Trade Talks Should Be Ongoing, Zentner Says

war really sticks and gets worse? So? I think, first, UM, we do expect these trade tensions. Let's say, I think war is a little inflammatory, but but it's certainly catches the attention more when you is the word war. But we are in an escalatory phase. Okay, there's no denying that. Um. And we've now seen the first round of thirty six billion dollars in teariffs go into place. Um. The questions that I get are I thought this was supposed to

hurt the economy. We've got four g d P in the second quarter that economists are tracking, Uh, what gives? It must not matter for the economy, And that's absolutely the wrong way to look at this. These first thirty six billion dollars that have gone into place are hitting intermediate goods, capital goods. Guess what matters for the US consumer goods? And it's the next round, the ten on two billion in Chinese goods that are really going to

hit consumer goods. And do you think that when we raise prices on consumer goods in the US because of tariffs, the consumers are just going to spend as much as they did before that we really don't care that prices are going up. That's just not the case. So when we look at it, tear us, uh, you know, in you know, just one at a time. Right now, if I just look at the economic impact of the tariffs that have gone that went into place on Friday, um, it doesn't look like that much that you shave off

the US economy. But you start to build in the second round, impacts to supply chains, the unknown impacts to financial conditions, and you start to pile on the next round and the next round and the next round. At some point investors are going to say this is too much, this is changing the global growth story. And then the financial conditions piece of this escalates. At the time when you have unemployment at the levels I guess, okay, it increased to four, but that was because so many people

came back into the into the workforce. Where's the positive? Where's the benefit from these trade uh? Okay confrontations? I won't say war. Where where does the benefit come in? Because if the if the economy is already working and you're looking at that four GDP number that you mentioned, where's the benefit to this trade confrontation? Well, I think that that UM. Trade talks in general should be something

that are constantly ongoing between countries. The condensed timeline that we're on, and it has been very disruptive UM in the way it's almost like someone just turned the light on and said, oh, these this trade situation in the global economy is is unfair. Let's change it tomorrow. And it's self right, but it's it's I won't argue with the need for looking closely at trade agreements and trade among countries, and that should be an open ended conversation

that we're having. UM. What's what can be very disruptive is trying to change it overnight, when, as you point out, we've already got a tight labor market, We've already got a very low unemployment rate. We don't have a large manufacturing sector. We don't have a lot of workers to attract back to manufacturing or to retrain for manufacturing. It takes time to open idle factories, it takes time to

build new factories. You don't just turn on the manufacturing engine overnight in the U S. And so what does that mean? That means that that these trade negotiations UH on such a condensed timeline can create even more inflationary pressures. Then we've already got from tight labor markets in late

cycle dynamics. And what happens then then you run into the risk that it begs a more aggressive monetary policy response from the FED as they're seeing price pressures in the US from tariffs UH, and that's very difficult to deal with right policy or rates that are higher in the US than they otherwise would have been. That is to me the biggest risk. And it's not as if the world is standing still. Why this is while this is happening, correct? I mean Shinzo Abe, Prime Minister of Japan.

He is going to be in Brussels on Wednesday to sign a trade accord with the European Union. You have I believe a meeting between German Chancellor Angela Merkel and the Chinese premier Prime Minister UH. That will be to day actually UH in Berlin. And the topic there is trade investment. UH. Nothing is standing still just because the United States wants to impose tariffs on imported goods from China, plus wants to at least seemingly renegotiate NAFTA, and that

hasn't gone anywhere. What's the worst case scenario for the US economy if all of these things come to pass. Well, I think the long term worst case scenario for the U S economy would be that the rest of the world and other global leaders move on without us, and so we become the odd man out instead of the leader among all of these groups, trade groups, global groups. UH, just where we sit on the global stage. Of course, that is the longer term risk because trade negotiations can

be very sensitive. It's one reason why they typically take some time to play out. UH. And so that that I do. And with the change of guard I'm just thinking of Mexico, with the change of government in Mexico, which may be more adversarial when it comes to dealing with the United States, right there are there are a lot of you know, I think that I can't remember a time uh and uh, I'm forty seven years old.

I've been practicing economics for over twenty years. Uh and I cannot remember a time that politics mattered so much in the global economy. That and and politics, it's not just for the US. Everywhere politics are a wild card for just about every economy. And politics are playing out globally. Um and create another lay of uncertainty of exactly where does the U s end up? UM in this in these tips for tats. Now, I'm sure you've read the

reports about increasing logistics costs in the United States. I'm sure you've read the reports of input costs going up for many manufacturers. Uh. You've also read, I'm sure about what happens to our agricultural exports that may be displaced by exports from places such as for Zil and Argentina. What do you see if this continues? What do you see happening in the US economy? Well, I think we'll see some rebalancing, right, we already know and you've you've

touched on a lot of it. Businesses are have already been exploring alternative sourcing. UM. And it's not just the US. The the rest of the global economy will be doing that, right. They might buy things from somewhere else. So there's a rebalancing that will go on. And I'm not saying that when the dust settles, we won't come out ahead, um, but there's near term pain that will have to be digested. UM.

Just sourcing UH. New supply chains cost businesses money and they have to either eat that on the margin or pass that on to the end user either way to lose lose situation in the near term. UM. That doesn't mean it won't be a long term gain once all this rebalancing occurs, but it's something that's a reality of this late cycle economy that we're in, that we are, that we are now having to deal with in thirty seconds. Are you advising people, based on your analysis, to change

the way they view investing right now until it dost settles. Well, I think that on our wealth management side of the business, which sits on a two trillion dollar purse, you know they've been advising their clients to aggressively manage cash. And that's not just that that almost has nothing to do with the trade. Tension has to do with where we are in the cycle um and volatile markets that occur

in the cycle. Um, Mike Wilson, our chief US equity strategist on the institutional security side, where I sit UM is looking at you know, no more upside driven by earnings after the third quarter, So it just makes for a difficult time as we view as we start to

view the second half of the year. Many thanks Ellen Center, Morgan Stanley, chief US Economists giving us her views on the US economy based on trade confrontations of war not yet with us now in our London studios, Brian Class of the London School of Economics, Fellow in Comparative Politics

in their Department of Government. And some of you will know Professor Class for his outstanding work out on Twitter and just pointing out research topics as we look at a time of authoritarianism, and that gets to his wonderful book The Despots Accomplices is well. Um, there was a lot Class in this weekend in the literature, I thought of you this weekend. A lot of people have come around to your study of democracy in liberalism versus authority

terrian Ism. Is it overdone. Is it overdone done about the president in his relationship with Mr Putin? No, I don't think it is. I think we've got this global moment. There's been twelve consecutive years where the world has become

less democratic. That is now creeping into the West. You have poland hungry, some Italian populism flirting with the full train is um and then also across the Atlantic in the United States, where where Trump not only mimics the behaviors of authoritarian leaders but also admires them and and has praised virtually every Authorityraian leader under the sun, from President g to do Terte in the Philippines, Putin in Moscow, um, and then you know, sort of has taken a much

harsh attack on America's historic democratic allies, whether it be EU or NATO members. And that's going to be on display this week as Trump arrives in in the UK, moves on to Brussels, and then meets with Putin in Helsinki. I mean, he's gonna go to Helsinki, and this is you know, your your area. That the basic theme and Kevin's early push back on this today is people say Mr Putin will be hugely prepared and Mr Trump will be less prepared to be kind. Um, how does that

play in terms of your study? Well, I think it's a major risk. And that's why I think this one on one meeting is dangerous. It's highly unorthodox past foreign policy advisors to pass. Presidents would not allow it. Yeah, and and on top of this, you have this major risk. I mean, we had a dress rehearsal for this in Singapore. With the Trump Kim meeting that is falling apart very quickly, where Trump prematurely declared a win and now his secretary

of State is trying to do the cleanup. And you know, Kim was very prepared for that meeting because that's what their foreign policy revolves around. Putin is going to be the same. Um. And so I think there's a real risk that Trump makes serious concessions to Putin in a sort of good natured summit and it ends up getting played. Um. But we have you know, I think the bigger picture here is that there is a momentous shift in geopolitics underfoot and has been for the last year or two.

People tell talk about black Swan risk, the sort of unpredictable, unforeseen risk This one is a highly predictable risk. You have the president consistently attacking NATO allies, attacking NATO, attacking the European Union, and praising Vladimir Putin, and it would be a major, major geopolitical seismic shock if American foreign

policy ended the trans Atlantic relationship. How do you respond to the morning's urgency Eli like in Bloomberg Opinion writing and stuff beautifully that the real fear is Mr Trump will bargain Syria and Crimea. It's almost like a game of risk when we were kids three and two Central America. They're a huge risk. So last year, you know, Putin basically crafted a deal last year that involved a d

escalation zone in Syria. That d escalation zone is a misnomber because it's where a lot of the heaviest fighting with the Russian troops is happening right now. But Trump was able to claim a win and look optically like he was the deal maker. That might happen again with

Crimea or with Syria. And the problem with bargaining away Crimea, it's not just about that piece of terror roy it's the principle, which is basically the lynchpin of international security at to World War Two that you cannot change borders by force, and if Trump acknowledges that putin Ken, it up ends everything we know about international security and all that.

Can a future president, either Republican or Democrat, walk back from Trump if he makes a decision on CRIMEA he could or she could, but it's a it's a real problem because the word of the United States matters in diplomacy. This is one of the things that I think is is a consequential shift in the Trump administration too, is that it has torn up so many deals of his predecessor that you start to have this question about are

they a good faith dealmaker in diplomacy? And the question going forward is will Trump continue to basically work to blow up the international order? Brian Class, thank you so much. With the London School of Economics, the despots Accomplices is accomplice rather is is a book. Our topic is Amazon, Amazon dot Com and if we can imagine a world without Amazon. The shares of Amazon dot Com are up more than forty five percent so far this year. The

company has more than half a million employees. And our next guest Matt Winkler, Bloomberg Editor in chief Emeritus says, this is a value stock. Matt, always a pleasure, Thanks for coming into the studio. Why do you believe that Amazon should be viewed as a value stock. It's good to be with you, him. Um. Since its inception, Amazon has committed itself two greater customer efficiency in everything it does.

And it started with books of course. Um. And within a year of going public, it's market capitalization exceeded the number one bookseller Barnes and Noble. By two thousand fifteen, Uh, it exceeded the market capitalization of Walmart, which is the largest retailer in the world, and then this year. Uh. If you think about all the industries Amazon has entered, um, starting with books of course, continuing with retail, which is

broad and vast Walmart. Uh, it's in the business that Ibmazon, it's in the business that Oracles, and it's in the business that Netflix is in, and it's in the business that Ups is in. As in logistics, and market capitalization of Amazon exceeds all of those companies combined as of just a month ago. So you put all that together.

Amazon has been very consistent about relentlessly innovating from day one, and that relentless innovation is all about focusing on the customers, something that Jeff Bezos, the founder and CEO and Sherman has said, in act told us right after the company went public. What I care about is maximizing the customer experience.

And so you put that together. Um, that's why most of the analysts, all but one um on Bloomberg, surveyed by Bloomberg, recommend either buying the stock or keeping it because what they see is a future of greater innovation, more so than any other company. And I forgot to mention that you know, of all the publicly traded companies in the world, Amazon commits more money equivalent money to what we call r indeed than any other company. Matt, this is a spectacular article. I just put it out

on Twitter, folks. I'll be blunted. It's, without question the read of the day. Matt. You go back to the original prospectives May fourteenth, and then at the end of the article you have a stunning quote which as at all if their market was the Empire State Building there on the third floor. And what makes it so trenched, folks, is Matt Winkler was once on the first floor with a roll of decks on a wooden desk, trying to start a news company where you surprise Matt that you

heard there on the third floor of their future. Um. I thought that was a particularly good anecdote, which came from one of our more distinguished colleagues who works in Bloomberg Intelligence and no s far more than I do about technology, and he framed it that way, UM, so that every every person can appreciate what we're talking about here, which is that Amazon has unlimited expectations about what it can do about itself, and increasingly its shareholders recognize that.

And that's why I did say that in effect makes it a value stock. I mean, it sort of defies all the conventions of great God, it's not Graham and dot exactly well it is. I mean, if you think about it intellectually, it is in the sense that, uh, you know, he Graham and Dodd, both of them would say, by all the conventional measures they had, uh, this is

what a value stock is. But if we put it on fast forward and take ourselves into the twenty first century, which is where we are now, of course, I think they would appreciate what Bezos has been doing, which is constantly thinking about what can I do to make the happier? Okay, you once sent me to a dinner. You don't know this, Matt. I mean Reddo did it on the m X, but

you don't know this, Mat. But you sent me to a dinner once with a guy named Eisener of Disney, and Michael Eisler said something that I think I've heard from you. It's not only the innovation and the positive things you do, it's what you don't do. In your research on Jeff Bezos, what's the thing that Jeff Bezos is not doing every day? So I don't think he ever thinks about, uh, you know, what do I do with the dividend or how do I beat you know,

the earnings per share? I don't think he ever thought about that in the first you know, decade or two of the company's existence. Um, not for once. I mean he managed to do it ultimately, but in the life of Amazon most of those years, most of those quarters, Jeff Bezos never once thought about the things that most CEOs are obsessed with, which is how do I beat

the earnings estimates from quarter to quarter? Um? You know, And just to put it in perspective, let's compare him to another company that was considered, you know, wonderful in the nineties, and that was General Electric and every quarter

it beat uh the analysts estimates. But look at where g E is today, Um, sort of nowhere to say that east, whereas Amazon wasn't thinking that way from day one, Matt, Amazon and its focus on customer service, Can they bring that same focus to other industries such as health insurance, healthcare, Well, it would seem so because you know, if you think of where they started with books, and they encountered a great deal of hostility from the traditional folks who bought

books they were customers by the way, um. And eventually, you know, Amazon won over all the die hard antagonists who didn't like what Amazon was doing and that was just books. And then Amazon very quickly becomes a retailer um of everything, which is why it's called the Everything store. Um. That's defies sort of conventional wisdom that a company can sell anything in every thing and do it better than

all the traditional retailers. And that's exactly what Amazon did, and it did it in the space where you have these giants, and that's why it's market capitalization took off So the answer to your question is, of course, I think they can do what they prove and they can do it. It's what they're about, um, you know, and they start with the right, seems to me focus, which is what can we do to improve the customers experience? And that's very consistent and just give you ten seconds.

That seems ironic in a world where that's what you're supposed to do with every business. Yeah, I mean, you know, you could always say better lucky, that's smart that I would say Amazon is lucky and smart. Well done, Thanks very much, Matt Winkler, Bloomberg Editor in Chief emeritus, talking about Amazon dot Com how it is a value stock. President Donald Trump is scheduled to make his selection for the Supreme Court known at nine pm Eastern daylight time

today and we will of course cover that live. Here to tell us more about this appointment is Greg Store, our Supreme Court reporter. Greg. Always a pleasure to speak with you and learn what's going on. I have a question having to do with whoever or whomever rather is selected and perhaps approved by the Senate to uh fill the seat vacated by Justice Anthony Kennedy. What is the likelihood that people change their minds once they become an

associate on the Supreme Court. Well, Pim, if you would ask me that question thirty years ago, I would say there's a decent likelihood people do change. And you look at a justice like David Suitor Um, who has touted as a conservative when he joined the court and then shifted ratherly to the left. Nowadays, however, that both parties and especially the Republicans, have gotten very very good at picking the type of justice who will be a reliable vote for them down the road, we don't see as

much shift these days. And in the case of Justice Gorset, Donald Trump's first appointee, he very quickly asserted himself as the kind of conservative justice that the President and his supporters envisioned him him to be. And um, you know, I expect we'll have the same thing with this nominee and they will probably be reliable votes going forward. So would you don't subscribe to the notion that the Supreme Court follows public opinion? There is a certain, uh sense

in which that is true. Absolutely, the Court does, as a real general matter, have have a sense of the public sentiment and the polls. Uh, you know, And we are we are potentially going to have a very very conservative Supreme Court, and maybe that will test the notion that justices cannot change. But you know, this list of people that Donald Trump is choosing from is a list put together by the Federalist Society. It has been vetted to a much greater extent than to go back to

Justice Suitor. That appointment was some some three decades ago. Uh, And so the chances that somebody will actually move significantly to the left are much less than they used to be. Greg, Well, thank you so much for taking time with us today before all this excitement. Noah Feldman, folks, and you'll see this. It's not out yet, but Noah Feldman, the great Harvard calumnist for Bloomberg, Greg can't uh mentions the four candidates

onesie insider, onesie outsider, et cetera. And then there is Judge Barrett, who, to be blunt, Greg, he raves about can they forget that she's a conservative? I mean, is it do they actually look at their credentials versus their politics anymore? Well, they look at the credentials, sure, but um, I think the politics are much more important now Judge Barrett is Uh, it would be a very interesting choice.

She is the least experience, she is the youngest, she's only forty six, and she's the only woman on the list of four that uh it seems are the president's finalist. She has also as an academic as a law professor at Notre Dame, written some things that are going to get a lot of attention. She's made very clear she has a personal opposition to abortion. Uh. She has certainly raised questions about whether she would vote to uphold Roe v. Wade,

and I would say strongly suggested she would not do that. Uh. She in that sense, UH might be the most alarming to Democrats and liberal groups. She could potentially be the most dangerous justice from their standpoint, UH and the one who who would serve the longest. So there will be uh, you know, cross cutting factors that will be upfront if

she does indeed get the nomination. Gregg's store, Is there going to be anything different this time around in this sense that they're going to be many challenges to existing decisions. Whoever is UH nominated to fulfill Anthony Kennedy's seat, that you could see a big public reaction that will change the dynamic in Washington. It's a great question, PIM. I don't know the answer to that. UM. Democrats are certainly trying to make the case that Roevie Wade is at stake, Um,

and they have a pretty good argument. They're given that you have for justices right now still on the Court who have at least voted to uphold significant restrictions on abortion rights. UM. You know, that's that's obviously a huge factor that hasn't been been at issue previously in quite the same way. UM. You know, traditionally this has been an issue where Republicans have cared a lot more about

the Supreme Court than Democrats have. Again, as we see the court now potentially becoming a truly conservative court, that might also change and that might be a factor in the November election. Um. But that all remains to be seen, and it might matter a little bit who who the President nominates. There are some people who like Judge Barrett, who might be uh, you know, raise more red flags and be more of a target for Democrats than a couple of the other potential nominees. Who is the next

justice Associate Justice who you believe will will leave the bench? Well, certainly Justice Ginsburg, who is eight five Justice Brier, who just turned eighty. Both liberals are people we look to because they are the oldest justices. Uh. It seems very clear that Justice Ginsburg in particular is not going anywhere if um, as long as Donald Trump is as it it uh so the question will be can can her health? Um? Uh?

Can she maintain her health and her ability to do the job and the same thing to lesser extent for Justice Briyar. The one that we might look at as a potential retirement to give Donald Trump another seat would be Justice Thomas, but he's only seventy and could easily serve for another decade. Greg, is there any strategy to the President's thinking and that he says, I'm gonna pick Judge A of A B C D and keep on the burner Judge C. Dear you know whatever I mean?

Is there a Is there a two step process here? Yeah? There there has been some talk about doing that with Judge Barrett and and leaving her available. If Justice Ginsburg retires, um in part because she's a woman, it would be a woman replacing a woman. And and if Justice Ginsburg leaves, perhaps there's a you know, uh more of a call for for a woman, and also because she is the

least experience. She is a Donald Trump appointee. She's only been on the Federal Appeals Court for about eight months or so, and it would let her get a little more seasoning and uh, you know, perhaps make a smaller, stronger case for her confirmation. Gregg, were advantaged by your exceptional abilities. I should point out that, uh, Mr Store went to a law school in the Charles River in Boston,

in Cambridge. But but Greg, between you and Noah Feldman, I mean the columnist Professor Feldman raves about his fellow clerk at the court. Do guys like you care that Professor Noah Feldman raves about Barrett. Sure, and it's certainly you know, this is the sort of thing that she gets the nomination. Uh, you know, Republicans are going to be holding up Professor Feldman as look, here is you know somebody who disagrees with her on a lot of stuff, but says she is um highly qualified and has a

has a great mind. That will absolutely matter. It mattered when Neil Gorsuch was was nominated. One of the people who supported him strongly was Neil Catiall, who was a the top Supreme Court lawyer in the Obama administration and who ended up arguing the case against the Trump travel band you know that was held up. So, yes, those

things will matter. They matter a little bit in terms of the politics of it, and they matter, you know for people who do think that qualifications matter, that you can't just throw anybody on the court and that uh, you know, even people who are old school and think you ought to vote to confirm somebody if they are qualified, even if you don't agree with them on on a lot of issues, Greg Store, what do you believe to be some of the landmark cases that the Court will

face next term? Well, right now, we don't have a whole lot of landmark cases. UM. I think the issue of partisan jurymannering is very likely to come back. There's a case out of North Carolina that, uh it seems heat up for consideration later in the term. Um. A lot of abortion restrictions out there, Uh that could certainly

come up very soon. And this whole issue of uh discrimination on the basis of sexual orientation and whether people have a have a of just our free speech right to say I don't want to, um, you know, participate in the gay wedding. That issue is coming back to the Court as well. Thank you very much, Greg Store our bloom focas Supreme Court reporter, and of course we'll be uh covering that live at this nine pm Eastern daylight time when President Trump is scheduled to announce his selection.

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 onwo