00:00You know, one of the arguments is that the realities of the midterms, the reality of market reactions will govern how the administration moves forward implementing different tariffs or even sticking by the ones they've already announced.
00:13And yet there's not, there hasn't been a steady and clear line about where the final shoe will drop.
00:21Do you envision after the midterms a revisiting of the tariff regimes that were put in or talked about publicly earlier this year?
00:30Or do you think the administration will stay committed towards a reset?
00:33As I said, I think it's a permanent fixture of the approach.
00:36And I think the notion of having bilateral tariff ability to navigate those relationships is the way that they want to conduct foreign policy.
00:46I don't see that changing post the midterms.
00:49To your earlier question, you know, you can see the uncertainty in the economy.
00:53You can see the uncertainty among companies navigating it better and worse depending on their positioning.
00:58If you look at earnings, you know, certain companies have much more impact, other companies less so.
01:03Certain companies have an ability to pass it on, other companies less so.
01:07We believe that much of the absorption of tariffs has actually been in the value chain in the company margin and hasn't been passed on.
01:15Right.
01:15So we would tend to expect more inflation on the forward because I think you're going to start to see companies pass on more of the absorption that they've already dealt with in their margin structure.
01:27That's not sustainable over time.
01:29That will be somewhat balanced by the fact that I think the effective tariff rate is coming down.
01:33So if the effective tariff rate is plus minus 20 percent in the early part of the strategy, my guess is it's migrating down towards the mid-teens or even lower depending on how these exclusions work and, you know, what they decide to do vis-a-vis USMCA and the like.
01:47So I expect it to start coming down while prices are rising and more pass-through is happening.
01:51And where those lines cross and where inflation, you know, comes out is going to be a very important indicator.
01:56But I think our view is inflation will remain sticky.
02:00So you don't see inflation spiking in the first and second quarter of 20 seconds?
02:04I don't know that it will spike.
02:05I think there's a lot of cross currents.
02:07You've got wage, you know, you've got labor pressure, I think.
02:10I think 26 is the year where you'll see more layoffs.
02:14And so I think you'll see corporate America start to work on their headcount.
02:17And that will bring down, I think, you know, labor, labor supply in many respects, which has an impact on taking wage pressure down.
02:26So that's a that's a counterbalance to inflationary pressure.
02:30But then you do have tariffs that are more inflationary.
02:34And so, you know, where that's where that falls out is very hard to know.
02:37Our economists have their own views.
02:38You know, the market is obviously trying to figure that out.
02:41That's a huge volatility measure in the marketplace right now.
02:44But I'd say generally speaking, from our vantage point, feels like we're going to have more sticky inflationary pressure.
02:49And it's going to be very hard to bring the level of inflation down materially from here.
02:52But I don't see why it would spike necessarily.
02:55I don't see the inputs being a spike.
02:57I think it's just more kind of hard to bring it down from here.
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