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28:02We'll see you next time. Already trust Wise to manage their money internationally. Be smart. Get Wise. Download the Wise app today or visit wise.com. Terms and conditions apply. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. I said we're going all in on the economy this hour. We kind of do that every day, but that's kind of what we do. But we're doing it from a few different angles. On that, I want to bring in Stuart Paul.

28:39He's U.S. and Canada economist for Bloomberg Economics. He joins us here in the Bloomberg Interactive Brokers studio. We want to broaden this out to the entire world, the economic effect of potential conflicts. Bloomberg Economics team is out with a special report about global risk. It's called Flashpoint, counting the cost of potential conflicts. U.S.-China war over Taiwan, the cost of escalation on the Korean Peninsula, war between Russia and Europe, kind of modeling this stuff out. Venezuela is in there as well, in addition to others. We should know the team does write that the human cost of conflict is tragically high.

29:12We recognize that each time we talk about a potential conflict or a conflict, but the economic cost is also rising. So Stuart, if we sit here in the United States, you're in charge of US and Canada economics for Bloomberg economics. If you look around the world, Where do you see the biggest risk? Well, we could think about risk on two different dimensions. We have the probability of risk and then the consequence if something were to become, let's say, a hot war, right? So if we were to just think strictly about the consequences of global conflict, really any conflict that takes place in the South China Sea, an attempt to control the Taiwan Strait, an attempt to control territorial Taiwan would be the most consequential for the global economy.

29:55If we think about semiconductor production, about 60 percent of global semiconductor production takes place in Taiwan. These are the primary inputs to about one fifth of these are the primary inputs to about five percent, excuse me, of global GDP. Right. So we're thinking about just how much GDP can get dented by shutting down exports of semiconductors from Taiwan. And we're really talking about 5.3 percentage points of global GDP, trillions of dollars of economic activity. And if we think about the amount of cargo that just flows through the Taiwan Straits, we're talking about a fifth of global shipments, another two and a half trillion dollars of goods that are shipped through there every year.

30:41So, again, we're talking about trillions of dollars of economic consequential activity that's flowing through the region. And so, of course, it's going to matter most if tensions heat up between the two largest geopolitical rivals in the world. I want to just, if I can highlight, you guys say the damage would be global. Taiwan's economy would be decimated. And that you folks estimate China's GDP would fall by 11 percent. The U.S. is by 6.6 percent in the first year. In addition to the main actors, the EU, European Union could have GDP drop by almost 11 percent. India by 8 percent. The U.K. by more than 6%.

31:17And then closer to the fighting, something like South Korea could shave 23 % off GDP in Japan, 14.7%. I have to believe, we talked about, you know, during the buildup of the nuclear arms race, there was a nuclear deterrence. There has to be, to some extent, an economic deterrence. That understanding that doing things like this, it's not like you hurt one person, maybe your original or initial foe. Everybody's going to feel it. That's very true. And it's important that you bring it up because an outright hot war is something that's incredibly improbable because of the economic consequence. We're talking about denting global GDP growth by about 10 percent.

31:55Nobody wins there. Nobody wins there. So what happens along the gradient of outcomes? Let's dial it back and say, okay, what if it's not a hot war? What if China just imposes a blockade on Taiwan and asserts its authority through the Taiwan Strait, preventing cargo from flowing through? That's still dense global growth by about 5%, right? So it's the sort of thing where now it becomes a little bit more economically viable. The deterrence, now we're not talking about a sort of nuclear-type deterrence, a mutually assured economic destruction like we were contemplating during the Cold War. Instead, we're talking about more like regional skirmishes or something that's more akin to a proxy war during the Cold War.

32:405.3 % percentage points of global GDP is nothing to sneeze at, but it's a little bit more of a realistic expectation. And so it does put something like China asserting its authority in the South China Sea. It makes it a little bit more viable. Hey, I want to kind of go around the world in the time that we have left with you. And you're going to hang out with us for a little bit until the end of trading here. So we're looking forward to that. But Stuart, the Middle East right now and the buildup of resources from the United States in the Middle East, we talked about some of those headlines earlier this week.

33:18There's a section in here called the$108 oil war, how the Middle East could crash the world economy. How does that happen? Well, it's so interesting because we think about North American energy independence, and we think that, okay, well, maybe the Middle East doesn't play as much of a role as it did in global economics, let's say two decades ago. But if we think about energy consumption and where the energy is produced that ends up getting consumed globally, the Middle East is still a major actor. Still about 15 % of global energy production is initially sourced from the Middle East. That's the same as what we saw in the early 70s, right?

33:55So the Middle East is still the key player globally when it comes to energy production and energy consumption. Not the U.S. U.S. matters a lot. And certainly for our standard of living, which was a phrase that mattered a lot during the Bush era, for our standard of living here in the United States, the Middle East is a little bit less relevant. But globally, the Middle East is as relevant today as it was even in the early 1970s. If we think about where conflict can arise, the places that are in control of oil are the places that matter most. The conflict in Israel and Gaza didn't matter as much as, let's say, the U.S.

34:33sending an aircraft carrier toward the Strait of Hormuz for a potential conflict with Iran. Could what's happening in Venezuela change this equation? We just heard from Chris Wright, the energy secretary. He's in Venezuela with Anne-Marie Hordern. They're talking about the opportunity for U.S. oil companies there. He said he will not the U.S. will not guarantee security. But it seems like this, the administration in Venezuela is receptive to U.S. companies increasing output there. Does that change the equation? Well, so let's just put orders of magnitude on everything. Right. So those are big reserves.

35:08They are pretty big reserves, but only about ramping up Venezuela production to where it was, let's say, before the Chavez era would just add about one and a half percentage points to global oil supply. Yeah. Right. So that's just one and a half percentage points. We're talking about 15 percent coming from the Middle East. Doesn't move the needle in the same way. Right. So it doesn't move the needle in the same way. When we think, though, about regional trade alliances, it again creates a sort of hemispheric independence from the Middle East. Already, the Western Hemisphere is relatively insulated from the goings on in the Middle East.

35:41But bringing that additional supply online from Venezuela would do good in the Western Hemisphere. All right. Stu's going to stay with us because we want to broaden out our conversation even more and add a really interesting voice to it as well. So I want to bring in Steve Moore. He's the co-founder of the nonprofit Unleash Prosperity. He's a former economic and senior policy advisor to President Trump in 2016 and 2024. He served as chief economist and distinguished visiting fellow at the Heritage Foundation for 12 years. He's the author of a couple of books, including Trumponomics, Inside the America First Plan to Revive Our Economy in 2018, and more recently, 2024, The Trump Economic Miracle.

36:14And then in 2019, President Trump selected Steve Moore for the Federal Reserve Board of Governors. Moore ultimately withdrew from that. All right. He is also the author of Trumponomics, Inside the America First Plan to Revive Our Economy and the Trump Economic Miracle. I think you said that, but we thought we'd say it again. There's a lot going on. Steve joining us from Washington, D.C. Steve, it's good to have you here. Bloomberg Economics. Thank you for having me. U.S. economist, Canada economist Stuart Paul is also with us. You know, we're talking about a lot of issues, and it does feel like when we think about what's going on in the world, geopolitics largely at play in a big way.

36:51We're trying to assess the different trade deals, the different alliances. Stu just laying out if we have problems, certainly in Taiwan or in the area in terms of what that could be. It could be a$10 trillion global economic hit. These are big, important things. The world, though, is changing. What do you assess when it comes to some of these global alliances, trade or other, and how that could impact the global economy and the U.S. economy? Is that for me? Yes, that's for you. So, I mean, let's start with the fact that, you know, we have a very, very strong economy right now in the U.S. It's all the economic indicators are pointing north.

37:34We have declining inflation. We got a really good job report yesterday. We are seeing a booming stock market over the last year or so. We're seeing real wage increases for workers. So it's about as good a picture as you can get right now. And, you know, Trump was right when he went to Davos and said, if you want to grow, because we're growing much faster than virtually any of our competitor countries, do what we're doing and promote lower tax rates, promote energy production in your home country, deregulate. And don't forget, that's a huge, huge burst to the economy in terms of increasing the productivity of our of our businesses.

38:16So I feel very confident about the economy in 2026. I think that we I don't think we're going to see the 15 percent growth that Donald Trump said we could see. But I think we could easily grow at three, four or five percent. And those are those are very positive numbers. One of the things that I'm thinking about, Mr. Moore, is that there's sort of a reshuffling of a lot of a reshuffling of the global commercial order. There's a reshuffling of global alliances. There's a reshuffling of military alliances. There's a reconsideration of tax policy. There's a reconsideration of regulatory policy. Big structural changes that have a lot of growing pains.

39:01On the other hand, you have the Fed, you have the president calling for interest rate cuts, perhaps to smooth over some of those growing pains. But all the data that we're seeing so far that you're alluding to is pointing to a relatively resilient U.S. economy. Sure, we didn't see a ton of job growth last year, but it looks like we're kicking off 2026 really strong. Where do you think that these two different things end up shaking out? On the one hand, we have really resilient economic activity right now, but there's a lot of risk in the reshuffling of these major structural factors. Well, there's no question you're exactly right that Trump was does want to and has reshuffled the deck when it comes to both our foreign policy and our trading policy.

39:48I'm much more of a conventional Ronald Reagan free trader. and so President Trump knows I don't always agree with him on his trade policies. There's no question that when we had the Liberation Day that that really roiled markets and did cause a temporary reduction in economic output. On the other hand, the one thing that I try to let people understand that don't necessarily understand how Trump operates is the guy is a dealmaker. That's an obvious point. And he has the way I like to put it is, look, the global economy is pretty simple to understand. The United States is the hub of the world economy and every other country is a spoke.

40:32And that gives the United States an enormous economic advantage, just as we are so majorly benefited by the fact that we have the world reserve currency in the dollar. And so Trump is for the first president in my lifetime that is sort of using flexing America's economic muscle to force other countries to do things that are in many cases their own interests, but also in America's interest as well. And so what I'm saying is that I'm not a big fan of the trade tariffs that Trump has put into effect. But some of these trade deals that he has delivered, we don't know for sure yet because it's still early in the game.

41:10But it looks like if Trump is even nearly right on this, that they will bring a lot of capital investment in the United States. We'll see lower tariffs applied on American manufacturing and agricultural products. And that will only make America stronger. You mentioned the president is a dealmaker. one of the deals that he made in his first term was the USMCA trade pact. Our team reporting that the president is privately musing about exiting that trade pact, according to people familiar with the matter. Earlier today, we heard from White House Trade Advisor Peter Navarro. He said the North American trade pact has significant flaws.

41:44He expressed worries about China shipping goods through Mexico and Canada. Should the US get out of the USMCA? No, I'm a big fan of that. In fact, I mean, I was a big fan of NAFTA when it was first, you know, talked about under Ronald Reagan and then signed into law by Bill Clinton, a Democrat. It's been enormously advantaged to the whole North American continent. It's critically important that we trade with Mexico because for many reasons, we want to make sure that Mexico remains politically stable. And we want to see higher living standards in Mexico. And Canada is a lot of people don't realize, by the way, that Canada and Mexico are our biggest trading partners, not China, not Europe, but Canada and Mexico.

42:28Don't worry, the Bloomberg audience knows, Steve. Yeah, that's for sure. So the well, I was even surprised, frankly, when I was looking at these statistics, I thought our trade with China might might have been larger than Canada, Mexico, but it's not. And so, look, you're talking to somebody who is very much in favor of continuing free trade flows between our three countries. Now, it is I think Trump has a legitimate complaint that if we have a free trade deal with Canada, Mexico, and then Canada, Mexico are bringing in goods from China. And then China is using them as a port of entry to bring in things to the United States.

43:04That's a problem. But are we doing that? I mean, that's I guess we should know that. You know, we have to be careful about what is said, right, to understand exactly. That's true. Because I think Mexico and Canada understand the importance of an ally like the United States, and certainly when it comes to China. What do you think, Steve, is the damage, though, that is being done to the United States on a global level? Because alliances, the EU is moving on, China is moving on. And I do wonder that those aren't quick fixes necessarily. Are we being kind of hurt longer term by some of these, you know, former allies or allies still in name, but also they're looking elsewhere because they don't love the volatility and instability of this White House?

43:54Yeah, that's a great question. And the last thing we want to do is send these other nations running into the arms of China. I don't quite get the logic of that, by the way, by the part of the Europeans who've really been saying, well, maybe we'll try it with China. I mean, my goodness, these are the same countries for the last 15 years have talked about climate change being the most important issue on the planet. And here they are running to the country that's the biggest polluter in the world. So that's a little hypocritical. But look, we want to trade with Europe. We want to trade with Canada.

44:24I think it's. Don't we need to? to keep the U.S. economy? You talked about earlier that this economy is doing well. Don't we need that? Yes, trade is critically important. I believe that, you know, in fact, the one thing I would say that I disagree with Trump about him, he thinks that the free trade regime over the last 50 years has been negative for the U.S. And my own opinion is I don't think there's any country in the world that has benefited more from free trade than the United States. I mean, my goodness, When I first came to Washington in 1982, 83, the Dow Jones was at$1 ,000. Now we've got a Dow Jones at$50 ,000.

45:06I mean, we have so dominated the world economy in terms of the competitiveness of our businesses, no other country, not even China, comes close. I mean, our net worth as a country in terms of our businesses are almost as large as the rest of the world combined. And that's largely because not not just just, but that means that trade has actually benefited the United States, not hurt our workers. As an economic competitor, sure, the U.S. has been a tour de force. If you ask somebody like J.D. Vance whether it's been worth the toll that it's taken, let's say, on the Rust Belt, it seems like he's a little bit unsure.

45:40And Scott Besson, of course, famously has the line that the American dream is not having cheap imports and cheap labor flooding the country. Instead, it's about having a job and building a future. We were just talking about housing, affordability, having a stable job and being able to afford a home. One of the things, though, that I think about in terms of free trade. So at a minimum, it seems like there's at least a questioning in the White House whether free trade has truly benefited us. What I'd like to hear your opinion on is whether free trade for manufactured goods is different, let's say, than free trade for inputs to production.

46:17Like we definitely need graphite. We definitely need nickel, lithium, copper, things that we don't necessarily have under our feet. Is that different to some extent than trade for cheap manufactured goods that the White House seems to be so upset about? Well, let's put a little political angle on this, because, look, as I said before, I think this is a strong economy. But a lot of the American people don't agree with me right now. If you look at the polling, you know, middle class Americans have a lot of anxiety right there. Now, some of it is many people just don't like Trump, but some of it is, you know, people aren't feeling the love, so to speak, and they're not feeling the positive effects of the kind of statistics that I mentioned.

46:55And so that's a political problem because we do objectively see a lot of things moving in the right direction. But you're right. You go to these, you know, towns in the Midwest. I grew up in the Midwest and they're not feeling like it's a sort of shared prosperity. Well, is it because they're not, but Steve, is it not that they're not feeling it? It's the reality of it. It isn't a shared prosperity. Well, maybe not. I mean, although even the statistics show that, you know, the incomes for even the lowest income groups have been rising. And you can tell I'm kind of flummoxed by this because it does look from the objective evidence like things are getting better.

47:37But there are certainly patches of the country that have not felt the kind of prosperity that other parts of the country. And so that's why it applies to manufacturing jobs, because a lot of Americans believe, you know, we're losing a lot of those old, you know, 1970s, 80s, 90s jobs that gave people a middle class living. Now, if I may, I mean, what's sort of interesting about this subject, though, is that many of those sort of manufacturing jobs won't even exist in 20 years. I mean, we are moving into a new era of artificial intelligence and robotics that just are changing so dramatically and so rapidly.

48:21The way we work, the way our businesses work, the way we play. I mean, how many trucking jobs will we have in 20 years? Not many. Yeah. You know, if the tech there and if the legislation gets there. But I kind of see that happening. We're speaking with Steve Moore. He's the co-founder of Unleash Prosperity. He's a former Trump economic advisor. He joins us this afternoon from Washington, D.C. Also joining us is Stuart Paul, U.S. and Canada economist for Bloomberg Economics. Steve, the president is trying to bolster the shrinking U.S. coal power industry. He'll use$175 million in government funds, taxpayer money, to upgrade six plants and have the Defense Department buy power from others.

49:01We had an interesting conversation with our colleague Will Wade, who covers energy here and power at Bloomberg News. And we asked him why the U.S. moved away from coal. And I was expecting an answer from him, to be honest, that it was about, you know, environmental reasons. But he had one word. He said money. It's cheaper to use natural gas and have natural gas fired power plants. Is this a bad move by the Trump administration because it's it kind of goes against the free market forces? Well, that's a tough question, too, because it's also intertwined into politics. You know, the coal coal is still a fairly important source of our energy.

49:37and we get much more energy from coal than we do from green energy, for example. Not that much more. We get about 16 % from coal. And then if you take all renewables together, you get 20%. I'm not sure about those stats. But the point is that coal is still, it's basically been an important part of our energy mix. I happen to believe that we should use all forms of our power that are competitive. and coal was made uncompetitive in no small part because of the regulations, but we also all want clean air as well. But look, I'm not going to count out coal. I don't want government subsidies to coal.

50:19I certainly, I think I'm glad that Trump is getting rid of the, remember those green, the green movement grew only because they were lapping up, you know, tens and tens of billions of dollars from taxpayers. They just weren't competitive. So, look, my view is very simple on the future of energy. It's the two ends. It's natural gas and nuclear power. And ultimately, those are going to be, I think, the fuels of the future. And that means that, and the good news about that is both of those are very clean burning fuels. Is it possible to have your nukes without subsidies? Yeah, that's what, oh, without, that is a good question.

50:57I don't know the answer to that. I mean, you may know better than I do, but because nuclear power has been subsidized. But I think I'm going to go with the optimistic forecast that we will see nuclear power becoming more efficient and more productive and competitive without any government subsidies. Hey, last time, Steve, you were with us. This was at the end of the year before we knew the president would pick Kevin Warsh as his nomination to the Federal Reserve. Is this a good choice in your view? Does this ensure that there will be an independent Fed? And I'm assuming you think an independent Fed is important.

51:35Yeah, look, I told the president early on in this process that I thought that that the three people I thought would be the best for that position where Kevin has a Kevin Warsh or Laffer. And so I'm glad he picked somebody off of that list. I am incredibly excited about Kevin Warsh. He will be independent. And he's a smart guy. He understands monetary policy. He understands the importance of keeping the most important thing the Fed needs to do right now, in my humble opinion, is to keep the dollar strong and stable. And by the way, Trump isn't always in favor of a strong dollar. Sometimes he favors a weaker dollar.

52:15I disagree with them on that. I think we clearly benefit from having a stronger dollar. And by the way, if you want to afford, you want to have things more affordable, you want the dollar to be stronger, not weaker. So I think he's got all the right economic instincts. And I think he will, once the Democrats on the, you know, because the big committee hearings will be coming up for his Senate approval. And I think he will do very well with that. I think he will be confirmed. And it'll be an independent Fed just quickly. I hope so. I think it will. Look, I think he's not a political guy for the most part.

52:52And so, I mean, he's a Republican, but I've known Kevin Warsh for many years and he will and he's a real professional and I can't think of any better. I really, truly, I think he was about the best choice that we could have. All right, Stephen Moore, thank you so much. Co-founder of Unleash Prosperity, former Trump economic advisor joining us from the nation's capital. Stu Paul still here in studio, part of our Bloomberg economics team. We're counting down to the close. Got about a minute here. Your thoughts on that? Well, so I think that Kevin Warsh actually runs the risk of being a little bit too political.

53:25I think that when we saw an additional half a cut or so priced in upon the announcement that he'd be the nominee, I think that that was markets reconciling this fact that there is going to be a little bit more of a political charge to monetary policy if we were to see somebody like Kevin Warsh. But the Senate Banking Committee members know this to be true. That's why Senator Tom Tillis is going to prevent that nomination from going forth until we see the DOJ probe into the Fed stopped. And we'll see just how much President Trump is devoted to Kevin Warsh as a nominee because he would have to direct the DOJ to stop the probe into the Fed, something that it doesn't sound like he's been willing to do to this point.

54:07Yeah, we'll see what what Tom Tillis and the Senate finance or Senate Banking Committee rather ends up doing. I do want to point out, I'm looking at the U.S. Energy Information Administration data from 2023. It's the most recent data that's available in terms of total electricity generation here in the U.S. because we just had this debate with Steve Moore. 60 % comes from fossil fuels. 16.2 % came from coal. And then renewables accounted for 21.4 % of that 21.4 % total generation. More than 10 % came from wind power back then. And hydropower was at 5.7%. And solar was at 3.9%. So we do do more renewables than coal.

54:48Yeah, and we certainly have seen that move. Good stuff. Stuart Paul, thank you so much. Thank you. Really appreciate it. He is U.S. and Canada economist with our Bloomberg Economics team. Joining us here in our Bloomberg Interactive Broker Studio. This is the Bloomberg Business Week Daily Podcast. Available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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