Closing Bell - White House’s Peter Navarro on Tariffs; IBM CEO Exclusive Interview 3/11/25

Episode Date: March 11, 2025

White House aid Peter Navarro weighs in what’s next for trade policy and tariffs. Vital Knowledge Founder Adam Crisafulli and Calamos Investment Management Co-CIO Michael Grant break down volatile markets. IBM CEO Arvind Krishna joins exclusively to discuss AI innovation and enterprise demand. Yale School of Management Senior Associate Dean Jeffrey Sonnenfeld on CEO sentiment and the business impact of Trump’s policies. Plus, Moody’s Analytics Chief Economist Mark Zandi on recession odds, JOLTS data, and the CPI preview.

That's the end of regulation. Clean Harbor is ringing the closing bell at the New York Stock Exchange. Global E doing the honors at the NASDAQ. Another roller coaster session as the market reacts to fast moving tariff and trade developments with stocks closing off the lows on late breaking headlines from the lows to the highs for the S&P. Nearly 2% move today, but fading again into the close here. That's the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan at CNBC headquarters. Coming up in just a moment, White House Senior Counsel for Trade and Manufacturing, Peter Navarro, is going to join us in a first on CNBC interview to talk about the trade developments between the U.S. and Canada and more. Plus, John Fort is at South by Southwest in Austin, Texas, where he will be joined shortly by a special guest, John. That's right, Morgan.

IBM CEO Arvind Krishna is here. We just did a little conversation here in a keynote today at South by Southwest. We're going to talk about the White House. He was there yesterday with President Trump, Also talk about the impact of tariffs and this market turmoil on the business of technology companies, AI, quantum and more. All right. We're looking forward to that, John. We're going to see in just a little bit. We begin, though, with the tariff news that shaped the trading day again. Stocks fell mid-session after President Trump said he would double the tariffs on Canadian steel

and aluminum to 50%. That was in response to Ontario's move to place a 25% tax on electricity exports to the United States. But we came off the lows after Ontario's Premier said the electricity surcharge would not take effect. Joining us now in a first on CNBC interview is Peter Navarro. He is the White House senior councillor on trade and manufacturing. Peter, it's great to have you on the show. Welcome to Overtime. It's great to be here, Morgan. It's a beautiful spring day. And bullishness is in the air, at least at the White House, I can assure you of that.

So what does bullishness look like? Are these doubling of aluminum and steel tariffs on Canadian imports not going to happen now? So yeah what happened was the premier of Ontario, a province of Canada, independently decided to put a surcharge on hydroelectric power to the US of 25 percent, made some very provocative statements. The president is not going to stand for any of that. And cooler heads prevail. I mean, as soon as you look at the fight itself, I mean, a 25% surcharge on electricity sounds like a big deal to America, but when you parse it out, it only affected three states, Michigan, Minnesota, and New York. It was a nothing burger totally for Michigan and Minnesota and a little tiny burger for

New York and this guy's firing these big cannons at us and he got a bazooka back at him and cooler heads prevailed. I would just ask my friends in Canada to let's let's tamp down the rhetoric. I understand politics and it's a political season there. What we're trying to do, Morgan, is simply level the playing field internationally and with respect to the specific tariffs that went in effect on Canada and Mexico, we're trying to stop the Canadians and Mexicans from killing Americans with fentanyl and fentanyl that spreads across our prescription drug chain.

So we want to keep all of this in perspective, but we bounced off the lows. But if you look, if you look even medium term, long term, it's a beautiful bullish scenario, but we're coming out of a very bearish set of factors imposed by the Biden regime That are both inflationary and stagflationary that we're trying to fight our way through and we got to work our way through that if you want But that's kind of where things are at. Yeah, but the future is so bright I need shades here particularly with these lights. So Peter does that mean that we're not going to see 50% tariffs come tomorrow on steel? Correct yeah that's Secretary of Commerce Lutnick did a beautiful job negotiating that but but frankly the Premier he's been I mean look just tamp it down please over there

okay just throwing down the hockey gloves and stop that rhetoric and let's just look at what we're trying to do. We love Canada, but look, there's some big issues there and we're not going to tolerate anything but them stopping killing Americans and and doing what's right with respect to things like steel and aluminum, which they've been dumping into our country and that's stopping. Yeah. And certainly all of this started around fentanyl and illegal immigration.

How much does this though, and the tit for tat nature of the tariffs that we saw play out in real time very quickly, albeit very quickly today, set the stage for what we can expect from the president's come April 2nd for the countries that don't come to the table to negotiate on reciprocal tariffs? Sure, I think what the president has established unequivocally not just with this action but previous actions is he's not going to tolerate retaliation. I mean what we had with this fentanyl tariff China retaliated and we increased their tariff from 10 to 20 percent

in a heartbeat. That's what's going to happen here. The thing is that we are the biggest market in the world, full stop. And these countries out there are heavily export dependent on our economy and all of them cheat us in very different ways. And it's both the tariffs that are higher and these non-tariff barriers. I did a little bit of analysis today. I was kind of going through it's like how they cheat us. And just as a metric for autos, if we try to sell a $50,000 Cadillac to Germany, by the time it gets through the tariffs, VAT tax and other barriers, it's $65,000 Cadillac to Germany by the time it gets through their tariffs that tax and other barriers. It's $65,000 whereas if they're selling a BMW to us a

50,000 BMW there they do these export subsidies through the vat and it's $42,000 that's not fair. That's a 20,000 differential, but you go further and you look at like Brazil You look at Vietnam you look at like Brazil, you look at Vietnam, you look at India, it's like these are in the excess of over $100,000 for a $50,000 card. That's how we're being cheated. Agricultural products, I mean, you try to sell rice from this country to Japan and it's like up to a 700% tariff

I mean, huh, I mean and then try to sell dairy to Europe. It's like 40% meat. I just so This is not fair. It's not right. President Trump is gonna Set this right in April 2nd. We begin that process with reciprocity Okay so Peter ahead of that tonight president Trump is going to go meet with give or take a hundred CEOs of largest American companies at the business roundtable. I speak to CEOs across industries on a daily basis both on TV and off and they say things to me like level playing field yes we want it more markets for our goods yes we want

it tax reform yes greateregulation, great. All of the uncertainty as we're seeing all of this trade policy play out in real time so publicly, not so great. It is the constant theme, the uncertainty, and CEOs saying that they feel like they can't make investments right now until they have a better sense of where this is all headed. What is your message to them, especially before the president meets with the business community? I love that question Morgan and let me just say when you when you mentioned the tax angle, let's remember here that tariffs equal tax cuts. One of the biggest macro decisions

this country is going to face and it's going to happen on Capitol Hill is whether or not we're able to get one of the best tax cuts in history or whether it's going to be a tax hike because things are going to lapse and the tariffs are going to pay for that tax cut and everybody in America is going to benefit it. With respect to the certainty, there's a lot more certainty than the markets are giving us credit for if you simply take President Trump at his word. I mean, look at what happened today. In the last couple of days, like the day traders made a ton of money on volatility and fear

in the markets. They didn't trust in Trump. But what happened today? We had breakthrough on some peace in Ukraine, and we had Ford back down on his threat to impose a surcharge on our electricity, and then things Ford back down on his threat to impose a surcharge on our electricity and then things come back down. I mean I don't understand why the markets can't see through that fog of war and understand that we're making this beautiful transition to a world where we're gonna have a 3D war on

inflation. It's the drill baby drill, it's the deregulation, and it's the doge. We're going to have a tremendous influx, already $2 trillion of pledged investment from the tariffs coming in. What does that do? That raises wages, real terms, and helps purchasing power and drives down the wages. We bring the trade deficit down, that strengthens the dollar, more purchasing power and drives down the wages. We bring the trade deficit down, that strengthens the dollar, more purchasing power. See that Wall Street, it's bullish,

but we gotta get from there, which is the Biden, just total fiscal irresponsibility accommodated by the Fed to a world in which we're fiscally responsible and we're taking care of our manufacturing and defense industrial base and life's good for the deplorables and American workers, which are the people that got President Trump elected. So see that chessboard.

If you're a CEO and you've got a bunch of off-shored stuff, you should have been bringing that on shore months ago in anticipation of his victory And now it's like whoa I got caught by surprise. No you didn't get caught by surprise you bet against Trump okay bet against Trump and then you didn't believe that Trump would do what he said if anybody look if there's anything People have learned right now in the first 45 or 6 how many days it is, Donald Trump is going to do exactly what he promised on the campaign trail and that's going to be for the benefit of America. And that does seem to be happening to your point.

He has laid out a very big socioeconomic vision. I mean the Dow still finished down 1% today, it's down more than 3% this week as investors are trying to wrap their mind around what's noise and what's reality here where the trade policy stuff, the implications to the broader economy are concerned. I do want to though ask you how all of this sets the stage for renegotiating USMCA. What do you want to see come out of that and what should we expect in terms of that process? Again another great question. We've got a great US trade representative in Jameson Greer. He was the deputy to Bob Lighthizer, who was the greatest USTR in American history, and

I think Jameson will be equal or surpass Bob. It's going to be up to Jameson to lead point on that review of USMCA. What I can tell you is that USMCA has not worked to America's advantage in many ways. And a large part of the problem was that the Biden administration did not enforce the deal. And because they didn't enforce the deal on either side of the border, countries, not just Mexico, but countries taking advantage of Mexico, allowed Mexico to take advantage of us. They basically turned Mexico into a big trans-shipment platform for all sorts of dumb products.

There's all sorts of tariff avoidance, gaming the system, and that's all gonna come out in the review. And there's a reason why we have these big trade deficits, particularly with Mexico, and it's huge. And it's because USMCA is not working for America right now. And it's because Biden didn't enforce it. There is so much to dig into here. I feel like we're just scratching the surface,

but Peter Navarro, appreciate the time and the insights. Great to talk to you any time. Peter Navarro joining us from the White House. Transshipment is a term that investors should get familiar with. the market right now. We have a lot of people that are interested in investing in the world right now. Peter Navarro joining us from the White House. Trans shipment is a term that

investors should get familiar with. Joining us now is vital knowledge founder Adam Chris Fooley and Michael Grant. We are going to start with reactions. on the latest in this, Adam, dare I call it a trade war at this point, negotiation? Yeah, I mean, I think that the market right now is just in an extreme state of uncertainty, like you asked repeatedly. You know, on the one hand, there are the tariffs that markets

generally do not like. I think economic theory has rejected them, you know, as an effective tool driving growth and productivity and prosperity. There's that, but then there's also just the completely muddled messaging around tariffs. What's going in place? Why are they going in place? With Mexico and Canada, it's about, is it about immigration? Is it about drug flow?

Is it about trade imbalance? There's so much mixed messaging that markets can't get a sense of playing out over the coming months. What will go in place? When things will go in place? Ideally, hopefully, April 2nd is a cathartic event where there is a coherent strategy outlined by the White House about who will be subject to tariffs,

who will not be subject to tariffs, and there's kind of consistent reasoning and underlying theme behind everything. But so far, we're not really getting that, which is why stocks continue to trade very poorly. It was another relatively negative day. The Equal 8 S&P traded very poorly. The Dow traded poorly.

Markets ended off of their highs in the afternoon. So, you know, markets are in an extreme state of flux right now. Michael, I want to get your thoughts on this, especially because there's been so much talk for weeks now about a so-called

Trump put on Wall Street. And President Trump and others in his administration, I think about the Treasury Secretary even on CNBC last week, have basically batted down the idea implicitly that a Trump put even exists. I wonder if instead investors

should be focusing more on the bond market where Treasury yields have come off dramatically in the last couple of days, last couple of weeks. Crude oil, though up fractionally today, has come down dramatically since Trump took

office and even the dollar, which has been weakening. Well, I think Peter's message a few minutes ago is that we should take Donald Trump's messages literally and seriously, which means tariffs are part of a broader strategy of focusing on Main Street over Wall Street. And what Wall Street is hearing is that the administration will accept short-term economic pain. And the view of the Trump team is that the market and the economy has become far too dependent on government support, fiscal policy, and that's going to be reined in. So I think the market is listening to that

and actually hearing not uncertainty, but a very clear message that the forces are in play for a much slower economy in 2025. And I think everything that Peter just said reinforced that. Okay, gentlemen, thanks for joining me and for reacting to that interview. Michael and Adam, we are just getting started here on overtime. We have such a big show coming up.

IBM CEO joins us live from South by Southwest after meeting with President Trump yesterday at the White House. We're going to ask how Washington policy is impacting his business and if he's seeing any signs of a slowdown. Plus Moody's chief economist Mark Zandi will be with us as he sounds a warning about potential recession in the U.S. over time. We'll be back in two. Welcome back tech stocks down sharply this week as the Nasdaq comes off its worst day since 2022. Welcome back tech stocks down sharply this week as the Nasdaq comes off its worst day since twenty twenty two let's get to Mike Santoli for more on that move and more Mike. Yeah Morgan

a lot of charts have a general look like this this is the semiconductor index ETF where they've kind of compromised along their two year trend they're basically at a point of sort of make or break as to whether they're going to remain

in this trend. So you see where we finished today and it's still pretty touch and go. It goes back to levels first reach more than a year ago. So this is one of those bellwether areas that really has given up a leadership profile and has to

rescue itself before too long unless the complexion the overall market's going to change Apple not as severe. It's definitely in an upper range and well above last year's highs. But again, it's sort of working with this multi-month or half a year of upside that it might give back in June of last year,

when it had that big pop on the AI announcement. Now, consumer discretionary, equal-weighted relative to consumer staples, very key kind of macro tale from the market. And you see it looks just like mirror image, right? I mean, this is telling you the market is becoming less confident about the strength of the consumer more defensive

buying up the equal weighted consumer staples and you see that real divergence happening in the latter part of last year right around the fall. So you know this seems like why the stakes is sort of rising in a lot of sections of this

market Morgan. All right. Curious how closely you're watching the technicals right now across the major averages and key sectors within this market given the fact that we've seen a lot of selling and a lot

of damage done for lack of a better term very quickly here. Yeah. Looking at all of it it seems like we broke through a bunch of plausible levels on the S&P where we might have bottomed although today was not too

discouraging in my view- you had a couple of decent intraday bounce attempts the most hard hit parts of the market led the way higher like the nasdaq one hundred. Type names we also hit a low in the S. and P. five hundred that was something of a key kind of. Sort

of hedging structural level that that people wanted to make sure didn't break so you know it's still you got to keep it on a short leash. But it seems like today was more nuanced than just, oh no, another down day by three quarters of a percent. All right, Mike Santoli, we'll see you later this hour. Thank you.

Up next, IBM CEO joins us exclusively from South by Southwest. This is one day after appearing at the White House with President Trump. We're going to talk about how Washington policy is impacting his business, plus the latest on AI, quantum and much more. And is Kingdollars losing its crown? We're going to talk about the accelerating downturn for the dollar index,

what it means for your money. Stay with us. Welcome back. IBM shares are lower today but holding up strongly so far this year compared to other big tech peers. CEO Arvind Krishna meeting with President Trump at the White House yesterday before heading to South by Southwest in Austin. And now he joins us exclusively with John. John, take it away. Morgan, thank you.

Arvind Krishna, CEO of IBM. Good to have you here. So you're with the president yesterday at the White House. Did you leave there feeling the same, better or worse, about his strategy here with the economy? Much better. He was engaged, he was listening, he wanted to really leverage technology and innovation,

and an aspect I wasn't expecting, but that really excited me. He also wanted to talk about how technology can be used in innovation and an aspect I wasn't expecting but that really excited me. He also wanted to talk about how technology can be used to modernize government and to really improve how government serves citizens. I think that was exciting. So what does that mean for a company like IBM

whose message is very much about how AI, how data transformation can drive efficiency, including in government? Look, it's the same message for government as you would have for our large business clients. We believe that AI is a massive productivity enabler. I like the McKinsey estimate, which is about $4 trillion by the end of the decade

in terms of annual productivity. The vast majority of that accrues back to the, back to the deployer of AI. Some of it will come to the inventors and people who sort of provide the technology. But I think it's time right now, get started on the low risk use cases, then move to the middle risk.

And then some of the more advanced use cases are probably still a few years away. But customer service, enterprise operations, supply chain, procurement, I think all of those are here and now. Okay, well arguably some of that positive impact is in the medium term. In the near term now, we are seeing names like Teradyne

today saying that some of this economic and market uncertainty is freezing their customers from actually taking action and ordering. Do you expect to see more of that? Are you seeing any of that in your ecosystem? Look, always when there's uncertainty in the overall economic environment, but I'll be candid. I think that's short-term, that's not medium to long-term. When there is short-term uncertainty, people tend to pause, not

stop, just pause for a few weeks until they have a better handle on their own demand. Once they get a sense of their own demand, then they're going to leverage it. I actually think most technology is going to have a smaller impact than other areas, because technology is actually a counterbalance to the uncertainty. You can have costs that are not all around other fixed costs, and you can leverage the technology

to handle the uncertainty a little bit. Is that really a way of saying, hey, if it pencils out, if a CFO can reasonably expect, okay, if I implement this, here's what I'll be able to save, that sort of spending is more likely to go through even in this environment? 100%, we've seen this many, many times before. If we can show them how technology can help them

automate their infrastructure, how it can help them put their workloads on the right place, if we can help reduce some of the complicated and complex use cases which require very expensive labor. Those use cases people will keep doing even through uncertain times. Let's talk about public private partnership. We were just on stage with Illinois's governor J.B. Pritzker talking about their move toward quantum and providing space and a development environment for that. IBM is a part of of that how much of that goes through gets

built gets invested in this kind of environment. I think a huge amount watch what has happened in the last 40 years those who choose to invest when they think times are uncertain means three four five years from now is when those investments pay off so for areas that are still nascent, you've got to start early. And that's what Illinois and Governor Pritzker are doing. They're starting on quantum now, then hoping that as it takes off, they have the skills, they have the employee base, and they become the place that by the end of the decade, people are going to want to flock to to be able to exploit quantum. By the end of the decade, people are going to want to flock to, to be able to exploit quantum.

By the end of the decade, not 15 years for quantum to pay off? Not 15 years, by the end of the decade, we're going to see quantum utility happening, meaning there are going to be use cases around materials, maybe drug discovery, around financial risk optimization use cases that are going to be surprising. You're about to do some global travel. How are you seeing other geographies across where you do business kind of reacting to this environment?

How are their economies holding up? I was just in the Middle East a few weeks ago. I would say their economies are booming. Yes, oil prices go up and down, but despite that, their economies are booming as they're choosing to industrialize and diversify what is happening there. If you look at India, I think we would all hope for 6% growth.

When they see 6%, they call it slowing down because 8% is what they want. When I see Japan, Japan's in a better place today than it has been for the last 30 years. These are just three quick examples. Then you can say Indonesia, you can say Mexico, you can say Singapore. They're all places where there's a lot of optimism. You just had an investor day and IBM is generating a lot of cash these days. That puts you in an interesting position at a time when people are concerned and maybe less likely to spend. How are you planning to deploy that cash

in an uncertain environment? Look, we're very straightforward. We are committed to our dividend, so that is use one of the cash. We really want to reinvest the bulk of the remainder in growing our company. So as assets become available, mostly in software, but a little bit in consulting,

we will use it to provide even more innovation back to our clients and to further deepen our portfolio along the areas we just talked about, AI, hybrid cloud, automation. Those are the areas we are focused on. Those areas we're going to stay in. And of course, deepen our partnerships with our most strategic partners. For example, are there industries in particular there?

We tend to not so much be industry specific. We tend to be much more around things we can bring all of our clients, and then we will do industry specific assets, whether it's in banking. But when we say in banking, we don't mean we're not going to do retail banking. What we will do is maybe do some stuff around fraud, or maybe we'll do stuff around Salesforce,

or around AWS skills, or around Microsoft skills. Those are the kinds of areas we'll go in. One which is a domain, not an industry, is cyber security. We've been doing a lot of work with Palo Alto Networks to bring a collection of assets together to our clients so that clients can feel better in this world of cyber. We've talked quite a bit about that. Arvind Krishnan, CEO of IBM, thanks for taking some more time with me here at South by Southwest. Morgan? John, great stuff. Well, time for a CNBC News Update with Bertha Coombs. Bertha?

Morgan, the man British police arrested earlier today is the captain of the cargo ship involved in yesterday's collision The ship's captain and team are actively assisting the investigation. Local police said the 59-year-old man was arrested on suspicion of gross negligence manslaughter. He has not been named and has not been charged. Staff at the Department of Education were told today that the headquarters will be closed tomorrow for quote, security reasons. According to two current employees who shared

with NBC News screenshots of the email they received, the memo stated the department's headquarters and offices in the Washington suburbs would reopen Thursday. The department has yet to comment. And in a show of support of Elon Musk amid the recent Tesla takedown protests that have erupted nationwide, President Trump said today he'll label the violence against Tesla dealerships as domestic terrorism. Earlier today, the president shared on Too Social that he would be purchasing a Tesla in support of Elon Musk.

Not sure if they have EV charging stations at the White House, though. We'll shortly find out. Bertha Coombs, thank you. Still ahead, we'll talk more about how Washington policy is impacting business when we're joined by Yale School of Management's Jeffrey Sonnenfeld, who said CEOs at his conference today were, quote, bewildered by some policies out of Washington. And we'll talk to Moody's chief economist,

Mark Zandi, as well, who says the risk of recession in the U.S. is rising. Welcome back Mike Santoli returns with a look at the dollar index falling today and down sharply this year Mike. Yes Morgan quite a round trip for the dollar index teacher on 103 there's nothing particularly out of the ordinary about that level but you see how quickly it got down there now of course the euro has been roaring higher that's after some fiscal

measures in Germany so a lot of it is global rebalancing trade going on a little bit less net demand for U. S. assets obviously U. S. government treasury yields now don't have too much of a yield premium relative to the rest of the

world compared to how it's been in the past so those are all related issues could take some of the pressure off- big company earnings estimates as we go ahead and maybe even- you know you kind of bolster the the growth story is an easing of

financial conditions down the road now take a look at the rest of the world's equity markets relative to the U. S. obviously U. S. out performance had been massive over the prior couple of years almost coming together here though and this really does go the U.S. Obviously U.S. outperformance has been massive over the prior couple of years almost coming together here

though and this really does go the way of the mega cap tech stocks that is the kind of instrument of U.S. exceptionalism when it comes to stock market indexes and you see there it's been a little more of a level playing field and year to date

rest of the world really outperforming Morgan. All right Mike Santoli some good charts there as always. Well up next Yale School of Management's Jeff Sonnenfeld with a look at some harsh words really outperforming Morgan. All right, Mike Santoli, some good charts there as always. Well, up next, Yale School of Management's Jeff Sonnenfeld with a look at some harsh words from the CEO community for the Trump administration.

And later, Moody's Analytics Chief Economist Mark Zandi on whether the recession risks spooking the market are valid, stay with us. valid. Stay with us. Welcome back. OK, we have Jeff Sonnenfeld with us fresh off of hosting his Yale CEO caucus in Washington this week. Jeff, it's great to have you.

I've been at some of your CEO conferences and they are always dynamic. They're always spicy. What are the headlines coming out of this one here today? Well, thanks, Morgan. You would have liked this one, I think, especially. We had a mix of 100 CEOs from consumer products

to consulting, from automotive to advertising, from media to manufacturing, retailers, technology, the biggest companies in the country. And none of them, by the way, is a historic break for the Republican Party. None of these people supported the Republican candidate. No major Fortune 100 CEO did. And this is only a Donald Trump phenomena.

However, after he won, they universally rallied behind him. And we thought that was great. They made trips down to Mar-a-Lago. They talked about company-specific issues, strategic issues they could work with, and now he's squandered that goodwill. What we're finding is that as many as 80 percent of them tell us that these tariffs are highly inflationary, and 70 percent say actually that the Trump economic initiatives are bad for the economy.

The whipsawing that they have that we actually had today, 12 different bulletins that contradicted themselves from the Trump administration. And these people threw their arms up in the air. They were sighing. We had, just between us, we had Eamon Javers there getting news feeds off of Truth Social. And he's telling us, and people were, CEOs were sighing,

like, oh my gosh, now what? They were trying to figure out how to commit billions of dollars of capital with something which being whipsawed around, not just day to day, minute to minute. And there's just been nothing like this. They're confused as to why we're attacking our allies instead of our adversaries. There's one added twist that caught us by surprise. And that was they're almost ready to confront them.

Right now as we're talking, the business roundtable is meeting with him. And they said they want to talk to him about these issues. But of course they were cautious about not wanting to poke the bear. But they did say they're ready to talk about the degradation of national security, which caught us by surprise that that was the issue, that they were universally, 90% of them were upset about that, which we thought they were tracking the economic issues so much more. They thought that the stock market would have to fall

another 10, 15% before they dramatically confront privately the president about this, but through collective action. When you say degradation of national security, what do you mean? Do you mean doge cuts? Do you mean the fact that a lot of the trade policy we're playing out in real time right

now is happening between with Canada and Mexico and less or so with China, which is seen as an adversary to the to the country and certainly the biggest national security threat? What is it? No, very good question.

While they're upset about us undermining strong allied relations. And by the way 85% of them are in favor of tariffs Selective tariffs there are issues president Trump is right the trade negotiators are right on on steel and aluminum issues that are being shipped Through Canada and nobody's nobody said that the president Trump is completely wrong It's the process of what they're doing here But when you get to national security it isn't just kicking our allies in the face. Some of them need to. We had

some very prominent Canadian officials in with us who just said there needs to be more burden sharing. And they agree with President Trump that while they might cut off our electricity coming out of Ontario into Minnesota and Michigan, they thought they should, they could pay more in terms of NATO support and defense. However, what they're most worried about is the dismissal of thousands of patriotic expert FBI agents that are nonpartisan, the demoralization at the CIA, the dismissal of the foreign interference task forces in the Justice Department, and the suspension of vital protective

mechanisms for cybersecurity intrusions of which there are almost a thousand attacks today on the White House alone that we would be letting our guard down they were bewildered by that and they also they also have already started to talk to them about the CHIPS Act which they thought should have been restored yeah a lot of questions about what the president intends to do with the CHIPS Act and the remaining funds to be paid out from it. But I'm struck by conversations just over the last couple days, couple of hours with the CEOs of ServiceNow and IBM, prominent software names, both of them pretty bullish

on some things that President Trump is doing, ServiceNow on Doge and the drive toward efficiency. IBM just met with the president yesterday. Arvind Krishna said he came away feeling a lot better about the president's strategy there. So how much time do you think the administration has to let this strategy play out as the business community, some in the business community, might be thrown a bit by uh... his tactics

uh... it john it's it is a a fabulous nuance that you raise is that those two c e o's and several others uh... michael dell is another that have a very sophisticated way of approaching jamie diamond approaching donald trump without poking the bear they don't push president trump into a corner so he lashes out like a wounded animal uh... you know i we can understand that why without poking the bear. They don't push President Trump into a corner so he lashes out like a wounded animal.

You know, we can understand why the perhaps thin-skinned but heroic President Zelensky reacted the way he did in the Oval Office. That's not a way to win Donald Trump, President Trump over. These guys are very good at it. Arvind Krishna is a scientist-scientist but a great business leader and he knows how to present the business case stories much the way Tim Cook does on other settings. And to engage the president cognitively, intellectually, strategically, he hears it. We had the same issue when the Business Roundtable asked me to help them back in 2019 on the

H-1B visa issues. Some of the same people you're talking about were going to be losing their technology workers. Instead of embarrassing him publicly, which is not a good way to do things the way that, unfortunately, it unfolded with President Zelensky, is what we found out just between us is that if we could get past some barriers at the White House to get to President Trump directly by pointing out how some major tech companies had already leased space in Vancouver and Ontario and were starting to put their workers they couldn't keep in the US, they weren't going to send this offshore

to foreign, to other zip codes and other continents. They're going to keep them in North America and they're just working out the plans for the infrastructure. President Trump, you know, he's a savvy businessman. Once he heard that, good for him. He spun on a dime and flipped and came back to do the right thing with the H-1B visa issue. And somebody like Arvind Krishna is a godsend to the tech community to figure out how to pull him back in from some hardliners, that is, pull President Trump back in from some hardliners. And I have

utmost confidence that Arvind Krishna not only tells you the truth, but he comes at you with a very compelling strategic and technological argument and not with any baby talk. It's a very sophisticated approach. That's what the business roundtable needs to do. They need to engage more. And I think the tech council yesterday set a good model for how to do that. Sometimes some of the business trade groups have been afraid to engage.

And so the CEOs themselves, as you saw yesterday with the examples you used, are sometimes much better than when you have the staffers putting CEOs together to write white papers that produce these reports. They actually subtract from your knowledge. The more you read of them, the less you know. Is that in fact, when they actually talk about business issues directly, CEO to CEO, CEO to Donald, to President Trump, that's a much more effective way to do it. Jeff Sonnenfeld, it's a great point. Thanks for joining us. We'll be watching this Business

Roundtable meeting and any headlines we get. Up next, Moody's Analytics Chief Economist Mark Zandi on whether a key inflation report tomorrow could increase the risks of recession and spark more selling on Wall Street. And check out shares of KZ's general stores. Just out a third with their quarter earnings results earlier this hour. Beating on the top and bottom lines, you can see shares are about one and a half percent right now, we'll be right back.

We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back.

We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. We'll be right back. Welcome back to Overtime. Recession fears continue to weigh on the market, and we'll get another view into the health of the economy tomorrow morning. We get a key inflation report.

That's the February Consumer Price Index. Joining us now is Mark Zandi, Chief Economist at Moody's Analytics. Mark, I wonder, even if inflation seems to have been under control for the month of February, does this tariff turbulence freeze the Fed from cutting any time soon? It does. They told us point blank that the economic uncertainty, the policy uncertainty, the uncertainty around economic policy, I should say, is the reason not to move. They're not under a whole lot of pressure.

Inflation's on the high side of their target, but pretty close, and growth is okay. The economy's still pretty close to full employment, so no real pressure to move, and given the uncertainty around economic policy, and of course we're seeing that on a daily, hourly basis, you know, no reason to move quickly here. They wanna gauge how this is all gonna play out

before they take another step. So where are we most likely to see actionable information in the CPI report? How much of it maybe has to do with shelter and how that's trending? That's been an issue for consumers for quite a while. How much of it just has to do with falling within expectations? No huge surprises.

Yeah, I think, John, if it's the monthly increase is three-tenths of a percent, and that means the year over year growth is close to three, that's right down the strike zone. I mean, again, that's on the high side of what the Fed would like to see, but that's where market expectations are, I don't think, any big moves. I think if you look under the hood and take a look at the different components, I think the thing to look at are things that matter to people, like what's going on with food prices. That was pretty hot last month.

It's been pretty hot over the last several months. We should watch that very carefully if it comes in with a strong increase. Energy prices matter a lot to people. And of of course the cost of housing and the cost of rent. So those are staples, those are things that people need and those are what people are focused on and I think those are the things that we might want to take a close look at, abstracting from what it means for monetary policy. Mark, it's interesting because in 2022 we saw this aggressive, fast and furious

tightening cycle on the monetary policy front. We continue and yes, I realize we've seen a couple of cuts, but we continue to be in what many officials would call restrictive territory where rates are concerned. And yet it looks like a soft landing was actually emerging. And I wonder if we need to be talking more about the role that fiscal policy played in that dynamic, especially now as you start to take that out of the equation and you see cuts to things like government spending. Well, yeah, you make a great point.

You know, the economy was doing just fine with a pretty high federal funds rate target. Federal funds rate target's just under 4.5%. That's higher than I think any official or economist would say is the so-called equilibrium rate, that rate at which policies need to be supporting restraining economic growth. My own view is though, if we stay here for a long time, it will wear on the economy and abstracting from everything else, tariffs, trade war, doge, everything else, the economy would start to feel it. So we would have to see lower interest rates.

But now you throw into the mix the very significant restraint on growth that's occurring because of the trade war, the developing trade war, and now the doge cuts to government employment into funding, it makes a greater case that perhaps the Fed is going to need to move more quickly in cutting interest rates. Of course, they have to have the eye on what the tariffs and immigration policy means for inflation at the same time. So it puts them in a pretty tough spot.

But my guess is in a not too distant future, the growth effects will outweigh the inflationary effects and they'll start cutting interest rates again, because they'll have to offset some of the restraint from the federal government. The other thing is when the economy is slowing and it's slowing and the trade war is doing real damage, if you get into real scrape, the federal government steps in and tries to provide support. Some of it's automatic in the tax code and spending. Some of it is discretionary. Lawmakers come together and say, hey, we've got to give the economy some help. None of that's going to happen. This go around because of the doge cut. So I think more of the onus on keeping the economy

out of recession here is gonna fall on the Fed. And that probably means lower rates than otherwise would be the case. Okay, Mark Zandi, we'll be watching it all. More will be revealed, John. In the meantime, major averages did finish lower with the exception of the Russell 2000, but well off the lows we saw earlier in the session amid all of the ping-ponging back and forth around trade

concerns and possible policies. Yep. And Adobe is the big name on tomorrow's earnings calendar. We're going to hear exclusively from Chair and CEO Shantu Narayan right here on overtime before he speaks with analysts on the call. Looking forward to that. Meantime, keep an eye on Congress as well and specifically the House as we look to see a continuing resolution passed ahead of a possible government shutdown.

That does it for us here at overtime. Fast money begins right now.