Wall Street Week — America’s Relationship Woes, Battery Pivot, Farmers’ Fed Warning

[00:00:00] Speaker 1: This is Wall Street week. I'm David Weston bringing you stories of capitalism. Krista Freeland served as Canada's deputy prime minister, foreign minister, and trade minister. In her new book, Unreliable Boyfriend, she tells why she thinks the United States has gone in the wrong direction in its economic relations with the rest of the world. And she sits down with former Treasury Secretary Janet Yellen to lay out their shared hopes for a world that has moved beyond peak globalization. Plus, the U.S. pivots from EVs to BESS, that's Battery Energy Storage Systems, in the search for more reliable electricity to power all those data centers. And Chicago Fed President Austin Goolsbee takes us to the farmland of Illinois for a view of the economy from his district's farmers. But we start here in India, where Bloomberg convened the new economy forum this week, bringing together leaders from government, business, and the markets to share views on an increasingly uncertain world. The forum began at the top with the leader of the most populous country in the world and the fastest growing large economy, India's prime minister Narendra Modi, who warned about the risks of countries using economic engines against one another. [00:01:30] Narendra Modi: Things that connected the world at one time are today being weaponized, be it supply chains or energy, be it minerals or payments or technology, they are all becoming tools for coercion and for exerting pressure. We are all seeing when and where the roots created by globalization over the last few decades became choke points. In the midst of all this, artificial intelligence is changing the way we work in every sector. In several countries, aging-related challenges are also increasing at a fast pace. In this situation, one of the biggest questions facing the world today is that of trust, of confidence. The confidence that supplies will continue uninterrupted in times of need. The confidence that promises made will also be kept. The confidence that partner countries will stand by us in times of need. [00:02:58] Speaker 1: Speaking on stage in Delhi, former U.S. Commerce Secretary Gina Raimondo echoed Prime Minister Modi's concerns about geopolitical conflicts and their effects on the global economy. [00:03:08] Gina Raimondo: We are in the middle of a number of conflicts at the moment that are urgent and I would argue need to be urgently resolved. You know, the conflict in Iran is urgent with challenges reverberating around the world, driving up energy prices, hurting supply chains. So that's urgent. Ukraine, urgent. You know, so these are things that require immediate attention and hopefully resolution. [00:03:38] Speaker 1: PAUL SOLMAN: But, given the uncertainties, Raimondo underscored the need for companies to adapt to whatever they face. [00:03:45] Gina Raimondo: RAIMONDO CHEN: I think it's also important for businesses, for all of us, but for businesses to innovate, not just in the technology, but be open-minded to new ways of doing business. Specifically, I have seen companies, they want to do more manufacturing in the U.S. to avoid the tariff. They want to have more scale, for obvious reasons. So I'm even seeing traditional competitors work together to, in some ways, combine their supply chains. Which, I don't know, even five years ago, you would think that's a crazy thing to do. Why would we want to do that? Our supply chains or ours is a competitive advantage. But now they're saying it's more scale, stronger, tariff-resistant. And so I think you're starting to see, to adapt to some of this craziness and unpredictability, you're seeing even competitors figure out ways to work together in areas that will make them both stronger. [00:04:46] Speaker 1: PAUL SOLMAN: For investors like Rob Goldstein, chief operating officer of BlackRock, the answer lies in planning not for one set of contingencies, but for a range of possible outcomes. [00:04:56] Speaker 4: PAUL SOLMAN: If you're managing a portfolio, you no longer could say there's a base case, and then I'll be plus or minus relative to the base case. PAUL SOLMAN: We're living in a world that's being driven by geopolitical fragmentation, by demographics, by technology, by the way the capital markets are changing, such that the aggregate of this is a world that's much more about discrete outcomes. And how do you think through what I would do to manage my portfolio across each of those discrete outcomes? PAUL SOLMAN: And if you think about it through a portfolio lens, many asset owners, in fact, you could argue a standard in terms of how one would approach a portfolio, would be to have a strategic asset allocation that they would review every few years. And that asset allocation would be about individual asset classes. And what's clear is that in today's world, the themes that we're talking about, particularly themes like AI, what's happening with regard to the different wars going on, these themes are more important than individual asset classes in portfolios. And these themes don't wait for your next, you know, every three-year meeting that you're going to have. So you just need to continually adapt to make sure that you're keeping up with the pace that the world is changing. And that pace is likely going to continue to get faster and never go back to what it was. [00:06:30] Speaker 1: PAUL SOLMAN: The forum's host country of India seeks to attract capital and companies buffeted by the winds of change in part by streamlining what it takes to do business here, according to its finance minister, [00:06:42] Speaker 5: Noomala Sitaraman. Most of the sectors in which we were drawing capital have been freed of very many regulations which had prevailed earlier. So the laws were made simpler, regulations were made transparent and consultative. And even more importantly, I think the human resource necessary for these sort of scaling up activities have been strengthened. And finally, Indian economy becoming digitized has really opened up the markets. So India and its middle class with its purchasing power has provided the confidence that you can manufacture here for the domestic market and manufacture here for exporting as well. [00:07:29] Speaker 1: PAUL SOLMAN: Blackstone is one of those attracted to India in part because of the reforms it's undertaken. And its president and COO, John Gray, helped kick off the forum in Delhi. [00:07:39] Speaker 6: JOHN GRAY: We've seen an enormous amount of progress in India, no question about it, because the government has done all sorts of things to change the rules for capital markets. We've actually moved multiple companies to India to list. Can you imagine that 20 years ago, that the liquidity in the Indian market is probably second to the United States today because of what's happened here. Obviously, the physical infrastructure has improved, the ability to get dispute resolution. All of that has improved. And the government has been welcoming foreign investment. 20 years ago, most industries, we couldn't even invest it. And what's happened as a result of that is a real acceleration in growth. So it's a very positive sign for this place. [00:08:24] Speaker 1: PAUL SOLMAN: Whether it was Gray or Raimondo, those gathering at the New Economy Forum this week agreed that the most consequential change of all is coming from technology, and particularly from AI. [00:08:36] Speaker 6: JOHN GRAY: I think the biggest thing, when we look back in history, when we look back 10, 20 years from now, will be the technology. Because I think that's the thing that's going to define this era, that we're moving from a place like we did in the U.S. from 1870 to 1900 with the industrial revolution, that when you bring this super intelligence to the entire world, that it's going to profoundly change how we live, how consumers live, how businesses are impacted, and how governments oversee societies. And to me, that's the big thing. That's the biggest challenge. These other things, yes, are making business more uncertain at times. But I think we'll find a way to plow through that. That's what we'll talk about, is really where things are changing. [00:09:24] Gina Raimondo: TAMARA KEITH: Look, it's going to be transformative. No matter what estimates you look at, the productivity gains are astounding. And that ought to yield impressive GDP growth and growth rate. The U.S. economy has grown net-net for 100 years at 2% a year-ish, you know, GDP growth. And you can, even for our economy, you know, hugely advanced economy, you can see AI changing that meaningfully, and that's exciting. What could, I think a lot about, okay, what are the conditions for that to happen? And what are the policies that government has to have in place so that we can all achieve the upside of AI? Because I think regulations done well are a public good, actually. Regulations done well help everybody to be more productive. You know, I've already talked a lot about safety, so I'll just leave it there. But I mean, if we don't get a hold of, if Congress doesn't act to say, these are the standards of safety. Just like we do for cyber, just like we do for really most products. You know, Americans deserve to know the products they use are safe. But what does safety mean? We need to define the safety standards and then test these models pre-deployment and make sure they, you know, hew to the safety standard. That isn't happening. So if models can be let out into the world without, and by the way, then there have to be punishments, right? We need a whole structure for the standards, pre-deployment testing, inspection, fines or criminal penalties. So that has to happen quickly. And I fear that it's not, it won't happen until we have a massive cyber incident or some other safety incident. I think it's important to have an AI economy strategy, which is to say, it's not enough to invest in AI and achieve the productivity enhancements. But how will we do that in a way that provides broad prosperity, not concentrated prosperity? How will we do that in a way that makes sure all workers have an opportunity, not just a few? Next, we focus on one of the issues addressed in [00:11:44] Speaker 1: Delhi this week, the move away from peak globalization. It's the subject of a new book from our contributor, Chrystia Freeland, "Unreliable Boyfriend." This is a story about Rocky Times. That is one way to describe what President Trump's aggressive trade policies have meant for U.S. relations with some of its closest allies around the world. Our special contributor, Chrystia Freeland, saw it firsthand when she served as the Canadian trade minister responsible for negotiating the USMCA, and then as her country's finance minister and deputy prime minister. She tells the story of how she came to be at the center of Canada's economic policies in her new book, "Unreliable Boyfriend," published this week. You have your new book out called "Unreliable Boyfriend." Let's start with the title. [00:12:37] Speaker 7: It is an intentionally fun, slightly cheeky title, because I think it's important that when we're talking about the global economy, we don't act as if only the high priests of, you know, business and [00:12:53] Speaker 1: academia are allowed to talk about it. And it is important, given your positions in the government of Canada and your relations with the United States on trade and on other things, a fair amount of the book is about things that you like about the United States, that Canada likes about the United States. [00:13:10] Speaker 7: Yeah, thank you for noticing that, David. You know, President Trump has been pretty clear how he feels about me. He said I was toxic. He said I was a nasty woman. He called me a whack. At one moment during the negotiations around the trade deal that we currently have between Canada and the United States. He actually announced at a meeting that he didn't like their negotiator very much, that was me, and said she doesn't like the United States. That's not true, David. I actually am a person who has a huge admiration for the United States and so many of the great things about the United States. And I also have a real respect for the partnership that the US built in the post-war period with its allies, very much including Canada. Having said that, I think the way that the United States is treating its allies, very much including Canada today, is absolutely reprehensible. And I think that we Canadians and other friends of America do our American friends and neighbors no favors if we try to sugarcoat that. [00:14:25] Speaker 1: You come from a place of deep, longstanding belief in free trade. And you talk about that in your book. At the same time, you also talk about in your book some movement on your part there, that it's not just rampant. It's not peak free trade anymore. What changed? A big part of the problem was China. And [00:14:46] Speaker 7: I think China's admission to the WTO in 2001 was well-intentioned by everyone, but incredibly naive. It overlooked the fact that China is an authoritarian communist regime that practices mercantilism very, very effectively and seeks to force Western countries out of some critical industries very intentionally. [00:15:11] Speaker 1: You have told us in your book what you think doesn't work, particularly with US relations with allies. Let me flip it around and say, as you look out there, what does work or what could work? [00:15:23] Speaker 7: So I actually, David, am a real optimist. I think it's really important for us not to be lazy and fatalistic and say, just because things have gone wrong and are going wrong now, we can never create something better. And I really do believe that there is an opportunity now to rebuild the Western Alliance and rebuilding the Western Alliance, I think requires absolutely doubling down on the security partnerships, but it also really means building even stronger economic connections between the friends. Something, an idea that actually someone appointed by President Trump first came up with that Janet Yellen popularized, the idea of friend shoring. So build your closest economic partnerships with countries that share your values and are your security allies. Do trade with other countries, but be more careful and don't become dependent on them. [00:16:31] Speaker 1: That idea of friend shoring popularized by Treasury Secretary Yellen is something she collaborated on with Chrystia Freeland during their time in office. And the publishing of Freeland's book gave the occasion for the two colleagues to reunite on their common views about international economic relations. [00:16:49] Speaker 7: Janet Yellen: So Janet, you were not the person who first invented the idea of friend shoring, but you are the person who really popularized the idea. And you did this at a very difficult moment for the world. Can you remind us what that idea was and what the inspiration was for proposing this? [00:17:14] Speaker 8: Janet Yellen: Friend shoring was intended as a response to what had happened during COVID, where we found ourselves short of critical supplies like PPE, Russia's invasion of Ukraine. We saw how devastating it had been for Europe, particularly Germany, to be so dependent on Russian natural gas and oil. Russia was weaponizing this. And we saw that trade could be weaponized and was potentially dangerous in that way to trade with countries that really didn't share your values. But those were two of the motives for inventing friend shoring, because what we were realizing at the time was that globalization had proceeded to a dangerous point where our supply chains were no longer resilient. And perhaps even worse, we had become very dependent, rare earths I think would be the best example of this, on supplies from countries that were not our friends, did not share our values, and were willing to weaponize our independence. [00:18:41] Speaker 7: Janet Yellen: Today, speaking as a Canadian, we're experiencing an approach where we see the White House behave with incredible friendliness towards China, a state dinner of great opulence and grandeur. We see the White House putting its thumb on the scale on the Russian side when it comes to the full-scale invasion of Ukraine. And this makes Canadians feel angry but also betrayed. We see America's closest allies be hit with unjustified and illegal tariffs that violate the trade agreement we have in place with the United States. So you proposed friend shoring. I'm seeing almost adversary shoring happening right now. Janet Yellen: How do you feel about this sort of absolute reversal? [00:19:37] Speaker 8: Janet Yellen: I think it's appalling. And I understand exactly why you feel betrayed by the United States and are so angry about it and believe that it's important for Canada Janet Yellen: and other countries not to accept this lying down and to retaliate. Janet Yellen: And I believe that both what our president has done in terms of undermining or even weaponizing our alliances, Janet Yellen: both on the security side and on the economic side, some of it has already been found to be illegal. Janet Yellen: And it certainly, I believe, runs against America's own interests. Janet Yellen: We have lost a great deal from the tariffs and especially at a time Janet Yellen: when affordability is an overriding concern of Americans. They feel they can't make ends meet. The tariffs have only made that worse. [00:20:49] Speaker 7: Janet Yellen: We do need to trade with our allies, most notably a great piece by Jamie Dimon about that. Janet Yellen: So do you think maybe the tide is turning and do you think maybe we can rebuild that security and trade alliance among the friends? [00:21:07] Speaker 8: Janet Yellen: Well, I think the answer is yes. And I was very heartened to see Jamie Dimon. As you noted, he wrote an op-ed that was published in The Wall Street Journal, Janet Yellen: arguing that the way forward for the United States is to rebuild our both our security alliances and our economic alliances. And he noted that many of the pieces that we need to do that are already in place. But broadly speaking, what you see in his piece are the elements of what Janet Yellen: we have endorsed with the idea of friend-shoring. Strong alliances, both security and economic. Janet Yellen: An open trading system, but a system that recognizes that Janet Yellen: we were naive about trading with countries that don't share our values and Janet Yellen: that we need a better form of trade that's more secure among countries with similar values. Janet Yellen: And I'd say he also noted briefly that Americans who feel they've been harmed by trade Janet Yellen: are not wrong and that that issue needs to be addressed because we're not going to be able to Janet Yellen: accomplish much unless we, you know, broad people broadly working class people in our Janet Yellen: countries feel that the economic system is benefiting them. Janet Yellen: But I know, Christia, in your book, you argue that hope is a strategy Janet Yellen: and I agree with you. And my hope is that you are right and things are changing in the United States and that we will be able to go back to being good, reliable partners in both economic and security matters with Canada and our other friends. [00:23:21] Speaker 1: Janet Yellen: That was former Fed Chair and Treasury Secretary Janet Yellen in conversation with Christia Freeland about their time working together and the opinions that they share about U.S. economic policy. Coming up, the promise of renewable energy has been long delayed because of the lack of reliable, efficient ways of storing electricity for when it's needed. But it turns out that that may be about to change. This is a story about unintended consequences. President Trump has made no secret of his skepticism about government support for renewable energy. And up to now, the sector has been limited by the lack of good ways to store electricity for when the sun isn't shining or the wind isn't blowing. But it turns out that the Trump administration's efforts to cut back on electric vehicles may be just what's needed to make real advances on wind and solar. Our colleague Ed Ludlow got an inside look at how makers of small batteries for cars are pivoting to make much larger versions for homes, businesses and cities. [00:24:32] Speaker 9: Renewable energy, while an alternative to fossil fuels, has one major limitation. It runs on nature's schedule, not the power grids. Battery energy storage systems, or BESS, is helping to [00:24:46] Speaker 10: close that gap. There's a lot of great generation sources that are cheap and green. The challenge with [00:24:52] Speaker 11: them is they're not dispatchable. The most significant improvement to the reliability and utility of solar renewable energy has been battery storage. Otherwise, it's dawn to dusk, and then you're out of power. [00:25:05] Speaker 9: That flexibility is becoming more valuable as data centers, new factories, and spikes in electricity use increase the need for power that's available on demand. And even as the administration scales back support for wind and solar, batteries remain eligible for federal tax incentives, including an additional benefit for projects using US-made components. To get a first-hand look at where that domestic supply is coming from, we travelled to Lansing, Michigan, home to LG Energy Solutions' largest wholly-owned US battery cell plant currently in operation. This is a really massive facility. It's 2.8 million square feet, [00:25:43] Speaker 12: 226 acres on the site. It's a pretty large site, and it's purpose-built. Oh, is that important that it's purpose-built? It means, when you look at this site, we also can scale vertically as well as horizontally. [00:25:56] Speaker 9: At full output, Lansing's expected to reach more than 35 gigawatt hours of annual battery-making capacity for both electric vehicles and grid storage. This is just one of five cell facilities we have in [00:26:08] Speaker 10: North America. And through that, we're able to deliver a larger amount of ESS cells for the US than any other manufacturer. [00:26:15] Speaker 9: LG's experience manufacturing in the US has come at the perfect time, as Washington pushes the power sector to reduce its reliance on foreign equipment. In August, President Trump issued an executive order targeting reliance on foreign-made grid equipment, including battery storage, and pushing energy [00:26:34] Speaker 10: developers toward US-made alternatives. The government policy has really enabled the US industry to develop. [00:26:41] Speaker 9: Devin Wilson leads sales for LG Energy Solutions' North American grid-scale storage business. He said demand is pulling the market forward, but federal policy helped build the factories needed to meet that demand. How much is this sort of driven by, and the direction of travel dictated by, regulation? Like, is America pushing to have ESS? Yes, certainly. I think the government, both sides of the aisle, [00:27:07] Speaker 10: recognize that battery technology is a really vital technology for our country. And so there's been a lot of policies that have been put in place to try to make sure that we have a thriving battery industry here. And it's been really successful. What we've seen is through the signals placed by those policies, we've been able to see facilities like this come online and support this industry at a great time. [00:27:30] Speaker 13: Alison Weiss: We've seen a huge growth in battery storage over the past five years. The annual installations have gone from 1.2 gigawatts a year to 19 gigawatts last year, so that's a 16 [00:27:43] Speaker 9: times higher installation rate. Alison Weiss is the head of global energy storage at research firm Wood Mackenzie. She says installations are ramping up fast. [00:27:51] Speaker 13: Alison Weiss: We've seen this growth of storage accelerated, certainly with tax credits first paired with solar, and then for standalone storage projects as well under the Inflation Reduction Act. [00:28:03] Speaker 9: Alison Weiss: Weiss also says new sourcing rules are forcing developers to rebuild supply chains. As of 2025, the US still imported 59% of its lithium-ion batteries from China. [00:28:14] Speaker 13: Alison Weiss: The new restrictions for getting the investment tax credit for battery storage projects Alison Weiss: have made it so that companies need to rework their supply chains after they get through developing whatever they were able to save harbor by the end of last year. Alison Weiss: And so that's why we forecast that 26 and 27 will have a little bit less growth than they would have otherwise had. Alison Weiss: As we progress through the later 2020s and early 2030s, there'll be a lot of domestic supply available for those projects. And together with the tax credit Alison Weiss: Of 30% that you get and then the additional 10% domestic content bonus adder, they will cost comparably to what might have otherwise been procured from China, especially with the tariffs that Chinese systems are facing. [00:28:58] Speaker 9: Alison Weiss: Even as tax and trade policies lay the groundwork for growth tomorrow, policy changes forced a reckoning for American battery makers late last year. Alison Weiss: While Trump's one big, beautiful bill preserves some incentives, it ended federal electric vehicle credits in September of 2025. The result? EV sales fell and the demand outlook weakened, leaving manufacturers built for faster EV growth that would never show up. The answer? Not a write-off, but a pivot. [00:29:29] Speaker 10: Alison Weiss: So the EV industry was producing batteries at a very large scale, driving down cost. And what that enabled was the battery energy storage industry to go and take those similar or same cells, you know, same fundamental manufacturing process, but purpose-built for ESS, and go and apply it to that industry. [00:29:48] Speaker 9: Alison Weiss: Now, across the country, battery makers are shifting their focus from the garage to the grid. And even the automakers themselves are getting into the game. GM and Ford are now redirecting parts of their battery operations towards stationary storage, while Tesla expands its grid storage business. Lansing captures that shift. [00:30:07] Speaker 10: The reason the ESS industry is where it is, is partially because of the advancement of battery cell technology. And the reason battery cell technology is where it is, is because of the scale of EV. So what we have now is, we're producing both EV cells here, as well as ESS cells, all inside the same facility. [00:30:25] Speaker 9: Alison Weiss: EV and utility-scale batteries serve different applications. But as the director for operations for LG's Michigan plants, Anthony O'Donovan, points out, much of the machinery and workforce behind it can be shared. [00:30:37] Speaker 12: Anthony O'Donovan: For EV and ESS, we do the same process. So any part of this process, when we come through formation, is actually just the chemical reaction of the cell. So if it's for an EV and it's a power system, we do exactly the same process. We'd use different lines for different products, but the same process. Automotive standards are really very stringent. ESS standards are no different. The manufacturing process with which we use, we use exactly the same technology, exactly the same equipment, and exactly the same quality standards for the cell. [00:31:11] Speaker 9: That flexibility allows LG to serve both markets and to shift quickly from one to the other if the [00:31:16] Speaker 10: economics change. Anthony O'Donovan: If EV comes roaring back, are you going to go in and replace all the ESS with EV? And the answer in short is no. There's demand for both industries. So we're just going to find ways to expand our manufacturing base and offer more for both industries. [00:31:30] Speaker 9: After the cells are formed, tested, and graded, they leave Lansing to be assembled into complete systems, storing excess power from either a renewable source or the grid, and then sending that energy out when demand rises. This next step is where CEO and president of Qcells USA, Chris Hodrick, comes in, turning all these components into power facilities. [00:31:50] Speaker 11: Chris Hodrick: As you look out across this Atlas complex, there are two major components that the eye can see from very, very far away. One are the PV modules and one of the battery containers. Both of those are proudly 100% made in America. Earlier this year, Qcells signed a sizeable MSA, Master Service Agreement, with LG Energy to procure batteries from them. The prevailing and most important consideration was domestic manufacture. That was the number one driver for us to partner with LG. [00:32:23] Speaker 9: Chris Hodrick: Hodrick says the partnership was more practical than ideological, driven by tax incentives [00:32:28] Speaker 11: for made-in-American manufacturing. Chris Hodrick: This Atlas Energy Park is one of the largest combined solar and battery storage projects in the United States, where when it's complete in 2028, it'll produce over almost six gigawatt hours of battery storage and three gigawatts of solar production. Chris Hodrick: It's only possible because of the tax policy that incentivizes domestic manufacture, that makes this possible. The renewable projects you see coming online today are a byproduct, I think, where policy and legislation has gotten it right. The incentives, whether it be tax or related demand, what we're talking about, we're talking about development opportunities that encourage the domestic manufacturer of equipment, meaning we're on-shoring manufacturing. What we have found is the confidence that the market has in the risk management criteria, financial risk for investment, as far as performance risk by developers of these systems, the reliability, the confidence in the product themselves, and the ability to source locally and domestically and keep the supply chain open has been key. And that will continue to improve as the domestic manufacturing capability expands. Those incentives improve the economics, [00:33:49] Speaker 9: but they don't remove the bottlenecks. BESS can make renewables more dependable and the grid more flexible, but scaling up requires far more than manufacturing battery cells. Scaling is probably the biggest challenge [00:34:01] Speaker 10: we have because we have to scale at every level. The manufacturing has to scale. Our execution teams have to scale. It doesn't matter if you've manufactured the battery. If you can't get it to site, get it connected and get it running. It doesn't do anything, right? The greatest constraints to expanding battery [00:34:15] Speaker 11: technology and battery storage are probably twofold. One is availability of labor. The second is the permitting and interconnection process. Utilities are very, very specific about those windows of time. They plan years in advance of what that looks like. And when you miss those windows, it's significant. You know, financial penalties for being late, as well as you might have a shortfall in capacity for the grid and for the population supports. And when you have a permitting delay that drives a construction window into and beyond that interconnection window, that's where there's a problem. Even a battery cell [00:34:50] Speaker 9: manufactured in the US is not fully independent of foreign supply. Key materials and components remain more expensive to produce domestically, meaning much of the upstream supply chain still runs through China. [00:35:01] Speaker 13: I think the big challenge for the upstream supply chain for cells is not that we couldn't manufacture all of it here, but that we haven't made it economic to do so. We need those 40% tax credits on the cell side, in addition to all the tariffs that are on the Chinese side, to make those cells come to cost parity. So we would need similar supports for the upstream components for that picture to make sense for further investment. It's just much more expensive to do that kind of manufacturing in this country currently. And so there needs to be the incentive side to support it. Battery storage is helping solve renewable energy's [00:35:40] Speaker 9: timing problem while giving factories originally built for the EV boom a powerful second wind. But with policy that can change at the stroke of a pen, the question remains how long America's battery makers can rely on the support of government and what happens when that support or that government changes. [00:35:59] Speaker 1: Up next, how the economy looks from the farmlands of Illinois. We take a tour with Chicago Fed President Austin Goolsby. This is a story about the view from the ground. The U.S. economy is often measured in big numbers, but it has lived in communities across the country, in factories, on farms and in the small businesses where Americans earn their living. For the Federal Reserve, understanding that economy means getting out of Washington and listening to what people are seeing and experiencing in their own homes and jobs. Chicago Fed President Austin Goolsby took Bloomberg's Michael McKee to rural Illinois, where farmers say the forces shaping the broader economy are cropping up in their backyard. [00:36:48] Speaker 14: In the Federal Reserve's 7th District, harvest is underway for farmer Troy Uphoff. So this is a soybean field. [00:37:00] Speaker 15: Yeah, planted probably in mid-April. Harvest is the best time of year, because you truly get to see the fruits of the nature. [00:37:09] Speaker 14: Harvest is part of a family tradition stretching back nearly two centuries, giving him a long view of the good years, the bad ones, and everything in between. [00:37:19] Speaker 15: Farmers in general are always optimistic, but have they had a rough two years? Absolutely. [00:37:24] Speaker 14: Well, what's happened to the crop prices? [00:37:26] Speaker 15: So the crop prices are lower mainly due to tariffs. Anytime you look at a tariff, a tariff is essentially a tax on a product. And it lowers our price because obviously we have that competition coming in and we have the lack of our demand, because whenever you put a tariff on one country, they're definitely going to put a tariff on one of your products. So the American farmer has been hit very hard by tariffs. [00:37:50] Speaker 14: And with crop prices low, every dollar it takes to grow them matters. [00:37:56] Speaker 15: Hear that noise? That is 10 gallon per hour at $6 a gallon, right there. Farmers are struggling in the rural economy right now. We've been hit very hard by inflation through the price of diesel fuel. Diesel fuel right now is roughly 80 percent higher than it was one year ago. The combination of diesel fuel prices, the effects of inflation on our seed fertilizer, and that goes back to your tariff question. So you go back to the inflationary core and our prices have simply went up faster than what our commodity prices have. So it's put the American farmer into a place where they don't have a lot of profitability for the last couple of years. [00:38:40] Speaker 14: Those are the kind of numbers Troy Uphoff wants Chicago Fed President Austin Goolsbee to hear. Not from a spreadsheet, but from the farm itself. [00:38:49] Speaker 15: Whenever President Goolsbee comes down, Austin will come in town with a thousand foot view, and I want to give him a boots on the ground, hands in the soil type perspective. I'd like to talk to him about how lower commodity prices have affected the balance sheets of growers. I want to share with him the fact that many growers out here have been struggling economically, and I want that boots on the ground. Mark Dixon. Mark. [00:39:14] Speaker 14: That is, in part, the point of the Federal Reserve's regional system. The 12 reserve banks were created to give different parts of the country a voice in a monetary policy that ultimately applies to everyone. And despite the name, the Chicago Fed covers far more than the city itself, stretching across a broad swath of the Midwest. [00:39:32] Speaker 16: The 7th District is really the heart of the Midwest: Illinois, Iowa, Michigan, Indiana, Wisconsin. [00:39:42] Speaker 14: These conversations give the regional Fed President something national numbers can't always provide. When you sit in the room with the rest of the committee members and you're listening to everybody's presentation from all around the country, does that sometimes lead your thinking or change your [00:39:59] Speaker 16: thinking? It can lead or change your thinking. And when we're out talking to people, they can identify trends before they show up in the data. And that's very important. It's not as though the reserve banks are going to the FOMC meeting and all they're doing is representing what their own parochial district wants. But talking to those local people is really quite fundamental in developing a worldview. And especially, I always say that one of the hardest things that the central bank ever does is get the timing right at moments of transition. And part of that is because the data are lagged. And part of that is because monetary policy takes a year to work. That job is made easier by being in direct contact with consumers, with business people out in the regions. [00:40:57] Speaker 14: You know, there's a lot of times when you hear what they were saying today. There was a lot of talk about diesel prices, a lot of talk about fertilizer prices and other commodities going up. Things that the Fed rate move won't affect one way or another. Yeah, it can't affect. [00:41:11] Speaker 16: How do you fold that into what you think you're going to do at the next meeting? Partly, it's get used to disappointment. You know, it's always the nightmare of the central bank if you're facing stagflationary shocks because there's not an obvious playbook. The playbook for overheating demand is straightforward. You raise the interest rate to try to reduce the demand back so that it matches supply. If you start to see inflation developing because of something happening on the supply side, now you're in the business of figuring out how long is this going to last. And historically, small to medium size supply shocks went away on their own quicker than monetary policy affects the economy. You know, it takes a year plus for monetary policy to work its way through. So if the supply shock is going to last for three months or six months, it doesn't really make sense for the Fed to try to respond. Increasingly, I've been a little concerned that these bigger supply shocks that we've been facing the last five or six years, starting with COVID supply disruption, then big tariffs, then big oil price, they've had each one of them a pretty substantially more persistent impact on inflation than at least the first estimate thought it was going to be. If it goes too long, if there are going to be permanent inflation shocks coming from these supply things, I do think even though the Fed can't pump oil, it can't ignore permanent inflation shocks that threaten to drive inflation above the target. We've already been more than five years above the 2% inflation target. We have to take that seriously. So if they're persistent supply shocks, I do think the Fed has no choice but to at least try to address and reduce the inflation. It doesn't have to be exactly the same magnitude or of the same form that you would go after an overheated demand, but it can't be nothing. At the Fed's Jackson Hole gathering, [00:43:29] Speaker 14: Chair Kevin Warsh insisted that the central bank is still committed to getting inflation back to 2%. But its main tool for doing that is raising short-term interest rates, which can make borrowing more expensive for farmers already facing high costs. For President Goolsbee, that's one reason for hearing directly from those farmers. You didn't just listen today, you also spoke, you delivered your message to the people here. There is one well-known critic of the Federal Reserve who has suggested that maybe Federal Reserve officials speak too much. What's the advantage there and do you disagree with that [00:44:06] Speaker 16: sentiment? I mean, I'm out here in the in the 7th District talking to business people all the time and I think that it's important for me as the representative out here to explain here's how I see the economy and here's what I'm hearing from you about what's happening in the economy. That demystification project, I think we could have used a little more demystification of what the who the Fed is and what the Fed does. Because then when you run into bumps in the road, fundamentally, if people don't know what the Fed does, we're back into this dynamic where they most people say they they're familiar with the Fed. They don't know what it does, but they think it's doing a bad job. I guess I disagree a little bit. If anybody's saying that the Reserve Banks not be out in their districts, I think that's a mistake. [00:45:06] Speaker 14: And what President Goolsbee heard in central Illinois was that the cost of doing business is rising. At the local grain elevator, the harvest tells a similar story. [00:45:16] Speaker 17: Grain prices are up right now. They've been down all year. Just in the last month, corn's gone from $4.50 to $5 a bushel. So that's helped out. That offsets some of the lower yield, but the expenses are so high that it's still going to be a tight year. All right. Thank you. [00:45:34] Speaker 14: Those are the kinds of signals Goolsbee takes back with him. Not instead of the national data, [00:45:39] Speaker 16: but alongside it. We come to a meeting here today and I'm trying to gauge, do they see weakness coming down the pipe or do they see strength? And what you heard across the board from multiple sectors was nothing about demand drying up, all about cost pressures, costs of fertilizer, the cost of diesel, the cost of shipping, the cost of all of these things. That adds texture to this question of, is what's happening problems for just the inflation side of the mandate or are we facing stagflationary direction shocks? [00:46:25] Speaker 14: And for Troy Uphoff, that means the view from his fields becomes one small piece of a much bigger [00:46:30] Speaker 15: economic picture. As a farm, we've been in this area since 1842 and we have always been faced with challenges. We were faced with the great depression. We've been faced with droughts in 1936, 54, 83, 88, 2012. We've had hyperinflation during the early 1980s. So we've always faced these adversities head on and yet every year we improve by technology and we improve our farms and we continue that optimism of growing food for the world. It's a privilege. I have the privilege of growing food for the world. [00:47:06] Speaker 14: A privilege and a perspective, giving us another window into the world, one not just of numbers but of faces, not just of prices but of people. [00:47:20] Speaker 1: Next, former Secretary Yellen on how peak globalization lost its appeal. Chrystia Freeland served as Canada's finance minister for nearly all of the time Janet Yellen was her counterpart as the U.S. Treasury Secretary. They shared many of the same views on international economic issues, including on what went wrong with pure globalization and what Western countries should do together to pursue new policies. [00:47:51] Speaker 7: So, Janet, I'm really glad that you have reminded us that the criticism of peak globalization did not only come from the populist right. It actually started on the left. And I think in the Trump era, sometimes we've forgotten that. Do you think that friend-shoring was, is a version of globalization that the left could get comfortable with? Were you getting traction on that? [00:48:23] Speaker 8: I think on the left, there were concerns about things like environmental standards, labor standards, that it wasn't right that we should have to compete against countries that didn't share our humanistic values and didn't care about protection of the environment or labor standards in the way that we did. I remember the protests, the WTO protests in Seattle. And so I think the idea also was that friend-shoring among countries, especially with similar progressive concerns that wanted to make sure workers were fairly treated, that didn't want to see environmental degradation, that those of us who shared those concerns, that friend-shoring was a way to address that. How do you remember it, Chrystia? [00:49:32] Speaker 7: I remember it exactly that way. And I absolutely agree. I mean, I think that you have hit the top concerns that the left had with global trade. You know, there were the values issues, the issues about environment, about human rights. And then there was the concern about, you know, because we have unions, because we want good paying jobs, because we want to have environmental standards, because we want to have labor standards, that if we have peak globalization, if we have peak global trade, our workers are constantly going to get undercut. And they are going to either lose their jobs or be told by their employers, unless you accept lower standards and lower wages, we're just going to offshore the work. I think that was the concern of the left. And my own view is that friend-shoring addresses that [00:50:30] Speaker 8: really, meaningfully. I agree with you. I think that you and I very much agreed about this. I think we saw things very much the same way. And let me just say, I very much appreciate the collaboration that we had trying to work toward this in the G7 and also in Five Eyes, where we discussed the importance of working together to make sure that China, for example, couldn't pick off one country that was concerned with some aspect of their behavior, whether it was Australia that had wanted to see the causes of the pandemic investigated, or Lithuania, that we needed to act in unison to collaborate to address these concerns and would be stronger if we did so. [00:51:36] Speaker 7: Yeah. Thank you for mentioning that, Janet, because I do think it's important for people to remember that there were actually not just people talking about the allies working together on China to make our economies, our countries more resilient. But actual practical work was being done. And that alliance was being advanced. [00:52:04] Speaker 8: Yes, I agree. And I think important members of that alliance worked together closely and very constructively that wanted to do that. And so I think it was very important to address the situation in Ukraine and to put on sanctions on Russia that regrettably haven't been sufficient to stop its brutal war against Ukraine, but really did impose economic costs on Russia for what it was doing. And things like the price cap that we constructed, to reduce the revenues that Russia got from its oil sales while at the same time making sure that its supplies reach global markets so that countries around the world weren't faced with shortages of oil. We could never have done that without the collaboration that we had. And I think that security collaboration and trade collaboration go hand in hand. And we were working meaningfully together toward that. [00:53:21] Speaker 7: I absolutely agree. And when you talk about the full-scale Russian invasion of Ukraine, something that we saw while you were Secretary of the Treasury, but that has become even more apparent today, is Russia's continued war against Ukraine is possible only because of China's support. The economic connections between China and Russia are keeping the Russian economy going and have meant that sanctions can't fully bite. And of course, China is an important supplier for the Russian arms industry. So, you know, French shoring was an important idea, not only vis-a-vis China, but also vis-a-vis Russia and the full-scale and ongoing Russian invasion of Ukraine. Can you talk a little bit more about how you see French shoring shaping the economic and security relationship between the U.S. and China and between the Western alliance and China? And I know, by the way, you are someone who the Chinese really respect and you always had very great, serious conversations with them. How would French shoring be a way to shape that economic and security relationship? [00:54:47] Speaker 8: I think the way I saw our relationship with China was that the United States, but really all of the allies, had a very strong interest in protecting our national security. And our common security. And we needed to make sure that technologies that were critical to national defense were not provided to China. And of course, China felt exactly the same way and had its own set of export controls. That approach, although the United States put in place its own export controls and investment controls, it can't be successful unless a group of allies work together. If one country does it on their own, then others have the capacity to replace the supplies that the United States or one of us would be restricting China from. And so in order for us to be successful in denying China access to these critical national security related goods, we had to hold hands and do this together and make sure that as a group we were working together. [00:56:15] Speaker 1: That does it for us here at Wall Street week. I'm David Weston. See you next week for more stories of capitalism.