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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and am Marie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business App.
Jamison Greer is joining us now, Jamison, Ambassador, Thank you so much for being with us. I know you've been incredibly busy. I can imagine you haven't slept much. I am curious how much we're seeing the end of negotiations or the beginning of the end, as there still seem to be some loose ends to be tied up.
Well, I would say that, you know, we've spent the past one hundred and twenty days negotiating with dozens and dozens of countries, and with some of these countries, the deals have been good enough that the President's been willing to accept them. With other countries, they're just going have a tariff. But we have you know, you can look at some of the information that's gone out there. We have fact sheets, we have a joint statement with Indonesia
that give some details. You know, we'll be finishing the paperwork in the next weeks and maybe a couple of months, but these deals are pretty much set.
They are set, right.
We wouldn't make an agreement unless we all knew the contours of it and the countries knew it. And it's an exciting time because the president has essentially reset the global trading system, and so we'll be you know, finalizing everything that's been agreed to on paper and then monitoring compliance going forward.
And Messagre, Can you help us understand how you landed on some of these rates, Specifically a country like Switzerland, it went from thirty one percent on Liberation Day, April second to now thirty nine percent, even though you and your colleagues were in negotiations with the Swiss trading partners.
Sure well.
So, first of all, the rates are largely determined by the trade deficit of a country with the United States and what the country is willing to do to address that trade deficit Switzerland. You know, this is surprising to some to hear, but we have nearly forty billion dollar trade deficit with Switzerland for a country of nine million.
Now we value our relationship with Switzerland certainly, but during our discussions with them, you know, we weren't able to reach agreement on the best way to reduce that trade deficit at all. Right, they ship enormous amounts of pharmaceuticals to our country. We want to be making pharmaceuticals in
our country. So this is a challenging situation. And so we have, you know, high tariffs not just on Switzerland, but many countries where we weren't able to fully resolve a path forward on reducing the trade deficit and opening markets.
My understanding was that the US in Switzerland actually had a negotiated text and it was just waiting on sign off from President Trump.
Is that accurate?
I think that's an overstatement.
I mean, the reality is all of these countries you trade back and forth paperwork and then you take it back to your leaders to get guidance from them, and so nothing's agreed, and tell everything's agreed. That's what every trade negotiator knows. So you know, the reality is we negotiate with lots of countries. Listen, there are a lot of countries that didn't get a deal that we've been negotiating with, and they, of course, they all want a deal. They all want to deal with the United States. So
I can understand that. You know, folks may want to try to manifest a deal in the last minutes, but we just have to do it's right for America, and the President stands that too.
I'm thinking of other countries like Taiwan, which that rate went down, India, Switzerland. Of course we know you are in negotiations with So between now and August seventh, could some of these countries that you spent a lot of time with your counterparts get a deal.
Well, that's not my focus.
I feel like we've been able to get everything set on August first. Of course, any country that wants to talk to us, they can always talk to us, and I'm sure some will be eager to find ways to reduce the deficit, open their markets, etc.
But we're really focused right now on implementing the deals that have been reached, well.
On implementing those deals. Representative, you meant that you would be looking and monitoring them for any violations. How will this administration judge what is a violation and what the consequences of that would be.
So, for example, you know, we put out a fairly detailed joint statement with Indonesia and we're finalizing the underlying agreement, and in there you can see that they've made commitments on tariff levels where they're going to remove all of their tariffs. They've made commitments on non tariff barriers with respect to you know, agricultural inspections and the way they
treat certain digital trade. And so our office, which has hundreds of people, the Office of the gust Trade Representative, they watch this and they make sure that Indonesia actually does what it's supposed to do, and if they don't,
the President has his teriff authority. I mean, all of the deals are premised and the modified rates for these countries are premised on them actually opening their market, making the investment and purchase commitments they've agreed to, and if you don't, you can have the tariffs go back into place.
This is basic trade enforcement. That's what we intend to do here, Ambassador.
Right now, there are a number of countries coming out and saying this is part of a negotiation, and they plan to keep talking with the team over in the Trade Organization and trade representatives from the United States. Is that just messaging to their own political constituents or is that reality?
Well, listen, they certainly have their domestic constituents they have to talk to. You can be sure that I woke up this morning to a number of trade ministers texting me and emailing me, and I'm sure they're reaching out to my colleague, Secretary LATINX, Secretary Beston, et cetera.
And my job is to talk to these folks.
I'm always going to talk to these folks, and you know, if they have proposals, you know, I'll talk to them and I'll brief the president. You know, we're focused on implementation and doing, you know, what's right to change the trading system to one that benefits American workers.
How much are you also hearing from US companies concerned about certainty and whether they're going to get clarity on exactly what the rates are going to be, whether they will stick, whether there will be adjustments, and how some of these things will work with transcenational shipments of getting penalized forty percent.
So So with respect to certainty, you know, President Trump has been talking about a new tariff program.
For for literally years, decades.
In some instances, you know, he has tariffs from his first term that are still in place. So sometimes when companies say we want certainty, what they mean is we want a different outcome, right, And you know by by putting you know, the market has baked in a lot of the tariffs we put in. You know, the new tariffs that we issued last night are firm. That's why we put it out in a very clear list. Everyone
can see it and understand. With surotect a transhipment that's always been illegal, and so we're just going to put an additional forty percent tariff on that. So, you know, I understand that there are going to be edge cases where companies have to change their supply chains and no one wants to do that. They just want status quo. But we can't have the status quo. The status quo is what led to offshoring and the loss of some of our key industries. So during that supply chain shift,
you know, that can be challenging for some companies. And I talk to a lot of these folks. I wanted to understand the president's trade policy. I want to hear about any you know on in tended consequences. But the presence trade policy is moving forward and we're shifting from a seventy year policy based on purely efficiency to a new policy based.
On fair and bounce trade, and the world is agreeing with US.
Investor agree.
What about the unintended consequences of what's going on with the sectoral tariffs on autos? The Ford CEO was on Bloomberg Television yesterday talking about the price disadvantage compared to auto companies if they're making a car in Japan because of the input costs of twenty five percent on those inputs that they need to make the car coming into the United States versus the fifteen percent right that Japan
now has. What's the point of the auto sectoral tariff if basically it's going to be bilateral now with country by country.
So first of all, you know, there are only a handful of countries that export cars to US, right essentially, you know Germany, Japan, in a couple of countries of the European Union. We also have Canada, Mexico, and we had our domestic producers. You know, choose over a couple of decades off for a lot of that production to Mexico, and so naturally there is some some challenge as they as they continue to reshure that and we understand that, right, I mean, our goal is long term. We're not looking
at quarterly earnings as policy makers. We're looking at a way to make sure that we have a strong, robust industrial base here that provide good jobs for our workers and support the national security. So you know, we're in constant contact with the domestics, with the unions and everybody. And you know, I understand that the that the auto companies are receiving a credit for content that's made in America, which is how it should be.
That's what we're trying to incentivize.
When you're looking and you're thinking long term, are you preparing for Supreme Court ruling against using IEPA for these tariffs? And if so, what's the plan be.
So the case is at the Federal Circuit right now. We had the arguments yesterday. You know, lots of questions, a lot of preparation. Dog did a great DJ did a great job. We had a great team out there. We feel very confident in the case. You know, if if there's still questions coming out of the Federal Circuit or further litigation that goes to the Supreme Court, we're confident there that this statue clearly says the President has the authority to regulate imports.
That's the language.
No, not my words, it's a statute statutes language.
You know.
In case there's a national emergency, the Presence declared a national emergency, So we feel confident, you know, if it goes the other way, then we'll manage that. The reality is, the countries understand the type of leverage that President Trump has created. That's why they're doing these deals, and they're going to stick regardless of what happens in litigation.
That's where I wanted to finish, And we just have a couple of minutes. We are out of time with you, I know, but I am curious what the game plan is should there be some sort of overruling of IEPA. Do you already have section two thirty two and others lined up?
Well, well, listen, we always have all kinds of plans. And I'm not going to go deep into our strategy here, mostly because we're pretty confident on the current plan. But we will do whatever it takes to make sure that the President can continue to rectify the trade deficit and change the global trading system. This is a historic thing.
This is once in a hundred years that you have the chance to reorder global trade like this, and we're doing it, and we'll use whatever tools are necessary to do it.
US Trade Representative Jamison Greer, thank you so much for being with it. Stephanie Rothawolf research still here and I'm looking right now at some of the internals of this data, and it includes average hourly earnings that ticked up to three point nine percent from the previous three point seven percent. You can see right now across the board there are still signs that things are solid, you know, even the unemployment rate. Yes, it ticked up, but not to the
significant degree that some people were worried about. What is the inflationary risk here longer term at a time when the Fed is being prompted to cut from a number of different reasons, and there still are these tariffs in the system.
Yeah, this is a challenge.
The data that we're seeing is largely appears to be rifferent by immigrat and that actually tightens the labor market for blue collar workers.
So what we might.
See is a labor market, which is something that was kind of known heading into this event, but it's now the reality. It's kind of painful because what we're seeing is job gains that have slowed down tremendously. It results in upward pressure on wages and then upward pressure from tariff. So it's like a stagflationary type of thoughts shop, which we're starting to see play out in the data. It's just a really complicated mix for the FED to kind
of deal with from here. So it looks like the labor market is okay, it's not as weak as these numbers today suggest. This is largely different by immigration in an economy that's hanging in there.
Mike, to that point, maybe the economy is hanging in there, but on the margins, this is by government bonds sell corporate bonds.
You know, corporate bond spreads, as you know, as we've
all been talking about, are really tight. I mean, you're not getting a lot of extra yield to buy corporates and high yield bonds, and obviously you're seeing a little bit of a knee jerk reaction negative action in the stock market as well, and this, you know, this whole tariff theme is definitely one of of not only inflationary, you know, is you know we just talked about the stagflationary risk is real, but it can certainly result in margin pressures for companies and I think that is still
to come, and I think we are starting to see some early evidence of that. And obviously that could put some pressure on corporate earnings, that could put some pressure on credit quality and and on corporate spread. So yeah, I think higher quality bonds and adding duration are the two themes we've we've been sticking here. The big question for the FED, right, and Stephan you kind of talked about this. I let's say growth is zero and the unemployment rate is you know, four and a half or five,
but inflation is at three. You know, what does the FED do in that world? Right, that that kind of stagflationary world. And and my gut is, you know, the FED and even Powell, who is is a labor market dove, would err on the side of saving the economy, saving jobs, saving the labor market and write off this inflationary risk as being a one off. So I think that's the kind of the risks the way they're skewed.
My colin Symphijian fixed Income, thank you so much for your time. And before we got this number, we saw a forty percent chance of a rate cutpying bike bakes into the market if for the month of September, And right now we have a seventy one percent chance of a rate of a rate cut in September. Joining us now is Jeff Rosenberg of a Black Rock we heard there from Mike Collins by Bonds. Is that your takeaway?
Well, certainly the market takeaway because the market's repricing September and it makes a lot of sense, and you guys hit on it, and I think it is the takeaway from today's report, which is it's the revision's story.
Remember there's been this undercurrent.
Of a debate about whether non farm payrolls in the labor market report is really mismeasuring the deterioration, and you see that in these first prints versus the revisions.
Wallers talked about it.
It's a little bit of vindication here, and that's basically saying his argument may hold sway or convince more people to come on his side of the argument. And you know, maybe they missed the opportunity in July, but it certainly raises the odds that you get it in September. And that's why you're seeing the big move. As you pointed out in the front end.
Of the curve.
Well, the President agrees with you.
He took to true socials had strong descents on the FED board and will only get stronger given the revisions. The downside revisions, Is this now a trend of this fragility we're seeing in the labor market.
Well, it was one of the numbers that Mike highlight it at the beginning. You know, when you take the revisions into account, you know, the three month average change in non for barrows drops from one hundred and fifty thousand average. There's just really a very you know, pretty strong labor market to thirty five thousand, which is which is you know, a dramatic shift. Now, as Mike just mentioned, you know, maybe we need to reset what we think
is break even. But with the revisions, it's a dramatically different picture to what the labor market is saying. And as also Mike was talking about, you know, you have a pretty strong year over year average hourly earnings figure, wage inflation. You know, the market is not caring about that because I agree with Mike. I think in the debate between the dual mandate of inflation versus full employment, they're going to air on the side of full employment.
And that's why, again, I think you're seeing this big move in the front end of the curve despite you know what we're not really talking a lot about, which is the wage number.
Jeff, I just wanted to jump in because we had heard from Powell this week who de emphasized the nonfarm payroll numbers themselves and said pay attention to the unemployment rate, and we were just talking with Stephanie about this idea of it being impacted more by labor supply and things like imm So given that, couldn't you say maybe for this bond market, I shouldn't get over my skis in joining this rally because we did have things like PCE yesterday which showed a stubborn rate of inflation.
Yeah, it's a really good point, and he did focus on that, and the unemployment rate, you know, ticked up one tenth and that was kind of aligned with expectations. But he also said in that press conference that the slowing in the labor markets even if it's both demand and supply with the equilibrium raises the risk that the downside risk would be to labor markets.
It was a little bit of a tell on.
Yes, we're in equilibrium now because you're getting both the supply and the demand side falling. But the risk is that the supply side sort of stops falling and the demand side continues. And I think that's kind of what the market is looking through here, particularly around this trend with the revisions, you know, more accelerated than say what we've seen in terms of labor force participation which you mentioned a minute ago, which actually tacked down here again
a tenth. But maybe you start to see that stabilize while the demand side doesn't stabilize.
And that's the risk that the market's pricing in right now.
Jeff.
Not all markets are pricing in things equally. I just pulled up what the future session is doing. You actually, just looking at the line chart would not even have any idea that we had any big economic piece of data come out s and P five hundred futures are basically at the level they were before. Is this a market that's not paying attention to the jobs numbers or it's just not bad enough for them to react, or maybe it's smooth sailing because it means that we could
get cuts. What do you make of how risk is not.
Reacting well, you know, and I looked at some of the futures and they looked like they were reacting and down. I think when you look cross market, you know, we talked a little better about this earlier this week. You've got to be a little bit careful about reading into the equity market. You know, this is very much sort of a macro conversation fed policy macroeconomic performance. The stock market is not the economy, and the stock market is
not even the S and P five hundred. It's really the S and P seven or six, and then you've got the.
Four ninety three. There's tremendous differential.
Look at sort of small cap performance versus you know, S and P five hundred performance, which is again it's sort of more dominated.
By the tech story.
So those stories and we're in the middle of earning season, you know, they can be much more dominant and reflective of those issues than they are what we're talking about here in the macro data.
I think when you look at the.
Two year that's mapping to FED expectations, and that's a pretty good message.
I think when you start looking across.
Into the equity market, you've got to be a little bit more aware that you know there's other factors going on in this environment of very concentrated equity valuation within the indices that can kind of lead to a misread across from the macro data.
Jeff Rosenberg of Blackrock, thank you so much for being with us. And as Jeff was talking about the chances of a September a FED rate cut, we're increasing it again to seventy six percent now from forty percent. Stephanie Rotha full Research here with us for a final thought. You've been parsing through all of this. Notably, the three month average of the net change in jobs has fallen to its lowest level going back to July of twenty twenty or June of twenty twenty. What's your takeaway.
I think the labor market has softened. Part of it is a big part of it has to do with immigration. Another big part of it has to do with government. About half of the revisions are driven by the government sector. So we're looking at an economy that's holding up, labor market has cooled down, and inflation is going to be heating up. This is a really challenging backdrop for August for risk markets.
And Marie.
The President's responding, he's coming out on truth social.
Yeah, he's not exactly saying what's happening in the jobs market, but he's signaling. This is the reason why he thinks the Fed is quote his words too little, too late.
Powell is a disaster. Dropped the rate.
I Meanwhile, the SMP not even responding. It's all about big tech.
No, not responding at all.
Again, you would have no idea that this piece of data came out. It is the bond market that is responding, sending us to a more than seventy percent odds that we will get that rate cut next decision.
Stephanie Roth of Wolf Research, thank you so much. Apple reporting is best quarter in over three years. Is iPhone demand picked up worldwide, including in China. Amazon shares and meanwhile falling after reporting the tech client underwhelming cloud growth. Joining us now is Tom Forte of the Maxim Group. Tom, how bad really was Amazon versus just not absolutely moonshot blowing out expectations like some of the other tech giants.
Yeah, I definitely think that Amazon was a victim of expectations. Had the company reports before Microsoft instead of after, we might be talking differently without downplaying investor concerns about the competitive landscape in cloud computing and artificial intelligence. But I do see the market's reaction to Amazon as more reflection
of high expectations than poor performance. Sales and profits were better for the quarter, and if you look at the ranges for the outlook for next quarter, they were better as well.
So tob Before we get to Apple, there is this issue of what the constraint is for Amazon's AWS, their cloud computing unit, which has really been their main profitability driver. Is it just capacity? Is it that they can't build out quickly enough to meet demand, or is it that they're losing share that they don't have the same kind of AI advancement that's say the Googles and the Microsoft have.
Yeah, so I would argue that it's more about capacity. So Microsoft is working closely with OpenAI, Amazon's working closely with anthropic. Amazon is the market leader as far as market share. Google to their credit and Microsoft, to its credit, are growing at faster rates off smaller bases, but I would argue that of those choices, it's more about capacity than necessary market share.
Tom, how do you understand whether we reward these companies or punish them for the capital expenditures that they're doing. Is there a hint of that in Amazon, that they're spending too much to justify what isn't as strong growth as the other mag seven in big hyperscalers.
Yes.
So I think the beauty of Andy Jassey as CEO versus Jeff Bezos is Andy's fond a way for the company to continue to generate strong profits and free cash flow and invest So I think that if we were talking about a Jeff Bezos led Amazon, there would be kind of ebbs and flows of investment spending. Andy has figured out a way to unlock sustain profitability even with
heightened investment. And I think Amazon, both under Bezos and under Jasse has investors trust that the investments will ultimately pay off, including for our official intelligence.
And then there was Apple, Tom, And one of the more interesting things that Tim Cook said on the call was that he thinks only one percentage point of the ten percentage growth in revenue was due to a pull forward effect. Tom, is that even measurable. How much faith do you put in that number?
Yeah.
So they looked at their sales trends in April as it pertained to iPhones and max and discerned that consumers, hearing all the chatter on tariffs, bought ahead of concerns that tariffs would raised the prices of those products, and as you pointed out, it contributed to about one hundred basis points of growth on a ten percentage point growth. So I think that.
Pull forward was a factor.
The concerning thing to me in Apple's results is that they're acknowledging that they're behind on artificial intelligence. The good news is they're taking action. They're raising their capex, which is much more modest versus Amazon, and they even hinted at strategic M and A, which I thought highly unusual for Apple.
Is it a little too late though, when it comes to what Apple's doing in terms of AI, given the fact that we see Meta basically go in take their top talent and leave Apple still struggling.
Yeah, I think I don't know that I would say it's too late.
It's definitely late.
So the good news is now we know that we should expect an elevated Sirian next year enhanced by artificial intelligence. That was a question mark even into the Developers conference. Recently, I think Apple has shown a consistent ability to play catch up. They're not always first, but their best. Maybe they won't be the best in AI, but certainly they can be better than what they are today.
Does this show you the fact that Apple is saying that potentially is going to have to look elsewhere for AI, that they're just changing their strategy for a company that we know loves to build in house.
I think they're saying that everything's on the table. So I don't think they're saying, hey, we're going to lean into strategic m and A unlike we've done in the past. I think that they're going to pull every lever they can to materially enhance the artificial intelligence experience on their products. That's how I view that statement, Tom forty.
This past week has been about American exceptionalism driven by big tech, and we've certainly seen some blockbuster results. We're quibbling with the details about Amazon, but still a pretty solid set of numbers. And I just wonder when you have the likes of Michael hartnant Over at Bank of America talking about a bubble in tech stocks and evaluation that just seems to have gotten over the skis even of all of the optimism that you saw in the earnings. What's your response.
Yeah, So if you looked at the peer set for Apple, the PE went to about thirty five times from closer to twenty eight times between last quarter and this quarter. So I think there's a lot of high expectations in big tech that they're going to lay in the plane or however you want to think about it when it comes to both tariffs, AI investment and getting a return
on the AI investment. So, as a long time followed the industry, going back to ninety six, having survived the dot com bubble, I do think that there's a lot of high expectations. It's reflected in the big PE multiples you're seeing in big tech.
Tom Forte of Maxim Group, thank you so much for that.
This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and, as always on the Bloomberg Terminal and the Bloomberg Business app.