May 8, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the US and UK reaching a trade deal and what we need to know about the deal. Are more trade deals coming with Europe? The fentanyl crisis provided an opening for the US and China to get back to the table. Why the Fed isn't ready to join other central banks in cutting rates.
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Speaker 1 (00:00):
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(01:05):
Zada and Mike Armstrong.
Speaker 2 (01:10):
Chuck, Mike and Tucker with you here, and top story
today is basically, as we speak right now, we are
expecting to get some details surrounding the trade deal between
the United States and the United Kingdom. And Mike, we
(01:30):
don't know anything yet. Again, I expect that we'll be
updating this kind of as we go during the hour here,
but i'll quote here from the Wall Street Journal and
the Financial Times and Bloomberg of Hall had similar reporting
on this.
Speaker 3 (01:45):
Here's the quote.
Speaker 2 (01:46):
The UK is hoping to get a reduction in the
twenty five percent tariffs the US is levying on steel
and automobiles, but the baseline ten percent tariff will likely
remain in place, officials say. In return, Britain is offering
concessions on a digital tax levies on big US tech companies,
according to officials with the matter and also specifically talking
(02:08):
the UK has indicated this morning that this is not
a comprehensive deal encompassing all aspects of trade between the countries,
but really a preliminary agreement on these couple of areas,
with the idea that they'll continue talking in the future.
Speaker 4 (02:25):
Yeah, So the press conference was supposed to occur at
ten am Eastern. We are seven minutes past. We will
see and keep updated as things keep going here. But
what would you be looking for if we're going to
treat this as some sort of canary in the coal
mine about future negotiations with other I guess non Chinese countries.
(02:45):
When we come to tariffs the United States and the
United Kingdom, this seems like low hanging fruit. We don't
have much of a trade deficit with the UK, like
we do not have a trade deficit with any trade deficit.
Speaker 2 (02:57):
We run a surplus of eleven point eight billion dollars
last year.
Speaker 4 (03:00):
So seems pretty easy to get a trade deal done
based on how the Trump administration prioritized countries that they
were going to hit with reciprocal tariffs. So is there
anything to learn from this if it's a you know,
even if it's an all encompassing trade deal, that it
covers many items and even does away with the ten
percent baseline terrafs, which it doesn't seem likely today.
Speaker 2 (03:23):
Well, I think, look, whatever happens with that ten percent
is going to be the only thing that matters. Nothing
else here is important, quite honestly, Like, here's the deal.
If you look at how much US the US imports
about ten billion dollars in cars from the UK, range Rovers, Jaguars,
things like that. The US exports a billion dollars in
(03:46):
autos to the UK. Like that's like that's like a
day of Toyota sales in the US.
Speaker 3 (03:53):
YEP.
Speaker 2 (03:55):
The UK digital service tax costs about eight hundred million
dollars in a given year for US companies, and the
US imports about five hundred million dollars of steel from
the UK. So like that stuff in and of itself,
quite honestly, does not matter at least to the US.
To the UK, it's it's it's a bigger deal just
(04:15):
because the UK economy is significantly smaller, and so getting
some kind of waiver on those auto export taxes to
the US the auto tariffs to the US is meaningful
for them.
Speaker 3 (04:27):
But as far as hey.
Speaker 2 (04:29):
Like, how is this going to affect the US economy,
the answer is it's it's not like it's it's there's
there's nothing there.
Speaker 4 (04:36):
The I think the bigger piece of this is, you
know markets were up in pre markets close to one percent.
They've since come back down to earth s and p
right now up about a third of a percent. But
the question in my mind is can you use this
as any sort of framework for other countries? And the
indication would be probably not, because we run a surplus
with the UK and just about every other country that
(04:58):
we're going to be negotiating with, we run a trade deficit,
which seems to be the defining issue that the Trump
administration is focusing on.
Speaker 2 (05:06):
So I think, yes, if you're trying to be like,
can can this be like the exact temple with the answers?
Probably know. But here's the piece that I do think
is going to be instructive. We run a trade surplus
with the United Kingdom. We send them eighty billion dollars
in goods, we bring back sixty eight billion dollars in goods,
So we've got a trade surplus with them. If the
(05:28):
ten percent baseline tariff stays in place on a partner
that we have a trade surplus with the question that
I do think is worth asking, and where I think
you get some answers, is, hey, what happens to the
countries that we do not have a trade surplus with?
Speaker 4 (05:48):
You would think an excess of ten then.
Speaker 2 (05:51):
Does you gotta imagine the UK for multiple different reasons,
is going to have a better deal than just about
every other country out there, most notably like the trade situation.
Speaker 3 (06:04):
So I guess I look at.
Speaker 2 (06:06):
It and I go, okay, if this is kind of
the baseline that we have for I mean, here's the thing.
If if you had one hundred and eighty countries where
we were trading like we were with the UK, would
would there be any complaint like the not? Like, there's
there's no way that you you get there. You wouldn't
(06:26):
have any issue with any any trade deficit because there
simply wouldn't be one. So I think the question then is, Okay,
so you've got a country like Japan who's running a
seventy billion dollar trade deficit. Well, Japan's running a circles,
but the US is running a seventy billion dollar trade
deficit with Japan?
Speaker 3 (06:46):
How do we square that circle?
Speaker 2 (06:48):
You know, how much more complex does it have to be?
And maybe this is why you have Treasury Secretary Bessett
involved in these negotiations as opposed to just the US
Trade Representative. There's very lovely currency components that play into
some of these and those things get you know, pretty
complicated and pretty complex. So it's not to say that
you won't get something done. But I keep coming back
to the tariff piece, and I go the President multiple
(07:10):
times this week, and these are quotes I keep coming
back to. Has said something of the equivalent of, Hey,
we have, you know, a product that we're selling, and
we're going to set the price and you're either going
to accept it or you're you're not going to be
able to do business with us. And the price that
he's viewing is that that teriff rate. And so I
(07:31):
guess what I'm getting at here is, Hey, the UK
because of its trade deficit, the shared you know, the
long history between the two countries. I mean again dating
back to literally the United States being a colony of
or multiple colonies of the UK originally, and then you know,
fighting together in World War One and World War two,
when Gulf War one and the War on terram like,
(07:54):
you can go through all of this shared history and
basically say there's maybe one or two other countries that
you can consider to have as advantageous a position both
from a you know, a similarity perspective, a shared history perspective,
and a trade perspective. If this is the best one
(08:16):
that you get, then hey, what's it going to look
like for other countries and how do they get those
you know, over the hump, and what are the things
that you're able to actually get there? I think those
are the questions that are interesting for me to ask.
And so, you know, the assumption that I think everyone
on Wall Street is working at right now is that
the baseline ten percent tariffs are going to stay in place,
(08:39):
and something's going to happen on China, probably down into
the fifty percent range.
Speaker 3 (08:43):
That's kind of the.
Speaker 2 (08:44):
Where where people are working from. That's gotten markets to
this point, and so I think the question in the
set up here is, hey, if there's anything that is
better than that, great, you know, you've got the potential
for you know, improvement. But there's also the likelihood if
this is the best deal that the UK can negotiate.
Speaker 4 (09:02):
There's no way that France, Germany, Japan and others can
neotiate the same deal.
Speaker 3 (09:05):
Then no.
Speaker 2 (09:06):
I mean, like you look at you know, Mexico and Canada,
which respectively run one hundred and seventy billion and sixty
three billion dollar deficits with the US, and you sit
there and go, okay, like, how's that going to work.
So I think those are the questions that are that
are interesting to sort through and you know, try to
inform where things are going. But I think the working
(09:27):
assumption that's out there for most people ten percent staying
in place something extra on China, but probably not the
one forty five that's there. And obviously we'll have to
see how things go over the weekend, if we get
any movement in that rate over the weekend, or if
this is kind of a prelude to something that is
you know, further down the line in you know, later
this month or as we get into the summer with China.
Speaker 4 (09:49):
The other question I would have about the UK deal
they just inked a the UK did with inked a
new deal with India on trade and other you know,
immigration type issues. I'm interested to see Scott Besen's been
kind of dangling this carrot out in front of other
countries of hey, join with us on penalties on trade
with China and we can negotiate a better deal. Is
(10:10):
there any mention of that in a deal with the UK?
I kind of doubt it, but that would be kind
of the only circumstance I could envision where that ten
percent baseline starts disappearing.
Speaker 2 (10:20):
And that's one where, by the way, negotiations with the
EU become really complicated because the EU, and specifically Germany
to a significant extent, there's some significant political capture there
by China, and I think that you would get significant
pushback from the EU, which could make that one of
the more difficult negotiations potentially, if that is a sticking
(10:44):
point there. So I think that that's something that bears
watching as we get more details. But again still no
specifics you know, that have been hammered out or any
not hammered out, but that have been made available publicly
yet and we'll have to see what we get over
the course of the day, and then I think all
eyes continue to be the reporting from Charlie Gasperino from
(11:06):
Fox Business. India is kind of next in the cube,
but obviously with everything going on right now between India
and Pakistan, that seems to have slowed things down at
the moment, and so I think, you know, that's another
one that you would expect to see in short order. Australia,
South Korea, Japan, They're all kind of in that next
group that you would say, Okay, these are the ones
that you should have, you know, the easiest deals to
(11:30):
potentially work or the easiest frameworks to establish, and we'll
have to see what we get there. Anything else on
the UK one that you want to touch on, Mike.
Speaker 4 (11:39):
No, but there's been some news out of the EU.
Let's take quick break and cover how they are preparing
for negotiations with the US. Next here on the Financial Exchange.
Speaker 1 (11:48):
Market volatility is at its highest point since the pandemic.
Keep it here for the most comprehensive coverage of the
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Well Street watch a full update on the markets performance
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Speaker 5 (12:15):
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Speaker 2 (12:50):
All right, let's talk a little bit about the state
of negotiations between the US and EU as it relates
to trade. Basically, all the reporting there hasn't really been
any progress to the point, not really a ton of conversation,
it sounds like, but it does appear that things are
set to ramp up with some talks in the next
week or two, and the EU unveiling this morning. I
(13:14):
guess it was, you know, kind of midday their time,
a whole set of different additional tariffs that they would
put in place if they're not able to get these
negotiations to a satisfactory place. So pretty much saying, hey,
we want to, you know, try to get something done,
but if we can't, here's what we're gonna do. And
(13:35):
it's not gonna be a whole lot of fun for you.
What are they proposing?
Speaker 4 (13:38):
Yeah, so this is unsurprising. And by the way, you know,
just because they are listing this out, I don't take
this as bad news about the direction of these negotiations.
Speaker 3 (13:46):
If you are the EU.
Speaker 4 (13:48):
You are not going to sit on the sideline and
go into these negotiations with no bargaining power. You have
to do something like this. Correct the list of things
that they mentioned big ones anyway, cars obviously, planes makes
some sense. You manufacture your air buses in France. We're
not going to import any Boeing planes, or we're gonna
hit them with tariffs if we do. Bourbon has been
(14:10):
a constant source of targeting by the EU and other
countries over tariffs several times now. So those, you know,
are a number of the different items that would be
looked at. But like you mentioned, Chuck, it'd be targeting
about one hundred and eight billion dollars of US goods
that would be looked at for reciprocal tariffs in the
event that they cannot make this all move along. By
(14:33):
their own study, they said that in terms of the
European made goods that would be facing tariffs coming into
the United States, they're looking at duties on some five
hundred and fifty billion euro worth of goods. So this
is a smaller basket because frankly, there's fewer goods that
go into the EU from the US than the other direction.
I don't know, unsurprising and you know, just kind of
(14:55):
to me is part of the negotiation tactic. Hey, we're
going to go after some of the most critical items
that the US is able to export to US.
Speaker 2 (15:05):
Yeah, and just to give some color on the trade
deficit that the US has with the EU, the US
exports about three hundred and seventy billion dollars worth of
goods to the EU. We import about six hundred and
five billions, So in total, there's about a trillion dollars
in trade between the two countries. But it's kewed, you know,
call it like sixty two to thirty eight percent in
(15:25):
favor of goods heading from the EU versus goods heading
from the United States. So yeah, look, I don't think
that the publication of this list says anything about the
fact that things are good or bad.
Speaker 3 (15:36):
As you noted, it's much more.
Speaker 2 (15:38):
Hey, if someone you know, places a punitive measure on you,
in order to start negotiations, you basically have to say, Okay,
here's what we're going to do to you. Otherwise you're
just negotiating against yourself.
Speaker 4 (15:49):
It's the Roosevelt theory speak softly, carry a big stick.
Speaker 2 (15:52):
So I think that this is gonna be something that
we'll see how things go over the next few weeks
or so and whether we start to see some signs
of progress there.
Speaker 3 (16:01):
But look, if the ask from.
Speaker 2 (16:04):
The Trump administration, which I think one of them is
going to be, hey, we need you to, you know,
focus on detaching yourself somewhat from Chinese supply chains, there
are all kinds of signs that that's going to be
a really tough putt with the EU because China is
absolutely deeply embedded into the EU economy now, and furthermore,
(16:27):
you know, has significant influence amongst different political groups within
the EU as well, to the point where you know,
with a number of things that happen, you kind of
look at you like, man, this is this really does
not seem to be in Europe's best interest in a
lot of cases, but instead in China's best interest. And
so I think this could be one of the tougher
(16:48):
negotiations if that is a sticking.
Speaker 3 (16:51):
Point for the Trump administration.
Speaker 4 (16:52):
Yeah, I gotta tell you, Chuck, I mean, as big
of a deal that is for the EU, think about
countries like Vietnam, Japan and Australia and the the forget
about like ties, the utter reliance that those countries have
on the Chinese economy for employment and just everything that
they do. Maybe Australia a little bit to a lesser degree,
(17:13):
but those ties are so more, so, much more than
what we experience with EU, UK, et cetera. That, yes,
these negotiations with the EU would be a challenge, but
when you dive into some of those Asian countries, it
is even more significant than So I do wonder about
(17:34):
the ability for the United States to drive that wedge.
It's going to be significantly challenging.
Speaker 2 (17:40):
Yeah, and just as an example Vietnam. So if you
go through and look at you know, the data, Oni,
So let's look at the EU first. So the European Union,
in terms of their largest exports, twenty one percent of
EU exports go to the US, fourteen percent go to
the UK, and then eight and a half percent go
(18:01):
to China. In terms of you imports by country, if
you looking at hey like where do you know where
do they bring stuff in from? Biggest import by far
as China. They bring in twenty two percent of all
their imports from China, fourteen percent from the United States,
seven percent from the UK. If you go and take
a look at Vietnam, just to get like the scale
(18:24):
of this, Vietnam eighteen percent of their exports are to China,
So it's a bigger chunk than the EU.
Speaker 3 (18:29):
It's it's effectively more than double.
Speaker 2 (18:32):
And from an import perspective, that's also the case. Thirty
seven percent of Vietnamese imports come from China, next closest
to South Korea at seventeen then Japan at seven point two.
So yeah, this is something where again I think you're
gonna have with some of these other countries, you know,
(18:53):
specifically like Vietnam, Thailand, Malaysia, Cambodia. Part of the challenge
that the US is going to have and to gociating
there is I do think it's twofold as it relates
to China. The first, hey, stop your reliance on them.
But the second is stop you know, the flow of
stuff coming from China that's being relabeled as being in
your country. It's gonna be a big one too, potentially,
(19:15):
big Ten's take a quick break here. When we come back,
we're gonna do a little bit of Wall Street Watch
and then talk a little bit about those US China
talks that are slated to start this weekend, and how'd
they get on how they kind of get on course
to meet Anyways, we'll discuss that when we return.
Speaker 1 (19:39):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Are in positive territory as Wall Street aweights official details
of a new trade deal between the US and the UK.
News conference was supposed to start at ten o'clock, but
hasn't started yet to this moment, so we're still awaiting
that press conference. Investors are also digesting yesterday's commentary from
(20:20):
the Federal Reserve in Jerome Powell. Right now, the Dow
is up by over two thirds of a percent, or
two hundred and eighty points. S and P five hundred
also up by two thirds of percent or thirty five points,
and the Nasdaq is up just over three quarters of
a percent or one hundred and thirty nine points. Rusted
two thousand is up by seven tenths of a percent
or thirteen points. Tenure Treasure Reill left by four basis
(20:44):
points now at four point three to two percent. In
crude oil up two and a half percent higher today
training a fifty nine dollars in fifty one cents a barrel.
FOURD announced price increases for three of its popular vehicles
due to tariff uncertainty, including twenty twenty five models of
the Maverick, Broncos Sport and Mocke built after May second.
(21:05):
The Detroit automaker said the new prices would increase anywhere
between six hundred and two thousand dollars a vehicle, depending
on the features. FOURD shares are up by half a percent. Meanwhile,
beer brewer Molson Cores slash its annual outlooks, citing intensified
overseas competition and consumers economic woes. However, its competitor Anheuser
(21:27):
Busch InBev posted better than expected earnings. Molson down by
five percent, while bud stock is up by two percent.
Shopify's shares are down by two percent despite the commerce
technology platform beating revenue expectations for the first quarter. However,
it did post a wider quarterly net loss. Chip maker
(21:48):
arm Holding sinking by five percent after the company posted
weaker than expected guidance for the current quarter. App Love
and stock jumping by fourteen percent after the AAI powered
marketing platform posted stronger than expected first quarter earnings, boosted
by its ad business, and also announced the sale of
its mobile gaming business. And Krispy Kreme pulled its annual
(22:09):
guidance and said it would stop paying dividends, citing a
challenging environment, sending shares in Krispy Kreme down by nineteen percent.
I'm Tucker Silva. That's Wall Street.
Speaker 3 (22:20):
Watch, Mike.
Speaker 2 (22:22):
We got a piece in the Wall Street Journal. The
headline is fentonyl crisis provided opening for US China trade talks.
And again, just kind of a nice little background piece
that I think gives us a little bit of insight
into how we got to the point where the two
sides are going to be sitting down for a chat
in Switzerland this weekend.
Speaker 4 (22:41):
Yeah, it does not appear that this would have necessarily
happened without this opening. And the point here is that
China does participate in the illegal The governments does not,
but manufacturers in China and gangs export the components too
Mexican cartels allegedly who then ship the stuff into the
(23:02):
United States. And both China and the United States seem
to agree that this is a not easy to resolve problem,
but at least a problem that most can agree on
should be addressed. And who knows if it actually leads
to anything, but certainly is an opening door for two
countries that seemingly do want to find a path for
(23:23):
de escalation while being able to save face with their citizens.
Is that Do you think that that's a fair categorization
of where we are now with US and China trade?
I think so, but we're all guessing at this stage.
But that seems to be the read that most are
painting here is Yeah, both countries see that they're going
(23:45):
to be doing harm to their own economies by keeping
things where they are right now, which is effectively an
embargo on all but about one fifth to one quarter
of goods coming in and out of those countries. And
I think both i'd see how problematic that would be.
So I'm not really optimistic about where these negotiations lead
(24:06):
to this weekend, but it's an encouraging sign of progress,
I guess, I'll say.
Speaker 3 (24:12):
Yeah.
Speaker 2 (24:12):
So I think in these like rather than being like, hey,
here's you know, what's going to happen. You kind of
think of it in terms of, Okay, best case, base case,
and worst case scenario, and what are the probabilities of
those absolute best case scenario, Like, what's the.
Speaker 3 (24:27):
Best thing that could happen this weekend?
Speaker 2 (24:30):
You go back to twenty percent blanket tariffs on China,
China removes you know, all tariffs, maybe even down to
like twenty percent on the US, and you go from there,
and you could even say, Okay, we're going to make
this retroactive back to April ninth.
Speaker 3 (24:44):
So hey, companies, if you've.
Speaker 2 (24:45):
Paid tariffs, applied for a rebate to the Customs and
Border Patrol, Okay, that's best case scenario, yep one in
twenty yeah, five ten percent chance something like that case
in pretty much what I think everyone is pricing in. Okay,
tariffs are gonna be taken down to somewhere in that
(25:05):
fifty percent range. Maybe China does something similar, agrees to
future conversations. I'd say the market's probably pricing in like
an eighty ninety percent chance.
Speaker 3 (25:15):
Of that worst case scenario.
Speaker 2 (25:19):
Sunday night, we really don't like each other anymore, and
we're gonna maintain these tariffs because these talks were not constructive,
and we are not scheduling further ones at this time.
Speaker 4 (25:30):
Yep.
Speaker 2 (25:30):
That'd be your worst case, you know, like that that's
your worst case scenario. Again, maybe like five to fifteen
percent chance. And by the way, what we may end
up getting could be a combination of these in different
respects as well. It could be, Okay, we're lowering our
baseline rate on tariffs to fifty, but in some national
security areas, we're gonna keep it at one forty five,
(25:50):
and we're gonna go, you know, make this retroactive to
April ninth. So like you can get things that cross
over as well. But when you start getting into like
all those different contortions and everything, it's kind of like,
what are we doing here? We're not there, so let's
just let it play out and see what happens.
Speaker 4 (26:04):
Yep.
Speaker 2 (26:05):
So that's that's kind of where we are, I think.
But I think we'll know a lot more after this weekend.
Obviously at the you know, obviously like wha.
Speaker 4 (26:15):
Meetings are occurring this weekend, so we will know more
after this weekend.
Speaker 2 (26:18):
On Monday, the bolt call would be, I think we're
gonna know less after this weekend.
Speaker 4 (26:22):
To Michael, Yeah, that would be that would be an
interesting one.
Speaker 2 (26:25):
So I think the the piece that that then matters is, Okay,
what do these different tariff levels mean for business in
the US if it goes back to twenty and this
is from you know people that I know that are
you know, big importers from China. If it goes back
to twenty, call up your boats, get your ships on
(26:47):
the water, get your factories moving. We're bringing all that
stuff over because we can figure out how to eat twenty.
It might be uncomfortable, but you can figure out how
to eat twenty.
Speaker 4 (26:57):
Well, I mean small businesses can at least afford it.
Speaker 3 (26:59):
Right.
Speaker 4 (27:00):
It's not a question right now of companies entirely just
saying oh, like U should we pay the one forty
five should we wait and see? It's literally a question
of hey, if we have to pay a tariff of
one hundred and forty five percent on these goods that
we're bringing over, we can't find alone even to go
and afford it. So it's it's a non issue.
Speaker 2 (27:20):
So if you come in like best case scenario, which
is twenty, you say, okay, like stuff's gonna be coming.
Speaker 3 (27:25):
But here's the other piece.
Speaker 2 (27:26):
Then if everyone in their grandma's calling their factories in
China and calling up their logistics people, what does that
do to cost? Hint, it doesn't move them down right,
you know, the estimates that I've heard from you know,
people that are in this business are hey, if this
is if you do get that best case scenario, shipping
(27:46):
costs might go up anywhere from double to triple in
some cases, and shipping times may go up anywhere from
like fifty to one hundred and fifty percent, right, because
there's gonna be this huge backlog of people trying to
get stuff out, and there's only so many ships out
there that carry this stuff. Like you, you don't just
have a whole bunch of spare ships floating around because
(28:08):
that's not really something that makes the shippers any money.
And it's a very concentrated industry shipping stuff from China.
There's only a few companies that basically control the vast
majority of that market. So even in that best case scenario,
it's still gonna add some some cost and time. Middle scenario, Okay,
tariffs go to fifty there are still some companies that
(28:30):
are gonna say, we can't do this.
Speaker 3 (28:31):
We can't make it work. Some will say, yes, we can.
Speaker 2 (28:34):
It's kind of like your middle ground, and you probably
don't see any dramatic, you know, increase in production costs
and shipping times just because I think that kind of
gets you to a middle ground there. But it's gonna
be because some companies are saying no, we're not gonna
do this, and some are gonna say, hey, let's order
more in case things get worse, right, And if it's
still at one forty five, then you've got effectively, you know,
(28:55):
you know, this blockade with with China basically like this
defect embargo. And if that's the case, you're not going
to really see any change, if anything, you might get
worse if that, if you know, from there, just because
companies may have been you know, trying to produce stuff
and shipping it saying okay, maybe by the time it
gets to the US the situation will be better, and
(29:17):
if you don't see improvement, they might stop doing.
Speaker 3 (29:19):
That is the case that you can make.
Speaker 2 (29:21):
Yeah, just trying to you know, work this all out
in front of you know, everyone listening.
Speaker 3 (29:27):
How I do most things.
Speaker 2 (29:28):
I guess let's take a quick break here. When we
come back we did have a FED meeting yesterday. We'll
talk about what they said, what they did, and what
it means for the global economy.
Speaker 1 (29:40):
The global trade war is in full swing. How long
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Speaker 3 (30:12):
Mike, Yesterday we had a FED meeting.
Speaker 2 (30:14):
I advertised it as the least consequential and least important
FED meeting in quite a while, and I think that's
basically what we got. The market didn't really react to it,
and some kudos to Jay Powell for, you know, sticking
to his script and not really saying anything crazy other
than I think the one thing that we learned is, look,
(30:35):
there's a pretty high bar for the FED to do
anything at the June meeting, even the July one would
require a pretty meaningful shift in either the unemployment or
inflation data before then. And so I think the one
thing that we did get here is, hey, barring some
kind of significant shift in the data in the next
month or two, you're basically on hold until September.
Speaker 4 (30:57):
Yeah, it looks like it. The the next meeting in June,
I think has an eighty percent probability of nothing being done.
It's a little bit less clear when you get out
to that. What do we have a late July meeting then?
Speaker 3 (31:10):
Ah?
Speaker 2 (31:11):
Yeah, So the July meeting is on the thirtieth, like
as almost as lay as it can be.
Speaker 4 (31:15):
So, you know, the term weight was used some twenty
two times, or different versions of the word weight. Waiting
holding off was a lot during this meeting, Mike. So
I would agree with you, Chuck. I do think that
this is the correct course for j. Powell to take.
That said, I think it is inevitable that he faces
(31:37):
criticism not only from President Trump but from others on
the fact that they waited in you know, twenty twenty
one and twenty twenty two to do anything in the
face of inflation and got it wrong. I'm looking at
the I'm looking at the transcript from the June twenty
twenty one press conference. At this press conference, year over
year PCE inflation was already up over three percent and
(32:00):
would continue on up through twenty twenty two to up
over five percent. And the very first thing they say
today the Federal Open Market Committee kept interest rates near
zero and maintained our asset purchases, and they would continue
to do so for quite some time thereafter. How I
guess how susceptible are they to this criticism and is
it a reasonable one that Hey, look, you held off
(32:23):
last time we were facing a change in the economy.
You completely missed it, and maybe you're doing so now.
Speaker 2 (32:30):
So I'm a big believer in not fighting the last war, yep,
because there's no two points in economic history that are
the exact same. And I guess the counterpoint to what
you said in what I would say is, hey, back
in you know the spring of twenty was it twenty
four or twenty three? I can't remember. Well, Actually two examples.
(32:53):
One spring of twenty three, Silicon Valley Bank blows up.
You got every tech body out there saying, oh, the
Fed's got a cut, like this is bad, like Bob,
and the FED said, no, you idiots, like this was bad.
You know this was a bank run because you guys
made a run on the bank. In a private chat,
(33:14):
and told everyone to pull their money out, and you
caused a few other banks to fail in the process,
but it's not affecting the overall trajectory of the economy.
Speaker 3 (33:21):
And by the way, they.
Speaker 2 (33:22):
Were right, and then they contained it other things. I
forget which year it was it, whether it was twenty
I think it was twenty four. Remember Q one of
twenty four when we got those couple of hot inflation
prints and the FED said, and Jake Powell was asked
about this a lot. He's like, we're gonna look through this.
This is not something that we think is a meaningful
(33:44):
shift and trend.
Speaker 3 (33:44):
We're gonna look through this.
Speaker 2 (33:46):
And sure enough, inflation has continued to come down to
the point where now you got PCE and core PCE.
You know, in the mid to high twos, they're still
not exactly where the FED wants, but they've gotten better.
And so you know that the FED said, no, we're
not hike rates because of this. So I think that
we can look at it and this gets it my
overall view of this j Powell Fed, which is they
(34:07):
got it really wrong in late twenty one and all
of twenty two, I think twenty three and twenty four.
Speaker 3 (34:15):
They kind of did very well.
Speaker 2 (34:17):
Maybe not AA plus but B plus a minus after
you know, getting a D for the prior two years, right.
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Speaker 4 (35:18):
Tuller. The President is currently addressing the nation on tariff's,
specifically a trade deal with the UK. Do we have
any ability to.
Speaker 5 (35:27):
Yeah, I mean it's a couple of minutes here, but
yeah we can.
Speaker 4 (35:29):
Yeah. Let's let's let's go live briefly to the President
Trump's press conference on trade with the UK, and we'll
be right back.
Speaker 6 (35:37):
You know, I'm a security blanket and that's very important
and we feel very very comfortable with that because it's
been a great ally, truly one of our great allies.
I mean a lot of people say our greatest ally.
I don't want to insult people by saying that, but
I can say it's certainly one of our greatest and
right at the top. And they're the first one we're
talking about. And by the way, we have many meetings
(35:59):
play today and tomorrow, and every country wants to be
making deals. And we have a meeting as you know,
Scott will be going over to Switzerland on Saturday, and
that'll be very very interesting. Let's find out. I think
they want to make a deal very badly too. Both
countries have agreed that the economic security is national secured
(36:20):
and we'll be working together as allies to ensure that
we have a strong industrial base, appropriate export controls and
protections for key technologies and industries like steel. Steel is
a big factor. Both countries will become stronger with steel
and things necessary for military. You know, we used to
build ships and other things literally at a level that
(36:41):
nobody's ever seen, and haven't we've eased up, and I
would say that the UK certainly eased up, but now
we're going to be uneasing both and we work together
once again. I want to thank Prime Minister Storm. He's
been terrific for his partnership in this matter. The special
relationship and external bond, it's really external and an internal
bunt between our two countries will soon be stronger than
(37:04):
ever before, and we really do we have a great relationship.
I want to just say that the representatives of UK
have been so professional and it's been an honor doing
business with all of them, and in particular the Prime Minister.
And i'd like to introduce him now to say a
few words. Mister Prime Minister, please take it away.
Speaker 7 (37:26):
Thank you, mister President at Donald And this is a
really fantastic historic day in which we can announce this
deal between our two great countries, and I think it's
a real tribute to the history that we have of
working so closely together. Can I pay tribute Donald to
your negotiating team as well, particularly Howard and Jamison, who've
(37:50):
done an incredible job, a very professional job, and my
team as well to negotiating teams have worked at pace
now for weeks to bring.
Speaker 4 (38:01):
We unfortunately have a hard break that we need to
take now. But we'll be back in just a few
minutes with a recap on the press conference on the
US UK trade deal. Quick break. We'll be right back
on the Financial Exchange
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(01:05):
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Speaker 2 (01:10):
Chuck, Mike and Tucker with you here, and top story
today is basically, as we speak right now, we are
expecting to get some details surrounding the trade deal between
the United States and the United Kingdom. And Mike, we
(01:30):
don't know anything yet. Again, I expect that we'll be
updating this kind of as we go during the hour here,
but i'll quote here from the Wall Street Journal and
the Financial Times and Bloomberg of Hall had similar reporting
on this.
Speaker 3 (01:45):
Here's the quote.
Speaker 2 (01:46):
The UK is hoping to get a reduction in the
twenty five percent tariffs the US is levying on steel
and automobiles, but the baseline ten percent tariff will likely
remain in place, officials say. In return, Britain is offering
concessions on a digital tax levies on big US tech companies,
according to officials with the matter and also specifically talking
(02:08):
the UK has indicated this morning that this is not
a comprehensive deal encompassing all aspects of trade between the countries,
but really a preliminary agreement on these couple of areas,
with the idea that they'll continue talking in the future.
Speaker 4 (02:25):
Yeah, So the press conference was supposed to occur at
ten am Eastern. We are seven minutes past. We will
see and keep updated as things keep going here. But
what would you be looking for if we're going to
treat this as some sort of canary in the coal
mine about future negotiations with other I guess non Chinese countries.
(02:45):
When we come to tariffs the United States and the
United Kingdom, this seems like low hanging fruit. We don't
have much of a trade deficit with the UK, like
we do not have a trade deficit with any trade deficit.
Speaker 2 (02:57):
We run a surplus of eleven point eight billion dollars
last year.
Speaker 4 (03:00):
So seems pretty easy to get a trade deal done
based on how the Trump administration prioritized countries that they
were going to hit with reciprocal tariffs. So is there
anything to learn from this if it's a you know,
even if it's an all encompassing trade deal, that it
covers many items and even does away with the ten
percent baseline terrafs, which it doesn't seem likely today.
Speaker 2 (03:23):
Well, I think, look, whatever happens with that ten percent
is going to be the only thing that matters. Nothing
else here is important, quite honestly, Like, here's the deal.
If you look at how much US the US imports
about ten billion dollars in cars from the UK, range Rovers, Jaguars,
things like that. The US exports a billion dollars in
(03:46):
autos to the UK. Like that's like that's like a
day of Toyota sales in the US.
Speaker 3 (03:53):
YEP.
Speaker 2 (03:55):
The UK digital service tax costs about eight hundred million
dollars in a given year for US companies, and the
US imports about five hundred million dollars of steel from
the UK. So like that stuff in and of itself,
quite honestly, does not matter at least to the US.
To the UK, it's it's it's a bigger deal just
(04:15):
because the UK economy is significantly smaller, and so getting
some kind of waiver on those auto export taxes to
the US the auto tariffs to the US is meaningful
for them.
Speaker 3 (04:27):
But as far as hey.
Speaker 2 (04:29):
Like, how is this going to affect the US economy,
the answer is it's it's not like it's it's there's
there's nothing there.
Speaker 4 (04:36):
The I think the bigger piece of this is, you
know markets were up in pre markets close to one percent.
They've since come back down to earth s and p
right now up about a third of a percent. But
the question in my mind is can you use this
as any sort of framework for other countries? And the
indication would be probably not, because we run a surplus
with the UK and just about every other country that
(04:58):
we're going to be negotiating with, we run a trade deficit,
which seems to be the defining issue that the Trump
administration is focusing on.
Speaker 2 (05:06):
So I think, yes, if you're trying to be like,
can can this be like the exact temple with the answers?
Probably know. But here's the piece that I do think
is going to be instructive. We run a trade surplus
with the United Kingdom. We send them eighty billion dollars
in goods, we bring back sixty eight billion dollars in goods,
So we've got a trade surplus with them. If the
(05:28):
ten percent baseline tariff stays in place on a partner
that we have a trade surplus with the question that
I do think is worth asking, and where I think
you get some answers, is, hey, what happens to the
countries that we do not have a trade surplus with?
Speaker 4 (05:48):
You would think an excess of ten then.
Speaker 2 (05:51):
Does you gotta imagine the UK for multiple different reasons,
is going to have a better deal than just about
every other country out there, most notably like the trade situation.
Speaker 3 (06:04):
So I guess I look at.
Speaker 2 (06:06):
It and I go, okay, if this is kind of
the baseline that we have for I mean, here's the thing.
If if you had one hundred and eighty countries where
we were trading like we were with the UK, would
would there be any complaint like the not? Like, there's
there's no way that you you get there. You wouldn't
(06:26):
have any issue with any any trade deficit because there
simply wouldn't be one. So I think the question then is, Okay,
so you've got a country like Japan who's running a
seventy billion dollar trade deficit. Well, Japan's running a circles,
but the US is running a seventy billion dollar trade
deficit with Japan?
Speaker 3 (06:46):
How do we square that circle?
Speaker 2 (06:48):
You know, how much more complex does it have to be?
And maybe this is why you have Treasury Secretary Bessett
involved in these negotiations as opposed to just the US
Trade Representative. There's very lovely currency components that play into
some of these and those things get you know, pretty
complicated and pretty complex. So it's not to say that
you won't get something done. But I keep coming back
to the tariff piece, and I go the President multiple
(07:10):
times this week, and these are quotes I keep coming
back to. Has said something of the equivalent of, Hey,
we have, you know, a product that we're selling, and
we're going to set the price and you're either going
to accept it or you're you're not going to be
able to do business with us. And the price that
he's viewing is that that teriff rate. And so I
(07:31):
guess what I'm getting at here is, Hey, the UK
because of its trade deficit, the shared you know, the
long history between the two countries. I mean again dating
back to literally the United States being a colony of
or multiple colonies of the UK originally, and then you know,
fighting together in World War One and World War two,
when Gulf War one and the War on terram like,
(07:54):
you can go through all of this shared history and
basically say there's maybe one or two other countries that
you can consider to have as advantageous a position both
from a you know, a similarity perspective, a shared history perspective,
and a trade perspective. If this is the best one
(08:16):
that you get, then hey, what's it going to look
like for other countries and how do they get those
you know, over the hump, and what are the things
that you're able to actually get there? I think those
are the questions that are interesting for me to ask.
And so, you know, the assumption that I think everyone
on Wall Street is working at right now is that
the baseline ten percent tariffs are going to stay in place,
(08:39):
and something's going to happen on China, probably down into
the fifty percent range.
Speaker 3 (08:43):
That's kind of the.
Speaker 2 (08:44):
Where where people are working from. That's gotten markets to
this point, and so I think the question in the
set up here is, hey, if there's anything that is
better than that, great, you know, you've got the potential
for you know, improvement. But there's also the likelihood if
this is the best deal that the UK can negotiate.
Speaker 4 (09:02):
There's no way that France, Germany, Japan and others can
neotiate the same deal.
Speaker 3 (09:05):
Then no.
Speaker 2 (09:06):
I mean, like you look at you know, Mexico and Canada,
which respectively run one hundred and seventy billion and sixty
three billion dollar deficits with the US, and you sit
there and go, okay, like, how's that going to work.
So I think those are the questions that are that
are interesting to sort through and you know, try to
inform where things are going. But I think the working
(09:27):
assumption that's out there for most people ten percent staying
in place something extra on China, but probably not the
one forty five that's there. And obviously we'll have to
see how things go over the weekend, if we get
any movement in that rate over the weekend, or if
this is kind of a prelude to something that is
you know, further down the line in you know, later
this month or as we get into the summer with China.
Speaker 4 (09:49):
The other question I would have about the UK deal
they just inked a the UK did with inked a
new deal with India on trade and other you know,
immigration type issues. I'm interested to see Scott Besen's been
kind of dangling this carrot out in front of other
countries of hey, join with us on penalties on trade
with China and we can negotiate a better deal. Is
(10:10):
there any mention of that in a deal with the UK?
I kind of doubt it, but that would be kind
of the only circumstance I could envision where that ten
percent baseline starts disappearing.
Speaker 2 (10:20):
And that's one where, by the way, negotiations with the
EU become really complicated because the EU, and specifically Germany
to a significant extent, there's some significant political capture there
by China, and I think that you would get significant
pushback from the EU, which could make that one of
the more difficult negotiations potentially, if that is a sticking
(10:44):
point there. So I think that that's something that bears
watching as we get more details. But again still no
specifics you know, that have been hammered out or any
not hammered out, but that have been made available publicly
yet and we'll have to see what we get over
the course of the day, and then I think all
eyes continue to be the reporting from Charlie Gasperino from
(11:06):
Fox Business. India is kind of next in the cube,
but obviously with everything going on right now between India
and Pakistan, that seems to have slowed things down at
the moment, and so I think, you know, that's another
one that you would expect to see in short order. Australia,
South Korea, Japan, They're all kind of in that next
group that you would say, Okay, these are the ones
that you should have, you know, the easiest deals to
(11:30):
potentially work or the easiest frameworks to establish, and we'll
have to see what we get there. Anything else on
the UK one that you want to touch on, Mike.
Speaker 4 (11:39):
No, but there's been some news out of the EU.
Let's take quick break and cover how they are preparing
for negotiations with the US. Next here on the Financial Exchange.
Speaker 1 (11:48):
Market volatility is at its highest point since the pandemic.
Keep it here for the most comprehensive coverage of the
global trade war. This is the Financial Exchange Radio Network.
Well Street watch a full update on the markets performance
todate weekdays at ten thirty only here on the Financial
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Speaker 2 (12:50):
All right, let's talk a little bit about the state
of negotiations between the US and EU as it relates
to trade. Basically, all the reporting there hasn't really been
any progress to the point, not really a ton of conversation,
it sounds like, but it does appear that things are
set to ramp up with some talks in the next
week or two, and the EU unveiling this morning. I
(13:14):
guess it was, you know, kind of midday their time,
a whole set of different additional tariffs that they would
put in place if they're not able to get these
negotiations to a satisfactory place. So pretty much saying, hey,
we want to, you know, try to get something done,
but if we can't, here's what we're gonna do. And
(13:35):
it's not gonna be a whole lot of fun for you.
What are they proposing?
Speaker 4 (13:38):
Yeah, so this is unsurprising. And by the way, you know,
just because they are listing this out, I don't take
this as bad news about the direction of these negotiations.
Speaker 3 (13:46):
If you are the EU.
Speaker 4 (13:48):
You are not going to sit on the sideline and
go into these negotiations with no bargaining power. You have
to do something like this. Correct the list of things
that they mentioned big ones anyway, cars obviously, planes makes
some sense. You manufacture your air buses in France. We're
not going to import any Boeing planes, or we're gonna
hit them with tariffs if we do. Bourbon has been
(14:10):
a constant source of targeting by the EU and other
countries over tariffs several times now. So those, you know,
are a number of the different items that would be
looked at. But like you mentioned, Chuck, it'd be targeting
about one hundred and eight billion dollars of US goods
that would be looked at for reciprocal tariffs in the
event that they cannot make this all move along. By
(14:33):
their own study, they said that in terms of the
European made goods that would be facing tariffs coming into
the United States, they're looking at duties on some five
hundred and fifty billion euro worth of goods. So this
is a smaller basket because frankly, there's fewer goods that
go into the EU from the US than the other direction.
I don't know, unsurprising and you know, just kind of
(14:55):
to me is part of the negotiation tactic. Hey, we're
going to go after some of the most critical items
that the US is able to export to US.
Speaker 2 (15:05):
Yeah, and just to give some color on the trade
deficit that the US has with the EU, the US
exports about three hundred and seventy billion dollars worth of
goods to the EU. We import about six hundred and
five billions, So in total, there's about a trillion dollars
in trade between the two countries. But it's kewed, you know,
call it like sixty two to thirty eight percent in
(15:25):
favor of goods heading from the EU versus goods heading
from the United States. So yeah, look, I don't think
that the publication of this list says anything about the
fact that things are good or bad.
Speaker 3 (15:36):
As you noted, it's much more.
Speaker 2 (15:38):
Hey, if someone you know, places a punitive measure on you,
in order to start negotiations, you basically have to say, Okay,
here's what we're going to do to you. Otherwise you're
just negotiating against yourself.
Speaker 4 (15:49):
It's the Roosevelt theory speak softly, carry a big stick.
Speaker 2 (15:52):
So I think that this is gonna be something that
we'll see how things go over the next few weeks
or so and whether we start to see some signs
of progress there.
Speaker 3 (16:01):
But look, if the ask from.
Speaker 2 (16:04):
The Trump administration, which I think one of them is
going to be, hey, we need you to, you know,
focus on detaching yourself somewhat from Chinese supply chains, there
are all kinds of signs that that's going to be
a really tough putt with the EU because China is
absolutely deeply embedded into the EU economy now, and furthermore,
(16:27):
you know, has significant influence amongst different political groups within
the EU as well, to the point where you know,
with a number of things that happen, you kind of
look at you like, man, this is this really does
not seem to be in Europe's best interest in a
lot of cases, but instead in China's best interest. And
so I think this could be one of the tougher
(16:48):
negotiations if that is a sticking.
Speaker 3 (16:51):
Point for the Trump administration.
Speaker 4 (16:52):
Yeah, I gotta tell you, Chuck, I mean, as big
of a deal that is for the EU, think about
countries like Vietnam, Japan and Australia and the the forget
about like ties, the utter reliance that those countries have
on the Chinese economy for employment and just everything that
they do. Maybe Australia a little bit to a lesser degree,
(17:13):
but those ties are so more, so, much more than
what we experience with EU, UK, et cetera. That, yes,
these negotiations with the EU would be a challenge, but
when you dive into some of those Asian countries, it
is even more significant than So I do wonder about
(17:34):
the ability for the United States to drive that wedge.
It's going to be significantly challenging.
Speaker 2 (17:40):
Yeah, and just as an example Vietnam. So if you
go through and look at you know, the data, Oni,
So let's look at the EU first. So the European Union,
in terms of their largest exports, twenty one percent of
EU exports go to the US, fourteen percent go to
the UK, and then eight and a half percent go
(18:01):
to China. In terms of you imports by country, if
you looking at hey like where do you know where
do they bring stuff in from? Biggest import by far
as China. They bring in twenty two percent of all
their imports from China, fourteen percent from the United States,
seven percent from the UK. If you go and take
a look at Vietnam, just to get like the scale
(18:24):
of this, Vietnam eighteen percent of their exports are to China,
So it's a bigger chunk than the EU.
Speaker 3 (18:29):
It's it's effectively more than double.
Speaker 2 (18:32):
And from an import perspective, that's also the case. Thirty
seven percent of Vietnamese imports come from China, next closest
to South Korea at seventeen then Japan at seven point two.
So yeah, this is something where again I think you're
gonna have with some of these other countries, you know,
(18:53):
specifically like Vietnam, Thailand, Malaysia, Cambodia. Part of the challenge
that the US is going to have and to gociating
there is I do think it's twofold as it relates
to China. The first, hey, stop your reliance on them.
But the second is stop you know, the flow of
stuff coming from China that's being relabeled as being in
your country. It's gonna be a big one too, potentially,
(19:15):
big Ten's take a quick break here. When we come back,
we're gonna do a little bit of Wall Street Watch
and then talk a little bit about those US China
talks that are slated to start this weekend, and how'd
they get on how they kind of get on course
to meet Anyways, we'll discuss that when we return.
Speaker 1 (19:39):
Like us on Facebook and follow us on Twitter at
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving market so
far today right here on the Financial Exchange Radio Network.
Speaker 5 (20:00):
Are in positive territory as Wall Street aweights official details
of a new trade deal between the US and the UK.
News conference was supposed to start at ten o'clock, but
hasn't started yet to this moment, so we're still awaiting
that press conference. Investors are also digesting yesterday's commentary from
(20:20):
the Federal Reserve in Jerome Powell. Right now, the Dow
is up by over two thirds of a percent, or
two hundred and eighty points. S and P five hundred
also up by two thirds of percent or thirty five points,
and the Nasdaq is up just over three quarters of
a percent or one hundred and thirty nine points. Rusted
two thousand is up by seven tenths of a percent
or thirteen points. Tenure Treasure Reill left by four basis
(20:44):
points now at four point three to two percent. In
crude oil up two and a half percent higher today
training a fifty nine dollars in fifty one cents a barrel.
FOURD announced price increases for three of its popular vehicles
due to tariff uncertainty, including twenty twenty five models of
the Maverick, Broncos Sport and Mocke built after May second.
(21:05):
The Detroit automaker said the new prices would increase anywhere
between six hundred and two thousand dollars a vehicle, depending
on the features. FOURD shares are up by half a percent. Meanwhile,
beer brewer Molson Cores slash its annual outlooks, citing intensified
overseas competition and consumers economic woes. However, its competitor Anheuser
(21:27):
Busch InBev posted better than expected earnings. Molson down by
five percent, while bud stock is up by two percent.
Shopify's shares are down by two percent despite the commerce
technology platform beating revenue expectations for the first quarter. However,
it did post a wider quarterly net loss. Chip maker
(21:48):
arm Holding sinking by five percent after the company posted
weaker than expected guidance for the current quarter. App Love
and stock jumping by fourteen percent after the AAI powered
marketing platform posted stronger than expected first quarter earnings, boosted
by its ad business, and also announced the sale of
its mobile gaming business. And Krispy Kreme pulled its annual
(22:09):
guidance and said it would stop paying dividends, citing a
challenging environment, sending shares in Krispy Kreme down by nineteen percent.
I'm Tucker Silva. That's Wall Street.
Speaker 3 (22:20):
Watch, Mike.
Speaker 2 (22:22):
We got a piece in the Wall Street Journal. The
headline is fentonyl crisis provided opening for US China trade talks.
And again, just kind of a nice little background piece
that I think gives us a little bit of insight
into how we got to the point where the two
sides are going to be sitting down for a chat
in Switzerland this weekend.
Speaker 4 (22:41):
Yeah, it does not appear that this would have necessarily
happened without this opening. And the point here is that
China does participate in the illegal The governments does not,
but manufacturers in China and gangs export the components too
Mexican cartels allegedly who then ship the stuff into the
(23:02):
United States. And both China and the United States seem
to agree that this is a not easy to resolve problem,
but at least a problem that most can agree on
should be addressed. And who knows if it actually leads
to anything, but certainly is an opening door for two
countries that seemingly do want to find a path for
(23:23):
de escalation while being able to save face with their citizens.
Is that Do you think that that's a fair categorization
of where we are now with US and China trade?
I think so, but we're all guessing at this stage.
But that seems to be the read that most are
painting here is Yeah, both countries see that they're going
(23:45):
to be doing harm to their own economies by keeping
things where they are right now, which is effectively an
embargo on all but about one fifth to one quarter
of goods coming in and out of those countries. And
I think both i'd see how problematic that would be.
So I'm not really optimistic about where these negotiations lead
(24:06):
to this weekend, but it's an encouraging sign of progress,
I guess, I'll say.
Speaker 3 (24:12):
Yeah.
Speaker 2 (24:12):
So I think in these like rather than being like, hey,
here's you know, what's going to happen. You kind of
think of it in terms of, Okay, best case, base case,
and worst case scenario, and what are the probabilities of
those absolute best case scenario, Like, what's the.
Speaker 3 (24:27):
Best thing that could happen this weekend?
Speaker 2 (24:30):
You go back to twenty percent blanket tariffs on China,
China removes you know, all tariffs, maybe even down to
like twenty percent on the US, and you go from there,
and you could even say, Okay, we're going to make
this retroactive back to April ninth.
Speaker 3 (24:44):
So hey, companies, if you've.
Speaker 2 (24:45):
Paid tariffs, applied for a rebate to the Customs and
Border Patrol, Okay, that's best case scenario, yep one in
twenty yeah, five ten percent chance something like that case
in pretty much what I think everyone is pricing in. Okay,
tariffs are gonna be taken down to somewhere in that
(25:05):
fifty percent range. Maybe China does something similar, agrees to
future conversations. I'd say the market's probably pricing in like
an eighty ninety percent chance.
Speaker 3 (25:15):
Of that worst case scenario.
Speaker 2 (25:19):
Sunday night, we really don't like each other anymore, and
we're gonna maintain these tariffs because these talks were not constructive,
and we are not scheduling further ones at this time.
Speaker 4 (25:30):
Yep.
Speaker 2 (25:30):
That'd be your worst case, you know, like that that's
your worst case scenario. Again, maybe like five to fifteen
percent chance. And by the way, what we may end
up getting could be a combination of these in different
respects as well. It could be, Okay, we're lowering our
baseline rate on tariffs to fifty, but in some national
security areas, we're gonna keep it at one forty five,
(25:50):
and we're gonna go, you know, make this retroactive to
April ninth. So like you can get things that cross
over as well. But when you start getting into like
all those different contortions and everything, it's kind of like,
what are we doing here? We're not there, so let's
just let it play out and see what happens.
Speaker 4 (26:04):
Yep.
Speaker 2 (26:05):
So that's that's kind of where we are, I think.
But I think we'll know a lot more after this weekend.
Obviously at the you know, obviously like wha.
Speaker 4 (26:15):
Meetings are occurring this weekend, so we will know more
after this weekend.
Speaker 2 (26:18):
On Monday, the bolt call would be, I think we're
gonna know less after this weekend.
Speaker 4 (26:22):
To Michael, Yeah, that would be that would be an
interesting one.
Speaker 2 (26:25):
So I think the the piece that that then matters is, Okay,
what do these different tariff levels mean for business in
the US if it goes back to twenty and this
is from you know people that I know that are
you know, big importers from China. If it goes back
to twenty, call up your boats, get your ships on
(26:47):
the water, get your factories moving. We're bringing all that
stuff over because we can figure out how to eat twenty.
It might be uncomfortable, but you can figure out how
to eat twenty.
Speaker 4 (26:57):
Well, I mean small businesses can at least afford it.
Speaker 3 (26:59):
Right.
Speaker 4 (27:00):
It's not a question right now of companies entirely just
saying oh, like U should we pay the one forty
five should we wait and see? It's literally a question
of hey, if we have to pay a tariff of
one hundred and forty five percent on these goods that
we're bringing over, we can't find alone even to go
and afford it. So it's it's a non issue.
Speaker 2 (27:20):
So if you come in like best case scenario, which
is twenty, you say, okay, like stuff's gonna be coming.
Speaker 3 (27:25):
But here's the other piece.
Speaker 2 (27:26):
Then if everyone in their grandma's calling their factories in
China and calling up their logistics people, what does that
do to cost? Hint, it doesn't move them down right,
you know, the estimates that I've heard from you know,
people that are in this business are hey, if this
is if you do get that best case scenario, shipping
(27:46):
costs might go up anywhere from double to triple in
some cases, and shipping times may go up anywhere from
like fifty to one hundred and fifty percent, right, because
there's gonna be this huge backlog of people trying to
get stuff out, and there's only so many ships out
there that carry this stuff. Like you, you don't just
have a whole bunch of spare ships floating around because
(28:08):
that's not really something that makes the shippers any money.
And it's a very concentrated industry shipping stuff from China.
There's only a few companies that basically control the vast
majority of that market. So even in that best case scenario,
it's still gonna add some some cost and time. Middle scenario, Okay,
tariffs go to fifty there are still some companies that
(28:30):
are gonna say, we can't do this.
Speaker 3 (28:31):
We can't make it work. Some will say, yes, we can.
Speaker 2 (28:34):
It's kind of like your middle ground, and you probably
don't see any dramatic, you know, increase in production costs
and shipping times just because I think that kind of
gets you to a middle ground there. But it's gonna
be because some companies are saying no, we're not gonna
do this, and some are gonna say, hey, let's order
more in case things get worse, right, And if it's
still at one forty five, then you've got effectively, you know,
(28:55):
you know, this blockade with with China basically like this
defect embargo. And if that's the case, you're not going
to really see any change, if anything, you might get
worse if that, if you know, from there, just because
companies may have been you know, trying to produce stuff
and shipping it saying okay, maybe by the time it
gets to the US the situation will be better, and
(29:17):
if you don't see improvement, they might stop doing.
Speaker 3 (29:19):
That is the case that you can make.
Speaker 2 (29:21):
Yeah, just trying to you know, work this all out
in front of you know, everyone listening.
Speaker 3 (29:27):
How I do most things.
Speaker 2 (29:28):
I guess let's take a quick break here. When we
come back we did have a FED meeting yesterday. We'll
talk about what they said, what they did, and what
it means for the global economy.
Speaker 1 (29:40):
The global trade war is in full swing. How long
will it last? Is anyone's gas? Keep it here for
the most up to date information plus breaking news every
day right here on the Financial Exchange Radio Network. Find
daily interviews and full shows of the Financial Exchange on
our YouTube page. Like us on YouTube and gave con
up on anything and everything you might have missed. This
(30:04):
is the Financial Exchange Radio Network.
Speaker 3 (30:12):
Mike, Yesterday we had a FED meeting.
Speaker 2 (30:14):
I advertised it as the least consequential and least important
FED meeting in quite a while, and I think that's
basically what we got. The market didn't really react to it,
and some kudos to Jay Powell for, you know, sticking
to his script and not really saying anything crazy other
than I think the one thing that we learned is, look,
(30:35):
there's a pretty high bar for the FED to do
anything at the June meeting, even the July one would
require a pretty meaningful shift in either the unemployment or
inflation data before then. And so I think the one
thing that we did get here is, hey, barring some
kind of significant shift in the data in the next
month or two, you're basically on hold until September.
Speaker 4 (30:57):
Yeah, it looks like it. The the next meeting in June,
I think has an eighty percent probability of nothing being done.
It's a little bit less clear when you get out
to that. What do we have a late July meeting then?
Speaker 3 (31:10):
Ah?
Speaker 2 (31:11):
Yeah, So the July meeting is on the thirtieth, like
as almost as lay as it can be.
Speaker 4 (31:15):
So, you know, the term weight was used some twenty
two times, or different versions of the word weight. Waiting
holding off was a lot during this meeting, Mike. So
I would agree with you, Chuck. I do think that
this is the correct course for j. Powell to take.
That said, I think it is inevitable that he faces
(31:37):
criticism not only from President Trump but from others on
the fact that they waited in you know, twenty twenty
one and twenty twenty two to do anything in the
face of inflation and got it wrong. I'm looking at
the I'm looking at the transcript from the June twenty
twenty one press conference. At this press conference, year over
year PCE inflation was already up over three percent and
(32:00):
would continue on up through twenty twenty two to up
over five percent. And the very first thing they say
today the Federal Open Market Committee kept interest rates near
zero and maintained our asset purchases, and they would continue
to do so for quite some time thereafter. How I
guess how susceptible are they to this criticism and is
it a reasonable one that Hey, look, you held off
(32:23):
last time we were facing a change in the economy.
You completely missed it, and maybe you're doing so now.
Speaker 2 (32:30):
So I'm a big believer in not fighting the last war, yep,
because there's no two points in economic history that are
the exact same. And I guess the counterpoint to what
you said in what I would say is, hey, back
in you know the spring of twenty was it twenty
four or twenty three? I can't remember. Well, Actually two examples.
(32:53):
One spring of twenty three, Silicon Valley Bank blows up.
You got every tech body out there saying, oh, the
Fed's got a cut, like this is bad, like Bob,
and the FED said, no, you idiots, like this was bad.
You know this was a bank run because you guys
made a run on the bank. In a private chat,
(33:14):
and told everyone to pull their money out, and you
caused a few other banks to fail in the process,
but it's not affecting the overall trajectory of the economy.
Speaker 3 (33:21):
And by the way, they.
Speaker 2 (33:22):
Were right, and then they contained it other things. I
forget which year it was it, whether it was twenty
I think it was twenty four. Remember Q one of
twenty four when we got those couple of hot inflation
prints and the FED said, and Jake Powell was asked
about this a lot. He's like, we're gonna look through this.
This is not something that we think is a meaningful
(33:44):
shift and trend.
Speaker 3 (33:44):
We're gonna look through this.
Speaker 2 (33:46):
And sure enough, inflation has continued to come down to
the point where now you got PCE and core PCE.
You know, in the mid to high twos, they're still
not exactly where the FED wants, but they've gotten better.
And so you know that the FED said, no, we're
not hike rates because of this. So I think that
we can look at it and this gets it my
overall view of this j Powell Fed, which is they
(34:07):
got it really wrong in late twenty one and all
of twenty two, I think twenty three and twenty four.
Speaker 3 (34:15):
They kind of did very well.
Speaker 2 (34:17):
Maybe not AA plus but B plus a minus after
you know, getting a D for the prior two years, right.
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Speaker 4 (35:18):
Tuller. The President is currently addressing the nation on tariff's,
specifically a trade deal with the UK. Do we have
any ability to.
Speaker 5 (35:27):
Yeah, I mean it's a couple of minutes here, but
yeah we can.
Speaker 4 (35:29):
Yeah. Let's let's let's go live briefly to the President
Trump's press conference on trade with the UK, and we'll
be right back.
Speaker 6 (35:37):
You know, I'm a security blanket and that's very important
and we feel very very comfortable with that because it's
been a great ally, truly one of our great allies.
I mean a lot of people say our greatest ally.
I don't want to insult people by saying that, but
I can say it's certainly one of our greatest and
right at the top. And they're the first one we're
talking about. And by the way, we have many meetings
(35:59):
play today and tomorrow, and every country wants to be
making deals. And we have a meeting as you know,
Scott will be going over to Switzerland on Saturday, and
that'll be very very interesting. Let's find out. I think
they want to make a deal very badly too. Both
countries have agreed that the economic security is national secured
(36:20):
and we'll be working together as allies to ensure that
we have a strong industrial base, appropriate export controls and
protections for key technologies and industries like steel. Steel is
a big factor. Both countries will become stronger with steel
and things necessary for military. You know, we used to
build ships and other things literally at a level that
(36:41):
nobody's ever seen, and haven't we've eased up, and I
would say that the UK certainly eased up, but now
we're going to be uneasing both and we work together
once again. I want to thank Prime Minister Storm. He's
been terrific for his partnership in this matter. The special
relationship and external bond, it's really external and an internal
bunt between our two countries will soon be stronger than
(37:04):
ever before, and we really do we have a great relationship.
I want to just say that the representatives of UK
have been so professional and it's been an honor doing
business with all of them, and in particular the Prime Minister.
And i'd like to introduce him now to say a
few words. Mister Prime Minister, please take it away.
Speaker 7 (37:26):
Thank you, mister President at Donald And this is a
really fantastic historic day in which we can announce this
deal between our two great countries, and I think it's
a real tribute to the history that we have of
working so closely together. Can I pay tribute Donald to
your negotiating team as well, particularly Howard and Jamison, who've
(37:50):
done an incredible job, a very professional job, and my
team as well to negotiating teams have worked at pace
now for weeks to bring.
Speaker 4 (38:01):
We unfortunately have a hard break that we need to
take now. But we'll be back in just a few
minutes with a recap on the press conference on the
US UK trade deal. Quick break. We'll be right back
on the Financial Exchange
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