00:00We're always trying to game out what it is, what the U.S. wants.
00:03I think our trading partners are certainly trying to do that.
00:06And the rationale feels like it keeps changing.
00:08And I want to get your take here.
00:10It changes from a forceful way to bring manufacturing back home to the U.S.
00:14There's also a way to reshape the global trading order, the one that's been in place since the end of World War II.
00:21And then there's also generating income to pay for the extension of tax cuts.
00:25How much does the answer actually matter to investors as long as uncertainty gets up, gets cleared up for a certain period of time?
00:33Well, exactly.
00:36And uncertainty, I think, has cleared up substantially as a result of, I would say, Trump's pivot.
00:43No one believed that the rate on China would be down 30 percent.
00:48If you remember the weekend before, he said 50 sounds good.
00:51Then he said 80 percent sounds good.
00:53And here we are at 30 and, you know, China going down to 10.
00:58I think we know the regime now.
01:00I think I do not think the reciprocal tariffs are going to go back on any country that is even engaged in trade negotiations with the United States.
01:12And I don't think we're going up on China either because they're going to be continually engaged in trade negotiations.
01:19And so basically where we are today with some minor changes, I know, is where we're going to be.
01:26And so that clarity of circumstances is a big plus for the economy and for the markets.
01:34Now, listen, it's still the highest tariff in 85 years.
01:38It still averages, you know, 16 or 17 percent, which is certainly a lot higher than it used to be.
01:46But the fact that it's at a level that I think is manageable, a level that a lot of firms can now see what kind of adjustments they need to make in order to deal with it.
01:59Yeah, no, well put. And that is definitely the sequence of things that happen.
02:03But I guess this pattern that the president has demonstrated of declaring victories for solving situations that he himself created.
02:12At what point do investors look past this?
02:14Because right now, you know, you see markets celebrating the truce between China and the U.S.
02:19But as you noted, the tariffs are still higher than they were before we began this whole thing.
02:24You're right. Well, and we're still not at that, you know, the the all time highs, although certainly we've gotten a lot of quotes to this.
02:32And everyone knew. I mean, you know, I mean, Trump will make, you know, lemonade out of any lemons, as the expression goes.
02:40I mean, you know, he'll he'll call any deal a victory that, you know, the truth of the matter is very little manufacturing jobs are going to be brought back.
02:52I mean, you know, compared to, you know, the total number of jobs in the United States or certainly anything that we we used to have years ago.
02:59I mean, the world has changed everywhere on that.
03:02I mean, listen, we like the Boeing orders with a few of the other things that are going to go on.
03:07But, you know, that's that's not going to be the main thing.
03:10Now, it is going to bring in some some revenue.
03:13It's like a sales tax in a way on imported goods, you know, and a lot of economists actually say we should probably work towards more of a sales tax or what we call a value added tax and away from the an income tax,
03:30which is something that, you know, Trump is also talking about moving away from an income tax.
03:35So but, you know, it was done in a very disruptive way and uncertain way.
03:42I mean, certainly the markets didn't like it.
03:45Let's hope we're, you know, moving.
03:48And I think we are towards a period of much calmer policymaking by the Trump administration.
03:55Yeah.
03:55It feels like the market has really raced from an oversold condition to an overbought condition.
04:00You can even say in record time.
04:03Where do we sit right now, Professor?
04:05Well, we certainly have.
04:07I mean, you know, with the VIX under 20, you know, a lot of all that uncertainty and put buying, as I say, option buying in order to predict it,
04:16it really kind of disappeared because all those shorts, boy, they were forced to cover.
04:22And, you know, many of them did.
04:24So I would certainly agree with you.
04:26I think in the short run, we do have an overbought situation like we had an oversold situation the second week of April.
04:33So it's going to settle down, and we know we're going to take a GDP hit this year.
04:38I mean, you know, at the beginning of the year, we're looking at 2%, and now, you know, even Goldman Sachs and others have raised theirs from, you know, near zero half now to one,
04:49and with a little bit more inflation than what we certainly have because those tariffs are still going to, you know, impact the price of many of those imported goods.
05:01Very quickly here, what point does the tax bill start to move the stock market?
05:04Because you could make the argument that bits and pieces of it are worrying the bond market with yields moving higher today.
05:12Well, you know, it's pretty much as expected, you know, honestly, at the, you know, from the beginning of the year, you're right, yields, you know, crossed on the 450 side today.
05:27But I think part of it is a little bit of improvement on the economy and a little bit of, you know, treasury bonds are often, you know, the risk-off measure.
05:36And now that people are calmer about the stock market, a lot of them are not as anxious to buy the bond.
05:42So it's not just the deficit.
05:44And I want you to remember, you know, and I'm for making a lot of the tax cuts permanent, but the truth of the matter is a lot of these changes were pretty much anticipated, you know, when Trump got elected.
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