Trump Vows No Tariff Extension, Hardens Threats on Copper, Drugs

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1:32And trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenebeck on Bloomberg Radio. Well, President Trump said he planned to implement a 50 % duty on copper imports as part of a set of looming sectoral tariffs. while also indicating he could offer pharmaceutical manufacturers at least a year before applying a crippling 200 % tariff on their foreign-made products. We've got Joe Doe with us, Economic Statecraft reporter for Bloomberg News. He joins us here in the Bloomberg Interactive Brokers Studio.

2:10Before you covered Economic Statecraft, you covered metals and mining. And that's where I want to start with you, because we have these global, correct me if I'm wrong, but global minerals companies or copper producers, Freeport Mac Moran, for example, among the best performers in the among the best performing stocks today, I should say. But these are global companies and they have minds all over. Right. So if you put a 50 percent tariff on copper, then copper you import will be more expensive. right so it could affect companies that even if they're american companies if they import it right what am i missing here no i mean this is the debate in the industry right so uh many months ago trump said we're gonna do copper tariffs and it was just like one of 30 things he said in an oval office conversation right and copper came out of nowhere that was a big deal because steel and aluminum we did eight years ago copper never hit like that roster so for it to hit suddenly that It was a big deal in the metals and mining industry because the United States consumes about 1.6 million tons of copper.

3:15850 ,000 tons of that is domestically produced. So you're still talking about half of your consumption coming from abroad. That's a big question mark for consumers, right? Think about it. Like copper goes into literally everything. I mean, almost literally everything. It is ubiquitous in the United States. It's ubiquitous everywhere in the world. uh we rely on a major ally for those imports chile 38 of our imports of our uh come from chile that's a that's a big deal but they're a great trade partner right i mean maybe the best trade partner in south america the idea that you're suddenly going to be put putting a 50 tariff on those imports is significant because ultimately the consumers are not just you and i it are the it is the fabricators right the people who make copper pipes uh copper wiring they have questions too and those copper wire producers for example might have something to say saying whoa hold on we produce in the united states we are major majorly important we in terms of actual revenue in terms of actual profit because it's more downstream that's the ball game so i don't know how this ultimately plays out the president said it's a 50 tariff but what does it actually look like on paper?

4:28Do we get 50 % across the board? Do we get something that says, well, it's a 50 % tariff on raw copper imports and it's a lower percent tariff or a higher percent tariff on copper products? Are there some sort of export controls? These are the questions that the market actually cares about. And I think for your listeners who are saying, Joe's all over the place with this, I can't keep up with it. I think what I'm trying to say to you guys and to anybody who's listening who's a smart person on wall street it is complex and to come out and just say across the board 50 tariff on copper doesn't say a whole lot to the people who trade this thing they still need more detail i think this is very helpful to smart people on wall street i don't think you're all over the place i think you're hitting the nail right on the head um but i mean when it comes to the companies like the u.s copper companies this is good for those stocks or not necessarily to be determined uh like right back to the point um these copper companies are global so freeport mcmoran's biggest mine is not in the united states they do mine here in the united states but the biggest mine is not here so yes on one end uh it's a benefit for them but on the other end it is potentially harmful.

5:47And so you ask yourself, what are the conversations happening inside the C-suite of a place like Freeport-McMoran or Rio Tinto, where they're saying, okay, great, so this helps our operations in the United States, but we have all of this other production outside. We had many customers inside the United States, and we're trying to figure out how to square away that issue. How does the supply chain work? Obviously, there's still a lot of uncertainties but is this a scenario where the tariff ultimately would be likely to get passed down to the consumer if this is a material that is as you've said in like literally everything phones cars etc i guess we'll have to see i think this has always been the issue with even steel and aluminum let's how much did the end consumer actually end up paying more for uh for various products like we heard way back in the day you know in 2018 2019 uh people who were buying new windows for their houses you know have the window frames are all aluminum they were paying more for their window frames um but it's not as clear if like you say buy an iphone right like how much copper is in the actual iphone i don't have the number off the top of my head but i think we're gonna have listen we're gonna have to get the actual details of what actually gets put into the section 232 decision.

7:05And then we're going to, if, if it, whatever goes into place, we're going to have to see how it actually impacts these downstream consumer products all the way down to wiring in your house. I want to talk about economic statecraft. And there's a paper from the Hoover institution about this from HR McMaster who served in the Trump administration and Andrew Grotto as well. And they write that when a country uses an instrument of economic statecraft, it aims to produce an economic effect within its domestic market or in global markets to achieve a geopolitical objective. Economic statecraft in the context of your beat, I imagine has a lot to do with the United States and what the United States is doing to achieve certain outcomes.

7:47Yeah. How's it going right now?

7:52It's a tough call, right? I mean, listen, I think it is easy. we've all known Donald Trump for a very long time and we know the bluster that he puts out into the market and the different things he says there are things he says that there are a lot of smart people who say you know he's actually right it's just the way he said it maybe is not the way to communicate it right and and I but at the same time there are things that you do that aren't actually good right like these reciprocal tariffs obviously were received very terribly by the United States markets and global markets and i think we've seen that play out over the past three months in the markets on the other hand if you look at something like rare earths critical minerals what we saw between the united states and china was the negotiation for the trade agreement between the united states and china actually became about rare earth magnets these permanent magnets that are needed in all sorts of the electrification and uh ev vehicles and everything else that is important and there is a concern among automakers ford has come out and said it very publicly we reported a few weeks ago that quietly many aerospace related companies are coming out and saying there's concern around this when they say there's a concern they're saying we do realize maybe we need more domestic production of these things of these rare earths and these rare earth magnets and so in that regard that's just an example of where maybe trump is right maybe you do need to build out some sort of domestic industry i'm not saying you just build the industry you take it all away from china but like an executive once told me years ago five years ago you know joe the point isn't you take 50 you know china has 80 market share in the world it's not that next year or five years from now you take 50 of that market share it's you take one to two percent market share each and every year little by little joe doe economic statecraft reporter for bloomberg news joining us in the bloomberg interactive broker studio check out his work and more on the Bloomberg Terminal and at Bloomberg.com.

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11:34you're listening to the bloomberg business week daily podcast catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. For how investors are trying to weather this and figure it out, let's bring in Libby Cantrell, Managing Director and Head of Public Policy at PIMCO. She joins us here in the Bloomberg Business Week studio. Libby, I want to start with trade policy and tariffs, and then we'll get to the president's domestic policy win. I'm going to ask you the same question that I just asked Adam.

12:07For investors, though, is this a moment of clarity? I'm not sure if it's a moment of clarity. I mean, I think in some ways it reinforces the president's conviction around tariffs. I wholeheartedly agree with what Adam was saying. I mean, I think there's sort of this view in the marketplace that Trump doesn't really mean this. There's sort of this whole taco meme, right, that Trump always chickens out. I think on trade in particular, that has not been the case. If you just look at where the effective tariff rate is right now on all U.S. imports, the average effective tariff rate is around 14 percent.

12:38Right. That's up from, what, 3 % or so earlier? 3 % as of January. Okay. So regardless of what happens on August 1st, and we do think that there will be some sort of sacrificial lambs, if you will, but I think that sort of the signal from the noise here is that tariffs are already high, and they are likely to go higher. So you don't think the extension to August 1st that we learned yesterday, and even got more information on today, you don't think that's, some people are saying that's taco. Sure, is it more of a window? It's not July 9th. For further negotiations, sure. But I do think that maybe even with some of our negotiating partners, they weren't taking Trump very seriously.

13:17And I think this is, in many ways, he's trying to reinforce that this is not just a threat. And again, I guess from an investor perspective, the reason why you care about tariffs is you care about what's going to happen with the economy, the macro economy, with companies, with inflation, in the case of bonds in particular. And I think that the bottom line here is that tariffs are already high. So regardless of what happens on August 1st, we will start, we do think we'll start seeing some fragility from an economic perspective. One thing that has not been mentioned that I do think is worth maybe reinforcing for investors is that this is getting a little wonky.

13:54But the statute that the president is using to impose these tariffs, something called IEPA, the International Economic Emergencies Powers Act, That has already been found in court to be unlawful, to impose tariffs. We do think that the Supreme Court will likely hear this, and they could also decide that this is unlawful, meaning that come December, whenever the Supreme Court were to rule on this, if they were to overturn this, all of these tariffs, the reciprocal tariffs, the 10 percent baseline tariff, all of those would go away. So I think this is something that's also important, is that while we think that the president should be taken both seriously and literally in terms of his tariff threats, we think he really believes this.

14:35He really does have conviction and commitment to sort of reshaping the global trading order. There is a possibility and probably a high possibility that come December or January, whenever the Supreme Court does hear this, is that they could overturn this. And that could obviously cause just another inflection point. Now, the last thing I'll just say on this, again, kind of wonky, is that the president has other tools, other legal tools that he can use to impose tariffs. One is this what's called Section 232, and that is going to be the tool that he's going to impose things like the copper tariffs.

15:04He's already imposed aluminum and auto tariffs using that tool. Do you think that's why the market has been relatively calm in the face of all of these headlines back and forth about the different tariff rates that investors are maybe holding out hope that we won't have that much of tariff policy change come the end of the year? The equity market, right? I mean, of course, we're a bond house. And so, you know, we look at the equity market. But I think bonds are probably taking the president a little bit more seriously. I think the equity market, you know, is wanting to believe what it wants to believe.

15:36And I do think there is this assumption that President Trump doesn't necessarily mean this. And of course, I mean, to the credit of the equity market, we haven't necessarily seen the pass through from tariffs to either consumer prices or hurting sentiment necessarily. So, you know, there has been reason to be bullish. And of course, we just got the one big, beautiful bill done. There wasn't much time for celebration of that in Washington or in the markets for that matter. I think it's a little surprising that President Trump isn't spiking the football on that one a little bit more because that is a huge accomplishment, honestly.

16:12Regardless of what you feel about the bill, to get something that big over the goal line with such a small majority is a real accomplishment. Well, we only have a minute left with you. Let's talk a little bit about that and the idea of widening deficits. And I'm curious, given the fact that PIMCO is a bond shop, why do you think that we're not seeing bonds react to the idea of this widely? Well, you have. And I think you have seen over the last six months, you've seen a steepening of the yield curve. You've seen, obviously, that, you know, April 9th sort of temper tantrum, if you will, and the long bonds selling off by a very significant amount.

16:47So I think there is a terror over tariffs, wasn't it? That was over tariffs, but it was, I mean, I think it had to do with the fact that there was already questions about deficits, about fiscal profligacy, about the institutions and all of those things. You know, I think you have, I think that there are a couple of things. One is that the U.S. dollar continues to be the reserve currency, that the Treasury has continued to be the reserve asset of the world, and that real yields also look pretty good. I think our view is that there's probably more value in the belly of the curve, the shorter durations of the maturities of the curve versus long out.

17:20But you have seen, again, it sort of depends on where on the yield curve you're talking about. You have seen the long end, I think, digest some of these deficits. Libby Cantrell, great to see you. Great to see you. Thanks so much for joining us. Libby Cantrell is Managing Director and Head of Public Policy at PIMCO, joining us in the Bloomberg Businessweek studio. This is the Bloomberg Businessweek Daily Podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station.

17:53Just say Alexa, play Bloomberg 1130. Want to talk oil and energy? Oil fluctuated as traders weighed President Trump's latest wave of tariff threats against French tensions in the Middle East. West Texas intermediate crude flip between gains and losses, hovering around$68 a barrel. This is a key psychological level that prices have only briefly breached in recent weeks. Meanwhile, another ship in the Red Sea came under attack. Also, traders have to understand exactly what's happening with tariffs to get an idea for demand. Watching all of this is Dr. Ellen Wald, president of Transversal Consulting, also senior fellow at the Atlantic Council.

18:31She's also the author of Saudi Inc. She joins us from Boca Raton, Florida. Dr. Wald, always good to check in with you, especially on a day such as today. I want to start with tariffs and really the way that traders are trying to understand oil demand for countries that have been had tariffs implemented on them. How does this change the view of oil demand in the coming weeks, months and years? It's kind of contrary to what you might think it would be. Essentially, the idea is that if tariffs are going to go up, then that will mean lower economic activity in terms of trade. So if a product you're trying to buy from another country has a very large tariff on it, you're less likely to buy that product.

19:14That means there will be lower shipping, fewer products being shipped, for example, and therefore lower demand for the energy needed to ship those products. So the idea is that then if demand is going down, then oil prices will go down. But if tariffs are lower and lots of people are buying, lots of stuff from all over the world, then demand will be higher and therefore oil prices will rise. So it's a little bit of the opposite of what you would think it would be. But that's generally how we conceptualize the way that tariffs impact oil prices. I want to talk about OPEC as well, because they're increasing oil output, increasing supply.

19:58Just to help us understand in context how investors are supposed to understand what that's going to mean for worldwide oil supply and prices. Yeah, it's a very interesting situation we're in right now because we're coming off of this Iran-Israel war where prices kind of shot up and then went down. And then we had this kind of resolution, sort of, which led to essentially eliminating the war premium that had been on prices. So prices were down. Now we're coming off, then we head right immediately into this OPEC meeting where OPEC decides to increase more than probably was expected. Most analysts, I think the market expected that OPEC was going to increase maybe by another 400 ,000 barrels a day.

20:45They increased that. It's now almost five, it's closer to almost 600 ,000 barrels a day starting in August. And then there are some pretty sure signs that they're going to increase again in September. So that means we're going to see more supply on the market. I think they have some pretty good ideas that, at least in OPEC's mind, that demand is going to be going higher. And so that's why they're looking to increase. But they've also, it shouldn't come as a huge shock because they've made no secret of the fact that they've wanted to unwind these voluntary cuts for a long time. And so this is essentially their plan.

21:25I don't think we'll see any deviations from it. And it's supposed to send oil prices lower. But then you have, you know, it didn't actually send them as low as we might have expected. But again, I think we're going to see another increase from them next month. So you've got that on one hand, you've got these tariffs on the other. I think that the pressure is really on to get deals done. And if they can get deals done, then that indicates the demand is going to go up. And so there's really a lot of pressure now to see if we can get these deals done. Can they get done in less than a month? not so sure if that's even really feasible at this point.

22:03But Dr. Wald, even if deals get done, if high tariffs say, you know, 20 to 25 percent, 30 percent in some cases, if those remain in effect on these countries, even after a deal, that's bad for demand, right? Yes, it's not good for demand. I think the idea is that if we see trade deals being done, then the tariffs are going to the tariffs will go away, essentially. And I think that in a lot of cases, we've seen these tariffs get implemented and then, say, five days later or less than five days later, they get taken back down. I think what's interesting, though, is you have to remember that people might be putting in orders now for things that would come in a month or two months or three months.

22:42So they're having to plan ahead. And all of this uncertainty basically screws up everyone who's trying to buy something or sell something from overseas. So anyone who's dealing in global trade, which is essentially almost any business, is facing a massive amount of uncertainty right now. And demand does not like uncertainty. And so I wouldn't be surprised if we see prices start to decline in the short term, particularly because of all of this uncertainty, general economic uncertainty, surrounding the tariffs and tariff issues and trade negotiations. Dr. Wald, what are your current views on the state of geopolitical tensions?

23:20I know you had written previously about potentially the Strait of Hormuz closing and how that would affect the global economy and oil output. Should investors still be concerned that there are more geopolitical tensions to come that would affect the oil market in the near term? Or is that risk not really present anymore? I think there's always a risk of geopolitical tensions, especially when you're talking about countries like Iran and Israel and other countries in the Middle East. You're talking about China, for example. The risk is always there. I do think that the risk that the Strait of Hormuz could be closed, which is not something I think is really a feasible thing to do at the moment, but it could be the safety of shipping through the Strait of Hormuz could be threatened at some point.

24:07I think that that likelihood is way far down now. As long as Iran is exporting oil, they really don't have any cause to threaten any other shipping. And President Trump has made it pretty clear that, yeah, he gets it. China's going to keep buying this oil. Iran's going to keep shipping it to them. They're doing what they can to try to thwart it according to sanctions, but at some level, they're not going to be able to stop it. I think he wasn't saying he's going to relax sanctions, but it's going to happen. He knows it's happening. And in some respect, it does keep Iran from kind of having nothing to lose.

24:43As long as Iran can sell to China, in some respect, they have skin in the game. They're not going to really try to hurt anyone else going through the Strait of Hormuz. I do think that the Red Sea is an ongoing serious issue that really demands a lot more attention than has been given. And the fact that this is a really important waterway, yeah, it's not the only way to ship oil across the world. It's a lot, you know, you can go around Africa, but it's a lot easier to go through the Suez Canal. And the fact that this is still an ongoing issue with ships being attacked there, I think that's a real threat to all of the global shipping, not just to the oil market, and that it really is a much more serious issue than perhaps the market is taking into account.

25:30So that's the international view. I'm wondering about the domestic view. And certainly, these are all tied together when it comes to the global energy market. But when we think about the United States and the president's stated goal of more energy production and more drilling here in the United States. In fact, we did hear from the energy secretary during the cabinet meeting talking briefly about this and about oil and gas. Is$68 a barrel, especially just a few weeks after oil was$58 a barrel here in the U.S., is that a high enough price for companies in the U.S. to start exploring more, to start drilling more, to start increasing production, especially given that we saw that increase in output from OPEC plus over the weekend?

26:10Yeah, I think that's a really good question. I think that for some companies, it's enough. And for others, it's not. And I do think that the real question here is if the price of oil is going to be remaining around that$68 barrel mark, what else can the government do to encourage drilling that isn't necessarily related to the price of a barrel of oil? What can they do to make it easier for these companies to deal with regulations? What can they do to decrease the length at the time and the significance of lawsuits, for example? These are all things that companies spend a lot of money and time dealing with in order to just get to the place where they can even drill.

26:51And so what the government can do is the government cannot change the price of oil all that much. They can't say, oh, we want it to be high enough, this high so that everybody feels comfortable drilling more. but they can't change that. I mean, I guess technically they could set, you know, they could try to price control, but that's a bad idea and we're not going to do that anymore. But what they could do is they could help in the regulatory aspects. And if they can decrease red tape, help things move more smoothly, then companies will be much more inclined to go out there and do exploration and do drilling and things like that because they don't just spend as much time and money dealing with all the red tape.

27:31So that's one way they can make that$68 an hour more valuable to companies. Do we know if the government has plans to do any of that anytime soon? Well, they say they want to. I mean, I've heard that they want to get rid of NEPA reviews entirely. That's this environmental review that often can take years and years to complete. Before they said, oh, we want to have them done in three months. Now they're saying, oh, we want to get rid of them entirely. But we need to see some actual concrete steps taken to do this, because companies can't just, you know, they can't make decisions about whether to allocate, you know, massive capital expenditures based on something that the government says that it might do or that it wants to do.

28:12They're going to need to see, yeah, we're doing this. You know, if you apply for a permit to do X, you can expect that it will be approved within, you know, Z amount of time and have that actually occur. And I think that if we if we saw something like that happen, you'd see companies much more willing to go out there and to, you know, to drill more, to explore more, because they wouldn't be so afraid of all of the expenditures and the time that goes into that. We only have 30 seconds left, Dr. Wald. How would you say demand is looking here in the United States? Because we like to look at that as a measure of how consumers are doing, how they're feeling, and what they're buying.