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We begin with Douglas Irwin of Dartmouth College. Against the Tide is a definitive history. I read it cover to cover. Many other people just buy it and put it on a bookshelf so they can pretend they read it. It is trenchingt it is deep. And one of the examples you see of that is the actual work of Doug Irwin. Go back to nineteen ninety seven and you get a twenty six page paper out of the NBER Higher Tariffs, Lower Revenues analyzing the fiscal aspects of the Great Tariff
Debate of eighteen eighty eight. Professor Irwin, thank you so much for joining us. Are we reliving McKinley in eighteen eighty eight?
You know, the President referred to the eighteen eighties and his remarks yesterday, and I think he's succeeded in bringing us back there. First of all, the average tariff on total imports is going back to levels we haven't seen since the eighteen eighties or eighteen nineties. It's taking it from about two percent three percent today up to perhaps thirty percent, and that's historically unprecedented. He talks about the
revenue effects as being important tective effects. These were all things that were debated in the late nineteenth century, and we're reliving that in a real way.
Off your remit, but I'm going to go there. McKinley lost eighty six seats in the congressional election of eighteen ninety. Is Trump going to find the same fury at the ballot box?
Well, I think, as you've just reported, you know, car prices are going to go up. All sorts of other items that we hadn't even thought about are going to go up as a result of these tariffs, from avocados to phones to shoes. And we've seen in recent years the electorate is very sensitive to higher prices than inflation.
And so, once again speaking historically, anytime there's been a major increase in the tariff when there hasn't really been a societal consensus behind it, when there hasn't been a lot of public support for it, the income party gets punished at the midterms, and that happened after Smooth Holly. That happened after the McKinley tariff in eighteen ninety, and we could be in for a repeat of that.
Professor Erwin, I was just reading your article in Foreign Affairs Magazine, the Incoherent Case for Terrorists. It's very similar to what we heard from Professor Furman from Harvard yesterday that Tom and I had a conversation with what is the counter argument that the President is getting in the White House for terrffs.
But I think actually yesterday provides some clarity about what the purpose was. As Jason and Chad and I and others have pointed out, we don't know are these primarily for revenue, primarily to reduce the trade deficit, primarily to reshore jobs in manufacturing, primarily to strike better deals through reciprocity. And the formula used to calculate these tariffs was based on the trade balance, so it seems like that's the
major consideration that they're trying to aim for. But the problem is bilateral tariffs may not affect those bilateral trade balances may not affect the overall trade balance. Of course, if we go into a recession, the trade balance will shrink, but that's not exactly the mechanism by which the administration wants to reduce the trade deficit.
So at the end of the day, professor, how do you think these tariffs will be implemented? I mean, how does the mechanism work? How are we as consumers going to kind of see this, do you think?
Well, you know, businesses, most of US imports, at least a large chunk are intermediate goods, components, industrial supplies, and things like that. So it will be businesses that will first feel the pinch, but then of course that raises their cost of production or they have to seek alternative sources of supply, and to extent their higher prices they
have to pass those on to some extent. Of course, it sort of trickles down in some sense and as whittled down as you get along for the production process. But it's mainly firms that have to adjust these in the short run, and then consumers will see a neptick in some of the prices of the goods they buy later on.
The grievance here in folks who are with Douglas Irwin and Dartmouth College Edgiar Denny coming up Elizabeth Economy with us in the nine o'clock are really focused on China, Professor Irwin, The reality is the grievance and retribution of mister Trump and the assembled workers, construction workers, laborers yesterday wrapped around senators in the rose garden. The grievance is a stereotype starts. It's not maple sugar make up in New Hampshire. It's textile workers in North Carolina who lost
their jobs to Vietnam. So fancy people in a bow tie could buy a blue shirt made sixty miles northwest of Hanoi? Did he help North Carolina yesterday? Discuss with us this core emotion of America that we were taken to the cleaners by globalization and we want our pride back. Discuss that emotion, Doug Irwin.
No, that's certainly a visperable, visceral reaction among many people that we've closed many factories, we've lost manufacturing jobs. But as I and many accomas have pointed out, most of those job losses are due to automation, not due to offshoring. Even if we bring back some of the factories to produce these things because the cost of importing is much higher, the jobs probably won't follow. Even with textiles and apparel,
a lot can be automated. And so, you know, when you think about the steel industry, which has always been near and dear to the President's heart. In the nineteen eighties, it took ten worker hours to produce a ton of steel. Now it takes one. We're producing just as much steel, but we just need many fewer workers because and the type of workers that we need to produce steel has changed from blue collar to white collar, from hard labor to engineers monitoring equipment, and so the whole nature of
the economy has changed. So we're not in the twentieth century anymore. We're in the twenty first century. And to go back to the nineteenth century is going to be really a hard pull. And that's why the markets are reacting the way they are.
What do you recommend from fancy handover? You should see handovers? Gorgeous? Love it absolutely winnival there, it's just gorgeous. What do you say, dugger when too White River junction leveled for forty.
Years, that's exactly we're right near here in Hannover, right near many communities that were devastated, But the devastation goes back decades ago, even before the globalization, before and after before the wto structural change in the US economy, a lot of those jobs went from the north to the south. If you go to Manchester, New Hampshire, right along the Merrimack River, there's a mile long brick building enormous used to produce boots, shoes, and textiles, but it hasn't done
that for a century. Those jobs were lost in the nineteen fifties or before. Once again in the pre globalization era and those jobs went south. And the same thing has happened with Indiana, Michigan, Ohio, the rest belt in the north, A lot of those we're still manufacturing stuff. It's just in the south it's a different region where labor costs are lower. Union's not so pervasive, and so we think we've lost things as a nation, but we've lost certain regions have lost out and that's a very
difficult thing to rejuvenate with tariffs. Tariffs are not going to help White River Junction Professor.
Does the US economy risk being isolated in the global economy?
Here?
Yes, I mean you can see this, there's so much uncertainty about what's happening and what's going to unfold. So it could be that this sparks reprisals. I know that EU is considering countermeasures and what have you, and so the US gets isolated and other countries retaliate in kind. But it also bring a flood of diplomats coming to Washington seat trying to seek a deal to get rid of this terrace on their particular country. Now so many
countries have been targeted. That's going to be a lot of bilateral discussions over the next few months and a lot uncertainly about what's going to happen. But it could be the damage could be mitigated over time through that way. But we'll just have to see sort of see how it works out.
And your community across the nation, we say good morning to all of you on Apple car Play Android Otto Douglas Erwin with US of Dartmouth at College, Edward Jard Denny coming up here from your Denny Research and Elizabeth Economy. In the nine o'clock hour. After Edieard Denny, we have a Secretary of Commerce with Jonathan Farrell looking for that'll be a heated conversation to say the least Edgiar Denny.
I think I learned from the path from London School of Economics to Chicago, a guy named Hayek said we would clear markets. All of the press this morning, from Erwin, from Furman, all of the experts that we talked to posing at Peterson Institute, Chad Bone, this is a disaster. Professor Irwin Hayek wants us to clear the market. From your economics and trade analysis, How do we clear this train wreck?
Well, unfortunately, what can go up very quickly and fast, namely tariffs, don't necessarily come down quickly or fast, namely tariffs. We've seen that with history. So cleaning up the mess caused by Smooth Holly in the nineteen thirties and the Great Depression that took decades. The tariffs went up fast, but they came down slowly because you have to negotiate, because vested interests have a stake in perpetuating them that
we weren't there before. That governments become addicted to the revenue. I mean, if we're using these tariffs to offsets some the tax cuts, it's going to be What that means is to get rid of the tariffs, we're going to need to increase taxes elsewhere, and that's always a politically difficult thing to do, so reversing these things once these steps have been taken is very, very difficult.
With us two giants of the business Douglas eve And and Dartmouth College and from Yale University, and of course has work with CJ. Lawrence. Nancy Lazara on the other day ed Your Danny from Your Danny Research this morning ed the reaction to Doug Erwin's failed trade policy is a Dow down eleven hundred future points? Is this the beginning of a bear market? In a lesser MAGS seven?
Well, I think so. I mean, up to now the bear market has been the Magnificent seven. The S and P four hundred and ninety three was actually flat for the year until this hit the fan. And now I think we've got a broadening of the market to the downside, and clearly we're solidly into correction territory. And once you do that and you've got a major policy failure, you
run the risk of turning into a bear market. This has been kind of a free fall in the S and P five hundred, not so much in the the equal weighted SMB five hundred.
Let's turning now, right, Let's get in one more question. Your Denny's playing paddleball with Blanche Flower this morning up at Dartmouth, so we got to squeeze in one more here with Doug Irwin. Doug, we need to rewrite Against the Tide. What's the new prologue the new epilogue looked like for your classic textbook this morning.
Well, you know, Against the Tide is more about the intellectual history of trade, and there I think the wisdom of Adam Smith still resonates. He had so many insightful things to say. He said, there's nothing could be more absurd than this whole idea of the balance of trade. And that's the whole idea behind these biolateral tariffs. And this other book called Clashing over Commerce, which is a history of US trade policy. Clearly this is a new
chapter in the history of US trade policy. Is a major development, a huge increase in tariffs we haven't seen in decades, decades, and it's going to reshape the global trade environment.
Professor Irwin, thank you so much, patiently waiting after Doug Irwin has said, you're Danny and we welcome him from your Jenny research a. You have parchment from Yale University. Ernie Tedesky and Monica Gimble are up at the Yale Budget Lab. Martha Gimble, I should say, are up at the Yale Budget Lab just absolutely killing it on their analysis of these tariffs. Their analysis is griham. It's a three thousand plus dollar weight to every single household in America.
What does that do to the revenue stream of the Dow Jones industrial average.
It's not good, that's for sure. Matt, may I see something on behalf of the stock market vigilantes.
Would that be all right? Yes? Please on behalf?
On behalf of the stock market vigilantes. I'd like to say, mister President, take down this tariff wall. This is the most absurd policy that one could possibly imagine, and it's a disaster for the economy. It's a disaster for the stuff. And I think the pushback on the administration from the stock market vigilantes is already quite intense. This say is turning out to be not Liberation Day plus one, It's turning out to be d Day in the on Wall Street.
I mean, Andre Denny, you were weaned to this. I mean to go back to the huge academic debates of the twentieth century in the development of our great economic programs out to Stanford and UCLA as well. This policy at Yard Denny isn't a twentieth century debate. How far back is the president going? Is he beyond Stanley Jevons? Is he beyond John Stuart Mill? Is this guy taking us back to a mercantilism of the seventeenth cent? Absolutely?
Absolutely well, I mean really back in time, and certainly well before McKinley, which seems to be his favorite role model, favorite president.
In terms of.
Tariffs, the President may love tariffs, but nobody else does. Nobody in the stock market loves tariffs. They are killers of economic growth. They lead to inflation. I mean the president seems to be asking for a recession. He said that this would cause pain. I don't think he appreciated how much pain it could possibly cause.
So as you think about investment, you know, I don't know opportunities risk here? What do you do with a portfolio today? What is a strategy in a world where we have substantial tariffs and therefore maybe issues with economic growth, with inflation. How do you position a portfolio today?
Well, there's so much uncertainty out there. But my feeling right now, and it could change rapidly depending on what the President says next, is that it's too late to panic, you know. I think if you've got a good portfolio, you stay with it. I think that the political pressure on the administration to become more reasonable about this whole thing quickly is going to be intense. I mean, the Republicans are going to lose their majority in the midterm elections if nothing changes on this.
Mistaken course ed.
I mean, it seems like I don't know where to go here. I think a lot of investors are looking at their screen this morning, Saint boy. I've got the stock market down three four percent. I mean, I've got yields plunging. I've even gold is off.
Yeah.
One, I'm not sure where to hide here. Any any thoughts there?
Well, I think the only place to hide is in your portfolio. Just stay with it. I think we'll get through this. I think that there will be a lot of pushback to change it. I think I'm not the only one calling on the President to take down this tariff wall. I think the pressure is going to be intense to declare victory by getting some movement on the other side of the negotiating table, but to get victory and claim victory or rather rapidly.
Surveillance worldwide across the nation. In your morning commute, good morning, good morning on serious XM ninety nine one FM in Washington. Good morning, huge interest down there. Thank you so much for that ninety two nine FF on Boston. I'm gonna be up in Boston this weekend. Really, I couldn't get tickets for Opening Day, you know, if you know I got, That's a tough ticket I got. I got to sit down next to the on deck circle because they're just killing it. There's a couple of bars near it.
I think I can recommend to you.
Thank you, like you know Seven's on seven on Charles Street or over on Peacon Hill. Yeah, maybe I'll be at Seven's Friday night. We'll see ninety two nine FM. What I do know. We're the ed Yard Denny here on YouTube. Subscribe to Bloomberg Podcast commercial free in nine minutes, maybe eleven minutes. Howard Lutnik, the Secretary of Commerce for
President Trump at the White House. Edyard Denny, your work the work of a wonderful at Heimen, Nancy Lazar, all of c J. Lawrence is a melding of the markets. So I've got this economy and let's say I get a growth shortfall. Do you just bring that right over to single digit revenue growth for Nvidia, Microsoft and the other mag seven.
I think that's the conclusion. They are kind of tight at the hips of the market. Clearly is driven by earnings, and earnings are driven by the economy. Just a couple of days ago, in reaction to the auto tariffs, which are just as absurd as all the other ones, I lowered my outlook for the economic outlook from two and a half to three percent all the way down to one and a half percent. It was a painful decision to make, but that was the conclusion I came to.
And what I've got the economy doing now is growing by one percent in the first quarter, then in the second quarter three percent, because I think people are going to scramble here to buy cars before their prices go up, and then I think we're looking at a growth slow down, maybe no growth in the second half of the year.
Can it clear though? I mean, I mean everybody showed up at the coronation I'm kidding, folks, that was a joke with disrespect to President Trump. I'm sorry. If the inauguration at your Denny Bezos was there with Missus Bezos and all the others. Was Tim Cook there? I can't remember? But these can they doctor Yodenny? Can these guys line up, sit the guy down and say it's the magnitude or that you're doing. It's killing us raised tariffs? But just
the teens weeds them out. Why can't these corporate titans get that done? Well?
I think up to now, the assumption was that the administration collectively knew what they were doing. But clearly with the reaction of global stock markets, that's not the case. There there is no vote of confidence anywhere, not even in gold and what this administration is doing. I mean, as you said, there seems to be no place to hide, and the only place to hide is to go to the White House and tell the President and the administration that this policy is just wrong, but.
It is the policy of the day. So again, what do you suggesting investors do here? You know, we oftentimes talk about a flight to quality, whether that's quality companies, quality stocks, great balance sheets, buying back by Max stock lots of cash. How do you what would you say to your clients today.
Well, there's some amazing buying opportunities if you're willing to look past all this whenever you get I mean, we've really never seen pessimism like this, other than the very depth of a recession, the very depth of a bear market. Usually when sentiment is this negative, that's from a contrary perspective, is a by signal. The problem is that when pessimism is this negative, you also get a FED put You
get the Fed lowering rates. But there's no way that the FED can bail out the administration here by lowering interest rates because they know, we know that this is all going to lead to higher inflation at least for three to six months.
Ed your Denny with us, and we continue with doctor your Denny. Of course your Denny research is Yeah, we thought we'd take a breaker for those of you on radio. You have to observe it on YouTube you can pick it up. Edier Denny, what is the name? You didn't name the beast behind you on the brown upholstered chair. You didn't name that dog? Maynard Keynes?
Right, No, no, no, that's Max and I am working on creating a currency, a cryptocurrency named after Max where you may see him with sunglasses.
Maxim on the coin, worried about the terrorists here is well, very relaxed about the whole thing.
He is smart.
Speaking of relaxed. A colleague of yours, Robert Schiller, the Laurie Yeap, wrote a book. Once. I sat with him in the New Orleans airport and we're talking book ideas and that, and I take no credit for this. But six months later there was Bob Schiller Edyard Denny out with a book called The Good Society. The President carries a grievance the retribution of a huge part of America. We've consistently seen that, including his wonderful interview with John Michelswaite,
our editor in chief. Talk to the people that are not advantaged by a New Haven education, talk to those feel the president's grievance and retribution.
Well, I say this as a non political observation that the president got a pretty damn good economy for starters. The unemployment rates four point one percent, the inflation rate is quite close to two percent. The real GDP's at an all time record high consumption per household as an all time record high. This is not to say that there aren't people who aren't doing well, but all in all,
from a top down analysis, things are pretty good. But you asked me, really from the bottoms up, for the people who have been suffering, I don't know that these policies are going to make things any better for them. And the immediate impact is to do exactly the opposite of what most Americans voted for when they voted for. Those who voted for Donald Trump wanted to see prices coming down. Instead, we're going to see auto prices go
up five to ten thousand dollars. We're going to see auto insurance go up even more, Maintaining and repairing cars is going to go up. The immediate impact is not going to be a happy one for anybody in America.
So Ed, I mean, there's you know, obviously from the Trump administration, it's all about I guess they would say free trade has not been good for the US. We are getting ripped off. Is there evidence to suggest that free trade is not working for the United States? It seems like just a few months ago we were talking about US economic exceptionalism.
How we're doing better than the rest of the world. I don't know where the problem is.
Well, you know, everybody goes shopping and they shop in Walmart, and they shopped in Costco and other places, and a lot of the goods that we buy voluntarily without anybody forcing us come from overseas. I mean, do we really think it's realistic that Nike can make us sneakers here at the without the price going up dramatically?
This is I don't mean to interrupt out to you, dennybody, we got economic data. Wo minute, we'll give that to you. Continuing claims out some other stuff here. Paul Sweeny at ten am with the Ism Services Index pedeductor your Denny. Alexander Skaggs over it. Wrigglesworth brought us to us this morning over at FT Alpha. She said, Look, we don't grow Banan. I mean, that's how simplistic this train wreck is. Yes, yes we have. Yeah, well that's what she said. I mean,
Alexandra nailed it. I mean, Paul, you can't buy a Vespa in America. You're not if you bring a Vespa over to America, is it? How about your BMW Paul made in Alabama?
How about just last week? I bought a Honda. I bought a Honda CRV hybrid, you know vehicle. I don't know where it was built. I think it was probably built somewhere in the United States. But I mean, am I going to pay twenty or twenty five more for that?
I don't know?
This is this is really important. Let's frame this out. Sweety's got a six car garage around the Mansa, Jersey Beach professor or Denny, America in particularly doing better than good America. They like their foreign things. Politically, how does that butters into your work?
Well, look, I've always and of the opinion that at the end of the day, what's key to understanding what the standard of living is in America is consumption per household at the end, you know, maybe that's too materialistic, but that's an easy way to measure it. Another way to measure it is real wages. Real wages are all time record high. I know there's been a lot of controversy about that, but that's what the data shows. Inflation
adjusted wages of all time record high. Employment is it an all time record high, and consumption per household is an all time record high. You can't explain any of that just by saying that the richer getting richer. There's just not enough rich to account for all those developments.
And one more questionnaire as we tee up for John Faroh with the Secretary of Commerce, professor, I say, I call him professor, your Denny. He's running a research note. Folks, subscribe to the Denny Note. It's really good. He's got someone work with him who's better than good. Makes it happen. You know, I look at your Denny, at where we are in the answer is the panic is go to cash? You are the great optimist. I'm sorry, Brian Belski, Your
Dennie's a great optimist? Ed youar Denny this morning? Are you saying go to cash?
No, no, no, no, it's I think again I could be wrong about this. I think it's too late to panic. I think the Republicans are going to panic. I think they're going to realize that this policy is a disaster. I think the pushback from senators and representatives is going to be awesome. I mean, look at all these people that are retiring. People my age. I still have to work for a living because I got five kids and four daughters.
Oh, I would not know about that.
But my friends are all retiring, and they were really happy because they went on their cruises and watched their their stock portfolios going up. Now there's there's Matt. They are Matt as Helen. They're not gonna take it anymore. They're going to be flooding Congress with complaints about how instead of creating wealth, the president is destroying wealth and.
Is including pizza. Is Yale University popping one hundred thousand a year? You guys popping one hundred k up at New Haven? Now on tuition?
Hallie, Well, I'm not a professor. I'm not there anymore. I'm here at my home office in Long Island, so I have not a clue what it costs. And my kids are beyond college.
Thank god. I pity anybody that's not the case. Thank you, Max and Dog love to having you on the show. Ed Jo Denny, thank you so much.
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.
No introduction necessary. Robert Michael, Bob Michael joins US now CIO with JP Morgan Asset Management. Thank you for joining Bloomberg today. I really appreciate it. I can't imagine I've been up since twelve thirty five pm. I know Michael Faroli has in Caswine right now Dovetail the Casman Farole analysis of price up, yield down to a four to ZHO three handle and the ten year yield. Does it aggressively changed your own Powell's life? Does it change Wall
Street in the fixed income market? Some? The JP Morgan analysis has occurred since five pm yesterday?
Yeah, great question, Tom, and I've spent the last twelve hours coming through our research and at all points to the same thing, which is given as how tariff's stand as they were announced. That's going to push the US economy into recession. They're dramatic its attacks on businesses and households. It's going to cause them to retrench. It's worse than most expectations. I think the caveat is we don't know
what the policy response will look like. We still have until April ninth for the majority of the times to be enacted, so there could be a lot of negotiation. You have the FED sitting with a lot of dry powder. At four and three eight percent, they could bring rates down quite a bit. And you don't know what's going to happen overseas. You could see freskal stimulus.
Tell me what you read in the bond market. You've got your team of people, he has twelve report to him. The team. What you see across full faith and credit, high yield spread in all? What have you observed since five pm yesterday?
I see confusion. I see the market trying to digest. Inflation could go above four percent. The Fed's hands are tied, and recession could mean unemployment cruises through four and a half percent to five percent?
Is JP Morgan publishing a five percent? What if an unemployment?
No?
No, I got to make some news here. Lease has failed me today.
Okay, I've got news for you.
Please.
The Fed's hands aren't tied and you'll love this. Where is Samuelson econ one oh one text?
Do you mean the nineteen forty eight textbook? The difference is, folks, I read it in the English, Michael read it in Greek. Tell Us about Samuelson nineteen forty eight.
There is a difference in where the inflation is coming from. Demand pull is something the FED responds to by hiking rates. That's what we saw after COVID. Cost push is what the FED responds to by cutting rates because of the impact it has to businesses who see profitability eroad and two households who see their purchasing power.
Well, did you see bought Michael's Lapel's why.
It makes exist talk about the nineteen forties exactly.
So, Bob, what I mean?
You're sitting there, JP Morgan Asset Management. What are you telling your men and women who are putting money to work today? What are you telling them to do today? Do you do you dive into the sell off here? Do you just say we need to recalibrate here because there's a new world order, maybe a recession in the offing.
I tell them bonds look great. This isn't a market with the FED down around zero one percent, the ECB at minus a half minus three quarters of a percent. This is a FED at four and three eighths with a lot of firepower to bring rates down. If there is no grand bargain and these towers hit in full force and there's some retaliation, the FED could bring rates down two hundred basis points two and a quarter two and a half percent, the entire treasury curve goes down
to the low twos. So get in. We'll put you in the right bonds.
Do you put these at a slow day? Instrue?
JP Morgan asset Management, I love them.
Credit risk?
Do I take credit risk? I can't even imagine taking credit risk today because I think a lot of people are just looking at the futures here. People are just stepping back.
You can take some I think clearly you want to be up in quality. Uh, there's a lot in the banking system and financial services where banks look structurally over capitalized because of all the regulatory environments in the last few years. But generally you're right. You just want to pull back a little bit, see where the dust settles. I want to see more pricing in of potential recession.
Unfair question. I don't want you to get in trouble with the general counsel. Working for mister Diamond today it works like a six hour day. It's amazing, Bob Michael, It's as simple as this. We didn't know on a day in October eighty seven about portfolio insurance. We didn't know Myron Schulz was working a hedge fund with a twenty to one thirty to one leverage in nineteen ninety eight. So here we are. Now. We all agree that banks, including your brilliant bank, are solid, and you know, thank
you two thousand and eight. It's a fortress diamond in that. But there's other leverage issues out there, like private equity, private credit. They're not on your remit. But we're all in this together. Do you worry about shocks or systemic risks out there from this Trump trauma? See?
Tom, there you go. We knew those things. We knew about portfolio insurance, we knew about everything that you talked about, but we ignored it. I think private capital is a big one that's out there. When we look at the private credit markets that have about two trillion dollars, that's two thirds the size of the entire US banking system. When you look at their commercial and industrial loan unregulated, let's call it lightly regulated. Is it right for a shakeout? Yes?
Is it disaster brewing? Absolutely not so. Yeah, there are areas like that which we're looking at. You could see a shakeout, but there's nothing out there that tells you this could evolve into a significant crisis.
So what are you telling your clients today. I'm sure you're going to be on the phone. You're going to be doing zooms all day with your clients. What's the message today?
It is that next week is a long time away. The administration has left the door open for negotiation. Let's see what happens. But we're going to be left with some level of tariffs. And some level of tariffs is a tax on businesses and households that will slow things down and inflation yep, that will pop up mid threes, maybe up to four percent. The Fed has already told us they're going to look through that because that's cost
push inflation. So expect that if things slow down too much, the Fed will bring forward rate cuts.
One minute, here, I got the first print and the ten year real yield today, folks who are at two point zero percent a senka ago, and now we come in, we're at one point seven two percent on the first print in seven basis points. Where where is a ten year real yield? Where you say we're back to what we used to know in terms of low yields. Is it a one fifty? Is it a one twenty ten year real yield? What's the Bob Michael number there.
Yeah, I think a real yield on the ten yere should average about two percent. I will tell you this quarter, I'm willing to accept a much lower real yield on ten year treasuries to protect me to the downside against recession. So I'll go as low as a one percent real yield.
Thank you so much for coming in. We have two chairs there. Lisa needs to go up and get a gluten free breakfast. Bring mister Diamond with you next time to interview Diamond and Michael together would be really cool.
We're going to do a remote when they open their headquarters on Park Avenue. I've alreadyalked to Jamie work or working on that.
You know. They got to come on over.
Have you picked up the collar of your carpet yet in your office?
I walked through the building two days ago. It's fantastic. Can't like to move an end of August. Come on over and go up.
Don't you pick out the maroon carpet like Bill Murray and lost a Translate.
Corporate will pick it out.
Happy and I can't imagine the number of designers involved in that decision. Bob Michael, thank you so much. For coming in a huge day for JP Morgan.
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.
Joining US now Surveillance Irrationality correspondent Tina Fordham. She is with Fordham Global Foresight in London. Tina, let me cut to the chase. How will the Prime minister respond to this?
Well, the Prime Minister here in the UK will respond with relief. Britain got off lightly with ten percent tariffs. Now that is partly because the UK is an exporter of services more than goods. By like all politicians in this environment, Keir Starmer will be glad to take credit for having a successful policy with President Trump.
Algerschmating just mentioned a two month interlude to straighten out as he said, this irrationality. Tina Fordham, can our listeners and viewers survive two months until the adults show up?
I think that sounds like an eternity, and I suspect that we're going to see a fairly nuanced and sophisticated response from the European Union. I think the tension is best framed as between placating Trump and retaliation, and if you look at public opinion data in the European Union, there's strong public support for retaliating against the US. But there will also be, of course, a desire to play nice I think to start with and try to see about taking these down a bit, because twenty percent is.
Harsh.
Yep, so, Tina, I'm just looking at your notes here.
Liberation Day will.
Go down in history, but not for the reasons President Trump expects. What do you mean by that?
Oh, I think you know what I need.
Let's play it out for us.
Yes, I mean it was astonishing.
Let me put it this way.
I was watching in London with my seventeen year old and my twenty year old, and my seventeen year old said, mum, is this how the Great Depression started in the United States?
Because he's studying that period right now. It will go down in history as a voluntary act of self harm when the biggest and most powerful nation in the world world abdicated from its position in the global system and moved out of that into a deals based, seemingly ad hoc set of relationships with highly unpredictable policy that's going to end up costing US consumers among other things.
It's interesting, Tina we I was just speaking to John Tucker, who Deals talked with our radio affiliates all across the country here in the United States, and he was saying, you know, in the last couple of days, he's heard nothing but positive, positive support for President Trump and his terriff ISSU policies here. So, I mean, there's a lot of folks that feel like the Americans are getting the short end of the stick from global trade. What do you say to those folks?
And it's very moving, of course to see the UAW guy in the audience coming on stage. De Industrialization hit America very hard, and that speaks to what happened with globalization, the you know, stagnation of wages and everything else. So, you know, let's be clear that there is no question that there were a lot of people left behind by globalization and they are Trump supporters.
But looking at the data.
Trump's approval ratings have declined slightly from around forty seven present to about forty three percent. The ratings have dropped more on economic competence. And so here's where I would introduce a little nuance. The tariffs are not popular. You know, it does seem that Americans understand that this is likely to cost them money, and we've seen that hit in
consumer sentiment. Righting the wrongs of globalization is popular. And so the question is whether these policies accomplish that, isn't it if.
There's a ballot box repair of folks In eighteen ninety with McKinley, the Republicans were destroyed in the election. They lost eighty six eighty six seats in eighteen ninety. I'm not predicting that or anything like that, but Tina Fordam, do you have an assumption here that, on your reading of history, that trade and tariff excesses are solved at the ballot box.
It doesn't look good for that.
And I mean, we know that President Trump and members of his cabinet and advisors are drawn to this late nineteenth century period when you perceived US power was at its peak. But the world has moved on since then, and it's not clear whether you can turn back the clock and whether manufacturing jobs are really the answer. And this is where policy types like me are very unimpressed with these efforts. They do play well to people because there's a very strong sense and I call it stop the world.
I want to get off.
You know that things are moving too fast, that the world has become unrecognizable. And this is where politicians that offer a prescription are. You know, it's resonating with people. And sorry, the point about what happens at the midterms. You know, Wisconsin, judge went one way and Florida another way. We're only three months in. Historically, the party in power, though, does get hammered at midterms. And that's even apart from having taken such dramatic steps to alter the global system.
Tanta, thank you so much. Can't wait to see the writing. As Paul mentioned the researcher notes from Fordham Global Foresight, I can't wait to see those in the coming days.
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Her book The Third Revolution was my book of the summer a number of years ago, another book, A World according to China. She's someone that's done great duty for America with Ramando at commerce here a few years ago. We're thrilled that she could join us now from Stanford University doctor economy. Beijing takes us in. How will they respond?
Yeah, I mean, I think they've already started to respond. I think, you know, they've they clearly stated that they want the Trump ad administration to rescind the terrace. But beyond that, they put a stop measure on all Chinese investment into the United States. Not that that's such a big deal. It's only a couple billion dollars last year, I think, so it's not that meaningful. But I think we can expect, you know, that they have developed their
retaliatory toolkit to a very fine degree. So we will see some reciprocal tariffs. We will see some punishment of US companies, you know, investigations, you know, antitrust investigations, things that they'll just create to cause problems for US companies. We may even see some boycotts of companies that sell their products, you know, consumer products into China. Probably again,
some new restrictions on critical minerals, licensing requirements potentially. You know, they have a lot of different things that they can do, and we can expect to see the whole range of them.
Some people are writing this morning out of Yale University that these are basically a level of tariffs and harm. Back to nineteen oh nine, doctor Economy, let us go back not as far nineteen eleven. China was a ching dynasty. There was a revolution, there was a failure of their democracy to stagger through ten twenty years to get out the MAU. What is the political stability right now of the g regime across China given this unilateral shock from Donald.
Trump, Well, the Chinese have a pretty high capacity to endure pain. And the truth is that what the United States is doing will simply enable. She didn't pint to rally the troops behind him. And this is not even something that's just targeted at China. It's a Trump, you know, worldwide effort, and that means that he didn't pink and pink the United States as sort of an unstable partner and irrational actor. And so it's not a It will hurt China economically, no doubt, particularly at the low end.
You know, manufacturing, some of the e commerce exporters like Tan they will clearly take a huge hit. This is not coming at a good time for them. Their economy has been struggling, haven't you know, rebounded yet to pre pandemic levels of consumer spending. They're doing their best to try to, you know, improve that, but it's been difficult, Alton, and will continue to be difficult. So it's tough, but they will soldier through this. And Chijin thing is already
out there, you know. He was just in Japan and South Korea talking about making more progress on a free trade agreement, talking about working together with them on supply chains. He's heading off to Vietnam and Malaysia soon. So he's going to take advantage of what the United States is doing globally to improve China's position, its trade position, its economic position globally. He's going to try to present China as the stable pro globalization power in contrast to the United States.
Elizabeth, you mentioned the health of the Chinese economy. Do they have the ability to engage in a trade war successfully with the United States? Do they have that economic case capability?
I mean, they have the economic capability to the extent that. You know, they have spent some time over the past four years beginning to diversify their economy away from the United States, both in terms of ensuring that they have you know, their own supply chains domestically that's cheating things dual circulation. He wants China to be able to innovate, manufacture and consume largely within itself. They've also shifted production to other countries to try to get around the previous
Trump tariffs. So you know, they've been making more in Vietnam and Mexico and other places. Of course, given the Trump tariffs now that'll be more problematic for them. But again, they're exports to the United States. I think are only the only export fourteen percent now to the United States, and they've reduced it significantly over the past several years. It will be difficult, but they will find their way through just because of time.
I got a ways to go here. Is this a four hour conversation with doctor I think so Well's economy. I guess I got to go here, and it's it's never off your remit because you're so definitive on Pacific rim. But the unspoken is to worry about Taiwan. The president goes after Taiwan's semiconductor. We've got two military bases on the north tip of Luzana Island in the Philippines, and on and on. Should our listeners worldwide have a concern about opportunistic Beijing taking out Formosa.
No doubt there should be concern. I mean, Chi Jinping has said that unification with Taiwan it's one of his fourteen must do items for the great rejuvenation of the Chinese nation. We've seen a dramatic ratcheting up of Chinese military exercises around Taiwan. They've clearly been practicing to do a blockade. So I think we definitely need to be concerned.
And President Trump has been very noncommittal about Taiwan. I think his administration, you know, is split we have in terms of whether or not the United States would come to the aid of Taiwan. We're China to take military action.
I think National Security Advisor Texeth and Secretary of State Rubio have both been pretty firm in their commitment and overall pretty internationalists in terms of our Asian allies, Whereas I think, you know, Elon Musk has likened Taiwan to China, as Hawaii to the United States, and you know, President Trump's moves to get TSMC to do these major investments on top of chips and science Act, his call for Taiwan to spend ten percent of its GDP on defense,
which is you know, crazy. But nonetheless, they can be seen, as you know, in two different ways. They could be seen as President Trump saying, you do these things and that's enough to satisfy us that you're taking your security seriously and we will be there for you. Or they could be seen as President Trump actively trying to reduce US dependents or on Taiwan semiconductors and basically signaling that We're not going to come to their aid. So everything's up in the air.
Paul, get one more question in here. I mean, she's a trooper for YEP. Were theres from Stanford this morning? Get one more question in the doctor.
Elizabeth to the extent that the US is backing away from the global stage, are Asian countries something Vietnam, Malaysia, just that, South Korea, even maybe even Japan. Are they have any snare where they would engage with maybe even embrace China.
I mean, they're already embracing China to some extent. We saw that with the meeting with Japan, South Korea and China. I think it was just last week where they talked about moving forward on a regional free trade agreement, working on supply chains together. I'm just waiting for, you know, Japan and Australia to signal that they're going to welcome China's move into the Comprehensive and Progressive WOW CPTPP right, a trade agreement that we pulled out of in Trump one.
You got a time and date on that, Doctor Economy. I mean I want to, I don't.
I don't, And I'm praying against you know, all on praying and praying that that doesn't come to pass. But I am quite concerned because these are issues that just six months ago. Supply chains, you know, and you know, trade and engagement on technologies, all of these things were things that we were doing with our allies like Japan and South Korea. And now it's chime right.
Liz, thank you so much for joining us on Bloomberg Surveillance today. Director Economy, the classic is a river run Blacks, so many tour de forces along the way. We anticipate her next book of Course from Stanford University.
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