Surveillance: Tariff Impact Very Small, NEC's Kudlow Says

so interesting about this round of tariffs. If and I say, if it is implemented on September one, these are the consumer items that were spared from the first few rounds of tariffs. It could be an incremental hit to growth if it's implemented. But this could be the thing that consumers feel if the price you fist stopped, smartphone starts to go a little bit higher. Went in on all of this. I'm pleased to say that dropping by the studio is Michelle Mayer be of a Merrill Lynch, Head

of US Economics. Good morning to Michelle. Typically first Friday of the month, we'd be living with payrolls well in with trade this morning. What does that say about payrolls a little bit later? You know, I think it's the fact that you have these external factors that are overwhelming um the incoming data. So the what happens around trade is by far the most important risk factor out there, and it's going to be more of a forward looking

story as well. Right, So what happens to jobs today is not necessarily going to be a function or a factor for how you think about growth in the future if these terraffs go into place. This is the view from Deutsche Bank going into the number. We're wait payrolls, but this data has been rendered largely irrelevant. If it is strong but reinforced latest bond, bold signals and negative risk. If the data is weak, how do you frame it for clients this morning, whether this data matters or not?

What it means a bit strong? What it today? It's weak? Yeah, I mean I hate to say that jobs don't matter, you know, I hate to see any economic data doesn't matter, because you know, we do take all incoming information into our forecasts and think carefully about it. In jobs are important. They're important. They're telling us about you know, how many people are getting hired and how they're getting paid, etcetera.

So it matters. Um, if we have a strong report, I think it tells us that there's a bit more resiliency of the U. S economy to some of these risks, and that companies, while they may be starting to cut back on their investment in capital, they're still investing in labor, and people still have jobs, and there's some ability for the consumer to withstand some of these tariffs. That said, of course, the big risk factor out there is what happens on trade, and that's where people and markets are

most focused. Let's reset twelve months forward. What's your GDP call? GDP call for the United States? So we think we have growth essentially returning to trend one point eight percent on US sub two percent where you are now? And if if we put in a text on China, is the President puts it, you gotta mark that down right? Yeah, So that's the challenges. Actually, So are you modeling a grocerycession? Um? Well not yet? Um, So we think can I make

some news here to come on? We think we're gonna be leveling off right around trend maybe one to two quarter basis you fast slightly below trend, but the the overall Tratractordia stuff. But but yes, I mean, I think it's partly gonna be a function of how central Bank's offset this shock from But what's important your Johan as an American politics one eight percent Michelle Meyer, trend doesn't

get you reelected. That's what this is really about. Yeah, going into and the prospect of perhaps not getting a trade deal either, which seems to have been injecting submergency into the White House maybe over the last couple of days, Michelle, just on the payrolls reporting on global manufacturing. Manufacturing is in a recession worldwide at the moment. I think we can all agree on that. The risk is that it

bleeds into services. Do you see that happening? Do you see it taking hold of the service sector in any way shape perform here in the United States at the moment. So it's really interesting is on manufacturing. Yes, it's a global manufacturing downturn um, but in the U s the manufacturing data has been marginally better. The I s M survey is still above fifty. It hasn't fallen into contraction.

Territory manufacturing jobs based off last few reports and a DP this week are actually still increasing very modestly, but there is some growth. So I think would be really um interesting with today's report is whether or not the manufacturing sectors continue to have jobs. And then you know, what do you see on the services on the service side.

So far, there's been little evidence of a spillover from these global um challenges into the service side economy, but obviously something we have to keep a very close eye on, and that's something that fed Chair Power is very concerned about. So far, so good for the U S consumers, so fast,

so good for the labor market. You bring up fed Chair j Pown, So let's talk about it going into yesterday, the chances of a September right cut with fifty there and there about then after the trade news crossed the Bloomberg, guess what we approach almost percent for September right cut once more, that into play between White House trade policy

and federal reserve easing. How important is that at the moment, Michelle, I think that is the key story, This idea of an adverse feedback loop where President Trump puts more pressure in terms of greater tariffs and that weekends economic growth. It creates some greater risk factors out there, and then you have the power put that becomes ever more powerful

um and you see a central bank response. So for the markets to say, Okay, the terroors might happen, but we have a backstop that chair power is just going to cut. Do we have a backstop? I think we've got to talk about that. This belief that the chairman can underwrite trade policy from the White House, can it actually offset the global In fact, I would make the case, and I think Powell tried to make this cases that he doesn't want to be underwriting trade policy. He's got

no choice, has it. And that's really where the friction I think comes from. It's not the intention to give President Trump a green light to go ahead and be tough on trade. But if you consider what his mandate is. Mandate is to support economic growth, insure maximum employment. And if you have a big shock, which they are taking as external, they assume this is a pure exhaugen of shock. They're not being political about it. They're saying, Okay, we have a big shock, we need to offset in la

terre policy. If I look at the yields on my Bloomberg screen in the United States, one seventy two year year stunning to thirty year bond? Are those quote unquote good for America? So? You know, it sure looks like what two I'm thinking? You know, is that good for I mean, I know it's good for real estate guys like the guy who lives above the Gucci store on Fifth Avenue. But is it good for America? You know? So what it's I think the idea? Is that what

it's signaling about where we are as an economy. No, it's not good, you know it would it be a much better signal if we had a love three percent on the tenure or even four percent a ten year, that would be a signal of an economy that's growing. GDP growth is trending three percent, inflation is running two percent. You know, that would obviously be a better story. Um so the fact that interest rates are so low it is indicative of an economy that trend growth is lower

and inflation is more stubbornly low. Can we pretend it's a normal Friday? What's your non farm payrolls? Oh good, I've been waiting for that. I never asked today I will because nobody cares what it's we're looking for a hundred and seventy thousand, now, okay, one seventy car record? Dost want any five? Michelle Meyer? Thankanks, Michelle. I apologize we didn't do anything in the housing. I'm sorry. Next time we'll do that. Let's right now, fold this economics

and the Trump uh is? He said in all Io tax on China shock into what it means for Washington. Henrietta trades joins us love having a run from Beta Partners. I mean, Henrietta, you're gonna tell me the House and the Senate support the President Trump's tax on China. Hey,

tom Um, you know I was thinking. One of the best anecdotes I've got is when I was in a meeting with the Senate Majority whip at the time, John Corner, and speaking with his chief of staff and he and I asked him, you know, on a scale from one attend, how big a deal is this trade war? How big a deal are these China tariffs? And point blank the

answer was three. It's the three. I would say, now, maybe it's at like a five or six based on my conversations with Senior Council in the last twenty four hours, but they're not inclined to stop them. The one the one tariff that really does spook them is the potential for tariffs on automobiles against the EU. But they'll only

act on that after those. So, I mean, they don't care about the fiscal policy, one point x trillion dollar debt coming down the pike, what we're doing to our grandchildren, etcetera. You're telling me they're not going to matter about cell phone tariff and consumer product tariffs across all of America. I sincerely believe that. And they are looking at polling data from their constituents and amongst the Republican Party, you've

got roughly approval for Republicans. I don't disagree. Yeah, and so, and that's what they're that's what's driving them. Um. I had one client who very astutely said, you know, if I was the president, I put this on in August when everybody's thought, nobody's going to pay attention, and that's low and behold, August first comes around, and that's what we got and it goes into effect September one. I just wonder what the minimum condition for progresses to back

away from that any ideation. You know, I appreciate the question, but I would just push back a little bit because I get this from investors on the minute. The reality is it's USCR policy to provide a grandfather clause for inventories that have been ordered by the business community to travel from across the Pacific to get to their port

in the United States. That is something we have seen five consecutive times in a row with the first, second, third, and fourth chranches and then uh the escalation to they provide three to five weeks of leeway for cargo to come across the ocean if they're on a ship, or if they're in the air, or what have you. And they even granted in an extra fifteen days in the last May escalation. This is not an indicator that they're not serious. There are there's no scenario above five percent

odds that they don't put these tarasson September one. This four week grace period is literally the least they could do to prevent disruption to existing inventories. So let's talk about counter measures, then, Henriette the Chinese out this morning. If the US is going to implement the additional tariffs, China will have to take necessary counter measures. What did those counter measures look like? Well after the second round of tariffs, they switched from doing a dollar per dollar

retaliation into a percentage based retaliation. So right now both sides the tariff roughly sixty percent of each other's inventories. This billion escalation from the U s side represents about UM maybe given the President decided that it was going to be a little bit more than that, UM, So I would expect China to retaliate by putting tariffs on maybe eight billion, which would be as a percentage basis tip for tat. And then we saw yesterday that they

canceled from significant pork purchases. UM. There are anecdotal reports from the business community of increased red tape and all that that will continue. I'm glad you bring this up because it's eluded in the last twelve hours off this bombshell from the President that they have not purchased the agricultural products. Do you have evidence of that, Henrietta? Um? Well, I thought in your reporting from yesterday morning, UH that

they canceled the port purchase, so I assume that that's valid. UM. And what we're looking for is not just a couple of million UM purchases from Swabians. So we need we need some were in the range of two hundred to three hundred billion dollar commitments from China in the next two years in order for President Trump to feel like he's delivered. Where will that come from? Where does that? I mean, does that corn or wheat or you know, it's got to be everything. So that's gotta be everything

from soybeans to sorghum, corn wheat. Idiots? Why would they agree? Look, you're great at the non rudeness the Grace of Washington. John Farroll was extremely rude and I'm less extremely rude, but still rude. You're not the president made this announcement. I believe Secretary Monution was upset because he didn't brief the Chinese before the announcement. Why are they at the

margin going to buy more agricultural products on this Friday morning. Oh, I wouldn't expect that they would, and they have basically said since um I want to I want to say, really, since December second, Argentina they committed to making substantial agriculture purchoses and that was what like seven months ago. They still have not. Okay, we gotta leave it there. Thanks for the great briefing. Henry. The Trades of Veta ellen'sner joint.

She runs US Economics at Morgan Stanley. She's won every trophy out there and right now has a trophy call from the greater Morgan Stanley. A real cautious caution, I should say on the market, Ellen, are you gonna have to adjust your economic call, your Excel spreadsheet because of what the President announced yesterday? Yeah? So it's a it's

a good question. I mean, you know, economists loathe making uh changes on the fly, but I think the at the very least, um subjectively, you know, you'll see recession probabilities go up. The models may not pick up these kinds of things yet, right, but subjectively, um, you you have to assume more risk and more recession risk specifically on the back of this kind of renounce What what's

your run rate now twelve months forward? So twelve months forward, we've still got probability, um, but you can easily see that going higher. Uh, you know at at one in three. I would not be surprised right now, right because it's just the amount of uncertainty is incredible. Now, what's been keeping recession probabilities low in terms of just models, the real data, And one reason why the Fed resisted. UH. Many of the policymakers ended up resisting, delivering fifty basis points,

which was, as you know, against our advice. UM. But UH failed to do that because they just traditional monetary policy making is I want to see it in the data first. I really don't like being pre emptive. I think chair pal had made a push to try to be preemptive, UM, but traditional monetary policy making one on Wednesday and they decided just to cut twenty five basis points because they couldn't see it in the real data. But at what point do you need to assume that

that's coming? UH? And you know, the consumer is really the last holdout for the economy, you know in all your leading sectors, and the GDP benchmark revision showed this inventories down and falling, UH, investment down and falling profits and specifically undistributed profits. What do I have left over at the end of the day as a company to hire and to invest? All of that is down. So how long can you assume that the rest of the

economy holds up? Ellen? We gotta let John Farrow in here because he's going to speak with free trader Lawrence car Ellen what do you want to know from the administration this morning? What do you think the main question is for so many people on Wall Street, I think we're always trying to gauge what the pin point is. Uh, you know, how can they assure American household old uh that uh, we're gonna be able to fight this fight

without you losing your job? You know. And I think at the end of the day, that's what everyone wants to know. You know, at what cost are you willing to continue to play this game and keep uncertainty on such a high level. And then it just sounds felt like yesterday, And then in the little gaggle of reporters that the President spote too that he didn't seem too concerned about the market impact of his decision yesterday, that

he wasn't too concerned. He said something along the lines of the market and market participants having fully understood what had happened. I'm not sure what that actually means, Ellen, but it's not a change, a little bit of a shift at this White House. Well, yeah, I think you know, early on it was always okay. The you know, President Trump's pain point is the stock market. And as long as the stock market is holding up. That's his queue

that you can push this further. And if it's not holding up, then that would be uh you know, his uh uh circuit breaker, if you will, so, uh you know, apparently the FED is his circuit breaker, and that you know, uh, you know, he can get one basis points out of the f O m C in terms of interest rate cuts one way or another and one way that he's learned how to do that. Then is okay, you only delivered a basis point cut. You said that it's all about trade, I'll know to go further and get more cuts.

How is he going to deliver a recession? Well, that's the So that's the risk, right, I mean, is are you really going to thread that needle so finely that you know that you can push it hard enough that the Fed's got your back so to speak, and will cut in order to keep the economy a flow because the FED can't play that game, right, They're not going to play a game of chicken with the president on the economy. Uh. And so but if you know the FED has uh your back, and then it gives you

more cover to push trade further. But the risk is a course, as you note, recession risk or rising. The risk is that you push the economy into recession. And as you know, we don't elect the incumbent party. Um if we have recession in an election year. Uh, And so that is the risk, uh that that apparently the president is willing to take. So and then Chapman Pou tried his best not to get drawn into criticizing trade

policy in the news conference. I'm sure he's trying his best not to be the guy that has to underwrite trade policy, but it just feels like that's who he is now. So it's September while and truly in play. Are you looking for a right cut? So after the so, as you know, we expected dipty basis points to be delivered on One of their argument was that the message that you send to markets is that you will be

aggressive upfront and do whatever it takes. Having failed to do that, the market now has no confidence that the said will do whatever it takes. So that's one problem with not having started off aggressive. The risk there is that you're forced to do more as a follow up and deliver that at basis point cut. Anyway, UM, right now we have them, And this was an expectation we said on Wednesday that we have the next cut coming in October because you know, when when we look at

the data pattern, inflation is going to be rising. Here going into the September meeting, we didn't see that jobs. You know, we don't see in our models that jobs are going to fall off or the consumer is going to fall off. But you know yesterday was a different day. Well, yesterday was a different day. If you were on the partial differentials on an X on the back of the equation, how much do you take down g d P with

a ten percent terrifying everything remaining. So the modeling that we've done on ten percent on everything remain everything remaining ten percent if you just model it straight right, ten percent even though you're hitting a lot of consumer goods, UH does not make a material difference on GDP. And where we all weathered up about this, well, because here's the ladder, Tom, I'm getting ready to ladder you up. The ladder is in how it affects business confidence, consumer confidence,

CAPEX jobs. It's in the non linearity of financialations and confidence. It's less so on just the direct mechanical impact to GDP, and of course those other factors or that's the fuzzy side of economics. There's a lot of judgment that goes into that because certainly today when margins are already running so stin, there's not a lot more room that have to absorb this kind of increase in Let's take the partition of the economy. Joelivarnio over into Texas was brilliant

and emphasizing manufacturing off a cliff fine. The goods producing c p I is in the you know, deflation dis inflation. Are you predicting its service sector c p I given the Trump strategy will come down and begin to dampen general inflation like Dallas trimmed and all that. Does that roll over and come down or not? Well, not on any kind of timeline that markets certainly want to look at. So from teariffs, the mediate effect of course is again

just going back to the mechanics of it. Uh is you know, import prices rise, then pp I prices, so you get at the wholesale level and then consumer prices. So teariff going in on September one, you could see it starts to show up in cp I numbers by say November December, uh and that and so yeah, you get that impact where it lifts inflation, but of course

the FED looks through that. Uh, you know, it starts to affect impact consumer spending because they're not gonna unless income is out pacing that delta, you're not going to be able to overcome that. And you start to damp in consumer demand. And so after hitting aggregate demand, then it starts to have a gravitation on inflation. But you're talking it well into next year, where then it starts to turn inflation in the other direction. I got bad news.

Jim Gorman just emailed in James Gorman, and he says, are you going to talk about jobs with Ellen? What do you think of Job's day? Please? So I think job's day is going to be perfectly fine. But I think markets are going to take this as backward looking, uh, you know, jobless claims. So there are two things that you got to look at. Right Where businesses laying off, well,

we know they weren't. And we're really good at predicting that because we've got weekly initial jobs still remaining extremely low. What we're not as good at. Uh. And this is not a knock to me and my team is just economists in general. We're not as good at picking up in real time, didn't hiring change? Was there some slowdown and hiring? It doesn't feel like that occurred in July. It feels like this is going to be a pretty nice number. So we've got close to a hundred ninety

thousand in July. UM, and so I don't think to be a message today D eight six to get oh please, thank you? Can you go? Hundred six? Great? Alexander love Evan, thank you so much? With Morgan Stanley Place decide that Kathy Jones joined us Nashalp Center, the financial research chief Fixed Incomes Strategies. Good morning to Kathy. Your initial take please, Yeah, I would agree with Jim. This is a this is

a pretty good report all the way around. UM. I'm encouraged to see the labor force participation rate picking up. That's that's certainly a good sign, and the underemployment rate coming down. It's around seven. That's ah, it's not at the historic law, but it's getting pretty close to it. Probably the only weaknesses those downward revisions taking away about forty jobs from the prior couple of months, but not

not enough to really change the small picture. It's pretty good Kasey link in what you're seeing with an earnings reports, revenue reports at Schwab really coast to coast at the margin, Will we see a corporate labor cost cutting? You know, I think in some industries that's probably going to be the case. UM, But I think overall, the big swing factor here we all know is trade. Right, That's the thing that's driving business investment or lack thereof. That's the

thing that's driving optimism or lack thereof. So UM, once we get a resolution on that, If we get a resolution on that, then I think that that could be an important component of of what happens with the labor market. Within the labor market, then is a wage frame for us at wage dynamic. You see right now we're seeing

the gradual rise in overall average hourly earnings UM. If you look a little deeper into the wage growth, you are seeing some acceleration in certain industries, but the average is being held down by the fact that we add a lot of jobs in the lower wage sectors of the autonomy, which you know you'd expect at this point in the cycle. That's a good thing this point in the cycle. We're bringing people in and many of those are in lower wage areas, but that holds down the average.

But within that starting to see some pretty good wage increases in other areas. Keith, you were talking to Jim Glassman about this before, and to me, this is the heart of the matter, and it's the number one male I get from our listeners coast to coast is they don't look at it is a good economy because they see it as an unwaited barbell or unbalanced barbell. I should say, with a lot of low wage jobs being created, I mean, I get it, it's unit job growth, but

are they quality jobs? Well, you know, clearly it would be nice if at this point, with unemployment that three point seven, if we were seeing uh, stronger average wage growth. So no, a lot of these are healthcare services and many of these are lower wage jobs. But again, if you're pulling in people who have been sidelined, typically that's where you're going to see the jobs being create aided. So all jobs are good jobs in that sense. But yeah, it doesn't have a feel good factor that it might

have in previous cycles. Well, well then then let's move it to the fixed income area as well. Now you've had a huge shock of what the President said yesterday afternoon. How do you adjust your fixed income strategy when you barbell an okay, labor economy with the trade war that was accentuated yesterday afternoon. Yeah, this is really tough, and barbell is kind of a key word there. What do you do with a barbell? I mean, I mean, what

do I do if I've got gains and bonds right now? Well, you know, I think you need to hold on to some intermediate or long term bonds because the overall trajectory of global rates is still down. I mean, look at all the negative yielding bonds we have in Europe right now, and if the trade war continues, those fields are going to continue to fall. So you need something with duration. But we, like the Barbell idea, have some short term

and have some long term. Kind of missed that middle dip in the yield curtain, I mean, to a data check. Right now, we have a deterioration here. All in all, we are negative twelve than we advanced higher a better tape and right now negative fifteen down futures, negative ninety yields I'm gonna say, are churning. All in all, maybe a little higher yields off of where we were before the jobs report, the ten ye yield one point eight seven percent. Gold was up twenty dollars now up eighteen

dollars fourteen forty nine years. Currencies really don't play today. All in all, Sterling, I should say one twenty three Cathy Jones with us a schwab right now, Cathy, So I got a Barbell approach in bonds, but I want to go outside full faith and credit to try to capture a higher yield. Where do I do that? Yeah, it's getting tough to find great valuation. So saying the corporate market UM high yield spread versus treasuries are pretty tie.

And if we do UM get a slow down, further slow down in the global economy and further slow down here because of trade UM that doesn't offer you a lot of value. So if you're going to go out, we're suggesting just higher credit quality and corporates or you know, if you if you were in a high tax state like New York, you might look at the muni market. Well, come on, you want me to look at the muni market where that's priced up pride, the feeding frenzy of

acquisition there of price up and you're done. You have value in Muni's You know, you have to pick your spots really carefully on the Muni curve right now, it's very overvalued. At at the short end of the curve. You can find a little bit of value if you go intermediate term. Okay, well we call that the value of the curve. I guess um as well when I when I look at the fixed income market and it

has to come over to equity. I mean, I know you and Lizenne Sanders are barely in speaking terms, but if I have a Kathy Jones bond economy, that leads to a higher reward pe multiple, right where I've got to reset my equity valuation off of your world, right Yeah. I mean, obviously the discount rate matters for valuations and equities, and that's been a probably a pretty big component of what's driven the equity market. But Luzanne would tell you

to watch the part as well. So some of those downward revisions to corporate profits that we've seen in the GDP revision have her a little bit concerned. What are you seeing on the demand side right now? In terms of that insatiable desire for papers? There are a lot of issues right now to take up the demand. Yeah, yeah, absolutely. I mean if you were in a position to be a borrower right now, you would certainly want to issue bond at these yields. Kathy Jones, thank you so much, greatly,

greatly appreciate it. With Schwab's morning for the President and for the Trump administration's views on the jobs report, I'm pleased to say that we joined on Bloomberg Television and on radio by Larry Cardlo, National Economic Council Director. Good morning to Larry Ryan Jackson. Thank you great to have you with us. I can't think of a Payrolls Friday where we've barely talked about payrolls Friday because everyone wants to talk to me about trade. So where do you

want to start? I think we should just start with the headline. It's the trade story. So many people, Larry, are trying to figure out the minimum condition of success for the following month to avoid this September one tariff increase. If we've got any idea what that is, Larry, well, I don't want to speculate on that. Look and in some sense the story is very straightforward. Our team returned from Shanghai Bassador, Lighthouse Secretary Manuchin, we met with we

all met with the President yesterday, talked about it. President himself is not satisfied with the progress of the talks with respect to agriculture, with respect to structural items. Even he's still concerned about the sale outlawing the sale of Feton mall in China. So he did tweet uh and and put on tariffs at ten percent that will come on the three billion remaining balance September one. But look, Jonathan,

it was a very respectful tweet. It was a very matter of fact tweet, and he clarified some of that or added to some of that yesterday when he had his press haggel gaggle and said, really the issue of tariffs and the relationship depends on the progress or the lack of progress for a trade deal between the two great countries. Was a respectful letter and it's a constructive letter. And you know, we believe the President expects and our team expects to be meeting with the China team inter

early September. Can we assume though, that if the Chinese begin buying agricultural products between now in September, we can avoid that tariff increase. Would that be sufficient? I wouldn't. I wouldn't want to speculate, you know, can't avoid and so forth. I would say from our talks internally that that would be a plus. That would be a very good plus. If they start buying agricultural products in size, it would certainly help the story at the moment. The

President followed that tweet up with some more aggressive language. Larry, I think you'd say, until such time that there is a deal, we will be taxing the hell out of China. Larry, how do you expect the Chinese to respond to that language? Well, we will see. I don't want to speculate on that. There's some things coming out of Beijing today, and we will be evaluating these statements. I don't want to get ahead of the story at all. We'll see a day

at a time. But again, there's certainly a month here before the tariffs go into place. A lot of things can happen in a month, A lot of good things can happen in a month. So let's just see what happens. I don't I don't like to predict or speculate on any of this. Well, Letty, I appreciate that but just to understand the premise of that statement, we will be taxing the hell out of China if these tweets become policy on September one, taxes will be coming up on

US consumers as well. One night. Well, look at the consumer issue. You know, we've been down this road discussing it with respect to prior tariffs. You know, our view is any impact on US consumers is diminimous and minuscule, and we have models to show that. You know, look, probably the strongest aspect of the American economy today, including this Job's report, is precisely consumer spending and consumer income,

and that includes real income because there's no inflation. We think the economic burden of these arabs has fallen most heavily on China. They've had to slash prices in order to offset tariffs. That's damaged their profitability in their growth. There's a lot of movement of production and related supply chains out of China and going elsewhere. And so I really think that in terms of the American story, our economy is quite strong. Unfortunately, in terms of the China story,

I think their economy is quite weak. So Larry, relatively speaking, I think most people agree with that. But let's talk about some of those models you've modeled this impact of an extra ten percent on this three hundred billion that's been modeled internally. Can you share with us some of those findings that you've actually found. I'm going to talk to our team and see if we want to put any of that out. We have not yet. We may.

I'll get back to you on that. Okay, Well, I'd love to talk to you about it, because a lot of people are confused by it. Most people assume that if you put that tariff up to ten per cent on September one, there's gonna be some real pass through to the consumer because these are the retail I him that haven't been touched so far. So you're saying that won't happen come September, Prices won't go up on everyday items for consumers because of this tariff. Well, I'm speaking

in the aggregate, Jonathan. But again, our experience and our modeling suggests that any consumer impact be very very small, and that the biggest burden in economic terms is falling on China. And you know, I think the Chinese economy is in rather poor shape. I don't want the Chinese economy to be in bad shape. I'm just saying that's what's happened. Our economy is very strong. Their economy is very weak. They're losing market share, they're losing production. Uh,

and they're probably not going to get that back. People are going elsewhere. Some people are coming back home to the United States. We welcome that with our very low corporate tax rates and our deregulation program and our easy access to energy and so forth. So I think it's a plus. But look, with our forecast thing. We expect to meet with the Chinese in September, and some good things may well come from that meeting. That is possible.

At the moment, though, Larry, that manufacturing story abroad is starting to come into the United States. You see it in the I S M. S. I'm not saying recontraction territory here in the United States, we're starting to see them roll over. You're not worried about that that the weakness that's been triggered abroad from this trade story is starting to bleed into the U. S. Economy. There's real signs of it, Larry, I don't deny that. I mean,

the United States is not immune from the world economy. Um, maybe we can talk some about problems and policy mistakes and overseas. I am, however, heartened by the way new orders in that is M were up nicely, So that's a good sign manufacturing itself. In the industrial production report, as you may know, as up nicely in May and June. And durable goods, particularly so called core capex durable goods had a big increase in June after a decent increase

in May. So we're looking for a comeback there. I mean a lot of these issues, and I don't deny the hard good sector has been slower. It's the consumer sector that's really dominating. But you know, we have unfortunately faced two years of severe monetary restraint. Now hopefully that period of monetary restraint is coming to an end. And I note that the money and bond markets are predicting several more rate cuts from our central bank, so that's going to help the story. But we still have strong

incentives in place to produce and work and investment. I think that our economy is going to have a very strong second half. But Larry, let's be clear here. The reason that fed fund future start to really price in a right cut in September was after that suite. It's the belief that this trade story is gonna do some

real damage to the U. S economy. And that's what I'm struggling to get my head around going We've got its campaign season now, I'd love to know what the message is from the party, so the US consumer and anyone working in manufacturing that we're gonna push this, We're gonna tax the how so to say, out of China until they break and give us a deal. How far

are you willing to go with this? Well, Jennathan, I just want to note in today's jobs report, not only hundred sixty four thousand, which is a solid number households, which is the small business number. Household employment was up two hundred and eighty three thousand. Here's one very important number. Civilian labor force up three hundred and seventy thousand. Last

month was up three hundred and thirty five thousand. People are coming out of the woodwork to come back to work because of better job opportunities, better job training opportunities, and higher wages. That's so important and we just got and this is so important to the story of the strength of the US. The wage and salary numbers revised up across the board the last twelve months, wages and salaries rising at five point one percent, with no I beg your pardon, five point five with an above a

percent saving rate, which is absolutely phenomenal. And the biggest gainers in all of this are the low end, the middle and low end people, the blue collar workers and so forth. In fact, the bottom ten percent is the biggest gainer. Uh, some of our critics on the other side might want to check those facts to improve their own analysis. So I think we're in very, very good shape here at home, Larry. Looking at the equity market,

it's not in good shape over the last couple of days. Granted, it's been a fantastic year for US equities, but it's some real weaknesses that it has emerged in the last twenty four hours. The President said to reporters yesterday he wasn't concerned at all about the negative reaction from markets. I expected that a little bit because people don't understand quite yet what's happened. Is this a change of stance from the White House. There used to be a real

concern about equity markets if we pivoted. Well, no, Jonathan I'll go back to what you said two sentences ago. We you've had a heck of a year. The indexes are up more or less, and I think that is, by the way, foreshadowing a very strong economic mic growth period for the rest of and on into It's been a fabulous stock market and by the bye, encouragingly to me, at least in terms of the key sectors in the stock market, the hardwoods sectors, the industrial sector, transports have

had a terrific comeback. I noticed chips and semiconductors too. That tells me that any pause in the economy and hardwoods last year undoubtedly related to the monetary tightening from the fit. That pause maybe coming to an end. And that's why I'm pretty darn optimistic. When I look at today's job numbers and I see all these literally hundreds of thousands of people returning to the labor force, I say, something very good is cooking out there. Well, let me

let's just follow up on that question. Though I asked you, the President said that he's no concerned about the negative reaction from markets. Is that a change instance from the White House? Now he as as I understood that, he was just referring to the overnight mediate response. A day or two in the stock market doesn't make a trend, for heaven's sake. Well, let's have a final question on the phone exchange market, shall we. Last week was really

confusing for me, confusing for many others as well. You ruled out any effects intervention. Then the President said, I didn't say I'm not going to do something, just what is the policy right now? Look in brief, I mean I have the president's quotes here. Uh, he did say I wouldn't say I'm not going to do something now, but he said, look, having a strong dollar, there's a reason it's so good having a strong dollar is having a strong dollar, having a strong currency shows what an

amazing country. I stand by those remarks. I thank him for making them. We have ruled out any currency intervention. I mean. The problem here, and this president has said many times, it's not that our dollar is strong and rely independent, but we love that money is coming in here from all over the world. We are the hottest economy, were the only real major country with solid growth and

investment returns. The problem here is that President is concerned correctly in my view, that other countries maybe manipulating their currencies, perhaps to get some short term trade advantage. We don't like that. We want a level playing field, and the G twenty arrangements have always called for currency stability. As Secretary Minution would attest, that's the issue. We worry more

about what the others are doing. We're perfectly happy to have the US dollar as the center of the world's economy. We are the world's reserve currency, and we aim to keep it that way. With that in mind, Larry, when can we expect you to assign these countries as currency manipulates? As the Treasury Secretary has a watch list? Where's the final list of currency manipulates? As when do we get it? Well? Secretary Minition has expanded as well, Solist, that is a

Treasury function. I'm going to leave it to him. He's covering it very well. He's a very smart guy and a great leader over at Treasury. So we will follow that story as it unfolds. Great to catch up with you. Appreciate all the time you've given us this morning. I've been pulled in morning as well. The National Economic Council Director joining us from the White House. 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