Tariffs Weigh on Tech, Trump Signals TikTok Deal Close | Bloomberg Technology
>> FROM THE HEART OF WHERE INNOVATION, MONEY, AND POWER COLLIDE, FROM THE HEART OF SILICON VALLEY AND BEYOND, THIS IS "BLOOMBERG TECHNOLOGY," WITH CAROLINE HYDE AND ED LUDLOW. CAROLINE: LIVE FROM NEW YORK, I'M CAROLINE HYDE, THIS IS "BLOOMBERG TECHNOLOGY." TARIFFS HIT GLOBAL TECH STOCKS AGAIN TODAY AS CHINA RETALIATES AND IMPOSES TARIFFS ON ALL AMERICAN IMPORTS AND WITHHOLD -- WITHHOLDS CRUCIAL RARE EARTHS. $2 TRILLION WIPED OFF THE NASDAQ AND TWO DAYS AS THE BENCHMARK IS SENT TO ENTER A BEAR MARKET.
INVESTORS EXPECT THE FEDERAL RESERVE TO CUT INTEREST RATES FOUR TIMES THIS YEAR. WE WILL HEAR FROM THE FED CHAIR, JEROME POWELL, LATER IN THE HOUR. WE GOT TODAY -- DIVE INTO THE NASDAQ 100 MOVE. WE HAVEN'T SEEN THIS KIND OF SELLOFF SINCE 2020. >> THE SCALE OF THE WEAKNESS HAS BEEN BREATHTAKING. THE SIZE OF THE DROPS, THE BROAD-BASED NATURE OF THE SELLOFF HAVE BEEN PRETTY REMARKABLE. CAROLINE:
WHAT IS ALSO REMARKABLE IS HOW MUCH WE START TO SEE THE ONGOING RETALIATION, WHETHER IT BE FROM COUNTRIES LIKE CHINA AND THE IMPACT IT WILL HAVE ON BEING ABLE TO MAKE TECHNOLOGY PRODUCTS IN THE UNITED STATES, BUT INDIVIDUAL COMPANIES, LATER WE WILL BE SHINING ON THE LIGHT THAT SHINING THE LIGHT ON NINTENDO AND ITS DELAY OF THE SWITCH TO PREORDERS IN THE U.S.. IS IT PRICED IN? SO FAR I HAVE HEARD THAT FEW ARE WILLING TO JUMP IN. SOME ARE POSITIVE ON A LONGER-TERM BASIS SAYING THAT IF YOU HAVE A THREE YEAR TO FIVE YEAR TIME HORIZON YOU MIGHT BE ABLE TO TAKE ADVANTAGE OF THE DROPS IN THE NAMES, BUT WE DON'T REALLY KNOW WHAT TO EXPECT. THINGS WERE BAD YESTERDAY AND ARE WORSE TODAY. IS ARE GOING TO BE A RESPONSE TO THE CHINA RETALIATION? A BACK AND FORTH? WE DON'T KNOW AND THAT MAKES IT DIFFICULT FOR COMPANIES TO KNOW HOW TO PLAN AND IT MAKES IT DIFFICULT FOR INVESTORS TO KNOW HOW TO POSITION. CAROLINE:
AT THE MOMENT, WHERE IN PARTICULAR IS THE PAIN THE MOST ACUTE? HARDWARE? SOFTWARE? SOFTWARE IS IN THE EYE OF THE STORM IF THE EU DECIDES TO RESPOND FROM A DIGITAL SERVICE TAX PERSPECTIVE. RYAN: ABSOLUTELY. SO FAR WE SAW A RELATIVE OUTPERFORMANCE AND SOFTWARE WERE SOME TOLD ME THAT THIS IS TOO MUCH, TOO SOFT FOR SOFTWARE BECAUSE THEY ARE NOT AS DIRECTLY EXPOSED TO TARIFFS, BUT HARDWARE, LIKE YOU MENTIONED, VERY MUCH GETTING HIT. IT'S AN EXTREMELY -- YOU KNOW, THERE'S A LOT OF MANUFACTURING EXPOSURE TO CHINA, VIETNAM, PLACES THAT REALLY GOT HIT WITH TARIFFS. THOSE PLACES REALLY SUFFERED OVER THE PAST COUPLE OF DAYS. PARTICULARLY SHIPS CAME IN QUITE A BIT WITH A LOT OF UNCERTAINTY AND PEOPLE THAT WERE ALREADY CONCERNED ABOUT THE OUTLOOK FOR AI SPENDING, PEOPLE HAVING ALREADY TALKED ABOUT VALUATIONS BEING ELEVATED. THESE THINGS ARE ALL DOVETAILING AND YOU'VE GOT A LOT OF REASONS TO SELL RIGHT NOW AND VERY FEW REASONS TO BUY. CAROLINE:
WORST CASE SCENARIO IS THE LEAD QUOTE IN YOUR STORY COMING FROM AN INVESTMENT CIO AT GRANITE BAY WEALTH MANAGEMENT. DO WE THINK THERE IS A MOVEMENT BACK FROM THIS WORST CASE SCENARIO? MANY HAVE CALLED FOR THE FACT THAT APPLE MIGHT GET SOME SORT OF EXCLUSION FROM THE TARIFFS, MANY ARE BRACING FOR HEADLINE RISKS GOING FORWARD. RYAN: THERE'S A LOT OF BRACING FOR HEADLINE RISK. THERE'S A LOT OF HOPE THAT APPLE WOULD GET AN EXEMPTION LIKE IT DID IN THE FIRST TRUMP ADMINISTRATION, BUT THIS IS A VERY DIFFERENT -- DIFFERENT POLICY FROM THE FIRST ADMINISTRATION, SO THERE ISN'T MUCH OF A PLAYBOOK THAT YOU CAN USE HERE IN THE SAME WAY THAT YOU MIGHT HAVE THOUGHT THAT IT WASN'T THAT BAD EIGHT YEARS AGO OR WHATEVER THAT WAS.
IT'S LOOKING MORE SEVERE RIGHT NOW AND AGAIN, THAT MAKES IT HARDER FOR PEOPLE TO KNOW HOW TO ALLOCATE, TO POSITION, IF THEY SHOULD BE BRACING FOR SHORT TERM PAIN OR IF THIS LOOKS LIKE A LONG-TERM BUYING OPPORTUNITY. THERE ARE SO MANY QUESTIONS, IT'S HARD TO KNOW WHAT TO DO. THAT'S WHAT PEOPLE ARE TELLING ME. CAROLINE:
GET BACK TO THE FUNDS IN THE EMAIL, RYAN, THANKS FOR TALKING WITH US. TESLA, TRADING LOWER UNSURPRISINGLY, DOWN 15% IN THE LAST TWO DAYS FOLLOWING TARIFF NEWS. JP MORGAN, WANT TO SHINE A LIGHT ON THAT PERSPECTIVE, THEY CUT THEIR ESTIMATES FURTHER, QUOTING WHAT THEY SEE AS UNPRECEDENTED BRAND DAMAGE. CRAIG TRUDELL JOINS US FOR MORE.
WE HAVE BEEN DECIDING IF THESE WORK PRODUCTION ISSUES OR THE LACK OF A NEW MODEL, BUT FOR JP MORGAN THIS IS BRAND DAMAGE? CRAIG: I DO THINK IT'S BOTH, RIGHT? BUT JP MORGAN IS ONE OF THE MORE BEARISH BROKERS ON THE STREET. THEY HAD VERY MUCH A SORT OF LEANED INTO THE IDEA THAT THIS IS MORE THAN JUST THE MODEL WIDE CHANGEOVER, WHICH WE SHOULD NOTE IS A SIGNIFICANT ISSUE IN THE FIRST QUARTER. IT REMAINS TO BE SEEN JUST HOW MUCH TESLA CAN SORT OF OVERCOME ANY BRAND DAMAGE THAT, YOU KNOW, IS AN ISSUE HERE. BUT IT IS HARD TO SORT OF THINK
OF AN EQUIVALENT MOMENT FOR A CAR BRAND, WHERE YOU SEE PEOPLE THROWING PAINT ON TO SHOW ROOMS AND LETTING CARS ON FIRE. THIS IS JUST, YOU KNOW, VERY UNUSUAL FOR ANY PRODUCT, BUT PARTICULARLY FOR CARS WHERE, YOU KNOW, THIS IS THE SECOND MOST VALUABLE THING THAT PEOPLE BUY AFTER THEIR HOMES, RIGHT? TO TESLA NOW MEANS SOMETHING A LOT DIFFERENT THAN IT DID ONLY MONTHS AGO. THERE ARE REAL QUESTIONS ABOUT JUST HOW MUCH SORT OF LASTING IMPACT MUSKA'S ENTRY INTO POLITICS IS GOING TO HAVE ON THE BRAND. YOU CITED JP MORGAN CAROLINE: -- YOU CITED JP MORGAN ON THE STREET, DAN IVES, TESLA, EVEN HE IS SAYING THAT THE RECENT REPORT DELIVERY IS A DISASTER ON EVERY METRIC. IS THERE ANY OF YOU THAT ELON
MUSK POTENTIALLY STARTING TO EASE OUT OF THE WHITE HOUSE IN HIS DAY TO DAY ROLES AS HAVE BEEN REPORTED AND THEN THEY PUSHED BACK AGAINST IT, WILL HE COME BACK TO THE FOLD AND REFOCUS ON TESLA IN AN OPTIMISTIC LIGHT? CRAIG: IF WE LISTEN TO WHAT MUSKA HAS SAID AND EVEN JD VANCE, I HAVE A HARD TIME SEEING, SORT OF, HIM HEADING TO THE BACK SEAT, IF YOU WILL. THAT'S NOT HIS NATURE, RIGHT? HE HAS VERY MUCH SORT OF GOT ME IN DEEP WITH THIS ADMINISTRATION . YOU KNOW, IN THE LAST FEW DAYS HE WAS PICTURED WITH A, YOU KNOW, A TRUMP, EVERYTHING TRUMP SAID WAS RIGHT AT. I MIGHT BE GETTING THE VERBIAGE A LITTLE OFF, BUT HE IS VERY MUCH, YOU KNOW, BEHIND THE PRESIDENT. YOU KNOW, SORT OF ONE IN THE SAME WITH THE ADMINISTRATION. EVEN IF HE DOES TAKE A STEP
BACK OFFICIALLY, I THINK, IT'S HARD TO SORT OF FATHOM HOW IT COULD REALLY -- HOW HE COULD SEPARATE HIMSELF AFTER HE HAS THROWN HIMSELF IN SO EMPHATICALLY FOR THE LAST SIX MONTHS. CAROLINE: CRAIG, FOLLOWING THIS FOR SIX MONTHS AND THEN SOME. THANK YOU. THE MARKET ON SLOT, MARKET CAPS IN THE LOW 3 TRILLION.
LET'S GET TO SOME KEY ANALYSTS ON THE STOCK. WE'VE GOT THE KEY MANAGING DIRECTOR JOINING US NOW. YOU HAVE SO MANY NAMES AND I'M EXCITED TO TALK ABOUT ALL OF THEM. LET'S FOCUS ON APPLE AT THE MOMENT. TO WHAT EXTENT IS IT BEING
PRICED IN WITH THE SUPPLY CHAIN UPENDING THAT TARIFF IMPACT? WILL THEY GET SOME SORT OF EXCLUSION, DO YOU THINK? APPLE -- >> IT LOOKS LESS LIKELY NOW. I THINK THAT COMMENTARY IS PROBABLY CORRECT. THE MARKET IS DOING ITS BEST TO ASSESS THE IMPACT ON APPLE. RIGHT NOW, IT IS JUST DOING THE ROUGH MATH.
ONE THIRD OF THEIR REVENUE BEING IMPACTED, ABOUT ONE THIRD OF TARIFFS HIGHER. ONE TIMES ANOTHER, THE STOCK IS DOWN 10 TIMES -- 10% TO 15%, THAT IS AS GOOD AS THE MARKET CAN DO RIGHT NOW. WE WILL HAVE A FEW DAYS AND WEEKS TO REFINE THAT MATH AS WE SEE HOW THIS PLAYS OUT. BUT THEN THE STRUCTURAL CHANGE TO THE U.S. ROLE IN THE GLOBAL ECONOMY HAS ALREADY HAPPENED NOW. EVERY DAY AND WEEK THAT WE PROCEED IN THIS DIRECTION, IT'S GOING TO BE CEMENTED AS A DIFFERENT WORLD ORDER AND, THEREFORE, WE HAVE TO GET BETTER AT DOING THE MATH ABOUT HOW THAT IMPACTS COMPANIES LIKE APPLE, BUT ALSO A LOT OF OTHER TECHNOLOGY COMPANIES. CAROLINE: THERE ARE SO MANY HEADLINES
COMING OUT MINUTE BY MINUTE. IN ONE OF THEM WE UNDERSTAND THAT TRUMP SAYS THEY WANT TO CUT THEIR TARIFFS DOWN TO ZERO. VIETNAM HAS BECOME A RELATIVELY NEW HUB FOR APPLE. HOW ARE THEY ABLE TO IN THIS MOMENT WHERE THE NEWS CAN CHANGE FROM DAY TO DAY, ABLE TO STOMACH THE HIGHER COSTS? THEY HAVE A HEALTHY MARGIN OF 46% TO 49%. THAT'S RIGHT.
-- GIL: THAT'S RIGHT. APPLE HAS A FEW LEVERS. THEY CAN CUT COSTS TO SUPPLIERS. THEY CAN PASS IT THROUGH TO CONSUMERS. THREE, THEY CAN ABSORB SOME OF THE MARGIN DEGRADATION. IT HAS ALL THREE LEVERS IN THE
SHORT TERM, THEY WILL BE USING ALL OF THOSE. BUT TO YOUR POINT, IN THE MEDIUM TO LONG TERM, THEY HAVE THE ABILITY TO SHIFT PRODUCTION. THEY ALREADY STARTED SHIFTING PRODUCTION FROM CHINA TO INDIA AND VIETNAM, WHO ARE FAR MORE LIKELY TO ARRIVE AT A BENEFICIAL AGREEMENT WITH THE UNITED STATES ABOUT TARIFFS AND TRADE THAN CHINA IS. SO, THE FACT THAT APPLE IS ALREADY MANUFACTURING IN INDIA AND VIETNAM GIVES THE MEDIUM TERM AND LONGER TERM FLEXIBILITY TO OFFSET SOME OF THE TARIFF INCREASES AND REDUCE THE IMPACT ON PRICES AND MARGINS. CAROLINE:
THAT'S A HARDWARE PERSPECTIVE. I CAN UNDERSTAND WHY NVIDIA IS FEELING THE PAIN ON A HARDWARE PERSPECTIVE AND GETTING IT OUT OF META. IS THIS SIMPLY ABOUT THE EU RESPONSE MECHANISM? GIL: THAT'S PART OF IT. IN AN ADVERTISING RECESSION, LESS DIGITAL ADVERTISING, THAT IS ALL OF THE META-BUSINESS. PART OF THE REACTION IS THAT EUROPEANS HAVE A HABIT OF DRAWING FUNDS OUT OF OUR LARGE TECHNOLOGY COMPANIES THROUGH NONTARIFF BARRIERS, THEY WILL DECIDE THAT META IS NOT -- THEY WILL FIND THE BILLIONS OF DOLLARS.
THEY WILL -- THEY HAVE DONE THE SAME TO GOOGLE AND APPLE. THE MORE THAT WE GET IN CONFLICT WITH EUROPE, THAT IS A LOT OF THE LEVER THAT THE EUROPEANS HAVE. IT'S NOT JUST TARIFFS ON GOODS. IT'S THE EUROPEAN INCLINATION TO PUT IN REGULATION THAT RESTRICTS THESE COMPANIES, ALLOWING THE EUROPEANS TO FIND THEM BILLIONS OF DOLLARS. CAROLINE: TRUMP SAYS THAT HE HAS A LEVER WHEN IT COMES TO TIKTOK AND CHINA. YOU COVER ORACLE. IN ANY CAPACITY, DO YOU WANT TO SEE ORACLE BECOME A MINORITY HOLDER OF FUTURE SHARES IN THE U.S. TIKTOK IF INDEED THAT DEAL
DISCUSSED AT THE WHITE HOUSE GOES THROUGH? GIL: SOMEBODY IS GOING TO GET A WINDFALL FROM THIS. TIKTOK U.S. BUSINESS IS INCREDIBLY VALUABLE. TO THE EXTENT THAT WE CAN ACCOMPLISH THE NATIONAL SECURITY GOAL OF NOT ALLOWING OUR DATA TO BE SENT TO THE COMMUNIST PARTY OF CHINA, THAT BUSINESS IS INCREDIBLY VALUABLE. WHOEVER GETS TO PARTICIPATE IN IT IS GOING TO GET A WINDFALL. IT LOOKS LIKE ORACLE MIGHT BE IN THE RUNNING TO DO THAT, BUT EVERYBODY ELSE IS RUNNING FOR THAT, TOO. IT'S INCREDIBLY VALUABLE BECAUSE IF YOU THINK ABOUT IT, THERE ARE REALLY ONLY THREE VENUES FOR SOCIAL MEDIA WHERE YOU CAN ACCESS CONSUMERS.
YOUTUBE, META, AND THE BYTEDANCE TIKTOK. WHOEVER OWNS TIKTOK IN THE U.S. WILL HAVE A VERY VALUABLE ASSET. TO THE EXTENT THAT ORACLE CAN EXPAND THEIR BUSINESS, THEY ALREADY HAVE A TIKTOK BUSINESS IN HOSTING. IF THEY CAN EXPAND MORE INTO AN OPERATIONS ROLE WITH TIKTOK, THAT WOULD BE A WINDFALL TO ORACLE. CAROLINE: THERE HAVE GOT TO BE SOME PEOPLE WAITING IN CERTAIN CIRCUMSTANCES. GIL, THANK YOU FOR YOUR
EXPERTISE. MORE BREAKING HEADLINES RIGHT NOW, TRUMP IS INDEED SPEAKING AND UNDERSTANDING -- AND WE UNDERSTAND THAT IT'S HE SAYING IT'S A PERFECT TIME FOR THE FED CHAIRMAN TO CUT INTEREST RATES. WE WILL BE HEARING FROM THE FED CHAIRMAN IN 10 TO 15 MINUTES AND HE WILL BE SPEAKING AT AN EVENT IN ARLINGTON, VIRGINIA. WE UNDERSTAND THAT TRUMP SAYS THAT POWELL IS ALWAYS LATE AND IT'S THE PERFECT TIME TO CUT INTEREST RATES. THE MARKET FACTORING IN ON
THOSE INTEREST RATE CUTS FOR THIS YEAR. LET'S LOOK AT THE OTHER COMPANIES BEING MOVED AROUND THROUGH TERRACE. NINTENDO, THE STOCK AS YOU SEE, FALLING CURRENTLY, THREE POINT 3% INTRADAY. THERE ARE REPORTS OUT THERE THAT THE COMPANY IS SET TO DELAY U.S. PREORDERS OF THE NINTENDO SWITCH 2 BECAUSE OF TERRACE. PRODUCT LAUNCH IS SET FOR JUNE
5. COMING UP, VICE PRESIDENT JD VANCE SAYS THAT A DEAL FOR TIKTOK WILL COME OUT BEFORE THE DEADLINE FOR THE POTENTIAL MAN. THE DEADLINE IS TOMORROW. WE WILL DISCUSS THAT NEXT. THIS IS "BLOOMBERG TECHNOLOGY."
♪ CAROLINE: IN RESPONSE TO THE MARKET TOUR -- TURMOIL, NEWS ON KARNER, THEY ARE SET TO DELAY THEIR PLANNED IPO AFTER THE IMPLEMENTATION OF THE TRUMP TERRACE ALL ACCORDING TO "THE WALL STREET JOURNAL." WE WILL BRING YOU ANY MORE OF THEIR BREAKING NEWS. AS WE UNDERSTAND, THEY ARE PAUSING THE PLAN FOR THE INITIAL PUBLIC OFFERING. SATURDAY IS THE DEADLINE FOR BYTEDANCE TO FIND A BUYER FOR THEIR U.S. TIKTOK HOLDING OR BE BANNED. TRUMP AND VANCE HAVE BOTH
SIGNALED THAT A DEAL IS WITHIN REACH. KURT WAGNER JOINS US FOR MORE. MAYBE A DEAL EVEN BEFORE SATURDAY THE FIFTH? KURT: I WOULD BE SURPRISED IF WE DON'T HAVE SOMETHING BEFORE SATURDAY. THERE WAS GOING TO BE AN ANNOUNCEMENT OF A PROPOSED DEAL, BECAUSE AGAIN, THIS WOULD REQUIRE BUY-IN FROM BYTEDANCE IN THE CHINESE GOVERNMENT, WHICH I DON'T THINK WE HAVE YET, OR AN EXTENSION TO CONTINUE DISCUSSING A DEAL. THIS WEEK THE TRUMP ADMINISTRATION WANTED TO TALK ABOUT A SPECIFIC DEAL INVOLVING ORACLE, BLACKSTONE, AND A HANDFUL OF OTHER INVESTORS AND I THINK WE ARE CIRCLING AROUND SOMETHING THAT LOOKS LIKE THAT AND I THINK WE WILL HAVE SOMETHING BEFORE MIDNIGHT, EASTERN, TONIGHT, WHICH IS WHEN THE VAN IS SUPPOSED TO KICK IN IF THEY DON'T DO SOMETHING.
CAROLINE: THE DEAL AS WELL AND GOOD DEPENDING ON WHO AGREED ON IT. I SUPPOSE U.S. INVESTORS MIGHT BE ALIGNED, BUT IS BYTEDANCE IN THE CHINESE GOVERNMENT ALIGNED CONSIDERING THE FURTHER TERRACE JUST UNVEILED? KURT: THAT TIMING IS NOT NECESSARILY A STRONG SIGN THAT EVERYONE IS WORKING TOGETHER. WE HAVE NOT HEARD FROM BYTEDANCE OR THE CHINESE GOVERNMENT.
MY UNDERSTANDING IS THAT THE U.S. SIDE OF THIS EQUATION IS WORKING TO PROPOSE SOMETHING THAT THEY THEN HOPE WILL BE ACCEPTED ON THE OTHER SIDE OF THE FENCE THERE. AS YOU POINTED OUT, WE ARE IN THE MIDDLE OF A GLOBAL TRADE WAR RIGHT NOW, PARTICULARLY WITH CHINA. TRUMP SUGGESTED THAT MAYBE TARIFFS ARE A NEGOTIATING, BARGAINING CHIP IN THIS WHOLE THING. BUT IT IS A COMPLICATED SITUATION BECAUSE OF WHAT YOU JUST MENTIONED. CAROLINE: ALSO COMPLICATED IT IS THE ALGORITHM AND THE OVERSIGHT THAT U.S. INVESTORS EVENTUALLY HAVE AND
WHETHER IT'S IN LINE WITH THE LETTER OF THE 2024 LAW THAT WAS PASSED. IT DIDN'T HAVE MUCH OF A WAY IN WHICH THE ALGORITHM COULD BEACH -- CAPTAIN CHINESE HANDS. KURT: THAT'S RIGHT, BY THE LETTER OF THE LAW, BYTEDANCE OR THE CHINESE GOVERNMENT SHOULD ESSENTIALLY HAVE ZERO INFLUENCE OR CONTROL OVER THE ALGORITHM. THE DEAL THAT HAS BEEN PROPOSED
SEEMS TO SUGGEST THAT THEY WOULD . SO, THE DEAL THAT IS BEING DISCUSSED MAY NOT FOLLOW THE LAW . THE QUESTION IS, IS SOMEONE GOING TO CHALLENGE TRUMP ON THAT? IF HE SIMPLY SAYS THAT THIS IS ACCEPTABLE TO ME, WE WILL DO IT, IS CONGRESS GOING TO STEP IN AND SAY LOOK, THIS DOESN'T FOLLOW THE LAW, WE CHALLENGE YOU, OR DO THEY LET IT SLIDE? I DON'T KNOW THE ANSWER TO THAT. YOU ROD UP THE STICKIEST POINT
OF THE WHOLE THING, ACTUAL CONTROL OVER THIS KEY TECHNOLOGY. BOTH SIDES WANTED AND I'M NOT SURE HOW THEY RECTIFY THAT. CAROLINE: KURT WAGNER STAYING ON TOP OF A TIMELY CONVERSATION, THANK YOU.
LET'S FOCUS ON WHAT ADVERTISING MARKETS DO IN THIS MOMENT. DO THEY GO TO TIKTOK OR NOT? RACHEL IS WITH US. YOU HAVE THE DATA. SINCE THE 19TH OF JANUARY, THE FIRST BANNING DEADLINE THAT WE WERE WORRIED ABOUT WHERE IT WENT BLACK FOR A MOMENT, TRAFFIC HAS RECOVERED AT TIKTOK? >> ABSOLUTELY. WE SAW TIKTOK TRAFFIC GO TO ZERO ON JANUARY 19. IT TOOK UNTIL MARCH 1 FOR TIKTOK TRAFFIC FOR MAJOR ADVERTISERS TO REACH Q4 LEVELS.
WHY? THERE WAS A LOT OF CONFUSION ABOUT WHY IT -- IF IT WAS STILL LEGAL TO ADVERTISE ON TIKTOK. IF YOU FOLLOW, TIKTOK DID A LOT OF ADVERTISING THEMSELVES TO COMMUNICATE THAT IT WAS A SAFE PLACE TO ADVERTISE. HERE WE ARE AND WE'S SEE TIKTOK TRAFFIC SURPASSING Q4 LEVELS. WE TRACK 2400 OF THE BIGGEST BRANDS IN THE WORLD AND TRAFFIC ON TIKTOK RIGHT NOW IS 20% HIGHER THAN Q4 LEVELS. CAROLINE:
THAT'S PHENOMENAL CONSIDERING THE LEVEL OF UNCERTAINTY GOING INTO THIS SATURDAY. ARE PEOPLE PARING BACK BECAUSE OF THIS ONE-OFF EVENT? >> WE HAVEN'T SEEN THAT YET AND THE REALITY IS TIKTOK IS A UNIQUE ASSET. IT'S WHY THE U.S. AND CHINA ARE FIGHTING OVER IT. YOU CAN BUILD BRAND AND DRIVE CONVERSION AT ONCE. UNTIL U.S. ADVERTISERS HERE THAT THEY SHOULDN'T BE ADVERTISING ON THAT PLATFORM, I BELIEVE THAT THEY WILL CONTINUE TO DO SO. THEY ALL HAVE CONTINGENCY PLANS. THEY HAVE CONTINGENCY PLANS FOR
TARIFFS AND NOW FOR ADVERTISING. BUT WE SAW AROUND JANUARY 19 IS HOW EASY IT IS TO MOVE DOLLARS FROM ONE PLATFORM TO ANOTHER. CAROLINE: WHERE DID IT GO? WHO BENEFITED? RACHEL: ALPHABET AND PINTEREST. IN BOTH OF THOSE PLATFORMS, YOU CAN DRIVE CONVERSION AND CONSIDER IT A THOUGHT I AM CAROLINE: WHY DID INSTAGRAM NOT BECOME THE AUTOMATIC PLACE? IS EVERYONE ALREADY THERE? RACHEL: THE INTERESTING THING ABOUT MATTA'S -- META IS THAT IT'S THE GIANT. BUT WHEN WE COMPARE Q1 TRAFFIC
TO Q4 TRAFFIC, WE SEE A 3% DECLINE. LOOKING AT THE TIMING OF IT, IT'S ALL AROUND THE ZUCKERBERG ANNOUNCEMENT OF REMOVING FACT CHECKING FROM THE PLATFORM. IT GOES BACK TO MANY OF THE THINGS BRANDS ARE BALANCING, ONE BEING CONCERNS AROUND BRAND SAFETY. CAROLINE: INTERESTING. I WONDER AT THIS MOMENT, WE ARE SEEING META STOCK UNDER PRESSURE SIGNIFICANTLY WITH PEOPLE WORRIED ABOUT ADVERTISERS PARING BACK BECAUSE OF ECONOMIC UNCERTAINTY, LET ALONE BRAND CERTAINTY. ARE YOU PREPARING YOURSELF FOR THAT? RACHEL: ABSOLUTELY. THIS IS A WHOLE OTHER CURVEBALL. THIS IS ABOUT TARIFFS, NOT THE
TRADE DESKS. CONSUMER GOODS. THE REALITY IS, CONSUMER GOOD COMPANIES ARE IN A REALLY TOUGH SPOT. THEIR MARGINS ARE GETTING SQUEEZED. THEY REALLY ONLY HAVE THREE OPTIONS. RAISE PRICES, WHICH RETAILERS AND CONSUMERS DON'T WANT. THE SECOND, REDUCE SUPPLY
CHAIN, PRODUCE FEWER. I CAN TELL YOU, ADVERTISERS DON'T WANT THAT. WHY? WHAT CREATES REVENUE TO RISE? DENSITY. YOU NEED MORE. THE WORST THING, BUT I THINK THE MARKETS ARE REACTING TO, REMOVING WORKING MEDIA SPEND ALTOGETHER. I CAN TELL YOU THAT IF YOU ARE A STUDENT OF BRANDS LIKE IM, IF YOU STOP INVESTING IN BRANDS, YOU WILL LOSE MARKET SHARE. EVERY CMO AND CFO ACROSS THE
WORLD RIGHT NOW IS HAVING THIS CONVERSATION. CAROLINE: GOING BACK TO TIKTOK, FOR 30 SECONDS, IF TIKTOK ISN'T PURCHASED BY THE ORACLE CONTINGENT AND WE DON'T SEE THE ALGORITHM COME TO U.S. HANDS, DO PEOPLE STICK WITH IT? RACHEL: I THINK HE WILL START TO SEE DOLLARS SHIFTING QUICKLY INTO PLATFORMS LIKE ALPHABET AND PINTEREST. CAROLINE: ALWAYS GREAT TO HAVE YOU ON RACHEL, JOY. THANK YOU. WE'VE GOT MORE BREAKING IN RESPONSE TO TERRACE.
THIS IS THE STUBHUB IPO. ACCORDING TO "THE WALL STREET JOURNAL," STUBHUB DELAYED PLANS FOR INITIAL PUBLIC OFFERING. REMEMBER, THE LIKES OF STUBHUB WERE POTENTIALLY COMING TO THE MARKET. CAULK -- FLORIDA DELAYED, ACCORDING TO "THE WALL STREET JOURNAL." COMING UP, WE HEAR FROM JEROME POWELL IN THE MIDST OF THIS MARKET UNCERTAINTY FOLLOWING WIDESPREAD TARIFFS, REACTION FROM CHINA. THAT IS NEXT.
THIS IS "BLOOMBERG TECHNOLOGY ♪ ." CAROLINE: U.S. JOBS GROWTH BEAT FORECASTS IN MARCH POINTING TO A HEALTHY LABOR MARKET BEFORE THE GLOBAL ECONOMY GETS HIT BY WIDESPREAD -- WIDESPREAD TERRACE.
MIKE MCKEE WHAT LOOKS RESILIENT. MIKE: THE LABOR MARKET IS GOOD NEWS BUT WE HAVE THE HEADLINES FROM JAY POWELL'S SPEECH SAYING THAT THE EFFECTS OF THE TARIFFS ARE PROBABLY GOING TO BE STRONGER THEY AND PEOPLE ANTICIPATED AND THEN THE FED ANTICIPATED. INFLATION AND UNEMPLOYMENT BITE BE HIGHER. THE ECONOMY MIGHT GROW MORE SLOWLY. THE SIZE OF THE EFFECTS IS
GOING TO BE UNCERTAIN. AND HE SAYS WELL TARIFFS ARE HIGHLY LIKELY TO GENERATE A TEMPORARY RISE, IT IS ALSO POSSIBLE THAT THE EFFECTS COULD BE MORE PROCESSED -- MORE PERSISTENT. SO POWELL IS MAKING IT CLEAR THAT THE FED'S FIRST GOAL THAT IT WILL BE TO FIGHT INFLATION, SAYING ERIN -- THEIR OBLIGATION IS TO KEEP INFLATION EXPECTATIONS WELL ANCHORED AND THAT A ONE-TIME INCREASE DOES NOT BECOME AN ONGOING PROBLEM. THEY ARE WELL-POSITIONED FOR WHATEVER HAPPENS BUT IT WILL TAKE TIME TO BE ABLE TO FIGURE OUT EXACTLY WHAT THE IMPACTS WILL BE. CAROLINE:
THERE IS THE BIND, INFLATIONARY PRESSURE BUT TRYING TO STABILIZE AN ECONOMY AND THE MARKET PRICES -- PRICING IN FOUR RATE CUTS AND DO THOSE GET PULLED BACK? MIKE: WE MIGHT SEE THAT MOVE AND IT IS INTERESTING TO SEE WHAT THE OVERALL MARKETS DO BECAUSE HE HAS BASICALLY SAYING IF THE ECONOMY SLOWS WE WILL LET IT AND KEEP AN ION INFLATION. AND WE THINK INFLATION COULD BE WORSE THAN WE HAD FORECAST BECAUSE TARIFFS ARE HIGHER THAN WE THOUGHT. CAROLINE: WHAT IS INTERESTING IS THAT PRESIDENT TRUMP HIMSELF HAS BEEN TALKING ABOUT JAY POWELL SAYING THAT HE IS ALWAYS LATE.
THIS WOULD BE A GOOD MOMENT TO CUT INTEREST RATES. WE KNOW WHERE THE WHITE HOUSE POSITION IS. MIKE: AND THE FED CHAIRMAN IS SAYING NO, YOU ARE WRONG. AND OUR FIRST MOVE MIGHT BE TO RAISE RATES IF WE HAVE TO FIGHT INFLATION. I THINK JAY POWELL IS JUST STARTING. I WILL TURN IT OVER TO HIM.
>> OF MAXIMUM EMPLOYMENT AND STABLE PRICES. WHILE UNCERTAINTY IS HIGH AND DOWNSIDE RISK HAVE RISEN THE ECONOMY IS STILL IN A GOOD PLACE. THE DATA SHOWS SOLID GROWTH, A LABOR MARKET IMBALANCE AND INFLATION RUNNING CLOSER TO BUT STILL ABOVE THE 2% OBJECTIVE. AFTER A COUPLE OF YEARS OF SOLID GROWTH, MANY FORECASTERS ANTICIPATED SLOWER GROWTH THIS YEAR.
THE INITIAL READING FOR FIRST QUARTER GDP WILL BE RELEASED LATER THIS MONTH. THE LIMITED HARD DATA IS STILL CONSISTENT WITH THE GROWTH OUTLOOK. AT THE SAME TIME, SURVEYS OF HOUSEHOLDS AND BUSINESSES REPORT DIMMING EXPECTATIONS AND HIGHER UNCERTAINTY. SURVEY RESPONDENTS POINT TO THE EFFECTS OF THE NEW FEDERAL POLICIES ESPECIALLY RELATED TO TRADE. WE ARE CLOSELY WATCHING THE TENSION BETWEEN THE HARD AND SOFT DATA.
AS THE NEW POLICIES AND THEIR EFFECTS BECOME CLEARER, WE WILL HAVE A BETTER SENSE OF THEIR IMPLICATIONS FOR THE ECONOMY AND POLITICS -- MONETARY POLICY. LOOKING ACROSS MANY INDICATORS THE MARKET APPEARS TO BE BROADLY IN BALANCE IN A SIGNIFICANT SOURCE OF INFLATIONARY PRESSURE. THE JOBS REPORT SHOWED THE UNEMPLOYMENT RATE AT 4.2%, STILL IN THE LOW RANGE WHERE IT HAS HELD SINCE EARLY LAST YEAR.
OVER THE FIRST QUARTER, THE PAYROLL GREW BY AN AVERAGE OF 150,000 JOBS, A COMBINATION OF LOW LAYOFFS, MODERATING JOB GROWTH AND SLOWER LABOR FORCE GROWTH HAS KEPT THE UNEMPLOYMENT RATE BROADLY STABLE. TURNING TO THE OTHER LEG OF OUR DUAL MANDATE, INFLATION DECLINED SHARPLY FROM THE PANDEMIC HIGHS OF MID 2022 WITHOUT THE KIND OF PAINFUL RISE IN UNEMPLOYMENT THAT IS OFTEN ACCOMPANYING. SUBTYPE MONETARY POLICY -- PERIODS OF HIGH MONETARY POLICY.
TOTAL PCE PRICES ROSE 2.5 PERCENT IN 12 MONTHS ENDING IN FEBRUARY. CORE PRICES IN -- EXCLUDING THE VOLATILE FOOD AND ENERGY CATEGORIES ROSE. HIGHER TARIFFS WILL WORK THEIR WAY THROUGH THE ECONOMY AND WILL LIKELY RAISE INFLATION.
REFLECTING THIS BOTH SURVEY AND MARKET-BASED MEASURES OF NEAR-TERM EXPECTATIONS HAVE MOVED UP. BY MOST MEASURES, LONGER-TERM INFLATION EXPECTATIONS BEYOND THE NEXT FEW YEARS REMAIN WELL ANCHORED AND CONSISTENT WITH THE 2% GOAL. WE REMAIN COMMITTED TO RETURNING INFLATION SUSTAINABLY TO OUR 2% OBJECTIVE.
TURNING TO MONETARY POLICY WE FACE A HIGHLY UNCERTAIN OUTLOOK WITH ELEVATED RISKS OF HIGHER UNEMPLOYMENT AND HIGHER INFLATION. THE NEW ADMINISTRATION IS IN THE PROCESS OF IMPLEMENTING POLICY CHANGES IN FOUR DISTINCT AREAS, TRADE, IMMIGRATION, FISCAL POLICY, AND REGULATION. THE MONETARY POLICY STANDS IS WELL-PLACED TO DEAL WITH THE RISKS AND UNCERTAINTIES AS WE GAIN A BETTER UNDERSTANDING OF POLICY CHANGES. IT IS NOT OUR ROLE TO COMMENT
ON THOSE POLICIES. RATHER WE MAKE AN ASSESSMENT OF LIKELY EFFECTS, OBSERVE THE BEHAVIOR OF THE ECONOMY AND SET POLICY THAT ACHIEVES OUR DUAL MANDATE GOALS. WE HAVE STRESSED THAT IT WILL BE DIFFICULT TO ASSESS THE LIKELY ECONOMIC EFFECTS OF HIGHER TARIFFS UNTIL THERE IS GREATER CERTAINTY ABOUT THE DETAILS SUCH AS WHAT WILL BE TARIFFED, WHAT LEVEL, AND WHAT RETALIATION FROM OUR TRADING PARTNERS. WHILE UNCERTAINTY REMAINS ELEVATED, IT IS NOW CLEAR THAT TARIFF INCREASES ARE LARGER THAN EXPECTED IN THE SAME IS TRUE OF ECONOMIC EFFECTS WHICH INCLUDE HIGHER INFLATION AND SLOWER GROWTH. THE SIZE AND DURATION REMAINS UNCERTAIN. WHILE TARIFFS ARE HIGHLY LIKELY TO GENERATE A TEMPORARY RISE IN INFLATION, IT IS POSSIBLE THE EFFECTS COULD BE MORE PERSISTENT.
AVOIDING THAT OUTCOME WOULD KEEP LONGER-TERM INFLATION EXPECTATIONS AND HOW LONG IT TAKES THROUGH FOR THEM TO PASS THROUGH TO THE PRICES. OUR OBLIGATION IS TO KEEP LONGER-TERM INFLATION EXPECTATIONS WELL ANCHORED AND TO MAKE SURE THAT A ONE-TIME PRICE INCREASE DOES NOT BECOME AN ONGOING INFLATION PROBLEM. WE WILL CONTINUE TO CAREFULLY MONITOR THE INCOMING DATA, AND THE BALANCE OF RISKS. WE ARE WELL-POSITIONED TO WAIT FOR LATE -- FOR GREATER CLARITY BEFORE CONSIDERING ADJUSTMENTS. IT IS TOO SOON TO SAY WHAT WILL BE THE APPROPRIATE PATH FOR MONETARY POLICY. WE UNDERSTAND THE BENEFITS OF A SOLID ECONOMY WHERE WORKERS CAN FIND JOBS AND INFLATION IS LOW AND PREDICTABLE.
WE UNDERSTAND THAT ELEVATED LABEL -- LEVELS OF UNEMPLOYMENT OR INFLATION CAN BE DAMAGING AND PAINFUL FOR COMMUNITIES, FAMILIES, AND BUSINESSES WHICH IS WHY WE WILL CONTINUE TO DO EVERYTHING WE CAN TO ACHIEVE MAXIMUM EMPLOYMENT AND PLOT -- AND PRICE STABILITY GOALS. I LOOK FORWARD TO YOUR QUESTIONS. [APPLAUSE] >> THANK YOU FOR BEING HERE. THIS FEELS LIKE QUITE A MOMENT TO BE SPEAKING TO YOU AND I THANK YOU FOR YOUR TIME. I WANT TO THANK YOU FOR BEING HERE AND TAKING THE TIME TO SPEAK WITH US AND THIS GROUP OF BUSINESS JOURNALISTS.
I WOULD LIKE TO GIVE A SPECIAL THANKS FOR HEATHER WONG WHO MADE THIS EVENT POSSIBLE. FOR STARTERS, HOW HAS YOUR WEEK BEEN? [LAUGHTER] CHAIR POWELL: JUST FINE, THANK YOU. >> CARE TO ELABORATE? CHAIR POWELL: SO FAR, SO GOOD. >> THANK YOU SO MUCH FOR BEING HERE AND TAKING OUR QUESTIONS. YOU WERE TALKING ABOUT THE ECONOMY AS BEING A STRONG ECONOMY. INFLATION IS COMING DOWN AND
EMPLOYMENT IS STRONG. PRESIDENT TRUMP EARLIER THIS WEEK WHEN ASKED ABOUT THE MARKET VOLATILITY THAT WE HAVE SEEN SAID IT WAS "TO BE EXPECTED, THIS WAS A PATIENT WHO WAS VERY SICK. WE INHERITED A TERRIBLE ECONOMY.' A LOT OF VOTERS DID OR DO AGREE WITH THAT
ASSESSMENT AT LEAST IN PART. HOW WOULD YOU RESPOND AND THE DISCONNECT BETWEEN THE STORY OF THE DATA AND THE WAY A LOT OF PEOPLE ARE FEELING? CHAIR POWELL: LET ME JUST BE CLEAR AT THE START. I MAKE IT A PRACTICE NOT TO RESPOND TO ANY ELECTED OFFICIAL'S COMMENTS AND I DO NOT WANT TO BE SEEN TO BE DOING THAT. IT IS NOT APPROPRIATE FOR ME. THE SITUATION IS THIS, AND PEOPLE WHEN THEY ARE SURVEYED THEY ARE UNHAPPY ABOUT THE ECONOMY.
THAT LARGELY REFLECTS THE INCREASE IN THE PRICE LEVEL THAT HAPPENED WHAT INFLATION WAS HIGH IN 2021 THROUGH 2023. INFLATION IS DOWN TO LOW LEVELS AND THE ECONOMY IS GROWING. PEOPLE ARE STILL EXPERIENCING THE HIGH PRESS -- PRICE LEVEL. THEY KNOW THEY ARE PAYING MORE FOR BASIC NECESSITIES OF LIFE. AND THEY ARE RIGHT THAT THEY ARE AND THEY ARE NOT HAPPY ABOUT IT AND THEY ARE RIGHT NOT TO BE HAPPY ABOUT IT. THAT ACCOUNTS FOR NEGATIVE SENTIMENTS.
WE ARE LOOKING AT INFLATION, THE CHANGE IN PRICES AND THAT IS COMING DOWN QUITE A BIT. AND THAT IS COMING LOW IN MEASURES OF MAXIMUM EMPLOYMENT. AND THE ECONOMY IS GROWING. ALL OF THOSE STATISTICS ARE GOOD, BUT THE PRICE INCREASES OF THE PAST FEW YEARS ARE WEIGHING ON BUDGETS. >> SO, I AM FROM MILWAUKEE AND I HAVE BEEN TALKING TO BUSINESS LEADERS, EXECUTIVES, AND CONSUMERS IN OUR REGION.
MOSTLY BEFORE THE NEWS, THEY ARE TROUBLED AND NERVOUS. ONE BUSINESS OWNER TOLD ME IF THERE IS A HINT OF A RECESSION WE ARE COOKED. AND HE ASKED ME TO SHARE THAT WITH YOU. WHAT ARE YOUR THOUGHTS? CHAIR POWELL: SO, I GUESS I WOULD SAY LET US START WITH THE FACT THAT THE INCOMING DATA THROUGH THIS MORNING'S EMPLOYMENT REPORT WHICH IS FROM A MONTH AGO, THE WEEK OF MARCH 12 THEY TOOK THE DATA. IT SHOWS A SOLID ECONOMY. UNEMPLOYMENT IS STILL LOW. I UNDERSTAND THE UNCERTAINTY THAT IS WEIGHING ON PEOPLE. YOU ASKED ABOUT A RECESSION.
WE DO NOT MAKE A PROBABILITY FORECAST OF HOW LIKELY IT IS. MANY OUTSIDE FORECASTERS DO AND MANY HAVE RAISED THE LIKELIHOOD FROM VERY LOW LEVELS. IT IS NOT SOMETHING THAT ANYBODY NOW IS FORECASTING. SOME PEOPLE ARE STARTING TO. SO, THERE IS NOT MUCH MORE I CAN SAY ABOUT THAT.
I REALIZE UNCERTAINTY IS HIGH AND WHAT WE HAVE LEARNED IS IF THE TARIFFS ARE HIGHER THAN ANTICIPATED AND HIGHER THAN PREDICTED, WE STILL DO NOT KNOW WHERE THAT COMES TO REST. WE WILL HAVE TO SEE THAT THROUGH. >> AT A CONGRESSIONAL HEARING LAST YEAR, ONE OF THE U.S. REPRESENTATIVE SAID THAT YOU WERE PRETTY BORING AND YOU THANKED HIM AND SAID THAT YOU CONSIDER THAT A HIGH COMPLIMENT.
IN FACT, I FEEL LIKE IT IS ONE OF THE RULES OF THE FEDERAL RESERVE SINCE THE HOUSING CRISIS TO BE A BALLAST IN THE FACE OF THE VOLATILITY OF THE MARKETS AND THE DRAMATICS OF THE EXPERIENCE WITH THE ECONOMY, VERY STEADY AND NO SURPRISES. IN A MOMENT LIKE THIS, WHICH ALSO HAS A LOT OF DRAMA BUT IT IS NOT NECESSARILY FROM AN ECONOMIC CRISIS BUT IT IS BY DESIGN AND POLITICAL. HOW DO YOU SEE YOUR ROLE IN THIS MOMENT? CHAIR POWELL: ALL OF THE VALUES THAT YOU TOUCHED ON OUR VALUES THAT I TRY TO LIVE BY. WE ARE DRIVEN BY ANALYSIS, CAREFUL THOUGHT, DISCUSSION, AND DEBATE. THE MERITS OF THINGS. WE TRY TO STAY AS FAR AWAY AS
WE CAN FROM THE POLITICAL PROCESS. WE DO NOT LOOK AT POLITICAL CYCLES. PEOPLE EXPECT THAT FROM US, FOR US TO TELL THE TRUTH. THAT IS WHAT WE ARE GOING TO DO. WE DO NOT WANT TO BE PART OF THE BROADER POLITICAL DISCUSSION ABOUT THE WISDOM OF POLICIES NOT ASSIGNED TO US. WE ARE NOT RESPONSIBLE FOR TRADE, IMMIGRATION, OR FISCAL POLICY.
THOSE DECISIONS ARE MADE BY OTHERS AND WHAT WE DO IS WE USE OUR TOOLS TO ACHIEVE THE GOALS THAT CONGRESS ASSIGNED US WHICH IS MAXIMUM EMPLOYMENT AND PRICE STABILITY. OVER TIME, I LIKE TO THINK THAT WE ARE A SOURCE OF CALM, RATIONAL ANALYSIS AND STABILITY. THAT IS WHAT THE BUSINESS THAT WE ARE IN. PROVIDING STABILITY TO THE PUBLIC. THAT IS OUR PURPOSE. >> SO, HOW CAN BUSINESSES AND INDIVIDUALS AND THE FED MAKE PLANS FOR THE FUTURE WHEN SO MUCH IS GETTING DICTATED BY THE ACTIONS OF A SINGLE PERSON? AND DO YOU SEE YOURSELF AS THE CONSOLER IN CHIEF OF ECONOMIC VALUES? CHAIR POWELL: TAKING A STEP BACK.
WHAT IS HAPPENING IS AS I MENTIONED THE NEW ADMINISTRATION IS MAKING SIGNIFICANT POLICY CHANGES WITH TRADE, IMMIGRATION, FISCAL POLICY AND REGULATION. YOU ARE A COUPLE OF THE MONTHS INTO THE ADMINISTRATION. AND THAT PROCESS WILL TAKE PLACE. AT A CERTAIN POINT THE NEW POLICIES WILL BE ON THE TABLE AND THEY WILL BE HAVING THE EFFECTS THAT THEY WILL BE HAVING. AND UNCERTAINTY WILL DECLINE. THERE IS A LOT OF UNCERTAINTY ABOUT WHERE THAT WILL SORT OUT AND WHAT FORMS IT WILL TAKE AND THE ECONOMIC EFFECTS.
A YEAR FROM NOW, THE UNCERTAINTY SHOULD BE LOWER AND THE EFFECTS OF THE POLICIES SHOULD BE MANIFEST AND CLEAR. I UNDERSTAND WHY IT IS HIGHLY UNCERTAIN, BOTH WHAT POLICIES WILL TURN OUT TO BE AND ALSO WHAT THEIR EFFECTS WILL BE IN THE NEAR TERM. WE JUST HAVE TO GO THROUGH THAT PROCESS. IT IS A MANIFESTATION OF OUR ELECTION CYCLE AND A NEW ADMINISTRATION COMING IN WITH NEW POLICIES.
>> GIVEN ALL OF THE CHANGE HAPPENING AND THAT WE ARE IN A PERIOD WHERE THINGS HAVE NOT SETTLED, AND THE FEDERAL RESERVE AND YOU AS CHAIR ARE VERY PROJECTION, DATA, AND POLICY DRIVEN, HOW DO YOU HANDLE A MOMENT LIKE NOW? CAN YOU TWEET THE PLANS AND PROJECTIONS -- TWEAK THE PLANS AND PROJECTIONS? DO YOU HAVE TO RESET THEM? CHAIR POWELL: WHAT WE HAVE HAD WAS A PLACEHOLDER. THEY WOULD NOT CALL IT A FORECAST. BUT THAT IS HOW WE HAVE BEEN THINKING OF IT. IT IS A GOOD TIME TO TAKE A STEP BACK AND LET THINGS CLARIFY. THAT IS WHY IT IS TOO SOON TO SAY WHAT THE APPROPRIATE MONETARY POLICY RESPONSE WILL BE.
AND IT IS TOO SOON TO STAY -- TO SAY. WE CANNOT SAY THAT WITH ANY CONFIDENCE. WE HAVE TAKEN A STEP BACK AND WE ARE WATCHING TO SEE WHAT POLICIES TURN OUT TO BE AND THE WAYS THEY WILL AFFECT THE ECONOMY AND THEN WE WILL ACT. FORTUNATELY OUR POLICY STANCE IS IN A GOOD PLACE TO DO THAT.
WE ARE MODERATELY RESTRICTIVE, LET'S SAY, SO IT IS NOT TIGHT POLICY. WHICH IS APPROPRIATE BECAUSE INFLATION HAS NOT BEEN ABOVE TARGET. WE THINK WE ARE WELL-POSITIONED TO ADDRESS WHATEVER MAY COME. IN THE MEANTIME, WE ARE WAITING FOR GREATER CLARITY BEFORE WE CONSIDER ADJUSTMENTS. >> THAT THEY CANNOT MAKE THEIR PLANS, THEY WANT TO EXPAND AND BUILD A NEW FACILITY OR HIGHER OR DO WHATEVER THE FUTURE CALLS FOR. THEY SAY THEY ARE TRYING TO LOOK AROUND THE CORNER AND THEY
ARE NOT SURE WHERE THE CORNER IS. AND THEY ARE NOT EVEN SURE WHAT IS AROUND THE CORNER. IT SOUNDS LIKE THEY ARE IN THE SAME POSITION AS YOU ARE. CHAIR POWELL: WE HEAR THE SAME THING AND WE HAVE INCREDIBLE CONTACTS AND BUSINESSES, UNIVERSITIES, THROUGH THE RESERVE BANKS AND THROUGH THE BOARD OF GOVERNORS. AND THAT IS WHAT WE HEAR. IT IS A PROCESS AND WE ARE GOING THROUGH IT. AND I THINK WE WILL KNOW WHEN
WE KNOW WHAT THE POLICIES ARE, EXACTLY, AND WHAT THEIR IMPLICATIONS WILL BE. THAT WILL BECOME CLEAR AND THAT IS A TIME WHERE PEOPLE CAN MAKE DECISIONS. AND WE HAVE EARNED THAT A LOT FROM PEOPLE AND WE ARE IN THE SAME PLACE OF WAITING FOR CLARA SEE -- CLARITY ABOUT WHAT OUR POLICY SHOULD BE. WE WILL HAVE TO SEE. >> AS YOU ARE TALKING ABOUT PLACEHOLDERS AND HAVING SOMETHING IN PLACE WHEN THERE IS SO MUCH WE DO NOT KNOW.
IT OCCURS TO ME THAT THIS IS NOT THE FIRST ECONOMIC SHOCK THAT YOU HAVE STEERED THE ECONOMY THROUGH. THERE WAS COVID ALMOST EXACTLY FIVE YEARS AGO. IT SEEMS SIMILAR WITH CERTAIN WAYS WITH A LOT OF UNCERTAINTY AND SHOCK, AND POTENTIAL DISRUPTIONS TO PRICES AND SUPPLY, WHICH IS IN THE FEDERAL RESERVE'S WHEELHOUSE. FROM WHERE YOU SIT, CAN LIBERATION DAY BE PREPARED TO THE ECONOMIC EFFECTS OF COVID? ARE THEY TOTALLY DIFFERENT OR SOMEWHAT RELATED? CHAIR POWELL: I THINK EACH SITUATION IS DIFFERENT. THERE WAS COVID AND THEN THERE WAS THE RESPONSE TO COVID AND THEN THERE WAS HIGH INFLATION. AND THEN THERE WAS SOFT LANDING AND THEN WE HAVE NEW ADMINISTRATION AND CHANGES IN POLICIES.
EVERY SITUATION, IT KIND OF RHYMES BUT IT IS NOT THE SAME. IN THIS SITUATION, WHAT WE FACE IS WHAT I MENTIONED IN MY REMARKS. YOU HAVE RISKS FOR HIGHER UNEMPLOYMENT AND INFLATION. AND THAT IS DIFFICULT FOR A CENTRAL BANK. BECAUSE OUR TOOLS EITHER SLOW DOWN OR SPEED UP THE ECONOMY OVER TIME. AND HIGHER UNEMPLOYMENT WOULD CALL FOR SPEEDING UP THE ECONOMY AND HIGHER INFLATION CALLS FOR SLOWING IT DOWN. IF WE FIND OURSELVES IN THAT
SITUATION WE LOOK AT HOW FAR EACH OF THE TWO VARIABLES IS AND HOW LONG WOULD IT TAKE TO GET BACK AND WE WAY THOSE THINGS AND MAKE A DECISION. THAT IS A DIFFERENT SITUATION, VERY DIFFICULT SITUATION. WHEN WE FACE TIME INFLATION IT WAS PAINFUL FOR THE COUNTRY AND WE KNEW WHAT POLICY. WE KNEW WE NEEDED TO RAISE THE RATES.
DURING THE PANDEMIC, WE KNEW WHAT WE NEEDED TO DO IN THE DIRECTION WE NEEDED TO TAKE WITH FORCE AND WE DID. >> IT IS ALMOST A SITUATION WHERE THE DUAL MANDATE ARE AS ODDS -- ARE AT ODDS WITH ITSELF. CHAIR POWELL: IT IS THE INTENTION. THAT IS NOT WHAT WE ARE SAYING -- SEEING RIGHT NOW. THE EFFECTS AT THE MARGIN WOULD BE FOR HIGHER INFLATION AND HIGHER UNEMPLOYMENT.
THAT IS MARGINAL. YOU ARE NOT IN A SITUATION LIKE WE WERE IN THE 1970'S WHERE THE TWO GOALS WERE REALLY PULLING IN OPPOSITE DIRECTIONS. AND IT IS VERY HARD FOR A CENTRAL BANK TO BE THE ANSWER TO THE SITUATION LIKE THAT. THAT IS NOT THE SITUATION WE ARE IN TODAY. >> ONE OF THE QUESTIONS FROM THE AUDIENCE IS THAT IF UNEMPLOYMENT TAKES OFF AND INFLATION TAKES OFF, WHICH ONE DO YOU GO FOR? WHAT DO YOU DO? CHAIR POWELL: WE ACTUALLY HAVE A DOCUMENT CALLED THE CONSENSUS STATEMENT OR THE LONGER VERSION IS THE STATEMENT ON LONGER GOALS AND MONETARY STRATEGY.
THE SIXTH PARAGRAPH CONTEMPLATES WHEN THE TWO GOALS ARE IN TENSION. IT SAYS THINK ABOUT HOW FAR EACH VARIABLE IS FROM THE GOAL AND THINK ABOUT HOW LONG IT WOULD TAKE FOR EACH TO GET BACK. IT IS AN EQUATION. YOU ARE COMPARING TWO QUANTITIES WITH TWO VARIABLES.
AND YOU LOOK AT THAT AND THINK WHAT DO I NEED TO DO? TYPICALLY THIS DOES NOT HAPPEN. IF ONE IS FURTHER AWAY YOU WOULD FOCUS ON THAT ONE. IN THE CASE OF HIGH INFLATION IT THEY POINTED IN THE SAME DIRECTION.
THE LABOR MARKET WAS OVERHEATED AND THE INFLATION MARKET WAS HIGH. THIS COULD BE DIFFERENT, BUT WE ARE NOT FACING THAT TODAY. >> I FEEL LIKE THERE IS ANOTHER TENSION INHERENT IN THAT YOU ARE LOOKING AT THE MACRO AND GLOBAL ECONOMY AND THE U.S.'S PLACE IN IT. THE DATA IS VERY PROFOUNDLY HUMAN AS JIM HAS BEEN POINTING OUT. JOBS AND PRICES ARE THE TWO MOST HUMAN PIECES OF DATA. AND CERTAINLY, IN THE DATA THEY
EXPERIENCE THINGS THAT LOOM THE LARGEST. HOW DO YOU RECONCILE THOSE TWO THINGS WHEN YOU ARE LOOKING AT THE DATA, BOTH THE GLOBAL MARKETS AND KNOWING THAT THE DATA REPRESENTS LIVES, JOBS AND PRICES AND THINGS LIKE THAT. CHAIR POWELL: AT THE FED WE ALWAYS KEEP A FOCUS ON THE PEOPLE THAT WE SERVE. AND WE KNOW AND ARE VERY CONSCIOUS DAILY THAT THE THINGS THAT WE DO HAVE AN EFFECT ON PEOPLE'S LIVES.
IT REALLY DOES FOCUS THE MIND. IF YOU TALKED WITH PEOPLE AT THE FED THERE IS A STRONG COMMITMENT TO SERVING THE PUBLIC. ECONOMIC EVENTS ARE VERY UNPREDICTABLE AT TIMES AND THERE ARE SHOCKS YOU CANNOT SEE COMING. OUR JOB IS TO, WHATEVER HAPPENS, USE THE TOOLS TO BRING THE ECONOMY BACK TO PRICE STABILITY AND MAXIMUM EMPLOYMENT, AND THAT IS WHAT WE DO. WE TRY TO KEEP EVERYBODY IN THE ROOM WITH US WHEN WE ARE THINKING ABOUT WHAT TO DO.
>> SO, IN RESPONSE TO THE LAST ROUND OF TARIFFS, HARLEY DAVIDSON MOVED SOME PRODUCTION TO THAILAND. NOW THE COMPANY BY -- MIGHT BE WHIPSAWED BY THE NEW TARIFFS. IT WOULD BE DEVASTATING FOR SALES, EMPLOYMENT, AND THE FUTURE OF THE COMPANY. A LOT OF COMPANIES ARE IN THAT
SAME POSITION. WHAT YOU SAY LIKE -- WHAT DO YOU SAY TO HARLEY DAVIDSON AND THE WORKERS? CHAIR POWELL: I WANT TO STICK TO THEIR STICK TO OUR KNITTING. WE HAVE A GREAT THING CALLED INDEPENDENCE OF MONETARY POLICY AND THAT IS CRITICAL.
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