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We are advantaged at Bloomberg with a gentleman who's done a tour of duty in government at the White House, directly at the White House in Bloomberg Economics, and then up ten years ago, somebody said let's put Brendan Murray in charge of trade, and he has begun absolutely definitive for not only the usual show up and throw up verbiage on trade, but anecdote, an actual what's going on on the ground. Brendan Murray from a cornfield in Iowa and he's a Queen Victoria Street in London and joins
us this morning. Brendan, you got a great article about Republican farmers in Iowa going what in God's.
Name is going on?
What did you learn in your reporting on Iowa corn and their future?
Well, yeah, you know, Tom, there's going to be a lot of focus today and the nudey's ahead on the automobile industry, on electronics and energy and food and a lot of these major products that move back and forth between Canada, Mexico and the US. But if you look at in the heartland of the US, at American farmers, one of their key products was something that China retaliated against today, and that's soybeans. And the soybeans are you know,
kind of a pretty basic sort of commodity. You can grow them in Brazil just the same way you can grow them in Iowa. And the farmers in the Midwest and now went in particular in large blocks blows voted for Trump. But at this meeting that that that that we've that we've seen some reporting on they're not happy about this trade war that Trump is starting, and they if you alienate China as one of their main customers, that's not good for them. And of course prices fell today.
So in the in the in the grand scheme of things, you know, autos and electronics are much more you know, economically important, but politically the president needs to hold that base. You know, how loudly are Republican farm State senator is going to applaud tonight when he says.
You know, let's combine the Brendan Murray magic. Here.
There's a guy named Grassley who's one hundred and fourteen years old. I adore the guy. He sounds like my grandfather out of Ames, Iowa. No excuse me, Iowa City, Iowa years ago. Brendan Murray, what is Senator Grassley going to do to sit the President of the United States? Grassley sitting there at the desk with Kevin Hassett with a Pennsylvania PhD. What do they tell the president?
He's going to say? You know, he he himself would say, look, I'm in the I'm in the minority on this position, on this free The Republicans used to be the party of free trade, opening markets abroad and that kind of thing. And he'd be the first to admit that he's now
in the minority in that with that view. So my guess is he would talk to the President about some sort of farm bill, some sort of assistance to give farmers the way they farmers got the help during the Trump's first term to offset this loss of income that they're looking at. You know, the it's not just it's just it's not just the you know, sales to China that are going to be affected. It's farmer's import you know, this thing called potash, and it's for fertilizer and they're
going to have to pay more for it now. So planning sees it, you know, so it just kind of it kind of hits them on both sides. So Rashley is going to say, you know you're going to go if you're go go this route, then we need then we need some you know, we need farmers need some you know, welfare essentially.
Okay, Brendan's a city guy, and he's talking about this thing called potash, right just his wind potash.
You got a question in here to Brendan Murray.
Well, because Brendan, you were just talking about how when it comes to tariffs impacting more electronics and autos, But at what point do you think and how long before we could see changes when it comes to the price of consumer goods at the grocery store.
I mean it was just the the you know, targets. Target's CEO was on there on the airwaves today saying that that they customers could see price hikes within days. And he's talking about strawberries, avocados, bananas, you know, vegetables, the kinds of things that you know, the US depends a lot on Mexico for so you know, they flipped the switch to turn the tariffs on, and you know, companies say, I'm suddenly paying twenty five percent more and
they just passed that on to consumers. So I don't know how you stockpile tomatoes because they don't exactly last that long, but you know you got to figure that the tomatoes are going to be twenty five percent more expensive next week.
Brendon, keep writing with your team these anecdotal, real articles about real people and not people in boat eyes.
Going to three decimals.
By the way, Brendan, if you go to Michael Barr's refrigerator, you will find age tomatoes and they.
Won't find chicken pauls. You're going to find chicken feet. Brendan Murray, thank you.
So much driving all of our trade coverage one of the jewels of Bloomberg News.
You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from seven to ten am Eastern. Listen on Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube right now.
With substantial acclaim, Barbara Reinhart, CIO and Voya Investment Management whatever you know.
You wrote your usual.
Ten thousand words. I'm kidding, it's all like all brevity here. Let me quote, folks the single sentence from young Reinhard.
I'd be buying equities.
Is it by the dip or is it more sophisticated than that?
Well, I think there's two things, Tom, that are really important for everyone to know. Number One, positioning is much less, is more on sides at this point. So coming into the year, you had big positioning. Everybody was running equity overweights big year last year. A lot of that positioning has been taken out of the market right now. So that's number one. Number two sentiment, short term sentiment indicators
are very over sold. Those are contraring indicators. S and P versus AG is down over six percent at this point, and you're seeing some fear into the market, which is generally when it's a better time to start adding to equities.
That's interesting too, because Tom and I were talking earlier about how Emma wu at GP Morgan actually in video was contributing to the buy the dip inflows when it came to retail investors, but they did see them actually selling names when it came to Tesla and Apple. So we were talking about sentiment at extremes. I mean, the bull bear spread last week for Aii was the lowest it's been since twenty twenty two. And however, you're on
those lows since two thousand and ninths. Are your clients going in and asking to puyah?
I think it's short term indicat short term sentiment indicators are definitely over sold. The medium term ones are hanging a little bit more towards neutral. But unless you're going to have a recession, your short term indicators generally give
you a very good risk reward opportunity. About legging into the market, it could be that you go lower over the course of March and then some seasonality really starts to pick up into April, but we think that it's difficult to time it, and when you've got weakness, it's good to buy in unless you think there's going to be recession.
I love the.
Phrase legging into the market. I have no idea what that means.
That means buying across the dips.
Being brave here futures and negative.
My eyes are failing here negative forty on the S and P futures right now, so we have to readjust we have to recalibrate, and it's not a day for simplistic equity at questions, are you factor choosing this morning? Are you like securities analysis Graham, Dot and Coddle choosing? What's the method to make the marginal acquisition?
I think it's difficult to step in front of momentum at this point. Right momentums had a massive run. After you've had big runs like this, it's difficult to see that would be able to do a three peet of it and have it three years in a row. I'd be more inclined to buy things that are more value oriented. Not internationally, I think that Europe is way over at SKIS at this point. For Europe to continue to outperform, you would need to see earning speed outpacing the US
like they did in twenty seventeen. That won't be the case, or at least we don't think it will. So I'd be buying things that were much more of value oriented. If you really want to go bondom picking, look in the small cap universe. It's down over twelve percent at this point. So it's really gotten quite hammered, even though the fundamentals don't look to be quite that bad.
It's such a tough space because that's the ongoing debate for years when you think about whether it's the Russell two thousand or the S and P six hundred, and especially the two thousand, just given the amount of zombie company's close to all time highs and it so, I mean, at what point is that really going to be more of a longer term buy than something that you just step in and buy on the shorter term.
Yeah, the longer term the key to buying small caps, and it's usually generally in the S and P six hundred if you're coming out of a recession. So if you're halfway through a recession, isms have bottomed, you're starting to see the uptick from something akin to you know, forty to forty.
Five on the on isms.
That's generally when you want to when you want to buy the junkie stuff. That was the twenty twenty small cap rally. It was really led by the junkie stuff.
I haven't even brought this up yet today because as you know, folks have death in the dots. I'm death in the parlor game of the FED. But you know, Jason Furman's on fire this morning out on Twitter, and there has to be a FED rea except the question, Barbara reinhard. Are their hands tied?
It's going to feel stagflationary for a little while. You're going through the markets. Right now, they're going through a proper growth scare. Tariffs are only going to exacerbate that to the downside. And when there's a lot of uncertainty what a corporate CEOs and treasurers do. They start to pause, They put out decisions. They make the say, we're going
to decide on hiring later this year. So that could get us GDP growth down to sub two percent, but you would need a significant shock to get it below one percent, which would really kind of start skating along the lines of recession.
The Fat's hands may be tied.
For maybe a meeting or two, but they will react if they start to see weakness in the labor market.
Will they react that they start to see weakness in the stock market. Alan Greenspan used to say, the stock market is an important barometer.
It is an important barometer.
I think they have a little ways to go because of the very big back to back gains that you had.
Over twenty two and twenty four or twenty three twenty foe.
Is there a specific level all the S and P five hundred or percent draw down that you would need to see?
Gosh it, we don't necessarily do things kind of unapplied levels. I mean, two hundred day moving average is what everyone looks at, but that could be a big moving target. I think it's more a culmination of a lot of our indicators. So we have, you know, sentiment indicators, valuation indicators, and also fundamental. The fundamental deterioration that you've seen in
the market is really due to this uncertainty. It will get worse if these tariffs are they are going to be imposed, if they continue for a prolonged period of time.
Talk to us about the difference between the markets set up when Trump first took office in twenty seventeen versus now. Because even if you're looking at asset manager positioning exposure to those equity futures, I mean, that's tracking above the fortieth percentile coming into this year. Back in twenty seventeen, it was below the tenth percentile.
Right, Just that's such a good question I'm so glad you brought it out. In twenty seventeen, it was a very different setup. So the US was kind of still plodding along, having a great deal of difficulty after China devalued its currency in late twenty fifteen and into sixteen, there was a big draw down, almost twenty percent decline in equities, and it was struggling to kind of shake off some.
Of that malaise.
Europe actually was growing faster than the US, so that setup is not what you have right now. Right equity markets have been on fire over the past five years, even after looking at the twenty twenty two draw down, and valuations are much higher. But I would also say the companies in the SMP five hundred that are generating these big free cash flow, they are not terribly cyclically
sensitive to the economy. However, you know, I would say that most investors, retail and institutional investors, were very much longer equities than they were in twenty seventeen. But this is a good, proper shakeout, and I think a growth scare which we didn't have in seventeen.
When we're seeing the rotation more globally into European and equities in China, and specifically, how long do you think that'll hold for because a lot of portfolio managers just maxed out their allocation towards the US stock. So is this something you think is going to be more temporary or something that would hold.
I think it is temporary as sure as night follows day. Europe will tend to have these kind of an etha in general, so developed international they tend to go through these fits and starts where they have, you know, twenty percent counter trend rallies. They can go out anywhere from one to six months. They draw a lot of investors in. You start hearing the cry to Europe is going to outpace the US.
I wouldn't buy that.
The valuation gap between Europe and the US is actually closed at this point. Europe is no longer cheap because everyone's piled into it. So my sense is that Europe would not be a place where I'd be allocating capital at this point.
I'd be still sticking to the US.
We say good morning to all of you across the nation.
Here with futures negative thirty nine down futures negative one sixty six, A vixed deteriorates twenty four point two one up one point four to three points.
This morning, Barbara Ryan Or.
With us, Lavoya Abby Joseph Cohen will be with us next year on confidence to be in equity markets. Part of confidence is a five percent money market funt I believe it's price up, yields down across the bond landscape. What does cash do when they don't enjoy five percent?
Well, you know, I think bond yield starting to drop is actually going to be somewhat stimulative, but it kind of buttresses a little bit of the tariff, probably uncertainty in the markets. It won't be able to overcome all of it. You know, five percent is really competitive when you've got a four. When you've got a ten year treasury it close to four fifteen, four, eighteen, four twenty. So cash looks like a really good thing. But I
would say cash is a paradox. It is difficult to it's difficult to get out of it because you become so enamored with it usually, and you know that is.
The worst thing you can do for your portfolio over the long run.
Is it difficult to get out of mag seven when you're so enamored with it.
That's a good question.
I think the enamoring of the MAG seven is probably the real The shine is off that penny at this point. But do I think that the US has better earnings power, better shareholder practices, better underlying fundamentals than the rest of the world.
Absolutely the issue here.
Come on, we're talking soybeans and laws.
Maybe we're talking, you know, cars, and Michael Barr's on a ladder about the.
Windsor Detroit Bridge. It's got nothing to do with Nvidio, right.
It doesn't. It doesn't.
But I do think that the overall landscape of tariffs will cause enough corporate CEOs to pause and to say, maybe we don't need to do that property, plant and equipment build out. Maybe we should postpone hiring for the near term, just because the visibility is low. When you don't have much visibility and you're driving a car, what do you do? You slow down? And that's exactly what we're concerned about.
Tom Keane bringing up those MAGS seven names, I wanted to point out since there was so much talk last week about the MAGS seven, the index, and the terminal entering a correction, but most of those losses were driven more so by Tesla I mean, that's a down by more than a third in that span, and then Meta's actually hire since then if you go back to mid December. So how much more pain do you think in more
individual stocks? Because also there's a lot of technicals for certain ones, whether you're looking at in video where people are going to step in and by the lows. Because even if you look at in VideA the last twelve months, I mean, it's still been kind of in a narrow trading ring.
You see these.
Bounces to all time highs and then drawdowns again.
I think the big issue is you've got a lot of concentration in the US equity market. When there's concentration, it's difficult to kind of differentiate.
But there are.
Many as to a portfolio manager ands I know that are have a very good view on other parts of the mag seven rather than Tesla. So it's difficult to make the case that Tesla can have a really big bounce at this point, simply because I think all autos are going to kind of get washed out together with this potential tariff issue with Canada and Mexico. So I think that they're not moving in unison and that creates more opportunity for active management.
Just mentioned the Trump put. I have no idea what that is, the Trump call or the Trump put. But let's all agree, including Trump supporters and detractors, that this president can change the script at any moment. Come out Gilda Radner.
At the speech tonight and goes, never mind what happens.
Barbara, I think that's a credibility issue. My sense is that he's relatively serious on this one.
Yeah, but there's going to be economic pain.
I mean, you're talking about throwing Canada and Mexico, your north and southern neighbors, into a severe recession that will be felt in the US. And there's there's certain things on his tariff list that there are no substitution effects for.
So that's going to cause, you know, some issues. And I think that.
But the issues are it's difficult to get the US to into a recession at this point. The economic strength is coming off of oil. I'd be more I'd be more focused on a FED put than I would on a Trump Put's strongly.
I agree, that's strongly, Barbara Reinhert. This has been brilliant and a great effort into Abbie Joseph Cohn Barber rhinhert Is with Voyagen.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Atto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
We're gonna go NonStop with a person you want to listen to. Abby Joseph Cohen has an earned career through the thick and thin of the American landscape like no one else. At Columbia Business School now off of Gold and Sacks. We're thrilled that the Professor of Business could join us this morning. Abby, We've been here, but we haven't. Kevin Gordon over Schwab says, these are proposed tariffs and reciprocity that go back at least to the nineteen forties.
What does the future look like if we affect these tariffs?
Good morning Tom, Good morning Jessica.
Gee.
That's a simple question, Tom.
That's what we're doing.
Yeah, you know what, I would disagree a little bit. It's not going back to the nineteen thirties, it's going back to the nine teenth century. Tariff based economy is something that didn't work then didn't work in the nineteen thirties, and I think it's very dangerous. You know, you have had other guests on who have talked about quantifying the impact, which will be very substantial if in fact these tariffs hold.
And it's not just the US tariffs on our best neighbors and best trading partners, but also what they decide to do. I'll use the word to reciprocate, but this
is a very difficult situation. Obviously. The thing that is somewhat odd about this and different from what was seen in previous periods of history, is these are tariffs being levied on our friends, and the blowback, the damage economically can actually be extremely severe on our own economy, even without the so called you know, pushback and reciprocal nature to.
The nineteenth century, and folks, you've heard me talk about
this of a new gilded age. Maurice Sobsfield, who Abby, Joseph Cohen and I worship iconict with Roguolf and Opsfeld and crudmen in International Economics, writes in the Ft This Morning and says it's simple there is an inequality in America the Genie coefficient, which is fancy math is completely out of whack, Abby Joseph Cohen, how does Senator Grassley of Iowa or Marquis of the Commonwealth of Massachusetts, how do they get us away from the gilded age so
that we don't affect these harmful tariffs.
You have combined two very important topics. Tom One is the inequality, which clearly is there and has worsened in recent years. We typically look at inequality based on punt income, but also on wealth, and we have seen that the inequality related to wealth has actually become even more pronounced
than that related to income. But what you also need to think about is how do we adjust our economy to reflect this and the power that is being wielded by those in the corporate arena but also being assisted by the government. And you're right to say, what can
the Congress do about this? And one of the things that is troubling, of course at this point, and I'm an economic analyst, I'm a markets analyst, I'm not a political analyst, is that we don't really see the Congress getting involved in a lot of the discussions about what is happening right now. As I see it. Bottom line is many of these changes, especially on tariffs, are extraordinarily painful and will be more hurtful for people at the lower end of the income and wealth spectrum.
Abby of course, there has been ongoing debate that Trump wants to raise revenues to finance tax cuts potentially. How do you view that and what are the repercussions with tariffs being so severe? As you mentioned on our Trading Partners.
Yeah, again, I have not done the calculations myself, but looking at those people and firms that have done the calculations, there's a mismatch. The sort of revenue that would be raised from these tariffs may in fact not be all that significant and certainly were pale in comparison with some of the tax cuts that are being discussed, So there seems to be a mismatch. The other thing to keep in mind is that when you analyze tariffs, it's a
dynamic process. It's not just look at a certain percentage in this case, twenty five percent against Mexico and Canada and then use that number against what the imports have been. You also need to think about what will happen to those imports, What will happen to aggregate demand, and I would say that most economists would agree at this point that the sort of tariffs that are being discussed will
negatively impact aggregate growth in the United States. And again that pain will be felt most significantly by middle income and lower middle income workers in the United States.
Abby Joseph Cohen with us for an extended moment here this morning.
Abby, I was at a.
Wonderful store, Dangerous Provisions on Madison Avenue, where they've raised the price of their egg sandwich, and next to me with as a student with the Blue Patagonia Columbia Business School, how are you teaching tariff economics in the market impact to the students of Columbia Business School.
Once again, Tom a very important question, and I think that we need to keep in mind that many of the students at Columbia, and they are wonderful students. About half of the people in my class were from outside the United States, and I have to say that the discussion about tariffs puzzles them just the way it puzzles
many of us here in the United States. Many of them, for example, hail from countries that are quite friendly to the United States, nations that are military allies of the United States, and to use tariffs against your friends seems a little bit odd. Now, let's keep in mind that
there can be an appropriate use of tariff. For example, in cases where there's dumping, where a nation is dramatically overproducing and perhaps is selling that item in the United States or another country for below the cost of production, that might be a good reason to impose a tariff. Similarly, if you're looking to protect a particular industry for national security reasons, that might be yet another reason to impose
a tariff. But these widespread across the board, tariffs on all items coming into particular country, especially a country that's friendly to us. There doesn't really seem to be economic rationale behind it.
Abby, you're too young to remember this, but at the clearest memory of October of nineteen eighty seven, and over a series of days, we enjoyed down thirty one percent, we're down six percent, and we're pretty much hysterical. Have we forgotten what a correction is in the stock market?
Tom, Yes, I do remember that day. And one of the big differences between October of that year is that that big decline had to do with internal mechanic within the stock market. I think that one of the reasons people are so concerned right now is not just the dollar amount or the percentage amount, or the rise in the VICS. It's the economic uncertainty. Back in nineteen eighty seven, there was no economic change that had triggered that particular decline,
and so it was quickly reversed. I think what people are concerned about now is that there is true uncertainty with regard to economic policy, and there doesn't really seem to be a clear rationale economic rationale behind the numbers that had been thrown out vis a v A twenty five percent increase in tariff. In addition, we're facing uncertainty with regard to whether the continuing resolution that has kept
the federal government working it will expire March fourteenth. We do not yet have a new budget in place, so that's another area of uncertain Indeed, one of the things, however, that I'm looking at very closely, are not some of these things right on the news flow, but rather the long term issues. And something that I don't think is getting enough attention is that decisions made by the Trump administration are damaging the long term status of the United
States as a scientific and technological leader. We're basically cutting off at the knees a lot of the work that's being done by leading scientists in the US government and also in US universities.
I look, aby where we are.
I got to be quick here because just met once again and we're going to have headlines out of Mexico here. President Steinbaum is speaking right now and announcing quote countermeasures on a Sunday. How do you be comfortable long term investment? Abbey owning securities here? I don't you want you to redo what David Costin's working with this morning at your Goldman said always your golden sechs, But just in general, how do we have comfort with equities as a long term opportunity.
Right now? I think we need to kind of sit back and see which way policy is moving, and then of course we can apply the models. As you well know, the long term benefit of investing in the United States has been related to the strength of our economy, including the long term investment that is made by companies in cap X, also the investment that's made in information, whether that's education at the K through twelve level or at
the university level. But also, as I mentioned before, our willingness is a nation to invest in the future by funding places like NIH and the National Science Foundation and NOAH and CDC, And I think that many investors ought to be paying attention to whether Prump administration will reduce those cutbacks and in fact, I hope reverse them because they make no economic sense.
What else potentially could be coming from the White House when it comes to trade policy, Because you're mentioning that March fourteenth deadline for the government to avert a shutdown, but then on March twelfth, just next week as well, twenty five percent tariffs on all steel and aluminum imports are also set to come.
Yeah. Now, one thing that I don't know again I'm an economic analyst, a markets analyst, not a political analyst, is I don't know what the game theory is behind this. There are some people who are postulating that the twenty five percent numbers that were picked out for tariffs were designed basically to be an opening bid, if you will,
for negotiations with various countries. So where we end up, I don't know, but I think to kind of throw the gauntlet down in front of nations that have been cooperative with us over the years that have their own economies intertwined with hours. You know this is not a mechanicalist economy. We are highly dependent upon these inter relationships that we have, and many of these tariffs will adjust very significantly.
I mean the time we got left, I got to interrupt you. I mean, you're working a hard fifteen hour week up at Columbia Business School. Let's be honest to Abby Joseph Cohen. You could slide right over to be vice chairman of the FED, or dare I say chairman of the FED?
In a heartbeat?
Given the moment, the politics of the nation, how should your own Powell respond to this moment?
I think mister Powell and the other members of the FOMC need to be doing what they have been doing, and that is to focus on the data and to keep in mind the dual mandate of inflation but also employment. And one of the things that has been terrific throughout the Biden administration has been ongoing creation of jobs and then the increase in the average wage adjusted for inflation for the American American family. They will be watching at
the FED whether that good news continues. If we see an erosion in the labor markets, if we see an erosion in wages adjusted for inflation. I think at that point they're going to need to adjust the policy and provide some stimulus to basically offset some of these policy decisions coming out of the White House.
Interesting and of.
Course, folks, that's the first we've heard this morning, and always what you hear from Abby Joseph Cohen about wages, both wages and real wages given rising inflation is being part of the Fed calculus. She is a Columbia Business School of course forever with Gulb and Sachs. Abby Joseph Cohen, thank you so much extended comments this morning.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.
With our question.
This is our conversation of the day. Jehan Beovan is out of university to Montreal and Princeton University. He is definitive on his Canada and their economics. He is the head of Blackrock Investment Institute.
But today is different.
We speak to John Belevan about what is occurring between Detroit and Windsor, Ontario.
Jehan, you know the landscape better than anyone.
If I look at reciprocity across St Bridge between Windsor and Detroit, what's Doug Ford gonna do, mister Trudeau, the future, mister Trudeau, what are they going to do on a reciprocal basis against what mister Trump is doing?
Well, good morning, Tom, Just it's a pleasure to be here. Yeah.
I think, well, we've already started to see reprocessing, reprocessing processes at play today, and I think there is uh, from what we what we have been they've been saying pretty clearly, there will be uh.
There'll be responding in kind I guess over the as things go. So that's the first thing I don't know. I mean, I think we're all learning as we go here what's going to be the extent of these things.
But in terms of the intent of responding, I think.
There's no there's no doubt that this is the current stance there, uh, And so we'll see what happens in response in the US after that as well.
Jean Beave, we studied very carefully Ken Rogoff and of course Maurice Absfield out at Berkeley. Professor Absfield writes an absolutely blistering up ed released about four hours ago in the Financial Times. It's like Berkeley, one oh one, John, you can appreciate that you're a freshman at Princeton and it's like, oh, it's complicated. Professor abs makes clear the simplicity of the Trump administration has no academic grounding. Where is the part where President Trump is being too simplistic?
Well, I think, uh, I'll confess I didn't have a chance yet to of course I will. But the I think the it is a fact that when it comes to trade, we have like very good models to think about, like you know, more static uh, you know, trained pattern and like you know, we go back to Ricardo and but the reality is a lot more complex with trade and what's going to be the ultimate macro effect on growth, for instance, I think is a is a bit difficult to uh, for academics to agree. I think the inflation
impact is pretty clear. I think you're gonna get find you know, consensus there. But more broadly than that, I think it's a it's harder, uh, And I think you know, it all depends also on what is the objective of these of these tariffs. I mean it always statistical revenue generation could be an objective.
Are we talking about trade balances?
I think one thing that is not fully appreciated is that these two objectives work against each other. If you really are trying to maximize that's revenues, you're gonna have to live with a wider trade balance.
So I think you more than what the academic confusion would be.
I think is the lack of clear understanding of what are we doing here that I think creates a certain you know, I used to a huge amount of uncertainty.
Interfering this out just Manton, the Atlanta GDP is a as a headline making negative two point eight percent, and a lot of people, including hot SIUs and the team over at Gold and Sachs, are saying it's actually still diminished, but somewhere in the zero even up as high as positive one point six. So there's a real argument about the growth dynamic.
Right in the volatility that we see. So Sean, I mean, you were actually previously appointed as Deputy Governor of the Bank of Canada, and of course we're looking at how Canada retaliated tariffs one hundred and seven billion dollars of US products. So your view when it comes to the Bank of Canada and when it comes to the direction of interest rates, we're looking at overnight swaps increasing those bets that the Bank of Canada will cut rates by
twenty five basis points that it's more twelve meetings. So how do you view this when it comes to central bank policy?
Yeah, so I think the starting point here is that this is not what the market is currently pricing. But we I strongly believe that this is a stackflationary shock.
Right.
I'm not saying we have stackflation, but I think the shock itself, these kinds of measures are stackflationary.
They're pushing grown down and they're pushing up, and I think.
That makes it triggy because from the US perspective, like the yields are falling. We had like fifty basis points of decline in ten years over the last month, and I think that has been interprented mostly as a growth shock.
I think what's going to be the wake.
Up call over the next two weeks is that like inflation is going to be the other part of the other leg of that story, and that's going to complicate the rate kind of landscape.
So I think on the side, it's.
Not clear that to us that there's going to be much to cut rates for Canada. The complication is that there is like now a week Canadian daughter dynamic, a week loony which is which is like a massive issue for the for the Central Bank. So I mean, as long as this or they will fit that, as long as it's orderly, there's no gapping and currencies, you know, that's not the objective.
But I think like once you get to the level we're saying right now, it's going to be an additional concern.
So even though it's a stagflationary shock, on top of that, you have a week dollar.
So I think the knee jerk.
Reaction will be to cut, but I think that's going to be much more messy and predicated, and I think it's a given that we have an easy cycle coming out of this in Canada.
Bloomberg surveillance this morning across the nation across Canada as well. Thank you for listening on Apple, car play, Android auto on YouTube. Subscribe to Bloomberg Podcast growing each in every day. Major shout out to David Weston in his conversation on Friday with the Treasury Secretary of the United States that had over three million downloads on our digital platform. In a matter of ours, just a final question please to doctor Boven.
As far as when it comes to the economy, what do you think is the biggest risk when obviously we're continuing to talk about tariffs, but what's the follow through here?
Yeah, so I think this is this is this is an environment with you know, I don't think I've ever seen an environment where there's so many moving parts over which you have as wide a range of views from the commentators on how they're going to play out.
So I think this is very unusual to me. The most important thing.
To watch is that, as I said, I think this is mostly a stagflationary shock where the tariff piece inflation was not a resolved issue from our perspective, so it's adding a layer to something that was already a problem.
And then we're going to have the fiscal side of things that's going.
To play out over the next week, right, so we're going to have the discussion government shutdown potentially. So the waking up of this is stickflationery nature plus a fiscal story, and I think will be expansionary those two things where and when you see the yields at four thirteen on the ten year, I think that raises questions and Jimine as.
The much Jean, thank you so much here and shorting us really really appreciate your attendance today.
He is with Blackrock. We hope to get doctor.
Beavener's studios for an extended conversation here in the coming week.
Shamblevent is with Blackrock.
This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at seven am Eastern on Apple Corplay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa Play Bloomberg. Eleven thirty.
We're looking at the three month correlation of no eggs at Costco with our newspaper report this morning Lisa Matteo, Oh, Lisa, are there eggs at Aisle six?
There are eggs, but paying more as usual. And speaking of paying more, this is kind of a look into what products are going to be You're going to be paying more. And the Wall Street Journal, i mean the Washington Post did this analysis. It was like international trade data from the Census Bureau. So this is a breakdown.
Stick with me because there's some numbers here. So we start with China, right, the main source of imported consumer goods spending, sending about two hundred and ten billion dollars worth of everyday household to the US in twenty twenty three.
So what does that mean.
It means electronics, clothing like cotton shirt, shoes, kids, toys, things like that. Then you get to the grocery aisle. You know about nine point nine billion dollars worth of vegetables, more than eleven billion worth of fruit and frozen juices come from Mexico in twenty twenty three.
What about the beer?
And then yes, then you have back up avocados, right, the beer, tequila. You can't forget the tequila just and then we talked about cars, right, We've been talking about cars Canada and Mexico. The US also imported ninety three billion dollars worth of crude oil from Canada and twenty twenty three. So it's kind of this good breakdown of what you can possibly pay more for it's going to be, I.
Think it's unknown. The uncertainty here is off the chart.
Some of the research notes. I mentioned George Sarahvellis at Deutsche Bank with a blistering note like ten minutes ago and we'll get more in futures. De tiorate now new Low's negative thirty seven. Another story, Lisa, Yes.
So Tom, you always sees me about looking for a gluten free products, right, so how about tariff free products?
Well?
What tariff free?
Oh? Tariff free?
Yes, so this is these are the signs.
Yes with a T.
It's happening that this housewares trade show in Chicago, the Inspired Home Show. So a lot of the booths are posting these signs that say tariff free because they're trying to attract new customers. One company did it. He said that they actually helped him land new customers. He started changing up some of the things he does with this company. But he says that is starting to help. So you might start seeing some of these signs you know as it is.
Yes, I mean you know you're the Texas girl here. I mean Texas is booming. Let's all agree on that.
What does the Mexican border slow down? Do now to Texas?
So the answers is ginormous.
Well, it is ginormous. I grew up in South Texas, so especially when it comes to a lot of the hospitality, construction jobs as well as landscaping. That's a big question mark is what it means for some of these smaller businesses that depend on some of that labor and what it means for if it's not as cheap as far as how that feeds into their businesses as well as wage infleetion can get.
Yeah one more so, we heard about Target right the CEO saying that he was going to start having to increase prices, especially fruits, vegetables, things like that. But the CEO of Chipoli actually told NBC Nightly News that they are going to fit the bill for any cost increases from tariffs. He said, for now, that's what they intend to do because their economic model can withstand it. But he did add that pricing changes could eventually come if
those costs become a quote significant headwind. And when we were talking about the avocados, they actually get fifty percent of their avocados from Mexico, but they also have the rest coming from Columbia, Peru, Dominican Republic too, so that might help out. But he estimated the cost of goods increasing six ten percent on a rolling basis from tariffs, but he says right now they're not going to pass that on to the consumer.
Lisa Mateo, thank you so much on the newspapers.
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