April 8, 2025 • 40 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Another volatile day on Wall Street pushed the S&P 500 Index back to the brink of a bear market as the Trump administration doubled down on its plans to enact hefty tariffs that threaten to send the American economy into a recession.
The S&P 500 fell 1.6% in a fourth straight session that has seen moves of at least 4% from peak to trough. The index powered higher by as much as 4% in early trading on optimism that President Donald Trump would negotiate lower rates on key allies.
Meanwhile President Trump’s tariffs are rattling US consumers, who are stocking up on everything from cars to olive oil and iPhones. The behavior offers some good news for businesses that are rushing to figure out how to respond to the upheaval caused by Trump’s global trade war.
Today's show features:
- Vincent Cignarella, Bloomberg Markets Live Macro Strategy
- Wendy Schiller, professor of political science at Brown University
- Swamy Kotagiri, Magna International Chief Executive Officer
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Just looking at the major industry groups in the S
and P five hundred today, there are eleven your best
performing group financials, but they were still down about four
tenths of a percent. Bottom of the pack. Energy was
down about two and a half percent. Real Estate was
down about two and a half percent, Consumer discretionary down
about two and a half percent, Materials down almost three percent.
All eleven of the main industry groups are down today.
(00:52):
Let's see what Vince Cignerella makes of the trade that
we've seen not only today but since the tariffs were imposed. Vince,
of course, is Bloomberg Macros strategist joining us. So, Vince,
it looked like we were going to have we did
have a rally, and it looked like maybe it would hold,
and then.
Speaker 4 (01:08):
That was not to be the case is it looks.
Speaker 3 (01:10):
Like trade tariffs and talk about that between the US
and China flared up again. Talked to us about the
trade today and what was significant for you.
Speaker 5 (01:21):
Well, I mean the tariff is the you know again,
the tariffs are the word tariff is the trade. You know,
there was a little bit of excitement this morning when
Trump was announcing potential deals with South Korea and Japan,
and that Italy's Maloney was coming in a couple of
weeks to discuss trade. So things were looking on the up.
(01:42):
And then the reinforcement that China tariffs was still with
US and we're going to hit it about one hundred
and four percent tonight. That was confirmed or reconfirmed, i
should say. And the reality what we heard from Trump
this morning was, you know, China wants to do a deal.
They don't know how to contact us, you know, I
(02:02):
mean they went to the wto this morning complaining of
Ouz Harris. So that that's hardly that's hardly a country
looking to do a deal with the US. And it's
really unlikely that President she is going to be knocking
on the White House door with hat in hand looking
to do a trade with Trump. So this is going
to be extended for a while, I think.
Speaker 6 (02:21):
And that's extended in what says like, we know the
fight's going to be extended, but the carnage that we're
seeing if your long equities, how long is that going
to be extended? What turns that around? I mean stocks
have been in free fall in the last four days.
Speaker 5 (02:37):
Yeah, it's a really really good question. Talking to traders today,
we're definitely seeing some folks stepping in at the clothes,
getting their toes in the water. The extension that possibly
that people are talking about is forty five hundred in
the SMP cash. We're still about four hundred away from that.
But you know, there's going to be a lot of
give and take, and even if that happens, we're is
(03:00):
just a lot of talk and I don't want to
really go into this too much because it's just a
lot of scuttle but on the street about if things
continue like this, will the Trump administration look for a scapegoat?
Will it be will it be Lutnik? Will it be
the Varro? And traders today are putting more bets on
the Varrol than Ludnik.
Speaker 6 (03:18):
So what would what would that do to markets? If
if Navarro got the booth, and look again, you're saying
this is scuttle. You're saying this is scuttle, but.
Speaker 5 (03:25):
It's totally rumored, just totally conversation on this.
Speaker 6 (03:28):
But there's it.
Speaker 5 (03:28):
But would that actually o fact to this whatsoever? But
if Navarro would get the booth tomorrow, you probably see
about a two thousand point rally in out.
Speaker 3 (03:37):
To be honest, well, you know, it's so funny that
you say that, because we were talking with our Max
Chafkin about some of the back and forth between Elon
musk Uh and Peter Navarro, and you know what, there's
been some speculation again rumor careful, let's be smart here,
but that, yes, but that the president, you know, looking
for an off ramp, and I guess we just assumed
(03:59):
it would be in deal with countries. But you do
wonder if he is looking for some individual to say, listen,
that was his plan. Maybe it was wrong. Let's get him,
you know, let him go, and let's let's let's redo this.
But again, who knows?
Speaker 5 (04:13):
Right, Yeah, I mean I think the I think what
you said, the former part of that is really where
it's going to come from. You're going to see deals
getting done okay, And I think the administration is going
to be touting more of the deals getting done in
the next couple of weeks as opposed to the deals
not getting done as in visa vich China, And I
think we're going to start to see a little bit
(04:35):
more positive comments come out of the White House to
turn this little bit. Don't forget. We've even seen the
Republicans pushing back against Trump where they tried booking the
Senate and some in the House trying to basically impose
a bill that basically says Trump has to go through
the Senate in the House in order to impost harffs
it's dead on arrival. It's nice, it's it's not going
to absolutely so, it's it's the OA, it's not going anywhere.
(04:58):
But just the idea that they would even consider that,
and that his own party is pushing back is definitely
going to have some conversation going on in the White House.
And I think it's very very interesting that in the
last twenty four maybe even forty eight hours, we haven't
heard a peep at a Ludnik and he's been the
real bull in the China shop, if you will. In
(05:19):
the same camp As Navarro talking really tough on trade.
Speaker 6 (05:22):
Okay, so maybe that's the case. Who we have heard
a lot from his Treasury secretary Scott Bessett. What do
you make of that. He's been out each and every day.
Speaker 5 (05:31):
Yeah, you know, he's not going to go against Trump,
but he is again in terms of what the market
sees is a voice or reason, so he's more likely
to put a positive spin on things than a negative
spin on things. Remember like the rumors yesterday what has
it where he said Trump was going to consider a
ninety day pause. That headline was complete fiction. Came out
(05:53):
of a conversation on Fox, which was an elaboration on
a very very on very some thing has to said
that I really had nothing to do with a pause,
And you saw the market react like surging on that news.
They're desperately looking for good news to buy into this.
People do have cash, they do want to get into this,
(06:13):
But you just don't want to step in front of
the steamroller right now because it's still it's still coming.
As we saw today, although like think about like in
the last fifteen minutes, the Dow was down over eight hundred,
down three twenty into the close, so there's still a
lot of possibility for this to turn around that I
would just be really careful if you want to dip
(06:34):
your toes in a little bit. It's not a bad idea, yeah,
but definitely don't be sticking your head through the door.
Speaker 6 (06:40):
Vince, Vince, it's you know, I want to go back
to this idea that you know, if we saw a
head roll, if you you you say, if you see
a head roll, we could see a Look. We kind
of saw this yesterday with this ninety day reprieve. You know,
read all about it on the terminal. Great stories from
Bailey Lipschulten more about what happened yesterday. Carol, you were out,
(07:03):
but it was crazy, Yeah.
Speaker 3 (07:04):
I believe it or not.
Speaker 6 (07:06):
You've paid attention occasionally.
Speaker 3 (07:07):
I was like reading it because I hate you can't I.
Speaker 6 (07:12):
Was. But Vince, if we were to see a head roll,
that doesn't necessarily mean that Trump would back off this policy,
he told our editor in chief John Mikelswade before the election.
Tariff is his favorite word in the English language.
Speaker 5 (07:28):
I remember that conversation very very well. See what I
think what people really need to understand is and forget
about the short term view oh, the markets are going down.
Trump's going to change his mind. This, that, and the
other thing. He really really is an attempting to rewrite
economic policy for the United States for the last forty years.
He wants to bring us back before globalization, before the
(07:52):
Clinton globalization years, more towards that nineteen eighty eight, Reagan,
nineteen ninety two, George Bush kind of concept. Are trying
to bring, you know, manufacturing back to the United States.
The only way he's going to do that is to
somehow undermine and cripple the manufacturing state of China. And
the only way to do that is to outlast them.
(08:13):
You know, we can't outspend them. We have a thirty
six in building a trillion dollar deficit. This isn't This
isn't Reagan against against Russia in the eighties where he
outspent Russia and sort of won that war, if you will.
Speaker 3 (08:27):
But to be fair, to be fair, Vince, you know,
this is something we talked about Tom Morlock earlier. I mean,
we have what a one point two trillion dollar trade
deficit with China, and I mean that's real money, right,
And the whole reason that American companies wanted to be
in China and they set up shop there and so
on and so forth. Is they wanted to tap into
the one billion plus consumers of China and it hasn't
(08:49):
necessarily worked out as well as some might have anticipated.
And so this is about I feel like, or is
it about us and China or China kind of playing
more in a way in terms of trade back and forth.
Speaker 5 (09:05):
You know, I think so if you realistically, if you
look at globalization, the idea of globalization was we were
going to float all boats. So we in the United States,
for instance, and the developed countries I shouldn't say just
the United States. We were going to invest in underdeveloped
countries and such. We were going to lift up their
(09:25):
economies and then they were going to buy our goods, right,
and all boats were going to float and everyone was
going to prosper. Well, that didn't happen. If you look
at globalization in and of itself, it was a failed policy.
What happened was the developed countries spent a lot of
money into underdeveloped countries and they didn't buy anything of ours.
We just bought a lot of their cheaper stuff, and
that created deficits across the developed nations. Mostly of course,
(09:49):
in the United States because our consumers spend more than
anyone else in the world. And so what Trump is
trying to do is recalibrate that. And you know, you
can't fix it all in one day, but bring it
back a little closer to the middle where essentially we
get some meeting of the ways where they get a
little bit I get that balance and trade.
Speaker 6 (10:10):
Yeah, maybe you can look, maybe you can get Japan
to buy more US autos because we buy so many
autos from Japan that for example. But is there a
way in your view to actually go back in time,
because I think the ship has sailed the genies out
of the bottle. That seems to be like, this is
not a world of forty years ago. This is a
(10:30):
world where you know, we're we're using WhatsApp to connect
with people all over the world right now on devices
that are made with components that include Africa, Asia, Europe,
the United States. Like, this is a different world that
we live in. We're not making clothes in the US
that we wear like, this is a completely different world.
Speaker 5 (10:52):
Yes, and we're we're not going to be making We're
not going to be making textiles, you know, cheap textiles
and United States. I think realistically, the manufacturing he wants
to bring back to the United States is a bit
more high end. Where he's talking about guatos, for instance, chips,
you know, things of that nature. We're not we're not
(11:12):
talking about we're not talking about making sweaters and socks
in the United States. It's more on the high end
stuff and setting and setting perhaps in the high end
of things, a more level playing field, you know, as
opposed to as opposed to what happens now. And you know, look, yeah,
to think of it realistically, all of the rhetoricrat they
(11:33):
are saying tariffs are bad, tariffs are bad, tariffs are bad. Well,
if they're so bad, why do so many other countries
have them? To some extent, it's definitely benefiting a lot
of other countries. And I think that is what he's
trying to do, just to get a little bit of
a fairer trade situation. Right as you mentioned it, we're
not going back to the nineteen eighties. We're not going
to you know, steel mills are now. There's going to
(11:53):
be propped up all over this country tomorrow.
Speaker 4 (11:56):
But we haven't gone back to smooth Holly. I'm just
going to say.
Speaker 3 (11:59):
Going back further, I know, love it, love it, just
for those on radio.
Speaker 4 (12:03):
Vince actually like rolled his eyes on that.
Speaker 3 (12:05):
Having said that, Vince, I want to go back.
Speaker 4 (12:07):
I want to go back to the market.
Speaker 3 (12:09):
You know, we technically intraday saw a twenty percent correction
on the S and P five hundred and so technically
hitting a bear market.
Speaker 4 (12:18):
We bounced back off of it.
Speaker 3 (12:19):
Is that significant that we didn't close there?
Speaker 5 (12:24):
I think we need to see how we do overnight
and have China markets where the Asian markets react overnight.
I mean, we could easily see us testing to get
in tomorrow into the US session, depending upon the rhetoric.
I mean, you know, how is China going to push
back tonight? We don't know, We don't We don't know
what kind of comments we're going to get from she
or or or other trade ministers from China. You know,
(12:48):
we we've we've pushed them pretty hard, you know, and
to expect them again to come to the table is naive.
Speaker 3 (12:55):
I think, what's the what's the commentary that you're finding
as you you you know, talk with traders throughout the day.
I mean, yes, it's a lot of selling. Yes, the
markets have functioned well For those of us who are
here during the Great Financial Crisis, it was crazy and
you really felt like I mean, I just remember thinking,
oh my god, the financial market system.
Speaker 6 (13:17):
It doesn't feel like that to you now though it doesn't.
Speaker 3 (13:20):
I mean, I think everybody clearly understands why the market
is selling off. There is a clear catalyst, and.
Speaker 6 (13:27):
We call it self self inflicted.
Speaker 3 (13:30):
Yeah, and so exactly. So I how do you what
do people say about the market selling about this and
when does it become something much more problematic than an
understanding that it's coming from the White House directly.
Speaker 5 (13:45):
Well, you know, I think the endgame, I mean, obviously
the administration's endgame, but I think everybody would kind of
think the same. If you look at this in the
more medium to long term, this will pass, as as
if you think about the financial crisis that you made,
you passed. I can remember the crash in the late eighties,
looking over my shoulder and every time I looked over
(14:05):
at the Tiller eight, which was back then, and see
whether the dob was going going, oh my god, we're
still going down. Yeah, you know, the the the sell
off of this magnitude, I think it's it's different in
the sense that it's all happening in kind of one week,
and then not just the sell off, but the volatility.
(14:27):
We're down, we're up, We're down, we're up. It kind
of reminds me of training currencies back in the eighties.
This is a kind of volatility that we saw in
currency markets forty five years ago. You don't really see
it in equity market so much so it's it's unusual,
and it's and it's different, and I think a lot
of folks in equities are just not accustomed to this.
Uh And I don't think any traders are really accustomed
(14:49):
to this. Since we've gone electronic, we haven't had it.
Will this kind of evolve?
Speaker 6 (14:53):
Vince? Is there is there is there a technical signal
that you can glean from stocks starting higher, then losing
that momentum, and then finishing decidedly in the red.
Speaker 5 (15:08):
Well, you know, you look at this, and you look
at you know, these are ugly tapes. I mean, without question,
you don't like to see this kind of price action
where you where you start out high in the morning
and you have this positive euphoria and then the sort
of puke into the into the afternoon.
Speaker 6 (15:23):
That's a technical term right, yeah, definitely.
Speaker 5 (15:26):
Technically right into the close, but there was I will
say there was a positive to the close. I mean
we were down about eight hundred and fifty points. I
think in the now we closed down around three twenty,
So there was definitely there was definitely some capitulation, some buying.
We're starting on just glancing over futures is still trading
abower as we head into the last hour before the
(15:48):
break at five o'clock, So we are seeing a little
bit of a sell off in future and it's not terrible,
it's not aggressive. You know, we have inflation numbers coming
on Thursday and Friday, sentiment numbers coming on Friday, and
we start the earning season with banks on Friday. So
my guess is the earnings bar is probably going to
be set pretty low for next week and for the
(16:09):
banks on Friday. So there is a very good chance
we get some good numbers. And if the tariff conversation
just quiets a little and we get some positive earnings
next week and a good week of earnings, we could
easily see this rebound dramatically.
Speaker 3 (16:23):
Well, listen around the markets. We went with you, thank you,
thank you, thank you. Vince Signorellacome macro strategists joining us
here on this Tuesday.
Speaker 1 (16:32):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five e's during listen
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Speaker 6 (16:47):
From Wall Street to Capitol Hill. Because politically, this trade
war is creating divisions in the Republican net Party, Republican
senators expressed anxiety over the potential economic toll of Donald
Trump's global tariffs and pressed his trade representative from more
clarity on the President's objectives in the trade conflict. Check
Out what Tom Tillis of North Carolina said today, quote
Who's throat? Do I get to choke? If this turns
(17:10):
out to be wrong? This was as US Trade Representative
Jameson Greer testified before the Senate Finance Committee. You got
Ted Cruz extending his critique of the tariffs, and then
carry you got to note Elon Musk, the billionaire presidential
advisor he attacked White House Trade Counselor Pete Navarro is
dumber than a sack of bricks over this fight. This
terriff regime's spilling onto social media.
Speaker 3 (17:32):
Today, we want to ask what Wendy Schiller thinks and
makes of all of this. She's professor of political science
at Brown University, joining us from Providence, Rhode Island. Professor Shiller,
great to have you back with us. It does feel
like some Republicans are getting a little uncomfortable with some
of the President's policies.
Speaker 4 (17:47):
How do you read it?
Speaker 7 (17:48):
Well, good after Carol and Tim. I think this is
going to be an interesting sort of power play within
the Republican Party and it will spill over to the
tax cut bill because the only leverage that the Republicans
Senators have even Visa VI the House Republicans and President
Trump is the tax bill, which President Trump really really
wants as an accomplishment, particularly for this year. So, you know,
(18:11):
if they're not getting the answers they want, if they're
getting if they want to protect particular industries in their states,
even at the most local level, big businesses that are
suffering from these tariffs or will suffer from the tariffs,
they're going to have to play hardball with the President's
most preferred legislative package, and that's the tax cuts. So
you're going to start to see behind the scenes, but
also maybe publicly. Ran Paul's been pretty out there from
(18:34):
Kentucky saying he's not happy about this either. And I
think that's what's beginning to disrupt the inter chamber negotiations
on the tax bill.
Speaker 6 (18:42):
Bet in the House, in the Senate, how much power
do these members of Congress actually have because the Resident
has shown he is not afraid to support primarying some
of these folks if they don't get behind his agenda.
Speaker 7 (18:56):
Yeah, you know, his Trump's success record in primaries in
the in the Senate level, at the cement level is
not all that great. His success is a little bit
better on the House side, but not really on the
Senate side. And you mentioned Tom Tillis who's running for
reelection in North Carolina, Joony Ertz running for re election
in Iowa, just to name a few.
Speaker 3 (19:13):
And so those seats.
Speaker 7 (19:15):
Particularly North Carolina, could be heavily contested. You know, let's
say the former governor where Cooper wants to run. That's
gonna be a problem for Tom Tillis. So they've got
to show some returns. What is the endgame on the
tariff fights? What does he expect to accomplish? The President Trump,
As you say in your prior conversations, you're not bringing
textile manufacturing back to North Carolina. You have had a
(19:37):
resurgence on a micro level of some companies making things
in North Carolina.
Speaker 6 (19:42):
That's ouriasonal stuff. I think people would say.
Speaker 7 (19:44):
Truly, well, you know no, I mean my understanding. I
think there's a couple of companies that's taking over factories
and done pretty well. But you know what is Tom
Till's gonna say uh to North Carolina when things really
become more expensive or inflation goes up and the Tower
sort to blame unless Trump pulls the plug on the
tariffs before those contemplationary pressures can really exert their will.
Speaker 3 (20:06):
Wendy, what do you think is the endgame? I mean
President Trump has talked about terriffs for a long, long, long,
long time, right. This has been part of his playbook,
and he didn't get to do as much as I
think it's safe to say that he hoped to do,
maybe the first time around, doing something a lot more
aggressively this time around. He likes tariffs, he said that,
But I do wonder too. I agree with you, what
(20:28):
is the endgame? Is it to get Europe? To spend
more on defense. Is it energy policy? Is it access
for us to critical minerals?
Speaker 4 (20:35):
Like?
Speaker 3 (20:36):
What is it? Do we really understand what.
Speaker 4 (20:39):
The endgame is with all of this yet?
Speaker 7 (20:41):
It's just unclear from the current public conversations that are
leaking or being leaked on social media or even just
playing out on social media what the team of advisors
agrees on the endgame.
Speaker 3 (20:53):
Whether Trump is willing to even.
Speaker 7 (20:55):
Think about an endgame. But what he'd like to do
is probably go to a plant that was abandoned or
shut down temporarily a couple of years ago and see
it reopened. I mean, the only way you're going to
convince the American people that paying more for all these
goods or small businesses that might have to lay off people,
is that you have succeeded in creating jobs or bringing
real jobs back. And that isn't happening quite yet. And
(21:17):
that was the problem in the first administration. Very hard
to do. He could not even prevent plants from closing
down and going to Mexico.
Speaker 3 (21:24):
Is there that know?
Speaker 7 (21:25):
NATO defense spending will make some people happy, but the
average American I don't think it is going to care
very much about that.
Speaker 3 (21:29):
To be fair. Is there's something though in the President's fight, right,
We've talked with you about the gaps right within our society,
that there's a bunch of people who feel like nobody
is representing them. They can't get ahead, they can't buy
a house, they can't get a good job. I was reading,
I think this morning about people who are making forty
to fifty thousand dollars here in New York, and yet
(21:50):
they go home to shelters because they can't afford to
live in an apartment. So there's something wrong, some disconnects.
So is there something to what the president is doing,
whether it's with China in terms of leveling the playing
feel about access to markets?
Speaker 7 (22:04):
Well, access to markets is fun by the United States.
You have a combination of a lot of regulation which
makes making things more expensive. You have, you know, some
we have weaker private sector unions than most of Europe does.
For sure, we have some pretty strong public sector unions.
So you'd have to sort of weaken the private sector unions, right,
I mean, you'd have to do something like that to
make it less expensive. He's going to eliminate a lot
(22:27):
of regulation, which will make everybody happier. And that will
mean slightly less environmental protection. There are trade offs for
everything we're doing, but it is more expensive to manufacture
goods here, I think for lots of reasons some people
might like and dislike. So you have to dismantle that system.
But if you're also dismantling healthcare and education, we're not
going to stay competitive with the countries that are investing
(22:48):
in those areas. So, you know, the Traudminstration has to
have a holistic approach to this, and right now, I'm
not sure we're seeing the things coming together working in
the same direction as much as we might like.
Speaker 6 (22:59):
When it comes to a goociations directly with China and
near view Wendy, how much leverage does the US have, Well.
Speaker 7 (23:06):
You know, we have an awful lot of manufacturing in China.
The farmers themselves, you know, they export lots to China.
We are very dependent on China. There's also intellectual property.
We haven't even heard about that from Donald Trump, you know,
intellectual property theft, that was the big theme in his
first administration.
Speaker 3 (23:22):
What's he going to do about that?
Speaker 7 (23:24):
You know, I think it's a very difficult relationship to
extricate from. But if Trump can get some manufacturing back,
or at least, you know, make corporations reopen or build
plants here, do something like that. Then it shows the
Republican Party that this is a policy that could benefit
them politically, which moves them closer to Trump, not further away,
(23:44):
but that's a couple of years away. And the House
elections in twenty six just seemed closer and closer every
single day.
Speaker 4 (23:50):
How do you think about this era?
Speaker 3 (23:53):
It's still being written as we speak. We just got
about thirty seconds. How are you you're teaching your like,
how are you thinking about this?
Speaker 7 (23:59):
Just quickly, forget everything that I've been teaching for very
long time. Forget everything you've thought about strategy and motivation
on the president by the president and his team. This
is a new day, a new a new way of
doing things. He's disrupting and we're all going to have
to be very flexible and be able to pivot. But also,
you know, local politics, you know that's the thing. When
(24:21):
does the House report? Can party break from President Trump?
Speaker 1 (24:24):
If ever, you're listening to the Bloomberg Business Week podcast,
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Speaker 6 (24:41):
Hey, it is time for another edition of Bloomberg Plugged In.
It's your weekly look at evs, and we are watching
the auto sector closely. Giving that a twenty five percent
tariff on US auto imports took effect last Thursday. Well,
levy on parts is slated to begin no later than
May third. The measures are expected to dramatically increase costs
and up end supply chain. So let's talk to one
of those suppliers who smack dab in the middle of
(25:03):
all of this. Magna International is a Canadian a based
autoparts and auto tech company. They create components so think
car electronics, drive trains, vision systems, powertrain systems and more
for some of the biggest car companies in the world
GM for It's Delantes and more. The company is more
than one hundred and seventy thousand employees across twenty eight countries,
and by sales, it's the biggest automotive supplier in North America.
(25:25):
I've got a market cap of close to nine billion dollars,
though its stock is down about twenty five percent so
far this year. Swami Kodaghary is a CEO of Magna International.
He joins us this afternoon from Troy, Michigan. Swami, thanks
for joining us. I know you have been extremely busy,
so we certainly appreciate it. How are you and the
auto manufacturers that you work with managing these tariff costs?
Speaker 7 (25:49):
Hi?
Speaker 8 (25:49):
Tim, good afternon Thanks for having me. And you know
we are right really focused on control the controllable, and
things seem to be changing on everyday basis. Open the
playbooks that we've had during the rotating UW strikes or
COVID or two thousand and eight financial crisis, or the
chip crisis, and you put them all together. I think
(26:10):
that's what we seem to be having right now.
Speaker 6 (26:13):
What a way to put that. So, the financial crisis
saw car many some car companies declare bankruptcy.
Speaker 3 (26:21):
Right exactly, you're saying it's as bad as that, and
then some.
Speaker 8 (26:25):
Yeah, I think I think the important part Carol here
is look. Part of it is looking at tariffs of
importing vehicles cross border. Okay, the OEMs are the importer
of the record. We as suppliers, you know, have to
still look at any inter company perts going across the border,
and you have to look at the tier end supply chain.
(26:48):
But all in all, even if we look at what
we can do internally, all of this is going to lead,
I believe, to demand destruction, at least in the short term,
which is why I compared it, you know, to what
happened during the two thousand and eight and two thousand
and nine where the volumes went down drastically, right, And
(27:08):
that is the reason for my comparison to that.
Speaker 3 (27:12):
As Tim mentioned in the introduction, you know your top customers, GM, Mercedes, Ford, BMWVW, Stilantis, Nissan.
Are you already seeing tell me like kind of what
the environment was going into the tariffs and then how
it's changed in terms of demand from your customers now
that the tariffs are here.
Speaker 8 (27:32):
Okayl One of the important things in the automotive industry,
certainty is stability, and what we have today is the
complete uncertainty.
Speaker 5 (27:40):
Right.
Speaker 8 (27:41):
It's difficult to plan in an industry such as ours,
you know, on an everyday basis, right, and that's what
we're trying to deal with today. You might have seen
some of the announcements that have come starting April fourteenth,
some of them starting you know, last Monday, already BMW
five the Spartanburg facility, or General Motors from Fort Wayne
(28:03):
Instilantis in Telukah, war on truck windsor you know, halted
productions or changing production schedules and so on and so forth.
So that's the fact we are starting to see. And obviously,
you know, it's an industry that you can't flip the
switch to change things overnight. If there is a policy
roadmap towards whatever the outcome might be, I think that's addressable.
(28:26):
But today the struggle seems to be addressing what's coming
at us on a daily or hourly basis.
Speaker 6 (28:33):
So who absorbs the cost here? What's you know, what?
What do your shareholders need to know about? Where customers
will see price increases? Where you will see a head
to margins, Where you're where the end end user? Right,
us people who go and buy these cars will see
price increases. Where do the where do the chips fall?
Speaker 8 (28:56):
Yeah, it's kind of all of the about him, right
because you know, from a apply base as well as
the automotive OEM's perspective, everybody look at whatever that can
be done. I think that is given. But given the
industry and the type of margins that are there, that's
(29:16):
out there. You know, everybody knows that nobody can handle that,
you know, magnitude of the impact that we're talking about here.
So I believe it has to some way, shape or
form pass on to the consumer. And if you look
at where the car prices are today in the market,
they're already you know, stretched quite a bit, right. So
(29:38):
that's why I talk about demand instruction and the consumers
ultimately facing, if not all of it, a significant part
of the impact of the tariffs.
Speaker 6 (29:47):
You know, you said, it's like the playbooks from the
financial crisis, COVID, the UAW strikes all combined. But I'm
wondering if as a result of this, you are making
any big chaeges to how you do business where these
parts are manufactured. Do you plan as a result of
these tariffs to do more in the United States?
Speaker 8 (30:09):
It's too soon to say that, right, Like I said,
we are investing or not we as an industry, if
you're doing investments today, it is typically for starting production
in twenty seven or twenty eight, So we're talking at
least two years out right. So when we start talking
about what needs to be done, should we react to
(30:30):
what's happening today and where the policy ends up is
going to be ultimately what everybody's looking at. So from
a near term perspective, cash conservation and hesitancy or tentativeness
to say where will it end up. So if there
is a dollar that I can push out from a
perspective of investing today versus a month or two months
(30:52):
from now, I'll pick the later, right because I want
to have certainty in where we are ultimately going to
invest in get the returns.
Speaker 3 (31:00):
So no, I'm sorry, please finish.
Speaker 8 (31:04):
No, no, no problem. I think going back, everybody is
now focused on free cash flow, conversion, capital efficiency, so
there's a little bit of a wait and see approach.
And you know, in the industry that depends on two
or three year cycles, that's you know, difficult.
Speaker 3 (31:23):
So the thing I wanted to ask you, and I
keep going back to this interview that Shineli Basika Bloomberg
did with Boaz Weinstein, and he said, you know, even
if we get it changed and perhaps the White House,
the President comes out and says forget it, delay of
ninety days or you know what, let's call it off.
The problem is that the president's going to be in
(31:45):
the White House for the next four years, and that
what he said is the uncertainty genie is out of
the bottle. I can kind of get away from this.
That would you feel if the President came out and said, oh,
change my mind, would you feel confident in to move
forward or would you feel like you were constantly a
little bit off balance, not sure if something might change
(32:06):
from the White House.
Speaker 8 (32:08):
I think the industry as a whole is going to
be a little bit more conservative, and think twice, we've
always believed, you know, you have to produce locally, whether
it's a local for local, and we've always looked at
the entire North American market as one market. So that
is being questioned right now. So we have to work
(32:29):
very closely with the OEMs, not just as saying I
think the whole ecosystem has to be pretty much aligned.
As you think of investments going forward, which segment is
going to be consumed, Where where do you put the footprint?
So in short, Carol, I think there is going to
be a little bit more thought before new investment goes
into address, you know, especially where parts or vehicles are
(32:54):
going crossboarder.
Speaker 3 (32:55):
Right, So then when we think about the US economy
or global economy, there are investments that will not have
and there will be as we talked, was it a
little bit of a demand destruction, Like there'll be some
destruction that economic impact we don't get back right because
of that conservative mode.
Speaker 8 (33:11):
I think it's fair to say there's going to be
tentativeness in the investment cycle now until people get a
little bit more clarity. That's one thing, and the second
thing is short term. I think there is going to
be you know, reduction in volumes.
Speaker 6 (33:27):
I mentioned you have one hundred and seventy thousand employees
in countries throughout the world, stock down about twenty five
percent so far this year. You're going to take a
hit ostensibly as a result of these Are you going
to have to start making decisions about who keeps their
job and who doesn't keep their job.
Speaker 8 (33:50):
And tim Yes, that's the reason why I compared it
to what happened during the COVID or the UW rotating strikes. Right,
you have to constantly re act to how the OEMs
are planning their production schedules, whether it's lines coming down,
complete factories, assemblies that are stopping, which means we have
to react accordingly. So obviously there's going to be that impact,
(34:13):
but we have to as one of our guiding principles
is a long term strategy to look at our business
as a long term owner. So whatever decision we make,
we have to look in terms of today, but making
sure that it doesn't hurt us in the long term.
So that's a little bit more challenging today than it
was a few months ago.
Speaker 3 (34:33):
One of the things I want to ask, are you
afraid and do you feel like the c suites afraid
to really speak out against the Trump and mysters? You're
actually being pretty frank here. CEOs and some surveys are
calling this the Trump recession. CNBC did a CEO survey,
yet it seems like most don't want their names attached
to the criticism of the administration. Is the corporate community
(34:57):
afraid to speak out.
Speaker 8 (35:01):
From our side? Look, I think Tim mentioned in the
introduction we are in twenty eight different countries over the
last year and a half. Nineteen of the countries that
we are present in had elections, right, so policy is
something we deal with all the time. This is obviously
a little bit more disruptive than what we have seen
elsewhere or seen in my career here, But we have
(35:24):
to look at the industry long term. Right, Our design
cycles four to five years, and maybe with the changing
industry it's dropped down to two or three years. But
you got to take a long term approach. So yes,
it's disruptive today, but we have dealt with this in
the past and we just you know, have to keep
our head down and hope we look at a policy
(35:46):
roadmap rather than react to something that's happening today.
Speaker 3 (35:49):
One of the things I do want to ask then
and kind of on that, in terms of long term strategy,
what does the auto supply chain look like if the
Trump tariffs are here to stay? Long does it take
to realign a point that will mitigate tariff costs?
Speaker 8 (36:05):
I don't know. It's mitigation that is definitely going to
lead to rationalization of the footprint, right, we have to
start looking at balancing capacity. You know, luckily we have
footprint in Mexico, US and Canada. So again, like I said,
it's not going to happen over time. Depending on complexity
of the part in the system, it could be anywhere
(36:28):
from months to years. There are some complex systems where
just to give you an idea, of Some of our
plants are a million square feit facilities, right with about
three four hundred million in invested capital. So those kind
of plants are not easy to transfer overnight. Those will
take years. And it's not just a unilateral decision either, right,
(36:48):
this has to be done in conjunction with the product
cycle planning of the OEM. Where is the assembly plant
and how be going to work with them? So there's
a lot of complexity the involved here. Some of the
more complex footprint rationalization might take years to crystallize.
Speaker 6 (37:07):
You know, as we're talking, we're seeing stocks continue to fall.
How do you watch not your company's stock specifically, but
the broader sell off in the context of consumer demand,
the wealth effect, and just concerns to growth.
Speaker 8 (37:23):
Yeah, I think that's like I said, that's the demand
destruction part, right. What happens to the industry, interest rates,
what happens to the oril economy, the buying power of
the consumer, especially with a lot of fear that might
come based on what's happening around you, which all means
people's ability to buy cars and at what price point.
(37:45):
If that's impacted, the whole industry is impacted, and that
is the big concern that we all have.
Speaker 6 (37:51):
Right Well, you know, we talked a little bit about
whether you'd move facilities. You said it's too early to say.
We are already starting to see automakers reshoring assembly plants
or make announcements. Hyundai was one of the ones we
saw from the White House just in the last month.
If we see more automakers reshore assembly in the US,
(38:11):
will you need to move facilities back to the US
as well.
Speaker 8 (38:17):
We have a footprint in the US. But to your point, Tim, yes,
I think look as a supply base, we look at
the material availability of the entire supply chain where it's
coming from. We have to look at the logistics. We
have to be as closed, you know, as possible to
the assembly based on the type of the part and
the complexity of the part. So considering all of that stuff,
(38:41):
if there is a significant reshoring, yeah, we have to
look at, you know, rationalizing the footprint differently.
Speaker 3 (38:49):
Hey, s I mean just to kind of wrap up here.
You know, you kicked off and both Tim and and
I were like, a wait, what moment when you said
that you're thinking about this environment akin to I think
you said the GFC, COVID and union strikes all together,
that's today's environment. So is a recession here in the
United States given is maybe perhaps a global recession. Given
(39:13):
a given I should say.
Speaker 8 (39:15):
Yeah, I think you know again, hopefully you know everybody
comes to the table and has the discussion to avoid that.
But all indications seem to be, you know, heading in
that direction that the economy is taking a hit. But
like I said, this is happening so fast and so quick.
(39:36):
Part of it is you know who comes to the
table at what time, and you know how much can
you recover and how fast can you recover? But that's
definitely on the cards based on the facts today.
Speaker 3 (39:47):
Well, we really appreciate your honesty and giving us an
assessment of your world that really plays into all of
the major auto manufacturers. Swami, thank you so much. Swammi Kutigeary.
He's chief executive officer of Magna International. Joining us right
here on Bloomberg Businesswekdaily.
Speaker 1 (40:03):
This is the Bloomberg Business Weekdaily podcast, available on Apple,
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(40:23):
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Speaker 2 (00:08):
This is Bloomberg business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Week
Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 3 (00:32):
Just looking at the major industry groups in the S
and P five hundred today, there are eleven your best
performing group financials, but they were still down about four
tenths of a percent. Bottom of the pack. Energy was
down about two and a half percent. Real Estate was
down about two and a half percent, Consumer discretionary down
about two and a half percent, Materials down almost three percent.
All eleven of the main industry groups are down today.
(00:52):
Let's see what Vince Cignerella makes of the trade that
we've seen not only today but since the tariffs were imposed. Vince,
of course, is Bloomberg Macros strategist joining us. So, Vince,
it looked like we were going to have we did
have a rally, and it looked like maybe it would hold,
and then.
Speaker 4 (01:08):
That was not to be the case is it looks.
Speaker 3 (01:10):
Like trade tariffs and talk about that between the US
and China flared up again. Talked to us about the
trade today and what was significant for you.
Speaker 5 (01:21):
Well, I mean the tariff is the you know again,
the tariffs are the word tariff is the trade. You know,
there was a little bit of excitement this morning when
Trump was announcing potential deals with South Korea and Japan,
and that Italy's Maloney was coming in a couple of
weeks to discuss trade. So things were looking on the up.
(01:42):
And then the reinforcement that China tariffs was still with
US and we're going to hit it about one hundred
and four percent tonight. That was confirmed or reconfirmed, i
should say. And the reality what we heard from Trump
this morning was, you know, China wants to do a deal.
They don't know how to contact us, you know, I
(02:02):
mean they went to the wto this morning complaining of
Ouz Harris. So that that's hardly that's hardly a country
looking to do a deal with the US. And it's
really unlikely that President she is going to be knocking
on the White House door with hat in hand looking
to do a trade with Trump. So this is going
to be extended for a while, I think.
Speaker 6 (02:21):
And that's extended in what says like, we know the
fight's going to be extended, but the carnage that we're
seeing if your long equities, how long is that going
to be extended? What turns that around? I mean stocks
have been in free fall in the last four days.
Speaker 5 (02:37):
Yeah, it's a really really good question. Talking to traders today,
we're definitely seeing some folks stepping in at the clothes,
getting their toes in the water. The extension that possibly
that people are talking about is forty five hundred in
the SMP cash. We're still about four hundred away from that.
But you know, there's going to be a lot of
give and take, and even if that happens, we're is
(03:00):
just a lot of talk and I don't want to
really go into this too much because it's just a
lot of scuttle but on the street about if things
continue like this, will the Trump administration look for a scapegoat?
Will it be will it be Lutnik? Will it be
the Varro? And traders today are putting more bets on
the Varrol than Ludnik.
Speaker 6 (03:18):
So what would what would that do to markets? If
if Navarro got the booth, and look again, you're saying
this is scuttle. You're saying this is scuttle, but.
Speaker 5 (03:25):
It's totally rumored, just totally conversation on this.
Speaker 6 (03:28):
But there's it.
Speaker 5 (03:28):
But would that actually o fact to this whatsoever? But
if Navarro would get the booth tomorrow, you probably see
about a two thousand point rally in out.
Speaker 3 (03:37):
To be honest, well, you know, it's so funny that
you say that, because we were talking with our Max
Chafkin about some of the back and forth between Elon
musk Uh and Peter Navarro, and you know what, there's
been some speculation again rumor careful, let's be smart here,
but that, yes, but that the president, you know, looking
for an off ramp, and I guess we just assumed
(03:59):
it would be in deal with countries. But you do
wonder if he is looking for some individual to say, listen,
that was his plan. Maybe it was wrong. Let's get him,
you know, let him go, and let's let's let's redo this.
But again, who knows?
Speaker 5 (04:13):
Right, Yeah, I mean I think the I think what
you said, the former part of that is really where
it's going to come from. You're going to see deals
getting done okay, And I think the administration is going
to be touting more of the deals getting done in
the next couple of weeks as opposed to the deals
not getting done as in visa vich China, And I
think we're going to start to see a little bit
(04:35):
more positive comments come out of the White House to
turn this little bit. Don't forget. We've even seen the
Republicans pushing back against Trump where they tried booking the
Senate and some in the House trying to basically impose
a bill that basically says Trump has to go through
the Senate in the House in order to impost harffs
it's dead on arrival. It's nice, it's it's not going
to absolutely so, it's it's the OA, it's not going anywhere.
(04:58):
But just the idea that they would even consider that,
and that his own party is pushing back is definitely
going to have some conversation going on in the White House.
And I think it's very very interesting that in the
last twenty four maybe even forty eight hours, we haven't
heard a peep at a Ludnik and he's been the
real bull in the China shop, if you will. In
(05:19):
the same camp As Navarro talking really tough on trade.
Speaker 6 (05:22):
Okay, so maybe that's the case. Who we have heard
a lot from his Treasury secretary Scott Bessett. What do
you make of that. He's been out each and every day.
Speaker 5 (05:31):
Yeah, you know, he's not going to go against Trump,
but he is again in terms of what the market
sees is a voice or reason, so he's more likely
to put a positive spin on things than a negative
spin on things. Remember like the rumors yesterday what has
it where he said Trump was going to consider a
ninety day pause. That headline was complete fiction. Came out
(05:53):
of a conversation on Fox, which was an elaboration on
a very very on very some thing has to said
that I really had nothing to do with a pause,
And you saw the market react like surging on that news.
They're desperately looking for good news to buy into this.
People do have cash, they do want to get into this,
(06:13):
But you just don't want to step in front of
the steamroller right now because it's still it's still coming.
As we saw today, although like think about like in
the last fifteen minutes, the Dow was down over eight hundred,
down three twenty into the close, so there's still a
lot of possibility for this to turn around that I
would just be really careful if you want to dip
(06:34):
your toes in a little bit. It's not a bad idea, yeah,
but definitely don't be sticking your head through the door.
Speaker 6 (06:40):
Vince, Vince, it's you know, I want to go back
to this idea that you know, if we saw a
head roll, if you you you say, if you see
a head roll, we could see a Look. We kind
of saw this yesterday with this ninety day reprieve. You know,
read all about it on the terminal. Great stories from
Bailey Lipschulten more about what happened yesterday. Carol, you were out,
(07:03):
but it was crazy, Yeah.
Speaker 3 (07:04):
I believe it or not.
Speaker 6 (07:06):
You've paid attention occasionally.
Speaker 3 (07:07):
I was like reading it because I hate you can't I.
Speaker 6 (07:12):
Was. But Vince, if we were to see a head roll,
that doesn't necessarily mean that Trump would back off this policy,
he told our editor in chief John Mikelswade before the election.
Tariff is his favorite word in the English language.
Speaker 5 (07:28):
I remember that conversation very very well. See what I
think what people really need to understand is and forget
about the short term view oh, the markets are going down.
Trump's going to change his mind. This, that, and the
other thing. He really really is an attempting to rewrite
economic policy for the United States for the last forty years.
He wants to bring us back before globalization, before the
(07:52):
Clinton globalization years, more towards that nineteen eighty eight, Reagan,
nineteen ninety two, George Bush kind of concept. Are trying
to bring, you know, manufacturing back to the United States.
The only way he's going to do that is to
somehow undermine and cripple the manufacturing state of China. And
the only way to do that is to outlast them.
(08:13):
You know, we can't outspend them. We have a thirty
six in building a trillion dollar deficit. This isn't This
isn't Reagan against against Russia in the eighties where he
outspent Russia and sort of won that war, if you will.
Speaker 3 (08:27):
But to be fair, to be fair, Vince, you know,
this is something we talked about Tom Morlock earlier. I mean,
we have what a one point two trillion dollar trade
deficit with China, and I mean that's real money, right,
And the whole reason that American companies wanted to be
in China and they set up shop there and so
on and so forth. Is they wanted to tap into
the one billion plus consumers of China and it hasn't
(08:49):
necessarily worked out as well as some might have anticipated.
And so this is about I feel like, or is
it about us and China or China kind of playing
more in a way in terms of trade back and forth.
Speaker 5 (09:05):
You know, I think so if you realistically, if you
look at globalization, the idea of globalization was we were
going to float all boats. So we in the United States,
for instance, and the developed countries I shouldn't say just
the United States. We were going to invest in underdeveloped
countries and such. We were going to lift up their
(09:25):
economies and then they were going to buy our goods, right,
and all boats were going to float and everyone was
going to prosper. Well, that didn't happen. If you look
at globalization in and of itself, it was a failed policy.
What happened was the developed countries spent a lot of
money into underdeveloped countries and they didn't buy anything of ours.
We just bought a lot of their cheaper stuff, and
that created deficits across the developed nations. Mostly of course,
(09:49):
in the United States because our consumers spend more than
anyone else in the world. And so what Trump is
trying to do is recalibrate that. And you know, you
can't fix it all in one day, but bring it
back a little closer to the middle where essentially we
get some meeting of the ways where they get a
little bit I get that balance and trade.
Speaker 6 (10:10):
Yeah, maybe you can look, maybe you can get Japan
to buy more US autos because we buy so many
autos from Japan that for example. But is there a
way in your view to actually go back in time,
because I think the ship has sailed the genies out
of the bottle. That seems to be like, this is
not a world of forty years ago. This is a
(10:30):
world where you know, we're we're using WhatsApp to connect
with people all over the world right now on devices
that are made with components that include Africa, Asia, Europe,
the United States. Like, this is a different world that
we live in. We're not making clothes in the US
that we wear like, this is a completely different world.
Speaker 5 (10:52):
Yes, and we're we're not going to be making We're
not going to be making textiles, you know, cheap textiles
and United States. I think realistically, the manufacturing he wants
to bring back to the United States is a bit
more high end. Where he's talking about guatos, for instance, chips,
you know, things of that nature. We're not we're not
(11:12):
talking about we're not talking about making sweaters and socks
in the United States. It's more on the high end
stuff and setting and setting perhaps in the high end
of things, a more level playing field, you know, as
opposed to as opposed to what happens now. And you know, look, yeah,
to think of it realistically, all of the rhetoricrat they
(11:33):
are saying tariffs are bad, tariffs are bad, tariffs are bad. Well,
if they're so bad, why do so many other countries
have them? To some extent, it's definitely benefiting a lot
of other countries. And I think that is what he's
trying to do, just to get a little bit of
a fairer trade situation. Right as you mentioned it, we're
not going back to the nineteen eighties. We're not going
to you know, steel mills are now. There's going to
(11:53):
be propped up all over this country tomorrow.
Speaker 4 (11:56):
But we haven't gone back to smooth Holly. I'm just
going to say.
Speaker 3 (11:59):
Going back further, I know, love it, love it, just
for those on radio.
Speaker 4 (12:03):
Vince actually like rolled his eyes on that.
Speaker 3 (12:05):
Having said that, Vince, I want to go back.
Speaker 4 (12:07):
I want to go back to the market.
Speaker 3 (12:09):
You know, we technically intraday saw a twenty percent correction
on the S and P five hundred and so technically
hitting a bear market.
Speaker 4 (12:18):
We bounced back off of it.
Speaker 3 (12:19):
Is that significant that we didn't close there?
Speaker 5 (12:24):
I think we need to see how we do overnight
and have China markets where the Asian markets react overnight.
I mean, we could easily see us testing to get
in tomorrow into the US session, depending upon the rhetoric.
I mean, you know, how is China going to push
back tonight? We don't know, We don't We don't know
what kind of comments we're going to get from she
or or or other trade ministers from China. You know,
(12:48):
we we've we've pushed them pretty hard, you know, and
to expect them again to come to the table is naive.
Speaker 3 (12:55):
I think, what's the what's the commentary that you're finding
as you you you know, talk with traders throughout the day.
I mean, yes, it's a lot of selling. Yes, the
markets have functioned well For those of us who are
here during the Great Financial Crisis, it was crazy and
you really felt like I mean, I just remember thinking,
oh my god, the financial market system.
Speaker 6 (13:17):
It doesn't feel like that to you now though it doesn't.
Speaker 3 (13:20):
I mean, I think everybody clearly understands why the market
is selling off. There is a clear catalyst, and.
Speaker 6 (13:27):
We call it self self inflicted.
Speaker 3 (13:30):
Yeah, and so exactly. So I how do you what
do people say about the market selling about this and
when does it become something much more problematic than an
understanding that it's coming from the White House directly.
Speaker 5 (13:45):
Well, you know, I think the endgame, I mean, obviously
the administration's endgame, but I think everybody would kind of
think the same. If you look at this in the
more medium to long term, this will pass, as as
if you think about the financial crisis that you made,
you passed. I can remember the crash in the late eighties,
looking over my shoulder and every time I looked over
(14:05):
at the Tiller eight, which was back then, and see
whether the dob was going going, oh my god, we're
still going down. Yeah, you know, the the the sell
off of this magnitude, I think it's it's different in
the sense that it's all happening in kind of one week,
and then not just the sell off, but the volatility.
(14:27):
We're down, we're up, We're down, we're up. It kind
of reminds me of training currencies back in the eighties.
This is a kind of volatility that we saw in
currency markets forty five years ago. You don't really see
it in equity market so much so it's it's unusual,
and it's and it's different, and I think a lot
of folks in equities are just not accustomed to this.
Uh And I don't think any traders are really accustomed
(14:49):
to this. Since we've gone electronic, we haven't had it.
Will this kind of evolve?
Speaker 6 (14:53):
Vince? Is there is there is there a technical signal
that you can glean from stocks starting higher, then losing
that momentum, and then finishing decidedly in the red.
Speaker 5 (15:08):
Well, you know, you look at this, and you look
at you know, these are ugly tapes. I mean, without question,
you don't like to see this kind of price action
where you where you start out high in the morning
and you have this positive euphoria and then the sort
of puke into the into the afternoon.
Speaker 6 (15:23):
That's a technical term right, yeah, definitely.
Speaker 5 (15:26):
Technically right into the close, but there was I will
say there was a positive to the close. I mean
we were down about eight hundred and fifty points. I
think in the now we closed down around three twenty,
So there was definitely there was definitely some capitulation, some buying.
We're starting on just glancing over futures is still trading
abower as we head into the last hour before the
(15:48):
break at five o'clock, So we are seeing a little
bit of a sell off in future and it's not terrible,
it's not aggressive. You know, we have inflation numbers coming
on Thursday and Friday, sentiment numbers coming on Friday, and
we start the earning season with banks on Friday. So
my guess is the earnings bar is probably going to
be set pretty low for next week and for the
(16:09):
banks on Friday. So there is a very good chance
we get some good numbers. And if the tariff conversation
just quiets a little and we get some positive earnings
next week and a good week of earnings, we could
easily see this rebound dramatically.
Speaker 3 (16:23):
Well, listen around the markets. We went with you, thank you,
thank you, thank you. Vince Signorellacome macro strategists joining us
here on this Tuesday.
Speaker 1 (16:32):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five e's during listen
on Applecarplay and Android Otto with the Bloomberg Business app
or watch us live on YouTube.
Speaker 6 (16:47):
From Wall Street to Capitol Hill. Because politically, this trade
war is creating divisions in the Republican net Party, Republican
senators expressed anxiety over the potential economic toll of Donald
Trump's global tariffs and pressed his trade representative from more
clarity on the President's objectives in the trade conflict. Check
Out what Tom Tillis of North Carolina said today, quote
Who's throat? Do I get to choke? If this turns
(17:10):
out to be wrong? This was as US Trade Representative
Jameson Greer testified before the Senate Finance Committee. You got
Ted Cruz extending his critique of the tariffs, and then
carry you got to note Elon Musk, the billionaire presidential
advisor he attacked White House Trade Counselor Pete Navarro is
dumber than a sack of bricks over this fight. This
terriff regime's spilling onto social media.
Speaker 3 (17:32):
Today, we want to ask what Wendy Schiller thinks and
makes of all of this. She's professor of political science
at Brown University, joining us from Providence, Rhode Island. Professor Shiller,
great to have you back with us. It does feel
like some Republicans are getting a little uncomfortable with some
of the President's policies.
Speaker 4 (17:47):
How do you read it?
Speaker 7 (17:48):
Well, good after Carol and Tim. I think this is
going to be an interesting sort of power play within
the Republican Party and it will spill over to the
tax cut bill because the only leverage that the Republicans
Senators have even Visa VI the House Republicans and President
Trump is the tax bill, which President Trump really really
wants as an accomplishment, particularly for this year. So, you know,
(18:11):
if they're not getting the answers they want, if they're
getting if they want to protect particular industries in their states,
even at the most local level, big businesses that are
suffering from these tariffs or will suffer from the tariffs,
they're going to have to play hardball with the President's
most preferred legislative package, and that's the tax cuts. So
you're going to start to see behind the scenes, but
also maybe publicly. Ran Paul's been pretty out there from
(18:34):
Kentucky saying he's not happy about this either. And I
think that's what's beginning to disrupt the inter chamber negotiations
on the tax bill.
Speaker 6 (18:42):
Bet in the House, in the Senate, how much power
do these members of Congress actually have because the Resident
has shown he is not afraid to support primarying some
of these folks if they don't get behind his agenda.
Speaker 7 (18:56):
Yeah, you know, his Trump's success record in primaries in
the in the Senate level, at the cement level is
not all that great. His success is a little bit
better on the House side, but not really on the
Senate side. And you mentioned Tom Tillis who's running for
reelection in North Carolina, Joony Ertz running for re election
in Iowa, just to name a few.
Speaker 3 (19:13):
And so those seats.
Speaker 7 (19:15):
Particularly North Carolina, could be heavily contested. You know, let's
say the former governor where Cooper wants to run. That's
gonna be a problem for Tom Tillis. So they've got
to show some returns. What is the endgame on the
tariff fights? What does he expect to accomplish? The President Trump,
As you say in your prior conversations, you're not bringing
textile manufacturing back to North Carolina. You have had a
(19:37):
resurgence on a micro level of some companies making things
in North Carolina.
Speaker 6 (19:42):
That's ouriasonal stuff. I think people would say.
Speaker 7 (19:44):
Truly, well, you know no, I mean my understanding. I
think there's a couple of companies that's taking over factories
and done pretty well. But you know what is Tom
Till's gonna say uh to North Carolina when things really
become more expensive or inflation goes up and the Tower
sort to blame unless Trump pulls the plug on the
tariffs before those contemplationary pressures can really exert their will.
Speaker 3 (20:06):
Wendy, what do you think is the endgame? I mean
President Trump has talked about terriffs for a long, long, long,
long time, right. This has been part of his playbook,
and he didn't get to do as much as I
think it's safe to say that he hoped to do,
maybe the first time around, doing something a lot more
aggressively this time around. He likes tariffs, he said that,
But I do wonder too. I agree with you, what
(20:28):
is the endgame? Is it to get Europe? To spend
more on defense. Is it energy policy? Is it access
for us to critical minerals?
Speaker 4 (20:35):
Like?
Speaker 3 (20:36):
What is it? Do we really understand what.
Speaker 4 (20:39):
The endgame is with all of this yet?
Speaker 7 (20:41):
It's just unclear from the current public conversations that are
leaking or being leaked on social media or even just
playing out on social media what the team of advisors
agrees on the endgame.
Speaker 3 (20:53):
Whether Trump is willing to even.
Speaker 7 (20:55):
Think about an endgame. But what he'd like to do
is probably go to a plant that was abandoned or
shut down temporarily a couple of years ago and see
it reopened. I mean, the only way you're going to
convince the American people that paying more for all these
goods or small businesses that might have to lay off people,
is that you have succeeded in creating jobs or bringing
real jobs back. And that isn't happening quite yet. And
(21:17):
that was the problem in the first administration. Very hard
to do. He could not even prevent plants from closing
down and going to Mexico.
Speaker 3 (21:24):
Is there that know?
Speaker 7 (21:25):
NATO defense spending will make some people happy, but the
average American I don't think it is going to care
very much about that.
Speaker 3 (21:29):
To be fair. Is there's something though in the President's fight, right,
We've talked with you about the gaps right within our society,
that there's a bunch of people who feel like nobody
is representing them. They can't get ahead, they can't buy
a house, they can't get a good job. I was reading,
I think this morning about people who are making forty
to fifty thousand dollars here in New York, and yet
(21:50):
they go home to shelters because they can't afford to
live in an apartment. So there's something wrong, some disconnects.
So is there something to what the president is doing,
whether it's with China in terms of leveling the playing
feel about access to markets?
Speaker 7 (22:04):
Well, access to markets is fun by the United States.
You have a combination of a lot of regulation which
makes making things more expensive. You have, you know, some
we have weaker private sector unions than most of Europe does.
For sure, we have some pretty strong public sector unions.
So you'd have to sort of weaken the private sector unions, right,
I mean, you'd have to do something like that to
make it less expensive. He's going to eliminate a lot
(22:27):
of regulation, which will make everybody happier. And that will
mean slightly less environmental protection. There are trade offs for
everything we're doing, but it is more expensive to manufacture
goods here, I think for lots of reasons some people
might like and dislike. So you have to dismantle that system.
But if you're also dismantling healthcare and education, we're not
going to stay competitive with the countries that are investing
(22:48):
in those areas. So, you know, the Traudminstration has to
have a holistic approach to this, and right now, I'm
not sure we're seeing the things coming together working in
the same direction as much as we might like.
Speaker 6 (22:59):
When it comes to a goociations directly with China and
near view Wendy, how much leverage does the US have, Well.
Speaker 7 (23:06):
You know, we have an awful lot of manufacturing in China.
The farmers themselves, you know, they export lots to China.
We are very dependent on China. There's also intellectual property.
We haven't even heard about that from Donald Trump, you know,
intellectual property theft, that was the big theme in his
first administration.
Speaker 3 (23:22):
What's he going to do about that?
Speaker 7 (23:24):
You know, I think it's a very difficult relationship to
extricate from. But if Trump can get some manufacturing back,
or at least, you know, make corporations reopen or build
plants here, do something like that. Then it shows the
Republican Party that this is a policy that could benefit
them politically, which moves them closer to Trump, not further away,
(23:44):
but that's a couple of years away. And the House
elections in twenty six just seemed closer and closer every
single day.
Speaker 4 (23:50):
How do you think about this era?
Speaker 3 (23:53):
It's still being written as we speak. We just got
about thirty seconds. How are you you're teaching your like,
how are you thinking about this?
Speaker 7 (23:59):
Just quickly, forget everything that I've been teaching for very
long time. Forget everything you've thought about strategy and motivation
on the president by the president and his team. This
is a new day, a new a new way of
doing things. He's disrupting and we're all going to have
to be very flexible and be able to pivot. But also,
you know, local politics, you know that's the thing. When
(24:21):
does the House report? Can party break from President Trump?
Speaker 1 (24:24):
If ever, you're listening to the Bloomberg Business Week podcast,
catch us live weekday afternoons from two to five these
during listen on Applecarplay and Android Auto with the Bloomberg
Business app, or watch us live on YouTube.
Speaker 6 (24:41):
Hey, it is time for another edition of Bloomberg Plugged In.
It's your weekly look at evs, and we are watching
the auto sector closely. Giving that a twenty five percent
tariff on US auto imports took effect last Thursday. Well,
levy on parts is slated to begin no later than
May third. The measures are expected to dramatically increase costs
and up end supply chain. So let's talk to one
of those suppliers who smack dab in the middle of
(25:03):
all of this. Magna International is a Canadian a based
autoparts and auto tech company. They create components so think
car electronics, drive trains, vision systems, powertrain systems and more
for some of the biggest car companies in the world
GM for It's Delantes and more. The company is more
than one hundred and seventy thousand employees across twenty eight countries,
and by sales, it's the biggest automotive supplier in North America.
(25:25):
I've got a market cap of close to nine billion dollars,
though its stock is down about twenty five percent so
far this year. Swami Kodaghary is a CEO of Magna International.
He joins us this afternoon from Troy, Michigan. Swami, thanks
for joining us. I know you have been extremely busy,
so we certainly appreciate it. How are you and the
auto manufacturers that you work with managing these tariff costs?
Speaker 7 (25:49):
Hi?
Speaker 8 (25:49):
Tim, good afternon Thanks for having me. And you know
we are right really focused on control the controllable, and
things seem to be changing on everyday basis. Open the
playbooks that we've had during the rotating UW strikes or
COVID or two thousand and eight financial crisis, or the
chip crisis, and you put them all together. I think
(26:10):
that's what we seem to be having right now.
Speaker 6 (26:13):
What a way to put that. So, the financial crisis
saw car many some car companies declare bankruptcy.
Speaker 3 (26:21):
Right exactly, you're saying it's as bad as that, and
then some.
Speaker 8 (26:25):
Yeah, I think I think the important part Carol here
is look. Part of it is looking at tariffs of
importing vehicles cross border. Okay, the OEMs are the importer
of the record. We as suppliers, you know, have to
still look at any inter company perts going across the border,
and you have to look at the tier end supply chain.
(26:48):
But all in all, even if we look at what
we can do internally, all of this is going to lead,
I believe, to demand destruction, at least in the short term,
which is why I compared it, you know, to what
happened during the two thousand and eight and two thousand
and nine where the volumes went down drastically, right, And
(27:08):
that is the reason for my comparison to that.
Speaker 3 (27:12):
As Tim mentioned in the introduction, you know your top customers, GM, Mercedes, Ford, BMWVW, Stilantis, Nissan.
Are you already seeing tell me like kind of what
the environment was going into the tariffs and then how
it's changed in terms of demand from your customers now
that the tariffs are here.
Speaker 8 (27:32):
Okayl One of the important things in the automotive industry,
certainty is stability, and what we have today is the
complete uncertainty.
Speaker 5 (27:40):
Right.
Speaker 8 (27:41):
It's difficult to plan in an industry such as ours,
you know, on an everyday basis, right, and that's what
we're trying to deal with today. You might have seen
some of the announcements that have come starting April fourteenth,
some of them starting you know, last Monday, already BMW
five the Spartanburg facility, or General Motors from Fort Wayne
(28:03):
Instilantis in Telukah, war on truck windsor you know, halted
productions or changing production schedules and so on and so forth.
So that's the fact we are starting to see. And obviously,
you know, it's an industry that you can't flip the
switch to change things overnight. If there is a policy
roadmap towards whatever the outcome might be, I think that's addressable.
(28:26):
But today the struggle seems to be addressing what's coming
at us on a daily or hourly basis.
Speaker 6 (28:33):
So who absorbs the cost here? What's you know, what?
What do your shareholders need to know about? Where customers
will see price increases? Where you will see a head
to margins, Where you're where the end end user? Right,
us people who go and buy these cars will see
price increases. Where do the where do the chips fall?
Speaker 8 (28:56):
Yeah, it's kind of all of the about him, right
because you know, from a apply base as well as
the automotive OEM's perspective, everybody look at whatever that can
be done. I think that is given. But given the
industry and the type of margins that are there, that's
(29:16):
out there. You know, everybody knows that nobody can handle that,
you know, magnitude of the impact that we're talking about here.
So I believe it has to some way, shape or
form pass on to the consumer. And if you look
at where the car prices are today in the market,
they're already you know, stretched quite a bit, right. So
(29:38):
that's why I talk about demand instruction and the consumers
ultimately facing, if not all of it, a significant part
of the impact of the tariffs.
Speaker 6 (29:47):
You know, you said, it's like the playbooks from the
financial crisis, COVID, the UAW strikes all combined. But I'm
wondering if as a result of this, you are making
any big chaeges to how you do business where these
parts are manufactured. Do you plan as a result of
these tariffs to do more in the United States?
Speaker 8 (30:09):
It's too soon to say that, right, Like I said,
we are investing or not we as an industry, if
you're doing investments today, it is typically for starting production
in twenty seven or twenty eight, So we're talking at
least two years out right. So when we start talking
about what needs to be done, should we react to
(30:30):
what's happening today and where the policy ends up is
going to be ultimately what everybody's looking at. So from
a near term perspective, cash conservation and hesitancy or tentativeness
to say where will it end up. So if there
is a dollar that I can push out from a
perspective of investing today versus a month or two months
(30:52):
from now, I'll pick the later, right because I want
to have certainty in where we are ultimately going to
invest in get the returns.
Speaker 3 (31:00):
So no, I'm sorry, please finish.
Speaker 8 (31:04):
No, no, no problem. I think going back, everybody is
now focused on free cash flow, conversion, capital efficiency, so
there's a little bit of a wait and see approach.
And you know, in the industry that depends on two
or three year cycles, that's you know, difficult.
Speaker 3 (31:23):
So the thing I wanted to ask you, and I
keep going back to this interview that Shineli Basika Bloomberg
did with Boaz Weinstein, and he said, you know, even
if we get it changed and perhaps the White House,
the President comes out and says forget it, delay of
ninety days or you know what, let's call it off.
The problem is that the president's going to be in
(31:45):
the White House for the next four years, and that
what he said is the uncertainty genie is out of
the bottle. I can kind of get away from this.
That would you feel if the President came out and said, oh,
change my mind, would you feel confident in to move
forward or would you feel like you were constantly a
little bit off balance, not sure if something might change
(32:06):
from the White House.
Speaker 8 (32:08):
I think the industry as a whole is going to
be a little bit more conservative, and think twice, we've
always believed, you know, you have to produce locally, whether
it's a local for local, and we've always looked at
the entire North American market as one market. So that
is being questioned right now. So we have to work
(32:29):
very closely with the OEMs, not just as saying I
think the whole ecosystem has to be pretty much aligned.
As you think of investments going forward, which segment is
going to be consumed, Where where do you put the footprint?
So in short, Carol, I think there is going to
be a little bit more thought before new investment goes
into address, you know, especially where parts or vehicles are
(32:54):
going crossboarder.
Speaker 3 (32:55):
Right, So then when we think about the US economy
or global economy, there are investments that will not have
and there will be as we talked, was it a
little bit of a demand destruction, Like there'll be some
destruction that economic impact we don't get back right because
of that conservative mode.
Speaker 8 (33:11):
I think it's fair to say there's going to be
tentativeness in the investment cycle now until people get a
little bit more clarity. That's one thing, and the second
thing is short term. I think there is going to
be you know, reduction in volumes.
Speaker 6 (33:27):
I mentioned you have one hundred and seventy thousand employees
in countries throughout the world, stock down about twenty five
percent so far this year. You're going to take a
hit ostensibly as a result of these Are you going
to have to start making decisions about who keeps their
job and who doesn't keep their job.
Speaker 8 (33:50):
And tim Yes, that's the reason why I compared it
to what happened during the COVID or the UW rotating strikes. Right,
you have to constantly re act to how the OEMs
are planning their production schedules, whether it's lines coming down,
complete factories, assemblies that are stopping, which means we have
to react accordingly. So obviously there's going to be that impact,
(34:13):
but we have to as one of our guiding principles
is a long term strategy to look at our business
as a long term owner. So whatever decision we make,
we have to look in terms of today, but making
sure that it doesn't hurt us in the long term.
So that's a little bit more challenging today than it
was a few months ago.
Speaker 3 (34:33):
One of the things I want to ask, are you
afraid and do you feel like the c suites afraid
to really speak out against the Trump and mysters? You're
actually being pretty frank here. CEOs and some surveys are
calling this the Trump recession. CNBC did a CEO survey,
yet it seems like most don't want their names attached
to the criticism of the administration. Is the corporate community
(34:57):
afraid to speak out.
Speaker 8 (35:01):
From our side? Look, I think Tim mentioned in the
introduction we are in twenty eight different countries over the
last year and a half. Nineteen of the countries that
we are present in had elections, right, so policy is
something we deal with all the time. This is obviously
a little bit more disruptive than what we have seen
elsewhere or seen in my career here, But we have
(35:24):
to look at the industry long term. Right, Our design
cycles four to five years, and maybe with the changing
industry it's dropped down to two or three years. But
you got to take a long term approach. So yes,
it's disruptive today, but we have dealt with this in
the past and we just you know, have to keep
our head down and hope we look at a policy
(35:46):
roadmap rather than react to something that's happening today.
Speaker 3 (35:49):
One of the things I do want to ask then
and kind of on that, in terms of long term strategy,
what does the auto supply chain look like if the
Trump tariffs are here to stay? Long does it take
to realign a point that will mitigate tariff costs?
Speaker 8 (36:05):
I don't know. It's mitigation that is definitely going to
lead to rationalization of the footprint, right, we have to
start looking at balancing capacity. You know, luckily we have
footprint in Mexico, US and Canada. So again, like I said,
it's not going to happen over time. Depending on complexity
of the part in the system, it could be anywhere
(36:28):
from months to years. There are some complex systems where
just to give you an idea, of Some of our
plants are a million square feit facilities, right with about
three four hundred million in invested capital. So those kind
of plants are not easy to transfer overnight. Those will
take years. And it's not just a unilateral decision either, right,
(36:48):
this has to be done in conjunction with the product
cycle planning of the OEM. Where is the assembly plant
and how be going to work with them? So there's
a lot of complexity the involved here. Some of the
more complex footprint rationalization might take years to crystallize.
Speaker 6 (37:07):
You know, as we're talking, we're seeing stocks continue to fall.
How do you watch not your company's stock specifically, but
the broader sell off in the context of consumer demand,
the wealth effect, and just concerns to growth.
Speaker 8 (37:23):
Yeah, I think that's like I said, that's the demand
destruction part, right. What happens to the industry, interest rates,
what happens to the oril economy, the buying power of
the consumer, especially with a lot of fear that might
come based on what's happening around you, which all means
people's ability to buy cars and at what price point.
(37:45):
If that's impacted, the whole industry is impacted, and that
is the big concern that we all have.
Speaker 6 (37:51):
Right Well, you know, we talked a little bit about
whether you'd move facilities. You said it's too early to say.
We are already starting to see automakers reshoring assembly plants
or make announcements. Hyundai was one of the ones we
saw from the White House just in the last month.
If we see more automakers reshore assembly in the US,
(38:11):
will you need to move facilities back to the US
as well.
Speaker 8 (38:17):
We have a footprint in the US. But to your point, Tim, yes,
I think look as a supply base, we look at
the material availability of the entire supply chain where it's
coming from. We have to look at the logistics. We
have to be as closed, you know, as possible to
the assembly based on the type of the part and
the complexity of the part. So considering all of that stuff,
(38:41):
if there is a significant reshoring, yeah, we have to
look at, you know, rationalizing the footprint differently.
Speaker 3 (38:49):
Hey, s I mean just to kind of wrap up here.
You know, you kicked off and both Tim and and
I were like, a wait, what moment when you said
that you're thinking about this environment akin to I think
you said the GFC, COVID and union strikes all together,
that's today's environment. So is a recession here in the
United States given is maybe perhaps a global recession. Given
(39:13):
a given I should say.
Speaker 8 (39:15):
Yeah, I think you know again, hopefully you know everybody
comes to the table and has the discussion to avoid that.
But all indications seem to be, you know, heading in
that direction that the economy is taking a hit. But
like I said, this is happening so fast and so quick.
(39:36):
Part of it is you know who comes to the
table at what time, and you know how much can
you recover and how fast can you recover? But that's
definitely on the cards based on the facts today.
Speaker 3 (39:47):
Well, we really appreciate your honesty and giving us an
assessment of your world that really plays into all of
the major auto manufacturers. Swami, thank you so much. Swammi Kutigeary.
He's chief executive officer of Magna International. Joining us right
here on Bloomberg Businesswekdaily.
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