Dollar to Weaken on Mexico Trade Tensions: Nordvig

it was China, uh, then Mexico and now India. To get a sense of where we go next, we welcome our next guest, end Nordvig, founder in CEO of Exante Data LLC, also a chief strategist there at Exante based in New York City, YenS, Thanks so much for joining us. Um. It just seems like these concentric circles of ever growing trade tensions continue to widen. What is your sense of

how this will play out for US economic growth? Yeah, I have to say it's rudy Stantin to be a so a big compounding effect in the sense that, okay, maybe the US economy could sort of take one trade war but when you start to have multiple trade wars at the same time, it becomes much harder to handle. So obviously, having a small amount of tariffs on as a small portion of trade is one thing, and we

had that initially with the steel terroriffs. But we're starting to look at a situation where we could have tariffs on all imports from China. And the process that we're in now with Mexico starts from a low level of terrorists, but it is potentially on all goods ramping up to so if this goes the wrong way, we're really looking at a situation where you have tariffs on a very,

very big number of imports. And most of the research has coming out on how this feed through into the economy suggests that US consumers pay really the bulk of the bill, and that's how you you get a really big negative impact on the US economy. What's interesting to me and is where the havens have been. I mean, we've seen people flood into the dollar, the broad Dollar index gaining about a half a percentage point last month. Meanwhile, we're also seeing people flood into US treasury, so US

the sort of biggest beneficiary. UH, so far do you

think that's going to continue. Yes. I think when you had the US China tension really driving things, it made some sense that there was a sort of positive dollar effect for a period of time, and that was linked to the fact that, Okay, China is a big part of the global economy, so the global growth situation with the terra rate and also the Chinese currency is such a big drive of global currency markets that if the Chinese currency was weakening, it was going to essentially push

a lot of other currencies down with it and sort of implicitly generate dollar strength. But I think one once you escalate the trade war to include Mexico, it becomes different because number one day, the hit to the U s economy is disproportionate larger, in part because Mexico has more imports from the US that they can retaliate against, but also just because those two effects start to stack up to on top of each other and and the

FED really is forced to respond more forcefully. And that's what you're started to see obviously in FED pricing having moved very aggressively. So now not only are we pricing a FED cut by September, but we're really starting to pry a high probability that the Fed will be forced to move sooner than that. It's a pretty extraordinarily quick shift.

And the rate moves are now such that that the dollar is starting to take a hit, And I think, right this so and I think the problem is that we've we've come from a period where the dollar has been strong for about a year, So momentum starts to turn, there could be a lot of technical adjust ones that that can really put the dollar on quite a bit of pressure. And today might be a really important day

because the euros down to move. Gold is having a very big move today, which is typically a reflection of the broader dollar direction. So it's a quite important day for the currency market today, I would argue. So, yeah, staying with the currency markets, the when we think about China, in particular the trade tensions there to what extent I mean, historically the Japanese yen has been perceived as a safe haven.

Do you still consider that to be the case? Yes, I think the yen has has clearly participated in this UH dynamic over the last few sessions where the dollar is trading on the back foot, and that has generated a decent size move. Thow on dollar yen. It's not like a big break from the range we've seen the last couple of years. We've sort of been in a in a one oh five one of fifteen range, which is relatively now a range over the last two three years.

So the big question is whether we're gonna really break out of that range. And I think there's two big questions that The one question is, okay, a Japanese investor is going to start to hitch the US assets Differently if we're looking at potentially a big slow adown in US growth and the fail actually cutting rates, So that's something that that certainly will come into play if if the FED really delivers and they carry involved in in in this trade and therefore the cost of hedging comes down.

And then the other thing that that's really important to the end is Japanese companies have been on a bit of a buying spree in terms of buying up other companies around the world m and a activity that could be in question if we have a real sort of tense global environment, and that would also see the end strength and if that outflow stops. So I think there's

a chance we can break out of this range. The big thing to watch in the short term is is this theme of escalation sticking, Like are we going to have the escalation on June ten with the tariffs actually coming into effect in relation to Mexico, and then are we going to have some kind of positive headlines at the G twenty meeting when when it takes place in Japan at the end of the month, or are we just going to literally move to the full blown trade

war versus China. I think those are the really key things to watch there. How much for the dollar weaken in your view? So I think if if the FED is really delivering cuts here in coming months, and we have an environment where where perhaps the Chinese actually hold their currency, so that's a key one. But if the Chinese don't allow their currency to move, then I think we're in an environment where the dollar can weaken meaningfully.

But if the Chinese allow their currency to break seven, so a depreciation beyond what they've allowed in recent years, then you have a sort of tricky situation with as dollar bearish impulse from the FED, but actually accounts of force from the direction of the Chinese currency. So it's absolutely crucial whether the Chinese are going to hold the currency here as they've done in recent weeks, or whether they're going to allow a break of seven if we

move to a full blown trade war. So yeah, it's just given the uncertainty surrounding global trade, are there pockets of relative safety that you're looking at in terms of currencies? Um, well, I think I think one thing that's been very interesting over the last week or so that I actually think can continue is that we're now seeing that emerging market currencies that had a really bad year over the last

year or so can actually start to perform better. So, um, it's it's a situation where we have a sort of bearish positioning in e M space that is now perhaps too bare if we have a much low environment for global yields, So I think EM currencies can start to ironically do better, especially relative to other risk asses. So for example, if to compare with the S and P, I think currencies can do better. Nord Vig, thank you

so much for being with us. A really interesting call there about how emerging market currencies will do well as yields continue to go lower here in the United States. YenS nord vigas founder and chief executive officer of Exante Data, also chief strategist at Elexante Advisors. There's been a market shift in sentiment from oh, China and the US will come to some sort of deal to what will it

protracted trade war look like? Joining us now to think about that is Carl Weinberg, Founder in chief international economist at High Frequency Economics. Carl, let's start and fast forward making some assumptions that trade wars rage on, the market keeps declining, and an economic downturn ensues. What does that

economic downturn look like? Well, good morning, Lisa Um. You know, the economic downturn that we're looking at worldwide right now is a little bit broader than trade, but than the trade wars, but it all has its roots in trade, which is now flatter declining depending on the metric you look at worldwide, and you know, companies that export are

the ones that are affected. First. Tariffs affect consumers make them a little bit less reluctant to buy stuff because they have less disposable income, is they're they're spending power goes down. But the first reel hit is probably going to be on the side of corporations that are going to face supply chain issues. They're going to face cost

issues and then that will lead to financial market implications. So, Dr Winberg, we got some disappointing US manufacturing data out today, give us a sense of to the extent that these trade skirmishes uncertainties continue, maybe even expand. If you think about you know, India as well now being in the crosshairs, how do you think the manufacturing community around the world

will respond, Good morning, Paul. Yes, everybody has got to be alarmed by this because the expansion of the U. S. Administration's tariff i'll call a tariff aggression to borrow language from the Chinese UM basically undermines the confidence that companies of all kinds all around the world face and making

business plans and decisions. They don't really know the cost structure that they're going to face, they don't really know the trade and the tariff regime, and as the FedEx example indicates, they don't even know if they're going to be constrained in their business. Enterprises and companies that resist the tariff advances by the United States, the tariff increases.

So it's a general role of uncertainty, it's a role of profit compression, and it's certainly in these uncertain times, it's one that causes companies to cut back on investment until the all clears, and of course that's always bad for the world economy. You were saying earlier that there will be financial market implications. Basically, the market's going to sell off. Risk assets are going to sell off in

this scenario. How much is this going to be a crash? Like, yeah, Well, you know, I was listening to Bloomberg Radio as I was driving into the office this morning and heard you guys talking about individual companies and the impacts that this is having on their earnings forecasts, on their profit forecast, on their general rural view of the world in there, and their guidance to markets. So this is really how it begins, you know, crashes. You know, I'm not in

the business of predicting crashes. You know, I don't think we have to have a stock market crash. The stock market is certainly high enough that some kind of correction is probably coming anyway. This just increases the odds of that happening. But a crash, you know that that's not my domain to predict it. I don't have anything on my horizon that will cause a crash. Dr Weinberg, I

think I have a straightforward question here. Who pays for tariffs? Oh, that's a really straightforward question, very refreshing also because the Trump administration has it all wrong when they raise tariffs on things that come from China. You pay the tariffs, right, not the Chinese. Now, the Chinese may lose themselves to the United States, but since the exports are growing between oh say, five and ten percent per year anyhow, they're probably going to sell whatever they don't sell to you

to somebody else and um. In terms of the counterfeariling tariffs, the Chinese have been very careful to tariff things for which they consumers at home have a lot of substitutes, like soybeans. Think by soybeans from any number of countries in the world. They just buy less from the U. S. Farmer, and the U. S. Farmer is the one who pays the tariff. So at the end of the day, when you go out to buy your iPad and you can't buy it from any source other than China, you end

up paying the tariff. Your income to spend on other things is reduced, and you're the one who then has the vote to determine whether or not this regime is going to continue. So one sort of theory, and President Trump has put this out, is that eventually companies will rejigger their supply chains so they don't rely on countries that are the most tariff And this is sort of

the point of putting on these levies. I guess my question is, you know, how do you respond to people who say, look, this is temporary in order to get the trading situation more fair, and then the US will prosper as a result of it. A Lisa, you sound like a Wall Street economist. You know, at the end of the day, everything's going to be all right. But until we get there, all right, we have to survive,

al right. A company who supply chain is interrupted today has to live until tomorrow to be able to take advantages of whatever is coming better and tomorrow. We economists are always guilty of ignoring transition costs and transition obstacles as we talk about one new situation being better than another. You know, maybe we will or maybe we won't be better off tomorrow. We can debate that forever. But for a car company that has to source parts from a country that can no longer trade with or at a

twenty higher costs. That's a problem for survival today. That's a problem for pricing today, for profits today, for making payroll today, for hiring and firing workers today. And that's really what we're talking about in the financial markets, isn't it. It's today? So Dr Weinberg, are the particular industries that you think are most at risk here? In? It's just a rising and trade tension environment. Um is there anything

particularly that I think investor should be looking out for. Well, you know, I can hide behind my role as a macro economist and say that I don't look at industries, but as a macro economist, what I can say is that pretty much every industry, whether it's manufacturing or services,

today has gone global. Pretty much all industries, pretty much all companies have some kind of linkage to the rest of the world, and therefore every company is vulnerable to um uh these uh this tariff regime and um I can't even think of any exceptions of a pure domestic company that purely sources things domestically. I mean, even if you just use a laptop computer to do your books. You know, Joe the plumber is vulnerable to higher tariffs on that computer that he does his books on because

of the tariff things. So we're all subject to this in one way or another, all industries, al sectors, all people, no place to hide. One thing that I find interesting is the question of who's going to suffer more, the US or emerging markets, including China. We have PIMCO coming out and saying investors are underestimating the value in emerging market stocks. Do you think that right now developing markets are going to be less hard hit than the United States? Well,

you know, the developing markets. I mean, let's look at China. Alright. China makes a wide variety of stuff, and the United States is only about fift of its export market, and it's not going to lose all its exports of the United States. For sure, Americans will pay more for the stuff that they can't get from somewhere else. However, all right, a lot of the stuff that they won't sell here in the United States. They've got eight five percent of

the world to sell their stuff too. Now, China is an extraordinary case because of the diversity of its products. But whether you're selling you know, broad based commodities or high end manufactured goods. If you're any country in the world, you can sell it probably to somebody else if you can't sell it in the United States. And that's really

one of the flaws in the strategy. Unilateral attacks on countries like this when you're not the biggest dominant player in the world anymore, that is a strategic error in my opinion, Dr Carl Weinberg, thank you so much. Dr Weinberger's that found their in chief international economists at High Frequency Economics. I think a couple of takeaways there are. Number one, trade wars are bad um and number two, tariffs ultimately are paid by the consumer, neither of which

is good for a global economic growth. Let's talk clean energy for the home. In the US, buildings account for nearly of all carbon emissions, and one company has a plan to curb those emissions. Kathy Hannon is the CEO and co founder of Dandelion Energy. Dandelion Energy is a spin out company of Google x and as the nation's leading home geothermal company. Kathy, thanks so much for joining us. So just tell us a little bit about dandelions technology and how it kind of works. I'd be happy to so.

Dandelion installs residential geothermal systems. These are systems heating and cooling systems that get placed in the home, usually where the furnace used to be, and they have what are called ground loops. So these are pipes that we install in the ground and they let that heat pump gather heat from the ground to heat the home in the winter and then push heat into the ground to cool

the home in the summer. So they're very inexpensive to operate, very quiet, and a lot of homeowners have started switching from there from their furnaces. Can you give us a sense of just how big adoption has been so far? Absolutely? So. The company actually started selling our product UM a little bit less than a year ago, and we already have hundreds of customers in New York, which is the market we serve today. So if I were to do this to my home, what's my out of pocket costs and

what are my hopeful savings? Absolutely well, UM out of pocket costs tend to be around eighteen to twenty thousand dollars, which sounds like a lot, but when you consider that UM many homeowners are spending three thousand, four thousand dollars

a year on fuel, oil or propane um. That payback period tends to be very very fast, and we offer financing, so actually most of our homeowners choose to pay nothing up front, so zero cost, and then UM they pay off the system over time and the repayment amount each month is less than what they would have been spending to eat their home otherwise, so they're actually coming out

ahead every single month that they have the system. One thing that I find really interesting about this company is that it's to spin out from Google X, which is where all moonshot ideas are born at Google and you worked there before becoming the CEO and co founder of Dandeline Energy. Why did you decide to spin it out? So we made the decision with Google X to spin it out because this company really UM was ready. It

was ready to start selling products to homeowners. And what Google X specializes in as research and development UM moonshot projects that can take a decade to come to fruition, but then when they do, they change the world. And for this project, we didn't need that decade. We UM we were ready to start selling the product, so we decided to been it out and started to sell. So talking about this, the German Geothermal market is it? I mean, how big is it? How fast is it growing? Um,

just give us a sense of what the market looks like. Well, today, it is actually quite a small market in the sense that very few homeowners get to enjoy geothermal heating and cooling. And I would say many homeowners haven't really heard about it even, which is a shame because there's just so much money that homeowners could save if they were to adopt the technology. What's been preventing it from being larger

in the past has been it's been too expensive. So a typical system in the past has cost fifty or more, which is just out of range for almost everyone. Um. But the heating and cooling market couldn't be bigger. So all of us spend so much money, especially in climates that get cold in the winter, on heating, and that market is hundreds of billions of dollars. What was it like working at Google x Oh it was fantastic. So my job, which I was so lucky to have, I

was a rapid evaluator is what we called it. So what that meant is I got to explore new opportunities for Google to invest in technologies that could have a huge impact and become huge businesses someday. And I think one of the great things about X is just the intellectual freedom that we were given to do that sort of thing, and then also, of course the quality of

the people that we got to work with. Who So when you think about the Google lex is you know, I guess investors, when I think about Google X, it really is these moon shots. How many projects are roughly being worked on, I guess, or how many you know at any given time, and then I guess you just decide when it's time to spin out, right, Yeah, So the way it works is at the very early stages,

things are just an idea. So it's really you know, there are there are hundreds of ideas getting batted around at any given time, but most of them, as you can imagine, make it very far because part of the process it access to identify as quickly as possible. Why I give an idea is doomed not to work. So we're trained to be optimists, but optimists who are always

looking for the fatal flaw. Because opportunity costs is such a real thing, especially at a place like Google with so many resources, So the areas that are most ripe for disruption energy. You pinpointed, is are there any others

that are sort of high areas of interest? Well, I haven't been there for two years, so I can't speak about the areas of interest there today, but I know that UM we were always very attentive to trends and technology, so you can imagine that UM areas like artificial intelligence, robotics, UM, you know, maybe maybe agriculture, maybe bio. I think all of those areas we're just seeing such rapid development that I wouldn't be surprised if they were fertile ones for acts.

Kathy Hannon, thank you so much for being with us. Kathy Hannon, chief executive officer and co founder of Dandelion Energy, looking at the trapped heat in the ground as a potential source of energy and depositor of energy in the summertime as a way to have a more green way of heating your home. Alphabet shares falling today at nearly six percent, currently down five point one percent, five point

seven percent. Excuse me. This comes as the Department of Justice in the United States is considering an antitrust probe into the company. Very interesting development. Sharre OVERDA Bloomberg Opinion columnist joining us here, What do you make of this? Why now? I think that's a very good question, and

it remains to be seen. Look, there's obviously a different administration in Washington, and the tech companies, including Google, are also getting big, bigger every day, and more powerful every day, and officials in government, including the head of the Department of Justice, have signaled an interest in the size and power of big tech companies, although I think people like Attorney General Bill Barr have been quick to note that looks size itself is not an antitrust violation, but how

you use your power can be. That's interesting because I think it's obviously a big issue for Google today. But as you suggest this, I think investors probably are also concerned that they're just looking at tech more broadly, given how some mean, is that really a risk out there? From what you know? I mean to me, Look, this is one of the biggest risks of any of these large US tech companies, is the possibility of continued, persistent,

permanent political and rap aleatory pressure. You were seeing today right that both Amazon and Facebook have a little bit of a stock declined today. There was news out of Washington over the weekend that you know, the Department of Justice in the FCC have sort of d vied up responsibility or the d o J is sort of taking responsibility for Google and the Federal Trade Commission, Sorr said, FCC,

the Federal Trade Commission has taken responsibility of Amazon. So that suggests that there may also be kind of regulatory interest looking at Amazon. And I think that the share price of Amazon today reflects that possibility. Which segments of Alphabet's business are most likely to come under particular scrutiny.

You are shaking your head. It could be anything, right, Look, so there is some precedent here, right, The Google or Google's parent company, Alphabet has been fined multiple times by European anti trust regulators, and that was over a number of issues, including UM the way that Google sort of tied its Android smart phone operating system to other aspects of its business, including UM, it's it's apps, and it's

Chrome browser for smartphones. There was a fine related to how Google UM handles Internet shopping and other kind of comparison internet shopping engines. The Federal Trade Commission investigated Google for possible antitrust investigation violations more than six years ago, and it looked at a number of issues, including Google kind of scraping information without permission from other Internet providers including Yelp and trip Advisor to sort of improve Google

search results. So look, the d o J could look at any of those things, or really anything, I guess, you know, taking a look at it from Google's perspective, they can probably just come back to regulators around the world and say, hey, we built the best mouse trap out there. That's why we have seven year per share of church queries. But that doesn't seem to be winning

the day here. I think that is there a sense that maybe that argument has to change that yet it's not just that their substitutes, but you guys maybe just mishandle your market dominance. So I think that's a great question. And look at the Google is very practiced now at dealing with these kind of anti monopoly concerns and regulations. And Google's line has always been, as you said, we built a better mouse trap. Competition is just one click away,

as their kind of favorite phrase. And it is hard, right because you can't necessarily point to direct consumer harm because Google provides Internet services that are free and a lot of billions of people use them around the world, and they're valuable, But what regulators look at as well, or what they might look at as well is Okay, let's play the long game here. If Google manages to kind of put out of business or guest stranglehold on lots of aspects of internet advertising or lots of of

aspects of information online, does that harm consumers? Or is Google doing things um that basically abuse its power in such a way that it crushes competitors. And the problem with anti trust and investigations is that they're broad and you just don't know what the investigators will find interesting. Sure of a day Bloomberg Opinion colums covering all things tech for us coming in at the last minute to give us some color on Google. 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 abram Woyds. I'm on Twitter at Lisa Abramoyit's one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio