Wall St Hits Main St, Neel Kashkari & China Strikes Back 4/11/25
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Bring in show music, please. Hi, I'm CNBC producer Zach Valisi. Today on SquawkPod. Do you feel liberated yet? Tariff negotiations between the United States and just about every country we trade with might be on pause. But is the market whipsaw doing damage to the economy that our Federal Reserve spent the last couple of years trying to bring into balance?

Neel Kashkari, head of the Minneapolis Fed, joins us. I think we need to finish the job on inflation, and then we'll be able to get back to the traditional tradeoffs of the dual mandate goals. And for me, for one policymaker, I'm not there yet. Will the tariffs, however they're negotiated, prevent the Fed from getting the job done on inflation?

If we see that attractive deals or whatever the deals are happen very quickly and we have some confidence, then I think that would give me more confidence that whatever these effects are are going to be shorter-lived. I think if I was a New York Post headline writer, I would say, "Fed to White House."

colon, Donnie do a deal. But tariffs on China still in effect. And now Beijing strikes back with levies of 125% on U.S. goods. Market watcher Marco Popic on the geopolitics of a brewing trade war. U.S. is the bubble. U.S., all of it.

Plus, the rest of the news that got us squawking on this up, down, in, and out historic week for the U.S. financial markets. When you say that this is a Wall Street problem, it is so far from that at this point. Weekend, anyone? I'm ready to just fall into the masters. It's Friday, April 11th, 2025. SquawkPod begins right now. Stand back here by in three, two, one. Cue, please.

Good morning, everybody. Welcome to Squawk Box right here on CNBC Live from the Nasdaq Market Site in Times Square. I'm Becky Quick, along with Joe Kernan and Andrew Ross Sorkin. It's Friday, and I guess that brings some relief, but... It's been a long week. It has been a long week all the way around. Ten days, yeah. Ten days in May, in April. Ten days in April this week. Let's take a look at what's happening right now. Are we feeling liberated? I'm feeling shackled. Oh, God.

I'm feeling anxious. Meantime, China retaliating against the raised U.S. tariffs with higher levies of its own. China's finance ministry saying that the country is now going to raise tariffs on imported goods from the U.S. to 125 percent. That's

up from 84 percent now but it added that it will ignore potential further u.s tariff increases and not retaliate calling any increases from here quote a joke unquote a statement from the finance ministry translated by cnbc said that quote with tariff rates at the current level there is no longer a market for u.s goods imported into china right

And that's why it would be a joke. It's a joke. You don't have to raise them any higher because you're basically cutting off trade. Cutting off trade. The Trump administration confirming to CBC yesterday that the U.S. tariff rate on Chinese imports is now effectively 145 percent. Despite today's retaliation from China, spokesperson for the country's commerce ministry saying that Beijing is open to negotiate with the U.S. on an equal footing. One corporate note from this morning, Reuters reporting that Tesla has stopped taking new orders today.

from Model S and Model X vehicles on its Chinese website. Both models are made in the U.S. and imported to China, so you can see the effect of that immediately. And there you have it. And this is what...

This is what tariffs mean. And if you're isolating China and that's the whole idea, which now in hindsight, that's the rationale that we're hearing. It's always in hindsight. A lot of times it's in hindsight. We're not isolating them. They are reaching out. We are driving our other trading partners into their arms. You need them to, yes and no. Hopefully our other, I'm still optimistic. I mean, South Korea this morning, South Korea, do we believe them? Everybody's posturing. South Korea says we must put in even greater effort to strike a deal.

If you believe one side, the Trump administration, there's 75 groveling trade partners that are going to do whatever we want. You believe the other side. It's like, why should we do anything when Trump, when President Trump was hit over the head with market realities this week in the United States? The scariest thing. I know you said, you know where I am. The scariest thing for me is that.

I don't believe, you know, a Trump put, you need to be able to follow through on stopping the declines. I don't think he has. I think that you can. I don't think he does not have it. And that's what I mean. But and the other thing, like, I think a Fed put, I believe in that because they can do positive. They can flood us with liquidity. All Trump can do at this point is remove negatives. That doesn't give you positives. That doesn't get you back to where you were. And I worry. I'm worried about your toothpaste, too.

Not just that we've damaged relations. That's one thing, possibly. But we've damaged...

In an overvalued market at the beginning of the year, we've damaged some of the confidence that people have, that CEOs have, that investors have. And that's the toothpaste. And consumers. That's the toothpaste. Because yesterday was horrific. I will say this. When you say that this is a Wall Street problem, it is so far from that at this point. I went to my son's basketball game yesterday, and every single person there was asking me what the...

declines in their 401k means, what will stop this. These are people who, some of them are retired, living on a fixed income, grandparents who were there, others who had friends who had just retired, lost $100,000 of their million-dollar retirement. That's why we're so lucky, because none of us are anywhere near the age of retirement, the three of us. What are you looking at? What are you looking at?

But, you know, this is real pain that sits up and makes people pay attention. And this is very much a Main Street issue at this point. I'm ready to just...

fall into the masters and just not even think about anything else and just have it on and not even turn my phone off, not look at Twitter. But seriously, from a negotiating perspective, because you know that I think we're in the worst possible... I don't know whether that's true. I hope that's not true. Look, I hope it's not true. That's pessimistic. That's pessimistic. I hope it's not true either. And by the way, I imagine all of these countries...

are physically calling yeah yeah acting now making it look good well imagine they would like to start looking good it's like we would like to find a way to do a deal with you we want to talk to you about this mess because we don't want this mess to be the mess it is but when they sit there and then say okay well what do we have to because we're saying we have to give you something

We're saying, give us something. And they're now going to be saying, no, no, no, you give us something. You want to go after China with us? You give us something. We're not giving you anything. It's a bit of a circular firing. Yeah, and here's what's going to happen. There's supposedly, and I don't know which 75, I don't know who isn't calling at this point. We don't know because...

You know that the Trump administration is going to, their point of view, their spin is going to be that this is very positive. Every deal that is announced, if there are any, over the next 90 days, you're going to hear us saying, oh my God, look at this. You're going to hear the Trump administration just trumpeting how great it is. My guess is you will see trade agreements. You will, but how are we going to judge whether they're good? How are we going to judge whether they have teeth, the things other than tariffs, how do we know whether they're addressing that? At this point, it's just take away some of the bads, and people will cheer that. Maybe. Maybe.

I hope so. You didn't see Rory yesterday. I didn't. I'm pretty busy.

Pretty busy. All the, yeah, you've got a lot going on. I didn't see the very end. I just saw it this morning. He was four under going into 15. Oh, and he collapsed on 15. Double bogeyed 15, hard 16, double bogeyed 17. I mean, he's even. That's fine. That's fine. Although I know Rose once again was leading after the first. He was just fearless. He managed to finish with 22 putts. He did all 18. He was amazing. He's so solid. I love that guy, too. He's really a nice guy. All right.

On this vote, the yeas are 216, the nays are 214. The motion is adopted. Without objection, the motion to reconsider is laid on the table. Hey everybody, good to see you all. It's a good day in the House. I told you not to doubt us. The media always does, the Democrats always do, but we get the job done. House Republicans narrowly

That goes without saying, right? Since it's the House adopting a revised, but was it 216, 214, I think, narrowly passing. After the special elections? No, I think that was the end of what it, of what this actual vote was. But that is, that's like, that's as good as, almost as good as you can do with Massey and some of the others. Revised budget blueprint that will be needed to advance President Trump's, oh, there it is.

The vote was 216 to 214, with two Republicans joining all Democrats. That's a shocker there. In opposition, board collective. The president had endorsed the budget plan, which the Senate adopted last weekend in its own narrow vote. House Speaker Mike Johnson scrapped the vote Wednesday night after he couldn't strike a deal with some GOP holdouts who wanted commitments on deeper spending cuts. Yesterday's narrow House vote is just

One that congressional Republicans need to take as they work to pass President Trump's agenda of tax cuts, immigration enforcement, military expansion and raising the federal debt ceiling. And you wonder how many rabbits Mike Johnson can pull out of. I mean, he's he's he's not over it. He's 10 for 10 or whatever it is he has not done.

He's been able to do it somehow. With extreme pressure and help from President Trump himself. From President Trump. And calls going. But he's been wrangling the cats. But their timeline is still far more aggressive than the Senate Republicans. Senate Republicans are saying August for their timing on this. His is May. But when does he not, you know, that would be a bad time.

signal if one of these times he's unable to get the... And it is hard with the Freedom Caucus. I assume it's going to get harder and harder as the tariff thing gets played out, right? Yeah. Yeah.

New York authorities now say that two of the adult victims who died in that helicopter crash yesterday afternoon were a married couple from Spain. Augustine Escobar was a senior executive with Siemens. In a statement, the company said it was deeply saddened by the crash. On social media site X, Spain's prime minister called the crash an unimaginable tragedy.

The helicopter was one of many that fly tourists near Manhattan to take in the sights of New York City. Officials said that it took off from near Wall Street around 3 p.m. Eastern time yesterday, then lost control after it turned at the George Washington Bridge to fly along the New Jersey shoreline. The cause of the crash is unclear and under investigation.

New York City officials saying the three adults and three children lost their lives. The children are believed to be the married couple's children. And the third adult victim was believed to be the helicopter pilot. And the images, I don't know if you saw them, and I think we showed them a little bit there, but not the full image is just heartbreaking and tragic. And that right there will just send you into a...

a spiral but it's such a tragedy it's terrible but I mean I still helicopters still just give me the it's like they're safe I guess kind of most of the time but they're definitely the probability goes way up if you're gonna fly constantly and look at

Like, you can't find a single famous person. It's very difficult to die on a commercial airline flight. I can't think of one. Helicopters, I can think of dozens. You know, Frank Wells or Kobe. Yeah, I can think of so many. Well, there's just the opportunity for a single point of failure in this case from what they're saying about this. Was it the twin engine and everything? But what they're saying about this one was that the rotor, literally...

separated from the actual helicopter. They call apparently this, they call it the Jesus nut, whatever the thing is that holds the rotor at the top to the helicopter. But it's one thing. So if you lose it,

And it separates. And you could see, I mean, the way that helicopter went down, the rotor went one way and the body of the helicopter went the other. I mean, it's just... Well, that's something you'd like to check probably every flight. How's the Jesus nut? That's apparently what they call it in airline. But helicopters remind me of, like, bumblebees. They shouldn't be able to... Why? It's just hard. You need to just... But it's...

It's scary. It's rare. It's still rare. It's still rare. But yeah, we'll be right back.

The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world. U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.

Hello, I'm Laura Castleton with Janice Henderson Investors. Is a brighter future possible? At Janice Henderson, we think it is. We've worked to help our clients achieve superior financial outcomes and fulfill our purpose of investing in a brighter future together. We never forget that this means our thinking and our investments are helping to shape millions of futures. At Janice Henderson, we are committed to helping you invest in a brighter future. To learn more, go to JaniceHenderson.com.

How will you shape the future of consumer products in retail with confidence? Behind every favorite product or seamless checkout, there's a series of strategic decisions to make.

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Good morning, everybody. Welcome back to Squawk Box. We're live from the Nasdaq market site in Times Square. Meantime, I want to get straight over to senior economics reporter Steve Leisman. He's got a special guest for us this morning, sir. Andrew, thank you. We're pleased to be joined this morning by Neil Kaskari, the Minneapolis Federal Reserve president. Neil, thanks for joining us. And I can't think of anybody better to be here because of your experience both at the Minneapolis Fed over many years, but also personally.

from investment banking as well as your role in the Treasury during a particularly interesting time, the great financial crisis. So, Neil, I usually don't do it this way, but I just want to ask you broadly, how are you feeling about this economy right now and financial markets given all of the changes that are going on? I'm going to ask you the most open-ended question I've ever asked a Federal Reserve official.

Well, good to see you. Thanks for having me. It's hard to get a read of what's happening underneath. You know, it's really important for the Fed. Obviously, we're very focused on inflation and employment, trying to understand we've got an uptick in inflation expectations in the near term. It's our jobs to make sure that that does not translate into a long-term increase in inflation expectations. And so I'm paying attention to the same market moves you all are,

The bond market, I'm paying particular attention to to try to understand what is it telling us about the underlying inflationary dynamics. And it's a complicated thing to analyze.

Before you get to the inflationary dynamic of the bond market, Neil, one of the remarkable developments has been this, that at a time when there's concern across the globe, the general trade has been to trade into U.S. assets as a flight to safety. That's not happening now. The dollar is selling off this morning against a broad range of currencies. Yields have been elevated.

Is it curious to you and what is it telling you that there is no obvious or traditional flight to safety in the current environment? Yeah, I think your observation goes to the heart of the matter. And I always go back to fundamentals. Why do we have a trade deficit in America for decades?

It's because this is just the math of economics. Investors around the world have viewed America as the best place to invest. And if that's true, we will have a trade deficit. And so now one of the ways that expresses itself is in lower yields across asset classes in America.

So if the trade deficit is going to go down, it could be that investors are saying, OK, America no longer is the most attractive place in the world to invest. And then you would expect to see bond yields go up. Now, it also could be inflation. And that's why this matters a lot to the Fed. I'm not seeing evidence.

Yet, that long run inflation expectations are climbing and it's the Fed's job to make sure that that doesn't happen. But you, I would expect to see if investors decide, hey, we want to invest elsewhere, all else equal, that ought to be pushing up yields. And you'd see that in what we call the term premium.

Neil, can I just throw one other possibility on that? These are pretty short-term moves. We hope they don't become longer-term moves. Could it be a reflection of hedge funds and others that were leveraged and needed to sell things as equity markets dropped, selling the assets that are most liquid and trying to make sure that they have the cash to pay whatever comes?

Certainly, there's a lot of you're right, Becky. There's a lot of complexity. The basis trade has been getting a lot of attention. But I would just point to something that Steve mentioned, which I think reinforces the story a little bit. And that is that the dollar has been weakening. Normally, when you see big tariff increases, I would have expected the dollar to go up. The fact that the dollar is going down at the same time, I think, lends some more credibility to the story of investor preferences shifting. You know, let's talk about things that

We never really want to talk about, which is this idea of what's happening in the financial plumbing.

And those are the calls that I make to people to say, "Hey, how is this stuff happening?" And when I say financial plumbing, what I mean is the reason why you can have your paycheck direct deposited and then withdraw cash at the ATM machine, the pipes that connect those two, that's the financial plumbing. And it's all around the globe for the dollar. I made some calls to people, Neil, and one guy said to me, "We're not the story now, but we're getting closer."

So give us your idea or your sense at all what's happening inside the financial plumbing. Does this rate in a way that was near or close to what happened in the pandemic? Or are we still far away from that and we shouldn't be worried about that?

I think we're quite a ways away from that. I mean, during the pandemic, the pandemic was so unique because the virus was so unknown and how dangerous it was was so unknown that people fled all sorts of assets, stocks, bonds, everything, corporate bonds, treasuries, and they just wanted cold, hard cash.

And that's where the Fed had to step in in a very profound way to flood the system with liquidity. Ultimately, we have the ability to manage some of these transitions. So if there's a dislocation, I'm not forecasting this, but if there were a dislocation, we have the ability to smooth out that dislocation. But going back to the discussion on yields, we're not going to be able to change where yields ultimately settle.

All we can do is make that transition path a little less rocky. But the settling of where yields end up settling, that's that depends on trade policy and fiscal policy and U.S. economic competitiveness. You don't want to stop out of the Fed's hands. You don't want to stop the market from getting to a new equilibrium that it wants to be at. You can only smooth the transition there.

Correct. We don't have the ability to stop it settling wherever it wants to settle. All we can do is smooth the transition if there is if there are big dislocations in markets. But I'm not seeing big dislocations yet. I'm seeing some stresses, but markets seem to be adjusting OK so far. Neil, I didn't like either scenario for why what was happening was happening. You know, one, inflationary expectations are going back up or two. We're becoming less attractive as the as the place grows.

to invest, both sound, I can't even pick, that's like a Sophie's Choice. Given the number we saw yesterday, you think that was an outlier, the CPI number? Or does that make it even more troubling that there probably isn't a reason to ratchet up inflationary expectations? So then the only answer would be that,

you know, we're less attractive as a place to attract capital, which I don't think we want that. I don't think the Trump administration, at least if it was explained that way, I don't think they'd want it either. Well, when we dug into the CPI data, there was a lot of good news under the hood. One of the biggest drivers of the high inflation of the past couple of years has been housing. We've done a lot of analysis that said as new leases turned over, the housing inflation ought to be coming down. That trend seems to be continuing as we expected.

based on the new lease data. So I think the fundamentals of the soft landing of inflation have been in place. It's been continuing. That's been good news. But given the big moves in trade policies over the past few months and the market dynamics that we have just been talking about, it's pretty stale pretty quickly. And I think even the tariffs after the pause, the effective tariffs are still 100-year highs.

And so that suggests that inflation, at least in the short term, will be going back up again. And it's our jobs to make sure at the Fed that it does not lead to long-term inflation. Yet, Neil, when you say that, people hear that in a kind of clinical monetary policy way, the people who are very attuned to your speaking and Fed speak.

which is that given the concern about growth, both sides of the mandate, the growth side of the mandate or the employment side of the mandate and the inflation side, you're going to take care of the inflation side first. Is that a correct read of what you're saying? That's my read of things. You know, if we hadn't had four years of high inflation, I would be more comfortable taking this quote unquote look through on inflation policy, which is if there's a one time consumption tax increase or one time tariff increase,

that pushes up the price level. There's an argument to be made that that's a one-time effect on inflation and just look through it. I would be more sympathetic with that view if inflation had been around our target for the past few years. But coming into this with elevated inflation for four years, and it's still elevated today, that makes me quite nervous about taking that one-time look-through approach

because we have this possibility of unanchoring of inflation expectations where people lose confidence that we're really on the job. And I've heard many of my colleagues speaking in the past few days also echo the focus of we have to make sure that long run inflation expectations remain anchored. And so for me, that's got to be job one. Neil, we've been having conversations all week about private credit. We spoke earlier with the CEO of Apollo, Mark Rowan.

I'm curious how you think about the universe of private credit and loans through that mechanism, given the connection, talk about financial plumbing, back to the traditional banking system, which is to say that banks, you know, in the last couple of years have gone, you know,

as much as they can into trying to provide leverage, if you will, into the private credit system and how much we should be talking about that or not. You know, I've dug into it quite a bit. Anytime we see an asset class grow as quickly as private credit has, it raises concerns as to some systemic risk building. My analysis says that private credit funds generally are much, much less levered than banks. Say if a bank is 10 to 1, a private credit vehicle might be 1 to 1 leverage.

And the sources of systemic risk are traditionally the intersection between leverage and maturity transformation. So borrowing short and lending long. The private credit funds that I've studied generally have much longer term funding. And so right now, I'm not seeing a systemic risk building in private credit, though it does represent leverage and leverage across the economy is itself a source of economic risk.

But I'm not seeing as much evidence as a source of financial stability risk that one might be worried about. So, you know, bears watching. I don't want to declare all clear, but I don't see the fundamental kindling there that would suggest that it's particularly risky. Now, let me ask you a different question, which maybe has to do with just the strength of the economy and how you see these negotiations playing out and therefore sort of what the Fed does or doesn't do about them, which is to say we've now had a bunch of sort of negotiations.

dealmaking conversations at the table about if you are an ally of the United States or supposed ally and you're supposed to be making a deal to the extent that some of these countries say, you know what, we're not going to do this or we're going to take much more than 90 days or we're not going to make a favorable, whatever. And it just doesn't turn out the way you'd want. I'm taking the most negative perspective of this, not from a political perspective,

perspective just just just as we're sort of like trying to figure out the risks of all of this and so the question becomes you know is there a fed put on those negotiations or is there an administration put on those negotiations or or neither

Well, I certainly, Andrew, can't speak to an administration's what the administration will do. That's obviously up to them. And as Steve and I were talking about a few moments ago, the Fed cannot change the ultimate destination of where the economy is going to settle. All we can do is keep inflation in check.

and try to keep dislocations from disrupting that transition period. And so we're going to watch all of this very carefully and try to get inflation all the way back down and keep the labor market strong. But as you all have talked about for many, many days or weeks, a tariff pushes up inflation and the margin pushes down economic activity. So it puts the Fed in a particularly challenging position. That's what we have to focus on. And those are the only those are the only tools that we have at our disposal.

Neil, I'm interested in timing as to when and how the Fed can respond. I can count on one hand minus three fingers the number of times that I've gotten a call from a Fed official saying they didn't say what they meant. And so when the Fed chair says something, I think he means it. And what he said last Friday was inflation over the coming quarters. And this question is about how long do you need for the inflation numbers to clear and

Before you're confident enough to address the growth side of the mandate, that you're sure that this is a one time increase in the price level. Because when I hear coming quarters, that brings me to like October and I see the market priced in with rate cuts in June.

So is the market overestimating your ability or the timing of your ability to feel confident that the tariff impulse is a one time increase to the price level? Well, I think answering your question, Steve, goes back to Andrew's question and Andrew's comment, which is it really is partly going to depend on how the negotiations go. If we see that.

deals, attractive deals or whatever the deals are, happen very quickly and we have some confidence of where the tariff are going to settle the U.S. tariffs and our trading partners, then I think that would give me more confidence that whatever these effects are, are going to be shorter lived. If the negotiations take a long time and that there's tit for tat and back and forth and this is going to be an ongoing negotiation, then it'll take me more time, at least speaking for Neil, more time to reach that level of comfort. But you've heard over the past few days,

Most of my colleagues have come out and said, you know, inflation is job one. We can't let inflation expectations get unanchored. Neil, let me ask you about something you were just mentioning. Inflation expectations have tempered somewhat because of the housing component coming down. But mortgage prices have jumped pretty substantially this week.

Our colleague Diana Olick, who covers the housing market, had a story that lays out another potential problem with this. The Chinese are big owners of mortgage-backed securities. They've already been dropping their positions on that. I think as of the end of September, it had dropped by more than 8% than where they started the year. By the beginning of December, it was down 20%.

If they decide to retaliate by dropping mortgage-backed securities, what would that in turn mean for pressure on the U.S. housing market and inflation along with that? Well, I think mortgages, you know, when we do quantitative easing, we've done both the mortgage-backed securities and the treasuries. They tend to be quite linked and not perfectly linked, but they are linked. So I think over...

over the Treasury market and the mortgage market, you would continue to see yields continue to climb. And that will really put a continued freeze on the housing market. So we've seen a dearth of activity in housing. It's been expensive for buyers to come in. There have been very few transactions. I think you would continue to see that happen. And in some sense,

You know, you might push up inflation a little bit, but if if sales aren't happening, it's not clear to me what that'll end up doing to prices. I think more likely you just see less activity and it'd be somewhat of a drag on U.S. economic growth because the housing market itself is an important sector of the U.S. economy in terms of building homes and furnishing people who want to buy a house and have been saving and thinking they get to that point. I mean, that's a deal killer.

It is. It's a real challenge. And you end up just having a frozen housing market, per se. The longer the mortgage rates end up being higher, the higher the mortgage rates go. You know, I guess I'm back to thinking about that number yesterday and on where the risk really is now, whether, you know, with your dual mandate and the response of the markets to what some are, for lack of a better term, calling the Trump put backing away.

I think it'd be scary if the Trump put didn't work, if the administration was unable to stop it. I also worry about times in the past when we thought we had a Fed put and there have been times where you gave the market what it wanted and you know how the market goes down the next day, sometimes that happens. But I think the combination of the Fed and Trump

A Trump put could do it. Why not do it preemptively? Why not? I mean, if you're at three and there's a possibility, it'd be bad to get to the point where you have to come in if the dollar gets worse or if the market, you know, it's Friday. Things are OK so far. But I'm really I think we're on tenor hooks.

that this could start to get out of hand. Why not do it now if we're not restrictive anymore? You know, I'm, you know, again, just speaking for me, I'm not somebody, even though I was at Treasury during the 08 crisis and I led the TARP program, I think you remember that. I think that the Fed or Treasury stepping in should be done reluctantly, should be done when it's only truly needed, not all the time. And right now,

Short-term inflation expectations have increased. We've had four years of elevated inflation. I think we should be very cautious about taking moves that potentially could demonstrate a weakening, which I don't believe is there, but a weakening of the Fed's commitment to get inflation all the way back down. I think we need to finish the job on inflation, and then we'll be able to get back to the traditional tradeoffs of the dual mandate goals. And for me, for one policymaker, I'm not there yet.

Neil, I've been saying this out of what I think is my knowledge of the Fed, but before you did anything on an emergency basis...

Is it fair to say that you guys feel like you have a bunch of programs available that are already in existence that you would prefer to see the markets or market participants turn to before you did anything on an emergency basis? And I'm talking about standing repo facility. I'm talking about swap lines and that kind of stuff. Do you feel like you're prepared for any kind of thing? And is that something that is...

should be thought as being helpful for the market that these things are already there. Oh, that's a great point, Steve. Absolutely. I mean, the discount window is always there against a wide range of collateral. Just as you said, we have the new what we call the ceiling facility, the SRF, that is there to provide reserves against Treasury collateral if needed. So there are tools there to provide more liquidity to the markets on an automatic basis that market participants can access. So that's

in addition to the swap lines that you talked about for global financial institutions. So those tools are absolutely there. And we also monitor activity there, and I'm not seeing much activity there yet either. And so that's a great point. Now, if you remember when Silicon Valley Bank

blew up there was a unique situation where the risky assets that are normally not risky were the source of the instability and then in that moment the Fed was able to stand up what we call the BTFP the bank term funding program designed specifically for that scenario. No we don't have the ability to design a facility to offset the economic impact of tariffs there's just there's no there's no tool that does that because tariffs put up push up inflation and push down activity.

Neil, thanks for... I would just point out those programs did not exist in 2008. And those things have been stood up... That's an excellent point. I forgot about that. ...and remain there. So there's a whole bunch of things that are out there that maybe is the reason we're not hearing. Neil, thank you so much for joining us this morning. Thank you for having me. Neil Kashkari, I think if I was a New York Post headline writer... Yeah, what would it be?

fed to white house colon donnie do a deal well and i think that's the other thing that's not what he said just to be clear to the question that joe asked why wouldn't you do something preemptively i don't think they want to encourage right the policies that they've seen to this well i don't i think they're neutral as to these policies they will take the policies but when you asked him could they cut rates that i can cut rates and i can foresee cutting rates

depending upon the negotiations. And depending on the inflation. I just think inflation with what's happening is... I hear what you're saying. You want them to go on the come based upon what they saw. I don't think inflation is our problem right now. But what do you do, Joe, if you've got these things coming through on the tariff side? I don't know. I just get scared when we start talking about puts. Because I don't think people...

Really? You can stop this? Either the Fed or... Well, what would be worse is what you alluded to. Right. And we've seen that before. Remember we've seen that before? And it went down. Everybody's hoping for the Fed to go 25 or 50, then they go 50. They have never failed at it. The world can only end once. They just ask for more. That's what Art Cashin said. The world can only end once. The world happens only once. It's a trade you have to time very carefully. Tease will be next.

Coming up: China, China, China. The country thinks the US tariff policy is a joke.

We'll hear from our reporter in Beijing, Eunice Yun. It's very difficult to see President Xi Jinping saying, OK, well, you know, let me call up President Trump and let's make a deal. And global strategist Marco Poppich walks us through the market implications, equities, commodities and treasuries from the volatile rollout of the Trump administration's trade tape.

In a policy-induced recession, it's very dangerous to get overly bearish, whether on risk assets like equities or on commodities, because policies can be reversed. It's not like this is a great financial crisis. It is a policy-induced slowdown. Much more is still ahead. SquawkPod will be right back.

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Net credit. Credit to the people. We're back. You're listening to Squawk Pod with Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Here's Andrew.

China raising its tariff on U.S. goods now to 125%. It says it no longer will match U.S. tariff increases because at this point, American imports aren't marketable at these levels. They're calling it a, quote, joke. Eunice Yoon joins us this morning on the ground in Beijing. What is the latest?

Thanks, Andrew. So these new tariffs are going to go into effect in six hours' time. And as you were suggesting, the language around this decision is really interesting. The Chinese Commerce Ministry had called these tariffs abnormally high. They said that they were a joke. And the argument

is that at these levels, Chinese people wouldn't even be able to buy some of these American goods or wouldn't want to buy American products. So they also, the ministry went on to say that if the United States continues to play the numbers game of tariffs, then China will ignore it. So instead, the focus has been on how to

to support Chinese exporters from President Trump's 145 percent tariffs. And it looks as though the government is also marshalling some support from the private sector. Today, J.D. said that it's going to buy $27.3 billion

worth of Chinese exports this year to sell into the Chinese market. Alibaba, its grocery chain, Hema, is going to be fast-tracking exporters to sell into the China market. And then we also saw some support for Chinese companies that want to use American tech because the Semiconductor Industry Association defined what it means by a U.S. chip. So a U.S. chip, if it's designed in the U.S.,

but then it's taped out or basically turned into a chip elsewhere, then those ones would not be subject to a tariff by the Chinese.

What is the political sort of view or just sentiment among people on the ground about what's happening here and how much support, therefore, does President Xi have in all of this and the government to the extent that he cares about what the people think at any given moment? That's great elections. Amazing.

Very popular. Yeah, I mean, it's difficult to say exactly what the Chinese people think in terms of the support for this tactic by President Xi Jinping. But the calculus for President Xi Jinping is really different from, say, President Trump. Because the whole

ideology for diplomacy here is that President Xi, who's been spending years and years making himself as -- shaping himself as the savior of the Chinese people and the one who's going to rejuvenate the country, really cannot be seen as

bowing down to the West and in particular, the United States. So it makes right now, it makes it, it's very difficult to see President Xi Jinping saying, okay, well, you know, let me call up President Trump and let's make a deal. It's just,

Right now the conditions are not right for that. Well, what happens if you criticize President Xi in China? You don't recommend it depends if you do it publicly. Yes, I wouldn't recommend it. You would disappear. Right. And so in that way, you know, in the US you have. Yeah, there's sort of that can happen here. There's sort of two views that I've heard from US negotiators who are involved in this. One is that.

China is doesn't have, you know, leverage in this situation and therefore may be willing to give something up in all this. And in a sort of patient way, oddly enough, might be willing to say, you know what, I'll give you something now because, you know, who knows where the politics of America are going to be in a couple of years from now. We'll we'll make it up on the back end later, meaning that's a sort of long view that that would be beneficial to the U.S. The other sort of long, patient view is to say we can wait these people out and we just don't care.

And so which is it? I mean, I see the one that's very visible right now, but as you see this play out. I think it's the second one. I think that President Xi is looking forward and that the most important thing when you think about his psychology, the psychology of the Communist Party is for their own survival. And right now he has shaped an entire narrative around him that he is the one who is going to stand up for China.

That's been going on for years here. So the idea that he would at some point just bow down to President Trump just seems unfathomable. Eunice Yoon in Beijing this morning. We appreciate it. We're going to be watching this, as you can imagine. Thanks for joining us right now to talk about the impact of the U.S.-China trade war on the global energy market. Marco Popic, macro geopolitical chief strategist at BCA Research. Good morning to you. Let's talk about it.

By the way, China now calling this whole thing a joke, given the prices have moved the way they have. But in your sector of the world, how is it going to impact things at this point? Well, I think that commodities have responded to an increase in recession risk. And that makes sense. I mean, this is what happens all the time. Bond market is not responding the way that it usually would to recession, but commodities are. And I think that in a policy-induced recession,

recession, it's very dangerous to get overly bearish, whether on risk assets like equities or in commodities, because policies can be reversed. It's not like this is a great financial crisis. It is a policy-induced slowdown. And I think that the market, including for commodities, is going to look through further pain that may come through fundamental hard data if policymakers start talking about this as being just for lulls. Just say that again, just for lulls? What do you mean by that? Yeah.

As the kids would say, right, Andrew? I mean, when China says this is now a joke, when President Trump's official White House tweet says that we should all let him cook, literally that's what the White House tweeted, it suggests that we're not going to be at these tariff levels for very long. They're all just part of an elaborate bargaining attempt. And so President Trump also did say last night, very genuinely, that he is looking forward to a deal and that there will be a deal with China.

So I think the markets are going to slowly move away from the worst-case scenario, which is that we're in some sort of a neo-McKinleyist world.

where tariffs are used to raise revenue to finance tax cuts. I mean, when was the last time any U.S. policymaker actually referred to them as revenue raisers? So you think that the entire edifice of everything that we've heard from the administration over the past week about what they ultimately want to do, not just with China, but with tariffs across the board, the raising of revenue, the bringing manufacturing back to America,

all the different component parts, you think none of that is going to happen? I think some of it's going to happen, but we priced the worst of it.

And the S&P 500 got to 4,800. And then you started seeing the bond market reaction as well. And the dollar is down. I mean, for example, against the euro, we're down 10% in a matter of months. That's very, very unusual. There's an exodus out of U.S. assets. And so, yes, the constraints have hit. And policymakers in the U.S., President Trump is trying to pivot towards a bargain. How do you handicap the question of just perhaps

paralysis, investment paralysis, at least in this moment. And maybe you look through it and say it's one quarter, two quarters, but we won't probably see it from this quarter's earnings report. And we just talked to Andy Jassy yesterday. He's not even seeing it in the consumer yet. But to the extent that we're not having that companies are going to not necessarily making huge investments anywhere or at least sort of rethink what they're doing. Does that concern you at all? Or should we again look through that?

We have to look through that. Let's go back to 2020. Last time we had effectively a policy-induced recession because it wasn't the virus that caused the recession. It was the response to it, right? It was the lockdowns. When did the market bottom in 2020? Was it when you and I didn't have to be locked down anymore? Was it when earnings bottomed? Was it when the vaccine? Exactly. March 23rd, 2020. So it's very dangerous, very dangerous in a policy-induced recession.

to get overly driven by fundamentals and hard data, which, by the way, over the next couple of quarters is going to look pretty bad. I completely agree with you, Andrew. It's going to be a slowdown. CapEx is going to look pretty weak. Uncertainty, CEOs are not going to know what to do. It's staring you in the face. It's already, if everybody's talking about it and staring you in your face, then it's already happened, probably. Mark, what, you know, the market itself, what worries me was that, let's say we didn't do anything and the market plummeted.

happened to show some weakness because it was at 23 times earnings because we were up 20% last year and 20% the year before. And, you know, it was led by seven stocks, essentially. That's why we're at those levels. It wasn't, you know, a lot of stocks weren't really doing much. What if it was already primed

This is a good excuse, but there could be some lasting damage to the underlying technicals of the market that doesn't go away if we pull back on tariffs. We may be stuck where we can't fix it. Well, look, we're not going to pull back on tariffs completely, but regardless of that, you're right. And actually, there was something already happening from January to April to Liberation Day. What was that? It was the underperformance of U.S. assets.

So if you really think about what happened January, February, March, even before the big sell-off, we had the underperformance of tech relative to Europe, China, and emerging markets. And I think that's going to be with us for the next five years. So the big takeaway from this year, from Trump presidency, from everything that's happened, is that there's a rotation out of the U.S. And obviously, that's become vicious now with bond yields staying high and the dollar falling. I mean, it's become...

like the story but that exodus started well before liberation day and that's because of the point you're making u_s_ is the bubble u_s_ all of it i mean we would have seen maybe it would have been a lot harder to see that slow bleed kinda like boiling of frog in a in a pot uh... it's become patently obvious do you have a technical level you're watching i think we were at

4,900 and change, 80 something was the low that we set recently. If we fall below that again, what happens? So yeah, I think that the way to think about it is that 4,800 on S&P 500 is the bottom. And I think 4.8% on the tenure is the lowest the bonds are going to be. So you basically want to buy bonds at 4.8%. And I think you want to buy S&P 500 at 4,800.

Policymakers on both of those ends are going to have to modify their policies. You know, one thing to watch really carefully is what's going on on the fiscal side. I think much more attention should be paid to the reconciliation bill in Congress. I don't see the bond market letting them do much more than what the House of Representatives wants, which is much more muted than Trump's campaign policies.

And by the way, the dollar sniffed that out because American outperformance over the last five years is based on that fiscal story. That fiscal gravy train is ending. And that's actually when that slow burn started, when bond yields peaked at 4.8 and the dollar peaked relative to the euro at 1.02. That was January. That was the bond market and currency markets responding to the growth engine of the U.S. effectively ending.

Marco, this is fascinating and I think provides a lot of great perspective on all this. We'll see whether it all turns out to be right or not, of course. But we look forward to seeing you again very, very soon. Thank you.

Got some news out just this morning. John Malone stepping down from the board of Warner Brothers Discovery. He's going to become chairman emeritus. Big move there. The stock, by the way, we should mention unchanged this morning on the back of that news. But yesterday and of course, it was a complicated day. The stock did drop about 12 percent. I don't know if that's because people had any expectation that that that he was leaving. He

He does have some very positive comments about the company, but of course, moving into this role does allow him, I imagine, at some point potentially to sell shares

If he were so choose without having to therefore disclose the sale of those shares prior to prior. Right. If you're on the board, you have to you're a true insider. I don't believe you'd necessarily be an insider under this relationship, but maybe we should take a look at that. Of course, he has been a big proponent of this deal, along with David Zaslav. He's been a great champion of David Zaslav's over all of these years. The creation of Discovery and the creation of so much.

of this media empire. Mike Freese, you know, he's had his guys. He always refers to them, who he travels with. Maffei leaving earlier last year and kind of watching this play out. But, man, is he a legend, and he is somebody who everybody in the media landscape listens to and consults with before they do just about anything. Interestingly, you did see that David Zaslav made a couple of comments earlier this week internally around trying to, you know, tighten the belt, make sure, you know,

Folks aren't doing extra travel or other things, in part because I think he's a little bit worried about where this whole economy is headed. Maybe that gets a little bit better with this pause on the tariffs. I don't know. I'm watching a lot of Zaz's shows. That's all I can tell you. Just finished White Lotus. White Lotus. I didn't like the ending that much. I thought it was disappointing. Don't blow it for people who haven't seen it. You know what? Because of you, I started with The Pit. You

You get through the first episode? I'm so squirmy with all the blood. It's not for you. You're like, you're like crap. You're like the 20 year old doctor that's new. It's a great show. They pulled the leg off and she faints. It's a great show, but I can't, you know. And they call her, they call, I'm going to start calling you crash. There's a lot of this. There's a lot of this. Oh, it's unbelievable. How about the medical terminal? Have your phone with you because there are things you need to Google quick.

But it's phenomenal. Noah Wiley is amazing, too, isn't he? No, he does a great job. He does a great job. I love it. My son's totally addicted to it. And he's squeamish. You know, there's a big lawsuit going on with the family that helped create ER originally. Really? Because of whether this is technically considered a reboot or not. Nothing like ER. Or whatnot. But the development process as a whole. You can go read all the stories about it. ER had pretty boy George whatever's name. It's the only reason he left.

I think it's Michael Crichton's family, the estate. Really? Yeah. I love that. I used to love it. I knew his brother well. Excellent. A lot more on Scott Fox ahead. FNN guy. FN what? Don't do this while you're watching. FNN guy.

That's it. That's SquawkPod for today. And for the week, we made it to Friday. SquawkBox is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. Get the best of our TV show right into your ears when you follow SquawkPod, wherever you get your podcasts. We'll meet you back here on Monday. Have a great weekend. We are clear. Thanks, guys.

The U.S. and China are competing for global leadership. The country who wins will define the world we live in. U.S. international assistance is vital to our national security. It helps prevent terrorism and avoid costly wars. It fights diseases and saves lives. It helps keep America as the number one economy in the world.

U.S. international assistance protects our interests at home and abroad. If America doesn't lead, China will.