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I want to switch back to what kind of stay with global trade?
Here? Shawn donad Joints is here, Bloomberg News senior economics writer. As President Trump widens the trade fight to include global taxes and regulation, Sean, thanks so much for joining us here. What is the latest from this administration as it relates to global trade, taxes, regulation.
It's a wide mix of topics.
It's a wide mix of topics. It's also a fast moving topic, as you can appreciate, and your previous guest was talking about. Look, yesterday President Trump announced a plan to come up with what he calls reciprocal tariffs, and that will apply to any country in the world. They're going to start by focusing on countries with which the US has a large trade deficit or economies. So they're
looking hard at the European Union, for example. But what was interesting about yesterday in a real departure from what the US has done for decades is that they're going to try and calculate these reciprocal tariffs by looking not just at the tariffs that those other countries charge US goods, but also at taxes, at what they call non tariff barriers, which gets into things like regulation, and as they say in the order that President Trump signed yesterday, any policy
that offers any kind of barrier to a US good. As someone I was talking to yesterday pointed out, that could even mean taking on the metric system if you're talking about the EEA, trying costs there. Uh So, it's a real broadening out of what Trump has has had as its kind of central grievances on trade in the past. One big target is the European Union's use of a value added tax, which is effectively a sales tax that all of its member countries operate. That's very different from
what we have here in the US. We obviously don't have a national sales tax. We only have state level sales taxes, and so.
None are as high as the v A T. So I mean, none are as high as as.
The VAT and the real right from from from the Trump administration is that European exporders get to clim back v a T when goods leave the European Union, and that US exporters to the EU have to pay v a T when they arrive there. Now, tax experts say that's kind of a misreading of how how things works. VA T, much as a sales tax in Maine or Maryland would be U is a tax on something that
you buy in that in that place. And those US goods that have to pay a v a T in or those US companies have to pay a VAT when they sell in France, say, are selling alongside French goods that also have to pay a VAT. Anyone has to pay VAT in Europe, so it's not quite the competitive disadvantage.
It's a little different. I mean, if I order something from Maine, I don't pay main taxes on it, right, but.
Right unless you buy it in May.
I feel like this was a concept of a plan Sean more than really a plan, and I thought we were going to get it. He tweeted that it was a big day, the big This is the big day, right, and then he said, well, a good one to a plan. And also we're not going to know until April first, like they still have to do studies. Didn't they study during the campaign? I mean, I know which countries have higher tariffs than we do on goods. All he has to do is get chat GPT right or a Bloomberg
and he would get the numbers. Why does he need to study until April first? Is he serious about this?
Well, because that's the business the government, right, There's a process here, and if he's going to invoke some of the authorities that he wants to invoke to apply these tariffs, and they are going to defend it against potential lawsuits from companies and defend it to the public, they have to at least go through a process of doing an official study. You should point out that.
What was the point of twenty twenty five? Didn't they already do these studies?
The twenty twenty five wasn't his thing. And we should also point out that his main economic officials, his main trade officials, although they were in the Oval Office yesterday, haven't actually been confirmed by the US Senate yet, and that rights Howard lot Make, the Commerce Secretary and incoming Commerce Secretary, and Jason Greer his US Trade.
All right, all right, Sean we'll stay on top of this. I know you will as well. Here Sean Dinham, Senior economics writer, Bloomberg News. He's down there in Washington, DC.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
A couple of the big topics that get people's attention.
If you're writing a story, put meta and AI into the headline.
Oh yeah, you're going to get some reader ship.
Did you know that ai in Chinese means love?
I did not.
Yeah, I guess the word for love in Chinese is AI.
I don't know how you pronounce it. But where did you come across this piece of information?
David English wrote about it on the Bloomberg terminal.
Then it's got to be true. So let's check in here. Man Deep Singh.
He's a senior technology analyst at Bloomberg Intelligence. Man Deep, you got a big name, a big company, a leader with deep pockets in meta talking about AI powered humanoid robots.
What's your takeaway here?
I mean, right now, it looks like everyone thinks that is the next big hardware opportunity, whether it's Apple and now Meta, they seem to be looking at that form factor. And actually Nvidia dropped in that hint back in January when they talked about a new chip or humanoid robots. They released the new chip at CEES and they actually released their own large anguid model for the humanoid form factor. So it's not a surprise that everyone else is also
looking at that opportunity. And obviously you have Tessa who already has Optimus as a product and has talked about it almost on all their earnings calls, you know, recently, they.
Seem a little late to the party to me, frankly, I think has so much money. You know, they go after Twitter with threads, they go after open Ai with whatever Meta's AI product is called.
They go after Tesla with well appleshow you don't have to at first, you just have to be you know, cool and good and all that kind of stuff. True.
So, Mandeep, is this something that the street's going to like because it's AI? Or is this something the street's going to say, you know, is this kind of like the metaverse, which we didn't really like house. Do you think the street's going to react to this.
Yeah, I think in the case of Meta, I mean, there are question marks on their ability to design a good, compelling hardware and look reband Meta glasses have been successful, but when you look at the overall margin profile for a company like Meta, I mean, ADS is such a high margin business that hardware continues to be a drag
on their overall margins. And the fact that they're losing almost twenty billion dollars every year on reality labs makes you wonder if they add more hardware in the form of humanoids, it could have mean bigger losses in that segment. So I'm not sure if that's the right strategy for Meta. Given they've had so much success, you know, with their apps, family of apps, and how good they have been in deploying AI across their apps, why would you want to
spend too much time on hardware. But I think Mark Zuckerberg's view has always been he wants to control the ecosystem from the hardware. I have that vertical integration, and that's why they're doing it well.
MetaStock, just to give you a sense, up one percent today a twenty five percent year to date in a fifty five percent on a trailing twelve month basis.
So the market likes what's happening at Metal. Yeah, they're killing it, but.
They don't control the ecosystem, right, I mean, where does Facebook have any hardware other than that virtual reality glasses thing that I don't think anyone bought.
Well, okay, I think it just goes to show that Meta obviously is dependent on these app stores for their apps to be successful, and they are. You know, they have three of the most popular apps on both Android and iOS app stores. So anytime Apple or Google makes a change, that is where they got impacted with the IDFA changes, and look, that's what they want to avoid the next time it happens. Given every you know of the software vendors is trying to infuse AI lllms at
the operating system level. So what does that mean for a company like Meta, which has its own LLM and wants to deploy it across more places. So owning the hardware does have some potential over there.
I've upgraded to the pro model of chat GPT.
Now, oh yeah, that's not working. Were hanging for it?
Well, I kept getting cut off because I was asking too many questions, but I use it locked Really how much you pay twenty dollars a month? Sure, yeah, and it's pretty pretty sweet, But I wonder if it costs less to develop and run a large language model than we thought.
I haven't.
I realized it's a couple of days old the story, or a couple of weeks. But I haven't got your take, man, deep is deep Seek full of it? I mean? Were they just using illegally procured you know, Hopper chips or Blackwell chips, or did they really like make an LLM with six million bucks?
Look, that was their last training round. That wasn't inclusive of all their training costs. But the bigger thing here is Apple, you know, partnering with Ali Baba to deploy LLLAM on their phone, and that's part of Apple intelligence. So to me, you know, it's not just deep Seek anymore. All the other companies over there in China, whether it's Ali Baba or you know, the other ones I do,
et cetera, they all have their llms. They may not be as capable as deep Seat, but this thing is getting commoditized in my view, given every LLLM provider is improving their reasoning capabilities and now Apple partnering. I think that's a big step in terms of deploying their technology and Apple I think did note at their last Drugs call that Apple Intelligence was a big driver of refresh refreshers wherever it was available.
All right, well, I'll like bob.
It's up three percent today, it's hitting a fifty two week high, still below it's all time high from back in twenty twenty, but it's up sixty eight percent over the trailing twelve months. So certainly getting some love there. Min deep Sink, thanks so much for joining us. Man deep Sink, he's a senior.
Technology analyst for Bloomberg Intelligence.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Coarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Isabelle's sitting in for Alex Steel on Paul Sweeney.
We are live in the Bloomberg Interactive Brooker Studio in New York City, streaming live on YouTube's ahead of to YouTube dot com. That's the internet thing. Search Bloomberg Podcast now, and that's where you will find us, all right. I've been in this business since nineteen eighty six, and since then, in my mind, Morgan Stanley has been the dominant franchise when it comes to all things real estate, real estate finance,
and they still are today. Everywhere you go in the supply chain in terms of real estate financing to find ex Morgan Stanley people.
So we're really.
Appreciative to have our next guest, Lauren Hockfelder. She's the co CEO of Morgan Stanley Real Estate Investment. She joins us here in her Bloomberg Interactive Brooker studio. When I talk about commercial real estate, I think the first lesson I learned is don't just think about office space because there's so much other stuff out there. Where are you guys at Morgan Stanley seeing the best opportunities today?
Yeah, So we start with what's driving demand, and so we invest behind long term mega trends. Trends we're focused on today are e commerce, the supply chain, realignment, aging, demographics. So where does that bring us? That brings us to industrial warehouses, that brings us to senior living places that are really going to be propelled not by cyclical up and downs, but by these long term trends, which.
Do you see as leading right now? Because we've seen a huge shift in commercial real estate, some people have said it's bottom, but what are your views on that?
Well, Look, commercial real estate or private real estate values in the US are down what twenty five plus percent over the last two and a half years, while the equity markets are up sixty plus percent over the same period. We feel really good about the entry part point to a lot of real estate today. We think that, you know, we've seen a bottom start to form. Liquidity increasing, transaction volume, increasing costic capital really coming in, spreads compressing. So we
really feel like twenty four was about moderation. Twenty five twenty six, we may see the transition into an up cycle.
All right, what we got here, let's get an informed opinion. Commercial office, real estate, New York, San Francisco, Chicago, Boston. Have we seen the bottom that I can't remember seeing too many transactions out there that would suggest we've seen the bottom.
I don't know.
Divergence, So I think for the best of the best, we've probably.
Seven thirty one lection to avenue best.
I mean absolutely, for the best of the best, you are seeing not just resilience from some of the headwinds, but actually the best of the best assets are benefiting from what's going on right now, massive consolidation into these top tier buildings. They've become like an oasis in the office desert. Everyone only wants to be in these assets. And so yes, you're seeing leasing pickup in our San
Francisco office assets. We are commanding all time high rents, signing long term, high quality leases at way abou pre COVID. That's stunning when the market's almost forty percent vacant.
So what happens to that forty percent is it just have to find the bottom somewhere.
So look, I think yes, you're going to have some conversions to alternative uses. There are major complexities with that, both sort of zoning wise and physical construction wise. Some of it will get converted, a lot of it's just going to be cost prohibitive to really release in a meaningful way. You have to retrofit for sustainability conditions and amenitization. Demand has changed what it wants.
Apart from the example you gave, uncertain things they lingers. We have investors, they'll cautious about jumping in. What do you tell them or how do you convince them?
Look, it depends where there are certainly areas I would not jump in. But when you look across the globe, for example, we find the US to be the most interesting market in which to invest today. The US is always fifho right, first in, first out, it's correct to the sharpest. It tends to rebound the quickest. So this is a market for the right sectors, for things like senior housing, industrial, certain other spaces. We find it really compelling.
There are other parts of the world, and frankly other sectors that we don't think have bottomed yet. For those lower quality assets, you still have a wall of maturities that's coming. And don't mistake delaying with fixing the problem. There's still some pain to come there.
Talk to us about the capital markets, the financing for real estate. If you want to go buy a building, do whatever you want to do in your real estate portfolio, where do you get the capital?
So debt capital is absolutely coming back. So we saw a period of time where there was just total illiquidity. We've seen CMBs picked up very materially so, and we've seen spreads compress very materially so. Of course, base rates are moving around, maybe more than we'd all like, but spreads have compressed, so you're seeing a return to some of the from some of the balance sheet lenders, you're seeing CMBs, and you're seeing really this massive rise in
non bank lenders. So these alternative asset management, private credit, private credit, private real estate credit.
Interesting you mentioned that twenty twenty five or twenty twenty six maybe the year of reckoning.
There was a big Bloomberg piece late.
Last year around November quoting a lot of people saying that, yes, twenty twenty five will be our year. But then hindsight that may look like wishful thinking, especially with the rates they'll elevated. How are you squaring your thoughts on that?
Absolutely well, Look, we think this cycle is not going to be about rate compression. So coming out of the GFC, one of the ways we all did very well is you know, rates fell, you had cheap debt, you had cap rate compression. That was how a lot of appreciation was created. We think this cycle is different, so we do expect to see moderation and rates. Perhaps it's a bumpy road down, but ultimately that's not what we're betting on.
We think this cycle is much more about cash flow growth, and so what that means is you need to be in those sectors that have those mega trends driving demand and in those sectors where supply has just fallen off a cliff. That's how you get cash flow growth and frankly, owning assets that you can really improve. So not just buy and hold, but buy and change.
If you had the chance to buy a B level building on Third Avenue on forty eighth Street at fifty cents on the dollar, would you buy it?
It really depends. So I think what people sort of people tend to homogenize real estate, and I think there's a big difference between a forty thousand square foot floorplate and a twenty thousand square foot floor plate in terms of what it wants to be and what it's sort of highest and best use is. So it's just you need to think about how that specific asset. It's not bs B as B.
Okay, how about right across the street, can you lease out some of that commercial space because it hasn't been leased since the pandemic.
I don't know what's going on there, so we need.
That's commercial real estate. I don't know across the street from us. Still after the pandemic, it was.
The victorious secret across.
This Not that I don't know what's going on there, but Lauren, thank you so much for joining us. Lauren Hotfelder, she's the co CEO of Morgan Stanley Real Estate Investing, joining us live here in our Bloomberg Inactive Broker studio.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Coarclay, and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
A lot of towers talk around the fireplace these days. It seems to be the economic policy of choice for President Trump and his administration, so industries around the world are trying to figure out what impact it will have on their.
Business, and that includes the luxury business.
Ronnie set Home joins and she's managing partner at set hom Lag Group.
Ronnie, when you think about.
The luxury business, high priced items, by and large, different price points, different types of consumers. But again, if they're going to be subject to terraces, whether it's from Mexico or China or anywhere.
How does that play out in the luxury business.
I'm not sure it's going to vote very well for the luxury business. I mean, there is some stagnation already with consumers purchasing luxury for the top one percent, none of these tariffs will really have an effect on their purchasing power. But there are a lot of Henry's out there which are high earners, not rich yet, and they may pause if they have to spend an extra ten to twenty five percent on the same item Henry's.
I had to explain that to my parents.
I just heard it for the first time.
Here.
It's a thing, all right, high earners but not rich yet.
Okay, so yes, it is a thing.
Which industry in the luxury sector will be hardest hit, though.
I think the fast fashion will be the hardest hit. I mean, right now, the tariffs that are going to be imposed on China are not just a regular ten percent tariff, but there's also a loophole which currently allows fast fashion retailers from China like She and that probably is one of the top ones that come to mind, allows them to ship products to the United States tax free if the total sale is less than eight hundred dollars and if that goes away, I'm sure that that industr will be hit very hard.
So I think a lot of retailers Ronnie are trying to think about their strategy about to what extent can they pass increased tariff costs along to their consumers or how that gets absorbed within the supply chain. What are the luxury companies thinking about how much can they pass through to their consumers?
Well, I mean, as of January, a lot of the luxury retailers have already increased their prices by as much as ten percent, and consumers are used to increases every January from luxury you know, good makers. However, I'm not sure if you tack on another ten or twenty five percent that they'll stick around. I mean, I'm I'm worried about you know, Canada goose for example, as the name implies, you know it's from Canada. They are very expensive jackets.
They're great jackets. But who's going to pay an extra twenty five percent or more? It's unclear. So I'm not sure if all of the tariffs can be really pushed down at the consumer level, I think there's gonna be some pain sharing here. But you know, that's just my opinion.
Where do you think consumers will shift their attention to. We have some analysting maybe emerging markets like India or the Middle East.
Is that what you're seeing as well?
Well?
Since about I think twoenty and nineteen, a lot of companies that rely heavily on China, we're starting to diversify, and right now Vietnam and Bangladesh are like second and third in line. But yes, I do see some additional diversification coming.
Secondary market circular cost for the luxury business, secondary markets material how does that going to be impacted?
Yes, I think it's going to really change everything about the secondary market. I mean, if you try to purchase a handbag, which is, you know, one of the main goods that people are looking for bargains for because not everyone has twelve thousand dollars or something to spend on a handbag, they go to places like eBay, and a
lot of individuals selling on eBay are international. And if there's a tariff, likely if you're not paying attention, your beat, your bag or whatever good you're buying is going to be held up in customs awaiting a payment. And for those consumers who are paying attention to how much the tariff could be, they may be dissuaded from purchasing at least online. Then you have secondary good providers that are local in some places, like you know, the Real Real
or Fashion File. You can go into the store. But again, depending on where the item came from, people may be dissuaded. They just may not have enough money to spend an extra ten to twenty five or whatever the percentages end.
Up being on the part of the company. What do you think about the strategy of shifting some production to the US. I mean, this would allow brands to avoid TIFF's entirely, or maybe cut costs. For instance, energy prices in the US are significantly lower than in Europe, so maybe that would be one thing.
I think it really depends upon what good we're talking about. So, for example, the beauty industry, it is heavily reliant on packaging. Many people may not know, but oftentimes the formulas are pretty much identical from brand to brand, and what you're
really paying for is the packaging. And of course, you know the color people do have unique colors, and there are so many reds, you know, I'm sure anyone trying to purchase red lipstick has gotten the experience that they had to try on thirty of them before they found the perfect red. However, it's the packaging and the mold. The creation of the mold is very expensive, so I don't know, for example, if the beauty industry will be able to pivot to us made immediately.
It might cost you much.
All right, Ronnie, thank you so much for joining us. Ronnie set Home. She's managing partner at Sethom Law Group as well.
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