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>> Libby Kent of Pimco writing, "The adage

that war is easy to start but hard to

finish seems to be playing out despite

President Trump wanting to bring the

conflict to an end." Libby joins us now

for more. Libby, good morning.

>> Good morning.

>> Apparent contradictions in some of the

statements we've seen. Do you view that

as strategic ambiguity or just the lack

of a strategy?

>> Well, look, I think that the president

very much wants an offramp. I think he

realizes that politically, domestically,

that this is pre presenting quite of a

headwind to to his party. Um I think the

question is is whether he can declare

victory without the straight of Herm's

opening. Um he think he he might be

trying to, but is does that actually

translate to market action? And then

also importantly from a voter's

perspective, does it actually translate

to a decline in gas prices? Because as

we know, you know, gas and groceries,

the two things that really matter to

voters, particularly on the heels of the

2024 election, the bout of inflation in

2022, I mean, voters really care about

affordability. And so, I think this this

is sort of the question. I think he

wants to end this understandably, but I

think really the the bigger question is

can he and can he do this without ground

troops? I mean, can you know, you know,

is it enough? Is it sufficient enough

just to declare victory rhetorically

without actually having sort of the

substance behind it?

>> You started by saying that it's clear

that the president wants an off-ramp. Is

it because we're reaching up against the

four to six week time frame or is it

because of the market response that

we've seen and increasing pressure from

the Republican party?

>> I think it's all of the above, honestly.

I I think the president I mean you know

President Trump um has had a deep

ideology around um you know lack of US

intervention uh and wanting to end these

you know forever wars. Uh and I think

that there may have been a

miscalculation that you know sort of um

translating the success that he had in

Venezuela was going to be transferable

to Iran. And you know whether that was

naive or what have you you know say what

you will about it. Um but I think it was

a miscalculation and now I think that

the you know the president is likely

wanting to you know end this. Um but

again I think the question is just will

uh you know again and I I said this to

our to our traders yesterday. This is

not like tariffs right I mean he he had

unilateral control around tariffs. He

could impose tariffs and then walk back

from tariffs. This obviously is just

much more complicated and much more

complex. And so even though I think

again the desire is to do that, it is to

decrease um the conflict, I think it's

just a question of whether he's going to

be able to.

>> At what point is the fiscal constraint

also uh becoming an issue given the fact

of recent reporting talking about

demands on Saudi Arabia to help pay for

some of uh the further incursion to try

to solidify the straight of Raboo out of

Iran's reach. I mean, look, we were we

were coming into 2026 running a deficit

of around 6.3% of GDP, more or less. Um,

if you take off some of the tariff

revenue, you know, having to pay some of

that back, you know, that bumps up the

deficit to sort of 6.5 6.7%.

And then if you also overlay a $200

billion supplemental request that the

Pentagon has suggested that they will

will be asking Congress for, I mean,

then you're bumping up to 7% deficit.

So, I I do think the fiscal here is

going to be a constraint. I don't think

Congress I don't think the president

will have the votes in Congress to

approve that $200 billion supplemental.

Uh I think that they're going to I think

Congress will likely sloww walk this.

So, yes, I do think the fiscal is an

issue. I think part of the reason why

you've seen some of the you know the the

yield curve do what it has uh is because

of concerns about, you know, deficits

once again.

>> Let me just a final word if you can on

this relationship with the Europeans.

the president lashing out of France,

calling France very unhelpful, taking a

dig at the UK. Of course, the UK's

really dragged their feet on showing any

willingness to get involved in this war.

The Italians saying just moments ago,

there are no tensions with the US over

the military base use. Europe's very

divided on this issue right now. Does

Europe have one voice and what is this

relation look relationship look like 12

months out?

>> I mean, I think that is obviously a very

good question, an open question. I mean

if you just looked at the national

security strategy sort of the document

that the administration put out at the

end of last year sort of regarding

relationships around you know around the

world I mean they were very critical of

Europe um just in terms of you know from

lots of different dimensions but

particularly around the security

guarantee that Europe needs to be

spending more that they need to be you

know focused on their own security and

so obviously this issue has just even

cracked that that that issue even

farther open um so I think it you know

it remains to be seen. Of course, this

is, you know, unconventional and

somewhat unprecedented that the US and

Europe, you know, our strongest ally,

uh, you know, is having this, you know,

sort of falling out.

>> And the far-left Spanish government

isn't exactly helping on that front

either.

>> Well,

>> I left them out of it.

>> They That's a whole other ball of wax

that I think will be dealt with at

another time.

>> Stay with us. More Bloomberg

surveillance coming up after this.

An individual who just met with a number

of the US trade partners at a WTO

meeting in Cameroon is Ambassador

Jameson Greer, the United States trade

representative. Ambassador Greer, good

morning and thank you so much for

joining me.

>> Good morning. Great to be here.

>> So, you just got back from meeting with

a number of trade partners and at the

moment global trade is upended by what's

going on in the street of Hermoose. Did

you have an update to give American

trading partners about the flow of trade

through that critical waterway?

>> Well, right now I think the thing to

understand is that the United States is

generally insulated from a lot of the

supply chain effects when it comes to uh

you know direct uh commodities and

things like that. For a lot of that uh

we have domestic sourcing, we have

sourcing from our partners to the north

and south of us and other places. But

obviously we're aware uh that this has

an impact in other in other countries

particularly in Asia. uh we know that

their supplies are tight uh and so we're

watching that really closely. When I was

meeting with all of them, this was not a

particularly high on their agenda of

things to discuss with me because we

were meeting for other reasons, but

we're we're monitoring the situation

given that uh the the supplies of

commodities coming out of the out of the

Gulf can affect our trading partners

long ways

>> and it's not just crude. It's liqufied

petroleum gas which you need especially

in countries like India to cook. It's

fertilizer. Do you have a sense of a

timeline? Well, you know, first of all,

any kind of operation, you're focused on

objectives and you don't want to set

artificial timelines. Uh, when I hear

from the Secretary of State or the

Secretary of Defense, they talk about

uh, you know, operations in terms of

weeks. We hope that's the case. Uh, the

Trump administration has made a lot of

headway in its objectives in Iran in

terms of destroying ballistic missiles,

destroying the navy, and making progress

to make sure that they don't obtain a

nuclear weapon.

>> You met on the sidelines with your

Chinese counterpart. China buys the lion

share of Iranian crude. We have seen

Chinese vessels given safe passage

through the strait. Did this become a

focal point of that conversation?

>> It did not. When I met with uh my

counterpart, Minister Wong, the Ministry

of Commerce Minister, this did not come

up. We were focused on preparing for the

leaders meeting which will occur in

miday. Uh we were talking about the WTO

itself and the future of it or

potentially lack thereof as the case may

be. And so

>> lack thereof. you thinking about getting

out?

>> Well, I wouldn't say that. I would just

say that the ability of the World Trade

Organization to meet the needs of the

moment, addressing structural

imbalances, uh currency issues, uh you

know, huge export-driven surpluses by

other countries. The WTO has never been

able to address those things and it

won't be going forward. It can barely

address issues on its current agenda.

>> So, potentially you want a revamp of the

WTO. Is that what you're calling for?

>> I will tell you that we have called for

reform. The Trump administration has put

in many proposals, concrete proposals

about reform, about how to graduate

countries uh to take on more obligations

as they become more developed. Uh we've

talked about making sure that uh

countries can adjust their tariff

schedules to account for national core

interests and we put forward a reform

plan together with a bunch of trading

partners at a recent meeting in Cameroon

and there was near consensus on this. uh

countries like Brazil and Turkey

eventually oppose the closing package

which is unfortunate but it's also kind

of exhibit A of how the WTO is unable to

address these core challenges.

>> Back to the straight in your

conversation with your Chinese

counterpart. The president has been

pretty direct to European allies. If you

want the straight to open, you should

also help us send vessels, send a mind

sweeper, send your navy. If China is the

one that's benefiting the most in terms

of they're the ones that for years have

been supporting this brutal regime,

should they also not be on the hook to

reopen the street?

>> Well, listen, this is a decision for

China and and I'll obviously let the

president and secretary of state and

secretary of defense decide how they're

going to line with other countries in

reacting to to the straight of Hormuz

closing. Again, it affects these other

countries much more than it affects us.

Other countries have been working with

Iran to figure out arrangements to get

out oil, gas, fertilizer, and all these

other things. But it is clearly in the

interest of the world community to make

sure not only to make sure that the

strait is open, uh, but to make sure

that Iran doesn't get a nuclear weapon,

Iran doesn't empower its terror proxies

in the region. The world would be much

safer if the world was aligned on taking

care of the Iran issue. As you prepare

for this trip, there's a lot of

reporting that China, like Russia, is

helping Iran, even when it comes to not

just supply chains, but targeting US

troops. Is this going to be on the

agenda when the president meets? Is this

even potentially a reason why the trip

could maybe get postponed?

>> In past meetings between the presidents,

they've always talked about conflicts

and hotspots. Uh, in the past, they've

talked about Ukraine and Russia. They've

talked about Iran. I assume that they'll

talk about these things again. Uh, with

respect to your question, is there going

to be a delay in the meeting? I haven't

heard talk about that, neither

internally. I didn't hear that from my

Chinese counterpart when I talked to him

last week.

>> When it comes to the tariffs, right now

they're section 301 tariffs that you're

looking into when it comes to China. And

we've seen China actually have their own

announcement that they're going to

investigate US companies. This tit

fortat we might see in the trade between

Beijing and Washington back to where we

were almost what it feels like a year

ago. Do you think that's going to hinder

the US from getting back to the 20%

level they were at before AIPA was

struck down?

>> I don't think so. Uh when you look back

to the Busousan agreements, the

agreements we achieved with the Chinese

last year, we were seeking stability. Uh

we were seeking to see, you know,

achieve a level of, you know, tariff

application on one side and a flow of

rare earth minerals and and things from

the other side. Both sides want

stability. Both sides want to see

continuity. The Chinese know that the

United States is trying to control for

our, you know, giant trade deficit we've

had with China for a long time, which

went down by 30% last year, by the way.

So, I don't think it's going

>> right. But China's imports to other

countries into the United

States. Don't you have an issue with

trans shipment at the moment?

>> So, there's there's always been an issue

with trans shipment, but when you look

at our shipments from third countries

outside of China since April, right,

since liberation day, that that deficit

has gone down by 17%. So while there may

be some trans shshipment, overall our

trade deficit is going down. It's going

down with China. It's going down with

the rest of the world. It's going

exactly the right produ uh direction. At

the same time, wages are going up in

America. Productivity is going up.

>> Do you think you're going to get to the

20% level?

>> Well, I can't prejudge the

investigations right at section 301. We

have to go through the legal process. We

have to collect information. It's quite

public. It's quite transparent. Uh you

know, we know what the nature of the

deal is that we struck with the Chinese.

Uh so, so we will see. All I know is

that the president for sure is going to

keep protecting our economy. He's going

to protect our producers so we can

continue to have increased production in

the US, increased wages here.

>> If China plays hard bowl though, not

just with their own investigations, but

potentially bringing rare earths back

into the foray. I know there they have

basically till October there's a deal on

the table. Potentially then would you

look to maybe decrease the tariff level?

>> Well, you know, from our perspective,

we're looking for stability. We're

trying to achieve we're trying to get

the trade deficit reduced. We're trying

to increase manufacturing in the United

States and we're trying to increase real

wages and all of that is happening. So

we don't see a need to change our

policy. The Chinese want stability. We

want stability. I actually see a

positive agenda with China going forward

where we learn to manage our trade with

each other where we pick the kinds of

things we want to be selling to each

other. things that are mostly

nonsensitive to avoid some of the

national security elements that prove

challenging in negotiations. I I I see

stability with China over the next year.

>> When it comes to this extension on rare

earths, are you going to need one in

October or will you think the United

States is in a place where we don't need

an extension?

>> Well, we've we've made a lot of

progress. We have a few months. So, I

think we'll assess that down the road.

Uh you know, we have Project Vault where

we're stockpiling a lot of critical

minerals and rare earths. We have new

projects in the United States to mine,

process, and manufacture rare earths,

including permanent magnets that that we

need for different motors. We're working

with our counterparts and our trading

partners, uh, Australia, the EU, Japan,

Mexico, to find projects we can do

together to increase supply chain

security.

>> How much will rare earths be on the

table of this discussion with the

president in Xi Jinping in May?

>> So, when we met in Paris with our

Chinese counterparts a couple of weeks

ago, we talked about rare earths. Uh,

the process with the Chinese is working

fairly well. There are a few things here

and there where we highlighted that we

didn't feel like we were getting rare

earths in a timely fashion and we

highlighted that to our partners. They

took note of that and have it under

consideration. So the presidents will

talk about it if they need to. Our hope

and expectation is that we're able to

manage a lot of it between now and then

at the staff level.

>> Do you think you're going to have to

meet your counterparts again before the

big leader meeting in Beijing?

>> I don't think we're going to need to do

that. uh particularly when we were in

Paris, we reached general agreement on

the types of outcomes we want for the

leaders meeting and right now our

deputies and our staff are commun are in

regular communication to try to land all

those uh outcomes.

>> Can you give us any sense of what the

main deliverables are going to be in

Beijing?

>> I think that one of them uh and people

there's been a little bit of coverage on

this. We've been talking about a board

of trade, a USChina board of trade,

which really will be a mechanism to help

manage trade over the past 10 years or

so as the United States has tried to

eliminate its trade deficit with China,

figure out its export control situation.

If we can formalize the mechanism a

little bit to make sure that we are we

can agree on things we are selling to

each other for the US, we want to be

selling uh Boeings, uh we want to be

selling medical devices,

pharmaceuticals, a products, things like

that. you know, the Chinese want to be

selling things to us and we're willing

to buy things like, you know, low tech

consumer goods and and things like that,

certain commodities that maybe the

Chinese have that we don't. And so

coming, you know, establishing that type

of mechanism at the leaders meeting and

then going through a process of figuring

out how to optimize trade with each

other, that's going to be a big

deliverable.

>> Stay with us. More Bloomberg

surveillance coming up after this.

crude this morning holding on to triple

digits following reports the US could

look to wind down hostilities in the

Middle East. Vikasdia of Mcquaryy

writing the market is still expecting

President Trump to soon declare victory

but noting should the war continue until

the end of June crude could reach $200 a

barrel. Versus we've got a lot to talk

about buddy. So let's take it from the

stop. I imag from the top I imagine

you've asked been asked this question

already this morning. the story on the

Wall Street Journal when I ask you what

would happen let's say this is right the

president pulls back ends the campaign

calls it successful mission complete but

then leaves the straight of largely

closed for everyone else to figure out

what would it mean for this market

>> that situation had obviously you know

we're asking about it we're talking

about it this morning the odds of that

are rising that situation would uh take

some of the risk premium out of the

market but it wouldn't fix the physical

challenge Right. The the physical market

is uh already too tight and we think

it'll just keep getting tighter unless

the straight reopens with a US

declaration that you know the war is

over. uh without those two going

together um you will start running

through SPRS and other mitigation right

so that um will we think just continue

to put upward pressure but it may not be

exactly what it you know uh initially

looks like that the the the real

challenge may be on refining margins

>> and you know we've already had record

refining margins but we it may still be

cheap right now

>> can I ask you about how big the cushion

is at the moment moment. We spoke to

sock gen and Michael Hey in the previous

hour and he said the final vessel

carrying jet fuel into the UK is going

to get there in 48 hours. He was in the

UK was talking about that market

specifically, but we're seeing other

problems elsewhere.

>> Given that you've got visibility on

this, you can see the tank is literally

moving. You can see what's going to

arrive and what's not going to arrive

over the next several weeks.

>> How big is the cushion right now? When

do the shortages start to turn up in

some of these bigger markets?

Um he he's correct. You know, a lot of

the refined products going into Europe

um the the last cargos will be arriving

in the next couple of days. Uh globally

for crude oil, a lot of the last cargos

that left before the conflict going to

Asia will be arriving in the next really

um 7 to 10 days. So after that, you will

have to start drawing down on uh stocks

that are both onshore and offshore. That

is a decent cushion though. It's it's

it's um I think you can handle that for

another month. OPEC does have a couple

hundred million barrels that were

outside of the Middle East available for

this kind of situation. They're using

that already and that's that's going to

help as well. And then the SPRs around

the world will start to uh be available.

So all of these mitigation items will be

helpful, but they're not enough. you

know, by our balances, you still need

something on the order of four to five

million a day of run cuts in the

refining sector to rebalance the oil

market. But, but if you do that, you're

going to end up even shorter and shorter

on those very fuels. Like you mentioned,

jet fuel uh being one of the big ones.

>> How quickly could some of that get

restocked? Right. You said that if we

wait for a month, we might work through

the ongoing stores that are available in

some of these regions. What about you

know 3 weeks if let's say the conflict

ends and the street of Vermuse opens up

how fast could production get back into

tankers get back over to these places?

Uh the production that's shut in right

now which we think is around 12 million

barrels a day will be able to come back

quickly. the geology and the logistics

in the Middle East. Uh you know,

anything that's not damaged and mostly

it's not on the production side will be

able to come back and really within a

couple weeks things should start to

normalize. Um there is a lot of oil uh

on tankers right now that could be made

available. The minute they can transit

or muse, they'll do that. So you'll get

a nice surge of resupply, but you still

have to cover the transit time, right?

That's still four to six weeks depending

on where. So uh the the the availability

of those cargos for refiners may be you

you could think about it as from uh the

time transit is okay. It could take four

to six more weeks for those barrels to

actually start showing. Um on the

refining side however we think it could

be tougher because we don't know the

damage right now. Uh we don't even know

how many uh barrels a day are out. We

know it's a lot. you know, we think it's

um

the run cuts from managing storage is

probably about 3 million a day globally,

mostly in Asia, and then the damages are

probably another 3 to four million

that's out largely in the Middle East.

Those could take um quite a bit more

time to get back up and running and then

deliver those finished fuels versus

crude.

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