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Welcome to the Monday edition of Balance of Power. Yeah, Happy Monday, we got news. I'm Joe, Matthew and Washington. I'm glad you're with us here on the radio, on the satellite, and on YouTube, where you can find us right now if you search Bloomberg Global News, find our live stream and join me here inside the terminal because we've got the budget.
It just dropped.
We're going to get into this a bit more with Douglas holtz econ coming up in a few moments, but I want to give you the news as investors have been waiting for this, remembering the president's budget is a statement of values seven vere trillion. There's your headline dollars
fiscally year twenty twenty five. We haven't figured out the one we're living in right now, but we're on to twenty five, six hundred and twenty one billion dollars domestic discretionary spending deficits would fall three trillion dollars if they approved taxes on the rich and corporations. US debt hitting forty five trillion dollars in a decade, the President is asking, here we go eight hundred and ninety five billion dollars
for defense related programs. We'll have much more on this as we work our way through the hour here, as the White House says, indeed, it will reduce the deficit by about three trillion dollars, but you've got to pass some tax hikes to make that happen, and we can't even pass an actual budget. Meantime, the President making news over the weekend on Israel. Ramadan began yesterday, and as you remember, walking into the State of the Union last week, the hope was to have a cease fire in place
by then. It did not happen. And the President now we're referring to red lines when it comes to Israel, warning Benjamin Netanya, who is our reading the headline, not to attack Rafa as Ramadan begins, and that is where we start our conversation with Ian Marlow, Bloomberg senior reporter covering diplomacy and Boy we could use them now. Ian, it's great to see you. Thank you for making us part of your Monday. We start talking about red lines,
we think about Barack Obama and Syria. The messaging here is getting pretty complicated. What's the President doing.
I think he's kind of grasping at straws to some degree. I think the US is facing, you know, several months into this five months into this conflict, the real possibility that they just don't have as much leverage over Israel as.
They would like.
They're air dropping aid when there's plenty of land borders with Gaza. They're now talking about, as President Biden said in the State of the Union, they're going to be creating a temporary peer to bring in aid by sea sort of everything, uh, accept pressuring Israel to the degree that would actually, uh, you know, bring about significant change in the humanitarian situation, which is getting incredibly dire with you know, famine, starvation.
And the rest of it looming.
So now it's like public diplomacy. He's speaking through the media a hot mic moment at the State of the Union when he said that to Jerry now that I'm gonna have a come to Jesus meeting with Pebe.
Did he want that to go out to the world.
Yeah, it's hard to know. It's hard to know with with with both Biden and nan Yah who here, because they are they're both dealing with really uh intense international and domestic situations. I mean, Biden's facing an election here and YEAHO will face an election as soon as the war ends. He's got people in his far right coalition that want even tougher stance on you knows, a no aid getting in, you know, crushing Hamas, you know, going into Rafa where there's all you know, more than a
million civilians sheltering. Uh, It's it's a complicated right now. And I think the harsh words and rhetoric we're seeing now is an example of that behind the scenes diplomacy failing to take hold, and that diplomacy, the hostage talks, the talks about what happens in.
Gaza the day after.
All of that is continuing, but all of it can still founder on beb basically saying no.
To what extent does Ramadan factor into the chances of a ceasefire happening now? Does this put talks on ice.
For a month or will they continue at the moment, I think privately, US officials are thinking that Hamas is going to wait a little bit until Ramadan rolls out a tiny bit so they can see whether that, you know, that little space will allow the region to heat up. You know, maybe you we'll see protests, Maybe we'll see protests, you know, in the West Bank or across the region, perhaps more violence, and that might put pressure on Israel, the US and allies to try and get to the
table more. That is the sense from the West about what they think Hamas is doing. But at the moment, no one really knows. And I think, you know, obviously Biden had hoped, you know, for a Monday or two ago for this hostage deal to be done. Still not done, and it doesn't look like it's going to be done in time for I mean, definitely not in time for Ramana.
In the beginning, just lastly, Ian there was a big supplemental budget request that was mostly geared toward Ukraine but had billions for Israel. Is that off the table now? Are we still going to send that money if it's ever approved?
I think the thing is now they're sending a lot of military aid sort of below the threshold where they need congressional approval, so a lot of that has still been going on. I think that's sort of nuts and bolts, you know, repairs, you know, extra equipment and things like that. I don't think it's clear exactly what's going to happen with that on, you know, in terms of the broader funding. But I don't think there's any sense at the moment
that Israel is in dire strait, unlike you. Right, Yeah, there's a very oversation, Yeah exactly.
I'm glad you could come talk to us Ian Marlow, Bloomberg senior reporter covering diplomacy. Look for him on the terminal and online as the President draws a red line and Israel.
It's an important moment.
I'm glad you could share it with us Ian with great reporting as always here at Bloomberg News.
I'm Joe, Matthew and Washington.
Turning back to the budget that just dropped, and this is the day we've been waiting for, remembering, of course, that this is not the budget that will pass. It's not only coming from the White House before Congress gets its hands on it. But we're in the middle of a campaign season, so all of this is as we hear every year a statement of values. The question is can any of this get through the House and the Senate? Could this in fact be the framework the skeleton of
a budget. Here's an even crazier question. Will we have a budget in twenty twenty five? Still eleven found one in twenty four Douglas Holzekeen used to do this for a living when he was, of course chief economists the Presidents of Economic Advisors. He's now president the American Action Forum and joins us Douglass, It's.
Great to see you. Happy budget day.
I specifically asked for you so we could get your read on this, and I'm glad you could join. The headlines are just rolling, and I want to just let everybody know that this came out at noon. So Douglas hasn't exactly been able to pour over this with the Green Visor. Just broadly though, Douglas, how do you look at a budget from the administration? What parts are you looking for to get a sense of what might happen to the actual spending debate here in Washington, not the campaign.
Well, I think there are two big things you look for in a budget. Number one, how much depsit reduction do you get it takes something like eight trillion dollars over the next ten years to stabilize debt relative to GDP. This budget won't contain eight trillion dollars steps at reduction, so we're still going to see the debt rising and rising more rapidly than the economy. Second thing you look for is what steps are being taken to slow the
growth rates of so Sucre and Medicare. We're going to spend about eighty two trillion dollars over the next ten years. Nearly thirty five trillion of that will be so Screa Medicare. Those are the big programs in the budget. They grow faster than everything else. They grow faster than revenues, possibly will seven percent for Medicare, five and a half for SOB security. This budget won't contain anything that's going to
slow the growth of subscurity and Medicare. So it's a statement of campaign values, but it is not a serious fiscal document.
Wants to raise taxes. We've heard this before from President Biden. Raising taxes specifically on the wealthy billionaires would get a minimum twenty five percent.
It wants corporate taxes higher, and that.
Is the justification for lower deficits in this plan, Douglas. They say deficits would fall three trillion dollars with these tax hikes approved.
But we all know that is not going to happen, right.
No, they want to raise the corporate rate up to twenty eight percent. The trouble with that, of course, say, since it was cut down to twenty one percent, we haven't lost the headquarters to Yes Corporation, and we used to lose about ten a year, and so that problem got fixed down that they're now threatening done fix it. I don't think Congress would go along. They want to join the international twenty one percent twenty percent minimum tax.
Congress has show non interest in that, and they want to raise this book income alternative tax from fifteen to twenty one percent. You will recall that the Treasury threw up its hands last year and said we're not going to collect this fifteen percent tax. We don't know how. So that's hardly reassuring if you're going to make the rate higher and you still haven't collected a dime in
the last time around. All in all, these are you know, making the point that we want to tax corporations, We want to tax affluent individuals, but they're not poles that are likely to get over.
The finish line.
Here's your reality check. And as I read further down, Douglas hold Zeke and the President is calling on Congress to apply his cap. It's a two thousand dollars cap on rug costs thirty five dollars insulin cap for all, not just medicare. That's playing pretty well on the campaign trail. This has been one of the things that the President talks about that is received very well. Why doesn't Congress approve that? Why doesn't the Republican majority in the House take it away from it?
There's a pretty small fraction of Americans who have more than two thousand dollars in drug costs every year, something like three percent or so. So you're going to cap everyone at two thousand. That's a pretty broad insurance mandate. And how are they going to pay for that, Well, they're gonna have to raise premium So this is a recipe for higher premiums on every health insurance policy in the United States. I don't see members of Congress, who are up every two years being too eager to get
into that discussion. Insulin's a different matter. That's pretty popular idea, and it's popular proven by the fact that every pharmaceutical company offers insulin at thirty five dollars a month. They have a private program to do that. So the the Medicare proposals, the health ins proposals, are not quite as practical as they appear to be appealing on the campaign trail.
Yeah.
Sure, now you and I are having this conversation with a straight face. We're getting wonky on this stuff, and that's what we do. But the fact of the matter is we don't have a real budget for twenty twenty four, and I'm just not sure if wherever you can tell me going to get one for twenty five. We're actually under a laddered cr right now that with the second half set to expire on March twenty second. And if you want or listen to this program, you don't need
me to tell you about it. God love this audience. They're dialed in, Douglas. I wonder if it's more likely we shut down on the twenty second or actually get a budget for twenty twenty five.
Well, certainly there is a threat of a shutdown, But I think the good news is that from all of the political polling that I have seen and people have talked to a shutdown hurts Republicans dramatically in the fall. They don't want that. So there is an incentive for that House to get it together and compromise, get these over the finish line, and put the twenty twenty four budget, which began October first, twenty twenty three, so we're way
behind schedule. Ye, put that in the review mirror, and then's see if they can get to yes on the next year's budget during the campaign season. I'm a little pessimistic.
On that front.
About which part, whether we go beyond the twenty second Oh no, I think we'll.
Get that done. I think that's in the political interest. But you know, we now should be doing the twenty twenty five budgeting, and right I don't see that getting done in an election season.
Yeah, that's god. We're just going to get used to this stuff.
The President did sign the first minibus over the weekend, six hundred and or four hundred and sixty billion dollars. That's the first six bills. The other six are in the next package, which actually is a much larger portion of the budget. And as you know, Douglas it includes HHS, it includes Homeland Security, the Pentagon, the sticking points here, the stuff that no one can seem.
To figure out. What makes you optimistic that they get this done?
So take the polling on the House Republican side they have.
It's as simple as that show. You don't want to be blamed for it. No, Look, I mean it's real simple. They have a big advantage on the immigration issue. If they close the government, they lose it entirely. So Republicans finally have a re get to the table with Democrats in the House houses, you know, in the Senate. That's already happened, and so we're going to see the same
movie we saw with the first minibus. At the last minute, they will put this on the House floor under the quote suspension of the rules.
They'll get a two thirds majority. It'll be carried a lot by Democrats also some Republicans, and we will finally have the budgeting in place for the remainder of the fiscal year.
That would be a small miracle around here.
We avoid the sequester in that case, and then we start looking at the next fiscal year. I can't imagine how that would actually proceed. You don't think we get a real budget for twenty five do we go through the motions or is the House essentially closed after this?
So the House Budget Committee actually marked up a budget resolution. They did it today the State of the Union, and they will vote on that in the House Budget Comedy. The Senate Budget Contee has shown no interest in doing any budget work this Congress, so I don't think they'll do anything, so we won't have a real congressional budget process. We'll get the president's budget today, they'll look over it, and they'll start negotiating about the kind of spending they
could maybe agree on after the election. But I think we're doomed to a continued resolution from September thirtieth through the election.
Wow, all right, we'll play this tape back. Douglas, thank you. I'm glad you could joined today. Happy budget Day, even.
If it's not real.
Douglas old Zeke and the president of the American Action Forum. He has been inside the bubble. Was Chief economist the President's Council of Economic Advisors two thousand and one to two thousand and two the Bush White House.
You're listening to the Bloomberg Balance of Power podcast. Ken just Live weekdays at noon Eastern on Applecarplay and then royd Otto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.
You know, Joe. Typically, if you were to say something like we're going to quadruple the tax on stock buybacks to raise the corporate tax rate to twenty eight percent, financial markets wouldn't necessarily react really well to that. And yet that's exactly what we got in the budget outlined
by President Biden. Doesn't seem like it's making too much of a dent, which probably speaks to the fact that the market is acknowledging that the likelihood of this becoming reality sure is probably lower than it is higher.
Yeah, it tends not to be a pass through, right, going to be a debate. The question is, well, there be a budget at the end of that debate, And as we'll discuss coming up with Congressman Seth Moulton, we haven't figured out how to do it this fiscal year, So why would one in a campaign cycle be any different? And that's going to be a big question here. Although Republicans did Mark up a twenty twenty five plan last week. Speaking of aspirational, everyone's dancing to their own music. Mike
Dorney knows about that music. He's been covering Washington.
For a minute.
He's with us now, Bloomberg's deputy congressional editor, Mike. It's great to see you. That's how this works, right. The problem is this year we haven't figured out how to keep the lights on it.
Yeah, we're in a total gridlock at the moment because there's a very different view of what the government should be doing. They're blocked fighting each other. This budget is should be viewed as aspirational. This is what Bidens do if he were reelected and got not only a Democratic Congress, but a Democratic Congress that didn't include people who disagreed with him, like Joe Manchin that said, you know, this is like you know, we had the State of the
Union speech last week. This is a little bit of how the rubber meets the row with that that vision that Biden presented. And as far as like a budget getting done in an election year, I'd give the chances very low. Usually or often what they do is just wait until after the election to deal with like how they're going to spend.
So could be looking at another CR after September thirtieth of this year, after the series of crs that were kicked off after September thirtieth of the year.
Kind of different. It wouldn't be as dysfunctional as sure. It would be basically saying, hey.
This is what it's going.
We'll wait till after the election. Then we'll see where we all stand and then we know who has what kind of power and then we can make a deal.
Well, and just for the dose of reality, Steve Scalise, the number two in House Republican leadership, just said they reject Biden's buzzet proposal the price tag. He says, if the proposed budget is yet another glaring reminder of this administration's insatiable appetite for reckless spending. Goes on to say, the budget doesn't just miss the market, is a roadmap to accelerate America's decline.
So I guess, yeah, if Biden thinks it's a good idea, gosh before it.
That gives you a sense of where we're starting here.
Can we maybe back up a second before we talk to Congress of A Moulton Mike are we going to shut down on the twenty second. There's no guarantee that this next package of six bills will get done either.
Right, there's no guarantee that said, you know, I've continued to view that the Republicans and the Democrats have both shown their hands on this that neither side wants to shut down of the government in an election year. Speaker Johnson has signaled again and again that he is willing to come to a deal to avoid a shutdown, whether that's kicking the can down the road as he did every other time, or actually reaching the ultimate deal as he did with about a quarter of the funding for government.
So I wouldn't expect there's much of a likelihood of an actual government shut down before, you know, in this fiscal year.
And at least I thought that, all right, at least there's this, at least there's that. Yeah, So we'll see a lot can happen and the next two weeks. Mike Dorning, who is our deputy team leader of Congressional coverage here a Bloomberg thank you so much for joining us. And now joining us is Congressman Seth Milton, Democrat from Massachusetts, who of course is very much involved in all of these different spending battles. Congressmen, thank you so much for
coming back to Bloomberg Television and Radio. Do you have an understand of what where we stand in these next six appropriation bills that need to be passed by the twenty second Are we going to get another I guess megabus is what we decided to call it.
What's the plan, Well, that's definitely the plan.
The plan is to do exactly what we did last week, which is combined these appropriations bills together, work out the differences, and then pass them as one package against the objections of the extremist Republicans who always vote against just simply having a budget basically.
So that is the plan.
The challenge is that this group of appropriations bills is just more contentious, it's more challenging. And I was speaking
with a Republican colleague last night about this. I mean, he's cautiously optimistic, but at the end of the day, it's up to the Speaker of the House to quell the opposition on the far right, and the speakers worried that if he goes too far, they're going to do the same thing to him that they did to Kevin McCarthy, which is just kick him out of conference or out of the speakership.
What do you make of Sorry, congressman, it's good to see you, by the way, welcome back. What do you make of Steve Scalise's statement here? Kaylee just mentioned this, it's a roadmap to accelerate America's decline. That's quite a starting point when it comes to a debate, isn't it.
I mean, this is just typical for Steve's Scalise.
I mean, you know, if President Biden were to save a young girl from a fast rushing stream, Steve Scalise would criticize him for it.
So it doesn't really mean much of anything at all.
The fact of the matter is the president has put down his vision for the country, and that's important for a president to do. I think it's especially important for a president to do in an election year. The contrast heere with Republicans is that they want to preserve these massive tax cuts for the wealthy that have ballooned our deficit. They are the ones who have been terribly fiscally irresponsible.
I mean, the deficit just mag went up like trillions of dollars under Donald Trump, and they want to go back to that again, That's what they're defending. So when President Biden just says, look, I think everybody should pay their fair share, it's important.
For Americans to know that Republicans disagree with that. They think the rich should pay less.
Well.
Of course, the President is also requesting a few things from Congress, including renewing his call for supplemental funding for Ukraine and American allies and border security. We all know the fate of that original supplemental deal after it was struck very quickly died. Something did indeed pass the Senate. Very unclear what happens in your body going forar but we do know that perhaps a discharge petition could be
one way around. How Speaker Mike Johnson, if he decides not to put Ukraine aid on the floor, are you confident that that would work?
No, I'm not confident.
And this is a very big problem for our national security because supporting Ukraine is not just about defending these amazing freedom fighters in Europe.
It's about protecting Europe.
From the onslaught of Vladimir Putin, and it's about sending a message to seizing Ping in China that democracies are going to stand together, that allies are going to stand up for each other, and that ultimately that means he should not start World War III in the Pacific by invading Taiwan.
So I think people forget just how high the stakes are here.
Now.
Most Democrats and Republicans in Congress do understand this. The issue is that Republicans again are feeling pressure from the extreme isolationists on the far right who are against funding Ukraine, who just simply don't understand the basic principles of national security. Now, to Speaker Johnson's credit, I think that heat understands that this is important, and in his heart of hearts, he
wants to do it. The question is whether he will have the card is to stand up to these Freedom Caucus extremists and do the right thing for our national security, the right thing for freedom and democracy, or whether he'll cave to them because again he's afraid that they'll kick him out of the Speaker Seed.
Well, the fact that we're still asking about this does make you wonder Congressman Speaker Johnson has not shown his cards on this. He says he'll work against the discharge petition that Kayleie mentioned, But we have no sense about when or if ever Ukraine funding comes to the floor. Are we entering a world now in which Ukraine may never get more funding from the US?
I mean that is a distinct possibility under this Republican leadership. I mean the Speaker has not been able to do anything. He doesn't have a plan. His biggest accomplishments to date are not shutting the government down, and even that he's had to go against the extremists in his caucus to do so.
I mean, this is what Americans get when they have.
This Republican Party that is in the middle of a civil war leading the House of Representatives.
There's no leadership, there's no plan.
I wish I could tell you that this is what we're going to do, here's how we're going to go about it, here are the challenges, here's why I think it will work. But there is literally no plan. All we know is that there are good Republicans who want to do the right thing. Democrats are standing by to do the right thing and inevitably bail the Republican Party
out when they can't lead. But we are absolutely facing the possibility of both a shutdown and the possibility that we abandon Ukraine and send a message to China that hey, go ahead, start a war in the Pacific because we're not going to do anything, and that's ultimately very dangerous. There are truly American lives on the line when you think about the long term consequences here.
Well, and of course, Congressman, it's not just aid for Ukraine that is in question. Aid for Israel is tied up in this as well. But i'd like to ask you about some of the rhetoric we heard from both President Biden and Israeli Prime Minister Benjamin Netanyahu over the weekend. When Biden, in an interview, suggested that if Israel were to invade Rafa, where there are a million Palestinians who have sought refuge there, that that would be a red line. Netanyahu went on to say that his only red line
is that October seventh does not happen again. But Sir, what good are red lines? If the US still says it will stand by Israel, support for Israel, military support for Israel will continue, what leverage does the president actually have here?
Well, let's just step back for a minute.
I mean, this is an incredibly complicated and divisive situation, but there are a few principles that we should all agree with. First of all, Israel has a right to exist in an obligation to defend itself. But second of all, you're not going to ever have peace in the Middle East if you don't have Palestinian rights. And I think that for all the critics of a Tuesday solution, no one's been able to come up with a better idea. Palestinians and Israelis both deserve to live in peace and freedom,
to have democratic rights, to have a national state. And ultimately, both Israeli and Palestinian innocent people should not be killed. And the scope of the human tragedy unfolding in Gaza, it's just it's.
Just unbelievable and heartbreaking.
And at the end of the day, as we learned in Iraq and Afghanistan, a speaking as a marine veteran here who's fought in a counterinsurgency, if Netanyah who continues killing so many innocent civilians, he's going to lose the war because he's just serving as a recruitment tool for Hamas. So the issue here is that Netanyahu fundamentally has to go.
What he's doing is morally bankrupt, it's militarily bankrupt, it's not going to work, and so therefore what he's really doing is pursuing his own interests and not his And you hear this from the Israeli people, I mean net Yeah, who has the lowest approval ratings I think we've ever seen for a prime minister, even in the midst of a war. People can't stand him. I had the opportunity to speak with a hostage family just after the State of the Union, and I brought up this concern. I said, look,
we support Israel's right to defend itself. Everyone should want to get rid of this terrorist organization wants. You're never going to have a Palestinian state if AMAS is around. But I really disagree with what the Prime Minister Netyah
who is doing. I think his strategy is failing. And without missing a beat, this hostage family chimed in and said, well, his first failure was the fact that he let our guard down with his political division in a October seventh happened in the first place, So there is just widespread dissatisfaction with Prime minister yet yea who in Israel? And so when you hear President Biden just echoing those same sentiments. I don't think anybody should be surprised.
We're always curious your thoughts on our policy in Israel as well as Ukraine. From your view on the Armed Services Committee, and as a combat veteran congressman, I'd like to in our remaining moment, tap your expertise as a member of the China Select Committee. It appears that the TikTok bill that could result in the banning of TikTok will end up on the floor for a full House vote on Wednesday.
Will it pass?
Should it?
Well? First of all, let's be clear, this bill does not ban TikTok.
It just bans the Chinese Communist Party from essentially owning it.
Inderstanding right.
That's a very important distinction, because what TikTok is doing is sending out messages to all its users to call people like me and say, don't ban TikTok on we're doing it all. Yeah, but I'm trying to ban TikTok. I hope it gets a vote. I think that we don't need the Chinese Communist Party telling our kids what to watch online, which is essentially what's going on here.
And I just want to see TikTok survive and thrive, but under American protections, in American hands, and everyone I think here in America should want that too.
All right, I won't call it a band. I'm I'm putting that out there right now. It's a divestiture bill right right. But if the divestit doesn't, I'm just putting it out there. I'm still calling it Twitter not ex Congressman, I have one a lot of problems. Congressman Seth Molton,
It's great to see you. Welcome back to Bloomberg. The Democrat from Massachusetts talking about many issues with us here today, and we're going to continue that conversation straight ahead with Gene Soroka from the Port in LA alongside Kaylee.
I'm Joe. This is Bloomberg.
You're listening to the Bloomberg Balance of Power podcast. Catch just live weekdays at noon Eastern on Apple car Play and then Rouno with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Welcome back to Balance of Power on Bloomberg Television and Radio, where we were just speaking with Democratic Congressman Seth Moulton, who sits on the China Slowe Committee in the House about a bill that could come to the floor this week that would ban TikTok in the US if Byte Dance it's Chinese owner, does not divest. It have to be very clear that this is if it's not a
guarantee that Lily banned Byte Dance has a choice. The TikTokers are mad, but this speaks to concern about the Chinese Communist Party that is really bipartisan here in the US, and how everyone is just trying to be hawkish on China pretty much all the time.
So if they did ban it, then the Trump and Biden campaigns would come off of TikTok.
Yes, okay, well they'd have to.
Well, I guess there'd be no TikTok here for that. But I don't quite understand. You know, we're talking about this even as the campaigns use TikTok to.
Reach voters, right, young voters.
Let's work for something. I guess sure, But we'll find.
Out on Wednesday.
We will find out on Wednesday. That's when Steve Scalisee, the number two in the House on the Republican side, says he'll bring this to a floor and we'll see just how bipartisan this effort is when it comes to China. But of course there's a lot of other issues to consider when we think about the US stance toward China, including when it comes to trade. Joe, we know that under the Biden administration, the trumps that were put or the terrorists that were put in place during the Trump
administration have stayed. And now former President Trump is he very likely will be the Republican nominee November, is pushing potentially even larger tariffs that would come under a second administration. And he was actually asked about this in an interview on another network earlier today. Take a listen.
Is there no concern that China could impose retaliatory tariffs or retaliatory actions that would make doing business in China difficult for American companies what are dependent on Jenniff for growth?
That's okay, Yeah, sure it might do that. Even if they do let American companies come back to America. I would say that China, if you're building a plant on our border to build cars in Mexico and to sell them into the United States, I'm putting a fifty percent tariff on all those guards.
He said fifty right, yes, five oh five zero. That's Donald Trump from earlier a Stemlin. He's on the phone for like a half an hourly, where is he? Exactly what phone are we doing? So there was a lot to pick through there, but he said sixty percent before in terms of across the board, which would result, based on the number crunching at Bloomberg Economics, result in a divorce. That would be the end of our trade agreement likely or relationship on any levels, stop all imports and exports.
So you have a lot of questions here about how this would impact trade, where we would go and what that might mean for supply chain. And that's where we start our conversation with Jeene Soroca, who is with us in studio today in Washington. He runs the busiest port in America, as Kaylee mentioned, the port of la and Gene, it's great to see you. Welcome back afternoon, sit you to be back in studio. Well, sure thing, welcome back
to the nation's capital. Do you take commentary like this seriously because it would have a massive impact on the operations.
Of your port, Well, you have to, and it would absolutely be disastrous.
Joe, I think the look at this is that for every four containers we moved through the Port of Los Angeles, it creates one job. Sixty percent tariffs or whatever he's talking about, means inflation to the American consumer. The US Mexico Canada Agreement was designed just for this purpose to enhance trade, and Mexico is leapfrog China as our largest trading partner. All of this makes very little sense.
Well, you say Mexico is the largest trading partner, but surely if we were to see terrorists of this size, it would mean that there's just not a lot of trade coming from China at all. Right, you would just all of that cargo that would make it through the bard of La likely wouldn't be coming, right. I mean, can you quantify the amount of jobs realistically that would be lost in that scenario. If it's what'd you say, four containers one job.
That's right, Kelly.
One in nine jobs in Southern California rely on our ports. That's about a million people that go to work every day counting on us to do our job. About fifty seven percent of trade at the Port of Los Angeles back in twenty twenty two was with China. That dropped down to fifty three percent, so fractionally, but as you can keep lopping off the top of this, it has a great impact economically and on the people who go.
To work every day.
Well, this is obviously something that's going to take time to figure out. It won't be until after the election obviously, if we know this is a real conversation. Although to Kaylie's point, the Biden administration has not relaxed tariffs left over from the Trump administration.
Should it.
That's right, and what we see is that there's no reason the two biggest economies in the world can't trade together. But it's been in discussions that I've had with the administration. While footwear and toys and clothing are not of consequence, where we get our chips, where we get our software is and making sure we have rules of engagement on the international trade or front of mine to the administration, Well, of.
Course, there was a time when you would come join us here on Bloomberg TV and radio during the aftermath of the pandemic, when everything we had to ask you about with supply chain, and that also had a relation to China, because China closed down a lot of production facilities because of COVID and therefore you know, things were delayed in getting produced and getting out of the country
and into US ports. Are you seeing any supply chain bottlenecks anywhere now now that China has reopened, But perhaps we now have the issues of the Red Sea and ships diverting around the coast of Africa. What is happening in real time?
As always, Kaylee, there seems to be a lot on the mines of logistations and supply chain experts. China exports were up ten percent in the first two months of the year, and my projection for Q one at the Port of Los Angeles is twenty percent growth, mainly on the heels of having a long term dockworkers contract in place. We've got another five years of certainty with that respect. But drought in the Panama Canal, security concerns in the
Red Sea, with lower crossings through the Suez Canal. Most importers are exporters that I'm visiting with now on those topics are telling me they're pointing more cargo towards the Southern California Gateway.
Interesting has the administration solved this problem? We were getting daily reports of attacks against ships by hoothy rebels. We spent some time bobbing their installations. Don't seem to be reading those stories any longer. Just to follow on to Kayley's question, have we seen improvement? There are some ships pointing back into the Red Sea.
Not really, Joe, and what we need is a global response to this.
When I was based in Dubai working for the private sector American President Lines, we had meetings with NATO on a regular basis that they're Africa headquarters in Djibouti. We were varying speeds and timing schedules of our vessels to protect our crew, assets and cargo. This is not going away anytime soon. Many have changed their routes to go around the Cape of Good Hope, adding transit time and cost.
Think of fuel burn to the supply chains coming to the East Coast and Gulf, as well as that lifeline of manufacturing to Europe.
So what are they waiting for to go back into the Red Sea?
Well, safety and security.
I don't think we have any level of confidence right now that ships can pass unimpeded through the Red Sea to the Suez Canal.
And again, concern for cruise is front of mine to all of US well.
And you mentioned how that dynamic as well as increase volumes for China are going to translate you think in your estimation to hire volumes at your port and imports on the California coast, And you mentioned the contract with dock workers that is now in place. But are there enough workers to go around to take those upticks in volume.
I think we're in pretty good shape.
We're running at about seventy five to eighty percent of normal capacity from what I see at the Port of Los Angeles. But we're not immune like anyone else in the nation. There are almost eight point nine million jobs open. We have to continue to do the best we can to attract, recruit and retain people in our industry, from the dock workers to truckers and warehouses to the logistictions and it specialists that we need.
Does the last mile remain the biggest challenge for you on that front?
I think, really what it is, Joe, it's the velocity of cargo.
If there's anything we learned from COVID, this port has to be a transit facility, not a warehouse for resting containers. We've got to balance all these interdependencies with rail trucking and warehouse just as much as we do getting that cargo on and off the vessels. Twelve thousand lifts off and onto ships coming at the Port of Los Angeles on average.
That's the best in the business today.
Interesting we also today and you kind of jog my memory when you were talking about investments you need to make into AI, for example technology. Part of the budget that President Biden put forward today does include introducing kind of AI offices, even at the Department of Labor, trying to capitalize on that technology. How do you view AI changing the way that operationally ports will be handling things
into the future. Does that get rid of workers or does it just ease the operations through which they are undertaking. How is AI going to change the future of shipping?
We cannot leave the worker behind. When technology is moving faster than ever before. AI can help us with predictive and prescriptive analytics. You see something happening on a regular basis, how do you react in quicker time?
That's the basis for it.
With our Port Community system, the Port Optimizer code developed by General Electric, we can now see upstreams some forty days before a vessel comes into La better to plan land equipment and our skilled workforce. And that's in part why I'm here this week in Washington. I'm with a delegation from the Los Angeles Area Chamber of Commerce, led
by CEO Maria Salinas. We're going to be meeting with elected officials and policymakers to campaign for more interest in the Southern California region, including our port.
We wish you luck with the meetings, of course, And while we're sitting here with Gene Soroca, of all people, I have to acknowledge the date. We're talking about this a little bit earlier in the newsroom. March eleventh, twenty twenty, was the day the World Health Organization declared COVID a pandemic. It was on that same day. Remember the NBA canceled the rest of its season. That same day Tom Hanks announced he had the virus. People started to freak out,
It started to feel real. It was the same day then President Trump imposed a new travel band from Europe. Your Life, Your World, your whole career, and the operations of that port.
Changed that day, too, didn't they.
It sure did, And it's a very very strong reminder of what we went through I lived in China during SARS, and this became one hundred one, ten thousand times worse than what we witnessed on the ground there. Stopping all work, but having a selfless opinion of how we were going to keep the American economy moving from our dock workers to all those in the supply chain was just so inspiring at that time of great uncertainty.
I made us late by bringing us up, but I'm just struck by the day.
Everyone should go outside, breathe fresh air, Actually go inside and breathe fresh air, go out to dinner, do something you couldn't.
Stand within six feet of other peoples. That's right on all the things we have the privilege of doing now.
Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already, at Apple, Spotify, or wherever you get your podcasts, and you can find us live every weekday from Washington, DC at Noontimeeastern at Bloomberg dot com.