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Prasad with this magisterial book, The Dooload of Cornell on Trade, Professor, what is a single thing you would say to a freshman class at Cornell this morning about this court decision?
It is a very important accession of the Court's authority in terms of making sure that the separation of powers between the executive branch, the legislative branch, and the judicial branch, you know, stays in place. There has been a lot of concent about the rule of law and what is
being done to that. But it's very good that the Supreme Court really put its foot down and made it clear that at least the state authority that President Trump has been using to invoke tariffs against the broad range of trading partners, that's not quite on.
You do this, You get on planes and you go advise the French, the Germans, you advise Singapore. What is your advice to the continent of Europe, is they respond to this trade bombshell patience.
I think the key issue right now is how this is going to play out. The Trump administration has made it abundantly clear that it's going to use other tools that it has in its arsenal in order to reimpose tariffs at one level or the other. But the question of how effectively they can do it, how broadly they can do it, and how quickly they can do it,
I think it's really on the table right now. Many countries, including economic areas the European Union, have in fact been engaged in negotiations, have set up trade deals for the US already, and some of them have gotten better deals because of this core tooling. Some of them have gotten worse deals. But I think the reality is that nobody quite knows right now what the trade landscape is going to look like, what sort of tariff measures are going
to be in place. So I think right now waiting is probably the best thing to see how it does settles.
So as far as this, if I'm a you know, some of the countries trading partners in the US, I mean, if I've already struck deals, what do I do here do I come back to the US and say, hey, we need to renegotiate.
I'm not paying thirty percent here, I want the ten or to fifteen percent.
What happens here, That's right.
Many of these countries have made economic concessions and it has caused them some political capital within their own countries. So I think countries do want to stick with the trade deals if this core ruling leaves them in a better position. But there are many countries who struck trade deals, made these concessions, and now find themselves in a worse position because Trump has imposed these tariffs across the board using Section one two two, and that is certainly going
to mean that renegotiation is needed. But the reality is that the US administration has limited capacity to deal with
all of this at the same time. But certainly if a country has struck a trade deal and now is in a worse position, then before the deal they need to make a pitch for renegotiation or at least for the Trump administration, you know, to adhere to the terms of the deal and give them exemptions from this broad fifteen percent tariff that Trump has now applied across the board for countries set there in the midst of negotiations.
Certainly it gives them a stronger bargaining hand because the Trump administration clearly cannot apply tariff's villy nilly across the board. So I think those those negotiations are probably going to take a bit of a pause.
S far.
One could argue that, if nothing else, this Supreme Court ruling just reintroduces, I guess, a level of uncertainty into trade global trade like we had back almost in April of last year. How do you think global trading partners will proceed over the coming months given the Supreme Court ruling.
The level of uncertainty, as you've pointed out, Paul, is just enormously elevated right now, because, yes, Trump's actions with tariffs are quite you know, peremptory mercurial, and you never quite knew what was going to happen in terms of the levels of tariffs, who would be subjected to them. But there was a sense that at least some certainty was returning to the process with some tariffs being taken off, some trade deals being struck. All of that is off
the table right now. The more interesting question is how businesses are going to respond because to them now the landscape hascome completely uncertain, and the presumption is probably that they're going to retreat from trade and try to protect themselves from further on seventday.
At the moment, that's right, I want to go as we're to finish up here, and folks, I can't say enough.
I'm gonna say it.
With Zwaran the Doom Loop, I'm like he's got Circe from the Game of Thrones in chapter one. I mean, I had no idea as far as Circe from the Game of Thrones was doing economics. She was. She was at Cornell. She was so so difficult at Cornell. She melted snowduts, just like in show. I look at the Doom Loop here and for me it's Apple lawyer up. They had eight hundred million and one point one billion, maybe one point four billion, some model of three point.
Two billion in tariffs.
His tim Cook can assue the United States of America to get that money back.
That's going to be a long and very complicated role because certainly I'm traveling all the refunds, all the tariffs that have already been paid, and sending out refunds is going to be a massively difficult administrative process, although some argue that, you know, it's quite easy to just turn the money back, given that the US administration has a
very clear indication of who paid tariffs and when. But I think there is going to be again some holding off on this because the numbers involved are really large at the moment, and it's sort of entirely clear this administration is that capacity to turn things around or wants to, because again with new tariffs coming into place, and some of these decisions now likely to rest on what tools
the administration decides to use. I think all the uncertainty with the tariff landscape means that corporations are not going to be jumping up and down to get the tariffs back, especially the large ones. For the smaller ones that live day to day, it's a much more important issue because they need that money.
Yeah.
I don't disagree with that anyway. Shape for an asurpisade. Thank you so much for joining us, Stay with us. More from Bloomberg Surveillance coming up after this.
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Short a visit right now with Torston Slock with Apollo Global Management. He has spent the weekend and has wonderful continental europe experience. Torston, how do you think the continent will respond to tear us? The zeitgeist over the weekend is Britain hammered, China, Brazil, etc.
I mean, how does the EU adjust?
Well, the European Commission put out a statement yesterday where they clearly said that they were going to honor the train deal, but at the same time way were of course asking questions about well, what are the exact conditions for what we're doing going forward. So the Europeans have already stated that they are going to honor the trade deal. They expect the US to honor the trade deal. But it's very clear that this is indeed injecting a whole
new level of uncertainty. Also on the Europeans Pod.
With your work at Apollo Global Management.
Is there a sum market reaction to what this does to confidence?
Say out of the fourth of July.
Well, the channels now is of course that Section one two two tariffs, the fifteen percent. They only count for one hundred and fifty days, and then it remains to be seen whether they will be continued by Congress. So in that sense, that's a whole new level of uncertainty. The other level of uncertainty also is that the fifteen percent is on the whole world and not on individual countries. So this is also raising questions about that it's no longer as targeted as it was before.
It cannot even be targeted just to Europe or to.
Say Korea or Japan. It is on literally every trade partner that the US has. So those two dimensions, both of the time length and also that on everyone, is
indeed injecting uncertainty. I mean, well, of course many people might even have looked at this and say, well, Friday it was ten percent, now it's fifteen percent, And that's of course we're raising questions on their thoughts also about what is exactly the level of terrorists in particularly when we get two hundred and fifty days down the road.
In Claudia Sampaul was blistering and saying that even these new tariffs could be legally.
Challenged exactly so in TOURSA, what are our how do you think our trading partners will react here. It's just yet another kind of unknown thrown into the discussions of trade policy. How do you think they're going to react here?
Well, I think that again the Europeans response, and I think also the fact that the Indian mission to the US to trade to do trade negotiations was canceled is telling you also that they are beginning to be at least some legal issues around both of course the existing trade deals, but also what might be the framework going forward. They are likely thinking about, well, if we signed a document today, is this going to change soon?
Again?
Are they going to be any legal issues? Ascodia Sam was saying that there one two two is actually under the conditions that there has to be a balance of payment crisis, which is very different from a trade crisis or a trade.
Deficit and a balance of payment deficit.
So from that perspective, there's also legal challenges likely going to come on this section one two two the tariffs. So that's why there's just a lot of things. The dust has really been whirled up. We really opened up the macroeconomic text boogainst national finance, because there's just a lot of things that now people need to think very hard about it, and I think that's what the rest of the world is trying to do at this moment.
Torsen.
Despite all the global trade uncertainty over the past fourteen fifteen months, the US economy performing well. How do you put that into context?
Well, because in the background, while we've had the trade ball especially of course this diberation day, we've had a very strong boom in AI spending, and we've also had an industrial renaissance. The dustrial renaissance really was already started on the Biden with the Chips Act saying that semi conductors need to reproduce domestically. Of course, Trump has also focused on pharmaceuticals, need to produce domestically. That's also non focused on defense. Of course, need to also grow and
this is us for a renaissance. This is indeed also something that's a tail into growth. And finally, let's not forget on January the first, we also got the one big beautiful bill, The one big bulti of Al bill was changes to tax laws that were done retroactively, so it actually took effect of first of January twenty twenty five. That means that when households get a tax refund here in April and March. Well, that tax refund, which normally is around three thousand dollars, that will not go up
too roughly around four thousand dollars. So we have a fairly significant boost coming to consumer spending here in March, April, and May. And on top of that, we also have immediate expensing where companies can write down their capex expenditures right away, which is also a boost to capic spending.
So the short answer to your question is, yes, the.
Trade bill has certainly been a hit wind, but while that heatment has been playing out, we've had a number of tailwinds that, of course have been the reason why the economy has continued to do so well.
Have you got a rationalization, tourist cinem a one point four percent GDP was due to shutdown. Did you bring down a real, real GDP view forward for the rest of this year.
No, because also exactly as you're saying, Tom, this PA clearly said that the one point four number, if we take what the shutdown accounted for, there was roughly one percent is point, So that brings you to two point four which is higher than the Congressional Budget Office estimate of two percent, which is the long run growth rate for the US. So in that sense, the US economy outside of the shutdown, of course, was actually still doing reasonly well, and they slowly out of the label market.
As you also have discussed so much, it really is mainly drawn by labor supply that has been falling and much so much labor demand. So that's why you can still have strong GDP and slower job growth. But slow job growth is not because of weaker labor demand, but it's really because the weaker labor supply. So taken together, the US economy actually continued to do well. That doesn't mean that there are still risks that we could hit
the rough and not go down straight the fairway. We actually think the risk of hitting the rough and not going straight to the whole here it has increased from ten percent to thirty percent. So we are watching the tail ridge to the opto very carefully, not only of course because of AI and what's going on with the trade ball, but also because of issues. Just as comment debt, interest rates could potentially see a quick move up and down because of the inflation surprise at imposting and all
SAX saying inflation is going to go high. So that's a number of other things that could throw us off. But the bottom line is the economy continues to do well.
Or is there can post and looking at wage inflation, that maybe the surprise of the year. Turst and Sluck, thank you so much with a puddle.
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It's one of.
The most twisted parchments and economics out of Brown Universe, with all of the fabulous heritage there of William Poole and other giants as well. They're not to the crazy Mathewess Paul of San Diego, which is like the most mathematical. I mean, they're doing standard deviations in the hallways and
it's nuts. Martha Gimblet survived at all. It has provided a leadership at the budget lab at Yale, and as we go from stumbling crisis to stumbling crisis, everybody is tuning in with more and more intensity to the academic work. This weekend they published a tour de force. I put one chart, figure five out. I'm going to translate it now with political viciousness for Martha Gimble.
Martha, your distribution.
Of tariff effect and then adjusted for the fact will substitute. And you take it after tex when you take the tariff analysis of the budget, lab after tax, after some form of rental housing measurement, after some form of basic food measurement, how is the bottom half going to survive these tariffs?
You know, it's not going to be great for anyone, but tariffs are also regressive. It's much much worse for people at the bottom. And I think it's also important to keep in mind that this combines with the One Big Beautiful Bill Act from last year, which yes, you know does send money out into the economy, but is also regressive. And if you combine the effects of teriffs and the One Big Beautiful Bill Act, it's only really people at the top who are better off on net.
And so if you're thinking about what's going to happen with consumer spending in the future, we're going to be facing consumers towards the middle and bottom who are a lot more constrained because prices are going up for them at the same time that they have less spending power.
So, Martha, what did the Supreme Court ruling mean for the overall tariff rate? Is it HighRes it lowers the same?
I don't know.
Well, yes, that is an excellent question. That's partly because the tariff rate has been a lot of different things over the weekend. So we started at sixteen percent going into this Scotus ruling. Then scot Has ruled, it went
down to nine. Then President Trump announced tariffs, but they didn't announce the exemption, so it looked like it went up to fifteen percent, and then they announced the exemptions, went down to twelve, and then he announced that we were going to fifteen and went back up to fourteen percent. So we've had like five different tariff rates in the space of thirty six hours. I should also note when I say, you know, twelve fourteen, he's using an authority
that expires in one hundred and fifty days. Now they've said that they're going to put other tariffs in place that will, you know, in some way was replicate these tariffs That might be true at the overall effective tariff rate,
that headline number. But if you're a business, you need to know, wait, exactly what products are going to be tariffed, exactly what countries are going to be affected, And they haven't provided clarity on that, and so what we're in is this big sea of uncertainty that we're all going to be sitting in for quite some time.
So, boy, it's so hard for just to keep track of what the tariff rates are. Do we have any confidence that they're being collected accurately? Because I can't imagine some person, it's some loading doc, you know, figuring all this stuff out here.
I will say, at one point in twenty twenty five, a reporter called me and said, do you know what the tariff rate is on this very specific product? And I said, I have no idea. That's a question for CBP And he said they were my first call. They said they couldn't tell me. It's very confusing, and you're trying to keep track of all these different things and when things land when they landed. This is it's really hard to do business under these circumstances.
Give us a window, Martha, into this.
How many experts at the Budget Lab of Yale were working on this magic Friday and into the weekend. How many people were making the soup?
Yeah, we had four. So I will call in here John Rico, John Isln, Josh Kendall, and Mattie Lee. So everyone please take your local So.
Like Uslin's got substantial like Berkeley, Maryland chops, he's worked at CBO. And that did the adults in the room, these young turks who are brilliant, do they see the same legal sequence ballet again of a court, an appeals court, a Supreme court, or for all our listeners and viewers, Martha Gimble, can we get this done faster?
I don't know.
I mean, so the section one twenty two, which is the already that they're using right now, you've already seen people over the weekend debating whether or not it applies to this particular situation. And you know, once again, are these tariffs legal? So I assume that there's going to be litigation and we're just going to go through the whole thing all over again.
Martha Gimblale with us a budget levity, and we continue here. Douglas Irwin of Dartmouth College definitive his book Against the Tides Change the landscape of tariff analysis thirty forty years ago with US tomorrow as well.
Paul Sweeney with Martha Kimball.
Martha, you know, how about some of these training quote unquote partners that have signed I guess, big reciprocal deals that are at rates perhaps higher than the ten or fifteen percent wherever we are. Now, what do they do? Did they come back to the negotiating table and say, hey, we want the better rate? What do they do?
Yeah, that's a really great question. There was just reporting out this morning saying that Europe is putting their you know, deals on hold until they find out what on earth is going on. There's a lot of uncertainty at this point. You haven't asked me about refunds for people who have already paid merits as another source of uncertainty. You know,
the court didn't really rule on that. The administration has heavily implied that they're going to fight any payment of refunds, So people are going to start sumer ring.
You know.
It's it's when you think about tariffs. There are negative economic effects that I think about with tariffs, But for me, overall, the biggest negative comes in through the uncertainty and people being unable to make decisions and not knowing what's going on, and we certainly did not see a decrease in uncertainty over My.
Answer is, as an amateur, this gets decided at the ballot box, as it has back to eighteen ninety and frankly before that that was coming off the Panic of eighteen seventy two. They had the enjoyment of the Panic of eighteen ninety three three years later or basically then through the Republicans out of office. Martha Gimble, do you and your team see a political ballot back solution to our tariff discussion?
You know, we're a nonpartisan group of economists, so I want to mention in trouble. Come on, I will leave that to the political scientist. The one thing I will say is, you know, because of the one hundred and fifty day limit on the type of legal authority that they're using right now, this is actually going to become almost by design, a very live issue over the summer,
just as we're heading into the midterms. So I think you know, depending on which way you think this is going to go, it's going to be established a discussion.
Then can you calculate the fiscal whole. Now, can you figure out with the just the craziness of what Paul seventy two hours, is there a new plug in that CBO is going to have where the money's not there?
What do we do?
Well? First of all, shout out to CBO who managed to get their updated budget and economic outlook out right before this, so I know the animals. They're beating a size side of relief, you know.
There.
They did say that they expect that the administration will be able to, under different legal authorities, basically recreate the tariffs and it won't have a huge impact on revenue. We're still waiting to see again what a final mix of tariffs looks like. If you look at the fifteen percent and it's extended after one hundred and fifty days, you know that takes you down to two trillion over ten. We were previously at two point three trillion over ten,
So you've lost three hundred billion. You know, that's a substantial amount of money, to be clear, but you haven't lost the full shebang. You're still going to get substantial amount of revenue.
If Apple wants a big check, or name any other big company, are the tariff monies in a piggy bank somewhere or have they already Dare I say, have they already been spent?
Well, it's sort of an interesting question actually of like, you know, how good has the record keeping been on this? You know, it's not like they've been kept in a you know, special box in case of you know, how the Supreme Court ruled. Now you know, that doesn't mean that they can't give refunds, but they have to track down who paid what in what way. You need the documentation. It's just going to be a mess.
So what is the the bold case for just broad tearffs like we're seeing this administration. You're an economist, what there's got to be something there for this administration to hang their hat on.
You know, almost all economists would say to you that there is not. You know, we've started doing a tariff impacts tracker where every month we look at the impacts of tariffs and you know, are we seeing that improvement in manufacturing employment that the administration said we would get from tariffs? No, has not been the case, right, things like that, we are seeing some sign of tariffs showing
up in durable prices. So, you know, so far what you're seeing is the beginnings of what economist said was going to happen, which is on net bad for employment, not ideal for GDP, and a rise in prices.
Paul is the most uncomfortable questions, Martha. It's made more so by the exactly Martha, you're a trooper. Thank you so much. Folks may think Tank of the Year last year, the budget lab at Yelle.
There's a million other people doing spectacular at work, but wow, had they become influential?
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I mean, in silence, you don't really know right now.
I know in New Jersey Translit will wait on them, but I suspect I'll be spending another evening in the metropolis.
We will get an update now from a gentleman with experiences, this legit major storm experience. General liber joins us now with the mt A Jenna. What's your biggest headache right now?
Listen?
We got service running. You know, the challenges are are well known. We got to keep our snow fighting equipment. We got jet engine snowblowers operating on the subways, uh, literally clearing the tracks, especially in the outdoor areas. The challenge of you know, buses moving around is the same as any vehicle.
But we are meeting the challenge, Tom Paul. We are.
We're running full subway service, albeit on a little you know, reduced frequencies.
We got buses out there.
Metro North is operating on a reduced The one piece of our system that is on suspension is the Long Island Railroad. It's no secret that Long Island's getting hammered and that wasn't the safe place to operate. But otherwise subways, buses, commuter rail operating.
How does the wind play into it? I mean, I'm calling it a snow it cane. I get the temperature snow is snow, But like the wind on the various trunks that you have, I mean underground, it doesn't affect it. But how do you adapt to the wind?
Generally, Burt, the issue with wind mostly is actually the impact it has undrifting it. You know, when you have, for example, we have some areas of the subway system that are what we call an open cut. That's like a little valley, a depressed area below grade, but it's still open to the sky and snow tends to accumulate, and the wind pushes the snow into those areas. The drifting on the commuter railroads sometimes we'll cover the third
rail are source of power. So that is and obviously for people who are driving buses and even trains, the visibility issues associated with wind. That wind is the dominant factor in determining when we can bring back Long Island Railroad service at the east end of our system.
So what is the latest thinking, johneral about the Long Island Railroad here, because again, as you've mentioned, and we've heard from the weather folks, that's really bearing the brunt of the storm.
Yeah.
Well, we did an orderly shutdown last night at about one am. The goal is always to get everybody home. We did that last night with some extra service late late and now we're going to be focused on orderly resumption of service, hopefully in time to operate tomorrow when the world will will be getting a little bit back to normal. So that's the approach that we take safety first, you know, and take account of where the snow accumulations
and the drifting may have impacted on service. You know, one thing to bear in mind is in our big train yards, that's where we tend to get, you know, the biggest drifting issues.
And you know sometimes that.
Inhibits your ability to put cars into the system into service. So we'll be digging out from in the yards and making sure that again the third rail and the tracks themselves are clear of snow.
We continue with General liber MTA share quality time from his crisis center, Paul Sweeney with General liber Jenna.
So, all your personnel, the critical personnel of the MTA, how do you manage getting those folks to where they need to be, because, boy, they have to get there just like the rest of us.
It's part of the.
Deal when you sign up to work for the MTA that you may have to come in under extreme circumstances. When the rest of the world is being told to stay home, our workers are being told to come in and they do. They work through the night, they work heavily. Yesterday we got seventy thousand employees at the MTA. Thousands of them have been many of them have slept in you know, in bus garages or in rail the rail Control center where our head of Subways spent the night at the bus command center.
It's part of the deal working for the NTA.
And you know, I talked to Governor Hokel in the last you know, in the last hour or two and uh and and she's really focused on on you know, a tip of the hat to the to the workforce.
A general lever.
I love artificial intelligence. It can ruin your day. General, you gotta help me here with the one point eight million dollars per inch? Myth Now, this is a Department of sanitation. Did every inch of snow costs one million dollars? What's your every inch of blizzard that costs the MTA?
Do you have a number? Even if you don't tell me, do you have a number in your head?
I'll tell you the absolute truth. I have no idea whatsoever.
It's that you've given me a new metric.
We we use analytics here like crazy to evaluate how well we're doing, hopefully to operate more efficiently every day. You know, revue you know, costs per car mile, costs per revenue mile for it subway and bus and commuter rail. You've given me a new metric to study. But right now I have no idea what to say to you.
John Old.
This is the second big, big winter storm of the season. It's arguably one of the biggest storms we've had in decades in this area. How's your system kind of holding up? Does is there a cumulative effect where boy, we can't We really don't want to have a third or fourth storm this season.
Honestly, the challenge is, uh is you know the same every time, which is you have to get the snow off. You have to make sure you have enough people to operate fully. You have to chain all the buses, you have to move car you know, subway cars around and put them in the tunnel, store them in the tunnels.
Uh, you know it's not.
That we we we every storm makes it harder. To the contrary, you know, for better, whereas we're getting better at preparing for these because we've had repetitive storms and we're going to continue to try to get better. In the air of climate change, we're dealing with all kinds of extreme weather events. You know, right now we're forgetting about torrential rainfall and and and rising sea levels, but those are issues for the MTA as well.
What does the morning look like. Let's say four or five am Tuesday morning. Mister Lieber, can you say back to normal.
I don't know about normal, but listen, our friends in at the Department of Sanitation are clearing not just the streets but the bus stops. That's really important, something that I know the Mayor wants to do better at compared to the first time around, so that our bus people who depend on buses will be able to get on and off them without having.
To climb climb over a four foot mint of snow. Who shots intant issue.
That's brilliant.
Who actually picks up a shovel and shovels a bus stop? Who is that person?
Well, it's a lot of it's it's folks who work for the Department of Sanitation.
There's some implemented.
This is City of New York as opposed to MTR but they're supplemented by Parks Department workers and they're actually hiring folks off the street for extra shovelers this time around. So I'm very hopeful that that particular challenge will be addressed and we're we're going to be clearing not just the tracks but also our yards as I mentioned, which is where trains tend to get stuck.
Uh.
And and there are you know, a lot of complex switches that can inhibit things that they're not properly in order one.
More question, Paul, you were you were impressed by the buses.
Yeah, just walking to work this morning, I saw some of the buses here. Talk to us about the buses because boy, there, I haven't seen too many snowplows out yet. Because the storm is still raging here. How do the buses adapt here?
It's it's old fashioned stuff, Paul.
It's we put chains on every on the tires of every bus, and that that that gets done in the days.
Leading up to, uh to the storm.
When we know it's coming, you know, forecastings get better and better, we chain the entire fleet, and we take all the articulated buses, which are you know, tend to move around a little more in slippery conditions. We take them out of service, and we make plans accordingly.
Gennal, thank you so much for taking precious time this morning.
This is the MTA of New York City.
As they deal with the storm, as I'm sure that we're seeing in Philadelphia and Boston.
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