Tariffs Could Suppress Aluminum Price If Imports Slow: Cosgrove

he's a senior analyst for Energy and Mining with Bloomberg Intelligence. Andrew, what are we expecting to hear? Um? I don't think anybody really has a clear cut expectation of what we're gonna hear? Um. I think if given that Trump is acting pretty rogue at the moment and not really tabling a lot of opinions given the Commerce Department submissions, but hey, if he if he goes tariss on steel, it is

absolutely off. We will be off to the races. Um. Although you know, given that nothing will be signed today, um, as far as I'm concerned and as far as I know, UM, So it doesn't mean that everything is set in stones, so to speak. But it's certainly um will help put a floor under some of these stocks steal specifically aluminum less.

So I think we're a little bit less bush on the aluminum decision because the US market is in a structural deficit, so we need imports, um to satisfy downstream industry. And if those imports or exports the US do not have a home in the U s then they just sit on the international market and will suppress prices. But just take a step back, and why is President Trump expected to make some kind of teriff announcement today? Uh? And what is the process once he has announced something

for it to become law? In other words, does he make an announcement at at like a stump speech, and then it's it's the law of the land. Yeah, there is. Congress has already kind of you know, blessed this essentially, so um, they would have to pass a law that would reverse this, so to speak. So whatever he kind of signs at whatever point in time, Again, don't expect

anything to be signed today. But um, he has until the middle of April UM, which was the end of the ninety day countdown clock that started in mid January. To make a decision given the fact that the Commerce Department submitted their findings to him, like I said, in the middle of January. So, um, that's kind of the timetable which we're at. So we're getting an announcement about a month and a half sooner than than the than

the end game. Well, Dave Wilson, just to get your thoughts here, because while you may see an increase or floor, as Andrew said, on the stock prices of companies like A. K steal and and U S Steal, I'm looking at the shares of Caterpillar right now. They're down nine tens of a percent. What about all the companies that use steal and aluminum. Aren't they going to end up with higher input costs? Well, that's the risk that you take

here in defending the metal producers. You're you are imposing more costs on metal consumers, and then you have to think about, well, what does it mean in terms of inflation? That really does seem to be the buggy man, you might say for markets at this point. So the whole idea that you would get imported inflation in essence, I mean, if US producers are able to raise their prices perhaps

because of the leeway they have with less competitive imports. Well, that is something that may change the inflation picture, maybe not in a substantial way, but enough to sort of add to the drumbeat on that score. Andrew, you got a thought on this, Oh yeah, no, I mean I think seven team is all about the uh, the year over year price increases that we saw comes around the commodity side. Team will be all about those commodity increases

feeding through into the middle part of the supply chain. Um. If you take autos, for example, three to four percent of the entire cost to produce a car is comprised of steel. UM. So again it's it's not it's not the end of the world for US automaker. If prices go up, which again let's just think about it this way, horiffs on top of what was already there. Now you have a lower US dollar UM, which is trending about seven percent year on year in and so, and you know,

prices continue to go up. That's upwards of on a on a three to four percent base. So if it goes from three to four percent, it goes to maybe five percent, it's not the end of the world. But again, will the auto companies pass those on. You know. That's that's that's up for debate. They'll probably try, but given the you know, tightened purse strings of the U. S. Consumer, it's it's also tough to argue. Thank you so much.

Joining us Andrew Cosgrove, senior analyst UH focusing on energy and mining for Bloomberg Intelligence, and certainly General Motors Fiat Chrysler. They are poised for demand to drop, and they are reporting pickup sales drop already today and we'll get details on those as we get them. Right now, I want to bring in Matt Bosler, Federal Reserve reporter for Bloomberg News. We are, of course awaiting the second day of testimony

from Federal Reserve Chair Jerome Powell. Matt, how much does it matter that we got very solid UH personal income data as well as jobless claims UH showing that the rate has fallen to the lowest for a week in

almost fifty years. Yeah, not bad, right. I think the bottom line is that it's just going to reinforce the message that he gave on Tuesday, which is that we've seen an improvement in economic data since December, the last time the Fed put out rate projections, and so in two weeks when they put out new rate projections, Uh, there's a chance that you know, those rate projections could go up based on that improvement. Nothing we saw this

morning really knocks them off that path. Interestingly, inflation was a little week, but at this point, it definitely looks like the Fed is more you know, focused on the forward looking growth outlook and the potential impact that's going to have on inflation down the road, even if the

inflation data right now are still looking a little muddy. Matt, Uh, he'll be testifying, drum palill be testifying before the US Senate Banking Committee, And I'm wondering if you could give us any thoughts about whether the questioning coming from Michael Crapo, the chairman, Republican from Idaho, as well as Uh Shared Brown for the Democrat from Ohio, whether the questioning coming from both sides will be any different than what we

listened into on Tuesday when he testified before the House. Yeah. I think that's a really interesting question because what we saw on Tuesday was, you know, House Republicans over the last several years have been much more critical of the FED. They've gone after the Fed on the large balance sheet and um, you know monetary policy rules, wanting to bind

the FED more two rules. Um. And I think there was some question about whether that was just because you know, we had a more democratic FED leadership in the likes of Bernanke and Yelling. Um. Now we have j Powell, who's obviously a Republican, but he was not spared from those same criticisms that his predecessors got from House Republicans. So, um, you know, the Senate tends to be a little friendlier. We'll see how that goes for him. Dave, you know

is notable. Uh. The last time that Federals a chair Powell went before Congress members Tuesday, Uh, the market did move, He did cause a reaction. Stocks went down. Do you think that he will cause a similar reaction today if he reaffirms his stand in a solid U S economy? Well, I mean, if you think about why you saw the reaction that you did on Tuesday, it's all about kind of some itchy trigger fingers, you might say, when it

comes to inflation and the FEDS response to that. You know, the idea that you might get for rate increases this year instead of three I mean that's sort of emerge from his back and forth with the folks in Congress. So you know, I mean that's sort of out there and it's really a matter at this point. Would he say anything to go beyond that in terms of providing any uh fodder for those trying to divine the feds

next moves on policy. Yeah, but he does now have the information and the experience based on his Tuesday presentation and testimony about how the stock market, how the bond market reacts to comments that he makes that he may not even really have in trying to alter anybody's perception that, in other words, he sees what he what the reaction is, and now what do you think that it's possible he'll

modify any of his responses. Probably not. Um. You know, it's interesting because going into that hearing, you know, we had had so many weeks of rising interest rates, pricing in more and more Fed moves, and so you know, for j. Powell coming in at the end of that rise in interest rates and saying, well, you know, kind of hinting that they might go for instead of three times this year, most of that was already priced in, so um, it would be even more surprising if he

reiterates that message today and we see a market reaction. Just had priced in even before his testimony. Yeah, it was getting more and more priced in, right, I mean, you almost had three rate hikes fully priced even before his testimony, which obviously indicates a significant probability of doing more than that. So if you look at the data now, if you go on the work function today, we're at about a one in three chance already that we got

four or more hikes this year. Saying that's what's different, Yeah, no, absolutely, um, but but it just you know, given that he endorsed that on on Tuesday already, it's hard to see how much more he could move the market in that direction. At this point, I want to bring some data that just came out, economic indications of more strength manufacturing in the US expanding at the fastest pace since May two thousand and four. This according to figures from the Institute

for Supply Management that came out just minutes ago. Dave, you know, the economic data in the US has been really steadily solid and frankly improving. Are we seeing And we've talked a lot about earnings coming out or coming to the end of this earning season. Uh, is there an expectation that this will continue? We're earnings better even than this economic data. Well sure, I mean when you consider SMP five profit growth is looking like sixteen percent

at this point, I mean, not's saying something. And you know that. Then you add in in terms of this year, the effect of the tax cuts that were made. Here I'll give you, I'll give you the companies for the SMP five have been reporting earnings that are ahead of estimates. For the fourth's a little bit higher than we've seen historically, right, And that's just to put that into context. More than of the companies in the SP already reported their results.

Well yeah, and you're seeing it on the top line as well. I mean, with more companies than usual coming out ahead on sales. And that's where you if you want to talk about how business is doing and how the economy is doing. I mean, focusing on the top line makes a whole lot more sense because you know, you don't have the issues of stock by backs and whatnot that can influence the bottom line. And right now, I just to let you know, Vesserserve chaired your own

Powell is giving his introductory speech. Matt is the FED getting behind the curve. I don't think there are really any indications that, certainly not in the inflation data. You know, again, the inflation data this morning, we're actually pretty weak. And you know, sort of these pro cyclical components of inflation that we've been talking a lot about, you know, the ones that sensibly respond the most too tightening labor markets are all going in the wrong direction for the most part.

So um, you know, there's the key question continues to be will the Phillips curve eventually reassert itself. The Phillips curve meaning that the lower the unemployment rate goes, typically the higher the inflation rate should go. It's an inverse correlation between inflation and unemployment rates exactly. So if you look at what the FED is saying right now, what j Powell is saying, the kind of the whole FED story is that, you know, we're getting bigger than expected

fiscal stimulus. So that's going to lead to faster than expected economic growth, which in turn is going to push the unemployment rate down faster than we previously thought, which should put more upward pressure on inflation. But you know, there's nothing new here in terms of the unresolved question of whether that sort of Phillips curve relationship is actually

going to reassert itself. It's just that we now have a bigger impulse, you know, if you do believe the Phillips curve is still operative, which most of the Fed do, and so that is why they are speeding up right now, even in the absence of any pickup and inflation. Well, one thing just to mention in terms of the economy is that there is a shortage of truck drivers. And we know that commerce in the United States depends on trucks. I believe it's somewhere in the order of about of

the nation's freight volume by weight moves by truck. And if you don't have people to drive those trucks, you're going to have to pay those that do more, and you're gonna have to pay more for those that may want to get those jobs, uh, in order to attract them from something else. Well, and Dave to that point, I mean, how much are the wage increases that we're seeing, even if they're not you know, run away by any means, how much of eating into the profitability of some of

these companies. Not so much at this point. It's a question of does it broaden out. I mean bear in mind, when a lot of companies talked about what they were going to do with their tax cut money, Uh, they decided to give bonuses to workers rather than increasing annual wages. So it's a one time deal which minimizes the effect going forward. I mean that said, the kind of issues that PIM has been talking about, given how low the

unemployment rate is, it's something that's got people's attention. And there's no doubt that in some areas of the economy, you know, trucking being an example, uh, that you are going to see higher wages and in fact that it's already started to happen. So Matt, just look going forward, what can we what are the sort of keywords that were waiting for from J Powell? What are you watching for?

So I think you know it's going to be it's going to continue to be interesting discussion about the fiscal stimulus, you know, when they ask him what, uh you know that is going to do to to you know, fed interest rates. I mean you saw that a little bit and we talked about it on Tuesday before beforehand. This

is really becoming quite politicized. And so you had some Democrats UM in the House Financial Services Committee trying to push Powell to say, well, doesn't this, you know, like ill time tax cut mean you're gonna have to raise rates more quickly and that's bad, etcetera, etcetera, trying to box him in that way UM, and he he kind of avoided that. So I think that is the first thing.

And then the other thing is, um, do we get more of a substitutive discussion about UM the inflation target and whether he thinks two percent UM is really an adequate target or if they need to move to something more robust, like a price level targeting regime. We didn't really get into that UM much on Tuesday, but that is definitely one of the biggest conversations in FED circles right now. Well, just to put in the context about

the incomes and spending. You know, we got the report today right and after tax income chump nine tenths of a percent. That's the most in a year. That's according to the Commerce Department that's just released this morning. And real disposable income increased the most in about five years. That's when you strip out different inflation measures. So it does seem to be that wages are increasing, but is it enough and does it really get completely offset by

the higher rents and the higher medical costs? Whatever I hear disposable income, I have to wonder, you know, is it really disposable because some of the same measures that we've used in the past perhaps don't work the same. J Wilson Bloomberg SAX editor, columnist and blogger at M Live go on the Bloomberg. Thank you so much, Matt Bosler. We know you have a busy day ahead of you of fed, watching FED tea, leave reading Matt Bosler Fed to reserve, reporter for a Bloomberg also joining us. Thank

you so much. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bluebirg Radio, M Data, The Tea