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About the first quarter?
What we all want to know was how things are looking in the current quarter, what the outlook is for more? We bring in Bloomberg News Chief Wall Street correspondent Trenata Rajen he joins us here in the Bloomberg Business Week Studio Shree. A couple words came up, uncertainty, unknowns, turbulence, what's the outlook.
If anything is look.
That's something that Jamie Diamond dens to use a lot, but yes, it's across ap Morgan, Morgan, Stanley Wells Fargo. That word certainly God repeated a lot more than we're used to seeing, and it's very understandable because of everything that's happened in the last week. It would have been an impossible situation to get to to expect these bank bosses to get in there and tell you that they have a very clear grasp of what lies ahead, because the path ahead clearly had there are many folks in
the road. We don't know where this will go for now. When you look at the numbers that they've printed, extremely good, extremely healthy, they should be happy with where they are.
But when you look at what their stock is actually doing for the year, down more than ten percent across the board rather than JP Morgan, and even JP Morgan is read for the year, it tells you that there is some nervousness in the system out there, not so much about how banks will handle it, but because banks are considered a good proxy for the broader economy, any concerns about the pace of growth, whether that's recession or even slower growth, which is what Ted Pick said, the
consensus seems to be explore growth, not no growth. That's still not going to be a good outcome for the banks at the end of the day. And that's why some chrepedition in their comments today.
Yeah, and we saw definitely some swings in the share price today as well in all of them. Hey, Allison, come on in here. What's kind of the key takeaway here.
So I think JP morgan volatility helps their trading, and they've used that to sort of set aside some money for the growing risk. I think, you know what's important is if you look at the underlying quarter for JP Morgan, obviously I thought it was very robust, and they had sort of five hundred million in upside to trading. They also had a gain related to First Republic of about six hundred million, and so they used that to set aside a billion in loss reserves. And that compared that
to Wells Fargo where they had a slight release. But then if you look at the underlying numbers, JP Morgan now weighted average view five eight percent unemployment rate and that's about simihere to Wells Fargo is so in a way, Wells Fargo had sort of stayed a little bit more conservative.
They have a different loan mix. JP Morgan has more card.
I think that's, you know, for sure, an area that I'm a little bit more worried about, just giving the growth we've had, it has higher loss rates. So and by the way, like forty percent of JP Morgan's reserve was for card. So JP Morgan, I would say, you know, the model benefiting from volatility helps them to provide for some of the risks from that uncertainty. And Wells Fargo just a little bit softer, right, So, as I said, they're not much happening with the reserve, but not interesting.
Income was a.
Little weak, demand a little weak, and I think that's why the shares are a little weaker.
So, Allison, given what we heard from these three banks, and we still have some to hear from next week, how would you characterize their view on the economy as it is right now trade tariffs and potentially any red flags.
I think you know, the view on the economy is I think similar to the rest of us. We have to see what happens with tariffs and a lot of the uncertainty, and there's a lot of unknowns and hopefully we'll know more by the time next time earnings rolls around.
Clear as mud, right, exactly clear is mud.
But factoring in, like what JP Morgan said, is like, look, we our space case is still very benign, but we're going to factor in more of a risk of a downside scenario.
All right, So listen, I got to just say we were all kind of looking forward to the start of earning season, so that we could talk about something else than tariffs, and obviously tires play into, you know, the outlook and what these guys have to say. But you know, Shre, we just talked with you and kind of how you know, we were looking forward to what we got from these guys.
So is there something as we look in this environment where uncertainty is the watchword that we got from them in terms of Yeah, folks, you should be worried because these are the guys that matter.
They see the financial system. Look, it's an.
Interesting question because for the longest time we've seen we we've looked at these bank earnings results not necessarily to see how good their bonuses will be at the end of the year. Right, that's what matters to them, But for us, it's a bell weather for what comes ahead in the broader economy. And maybe this is something Alison could address because one thing I've been thinking about, not an original thought, has come up a few times, but
I do feel it plays a bigger role increasingly. Are these big banks necessarily a true bell weather when you consider that they have stopped playing a role sort of in the riskiest spots of the lending market whether it's a mortgage market or the consumer debt market. Can you really look at their results and see if we're seeing a turn in the economy or do we need to look elsewhere?
What do you think?
I think it depends on the business that you're looking at. So I do think that from a card perspective, right, So, JP Morgan, biggest card lender, obviously focuses on the higher segment than some other card lenders back of America. When we hear from them next week, we really do look at their consumer trends as an underlying bell weather. The
thing is right is that nothing has happened yet. If anything, What we saw in JP Morgan alluded to this is that we've seen a little bit more frontloading of the spending, right so people that maybe want to make a sizeable purchase or you know, some things they wanted to sort of get in front of any uncertainty. We've also heard this from our retail analysts. We saw some of the five serve data right spending holding up with people were surprised, right,
but those numbers are through March. They're through March thirty first, and so a lot of the uncertainty is happening now. And if you you know, if you look at all the deals that are stalled as you know, you know, we're we've had a lot of IPOs reported to be on hold, and you know, looking more towards that side of the business, I think the most telling numbers are Goldmen, Sachs, Morgan Stanley cutting investment bankers. Now you know they do normally do that process at the end of the year,
they're doing it early. We saw the similar thing a couple of years ago Morgan Steam. We did also allude to things like AI and technology, but you know, they also were performance based. So I think you look at those numbers and you look at some of those those cuts, it's sort of telling on what they think is going to be happening with the banking for your pipeline.
I feel like we're not crazily worried, just real quickly.
Well, then to Allison's point, I think the divergence is there right If any pain in the consumer economy, it'll probably still take a few quarters to play out. But where you're seeing an immediate effect is because of the lack of confidence and because of the uncertainty, it is going to impact portions of the market. The banks that are tethered to the investment bank and the investment banking
business are going to see that effect. Which is why I'm very curious how Goldman reacts, not only through earnings, but also a few weeks beyond, because even in the last ten days you've seen a little bit of weakness in that stock relative to its bigger peers. I want to see if that loss or not or of earnings completely change the narrative on that.
And maybe just one thing throughout quickly. You know, one billion and lost reserves at JP Morgan. They built fifteen billing in the pandemic in a couple of quarters, So okay, there is uncertainty, but just keep in mind, and you know, people look at the market and different measures, but I would just point to that for the bank.
That's why we talk to you, guys. It's the perspective we needed.
Thank you both so much, Bloomberg News Chief Wall Street correspondent Street nottaraje On and Bloomberg Intelligence Senior analysts for global investment banks and asset managers, Allison Williams.
You're listening to the Bloomberg Business Week podcast. Catch us Live weekday afternoons from two to five ease during the listen on Applecarplay and Android Atto with the Bloomberg Business app, or watch us Live on YouTube.
Well, farmers are worried that Trump's trade war with China could cause disastrous consequences for their ability to sell soybeans. Even before the current administration took the reins, farmer income had been under pressure for a couple of years as the cost of seeds, fertilizer, and equipment went up and crop prices decline. That's what's going on here in the
US with this trade war exactly. We want to go outside of the US and talk to somebody who spent his career thinking about where products, where commodities come from, who brings them to us, how they're compensated, and the working conditions of those individuals. Paul Rice is the founder of fair Trade USA. It's the nonprofit fair trade certifier
he started nearly thirty years ago. The organization says that a product is a fair Trade certified and that means that it was quote made according to rigorous standards that protect the livelihoods of farmers, fishers, and other producer communities and the environment. He's got a new book out. It's called Every Purchase Matters How fair trade farmers, companies, and consumers are changing the world. He joins us from Berkeley, California. Paul,
great to have you. Congratulations on the new book. It's perfect to have somebody who understands trade and tariffs. You certainly understand these things. What is your view on tariff specifically with regard to the world where you've spent the last thirty years.
Well, tariffs are bad. There's no other way. There's no other way to put it. Tariffs are dumb, and they're going to hurt a lot of people. They're going to hurt American consumer US as we all know, because the cost of things that we buy are going to go up. And it's going to hurt American business because there's retaliatory tariffs. I recently spoke with a US company that sells about
forty percent of their roasted coffee into Canada. Retaliatory tariffs are going to make it harder for him to do that. And finally, the tariffs are bad for sustainability.
Oh.
Interesting. The onus is going to be pushed back onto a lot of developing world farmers and factory owners to absorb some of that extra cost, and it's going to pressure a lot of people to cut back on sustainability measures that you know, things like installing solar panels or you know, providing better housing for workers. So all the way around, tariffs are bad.
One of the reasons we wanted to speak to you is because the products that we see the fair trade certification are often products that you can only get outside of the United States. And I think it's fair to say the reason the President wants to impose these tariffs are because he has, in his view, the US has been treated unfairly when it comes to trade. He wants to see manufacturing specifically and production specifically move back to
this country. Is there a disconnect in your view given that some of the stuff that could see tariffs on it you can't actually produce here in the US. Like, help me make sense of that?
Yeah, a huge disconnect. I mean, seventy percent of Americans drink coffee. The US can't grow coffee, right, Coffee comes from Latin America and Asia and Africa. And you know, similarly, eighty percent of Americans eat bananas. Guess what, We don't grow bananas in the US. We import them. So tariffs are going to hurt Americans because all of those things that we love to drink and eat, like coffee and bananas,
the price of those are going to go up. But furthermore, you know, tariff's are really going to hurt those farmers around the world. And so you know, what is quite possible is that a lot of those businesses are going to fail because they cannot absorb the tariff, which means more workers out of work. I mean, imagine what happens if unemployment goes up in Mexico, what kind of pressure that puts on the southern border. There's nothing good about this whole tariff policy.
Now when I think about Paul Supermarket, certainly here in the United States, they live on such slim margins, so they have no choice but to pass any additional costs off to consumers.
Correct either they'll.
Pass it on to the consumer or they'll push it back onto the producer. And that's what I mean by you know, companies in Mexico, for example, going belly up or having to lay off workers. If you know, if Whole Foods or Costco or Walmart decides to push some of that extra cost back on to the producer, then we're going to see some severe business uh disruption south of the border, which is not going to help our
our national situation at all. And on the you know, similarly, even if it all gets passed on to consumers with prices already high, will consumers pay more for imported strawberries or tomatoes, or coffee or bananas? I don't know, you know, I think it's quite possible the demand goes down, which means a ripple effect around the world that you know it's going to it's going to be a tremendous hardship for a lot of people.
Well, that brings us to your book.
And as we said, it's entitled Every Purchase Matters How fair trade farmers, companies, and consumers are changing the world.
Fair trade, I think it's thrown around.
I think we'd like to buy fair trade goods, but explain to the world, just remind them what fair trade is all.
And you're talking when you ask the question, Carol, you're asking about fair trade like capital F capital T fair trade, not the concept of.
Fair trade, no exactly, which is something that president might use, but no, what fair trade?
Fair trade certified?
There?
It is.
What gets that certification. What has to happen in order to get it?
Yeah, So fair trade is a rigorous two hundred point checklist of social, labor and environmental criteria that farms and factories meet and get audited against every year in order to wear the fair trade certified label. And on this side of the market, our you know, two thousand plus market partners from Whole Foods to Target to Walmart all agree to pay a small premium back to those farmers and workers, which they then can invest in healthcare and
education and better housing. So fair trade, you know, through the lens of global development, it's a market based approach to global poverty and to protecting the planet for us the consumer. Increasingly, consumers want to know that there's no child labor in our chocolate bar and that the environment wasn't just in the production of our coffee. So fair trade is a way that we as consumers can feel reassured that the products we're consuming are produced in a responsible and sustainable way.
What are the checks that are in place to make sure these sustainable practices are followed when the folks from your organization are not watching, when they're not there visiting these plants.
So our one million plus farms and factories are audited every year. The auditors talk with the workers, they may visit the production sites, they do a rigorous inspection, and that happens every year. And in addition, of course, all of the brand partners or many of the brand partners are visiting those farms and factories every year. So it's
an incredibly rigorous oversight. And the producers, for their own part tend to be producers that are really bought into the notion of greater responsibility, and they're getting this premium, So producers don't want to run the risk of losing
the annual premium they get. So there's a real alignment of incentives where the producer, the farmer, or the factory owners get more money, the brands get a more secure and reliable supply chain, and the consumer gets a product that makes us feel good because it's helping lift workers out of poverty, it's ensuring fair wages, and it's helping to protect the environment.
I didn't know Driscolls had kind of gone through a little bit of a path. Dristcals. I think about strawberries right like, I mean, every berry, every berry is just close. It's the organic, it's the non organic. We are Bloomberg, and you know, we think, Tim and I think a lot about profitability. Obviously right here we are in earning season, but at the same time, the ability to be a
good company, be a good corporate citizen, do well. What is kind of the financial story of sustainability or fair trade practice is?
Yeah, I love I love this question, you know, because I spent eleven years working with coffee farmers in the mountains of Nicaragua in my twenties and then moved back here to start fair trade and I've always felt that fair trade would never work for the farmers if it
didn't also work for business. So I've spent you know, the better part of the last thirty years working directly with companies to develop a strong business case for sourcing in a more sustainable way, not just because it's the right thing to do, but because it creates value for the firm, right what Michael Porter at Harvard calls shared value. Right. So there's there's value for the farmer, for the worker, for the planet, but also there's supply chain resilience for
the company. There's brand differentiation for the company, and there's you know that emotional gratification as a consumer that we feel when we buy something knowing that it did no harm. I'll give you a recent example. Walmart piloted fair trade tomatoes and saw their sales go up by three percent when the label went on the package. Now, who would have thought that a Walmart consumer would care about tomato farm workers in the developing world, And in fact they do.
And so it's just an indication of the business case for fair trade right that consumers are moving in this direction. They're voting with their dollars, if you will, for the kind of world they want to see. They're looking for more socially and environmentally responsible products. And quite frankly, this macro trend is politics proof. I just wrote a piece for a Wall Street Journal and our ed piece entitled
will sustainability survive Trump's second term? And the reality is the business community is moving in this direction not just because it's the right thing to do, but because it's better business, and it is better for business.
Paul, is there anything that cannot be produced in your view, in a fair trade way? Right now?
Can an iPhone? I don't even think we.
Would love to work with Apple on fair trade iPhones we're not there yet, but over the last twenty six years, you know, we started with coffee, and then year after year we engaged with lighthouse brands, pioneering brands who wanted to take us into their industry. So now we work in apparel, we work in cosmetics, we work in you know, in furniture with Williams Sonoma Inc. And we're certifying seafood, we're certifying dairy. We sort of buy farms and factories
in the US now, not just abroad. And so you know, our vision is fair trade for all, and it's the notion that any and all supply chains, domestic or international, can be can embrace responsible sourcing practices. And so yeah, stay tuned. Maybe next year you'll bring me on when we have fair trade iPhones.
All right, we will do that.
We will do that.
We will hold you to it. Paul, Thank you so much, Paul Rice.
Glad we could finally get to you, founder of Fairtrade USA, his book Every Purchase Matters, How fairtrade farmers.
Come, copanies and consumers are changing the world.
This is the Bloomberg Business Week podcast. Listen live each weekday starting at two pm Eastern on Applecarplay and Android Auto 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.
Chinese exports of rare earth minerals are all but on hold as producers grapple with tighter permit requirements following last week's new restrictions on the critical materials in an escalating trade war with the US. We want to go deep on rare earth to understand how they fit into the trade war, if there are alternatives, how much leverage it gives China, and more. And we've got a great roundtable.
So we're going to just tell you sit down, pull your car over, maybe grab a drink, well, not if you're in the.
G get your shovel and dig in well, because this is going to be lining reference.
You're going to learn some stuff.
Gracelynn Baskern is director of the Critical Minerals Security Program at the Center for Strategic and International Studies, and it ain familiar to our audience. Bloomberg News Metals and mining reporter Joe Doe Graceland joins us from New York. Joe's here in our Bloomberg interactive at Brokers Studio Joe. Rare earths on the surface sounds like they're rare, but I'm learning that they're not actually that.
Rare, right, They're not rare. They come from the earth. Though they come from the earth, that part is true. It's hard to find them in density, right, So the rare earths are like literally in your backyard. If you just like dug up some dirt, you could be like, oh, they are rare earths in this, but.
You know, we live in New York, right.
But it's the same as like, oh, well I take zinc as you know, a vitamin or you know whatever. It might be, right, but in terms of industrial scale, right, because you need rare earth to create things like permanent magnets, and permanent magnets allow for wind turbines to keep moving and for electric motors to keep moving. I mean that's really all like the main thing regular people should know. To find the density is quite difficult. It's not like they're just in your.
Backyard, like a huge pile graceland.
Come on, in your background is pretty incredible. A mining economist critical minerals in Trade. You began your career in South Africa's Platinum Belt spent five years at the World Bank in South Africa. So tell us a little bit about like what don't we really know about rare earth minerals, and then we want to kind of roll into this how the US China trade war plays into all of this.
But come on in and welcome, Welcome.
Thanks so much for having me.
So you know, as Joe said, rare earths aren't rare, They're everywhere. But why we're really vulnerable for them is that once you dig them out of the ground, you have to separate them, and that those separation facilities are primarily in China. So for heavy rare earths, they actually separate over ninety percent of the world's heavy rearers and
about eighty percent of light rearers. Now the problem is that that means once they go to China, China can apply any sort of export restriction to them, and they actually started doing this about fifteen years ago when China first cut off Japan from rare earth exports because they got into an argument about a phishing trawler. So we have seen minerals and even rare earth's at the very beginning,
be weaponized over time. For US, it's a national security challenge because rare earths go into almost every form of defense technology, from fighter jets and warships to missiles and tanks.
Gracelyn, can we build the facilities here in the US that could process those rare earths? So then the United States gains control over some of the share.
Absolutely, and we are building them.
The problem is that none of these facilities come online overnight.
So over the last five years.
The Department of Defense, through something called the Defense Production Act, has given out over three hundred million dollars to build these facilities in Texas, in Canada and for some rare earth it'll be the first major facility outside.
Of China Canada that maybe five years ago that worked. We're not going to talk about that right now, but that made my ears perk up because of what's going on between the US and Canada right now.
But can we produce enough and Jill come on back in here enough in terms of to meet the demand that we need here in the US for things.
Not right now? Yeah, I mean this is you know where Graycelin's getting at here is very similar to the story of steel and copper and like all these other things anything manufacturing right like this is the approach of the Trump administration is bring all manufacturing back to the United States of America. To maybe take a phrase from our president, sounds great, doesn't work right, Like you can do it, but as Grayson says, it's going to take
you a while. I mean, MP Materials is like the big critical minerals company in the United States, and they're still shipping a significant amount of their rare earth pulled out of the ground to China to be processed. Yes, they're currently working on integrating everything and having their own processing, but you talk to anybody in the market and they're like that, even when they get fully scaled up to what they say they want to do, it's just not enough on their own gracelon.
So it sounds like China has a great weapon in this trade war to get the US to maybe bend a little bit.
Is that fair?
Absolutely?
So let's talk about the export restrictions that just came out this week.
So they're not actually a ban.
If you think about restrictions, you start with something that we call non automatic licensing, which means you have to apply to get a.
Permit to be able to export the minerals.
Then you have tariffs, you have quotas, those are your mid tier, and then you have a ban. What China did this week was the lightest form of restriction, for lack of a better word, is they put in the non automatic licensing. But if the trade war continues to accelerate, they can continue to tighten those restrictions. And ultimately, because there are so few facilities that can give us the rarers that we need outside of China, that's going to
undermine our national security. It's in things like semiconductors, so it's going to affect our economic security, and it's going to affect our energy security given that they are in many forms of energy technologies.
So as your read on what China did by taking the easiest member measure and or the least punitive measure a strong diplomatic sign to the US that we're open to negotiating.
I think it's a sign to both China and the US, Like, ultimately, these companies are all Chinese and cutting off exports all together would be economically consequential to them.
So it's a sign there that, look.
That there is room that we need to get ready, we need to buffer, you know, be ready for potential changes.
But it is also a signed to the US that they didn't.
Go all the way to the very end and ban exports immediately.
Joe, how long in your view do you think the US will have to rely on China for processing?
A long time? I mean, I want to talk in one hand, counting or not anywhere in the new Yar term. And to jump off what Graceland just said, they didn't put an export ban or an export control on everything, Like the two most common rare earths are untouched by this, right, So the way I've heard the subscribe from Graceland and from other people in the rare earth space, right the critical mineral spaces, Like Chinese policymakers are incredibly sharp. They
know the score, they know what impacts what. And when this came out, this export control came out on Friday Friday morning. Initially people in the market were saying, oh, whoa, Okay, they're going to restrict these you know, seven or so rare earth critical minerals. But then what they started realizing was, oh, my gosh, this includes like actual magnets, this also includes
actual products that are shipped to the United States. And that's when, especially in the defense community, people were calling up and saying whoa hold on? This is an interesting shot up across the bout because you might remember gallium and Germanium had export controls put on back in the fall, and that was like a follow up to prior year
where China had said they were looking at it. I mean, we had reporting a year ago that said when the gallium germanium shot came from China, that was the panic button that went off across the DOE, the DoD and all the other departments. So we had one very high senior White House official who told us that was the moment when everybody finally got it and understood how serious this was. And that was under the bid Ministers Biden administration.
So this isn't new, right, Like it is my point of they know the score, which is they'll roll out something here, they'll roll out something there, and it's it's a warning sign, right, It's like, Hey, we're doing this, and we're making the people that matter most realize it first.
Gracelin contextualize this for us because in the negotiations between the US and China, which do not exist right now, but we'll ostensibly have to exist when it comes to resolving this trade war. That's the whole idea here. How important is the card of rare earth.
Rare earth will be important, minerals will be important. If we take a.
Step back, and you know, with Joe is said as how this is escalated even from the previous administration of germanium gallium antimony was banned in the fall, we saw tungsten came at the start of this year.
Is that we are actually vulnerable.
You know, we kind of sometimes throw all minerals into rare ers or rares into minerals, but when I go beyond rarers, we're getting increasing restrictions coming out and all of these commodities that we're being hit by, or ones that we often don't have alternate supply of, but we may have limited stockpiles of and.
That we need for our fundamental security.
So expect to see minerals I think, feature very strongly in the conversation, including rarers, because of the fact that we are dependent on China for close to two dozen critical minerals.
All right, So final thoughts here, just got about a minute, minute and a half here left. So Joe, I don't know, I guess to watch the negotiations between US and China, right, and what they say specifically in this area, this is a really really important sign in terms of what's happening.
Yeah, we've all focused on tariffs for the past week, and for the past two or three days, we've really focused on the China terraffs because everything else apparently is
on pause. One hundred and twenty five percent or whatever the latest number is, right, and what we've seen from China in this context, the rare earth of what they've done is they have different tools to respond to punitive terriffs from the President of the United States, because on some level, when you're just saying one hundred and twenty five percent tariff on all imports coming from your country, it's like the market's like, well, what does that actually mean.
In China's response, they come back in very specific ways, and this is one of them. Very hard get it, very targeted, right, So like, great, you hit us with a big, big tariff. Guess what we're going to do this this one very specifically here, and maybe initially nobody in the market notices it, but people like Graceland and others are like, whoa, hey, let's take a look at this.
All right, So it sounds like the advice is, let's let's watch and see how this plays without this one in particular.
Hey guys, I wish we had this was so smart, so good.
Grace Lynn Baskren, Director Critical Minerals Security Program at the Center for Strategic and International Studies, Thank you, Thank you so much, and of course, Joe Doe always appreciate anytime we get with you as well, Metals and Mining Heavy Machinery reporter here at Bloomberg News.
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