US Trade Policy Shift Protects Domestic Industry Amidst Global Realignment - Episode Hero Image

US Trade Policy Shift Protects Domestic Industry Amidst Global Realignment

Bloomberg Surveillance · · Listen to Original Episode →
Original Title:

TL;DR

  • The US trade policy reset aims for a "fair and balanced" global trading order, moving from total free trade to one that protects domestic industry, with finalized trade deals and tariffs expected to be maintained.
  • Overturning existing tariffs by the Supreme Court would be a "disaster" for the new global trading order, necessitating efforts to maintain tariffs through alternative measures if emergency powers are lost.
  • US trade policy prioritizes reshoring American manufacturing and protecting food security through job creation and wage increases, rather than directly driving consumer prices, with other policies addressing affordability.
  • The EU's 90 billion euro loan to Ukraine, funded through collective borrowing, offers a step towards mutualized debt but bypasses the more powerful option of utilizing frozen Russian sovereign assets.
  • The AI trade is expected to continue into 2026, driven by increasing adoption rates, measurable productivity gains, and surging revenues from cloud services and LLMs, making current pullbacks potential investment opportunities.
  • Investors should distinguish between companies that will be disrupted by AI and those that can leverage it, focusing on infrastructure, proprietary data, vertical expertise, and companies embedding AI for competitive advantage.
  • The significant growth of private credit, now a 1.7 trillion asset class, introduces inherent risks, though prudent underwriting standards and covenants can mitigate these, especially with potential Fed rate cuts alleviating pressure.

Deep Dive

The US trade landscape is undergoing a fundamental shift towards a "fair and balanced" approach, moving away from purely liberal trade to one that prioritizes American industry and jobs. This strategic realignment, driven by the administration's policies, has resulted in significant trade deal finalizations and the implementation of tariffs, with an expectation of continued progress in 2026. However, this new order faces potential disruption from Supreme Court rulings on existing tariffs and ongoing negotiations with key partners like China and Europe, necessitating adaptability and a willingness to find new mechanisms for maintaining strategic trade objectives.

The administration's trade strategy is characterized by a proactive stance on establishing new global trading norms, marked by both the announcement of trade deals and the imposition of tariffs. This approach aims to reshore American manufacturing and bolster food security, with the stated goal of creating jobs and increasing wages. The success of this strategy, particularly the reliance on tariffs as a negotiation tool, is implicitly tied to the Supreme Court's interpretation of existing provisions; an adverse ruling would necessitate a significant reevaluation of trade policy. In parallel, discussions around affordability are being addressed through targeted tariff removals on goods not produced domestically, such as bananas and coffee, while broader inflation concerns are being tackled through energy, tax, and regulatory policies, positioning trade policy primarily as a driver of jobs rather than consumer prices.

Complex negotiations with China are ongoing, with a focus on recalibrating trade volumes and establishing a more balanced relationship. While specific agreements, like the one concerning TikTok's US operations, are progressing through private sector channels with expected government approvals, other areas such as export controls on advanced technologies like H200 chips are viewed as distinct national security and commercial decisions not subject to bilateral negotiation. The broader objective appears to be achieving stability and a more manageable trade dynamic, potentially moving towards a form of "managed trade" that acknowledges China's state-driven economic model. This approach aims to build confidence and ensure that trade flows are mutually beneficial, even if it requires more active management than traditional free trade models.

European trade relations present a unique challenge, with US stakeholders expressing strong concerns over what they perceive as discriminatory regulatory measures targeting American tech companies. While European officials frame these actions as necessary for competition and market regulation, the US perspective is that these measures are protectionist and disproportionately impact American businesses. Despite these tensions, diplomatic efforts continue, aiming for dialogue to understand and address the underlying drivers of these European policies. Simultaneously, negotiations with other key partners, such as India, are proving to be protracted, highlighting the complexity of forging new trade agreements in a shifting global economic landscape.

In the equity markets, a bullish outlook for 2026 is underpinned by a projected strong earnings growth cycle, with EPS growth forecasted at 14% for the S&P 500, followed by 13% in 2027. This optimism is further supported by an anticipated improvement in liquidity conditions in the first quarter, driven by the Federal Reserve's balance sheet expansion. This liquidity boost is expected to support riskier assets and speculative trades, including the AI sector, which is anticipated to perform strongly. While inflation is seen as a greater potential headwind for equities than a recession, its resurgence is not considered a primary concern due to potential disinflationary pressures from AI-driven productivity gains.

The AI sector, despite recent pullbacks, is expected to remain a significant investment theme in 2026, driven by increasing adoption, measurable productivity gains, and surging revenues from cloud services and AI models. While concerns about late-stage venture valuations in AI exist, the underlying demand and monetization trends suggest continued opportunity. Investment focus is shifting towards AI infrastructure, particularly energy, and companies with proprietary data and vertical expertise that can leverage AI for competitive advantage. The market is likely to see a divergence between companies that successfully embed AI to enhance their operations and those that are disrupted by it, with a critical eye on debt loads and cash burn, as exemplified by companies like Oracle.

The European Union's financial support for Ukraine, structured through collective borrowing, represents a significant step towards mutualized debt, though it excludes some member states. This 90 billion euro package is crucial given the projected financing gap and the IMF's concurrent loan, but it falls short of the total estimated need over the next three years. The decision not to utilize frozen Russian sovereign assets for this funding is viewed as a missed opportunity, potentially limiting its negotiating leverage and financial impact. This collective borrowing, while necessary for national security, will still place a burden on highly indebted member nations, highlighting the fiscal challenges involved in such large-scale support.

The private credit market, having grown substantially, presents inherent risks, but current indicators, such as improving interest coverage ratios and the prevalence of loan covenants, suggest a degree of stability. While the rapid deployment of capital in recent years raises questions about underwriting standards, prudent management within established platforms indicates a relatively secure position. The Federal Reserve's interest rate policy is seen as alleviating some pressure on private credit, though the long-term trajectory of rates, particularly the 10-year yield approaching 4.5% to 5%, could pose a challenge to the broader equity market by potentially stifling reflationary cycles.

Action Items

  • Audit USMCA compliance: For 5-10 key import/export categories, verify adherence to agreed-upon tariff structures and non-tariff barriers.
  • Analyze AI adoption metrics: Track AI usage growth across 3-5 key industries to validate productivity gain assumptions.
  • Measure trade deficit reduction: For the top 3 US trade deficit partners, calculate year-over-year changes in trade balance.
  • Evaluate EU tech regulation impact: For 3-5 major US tech companies, assess the financial impact of EU regulatory measures.
  • Assess private credit covenant health: For 5-10 representative private credit portfolios, review covenant adherence and interest coverage ratios.

Related Episodes

Key Quotes

"During 2025 president trump the administration has essentially reset the global trading order to move from you know total liberal trade with the united states without any costs to a new fair and balanced approach we had we've announced lots of trade deals we've announced lots of tariffs as you know in the coming year we expect to finalize a bunch of those trade deals as well"

US Trade Representative Jamieson Greer explains that the administration's trade policy in 2025 focused on shifting from a purely liberal trade model to one that is "fair and balanced." Greer indicates that this reset involved announcing numerous trade deals and tariffs, with expectations to finalize more deals in the upcoming year.

"Well it it would be terrible if the Supreme Court overturned the case because we have built a new global trading order on the back of the of these tariffs and the tariff system and our trading partners have accepted it and they've made deals and they've accepted there's going to be some tariff level to help protect us industry so it would be disaster if this was pulled out"

US Trade Representative Jamieson Greer emphasizes the critical role tariffs have played in establishing a new global trading order under the current administration. Greer states that overturning these tariffs, particularly those enacted under the Ippa provision, would be disastrous because trading partners have accepted this system and based their deals upon it.

"The purpose of the trade program is to reshore American manufacturing and protect American food security it's really about jobs and increasing wages which we've seen over the past few months when it comes to prices the president is undertaking a lot of other actions you know energy policy tax policy regulatory you know gas prices are down etc so we don't see the trade policy really as driving prices we see it as driving jobs"

US Trade Representative Jamieson Greer clarifies the primary objectives of the trade program, stating its focus is on reshoring manufacturing and ensuring food security, which in turn aims to create jobs and raise wages. Greer asserts that trade policy is viewed as a driver of employment rather than price inflation, with other government actions addressing broader price concerns.

"So there are there are two layers to the TikTok deal one is the private sector layer where the private parties are concluding a deal and then there's a layer of government approvals between the United States and China and so my conversations with the Chinese government over the past few months as you mentioned have covered a variety of issues and one of them has been TikTok back at our discussions in Madrid we came to an essential agreement that if the private parties came to agreement that the Chinese would approve it so we expect approval by the government of China in alignment with that agreement we reached earlier this year"

US Trade Representative Jamieson Greer outlines the two-tiered approval process for the TikTok deal, involving private sector agreements and subsequent government approvals from both the US and China. Greer confirms that discussions with the Chinese government have included TikTok, and an agreement was reached in Madrid that China would approve the deal if private parties finalized their arrangements.

"The very nature of export controls is that the US government is constantly reviewing the state of technology and assessing what technologies can be sold and which ones can't and balancing national security and assessing whether or not there's foreign availability everyone knows that the Chinese are quickly also trying to develop their own AI chips semiconductor tools to make those chips etc it's a race"

US Trade Representative Jamieson Greer explains that export controls are dynamic, requiring continuous review by the US government to assess evolving technologies and their implications for national security. Greer highlights that China's rapid development of its own AI chips and semiconductor tools creates a competitive race, necessitating ongoing evaluation of what technologies can be exported.

"I would say with the h200 export control issues those really are stand alone that was not a negotiated outcome in the United States with respect to export controls those are not something that are really subject to negotiation those are national security and commercial decisions made by the federal government so that's kind of standing on its own"

US Trade Representative Jamieson Greer distinguishes the H200 export control issues from broader trade negotiations, stating they are standalone matters based on national security and commercial decisions by the federal government. Greer emphasizes that these export controls are not subject to negotiation as part of larger trade deals.

"The profit cycle is still in an up cycle we're forecasting 14 growth uh eps growth for profit uh for the s and p next year followed by another 13 in 2027 i think liquidity which we talk quite a lot about uh that's going to improve quite a lot in q1 uh with the fed starting to expand its balance sheet it was a lot sooner and a lot bigger than what we had previously forecasted and with that we're going to see a huge uh uptick in the liquidity environment overall and i think that's really going to be the bull case for equities as you move into 2026"

Ohsung Kwon, Chief Equity Strategist at Wells Fargo, presents a bullish outlook for equities in 2026, citing a continuing up cycle in profits with forecasts of 14% EPS growth for the S&P 500 next year and 13% in 2027. Kwon also anticipates a significant improvement in liquidity in the first quarter due to the Federal Reserve expanding its balance sheet sooner and more substantially than previously expected, which he believes will be a key driver for the equity market.

"I mean it depends on how you define qe um if qe is really about shortening duration then it's not a qe um but if qe is about uh boosting liquidity into the system because the funding market was really seeing a lot of stress if you look at the sofr spread between uh the sofr rate versus the fed funds rate it blew up back in october to as much as 35 basis points so there was a real stress that we saw back in october and november in the funding market"

Ohsung Kwon, Chief Equity Strategist at Wells Fargo, clarifies the nature of the Federal Reserve's actions, differentiating between quantitative easing (QE) focused on duration shortening and actions aimed at boosting liquidity in response to funding market stress. Kwon points to the significant widening of the SOFR spread over the Fed Funds rate in October as evidence of this stress, indicating that the Fed's actions are intended to alleviate such pressures.

"I'd assign a higher probability of un of of inflation i'm not too concerned about inflation either um because i think there's that ai productivity disinflationary uh pressure that's going to keep inflation pretty low um but there's the fiscal as well as monetary policy that's coming back in to potentially drive inflation higher so if i have to choose i'll say inflation has a higher potential um than recession but i'm not overall i'm not too concerned about it either"

Ohsung Kwon, Chief Equity Strategist at Wells Fargo, assesses the probabilities of inflation versus recession, assigning a higher likelihood to inflation but expressing a general lack of concern about either. Kwon believes that AI-driven productivity may exert disinflationary pressure, yet fiscal and monetary policies could also drive inflation higher, leading

Resources

External Resources

Books

  • "Mind the Business Small Business Success Stories" by Janice Torres and Austin Hankwitz - Mentioned as a podcast produced in partnership with Intuit QuickBooks.

Articles & Papers

  • "Bloomberg Surveillance TV: December 19th, 2025" (Bloomberg Surveillance) - Mentioned as the title of the podcast episode.

People

  • Anastasia Amoroso - Mentioned as Chief Investment Strategist, Private Wealth at Partners Group, discussing AI investment.
  • Heidi Crebo-Rediker - Mentioned as Senior Fellow at the Council on Foreign Relations, discussing EU financing for Ukraine.
  • Jamieson Greer - Mentioned as US Trade Representative, discussing trade deals, tariffs, and TikTok.
  • Jonathon Ferro - Mentioned as a host of the Bloomberg Surveillance podcast.
  • Lisa Abramowicz - Mentioned as a host of the Bloomberg Surveillance podcast.
  • Amaryllis Horter - Mentioned as a host of the Bloomberg Surveillance podcast.
  • Ohsung Kwon - Mentioned as Chief Equity Strategist at Wells Fargo, discussing his forecast for 2026 equities.

Organizations & Institutions

  • Apple Books - Mentioned as a platform for reading or listening to books without a subscription, and the home for Reese's Book Club.
  • Apple.co/reece - Mentioned as a URL to find out more about Apple Books.
  • Cisco Duo - Mentioned as a solution for phishing resistance and session theft protection.
  • Council on Foreign Relations - Mentioned as the institution where Heidi Crebo-Rediker is a Senior Fellow.
  • Doordash - Mentioned as a service for grocery delivery, including last-minute ice cream.
  • European Commission - Mentioned in the context of trade discussions and regulatory investigations concerning US tech companies.
  • European Union (EU) - Mentioned in relation to its deal to fund a loan to Ukraine and its regulatory measures against US tech companies.
  • Finra - Mentioned as a member organization for J.P. Morgan Distribution Services, Inc.
  • Google - Mentioned as a potential winner in the AI trend due to its long-standing investment and data resources.
  • Intuit QuickBooks - Mentioned as a partner for the "Mind the Business Small Business Success Stories" podcast.
  • J.P. Morgan Asset Management - Mentioned as a global leader in active fixed income ETFs.
  • Jpmorgan.com/getactive - Mentioned as a URL to learn more about J.P. Morgan Asset Management.
  • Kroger - Mentioned as a grocery store available on Doordash.
  • Lifelock - Mentioned as a service for identity theft protection.
  • Meta - Mentioned as an entity with massive data troves that could be a winner in AI.
  • New York City - Mentioned as the location of Bloomberg's global headquarters.
  • Oracle - Mentioned as an investor in TikTok's US joint venture and discussed in relation to its spending increases and cash burn.
  • Partners Group - Mentioned as the institution where Anastasia Amoroso is Chief Investment Strategist, Private Wealth.
  • Reese's Book Club - Mentioned as being hosted on Apple Books.
  • Ruby Studio - Mentioned as the producer of the "Mind the Business Small Business Success Stories" podcast.
  • Silver Lake Management - Mentioned as an investor in TikTok's US joint venture.
  • TikTok - Mentioned as having reached binding agreements for a new US joint venture.
  • USMCA - Mentioned in the context of trade discussions with Jamieson Greer.
  • Venmo - Mentioned for its cash back program with the Venmo debit card.
  • Wells Fargo - Mentioned as the institution where Ohsung Kwon is Chief Equity Strategist.

Tools & Software

  • Cisco Duo - Mentioned as a tool providing phishing resistance and session theft protection.

Websites & Online Resources

  • Duo.com - Mentioned as a URL to learn more about Cisco Duo.
  • Lifelock.com/iheart - Mentioned as a URL for Lifelock with a promo code.
  • Omnystudio.com/listener - Mentioned for privacy information.

Other Resources

  • AI (Artificial Intelligence) - Discussed as a trade that may present opportunity despite pullbacks, with positive developments in adoption, productivity, and monetization.
  • AI Productivity Disinflationary Pressure - Mentioned as a factor that could keep inflation low.
  • Active ETFs - Discussed as aiming to beat the benchmark, contrasting with passive ETFs.
  • AI Trade - Mentioned as potentially working more in the second half of the year and being priced better today.
  • AI-powered Monitoring - Mentioned as a feature of Cisco Duo.
  • AI-powered Services - Mentioned as something companies with proprietary data and vertical expertise can invent.
  • AI-powered Productivity Gains - Mentioned as measurable gains seen over the last three years.
  • AI Trade Valuations - Mentioned as having a premium in late-stage venture valuations.
  • AI-powered LLMs - Mentioned in relation to surging revenues.
  • AI Infrastructure Sell off - Mentioned as a recent market event.
  • AI Companies - Mentioned as having proprietary data and vertical expertise as a competitive moat.
  • AI Ecosystem - Mentioned in the context of bubble-like valuations in certain parts.
  • AI Trade - Mentioned as not being over.
  • AI Trade - Mentioned as potentially working more in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as having signs of bubble-like valuations in certain parts.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.
  • AI Trade - Mentioned as not being a bubble yet.
  • AI Trade - Mentioned as potentially becoming a bubble in the second half of the year.
  • AI Trade - Mentioned as being back on.
  • AI Trade - Mentioned as having pockets of winners and losers.

  • AI Trade - Mentioned as not being a bubble yet.

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