00:00 Speaker A
Rob, I want to start with you because a delay is not a cancellation. What are the next 90 days going to look like and where will they leave us?
00:10 Rob
Yeah, thank you very much. Glad to be on. I think that over the course of the next 90 days, of course, we’re going to see President Trump’s team really working very hard to hammer out trade deals, right? Because he’s now, I mean, as of, you know, yesterday morning, it felt as though he had lashed himself to this poll of, we are going to apply the tariffs that we set out last week. Now it feels as though he’s, he’s lashed himself to the, to the opposite pole, which is we are going to eventually get to these deals, right? This is a delay, uh, given what sounds like President Trump’s optimism that they will eventually be able to strike bilateral trade deals. Now, now, you know, especially with partners like Vietnam and Japan, I think that that’s relatively likely over the next 90 days, but with the EU and others, I mean, there are intractable disagreements that frankly, we, we see as being very, very hard to negotiate around or, or negotiate through, um, over the next 90 days.
02:02 Speaker A
And Rob, how are you advising clients in this moment? And how are you getting clarity on the end goal, on the objective of the president, just to get a sense of where his thinking may be heading moving forward?
02:15 Rob
Yeah, to be honest, we’re, we’re telling clients not to rely on a, uh, you know, a North Star when it comes to what does President Trump want from here, right? There are sects of the President Trump team who, who are committed to revenue raising. There are folks who are committed to, you know, decoupling from China, not only the US decoupling from China, but the global economy writ large decoupling from China. Um, and of course, that there’s probably a, a plurality of President Trump’s team who is really committed to bringing manufacturing back to the United States. Now, I, I think it’s important to say that in the short term, these are not, you know, necessarily opposing goals. You can kind of have your cake and eat it too. In the longer term, that, that’s probably not true. So to this point, it doesn’t seem like President Trump himself is, you know, operating with a singular goal in North Star. So what we’re telling clients is, you know, understand all of these desires and all of this momentum in each direction, um, but don’t rely on one as a, a simple or a singular justification for what we’re going to get from here.
04:02 Speaker B
You mentioned a global decoupling from China. Do you think there’s the possibility that the president is likely to try to get other countries to impose tariffs as well? And what might that look like?
04:18 Rob
Well, I think that if, if not tariffs, right? I think that President Trump, part of the negotiation is going to be, we are uncomfortable with, with the extent to which China is operating in, you know, X country’s economy. So as an example, uh, President Trump applied or, you know, over the course of the past week has threatened to apply, and yesterday applied, and then quickly rolled off, um, a very high tariff on Vietnam. Right? And, and, and we’ve heard from President Trump’s team that Vietnam may be first in line when it comes to having come to the president and saying, we are ready and willing to negotiate. I think one of those negotiating points could be, I, President Trump, I’m concerned about China’s FDI into Vietnam. We’d like for you, Vietnam, to sort of limit that FDI, to pull that relationship back. We want your economic and trade relationships to be driven primarily by US interests and not by Chinese interests. And of course, you know, if you’re sitting on the Vietnamese side of the table, that’s going to be a very difficult pivot to pull off if they want to pull it off at all.
06:03 Speaker A
Eric, I thank you for your patience while we were getting some of our policy on with Rob here. Just talk to me about how you are viewing the economic impact of this 125% tariff on China. How are you thinking through the impact that could have on the American consumer on American companies?
06:27 Eric
I think Stephanie is right. It doesn’t matter if it’s 125%, 225%, 2025%. We’re at a point now where essentially there will be no goods coming in from China. And that is a dramatic change to the economic alignment. If you think back to the post-pandemic period and the challenges that we had in rebooting supply chains, trying to recalibrate supply chains again without China involvement at all, I, I think is a Herculean effort that many companies will have to go through, even if in some cases it’s something they might have thought about previously. And then to Rob’s point, you know, part of the answer in 2018 when the first round of tariffs was imposed was to reshore and to have Chinese content come through countries like Vietnam. If that’s not going to be possible, the challenge gets even greater. So we look at this and think that it does have a significant impact on the American economy, um, and a significant impact on consumers. We’re going to face shortages of goods that currently come only from China. And that’s going to be an issue that we have to deal with.
08:16 Speaker A
Eric, how do you think about the timing here in the sense that there’s been so much uncertainty? How are companies going to decide to shift their supply chain? Are they just going to do it immediately because we don’t really know how long these 100% plus tariffs are going to be on China, in which case it just makes sense to move out of China regardless.
08:41 Eric
I mean, I think where you have the capability to do things in more than one location, you’ll choose the non-Chinese location for a period of time. But I think it’s premature to assume that companies will make durable investments based on a policy environment that has swung dramatically over the course of seven days, and to say nothing of the changes we’ve seen over the last three months. You know, a big part of what we believe to be the objective of the current administration’s policy is to boost investment in the US economy. I can’t see that happening in the near term simply because the uncertainty is too high. And I think that the, the back and forth over the last week has damaged policymaking credibility significantly and made delay that sort of investment still further. You know, if I were a company, and you can think about the automakers here, many of them do have some spare capacity and the ability to run their production lines in the US at greater, at greater levels. And I have no doubt they’ll do that. But are you really going to rebuild a factory from somewhere else in the US based on a policy that could change at the drop of a hat? The lack of reliability, the lack of a process orientation, and the lack, as Rob said, of a clear end goal here means that it argues for conservatism and conservatism argues for slower growth.