The Trump Economy and Israel-Iran Latest
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This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We welcome all of you across the nation with our questionnaire conversation of the day here.

is with Gary Gensler. He's a former chairman of the Securities and Exchange Commission, professor of practice of global economics and management at MIT. Did you ever study under Stanley Fisher? Did you have the privilege years ago? I got to know Stan Fisher, a terrific public servant. I got to know him when he served here at the U.S. He was in international finance. I also got to know him a little bit when he ran the central bank over in Israel.

Katie Greifeld called me up earlier this morning and she said, and folks, Gus, the horse is okay and the heat, it's serious. And Katie said that the horses are doing fine this morning. And Katie said, can you do the entire interview on crypto? And I said, with all that's going on from the Gensler to the Atkins SEC, we're going to get crypto out of the way now, folks.

And I'm sorry, Gary Gensler, it is breaking news. I got Chris Giles in the FT this morning, highlighted the Bank of International Settlements research. I adore Raphael Auer's work.

At BIS, I got Rogoff in chapter 17, 18, and 19 going after stablecoin. We need a Gensler update. What are we getting into with Tether and stablecoin? So, Tom, I couldn't agree with you more about your earlier statement. There are so many bigger items going on in this economy, the tariffs, immigration, frankly, a whole attack on science funding, a lot of things that are going to...

I think hurt long-term economic growth. And that's why I joined Simon Johnson and other colleagues from the Center of Economic Policy Research to do a book, a rapid response book about the economic consequences. But in that book, you're asking about stable coins. It's interesting. The worldwide dollar market is about $45 trillion. That's when you add everything up, $45 trillion. And stable coins are about a quarter trillion.

And so, you know, the question is, is Scott Besant, Secretary of Treasury, right? He says that's going to grow to $2 trillion. It starts to say, what's the use of one of these? We already have digital dollars. You and I, we all, Lisa earlier was saying, I don't understand stable coins. We have stable coins. They're called U.S. dollars, deposits, money market funds, and so forth. The only thing that these companies are offering is an alternative way to move dollars

outside of the banking system, which means outside of sanctions, outside of any money laundering laws. And so that's the real risk. It could undermine the US geopolitically. - Paul's got any questions. Let me get this in right now 'cause I think it's so important. The bravest book in my career here

was Ken Rogoff, The Curse of Cash. He got death threats off that book. It's nothing more than a use for criminal activity. It replaces illegal $100 bills in briefcases. How simplistic is that statement that I just made?

Well, you're talking about these stable coins? Tether, stable coin, the whole thing. It's nothing more than a walk around the SEC and the rest of the financial world. Look, stable coins, Tether was...

invented early on, about 10, 11 years ago, to be the equivalent of the poker chip at the casino. You could use it to move crypto versus crypto because these large exchanges couldn't get bank accounts.

And so instead, you could sidestep any money laundering and sanctions. At a quarter of a trillion dollars, it's starting to be somewhat meaningful. And here's the cool question, the interesting economic question, who gets the interest payments? Who gets the float, the 3.5% or 4% on-- for every billion dollars, that's $35 or $40 million of interest. And who gets that interest? I'd rather have a money market fund where I get the interest, the investor.

Gary, the economic consequences of a second Trump administration preliminary assessment. We're six months into the second administration of President Trump. There's lots of unique economic policies coming out of Washington. Let's start with tariffs. When I was in business school, tariffs were kind of a targeted thing you'd do once in a while if somebody was dumping steel or something else in there. We've never really seen them as a whole policy across the

the globe across all of our trading partners. How do you think about the President Trump's economic policies focusing on tariffs? I think, and thank you for mentioning this book that we did together, it was a rapid response book, but overall all our experts said tariffs are going to put downward pressure on economic growth and upward pressure on inflation.

And that's the history of these things. We have seen worldwide movements to tariffs, and it was right before the 1930s Great Depression, and Congress got in and weighed in and so forth. And I would remind listeners that tariffs are only on goods, not on services. And about 90% of workers in the U.S. are working outside of the manufacturing field.

And one of our authors, Michael Strain, wrote an excellent chapter. And Michael says it won't even help manufacturing because manufacturers have to buy all these goods, these intermediate goods from overseas, and the tariffs will be higher. So I don't think the tariffs are going to help.

I think they're going to hurt. And interestingly, they're going to particularly hurt also in rural communities because rural communities have to sell their farm goods, their agricultural products overseas. So it doesn't even necessarily help the president and some of his political base in rural states. A lot of, I'm just going to,

preempt a lot of email I'm going to get today in my social saying, we haven't seen any of it. Tariffs are working just fine. Inflation's not there. Or is it just too early? So it's a bit early, but I'd say this to any listeners. You've just had the largest tax increase that you've had in generations.

Average tariffs in the U.S. were 2.3%. Globally, adding everything up, 2.3%. And that was even after the first Trump administration raised tariffs in China. They are now over 10%. So the overall tariff rates have gone up fourfold. That's a big tax increase. It takes time, but...

The International Monetary Fund lowered our growth estimates for this year a full point. So, you know, we're seeing that happen. Right. I've got to ask, we've got all sorts of topics to talk to with Gary Gensler, former Securities and Exchange Commission chairman at MIT, out with a wonderful, what do you call it, like a Kindle book? Is there like a... Well, it's a real book. We do have it physically, but it's online at the Center for Economic Policy Research, which

is a remarkable organization in Europe, and you can get it for free right at the CEPR website. Wonderful. So I'll get that out on LinkedIn and Twitter as well. So I got to get this straight. You're at Pikesville High School. You end up at Wharton. You do better than good in your academics.

The world's imploding in private credit, right, Paul? Sure. Everybody needs a valuation. You have to be the first call for the University of Pennsylvania. Do you have any handle on the new valuation, the mark-to-market of private credit, and dare I say private equity as well? Well, you're kind. I mean, University of Pennsylvania was terrific. I'm at MIT now, so I just have to give that shout out. But in terms of private credit, look, this is a field about...

give or take two trillion dollars of lending and assets under management that has competed with commercial banks. And we made sort of a conscious decision to move some of these risks out of commercial banks and into private credit. And I think it's good. It's competition in the capital markets. I really do. Cut to the chase of Sloan. You're at Sloan with a piece of chalk in your hand. What's the haircut right now on private credit? Is it 18 percent? Is it greater?

Or if you're talking about valuations, it really depends on what the large companies, the Apollos and the Blackstones and so forth, how have they valued it? So that if they're valuing it properly, then it's not a haircut. But yes, they usually charge higher interest rates.

Gary, how do you think the U.S. should, from a trade perspective and economic policy perspective, deal with China right now? It feels like the globalization trend that you and I and Tom grew up with, that seems to have lost a lot of steam. It's out of favor now.

Maybe that's a short-term trend. I don't know. But specifically with China, how do you think the policy should be? Well, my experience, and we had to negotiate when I was at the SEC, a big consequential transactional situation. Can China keep their companies in the U.S. stock market? And China was not playing ball and following the rules about inspections. We were able to sort that through. And my experience is, as you treat

with respect and dignity and consistency. And this oscillation, this big, volatile changes of policy, I think is not doing the U.S. well. I think, yes, the president is a risk taker. I respect that. He is a fundamentally, he's come into office very determined and he wants to readjust with China. But I think China is very savvy in terms of

they're going to be able to compete with this in artificial intelligence, even if we clamp down on export controls. And they have those rare earth minerals that they're able to, they have leverage points is what I'm trying to say. I've got to go to a new topic here, but Gary Gensler, to get to that topic,

I used AI. I went to Gemini here and I tipped in the difference between the Gensler and Atkins SEC. First of all, Gary Gensler, as you mentioned, Paul, esteemed at Goldman Sachs. Paul and I would editorialize. You would be on a short list to run any major firm in America. Fine.

Gary Gensler on AI. What do our kids, what does Lisa Mateo need to know? Well, I would say this. One, it's been around at least 10 years, even longer, so it's not just new with OpenAI and ChatGPT. Two, it's the most transformative technology of the time.

And I find myself thinking, I'm more of the optimist. I think there'll be a lot of new productivity that comes from this, but also a lot of changes in the job market. Bloomberg will be different. Bloomberg Radio, maybe not so different. All right, Lisa. But I think it will be very different. And so...

I think the US versus China is an interesting thing. The big hyperscalers, the big, you know, CHAP-GBT and Gemini and so forth.

Those companies are competing with China, and China's got natural... Deep Seek, whatever it is. Well, they have Deep Seek, but they have something else. They have 1.4 billion people. So they have data advantages over... We're big, but we're only 340 million people. Let me go to what I was on with Gemini here and also the AI effort of Bloomberg, and that is the shift from the Gensler SEC...

over what paul atkins has been charged by the president of the united states you're going to tell me collegially that the venn diagram of gensler and atkins is pretty tight there's differences but there's a collegial agreement baloney people see this gary gensler is a sharp

that we're seeing right now, is it? - Look, elections have consequences and I have a deep respect and you're right, I'm gonna be respectful. Chair Atkins has served at the SEC not once but twice before. He knows the agency well. And I think whether it's Republican or Democrat, what this show is focused on is the markets, the capital markets. And the capital markets do best when there's rules of the road.

And that's been true for 90 years. And that's what's really critical. Now, the SEC has shrunk about 20%. So it's not as able to surveil the markets and make sure that it's free of fraud and manipulation. Where are your shadows right now? If we go to a more, what's the word, swashbuckling? Is that right?

Yeah, swashbuckling works. That works. If we go to a more Trumpian SEC, where are the Gensler shadows now within global Wall Street? Where's the leverage, the thing, the portfolio insurance of 87, the surprises of August 1998? Where's the shadows for you in the system? Look, I think that overall, it's much beyond the Securities and Exchange Commission. It's

in terms of the whole financial markets.

you probably will have a tendency to greater leverage, meaning more borrowing. But we are also in a heightened risk environment, geopolitical. As we lay out in this book, we are pulling back the U.S. from global alliances. So there is definitely a bit more inflation risk. There's a lot more leverage in the system. Investors are less well protected with, frankly, this sort of deforestation.

large dismantling of something called the consumer financial, the CFPB. And so investors have to be a little bit more aware there's more risk in the system, big risk. And there's also, I would say, the US dollar is under pressure. It's down 10% this year so far.

And this is in the environment where the stock market has been quite resilient. You know, we're almost at near all-time highs. And so then investors have to say, is there more downside risk than upside potential? Another big area of change within the second Trump administration has been immigration. How is that impacting, effectively shutting down the southern border? How does that impact the U.S. labor markets?

So it's interesting, again, in our book, this Economic Consequences of the Second Trump Administration, a Preliminary Assessment. We have a really interesting chapter on this question. And overall, the forecast is that it will cut

by about 0.7 to 1.5%. And in terms of the labor market itself, interestingly, it's going to hurt rural America a lot. Now, rural America will also be hurt by Medicaid cuts, because believe it, Medicaid is more used in rural America than in urban America, and also the tariffs. So there's like a triple threat to rural America, which, again,

Again, politically, it's an interesting conundrum for this White House what to do. But on immigration, I would say it's a downward pressure on the economy, these policies, in addition to the downward pressure from tariffs. Gary, I want to get this in. I think it's too important. And this goes to your colleague, the Nobel laureate, Simon Johnson. Right.

Wonderful friend and colleague. In the heart of the world blowing up for me personally, and there was Andrew Ross Sorkin's wonderful book and any others, Raghuram Rajam, out at Booth. That's a Chicago, that's a school, Gary, out in Chicago. You may not be familiar with that. Very, very familiar.

Simon Johnson's monograph, 13 Bankers, was the definitive book to describe the moment where we lost control in 05-06, where the SEC opened the floodgates to certain transactions and leverage.

Are we at a risk now where we could repeat what Professor Johnson wrote about where chapter four of 13 bankers, this is the piece of paper that opened the risk floodgates. Can we do that again? I think we're human, Tom, and humankind, we ebb and flow on risk. The financial system writ large.

is in good shape, but will it tend towards greater borrowing against risk assets? And that's when you have challenges. And I think we have a US dollar that people have some question about. You have inflation moving up. You have greater leverage. And you have a tremendous amount of uncertainty, policy and geopolitical uncertainty. And those are times you can see

You know, I'll call them spills on aisle five. And, you know, financial spills on aisle five hurt millions of Americans when you lose your jobs or your mortgage rates go up.

I got six more questions. How many do you have? Yeah, plenty. Sure. We are out of time. Gary Gensler, thank you so much. The former chairman of the Securities and Exchange Commission out with a new effort. I'll get it out on LinkedIn and Twitter at CEPR with Simon Johnson and his colleagues at MIT.

If this government spending in defense goes towards things like R&D that have dual-use civilian purposes, you could get spillovers that actually end up enhancing productivity in Europe and so have a more long-lasting impact on growth.

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You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10 a.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Monica DeCenzo with us right now with the market lifting. The fancy title has had a global investment opportunity as a J.P. Morgan private bank. Far more importantly, she flies around the world.

talking to high net worth family offices and others with large pots of money for the J.P. Morgan Bank. And way more important, Monica, you were in the trenches of equity research long ago, and you did something that probably needed on Wall Street a lot more. You were a rock star and you took a year off.

How did you know that? It's amazing. Lisa and I have been working on this since 3 a.m. What was it like walking out the door after the addiction of 70 hours a week? Everyone thought I had lost my mind, including my parents, who were very concerned that I'd be living in the basement. But I wanted to try something different. I enjoyed a year traveling all around the world.

-Very cool. -And then at the end of the year, my former boss, Alexia Quadrani, who I think Paul knows, called me back and said, "Any interest in coming back to this?" And I did. The stereotype is people sort of drift off into the Netherlands, and you came back ever stronger.

From that year off, how did it make you stronger to rise to such an important level at J.P. Morgan? I actually think the perspective you get by seeing other parts of the world and meeting people. I traveled by myself for a year, just alone, which makes you a little more independent. And I think in my role now, a little more interesting.

All the stuff I saw and people I met when I talked to clients, they think it's odd and intriguing. And I think when you choose to come back as an adult versus jumping into this career after college where it just feels like the obvious path, that's a very different thing. President Trump emailed me from the, actually texted from Air Force One going across the Atlantic. He says, ask Monica if American exceptionalism still reigns. Is it still there for your clients worldwide? Yeah.

So worldwide is an interesting question. Let's separate US clients versus international. In the US client base, the last decade, they have cared mostly about maintaining a very heavy overweight to US equities and US investments overall. The last six months, we've seen them start to pivot, which I think is important because

If you had that 60/40 portfolio, drift brought you closer to 75/25 over just the last few years, which means you have more equity than you probably need, and you probably have more US than you need. And so our US clients are finally starting to look outside the US, looking at Europe, looking at Japan, looking at local denominated assets.

to balance out their portfolio. My international clients have always done that, but I will tell you coming out of COVID, my international clients, they felt like the US was the safest bet. They thought we were best positioned to rally after COVID. I was in London a couple of weeks ago and that has changed a little bit. And again, they're not giving up on the US, certainly. They appreciate our dominance in tech and AI and everything like that, but they're understanding that they need to have more diversity in their portfolios. And so I don't think US exceptionalism is dead. Is it being chipped away at on the fringe? Yeah, absolutely.

So for your clients, let's say the family office is a big part of your client base. How do they think about alternative investments? I'm actually surprised that it's

A big allocation, as big an allocation as is, how do you guys think about alternatives with your clients? So when you start to get to the family office levels, let's assume you're talking about a billion dollar plus balance sheet. At that kind of level, you're talking about generational wealth. And so they can have a higher allocation to alternatives, which are less liquid, because they probably don't need to tap into that money in the next five, 10 years. And so there we can see alternative allocations north of 50%. Wow.

Which is amazing. For a traditional client, you would be much lower, like half of that, if not less. So where are we or what's your role at J.P. Morgan? How are you kind of working with your clients to deal with the geopolitical risk, with the domestic political changes that we have here in the U.S., with the change in maybe the U.S. not being as safe a haven as it was even six months ago?

What's the kind of conversations you're having? Yeah, as far as it means with-- think about the US, the US exceptionalism idea. There, we've been advocating more global diversification portfolio. So again, look at Europe, look at Japan, look at local denominated bonds, like EM and other markets.

have more exposure in your portfolio to things outside the US. When you think about geopolitical risk, we really don't do a whole lot in portfolios that we manage around that because history tells us geopolitical flare-ups are a pretty bad indicator of pulling out of the market. People want to do that, that's the inclination, but in fact, if you did that, you actually underperformed. And we looked back over three, six, and 12 months after geopolitical spikes,

Only on a three-month basis do equities lag. So near-term, it causes volatility. Intermediate to long-term, it generally doesn't matter for a global diversified portfolio. We continue with Monica DeCenzo, head of global investment opportunities at J.P. Morgan Private Bank, with headlines out from the testimony of Chairman Powell that we will see later today.

Today, the U.S. economy labor market remain in a solid position. There's many headlines. I'll pick a few. Effects of policy changes on economy remain uncertain. We've heard that uncertain word. Maybe the key headline here. The chairman says ultimate tariff level will determine the impact of the path forward. Long run inflation consistent with 2% target. Is Jerome Powell from all your travels, Monica? Is he central banker to the world?

Certainly all eyes are on him. And that was some of the conversations I had in Europe a couple weeks ago. And I think most people agree with this view that we probably haven't seen the full impact of tariffs in the data. And so most of the people I work with assume that you're looking at a fall, if not later, for any kind of move on rates. I know overnight there was some last day or so some questions around maybe July, but still the view of most people that I work with is later. As you synthesize JP Morgan's research, when does the feel of tariffs click in?

Now? The feel is there from a vibe standpoint. If you look at sentiment, corporate and consumer, it's there. People are petrified. Companies are trying to figure out what they're going to do. But it hasn't flowed into all the hard data yet. And I think that takes time because we don't actually know. If you look at corporate earnings, we're assuming earnings growth slows down in Q2 from double digit to single digit, but still OK. And so I think, unfortunately, from a data standpoint, you're looking at end of summer, if not later, to really have a handle on this. And...

it'd be great to have the administration be somewhat consistent in the communication. I think that would help a lot and maybe give Powell the ammo that he needs to actually move. I don't think he's going to do anything without some stability though. Fixed income space. I mean, we can sit here in a two-year treasury and get darn near 4%. Yeah. Your,

Do your clients want to take credit risk at this point or are they comfortable in the treasury market? Very comfortable in treasuries. Where we've seen a little more interest in the muni market. So you've seen some dislocation there, especially on the questions around will some of these universities maintain their tax status? So that's created a little bit of volatility. And if you're willing to take muni risk, which historically has very low defaults, which most of my clients are, that somewhere would lean into. High yield, not so much. Spreads, most people feel, aren't wide enough. You're not getting paid enough.

And then the other part, hybrid instruments like Bank Preferreds. We love financials here. And Bank Preferreds will give you, if you're a U.S. taxpayer, high single-digit tax equivalent yields. And so that makes a lot of sense if you're not concerned about any more large banks. Is the Monica DeCenzo formula just as simple as load the boat on Georgetown? No.

is that what you're saying i mean george i've not looked at their bonds lately but um perhaps some other universities if you feel comfortable with them yeah and i would want a diversified muni portfolio for sure but i have the privilege of paying uh new york new york city taxes so i'm a big owner of munis myself you're in a meeting there's seven fancy people from jp morgan there's you know some elderly high net worth foreign domestic i don't care

With the kids, it's like, what's a TV show, Succession? It's like she's in the room with the Succession people. That's her clients. Were they your clients? The characters from Succession? The actors are not. I would love to meet many of them. Just very quickly here, if they say we've loaded the boat at Apple or pick a big stock,

How do you talk about us selling the mother load? It's a big struggle for many families I work with now because they have massive embedded gains. And so oftentimes the tax tail wags the dog and people don't want to sell. Now, there are things you can do to chip away over time. There are loss harvesting strategies. There are things like exchange funds you can put a concentrated position into. But I'm a big advocate of

that concentration. Concentrations are great for creating wealth. They're not great for sustaining wealth over the long term. And so we need to get that diversification going. It's just, it can be very difficult when someone's tethered to a story like Apple. Jamie from Central Park just emails in. Ask her if she's taking another year off. Are you taking another year off? If Jamie's listening and he wants to offer that, I'd be willing to come back with some new perspective in a year.

Thank you so much. Monica DeCenzo on a beach somewhere here in the coming months. She is with J.P. Morgan. This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. Henrietta Trace joins us now in studio. We could talk here for hours.

and hours. Richard Haass yesterday was heated that the legislative branch, Capitol Hill, your expert, has given away the right to declare a war. After years and years and years and years with this action, it's over. The president handles the Pentagon.

Yeah, that's absolutely true. And, you know, Leader Schumer is going to file a war powers resolution. They'll vote on that on Wednesday. But this is a very partisan situation. I'd say like 85 to even 90 percent of the Republican conference is very much behind the president making the choices that he made. And so they're not they just don't have the votes to force the issue. But absolutely. And I think Rand Paul would very much agree with that sentiment.

Where do we go here on the domestic stuff? The one big, beautiful bill, where are we with that right now? Yeah, we are in a much tougher place than I think it appears from the outside. I was with some Republican Senate folks last night and talked to them constantly, obviously. And I think that underneath the surface, they are paddling very furiously. I increased my odds from 20% to 40% that they could get this done by the 4th of July. Really? Okay.

But that's mostly because they have the advantage of these crises, launching weapons in Iran, deploying the National Guard out to California. That all helps advance the narrative around the immigration spending and the military spending. But the tax package itself, the Medicaid cuts are

Very problematic. And what the American public does know about this bill, they don't like. It's got a 67% disapproval rating on the healthcare side and a 71% disapproval rating from independent voters generally nationwide. So they need to jam it through. That can grease the wheels, but there's a lot of details to iron out.

All right, just I don't know how to put this. Where's the Republican Party? I guess just in general, where's the Democratic Party? I'm sorry, where's the Democratic Party in general and maybe as it relates to this legislation? The Democratic Party is not even remotely keeping up with the pace of the conversation, especially around this. Yeah, not at all. They're not even on target on an hourly basis, let alone a daily basis.

um and i think that that's really a part of the problem okay let's just cut to the chase we have an election going on this morning uh in new york we'll get henrietta trace's view on that in a moment she's the only one i know who understands ranked choice voting except gina uh cervetti and robert brockton um you know what's so important here henrietta is hockey jeffrey seems to be where everybody goes to isn't he supposed to be visible and vocal so much more visible and vocal than where he is right now why

And they're nowhere in terms of getting a discussion about what's in this bill. The bill is unpopular. Go talk about the unpopular stuff on every media outlet that you can. Okay, but you're in that chair 14 at the Capitol Grill in Washington. You live there. Why? Why are, for Republicans and Democrats listening, why is Mr. Jeffries, who everyone considers articulate, silent?

I think he can't break through and keep up with the cycle is really what I've seen. I don't understand why they're not on tariffs all day, every day. If you're making the price of a can of beer more expensive, talk about it all day long. Talk about it going to the 4th of July, Memorial Day. They're nowhere on tariffs. They're nowhere on this War Powers Resolution. They don't even have a unanimous front there. They're expecting maybe 190 Democrats to sign on to the War Powers Resolution bill in the House, but they're not going to be comprehensive. And the pushback to this

Senate bill is not nearly as forceful or detailed or even talking about the Medicaid stuff. I think they're relying on the institutional knowledge of the American voter to rail against Medicaid cuts, which the American voter can do very quickly. But I don't think Democrats are advancing the narrative. So do you believe so we have just explain to us the timing here. We're going to get

July 4th is what date, and then what do we do after July 4th? July 4th is meaningless. July 4th is a manufactured feel-good story. It doesn't do anything. The only deadline that is real, and I just heard Kevin McCarthy say this, is the debt ceiling deadline. And that is, of course, exactly correct. The debt ceiling breach is going to happen in mid-August. They don't need to pass this bill until they're ready to leave for the August vacation.

So they've got time. Matt from Larchmont emails in and says, okay, SALT I think is back to $40,000, but with a lower income hurdle or something. Are we going to get a – would you explain for Matt and for me, why does Oklahoma care that SALT in New York or New Jersey –

or California needs to be adjusted? - They don't, they absolutely do not. West Virginia for sure doesn't care. And we've heard all the senators from those states say that for years now. The reality on this bill is that the senators have about a trillion dollars

that they can throw at various problems. We have a lot of big problems. There's $122 billion that got stripped out of the SNAP cuts that the parliamentarian won't allow. We have to fix the SALT cap more than 10K. It needs to stay probably at 40K, but drop down to $300,000 in its income bracket, which is extremely expensive. SALT alone is a $1.2 trillion revenue raiser. We need to extend more money on the IRA and get some of these Medicaid cuts out. So I can spend a trillion dollars real fast

And that's what they need to do between now and July 4th. So it looks like the Republicans, do they have the run of Washington? It just feels like obviously they have the majorities, but slim majorities. But it feels not that slim. It feels like they can get pretty much anything they want here. And that's good for policy, maybe if you want to get stuff done. But is that kind of where we are? Absolutely. This is the Trump effect.

So when you look at the details of this bill, and to get even more granular, the reason Lisa Murkowski of Alaska is out right now talking about maybe not supporting this bill is because 35% of Medicaid recipients in Alaska will lose their coverage with this package. Dan Sullivan is up for re-election this cycle. So there are members who are taking a lot of heat from the members who are at risk. So give us a vignette. Hannah, you're an expert at this. Unfortunately, we're near out of time. A given congressperson

in a room or over lunch, like in the movies, Redford's there, the rest of them.

Do they just say, this is all that matters to me. If I don't get this, I won't vote for the bill. Does that Hollywood drama happen? Some of the members are like that. Rand Paul is like that. He's a no-go just because of the debt ceiling. But what really happens in these caucus lunches is members will get much more vocal towards the end of the process. So last night, Tom Tillis of North Carolina, who's in a tough race, came in with a piece of paper showing the top 10 states who are going to lose Medicare coverage.

Medicaid coverage. He's going to lose 600,000 people just in North Carolina. So members will go to the mat for their individual issues. The Trump effect also is such that they're trying to keep members from speaking out publicly about their concerns. If you have a problem, go straight to the president. Go straight to Leader Thune. And that keeps the expectation or the negative vibe, if you will, down. But it is very much alive in these caucus meetings, especially right now. Who's driving the bus here in Congress? Is it...

I mean, who's pushing all this through? - Leader Thune is doing a lot of heavy lifting on the Senate side with Lindsey Graham. - Is the president near in the vicinity? Like the Red Sox are a lame duck. Okay, they're playing 500 ball again. Is the president near a lame duck?

I think the reason he floats the idea of running for a third term is because he doesn't want anybody to talk about him being a lame duck. Indeed, I also heard that straight from the former speaker. So I think he is presenting as though he will run again and allowing that confusion to list so that there won't be a shadow presidency. Do you know that New Orleans is seven degrees cooler than New York City right now? Come on down.

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This is the Bloomberg Surveillance Podcast. Listen live each weekday starting at 7 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal. If you look at Emily Kilcrease's bag collection, it's unbelievable. She's never had an introduction like that. Joining us now, this is the conversation today for those of you coast to coast looking at tariffs and trade. Emily Kilcrease,

Gilcrease is earned ability within our trade, our thinking of international affairs with the National Security Council and working with Mr. Lighthizer a few years ago. Emily, thank you so much for joining Bloomberg Surveillance. How different is the day-to-day trade tariff grind of Trump II versus Trump I, which you lived?

It's a great question. The trade space is fundamentally different under the second Trump administration. He came into this term willing to use tariffs at a scale we've just never seen before in the era of a globalized economy. He used them faster, he used them harder and on both strategic competitors like China, as well as on close US allies. So the

goals of his tariff program have changed substantially. And the, candidly, the chaos that we've seen in some of his trade policy is just much different than what we saw the first time around. - You lived Lighthizer's book, "No Trade is Free." He came out of a desperate Northeastern Ohio and said, "We need to fix the system." What I see, Emily Kilcrease, is just simple.

It's a question of magnitude. Can this nation survive even a blended 17% tariff? Isn't that beyond Lighthizer? It's a good point. Tariffs do have a role in addressing unfair trade practices that we've seen from other countries, mostly China. Clearly, Ambassador Lighthizer and President Trump have been focused on that. They can have a role in protecting critical industries. But the question that you've identified is, can we use tariffs

at high levels for all of the different goals that the Trump administration is now trying to use them for. Can we use tariffs to generate revenue? Can we use them to fix trade deficits? Can we use them to combat unfair trade practices? When you add all of that up, you do end up with a very high tariff rate that could have some serious consequences for the U.S. economy, for U.S. productivity, and ultimately for the U.S. workers that the Trump administration is trying to help. So it's a really big risk. It's a big experiment.

And there are certainly very good reasons to think that it might not work out the way that the Trump administration wants it to if you do have a tariff wall that exceeds 20% or more. Emily, I think the premise for President Trump and his economic supporters and his policies is that

Somehow the United States is at some disadvantage or is not treated fairly by some of its trading partners. But others would push back and say, hey, since World War II, no one has benefited better or greater than the United States from free global trade. How do you think we should think about that?

So there is a small bit of truth in what the Trump administration is saying, what the president is criticizing in terms of how our trading system works today. We have a trading system that treats China the way it treats everybody else.

geopolitically, that doesn't make a lot of sense anymore. We also know that it's been really hard to get even some of our closer trading partners like Europe to address longstanding trade irritants in the relationship. Trade is hard. It's hard to get other economies to fix regulations, fix barriers to trade sometimes. So it's not that the Trump administration is completely wrong. It's a question of whether their approach to fixing these problems is actually going to have the effect they want it.

Emily Gilchrist, your essay in Foreign Affairs is blistering. And there has to be a change here in process. Is the change here to go from Trumpian dealmaking back to a diplomacy of, say, the Uruguay round?

So I don't think there's going back, right? I don't think there's going back to a WTO-led system. I don't think there's going back even to kind of a more mild approach that we saw in the first Trump administration. The point that I make in the essay in Foreign Affairs with my co-author Jeff Gertz is really one about U.S. credibility. And that's where we argue that the U.S., and particularly the Trump administration, needs to show that not only is it going to threaten terror,

tariffs, that it can credibly commit to not impose tariffs if our trading partners do what we ask them to do. So far, we haven't seen that. We've seen continued threats of tariffs. We've seen continued back and forth, on again, off again, tariff proposals. That really hurts the US ability to kind of usher the economic order into a better, more sustainable state. And in many ways, it's undermining the Trump administration's own goals.

Emily, thank you so much. And I'll get the essay out from Foreign Affairs. Very valuable, short, sweet and really thought provoking on this new regime of terrorists. Emily Kilcrease joins us this morning off the Foreign Affairs essay. This is the Bloomberg Surveillance Podcast, available on Apple, Spotify and anywhere else you get your podcasts.

Listen live each weekday, 7 to 10 a.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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