Want Ventilators? Roll Back Trump's Tariffs

from China. So this includes face masks, hand sanitizer, protective gear that is now very much in demand. And the Trump administration did you know, offer exemptions for those products, but they took that very recently ago, as then you know, one to two weeks ago, and at that point, you know,

some of the damage is already done. I mean, we've already then shifted the flow of goods now to places like Europe, which of course are battling their own issues with the coronavirus and may in the future be less willing to export some of those products to US UM And then you know, it's also an issue of whether or not you know or necessarily the the customer of

first choice for um Chinese suppliers. You know, the Peterson Institute did a really great piece on this, just looking at the ways in which it changes incentives when you do have those tarrifts in place. So that certainly is

not helpful. But I think about it also, you know, the second part of this is just in a broader sense, manufacturers are getting hit really hard by this, whether that's just you know, a total drop off in demand or a disruption of their supply chain, and the terrorists just seem like an extra tax that makes this harder on them.

It just seems unnecessary. And that's particularly true at a time when we're really starting to see an emphasis on calling the manufacturers to step up and use their idol factories to make products like masks and ventilators helps to still this shortage in America right now. And if they do that is the reward then that when we go back to normal life, they still have to jump through the obstacles of tariffs when they answered their patriotic duty.

I just I don't know if it makes sense, and it strikes me as more of a hindrance when we should be spilled a thing on everything that can possibly help us in this spite against coronavirus. Brook really interesting to take at a time when it's like whack a mole with respect the information coming at you every single day in terms of which part of the market, which part of the economy, which part of the political world, which part of the central banking world is in the

front and in the focus. Amid all of this, we haven't talked as much about supply chains, just more broadly, and before we get into just what the tariff policy should be, how much our supply chains still disrupted from what happened in China and what's been going on now in in in Europe. I mean, how much are those supply chains still intact to begin with? Look, I mean I think they were significantly disrupted by what happened in China, and you know, at the time that sparked a conversation

of oh, are we too dependent on China? But then as you've seen this virus spread across the world, I don't know if it really makes the difference at this point where your supply chains are. We're same factory shut down in Latin America, factories shut down in the US, factory shut down in Europe, and so you know, I think as we think about how supply change changed down

the road. Initially I was thinking of this as more of a geographical rethink, but then I think that now maybe we pivot to what do these factories look like? You know, robots don't get coronavirus? Does this just speed the spread of automation? Do we see more and more companies relying on additive manufacturing where you don't need to get parts from different parts of the world. You can just have something come out of a printer and be

in your factories. So I think those types of conversations are maybe now where we're more headed at this point in time, because you are seeing amazing disruption to the flow of goods um you know, across a broad range of products, and I think we're going to have to think about how we better safeguard those systems. Well, I think the line of the day Lisa is robots don't get coronavirus. Yeah, And I kind of malfunctioned a little bit earlier when I'm trying to speak, so I think

I'm safe. So Brooke, just practically speaking, can I auto manufacturing plant? Switch were to make ventilators? So there are issues with this, So you know the UK is also calling on its manufacturers to make ventilators, and the confirm there that these are very heavily regulated devices, and we don't I think, want to be in the practice of vending those rules because obviously we don't want to do

anything that might make this health crisis actually worse. But I do think, you know, companies that have experience making heavily regulated equipment UM might be in a better position to step up, at least as far as that is concerned. Now, I will say, you know, auto factories do require require assembly line somewhat similar to ventilators, and there are similarities

that you think about. You know, the highly advantaged like h sex systems that are in those cars, and you know the technology that you would need to do a ventilators, So there are some similarities there. Also, there are hurdles that need to be worked out masks and hand sanitizer and protective year that is a lot easier to do. You may see more companies stepping up on that front, but I do think there is a path to make

more ventilators. We will have to figure out some of the logistics of that, and it's not quite easy as just flipping a switch to making a totally different product. Brook Sutherland, thank you so much for being with us, brook Sutherland, Bloomberg Opinion industrials columnist, joining us to talk about the tariff situation rolling them back, but also the

supply chains. And I do think, Paul, you raise really interesting point, which is in a wartime situation, typically, uh, the US has mustard all of its capabilities to manufacture weapons or manufacture clothing for the troops. And you have to wonder if this is being treated as a wartime situation, at what point will the factories that are offline to make cars be corralled into making ventilators and be making masks and purel and toilet paper, because that seems to

also be a concern for a lot of people. There is a question though about the oil patch and how much is sort of exacerbated by the fact that Saudi Arabia and Russia appear to be in a tiff that does not seem to be going away anytime soon, where both of them are doubling down on production at a time when demand is falling off a cliff to try to understand this relationship, what happens if they come to some sort of accord and curb production. What will that

mean for oil? What will that mean for the entire relationship of nations in the Middle East and Russia joining US right now? Professor Megan O'Sullivan, Professor of International Affairs at Harvard's Kennedy School, former National Security Council advisor, also a Bloomberg Opinion columnist. Professor, I'd love to get your opinion for starters of how long in the making this

tiff between Saudi Arabia and Russia really was. I mean, in other words, how entrenched are they on their respective sides, unable or unwilling to come to the come to the table and stop producing as much oil. Well, as you know, Russia and Saudi Arabia and the rest of OPEC began producing and cooperating in an unprecedented fashion towards in ten, basically to deal with the price plunge of that time.

And for quite a few years people predicted that this would be a very transitory relationship, both basically between Russia and between Saudi Arabia, and it was more resilient than people thought. Um every time there was an opportunity or needs to renew a production cut or to revisit it. People product predicted some kind of collapse like the one

that we saw on March six. But Um, I would say that both sides have been taken by surprise at the market reaction, because unlike the other times when it looked like Russia might walk away from its cooperation with OPEC, this time it we have both a supply surge and

we have this massive demand contraction. And so while both sides I don't think we're planning for this fallout to happen, um, the fact that it happened and that the repercussions have been so dramatic, I think does create at least some kind of an opportunity for the two sides to come

together in the coming I would say months. However, the longer this goes on, I think there are certain new variables that are coming into the mix that could change the trajectory of what I think everyone began thinking was just going to be a temporary kind of tiff that would ultimately be resolved in coming together in a new production cut. So, Megan, it's just extraordinary to me that the behavior of Saudi Arabian Russia on the supply side, given what we now know, about the demand side and

the creating demand for oil. Who do you think is going to blink first? And why? Well, I mean, we already have seen signs that the Russians are acknowledging that the economic impact here is going to be greater than they thought. We've seen the finance minister just a couple of days ago talk about how Russia is going to go into a deficit. You can see the impact on the ruble um. Russia has more difficulty borrowing than Saudi Arabia, so it probably is less well prepositioned to endure a

long term slow price decline. So I would say, if we're really assuming that this is going to result in the two sides coming together that at some point, I think Saudi Arabia is not wrong in thinking that Russia will feel the pain and there'll be an opportunity to come back to the table. However, and I still think that is the main most likely scenario. However, there are a couple of things unfolding, as I mentioned that could change the perspectives of these two players. One, the demand

plunge is so much deeper than people thought. I mean literally, it's only been two weeks since these two countries came apart, and we've seen that the projections for demand have changed dramatically. Two weeks ago, Saudi Arabia was arguing that a cut of one point five million barrels of oil a day would be enough to stabilize the situation. People are now talking about this quarter of oil demand going down by

ten million barrels of a loyal day. So coming together to agree on a cut of a million barrels is actually, even within these two weeks, is no longer perceived to be sufficient to the challenge at hand. Also, we're seeing producers in the US, Brazil, Canada already coming together and saying, you know, it looks likely that our production is going to shrink, We're going to have capex limitations. And this is much quicker, I think than Saudi Arabia um expected.

And it must be heartening to these producers Russia and Saudi Arabia that have been frustrated that their policies have basically helped high cost producers. So it's possible that you might have both of these sides, Saudi Arabian particular saying hey, we didn't expect to move to the situation where we were kind of playing for longer, and but here we are, and maybe we have to make the best of it

given the situation. So despite that backdrop, given the glood of production, and given the fact that demand is falling off way faster than people had expected. I want to put the perspective the huge rise in prices that we saw yesterday after President Trump said that he could intervene, that he would intervene if this carries on, and that the US has great power to do so to bring Saudi Arabia and Russia to the table. What power does

the United States have to to do that. Well, my feeling is the President probably overstating the US power here. The US does have a lot of diplomatic and political leverage with Saudi Arabia just because of the importance of that bilateral relationship, and so certainly you can imagine that the United States would be putting a lot of pressure on Saudi Arabia to come to the table, especially if Russia started the show indications that is interested in doing so.

The United States does not have much control over Russian behavior, and the thought was that the United States could threaten some more sanctions. I actually think that could backfire We've seen repeatedly over the last five years that Vladimir Putin is willing to take an economic hit in order to stand up to the United States. So to imagine that the threat of sanctions could change Russia's calculation in a way that makes it look like Putin is acquiescing to Trump,

I think that is not tenable. An interesting idea surface just this morning you had one of the commissioners of the Texas Railroad Commission saying, actually Texas could return to a policy of pro rationing that it hasn't had since the early seventies and rain in some of America's production. That opens the possibility still likes say distant, but for a Russia Saudi um uh Us conversation that the Russians have wanted to have for a long time, and that

could be where this could go. This would be the real wild card in this situation. But absence that, I don't think the United States has the ability to solve this problem just through diplomatic pressure. A. Megan, thanks so much for your perspective. We really appreciate you helping us

understand what's going on the global energy markets. Megan O'Sullivan, Professor of International Affairs at Harvard's Kennedy School, former National Security Council advisor, and a Bloomberg opinion columnists giving us her sense on the markets here weekend. We still have a little bit weaker oil today after the big, big pop yesterday, but still way way down supply and demand not good for the price of oil. The question is when will Saudi Arabia and Russia come to the table

uh and come to an agreement. This is Bloomberg. We are looking at a markets that are trying to find some calm after a storm that was the biggest storm ever if you look at the VIX index and was certainly included some of the biggest whip saws since seven Black Monday. And the question is how do you find sane? How do you find sanity? How do you find a compass amid a complete dearth of any information? Peter Anderson, a voice of reason, a voice of calm, founder of

Anderson Capital Management, joining us now. Peter, thank you so much for being with us. What's going to help people stay sane as they invest their money in this kind of environment? Well, Lisa, I know that you've talked to a lot of investors and a lot of investor managers, and I thought I'd take a little bit of a

different take. Instead of just going back on histories of UH selloffs and how we react, I thought I could propose a couple of tools for everybody out there, because I think most investors are feeling really uncomfortable about the information and how they should act on this information. And if we could just get some simple categories, I think that might help people. So I have a couple of suggestions. The first thing is this concept of leading versus lagging indicators.

Now we've used those a lot in economics and investing, but probably not so much when we're talking about something like the virus. And if you recall Dr Fauci recently mentioned he made a little bit of a reference to this when he said, look what we're seeing now are the results of what the virus did two weeks ago. So I find it very helpful. Whenever new information comes, I put it in a category. Is this leading indicator or a lagging indicator? And what should I do if

it is lagging? It doesn't matter that much to me, But the leading indicators are the things I think we should focus on. Interesting, Peter, So as we think about this market volatility. Are you trying to Are you suggesting to your clients that they sit on the sidelines and not panic and maybe take the longer view here, And if so, are you having any success with that? Well? I am. You know, I've talked to all my clients and most of them are saying and mature that they say, Look,

I've seen versions of this in the past. You know, the virus is a new twist, but in terms of selloffs, we've been here before, and we also are quite familiar with the way we react psychologically and from a behavioral perspective, So why don't we focus on what the leading indicators are? And so to me, the leading indicators are when we have the press conferences every day, I tell them to focus on the following you know, what are the what

is the news about the vaccination? What's the news about trends in the current cases, not the past cases, but what might be happening in the future, Because when we get these cases reported to us now, they're just going to get worse because it's the results of the virus in the past. So looking forward, also, let's think of do they announce new innovative approaches, For instance, yesterday they mentioned cruise ships could be available for hospital beds. I

think that's very creative if we need that. They've also mentioned drive by testing. So the more creative we get with this, and the more we get a handle on when the virus is going to peak, that is the main driver of everything. Everything else, to me is expendable

at this point. But we should focus on what are the leading indicators to tell us when we think this might crest, and then we're off to the races, because then we have a data point and we can say, okay, what should our actions be as a result of now knowing that we've reached the maximum case accumulation. Well, and speaking of press conferences and paying attention, we will bring you some comments by Treasury Secretary Stephen Mnuchin and UH

majority leader and seminjority leader Mitch McConnell. They will be joining shortly and with some comments that they gave in Washington, d C. And we will bring them to you when we get them. But there is a question when you start talking about how people have been through this type

of thing before, have they? I mean, this is sort of one thing that I'm struck by the speed that this has occurred has just been so dramatic that in some ways it feels like perhaps this is a different kind of sell off and a different kind of economic downturn than we have seen in modern history. Do you agree, Yes, I do. I mean to a great extent, of course.

You know, when you look back at the major sell offs, each one has its own story in its own cause, and who would have expected, uh, something like a virus to have this major world impact. So I agree with you on that level. However, I also say that we can look back at how we react to each one of these surprises. Peter Anderson, a voice of reason, founder of Anderson Capital Management, joining us by phone. Really interesting, trying to find that compass right now amid a sea

of uncertainty. Paul, Yeah, it really is. At Lisa, and I think a lot of investors, Um, you know, they're if they haven't already panicked, Um, you know, I think they're obviously I was looking at their portfolios, looking at their flour one case, and just kind of in shock here. But um, you know, I think one constructive thing is to really take a look on the other side. When we do get the other side, How do you want to be positioned, what do you want to maybe look

at in terms of some investment opportunities. So that's hard to do right now as we continue see the Baltilo in the markets. But I think that's what Peter was suggesting that his clients do. The Federal Reserve just announced coordinated Central Bank swap line enhancements. It says it will act with the Bank of England, Bank of Canada, Bank of Japan, the European Central Bank, and the Swiss National Bank.

The swap lines to commence on March twenty through three, and they will go through UH the end of April at least. And this would be the dollar swap lines that they initiated over the past few weeks UH in order to ease up some of the dollars shortage and liquidity crunch there a few weeks, a few days, I should say, it's been weeks at least each day has

felt like that. And meanwhile they're going to switch each swap line daily from weekly, just showing this ongoing effort to try to ease some of the kinks in the workings of financial markets right now. Yeah, global coordination there at least, I think that's the key takeaway here and again it goes to that liquidity issue or cross markets that we've been talking about. So it's ice to see

the coordination. So our Jersey chief strate strategist at Bloomberg Intelligence, Uh, we have him standing by here to give us his sense on how important this is. And we have seen some dollar weakness today which has actually been a huge positive for global markets. I mean, are we seeing the beginnings of this bleed into markets the feed is actually

being successful in easing some of the dollar shortage. Yes, so I I do think that this type of activity in particular will be helpful for markets globally and primarily for uh, those folks who have funded in dollars who aren't in the United States, right, So that that's really where the funding shortage in dollars has been. That people have been hoarding their dollars wanting to keep them as

a safe haven currency. Um. So this allows basically for the flow of dollars in the global financial world to to continue. And the fact that they're doing these weekly operations on a daily basis I think is important because that means that there's liquidity on demand. So the way that they did it before by only having an offer and once a week is you only had liquidity on that day, you didn't have liquidity all those other days.

So UM, while I think the total dollar amounts might not be massive in this program, UM, keep in mind they did get up to almost five hundred billion dollars during the crisis. So it's very possible that you can wind up with you know, fifty a hundred billion dollars of usage in these swap lines um every day. And and you know, so you wind up with with a rolling hundred billion dollars every day that that basically helps

the financial markets to work. You know, some of the other things that the Fed's done, I don't think we'll have a massive issue. Like last night the FED announced that they were bringing back the commercial paper. Um that that the money market funding Facility book. Great. Frankly, money markets weren't really your problem this time. This is you know,

this is a much different crisis than two thousand eight. Well, I do want to just before we let you go, because I know you've got a lot on your plate. There is still a question though about the demand for dollars. And I look at one month and three months t bills. The rates on those are both negative. You can find

negative rates currently in the United States. Is that a concern for you given the fact that the lower bound for the Federal Reserve has been and has been stated to get again is zero and they are not planning to go negative. Well, I don't think that that's a problem. I think that does show you the risk off mentality that's still pervasive within the markets. And and you know the fact that you have UM interest rates that are

not going to go up anytime soon. The UH, the the idea that you have UH tea bills that are still in demand. It's basically the the safe haven of safe havens. If you if you have to buy securities and you can't hold cash, then you have to buy something and that winds up being in front of te bills. And you know that this did happen. I mean this did happen not so long ago. You look at two thousand eleven, you look at two thousands nine, you had negative tea bill yield. So this is this a rehash

of that. This is almost like you know, where is last time in two thousand seven and two thousand nine you had a significant um uh. It took a little while for all of this to happen. This is kind of just the sped up version of of a risk off. Yeah, thanks so much for giving us a few minutes. We know you're busy, but we appreciate your insight. There, our Jersey chief interest rate strategist for Bloomberg Intelligence looking at the markets. Here, we are slightly green on the screen.

Let's see where the action is. Bloomberg Stocks editor Dave Wilson, David, are you looking at this morning? Well, even though uh, you know, we were green, I should say that the SMP is now turned lower by a tenth of a percent. You have more stocks down than up. I mean you're seeing department stores or one area that jumps out because you know, you had Coals closing all of its US retail stores more than locations until at least April first because of the coronavirus. Coals is down about seven and

a half percent. You're seeing Macy's Nordstrom fault as well. And then there's the story of a T and T. And that's a pretty interesting case because this is a company that's been buying back stock that they issued when they bought Time Warner. They had a four billion dollar program in place to do that uh, after a previous one in December what they call an Accelerated Share Approaches program worked out with Morgan Stanley. Pretty common for companies to go this route. So today A T and T

comes out and says we're canceling the current program. And we report that A T and T is going for three billion dollars and loans to try and bolster its finances. So you put that all together, you've got A T

and T down six and a half percent. So I mean it's really two sides of the same coin in a sense, companies pulling back from buying back their shares even though they're way down clearly from where they were just a month ago, and increasingly having to line up financing at the very least to make sure that they can keep their business going. Tables and Bloomberg Sox editor, thank you so much for the update. Thanks for listening

to the Bloomberg pen L podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa abram Woods. I'm on Twitter at Lisa abram woits one before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.