CEOs on Trump with Jeff Sonnenfeld 3/14/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Here's what's coming up today on Squawk Pod. What do America's corporate leaders think of the first weeks of Trump 2.0? The Yale management professor called a CEO whisperer, Jeffrey Sonnenfeld, says the corner office is concerned. We had 100 CEOs across sectors, 60 % Republican group, about 30 % Democrat, 10 % Independent, and they were overwhelmingly discouraged. And may not have the stomach for more market volatility off the president's policies. A 10 % loss already. CEOs are doing it, but they aren't doing it with grandiosity and trying to throw stones at the emperor that missed.

0:44And tariff talk. Who should be allowed to tariff us if we can't? The levies threatened on products from around the globe and from the wine cellar to the toy box. Do you think it's lol or lol? LOL. LOL. All that today and more. It's Friday, March 14th, 2025. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue it, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. We're live from the NASDAQ market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. Not only is it Friday, guys, it's Pi Day. It is Pi Day. That's right. 3.14159265358797 You practiced.

1:36No, we're learning it last night for Kyle. 323. Yeah. They have a race today, so we'll see how far they can carry it out. Other than being able to do that, do you get any advantage from knowing all those decimal places? No. None whatsoever? No. I tried to carry it out to 30, and I can't. Get yourself a calculator. Pie day for me just sounds like, no, pizza. But I mean, as an excuse for that, maybe. But it is kind of, it's a cool day. And total nerds and geeks, really. It's like almost. Yeah. Here we are. It's between my anniversary and my son's birthday. Right. It's the border day between. 13, 14, 15.

2:17Yes. Anniversary, pie day, Scotty's birthday. Exactly. And the equity futures are looking up. Maybe not as a result of that, but maybe. Senate Minority Leader Chuck Schumer indicating he's now going to vote to advance a six-month bill to fund the government that was passed by GOP lawmakers in the House. That happened earlier this week. It means the bill will likely eventually pass in the Senate today or possibly tonight. A key Senate test vote now set to begin. That's going to happen after 2 p.m. Eastern. And we will need, I say we, it will need, I shouldn't say we, I didn't mean it like that.

2:50it's going to need at least eight Democrats to support it. Schumer speaking on the Senate floor yesterday. Here's what he said. Under a shutdown, the Trump administration would have full authority to deem whole agencies, programs and personnel non-essential, furloughing staff with no promise they would ever be rehired. And if this afternoon's Senate test vote passes, then lawmakers would then have to agree on timing for when a final vote will be held. It's possible the government could shut down before that final vote is taken. We as a country are going to need those. That's what I meant. We as a group.

3:33But no, we as Republicans are going to need eight more votes. We as Democrats are going to need eight more votes as Democrats. So we are we. And you know what? But I think we forget that. I think we forget that way. Why are you laughing? I think we forget that way too much. Don't we? We? It's an interesting about face for Schumer, but you probably look through him. I think he just came on this and realized there's his body language. Yeah, there's not going to be a whole lot to get out of this. The caucus was split. At least half of his caucus did not want him to shut the government. But even when he was acting like he was going to, he always seemed like he was.

4:12It's a bad scenario. It is. But he seemed like he knew. I'll tell you that people are saying and I hear it, you know, that if you control all three branches of government and the government shuts down, you could still blame, you know, the Republicans. I don't think that was going to happen this time because of the House's recess. They passed the Republican. And so I also think what Schumer pointed out is accurate for the Democrats to say that they want to slow doge. and want to make sure this has been done in a little different way, that was not going to get them to their ultimate goal on that.

4:49Oh, boy. Federal, you know what? Don't you love when people say don't talk with businesses, just talk about stocks? We're so wrapped up in everything in Washington, right? Not one thing happens that we talk about that isn't somehow, it seems like, tied to. It feels like it's been that way for about 15 years. I know, but the last, has it been two months yet? The last January 20th? No, it hasn't. It's incredible. A few more days. In the meantime, the premier of Canada's province of Ontario calling a meeting on tariffs yesterday with Commerce Secretary Howard Lutnick productive and saying that the two men will speak again next week.

5:28Earlier this week, Ontario leader Doug Ford suspended an electricity surcharge that Ontario had levied against three U.S. states. and President Trump pulling back on threats to double tariffs on Canadian steel and aluminum, although a 25 percent U.S. tariff did go into effect on Wednesday. I'll be glad to get to April 2nd. I will, because... See what happens? Yeah, I think a lot of this is total BS. Well, here's the thing. Which part? I don't think right now, honestly, I think if cooler heads prevail, if you're in compliance with USMCA, that should all be off the table. Right. All right? the fentanyl thing all right i get it you used it for a while let's get to the point where you stop saying that if you're going to arbitrarily put look at you no if you're going to if you're going to put arbitrary i've always said you know i've said that all along but if you're going to arbitrarily put tariffs on on a lot of stuff that our car makers use from canada and if you can see just connect the dots.

6:34It's going to cost our guys, our automakers, billions of dollars to comply with this for no good. What's the reason? So the billions of dollars they would have spent on retrofitting or just take your pick, new factories, whatever they do with money, if it's two or three billion dollars less because of this, it makes no sense. And you know, who pay it. We do pay it. Not all of it. U.S. consumers. Not all of it. And I think... You're coming around. I'm not coming around. You're coming around. Not coming around. I just think that if you... I see why Sonnenfeld's coming on. He'll be hyperbolic. I know.

7:15But Joe Kernan, the CEO of Joe Kernan Inc., behind the scenes, I'm saying these things, just like these other CEOs are saying. Cooler heads might prevail. Scott Bessent, the Treasury Secretary and Howard Leitnick, the Commerce Secretary, both said yesterday in interviews that they would like to see, their plan is to eventually not have these tariffs come on. I think if you talk to Peter Navarro, he'll tell you something very different. Peter Navarro has always told us that this is going to be a long-term way of raising revenue. Now, those two competing camps are both in this administration, and you wonder which one goes out.

7:47Can I say there's one camp, there's only one camp, an audience of one. Right. And that audience of one, you can go back 30 years ago, has been talking about tariffs, raising tariffs, raising money. He believes this way. How about reciprocals? This is not a, to me. But he didn't follow through with it in his first administration. Sure, but I think that this is a lifetime goal. But he followed through with some that were kept on by the Biden administration. It's a lifetime goal. So the idea that he's going to be swayed by either Bessin or Lutnik, I'm not so sure. Maybe swayed by the market's reaction.

8:22Maybe swayed by what he hears from Otto. I don't think he's just, he has a lifetime goal of levying tariffs on people. No, levying, I think he's a... Slapping, I think he wants to, he thinks it'll bring back... He has a theory of the case. What I'm saying is a theory, people who have theories of the case for decades... Decades, yeah. Typically want to at least try to experiment with the theory. Don't you think reciprocal tariffs might make sense in certain cases? In certain cases, but I would say limited cases. Some of the tariffs that we've heard from Canada... Who should be allowed to tariff us if we can?

8:53But some of them have been red herrings, too. I mean, if you listen to the ones that are. But the idea that, OK, we're going to charge 200 and something percent, that Canada is going to charge that on our dairy. It's only if we reach levels that are more than twice of what we're bringing in now. So that's the USMC. Yeah, they've never been hit. So, you know, these theoretical tariffs that aren't actually playing out because we don't hit the thresholds on them. But you could handle that if you want to renegotiate the USMCA, then that takes all this off the table. Become a 51st state takes all that off the table.

9:26By the way, my new view for you is to say, go for it. You go get Canada to be your 51st state. I don't want it. Because it will immediately supplant Vermont as the most liberal state. I don't want it. But it would undo the politics of this entire country. It would. You, I think, would be so valuable. You're right. So I find the whole thing. Just like they tried to do with the open border with the undocumented Democrats. It would make us permanently. It would make us permanently. Have you talked to the folks? They're not returning my calls. What have I done? I've done nothing. Have I? U.S. real estate giant Compass is in advanced talks to buy Berkshire Hathaway's brokerage business.

10:09That's according to a report in The Wall Street Journal that says a deal could be finalized soon, barring any last minute hurdles. That deal would be a rarity for Berkshire and CEO Warren Buffett, who rarely sells companies to others. The journal cites statistics showing Compass was the largest U.S. brokerage by volume in 2023, while Berkshire's Home Services of America came in at the fourth largest. I believe that unit's been basically break-even for a while. But there was a big court case last year that Berkshire Hathaway was added to the list of defendants, And this was that court case in Kansas City, Missouri, where they accused the National Association of Realtors and a lot of these brokerages of artificially inflating prices for the fees that home sellers pay, the agent fees that are usually between 5 and 6 percent.

11:00There was a big ruling that came out. It was something like one and three quarters billion dollars or something. Berkshire has the deepest pockets of any of those brokerages that were brought up because they've got so much cash on hand, more than any other company. In fact, I read a statistic last week that Berkshire Hathaway now has more money than the value of all the companies in the FTSE 100, just in terms of the cash that they have on hand. So that might be part of the reasoning, too. Because he thinks that he's a target of this? Well, he doesn't think it. They were added as a list of defendants.

11:31No, I know. But is the idea that somehow they would be – I mean, they're a bigger target because they're the biggest one. Right. They've got more money than any of the other brokerages. And so if you get rid of it, the idea is that Compass is going to have to deal with this problem? You know, a lot of them settled. I believe Berkshire Hathaway did not settle in that suit because Berkshire Hathaway never settles lawsuits that they think are brought frivolously. But it's interesting. We'll see what happens with it. Toymaker MGA Entertainment, which makes brats and lol surprise dolls. Do you think it's lol or lol?

12:10Lol. LOL. It is LOL surprise. Yeah. But lol dolls would rhyme. Lol dolls. You've heard of it? Yeah. You've heard of LOL dolls? Yeah. You? They're very popular with little girls. I've heard of brats. I don't know. Accelerating its shift out of China, the company is. It's a major supplier of toys with Walmart and Target. It now says it's taking steps to move 40 % of its manufacturing to India, Vietnam and Indonesia within six months or so after the shift. Roughly 60 percent of the company's manufacturing will still be in China. The CEO warned that he may have to raise wholesale prices on the goods made in China to protect the company's already thin profit margins.

12:53President Trump has imposed a 10 percent tariff on all Chinese imports in early February on top of existing duties and doubled that to 20 percent earlier this month. Does that help? It's not coming here. Well, I was going to say, the move is to try and get manufacturing back here. But it's also to punish China. And then you throw fentanyl into the discussion about China. You're saying this is good or bad? I'm saying that you don't need fentanyl. You can throw it in there, but we've got a lot of other issues with China to try to maybe punish them for doing things. But the cost of these dollars is still going to go up.

13:30Right. Right. And the manufacturing is not coming here. We're just moving. It's not coming. Right. But is that a good, is that something that we like? Unless, look, Steve Mnuchin yesterday in another interview theorized that if you were just to put a 10 % tariff on everything from everywhere, that that would be something that really would shore up the budget here, that would bring in money, and it would keep them from going to other countries instead of coming here for manufacturing. That's interesting, yeah. The cheese will be next. Coming up on Squawk Pod, the corner office and the Oval Office.

14:06This week saw multiple gatherings of CEOs and the top issue, their relationship with the White House. Yale's Jeffrey Sonnenfeld, who hosted one of those CEO summits, joins us next. I've known Trump for almost 30 years. He's a very smart guy. He doesn't want to be put in a corner. He gets defensive like a wounded animal and slashes at you if you embarrass him. And they've learned how to try to engage him through small groups of collective action.

14:37This is Squawk Pod. Up and Andrew, Q. You're watching Squawk Box right here on CNBC. I'm Andrew Osorkin along with Joe Kernan and Becky Quick. Goldman Sachs CEO David Solomon out with his annual letter. Leslie Picker joins us right now. She's got more on that letter. Good morning, Leslie. Hey, Becky. Good morning. Yeah, he's calling the current environment, quote, complex and saying that clients are acting cautiously until they have more clarity on policy. He said, quote, global growth has been hampered by inflation and escalation in potential tariffs and the toll of geographical tensions and prolonged conflicts across multiple regions.

15:14Solomon described the direction of various policy items in the U.S. to be, quote, unclear, noting the, quote, discussion around tariffs in particular may weigh on corporate sentiment and the impact on the bottom lines could be significant. He said, quote, many CEOs I engage with are evaluating the potential impact on their top and bottom lines. And as a result, we are seeing some of our corporate clients act more cautiously until they have more clarity. However, he says that there has also been a meaningful shift in CEO sentiment given the expected change in the regulatory environment. He writes, quote, the appetite for dealmaking has increased and that could spur further capital markets activity in 2025.

15:57Shares of Goldman down more than 8 percent this year, in part on concerns that this recent bout of uncertainty that he describes could hamper the potential revival in deals and low making. So he sees some positives there on the regulatory front as it pertains to the capital markets, but also the uncertainty, which is impacting some clients in the near term. Leslie, I want to thank you for that. I want to bring in another voice about the relationship between confidence, the White House, corporate America, all of it. Joining us right now is Yale School of Management Senior Associate Dean for Leadership Studies.

16:29Jeff Sonnenfeld is also a CNBC contributor. Jeff, it's nice to see you, sir. Good to see you, Andrew. So let's just talk about it. there seems to be a disconnect between the idea of confidence. And maybe there's no disconnect. I think right now there's not a lot of confidence. Is that fair to say? I think that is fair to say. I think that report you just had on David Solomon is fascinating because he's shifted down a bit just from what he was saying a day ago where he was a little bit more effervescent. He's still talking about deal activity, but we don't see it. And we're at a 12-year low in M &A activity.

16:59I have David Solomon in class in two weeks, and we'll see how he's feeling at that point. But he's acknowledging the uncertainty. And that's what we're seeing with the CEO community. It's not just the reports you had this morning on the plunge in retail sentiment, the plunge in consumer sentiment and CEO confidence indices by other indices as his chief executive magazine. But we had 100 CEOs across sectors, 60 percent Republican group, about 30 percent Democrat, 10 percent independent. And they were overwhelmingly discouraged. There was a lot of goodwill that had been accumulated after the election, even though most large CEOs didn't support him, President Trump.

17:39They did rally, and we encouraged that patriotically to go down to Mar-a-Lago, talk about company-specific issues. Same thing happened in 2017. That goodwill dissipates quickly, and it's happening right now. The 85 percent think these these tariff moves are a disaster, even though they're in favor of tariffs. They want selective tariffs. And so here's the question, though, if they were to come out in the Trump administration, come out with tariffs. We know what the deal is one way or the other on April 2nd. I don't know if you believe that that's even plausible, but that's what they say is going to happen.

18:12will that create the certainty with which business can then know what the deal is going forward and therefore maybe be able to make investments in other things? Or do you see the tariffs as a negotiating tool that can come on, come off, will always be sort of up for grabs, in which case, obviously, the uncertainty persists? As you guys said just this morning at the start of the show, I think you nailed it by saying that Howard Lutnick's statements about these tariffs having a transitory effect, as the Secretary of Commerce, Howard Lutnick, as opposed to Peter Navarro, who I actually introduced to Donald Trump for the first time, is that Peter Navarro...

18:48You're responsible for the relationship? Yeah, I kept giving his books to Donald Trump that he didn't read, but Jared Kushner saw them there, and that's unfortunately the path we took. I've known Peter for years, but Peter is saying these are a permanent way of life and a revenue source. You know, during our session, it was really fascinating. It was, as Eamon was giving us updates, Eamon Javers from CNBC, he gave us 12 updates through the course of the day. And people gasped each time because they were head-spinning reversals. So whether or not it was automotive to advertising or consulting to computers, as people say, well, how do we keep up with this to make massive moves in automotive and manufacturing of tens of billions of dollars of capital?

19:30We can't even have consistency within 10 minutes. These were head-spinning reversals. And that was quite stunning. So CEOs are worried about that uncertainty more than anything else. And that's, you know, we have roughly half of them said we're ready now at a tipping point to talk about a disastrous economic situation. Most of the analysts you have on here in the last week would tell you that they have expectations about the recession have shot up to almost as high as 30 to 40 percent, depending which one you've had on. These people, to our amazement, were quite a bit higher. They're saying 92, 94 percent.

20:04We're saying we're headed right now on this path towards a recession. All this, Jeff, is tariff related. And most CEOs, if you ask why they were optimistic initially, it wasn't because of tariffs. It's because of deregulation. It's because of keeping corporate tax rates at 21 percent and other tax cuts. And it's because of Doge and cutting down government spending. Now, it's all been muddled. And we had Scott Besson on last week. And we said the seat of the pants nature of the way this tariff story is playing out might be bad for Congress. There's no put that the Trump call on the upside is if we have good policies, then the markets will go up.

20:45But in general, the other three things I mentioned versus what Kamala Harris proposed to do, I still take issue with your blanket statement that the people you talked to invariably didn't support Trump. Because those three things, deregulation, keeping corporate taxes low, and doge, are all very positive. We had Brad on yesterday, Altimeter Capital, Gerstner. Brad Gerstner, yeah. He says, look, you know, whether the market needed to come down, whether 20 percent is the max that it comes down. I mean, we are with 150 percent tariff in India. There are certain tariffs that need to be addressed in reciprocal tariffs.

21:30But once we get beyond this, you're left with less regulation, less government spending, bond yields coming down, which is good. And what was the last answer? And lower taxes for corporations. I wouldn't minimize. I wouldn't minimize. I'll take Trump any day over what we would have had with Kamala Harris. Would you wish Kamala Harris was president? We wouldn't have this volatility. Do you realize you wish Kamala Harris was president? We have just lost in the market, Joe, about 10 percent on the S &P. Twelve to 15 percent on that. It happens almost every year. We're in Nasdaq right now. So it's Nasdaq.

22:02Say 12 percent. OK. Happens every year. Almost. With the amount of money. No, no. It's happened in 97. Every year or every other year. It's happened six or seven times, and there are catastrophic reasons with catastrophic consequences. I heard it when Secretary Scott Besson said, no, it's do you know what that 10 percent is? That 10 percent that was just lost, you could fund the NIH for 90 years. You could fund the Ukraine war for 90 years. You know, that's a lot of money. So you're looking at, you know, at$40 billion a year. is you don't want to argue that 10 percent is some kind of historic sell-off so don't even know you don't even go there by translating it into billions of dollars the crash in 1929 on October 29th you know how much that was it was 10 percent is that in 1987 it was 22.6 percent in one day that was uh and it took and it also took four years for that to ever recover that price Jeff, you don't want to be on the side saying 10 % is catastrophic.

23:06Just to finish this point, Joe, it is consequences for that. That's an awful lot of money. You know how much that is for the average 401k holder? That's over$20 ,000 just lost for every family's 401k. That might be inconsequential to you, but that$40 ,000 per family was a lot that was just squandered. And it didn't need to happen. But on deregulation, yes, if you have your financiers on here, Jamie Dimon would be supportive of it. Guess who's not getting deregulation? The guest you had on yesterday in M &A. Why is M &A down by a 12-year low? It's because they're afraid of the right now. Brad Gerson said yesterday when Trump came in, all the investment bankers were called back from the beach to start working on deals.

23:50Every company has pulled their M &A teams off the beach. They haven't done anything for three years, and they're all back to work. Do you think deals get done in two months? It hasn't even been two months yet. Yeah, there's no deal activity right now. And the reason is this FTC commissioner, the chairman, who is a very experienced guy, a very smart guy, can't disavow a single thing that Lena Kahn stood for. President Trump appointed me to protect Americans in the marketplace. And that includes from big tech. And I've said since day one, big tech is one of our main priorities. And that remains true.

24:24You name it, whether it's Google, Amazon, he's in favor of it. Ladies handbags on tapestry. He thought those were the priorities. If you were to ask him, as Eamon did yesterday on your show, Eamon asked him, how about PBMs, which is 40 % of the drug costs? He said to you on the show, I don't care about that. We asked him about refineries where they've had 300 % price increases. You want to know where the price gouging was? That's where it was. He didn't care about that. He cared about big tech companies, the same thing as Lena Kahn. He didn't care about baked bread. There are three companies that control over 70 % of our baked bread, and they have huge price increases there.

24:58He didn't care about that. He cares to focus on where Lena Kahn went. And there's zero daylight between him and Lena Kahn. So, yeah, I don't see a difference there. And if you look at deregulation, Joe, I don't see where it is. You know, most of the automotive companies and the extractive energy companies, the oil companies, they want to keep the same methane abatement and pollution control that was there. And they fought the last Trump administration to maintain the Clean Air Act. Hey, Jeff, we've had some strategists who have come on the show and said that in the last Trump administration, it was all the good things for business that came first, lower taxes, deregulation, those things.

25:35It was the tariff talks that came later in the administration. And that's when the market really did start to wobble and drop pretty significantly on some of those things. We've had them say that this time we're going to take the bad medicine up front and maybe get to some of the better things for business later in the term. If that happens, do you think these Wall Street CEOs or these CEOs in general will change their mind about things? The sequencing, you're exactly right. While going back to a century, the GOP candidate was supported by over half of major business leaders consistently. Until 2016, it went to zero.