China Will Eventually Give In, Levy Says

Fordham in our London studios. An extraordinary day and history being made. Your evil task is you have to sort it out and write a memo. Get out front of Katherine Mann and Villain Bowder. Give us a on how you will write this up today for City Group London. Well, it wouldn't surprise you for me to say that I'll refer back to what I've been saying all along. Trump wants to change the international order. And even before he took office, of course, we were talking about pressures on

the postwar international system. Trump has accelerated that. Um, perhaps you know the obituary for for NATO has been written many times before, by the way, and NATO comes out of this with a more robust budget. But One of the most striking things about this for me is is how much President Trump was telegraphing certain headlines back to the domestic audience ahead of mid terms. And that was

I shook down everybody in that room. Everybody ended up happy and and and the US is no longer paying the freight for what we used to call um the peace dividend here in Europe. Part of this is his own style, and there's people that agree with his style. He is really his ratings have been extremely good across America, and part of it is his huge nostalgia for another time and place, and yet his disdain for the sequential presidents that we've had over the last number of years.

Is his nostalgia doable or is it just impossible to go back to what he perceives as another time and place. Political nostalgia is is something that's present everywhere, and of course it also was manifested in the in the Brexit debate. And and part of what I think it harkens back to is actually a desire for much more simple times. And when you heard the president's press conference today at NATO in Brussels, he spoke in big, clear themes not

about the detail when he was asked about specifics. Um. But he doesn't have nostalgia for the soul superpower moment, that's quite clear. And he's been very consistent about saying he thought that that that wasn't fair, wasn't fair burden sharing, And a lot of Americans agree with him. The City Group cares about Brexit obviously with the city and with the financial commitment that Mr Corbatt and others have made. Interpret for us this silly white paper that's coming out.

Will anyone read it, I guess is the first question? But what's it mean for the city in the financial sector in Are you a London optimist? Well, um, that's a that's a mixed bag. I'm not sure a lot of people will read the white paper, including members of the cabinet. We we have, of course moving away from

expertise and fact based analysis. Um. I think we can observe here in London though, that the so called hard bregsit tears are really running against a brick wall in terms of their optimism about realizing their vision and of course hard bregsit means no access to the Custom Union and everything else in terms of the City of London and of course the companies that I talked to. I spend a lot of time going and talking to CEOs all around Europe, in particular. Um companies have been making

their plans for some time now. They're not going to wait until a white paper is out, and we saw an announcement from Arabis for example, with that end point. Please tell us tomorrow when we interview you. You'll be at Blenhem tonight for dinner. Absolutely, it's just a question of which which diamonds time which. Thank you so much. You've been a trooper today to be with us. The extended comments of the President of the United States and Brussels was Fortum is of course with City Group, their

chief global political analysts. Let's focus on what's going on in the world economy. And what's great about is Mickey Levy's seen every episode of Downton Nabby, so it works well. And he's probably visited Jerome Avenue at one point. To Mickey Levy is the chief market economist, is the chief economist rather for the United States, America's and Asia for Barrenburg Capital, and he joins us here in our eleven three O studios. Mickey, thank you very much for being

with US UM. Now you know, I should just also mention that you served as at Blenheim Capital Management, so there's a kind of relationship there. What do you make of what's happening in the world's economy. Do you think that the United States is out of sync with what is happening globally? Or is the United States leading? Uh

the trend in in economic performance. Last year, there was extraordinary synchronization in global growth, particularly Europe, Japan, the US, all of them were growing way faster than potential, and emerging nations were doing well. This year, UH, Europe has slowed down a bit but is still healthy on average. Japan is still has slowed down but on average, and the US has a lot of momentum okay, and emerging nations are still doing well. So the global economies are

doing well. UM. But what's so extraordinary? I just watched the President Trump at NATO and his questions and answers. Is the dynamics going on in the world, both in economics, politics, UM and and trade negotiations and NATO negotia. It's just extraordinary. And when we when we think about what's what's going on? Yes, the US is speaking from a position of strength um

within Europe. Despite everything okay on average, we all know that that there are major problems in in Italy, we know there's Brexit issues, we know Germany is very fragile politically, UM one point I I and and and amid all this, China continues to grow rapidly in China just wants to keep everything, including all their trade and investment policies, just the way they are and and so won't make it

happen that that's correct. So one of the insights I get out of this, it confirms my view is that President Trump is this very erratic, um and chaotic, but very tough negotiator that likes to poke the eye of the establishment. And you have all the NATO members just basically saying, you know, everything's been okay, um, let's keep things the way they are and and be nice to yea. But Trump comes in and basically says, wait a second,

I'm gonna ruffle every everybody's feathers. And so one insight from this is in Trump's mind, he does he thinks about trade negotiations in the same breadth this thinking about Russia, the pipeline, China, UH, NATO it's all intermingled and and he but wouldn't that confirm the idea that that that we are in some kind of global world where things are interconnected and that one thing does affect another thing. Oh? Absolutely.

And another thing to keep in mind is that when you look at the world from Europe's perspective, or Japan's, or China's perspective, or the US, every country desperately needs each other for trading. And so Trump is pushing the envelope, but ultimately every country will ultimately be willing to negotiate. And and so one insight I got from today is just you know, Trump is going to um push China, and China will eventually give in on some of their

unfair trade practices. And and there were several comments today in the in the in the press conference about UM Russia and Putin. Well, he's headed to and and I think Putin has more He wants to meet with with Trump more than Trump wants to meet with Putin, be as they desperately need something. You know, the natural gas

issues critically important. Thank you very much. Mickey Levy is chief economist for Barrenburg Capital for the United States, America's and Asia Pim, why don't you bring in Dr Paraculis with some really interesting perspective not only on the president and an extensive press conference, but that European response as well. Well. I just want to bring him in as the assistant

project director for the US Project at the Chatham House. UH. Previously he worked for Action on Armed Violence, and he is a native of Lewiston, Maine, so he's got the perspective from both sides of the pond. Jacob, thank you very much for being with us. What did you make of the president's news conference today? It's been a fairly

chaotic twenty four hours. Um. It's hard to have one sort of singular takeaway unless you look back and remember that actually the President has been um critical of multilateral institutions and of NATO and of NATO allies for well, going back through his campaign and even before that. He looks at what he sees as the balance sheet, and it's important to draw the distinction before what he sees of the balance sheet and what other American political observers

or the rest of US might see as the balance sheet. Um, and just he's debt. So he comes into the the NATO summit and demands that Europe pay more, and then and then demands that they your pay even more than anyone has really considered in the past. The target is two percent of annual GDP, and that's a target for UM. He then makes the claim that Europe should aim for four percent, which not even the US bends. It's an

extraordinary increase and essentially an unmetable demand. UM. There were then a storm of headlines this morning that he had threatened to quote go his own way, which is an implicit, if not explicit, threat to the US participation in NATO, and then has a press conference where he more or less walked back and says, well, now I think more

money has been coming in. UM. I deserve credit for this. UM. So it's it's it's this, this incredible storm of confusion, which I think has drowned out any prospect of any other foreign progress. The summit. Well, I'm just wondering, why do you believe that it is an unmidable demand. I mean, the United States the defense budget nearly you know, seven

billion dollars. The next largest spender in dollar terms is the United Kingdom at fifty five billion, France at forty five, Germany at forty five and based on fiscal year twenty nine, forty billion is what we just spend on the Marine Corps. Well, it's important to remember that the US has a completely different conception and a completely different and vastly larger set of global roles for its military than any European country.

What we're talking about NATO defense. Actually most of the U s military is not engaged in the European theater. It's a relatively small portion, so it's a little bit I mean, you know, measuring military strength and military spending is incredibly tricky. The two percent goal, I think is not a particularly effective one. It's it's agreed upon because it's a nice, easy sort of tagline. It. It goes some way towards demonstrating commitment, but some capabilities are very expensive.

Others are perhaps more niche but incredibly effective and come much more cheaply. Um, I think there needs to be a better way of measuring it. But you have to remember that the the US is a global military actor, and no European country is or aspires to be. So there's not really a political appetite in any European country to have the kind even at a sort of the same population based scale, the same kind of global role

of the U stuff. Did you hear the president's press conference, Dr Parr, I I heard, I heard some of it. I wasn't able to listen to the entire thing. But I think the American media, whatever their persuasion, conservative, liberal, whatever, well fact check this thing to death. For you. As a grizzled military slash internet sational politics pro does that

press conference need fact checking? I think to some degree the fact checking kind of misses the point because at this point is pretty well established that the president plays fast and loose with numbers. He talks about numbers which are either exaggerated or not really the mass that anybody else is using. Um, that's that's kind of established at this point. Um. He didn't really say anything in that press conference that we haven't heard him say many times before.

NATO was not meeting its obligations. They're beginning to meet their obligations now thanks to me. Uh. They need to do more. They need to do even more in the future. Uh. Europe has been unfair to the US on trade. It's sort of the greatest hits parade of Trump's complaints about American allies in Europe um So in the sense that a lot of that's either misleading or untrue. Yes, it needs fact checking. But in terms of you know, did he say, are there new claims that need fact checking,

they're not not, particularly Jacob. As far as defense spending goes in Europe, do you believe that there will see more defense contracts for US arms from European partners. Well, here's the problem with Trump's negotiating strategy. I think it's not unreasonable to expect that European companies on your European countries rather are looking at areas where they could procure from American companies by way of demonstrating commitment in the

way that Trump likes to see. The problem with making a an unprecedented ask like a four percent defense spend is it's going to convince those coun countries that there's no point in trying to play at him, that no amount of buying Rocky planes or uh Cult rifles or any other American product is going to fundamentally change the nature of the President's belief and essentially, either an alternative arrangement has to be made or they have to figure

out of back up plans. Um So I think if you'd made if he touched his demands a little bit more reasonable, there might be more uh more there there. But I think there's a sense in which he's kind of pushed too far and actually harmed the negotiating position. Well, we have run out of time, but we will do this again. Thank you so much. Jacob Pericles is with Chadow Mouse out of the London School of Economics and

wonderful to speak to him today on these many issues. Um, let's pay attention now to Brexit, and I want to bring in Victoria Houston, who is International Senior Council for International Trade in the Competition Unit for the Institute of Economic Affairs. Victoria, I'm just wondering, based on what you know about the plan for Brexit, what exactly do you believe Britain is prepared to do right now other than put out a white paper? Are they prepared to leave

the European Union. Well, this has been one of the great bones of contention that the Brexit supporting members of the government have had, which is that effectively there's been very little to no preparation for leaving the Customs Union and the Single Market actually done in operational terms and the concern is that that had left us in a very weak position in terms of negotiations with the European Union, because they know that we're not really in a position

to be able to walk away with no deal. Therefore we will have to accept whatever it is they're willing to give us. That's a UM certainly not something that UM the Prime Minister and the Treasury would accept. That. They would probably argue that there's been a lot of preparation going on behind the scenes. It's not all visible. But unfortunately that seems to be the perception that UM,

that a lot of people have in this country. Well, Victoria, I wonder if you could just offer one example of let's say the ferry business, you know, the shipping companies, and what steps they are taking, if any, in order to prepare for what might happen after March that's the

Brexit deadline. Yeah, that's a great example actually, because there's there's a bit of a split here between the ferry operators and ports who operate on the short crossing between England and France, the DOVIDs Calais route, and that's actually where the vast majority of UK to EU trade routes through and that's really a very friction list. Lori's drive onto the ferry at Dover, or drive onto the Eurotunnel and then drive off the other side, and and that's

the that's the transit. It's finished now. For them, it's a very it's a very big deal if you're introducing new frictions to that process, so they're very worried. On the other hand, the other ports, for example on the east coast of England Um, which are much bigger ports that deal with containerized shipping, they're quite excited about this because this is a huge opportunity for them to win

back some of that business from the short crossing. However, both sets of businesses need to know what exactly it is they're preparing for in order to be able to make the investments, to to really make the most of it in the one case, or to to mistigate the difficulties on the other hand. Victoria's you brilliantly describe just one example of the micro analysis of how logistics and all will work. I'm sorry it reeks. Richard Neville, sixteenth Earl of war Work Warwick rather and the Wars of

the Roses. I mean, it's like history is just still there. There's this island, there's a channel, and there's Europe and they have these there's tensions that are always out there in the modern age. Bring you know the Earl of Work, the Earl of Salisbury over the Heathrow. How does Heathrow operate?

Is you see the new Brexit? So again the realities of international trade in in in the modern era um fast forwarding a little bit from the from the Wars of the Roses um is that as long as you have the systems and processes in place, it can be very low friction. So the vast majority of trade coming into the United Kingdom from outside the Customers Union is cleared within minutes or hours wrong win days, and it's all then the vast vast majority isn't subject to any

physical inspection at all. It's all then by means of electronic pre clearance and risk assessment. So as long as you have the systems and protos in place to do it, you can actually have very fact effective blue friction trade from outside Customs Union. In fact, I think you can probably recognize that in the case of the acting Canada, you have a very effective fast border where automotive pie chains on the side of that border. But even Victoria, we've got to leave it there. We're out of time.

Victoria Houston, thank you so much, Senior Council UH International Trading Competition Unit for i EA. This was really really if my love how, thank you so much. Victoria here, my love how we try once in a while to talk to people that are like worried about Okay, when this is all done, can the cows go from point A to point be in Ireland? Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on

Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.