Bloomberg Surveillance TV: June 2, 2025

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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.

Joining us now is Brandon Ferris of the Steel Manufacturers Association. Brandon, thank you so much for being with us. I just want to start with how the increase in stealing aluminum tariffs works hand in hand with this deal for some sort of participation with dpon steel taking a stake of US steal.

Absolutely well. Thank you for having me today, and with the deal and with what President Trump announced on Friday of raising the tariffs to fifty percent, President Trump is responding to an industry that has suffered from surges of dirt cheap steel from foreign imports, particularly from China, and so as part of this which was the largest investment in Pennsylvania history these fifty percent. Raising the tariffs to fifty percent helps protect the American steel industry.

We've learned that the US imports about seventy percent of its steel needs is according to Morgan Stanley. So do you think actually they really need this level of protection.

Yes, so even at twenty five percent, And the US International Trade Commission did a report on the two thirty two tariffs for steel, and what they found was that the price impacts were minimal, but what they really had a tremendous effect on was lowering the imports. Twenty four percent of imports were lowered when President Trump first instituted these tariffs in twenty eighteen. And so what we're still

Construction companies, I'm sure you've seen have worn that these levees are going to be increasing the cost of critical building materials. Do you have concern about the knock on effects what this fifty percent level means for the steel industry for things like construction as well as the auto sector.

Absolutely, anytime a tear, for any time a trade knob is turned, you have to look at the ramifications. And when the International Trade Commission studied the two thirty two tariffs, what it found was for the downstream industries, zero point two percent increase on their prices, So again small increase on prices, but a major effect on taking the imports down.

The Trump administration, though had or Trump himself had opposed this deal on the campaign trail. Are you happy about the nip on US steel deal.

We're looking forward to receiving more information. Again, what we look at is right now it is the number one deal that has ever been announced in Pennsylvania. One of our other members, New Course Steel, had just recently announced the largest investment in West Virginia history. So two out of fifty states the largest investment in their history is steel, and so we like where this trend is heading.

Brandon, you mentioned the dumping of steel in US markets coming from China, but let's be clear, this terifile effect much more than China. It is a sledgehammer, and you've seen complaints, for example, from the EU, from the UK. Is this the right method to take for what is a very serious problem. Should there have been something more surgical coming from the administration.

We do believe that the two thirty two steel tariffs are searched, and with this, yes, we do believe that it will help our industry. And the problem is not just China, it's global overcapacity. Lots of countries use cheap Chinese steel to replace their own and then send theirs onto the global market, and so this will help solve that issue.

So another concern, which again the most recent moves I'm sure you're hoping to concern, is something of just job stability and job security and any guarantees that the administration and many people hope that kneepon Steel will guarantee, Brandon, how far can those guarantees go when it is an industry that is facing a lot of changes, that is facing changes when it comes to technology that change the workforce. How long can job security be guaranteed.

I can't speak for US Steel, but what I can say for all of our members is that they have a more full order book than they've had in years. And what we're hearing is that we're hearing growth. Nearly every one of our members has announced growth, and this means more jobs, this means more revenue, this means better benefits for the economy. And so right now, what we're looking at, and what we've looked at since President Trump first instituted these terraces in twenty eighteen, is a changed

Brandon, are you worried about the US losing customers if the US angers essentially Canada and the European Union, as some of its biggest exporters are the people who actually buy some of this steel and aluminum, maybe setting them to look elsewhere if suddenly prices are that much more expensive.

What we can say is that most of the steel produced in the US is used in the US. We do have some trade with Canada, we do have some trade with Mexico, and I know that there are going to be negotiations this year talking about that. But as far as protecting the domestic steel industry, which is vital for economic security, energy security, national security. We believe that moving the tariffs up to fifty percent was a very good move.

Brandon Faris of the Steel Manufacturers Association, thank you so much for being with us. Turning back to trade, China hitting back the Trump administration accusing the US and violating is trade truths. Former Trump trade official Kate Calluquids joins US now.

Kate, thank you so much for being with us. What's your take.

On the ratcheting up intensions that we saw between the officials in China and the US over the past four or five days.

It has been a whirlwind. I think in the US China space. Of course, we saw huge tariffs, We saw those tariffs come down without much else agreed between the two parties, and now this war of words. I think it lends itself to the fact that some of the very baseline issues between the two nations remain very much in place, even though domestic pressure forced both sides to bring those tariffs down. So we're very much in the same space without the tear of pressure.

I think, Kate, is there really going to be an agreement if there isn't some understanding between the two countries on the AI sector and advanced semiconductors.

Well, you know, I suppose it depends on what China is willing to accept here, because I think that it's very clear from the United States perspective that these types of export restrictions on high tech goods are here to stay. In the big strategic economic competition with China, the focus from both sides, frankly in DC has been to restrict access of these technologies. So unless China is willing to accept that, I think we're not going to see an agreement.

Is there a chance that the Trump administration gives in more and allows them some access to this sector.

Well, you know, President Trump, of course, has sent some mixed messages around what he expects and hopes from China. After the tear off Detonte, the President announced his long term goal is to do business with China, which you know undermines a bit this notion that we could really sever our economies.

So I wouldn't say never.

The President certainly has shown, you know, willingness to walk back some of his strong rhetoric but this will be difficult because, you know, in a bipartisan way, Congress has been quite firm on this point.

The rhetor grick.

We've seen the war of words back and forth over the weekend from Friday to today. Could that derail a potential talk that Kevin has had said we should expect this week between the two leaders.

I suppose it could, although the signals I see on the US side at least are very strong language from the President, softer language of course from his his you know, cabinet officials. We saw Ambassador Greer, Secretary Bessett try to walk back a bit the very strong tone to say things aren't going great, but we're hoping the leaders will speak. So the US at least is sending a very strong signal that it would like to see a leader level discussion.

Do we have a sense, Kate of what the ultimate goal is? It feels like that's getting lost in all of this, is the idea to decouple with respect to tech between the US and China, to time or on video saying that that's not the answer. Is it to just isolate China with the allies that we have, albeit in a somewhat messy way, we don't have real sense of that through all of this, do you.

Well?

I wish I could help come up with a stronger clear plan here. The reality is the President has many, many goals when it comes to economic relationships with the rest of the world, and at times these do appear somewhat to conflict with one another. As I said, I do think his long term goal here is to reset the relationship with China, but to continue to have an

We heard over the weekend from a number of different advisors to President Trump that July ninth is the deadline and it will not be extended past that. In terms of the reciprocal tariffs, do you believe that.

Well, I think the President is always flexible, and I think if we need to go beyond July ninth, we'll find a way to go beyond July ninth. Of course, the President is a bit on his heels given the court decision last week, but I think it means that he's going to show signals that he can move tariff's forward in other manners as we've seen. We saw the announcement on steel in aluminum. He has quite a few other tools in his toolbox to bring to the ready.

It benefits them as.

Well to negotiate some deals before the President starts to use these other tariffs. But if we need to extend, I think the President and certainly Secretary Dissent has indicated if we need more time, we'll take more time.

Just quickly.

When you talk to your clients, what are the risk dates, the risk events that you have the flag to them saying this, actually you need to keep your eye out.

For Well, when I talk to my clients, I really say, you know, predicting is too late in the game. We need to anticipate big outcomes as opposed to the actual when and the dates and to when they might occur, because we know the President wants to move on large scale sectoral tariffs beyond II but beyond China. We are anticipating several big decisions this summer when it comes to semiconductor tariffs, pharmaceuticals, copper, critical minerals, and a range of

Kay Klukwitz, former Trump trade official, thank you so much for being with us. Anita Bajave of Bank of America, writing, we now forecast one hundred basis points of cuts next year with low conviction. Who pencil these cuts in for the second half of twenty twenty six? Aditya joins us now and Aditya thank you for that, because we're all humbly having low conviction about absolutely everything, So join the club.

We're joining the club.

I am curious what you make of some of those Chris Waller comments where he seems to talk about good news rate cuts at a time when so many other FED officials are saying, we have no clue.

Thank you for having me. I think we have no clue. It is probably a more accurate representation of where we stand. The challenge here is that we had fairly favorable based effects on inflation for the first four months of the year, and so it isn't hugely surprising that we got down to about two and a half percent on the core.

Well.

Chris Waller's argument in that was that you could look through that because we don't have the same tightness in the labor market, and the ability for employees to go to their employer and say, hey, inflation's going up, pay me more is limited because they just want to hold on to their jobs at this point. Is that a fair characterization of where we are?

Okay, But if inflation's above target and you aren't sure whether you should look through the shock or not. And at the same time, the labor market's holding up, what's the why do you need to cut it all?

Yeah, fair enough, We don't.

Think they're cutting this year, just to be clear.

So they're not cutting this year. But also another input in to this, and this is something Michael Gabe and Morgan Stanley has talked about. This idea that we're going to have low immigration and low immigration also means that the labor market's going to stay tight as employment growth slows. How much is that going to impact the outlook as this year progresses.

That's a more difficult one. I think it'll be very differentiated sector by sector. You're going to be seeing some sectors that are more dependent on immigration that could see wage pressure, such as construction, measure, in hospitality, agriculture. But in aggregate, if you're basically shrinking the population, you're reducing supply and demands. So it could also end up being a wash.

You said that if the labor market is holding up and inflation goes higher, why should the Fed do anything? Well, if inflation is going higher, shouldn't.

It be hiking?

Right? So that's a question that comes up every now and then I think there's some ways away from hiking, just because policy rates are already quite elevated, so they'll feel like they have some buffer. And again they'd rather be late than wrong. This is a point that we've made and I think it holds in both directions.

So you think this potentially will happen even though you have a little bit of great salt on there the second half of twenty twenty six. So do you think we'll have certainty on trade policy out of Washington by the second half of twenty twenty six?

Right, So the way we're thinking about the second half of twenty twenty six is that by that point inflation will the tariff riven. Inflation will start to roll off the year of a year rate because of base effects. So with inflation below three percent, maybe a slightly loser label market and different FED leadership, you might end up getting great cuts.

You said, different FED leadership. This is the question that we all really want to ask. Is Chris Waller just trying to get the job?

I'll let you decide that.

Okay, Well, it seems like a lot of people would say yes. Is this the mainstream thought or could this be the mainstream thought?

Of the Federal Reserve.

Do you think that this is the person to watch to see the direction for the Federal Reserve in twenty twenty six Chris Waller.

So he seems to be for now at least a bit of an outlier on the committee. I think what you're hearing from Chair Powell and then others like Hammock and Williams is that the FED is very patient right now. They just have no idea. Honestly, if you ask me told me that the FED should be preemptive, I would ask you, what is the FED even trying to preempt right now? There's risks in both directions to trade policy, there's risks in both directions to fiscal policy. Let's just

I'm sympathetic with this.

The question though, of wait and see for a data dependent FED really raises a question of what are you waiting for? Because the data is so incredibly messy, not only from a backward looking forward looking midigum working kind of point of view, but also just from a data collection point of view, You've had a real question about lowering of response rates to some of the nonfarm payrolls. Responses sentiment surveys are basically throw a darted to dartboard.

So the good news about the payroll surveys is that at least by the time you get to the third reading, the response rate is pretty decent.

Yeah when you get that, yeah, you get that.

Two months later.

Okay, but the piping.

Well, and then you have data that's unreliable. You have a FED that's not moving. The FED is not in the driver's seat. It is a political economy, and you can even see it in what's happening with the currency market. Interest rate differentials are not making a difference. Is it a problem that the FED is very passive right now? That they are very reactive? Is it a problem, especially if this economy heads in a worse direction.

I wouldn't characterize the FED as fassive. I think they've actually been pretty clear about their stunds. They've pushed back against market pricing of rate cuts. They've made it very clear that they're concerned about inflation to a degree that was more than perhaps I would have expected. I mean, did you look at the minutes last week? It was it was really striking for me. They had this when

What is the danger? Just just lay it out for us. If the FOMC starts to coalesce a Chris Waller type of policy, outlook, what is the scenario? Why is that the wrong decision?

I think it's concerning in the sense that we just don't know what policy is going to get implemented first, and then second, we don't know how it's going to affect the economy. Right, Basically, what we're looking at is a negative supply shop from the tariffs being offset by potentially a positive demand shock from fiscal policy. That can give you the offset that you're looking for on the fiscal side. It you can give you the offset that you're looking for on the output side. The problem is

Just to give us a compass for how to look at the weak head, what data point do you think is going to be most relevant? The jolts, the job openings, the non farm payrolls report on Friday, or the Beige Book with all those quotes from specific regions telling you I feel good, I feel terrible, I feel inflation, I feel layoffs.

I think it's the unemployment rate. You really want to watch the unemployment rate. I mean, typically the establishment survey is more reliable than the household survey. But as you mentioned earlier, we're in an environment where there's some very movement around immigration policy and that can effect leave a

Adj Bahave thank of America, Thank you so much.

Great to see you.

Victoria Fernandez of cross Mark writing, uncertainty remains even if economic data and tacticals show the markets holding their own for now, we see additional toppiness in the coming quarters. Victoria joins us now for more, Victoria join the club. Everyone's seeing choppiness because it's very hard to get a sense of what kind of direction to go in. I want to start with something that Danny was talking about earlier, which is that it's very hard to know which thing

Yeah, I wish i could give you a good answer on that, Lisa, but I'm just not really sure where the focus is going to be.

As you guys.

Mentioned earlier, it changes on a daily basis. So we're mostly through earnings, but there still are some good retail earnings that are going to be coming out this week. We've got some tech earnings coming out, but I think we're basically through that component. It's going to be do expectations of earnings continue to get.

Moved lower for the next couple of quarters.

That's going to be the key component as it relates to earnings, and we've seen that happen, so that's going to be of concern. But obviously headlines they're going to be driving so much of this. The consumer is what people are watching. Credit spreads is what we're watching, Corporate profits is what we're watching.

Those are all important, and they're all going to.

Move on a daily basis depending on what it's hearing from trade and from the tax bill.

So I think you have to take it.

All in stride through a lens however, of not being sure how much you can rely on the data, because how much of it is just due to the pull forward that we saw on March. That's another element you have to bake into your observations.

Which is one reason Victoria that a lot of people got a lot of confidence from earnings over the past couple of weeks. They came in significantly better than expected, Julian Emmanuel calling it a boom in earnings and the consequence in the response in markets.

That's real.

You are seeing those profits, you are seeing companies that are still able to reaffirm some of their guidance.

Does that give you confidence to.

Be a little bit more bullish in risk assets than you were previously.

I think it gives a confidence in knowing that we will come through the choppiness that we're talking about over the next couple of quarters, through all of the trade headlines. We will come through that, hopefully with stronger economic elements on the other side of that. One of the most important things I think we're seeing out of earnings is that we can continue to have that CAPEX number because profits remains strong. So you had revenues of what six

How surprising is that figure, just because when all of the trade headlines started to kick off, the narrative was, and let's be honestill, is that businesses are paralyzed by it that they're not committing capital. They don't want to put things to work because they just don't know what type of environment they're going to be operating in. The CAPEX figures we got and the expectations for them. Not trying to be cute here, but are they real?

You know, I would have thought if you'd ask me that maybe six weeks ago, I would have been very concerned in regards to the earnings that were coming, to the guidance that we would get as it relates to CAPEX, because of exactly the elements you said, because of the uncertainty and not knowing what to do going forward. But it seems like a lot of the businesses over this last earning season have really kind of reiterated some of those CAPEX spins. Obviously some has been pulled back, but

So American companies still want to spend, still want capital expenditures. Victoria in Europe, it was much weaker what we got from there. Earnings in terms of capital expenditures, we are looking at an S and P that's up just half a percent so far from the year in Europe. Stocks are up seven and a half percent looking at the company earnings. Does that suggests that that balance needs to shift back to the US, that European outperformance maybe has gone as far as it can.

I think there's a few elements that kind of drive that story of shifting maybe back to the US. We had, you know, kind of broadened out some of our exposure to include Europe earlier in the year, but you had a lot of catalysts that drove that. You had the change to the debt, you had an increase in defense spending, and we saw the European markets really respond, and at that point we thought it was time to take some money.

Off the table and move back.

And now you have increased concerns around inflation, We're seeing increased concerns, like you said, around corporate profits and what that means for capex. So I do think you could trim those positions, move them back into the US, into some of the sectors where you're seeing the momentum play. That's the most important factor right now, and the market

How much of the international story will be told by what happens with some of the budget negotiations in Washington, DC right.

Now, Well, I think it all ties into what we're seeing as it relates to the dollar and into currencies, which you guys have been talking about this morning. So we've seen the dollar come down in concern around the deficit. You see that play out on a global basis, So you want to look at some of those countries that maybe have current accounts on the positive side of that that should be supportive of their currencies versus the US.

But how much of what's going on in Washington, DC when it comes to the fiscal package actually a headwind or is it a tail wind, because the fact of the matter is this is just current policy as the crux of this bill.

Yeah, Am Marie.

It's interesting because we always thought that from the very beginning of this new administration.

We didn't think it was just like tariffs on their own. It was always kind.

Of a more holistic plan of tariffs and deregulation and lower taxes and improving some of these elements for businesses.

And so I think you have to look at what's going on.

In Washington through that lens and say, how does this help counteract some of the more downside elements that we're seeing from tariffs. It's a very important component. Congress is relying on some of the tariff revenue to offset some of the deficit costs. That's how they're able to go in and say that this is not going to add to the deficit.

So it's something that we have to watch.

It's all tied together and hopefully we come out of this with some benefits from both sides.

Victoria cross Mark, thank you so much for being with us. Have a great week ahead, and we'll see you soon.

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.