Power Lunch - Stock market rout on Trump's tariff rollout 4/3/25

Episode Date: April 3, 2025

Stocks are nosediving, sending the S&P 500 back into correction territory, after President Trump unveiled sweeping tariffs of at least 10% for some countries. The news intensified a recent sell-off and raised the risk of a global trade war that hits the already sputtering U.S. economy. We’ll tell you all you need to know. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Stocks tanking on new tariff turmoil. Hello, everybody, and welcome to Power Lunch. Almost all the major markets are selling off right now on new tariffs and new fears of an American and maybe global recession. This is one of the biggest down days since COVID first hit. A lot of those stocks are back at levels they were at five years ago during the pandemic. Right now, the Dow is down more than 1,300 points. So we saw a little bit of a lift midday, but we're heading back towards some of the lowest levels that we've seen since Trump's announcement. There have been only five bigger point drops for the Dow in history.

and all of them, as Brian mentioned, were in the spring of 2020. Look at the heat map. This is the S&P 500. All the components right now, a lot more red, although some green, and we'll talk about that later. Retailers getting hit the hardest. Walmart, Target down, down. Look, Walmart is way off the lows. It was down 7% last night, down down less than 2.

Target down 10%. Gap down 20, coals down 21. We'll have more on what could happen there coming up. What's in the green, the safety trade? Things like Coca-Cola, Philip Morris, Colgate, Lamb Weston. The top stock on results. Just keep in mind, Lamb Weston used to be $100-plus stock. And they're still warning about restaurant weakness, Brian, even with the 10% pop today.

Yeah, and this is not just a domestic story. The tariffs sitting nearly every country and nation. The tariffs, they're in different amounts. But the markets are taking down most every nation as well. Vietnam, that's a huge new tariff. It's ETF, the single hardest hit of any country-based ETF. It is down, we'll call it 10%. Also getting hit, Japan, Singapore, and Hong Kong.

There are, like Kelly pointed out, a few winners out there. Not many, but a few. The Brazilian ETF, the Spain ETF and the Mexico ETF are higher. The Mexico ETF, by the way, up nearly 4%. It, as a nation, seen as a potential winner from these tariffs, talk about more in just a minute. And oil is also lower oil, down about 7% to about 66 bucks a barrel. Not just the tariffs. OPEC, making some big moves, adding more oil to the global market. Is this kind of a six? from the Saudis. We're going to find out. We've got Halima Croft coming up on the show in a couple of minutes. Super interesting. By the way, one of the few glimmers for consumers at the gasoline pump, but again, a headwind for an industry, the energy industry that's already been struggling with price prices. Yeah, we want prices to go down, but we want them to go down for the right reasons, not a possibility of a recession. All right. Let's get right now to these markets and your money, as Kelly just highlighted, nearly everything is lower. Not everything, but maybe 99%. And no doubt that selling is triggering more.

selling the talk of margin calls, hitting some desks. You borrow money to buy stocks. Well, today, you're going to get a call that you've got to sell your stocks to repay that money. But as difficult as it may be to remember or think about on a day like today, know that sometimes it is the worst of times when you want to hold your nose, hold your stomach, hang tight, and maybe even buy. Let's talk about all of this with your lead-off guests and panel. Lindsay Bell, Clearnomics here on set. Gilbert Garcia, Garcia, Hamilton, and Associates, focusing more on the bond market. Lindsay, you are here.

Any words of comfort or advice to your clients and our viewers right now? Well, I think you put it nicely. Days like this are super uncomfortable, but they're not completely uncommon. And usually days like this create more noise than signal. And I think that's what the market is trying to find. Look, we saw the tariffs. They were broader in scope. They were deeper than we expected.

And so the market is reacting to that. But I think it's going to cooler heads can prevail over time as we learn more information. This is the changes in trade policy. This is a process. It's a process that kicked off on inauguration day when Donald Trump tried, when he signed in the America First Trade Policy. And so I think this is we're going to hear about negotiations over the next several weeks. And as we get more information, clarity will come. Or by the way, and I don't think anybody else is talking about this, the potential legality.

If the GOP challenges these tariffs in court, a judge could invalidate them. It's a small chance, but it's being talked about. Quickly, go back to you, Lindsay. I guess there's two ways to look at it, right? Which is today we're all kind of shocked by what we heard from the president. I mean, there's tariffs, I think Steve Leesman pointed this out to you. There's tariffs on nations that don't even exist. Or there's islands that have no people, more sheep than humans, that now have tariffs.

That aside, we either look at today as the reaction. to sort of the sound inferior yesterday, or these tariffs are just the start of a global recession where markets have to fall another 10 or 20 percent because the damage hasn't even been started yet. Yeah, I mean, it's TBD, right? We're in wait and C mode, and I think in the short term... That's scary.

TBD on that is scary. TBD is scary, but I think in the short term, you have to accept that there's going to be continued volatility. And, you know, like you opened the segment. You said it's times like these that can create opportunity. It doesn't mean we're putting a bottom in today. And like you said, like we both talked about, it's going to take time to figure this out. But I think when you think about the grander scheme, this takes time.

Tariffs, companies take time to determine how they're going to react, change potential operations. We saw in 2018, the market had a very negative, immediate impact to tariffs and went into place. Granted, they were not in the same size and scope that we're talking about today. But we did see a rebound in 2019. So the market sold off in reaction to what would actually turn into a downturn in earnings growth in 2019. So the market's getting ahead of this is what is happening here. Gilbert is the 10-year going to 3%. It is going to break 3% much sooner than we think, probably by tomorrow.

It's going to break through the forehandle. My view is a little bit different, if you don't mind, which is I think this was inevitable. I think that there's been chaos going on in Washington now for the last couple of months. I think already we've been seeing consumer confidence roll over. I think we've already seen money supply kind of languish at kind of low levels. And I think this was inevitable. And I believe we're going to look back in time at this error, and we're going to call it something like the way we look at COVID, the way we look at the S&L crisis for people as old as I am,

the way we look at long-term capital. And we're going to look back and say, those were the trade wars. And I think it's just the beginning. And I think what you see today is just a buildup of essentially correcting the overvaluation that has existed for the last really two years. If you go back to the beginning of this year and whether you look at data for 25, 50, 75 years, no matter what metric evaluation, stocks have been essentially in the 95th to 100 percentile of data. And so in our view, this was inevitable. And in my view, also, I think the Fed should really step up. This is the time for real leadership to say, we're going to stabilize the markets and let's do an emergency cut. But Gilbert, you're calling for an emergency cut in the breath after saying that stocks have been overvalued for two years.

That's correct. I think, though, it's about emergency cut would just stabilize the fall. because if you let it continue to fall and if you wait for the normal cadence of what they're looking to do, I think it'll be too late. But let me rephrase the question this way. And I love this back and forth. Yes, yes, yes. Because the question is, are stocks falling because they were overvalued, as you kind of hinted

before? Or are stocks falling because we're going into recession, which is what you're warning the Fed needs to get ahead of? We're going to go into a recession. Stocks are falling right now because they've already should have been falling because of the valuations. Now I believe people are recognizing we're probably going to start slowing down that this is not good. It is essentially a worldwide tax, and it's going to lead to a much slower economy everywhere. And I believe it's going to lead it to a recession. Right. And it may be

that the Fed does something. Probably, my guess, would be wait for the jobs data to roll over. I can't imagine them doing anything before we get negative payroll support or something like that. But I'm not in case. When I say 3%, I don't mean 3.95 on the day. tenure. I mean, are we going much lower than that or not? Because the argument that we wouldn't be is an argument that reshoring is inflationary, that high deficits are still inflationary, that all of these forces in the near term are going to push, you know, yield tire. So I'm curious which way you think, you know, and how much to the downside we could really have there. Sure. I think that the long end, whether it's a tenure or the long bond, depending upon where

you want to call the long end, is going to settle somewhere about 75 to 80 basis points lower than where we are today. And I think the short end is going to be even lower, somewhere in the low 2%. We see a much steeper yield curve and we see much lower interest rates. And by the way, this was already, in our view, in the cards, what has just accelerated it is all these tariff issues, which is going to generally lead to an economic slowdown worldwide, because, again, it is like a worldwide tax. And if you go back in time, I know there's another question coming.

If you go back over the last 30 and 40 years, there's been probably about nine things that led to an emergency cut. And they all make sense when you look at it today, whether it's a dot-com era, whether it's September 11, whether it's long-term capital. And I think we're in one of those type events right now. Those are multi-year events. I don't need to remind our viewers, long-term capital. Gilbert just referenced. I actually lived through that. It's 1998.

Internet boom, bust. We'll see what happens. if that's this. I'd love to know, Lindsay, your take on whether you think this is that bad. Also, on the noon show, on halftime, Joe Chernobyl said something I thought was pretty smart, which he says smart things every day. Everybody else is saying this is inflationary because tariff, prices go up. His view is that this is deflationary. Prices go up, people stop buying, which means prices may come down because there's less demand for those goods,

which maybe puts the Fed into play. And the Fed will have to cut. They won't cut into an inflationary environment, but they might into a deflationary environment. Yeah, I mean, it's a conundrum for the Fed, right? I think that the Fed, Chair Powell, says he's really committed to this wait-and-see stance, but he's going to be data-dependent.

And like Kelly said, I don't think he's going to make any changes until we actually see the data rollover, whether it's jobless claims or the payroll numbers that actually see changes. The problem is, is that the consumer. is in a different position today than they were in 2018 when Trump put his first tariffs on, or even in 2022 when inflation spiked because of the pandemic. The consumer right now is much more price conscious.

You see that in consumer sentiment numbers. You see that in the increase in inflation expectations by the consumer. You see it in rising savings rates right now as the consumer becomes more cautious going into this. So we're in a precarious position. We'll see how growth is impacted by higher prices. But I think higher prices go higher before they go low. is what I would say. You know, I want you guys to stick around. We're going to say goodbye and bringing Rick. Let's just, can we just bring Rick into the conversation?

Love it. Let's because I'd like to get Gilbert's reaction to Rick. So Gilbert and Lindsay, don't go anywhere. It's called Producing from the Desk. We're going to bring Rick Santelli into the conversation as well because the 10-year yield falling alongside stocks just above 4%. Rick, You just heard the inflationary, deflationary comments. Comment on that. And comment on this. is there any part of you that believes that come hell or high water, the president wants lower rates, and he's damn well going to get him, even if it means breaking parts of the economy?

You know, on the ladder, I hope not, okay? I can't get in the president's head. And even though his Treasury Secretary on CNBC pointed out that he wanted lower rates and they have gone lower, I don't think that's the way they wanted to get there. And in terms of inflation or deflation, I think it's pretty simple. Globalization was deflationary. Reversing globalization will be the opposite.

Now, it doesn't mean all timelines are going to confirm that because some of this is just a trade. Many are trying to peg all these moves in a cerebral way with very complicated, fundamental, or economic thesis. But it's not necessarily the case. Sometimes it's just many individuals, many institutions, many investors getting out of long-term trades, and the market gets jostled around. With respect to the globalization, this definitely sped de-globalization along. But in my opinion, it was going to happen one way or the other. So you either tear off the Band-Aid in a quick fashion or you let it fester over time.

Because after the 40s in World War II, when the U.S. economy was so, far ahead of all the other economies that we didn't care if we made good deals. We didn't care if we helped the competition. We helped the Japanese, the Chinese, the Europeans, because they were so far behind. If it was a race, we couldn't even see them. But times have changed. Now we compete. And when you compete, it's not that they're not allies in a cultural way or allies in a way of benevolence. Of course they are. And that hasn't changed. But we compete. And anybody who's been looking at some of the rhetoric between China, the U.S., the Europeans, the U.S., the people that are into more green issues in the U.S., and all these, we could see that there was a uniform elitism and globalism that many in the United States didn't like it in many countries they didn't like. And that divorce is going to cause lots of instability.

But we're not going to be able to really see the details for at least a quarter or two. None of this is going to catch up with the markets and the way we measure the economies in a very quick fashion. But I do agree with our one guest who said that most likely the markets are going to get used to this in a much faster time frame. And I think cooler heads will ultimately prevail. Rick, can I ask you a couple of tactical questions? What do you think happens with the 10-year from here? And what do you make of the dollar weakening? You know, see, here's what I think.

I think all the conventional wisdom about what was going to happen, I never put much confidence in it. The thing I put confidence in is for the moment, the only hedge against nervousness in stocks is going to be the Treasury market. Will that be forever? I can't tell you that. In terms of the dollar and treasury rates, look at my charts here. Everything goes back to October. When I see that kind of symmetry, it doesn't make me nervous because many of these correlations have not broken down with the volatility. In other words, two and 10 year yields are on pace to close it, lowest yields in six months.

If you look at the dollar index, the dollar yen, the euro versus dollar, the pound versus the dollar, they're all comping to early October, every single one. That gives me some confidence that there's a certain part of this move that is fearful as we may be with volatility and uncertainty. There is not necessarily an instability to what is going on. What's more, if you look at the major low in the dollar index from April 22nd, 2008, that was a 40-year low in the dollar. If you look at that chart, it's my last chart, what you'll notice is, other than the last four years, we have not spent a whole lot of time above 100.

So to me, there's a lot of mean reversion going on in foreign exchange that I wouldn't worry about. All right. Lindsay, you want to just give a thumbs up, thumbs down? Final comment here? Yeah, I would say if there's one thing I can add to the conversation is that margins are operating margins that are all-time highs for corporations. So while costs are going to go up, there is this also opportunity for companies to absorb prices. Of course, investors aren't going to like that, right? That means lower margins.

That's going to impact stock prices. But it could save the consumer, too. All right. Unfortunately, Gilbert, no time for final comments. By the way, guys, we just want to appreciate it. And I just learned that Bill Gross is going to join us. Legendary Investor, Buy Phone at the end of the show. So we want to save time for Bill as well.

Gilbert, though, thank you, Lindsay. Thank you very much. All right, the new tariffs are seeing and hitting potentially. We'll see what happens. So much of the stuff you buy, from couches to coffee mugs to clothes. If those goods are made overseas, they are likely subject to some new taxes, which could raise their costs. In other words, raise your costs as well because nobody thinks company is just going to eat it all. That is hitting the goods makers and the stores that sell them.

Some of the stock declines are 15, 20, 20, 20. 25% or more in retail right now. The gap losing one-fifth of its value. Let's dive more to the consumer and retailers with Courtney Reagan. It's been speaking with retail executives and joins us now. Courtney. Hi, Brian. Yeah, so Jay Foreman, he's the CEO of Basic Fund. It makes Tonka Trucks, care bears and more. He sums up what I'm hearing really pretty well. He says, quote, he's in shock. At these levels are completely beyond imagination. There is no way that the cost of these tariffs will not be passed along almost immediately. And for his products, Foreman says, there is no way that we can produce our toy products in the U.S. in the near-term, midterm, or frankly, ever.

Another source tells me these new tariffs will cost one retailer as much as it's EBITDA, which is in the hundreds of millions of dollars. And Sightex manufactures jeans in Vietnam and L.A. for brands, including Ralph Lauren, Jay Kruh and Madewell. Its CEO and co-founder, Sanjeeve Ball tells me the cost of making jeans in Vietnam is half of what it costs here in the United States due to labor only. And so an 80% 20% hybrid, manufacturing model is the best that he can do. Ball says none of his clients are yet asking him to take on all the pain, but everyone really still digesting the impact and trying not to make any big decisions

without more clarity. And I think, Brian, it's really interesting to point out that the actual tariff levels are higher in some cases than what President Trump unveiled yesterday when you're looking at it in aggregate because these new tariffs are being added to existing tariffs. So here are some examples from Morgan Stanley for the biggest apparel exporters. For example, we already had a 31% tariff on apparel imported from China. After yesterday's announcement, it's effectively 65%. The U.S. had a 4% tariff on apparel imported from Vietnam. Now it's 50%. These are very, very big numbers, Kelly. And I just think very few

retailers expected this level and this wide spread tariff announcement that we got. I'll be very, very interested in if there's any more response from Vietnam. But wiping out EBITDA is a big deal. A really big deal. Bringing that to us, Courtney Reagan all over it today. And then let's get to the tech wreck with the Mag 7 getting hit. The whole group trading 23% off the 52-week highs, losing about $900 billion in market cap today. The biggest laggard is Apple, down about 9% because of its similar exposure as retail has to the Asia supply chain.

Down for its fifth week in six. Amazon. Also, remember Amazon retail does a lot of this. as well. It's down 8% as it heads for its ninth down week in a row. Microsoft standout of the group had been lagging the prior year or so. Now it's down just less than 1%. Daniel Newman of the Futurum Group and James Chuck Muck of Clockwise Capital are both here to help us wade through all of this. Daniel, where is the opportunity? Yeah, it's hard to feel like there is any opportunity right now, but I am talking to a number of CEOs today. You know, I talked to Bill McDermott just a few minutes

ago, and he's saying to me, you know, CEOs are really focused on what they can control, Kelly. But I think there's a big opportunity. Which is what, by the way, Daniel, what can they control? Because what people are worried about is one of the things they can control is headcount. And you don't want to see companies turn to that and say it's time to sort of pull back because we have to control expenses when we don't know what's going to happen, as Courtney just said, with profits and revenue growth. Yeah, I think the lean into the AI opportunity, though, Kelly, it's going to be substantial right now.

First of all, I talked to a different CEO on this topic, and basically the entire enterprise AI buildout will continue. You'll actually see companies doubling down on R&D. So when you look at the mega cap tech companies, that's not going to slow down. In fact, they realize that is their future. And they see the overall tech opportunity is deflationary. One of the other big opportunities that I see is around the IP transfer. So a big part of what's going on, and I haven't heard a lot of this in the hour so far, is the negotiations.

These CEOs, and my perspective is this is the beginning. It's an opening salvo of negotiations with some of these critical markets like Taiwan, like China, like Vietnam, where a lot of this, you know, large AI equipment is being assembled and shipped. And what we don't have here is the security of knowing that we can manufacture these chips and in an event of a China, Taiwan, you know, conflict that we won't be stuck in time because we can't move forward to the next node. And one other thing I'll note here is national security is economic security. The cybersecurity space here is an opportunity. Companies are going to actually need to double down. And during this trade war, we're going to see more nation state actors. We're going to see more bad actors across the board. Companies, enterprises will need to secure. And no matter how much pressure they're under, they're going to need to invest in those areas, AI and cybersecurity.

That's it. Maybe we can show. I mean, hack is down almost 5%. But again, everything's down today. Maybe we can cycle through some of those names, CrowdStrike as well, where you see, This could be an area of opportunity. James, you were quite cautious on air with us a few weeks ago. That's being borne out today. How much longer do you stay in a more cautious portfolio position? I think for the foreseeable. I think after last night we can say safely that we're in a period of maximum uncertainty. I think we're in the very early innings of the reshaping of the global order.

Global alliances, reliance on the United States. And Kelly, you mentioned the weakness of the dollar. I think Larry Fink is absolutely right. the hegemony of the dollar is in question as the reserve currency. So here's what we know. We know that there's a lot that we don't know. And also we know that earnings and the CFOs of these companies also don't know a lot, which means that they're going to be extremely cautious with their forecasts, which means that earnings are likely going to be come down just from a defensive posture in terms of setting expectations. And then what does that mean to multiple?

So right now, you look at the NASDAQ, the top 10 stocks constitute 50% of the index. We're sitting at 18% right now. And right now, we think that, you know, over time, if this continues to play out as such, you could conceivably see the SMP at 4,800. So we'd be selling it to strength and continuing to rotate the portfolio toward the barbell strategy we talked about last time. James, what happens if we get a series of more constructive announcements from the likes of the trading partners, what have you?

is 4,800, you know, kind of the definite stopping point, or do you have to just be very, very nimble based on the news flow? The latter. I mean, maximum uncertainty necessitates maximum adaptability. So you have to be incredibly nimble. Like you said, you can have green shoots here that go one to five percent up over the course of a couple of days. So you have to be cognizant of potential good news on that front.

But that being said, if the trend continues on the macro perspective, That is where the downside could conceivably go. But you've got to stay nimble. I mean, right now, on our ETF, which is a long-only ETF, 20% of the portfolio was short. And that's not something that you see every day. And for every dollar of dollar general or Costco that we own, we own a dollar of micro-strategy or Palantir. That's how you play the barbell. We're playing it down the middle.

And you've got to stay balanced. But right now, I think the worst-case scenario played out last night. and you got to stay nimble and assume that CFOs will be very conservative this coming our agency. All right, gentlemen, thank you both, giving us both kind of the defensive playbook and maybe some areas to look for opportunity. James Chukmuck, Daniel Newman. We appreciate it today.

By the way, a special first on CNBC interview right here on Power Lunch tomorrow. We will be speaking with Microsoft CEO, Sayy and Adela to celebrate the company's 50th anniversary around 2.30 p.m. Eastern time. All right, your next guest says there may be some bond. opportunities right now in payments, things like credit cards. Sorting us now, part of your market navigator is David Miller. He is co-founder and chief investment officer at Catalyst Funds. David, why do you think a Visa or a MasterCard right now are maybe Havens?

So the reason they could be havens in this type of environment is if you think about tariffs, they're inflationary. And when you look at companies like Visa and MasterCard, they're essentially taking a piece off of every transaction. So as inflation increases, they have a natural inflation hedge built into them, which can be net positives for these payment facilitators like these in MasterCard. Yeah, and do higher costs, everybody seems to believe that tariffs will be inflationary. We'll see if they're deflationary or inflationary. But if costs go up and consumer spending stays strong because consumers have still been dealing with higher costs for four years now, David, does that go directly to the buy?

line of these companies? Yeah, that's a key question. What's the bigger impact? Is it more to inflation or is it more to GDP growth as to the impact of the tariffs? And when you look at it long term, I think you've got to look at these tariffs as part of a bit of a negotiating game or a bit of a dance. You know, when Trump came out with these numbers, these were the worst case numbers. And if countries want to bring down their tariffs and match the U.S., there is that potential for some long-term gain in exchange for some short-term pain. So that's really more the key question, is do countries come down and match tariffs or does this, you know, go into a full-scale trade war?

And we're yet to figure that out. I love when you say, you know, it's less clear what NVIDIA's dominance will look like five to ten years from now compared with MasterCard and Visa, which is apropos and quite a compliment for them. David will leave it there for today. Thanks for your time. Thank you. We're matching. David Miller from Catalyst Funds. Now, the auto parts servicers are one area to look for green today.

They're actually at all-time highs, both AutoZone and O'Reilly. And the idea your car is more expensive to buy, you're going to hang on to your current one for longer. Maybe we need fixed up as well more after a break. Welcome back. A lot of speculation already about what the Fed might do here. We were hearing from Governor Lisa Cook. Let's bring in Steve Leasman. Steve.

Hey, Kelly. Yeah, Governor Lisa Cook can be making comments on the recent tariff announcers says it was larger than expected. and the tariff price increases along with rising inflation expectations argue for holding policy restrictive or the restrictive stance of policy for longer if that happens, of course. But she says amid the growing uncertainty right now, it's appropriate to maintain the current policy rate. Monetary policy says it's still moderately restrictive. Now, if the uncertainty clears up, it will be appropriate, she says, to lower the policy rate. But the Fed and the Fed can afford to be patient at this place.

Now, she sees inflation risk skewed to the upside, growth risk skewed to the downside. Higher inflation than slower growth, she says, quote, post challenges for monetary policy. And on the effect of those tariffs, Liz Cook is looking at lower disposal personal income, which would reduce consumer spending. She says it can stall hiring and investment, the uncertainty around that that is, and lead to negative growth and weak labor markets. Finally, she says the recent uptake in inflation expectations is worrisome, and she sees the U.S. economy slowing moderately this year while the unemployment rate picks up.

We'll leave it there, Kelly, but some interesting direct comments about tariffs and the dilemma the Federal Reserve will face. And I think what she's saying is hold it right where it is for now. Yeah, stalling in the near term. All right, Phil. Sorry, Steve, thanks very much. Pleasure. Phil is coming up. Let's hit the heart of tariffs. That may be the automakers.

It kind of started with them, their costs, their labor costs, now in focus. Stalantis saying it's going to temporarily lay off 900 workers in the United States at its Jeep brand. Philabo, joining us now with more on the auto side of this important story. Phil. And Brian, at the heart of the questions surrounding where the automakers build their vehicles, it comes down to cost. Many people are saying, well, just bring the plants back from Canada and Mexico.

Not that simple. Partially because, or in large part, because it's much more expensive to manufacture in the United States than it is in Canada. in Mexico. In fact, we asked Alex partners to run the numbers. $70 per hour, hourly labor all in with benefits to manufacture here in the U.S. versus 40 in Canada. $6 to manufacture in Mexico. When you look at these ancillary costs as well, whether it is indirect employment, power needs, the infrastructure around that plant, it is 68 percent costlier to build in the U.S. than in Mexico, costlier to build here than in Canada. Canada is one area where Stalantas has said, you know what,

we're going to hold off on production at our Windsor plant. That is one move that the company is making over the next two weeks. Also going to be pausing some of its production in Mexico. Meanwhile, Volkswagen is halting rail shipments from Mexico. This is what we expect to see from a number of manufacturers. They're not going to keep building and shipping up here at the same rate they did before. Finally, we've got a couple other notes here. Ford, it's going to start offering employee pricing. There's a surge of people who are going out to the dealerships. Ford believes that this marketing plan offering employee pricing is a good way to say to people, if you're going to buy, come on into a Ford dealership. And as you take a look at the dealership stocks, keep in mind

that auto sales in March were up 4.8 percent, probably going to be a big month in April as well. Look out when it comes to May, because that's when you start to see the full impact of the tariffs if they're still in place, and that's likely when pricing would change. Guys? All right, Phil, Phil Leboe, and an industry really at the epicenter of a lot of what's going to happen here. Yeah, Carvana down 20 percent. Ironically, we talk about buying used cars, and the stock is down 21 percent today. Yeah, what gives?

Doesn't really jive with the markets, given that the auto parts companies are higher today. This is called stalling in TV terms. Now let's talk oil and energy. oil stocks also lower, and it is not just tariffs. OPEC, raising how many new barrels of oil it is going to put on the market in May. It's going to add just over 400,000, about 411,000 barrels per day, up from about 138,000 barrels. Now, that would add oil to a market already seen as being well supplied. So what exactly is going on here? Lea Croft, is a global head of commodity strategy RBC Capital Markets literally running in as we're speaking slowly with the previous guest.

So thank you for joining us. What is going on here? Well, I mean, obviously this was not something we were anticipating. Not on tariff day. Not on tariff day. We're anticipating a decision by the eight countries making voluntary cuts to say we're going to bring forward more production come May. What do I think underlies this decision?

There are several countries, as you know, Brian, that are consistently not producing what they're supposed to produce. Kazakhstan. Case in point, probably 700,000 over their production target. Iraq, another perpetual country that cheats. Russia's had some compliance issues as well. So the question is, by

making this move and basically saying, you have one month to get your act together, do we see a change in behavior come they? And I think what's interesting is, the countries that are driving this decision are saying, look, everyone thinks we need $90 oil? We want to show you. We don't need

higher prices, we're prepared to endure lower prices for a period. What I've heard from some market participants today and what I've read is, is this the start of a market share war? In other words, we hung together at certain prices, but now, forget it, let's put a bunch of oil in the market. Price is going to go down, but we're able to hopefully sell more of that product. Well, I don't think it's a classic 20, 2015 when we basically had all the barrels on the market. I think it's more akin to a little bit of what we saw in 2020 when basically it's like, hey, if you're not going to do what we tell you to do or if you're not going to do what you agreed to do, we're going to basically show you the price of that.

Because Prince Abdel-Aziz's doctrine is, I will be committed to market management, but everybody has to pull their weight. And if countries are not pulling their weight, we don't need to do this. So because I need to back this up here following. So we have oil prices, I don't want to say crashing down sharply today, because of recession worries. And OPEC is increasing supply at the same time? Well, that's it. I mean, that is why we talk about a surprise announcement.

Waking up this morning and you see oil down, you're thinking the driver is going to be demand concerns driven by tariffs, particularly in major demand centers like China. And then in the midst of that, we get the announcement this morning. Why would they announce that this morning? Well, again, if you want to have a little bit of, you want to have maximum impact in terms of, I would call it a controlled sweating, or, you know, escalate to deescalate.

If you want to basically show some countries you need to get your act together, this is a day to do it. I mean, it's not for the faint of heart to do that, but I think it's kind of an interesting move. Does it mean the price of oil is going to go yet lower? Well, the question, there are a lot of things we need to think about. When we think about tariffs, how long are we going to be in this tariff situation? Three months from now are the tariffs still going to be on? That's going to be the question about the demand impact. And then we have to think about other factors as well.

Are they going to pause this in May? Are we going to continually get more and more barrels coming on? As Brian said, is this a sort of OPEC loosening of discipline? Are there other factors, though? Are we potentially going to see something happening in terms of Iran? We have more sanctions on Iran. We have more sanctions on Venezuela. They would take their barrels off the market.

And how do we take the barrels off the market? Running OPEC math can be challenging. To say the least. We're glad you're here to do it. There's a lot of questions also. I don't want to put you on the spot about shipping costs, some confusion around tariffs and ships. Will this add a huge amount of cost to China flag? They're trying to build ships. We're still trying to figure that out.

We're trying to do that out. All of this. I mean, we are. And oil, by the way, I want to be clear. Oil is at 66. Oil's not at 46. It's not crashing. It's not at 36. Those are recessionary levels. Watch oil. Watch bond yields. That'll tell you probably where the stock market's going to go. But how much of this falling up on Kelly's point, do we think may have to do, with, let's just call this a potentially hyper-aggressive White House against Iran. And I'm trying to be very careful with my wording here. So is the question that you're asking, is OPEC, are certain OPEC producers looking to assist the White House by providing more barrels

in advance of tougher action against Iran on sanctions and military action? Whatever that possible action. The official word is no. But what I think we need to watch is, what happens really with the U.S. force posture in the Middle East? We have had a very significant buildup of U.S. forces in the Middle East, B2 bombers. The situation with Iran remains quite tenuous. As you know, we're watching that situation very closely.

We are on an island. We moved B2 bombers to an island called Diego Garcia, which basically is nothing there but an Air Force base. That's the same island we're now tariffing that Steve referenced last hour. Well, it's also an island that tariff or not is often used as a strategic point for longer-range bombers. the Middle East. I'm just throwing, I'm trying to be very careful. The type of bombers that we would use if we were going to do a strike on the Iran on nuclear facilities, the BT bombers. Doesn't mean we will. Doesn't mean we will, but we are in an escalatory situation at the moment regarding Iran. Either Iran makes a deal and essentially sanctions are lifted or we go to a plan B.

Maybe we should thank OPEC then because it sounds like that might push up the oil price otherwise. Or keep it from spiking if something would happen. If you were President Trump, you are happy with today's move. When everyone is talking about inflationary impacts, obviously OPEC's move today, it will be well received in the White House. Alima Croft, RBC Capital Markets. Glad you're here. Thank you. As always. Another big question everyone is asking, why were the markets caught so off guard when this is something the president had been talking about and telegraphing for a long time? And what are they going to do with the revenues raised from the tariffs? Brian Gardner is Chief Washington Policy Stratelist at Steefell. Stratiress at Steefell. Sarah Bianchi is Chief

strategist for international political affairs and public policy at Evercore. ISI. I will let you both take a crack at it. Brian, what are they going to do with the revenues? I think it's part of a broader restructuring of the U.S. economy. I think that's the goal. And I think when the administration and administration officials talked about increased revenues, I think people thought, oh, this is the money they collect at the border.

No, it is part of a broader restructuring plan to reshore businesses. is here to the United States and have some, a large economic boom that is going to generate massive sums of tax revenue. And I'm not endorsing the plan. But I think people misinterpreted what they meant by revenue raisers from the get go. And so they took their eye off the ball and thought, oh, this is more about negotiating. It's actually, it's a bigger, it's a, it's a more ambitious plan than people had originally thought. So when Fred Kemp was on the other day and he said, you know, you need to understand something. The president wants to reshape the global trade order, the global order. I mean, you think, yes, like this is what we're seeing play out.

And the question, again, is, okay, so let's say they now raise some revenue. Tax Foundation says 280 billion. Other estimates are higher. What do they put that revenue towards? How do they offset what will be, you know, higher prices for consumers in the near term? So, you know, I think part of it is, you know, there's going to be a number of different rationales for what you do with that money. One is to offset the extension of the Trump tax cuts. The other is to pay down the debt. And I think that's how they see this more broadly. I think this restructuring is a way to get at the U.S. fiscal situation.

So I think it's part of a broader plan to reorganize the fiscal situation in the United States, get debt and deficits under control without touching entitlements because that's a third rail for them. Right. And which he mentioned yesterday. He said, we are not touching, he said, Social Security, Medicare, and Medicaid, and you see some of the Medicaid and health care names are actually up today. Because this does change the nature of what we thought was going to happen with the budget bill just a month ago. Correct. So this is just a more ambitious plan than I think investors had really thought about in, in right after the election and really into January and February.

It's when we get into late February, when some of the rhetoric starts to come together, when the Secretary of Treasury starts talking. about detox. Then you can start to see the tea leaves that, no, this is not just, this is not negotiating tactics. This is not addressing just unfair trade arrangements with other countries. This is a broader, more ambitious economic plan. So, Sarah, let's bring you in on that with a couple more questions. Number one, we've seen some of the GOP and the Senate break with the president already this week. Would they ever potentially do the same in trying to undermine some of these tariffs? Could the courts play a role there? Or should we expect that they stick for now, And if so, how do you see that fallout affecting Washington and policy for the rest of the year?

Yes, certainly the Republicans are very, very nervous. I thought it was interesting that Senator Grassley introduced a bill today, that Congress should have a role. I'm not sure they're ready to break with the president on this yet, but certainly we're getting signs that we have not seen very much so far in this administration because of their anxieties. There's also people who do think that this is an overreach of AIPA of authority. I think you will see people pursuing that. I'm not sure that's really what's going to turn the tide here. But I think we should see the impact on the overall economy, inflation. I don't know that people should be counting all the deficit numbers quite yet.

Let's see how long this stuff stays in place. Yeah, Sarah, apologies for jumping in here. We actually are hearing from the president himself as he leaves for Mara Alago. Take a listen. We see the big golf tournament at Dural. I'm speaking tonight for charity. And then we'll be coming back here pretty quickly. But having a big event, a lot of charitable causes are involved.

So we look forward to that. It's in Miami at Doreau. The markets today are way down the first day and here. of the terrorists. So how's it going? I think it's going very well. It was an operation. Like when a patient gets operated on, and it's a big thing. I said this would exactly be the way it is. We have six or seven trillion dollars coming into our country,

and we've never seen anything like it. The markets are going to boom, the stocking's going to boom, the country is going to boom, and the rest of the world wants to see, is there any way they can make a deal? They've taken advantage of us for many, many years. For many years, we've been at the wrong side of the ball, and I'll tell you what, I think it's going to be unbelievable. The thing that people have to talk about, we're up almost to $7 trillion of investment coming into our country, and you'll see how it's going to turn out.

Our country's going to boom. The president making those comments as he departs the White House from Mar-a-Lago, saying the stock market is going to boom. The country is going to boom. Brian, of course, reporters were asking him questions about the market sell-off. Sarah Bianchi, I interrupted you. You can continue the thought, which was precisely about the politics of all of this. Well, I think the politics are tough, but look, what you see the president saying here is that he's got a stomach for some of this, you know, I think one of the things investors may be missed is, you know, certainly last time he did watch the markets more. And I still think there's a bottom here where they may

look to pivot out, but we are not there yet. And so right now, I think there are, there will be more voices, whether it's on the Hill, some of these businesses, what countries do they look to retaliate. So there's a lot more uncertainty to come that will weigh on the markets in the economy. But this president, at least right now, is holding strong. Yeah. And Brian, do you expect that he'll be able to hold up that way? In other words, the pressure now turns to, again, the any vulnerable Republicans, if it looks like there are problems there, and how exactly they navigate the pieces of legislation that are now important into your end? Well, I mean, you know, unless he, you know, is serious about running for a third term,

which has some constitutional problems, he's not running again. So I don't think he has to worry about Republicans as much as a regular first-term president would. He's not looking for a second term. And I think he sees this as a legacy. I think he believes that this is his mission. This goes back to the 1980s. CNBC's been running clips of him during the day, going back to the 1980s talking about Japan. So is there a Trump put? I suspect there is, but the markets have significantly materially mispriced that put. It's at a much different price than that we thought. Maybe there is a bottom. I think Sarah is probably right on this. We just don't know where that bottom is. And I suspect he has a more of a constitution for pain.

The secretary again, Secretary Besson has been pointing to the 10-year, not the equity markets. And the 10-year is doing what the administration wants it to do. Yeah. So I suspect- A strange way to get the 10-year down, but I do hear you. Yeah, we're going to leave it there. But yeah, maybe you break, like what do Mark Zuckerberg say, Facebook? You move fast and break things.

Well, the market, it's not broken. But it's cracked today, certainly the Dow. Guys, thank you. The Dow is down nearly 1,400 points. The NASDAQ down by 5%. Biggest decline for many of these major indexes since the beginning of COVID, when everything sort of crashed all at one time.

Investors fleeing for the safety of bonds in big part. And speaking of bonds, let's hear right now from a market legend that is Bill Gross, Bond King, co-founder of Pimco as well, author of a relatively new book, The King and I, Bill agreeing on last minute to join us by phone of Bill really,

do appreciate this. You tweeted out two weeks ago, March 14th, that Trump does not seem afraid to break things and that market strategists have a hard time of pronouncing the word bear. How do you see the markets playing out from here? You've lived through a few of these types of cycles. Well, it's good to be with you again, Brian. I think that this event, if you call an event from yesterday in terms of the terrorist, it's a similar event to the gold standard, going off the gold standard in 1971. It's an epic event.

It's not something where you can time quickly for a market bottom. It's something that we're going to have to live with as long as President Trump continues with his stance. And, you know, your prior guest talked about a Trump put and when he might change his mind. I think we have a similarity here with World War I where there was an event and there were alliances and there were countries that couldn't pull back

from what they had said and done before. And so we have that situation similar here. It's all related and dependent to my way of thinking on President Trump, but I don't think he's going to back on. President Trump, to be very blunt, is a macho male. And this macho male is not going to back down tomorrow, simply because the NASDAQ's down 5%. And that's an important point.

We, of course, we don't know what the president may do, Bill, but what we've heard a lot of guests on this show and other shows on CNBC say today as well, it's kind of a negotiating tactic. They're sort of semi-defending the president in a way, saying there's no way this will continue. That's kind of a theme. that we've been hearing.

But what if it does continue? And not only continue, Bill, but other countries then retaliate against us. And it continues to escalate. What would be, you know, sort of a best and worst possible scenario as you see it? Well, the worst scenario is that World War I analogy. The best scenario is where Trump claims

in the next two days, few weeks, maybe two months, that these policies are working, that, you know, we're raising trillions and trillions of money, and, you know, it's time to calm down a little bit. So that's the best scenario. I simply don't think the president is going to back down tomorrow or back down next week. And so, you know, this has serious implications for currencies, for world world markets, for economic policy around the world. And it's changing day by day as these countries react to what the president has done in terms of his policies. I think it's a very dangerous period of time.

It's not necessarily a period for stockholders to reach in and try and grab a bargain, catching the following knife, I think they will be trying to buy many of these bargains over the next few days, or the next few weeks, or in the next few months. So be calm and certainly don't sell in a panic way this afternoon. So, Bill, and, you know, again, appreciate you're joining us. You're very, very good at kind of translating the macro into really tactical moves. And in a time like this, you know, some of us are kicking ourselves, saying, all right, I guess we should have bought that the 10 year up at five. I guess it's not a great long-term investment. But whether it's fixed income, whether it's stocks.

And I take your note of caution here about there's going to be more downside. I mean, what tactic, and people are talking about credit spreads today, you know, high yield is widening out and so on and so forth. So I would just be curious, like super tactically. What are the positioning opportunities here? Well, what I've been doing, a lot of it today has. has been taken place, I guess, is buying domestic companies, buying telephone companies like AT&T and Verizon, buying tobacco stocks that yielded 7 to 8% like Altria, buying domestic companies, and they're doing well.

That's not to say that, you know, we should continue to buy them, even if they keep going up, because even that branch of the market, you know, seems a little overbought to me. So, yeah, actually, what amazes me, and I watch CNBC every day here from 530 in the morning, and I certainly watch your program at 10 and 11. But what amazes here is that none of the payments here to talk about cash anymore. My cash portfolio yields 4.3% and it doesn't go down. And so while we're waiting to see what happens, there's nothing wrong with the word cash. That's a great point. And we're certainly glad they're watching all day long, Bill.

How long will you want to hide out in cash? Because, I mean, cash does lose value over time with inflation. But to your point, some of these CDs and boring things like T-bills are offering, you know, four and maybe even higher percent. Well, they are, and it's basically a safe haven yielding 4.5%. There's nothing wrong with that, but it amazes me that over the past few months, the word cash has never been used as an alternative. The investors are always looking for a cheaper stock that will go up,

as opposed to, you know, waiting and out, you know, playing this as a safe haven for, you know, at least a few weeks to see the reactions of other countries in terms of their tariffs and the reaction of the dollar, I think that's very important. You know, if I were an economist and if I were a policymaker in the Trump administration, I would simply say that the way to cure the trade deficit is to weaken the dollar. A weaker dollar allows, you know, countries to buy our products and for us to look at foreign products more expensively. So that's the way to do it. I would agree with others that say that the Fed is in a quandary here that they can weaken the dollar by lowering interest rates, but trying to

lower interest rates its inflation is, you know, at 3% are going higher. Well, we do have 36 trillion in debt. The president, like it or not, I know today nobody likes it. I don't think, Bill, the idea being we want to drive down interest rates. The president has said that. He can't tell the Federal Reserve. I think he would like to tell Jerome Powell what to do. He can't. I don't think Jay Powell likes Trump very much.

I'm not sure if they've spoken. Trump has said he wants to bring down borrowing costs. He wants to bring down mortgage rates. I think at least right now he's doing that. But is that an economic benefit if you cause a recession and a lot of people lose their jobs or get pay cuts, do lower borrowing costs matter if the economic toll is greater than the benefit of the lower borrowing costs?

Yeah, well, they do matter, obviously. A lower interest rate is a better push for the economy going forward, but they don't do it immediately. And the mortgage rates, if you spoke to, yes, no, have an effect on housing going forward. other sectors that will benefit from interest rates. But, you know, the rates that we see today in terms of tenure, basically our function of recession here, or maybe in some cases a depression tear.

And so, you know, we've got to realize that it's not interest rates that are driving the economy. It's the economy as driving interest rates. Bill, what do you make of that? So I totally agree about the falling dollar, right? But what do you make of the fact that it is down? If we're having a recession trade, shouldn't it go up? Or, you know, if we're talking about doing more in the U.S.

and capital maybe flowing here, shouldn't it be going up? Well, you know, logically in the short term, perhaps it should. But I think what the market is reacting to, the currency market is reacting to, is that these policies will not be beneficial for growth going forward. And that's the conundum, that's the debate. You know, will these policies work in terms of generating industrial strength going forward? Will the economy grow? I don't think that's the case.

Like I said, I think this event is epic and it's epic in a negative way, simply because of uncertainty, of reciprocating policies and tariffs on what of other countries. and we've got a real quandary here, much like World War I. You're one minute and show, so very quickly, Bill, do you think that the stock market eventually rebounds fairly quickly here, or this is a prolonged period of downturn? Well, it always rebounds, but I don't think fairly quickly. I simply would say, you know, don't react today to what appear to be super bargains.

I do that myself. I look on my screens and I go, God, very attractive. I've got to buy some of this, but then I say wait. You know, in any event like this, you at least want to wait three days before the fog clears, and it's the moment we're only in day one. Well, luckily, tomorrow is Friday, and we're very lucky to have you join us by phone. Bill Gross, really appreciate your time today. Thank you.

That was interesting. Maybe not in a good way. I mean, a little bit of a cautious tone there. Wait three days. Yeah. Cooler heads. So we're back towards session lows. Not there yet, but it'll be really interesting into the bell.

Thanks for watching, Power Lynch, everybody. Closing bell.