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- [00:00]
David Guray
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- [00:02]
Mick Mulvaney
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Patrick Gillespie
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Public/Advertising Voice
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Mick Mulvaney
It'S usage based, seat based, or a hybrid model.
- [00:21]
Patrick Gillespie
Visit metronome.com to see how companies like OpenAI and Anthropic launch billing as fast as they launch products. That's metronome.com.
- [00:33]
Podcast Host/Narrator
Bloomberg Audio Studios podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:55]
David Guray
David Guray in for Joe Matthew and Kailey Leinz here on Balance of Power on Bloomberg Television and Bloomberg Radio. A big meeting coming up at 8:30pm Wall street time. I struggle to do the math to figure out what that will be in Tokyo. It is early in the morning there and that's where we find our colleague Tyler Kendall, our Washington correspondent who is traveling with the president on this trip to Asia. The president going to sit down with the new prime minister of Japan. And Tyler, the first thing I want to ask you about is what's going to be high up on that agenda? That is $550 billion. That is the commitment that Japan made to invest in the United States. Part of that came from this deal that Japan brokered with the US to get a lower, more favorable tarif, what do we expect to learn or hear from Japan about how they expect to spend that money? And if this deal, if this, if this trade deal that was brokered between the previous government and the United States is likely to be reopened and picked apart again.
- [01:48]
Jeannie Zaino
Right?
- [01:48]
Tyler Kendall
So, David, this investment fund that you're outlining is absolutely critical to Japan receiving that more preferential tariff rate of 15% that applies to all Japanese imports coming into the U.S. but also importantly, it extends to sector specific tariffs such as autos, which we know was a big priority for Japan while it was brokering this deal with the U.S. i have to say, and I mentioned this on the earlier hour of Balance of Power, but all of the local Japanese coverage has been on the potential for a US Japan cooperation agreement when it comes to shipbuilding. It appears that that cooperation agreement will include investment as part of this investment pledge fund that we know is really at the center of these deals, of course, the US Commerce Department has broad discretion on what is actually approved as a deal as part of. But we know that the administration has long been prioritizing these critical sectors they say need to be bolstered in terms of national security. And shipbuilding is, of course, at the top of that list. I would also say to pay close attention to any conversations around Japan bolstering its defense spending. We did see the new prime minister pledged to expedite the timeline to get Japan's military spending to GDP. They're aiming for this 2% goal. She's trying to move that up by actually two years, a move that has been broadly applauded by the Trump administration. So perhaps there's been some talk that maybe we'll see some sort of cooperation there when it comes to imports of US Military supplies as Japan tries to really ramp up its own speed when it comes to bolstering its military.
- [03:22]
David Guray
Tyler, once we get through this meeting and the president's going to meet with some US Troops and with business executives as well as, as you mentioned, the focus then shifts to South Korea, where President Trump is going to sit down with President Xi Jinping. And this comes on the heels of some meetings that took place in Malaysia between the US Treasury Secretary, Scott Besant, the US Trade Representative, Jamison Greer, and their counterparts. They announced at the end of that a framework deal kind of laying the groundwork again for that leaders summit, that leaders meeting that's going to take place in South Korea. Let's take a listen to what President Trump said about sort of what that meeting is likely to look like and what he hopes will be discussed and covered when it takes place on Thursday.
- [03:57]
Mick Mulvaney
What we understood yesterday or two days ago or even today is not going to be necessarily what it's going to be in two days. We're going to have a great talk. I have a lot of respect for President Xi. I like him a lot. He likes me a lot. I believe and respects me, and I think he respects our country a lot.
- [04:14]
David Guray
And we're going to have, I think.
- [04:15]
Mick Mulvaney
We'Re going to have a successful transaction for both countries.
- [04:21]
David Guray
Tyler, I want to ask you about a few things. So there were some things agreed to. Of course, they talked about the TikTok deal, they talked about soybeans. But there are kind of broader fundamental issues here that I'm going to go out on a limb and guess are not likely to be solved in a meeting that's one hour in length, two hours in length. What are our expectations? What's The White House saying our expectations should be here of what comes out of this meeting between President Trump and President Xi on Thursday.
- [04:44]
Tyler Kendall
Well, of course, David, you're alluding to the broader issues when it comes to the trade war between the US And China, mainly national security concerns, but also the White House's goal of ultimately rebalancing trade, in their words, which isn't going to get solved by this agreement that we're likely going to see emerge. Now, the understanding seems to be that we're likely going to get an extension of the trade truce that is currently in place that's set to expire on November 10, as the Treasury Secretary himself has effectively taken the threat of an additional 100% percent tariff off the table. As we've seen news of some key concessions according to the US Side, including that China is going to delay and review its newly unveiled export controls related to critical and rare earth minerals. You also, of course mentioned soybeans, which we know has been a top of mind for the Trump administration. Now, let's just say that that is what the main deliverable out of this meeting is, that there is an extension in the trade truce. Our analysts at Bloomberg Economics say that that will still leave the effect of tariff rate on China from the US at 40%, 25 percentage points higher than the global average. So still a lot of work to be done there. At the end of the day, this really does feel like a simmering intentions. Both of the sides expressing optimism, calling their talks in Malaysia over the weekend constructive. And David, what really feels like a market contrast from the recent escalation in recent weeks. It appears that all of those steps and threats that have been taken are for now at least neutralized so that both sides can get back to the negotiating table on a broader term deal.
- [06:14]
David Guray
Tyler, one more question. It would be unfair to anybody else but you. I know you've been tracking all of this, but we saw a headline cross the Bloomberg terminal here a few hours ago about the relationship between the US And Mexico. And Claudia Sheinbaum, the president of Mexico, said the U.S. is willing to extend the trade deadline for several weeks as conversations continue between the U.S. and Mexico. Of course, a dramatically different story between the US And Canada. Your perspective on sort of the ongoing debate over what these trade deals will look like given how Canada's now put itself in a position where it is, let's say, far out of favor from President Trump.
- [06:48]
Maura Gillespie
Right.
- [06:48]
Tyler Kendall
Actually, when this headline crossed, David, I went back to the first extension we saw, which was August 1st, 90 days would bring us to November 1st, which is why we're seeing this announcement now. And at the time, President Trump had said that Mexico was going to give be given preferential treatment because of just how much trade it does with the U.S. of course, we haven't seen that extended as such to our northern North American neighbors when it comes to Canada. Now, Mexico is currently facing a 23rd 5% tariff when it comes to non USMCA compliant goods. The threat on the table over the summer had been that that rate could ratchet up to 30% against Mexico. So we're going to have to see how this unfolds. Important to keep in mind here that the tariffs imposed on Mexico actually aren't imposed under the so called reciprocal tariff regime through IAEA by the International Emergency Economic Powers Act. The tariffs are imposed through IA but they're over fentanyl concerns and concerns with the border. And that's why we're watching really closely what sort of concessions could be there on Mexico's part in a bid to try to make progress to meet President Trump's demands. Now, you mentioned Canada. Of course we're watching that closely. President Trump declining to tell reporters on Air Force One whether or not this additional 10% tariff will extend to USMCA compliant goods. Of course, there's a 35% tariff on non USMCA compliant goods currently in place. But David, that does not extend to some of those sector specific tariffs. There is a whopping 50% tariff on Canadian steel and aluminum, which we know is a big point of contention between the two economies.
- [08:16]
David Guray
Tyler, thank you very much. Tyler Kendall, on what is a grueling trip here for the president. Grueling in terms of geography and time and amount of meetings and certainly expectations as well. And somebody who knows what that's like. Well, is one Mick Mulvaney, who is former acting chief of staff to President Trump, former director of the Office of Management and Budget, former Congressman as well. Let me ask you first off, if you miss being on a trip like this and what it's like for the president and his staff. There's so much on the agenda. We heard him float. Maybe he wants to take a little side trip and meet with Kim Jong Un as well. How does he approach these trips and what does he hope to get in terms of deliverables out of the way?
- [08:47]
Mick Mulvaney
I've done one of those side trips to meet Kim Jong Un on the way back. I honestly don't know how he does it. I just got back from Tokyo last night and I can barely stand up. I was thinking more about his meetings last week when he was in Israel. Maybe it was two weeks ago and I lose track of the time. He was in Israel and then Egypt and then for 36 hours, then came back and did two solid days of stuff at the White House and didn't seem to slow down at all. It's brutal. It's probably as tough on the staff as anybody else asleep anyway. He only sleeps about four hours a night, so I think he's probably immune to jet lag. But it's really tough on the team, there's no question about it. And at the end of the day, he is 79 years old, but I've seen no signs yet of closing, of slowing down. Every now and then I see him seem like he's probably a little bit, a little bit weary. But not too frequently, you know, from.
- [09:33]
David Guray
The beginning of this term, in the context of this, a conversation between President Trump and President Xi, there's been a lot of talk of President Xi isn't going to do this unless we're at the point at which these two leaders can make a deal. How do you think about the meeting that's going to take place on Thursday? What's likely to come out of it?
- [09:47]
Mick Mulvaney
It's always been a challenge because Donald Trump and I think President Xi work in entirely different manners. Trump wants the principal one on one, you know, big guy to big guy conversation first. And my understanding is the Chinese do it the exact opposite. They don't want Xi to have those conversations until all the other preceding lower level conversations have taken place. So the fact they're getting together I think is helpful. I don't count, David, on anything major coming out of this. In fact, I don't count on anything major coming for the next several years. I think both countries have sort of found this. You know, we used to describe it when it was military versus Soviet Union back in the 1960s and 70s as the Cold War. This is sort of a cold peace. I don't think you're going to see everything sort of get back to warm and fuzzy. I don't think you're going to see a full blown trade war. I think you see sort of choppy negotiations on and off, bits and pieces here and there for the next several years. I do expect some sort of announcement coming out of this. I think both gentlemen not want to have a face to face meeting and not have something to announce. But anybody who's sitting looking, oh, I think this is going to be wrapped up here this week and things will be Great. We go back to the way business was before Trump was in office. Don't understand the man.
- [10:56]
David Guray
You've lived through a few of these shutdowns before. Let's go back to when you were at omb. Would it have been a help or a hindrance not to have the president in Washington while this was unfolding?
- [11:04]
Mick Mulvaney
It wouldn't make a difference. Our problem was the Republican leadership in the House and the Senate. And that's one of the biggest differences you have now. Back in 2019, Paul Ryan and Mitch McConnell were on the phone every single day telling us how we were killing the country and we had to open the government up. And you just don't hear that today from Michael Johnson and John Thune. The Republican Party is a lot more united behind Donald Trump, and he's got a lot more support of his own party. So I think it's a dramatic difference in sort of the balance of power. Wait a second. I've heard that before.
- [11:34]
David Guray
Thank you for that.
- [11:35]
Mick Mulvaney
In Washington right now, again, I've been traveling for about a week, so it's been a while since I've sort of plugged in. But. But right before I left, I met with a bunch of my Democrat friends, and they were all like, look, Mick, we don't see the end of it. You guys are killing kidding yourself if you think this no Kings rally has anything to do with anything. There's a lot of Republicans saying that maybe after the no Kings rally, the Democrats would be more willing to talk to Trump and so forth, but they don't see it. Honestly, I think if I had to bet, and I've been wrong now, as has everybody from the very beginning on this, I think the Senate Republicans are going to start looking more and more at changing the filibuster rules, because I. That might be the only way to fund the government at this point.
- [12:11]
David Guray
Ask another question just about the uniqueness of this shutdown. I was on the Hill last week and sat down with the minority leader, Hakeem Jeffries, and I was just struck by the quiet of the Capitol right now. I mean, he's not meeting with Mike Johnson. It seems like there are very few conversations taking place. There aren't many people there to have these conversations. What do you make of that? And what does that say about the state of our politics?
- [12:29]
Mick Mulvaney
It should really frighten the Congress. This is one of the things, David, I really don't understand. Fundamentally, I thought Chuck Schumer was right. I don't see that very often. But back in March, I, I think what he was taking the position is, look, if the Democrats don't support the funding bill, then the government will shut down and Donald Trump's power will go up exponentially. And he's right. The power that the director of the Office of Management Budget have during an ordinary appropriations process is pretty considerable, but it goes up exponentially during a shutdown. I mean, look, there's one office, so it's essentially the president through the director of OMB gets to say, okay, you get to go to work today. You don't. You don't. You don't. You do. Of course, nobody gets paid until later and everybody will get paid later. But think about that in terms of the executive authority, what's open and what's closed. They have given so much more power to the executive branch. I cannot understand for the life of me how they allowed themselves to get here. And I don't know how they get out of it.
- [13:25]
David Guray
But nobody called you Darth Vader as we talked about kind of the. I know, I feel bad, but what do you make of what Russ Boat has done and is being able to do with that office? Could you have imagined that it could have as much power? Yes. In this circumstance, but in this term as it has?
- [13:38]
Public/Advertising Voice
No, we knew it did.
- [13:39]
Mick Mulvaney
We knew that it did. In fact, we tried back in 2019 during the 35 day shutout to do a lot of the things that OMB is doing now. But again, when you didn't have the support of your own Republican leadership on the Hill, it was very, very difficult to do. When you're going out night after night and on Fox News and the other right wing sort of media outlets, Republicans are beating up on the Republican President. It was really hard to sort of to do any of these things. So no, we knew exactly what the authority was. Exactly what the power. I shouldn't say the, that no one knows exactly what the authority is. You don't know where the bounds are. But you do know that the OMB and the executive branch has a lot more authority during a shutdown than it does during the appropriations process. So, yeah, we knew that this was there. And Russ and I used to joke about wouldn't it be nice to have this job when you know you could actually use it? And now he's getting a chance to use it.
- [14:27]
David Guray
When you look at the pressure points that are coming up, so the SNAP benefits expiring in a couple of days, open enrollment starting up, holidays on the horizon as well, where do you see potential off ramps or points where this could be Resolved.
- [14:41]
Mick Mulvaney
I see the airports as the pressure point. You think so? Yeah, I do. I just don't think snap registers with enough people. The media loves it and so forth and if you get it, it's critically important to you. But the ordinary middle class family that goes home every single night doesn't engage in politics. It doesn't touch them until they need to go see grandma at Thanksgiving. You know, you're talking about tens of millions of people a day who travel. And I think was a pressure point to 2019. I think it will be a pressure point now. I think Sean Duffy has done an excellent job of making it clear that, you know, any, any fabricated sort of sick outs won't be tolerated. But sooner or later people aren't going to work for no pay. We all know they're going to get paid eventually anyway. But look, missing a paycheck in this, in this, in this, in this world is tough for a lot of people. So I think that's the next pressure point. The last time they get paid out of sequence. They get paid actually tomorrow. They got paid two weeks ago. And in that paycheck they got paid for the last week in September. So they actually did get paid some in October. For September. The next check will be the first $0 check for the air traffic controllers. And I think that will be the next pain point.
- [15:43]
David Guray
Mick Mulvaney, great to see you.
- [15:45]
Mick Mulvaney
It's always good to see you. Welcome.
- [15:46]
David Guray
Thank you. A man who's worn many hats, of course, OMB Capitol Hill as chief of staff at the White House as well, joining us here on set in Washington, D.C. as we look ahead to where there might be potential off ramps. We'll continue that conversation with our politics panel here in just a moment on Bloomberg Television and Bloomberg Radio. And look to Argentina as well at the surprising results of the congressional race that took place there. What that means for Javier Milei and yes for the Treasury Secretary for Scott Besant as well, who authorized some extraordinary actions in Argentina. That's coming up.
- [16:18]
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- [17:20]
Podcast Host/Narrator
The Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [17:35]
David Guray
It's going to be the planes. That was what Mick Mulvaney said about how this shutdown ends as he sees it. Very curious to hear sort of what our panelists think about that as well. Gina, she and Zaino is back with us, Democracy visiting fellow at Harvard Kennedy School's Ash center and Bloomberg Politics contributor Maura Gillespie with us here as well. Bluestack Strategies founder and Republican strategists Jeannie, you've been watching all of this unfold and I'm very curious if you would agree with the former director of the omb, the former White House chief of staff, if you think that's how this ends, or do you think that these other pressure points, chiefly the SNAP benefits expiring the opening of open enrollment, those are going to have a tangible effect here on lawmakers willingness and ability to get together to try to hammer something out?
- [18:15]
Jeannie Zaino
Yeah, unfortunately, I don't see those as having the impact. You know, when you get the announcement, you're not going to be paying until next year. So while people may be frustrated, they're not going to feel the pain immediately. And for SNAP benefits, unfortunately, even though we're talking about millions of people potentially losing the ability to get food and access food in this country, which is stunning, it's not going to impact the representatives and senators. So I think it is going to be travel. I think it's going to be Thanksgiving. And that's going to depend on the fact that these people have lost a check. And, and it's, you know, we see flights starting to slow down and travel really impacted, which will frustrate people.
- [19:00]
David Guray
Maura, I want to get your thoughts and I look at the stats here from the Bipartisan Policy Center. 730,000 federal employees working without pay right now. Another 670,000 federal workers are being furloughed without pay. And I look at this statement again from the head of the American Federation of Government Employees, AFGE President Everett Kelly. Right. Both political parties have made their point, and still there's no clear end in sight. Today I'm making mine. It's time to pass a clean continuing resolution and end this shutdown today. No half measures and no gamesmanship. Put every single federal worker back on the job with full back pay today. Curious how you react to that, Mara. Again, it doesn't seem like that conversation's even taking place on Capitol Hill. It doesn't seem like many conversations are taking place on Capitol Hill here on day 27.
- [19:45]
Maura Gillespie
And that's what feels so different about this shutdown, right, is that the House has not been in since September 19th. Members aren't having these conversations. And it's something that we saw in the past where congressional leaders were there day in, day out, at least having conversations may not have always led to a fruitful discussion by each day, but at least they were open, the door was open to figuring out a solution. I do think that the American people's patience has run out, especially, especially with as many federal workers, as you just pointed out, who want to work and what I think from a Republican messaging standpoint, these are people who want to go back to work, who we're going to be paying regardless of the fact that they're in work right now. So we're really wasting money essentially for people who want to be in their jobs, doing their doing their work, but they can't because the government is still shut down. And I would have to agree that the point was made. I do think that Senator Thune, and you're now even hearing some reports that Johnson is open to figuring out what a solution would look like. But I do think it can't be done right now when the government is still shut down and it's just dragged on a little bit too long. And I don't know, the Democrats, they never really had a plan on how to get out of it, which is really problematic because now they have to essentially just say that the last 27 days was just to prove a point. That's not a great vesting tactic going into the midterms.
- [21:00]
David Guray
Mara, I'm curious of what you made of what Mick Mulvaney had to say about the role that President Trump is or isn't playing in the conversations that are taking place so much as they are here in Washington, Washington today. And he's, of course, on this trip to Asia. I think there's a lot of resignation among people on Capitol Hill that with him not here, it's unlikely that we're going to see a deal. And I found this in Henrietta Trey's the Veda partner's latest note. I'm going to read it aloud here. Trump has indicated he will not sign any legislation via autopen. This is something, of course, he cares an awful lot about, which means even if lawmakers reach a deal to reopen, the president will have to either have the text physically flown to him for his signature or will need to wait until he returns returns to Washington. How do you see the role of President Trump here again? Going back to my conversation last week with Hakeem Jeffries, the minority leader, he really making the point that Republicans in Congress can't do a whole lot without the blessing of the president of the United States. And his absence kind of prolongs this inherently. Do you agree with that or do you agree with Mick Mulvaney, who says his absence, him being overseas, really doesn't affect the conversations that aren't taking place right now?
- [22:01]
Maura Gillespie
I think logistically speaking, you're right in terms of it could create a problem if Senator Thune was able to get Democrats in the Senate to pass something that he passed the bill he's been trying to, and then that creates a logistical kind of situation about President Trump signing that into law. But I would say it's he can do a lot as far as pressuring or calling members of Congress and saying, you know, maybe how should we get back to work and how do we do that? He can make a phone call, you know, a conversation with Schumer and Jeffries and Thune and Johnson and spearhead that conversation, put a little more pressure on them. But I think right now, again, a lot of this does come down to Senator John Thune is working the will of the Senate, trying to get his colleagues to understand that he is open to having a vote on the subsidies and recognizing that this is an issue that needs to be addressed because it impacts millions of Americans and not just Republicans, not just Democrats, Democrats. But I think that speaker or the president is really focused on his own agenda, especially in the foreign policy realm right now. And unfortunately, it's not. This is not on the top of his priority list, although, you know, it probably should be.
- [23:09]
David Guray
Let's spend the remaining time we have here talking about the midterms and the way that the political terrain is changing ahead of them. And we've seen President Trump really pushing for redistricting and a lot of states across this country happen in North Carolina there's pressure for that to happen in Indiana and other states as well. Jeannie, let me turn to you and ask about what's happening in Virginia where you have state lawmakers looking to redraw those lines themselves. Democrats kind of respond in kind here to counter those moves by Republicans. What do you make of what's happening in Virginia? It's novel. The session's still open, so they're able to do this or at least push for it. But what do you make of kind of the broader fight that we're seeing play out here when it comes to where the lines are drawn, literally when it comes to the political term reign in this country?
- [23:52]
Jeannie Zaino
Yeah, I think Gavin Newsom described it months ago when this started in Texas and then California picked it up as a break the glass moment. And I think that's what you're seeing here. There's some reluctance on the Democratic side to engage in these mid decade redistricting proposals, but the reality is they feel if they don't meet the GOP on this that they are going to lose. You know, I think one important aspect of this is to take a step back. You know, you can draw all the districts you want. It still doesn't ensure you are going to win. You still need campaigns, you still need candidates. You still need issues on the local state level that matter. So I think there's sort of this idea floating, since we've been talking about from Texas on, that redistricting is some kind of panacea. It is not. There's no guarantee that somebody wins when you redistrict. So on both sides, they are taking a chance here. And I think the big losers here are the American public. We already have a terribly gerrymandered House. That's why it's so close. And this is only going to make it worse. I mean, I think when we look at the number of competitive seats that will be left in 26, it is abysmal. And that is a loser for the American voter because we are robbed of choice when we go to the ballot box in most instances. And so to me, I understand the impulse of Democrats to fight back and I understand why they feel they need to. But from both sides, this is another losing thing that voters are going to feel in Americans and anybody who loves democracy.
- [25:35]
David Guray
Mara, how about you on the kind of slippery slopedness of all of this, the way that it's happening, the kind of tit for tat nature of this and just sort of, sort of what it says to pick up on what ginny was saying about the state of our politics today. I think in North Carolina, there was one district that was carved in such a way that the incumbent's no longer in the district he was in before just presents a host of problems about representation. How do you see all of this playing out, and how do you see it sort of running its course?
- [26:01]
Maura Gillespie
We see that, you know, in Illinois, when my former boss, Adam Kinzinger, was really redistricted out of his own district, despite many Democrats thinking that he was a good Republican at the time, they still still drew him out of his own district. And so we see that happen pretty, pretty frequently here. But I think what Jeannie's pointing out speaks to a bigger problem. Not only does this create lack of choice, but we have a lack of choice because of the candidates themselves. Right now, our state of politics is really devolved in a way that people don't feel inclined to run for higher office even if they had wanted to. The current state of politics and how we talk to one another, how we campaign, how we attack and demonize those who have different views than us, it's putting people at risk. We've seen that play out, unfortunately. And so when you're talking to someone who maybe had wanted to run for a higher office or felt called to do so, they then are thinking about, what impact will this have on my family, my safety and security? And so then we end up having people who are either looking for fame, who had been in prior and had been in for a longer time. It just creates a, I think, in my opinion, a lesser pool to choose from, people willing to do this job. And that's a really unfortunate effect of the state of our politics today. But this certainly does not help in terms of choice and options for American voters, who are largely most in the middle. Right. We're not on the fringes. The large swath of the American public and voters are somewhere in the middle, and we're. We're robbing them of choice here in a lot of ways.
- [27:36]
David Guray
Jeannie, I'll give you the last word on this on, yes, the state of our politics, but also just how resonant this is going to be as we approach the midterms and the 2028 election. How much this is going to be something that you think is going to have resonance among, I guess, both political parties?
- [27:49]
Jeannie Zaino
It's going to have a huge impact. And I'm just thinking, David, over the weekend, I think it was yesterday the president posted on Truth Social, tying the NBA cheating scandal to the stealing of the 2020 election and warning about what could happen in the upcoming midterms and calling for things like no early voting, no mail in voting, calling the prop in California dishonest and a lot of concern with the DOJ being talked about overseeing some of these elections. So I think this is going to be a midterm for the ages, not particularly competitive, but lots of questions about how secure it is and how much people can trust the vote. And that's so problematic in a democracy. I wish the president would lift up up and not push down.
- [28:35]
David Guray
Jeannie, great to speak with you. Maura, great to speak with you as well. That's Jeanne. She and Zaino Democracy Visiting Fellow at the Harvard Kennedy School's Ashe center and Bloomberg Politics contributor Morgan Gillespie is Bluestack Strategy's founder and Republican strategist. Both joined us here on Bloomberg Balance of Power on this Monday for a fascinating conversation there about redistricting and about this shutdown as well. Coming up here, we're going to turn our attention to Argentina, which has been something that Washington has been focusing more and more on. An election there for congressional seats took place over the course of the weekend and Javier Milei's party did well than many people expected. What that means for the people of Argentina, but also for the US as well, after the US Made a sizable investment, shall we say, in that country's election. That's coming up on Balance of Power.
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- [30:21]
Podcast Host/Narrator
The Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay 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 1130 here.
- [30:39]
David Guray
In Washington for Joe Matthew and Kailey Leinz on balance of power on Bloomberg Television and Bloomberg Radio. I turned on the Bloomberg terminal this morning, saw The Argentine peso jump 10% this morning. Bond prices, they're also hitting record highs. And the reason is Javier Milei's political party won 41% of the vote, 64 seats in the lower house of Congress and 13 Senate seats in this weekend's elections. A referendum, yes, on his plans and policies, but also a bit of a referendum on what the U.S. treasury Department had done. Treasury Secretary Scott Besant developing all kinds of extraordinary actions there to build a bridge, as he put it, to the elections that that took place on this weekend. Patrick Gillespie is our Buenos Aires bureau chief and he joins us now from Argentina. Patrick, I could almost hear the back slapping coming from Treasury Secretary Scott Besant and his colleagues who are halfway around the world in Asia. They're taking a victory lap here and I wonder how premature that is in light of what's happened here. Or is it in fact an acknowledgement that maybe this worked and it did help Javier Milei.
- [31:41]
Patrick Gillespie
Well, David, Javier Milei just had a game changing moment politically in Argentina. And as you might guess, nobody could be happier than Scott Besson who took a very risky bet about a month ago to step in with a US Financial lifeline and try to shore up Argentina's economy in peso with the explicit goal of helping me lay win these elections. It remains to be seen if, if, if they can remain happy. What will be be important is if Milei can deliver on the economic reforms that this renewed political support from voters in Argentina is giving him. He needs to pull off a really delicate balancing act of igniting economic growth, keeping inflation in check and power sharing with other centrist blocs in Congress. So he's out of the woods politically for now, David, but he's far from the finish line of the free market utopia that he promised everyone.
- [32:31]
David Guray
Talk a bit more about that. You call that a balancing act, but I'd love to get a better sense here of what these next few months look like for the Argentine president and sort of how difficult that's going to be for him to pull off here in the months ahead.
- [32:45]
Patrick Gillespie
Absolutely, David. Beyond growth and inflation, Milei is going to have to try to push through labor tax pension reforms that are equally wanted by investors and reviled by Argentina's very powerful labor unions. He does not have a simple majority in Congress. What he secured on Sunday by a mile was more than a third of the seats in Congress, which protects his veto power. So he's got a stronger position to negotiate from. But he still needs Argentina's governors and other centrist blocs in Congress to get his deep economic reforms across the finish line. That would be welcomed by foreign investors. But you could definitely anticipate mass protests and pushback from these UN As Milei will look to dismantle what are very generous severance systems, severance pay in Argentina, as well as the pension system, which accounts for about two thirds of all government spending. So he's got a long road ahead and we've seen this before of a pro market president performing well in a midterm and then the wheels fall off. So Milei needs to not repeat history and show that he can work across the aisle, which he expressed last night in his victory speech, but also make sure these reforms not only are passed, but deliver the growth and make Argentines actually feel the kind of improved quality of life that he's pledged to deliver.
- [34:08]
David Guray
Patrick, thank you very much. Thank you very much for that update. That's Patrick Gillespie, our Buenos Aires bureau chief, joining us from Argentina on this Monday. And I want to turn now to where that backslapping was taking place that of course is in Asia. And our next guest, Nazagna Kakhdar, is national security practice group lead at Wiley Ryan, the law firm, and a former assistant secretary for industry analysis at the International Trade Administration. Here with some perspective on sort of the state of play when it comes to these trade negotiations and perhaps what we can expect on Thursday as well when it comes to the U.S. china relationship and kind of the stance of the U.S. going into these talks. How would you characterize the U.S. s outlook? We talk a lot about decoupling and the prospects of decoupling. Can you with a definition or a synthesizer of what the outlook is going to into these talks?
- [34:50]
Podcast Host/Narrator
Well, it's really good to be with you and you know, I'm going to use one word to really underscore what is happening today and going into Thursday, President Trump and President Xi, Xi Jinping's meeting is complicated, complicated, complicated. I think each country is going to demand of the other things that are just not going to be negotiable. That's sort of at the outset. China wants the US to oppose Taiwan's independence. The United States needs rare earth. We need magnets. We need magnets for our military capabilities. And so far what I've seen in these sort of pre negotiation negotiations, framework deals is easing of China off its export ban. But that doesn't say much. That doesn't mean that China has made absolutely clear that our military, our defense capabilities will not be get rare earths, will not get the magnets that we need for the motors. Imagine military equipment, all the motors that go into that. China's made clear it doesn't want to do that. The US has made clear. Rubio just doubled down on this the other day. Secretary Rubio, the US is going to not give in to China's demand for reunification, for the US to oppose Taiwanese independence. So negotiating positions are really tough going in despite sort of these small bites around the Apple framework concessions that we've gotten so far from one another.
- [36:14]
David Guray
That's right where I want to go. So you had the Treasury Secretary, Scott Bessant and the US Trade representative kind of setting the table for the conversation that's going to take place on Thursday. I think there was some happiness that it didn't go badly. They were able to accomplish something and get that framework in place. If you look at this as a spectrum, sort of how far along are we in getting to a deal as a result of what's taken place, yes, in Malaysia, but at the meetings that preceded it in Europe, where are we in that spectrum of getting to a deal with China?
- [36:39]
Podcast Host/Narrator
What a great way of looking at and I really want to underscore that this is the way to look at, about look at it is it is a time frame in the spectrum of the time frame of our history with China. We had a phase one deal with China in the first Trump administration. Myself, my colleagues, we were all part of sort of negotiating the terms of that. And I think everybody knew on some level that the Chinese might not hear to the terms of the phase one deal deal. And so the years progress and the Chinese don't adhere to the phase, the phase one deal. All the while the president Xi Jinping has consolidated power in China. He's indigenized critical capabilities and he's gotten control, stronger control of those critical supply chains. So, and then we see in the summer of last year, China imposed export bans on gallium, germanium, antimony. This year they just roll out, roll out, roll out more export plans, but they're not, not giving us what we need. And so when you judge China in terms of its actions, not its words, it tells a very different story. They're not ready to play ball. They don't want to play ball. And because of all the consolidation of power and supply chains. They're ready to continue to not play ball because they know that they hold a lot of the cards right now.
- [37:44]
David Guray
Regrets? I've had a few. I'm curious as you think about that phase one deal, sort of what happened with it that you think that the folks negotiating this deal are going to keep in mind. So there's that level of enforcement that wasn't there. What does that tell us about the way they should be approaching these conversations in light of how that played out?
- [38:00]
Podcast Host/Narrator
You know, I think the US has really boxed itself into a corner. So it's going to push China for a deal and it's going to say enforcement. And my key enforcement mechanism is tariffs. But what do the tariffs do? They impact the markets. And we know President Trump is looking at the markets, Secretary Bessant is looking at the markets constantly. And they want to signal to obviously US Investors in the world that the US Has a strong market. You can't have it both ways. You can't have a trade deal with China with strong enforcement and be willing to go to use your enforcement levers because China never adheres to deals. We have 25 year history of China at the World Trade Organization where it hasn't adhered to any of its, of its commitments. So now we're going to strengthen, are negotiating taxes with enforcement, but we're not willing to use the enforcement levers because of the markets. The administration has backed itself into a corner. I'm sure they're going to figure out a way out, but it's going to be tricky.
- [38:55]
David Guray
You know, well, the novel approach to trade that this president has. I want to ask you about kind of the corporate side of these deals. So if you look at what was inked over the course of the weekend, some deals for planes were agreed to as a part of all of this. I think about what's going to happen with conversations with Korean leadership and with Japanese leadership. The Japanese agreed to this very sizable investment they're going to make in the US to get those tariff rates lowered. How complicated work is that going to be to figure that out? And how novel is that to impose upon a country like, like Japan or have Japan make an investment of that size, which I think is like 10% of their, their economy.
- [39:29]
Podcast Host/Narrator
I think before getting, I think you touched on this too. I think let's, let's unpack the Malaysia, even a framework deal, because I think that illustrates, illustrates the complexity. So part of the framework deal with Malaysia, certainly by planes, but also, you know, open up your markets to to more US exports but also don't restrict exports of rare earths to the United States. But most of the Chinese, most of the investments in rare earths processing facilities and mines in Malaysia are Chinese. And the Chinese have blocking laws that says you don't adhere to U.S. laws or any laws that conflict with Chinese law. What is Malaysia going to do? What can it potentially legally do? It's going to have to either give in to China or given to the United States and it won't do 100% all US and 100%. It's going to do this balancing act and we might wake up and realize that what we thought we had agreed with Malaysia isn't going to pan out. Same thing I think with with Japan. Japan has committed to $550 billion investments here. They don't know what they're going to invest in. They don't know if the critical capabilities in the US are going to going to invest in are going to align with where Japan needs to go. And those supply chains are here. And Japan needs supply chains at home. Japan needs. This is the amount that they committed to Invest is about 10% of their economy. Right. They need to increase military spending and get their supply chains in order too because China has a choke point on global supply chains in terms of rare earths, industrial diamonds, etc. So Japan's in a tough spot as well.
- [40:53]
David Guray
Maybe I could ask you lastly just about the conversations taking place or not taking place in this hemisphere. So we reported today that Mexico is going to have a bit of an extension on delay on as it continues to talk with the U.S. canada not in that position right now. Those talks are taking place and it sounds like there's unlikely to be a conversation between the Prime Minister and the President anytime soon. How are you thinking about the progress of negotiations here in the North North American hemisphere?
- [41:17]
Podcast Host/Narrator
I think it's very likely that you know, USMCA is going to be renegotiated but then we're going to have some side, really strong side deals with the with Canada separately and with Mexico separately. And the reason is that their asks of them are going to be very different. Our trade and our dependencies are going to be very different. And with Mexico, this is sort of what I alluded to about Malaysia. Lots of Chinese investments in Mexico and how are we going to deal with rules of origin? How do we treat the products that are come from Mexico with substantial Chinese origin input into them. That's going to complicate our discussions with Mexico with the rest of the world when we impose when we ask that we impose higher tariffs on goods containing Chinese materials.
- [41:57]
David Guray
Thank you very much.
- [41:58]
Podcast Host/Narrator
My pleasure.
- [41:59]
David Guray
Here with me here in the studio in Washington, D.C. as we look ahead to more of the President's trip to Asia. He is in Japan, scheduled to meet with the Japanese Prime Minister here in the coming hours. Going to visit with US Troops there in Japan as well, and with business officials as well. See if making headway on that $550 billion investment. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at Noontime eastern@bloomberg.com this podcast is brought to you by.
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