China's Next Move In Trade War? Target U.S. Companies (Podcast)

New Economy. So, Andy, let's trade is right back on the front burner for the market's given President Trump's treet tweet yesterday. Just give us your sense of kind of what we've experienced so far with the tariffs. Are the tariffs working? Is it advancing our trade goals? Do you believe? No, they're not working. So what we're learning we just heard from Larry Cudlo that they were working right well, if they were working, China would have bent by now, and

China has not budged at all. In fact, what we're hearing is that China didn't make any additional offers at all. UH in the latest round of talks, and this latest temper cent threatened temper cent tariffs on three D billion will have about as much effect as the last bunch of tariffs on two D and fifty billion dollars. Trump is a is a one trick pony as tarots or tariffs or tariffs, he's tariff man, and he's doubling down on them. So I guess that I want to just

offer up the other view to this. People would say that it has been working, that China's economy has slowed more than people would have otherwise predicted based on the tariffs, and that they've had to engage in further stimulus to counteract that, which leaves them with less ammunition to counter their slow down going forward. I mean, what do you say to those arguments? Well, I would say, as look at the Chinese economy. Sure that the economy is slowing,

it probably would have slowed anyway it needed to slow. Um. I would also say, look at the resilience of the Chinese economy, and there's a lot more that they can do. They can cut interest rates, they can ramp up lending, they can offer support to small medium sized enterprises, the ones that are going to be hurt by this latest round of tariffs. They've got plenty of ammunition left. But more to the point, they're just not going to bend

to Trump's will. So right now, the entire Chinese leadership has decamped for the summer to Bay die Her, this seaside resort near Beijing, to talk about strategy. You can guarantee that this is going to be right at the top of their agenda. Can you imagine at this point a conversation she jimping, standing up and saying to this group, Okay, guys, the game is up right. We don't have any option.

We're just going to have to force ourselves to undertake really painful adjustments to our economy which Trump is demanding, even though we think this is going to be a really bad idea and could be and could be damaging. And then, by the way, we're going to have to explain this historic capitulation to the Chinese people won't have happened.

So you mentioned that you recently came back from Hong Kong, So do you have a sense, I'm guessing you're spending time over that part of the world, you have a sense of what the Chinese really want in a deal realistically what they want and that they think they can actually get. Well, the the you know, the the Hong Kong,

the Hong Kong situation is now aggravating everything else. So what you're hearing, the rhetoric you're hearing from the Chinese propaganda outlets is that the American black hands are behind this protest. And by the way, Trump very unhelpfully yesterday picked up all kinds of Chinese communist body talking points describing these protests in Hong Kong where two million people took to the streets against this extradition law, as riots, and he said, basically, it's nothing to do with us.

China can fix it. Hong Kong is a part of China. Uh and and and so the worst possible thing he could have said at this point. So we're now getting a sense that China does plan to retaliate against any sational tariffs at President Trump does implement them. What do you expect in terms of how that retaliation will look. Yeah, well, you see, they can't really retaliate in kind because they

run out of goods to to put tariffs on. America just doesn't sell enough stuff to China's So what we can expect is American companies to take a look at Look at the Boeing share price right there there in the middle now, or the end stages of negotiating a huge fleet sale to the Chinese. Don't hold your breath. I mean, you know, I can't see that being signed under the present circumstances. Companies like FedEx, for instance, which are already in hot water for mishandling this package that

was supposed to have been sent to Huawei. Maybe maybe they come, Maybe they roll out there so called Unreliable Entities list, essentially a hit list of American companies. FedEx may well be on such a list. Uh, forget about purchases of oil seeds, grains, cottons. China had just started to buy a bit of that. That won't be happening either, so you know, and just generally making life really miserable for American companies and the lot they can do without

formal sanctions. I'm just looking right now at some of the share prices and the commodities that you're mentioning. Interestingly, Bowing shares are slightly up, soybean prices are slightly up. So either markets are not taking this seriously or people think that this has already been priced in. Well, I mean, you know, these prices are up and down. Bowing took bowing. Bowing took a hit yesterday on the New Spin its Own World of Hurt. Sure. Look, I mean China will

have to respond in some fashion. And and you know, since they since they honestly cut, since they cannot even if they wanted to put on more tariffs. I think these direct threats to individual US companies to make them feel the pain is probably what we should expect. You can read more on all of these things and other stories from the Brook Opinion, a Bloomberg dot com slash opinion. Uh Andy Brown, thank you so much for being with us. We have been getting earnings out of the big gas giants.

I guess you would say, I know, Paul, they're giving me a look. I mean, honestly, between the solar system studying in my home household and the fact that I have two young boys, that's that's where my mind goes. I do want to talk, though, more broadly, about what's going on in oil, because it's been frankly a wild ride, and to help us pass through not only the earnings from Chevron and Exxon and others. But also what we're seeing in the crude market is John Kilda, founding partner

of Again Capital, joining us on the phone. John. Let's just start with the wild ride. Yesterday we saw the biggest plunge and crewed in four years, dropping about eight percent. Today you're seeing a bit of a rebound. How much would additional tariffs really crimp the value of oil? First

of all, good morning, but very much. I mean, I've been saying for a while that the the U. S. China trade war has had an outsized effect on the oil market, on energy pricing because it's been hitting the Asian economic region Japan, South Korea, China, Singapore, Indonesia, UH the hardest and the slowed slowing economic activity there, Every measure that comes out manufacturing, p M, I, S, G, D, p S, exports, you name it, all have been really on a on a terrific down slope, and that goes

to the heart of the energy demand growth outlook. It's been hollowed out to a great degree by this economic slowing. So, uh, you want to ratchet up the trade war more, it's going to ratchet down demand growth more. And that's why you're seeing these prices come under such pressure, and John, I, you know, we've all seen I think reports that Iranian oil tankers have been quietly offloading their supply into Chinese ports. That seems like a risky strategy for the Chinese. What

do you think is going on there? It's actually, um, they're being quite clever about it while they're they're what they're doing is the the Iranian tankers, not to get too technical here, are unloading the oil into what they call bonded storage or storage facilities that are actually owned by Iran. So it doesn't count yet as an actual transfer or transaction that would be that would be violative

of the U S sanctions. But what that's doing is creating this huge overhang of millions of barrels of oil.

Literally that if there's some kind of easing or if the Chinese want to throw down and say, you know, we don't care about your sanctions, We're going to buy the oil, all of a sudden we have a new flood of oil that goes into the Chinese market, which would displace obviously other salady barrels and other supply that would again cause the potential, you know, further cratering of the price so um, it's actually something we're all watching

because it's it's oil. It's almost like a mini strategic petroleum reserved that it's being built up into that if it gets tapped or called on, would obviously be another price break opportunity. So, John, you've nailed it with respect to your calls on oil prices. I'm looking right now, crew treated on the night Max currently treading at fifty five two cents a barrel, up two and a half percent today after yesterday's eight percent plunge. Where will this

price be? What should it be? Should the tariffs, the additional tariffs at President Trump discussed yesterday get implemented and there is some sort of retaliatory move by the Chinese government, you know, we're heading back down towards fifty dollars a barrel at this point. That's where major support is on on the chart. It's not just around psychological number. There's some real um you know math if you will involved

with that, with that level um. And it's remarkable right if you think about it, that with all the ten the surrounding Iran, with all the efforts by Saudi Arabian, some mothers in OPEC, including Russia to try to reduce supplies and get the price back up. That it's just not reacting. It shows you just how you know, the delitarious this situation is. And the fallout from the trade war is on the demand outlook. And that's what's just

key right now. And you know, we're gonna be heading down to that fifty barrel level and we'll see if that doesn't prompt another response from the Saddie's or the rest of OPEC in Russia, UM or even the other show that could fall here. What we're going to start to watch out for is our own shale players. UM. The they're here in footsteps from the financial markets about you know, persisting in their money losing endeavors here and uh, we've seen US domestic productions stall out of about twelve

million barrels. It could very well start to go back on the decline. Uh if this doesn't improve. So that's the other thing to watch out for. So John, just real quickly, in thirty seconds, we heard from Chevron and Exxon reported earnings today. What are the big oil companies saying about trade and how that risks their business? Well, it's it's a problem for them. The only bright spot they've had recently is their petrochemical businesses at the bigger

companies X and Chevron and some of the others. Now that's going to face an economic slowdown, and those businesses are highly cyclical, So if you get a downturn in the global economy, that's the that's their last vestage is now going to get hit too. So there's a reason why the energy sector is less than five percent of the S and P five hundred um. They're they're really uninvestable at this point. Uninvestable. That's hard, yeah, because they

both eat expectations and their share prices are down. So I think a lot of people probably agree with John absolutely. John Kilda, thank you so much for joining us once again. John is founding partner of Again Capital, based in New York City. Giving us an update on the oil markets. Well, this may be the dog days of summer, but we certainly had a busy week. This week. We had the FED, we had trade and tariffs, and today the jobs reports, so we actually had plenty for the markets to digest.

Help us kind of tie it all together. We welcome Dr Bob Eisenbeis Bob as a vice chairman and chief monetary economist for Cumberland Advisers, and Dr Eisenbeiss was formerly executive vice president and director of Research at the Federal Reserve Bank of Atlantic joins us on the phone from Sarasota. Bob, thanks so much for joining us. Let's kind of work backwards, maybe from what has been a very busy week, and we'll start with the jobs report that we got this morning.

What are your key takeaways from what seemed to be a pretty solid report. Well, it was a salad report, and there's lots of positives. The unemployment rate held constant at three point seven percent. There were games in a number of different categories, and uh, I noticed that those categories aren't necessarily the ones that are low paying jobs. We're not saying retail and food services and that sort

of thing. We're seeing good jobs being created. Um. And then I also note the fact that we now have about six point one million UH people unemployed, whereas we have over seven million job vacancies. So if you're an employer and you have a job, and you have a job vacancy and you can't hire people, why would you create more jobs? The only thing I can think of is that you may be creating jobs that have different skills, and so part of what we're looking at as a

skill min mismatch. So, Bob, given the fact that the jobs market looks like it's in very solid footing, given the fact that the economic expansion, albeit it is slowing, it is still chugging along here, how does the Federal Reserve Act going forward from your perspective, Well, they've painted themselves into a corner as far as I'm concerned. Um,

they cut once, build it as an insurance cut. I saw some commentator make the point that when you don't have another rationality, you can always build it as an insurance cut. Uh. They were not very convincing as to why they were doing it, especially. Uh. Make make two points. First, if the problems are slow down in Europe and trade issues, it's not obvious to me how a cut in interest rates is going to solve those dislocations. It's not so

I think. I think that's one of the things to sort of put in the back of our mind that it's just not there's not much of a connection between at this juncture the problems they're trying to address and the tools that they have to address it. Secondly, German power kept referring to uncertainty about trade on certainty about the global outlook. Well, to an economist, uncertainty has a special meeting. It means that you don't have an idea as to what the probabilities are going to be of

an event occurring. That's different from risk, where you do have some way of figuring out what the likelihood of these events. I don't know a single theory that says that Paul's monetary policy helps to deal with uncertainty. So I think I think they've really painted themselves into a corner. And I guessed before the meeting that should they make a cut, two things will happen. They will be criticized by the President and the markets will be crying for more.

And that that appears to be what's happening. So it's interesting. It's interesting, Bob. This week again a pretty busy week in terms of data for the marketplace. We had a good job report today, we had you know, a good we had a rate cut by the Federal Reserve. But sell off we've seen in the financial markets yesterday afternoon and continuing in today, and we have the dial off seven points right now. It shows where trade really fits on investors right our screen, I kind of right up

front and center. So what is your sense as to how investors should be pricing in the risk of a prolonged trade dispute with China. Well, I think, uh, first of all, what that means is trade is not all that important to us in terms of the volume of trade our exports and imports. Most of our trade is with Mexico and Canada, so you need to keep our eyes on what's happening in that arena as opposed to

necessarily worrying about the goods coming in and out of China. Um. We've also seen suppliers now moving supply chains to adjust to it, so they're taking steps to try to chrishion themselves from the impact of those trade wars. But I did find it very interesting listening to the broadcast today the number of different knock on effects that people have

been identified that fall out of these trade negotiations. And I think in this particular case, uh, those that are arguing that the Chinese are in no rush to strike a deal is going to be really important because the longer we go, the closer we get to the election. If there's a downturn in flows of funds to farmers and so on in the Midwest. That's going to have significant political implications going forward. Uh. I'd like to make one more point about the jobs market if I could

go ahead. Okay, Um, we tend to look at the number of jobs created as we assess how good the job market is, but we forget that the economy today is much bigger than it was in two thousand. It's bigger than it was in nineteen sixty. If we were to create jobs at the same rate we did between nineteen sixty and nineteen seventy, that one and sixty five

thousand would be four times what it is. If we were to create jobs at the same rate we did between nineteen eighty and before the financial crisis, that number would be twice as big. So while this is a nice job number, we need to sort of put it in perspective that tells us something's going on in terms of the job creation and the nature of how our economy is going and growing. That has implications for jobs.

That's that's an excellent point. Bob Eis and Bias, thank you so much for being with us and giving us your perspective. Bobby's and Bias's vice chairman and chief monetary economist for Cumberland Advisors, joining us from Sarah Study formerly was the executive vice president and director of Research at the Federal Reserve Bank of Atlanta. Yeah. Car Kadonna of Bloomberg Economics q f U S Economists was in here earlier saying that the actual numbers of the job's report

today looked pretty good. You dig under that though perhaps they looked a little less good, and again us a color, some color of what's happening on the ground. Let's bring in Becky Frankoitz, president of Manpower Group North America. Manpower Group is the third largest staffing firm in the world. Becky, thank you so much for joining us. So I want to start there are there signs from your vantage point

that the US labor market is slowing down? Yeah, So we would say that July's job report was pitched perfect. There were wage there was wage growth, workforce participation picked up, and there were strong job gains. Now the taste of growth is slowing. So year to day in eighteen, we had about two three thousand jobs this time and now we're having about a hundred and sixty five thousand on average per month. So the pace of growth is slowing.

But it makes so much sense, Lisa, because as we have fewer qualified workers looking for work because they're all employed, of course we're seeing slower job growth. So, Becky, given that we are at or near someone's definition of full employment, are you surprised that we're not seeing maybe better than three low three percent wage growth? Yeah, So July mark twelve months of three percent or greater wage growth. So

we're encouraged by that. But of course, you know, the basics of economics would tell you we should continue to see wages pick up based on supply demand. So, and this is something that we have been expecting for a long time, and it's been a little bit uh slower to take off than people have expected. Where are the main job gains, I mean in what industries? Yes, so

really encouraging. In July we saw professional and technical services add thirty one thousand jobs, and about a third of those jobs when computer systems designs and so we're actually starting to see these the effects of AI and automation come into new jobs in the workforce, which speaks to the fact that we have to start upskilling American workers now again encouraging that we've seen more companies commit to up skilling, so teaching, you know, people new new skills

for future jobs. We've seen more companies commit in the last two months than we've seen in the last two years. But upskilling our workers for tomorrow's jobs is mission critical for our country. Yeah, that's interesting. That's kind of where I wanted to go because Lisa and I speak to a lot of h C suite people and they tell us one of their challenges is actually finding qualified workers.

What do you think what are we seeing out of corporate American in terms of trying to address what is I guess a high class problem that you can't find enough qualified workers. Yes, I think I think it's actually a problem across all sectors of the economy, Paul. So you know what we're seeing is I spend my time with CEOs across America like you do, is a ride. Almost fifty of American employers are saying they can't find the skills that they need, and so we have to

create the workforce that we need for tomorrow. Our population growth in our country hit a thirty two year low in in earlier this year March of this year. And the challenge with that is the workforce we have is the workforce will have. And so we are seeing companies commit to upskilling, but that's just one piece of what's

required for success. To have successful upskilling, we actually have to understand the potential of our workers, understand the jobs that we're gonna need today and tomorrow, and then map people through career paths into those jobs, which industries are offering the biggest pay gains right now. Yeah, so again

encouraged this morning. You know, retail jobs were down about three point six or UM, but we saw manufacturing increase, so that's exciting UM and the positive of that is manufacturing jobs pay a little bit more than retail, so good to see growth there. You know, construction was up, but we're honestly, we're seeing growth across the economy. With the supply and demand we have in our country, it's

a great time to be an American worker. So, Becky, one of the things that one of the uncertainties in the marketplaces back kind of front and center. That's trade tensions with China. President Trump tweeting that the raising terrorists are putting tariffs on additional three billion dollars worth of goods. As you talk to hiring managers, are the trade uncertainties impacting their confidence as it relates to hiring or expanding. Yeah, I would say, of course it's a topic of conversation,

but we're not seeing that pull through into action. Despite the uncertainty around trade. Americans are increasingly positive and this plus job market and so are employers, and so we're continuing to see demand increase for qualified workers. And yes, of course the conversation is concerned over trade, but it is not translating into the slowdown of powering. Okay, this is yet, Okay, this is really interesting. So it's not

contributing to a slowdown in hiring. What are you hearing from businesses in terms of when it will or in other words, when they will start to pair back, how much they commit to future businesses based on concerns or

the reality of ongoing trade tensions. Yeah, we're seeing a wait and see approach honestly, where companies are saying, hey, we're going to continue to it because the fear is if I don't put my job request out there, I might miss an opportunity for a worker that would be willing to switch to my company, and so wait and see in terms of talking about trade, but not changing behavior,

but continuing to post jobs. In fact, we do a Manpower group, a Manpower Employment Outlook survey, and candidly for Q three, we saw a ten year high in intention to hire in our U S economy. So people still intend to hire even with that uncertainty. So beggy looking at you think about your survey work or just discussions with hiring managers. Are you seeing geographic particular areas of

strength and our weakness in the US? Now we're you know, of course there's there's variety across the cities, but we're seeing a lot of strength across all four areas of the country, whether it's you know, north, southwest or east UM. And so continued to see opportunity be regardless of where you live in the country. You know. The other interesting thing about today's job reports is, you know, I mentioned

we saw workforce participation pick up. The total labor force set a record high, and so again there are jobs geographically across the country, and we saw three hundred and seventy thousand new workers come into the labor force. I did some math this morning. That's like the entire city of Tampa, Florida, coming into the workforce in one month. Thank you, Frank Witz, Thank you so much for joining us on this job's Friday. Becky is the president of

Manpower Group North America, based in Chicago. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa bram Woyd's. I'm on Twitter at Lisa bram Woyds one. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio.