May 9, 2025 • 26 mins
- Peter Navarro, Senior Counselor: Trade & Manufacturing at the White House
- Alicia Levine, Head: Investment Strategy and Equities at BNY Wealth
- Sarah Bianchi, Senior Managing Director at Evercore ISI
- Dan Ives, Global Head: Technology at Wedbush Securities
Peter Navarro, Senior Counselor: Trade & Manufacturing at the White House, joins for a discussion on the US_UK trade deal and other potential trade agreements. Alicia Levine, Head: Investment Strategy and Equities at BNY Wealth, discusses the outlook for the S&P 500 and equities as the US reaches a trade deal with the UK and continues negotiations with other countries. Sarah Bianchi, Senior Managing Director at Evercore ISI, talks about the latest on US trade policy. Dan Ives, Global Head: Technology at Wedbush Securities, talks Big Tech and how US giants will continue to fare through 2025.
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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
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. Joining us now, very
pleased to say pin and Navarro, the Director of the
Office of Trade and Manufacturing Policy at the White House
Dot Navarro, it's been too long, sir.
Speaker 3 (00:43):
It's good to see you. Thanks for being here.
Speaker 1 (00:46):
Been a long time. Joan, it is good to see
you too, sir.
Speaker 3 (00:49):
Thank you, sir.
Speaker 1 (00:49):
First class digs here, my friend.
Speaker 2 (00:52):
Well, I'm pleased we're looking after you. Let's kick it
off with these talks this weekend. We just heard from
the President just moments ago, and he mentioned an eighty
percent tariff might be about right. Some to the Treasury secretary.
We understand you won't want to get ahead of those negotiations.
But I just wonder could you offer some clarity on
what about right means when the President says eighty percent
TAF on China seems right, seems right for the talks
this weekend, or seems right for the foreseeable future.
Speaker 1 (01:16):
Yeah, it was one of three people that was with
the White House the first term, for all four years.
One of the big reasons is I never got ahead
of the president. Let me tell you about Geneva, which
is kind of I've got a very warm memories. It
was my finest hour as a negotiator. I went there
(01:37):
to lead the negotiations for the United Postal Union reforms
that essentially got China rates fear to We save billions
on that. But I mentioned this because Geneva has symbolic
value in this negotiation. It is the headquarters of the
World Trade Organization. And the scariest thing I ever saw
(01:59):
in Geneva was the size of the China delegation at
the World Trade Organization. And they've played the WTO like
a fiddle. So let's see what happens tomorrow. I'd be
happy to come back on Monday do the debrief, but
I don't want to get ahead of the boss or
Scott Besting. And don't forget Scott's going with Jamison Greer,
(02:20):
the United States Trade representative. He's the guy who learned
that the knee of bob bliteheis for the first time around,
was there for all the China stuff. And he's the
guy who was the architect, along with Howard Lutnik of
the UK deal. So let's see what happens.
Speaker 3 (02:36):
It's in the very best.
Speaker 2 (02:37):
We'll sell the pensylin the weekend for the markets. Well,
pencil in appearance with you for Monday. No worries about that.
I'm looking forward to that conversation. Just got into the
weekend and reflected on your experience dealing with the Chinese
then on the UK. This is not the same relationship.
The trade relationship is tremendously unbalanced and has been for
a long long time. Can you frame for us how
difficult it has been previously for you to negotiate with
(02:58):
the Chinese and how much long it could take with
a Chinese relative to set the UK and other tripatas well.
Speaker 1 (03:06):
I could tell you. I think I sat face to
face with the China team maybe seven times during the
first term and twice Shi Jinping was there. It was
G seven. Just give me the G twenty both. I
think it was Tokyo and h and our Buenos Aires.
(03:27):
What's interesting, So what's so interesting to me, Jonathan about
China is that they have continuity. The same people are
going to be in Geneva or the same people back then.
And you know, our our regimes change, we we have
different governments and things like that. But they have the
advantage of that kind of continuity. But look, it'll be
(03:51):
interesting again. I don't I don't want to get ahead
of Scott and Jamison or the president. I think let's
see what happens. You know, my role, and we've got
fifteen countries we run enormous trade deficits. With that, we've
got to renegotiate the whole structure of those deals. And
there's another one hundred countries that cheat us in some
(04:13):
ways but smaller ways. My role in the administration on
all of this is to do the background analytics to
see how each country's cheating us, which basically sets up
the terms of the negotiation. And every country like fingerprints,
like India's the Maharajia tariffs, they have the highest tariffs.
(04:33):
Of any of our major trading partners, Japan is the
most clever at protecting its own markets with a combination
of domestic protectionism non tariff barriers. You know Germany they
have auto tariffs at ten percent, We have them at
two and a half percent, but they also have the
VAT tax which acts as another twenty nine to what
(04:56):
is it nineteen percent tariff and in exports subject. So
what I do is do the background and look at
kind of how these countries are doing what to us,
and we get great deals from there. People. I think
the UK deal is very interesting. I think the significance
is not just that it's a deal, but that's a
(05:17):
template for the future deals. What we do done is
there's like four or five verticals we look at. It's
the tariffs, the non tariff barriers, the digital taxes, and
then the various kinds of cheating, the dumping, the currency
manipulation and things like that. And then from there we
assess what the asks are, what we need and go
(05:39):
forward from there to see you get to see a
steady wave of deals. The USTR building is right across
the street from the White House. It's got the most
staff negotiating these deals, and it's like you go to
the Delhi and you have to take a number and
get in line. Every day there's delegations from around the
(06:02):
world lining up to meet with Jamison Greer and Howard
Ludnick and I've seen I looked yesterday at the schedule.
Was kind of fun out the July and it's just
you know, one after the others.
Speaker 4 (06:13):
Well, Peter looking at the countries lining up. One key
aspect of the UK deal was of course bringing down
the auto tariff to ten percent. So right now you
have a tariff rate that's lower for Bentley's, which is
a car that most American families can't afford made in
the UK, where Chevys have a higher rate if they're
made in Canada or Mexico. Is there an expectation that
(06:34):
the next trade deals auto tariffs will be coming down
those rates.
Speaker 1 (06:41):
It's going to be country by country. I mean, the
beauty about the UK is that very small amount of
exports they send us and we have a hard cap
I think it's one hundred thousand units where it goes
right back up to twenty five percent. And again we're
trying to do something that's mutually beneficial to both countries
(07:04):
to get to a better place. Well at the same
time changing the level of the playing field so that
it is more level. I think for me, the beauty
of the UK deal. Besides that was all of the
good stuff we had for AG. I mean, one of
the problems we have is this non tariff barriers like FIDO,
(07:26):
sanitary standards, what's that that's like these things they do
to keep our pork out, our chicken out, our beef.
Right now we're going to be able to sell a
lot more beef, poultry, dairy, and ethanol. I mean, they
had a really high tariff, almost a lockout tariff on
ethanol and that's made from corn. So folks in Iowa
(07:49):
are very happy about that. So this is the way
we're going to go forward on net The United States
is going to be far better off, and all we're
doing is trying to level the playing fielding. I saw
the EU kind of rattling sabers I think it was
yesterday about some kind of retaliation, and I would just
(08:10):
say to anybody who's who's in the European Union, I mean,
how can you look a US in the face and
threaten us when your tariffs are higher. You have lost
cases repeatedly at the wt O on US selling you
things like beef and poultry, and you won't even honor that.
Speaker 4 (08:31):
So yesterday the President called Ursula Vonderline fantastic, and he
said he hopes to meet her. But are you saying
that the European Union is not as high on the
priority list and say other trading partners like Oria Japan
not at all?
Speaker 1 (08:45):
I mean the EU to be clear here, we have
the second highest trade deficit with the EU, behind China,
so they're very high on the list. All I'm saying
here is that I I thought I found it unfortunate
that the EU kind of fired I think some term
was fired shots across our bow. It's like retaliation will
(09:08):
not work against the United States. We shouldn't have that.
Let's talk, Let's figure this out, and it would be
nice here. Let's give peace a chance here. All we're
asking for here in the United States of America is fairness.
I mean, hold on, would you agree? Is there any
disagreement on this set or on your set that the
tariffs of the EU are higher, and that the non
(09:29):
tariff bearers are higher, and that the wt O in
Geneva is basically sanctioning that through tuesdays one is the
But would you agree with that?
Speaker 5 (09:42):
I think there's a bigger question FactCheck there. There's a
bigger question here. There's a bigger question here. And this
is something that the German Finance Minister has come out
and talked about, which is they'd be willing to drop
all tariffs to zero if the US were willing to
drop all tariffs to zero, there is a willingness to
negotiate aground the board to a lower tariff regime. Would
that be acceptable to you?
Speaker 3 (10:02):
Or is ten percent?
Speaker 1 (10:04):
So stay with that. See that's such a misdirection. Okay,
it's the non tariff barrier. Stupid to kind of paraphrase
Bill Clinton. It's like, it's the non tariff barriers. So
when countries like Vietnam or entities like the EU say
to US, oh, let's all go to zero tariffs and
(10:25):
everything will be okay, that's not the problem. It's part
of the problem. But the bigger problem is the non
tariff barriers in Europe. It's the vat tax. I mean,
I don't know if you know this, but the United
States has tried going back to the nineteen seventies to
get equity treatment for the that tax which most countries
(10:46):
of the world use versus the income tax which we use.
We haven't been able to get it because the WTO
has a majority of people who benefit from sticking it
to the United States, so they do so. The zero
road tariff thing, that's that's misdirection and on your set,
you should call it on that. Let's lower the bad
(11:07):
terror barriers and let's let's let's give you relief on
the VAT tax. Now we're talking the VAT.
Speaker 5 (11:13):
Tax is a slightly different mechanism. This is all going
to take a long time, and there are a lot
of competing factors here in terms of who can possibly
pull these levers. And I'm just wondering, we've got two
months left in this ninety day negotiating period that is
paused for the retaliatory tariffs. Does that just get extended
out another ninety days as you have to deal with
different legislative bodies to possibly remedy what you.
Speaker 1 (11:35):
See, Well, we don't have to deal with legislative body. Well, okay,
in the EU perhaps, but you know, like coin a
term in Trump time, which is to say do it
as fast as possible without screwing it up. And that's
all we're trying to do. I go back to the
observation that the United States trade representative and that building,
(11:56):
which is historic building, by the way, beautiful to see
if you ever get there. The lines, you know, they're
they're coming in and out. We're talking, and we're talking,
and you know, let's as the Boss says, let's see
what happens. I mean, it's in everybody's interests around the
world to level the playing field with the United States
in a way which allows us to restructure this international
(12:18):
trade environment which is fundamentally skewed against the United States.
I mean, we're losing because of this system. The United
States is losing our manufacturing base, We're losing our defense
industrial base. And when push comes to shev and folks
around the world are looking for the United States to
help defend them. I mean, we get to a point
where we can't do that, what good is that? So trade?
(12:41):
Trade economic security is national security is one of the
guiding principles of President Trump in this administration. So we're
we're just trying to get fairness here, give give fairness
a chance here, and work with.
Speaker 3 (12:53):
Us looking forward to an update on Mondays.
Speaker 2 (12:55):
It's going to see it once again, sir, Thank you,
Director of the Office of Trade a Manufacturing Policy at
the White House. Heading into the weekend, we can extend
the conversation with Sarah Pianke of eviCore. Sarah, we've had
(13:17):
positioning now for weeks ahead of these talks. Here they are,
who's got the leverage?
Speaker 6 (13:24):
Well, look at this point, look, I think China has
a bit more leverage. But the reality is both sides
would like these tariffs to come down from these levels that,
as they all say, are basically an embargo. So I
think both sides will be delighted to you know, just
use even good mood music out of these talks to
take things down to the escalator. So I do expect
(13:46):
at some point next week we'll see these tariffs come
down to the sixty percent ranging on the US side,
and I think I do think China will we'll matchine
in some way.
Speaker 4 (13:57):
Sarah, how are you thinking about this weekend? Is it
talks about talks or do you really think that they
are going to hash out some trade issues.
Speaker 6 (14:05):
I think they are going to hash out minimal trade issues.
As you know, the one thing we've been saying in
all these countries is trade. Actual trade talks is hard
and long, but this is not hard. This is trying
to get down to something just manageable. While they begin talk,
so I think they'll they will talk about rare earths,
they will talk about some of these other issues, perhaps
(14:27):
if you purchase agreements, but in general, everybody wants this
to come down from these unsustainable levels and then which
by the way, sixty to fifty percent still really really high,
then that can at least, do you know, put us
on a path for an actual discussion, an actual outline
of what they're trying.
Speaker 1 (14:46):
To achieve to drop that rate.
Speaker 4 (14:47):
Does the US need to see a concession from Beijing.
Speaker 6 (14:51):
I don't think so. I think, look, they have to
make sure it doesn't appear that it's just a purely
unilateral a walk away. But I I think they can
use the cover of a good conversation, a commitment on
a small commitment on fetanol. I think it can be
largely symbolic or policies that perhaps are already in place.
Pretty much. I don't think there's a lot here, because
(15:14):
again I think Beijing has a lot more patience and
pain tolerance in the United States. But nobody's really happy
with where we're at right now.
Speaker 1 (15:23):
Sarah.
Speaker 2 (15:23):
We're hearing from the President right now saying China should
open up its market to the USA. It would be
good for them. Closed markets don't work anymore.
Speaker 3 (15:31):
Sarah.
Speaker 2 (15:32):
You lift some of these negotiations with the Chinese before
as the deputy US trained representative in a previous administration.
How difficult is it to get China to move to
where the US would like it to be. What is
it that they're refusing to open up that we'd like
to see them open up?
Speaker 6 (15:49):
Well, I'm not sure that opening up is really kind
of what honestly, what where the tensions really are? To
be honest, last time the President got trying to agree
to a bunch of purchase agreements, a particularly around ag
I had the honor of trying to see if those
were enforceable. There was not a lot. There was pretty
(16:10):
clear that China wasn't going to do that, And so
one of the challenges is not just what the agreement is,
but does anybody actually ever listen to it? The truth is,
what China really wants from the US is more access
to some of our technology and chips, and that's why
we always think this quote grand bargain is very very difficult.
We think the best you can do is sort of
(16:31):
a package of trades and exchanges and maybe a little
bit more market opening, but that's really not the core
of the issue.
Speaker 2 (16:38):
Sarah, I appreciate your time, as always, so Yankee out
of the call with this around of table relationship of
being my wilth alisiha good moniic in warning you were
following that conversation he said he didn't want to get
ahead of negotiations this week, and what's the best case
(17:01):
Monday morning?
Speaker 3 (17:02):
What do we waking up to?
Speaker 7 (17:04):
So you know, at six am the best case was
a fifty or sixty percent tariff rate and ten percent universal,
and then an hour later it was eighty percent tariffs
on China. The news changes quickly. Interestingly, the markets have
been hanging in there. I mean, the futures actually have
not reacted to that, And I think the message that
the markets have learned is that this is one grand
(17:26):
negotiating strategy and there's good cop bad cop in the administration.
And it's very clear with what the direction of travel is,
and the direction of travel is lowering of the tariffs
and getting to deals. I think it's also no accident
that doctor Navarro was on today before the negotiations in
Switzerland this weekend, since he has seen to be the
(17:47):
most hawkish when it comes to tariffs and particularly on China.
So if this is part of a negotiating strategy, I
think the markets have learned it's a negotiating strategy.
Speaker 1 (17:58):
So what do you make.
Speaker 5 (17:59):
Of that idea that there's been sort of I don't
want to say benumbing of markets, but the response to
headlines has been coming in again and again. Does that
give you actually a sense of comfort?
Speaker 1 (18:08):
Oh?
Speaker 7 (18:08):
Yes, I mean, look what really happened, you know somehow
April ninth was the ninety day pause. Was the message
to markets that were moving the whole probability curve over
to the right and the worst tailed scenario, that highest
risk tail scenario is actually off the table. That's why
the markets were able to rally and bounced off the lows.
(18:29):
That continues to be the case. And if you think
about it just in terms of numbers, because this business
is all about numbers. The original tariffs of April seconds
were about six hundred billion worth of tariffs six hundred
billion dollars, which was basically attacks of two percent on
the US economy. US economy is about thirty trillion dollars
(18:49):
of GDP, so six hundred billion in tariffs was about
two percent hit, which is why you had the odds
of recession go straight up, because if you think growth
rates are about two percent, you put it too percent
tax on it, you get to zero. Now, with all
the walkbacks, worried about four hundred billion in tarras. Okay,
so we've walked back about one third of that, and
I think ultimately we get to somewhere of about two
(19:12):
hundred billion in Tariff's still very high, but it's not
a two percent hit to the economy. And that's what
the market's been pricing in the whole time. Earnings are
probably higher for next year than that immediate base case
in April second, and at some point the markets are
going to look to twenty twenty six, and by the
summer we're looking at twenty six and not twenty five anymore.
And I think that's what's happening in the market.
Speaker 3 (19:33):
Weekend, and a weekend this weekend doesn't feel like it
doesn't not in this business.
Speaker 7 (19:36):
I mean, I mean, look, we've all glued to our
screens for a long time. So there's now weekend, there's
the Sunday nights checking the futures.
Speaker 1 (19:43):
We're going to do that again.
Speaker 7 (19:45):
But I think the intensity of it, as I said,
the markets have learned, this is negotiating. This is a
negotiation with doctor Navarro on to set the stake in
the ground, to commit the US on unnegotiating.
Speaker 2 (20:01):
Saturday, Denis went bust ranking. We're saying China tech waking
up to the revolution with the US Chinese trite sensions
abound down John's staff for more. Alongside of Leasha to
NY Town, it's going to say a sink we kind
(20:22):
of tried tos Why does tech fits in?
Speaker 3 (20:25):
It's all of this.
Speaker 8 (20:26):
Look, I think Tech news that they're walking back from
the cliff in terms of what they're going to need
to do right because the reality is that that's the hearts.
Speaker 1 (20:34):
And lungs of the supply chain.
Speaker 8 (20:36):
And I think what you've seen the Nvidia moment really
essentially giving Huawei the China market. I think that was
really that was the start of this. I think it
was the start of the administration recognized they're gonna have
to pull back, pull back, and look, you can't you
can't argue with the data.
Speaker 2 (20:53):
How self sufficient is Chinese tech without US tech?
Speaker 8 (20:57):
Look, they need US tech. But which is be someone
that spends so much time in China. I mean if
you put them in a room with a Selser bottle,
toothpick and you know, in a straw, they come out
with an AI chip. So the problem is is that
you don't want to put China in the situation that
they're going to have to ultimately innovate, because it's my view,
(21:18):
for the first time in thirty years, the US has
been ahead of China when it comes to tech. So
the last thing you want to do is cut US
tech off at the knees. And I think now the
administration is part what we're seeing in the market. They've
taken steps back and I think now at least getting
to some sort of balance. But still look, a lot
of you know, definitely allow more wood to chop ahead.
Speaker 4 (21:40):
They're resenting the diffusion rule onto the Biden administration. So
some of these geopolitical swing states are going to get.
Speaker 3 (21:45):
More access to US chips.
Speaker 4 (21:47):
How does China take advantage of that?
Speaker 8 (21:49):
I mean, look, China definitely is gonna, you know, from
a market share perspective, go after. I think we've already
seen in terms of Quai and others what they're going after.
But the reality is really the H twenty right like
ones you restrict the age twenty in terms of Nvidia,
that sort of started this sort of game of Thrones
battle that we're seeing in China. Definitely edging in terms
(22:11):
of what I've used the AI revolution Boba, you know,
I think front and center, but US continues to own
the AI revolution, and I think the one thing as
we go into Switzerland, you go into talks, the last
thing you want to see here is administration just double
down because if you do that and you don't lower
(22:32):
the tension, you don't de escalate, it's US tech that
gets hurt. And right now, I think that's sort of
the tenuous situation we're in, although much more positive than
called three four weeks ago.
Speaker 5 (22:43):
And Alisha really points to what we've seen in the
markets recently, which is as the tone has softened, we
have seen a huge ripporring rally in tech and everyone's
been piling in. It's the hey, AI stories back on,
Let's go? Is that going to be the leadership again
or is this a tenuous rally in face of some
of the uncertainties of how far some of these negotiats
tactics can work.
Speaker 7 (23:01):
So the one the thing that uncertainty is that it
creates a two way market, and I think many investors
see this as a great entry point. The multiples are
much lower, the stocks have been crushed, and you know, ultimately,
I think the narrative that US exceptionalism is over has
been has been very strong, and we saw this rush
into global markets, and the question is today I'm just
(23:22):
going to point out that the S and P has
outperformed developed international month to day, and there's a reason
for that, and that's partly because the tech earnings. With
the multiples and the cash flow, you can't get around it.
And ultimately, as an investor, you're investing in future cash flows.
And what we saw from these companies is that there's
nobody else that can touch these companies.
Speaker 8 (23:42):
And to your point, it was a jail in Bruns
and movement for the taxpase, let's say the nixtent.
Speaker 1 (23:48):
And it was a jail and Brune and six bucks.
Speaker 8 (23:51):
You've seen ultimately what happened here in terms of the AI.
Speaker 2 (23:55):
Right, the AI race flash points allow me to sort
of date town a compo Deep sixx one. Okay, big
upset be on Tride. Let's forget right, Deep six one
the second one. I think this week Apple coming out
and saying so is paked on Google.
Speaker 3 (24:08):
What was your reaction to that headline? That was a shot.
Speaker 1 (24:11):
Across the bow, right.
Speaker 8 (24:12):
I mean, just given what we're seeing, even on the
regulatory fronts, the last thing Alphabet needed to see. Look,
I think barxworts and a bite there, and it's like
it's our search queries like where AI is not ending
Alphabet's hearts and lungs in terms of, you know, their core,
their core money train. But it shows Apple when it
comes to AI and building it out, they're gonna have
(24:33):
to do their own path and they're gonna have to
build some of that out.
Speaker 1 (24:37):
And you talk about deep seek to almost kind of
put it in a bow.
Speaker 8 (24:41):
Look this every big tech firm wants to be. They
want to be the seed at the table. No one's
gonna say, okay, hey, Apple, Google, you could be our
our AI or open AI. And I think that's the
reality that we're seeing here.
Speaker 2 (24:54):
At least it just quickly. Has the tech trait changed?
Is it different now? Do you have to play it differently?
Speaker 3 (24:59):
I think you do.
Speaker 7 (24:59):
You have to differently. I mean it's no longer close
your eyes and just throw the dart at the magnificent seven.
I mean, there's clearly different growth rates here. But the
power of the size of the companies, we think is
still going to actually drive the SMP here. So we
think the American exceptionalism trade lives on and maybe in
different ways. But look at industrials have been rallying, you know, aerospace,
(25:21):
defense has been rallying, Tech has been rallying. This is
the base of the US economy and the SMP. It
does suggest also just say that some of the conversation
coming from the White House is finding its way back
into the market in a positive way and not just
putting a lid on things. Like we said weeks ago,
the forty eight hundred low is in. It's a regardless
(25:42):
of recession.
Speaker 2 (25:43):
Eliza Levine Dan ives from New York and this is Bloomberg.
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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
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Terminal and the Bloomberg Business app. Joining us now, very
pleased to say pin and Navarro, the Director of the
Office of Trade and Manufacturing Policy at the White House
Dot Navarro, it's been too long, sir.
Speaker 3 (00:43):
It's good to see you. Thanks for being here.
Speaker 1 (00:46):
Been a long time. Joan, it is good to see
you too, sir.
Speaker 3 (00:49):
Thank you, sir.
Speaker 1 (00:49):
First class digs here, my friend.
Speaker 2 (00:52):
Well, I'm pleased we're looking after you. Let's kick it
off with these talks this weekend. We just heard from
the President just moments ago, and he mentioned an eighty
percent tariff might be about right. Some to the Treasury secretary.
We understand you won't want to get ahead of those negotiations.
But I just wonder could you offer some clarity on
what about right means when the President says eighty percent
TAF on China seems right, seems right for the talks
this weekend, or seems right for the foreseeable future.
Speaker 1 (01:16):
Yeah, it was one of three people that was with
the White House the first term, for all four years.
One of the big reasons is I never got ahead
of the president. Let me tell you about Geneva, which
is kind of I've got a very warm memories. It
was my finest hour as a negotiator. I went there
(01:37):
to lead the negotiations for the United Postal Union reforms
that essentially got China rates fear to We save billions
on that. But I mentioned this because Geneva has symbolic
value in this negotiation. It is the headquarters of the
World Trade Organization. And the scariest thing I ever saw
(01:59):
in Geneva was the size of the China delegation at
the World Trade Organization. And they've played the WTO like
a fiddle. So let's see what happens tomorrow. I'd be
happy to come back on Monday do the debrief, but
I don't want to get ahead of the boss or
Scott Besting. And don't forget Scott's going with Jamison Greer,
(02:20):
the United States Trade representative. He's the guy who learned
that the knee of bob bliteheis for the first time around,
was there for all the China stuff. And he's the
guy who was the architect, along with Howard Lutnik of
the UK deal. So let's see what happens.
Speaker 3 (02:36):
It's in the very best.
Speaker 2 (02:37):
We'll sell the pensylin the weekend for the markets. Well,
pencil in appearance with you for Monday. No worries about that.
I'm looking forward to that conversation. Just got into the
weekend and reflected on your experience dealing with the Chinese
then on the UK. This is not the same relationship.
The trade relationship is tremendously unbalanced and has been for
a long long time. Can you frame for us how
difficult it has been previously for you to negotiate with
(02:58):
the Chinese and how much long it could take with
a Chinese relative to set the UK and other tripatas well.
Speaker 1 (03:06):
I could tell you. I think I sat face to
face with the China team maybe seven times during the
first term and twice Shi Jinping was there. It was
G seven. Just give me the G twenty both. I
think it was Tokyo and h and our Buenos Aires.
(03:27):
What's interesting, So what's so interesting to me, Jonathan about
China is that they have continuity. The same people are
going to be in Geneva or the same people back then.
And you know, our our regimes change, we we have
different governments and things like that. But they have the
advantage of that kind of continuity. But look, it'll be
(03:51):
interesting again. I don't I don't want to get ahead
of Scott and Jamison or the president. I think let's
see what happens. You know, my role, and we've got
fifteen countries we run enormous trade deficits. With that, we've
got to renegotiate the whole structure of those deals. And
there's another one hundred countries that cheat us in some
(04:13):
ways but smaller ways. My role in the administration on
all of this is to do the background analytics to
see how each country's cheating us, which basically sets up
the terms of the negotiation. And every country like fingerprints,
like India's the Maharajia tariffs, they have the highest tariffs.
(04:33):
Of any of our major trading partners, Japan is the
most clever at protecting its own markets with a combination
of domestic protectionism non tariff barriers. You know Germany they
have auto tariffs at ten percent, We have them at
two and a half percent, but they also have the
VAT tax which acts as another twenty nine to what
(04:56):
is it nineteen percent tariff and in exports subject. So
what I do is do the background and look at
kind of how these countries are doing what to us,
and we get great deals from there. People. I think
the UK deal is very interesting. I think the significance
is not just that it's a deal, but that's a
(05:17):
template for the future deals. What we do done is
there's like four or five verticals we look at. It's
the tariffs, the non tariff barriers, the digital taxes, and
then the various kinds of cheating, the dumping, the currency
manipulation and things like that. And then from there we
assess what the asks are, what we need and go
(05:39):
forward from there to see you get to see a
steady wave of deals. The USTR building is right across
the street from the White House. It's got the most
staff negotiating these deals, and it's like you go to
the Delhi and you have to take a number and
get in line. Every day there's delegations from around the
(06:02):
world lining up to meet with Jamison Greer and Howard
Ludnick and I've seen I looked yesterday at the schedule.
Was kind of fun out the July and it's just
you know, one after the others.
Speaker 4 (06:13):
Well, Peter looking at the countries lining up. One key
aspect of the UK deal was of course bringing down
the auto tariff to ten percent. So right now you
have a tariff rate that's lower for Bentley's, which is
a car that most American families can't afford made in
the UK, where Chevys have a higher rate if they're
made in Canada or Mexico. Is there an expectation that
(06:34):
the next trade deals auto tariffs will be coming down
those rates.
Speaker 1 (06:41):
It's going to be country by country. I mean, the
beauty about the UK is that very small amount of
exports they send us and we have a hard cap
I think it's one hundred thousand units where it goes
right back up to twenty five percent. And again we're
trying to do something that's mutually beneficial to both countries
(07:04):
to get to a better place. Well at the same
time changing the level of the playing field so that
it is more level. I think for me, the beauty
of the UK deal. Besides that was all of the
good stuff we had for AG. I mean, one of
the problems we have is this non tariff barriers like FIDO,
(07:26):
sanitary standards, what's that that's like these things they do
to keep our pork out, our chicken out, our beef.
Right now we're going to be able to sell a
lot more beef, poultry, dairy, and ethanol. I mean, they
had a really high tariff, almost a lockout tariff on
ethanol and that's made from corn. So folks in Iowa
(07:49):
are very happy about that. So this is the way
we're going to go forward on net The United States
is going to be far better off, and all we're
doing is trying to level the playing fielding. I saw
the EU kind of rattling sabers I think it was
yesterday about some kind of retaliation, and I would just
(08:10):
say to anybody who's who's in the European Union, I mean,
how can you look a US in the face and
threaten us when your tariffs are higher. You have lost
cases repeatedly at the wt O on US selling you
things like beef and poultry, and you won't even honor that.
Speaker 4 (08:31):
So yesterday the President called Ursula Vonderline fantastic, and he
said he hopes to meet her. But are you saying
that the European Union is not as high on the
priority list and say other trading partners like Oria Japan
not at all?
Speaker 1 (08:45):
I mean the EU to be clear here, we have
the second highest trade deficit with the EU, behind China,
so they're very high on the list. All I'm saying
here is that I I thought I found it unfortunate
that the EU kind of fired I think some term
was fired shots across our bow. It's like retaliation will
(09:08):
not work against the United States. We shouldn't have that.
Let's talk, Let's figure this out, and it would be
nice here. Let's give peace a chance here. All we're
asking for here in the United States of America is fairness.
I mean, hold on, would you agree? Is there any
disagreement on this set or on your set that the
tariffs of the EU are higher, and that the non
(09:29):
tariff bearers are higher, and that the wt O in
Geneva is basically sanctioning that through tuesdays one is the
But would you agree with that?
Speaker 5 (09:42):
I think there's a bigger question FactCheck there. There's a
bigger question here. There's a bigger question here. And this
is something that the German Finance Minister has come out
and talked about, which is they'd be willing to drop
all tariffs to zero if the US were willing to
drop all tariffs to zero, there is a willingness to
negotiate aground the board to a lower tariff regime. Would
that be acceptable to you?
Speaker 3 (10:02):
Or is ten percent?
Speaker 1 (10:04):
So stay with that. See that's such a misdirection. Okay,
it's the non tariff barrier. Stupid to kind of paraphrase
Bill Clinton. It's like, it's the non tariff barriers. So
when countries like Vietnam or entities like the EU say
to US, oh, let's all go to zero tariffs and
(10:25):
everything will be okay, that's not the problem. It's part
of the problem. But the bigger problem is the non
tariff barriers in Europe. It's the vat tax. I mean,
I don't know if you know this, but the United
States has tried going back to the nineteen seventies to
get equity treatment for the that tax which most countries
(10:46):
of the world use versus the income tax which we use.
We haven't been able to get it because the WTO
has a majority of people who benefit from sticking it
to the United States, so they do so. The zero
road tariff thing, that's that's misdirection and on your set,
you should call it on that. Let's lower the bad
(11:07):
terror barriers and let's let's let's give you relief on
the VAT tax. Now we're talking the VAT.
Speaker 5 (11:13):
Tax is a slightly different mechanism. This is all going
to take a long time, and there are a lot
of competing factors here in terms of who can possibly
pull these levers. And I'm just wondering, we've got two
months left in this ninety day negotiating period that is
paused for the retaliatory tariffs. Does that just get extended
out another ninety days as you have to deal with
different legislative bodies to possibly remedy what you.
Speaker 1 (11:35):
See, Well, we don't have to deal with legislative body. Well, okay,
in the EU perhaps, but you know, like coin a
term in Trump time, which is to say do it
as fast as possible without screwing it up. And that's
all we're trying to do. I go back to the
observation that the United States trade representative and that building,
(11:56):
which is historic building, by the way, beautiful to see
if you ever get there. The lines, you know, they're
they're coming in and out. We're talking, and we're talking,
and you know, let's as the Boss says, let's see
what happens. I mean, it's in everybody's interests around the
world to level the playing field with the United States
in a way which allows us to restructure this international
(12:18):
trade environment which is fundamentally skewed against the United States.
I mean, we're losing because of this system. The United
States is losing our manufacturing base, We're losing our defense
industrial base. And when push comes to shev and folks
around the world are looking for the United States to
help defend them. I mean, we get to a point
where we can't do that, what good is that? So trade?
(12:41):
Trade economic security is national security is one of the
guiding principles of President Trump in this administration. So we're
we're just trying to get fairness here, give give fairness
a chance here, and work with.
Speaker 3 (12:53):
Us looking forward to an update on Mondays.
Speaker 2 (12:55):
It's going to see it once again, sir, Thank you,
Director of the Office of Trade a Manufacturing Policy at
the White House. Heading into the weekend, we can extend
the conversation with Sarah Pianke of eviCore. Sarah, we've had
(13:17):
positioning now for weeks ahead of these talks. Here they are,
who's got the leverage?
Speaker 6 (13:24):
Well, look at this point, look, I think China has
a bit more leverage. But the reality is both sides
would like these tariffs to come down from these levels that,
as they all say, are basically an embargo. So I
think both sides will be delighted to you know, just
use even good mood music out of these talks to
take things down to the escalator. So I do expect
(13:46):
at some point next week we'll see these tariffs come
down to the sixty percent ranging on the US side,
and I think I do think China will we'll matchine
in some way.
Speaker 4 (13:57):
Sarah, how are you thinking about this weekend? Is it
talks about talks or do you really think that they
are going to hash out some trade issues.
Speaker 6 (14:05):
I think they are going to hash out minimal trade issues.
As you know, the one thing we've been saying in
all these countries is trade. Actual trade talks is hard
and long, but this is not hard. This is trying
to get down to something just manageable. While they begin talk,
so I think they'll they will talk about rare earths,
they will talk about some of these other issues, perhaps
(14:27):
if you purchase agreements, but in general, everybody wants this
to come down from these unsustainable levels and then which
by the way, sixty to fifty percent still really really high,
then that can at least, do you know, put us
on a path for an actual discussion, an actual outline
of what they're trying.
Speaker 1 (14:46):
To achieve to drop that rate.
Speaker 4 (14:47):
Does the US need to see a concession from Beijing.
Speaker 6 (14:51):
I don't think so. I think, look, they have to
make sure it doesn't appear that it's just a purely
unilateral a walk away. But I I think they can
use the cover of a good conversation, a commitment on
a small commitment on fetanol. I think it can be
largely symbolic or policies that perhaps are already in place.
Pretty much. I don't think there's a lot here, because
(15:14):
again I think Beijing has a lot more patience and
pain tolerance in the United States. But nobody's really happy
with where we're at right now.
Speaker 1 (15:23):
Sarah.
Speaker 2 (15:23):
We're hearing from the President right now saying China should
open up its market to the USA. It would be
good for them. Closed markets don't work anymore.
Speaker 3 (15:31):
Sarah.
Speaker 2 (15:32):
You lift some of these negotiations with the Chinese before
as the deputy US trained representative in a previous administration.
How difficult is it to get China to move to
where the US would like it to be. What is
it that they're refusing to open up that we'd like
to see them open up?
Speaker 6 (15:49):
Well, I'm not sure that opening up is really kind
of what honestly, what where the tensions really are? To
be honest, last time the President got trying to agree
to a bunch of purchase agreements, a particularly around ag
I had the honor of trying to see if those
were enforceable. There was not a lot. There was pretty
(16:10):
clear that China wasn't going to do that, And so
one of the challenges is not just what the agreement is,
but does anybody actually ever listen to it? The truth is,
what China really wants from the US is more access
to some of our technology and chips, and that's why
we always think this quote grand bargain is very very difficult.
We think the best you can do is sort of
(16:31):
a package of trades and exchanges and maybe a little
bit more market opening, but that's really not the core
of the issue.
Speaker 2 (16:38):
Sarah, I appreciate your time, as always, so Yankee out
of the call with this around of table relationship of
being my wilth alisiha good moniic in warning you were
following that conversation he said he didn't want to get
ahead of negotiations this week, and what's the best case
(17:01):
Monday morning?
Speaker 3 (17:02):
What do we waking up to?
Speaker 7 (17:04):
So you know, at six am the best case was
a fifty or sixty percent tariff rate and ten percent universal,
and then an hour later it was eighty percent tariffs
on China. The news changes quickly. Interestingly, the markets have
been hanging in there. I mean, the futures actually have
not reacted to that, And I think the message that
the markets have learned is that this is one grand
(17:26):
negotiating strategy and there's good cop bad cop in the administration.
And it's very clear with what the direction of travel is,
and the direction of travel is lowering of the tariffs
and getting to deals. I think it's also no accident
that doctor Navarro was on today before the negotiations in
Switzerland this weekend, since he has seen to be the
(17:47):
most hawkish when it comes to tariffs and particularly on China.
So if this is part of a negotiating strategy, I
think the markets have learned it's a negotiating strategy.
Speaker 1 (17:58):
So what do you make.
Speaker 5 (17:59):
Of that idea that there's been sort of I don't
want to say benumbing of markets, but the response to
headlines has been coming in again and again. Does that
give you actually a sense of comfort?
Speaker 1 (18:08):
Oh?
Speaker 7 (18:08):
Yes, I mean, look what really happened, you know somehow
April ninth was the ninety day pause. Was the message
to markets that were moving the whole probability curve over
to the right and the worst tailed scenario, that highest
risk tail scenario is actually off the table. That's why
the markets were able to rally and bounced off the lows.
(18:29):
That continues to be the case. And if you think
about it just in terms of numbers, because this business
is all about numbers. The original tariffs of April seconds
were about six hundred billion worth of tariffs six hundred
billion dollars, which was basically attacks of two percent on
the US economy. US economy is about thirty trillion dollars
(18:49):
of GDP, so six hundred billion in tariffs was about
two percent hit, which is why you had the odds
of recession go straight up, because if you think growth
rates are about two percent, you put it too percent
tax on it, you get to zero. Now, with all
the walkbacks, worried about four hundred billion in tarras. Okay,
so we've walked back about one third of that, and
I think ultimately we get to somewhere of about two
(19:12):
hundred billion in Tariff's still very high, but it's not
a two percent hit to the economy. And that's what
the market's been pricing in the whole time. Earnings are
probably higher for next year than that immediate base case
in April second, and at some point the markets are
going to look to twenty twenty six, and by the
summer we're looking at twenty six and not twenty five anymore.
And I think that's what's happening in the market.
Speaker 3 (19:33):
Weekend, and a weekend this weekend doesn't feel like it
doesn't not in this business.
Speaker 7 (19:36):
I mean, I mean, look, we've all glued to our
screens for a long time. So there's now weekend, there's
the Sunday nights checking the futures.
Speaker 1 (19:43):
We're going to do that again.
Speaker 7 (19:45):
But I think the intensity of it, as I said,
the markets have learned, this is negotiating. This is a
negotiation with doctor Navarro on to set the stake in
the ground, to commit the US on unnegotiating.
Speaker 2 (20:01):
Saturday, Denis went bust ranking. We're saying China tech waking
up to the revolution with the US Chinese trite sensions
abound down John's staff for more. Alongside of Leasha to
NY Town, it's going to say a sink we kind
(20:22):
of tried tos Why does tech fits in?
Speaker 3 (20:25):
It's all of this.
Speaker 8 (20:26):
Look, I think Tech news that they're walking back from
the cliff in terms of what they're going to need
to do right because the reality is that that's the hearts.
Speaker 1 (20:34):
And lungs of the supply chain.
Speaker 8 (20:36):
And I think what you've seen the Nvidia moment really
essentially giving Huawei the China market. I think that was
really that was the start of this. I think it
was the start of the administration recognized they're gonna have
to pull back, pull back, and look, you can't you
can't argue with the data.
Speaker 2 (20:53):
How self sufficient is Chinese tech without US tech?
Speaker 8 (20:57):
Look, they need US tech. But which is be someone
that spends so much time in China. I mean if
you put them in a room with a Selser bottle,
toothpick and you know, in a straw, they come out
with an AI chip. So the problem is is that
you don't want to put China in the situation that
they're going to have to ultimately innovate, because it's my view,
(21:18):
for the first time in thirty years, the US has
been ahead of China when it comes to tech. So
the last thing you want to do is cut US
tech off at the knees. And I think now the
administration is part what we're seeing in the market. They've
taken steps back and I think now at least getting
to some sort of balance. But still look, a lot
of you know, definitely allow more wood to chop ahead.
Speaker 4 (21:40):
They're resenting the diffusion rule onto the Biden administration. So
some of these geopolitical swing states are going to get.
Speaker 3 (21:45):
More access to US chips.
Speaker 4 (21:47):
How does China take advantage of that?
Speaker 8 (21:49):
I mean, look, China definitely is gonna, you know, from
a market share perspective, go after. I think we've already
seen in terms of Quai and others what they're going after.
But the reality is really the H twenty right like
ones you restrict the age twenty in terms of Nvidia,
that sort of started this sort of game of Thrones
battle that we're seeing in China. Definitely edging in terms
(22:11):
of what I've used the AI revolution Boba, you know,
I think front and center, but US continues to own
the AI revolution, and I think the one thing as
we go into Switzerland, you go into talks, the last
thing you want to see here is administration just double
down because if you do that and you don't lower
(22:32):
the tension, you don't de escalate, it's US tech that
gets hurt. And right now, I think that's sort of
the tenuous situation we're in, although much more positive than
called three four weeks ago.
Speaker 5 (22:43):
And Alisha really points to what we've seen in the
markets recently, which is as the tone has softened, we
have seen a huge ripporring rally in tech and everyone's
been piling in. It's the hey, AI stories back on,
Let's go? Is that going to be the leadership again
or is this a tenuous rally in face of some
of the uncertainties of how far some of these negotiats
tactics can work.
Speaker 7 (23:01):
So the one the thing that uncertainty is that it
creates a two way market, and I think many investors
see this as a great entry point. The multiples are
much lower, the stocks have been crushed, and you know, ultimately,
I think the narrative that US exceptionalism is over has
been has been very strong, and we saw this rush
into global markets, and the question is today I'm just
(23:22):
going to point out that the S and P has
outperformed developed international month to day, and there's a reason
for that, and that's partly because the tech earnings. With
the multiples and the cash flow, you can't get around it.
And ultimately, as an investor, you're investing in future cash flows.
And what we saw from these companies is that there's
nobody else that can touch these companies.
Speaker 8 (23:42):
And to your point, it was a jail in Bruns
and movement for the taxpase, let's say the nixtent.
Speaker 1 (23:48):
And it was a jail and Brune and six bucks.
Speaker 8 (23:51):
You've seen ultimately what happened here in terms of the AI.
Speaker 2 (23:55):
Right, the AI race flash points allow me to sort
of date town a compo Deep sixx one. Okay, big
upset be on Tride. Let's forget right, Deep six one
the second one. I think this week Apple coming out
and saying so is paked on Google.
Speaker 3 (24:08):
What was your reaction to that headline? That was a shot.
Speaker 1 (24:11):
Across the bow, right.
Speaker 8 (24:12):
I mean, just given what we're seeing, even on the
regulatory fronts, the last thing Alphabet needed to see. Look,
I think barxworts and a bite there, and it's like
it's our search queries like where AI is not ending
Alphabet's hearts and lungs in terms of, you know, their core,
their core money train. But it shows Apple when it
comes to AI and building it out, they're gonna have
(24:33):
to do their own path and they're gonna have to
build some of that out.
Speaker 1 (24:37):
And you talk about deep seek to almost kind of
put it in a bow.
Speaker 8 (24:41):
Look this every big tech firm wants to be. They
want to be the seed at the table. No one's
gonna say, okay, hey, Apple, Google, you could be our
our AI or open AI. And I think that's the
reality that we're seeing here.
Speaker 2 (24:54):
At least it just quickly. Has the tech trait changed?
Is it different now? Do you have to play it differently?
Speaker 3 (24:59):
I think you do.
Speaker 7 (24:59):
You have to differently. I mean it's no longer close
your eyes and just throw the dart at the magnificent seven.
I mean, there's clearly different growth rates here. But the
power of the size of the companies, we think is
still going to actually drive the SMP here. So we
think the American exceptionalism trade lives on and maybe in
different ways. But look at industrials have been rallying, you know, aerospace,
(25:21):
defense has been rallying, Tech has been rallying. This is
the base of the US economy and the SMP. It
does suggest also just say that some of the conversation
coming from the White House is finding its way back
into the market in a positive way and not just
putting a lid on things. Like we said weeks ago,
the forty eight hundred low is in. It's a regardless
(25:42):
of recession.
Speaker 2 (25:43):
Eliza Levine Dan ives from New York and this is Bloomberg.
This is the Bloomberg Sevenants podcast, bringing you the best
in markets, economics, an gio politics. 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,
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(26:04):
Bloomberg Terminal and the Bloomberg Business Out
Speaker 7 (26:10):
M HM.
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