C (2:42)

And if not, we just talk about football.

B (2:44)

Yeah, yeah, they talk about football. I roll my eyes.

A (2:49)

In any case, we do enjoy interacting with people and we hope you're our listeners. If not, just like and subscribe. You don't have to listen, but thanks so much for the opportunity to be here. What is going on? Well, a lot of things aren't new. The president's opinions about international trade is one of the things that's not new and whether America is getting ripped off. I used to be with a number of of university students in part of my work, and I'd always show them. I'd start the conversation in President Trump's first term with a 1987 recording from the David Letterman show where Donald Trump appeared with David Letterman and he gave a stump speech on tariffs and on other countries ripping off the US to David Letterman in 1987. So these are views he's held for a very long time. And given that he's now in his second term, he's probably not going to change. He hasn't changed much over the years at all on this issue. But the conditions of the moment, I think, are very different. And that's where I'd like to start. George Friedman has a very interesting book, and his title is the Moment We're In Now. The title of Friedman's book is the Storm before the Calm. And Friedman notes that this is the end of a sociopolitical cycle and the end of an institutional cycle for many governments. What Friedman means by that is the things that were created, and this is particularly in the Post World War II era, the institutions that were created, the arrangements among governments and for the US Government which were created then no longer seem to be working. They're falling apart. They're not as effective as they once were, if they were ever effective, but now they're not working at all. And that is making sort of a chaotic backdrop, but it's a natural process. Friedman points out that these things happen at the end of a cycle and we'll get through it. At least he has some confidence. But with regard to the current administration, that's at least one piece of it. But they are also in the situation where what I would describe is they have a mission but not a plan. In other words, if you ask different cabinet officers, what are you trying to do? There was actually a very coherent answer. I noted a speech by Treasury Secretary Besant to the Milken Institute just happened previously this week or speeches by his council of Economic advisors are all fairly consistent with what's going on and what the views are and what they're trying to get to. But while they have a mission, they don't have a plan. Okay. And the plan would be do this first, then this, then this and that, plus the backdrop of ineffective sort of teetering institutions is why it feels so chaotic. But, Bill, you've got views on this as well.

B (5:50)

Well, it's, I think the cyclical theory that is a good one and a lot of people have written about it and they refer to them in different ways. But there's an interesting book, and I've forgotten the author that talks about turnings. And we're in the fourth turning, which is the point at which things collapse and then get rebuilt and restructured in a different way. And you can make a good case that we're going through that right now and hopefully we'll get through it. I'm not sure it's the storm before the calm. It may be the storm before the flood. But it. I think Scott's right that they have a vision. The problem is that I would say the vision is less consistent than Scott has articulated. It's less consistent than the cabinet people have articulated, partly because we have a president who has never had an unexpressed thought. So everything that comes to mind, whether it's Alcatraz, which was two days ago, or movies, which was Sunday night, ends up being posted. And if you were ordinary person, people would roll their eyes and move on. But when you're the president, what happens next is. And I was talking to someone who worked in the Trump White House in the first term, what happens next is the president says something, however random it is, then immediately you've got a fleet of lawyers who have to scurry around figuring out how to do that. And nobody goes back to him and ever says that's a really stupid idea. They spend all their time trying to figure out how to implement that idea. So we're going to spend billions of dollars rehabbing Alcatraz at the same time we're trying to cut government, you know, on Alcatraz.

C (7:30)

I don't think that they realize that people swim regularly every day back and forth from Alcatraz under the bridge to the beach. And there's like whole clubs that do that. So, like maybe not the most secure place as it used to be.

B (7:45)

Well, I've done columns on this. In many ways, he's lost in the 50s. If you are every Western son, it's bronnie Millsap lost in the 50s tonight. And from a trade perspective, one of their objectives, I think, is let's bring manufacturing back to the United. And I say manufacturing because they don't talk about services much at all. I mean, movies is a foray into the services industry, but that's the first one. It's not only manufacturing. It's old manufacturing. It's heavy industrial stuff. It's steel, it's cars, it's machinery. We want to get that stuff back here. We want to make it all here. That's not feasible, I don't think. And most economists would say that, but that seems to be an objective. And in a way, that was Biden's objective as well. The difference is that Biden was a carrot guy. Let's give companies rewards if they do that. So if you look at the CHIPS act, if you look at the Inflation Reduction act, these are incentives for companies to do exactly what Trump wants them to do. Trump is a stick guy. I'm not going to pay them to do what I want. I'm going to threaten them with tariffs, which I'll charge them if they don't do what I want. And so I think it's not a coherent plan in the sense that they throw out all these tariffs. And now we're engaged in a whole bunch of negotiations, which I think we'll talk about later.

A (9:10)

There are some important carrots here as well. Energy abundance is one of them. We listen to Chris Wright, our Energy Secretary, talk about that. A carrot, certainly low energy costs are incredible.

C (9:21)

Carrot, here we go.

A (9:24)

That's where the AI investment is coming from. AI is basically driven by cheap energy. It's as energy intensive as turning bauxite into aluminum. And so it's going in places where you have abundant supplies of natural gas. So energy is part of that, but also lower taxes, low regulation, room to innovate, public lands that are more available to utilize for all kinds of things. So there is a whole set of incentives that are along with the sticks. So they're different incentives. But then again, as Secretary Besant says, we're trying to re privatize the economy.

C (10:09)

So when folks in the media and out there are saying, and we hear this refrain all the time, well, we don't understand their strategy. Do they even have a strategy? You guys are saying they actually have a strategy.

A (10:19)

Well, they have a mission. They know where they want to get. But how to get there is going to be rough.

B (10:24)

That complaint in particular comes from the foreigners who are coming in to negotiate.

C (10:30)

We're hearing it all the time.

B (10:32)

And they have two complaints actually. One, we don't know who to talk to and two, we don't know what the United States wants.

C (10:39)

Well, and three, if we find someone to talk to, are they really the person that's going to make the decision? And what happens when they say, yeah, this is okay? Is that really yeah, this is okay?

B (10:50)

Well, that's why they don't know because Trump has contradicted three of his four top trade advisors, Secretary Lutnick, Secretary Bessant and Peter Navarro. He's publicly contradicted all of them on various points at various times. The only one he hasn't contradicted yet is Ambassador Greer. And that's because I think he hasn't talked as much, at least publicly. And the day will come. But I think countries are learning there's really only one person that you can talk to to get a reliable answer. And I mean Trump really said this the other day. I think it was his Kristen Welker interview played on Sunday, which is, you know, I'm going to set the tariffs, I'm going to set the prices. Basically he's saying I'm going to run the economy and we're going to do it. They're going to do things the way that I say what that says. I mean, you can debate the wisdom of that, but what it says is there's really only one decision maker. And on trade, going back to what Scott said, you know, this is somebody with very strong, very fixed views he's had for more than 40 years. They're not going to change. And he really is his own trade person. The way this is playing out, I was telling Andrew I had a meeting yesterday with someone who's actually doing this and the way it's playing out is you listen to us, it's what we predicted. So I'm sort of happy countries are coming in and offering things and the US Attitude is we're not going to tell you what we want. Tell us what you'll give us and we'll tell you if it's enough and if it's not enough, we'll tell you maybe some things that you can add because there is a catalog which is called the National Trade Estimates Report which comes out I think 1st or 2nd of April every year, came out April 1st this year, which is exactly a catalog of everybody's non tariff barrier, unfair trade practices country by country. They've been doing it for years.

C (12:49)

Scott memorizes every year when it comes.

B (12:51)

Out like line by line, it's not a Trump thing. This has been going on for years. And so they've got a list and if you don't produce enough, they'll go back to the list. But countries are coming in though expecting a normal negotiation. And if you have done trade negotiations or observed them, they need to be win win. Both sides come in and they give each give something to get something for Trump. There's only win lose negotiations, the US Concession and all these negotiations, there's only going to be one and it is we're not going to do what we threaten to do. So you come in and concede we will not do what we said we're going to do. So we stay where we are and we get all this additional market access. That's the theory. Now countries are actually coming in wanting not to do that and coming in with asks of their own about what they want the United States to do. The United States, believe it or not, has trade barriers of its own and they're being rebuffed. So it's not at all clear to me how that's going to turn out because every other day there's a prediction we're going to have massive deals announced.

C (14:09)

Imminently and the stock market kind of goes up and down based on what they say in the morning on CNBC or the night before after the market closes.

A (14:19)

We did a volatility round trip from a month from Liberation Day to a month afterwards. So volatility is definitely there and it's caused by that. But Bill's absolutely right about one of the characteristics of the President is he's a win lose negotiator. You think about real estate. One thing about real estate is you're either the successful bidder for Rockefeller center or you're not. It is actually a win lose business, unlike many things that you deal with every day. I was in the soap business for a long time with Procter and Gamble. Not only were there win win outcomes, but you needed to make sure your partners got enough, the deal would hold up. And so you always work for win win in the negotiations. But the real estate I would acknowledge is different. That's probably a limitation. On the other hand, he's fairly obviously looking for collateral, which every real estate developer I've ever met is looking for collateral. And that tends to be their driving ambition. Now I would never underestimate his skills as a builder. Somehow he figured out how to get concrete delivered to Manhattan at 3:00am that's not easy. He did it when no one else could do it. But there are some characteristics he's brought from his past that affect this decision process.

B (15:39)

Just as an aside, I should say I was working for Senator Rockefeller when the Rockefeller center was sold to the Japanese, and he wasn't all that happy about it, although the family doesn't have a stake anymore. But I reminded them, when it comes to real estate, you know, they're not going to move it to Tokyo. You know, it's staying in Manhattan, and it's there. So it got a little bit more relaxed. Anyway. Sorry.

C (16:02)

No. So it's interesting. Win, lose, right? Win, lose doesn't typically work in trade. So what does the rest of the world make about this? The other thing that I want to ask is that President Trump's always talking about his leverage. Does the United States really have leverage with all of these countries we're trying to negotiate with?

B (16:24)

That's a really good. That's a really good observation. His basic view is that we have more leverage than the other guys because they need us more than we need them. We have a very large, sophisticated market. He's talked about the United States is this giant luxury store that people are going to come in and sell things here and make things here. And he believes that access to our market is so valuable that people will pay for it. And if you look at what Ambassador Lighthizer has been saying in writing, actually, it's the same theory. And I think that he overestimates our leverage and he underestimates the leverage that other countries have. We'll see this playing out with China, where his view has been that the Chinese depend on selling massive quantities of stuff to us, and if they can't do any of that, then they'll fold and do what we want. So far, that hasn't worked. It didn't work in his first term. In fact, I would argue he got played in his first term by the Chinese because he went in with a whole long list of demands. And what did he end up with? They agreed to buy a bunch of stuff and then didn't do it. So that's another element of this. He can be played. His approach is maximum demands and then retreat. Because I think that. I think we're going to see this. We saw this a little bit with Canada and Mexico in February. I think for him, being able to say that he won is more important than what he actually wins. What he wants is the Oval Office meeting, where he can, with the head of government, head of state, where he can say, I won, they folded, America is great. Again, the question of what he actually won is secondary. And if you look at his first term in China, this came up in the press conference where he announced the great agreement that he had just negotiated.

A (18:23)

We just point out that it is true that the United states among the G20 has the largest home market. So if you look at the portion of our GDP or portion of our economy that is trade, imports plus exports, the broadest possible measure, it's about 27% of GDP and that's by far the lowest among the G20, mostly because of the size of the home market. That said, he overstates the power, but at least that much is true. And you're right, he is not going to be patient about normal trade negotiations. He doesn't have time. He wants to force things, he wants to make things happen. And the disruption he thinks is to his advantage.

B (19:10)

And I think what he'll discover is it's not just about size of market and quantity. It's about things that we don't have and can't do ourselves, other people do. So the Canadians have get away from China for the moment. The Canadians have minerals that we don't have. We get a lot of oil and gas from Canada. We are a net exporter of oil and gas, but we have a long standing relationship where the Canadians ship oil down to the Midwest via pipeline, it ends up in gas stations all over the Midwest.

A (19:48)

Same with electric power in the Northeast United States.

B (19:50)

Yes. And if you put tariffs on that, if they stick, prices are going to go up. That's the way the economy works. China has stuff that we don't have and one of the problems that they're going to run into is that. And he talked get a fascinating conversation with a Bloomberg reporter actually during the campaign where the reporter said, you know, you want all these companies to move here and manufacture and okay, let's say they do that. It's going to take them years to do that. Stellantis, you know, which is Chrysler and Peugeot and others merger announced last year that they were going to reopen a plant in Bellevue, Illinois. The start date for that plant is 2027. So this is a plant that's already there, it's already built. The zoning problem isn't there anymore. It's retooling three years just to get the thing open. If you're going to start with a greenfield plant, it's going to be longer than that. And in the meantime the tariffs are coming in. So the reporter asked him, so all these prices are going to go up and you're going to be squeezing people who are relying on parts and components somewhere else before they start making them here. And his reaction was, well, if the tariff is high enough, they'll move faster, which I don't think is the way the world works.

A (21:15)

There's a basic misunderstanding of how complex and specialized businesses are these days. Everybody's concerned about an agreement with Venezuela. We have we have in refineries in the Gulf coast of Louisiana that are designed to process Venezuelan oil. And that's about it. All right. Light sweet crude is not something they can handle in their feedstock. That's just one example of specialization. But auto parts are specialized throughout, Basically follow Interstate 75 up and including the 401 in Canada. Auto parts makers are along that stretch of road and the national border doesn't really factor into it. Those are in their incredibly specialized facilities. So all this stuff is glossed over in an Oval Office meeting. So this is where it will really get hard with Canada and Mexico. Now, I think that a lot of the trade, the tariff talk will resolve if they can cut a deal with China. So that's the first I think that's the action if so. But there's a lot underneath it that has to be.

C (22:25)

So you're saying, Scott, that if we can get a negotiation with China that actually sticks, Mexico and Canada and everyone else will fall into place.

A (22:33)

I think it gets more straightforward because the ask Niro and they're able to focus then on and they'll have pattern bargaining, basically. And in some cases, I think some of this is just going to be not really trade agreements as much as preferential purchase agreements. So I think, for instance, I said this on last week's show that Japan, one of the ways if there's a problem with a trade deficit, Japan is an importer of hydrocarbons and importing liquefied natural gas from the US On a preferential basis. It's already relatively competitive cost. But if they were to do that, they would quickly erase any trade deficit. So meanwhile, General Motors and Ford are not going to sell any cars in Japan anytime soon. And it has nothing to do with tariffs. So once again, in that particular example, if you're worried about the trade deficit, you do one thing. If you if you think tariffs are going to get you an American car industry in Tokyo, think again.

C (23:32)

All right, so we're talking about Canada. We're going to come back to China. There was a big visit by the new prime minister of Canada yesterday. How did you guys think it went?

B (23:44)

Well, I did a TV interview right before it and they said what's important. And I just thought, from the Canadian perspective, the big thing is avoid a meltdown. Don't have a Zelensky meeting.

C (23:59)

Show up in a suit.

B (24:03)

And you don't want to show up in military uniform. No, I don't think if you're.

C (24:06)

And don't gasp, mon dieu, when you see Trump in his entourage either.

B (24:12)

Well, that's what Trudeau would have said, I think.

C (24:14)

Yeah, maybe not this guy.

B (24:16)

No meltdown. Carney, I think, was skillful in that regard. It was apparent they have deep differences on trade. Trump was.

C (24:26)

Deep differences is that Trump wants Canada to be the 51st state and Canadians don't. So there's that.

B (24:35)

I thought Carney followed what we've been calling the Sheinbaum strategy.

A (24:41)

Yes, Right.

B (24:42)

Which is what the president.

C (24:43)

Claudia Scheinbaum. The president.

B (24:44)

Which is step one is assert your sovereignty politely. Don't poke him in the eye, which is what happened yesterday.

C (24:51)

Do not poke the bear.

B (24:53)

Step two is find some small concessions to make, which remains to be seen. And then step three, which is the most important step of all, is let him win. Because go back to what I said earlier. What he really wants to do is say I win. What it is that he wins is less important.

C (25:11)

Well, it's because everybody on the golf course lets him win, too. Right. Isn't it the same thing?

A (25:16)

I don't know.

B (25:17)

I don't know the answer.

A (25:18)

He's capable of imposing tariffs between the 15 and the 7th based on the Columbia experience. But look, Bill's right about the US and their two big trading partners to the north and south. For the first hundred days, Mexico managed the relationship with President Trump in a much more sophisticated way and a much more constructive way than Canada did. And I think it had to do with the end of Trudeau as an elected official and the election dynamics. Now, it turned out the election, I guess we went from a minority Liberal government that will vote with the communists to a minority Liberal government that will vote with the Communists. I'm characterizing the ndp.

B (26:10)

That's in Trump's eyes, actually.

A (26:11)

Are. Yeah. So. Right.

B (26:15)

They're not communists.

A (26:18)

You haven't lived with the ndp.

B (26:20)

But in any case, my mother was Canadian, so I've.

A (26:24)

She didn't live with the ndp.

B (26:25)

She wasn't a Communist.

C (26:26)

Every time we talk about Canada, this is what happens.

A (26:28)

I moved to Canada when Bob Ray was the premier of Ontario. And so in any case, the election, while it didn't look like it moved much, I think Prime Minister Carney took the lesson of Mexico there. And I think he did handle the meeting very well and was looking for no embarrassment to be able to walk out with, with a way to move forward. It's not obvious what we're going to do with, with usmaca, previously nafta and, and we've got some obligations of our own to live up up to.

B (27:05)

Trump said yesterday we may not need it anymore, which I thought was a very.

C (27:08)

We don't need usmca.

B (27:10)

Right. Okay. It was a good transition thing and we may not need it anymore. And it's not clear what he meant by that. I think there's one area that we're actually, the three countries have a common concern which could end up being a basis for actually a constructive negotiation. As you know, it has to be renegotiated anyway in 2026. And so really, all that we're going through right now is moving up the timetable. But the one thing that we have in common that Trump is really concerned about, which I think is a legitimate concern, is that Mexico in particular, but also Canada, not end up being backdoors for Chinese imports in the United States. And they're concerned that what the Chinese will do, particularly if tariffs persist on direct imports from China, is they'll set up factories in nearby and import things or export things from those factories into the United States as products of Mexico or products of Canada or for that matter, products of Guatemala. And they would like to make sure that doesn't happen. That's.

C (28:12)

How would they stop that from happening?

B (28:14)

Well, in the old fashioned post Bretton woods world of international trade, where there were rules, the way that would happen is the three countries would agree not to let the Chinese in and use investment restrictions like cfius we have here. And use the parallel, the Canadians actually have the same system with broader authority block investments because they don't have to limit it to national security to, you know, restrict access. The Trump approach is, is always, though, threats, you know, but there's a lot of, I think, evidence to suggest that both the Canadians and Canadian government and the Mexican government are similarly worried about, similarly worried about, you know, Chinese entry into their economy in ways that might end up being not helpful to, to Mexican workers or to Canadian workers. If you look at the Belt and Road initiative that the Chinese have pursued, it's had a mixed record. I mean, there's been some successes, but there's been a lot of cases where things have not turned out the way that they were expected. The expected number of jobs were not created. It's ended up being a platform for Chinese moving into the economy and taking over segments of the economy at the expense of the indigenous. That's the wrong word. Domestic companies. It doesn't have to be that way, and it isn't always that way. So it's a mixed bag. But I think the Mexicans are wary about it. President Sheinbaum's predecessor kind of went back and forth about that. Some months he welcomed the Chinese investment, and some months he rejected it. But I think it's a basis for discussion that the three of them could have, because it's, I think, for Trump in terms of the relationship with the countries, once you get past the him saying, well, we don't want your cars, we don't want your steel, we don't want your aluminum. Once you get past that, I think what he's mostly worried about is we don't want you to be a backdoor for China.

C (30:19)

And do the threats work?

B (30:22)

I don't know.

A (30:23)

We'll see.

B (30:24)

Yeah.

A (30:26)

Look, the biggest, the big issue on whether they work or not, I think will have to do with Europe and Europe's reaction. Look, and Europe's agreements on tariffs will be part of the settlement in Ukraine. I mean, that's how it's going to play out, I think. Look, there was a proposal by Europe for a NATO security force in Ukraine as peacekeepers keepers. Excuse me. And that was immediately responded to by Russia saying, we consider those enemy combatants. So it was always a difficult moment and, you know, a good way to start World War iii, if you were, if that's what you were trying to do. And there was a week in Washington where you had Francis Macron and the UK Starmer here on Monday and Wednesday. That was when Paddington Bear came. I'm sorry, President Zelensky came on Friday and got the lecture in front of the press. So the week didn't go well. But in both cases, I think what they heard is a strong no from the United States about troops, NATO troops in. Not just NATO troops, but US Troops in Ukraine as a security force, security guarantees aren't happening. And one of the things that will drive is the importance of Europe reinvesting in their own security capabilities, which the Trump administration wants them to do. And I, as an American taxpayer, think they really do need to do. It's not 1949. Europe can afford. If Europe can afford welfare states, they can afford security investments. And the United States doesn't have to do that. And that does drive our deficits and debt. So that, I think will fall out of the US of of the US Role in, in settling Ukraine. However, that looks.

B (32:26)

Let me, let me bring it back to economics for a minute. Okay? I think the thing that we're at, Europe in particular, is worried about now, and it's something that I want to get into with respect to the dollar as well and debt instruments, is diversion. If Trump maintains a position of very high tariffs on China, and even if they go down somewhat, our trade with China has been declining anyway for numerous reasons. To the extent it continues to decline or simply stops because of the tariffs, all that overcapacity has to go somewhere. I think the Trump idea, which is. I think the right idea, is the Chinese should eat it and they should do more to increase consumption in their own country. But that's not their approach. Their approach is to export their way out of their economic problems. That's the standard tactic. That's what they're trying to do now. So they'll export somewhere else. And there's a whole range of circumvention and fraud things that you're going to start seeing about how to get stuff into the United States that is really Chinese, but looks like it's coming from Guatemala or the Cayman Islands or wherever. But Europe is the obvious other destination for stuff that no longer can be sent here, and they're worried about that. The thing that I think we should be worried about is how the financial markets are going to react to all of this and whether we're going to see a similar movement away from the United States as a safe haven and a transition to investment in other currencies somewhere else. Because I think the overall message, if you want to. I mean, Scott talked about the Trump message. I think the overall message he's sending is the United States is no longer a reliable partner, period. Whether you're talking about economics or whether you're talking about geopolitics, we simply can't be counted on. One of the interesting questions that came up yesterday in the conversation I had with a person from the government was, aren't these countries coming in asking or demanding that the United States commit not to put the terrorists back on? The United States will easily commit not to put them in in the first place. That's the quid pro quo. But will you Americans also commit never to put them back on again or never to, so we don't have to go through this endlessly? And the answer is going to be no, we won't commit to that. So what the United States is saying is, you can't trust us. You can't count on us. And you can't even count on us to be consistent from month to month in what we're going to do. So if you're an investor, for example, what is the signal that says to you, it seems to me that you're going to look for safe havens somewhere else. This is not a dramatic development. This is sand leaking out of the bag. But I think the signals that we're sending actually directly contradict what he wants. He wants more investment here. But the signal to investors, I think, is you can't be confident that the economics I've created to force you here are going to last longer than six months.

A (35:55)

They underestimate the value of predictability and stability. I think that's.

B (36:01)

You said it much better than I.

A (36:02)

They heavily discount it.

B (36:03)

I get to do the rant. He does. The logic.

C (36:05)

No, but it's 100%, you know, and that brings us to China and this weekend in Switzerland, Treasury Secretary Scott Bessant is going to China to negotiate, I guess, or just talk the Chinese. And we're hearing it's not going to be a deal, but it could be a de escalation. What is he, what do we mean by that?

B (36:28)

Well, this is the way it starts. And you know, this is a good, this is good news. This is a good development. No question. The analogy I've used on prior podcasts is this is like a sumo match and you've got these two 400 pounder guys in the wing, in the ring stomping their feet and glaring at each other and throwing rice around and a belly bump and eventually they get to grapple. And this is the first step because.

C (36:53)

This is the posturing and the throwing of the rice.

B (36:56)

Well, no, we're beyond that now. They're actually going to have a meeting.

A (36:59)

That'S going to make contact.

B (37:00)

Somebody that's important if he's meeting with.

C (37:02)

Will be a belly button bump.

B (37:03)

You're saying that's. It'll be a little bit more than that. I. They won't reach an agreement on anything but what, you know, they've gotten beyond the, the first question, which was, you know, who goes first? Because for each side, going first is a sign of weakness. So each side wants the other one to come to.

C (37:21)

Weren't they able to kind of fudge who blinked first with this too? That was very interesting to me. It was, you know, them, them. So they were able to come away with this in a way that both can save face.

B (37:31)

That's the way around it. And when I gave a little talk about this the other day, and I thought, you know, there's two. There have been two obstacles. One was a practical one, which I think they've now gotten over, and now there will be a series of meetings. The. That was. I'm sorry, that was political one. The practical one is the Chinese approach negotiations differently than the way Trump approaches them. Trump said likes to do things top down. He wants to meet with Xi Jinping, and he wants to get the two of them to agree, and then subordinates will work out the details. The Chinese approach is the reverse. We want to work out all the details first. We want everything nailed down so that when the leaders meet, they can sign and have a success. But we don't want to go into that meeting without everything being prepared and agreed to. So we know what's going to happen. That's the opposite of the way Trump does it. Getting over that is going to be very difficult, I think.

A (38:27)

Yeah, you have Confucius versus Plato, basically, in terms of the approach styles, but I think that's right. But look, I think it's good news that they're meeting, and I actually think Secretary Besant, excuse me, and Ambassador Greer are the right people to lead the delegation. I think some of our most constructive years with China was when Hank Paulson, then Treasury Secretary, was personally involved in that. So stay tuned for coming attractions, and there will be.

B (39:01)

I think this is the first step in what's going to be a long series. One of the interesting questions will be whether this is going to. Their intent is to try to squeeze everything in between now and July 8, which is when the postponement date runs out. That probably doesn't necessarily apply to China, but it's going to create, as one of the jokes, is a long line of heads of state lining up on 17th street to get into the White House on July 7th to see if they can get an arrangement that will make the tariffs go away.

C (39:35)

Maybe they can also have a cryptocurrency summit while they're there.

B (39:40)

Get me started on that.

C (39:41)

All right, Trey. Guys, this has been great, as always. We want to thank bafta, but before we get out of here, we want to answer some of your questions. I'm going to start with what will happen to the American farmers. And I know Scott has a lot of opinions about this.

B (39:57)

Well, they're toast.

A (40:00)

They're the strongest lobby group in America for a reason. I mean, go up to the Capitol Building. You'll find tobacco leaves are in the top of the Corinthian columns. And just visit the Agriculture Committee room on the House side, they have a patio. They have a view of the Capitol. They have real estate you wouldn't believe on Capitol Hill because of their influence. I think that the first gift to the American farmer is West Texas Intermediate at 56 or $57 a barrel wherever it closed. Low energy costs are key to the farm economy. And so I think to the extent that the policies are able to continue energy abundance and low energy prices, I mean, if you look at it, you've got to move stuff, you've got to process it, you've got to dry. It all takes hydrocarbons. Your key fertilizer is made of ethane. That's how you get ammonia. And so all of it depends on energy prices. That's the first gift. But look, it's part of the President's base. And I never worry about the Aggies.

B (41:10)

All right, well, wait a minute. They got hosed the first time and he had to come up with $23 billion to bail them out in subsidies, to bail them out. They're the front line of retaliation. I mean, it's the easiest retaliation you can undertake. You just stop buying soybeans, you stop buying corn, you stop buying wheat, you stop buying beef. And the Chinese have done that effectively. And it's tragic because we are now, you know, in our third or fourth year of trade deficit in agriculture after the previous 45 years of surplus. So we've turned a corner here in a very negative way. When the Chinese stopped buying our soybeans and went to Brazil during Trump 1.0, we've never gotten all of that market back, and we're not going to get that market back. And the farmers will tell you they are dependent upon exports for their long term survival. And you can lower their costs all you want, but if they can't find a market, you know, we are a slow growth economy and relevant to farmers. Our population is beginning to decline and.

A (42:27)

We just can't eat that much more.

B (42:29)

I mean, looking at us, we can eat that much more. But plus, you know, to the extent that we have extra people, Trump is deporting them. So this is not a growing market here for agriculture. They're going to have a tough time because it's the easiest retaliation you can undertake.

C (42:46)

All right, these two questions are a bit linked. One of your questions is, are we really weeks away from empty shelves? And another question I think that goes along with this is what will be the tipping point to get the Trump White House to back down from any of these stalemates?

B (43:04)

The bond Market. I'm a believer in what Carville said. You know, he wanted to be reincarnated as the bond market. They can intimidate anybody. And I think that's seriously, I think that Trump is already, I mean, the story in Trump 1.0 was he followed the stock market religiously daily. And when it started to tank after April 2, he said, well, equities aren't that important. But then when he pulled back the last time, it was because of the bond market. And I think that that's what they need to worry about. Because if investors start to move away from US Government debt instruments, everything goes up. The cost of borrowing goes up, mortgage costs go up, the economy slows down. We start to slip into, if not recession, then stagflation, which is a term that people that are my age remember from, you know, the Carter administration. But we haven't had that for a while. But it may be coming back. That may cause him to pull back. The other thing that may cause him to pull back is if he encounters unexpected resistance from the foreign countries that he's negotiating with. They're all rushing in to make concessions. But I've also noticed, you know, that they have yet to announce an agreement despite many predictions that there would be many agreements. This is turning out to be harder than they thought, particularly on the non tariff barrier side. If you're negotiating tariffs, that's not complicated. There's a number, yours is 20. We want it to be zero. Then you have an argument. When you're talking about non tariff barriers, it's different. This is the chicken story for us. Europeans don't take our chickens. That's a protectionist action. The non tariff barrier for the Europeans, this is a health safety measure. That's the way they look at it. And going to them and saying, you need to change this. You're telling them that we need to change their health, safety and environmental policies. We're telling them they need to change the way they've organized their society. That's a much bigger political ask and there's a much bigger political cost for them domestically to do that than the cost of lowering a tariff. So I think these are going to end up being harder negotiations. And one scenario, I think it's unlikely because some countries will fold. But one scenario here is that he discovers that he can't get these things to the finish line, which may mean that he's going to have to lower his standards.

A (45:47)

Bill's right about the 10 year. I mean, that's what the Treasury Secretary has said. He's watching. You know, in the banking business, it's going to be a busy summer because the Treasury Department will have to refinance about $9 trillion of U.S. debt because of the amount of short term lending that was done by the treasury in the previous administration. So we're going to get some signals on that. But I agree with Bill about that. The pressures will come from a lot of places. There are geopolitical pressures as well as financial pressures. And we'll just see. Trump always says I'm a tough negotiator but I'm flexible. And so we'll see which one he relies on going forward.

C (46:31)

Here's another great question. I've asked you guys this before, but I still don't quite understand it. How connected to the goal of devaluing the US Dollar are these trade tariff threats that the United States is making?

A (46:45)

Well, tariffs have the effect of devaluing the dollar. So one of the reasons I think that president likes tariffs so much, it's a very flexible way to manage currencies in a bilateral relationship. I don't know that there's a debt, there is a goal to reduce the value of the dollar by this administration. They've not said so. I would also point out that they like to be able to control the value of the dollar. I would note that Liberation Day happened to coincide with the last expiry of the 60 day Libor notes. Libor's closed as a facility. The Last Libor contract, 60 day contract ended on Liberation Day. So now it's it's the collateralized SOFR run by the Fed, New York Fed and the bank banks in New York, which actually controls the value of the dollar. So I think there's more going on there and I would not make make it just a blanket statement that they want a lower dollar. But I think tariffs are a way you can manage it more flexibly.

B (47:50)

Bill, I don't have much to add. Trump has been in different places on this. Well, he hasn't said anything about it lately that I'm aware of. But he in the past has said he's a strong dollar guy and he wants to have a strong dollar. I would not put his advisors in that category. I think the advisors who are concerned about the overall trade deficit understand that you're not going to get a smaller trade deficit with King dollar with a strong dollar. And you'll notice in his first term you notice the deficit actually got worse, not better. So if that's the goal and this gets back to what they're trying to accomplish. If the goal is simply to eliminate the trade deficit or at least reduce it, having a weaker dollar is central to that, which at least this week appears to be what's happening. But I'm not sure that will be sustained.

C (48:47)

Guys, thank you so much. Audience, thank you so much. I think we're getting the hook now because the timer has turned to zero. But we could talk about this all day. One thing I would definitely say, if you want to ask more questions, send us emails@csis. We also are posting on Instagram now a new thing called Ask csis. So if you want to ask CSIS a quick question about trade or tariffs or anything, we're going to do our best to answer as many questions as possible.

B (49:13)

Do that. I didn't know we did that.

C (49:15)

It's brand new.

B (49:16)

Cool.

C (49:16)

It's brand new. And we will do our best to answer it.

B (49:18)

I mean, we get stuck answering the questions.

C (49:20)

Exactly. See, I'm constantly trying to find ways to put these guys to work.

A (49:23)

Always the last to know.

B (49:24)

Yeah, exactly. Nobody ask us about this and pretty.

C (49:29)

Soon we're going to even have an Ask CSIS email account. But for now, go to our Instagram. Follow us on Instagram. You can also ask us on Twitter or LinkedIn. Thank you guys, as always and thank you to Baft.

A (49:41)

Thanks for the invitation.

C (49:49)

To our listeners. If you have a question for the Trade guys, write us@tradeguyssis.org that's tradeguyssis.org we'll read some of your emails and have the trade guys react to it. You've been listening to the Trade Guys, a CSIS podcast.