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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie hortert 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. Let's extend the conversation.
Eachwar percent out of Cornell right in the following. The President has now declared open war on the US institutional framework, which underpins the dollars dominance in global finance, as well as other aspects of US financial supremacy. Each war joins us now for more. Each one, Welcome back to the program sir. Let's just take your line of thinking. If we have declared open war on US institutions, where are you seeing signs of damage?
So, if one thinks about, what are the key elements of the institutional framework that, as I mentioned, have underpinned the dollars supremacy and foreign investors trust, particularly in the US financial system. It includes a system of checks and balances that is institutionalized, the rule of law, and most importantly,
an independent central bank. Each of these elements of the US institutional framework, you know, took some things during the first wrong term, but during the second term, Trump is really taking a hatchet to each of them. None of the checks and balances, either from Congress or to some extent, from the judicial system, seem to be working very well. The fedce independence is really crucial, and if you emphasize
there is operational independence. You know, no central bank can be ultimately free of political influence, because after all, it has to serve the welfare of the people. But in the operational decision making, you know, all evidence seems to suggest that leaving the central bank alone to do its job is that I think makes it most effective and credible, and that's what Trump is attacking.
The FED said that they would abide by what the court decides. I read that statement to the President live in the cabinet room, and it came out and asked him, would you abide by the courts? And he says, yes, of course he will. So if the court decides that Lisa Cook can stay. Is the damage already done or do you think that Ben just bolsters the view in America that we do have independent institutions.
Well, at the moment, I think a great deal of damage has already been done, because Trump is very clear that he wants to bend every institution in the US, including a statutorily independent one like the Federal Reserve, to his will in terms of policy making and the broader elements of policy that need to line up with his desires. And that's not quite You know what has helped America maintain it's financial supremacy. It's a sense that everybody, including
the government, has to play by the rules. You know, we may not like the rules, but whether you're a domestic investor or foreign investor, or the very government that sets the rules, you have to play by the rules. And that is the element that Trump is attacking now. Even a system where you have the rules very clearly laid out, ultimately it is norms that matter, because you cannot really write a rule that covers every eventuality, every
circumstance of the world. And those norms are certainly being shattered. And this is I think the real concern because even if Lisa Cook does stay on the board, a certain red line has been crossed and has made it very clear that it is loyalty to him and his policies that matter is much more than technical competence, even in an institution that is supposed to be largely run in technocratic grounds.
What does happen though, if, as the DOJ said last week, they're potentially going to investigate this, what happens if Governor Cook is convicted of mortgage fraud? Does she belong there?
So this is a really ugly matter, and it is going to get uglier because we are seeing that these allegations seem to be swelling up without much of the evidence being presented, And of course, once the evidence comes out, things will become a lot clearer what the intentions were, what the motives were, and, as your colleague pointed out,
the definition of causes very important here. Trump has argued that Lisa Quick is one of the overseers of the mortgage market and therefore any malfeasans or even the notion of malfeasance there is enough to be considered cause for
firing her. But the question here is whether the real cause should be in terms of her incompetence when it comes to monetary policy issues, or some much deeper issue of malfeasance, which certainly has not been established yet, but whatever it is, it has certainly put the Fed on notice that every one of its voting members it's going to be subject to very careful scrutiny, which perhaps is not by itself a bad thing, but in a potentially
very ugly way, being held to standards that certainly deviate from the past.
Each way, I agree that this moment is ugly. I would also suggest in the same way that you have it's very difficult to discuss because we have hearing about the allegations, but no formal legal investigation has been opened.
At the same time, Governor Kirk hasn't exactly denied anything that's been alleged, which makes it equally as complicated each wa I'm trying to understand how different this moment is to a moment we had a number of years ago of a financial disclosures of Federal Reserve officials who later resigned themselves because it became a distraction for the institution. Why do you believe this moment is different?
I think Lisa Cook is making a very important stand because without the evidence being clearly revealed, and in the case of the other federal officials, there were allegations initially, but ultimately they resigned when the evidence did come out.
So at this stage we do not have any clear evidence. Yet, we have a bunch of allegations by one Trump administration official, and these have largely been intermediated through the platform x So I think the real issue is whether there will be a process that is enow to take its course.
So rather than firing on the basis of this allegation, if it were if it was a situation where the evidence was clearly laid out so we could all see it, and then the ramifications were teased out, and then the president took action, it will be a very different thing. And of course the context is very important here. Trump has been attacking the FED. He's already made comments about Lisa Cook not having done what he thinks she and other members of the FED board should have done, which
is to cut interest rates quite aggressively. So there seems to be a mix of these allegations plus what he considers malfeasance in terms of not following his policy wishes, So I think that's one of the reasons why Lisa Cook might be making a standard. Of course, we're still agree and see how the evidence bleaves.
Old stay with us. More Bloomberg surveillance coming up after this. The former Trump White House trade official Kate Colloquwitz right in the following they expanded terrifs further weaken the prospects for a near term US India trade deal, with bilateral talks stored. Kate joined us now for more, Kate, welcome back to the program. I think we have to start from the very top blurring the lines between economics and
national security objectives. Can you just build on that and why India is so important right now?
Yeah, the situation with India is at a place I think none of us predicted early in the president's term. You know, they had risen out of the gate really as one of the first countries with which we expected a trade deal. But these national security issues, particularly the ongoing situation with Russia and Ukraine, have really elevated them as a problem in the President's mind. And now we see terror us reaching the levels of China almost the highest of any country at present.
Okay, as you know, China still buys Russian energy, the Europeans still buy Russian gas. Does consistency mats a here?
Well?
Apparently not. The President has made clear, of course, that he'll go after some of these other nations with this new executive order that targets buyers of Russian oil. But it's very clear only one country has received the additional penalties, and that's India. So hard to say that there's consistency here.
So where do the talks stand now we know that they're basically on hold. How quickly could these two trading partners coalesce and get you an agreement?
Well, as we've seen with other previously stuck agreements. I mean, I think anything can happen if you get the two leaders together. What we've seen so far, however, is that India's Prime Minister, because he has his own domestic political challenges, of course, is somewhat reluctant to get on the phone with President Trump. As you all know, that can be quite uncertain as to what the President can ask when
he gets on the phone with you. But I think it could get unstuck if the two men get together and find a pathway forward. That's what We've seen happen with President Trump, and I think it could happen here with India.
Is it going to potentially hurt India's chances given the fact that Prime Minister Modi is set to have a meeting and meet Shijipan in the next couple of days.
Well, I think that Prime Minister Modi is trying to flex a little bit here and show that he has other options. I'm not sure it will impact President Trump's view of this. I think this still has to be an issue resolved between the United States and India, and it doesn't matter if the Indians bring the Chinese alongside.
It is hard to ignore, however, that the highest tariff rates at present really are on countries aligned with China, and that's China, India, and Brazil, a group of nations the President has repeatedly targeted.
When it comes to the exemptions, though this is really key the likes of Apple, which put a lot of time and effort into moving their supply chain out of China into India. Do you think that exemption stays.
Well, that exemption is not really related to India so much as it is to the President's impending action on semiconductors and their derivatives like the products Apple makes, So that exception is really in place only until the President makes that move on semi conductors, which you know the White House has said is imminent. But you raise a very important point, which is in the first president and President Trump's first administration, a lot of companies moved from
China and they moved to India. So you know, we could see some very dramatic consequences for those that have done their manufacturing there.
I'm Marie just to build on some of that. Mexico Canada Okay, next year, how crucial are those negotiations going to be?
They're really important.
The US Mexico Canada Agreement, of course, is coming up under review. This was an agreement renegotiated by the first Trump administration. It's an agreement he's called the greatest trade deal ever negotiated. But the truth is the North American supply chain for American manufacturers is critical. It is crucial in this global competition with China, with India, and I think it will be very important to see that reshort essentially and restabilized well.
When it comes to the goods that are going between these borders ninety percent or USMCA compliance. They're also getting this exemption when it comes to the tariff rates. What does the Trump administration want to see build upon their USMCA that they themselves struck when it comes to renegotiating that exact trade deal.
Well, I think what we've seen in a number of the trade frameworks is what we're going to see in the USMCA negotiations, and that's to get rid of what we consider transhipt goods. And again, this is to ensure that Chinese inputs, Chinese goods are not somehow making their way into the United States through our North American partners.
So when the USMCA was renegotiated, we did see tightened rules to ensure that all cars that benefit from USMCA are almost entirely North American content, about seventy five percent. I think the President will push Mexico and Canada for similar commitments on a range of goods to ensure that anything benefiting from this duty free treatment is actually a product of North America.
Okay, we're still trying to figure out if some of these tariffs actually stand up to legal screen today and in the cabinet meeting yesterday, the Treasury Secretary talked about customs revenue of north of five hundred billion dollars a year. These tariffs and the revenue they're generating now too big to strike down.
Well, it's a great question. I think we are nearing that, and certainly the president's rhetoric, the president of his cabinet really justifying the value of this tear least tariffs and what they're doing for the deficit in the United States indicate that by and large they are here to stay. We have action after action piling up which threatened to raise the tariff level. I think it's going to be very challenging in a wholesale fashion to see these tariffs coming down.
Any stay with US multilindex. Savannah's coming up off to this in New York City, Max Show the form of Chief of Staff to the FULMA Vice President Mike Pench joins us now for more.
Mont, good morning, good morning, thanks for having me.
Thank you for big ka a much more interventionist White House over the past week and maybe the last number of months as well. Can you just weigh in how are you framing things in the moment?
Well, on this pretty good topic, I actually think there is probably broader support among a lot of small government people who say, you know what, the notion of a FED truly being independent was a nice notion, went before it had seven trillion dollars of assets on his books, and so you have a lot of unlikely people with
fourteen year terms have enormous influence over the economy. Having said that, I think there's probably a desire also that if there was actually effort to change it, it'd be more above board than coming up with sort of these fraudulent charge is against the board governor because there's probably plenty political pointees indministration of multiple mortgages too, and said
they're both their primary residents. So I'm sure there's a double standard here, and I wish there is a more intellectual appeal about the Fed's role as a postcon with bogus chargers.
I just want to pick up on the language a difference between challenges of fraud and fortullent challenges. Which one do you think it is?
I think these are bogus charges. I mean, what makes you believe that, Well, I don't know how many how many homes she has or if she listed both as private resident, is that really a reason you're going to remove somebody as a board governor. And again I believe there's probably plenty of people indministration who have done the same on their mortgage file.
Well.
Lots of reporting over this summer about Ken Paxton, who's the Attorney General of Texas who's running to be the senator. Good point, And do you think is litmus test now for the president? He's going to decide whether or not he's going to back Ken pax then, because he has three residences listen as a primary more.
You know Emory, he's very flexible in these things. I think this is this is more about his effort to exert control over the FED because I think they're concerned that their trade agenda is causing great weakness in the labor market and they want rates lower. And to be fair, this is what the President has always wanted, his lower rates.
Even when he had the option to appoint Jerome Powell in the first administration, there were three options between Kevin Warsh, John Taylor, and Jerome Powell, and the President asked who's going to make rades lower? And that's one of the ironies is that he chose the person who Steve Nichen told him is going to keep rates lower, but obviously he wants even lower.
They are now, how difficult is next week going to be? If the Senate Banking Committee begins their hearing of Steve Myron and you look at some of the Republicans on that committee. Are we going to see pushback not just from the likes of Elizabeth Warren but also like Tom tell Us.
We haven't seen it yet, Henry. He said, I'm not so confident that it's going to be significant pushback on his appointment. And I look, again, I think this is about effort, exert control, want to have a majority so he can lower rates faster. But again, I think it's reflective of a concern about where the labor market's going.
I remember Stephen Mall nominates it for a seat on the Federal sev the Senate was Republican at the time, and he didn't make it, and that was what's the difference between that first time for the president and this second thing?
Yeah, yeah, great question, because I think this is much broader than the Reserve. I think it's about all of his nominations. I think that you know, you go to his cabinet and I think it'd be hard to envision that RFK would have gotten confirmed in a previous Republican controlled Senate. I think this is basically a reflection that
Republicans are very worried about the president primary. He has shown his ability to engage in primaries and exert that control, and there's just an enormous fear factor, and he's using that with great leverage amongst Senate Republicans.
Has the Ponzi changed.
The Party's absolutely changed. I mean, I think the party has certainly become far more populous. I think you know, when you see basically the federal government looking to seize means of production and the biggest cheerleaders are Elizabeth Warren and Bernie Sanders, and there's not a Republican speaking out about the government taking over ten percent of intel. On the heels of saying, you know, in selling we have
export controls, we don't want to sell these chips to China. Oh, but if you allow us to take fifteen percent of the profits of a video, it's okay. And on the heels of saying we're gonna take golden shares of Nippon Steel a US steel, It's like this is clearly moving a direction where the populism and the progressive merge, and there's been total silence among center Republicans and centered Republicans.
With their silence, you say, potentially though, they're interested in revamping the Federal Reserve because they're in favor of small government. Nothing you just listed in terms of taking shares of companies is small government, he Marie.
That's I think one of the shocking parts is that I do believe that the first Trump administration was predominantly small government, was deregulatory, it reduced taxes, and I feel like the second administration is exerted its influence in all sectors of the economy and looking to exert its muscle. And I think it's a very different agenda.
To be more constructive on what they're doing in terms of, say intel, There's been a lot of criticism that they're mirroring what China does, or this is state capitalism like Europeans did in the nineteen sixties. What do you actually think Trump is thinking? Is this about building a sovereign well fun what is actually the strategy?
I think could he kind of rejected the Sovereign Wealth Fund the other day, But I do think it's concerning, you know, the trajectory there is basically Saudi Arabia, China, Iran, Russia. Those are the ones with sovereign wealth funds. I certainly hope that's not where we're going. I do think it's more for in his mind simply about leverage and where
he can have leverage. But again, the base of it was two weeks before he more or lessened s ANUWAYD the Intel CEOs and Chinese spy and then basically allowing to basically saying, Okay, well, we're not so worried about the national security and more as long as we can have ten percent. It's like, what's the justification. I feel like when you do this, you crowd out private investors. I don't think this would be good for either side.
I think you can see Intel shock. Intel stock probably declined because what private investor wants to engage and they feel like the federal government can just come in and take ten percent or more.
This is the Bloomberg Survendments podcast, bringing you the best in markets, economics, anngio politics. You can watch the show life 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 out
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