Tariffs on the EU & Consumer Tastes 5/27/25
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Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Busy long weekend at the White House. Two tariff announcements for Europe, which netted out at a 50% levy come July 9th. National Economic Council Director Kevin Hassett on deal progress around the world. Across all the countries, I expect we'll probably see a few more deals even this week. There's some stuff very close to finish.

And what's really going on inside our economy? Investor Ray Washburn's businesses are varied. He's on the boards of Sunoco and Red Lobster. He's watching consumers across their wallets. Credit card debt, consumer debt is a big worry. I mean, it's at an all-time high.

Plus, the rest of today's news that got us squawking. A record holiday weekend at the box office. President Trump's fight with Harvard takes a turn. And the tariff up and down and up and down changes Wall Street are watching. It's on a 24-hour basis that something can change. I do find myself getting to the point where I don't take anything quite as seriously. It's Tuesday, May 27th. Squawk Pod begins right now.

Stand, Becky, by in 3, 2, 1. Cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. And a down week for the markets last week on news of those tariffs for the EU. Across the board, markets were off by about 2.5%.

percent last week. If you check out Treasury yields this morning, Treasury yields over the course of the last week were sharply higher. This morning, you will see yields pulling back. The 30-year is actually below 5 percent. It's at 497. The 10-year is at 446 and the 2-year is at 398, back below 4 percent. This is coming as yields around the globe sell off.

There was a big move in the Japanese 30-year bond overnight that follows a report that Japan's finance ministry is considering offering fewer bonds at the long end of the curve. Last week, yields surged to record levels over concerns from a weak 20-year auction here in the United States and in Japan. And politics around a government stimulus program, you could see the Japanese 30-year,

moving down pretty substantially in yields. Again, there was a survey that took place where they asked some of the primary dealers, some of the buyers of bonds, what they would like to see at the long end. And the supposition is that Japan may not sell as many bonds, at least on the long end, as they had been doing. Japan's been doing the same thing we've been doing, which is issuing more on the long end at the same time that they are rescheduling

removing the central bank is not buying as many bonds as it had been before. So it's a supply-demand situation, and we'll see how this plays out. Let's give everybody a recap of what's going on here. Stocks fell on Friday, this after President Trump threatened to impose 50% tariffs on the European Union beginning in June. That was first. But then futures rebounded this morning after President Trump said he received a call from Ursula von der Leyen, who requested an extension on that deadline.

He said that he had granted an extension to July 9th. Now, a spokeswoman told reporters yesterday that both sides agreed to fast-track negotiations and stay in close contact. One of the EU's top negotiators posted on X that he had good calls with Commerce Secretary Howard Lutnick and U.S. Trade Representative Jameson Greer.

Markets in Germany and France then opened for trading yesterday, rebounded from Friday's drop. So I shouldn't say they opened yesterday. They opened today. It seems like it feels like yesterday.

There's a lot of big things. That happened over the weekends. But there's a lot of big things that have to happen even in the next six weeks. Oh, yes. You're talking about 27 countries. Supposedly nowhere near close. And some of it has to go through 27 different countries. But what do you call a deal at this point? You could call a lot of things a deal. And both sides would say, gosh, isn't it great? I just was thinking, I just really like how the bond market is making it easy for us. Because the three most important ones are,

the two year is at 3.99 just below four percent just below four the 10 year is at 4.4 just so we can it's really easy to remember and then the 30 year 4.97 right so i can even understand whether it's above or below those right isn't it nice that it's they're all below today but they were all above it they were all above last week the highest levels that we've seen in quite a while but for simple people

It's just on a Monday, even though it's a Tuesday. Half percent below 4%. Yeah. Getting back in line. It's tariff stuff. Wouldn't it help to be a technical analyst now? I mean...

Like, why pay attention to technology? Really, it's on a 24-hour basis that something can change. And I do find myself getting to the point where I don't take anything quite as seriously. I think if you really could just look at, if technicals really work, it'd be nice to hide in that space.

In that domain, although last time Katie Stockton was on, you know, they're wrong, too. She's expecting new lows or a possibility of new lows. She's still going to be right. She could be right. Then again, the market's momentum. It just and then you read about, you know, it seems like a lot of this people just shake off.

And it seemed to be what Kashgar was saying to her and talk about him in a second, too. But let's get to President Trump's other tariff threat from Friday on. This time it was, as you might recall, we were sitting here just minding our own business and the Apple and EU stuff came out. It was unbelievable. He said he was considering tariffs of 25 percent on iPhones made anywhere except the United States. Such a move is unlikely.

as it is estimated that iPhones made in America could cost up to $3,000. However, Treasury Secretary Scott Besant may have provided a path for an out for Apple in a Fox News appearance. On Friday, Besant said Apple could help bring production of chips and electronic components to the United States. And then separately, the New York Times reported that President Trump was irritated when Tim Cook declined to join him on that recent trip to the Middle East.

Probably was the Earth Day because he actually said it when he was over there. During that trip, the president took a number of shots at Tim Cook. During one address, he praised NVIDIA's Jensen Wong, saying, Tim Cook isn't here, but you are. President Trump said that the smartphone tariffs would begin at the end of June. In effect, all phones made abroad, including Samsung's devices. And Tim Cook went the next week and was at the White House. Apparently, I don't know what happened. When I travel, we all travel.

Look, there are some... You've got to kiss a rig. Sure, but... And it's not that hard. You don't even have to do anything. He gave a million dollars of his own money to the inauguration. He has shown up for a lot of things, been there at the White House. And look, there was some report... There were some reports over the weekend that...

This will come up in India's trade talks, too, because India would like to see a way for some of those phones to be made in India. Supposedly, we're close there. Right, you're close, but this... We've been close there for the last month. Supposedly, there was some holdup. We're probably closer today than we were a month ago. No, I asked Hassett. But supposedly, there was some stumbling block that's been overcome. This is a stumbling block.

This is a stumbling block if they can't produce phones there. India's thinking that they are the antidote to China. Right. And then it turns out, no, you can't make phones there and sell them over here. Which then changes the entire plan for what Apple would otherwise want to do in that country.

In the meantime, Elon Musk says that he has shifted his focus back to his companies and a post on X in response to outages related to a fire at an Oregon data center. He said on Saturday, back to spending 24-7 at work and sleeping in conference server factory rooms. I must be super focused on X, XAI and Tesla plus Starship launch next week as we have critical technologies rolling out.

Regarding the outage on X, he said major operational improvements need to be made. He did say that the backup should have kicked in. They didn't. And so they're working on that, too. If you check out shares of Tesla, though, they have risen pretty sharply over the last week or two, as it has seemed that he'd be spending much more time focusing on Tesla. The shares this morning are up another two and three quarters percent.

Separately, Tesla sales in Europe plunging in April down 49% year over year. The drop coming even as overall battery EV sales rose by 34%. Now, Tesla's faced brand damage in Europe from Elon Musk's political involvement with Trump.

Probably also because of some of the politics that he's got involved with in Europe, actually, and rising competition. Data showing that last week China's BYD sold more electric cars in Europe than Tesla. That's for the first time. So European consumers also have been showing a preference for hybrid electric vehicles rather than Tesla's fully electric models. Just like here. Although we were kind of shocked, biggest selling car. Yep, still has got the biggest selling car.

President Trump said yesterday he was considering taking billions of dollars in grant money away from Harvard and redistributing it to trade schools across the U.S.,

He called Harvard's he called it anti-Semitic and said giving the money to trade schools would be a great investment for the USA. Last week, the Department of Homeland Security said it was cutting off Harvard's ability to enroll international students before a federal judge temporarily halted that move. Harvard didn't immediately respond to requests for comments about Trump's posts. So if you're.

I don't know who you'd rather be, Tim Cook or Harvard. They're both in the crosshairs.

Disney's remake of Lilo and Stitch topped the holiday weekend box office, believe it or not, bringing in an estimated $183 million in North American ticket sales. Paramount's Mission Impossible, The Final Reckoning, brought in $77.5 million in its debut weekend. The total domestic haul of $327 million set a record for Memorial Day weekend, according to Comscore. Which is interesting. Yeah. It's

So the three hours you're saying is interesting because that's hard to do. No, but it was turns that we're setting records with people going to theater. So at the demise of that experience was greatly exaggerated. But is it for a business known as Fandango? But is it because the tickets are sold by a company? What about something called Spinco? Right. Right. Versa. But is it but is it ticket prices are high?

Like unit sales, is it a record, do you think? Or, you know, things go up. Oh, right. Inflation adjusted. I don't know whether it's a... But that's... I think they'll take it. People like Adam Aaron and EMC and things like that. Because I still like going. I still like... I can't believe Lilo... Kids' movies are important. They are. They are.

Teas will be next. Still to come on Squawk Pod, we're talking the U.S. economy with Sunoco's board chair, Ray Washburn. American Commerce runs on diesel. All our 18-wheelers run on diesel. If that softens, that's when you see that stores are buying less stuff in the Long Beach and need less trucks to truck it. So watching diesel sales is a real barometer of the economy. Washburn has a handle on consumers at the pump, in stores, and at restaurants. And he says they're worried. We'll be right back.

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And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF, part of Fidelity's suite of active ETFs. Learn more at fidelity.com slash FELC.

Before investing in any exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, an offering circular, or, if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. Fidelity Brokerage Services, LLC. Member NYSC SIPC.

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Welcome back to Squawk Pod. Up and Andrew, cue.

You're watching Squawk Box right here on CNBC. I'm Andrew Ross, working along with Joe Kernan and Becky Quick. Joining us now to discuss real estate, energy, tariffs, the state of the consumer, and much more, Ray Washburn, vice chairman of Gillen Capital, Gillen Property Group, chairman of Sunoco, member of Red Lobster's board. Welcome. Thank you. Thanks for being here and on set. What's the Italian, no, it's Mexican, right? Mexican, Micosina. How many of those you got? 27. 27 of those. Mm-hmm.

Board or Red Lobster at this point? How did that come about? Well, Red Lobster, as you know, went through bankruptcy after that $20 all-you-can-eat shrimp fiasco they had. So Fortress bought it, and Fortress asked me to go on the board. We do a lot of business with Fortress. You're on the board for that. Chairman of Sunoco. That's right. So if we want to talk energy, you can explain what's happening. Yeah, we're the largest seller of refined products in the Americas now. And then you started...

Initially, you bought the best mall in Dallas, didn't you? No, in the United States. In the United States. Okay. Wait a minute. Short Hills Mall is best in the United States. That's a mall. We're open air. Okay. You're open air. But you bought that, and then you bought how many more at this point? Well, we own Holland Park Village in Dallas, Country Club Plaza in Kansas City. In KC. In KC.

We've got a block in downtown Aspen. And so we've got different things around the country. You don't go anywhere that's not a great place, do you? No, I like to stay active. So the con-- and, OK, let's talk-- you've been active politically, actually. You were actually in the Trump administration, if you're-- Yeah, yeah. No, I was a Senate confirmed. I was the CEO of the Overseas Private Investment Corporation. Which merged with the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the-- the--

Well, now it's called the DFC, Development Financial. And it took part of USAID and part of the State Department. Well, you can comment on all the cuts there. I was the CEO when the BUILD Act went through. And so that was under my watch that that all happened. But you backed, I think you backed Romney. You backed Chris Christie. I was Chris Christie's financial chairman in 2016. Yeah, financial chairman. Right now, you would say you're a big backer of President Trump. Yes, I'm a very big backer of President Trump. Okay, so what...

What do you make of the backdrop being in all these businesses with tariffs and the big beautiful bill, Doge? How about all that? Give us a synopsis. Sure. Well, it's had us to really rethink a lot of our businesses in a good way. And I'll give you an example of Red Lobster. We used to source all of our shrimp from China, for example. We're the largest buyer of shrimp in the world. We've now shifted all that production in a fairly short period of time to India, Vietnam,

the Texas Gulf Coast. And so that had us rethink our supply chain. So in that sense, that was a good thing. In Sunoco, on the energy side, the only way we're affected really is on steel prices for pipes and stuff, because we have 15,000 stations in the Americas, and pretty much everything we have is produced here domestically. What do you think of this latest

Were you surprised? U.S. deal in Nippon, if that goes through? No, I just saw that on your... Who got to the president? I think Dave McCormick got to him. Senator. I want to go, though, on the show side real quick. Yeah, sure. So you're moving stuff to, you said, India and Vietnam. It's already moved. Already moved. Yeah. And the Texas Gulf Coast. Tim Cook was planning to do that, and apparently that was not good enough. So do you think long-term you're going to be okay? Well, we have to have the...

I mean, we don't have enough shrimp in Texas Gulf Coast to feed all our restaurants. And what's that done to your margins thus far? And what do you think it will do long term? Long term, you've just got to squeeze margin out. You know, all of us have got parts of our business that 150 percent tariffs, obviously nothing works. You get down to 10, 8, 10 percent tariffs. You can find that in your businesses to squeeze out.

What if it's 20 to 30 percent overall? It's a challenge for sure. It's a challenge. But, you know, the consumer at the end of the day isn't going to buy a, you know, $50 shrimp plate. So, I mean, the business will figure it out. I think President Trump sees that and is seeing slowly...

work their way through the system, he's going to understand what it takes to make the business work. Otherwise, we're not going to be selling much shrimp. That means you just find another alternative? No, I think it'll work itself out this summer. I think he's going to find compromise in a lot of ways. You know, the first thing he put out there was a big blanket deal. Now they're negotiating down the different parts of it. Do you see an eventual...

payback to the near-term pain that we felt maybe with the tariffs? Do you think it resets global trade in a positive way for the United States? Are you a believer? In a positive way? Yes, I think so. I think so. It brings so many... We have to rethink a lot of ways we do business, too.

And I think the tariffs have forced that to a lot of us. For example, our restaurants, we source all of our to-go packaging, things people don't think about, bags, plasticware, all those kind of things that you get are all from foreign places. And so those things have doubled, tripled, quadrupled in price. So we're having to find suppliers closer on shoring,

I think it's going to bring a lot of business. When I was running the Overseas Private Investment Corp, we financed a lot of companies in Central America, the Northern Triangle, Columbia, places like that. It's going to bring a lot much closer to the shores of the United States. But you think we'll get it back here, here?

i think we'll get some of it back here a lot of it is so labor intensive it just with our labor laws in this country it's difficult to do anything that for example our shrimp a lot of it's hand breaded so you have a lot of people dipping right and at minimum wages here you just can't it just doesn't work you so interesting yeah yeah it's so interesting shrimp yeah right no no but what do you do about that i mean do you think robots are ultimately going to be doing this for us

hand-braiding shrimp? That's what I'm saying. I'm sure someone will figure that out. I don't know if Elon Musk is going to have his robots, you know, doing the shrimp. Right. Well, if they do, then we absolutely can bring them back here. You're from Dallas, and I know you know Kyle Bass. Yeah, he's a good friend. Good friend. China Hawk. You with China Hawk? We doing the right thing? How should we approach that? Should there be permanent

high tariffs with China to decouple or to just... Well, we're able to move, again, a lot of production, a lot of things away from China. It just takes... Should we be doing that? Things are so cheap there. We should be doing that. Oh, absolutely. We should be doing that. Because of their designs on...

global on global dominance that that the chinese seem to have but the other countries like india you throughout africa and the one thing i learned running overseas for investment corporation was so many pockets of labor in other parts of world it has been untapped you go down this to south america to brazil argentina those countries in the end

an incredible amount of labor. - Ray, how did you think, we're trying to figure out why the market has been so resilient. If we hadn't had this sort of hiccup with tariffs and all the work, that some of the stuff's good. Deregulation is probably positive. The Biden economy, if you did back out some of the inflation and maybe it's pandemic related, maybe it was too much spending. But other than that, jobs market remained very strong. Wages were rising, except inflation rose too much.

Are we going to go into a really positive economic cycle, do you think, if we get beyond? Well, credit card debt, consumer debt is a big worry. I mean, it's at an all-time high. This is what we want to hear. So that's something. Yeah, credit card debt's an all-time. So in my three main businesses, call it retail, shopping centers, restaurants,

and Sunoco, you know, gasoline sales. What we're seeing across all three platforms, we'll start with gasoline. Gasoline right now, sales are soft compared to last year. Why? A number of things. One is refinery capacity is 90, 92% right now in the second quarter.

high 80s. Well, they're pushing so much gasoline onto the market. The consumer has slowed down their driving. So all of a sudden we have too much supply on the market. So is that good or bad? Even with cheaper energy prices, gasoline hasn't been as cheap because refinery hasn't met the demand. The refineries are continuing to pump it out because we haven't had a major disruption in the refinery. There hasn't been a hurricane, big fire explosion, something like that. So the refinery business is all out right now.

Okay? None have gone down for big maintenance. And so that's putting a lot of supply into the system. Okay. Okay, A. B, the consumer is out there. A lot of them are just, they're scared right now. There's a lot of kind of stagnation going on. So I think a lot of people. What are they scared of? Tariffs? Just the headline news, listening to you guys. I mean, watching, reading the newspaper every day that there are job losses and things going on. They're scared of their jobs. So they're driving less. EVs have come into about 4% of the market.

And what do you think I close to? You know, I don't know. The problem is a lot of people are kind of scared of EVs and like, I rent one or I get one. Am I going to be able to charge it? And so I don't know where it is. If you have to drive farther than a couple hours. The thing is, we're one of the largest sellers of diesel.

American Commerce runs on diesel. All our 18-wheelers run on diesel. There aren't electric diesel trucks. So that's good for your business. That's good for our business. So when you see distribution of goods around the country, they've got to be fueled by diesel. So that's strong for us right now. But if that softens, that's when you see that stores are buying less stuff.

in the Long Beach and need less trucks to truck it. So watching diesel sales is a real barometer of the economy. Right now, it's about equal to last year. It hadn't gone up, it hadn't gone down. It's just about soft.

so i guess i would say do you see any benefits yet to deregulation that president trump promised well we're also involved in community banks and you know okay yeah i've got about them too then yeah well the community banks being you know banks kind of this the sub 20 billion dollar size i'm a large investor in that that space the m a activity has been almost zero for the last

five years in that space. There needs to be a consolidation of our banks. We have too many banks in this country. And so you haven't been able to do it under the previous administration. But this could happen. This is in the future. That could happen. And so if that happens, that'll help, I think, get a lot of things turned because people forget community banks is really what drives this country. But they've got to be merged up and then new ones get started. And, you know, the local person, when you go to

go out and see running your banker at lunch or do alone it's difficult a lot of times the big money center banks have any any kind of relationship there but community banks is the key we've got to get that go away if you have mergers that no no you need that's the healthy thing because people only want to invest in banks and think they can sell and so you got a community bank up going lets a bulk up then you come along with another one if you look at the history of community banking over the years you'll see how that's

actually really accretive to people doing business. Great. Go back to the consumer's health and what you see both in retail and restaurants. So our shopping centers are mainly high end. The high end hasn't seen anything on it. I mean, we've still had positive growth, high, low, you know, kind of 8, 9% type gains. I was just out at ICSC in Las Vegas for the shopping center convention. And what they, ICSC,

There are no new shopping centers being built in the United States. The last mall was built 20, 25 years ago in the United States. Okay, everything is open air. If you look, it's 100% lease basically across the country. So what's coming in is cons, big lots, all those guys going bankrupt.

Those spaces are all being repurposed. So there is a very aggressive push by retailers right now to grab space because there's a limited amount of space. To the consumer, the consumer wants a great experience when they go shop. So a lot of retailers, and I'll give Red Lobster as an example, it had been bought by private equity companies.

And it kind of lost its way, they hadn't reinvested back into the concept in multiple years, consumer floated away. This new group, Fortress, came in, they're investing a tremendous amount in CapEx, well they got to get, buy the brand back for the customer. Things like across the street from here, Raising Cane is packed. Well that's actually a fairly new concept. The consumer wants excitement and the consumer will spend. They're out there. You go to any open-air shopping center, walk around, they're packed with people.

And they'll spend, but they only go where they get the great experience. They're not going to some strip mall outside of anywhere USA freeway. They want the experience. Most people have not expressed that concern about consumers, I don't think, that we have alone. Oh, but you've got credit card debt? Yeah, credit card debt, scared of losing their jobs. So, I mean, unemployment is historically very low at this point. So are they...

If they look into the abyss and they see that there's nothing there, is there something there? Is there something on the horizon? You guys all go out to restaurants. You look at the price. You're like, my gosh, look at how high prices are going. We've raised prices in our casual dining portfolio since the pandemic over 20%. Okay, over 20%. What's inflation been in that time? So, I mean, the consumer, how do they pay for that? They're paying more on their credit cards. I got a separate question. Yeah. You play the public markets?

A little. Like yourself? Not a lot, no. I'm really a private guy. Just a private guy? I didn't know if there was anything out there that you go, I like that. You know, I think real estate REITs are incredibly cheap. When you look at them versus the asset value underlying them, it's the old saying, it used to be, don't drill an oil well, buy it on Wall Street. Right.

I think it's the same real estate. I think it's cheaper buying it on Wall Street than it is going out buying your own shopping center. That's fascinating. But the thing about REITs right now, which I don't understand, is the public REITs, right, are trading at these very low multiples. You look at some of the private real estate funds, they've never marked the stuff down nearly to where the public REITs are trading. And so who's right? Well, there's a trillion dollars of debt coming due this year in real estate.

When that wall, that tsunami hits, we're already seeing it. I've bought a number of things at massive discounts to lenders. The difference this time is most of it's in private capital, private equity pockets, not public banks. So you don't get the headline risk. It's not on here that some big bank just took a huge write down on something. It's one of these big private equity firms up here that quietly kind of shuffle it off to the side. Can you get workers at all your restaurants right now? We have no problem getting labor. No problem. You have to pay a lot.

Do we pay a lot? Do you have to? No, I mean, we pay market. All right. And inflation. The reason I ask, and this is my anecdote, I went Taco Bell on Saturday. I spent $30 at Taco Bell. I've never spent $30 at Taco Bell in my life. Is that 35 tacos? No, I think it was eight or nine tacos. And I asked the guy, he said, the taco supremes have really gone up because of materials. And he's paying $15.50 an hour in, is that New Jersey? Is that the...

Is that the minimum wage now in New Jersey or for taco? I don't operate in New Jersey. But, so I was shy. I just wanted, but you're not seeing that where you are in, all right. That's interesting. Well, we primarily operate our restaurants in Tech, not Red Lobster, but my own chain. We're primarily in Texas, Mi Casino. Okay, Mi Casino. I know, I took Latin. I know nothing. That was great. Good summary across the board. Please come back. Sure. Great to have you. Thank you.

Coming up next on SquawkPod, the president's war of words against Apple CEO Tim Cook has escalated to impacting tariff policy. Could it lead to a $3,000 iPhone? White House top economic advisor Kevin Hassett joins us. We'll see what the end game is, but we don't want to harm Apple. And in the end, if you think that Apple has a factory someplace that's got like a set number of iPhones that it produces and it needs to sell them no matter what, then Apple will bear those tariffs, not consumers.

Don't just ride the index, seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And

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How will you shape the future of energy with confidence? What does it mean to deliver affordable and reliable energy for all?

This is SquawkPod. Hop on, Becky. Thank you.

All right, welcome back, everybody. Let's get to the latest with President Trump's broad spending and tax cut bill. Over the weekend, House Speaker Mike Johnson urged his Senate colleagues not to meddle, in his words, with that bill too much. But fiscal hawks in the Senate have signaled that they will not support it in the package in its current form. In an interview on CNN, Republican Senator Ron Johnson said that he thinks there's enough GOP opposition to the bill's current form to stall its progress and make changes.

He urged President Trump to get serious about spending reduction and reducing the deficit.

Meantime, Kentucky Republican Senator Rand Paul called the spending cuts in the House bill wimpy and anemic and said that he will not support it in its current form either. President Trump delaying the 50 percent tariff on the European Union until July 9th. With insight to the president's plan and much more, National Economic Council Director Kevin Hassett. Good to have you on, Kevin. As always, the way we we intro that it's like, oh, yeah.

the 50% tariff on the EU. Today's Tuesday. We didn't even hear about that until the show on Friday. So things move fast. I guess there's a time dilation is a fact in general relativity. But these are moving very quick. Can you tell me...

What was happening before Friday between the EU and the US that obviously got the president's dander up to just come out on a social post and kind of shock and awe the markets on Friday? What was happening? How intractable were those negotiations?

Yeah, they're kind of intractable. You know, I've been involved in those negotiations when they're in D.C. with Secretary Lutnick and Jameson Greer. And I got to say that there's not a lot of movement. There was not a lot of movement coming into the week. And as your pet economist, Joe, one of the theories I had of what was going on is that like the U.K. deal was actually pretty easy to negotiate because the U.K. had some specific stuff they really cared a lot about, like autos.

We had some stuff we really cared a lot about, like they hadn't allowed our farmers to ship stuff to their country. And so the deal was kind of easy to make. Well, you get your thing, we get our thing, and so on. But in Europe, they got all these countries, and each country has a different objective. And they have to aggregate these objectives at the EU. And so while we've been not making the progress we wanted to see, you can sort of understand that they've got a problem where they can't make up their own minds.

And so I think having a little bit of a deep breath and waiting for them to figure out what they want, then that should help the negotiations. But the bottom line is across all the countries, I expect we'll probably see a few more deals even this week. There's some stuff very close to finished. It's up to the president, of course. But in the end, the other thing I would say is that you should expect the best out of these deals. President Trump wants to put America first. He understands that our trading partners want to put themselves first and he wants them to be

second in our affections and America first, and the things are moving forward very quickly. And I think EU is actually about the toughest nut to crack amongst our allies because of the sort of aggregation of preferences problem. - Is it all about tariffs? Is it about non-trade?

protectionist policies and I guess, but you got, how many countries did you say? So it could be a little of each from, you know, it sounds like obviously it's not monolithic and I don't see how you figure it out by July 9th, Kevin.

Well, the non-tariff barrier issue, for example, there are simple things that we've been trying to do and have been succeeding to do with other countries where we just sort of say, hey, you know, if a car is OK for us to run on our roads and your cars are OK for you to run on your roads, then why don't we

like acknowledge that your regulations are okay for cars and our regulations are okay for cars. You can acknowledge that. And then we could just move our cars around without lots of costly retooling. And that's the kind of thing that we're shooting for. And then there's a lot of countries that are just like, okay, sure. But then with Europe, it's not quite so easy.

So you figure the phone call over the weekend, she just said, cool your jets, Mr. President. Let's let's let calmer heads prevail. We're going to try and in and come together. No specifics on concessions yet. It's just like, let's put this on pause and see what we can work out. Is that what happened?

Well, one of the things I've seen happen too is that the president is forming really strong, tight relationships with the leadership in these trade negotiations. And so I think it was almost like friend to friend. Okay, fine. You want some time off. You can have some time off. I think it was probably not more reasoned than that. I trust you. You're a good partner.

I really enjoy our relationship together. Let's try to fix this. We were already talking about off ramps on Friday, right after they announced. We're talking about off ramps and we're trying to figure out an off ramp for Apple. It'd be a $3,000 iPhone if they tried to make everything here. $3,500. $3,500 for a good one, for the kind you'd like probably. But what's the offer? I'm a smoke signal kind of guy. What's the supply? Yeah. What's the supply chain? I mean, what is Tim Cook supposed to do?

Right. Well, you know, we'll see how it works out. But the bottom line is that what we're trying to do is onshore as much as we can in the U.S. and make it so that the U.S. is not hyper dependent on imports from China. And so I think that one of the things we're seeing is that people are moving way faster than you might expect.

If you look at the 20% equipment investment in the first quarter before the tariffs even came in, with supply chains moving fast and just-in-time inventory management and AI, I think you're going to be astonished at how quickly stuff moves onshore. And that's what we're shooting for. And in the interim, then we'll see how it works out. But they need to move their stuff onshore as much as possible to make it so that the U.S. economy is secure and not prone to Chinese extortion.

But, Kevin, I did some reporting actually on the Apple issue over the weekend. I actually wrote something in Dealbook this morning about it, which is what do you think about the prospect? If Tim Cook were to come to you and say, look, we obviously can't move everything forward.

in 12 months. It's just not going to happen. Maybe we can start to move things over several years. In the meantime, we could try to assemble more of the phone in the United States so you could actually write on the phone assembled in the United States or potentially, depending on what you think the merits of it are, made in the United States.

maybe at their Texas facility or something else, but with a longer-term plan of maybe five or ten years, frankly, of being able to actually manufacture the phones here. If he were to come to you with something like that, do you think that then there would be a reprieve for the next couple of years as they get their house in order? Because clearly it's almost, just from a physical standpoint, impossible to move everything overnight.

And the damage it could do to the company overnight is obviously tremendous. Well, it is impossible to move things overnight. But one of the things we're seeing, I was joking with a person who does bond rating in the U.S. in my office a few weeks ago. And one of the things that happens at the Director of National Economic Council office

is that CEOs line up in my office. I'm kind of like the person in an airplane that's getting walloped over the head by everybody, where everybody says, oh, we're never going to be able to do anything if we have this tariff. It's going to be a disaster if we have this tariff. And then my friend who's a bond raider said, actually, they come in and they tell me the opposite because they don't want the bonds to be downgraded. And so the point is that everybody is trying to make it seem like it's a catastrophe if there's a tiny little tariff on them right now to try to negotiate down the tariffs.

And so in the end, we'll see what happens. We'll see what the end game is, but we don't want to harm Apple. And in the end, if you think that Apple has a factory someplace that's got like a set number of iPhones that it produces and it needs to sell them no matter what, then Apple will bear those tariffs, not consumers. Because it's an inelastic supply.

Hi. We had Ray Washburn here earlier. Not only is he a big industry leader, he served in the first Trump administration. He said, look, 8%, 9%, 10% tariff, business can figure out, they can find ways to do those margins. If you get above that, 20%, 30%, even 50%, well, that's not the case. So are you thinking eventually tariffs will get down to the level that businesses can negotiate within, 10% or less? Or do you think that a

A lot of this is going to be paid by the American consumer, too. Well, in the end, that's going to be up to the president. But we've seen that 10 is a place that a lot of people have been pushed to. And I would guess that if they come in with good enough offers, then they'll stay there or perhaps even below. But if they come in with retaliation and they don't open their markets to U.S. goods, then it'll go the other way.

The bottom line though is that it's astonishing how little foreign markets have been open to U.S. goods. And they're opening up in these deals like you couldn't believe. And so what's going to happen is that if you make something in the U.S., if you're a farmer in the U.S., then your markets are open to you in a way that they've never been before.

And so I think that as you're thinking about the economic impact of tariffs, we need to think about, you know, elasticities of supply and demand and so on, too. But we also need to think about what happens if all of a sudden the tariff barriers are gone and U.S. products are able to be sold all around the world. That's great for American firms. It's great for American equities. We keep hearing anecdotally about India and that there's been some excitement, stops and starts on how close we were. Do you know anything, Kevin? I've heard that

They've offered to cut the tariff gap by two-thirds or something, and they've reached some pretty high levels. What's going on between us and India? Is that close?

You know, I won't talk about a specific country, but I have been meeting with Indian officials. I had dinner with the ambassador a little while ago. And I think, you know, J.D. went over there and made a huge amount of progress. Thank goodness for the vice president. So. So, yeah, I would say that it's one of the ones that's on the list of it's close to the finish line.

On the list, obviously, that would be. And then I don't know. So you can't talk individually about any. But right. Because the president vitalizes everything, Joe. That's why. So you can see it. Oh, this looks pretty good to me. And this is July 9th deadline. That's a July 9th deadline, too, isn't it? For India? Yeah. Yeah, that's right.

All right. So I just 27 countries in the EU, Apple, India, you know, July 9th. You're not going to sleep. No one's going to be. Isn't it too much to hope for? Or will there be other delays? You see how the markets react when there's a slight bit of a respite. I know that that's not that's not what you're interested in, but it makes sense.

You know, it makes for some nervous traders, like on Friday, and then here we are, whipsawing back the day. Is this going to continue, or...?

President Trump wants the best for America and the best for our trading partners. And I'm sure that if you're 80 percent of the way the deal and you've got an agreement of principle, then, you know, the lawyers might have to work for a month. But so in the end, what you want to do is see the progress that you need to feel like for sure we're going to be able to get a deal. And once you've got that progress, then I'm sure that the president's not going to impose harsh, harsh deadlines. But he might decide to if he doesn't see progress. The

The underlying economy, has it surprised you that it seems to shrug off an awful lot of things? Or as you put your economist hat on again,

Is it coming? Is there some weakness in labor market coming? We just heard Ray Washburn also talk about credit card debt and the consumers are a little bit worried, but we haven't seen anything really reflected in the jobs numbers or the overall economy. How do you explain that?

Right. Well, the hard numbers have been very strong, even if you like smooth through the weird import thing of the GDP release. We have really, really strong job numbers. We've got inflation heading down towards the Fed's target. And this is before the tax cuts come in. I think that one of the things we talk about taking uncertainties off the table, the Council of Economic Advisers has estimated that if the House

hadn't passed the tax bill, that it would have been the biggest tax hike in American history. And that big tax hike, the biggest tax hike in American history, would have cut about 4% off of GDP growth. We'd have had a recession. And so if you look at the CBO's own estimate, if you have a recession, that reduces revenue by about one and a half times the percentage. The elasticity is one and a half. So it's a 6% decline in revenue. That's maybe about $300 billion decline in revenue just this year with a recession. But

It didn't happen despite like no Democrat voting for it because the House passed that bill. I think markets were worried. Are they going to not pass the bill? And now it looks like I think that markets are starting to going to want to price that in because the Senate's making a great deal of progress. The gap between the Senate and the House is not enormous. And then once that big, beautiful bill is passed, then I think that we're off to the races. If I have a vacation plan between July 4th and July 9th, I mean.

You got a few things that that's lots happening that week, isn't it? Yeah. Yeah. Well, I did. I did have one good night's sleep this week. I really did. I promise. No, we hope you got the July 9th. Yes. You got the big, beautiful bill promised by July 4th.

Things don't happen in July. I don't know if I'd plan a vacation the following week to follow. Yeah. When nothing, nothing. There'll be a recess in August. The recess matters in Congress and in elementary school. So keeping it thin, which and sometimes they think they're the same thing. All right. Kevin, thanks. Good to see you guys. Thank you. All right. Good to see you. Thank you.

And that's the pod for today on this first day of a short week, one day closer to Friday already. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Please follow Squawk Pod wherever you get your podcasts. We'll meet you right back here tomorrow. We are clear. Thanks, guys.

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