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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business App. Let's turn to tariffs. Ocean First Financial CEO Chris Mars saying, while the direct impact on businesses isn't concerning at present, the volatility and uncertainty is clearly evident. The longer the period of uncertainty, the more likely the perceptions translate into reality. Chris joins us now for more. Chris can morning, Marian, John, been so long, It's going to see you again, sir. Let's start with the reality, your reality and your business at the moment. What do you see there?

This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg Terminal and the Bloomberg Business App. Let's turn to tariffs. Ocean First Financial CEO Chris Mars saying, while the direct impact on businesses isn't concerning at present, the volatility and uncertainty is clearly evident. The longer the period of uncertainty, the more likely the perceptions translate into reality. Chris joins us now for more. Chris can morning, Marian, John, been so long, It's going to see you again, sir. Let's start with the reality, your reality and your business at the moment. What do you see there?

It is interesting because we'll read about taris, tarist tariffs. Our clients are not particularly concerned about them. And I think you have to look from their perspective. They've been through the first Trump administration and they have been through COVID. So I like to say, our folks got a PhD In supply chains during COVID. They figured out I have remarkably small businesses at bank with US. We cover clients between Boston and Washington. I have a pet foods business. This guy can explain to you the supply chains in China, Cambodia, Vietnam. He understands the tariffs, he knows where he's going to get his stuff, and it is not looming large in their minds. So it's more the perception than the reality.

It is interesting because we'll read about taris, tarist tariffs. Our clients are not particularly concerned about them. And I think you have to look from their perspective. They've been through the first Trump administration and they have been through COVID. So I like to say, our folks got a PhD In supply chains during COVID. They figured out I have remarkably small businesses at bank with US. We cover clients between Boston and Washington. I have a pet foods business. This guy can explain to you the supply chains in China, Cambodia, Vietnam. He understands the tariffs, he knows where he's going to get his stuff, and it is not looming large in their minds. So it's more the perception than the reality.

It's her sentiment, we say in the survey. At a consumer level, we're having this debate about whether it's hurting activity. So these companies that came into the new year with investment plans, with hiring plans, are they on hold or they go on forward with them?

It's her sentiment, we say in the survey. At a consumer level, we're having this debate about whether it's hurting activity. So these companies that came into the new year with investment plans, with hiring plans, are they on hold or they go on forward with them?

They're on hold.

They're on hold.

They're a little bit cautious and concerned. They want to make sure they see how things going to pan out. You talked about the continuation of the tax cuts earlier. Right for those customers, these are higher income house that own these businesses. They're trying to figure out the whole puzzle. So it'll be okay for a little while. You know, we have we have days, we probably have weeks, but I don't think we have months before that confidence starts to impact the economy.

They're a little bit cautious and concerned. They want to make sure they see how things going to pan out. You talked about the continuation of the tax cuts earlier. Right for those customers, these are higher income house that own these businesses. They're trying to figure out the whole puzzle. So it'll be okay for a little while. You know, we have we have days, we probably have weeks, but I don't think we have months before that confidence starts to impact the economy.

I want just to elaborate a little bit further on the point that John was making. There was an estimate of some of the small business confidence, a survey that showed just nineteen percent of small business owners in February. We're planning the capital outlies in the sixth next six months, which matches the lowest level since April twenty twenty. How do you match that with what you're telling us that actually they're okay, they're taking it in stride. Is there a sense that they really are going to re engage with all of those capital outlays immediately within the next six months, as soon as there is some.

I want just to elaborate a little bit further on the point that John was making. There was an estimate of some of the small business confidence, a survey that showed just nineteen percent of small business owners in February. We're planning the capital outlies in the sixth next six months, which matches the lowest level since April twenty twenty. How do you match that with what you're telling us that actually they're okay, they're taking it in stride. Is there a sense that they really are going to re engage with all of those capital outlays immediately within the next six months, as soon as there is some.

Clarity, Well, you know, we so.

Clarity, Well, you know, we so.

I think that these small business owners, right the company and their own personal financials are really closely tied, so they tend to be more cautious. They've built up liquidity since the since kind of COVID happened, understood the uncertainty, they have plans. We're talking about loan pipelines are improving and increasing, but there is a range of hesitancy around some kind of the edge con like a residential construction is an area where people are kind of holding back. They want to make sure that we don't kind of head into a recession. There isn't a demand issue down the road.

I think that these small business owners, right the company and their own personal financials are really closely tied, so they tend to be more cautious. They've built up liquidity since the since kind of COVID happened, understood the uncertainty, they have plans. We're talking about loan pipelines are improving and increasing, but there is a range of hesitancy around some kind of the edge con like a residential construction is an area where people are kind of holding back. They want to make sure that we don't kind of head into a recession. There isn't a demand issue down the road.

So are they concerned about the competitive advantage that they have versus large companies given their a negotiating position with potential contractors, with potential supply chains dealers. We hear about Walmart going to China and saying, guys, lower your prices, and they can do it because they are an eight hundred pound grilla and even they are getting pushed back. I mean, how much does that really issue for your clients?

So are they concerned about the competitive advantage that they have versus large companies given their a negotiating position with potential contractors, with potential supply chains dealers. We hear about Walmart going to China and saying, guys, lower your prices, and they can do it because they are an eight hundred pound grilla and even they are getting pushed back. I mean, how much does that really issue for your clients?

It is an issue, we said in a very different way, so we have I used the home building example, so we work with some of the largest home builders in the country. They can stock warehouses full of appliances, so they just kind of immune to where the appliance has come from. But in a different way, the small builders just move where they're buying stuff from. So, you know, ge appliances has a pretty strong US domestic manufacturing base, so they're going to buy Ge instead of some other brands. Some of the other brands have a bigger base in say Canada, So the small businesses are more nimble. The big businesses are able to do kind of more bold supply chain things, stocking up inventories and kind of planning ahead.

It is an issue, we said in a very different way, so we have I used the home building example, so we work with some of the largest home builders in the country. They can stock warehouses full of appliances, so they just kind of immune to where the appliance has come from. But in a different way, the small builders just move where they're buying stuff from. So, you know, ge appliances has a pretty strong US domestic manufacturing base, so they're going to buy Ge instead of some other brands. Some of the other brands have a bigger base in say Canada, So the small businesses are more nimble. The big businesses are able to do kind of more bold supply chain things, stocking up inventories and kind of planning ahead.

Our materials going up. Are they already seeing this price effects?

Our materials going up. Are they already seeing this price effects?

Sure, avery they've gone up. Lumber's gone up three different price hikes in the last couple of months, so lumber's certainly up. You're seeing anything with steel or aluminum. Although I'd make the comment that we tend to talk about steel for our clients, there's like fifty different kinds of steel. Some steel is going to be an issue, other kinds of steel are not. And although we're talking with many international parties, your steel can be sourced from South Korea, can be stores from Latin America. So there's very interesting kind of subset as you get under the covers and look for one company, steel may matter, for another company, it doesn't.

Sure, avery they've gone up. Lumber's gone up three different price hikes in the last couple of months, so lumber's certainly up. You're seeing anything with steel or aluminum. Although I'd make the comment that we tend to talk about steel for our clients, there's like fifty different kinds of steel. Some steel is going to be an issue, other kinds of steel are not. And although we're talking with many international parties, your steel can be sourced from South Korea, can be stores from Latin America. So there's very interesting kind of subset as you get under the covers and look for one company, steel may matter, for another company, it doesn't.

I was speaking to the head of a toy manufacturer and he was saying, well, it's not that big of a deeal because we can kick up prices and if people are buying a doll they can pay an extra two dollars and they don't really care. Do your business clients feel the same way that they can really pass it mostly along to clients?

I was speaking to the head of a toy manufacturer and he was saying, well, it's not that big of a deeal because we can kick up prices and if people are buying a doll they can pay an extra two dollars and they don't really care. Do your business clients feel the same way that they can really pass it mostly along to clients?

Generally, no, they're very concerned about passing it along, although we're starting to see contracts now have a language in the contract that would say, you know, we're going to pass along the price increases. So generally know, there are some cases that we have a special metal manufacturer. Their products going to jet engine turbines. We need them, so yes, the price is going to go up. It'll be a small increase to a bigger part of a larger engine. So they're just going to have to raise prices.

Generally, no, they're very concerned about passing it along, although we're starting to see contracts now have a language in the contract that would say, you know, we're going to pass along the price increases. So generally know, there are some cases that we have a special metal manufacturer. Their products going to jet engine turbines. We need them, so yes, the price is going to go up. It'll be a small increase to a bigger part of a larger engine. So they're just going to have to raise prices.

So this is where the rubber meets the road. They increase prices. Are you hearing direct feedback that consumers are unwilling to absorb those higher prices.

So this is where the rubber meets the road. They increase prices. Are you hearing direct feedback that consumers are unwilling to absorb those higher prices.

I think in consumer products you're seeing substitution, so people are choosing one thing versus another thing. We have a seafood supplier. They get snow crabs, right, so they get them from Canada. They have already told us if the tariffs go in, they're not going to sell snow crabs. You'll be eating something else, so you won't notice that your menu has changed. The snow crabs won't be on it because they're just going to go up to a price that restaurant tours we're not going to want to buy.

I think in consumer products you're seeing substitution, so people are choosing one thing versus another thing. We have a seafood supplier. They get snow crabs, right, so they get them from Canada. They have already told us if the tariffs go in, they're not going to sell snow crabs. You'll be eating something else, so you won't notice that your menu has changed. The snow crabs won't be on it because they're just going to go up to a price that restaurant tours we're not going to want to buy.

Hey, Chris, this was an important conversation. Let's do it again soon. Richard Chris ma ev Ocean First Bank shift the focus bank to commodities. Oil edging high following an industry report which signaled a large decline in US crewed stockpiles. Traders also weighed the prospect of a Russian Ukraine ceasefire in the Black Sea, and readercent of Energy Aspects joined us Now for more and Resa, welcome to the program. Let's get to that potential ceasefire that we could see between Ukraine and Russia on a much larger scale. What would that do to energy prices? What would that do to the flow of energy?

Hey, Chris, this was an important conversation. Let's do it again soon. Richard Chris ma ev Ocean First Bank shift the focus bank to commodities. Oil edging high following an industry report which signaled a large decline in US crewed stockpiles. Traders also weighed the prospect of a Russian Ukraine ceasefire in the Black Sea, and readercent of Energy Aspects joined us Now for more and Resa, welcome to the program. Let's get to that potential ceasefire that we could see between Ukraine and Russia on a much larger scale. What would that do to energy prices? What would that do to the flow of energy?

Firstly, I don't think we're going to get a seas far anytime soon in the true sense of the world, like you guys were discussing. I think there'll be a lot of noise, and I think we have to remember that both sides, Russia and Ukraine are going to tread this kind of line where they are all appear very positive and you know that all the outcomes are very positive, but if you actually look at it, nothing has moved. I think the positive spin we are seeing out of DC on very very minimal gains has been impressive, no doubt, But if you actually read through the details, there has been no shift from either side on their red lines. And I think that's the critical thing. Remember, the headlines will have to put a positive spin so that neither side angers the current president. I think we need to look at the whole thing through that lens. In terms of sanctions lifting, Remember we haven't lost any Russian oil because of sanctions. India and China continue to buy that oil. Any Russian oil we've lost is because of OPEC plus policy. That's not changing. OPEK is going to continue to bring back barrels over the summer months. Russia gets a part of that. That's fine. Beyond that, nothing one last thing. US sanctions on Russia, if they were to be remove without europe going ahead, that is actually bullish for oil, not bearish, because the original European sanctions were designed so that Russian oil couldn't flow at all through Western shipping sanctions. The price cap was designed to allow that to flow. If you take away the price cap, the European sanctions kick in without this caveat, and therefore really no Russian oil will be able to move other than in the dark fleet. People forget that, Amrita.

Firstly, I don't think we're going to get a seas far anytime soon in the true sense of the world, like you guys were discussing. I think there'll be a lot of noise, and I think we have to remember that both sides, Russia and Ukraine are going to tread this kind of line where they are all appear very positive and you know that all the outcomes are very positive, but if you actually look at it, nothing has moved. I think the positive spin we are seeing out of DC on very very minimal gains has been impressive, no doubt, But if you actually read through the details, there has been no shift from either side on their red lines. And I think that's the critical thing. Remember, the headlines will have to put a positive spin so that neither side angers the current president. I think we need to look at the whole thing through that lens. In terms of sanctions lifting, Remember we haven't lost any Russian oil because of sanctions. India and China continue to buy that oil. Any Russian oil we've lost is because of OPEC plus policy. That's not changing. OPEK is going to continue to bring back barrels over the summer months. Russia gets a part of that. That's fine. Beyond that, nothing one last thing. US sanctions on Russia, if they were to be remove without europe going ahead, that is actually bullish for oil, not bearish, because the original European sanctions were designed so that Russian oil couldn't flow at all through Western shipping sanctions. The price cap was designed to allow that to flow. If you take away the price cap, the European sanctions kick in without this caveat, and therefore really no Russian oil will be able to move other than in the dark fleet. People forget that, Amrita.

Are they even enforcing the price cap right now though?

Are they even enforcing the price cap right now though?

No?

No?

But the whole point is the price cap gives you the ability. You can claim whatever the price it is, but you can say, oh, because of the price cap, we are able to move it. If you take the price cap away, the European sanctions say they cannot use any any Western shipping or insurance services. That's the critical thing, because at least the price cap gives you a way to get away from it.

But the whole point is the price cap gives you the ability. You can claim whatever the price it is, but you can say, oh, because of the price cap, we are able to move it. If you take the price cap away, the European sanctions say they cannot use any any Western shipping or insurance services. That's the critical thing, because at least the price cap gives you a way to get away from it.

When it comes to other potential energy flows, we can see if they were to get closer to a ceasefire agreement. Certain rav talking to task News Russian state media yesterday said that nord Stream there is talk of nord Stream coming back online and Rita, what do you make of that?

When it comes to other potential energy flows, we can see if they were to get closer to a ceasefire agreement. Certain rav talking to task News Russian state media yesterday said that nord Stream there is talk of nord Stream coming back online and Rita, what do you make of that?

I think again there's going to be a lot of noise, a lot of headlines in terms of again gas, I think it is going to be more important for gas than it is for oil, just given the volumes loss. Right, Like I said, oil we haven't lost, but we keep forgetting. This is Russia also trying to create a wedge between Europe and the US, and that's why certain statements like that that of course you know, we're going to bring north stream and by the way, Europe, you need our gas. Europe has a big say in this, and the European sanctions are actually the main sanctions on Russia, much more than the US. Once it's the opposite for Iran.

I think again there's going to be a lot of noise, a lot of headlines in terms of again gas, I think it is going to be more important for gas than it is for oil, just given the volumes loss. Right, Like I said, oil we haven't lost, but we keep forgetting. This is Russia also trying to create a wedge between Europe and the US, and that's why certain statements like that that of course you know, we're going to bring north stream and by the way, Europe, you need our gas. Europe has a big say in this, and the European sanctions are actually the main sanctions on Russia, much more than the US. Once it's the opposite for Iran.

But how much will European gas actually be helpful to Europe? I mean, although Europe has a lot of tough rhetoric when it comes to Russia, they're still importing Russian gas.

But how much will European gas actually be helpful to Europe? I mean, although Europe has a lot of tough rhetoric when it comes to Russia, they're still importing Russian gas.

Oh yeah, And look, I think this is the biggest question mark that I don't think anybody will have a like true answer to in the sense that we are losing so much industrial demand and we have lost I would say fifteen percent of gas demand we believe is never going to come back in Europe because of the high gas prices and the relocation of industry to places like the US. So the question then becomes, yes, Europe is talking about more renewables and kind of tripling down on it. But if it's again not our basis. But if you suddenly start to get a ceasefire and sanctions get removed, does Europe actually change that. We do think some European countries will go back to Russian gas, but we're not going to get the volumes back anywhere close to where we used to be pre war.

Oh yeah, And look, I think this is the biggest question mark that I don't think anybody will have a like true answer to in the sense that we are losing so much industrial demand and we have lost I would say fifteen percent of gas demand we believe is never going to come back in Europe because of the high gas prices and the relocation of industry to places like the US. So the question then becomes, yes, Europe is talking about more renewables and kind of tripling down on it. But if it's again not our basis. But if you suddenly start to get a ceasefire and sanctions get removed, does Europe actually change that. We do think some European countries will go back to Russian gas, but we're not going to get the volumes back anywhere close to where we used to be pre war.

Are you saying, I'm rita that if there is an end to the war between Ukraine and Russia, then it will have an immaterial effect on the price of oil.

Are you saying, I'm rita that if there is an end to the war between Ukraine and Russia, then it will have an immaterial effect on the price of oil.

What's going to happen is that Russian differentials, which now trade at a discount, will go up because Russia no needs no longer needs to discount its oil, right because right now it's having to discount to clear but on a volume metric basis, No, because Russia is already producing as much as it can within the the OPEC last framework is just sending it to China and India.

What's going to happen is that Russian differentials, which now trade at a discount, will go up because Russia no needs no longer needs to discount its oil, right because right now it's having to discount to clear but on a volume metric basis, No, because Russia is already producing as much as it can within the the OPEC last framework is just sending it to China and India.

Before I let you go, I did want to get your take on copper and what we heard overnight from President Trump and the likelihood of pretty aggressive tariffs on copper. This goal to bring manufacturing back to the United States. Shift building is a big piece of that. It's also a part of the steel and aluminum tariffs. How much does that shift the cost of copper in the United States. We've seen a real departure of what's traded in the US and what's traded on the London's Metals Exchange.

Before I let you go, I did want to get your take on copper and what we heard overnight from President Trump and the likelihood of pretty aggressive tariffs on copper. This goal to bring manufacturing back to the United States. Shift building is a big piece of that. It's also a part of the steel and aluminum tariffs. How much does that shift the cost of copper in the United States. We've seen a real departure of what's traded in the US and what's traded on the London's Metals Exchange.

Yeah, and I think this is I mean, it's not just copper, like you mentioned steel and aluminum. Look, I'm in the Midwest myself. I've been meeting with a lot of the producers, including some who were in the meeting in the White House just last week, and I think the shift in metals prices is becoming a real talking point for both upstream and downstream, and ship building is I'm including them in the downstream just in terms of like certain producers are telling me their costs of got raw material costs of have gone up anywhere between fifteen and twenty percent. And I think that's why you are going to get prize discrepancy between US metals markets and the rest of the world, simply to kind of basically price that in. And I think metals markets are going to go through this huge period of volatility until we have more clarity on the second of April.

Yeah, and I think this is I mean, it's not just copper, like you mentioned steel and aluminum. Look, I'm in the Midwest myself. I've been meeting with a lot of the producers, including some who were in the meeting in the White House just last week, and I think the shift in metals prices is becoming a real talking point for both upstream and downstream, and ship building is I'm including them in the downstream just in terms of like certain producers are telling me their costs of got raw material costs of have gone up anywhere between fifteen and twenty percent. And I think that's why you are going to get prize discrepancy between US metals markets and the rest of the world, simply to kind of basically price that in. And I think metals markets are going to go through this huge period of volatility until we have more clarity on the second of April.

I'm Rita. I appreciate your view. Thank you. I'm Rita. Send their energy aspects. Jeanette Lodge Tatiga is a bad company, writing when we added up what has already been announced in terms of tariffs, we found that it would be a two hundred and thirty five billion dollar impact over twelve months, or zero point seven percent of GDP, which is more than many investors we're expecting. Jeanette joined us now for more. Janet, welcome to the program. Certainly surprising how hard and fast they've moved since they walked into the White House. Are you seeing any signs over the last couple of days that maybe they're just softening their tone, just maybe back in a way of touch.

I'm Rita. I appreciate your view. Thank you. I'm Rita. Send their energy aspects. Jeanette Lodge Tatiga is a bad company, writing when we added up what has already been announced in terms of tariffs, we found that it would be a two hundred and thirty five billion dollar impact over twelve months, or zero point seven percent of GDP, which is more than many investors we're expecting. Jeanette joined us now for more. Janet, welcome to the program. Certainly surprising how hard and fast they've moved since they walked into the White House. Are you seeing any signs over the last couple of days that maybe they're just softening their tone, just maybe back in a way of touch.

Yeah.

Yeah.

Absolutely, I think they are trying to start to walk back a little bit. I think it there hadn't been a lot of numbers put out there of what the actual impact was, and so we really try to take what has actually been levied already on China and Canada and Mexico when it's steel and aluminum, and then add in reciprocal tariffs and then sectoral tariffs, and I think that that number started to surprise some folks, and if you see all of that coming in at once, that can.

Absolutely, I think they are trying to start to walk back a little bit. I think it there hadn't been a lot of numbers put out there of what the actual impact was, and so we really try to take what has actually been levied already on China and Canada and Mexico when it's steel and aluminum, and then add in reciprocal tariffs and then sectoral tariffs, and I think that that number started to surprise some folks, and if you see all of that coming in at once, that can.

Actually be negative for the administration.

Actually be negative for the administration.

Now, obviously we're still getting mixed signals, so we don't necessarily know will some sectoral tariffs and maybe auto still be announced. That is kind of up and play. And you also have we have reciprocal tariffs that it's just focused on higher rates that other countries charge. But then the administration also wants to include what those countries charge in that taxes and put that into the equation and some other non teriff farriers, and that I think is the question. So they need to kind of figure out what pieces do they actually want to include and then how that actually can be structured, because it could be quite a shock if we come on April second, depending on what is announced. They don't pair some of this back.

Now, obviously we're still getting mixed signals, so we don't necessarily know will some sectoral tariffs and maybe auto still be announced. That is kind of up and play. And you also have we have reciprocal tariffs that it's just focused on higher rates that other countries charge. But then the administration also wants to include what those countries charge in that taxes and put that into the equation and some other non teriff farriers, and that I think is the question. So they need to kind of figure out what pieces do they actually want to include and then how that actually can be structured, because it could be quite a shock if we come on April second, depending on what is announced. They don't pair some of this back.

Well, when you mentioned that, I immediately think of the European Union and the Commissioner for Trade yesterday is all smile standing alongside Howard Lutnik and Jamison Greer Kevin Hassett after their intents and negotiations what he's calling it, and he says the EUSE priority is a fair balanced deal instead of unjustified terriffs.

Well, when you mentioned that, I immediately think of the European Union and the Commissioner for Trade yesterday is all smile standing alongside Howard Lutnik and Jamison Greer Kevin Hassett after their intents and negotiations what he's calling it, and he says the EUSE priority is a fair balanced deal instead of unjustified terriffs.

Do you think he's going home to Europe with a deal?

Do you think he's going home to Europe with a deal?

Yeah? I mean so this is what's interesting because I think you know, we did sit here some talk about lowering the tariff rate on autos and also trying to get the US to lower its tariff rate on pickup trucks. That's something that obviously can be done, that has been a bonu in contention for a President Trump for some time. But I think you also have to really watch this that piece because I think overall, if you look at just applying higher teriff rates on European goods, it's not going to be as much of a significant impact. If you start to add in that taxes and that impact, that's much higher of an impact on the European Union, And it's also more difficult for them to change that. They're not going to be able to easily change those taxes for the Trump administration, So it's harder to see where that negotiation could come into play. And I think that's going to be important as we move closer to April second and get more details.

Yeah? I mean so this is what's interesting because I think you know, we did sit here some talk about lowering the tariff rate on autos and also trying to get the US to lower its tariff rate on pickup trucks. That's something that obviously can be done, that has been a bonu in contention for a President Trump for some time. But I think you also have to really watch this that piece because I think overall, if you look at just applying higher teriff rates on European goods, it's not going to be as much of a significant impact. If you start to add in that taxes and that impact, that's much higher of an impact on the European Union, And it's also more difficult for them to change that. They're not going to be able to easily change those taxes for the Trump administration, So it's harder to see where that negotiation could come into play. And I think that's going to be important as we move closer to April second and get more details.

When we get more details in April second, what kind of terrorsts do you think we will see immediately, and then what other legal measures will they rely on that will take weeks or months, say two thirty two or three oh one.

When we get more details in April second, what kind of terrorsts do you think we will see immediately, and then what other legal measures will they rely on that will take weeks or months, say two thirty two or three oh one.

Yeah, I mean I think that they are going to try to announce several reciprocal tariffs immediately.

Yeah, I mean I think that they are going to try to announce several reciprocal tariffs immediately.

Now I think the question is is it a.

Now I think the question is is it a.

Thirty day implementation period, kind of like what we've seen for some of the other pieces earlier this year. But it might be more on select countries. So they're not going to probably go for a universal tariff, which is what they were talking about doing earlier this year. We've moved much more from that universal tariff to this reciprocal piece. If it's reciprocal, it could also be country by country, which means maybe you can apply it to a handful of countries at one time and then add in other countries down the road.

Thirty day implementation period, kind of like what we've seen for some of the other pieces earlier this year. But it might be more on select countries. So they're not going to probably go for a universal tariff, which is what they were talking about doing earlier this year. We've moved much more from that universal tariff to this reciprocal piece. If it's reciprocal, it could also be country by country, which means maybe you can apply it to a handful of countries at one time and then add in other countries down the road.

Allows for more negotiation.

Allows for more negotiation.

And that piece Trump has also been talking about, you know that he wants to do tariffs on autos, and he says that he's going to announce that soon. If you add in of that on the EU, that kind of also hits the European Union on autos, particularly Germany. It would hit Ireland in terms of pharmaceuticals, so that's going to be important piece. And I think the other thing that's really important too is what happens with Canada and Mexico. There are significant tariffs right now, if we're talking about whether or not Goods or USA compliant or not, and are those changed.

And that piece Trump has also been talking about, you know that he wants to do tariffs on autos, and he says that he's going to announce that soon. If you add in of that on the EU, that kind of also hits the European Union on autos, particularly Germany. It would hit Ireland in terms of pharmaceuticals, so that's going to be important piece. And I think the other thing that's really important too is what happens with Canada and Mexico. There are significant tariffs right now, if we're talking about whether or not Goods or USA compliant or not, and are those changed.

On April second, engine they go.

On April second, engine they go.

Just to reciprocal tariffs, which is much more manageable, or do we have reciprocal on top of what has already been announced for Canada and Mexico and that could actually be much more burdensome and much more troublesome for the market.

Just to reciprocal tariffs, which is much more manageable, or do we have reciprocal on top of what has already been announced for Canada and Mexico and that could actually be much more burdensome and much more troublesome for the market.

I feel like we're all trying to put together a tariff puzzle and figure out what pieces people are saying and then put it in its correct place. And if we were creating that kind of puzzle, where would this copper tariff piece really get put? Yesterday when President Trump announced that he is going to put tariffs on copper and has previously discussed something like twenty five percent of all incoming copper imports.

I feel like we're all trying to put together a tariff puzzle and figure out what pieces people are saying and then put it in its correct place. And if we were creating that kind of puzzle, where would this copper tariff piece really get put? Yesterday when President Trump announced that he is going to put tariffs on copper and has previously discussed something like twenty five percent of all incoming copper imports.

Yeah, I mean, so this is something that they are trying to rush, right.

Yeah, I mean, so this is something that they are trying to rush, right.

So usually you have two hundred and seventy days to do this kind of investigation, and this is something that he did with steel and aluminum, so but they it follows at least a little bit more of a process with regard to having input from the public and from companies that would be impacted.

So usually you have two hundred and seventy days to do this kind of investigation, and this is something that he did with steel and aluminum, so but they it follows at least a little bit more of a process with regard to having input from the public and from companies that would be impacted.

But I think this is something that he is.

But I think this is something that he is.

Trying to target certain areas and he feels like the stealing aluminum tariffs. You saw that we now got rid of the exemptions with the copper, that could be a similar story.

Trying to target certain areas and he feels like the stealing aluminum tariffs. You saw that we now got rid of the exemptions with the copper, that could be a similar story.

It also could be potentially somewhat.

It also could be potentially somewhat.

Of a negotiating tool if you can announce it and then it kind of hits certain partners and there's an opportunity there. But it seems like with the commodity tariffs in particular, Trump looks to be looking to focus on putting those into place and.

Of a negotiating tool if you can announce it and then it kind of hits certain partners and there's an opportunity there. But it seems like with the commodity tariffs in particular, Trump looks to be looking to focus on putting those into place and.

Not allowing as many exemptions. So that's something we're definitely going to be watching and going forward.

Not allowing as many exemptions. So that's something we're definitely going to be watching and going forward.

Jet there has been this shift in tone more generally, and John started the show talking about it. We've been feeling it in terms of market performance, and we're hearing it not just from the White House and Tarifa negotiations, but also from the House, with House Speaker Mike Johnson coming out yesterday saying we have to bring stability to markets, saying that negotiators around the budget not necessarily terriffs, need to give people certainty so that they can quote make decisions about expanding their businesses and jobs. How much are we hearing a kind of around the table feeling of concern about the uncertainty in Washington, DC. That is a material shift than say, even a couple days ago.

Jet there has been this shift in tone more generally, and John started the show talking about it. We've been feeling it in terms of market performance, and we're hearing it not just from the White House and Tarifa negotiations, but also from the House, with House Speaker Mike Johnson coming out yesterday saying we have to bring stability to markets, saying that negotiators around the budget not necessarily terriffs, need to give people certainty so that they can quote make decisions about expanding their businesses and jobs. How much are we hearing a kind of around the table feeling of concern about the uncertainty in Washington, DC. That is a material shift than say, even a couple days ago.

Absolutely, I definitely think that this is definitely a part of the conversation for policy makers. And if you think back to the first Trump term, you had them passing a tax bill first and then going in and putting on tariffs, primarily on China. So there are much more modest and scope than they are today, and that created a cushion for the market. This time we have the opposite. We have tariffs coming into place first. We're not obviously going to have a tax bill done by April, so you're going to have that more difficult piece coming in first before you get some.

Absolutely, I definitely think that this is definitely a part of the conversation for policy makers. And if you think back to the first Trump term, you had them passing a tax bill first and then going in and putting on tariffs, primarily on China. So there are much more modest and scope than they are today, and that created a cushion for the market. This time we have the opposite. We have tariffs coming into place first. We're not obviously going to have a tax bill done by April, so you're going to have that more difficult piece coming in first before you get some.

Of that fiscal policy to help balance it out.

Of that fiscal policy to help balance it out.

I think you do see members of Congress thinking about what will be the tariff impact and thinking about do we need to include some more pro growth to tax policies within that tax bill, So kind of bringing back the R and D immediate expensing, having one hundred percent bonus appreciation, doing that potential fifteen percent tax rate for domestic manufacturers, potentially even other pieces. So I think they're going to have to start being thinking about those proposals, and I think they are currently and how they get structured, and then as we get the TERRORF announcements, that will give them more to know what they need to do moving forward as that tax bill actually gets built.

I think you do see members of Congress thinking about what will be the tariff impact and thinking about do we need to include some more pro growth to tax policies within that tax bill, So kind of bringing back the R and D immediate expensing, having one hundred percent bonus appreciation, doing that potential fifteen percent tax rate for domestic manufacturers, potentially even other pieces. So I think they're going to have to start being thinking about those proposals, and I think they are currently and how they get structured, and then as we get the TERRORF announcements, that will give them more to know what they need to do moving forward as that tax bill actually gets built.

Jennet, appreciate your time as always to not load that I should take us a bad company, joining us around the type with adventuy shamp for a self jam, jumping into the sea, savantrac. Good to see you, Good to see you too. I've been asking this question. We all have all morning things really that bad based on what we sew and consumer confidence numbers in the past twenty four US.

Jennet, appreciate your time as always to not load that I should take us a bad company, joining us around the type with adventuy shamp for a self jam, jumping into the sea, savantrac. Good to see you, Good to see you too. I've been asking this question. We all have all morning things really that bad based on what we sew and consumer confidence numbers in the past twenty four US.

So the hard data has been relatively good, right. You have a strong, relatively strong label market. Inflation is easing ever so gradually. Even retail sales, even though it's a little bit below consensus, was relatively charged to the consumers holding up. But if you look at every soft or survey based data that you're getting it's all quite you know, points to kind of a souring sentiment. So the question is what's the lag between that souring sentiment and when that actually feeds through to the economy. If you look at say the last go around, the experiences is you know, after terrorists, it typically takes about three or four months for that to actually show up in the hard data. But people are starting to incorporate that into their forecast. We saw that from the fat They're lowering their growth forecasts, they're increasing their the unemployment rate, and they have inflation higher for the year. So all of that points to kind of a stagnating environment and that's not really great, you know for the markets, which is.

So the hard data has been relatively good, right. You have a strong, relatively strong label market. Inflation is easing ever so gradually. Even retail sales, even though it's a little bit below consensus, was relatively charged to the consumers holding up. But if you look at every soft or survey based data that you're getting it's all quite you know, points to kind of a souring sentiment. So the question is what's the lag between that souring sentiment and when that actually feeds through to the economy. If you look at say the last go around, the experiences is you know, after terrorists, it typically takes about three or four months for that to actually show up in the hard data. But people are starting to incorporate that into their forecast. We saw that from the fat They're lowering their growth forecasts, they're increasing their the unemployment rate, and they have inflation higher for the year. So all of that points to kind of a stagnating environment and that's not really great, you know for the markets, which is.

The reason why I think people are struggling to understand the role of bonds with all of this. Are they an offset or aren't they If you have a slow down in growth, usually the knew jerk reaction is to go into duration. This time around, is it?

The reason why I think people are struggling to understand the role of bonds with all of this. Are they an offset or aren't they If you have a slow down in growth, usually the knew jerk reaction is to go into duration. This time around, is it?

I think?

I think?

So?

So?

I think that when you see the equity markets start to correct, you are going to see bonds perform.

I think that when you see the equity markets start to correct, you are going to see bonds perform.

Well.

Well.

That negative correlation, I think is very much in play. And you saw that You've seen that sort of price action over even the last couple of months. I mean, equities have sold off quite strongly and you've seen, you know, bonds benefit from that. So I think that that's what dynamic is here to stay. There's also a lot of other reasons why I think I'm somewhat bullish on bonds. We actually have teny yells going to three seventy five by the end of the year. In an environment where the Fed is going to keep policy on hold and the front end is going to be pegged, you're going to see that rally come in the long and you're actually going to see flatter yield curves for the remainder of the year. There's also sort of demand dynamics that could favor treasures. For instance, if you see a change in the regulatory framework and there's changes to the supplementary leveragation requirements, I think you're going to see more demand from banks and primary dealers for treasure. So in that sort of environment, I can see tenyre treasure yelds actually heading towards three seventy five by the end of the year.

That negative correlation, I think is very much in play. And you saw that You've seen that sort of price action over even the last couple of months. I mean, equities have sold off quite strongly and you've seen, you know, bonds benefit from that. So I think that that's what dynamic is here to stay. There's also a lot of other reasons why I think I'm somewhat bullish on bonds. We actually have teny yells going to three seventy five by the end of the year. In an environment where the Fed is going to keep policy on hold and the front end is going to be pegged, you're going to see that rally come in the long and you're actually going to see flatter yield curves for the remainder of the year. There's also sort of demand dynamics that could favor treasures. For instance, if you see a change in the regulatory framework and there's changes to the supplementary leveragation requirements, I think you're going to see more demand from banks and primary dealers for treasure. So in that sort of environment, I can see tenyre treasure yelds actually heading towards three seventy five by the end of the year.

So this actually flies in the face of what a lot of people come on the show and talk about. They say, what's going on in Germany. This fiscal expansion increases the amount of develop market debt. Globally, you have sticky inflation that is going to remain persistently so and then on top of that, you have budget concerns, especially given the fact that the deficit is likely to expand by three trillion dollars over the next ten years on the base case for what right now the GOP is proposing in Washington, d C. How do you just shrug that all off.

So this actually flies in the face of what a lot of people come on the show and talk about. They say, what's going on in Germany. This fiscal expansion increases the amount of develop market debt. Globally, you have sticky inflation that is going to remain persistently so and then on top of that, you have budget concerns, especially given the fact that the deficit is likely to expand by three trillion dollars over the next ten years on the base case for what right now the GOP is proposing in Washington, d C. How do you just shrug that all off.

So there is I would say, for the first time in the last decade decoupling. If you were between TENNY treasure yields, for instance, in bone yields and JGB eiels, I think bone yieos are actually going to go higher because of more deficit spending coming from Germany and all the other countries in Europe, and in the US it's going to be the other way around, where I think Treasury Secretary Vestin is going want to issue more bills and not as much in coupon issue in sizes. So we actually have the ten yure treasury boom spread going to forty five basis points by the end of the year. So that's a pretty dramatic narrowing of that spread, and the decoupling is not just between treasures and booms, but it's also between treasurees and jgb's, So that is I think is going to be a paradigm shift for this year.

So there is I would say, for the first time in the last decade decoupling. If you were between TENNY treasure yields, for instance, in bone yields and JGB eiels, I think bone yieos are actually going to go higher because of more deficit spending coming from Germany and all the other countries in Europe, and in the US it's going to be the other way around, where I think Treasury Secretary Vestin is going want to issue more bills and not as much in coupon issue in sizes. So we actually have the ten yure treasury boom spread going to forty five basis points by the end of the year. So that's a pretty dramatic narrowing of that spread, and the decoupling is not just between treasures and booms, but it's also between treasurees and jgb's, So that is I think is going to be a paradigm shift for this year.

When do you think he wants to change that issuance because so far we haven't seen any changes to what Secretary Yellen was doing prior to him walking in the door.

When do you think he wants to change that issuance because so far we haven't seen any changes to what Secretary Yellen was doing prior to him walking in the door.

So I think that they probably keep coupon issuan size is stable for the remainder of the year, perhaps even to the first quarter of next year, and they probably issue a lot more by.

So I think that they probably keep coupon issuan size is stable for the remainder of the year, perhaps even to the first quarter of next year, and they probably issue a lot more by.

Way of bills.

Way of bills.

And what's interesting to me from the last fm C meeting is the fact that the Fed is basically ended its quantitative tightening programs, so they're only reducing their boundariet by five billion roughly and mortgages of course every month, which means that they're going to be buying more at some point. The maturing mortgages probably get reinvested into into into treasury bills, so that gives the treasuring more room to issue in the very front end as opposed to increase in COO bunishment sizes.

And what's interesting to me from the last fm C meeting is the fact that the Fed is basically ended its quantitative tightening programs, so they're only reducing their boundariet by five billion roughly and mortgages of course every month, which means that they're going to be buying more at some point. The maturing mortgages probably get reinvested into into into treasury bills, so that gives the treasuring more room to issue in the very front end as opposed to increase in COO bunishment sizes.

Since we're a week away from tariff day. I wanted to get your thoughts and what you thought the FED thinking about tariff's being transitory.

Since we're a week away from tariff day. I wanted to get your thoughts and what you thought the FED thinking about tariff's being transitory.

Do you think that's accurate?

Do you think that's accurate?

You know, I'm actually starting to hate the tea word because it's really really starting. It's really really, you know, difficult to know what's going to happen. I mean, yes, logically speaking, if you see a one time you know, increase in prices, that has to be somewhat you know, transitor, and you're seeing that play out in front of inflation break evens. You see two year inflation break evens. You're seeing a lot of that getting priced into the very front. And as supposed to look at say ten yure break evens, so five or forward five year break evens, those are actually quite low. So the market is also thinking that it's going to be sort of a somewhat of a one year two year inflation is as opposed to something that's more longer term. But I'm not willing to kind of bind into that transitory narrative because that transitory narrative could be a couple of years.

You know, I'm actually starting to hate the tea word because it's really really starting. It's really really, you know, difficult to know what's going to happen. I mean, yes, logically speaking, if you see a one time you know, increase in prices, that has to be somewhat you know, transitor, and you're seeing that play out in front of inflation break evens. You see two year inflation break evens. You're seeing a lot of that getting priced into the very front. And as supposed to look at say ten yure break evens, so five or forward five year break evens, those are actually quite low. So the market is also thinking that it's going to be sort of a somewhat of a one year two year inflation is as opposed to something that's more longer term. But I'm not willing to kind of bind into that transitory narrative because that transitory narrative could be a couple of years.

Just finally, did you say forty five forty five basis points?

Just finally, did you say forty five forty five basis points?

Yes, it's a little dramatic we're at.

Yes, it's a little dramatic we're at.

One fifty five right now. We haven't seen anything like that since twenty thirteen. It's been a long long time, yep.

One fifty five right now. We haven't seen anything like that since twenty thirteen. It's been a long long time, yep.

And that's the that's the dead break rule, right And what's also interesting to me is that as sentiments hours in the US, sentiment's actually improving in Europe because of the fact that you look at the zwzifos, the service all point to more optimism in Europe and pessimism in the US. So I can see them issuing a lot, you know, more debt and then that kind of pushing bon yos.

And that's the that's the dead break rule, right And what's also interesting to me is that as sentiments hours in the US, sentiment's actually improving in Europe because of the fact that you look at the zwzifos, the service all point to more optimism in Europe and pessimism in the US. So I can see them issuing a lot, you know, more debt and then that kind of pushing bon yos.

Just to help us understand this a little bit more. So you've got the spread. I use my hands will make this work, all right. So we're like this right now. Is that Germany coming up to the US, the US coming down to Germany? Or is it both? It's both and it's equal parts equal measures.

Just to help us understand this a little bit more. So you've got the spread. I use my hands will make this work, all right. So we're like this right now. Is that Germany coming up to the US, the US coming down to Germany? Or is it both? It's both and it's equal parts equal measures.

So we have tenny years going to about three seventy five at the end of the year, and bonn Yo's going perhaps towards you know.

So we have tenny years going to about three seventy five at the end of the year, and bonn Yo's going perhaps towards you know.

Three Germany, and most of the work here we're.

Three Germany, and most of the work here we're.

Just I mean here we're just showing just the treagies versus bones. But you're going to see all of Europe doing a lot more.

Just I mean here we're just showing just the treagies versus bones. But you're going to see all of Europe doing a lot more.

The periphery comes along for the ride. I guess to some extent you think they can handle that. I We'll have to see. That's the big question, isn't it whether the periphery can actually handle that adjustment in borrowing costs they're about to see off the back of the additional supply from Germany.

The periphery comes along for the ride. I guess to some extent you think they can handle that. I We'll have to see. That's the big question, isn't it whether the periphery can actually handle that adjustment in borrowing costs they're about to see off the back of the additional supply from Germany.

I'm guessing that this is going to create a lot of friction I can imagine among the EU if you think about the fact that the periphery has been doing the heavy lifting with growth, and now they're going to get penalized by the fact that now Germany decides to borrow after they've been doing it, and then penalized for borrowing.

I'm guessing that this is going to create a lot of friction I can imagine among the EU if you think about the fact that the periphery has been doing the heavy lifting with growth, and now they're going to get penalized by the fact that now Germany decides to borrow after they've been doing it, and then penalized for borrowing.

So it creates a.

So it creates a.

Real interesting question mark here. I don't know the answer to this, because they can't engage in that kind of fiscal behavior as well.

Real interesting question mark here. I don't know the answer to this, because they can't engage in that kind of fiscal behavior as well.

For Give me for the rapid five because it's a phenomenal call. What's the timeline for that call to get back to that forty five.

For Give me for the rapid five because it's a phenomenal call. What's the timeline for that call to get back to that forty five.

By the end of the year. A lot of the lead pricing is going to happen, especially in bones, probably towards the end of the year.

By the end of the year. A lot of the lead pricing is going to happen, especially in bones, probably towards the end of the year.

That's one to watch that's for sure, Sabater a phenomenal call. It's going to see you as a thanks for catching up with a sabatich Ouf for there of SoC gen. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, an gior politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.

That's one to watch that's for sure, Sabater a phenomenal call. It's going to see you as a thanks for catching up with a sabatich Ouf for there of SoC gen. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, an gior politics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern. Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and as always, on the Bloomberg Terminal and the Bloomberg Business app.