Tariffs on the EU & Consumer Tastes 5/27/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Busy long weekend at the White House. Two tariff announcements for Europe, which netted out at a 50 percent levy come July 9th. National Economic Council Director Kevin Hassett on deal progress around the world. Across all the countries, I expect we'll probably see a few more deals even this week. There's some stuff very close to finish. And what's really going on inside our economy? Investor Ray Washburn's businesses are varied. He's on the boards of Sunoco and Red Lobster. He's watching consumers across their wallets.

0:39Credit card debt, consumer debt is a big worry. I mean, it's at an all-time high. Plus, the rest of today's news that got us squawking. A record holiday weekend at the box office. President Trump's fight with Harvard takes a turn. And the tariff up and down and up and down changes Wall Street are watching. It's on a 24-hour basis that something can change. I do find myself getting to the point where I don't take anything quite as seriously. It's Tuesday, May 27th. Squawk Pod begins right now. Stand Becky by in 3, 2, 1. Cue it, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC.

1:19We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. and a down week for the markets last week on news of those tariffs for the EU. Across the board, markets were off by about 2.5 % last week. If you check out Treasury yields this morning, Treasury yields over the course of the last week were sharply higher. This morning, you will see yields pulling back. The 30-year is actually below 5%. It's at 497. The 10-year is at 446. And the two-year is at 398, back below 4%. This is coming as yields around the globe sell off. There was a big move in the Japanese 30-year bond overnight that follows a report that Japan's finance ministry is considering offering fewer bonds at the long end of the curve.

2:02Last week, yield surged to record levels over concerns from a weak 20-year auction here in the United States and in Japan. And politics around a government stimulus program, you could see the Japanese 30-year, moving down pretty substantially in yields. Again, there was a survey that took place where they asked some of the primary dealers, some of the buyers of bonds, what they would like to see at the long end. And the supposition is that Japan may not sell as many bonds, at least on the long end, as they had been doing. Japan's been doing the same thing we've been doing, which is issuing more on the long end at the same time that they are removing the central bank as not buying as many bonds as it had been before.

2:42So it's a supply-demand situation, and we'll see how this plays out. Let's give everybody a recap of what's going on here. Stocks fell on Friday. This is after President Trump threatened to impose 50 percent tariffs on the European Union beginning in June. That was first. But then futures rebounded this morning after President Trump said he received a call from Ursula von der Leyen, who requested an extension on that deadline. He said that he had granted an extension to July 9th. Now, a spokeswoman told reporters yesterday that both sides agreed to fast-track negotiations and stay in close contact.

3:16One of the EU's top negotiators posted on X that he had good calls with Commerce Secretary Howard Lutnick and U.S. Trade Representative Jameson Greer. Markets in Germany and France then opened for trading yesterday, rebounded from Friday's drop. So I shouldn't say they opened yesterday. They opened today. It seems like it. It feels like yesterday. There's a lot of big things. Six hours ahead. That happened over the weekends. But there's a lot of big things that have to happen even in the next six weeks. Oh, yes. You're talking about 27 countries. Supposedly nowhere near close. Yeah, and some of it has to go through 27 different countries.

3:54But what do you call a deal at this point? You could call a lot of things a deal. And both sides would say, gosh, isn't it great? I'm just, I just was thinking, I just really like how the bond market is making it easy of force because the three most important ones, the two year is at 3.99. Just below 4%. Just below 4%. The 10 year is at 4.4. So it's really easy to remember. And then the 30 year, 4.97. Right. So I can even understand whether it's above or below those. Right? Isn't it nice that they're all below today? But they were all above it last week. They were all above last week. Those are the highest levels that we've seen in quite a while.

4:33But for simple people, it's just on a Monday, even though it's a Tuesday. Below 5%, below 4%. Yeah. Getting back in line. It's tariff stuff. Wouldn't it help to be a technical analyst now? I mean. Like why pay attention to it? Like why pay attention to it? Really, it's on a 24-hour basis that something can change. Well, and I do find myself getting to the point where I don't take anything quite as seriously. I think if you really could just look at if technicals really work, it'd be nice to hide in that in that domain. Although last time Katie Stockton was on, you know, they're wrong, too. She's expecting new lows or a possibility of new lows.

5:15She still could be right. She could be right. Then again, the market's momentum. It just and then you read about, you know, it seems like a lot of this people just shake off. And it seemed to be what Kashgar was saying to talk about him in a second, too. But let's get to President Trump's other tariff threat from Friday on. This time it was, as you might recall, we were sitting here just minding our own business and the Apple and EU stuff came out. It was unbelievable. He said he was considering tariffs of 25 percent on iPhones made anywhere except the United States. such a move is unlikely, as it is estimated that iPhones made to America could cost up to$3 ,000.

5:57However, Treasury Secretary Scott Besson may have provided a path for an out for Apple in a Fox News appearance on Friday. Besson said Apple could help bring production of chips and electronic components to the United States. And then separately, the New York Times reported that President Trump was irritated when Tim Cook declined to join him on that recent trip to the Middle East. Probably was the earthquake because he actually said it when he was over there. During that trip, the president took a number of shots at Tim Cook. During one address, he praised Nvidia's Jensen Wong, saying, Tim Cook isn't here, but you are.

6:33President Trump said that the smartphone tariffs would begin at the end of June. In effect, all phones made abroad, including Samsung's devices. Then Tim Cook went the next week and was at the White House. Right. But apparently, I don't know what happened. When I travel, we all travel. Right. Look, there are some... There's a lot of... You've got to kiss a ring. Sure, but... And it's not that hard. You don't even have to do anything. He gave a million dollars of his own money at the inauguration. He has shown up for a lot of things, been there at the White House. And look, there was some report...

7:03There were some reports over the weekend that this will come up in India's trade talks, too, because India would like to see a way for some of those phones to pay. Supposedly, we're close there. Right, you're close, but this... We've been close there for the last month. Supposedly, there was... Closer. We're probably closer today than we were a month ago. But supposedly that there was some stumbling block that's been over. This is a stumbling block. This is a stumbling block. If they can't produce phones, they're India's thinking that they are the antidote to China. Right. And then it turns out, no, you can't make phones there and sell them over here.

7:34So which then changes the entire plan for what Apple would otherwise want to do in that country. In the meantime, Elon Musk says that he has shifted his focus back to his companies. He's in a post on X in response to outages related to a fire at an Oregon data center. He said on Saturday, back to spending 24-7 at work and sleeping in conference, server, factory rooms. I must be super focused on X, XAI and Tesla plus Starship launch next week as we have critical technologies rolling out. Regarding the outage on X, he said major operational improvements need to be made. He did say that the backups should have kicked in.

8:13They didn't, and so they're working on that, too. If you check out shares of Tesla, though, they have risen pretty sharply over the last week or two, as it has seemed that he'd be spending much more time focusing on Tesla. The shares this morning are up another two and three quarters percent. Separately, Tesla sales in Europe plunging in April down 49 percent year over year. The drop coming even as overall battery EV sales rose by 34 percent. Now, Tesla's faced brand damage in Europe from Elon Musk's political involvement with Trump, probably also because of some of the politics that he's gotten involved with in Europe, actually, and rising competition.

8:48Data showing that last week, China's BYD sold more electric cars in Europe than Tesla. That's for the first time. So European consumers also have been showing a preference for hybrid electric vehicles rather than Tesla's fully electric models. Just like here. Although we were kind of shocked, biggest selling car. Yep, still got the biggest selling car. President Trump said yesterday he was considering taking billions of dollars in grant money away from Harvard and redistributing it to trade schools across the U.S. He called Harvard's, he called it anti-Semitic and said giving the money to trade schools would be a great investment for the USA.

9:30last week, the Department of Homeland Security said it was cutting off Harvard's ability to enroll international students before a federal judge temporarily halted that move. Harvard didn't immediately respond to requests for comments about Trump's posts. So if you're, I don't know who you'd rather be, Tim Cook or Harvard. They're both in the crosshairs. Disney's remake of Lilo and Stitch topped the holiday weekend box office, believe it or not, bringing in an estimated$183 million in North American ticket sales. Paramount's Mission Impossible, the final reckoning, brought in$77.5 million in its debut weekend.

10:11The total domestic haul of$327 million set a record for Memorial Day weekend, according to Comscore. Which is interesting. Yeah. The three hours, you're saying, is interesting because... Well, three hours, because that's hard to do. No, but it was still... Few churns. That we're setting records with people going to theaters. So the demise of that experience was great. But is it because... Great for a business known as Fandango. But is it because the tickets are sold? Owned by a company called Spinco. Right. Versant. But is it ticket prices are high? Like unit sales, is it a record, do you think?

10:52Or, you know, things go up. Oh, right. Inflation adjusted. I don't know whether it's... But that's... I think they'll take it. people like Adam Aaron and AMC and things like that. Because I still like going. I still like, I can't believe Lilo. Kids' movies are important. They are. Cheese will be next. Still to come on Squawk Pod, we're talking the U.S. economy with Sunoco's board chair, Ray Washburn. American commerce runs on diesel. All our 18-wheelers run on diesel. If that softens, that's when you see that stores are buying less stuff in the Long Beach and need less trucks to truck it. So watching diesel sales is a real barometer of the economy.

11:29Washburn has a handle on consumers at the pump, in stores and at restaurants. And he says they're worried. We'll be right back.

11:41Welcome back to Squawk Pond. Up and enter. Q. You're watching Squawk Box right here on CNBC. I'm Andrew Ross Sorkin, along with Joe Kernan and Becky Quick. Joining us now to discuss real estate, energy, tariffs, the state of the consumer, and much more Ray Washburn, Vice Chairman of Gillen Capital, Gillen Property Group, Chairman of Sunoco, Member of Red Lobster's Board. Welcome. Thank you. Thanks for being here and on set. What's the Italian, no, it's Mexican, right? Mexican, Micosina. How many of those you got? 27. 27 of those. Board or Red Lobster at this point? How did that come about? Well, Red Lobster, as you know, went through bankruptcy after that$20 all-you-can-eat shrimp fiasco they had.

12:22So Fortress bought it, and Fortress asked me to go on the board. We do a lot of business. You're on the board for that. Chairman of Sunoco. That's right. So if we want to talk energy, you can explain what's happening. Yeah, we're the largest seller of refined products in the Americas now. And then you started initially what you bought the best mall in Dallas, didn't you? No, in the United States. In the United States. Okay. Wait a minute. Short Hills Mall is best in the United States. That's a mall. We're open air. Okay, you're open air. But you bought that, and then you bought how many more at this point?

12:52Well, we own Holland Park Village in Dallas, Country Club Plaza in Kansas City, which is over 15 city blocks. Phillips Place in Charlotte, North Carolina. We've got a block in downtown Aspen. And so we've got different things around the country. You don't go anywhere that it's not a great place, do you? No, I like to stay active. And, okay, let's talk. You've been active politically, actually. You were actually in the Trump administration. Yeah, yeah. No, I was the Senate confirmed. I was a CEO of the Overseas Private Investment Corporation. Which merged with? Well, now it's called the DFC, Development Finance.

13:26And it took part of USAID and part of the State Department. Well, you can comment on all the cuts there. I was the CEO when the Build Act went through. And so that was under my watch that that all happened. But you backed, I think you backed Romney. You backed Chris Christie. I was Chris Christie's finance chairman in 2016. Yeah, finance chairman. Right now, you would say you're a big backer of President Trump. Yes, I'm a very big backer, President Trump. Okay, so what do you make of the backdrop being in all these businesses with tariffs and the big, beautiful bill, Doge? How about all that? Give us a synopsis.

14:00Sure. Well, it's had us to really rethink a lot of our businesses in a good way. And I'll give you an example, Red Lobster. We used to source all of our shrimp from China, for example. We're the largest buyer of shrimp in the world. We've now shifted all that production in a fairly short period of time to India, Vietnam, the Texas Gulf Coast. And so that had us rethink our supply chain. So in that sense, that was a good thing. In Sunoco, on the energy side, the only way we're affected really is on steel prices for pipes and stuff. Because we have 15 ,000 stations in the Americas, and pretty much everything we have is produced here domestically.

14:37What do you think of this latest? Were you surprised, U.S. Steel and Nippon, if that goes through? No, I just saw that on your— Who got to the president? I think Dave McCormick got to him. Yeah. Senator. I want to go, though, on the show side real quick. Yeah, sure. So you're moving stuff to you said India and Vietnam. It's already moved. Already moved. Yeah. And the Texas Gulf Coast was planning to do that. And apparently that was not good enough. So do you think long term you're going to be OK? Well, we have to have the source. I mean, we don't have enough shrimp in Texas Gulf Coast to feed all our restaurants.

15:06What's that what's and what's that done to your margins thus far? And what do you think it will do long term? Long term, you've just got to squeeze margin out. You know, all of us have got parts of our business that 150 percent, of tariffs, obviously nothing works. You get down to 10, 8, 10 percent tariffs, you can find that in your businesses to squeeze out. What if it's 20 to 30 percent overall? It's a challenge. Yeah, for sure. It's a challenge. But, you know, the consumer at the end of the day isn't going to buy a, you know,$50 shrimp plate. So, I mean, the business will figure it out. I think President Trump sees that and is seeing slowly work their way through the system.

15:41He's going to understand what it takes to make the business work. Otherwise, we're not going to be selling much shrimp. That means you just find another alternative? No, I think it'll work itself out this summer. I think he's going to find compromise in a lot of ways. You know, the first thing he put out there was a big blanket deal. Now they're negotiating down the different parts of it. Do you see an eventual payback to the near-term pain that we felt maybe with the tariffs? Do you think it resets global trade in a positive way for the United States? Are you a believer? In a positive way? Yes, I think so.

16:12I think so. It brings so many. We have to rethink a lot of ways we do business, too. And I think the tariffs have forced that to a lot of us. For example, our restaurants, we source all of our to-go packaging, things people don't think about, bags, plastic wear, all those kind of things that you get are all from foreign places. And so those things have doubled, tripled, quadrupled in price. So we're having to find suppliers closer on inshoring. I think it's going to bring a lot of business. When I was running the Overseas Private Investment Corp., we financed a lot of companies in Central America, the Northern Triangle, Columbia, places like that.

16:45it's going to bring a lot much closer to the shores of the United States. Do you think we'll get it back here, here? I think we'll get some of it back here. A lot of it is so labor-intensive. It just, with our labor laws in this country, it's difficult to do anything. For example, our shrimp, a lot of it's hand-breaded. So you have a lot of people dipping. Right. And at minimum wages here, you just can't, it just doesn't work. So interesting. Yeah. It's so interesting. Hand-breading shrimp. Yeah. Right. No, no, but what do you do about that? I mean, do you think robots are ultimately going to be doing this for us?

17:14hand-breading shrimp? That's what I'm saying. I'm sure someone will figure that out. I don't know if Elon Musk is going to have his robots, you know, doing the shrimp. Right. Well, if they do, then we absolutely could bring them back here. You're from Dallas, and I know you know Kyle Bass. Yeah, he's a good friend. Good friend. China Hawk. You with China Hawk? We doing the right thing? How should we approach that? And should there be permanent high tariffs with China to decouple or to just... Well, we're able to move, again, a lot of production, a lot of things away from China. It just takes their...

17:43things are so cheap there. We should be doing that. Oh, absolutely. We should be doing that. Because of their designs on global... On global dominance that the Chinese seem to have. But other countries like India, you go throughout Africa. I mean, one thing I learned running overseas private investment corporation was so many pockets of labor in other parts of the world that it's been untapped. I mean, you go down to South America, to Brazil, Argentina, those countries. I mean, there's an incredible amount of labor. Ray, how did you think... we're trying to figure out why the market has been so resilient.

18:15If we hadn't had this sort of hiccup with tariffs and all the work, that some of the stuff's good. Deregulation is probably positive. The Biden economy, if you did back out some of the inflation and maybe it's pandemic related, maybe it was too much spending. But other than that, jobs market remained very strong. Wages were rising, except inflation rose too much. Are we going to go into a really positive of economic cycle, do you think, if we get beyond? Well, credit card debt, consumer debt is a big worry. I mean, it's at an all-time high. This is what we want to hear. So that's something. Yeah, credit card debt's an all-time.

18:48So in our, my three main businesses, call it retail, shopping centers, restaurants, and, you know, gasoline sales. What we're seeing across all three platforms, we'll start with gasoline. Gasoline right now, sales are soft compared to last year. Why? A Well, a number of things. One is refinery capacity is 90, 92 percent right now in the second quarter, high 80s. Well, they're pushing so much gasoline onto the market. The consumer has slowed down. They're driving. So all of a sudden we have too much supply on the market. So is that good or bad? Even with cheaper energy prices, gasoline hasn't been as cheap because refinery hasn't met the demand.

19:30The refineries are continuing to pump it out because we haven't had a major disruption in the refinery. There haven't been a hurricane, big fire, explosion, something like that. So the refinery business is all out right now, okay? None have gone down for big maintenance. And so that's putting a lot of supply into the system. Okay. Okay, A. B, the consumer is out there. A lot of them are just, they're scared right now. There's a lot of kind of stagnation going on. So I think a lot of people - What are they scared of? Tariffs? Just the headline news, listening to you guys. I mean, watching, reading the newspaper every day that there are job losses and things going on.

20:03They're scared of their jobs. So they're driving less. EVs have come into about 4 % of the market. 4%. And what do you think that goes to? You know, I don't know. The problem is a lot of people are kind of scared of EVs. And like, I rent one or I get one. Am I going to be able to charge it? And so I don't know where it is. If you have to drive farther than a couple hours. The thing is, we're one of the largest sellers of diesel. American Commerce runs on diesel. All our 18-wheelers run on diesel. There aren't electric diesel trucks. So that's good for your business. That's good for our business.

20:34So when you see distribution of goods around the country, that's got to be fueled by diesel. So that's strong for us right now. But if that softens, that's when you see that stores are buying less stuff in the Long Beach and need less trucks to truck it. So watching diesel sales is a real barometer of the economy. Right now, it's about equal to last year. It hasn't gone up, it hasn't gone down. It's just about soft. So I guess I would say, do you see any benefits yet to deregulation that President Trump promised? Well, we're also involved in community banks. And, you know, yeah, I've got to talk about them to that.

21:10Well, the community banks being, you know, banks kind of this sub 20 billion dollar size. I'm a large investor in that that space. The M &A activity has been almost zero for the last five years in that space. there needs to be a consolidation of our banks. We have too many banks in this country. And so you haven't been able to do it under the previous administration. But this could happen. This is in the future. That could happen. And so if that happens, that'll help, I think, get a lot of things churned because people forget community banks is really what drives this country, but they've got to be merged up and then new ones get started.

21:44And, you know, the local person, when you go out and run into your banker at lunch, you want to do a loan, it's difficult. A lot of times the big money center banks have any kind of relationship there. But community banks is the key. We've got to get that. But will that go away if you have mergers? No, no, you need, that's the healthy thing, because people only want to invest in banks that think they can sell them. And so you've got a community bank up, going, lets it bulk up, then you come along with another one. If you look at the history of community banking over the years, you'll see how that's actually really accretive to people doing business.

22:18Great, go back to the consumer's health and what you see both in retail and restaurants. Okay. So our shopping centers are mainly high-end. The high-end hasn't seen anything on it. I mean, we still have positive growth, high, low, you know, kind of 8%, 9 % type gains. I was just out at ICSC in Las Vegas for the shopping center convention. And ICSC, there are no new shopping centers being built in the United States. The last mall was built 20, 25 years ago in the United States. Okay. Everything is open air, if you look, is 100 % lease basically across the country. So what's coming in is cons, big lots, all those guys going bankrupt.

22:57Those spaces are all being repurposed. So there is a very aggressive push by retailers right now to grab space because there's a limited amount of space. To the consumer, the consumer wants a great experience when they go shop. So a lot of retailers, and I'll give Red Lobster as an example, it had been bought by private equity. And it kind of lost its way. They hadn't reinvested back into the concept in multiple years. Consumer floated away. this new group Fortress came in they're investing a tremendous amount in capex well they got to get by the brand back for the for the customer things like across three from here raising cane is packed well that's actually a fairly new concept the consumer wants excitement and the consumer will spin they're out there you go to any open-air shopping center walk around they're packed to people and they'll spin but they only go where they get the great experience you're not going to some strip mall outside of anywhere USA freeway they want the experience.