tariffs.
So I think in Q four we'll start to see
some of those effects.
Speaker 4 (17:07):
The political cell though for tariffs is to bring manufacturing
not to Canada or Mexico but to the United States
is ten percent getting it done.
Speaker 1 (17:14):
It's starting to create those conversations. And I think in
addition to it's not just terriffs that's an impact. If
there's tax incentives, if there's other regulatory incentives. Now, the
other thing that is hasn't necessarily been expressed here is
also about resiliency, and we saw after the pandemic, corporates
were really focused on resiliency. How do you get those
items actually into the country. So there is a huge
benefit in the healthcare industry, for example, they have already
(17:36):
done region for regions, so where they are supplying medications
here in the United States, they've actually brought that production
on shore. So it is really starting to happen. It's
just that it's a little bit longer of an order
cycle and they need some more incentives to actually make
that investment.
Speaker 4 (17:48):
What about the sectoral tariffs that were potentially going to
get when it comes to things like pharmaceuticals that are
also going to be on what many would say more
sound legal footing.
Speaker 1 (17:57):
And that I'd say is more of a concern for
corporates than the percent. So where those land and how
that means they have to rejig some of their supply
chains is going to be a challenge, so.
Speaker 5 (18:06):
They're looking at that.
Speaker 1 (18:07):
What I would say is that the biggest challenge of
the moment is still this uncertainty. So you don't want
to make an investment. You're waiting to pause to move
through that, and as a result of that, companies are
delaying decisions.
Speaker 5 (18:18):
There's only so long you can delay.
Speaker 1 (18:20):
Now. I can't tell you whether three months is okay,
six months is okay, at nine months, but we will
start to see that and that is a challenge, especially
if you want to supply onshore and also create more
production capabilities in the United States.
Speaker 2 (18:33):
Just quickly, how has your business changed? How have you
and the team had to winnovate? What kind of solutions
have you had to come up with the corporations?
Speaker 1 (18:40):
So great question. Thank you very much for that. I
appreciate it. And we are having to do three things.
So the first thing is really doubling down on working
capital treasurers and CFOs. I think over six seven years ago,
we're lucky a little bit blessed in the low interest
certain environment with less volatility, But now they're looking for
more tools in their toolkits, so we're looking at ways
(19:01):
to help them finance receivables, payables, inventory as well. So
inventory finance is a relatively new product area where again
you weren't having to hold so much on shore now
you are. The second area is around services. So services
trade is twenty six percent of global trade. It's growing
at three times the break and actually we're seeing a
lot of traditional goods manufacturers going into services trade. So
(19:24):
we've started to create contract monetization facilities for that, financing
those long term contracts that again are not traditional goods trade,
but actually it is an exchange and trade of information.
Speaker 2 (19:34):
You've got ten seconds to time me the third one.
Speaker 1 (19:36):
The third one is we are working with them on
how they look at new corridors.
Speaker 5 (19:41):
So I think HSBC we're.
Speaker 1 (19:42):
In over sixty markets. We have local presence with their suppliers,
so we're helping them to advance the new markets.
Speaker 2 (19:48):
Perfect time, and we'll continue this conversation. I'm up against
the heartbreaks. We've got to go, but it's good to
see you. Thank you, thank you, very much. Marissa Adams
there of HSBC joining us NAT's have that conversation. Alejandro
Vindol of ned Davis Research, Al Hondre, welcome back to
(20:10):
the program. Just frame things from your standpoint. Where's this
labor market at right now? Chair and Pou spent hours
talking about an economy that was solid. Do you believe
it's solid?
Speaker 8 (20:21):
You know, of course solid is a relative. Colin again,
thank you for having me back again. So the way
I would frame the labor market, it's not a super
technical term.
Speaker 5 (20:29):
But I would say it's okay.
Speaker 8 (20:31):
So we've been seeing signs of softening through a broad
array of reports, whether it's the jobless claims from the
continuing Claims data we saw yesterday rose to the highest
since twenty eleven or twenty twenty one, I'm sorry, some
weakness and payrolls, more balancing in the labor market from
the Jolt survey. But if you look at most of
that data, it's still quite far from their recessionary thresholds.
(20:53):
So it still gives the Fed some time to sort
of sit and wait and see how a lot of
you know, these potential polye changes can impact growth and
inflation in the coming months.
Speaker 5 (21:02):
Alle hundred.
Speaker 6 (21:03):
Can we continue to see the sort of just weakening
but not weak trend When does weakening tip over into weak.
Speaker 8 (21:13):
Our base case scenario is kind of, you know, just
sort of going about a slower pace of growth, not
necessarily recession, which is I think of what you meant
by week. Ultimately the base that the main thing to
watch is the labor market. So we've kind of had
these slow downs and growth over the past few years,
some upticks, but we haven't fallen into that recession territory
(21:33):
really because of that resiliency and the labor market.
Speaker 5 (21:36):
So that's why we're watching it so closely. I don't know.
Speaker 8 (21:39):
Our base case is that we kind of muddle through
with about the same sort of this slowing in growth,
but still away from recessionary thresholds. But again it's very
dependent on policy. If most of the downside risks come
into fruition, whether it comes through tariffs or higher inflation
and increase uncertainty, we could see pronounced weakness in the
labor market. If care sort of settle at a more
(22:01):
reasonable level, we get the big beautiful bill with tax
cuts in some expansionary policy, then that could sort of
keep the labor market from falling over the edge. So
just in general, a lot of uncertainty, pretty much what
you guys were mentioning earlier.
Speaker 5 (22:15):
Which is what everyone's been talking about.
Speaker 6 (22:17):
We have a week until that July fourth self imposed
deadline for the one big beautiful bill where no one's
going to be going on vacation, essensibly because John canceled
it or amor canceled it earlier. But there is this
question going forward about how much the economic outlook could change,
not only with a week from now that July fourth deadline,
but also July ninth. How big is the sort of
range of scenarios for you.
Speaker 8 (22:38):
Well, again, the base case and the highest probability of
more than fifty percent is just slowing growth and then
either stable or slightly higher inflation, So kind of what
you guys mentioned before, that stagflation light. But there are
some tail risks that you could maybe see things get
extraordinarily better. Right, Let's just say we do miraculously get
(22:58):
these ninety deals in ninety day within the next couple
of weeks or less than that, actually within one week
we get the big beautiful bill, that could be you know,
maybe a tail positive upside surprise, but I think it's
a lesser likely scenario. And then I talked before about
the potential recessionary scenario, but I do think that's lower
as well. So yeah, base case actually very in line
(23:19):
with what the FED has said, is a slow down
in growth below potential but still positive and slightly higher inflation.
Speaker 4 (23:26):
Well, you have individuals who are saying, like Michael Hartnett
this morning, a pivot from tariff to text cuts, raycuts
could lead to higher risk of a bubble in the
second half of the year. But you think the second
half of the year is still going to be talking
about policy uncertainty.
Speaker 5 (23:39):
In Washington, d C. Yeah, I do think it'll.
Speaker 8 (23:43):
Part of it is I don't think these tariff deals
are going to be done that quickly, so there's still
going to be some back and forth and some uncertainty.
We should have a little more uncertainty from the big
beautiful bill. I would suspect that's probably going to get
approved at least over the next month or so, or
we get some closure there. But I do think the
tariff uncertainty will continue, and the impact it's going to
(24:05):
have on inflation will take some time.
Speaker 5 (24:07):
So I think we'll be watching the data.
Speaker 8 (24:09):
And then there's also a lot of other policies that
have happened since the beginning of the year. We had
the Doge cuts at the beginning of the year that
could have reciprocal impacts on state and local governments. What
we started seeing at the federal level, and then also
the immigration policies. What are they going to do to
the labor force? What are they going to do to growth?
So it's not just those tariffs and big beautiful bill,
but there's a lot of other things going on that
(24:32):
may just have more of a delayed ripple effect as
the year progresses, and just contributing uncertainty.
Speaker 4 (24:37):
How quickly do we need to get to some clarity
and all these issues for the US to maintain this exceptionalism.
Speaker 8 (24:43):
Well exceptionalism, the way I describe it is just the fact,
especially compared to the rest of the developed world, we
just have the potential to grow so much faster.
Speaker 5 (24:54):
And it's pretty much just based on two things.
Speaker 8 (24:56):
We have generally faster labor force growth, we have faster
productivity growth, and over short periods of time, it's really
hard to see the effect, say the long term effect
on the long term growth of those items. But if
we were to see a huge production in our labor
force because of maybe some of the immigration policy, some
of the early retirement we've been seeing, that could create
(25:17):
a downside risk to long term US exceptionalism and growth.
And then, of course tariffs right holding all lost constant
tariffs reduce competitiveness, They reduce the gains from comparative advantage,
and could reduce that strong productivity the US has. On
the other end, we're also just generally more productive than
a lot of the developed world because we're less regulated,
(25:38):
we have more fluid labor markets, we have lower taxes.
Big Beautiful Bill will probably contribute to that as well.
We're also energy independent, so there's a lot of things
that still work in our favor, but there's a few
policy items that could whittle down some of that advantage
that we've had for several years now.
Speaker 2 (25:54):
Every time I see you, I want to move to
the sumbub. Every single time I one that grill, I
want that terrace, the trees in the back.
Speaker 5 (26:02):
I think she should run architectural idea.
Speaker 2 (26:03):
We move into Florida.
Speaker 5 (26:04):
Yeah, oh gosh, it's always beautiful. It's like perfect.
Speaker 2 (26:08):
We're moving to Florida. We're moving one hundred grad Dock.
I have met Davis Freesaid. 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 app.
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 am Marie 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
(00:33):
Bloomberg Terminal and the Bloomberg Business App. Joining us now
to discuss the state of energy, not just domestically but worldwide,
the seventeenth United States Secretary of Energy, Chris Right, Mister Secretary,
welcome back to the program sir, looking forward to an
in dev conversation with you about what you cover every
single day. So, first of all, just on a run
so we can deal with that. What is the current
stance of the US officially on the use and import
(00:55):
of the running crude?
Speaker 3 (00:58):
Oh, the sanctions are still in pl no change there.
I think the Trump what President Trump was referring to
there is Hey, if we make a large piece and
sanctions come off, aron can flourish.
Speaker 2 (01:11):
If you could a decent understanding the miss the Secretary
of just how much of running crud is being consumed
and impulsive already as things stand, despite the sanctions.
Speaker 3 (01:21):
We do so, a RAM produces about three and a
half million barrels a day, and they've been import they've
been exporting about one and a half million barrels of
oil a day, and the maximum pressure campaign that President
Trump did in his last term tamp that down to
only one hundred or two hundred thousand barrels a day.
They cut off ninety percent of it. That was a
possible strategy here as well, but hadn't been implemented yet.
(01:43):
We tried to give negotiations a chance see if we
can do it without maximum pressure.
Speaker 4 (01:48):
So is maximum pressure still on the table or is
the ad ministration walking away from that?
Speaker 3 (01:55):
Well, the goal right now, of course, is to get
a peace deal, is to get peace into the middle
and spread the focus on commerce not conflict. So no,
it's not actively being discussed right now, but the situation
is still dynamic there. We want to see peace, prosperity
and security as the future of the Middle East.
Speaker 4 (02:12):
When it comes to what's going on in Iran as well.
In terms of the IAEA, the Foreign Minister said yesterday
that basically they have no plans to having the Director
General Raphael Grossy in Iran and doesn't sound like they're
willing to give the inspectors the space, time and access
they need to look at these nuclear facilities.
Speaker 5 (02:29):
What is the United States response to that?
Speaker 3 (02:33):
Yeah, look, this is early on.
Speaker 5 (02:35):
This is early on.
Speaker 3 (02:37):
Iran has just had most of its nuclear program entirely
devastated by Israel and the United States. They're a little
bit humbled, they're a little bit shell shocked right now.
So yeah, I wouldn't put too much weight on those words,
but a final peace steal certainly has to have confidence
in a dismantlement of the Iranian nuclear program and that
people can have security it won't be resurrected in the future.
Speaker 4 (02:58):
You deal with a lot of nuclear at the Energy
Department before the US strikes, but after the Israeli strikes.
Raphael Grossi told us that the IAEA cannot verify with
the four hundred kilograms of sixty percent enriched uranium in
Isfahan was currently where it was?
Speaker 5 (03:16):
Was it still there? Do the Irradians take it out?
Speaker 4 (03:18):
Doesn't the IAEA need to go in and verify where
this enriched uranium is.
Speaker 3 (03:26):
I think that's quite likely part of a future negotiation
or a future deal.
Speaker 2 (03:30):
Miss the Secretary. Of course, this is just one part
of the conversaction and energy right now. I can tell
you earlier on this morning, there's a report that you
might have seen that came from reuts As. Actually the
Administraction is readying a package of executive actions aimed a
boosting energy supply to power the US expansion of artificial energy.
Mister Secretary, what can you share with this this morning?
Speaker 3 (03:49):
Yeah, Look, artificial intelligence is an incredibly exciting development that's coming.
It is going to revolutionize not just our economy but
our health drug discovery, but it also plays huge role
in national defense, which is why I've compared it to
the Manhattan Project. It's critical, it'll be transformative, and we
must lead. We cannot be second place in AI. And
(04:10):
to do that, we have the scientist, we have the capital.
You have to have a huge growth in US electricity production.
So we need to get the morass in the way
that's really hobbled the American energy system for the last
four years, and we got to unleash American investment in
American capitalism. That's going to take building a lot of
new power generation.
Speaker 6 (04:29):
Mister Secretary, to build on that idea, what type of
energy production are you looking at? I know that New
York State was just looking at potentially creating a new
nuclear energy plan.
Speaker 5 (04:40):
Is that one of the paths of travel.
Speaker 6 (04:42):
That you think is going to be pivotal for the
United States?
Speaker 3 (04:47):
Absolutely, look to have a secure power glided into power AI.
You need ninety nine point percent of the time on
power and so that today our biggest source of reliable
power today by far as natural gas. Our second biggest
source is nuclear, and our third biggest source right behind
that is coal. So those are the three keys to
(05:08):
the future of our electricity grid. Nuclear we haven't built
much for a while, so I was thrilled to see
the governor's announcement embracing nuclear in New York. We have
the governors of Tennessee and Georgia and Virginia passionate about
getting new nuclear built in their states. So yes, one
of our goals in this administration is is to launch
the American nuclear renaissance.
Speaker 6 (05:28):
Mister Secretary, how do you encourage this type of investment
at a time where the goal of the President has
also been to lower prices. And we've seen this particularly
in the energy space, where the President has been very
vocal about the desire to see energy prices lower. And
this has led to a number of oil rigs in
the shell patch to be taken offline because it isn't
profitable for a lot of these companies to be producing
(05:51):
as much as they used to.
Speaker 5 (05:52):
How do you sort of square that circle?
Speaker 3 (05:56):
Yes, yeah, prices are supply and demand. Prices are supply
and demand. But what we're doing in the administration is
everything possible to lower the cost to produce energy in
the United States. Cheaper to produce a barrel of oil
or an mcf and natural gas, you know, or a
ton of coal or a kilo one hour of electricity
from nuclear plants. So that's deregulatory, that's common sense regulation
(06:18):
focused on health and safety and the environment, but not
the nonsense that just burdens burdens energy producers. Nuclear will
be a little bit more expensive at the start, but
I think that cost will be borne by hyperscalers. They
want to see nuclear rearrives and they'll sign higher power
purchase agreements to help kickstart nuclear we need to grow
(06:39):
the energy supply and keep cost down. You're right, that's
a challenge. You're right to bring that issue up, and
that's what I work on seven days a week.
Speaker 2 (06:47):
Let's get at the regulatory burden. We're lucky to have
someone in your seat that's actually ran an energy company
in this country. As you know, permitting it is really
difficult across many dimensions. You have to go state by
state and the things you can do at the executive
level to make this a lot easier. Could you describe
those kind of things.
Speaker 3 (07:06):
That there are a number of things, and it is
why we created the National Energy Dominance Council. That's really
to bring people leaders from all different agencies that impact
the ability to build things in our country together and
say what We talked to producers and say, you know,
why aren't you building that? And they'll give us a
list of seven things. It'll take us seven years, and
(07:26):
we're really worried about this one and that one. So
we dive into those issues and say how can we
simplify that. But I'll highlight a Supreme Court decision from
just a few weeks ago on to get more oil
out of Utah via train that've been held up for
years through suits over NEPA, and the Supreme Court ruled
eight to zero. Every Supreme Court justice involved in the
(07:48):
case said, yes, we need to put NEPA back in
its box. It's to check to make sure the environment's
being considered. It's not to have years long, endless delays
because if you delay something, you make it more uncertain,
more expensive, and simply less things get built.
Speaker 2 (08:03):
Miss the Secretary, appreciate your time, sir, as always to
break down the situation. Hopefully we can engage on this
conversation again, Chris. Right there, the Energy Secretary of the
United States, Tobin Marcus of All for Research, joins us
now for more. Tobin, welcome to the program. I just
(08:25):
want to pick up on the language, the words used
by the COMMA secretary. How would lot mak we inked
the deal? What's the deal? Do you have any details whatsoever?
Speaker 7 (08:34):
This seems to be the third time for the giving
this particular deal because it seems to be a solidification
of the framework to get back to the Geneva and
census that was reached about two months ago. So it's
good to have that lockdown. But it does not really
look to me like that's delivering any kind of incremental
relief or incremental steps forward. It's just solidifying the set
(08:54):
of understandings that was required to keep the trading relationship
from going further off track in terms of access to
RARR earths on their side and the rollback of some
of the incremental export controls on our side.
Speaker 4 (09:04):
I was at those talks in London. I still can't
get from this administration and idea of what the language
looks like. Who signed it. The Chinese say earlier this
morning the US side will correspondingly cancel a series of
restrictive measures taken against China, which measures.
Speaker 7 (09:20):
So it seems from my perspective that the Chinese have
been primarily focused on the further expansion of export controls
and took place after the Geneva meeting. So certainly the
restrictions on natural gas liquids, on aerospace, on EA software,
those are I think are clearly in the set of
things that are going to be rolled off. The initial
vote of contention from the Chinese side was this declaration
(09:43):
that anyone using baway send chips is in violation of
US export controls, that the uside characterized as a restatement
of existing policy, and the Chinese side characterized as incremental
expansion of export control. So that, in my mind is
the question. I don't think that the US has committed
to rolling that back, but that I think is sort
of the final piece of wiggle room in how we
(10:04):
understand this.
Speaker 5 (10:05):
This isn't a trade deal.
Speaker 4 (10:06):
This is just an understanding of some of the de
escalation we've seen in these talks in Geneva and London.
So where does this leave the relationship more long term,
for more of a comprehensive agreement.
Speaker 7 (10:17):
It still looks very challenging to me. I think that
the bullish narrative in markets immediately after the Geneva meeting
was we've come down to thirty but of that thirty,
twenty percent is FEDYL related, and that should be an
easy thing for the Chinese side to alleviate Trump's concern
on you know, this is an authoritarian society, Well like
we should just think that they can flip a switch
(10:38):
and do whatever they need to do on export controls
on tentinal precursors to satisfy the US side. I think
that's easier said than done, even to the extent that
they can fully lay our substantive concerns, you know. I
mean there have been multiple rounds of headlines from Boomberg
among others about Vietnam aiming towards a twenty to twenty
five percent teriff rate in their talks.
Speaker 5 (10:58):
Even if we've.
Speaker 7 (10:58):
Reached a deal, that's what the to look consist of,
and we're taking Vietnam to twenty five, it does not
really make sense to take off that twenty percent Fennel
tariff and China at ten. It would be very upside
down to go after Vietnam, where the main concerns have
been around them as sort of an outlet for Chinese
industrial over capacity and transshipping and so forth, and hit
them harder than China itself. So I think we have
(11:19):
a long way to go. I mean, the Chinese love
slow delivered to mechanisms, and that's what we have in
place now. And I think these talks will drag out
for quite a while longer before we get further inco
mentally easy.
Speaker 5 (11:28):
Isn't that Tobin?
Speaker 6 (11:29):
Kind of what we expect across the board, that this
is going to be a process and they're going to
be frameworks that are going to be announced on July ninth.
Speaker 5 (11:35):
That will then kick the can down the road.
Speaker 6 (11:37):
And right now the market is banking on escalate to
de escalate, as John was talking about when it came
to a run, but also when it comes to trade
deals and what the path forward is likely to be
for the president.
Speaker 7 (11:48):
Yeah, so I think I am less optimistic about exactly
what these deals are going to deliver in terms of
market relevant relief than I think sort of hull blue
about deals in general and deal making as an enter
would suggest, you know, latnux indication that there's going to
be ten of these deals, and now we'll see they've
been teasing a bunch of deals right around the corner
for about two months now. But even if deals get
(12:10):
rolled out, I mean, again in Vietnam being in my
mind sort of the easiest or most important example, we
seem to be aiming towards a significant increase in reciprocal
terriff rates in that set of talks. So if we
roll out that deal, that's not like good news for
the market, it's not good news for I need to
take one name that was mentioned just a moment ago,
(12:30):
and similarly elsewhere, you know, like the sectoral tariffs have
been the sticking point primarily with Japan, with India to
some extent, they will be a huge sticking point with
the EU, although those talks are not quite as far along.
It doesn't really look to me like the US side
is going to give on those. And so if we
get a bunch of deals that don't drop the sectoral tariffs,
I don't really think that this represents a big kind
(12:50):
of dubbish impulse for markets.
Speaker 2 (12:54):
Type and appreciate your time and your opinion, Thank you, sir,
type of Marcus there before Free said it's not just
this morning the White House announcing imminem plans assigned trade
agreements with ten countries, with the focus now shifting to
the European Union. Marissa Adams of HSBC stand constructive, writing,
(13:17):
we have entered a new era for trade. We don't
expect things to go back to the way they were, Marissa,
joints is now for more. Marissa, good morning, it's going.
Speaker 1 (13:24):
To see you. Good morning.
Speaker 5 (13:25):
Thanks for having me.
Speaker 2 (13:26):
You've said this before. Trade doesn't stand still, but it
has changed. Can you just walk us all through how
it's changed.
Speaker 1 (13:32):
Yeah, And it's really interesting because we did see disruption
through the pandemic.
Speaker 5 (13:37):
You know, we've seen a different.
Speaker 1 (13:38):
Period of negotiations, but really posts April second, it's changed
that I am at both on the supply side and
the demand side. Now we've see these ten percent baseline
tariffs that are now in place, and I think it
is really clear. I always want to keep reminding people
they're there, so whilst we have a lot of negotiations,
ten percent is actually in place. But what's really changed
is the speed of negotiations. And you know, we've heard
(14:00):
this morning around the China deal. The Indian trade negotiators
are in DC this week. There's optimism around you deal,
and I think that this is actually quite a positive
sign that quite quickly we're looking to come to agreements. Now,
I would say there are deals in principle, they're not
free trade agreements, and free trade agreements, as we know,
take five to ten multiple years to really get down
to the nitty gritty detail. But at least this is
(14:21):
a positive sign that we're getting to some certainty For corporates.
Speaker 2 (14:24):
What are you seeing from individual corporations at the moment,
what are they doing. We've been having this debate with
economists and maybe it's better to have this debate with you.
Are you seeing them take the hit on margins, pass
it on to consumers, something in between? What are they doing?
Speaker 1 (14:34):
So it really depends sector bisector, and I think the
one industry where we've seen at the most is in
consumer retail. They have shorter order cycles, the lower margins,
So what we're seeing there is that some of them
are actually taking a hit to their bottom line. We've
seen a few companies come out this week around that.
The numbers, though still are fairly small, and I think
ten percent is something that co corporates can absorb. When
it starts to get to twenty five, thirty, forty fifty,
(14:57):
that's at a stage where even if you want to
compress your margins are going to have past pass costs
on to consumers.
Speaker 6 (15:02):
How much confidence do they have in terms of where
tariffs are going to be the highest i e. China,
that they're actually moving production. How quickly is that happening?
Speaker 1 (15:09):
And it's a really good question in the sense that
it depends if you are a shorter industry or a
longer order industry. So we've seen in the tech industry,
as an example, a lot of investment in semiconductors here
in the United States. But a factory isn't built overnight.
So we've got those commitments there, but five to six
seven years.
Speaker 5 (15:25):
To build a factory.
Speaker 1 (15:26):
You're only going to do that once you know there
is a certain path around how much more it will
cost to come on shore. And again, margins is key.
So some of those high margin tech industry tech businesses
in the OEMs, they can afford to come back to
the US. If you're in the ones that are a
little bit narrow, you're still having to compete with OEMs
in Asia for the ultimate end game. So that's where
it becomes a bit of a challenge. So we've seen movement,
(15:47):
and even over the past three four years there was
a lot of movement into Latin America into Canada's trading partners,
but even that is still five six seven years away
from really being fully up and in production.
Speaker 6 (15:58):
John alluded to this earlier, and it's a really good point,
the idea that ahead of any kind of tariff, there
was a stockpiling of goods at prices pre tariff, and
so we haven't really seen the ramifications either when it
comes to margins or when it comes to consumer pricing,
when does that run out?
Speaker 5 (16:14):
I mean, how long is that runway?
Speaker 1 (16:16):
Yeah, and Q one data actually, you know, you look
at Q one data, really strong results. The wto trade
index at quite a significant high that's seen, and that
is really due to that front loading. I think we'll
start to see some of the effects in Q four,
But industry by industry, So if you look at the
healthcare industry, I've been in New York this week speaking
to a lot of pharmaceutical companies and they have long
term contracts, so they are locked in for a year
(16:38):
and a half two years for some of that production,
so they may not actually see it for quite a time.
Same thing with the energy sector, where you have long
term energy sector contracts, but anything that is shorter order
and where they're able to adjust, they will. Now one
of your guests earlier was talking about the fact that
exporters don't really seem to be taking the hit at
this stage. That also might start to change because as
you're starting to negotiate with those suppliers, is there a
(16:59):
stage fore you you know, you've got to get them
to lower their prices a little bit to offset the tariffs.
So I think in Q four we'll start to see
some of those effects.
Speaker 4 (17:07):
The political cell though for tariffs is to bring manufacturing
not to Canada or Mexico but to the United States
is ten percent getting it done.
Speaker 1 (17:14):
It's starting to create those conversations. And I think in
addition to it's not just terriffs that's an impact. If
there's tax incentives, if there's other regulatory incentives. Now, the
other thing that is hasn't necessarily been expressed here is
also about resiliency, and we saw after the pandemic, corporates
were really focused on resiliency. How do you get those
items actually into the country. So there is a huge
benefit in the healthcare industry, for example, they have already
(17:36):
done region for regions, so where they are supplying medications
here in the United States, they've actually brought that production
on shore. So it is really starting to happen. It's
just that it's a little bit longer of an order
cycle and they need some more incentives to actually make
that investment.
Speaker 4 (17:48):
What about the sectoral tariffs that were potentially going to
get when it comes to things like pharmaceuticals that are
also going to be on what many would say more
sound legal footing.
Speaker 1 (17:57):
And that I'd say is more of a concern for
corporates than the percent. So where those land and how
that means they have to rejig some of their supply
chains is going to be a challenge, so.
Speaker 5 (18:06):
They're looking at that.
Speaker 1 (18:07):
What I would say is that the biggest challenge of
the moment is still this uncertainty. So you don't want
to make an investment. You're waiting to pause to move
through that, and as a result of that, companies are
delaying decisions.
Speaker 5 (18:18):
There's only so long you can delay.
Speaker 1 (18:20):
Now. I can't tell you whether three months is okay,
six months is okay, at nine months, but we will
start to see that and that is a challenge, especially
if you want to supply onshore and also create more
production capabilities in the United States.
Speaker 2 (18:33):
Just quickly, how has your business changed? How have you
and the team had to winnovate? What kind of solutions
have you had to come up with the corporations?
Speaker 1 (18:40):
So great question. Thank you very much for that. I
appreciate it. And we are having to do three things.
So the first thing is really doubling down on working
capital treasurers and CFOs. I think over six seven years ago,
we're lucky a little bit blessed in the low interest
certain environment with less volatility, But now they're looking for
more tools in their toolkits, so we're looking at ways
(19:01):
to help them finance receivables, payables, inventory as well. So
inventory finance is a relatively new product area where again
you weren't having to hold so much on shore now
you are. The second area is around services. So services
trade is twenty six percent of global trade. It's growing
at three times the break and actually we're seeing a
lot of traditional goods manufacturers going into services trade. So
(19:24):
we've started to create contract monetization facilities for that, financing
those long term contracts that again are not traditional goods trade,
but actually it is an exchange and trade of information.
Speaker 2 (19:34):
You've got ten seconds to time me the third one.
Speaker 1 (19:36):
The third one is we are working with them on
how they look at new corridors.
Speaker 5 (19:41):
So I think HSBC we're.
Speaker 1 (19:42):
In over sixty markets. We have local presence with their suppliers,
so we're helping them to advance the new markets.
Speaker 2 (19:48):
Perfect time, and we'll continue this conversation. I'm up against
the heartbreaks. We've got to go, but it's good to
see you. Thank you, thank you, very much. Marissa Adams
there of HSBC joining us NAT's have that conversation. Alejandro
Vindol of ned Davis Research, Al Hondre, welcome back to
(20:10):
the program. Just frame things from your standpoint. Where's this
labor market at right now? Chair and Pou spent hours
talking about an economy that was solid. Do you believe
it's solid?
Speaker 8 (20:21):
You know, of course solid is a relative. Colin again,
thank you for having me back again. So the way
I would frame the labor market, it's not a super
technical term.
Speaker 5 (20:29):
But I would say it's okay.
Speaker 8 (20:31):
So we've been seeing signs of softening through a broad
array of reports, whether it's the jobless claims from the
continuing Claims data we saw yesterday rose to the highest
since twenty eleven or twenty twenty one, I'm sorry, some
weakness and payrolls, more balancing in the labor market from
the Jolt survey. But if you look at most of
that data, it's still quite far from their recessionary thresholds.
(20:53):
So it still gives the Fed some time to sort
of sit and wait and see how a lot of
you know, these potential polye changes can impact growth and
inflation in the coming months.
Speaker 5 (21:02):
Alle hundred.
Speaker 6 (21:03):
Can we continue to see the sort of just weakening
but not weak trend When does weakening tip over into weak.
Speaker 8 (21:13):
Our base case scenario is kind of, you know, just
sort of going about a slower pace of growth, not
necessarily recession, which is I think of what you meant
by week. Ultimately the base that the main thing to
watch is the labor market. So we've kind of had
these slow downs and growth over the past few years,
some upticks, but we haven't fallen into that recession territory
(21:33):
really because of that resiliency and the labor market.
Speaker 5 (21:36):
So that's why we're watching it so closely. I don't know.
Speaker 8 (21:39):
Our base case is that we kind of muddle through
with about the same sort of this slowing in growth,
but still away from recessionary thresholds. But again it's very
dependent on policy. If most of the downside risks come
into fruition, whether it comes through tariffs or higher inflation
and increase uncertainty, we could see pronounced weakness in the
labor market. If care sort of settle at a more
(22:01):
reasonable level, we get the big beautiful bill with tax
cuts in some expansionary policy, then that could sort of
keep the labor market from falling over the edge. So
just in general, a lot of uncertainty, pretty much what
you guys were mentioning earlier.
Speaker 5 (22:15):
Which is what everyone's been talking about.
Speaker 6 (22:17):
We have a week until that July fourth self imposed
deadline for the one big beautiful bill where no one's
going to be going on vacation, essensibly because John canceled
it or amor canceled it earlier. But there is this
question going forward about how much the economic outlook could change,
not only with a week from now that July fourth deadline,
but also July ninth. How big is the sort of
range of scenarios for you.
Speaker 8 (22:38):
Well, again, the base case and the highest probability of
more than fifty percent is just slowing growth and then
either stable or slightly higher inflation, So kind of what
you guys mentioned before, that stagflation light. But there are
some tail risks that you could maybe see things get
extraordinarily better. Right, Let's just say we do miraculously get
(22:58):
these ninety deals in ninety day within the next couple
of weeks or less than that, actually within one week
we get the big beautiful bill, that could be you know,
maybe a tail positive upside surprise, but I think it's
a lesser likely scenario. And then I talked before about
the potential recessionary scenario, but I do think that's lower
as well. So yeah, base case actually very in line
(23:19):
with what the FED has said, is a slow down
in growth below potential but still positive and slightly higher inflation.
Speaker 4 (23:26):
Well, you have individuals who are saying, like Michael Hartnett
this morning, a pivot from tariff to text cuts, raycuts
could lead to higher risk of a bubble in the
second half of the year. But you think the second
half of the year is still going to be talking
about policy uncertainty.
Speaker 5 (23:39):
In Washington, d C. Yeah, I do think it'll.
Speaker 8 (23:43):
Part of it is I don't think these tariff deals
are going to be done that quickly, so there's still
going to be some back and forth and some uncertainty.
We should have a little more uncertainty from the big
beautiful bill. I would suspect that's probably going to get
approved at least over the next month or so, or
we get some closure there. But I do think the
tariff uncertainty will continue, and the impact it's going to
(24:05):
have on inflation will take some time.
Speaker 5 (24:07):
So I think we'll be watching the data.
Speaker 8 (24:09):
And then there's also a lot of other policies that
have happened since the beginning of the year. We had
the Doge cuts at the beginning of the year that
could have reciprocal impacts on state and local governments. What
we started seeing at the federal level, and then also
the immigration policies. What are they going to do to
the labor force? What are they going to do to growth?
So it's not just those tariffs and big beautiful bill,
but there's a lot of other things going on that
(24:32):
may just have more of a delayed ripple effect as
the year progresses, and just contributing uncertainty.
Speaker 4 (24:37):
How quickly do we need to get to some clarity
and all these issues for the US to maintain this exceptionalism.
Speaker 8 (24:43):
Well exceptionalism, the way I describe it is just the fact,
especially compared to the rest of the developed world, we
just have the potential to grow so much faster.
Speaker 5 (24:54):
And it's pretty much just based on two things.
Speaker 8 (24:56):
We have generally faster labor force growth, we have faster
productivity growth, and over short periods of time, it's really
hard to see the effect, say the long term effect
on the long term growth of those items. But if
we were to see a huge production in our labor
force because of maybe some of the immigration policy, some
of the early retirement we've been seeing, that could create
(25:17):
a downside risk to long term US exceptionalism and growth.
And then, of course tariffs right holding all lost constant
tariffs reduce competitiveness, They reduce the gains from comparative advantage,
and could reduce that strong productivity the US has. On
the other end, we're also just generally more productive than
a lot of the developed world because we're less regulated,
(25:38):
we have more fluid labor markets, we have lower taxes.
Big Beautiful Bill will probably contribute to that as well.
We're also energy independent, so there's a lot of things
that still work in our favor, but there's a few
policy items that could whittle down some of that advantage
that we've had for several years now.
Speaker 2 (25:54):
Every time I see you, I want to move to
the sumbub. Every single time I one that grill, I
want that terrace, the trees in the back.
Speaker 5 (26:02):
I think she should run architectural idea.
Speaker 2 (26:03):
We move into Florida.
Speaker 5 (26:04):
Yeah, oh gosh, it's always beautiful. It's like perfect.
Speaker 2 (26:08):
We're moving to Florida. We're moving one hundred grad Dock.
I have met Davis Freesaid. 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
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