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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is a special Bloomberg Daybreak Youate podcast bringing you

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Speaker 2: reaction to the latest tariff announcement from US President Donald Trump. Hello,

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Speaker 2: I'm Caroline Hepca.

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Speaker 1: And I'm Stephen Carroll. The measure is targeting the global

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Speaker 1: car industry or moving markets, and come ahead of even

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Speaker 1: more tariff news expected next week.

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Speaker 2: The charges are due to take effect from next Wednesday,

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Speaker 2: and we'll come on top of any other duties. Announcing

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Speaker 2: the new tariffs, President Trump said that he was not

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Speaker 2: interested in negotiating any exceptions.

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Speaker 3: If parts are made in America and a car isn't,

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Speaker 3: those parts are not going to be text or tariff

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Speaker 3: and we'll have very strong policing as far as that's concerned.

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Speaker 3: For the most part, I think it's going to lead

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Speaker 3: cars to be made in one location in and right now,

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Speaker 3: a car would be made here, sent to Canada, sent

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Speaker 3: to Mexico, sent all over the place. It's ridiculous.

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Speaker 2: Despite Trump's view, the levies risks disrupting operation for manufacturers

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Speaker 2: who rely on highly integrated supply chains across North America.

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Speaker 2: Shares and car makers in the US and Asia have

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Speaker 2: fallen after the news was announced.

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Speaker 1: Let's bring in our EMEA News director Raslind Matheson for

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Speaker 1: more on this story. Ras, we had been expecting an

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Speaker 1: announcement on auto tariffs. Donald Trump but told us it

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Speaker 1: was coming. But is this better or worse than the

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Speaker 1: industry had feared.

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Speaker 4: Well, it's probably pretty much what they were expecting. The

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Speaker 4: timing was interesting because first we were being told that

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Speaker 4: auto tariffs would come after the April to reciprocal tariffs,

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Speaker 4: and then Donald Trump pushed ahead either way, so these

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Speaker 4: take effect in a staged fashion. For entire cars, obviously

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Speaker 4: it's April three, and then for components in cars it's

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Speaker 4: a month later. Because this is going to be quite

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Speaker 4: complex for a lot of companies in the supply chain

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Speaker 4: to ascertain what components in your cars might be made

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Speaker 4: outside the US, or even go back and forth across

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Speaker 4: borders as part of the production process, out which bits

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Speaker 4: you have to pay tariffs when. It is going to

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Speaker 4: be quite complicated, So a little bit of time at

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Speaker 4: least for car companies to work that out. But what

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Speaker 4: it does show again is that Donald Trump is just

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Speaker 4: determined to use tariffs in a variety of ways, and

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Speaker 4: sometimes very quickly and sometimes in an interchangeable way. He

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Speaker 4: does change his mind, but you know he's willing to

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Speaker 4: use them, and sometimes very quickly.

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Speaker 2: Markets are trying to digest this. Which companies and countries

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Speaker 2: do we think are going to be hardest hit well.

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Speaker 4: As you're mentioning that, it's car makers, particularly in Germany

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Speaker 4: and in Asia. Some of these companies send a lot

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Speaker 4: of cars into the US or a lot of components

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Speaker 4: to Mexico for example, and on into the US, and

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Speaker 4: so you can see the impact on VW for example,

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Speaker 4: Hayundai in Korea, Japanese car makers. Also, you know a

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Speaker 4: lot of companies that do not produce cars in full

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Speaker 4: in the US right now. Of the one company it

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Speaker 4: might benefit of, oddly enough, his Tesla and Elon Musk

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Speaker 4: because he produces a lot of his evs in the

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Speaker 4: US for sale there and so he's kind of insulated

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Speaker 4: Ford equally. But even some of the other US automakers

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Speaker 4: they bring in a lot of parts from overseas, so

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Speaker 4: it's going to hit them as well. And so the

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Speaker 4: question is what's the knock on effect of all of that,

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Speaker 4: not just on these companies, but then on the US economy.

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Speaker 1: We've also had reaction from some other foreign leaders as well.

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Speaker 1: We were hearing from Mark Carney earlier Prime Minister of Canada,

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Speaker 1: the Japanese Prime minister as well. Our Slavangeline was very

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Speaker 1: quick out of the blocks with the statement from the

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Speaker 1: European Commission as well. How should we read into what

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Speaker 1: the response to this announcement has been from the US

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Speaker 1: trading partners.

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Speaker 4: The thing that's a bit intriguing so far in all

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Speaker 4: of this, as you say, there have been statements very

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Speaker 4: quickly saying this is going to be damaging and so on,

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Speaker 4: but no one's really retaliated. And in some of the

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Speaker 4: early tariffs that we saw, we saw some countries come

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Speaker 4: out and immediately respond with specifics and saying we are

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Speaker 4: in turn imposing X y Z on the US, and

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Speaker 4: it seems they're all holding far a bit. So they

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Speaker 4: put these statements out. They're saying they're going to meet

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Speaker 4: today tomorrow in Canada, obviously Mexico potentially having a meeting

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Speaker 4: of the government there today an announcement, but they all

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Speaker 4: seem to be training a lot carefully here and none

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Speaker 4: have really announced specific retaliation. Maybe that will come, but

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Speaker 4: they're also seemingly trying to work out in this kind

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Speaker 4: of new environment, how you manage Donald Trump and how

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Speaker 4: you deal with Donald Trump. And is it best to

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Speaker 4: come out swinging with something very quickly or is it

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Speaker 4: best to take a pause and then work out a

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Speaker 4: calibrated response.

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Speaker 2: Okay, Rolls, thank you so much for being with us

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Speaker 2: this morning. That is BIG's EMEA News director Roslyn Matheson,

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Speaker 2: as she says, are calibrations really around the world as to.

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Speaker 1: The reaction, Well, that's digging to how the markets are

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Speaker 1: calibrating to this. Where Market's Live Executive editor Mark cod

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Speaker 1: More Market. We've talked about the reaction in individual company shares.

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Speaker 1: Who've seen that fall in Asia and in US post

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Speaker 1: market trading yesterday as well. Can you explain the sort

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Speaker 1: of macro impact of this as well, because the currency

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Speaker 1: market reaction doesn't appear as dramatic.

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Speaker 2: Yeah.

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Speaker 5: So I think we've got to put the announcements every

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Speaker 5: night in context to what's coming next week. So we

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Speaker 5: know that the market is increasingly focused on tariffs, you know,

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Speaker 5: the US Liberation Day as Trump calls it, next week,

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Speaker 5: and I think we can't separate this preemptive announcement on

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Speaker 5: audit tariffs from that and so I think the bigger

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Speaker 5: picture dynamic here is that we are going to get

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Speaker 5: some more clarity on US tariff policy. I'm guessing, like

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Speaker 5: everything we've seen so far from this administration, we won't

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Speaker 5: get complete clarity and a lot of things will remain uncertain,

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Speaker 5: But we're going to have more clarity a week from now.

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Speaker 5: And what's important to emphasise is while this is supposedly

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Speaker 5: a really big risk catalyst on the horizon, and I

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Speaker 5: think it's it is going to be negative for equity markets,

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Speaker 5: it's going to also be negative for VALL. I expect

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Speaker 5: volatility to stay high into next week while we wait

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Speaker 5: that clarity. But once the tariffs are clariffled across the

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Speaker 5: board and not just the auto tariffs, then I think

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Speaker 5: we'll actually see volatility decline at the front end. It'll

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Speaker 5: be like in the same way Trump's inauguration we actually

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Speaker 5: saw a volatility fall all that week at the front

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Speaker 5: end despite hundreds of executive orders, because again we just

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Speaker 5: got some more clarity. What we'll actually see is a

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Speaker 5: steepening of the VALL curve. So both in FX and

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Speaker 5: equity markets will see longer end volatility increase because people

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Speaker 5: will say whatever tariffs are announced, are they part of

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Speaker 5: a negotiation, a negotiation deploy or how long will they

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Speaker 5: be in place? So I think that's the dynamic as

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Speaker 5: we're going to see risk off next week, but it's

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Speaker 5: going to be a low vall risk off. It may

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Speaker 5: not seem like that if you're a cash trader in

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Speaker 5: the moment, but from a macro point of view, that's

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Speaker 5: kind of way we're going to get. But I think

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Speaker 5: that the longer term story here is not going to

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Speaker 5: be changed under this dynamic. What's really important is we've

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Speaker 5: seen the end of US exceptionalism. We have fifteen years

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Speaker 5: of it markets exceptionalism, where we're now going to see

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Speaker 5: capital at flow from the US on a sustained basis

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Speaker 5: for years to come because the world's overexposed to US

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Speaker 5: assets and they need now to become less exposed because

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Speaker 5: they cannot trust what the laws will remain the same,

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Speaker 5: where the tax ruels will remain the same, where the

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Speaker 5: tariff ruels will maain the same to US exposure. So

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Speaker 5: that is the longer term story that we're going to

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Speaker 5: be trading for the next fe years, and this is

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Speaker 5: really just another marker in the road around that.

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Speaker 2: Yeah, and I think the question for people sitting in

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Speaker 2: Europe is whether that does mean a benefit for Europe potentially,

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Speaker 2: even amidst all of the risks and the potential impact.

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Speaker 2: I mean, you have to think also that car prices

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Speaker 2: in the US are thought to it's thought that they

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Speaker 2: will increase something like twelve thousand dollars because of the

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Speaker 2: new tariffs, because it will increase the cost of production

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Speaker 2: of a vehicle by so many thousands of pounds. Do

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Speaker 2: you think Europe is really potentially a winner here?

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Speaker 5: Absolutely? I think you know, ultimately much of the rest

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Speaker 5: of the world is going to be a winner. But

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Speaker 5: I think we're going back into a world where you've

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Speaker 5: got to pick winners and losers a bit more actively.

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Speaker 5: We're going back to world it's going to benefit active

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Speaker 5: fund managers over passive fund managers, because you know, the

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Speaker 5: bigger picture story is that US has benefited compared to

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Speaker 5: the rest of the world. And really you did not

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Speaker 5: have to be particularly sophisticated. You just piled your money

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Speaker 5: into US megacap tech. If you didn't want to be

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Speaker 5: so focused, you did in the SBF Avendre and Nastek,

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Speaker 5: and it worked. That world's changing we're now going to

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Speaker 5: be going US is going to underperform, but it's not

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Speaker 5: so easy to just dump it into European stocks because

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Speaker 5: some stocks will lose, some will gain. So you've got

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Speaker 5: it kind of you're going to benefit active managers, but

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Speaker 5: Europe absolutely will gain. It'll gain from two aspects. One

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Speaker 5: is that the world has to decrease its exposure to

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Speaker 5: the US and there are not many other viable options

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Speaker 5: and Europe's going to take a decent chunk share of

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Speaker 5: that as people diversify around the world. And also it's

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Speaker 5: got its own positive story around the paradigm shift around

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Speaker 5: its spending, so that will also increase the number of

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Speaker 5: assets for reserve managers to invest in Europe. So again

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Speaker 5: these are longer term stories, but over the next several years,

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Speaker 5: absolutely europle gain. I kind of have liked saying this

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Speaker 5: thing over the last couple of months, but I mean

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Speaker 5: it that I think I think You're dollar will trade

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Speaker 5: to one thirty before one zero four, one thirty one

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Speaker 5: thirteen before one zero four, because I think that's the

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Speaker 5: multi year story here is we're going to get reserve

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Speaker 5: diversification out of the US into European assets. Ins A Europe.

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Speaker 1: Game, Mark, we always think that you mean what you say.

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Speaker 1: Thank you very much for joining us. Mark Codmore, our

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Speaker 1: Markets Live executive editor. We're joined in the studio by

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Speaker 1: Carl Tonnenbaum, who is chief economist at Northern Trust. Carl,

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Speaker 1: good morning, Great to see you with us.

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Speaker 6: Good morning studio.

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Speaker 1: President Trump says that these TIFFs will mean US jobs,

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Speaker 1: US manufacturing, that he will enforce the tariffs. From a

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Speaker 1: US perspective, will that work.

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Speaker 6: The supply chains that have arisen over recent decades are

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Speaker 6: very efficient, they have raised standards of living, they have

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Speaker 6: reduced cost, and unwinding them is going to be a

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Speaker 6: time consuming and expensive proposition. In addition, modern manufacture is

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Speaker 6: not very labor intensive. Certainly in the auto industry, robotics

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Speaker 6: have been a presence for decade, and now with AI,

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Speaker 6: the direction of the robots no longer needs as much

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Speaker 6: human intervention. And so, while certainly the wish is that

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Speaker 6: manufacturing jobs lost over recent decades in the United States

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Speaker 6: would be restored, the likelihood of that happening is not

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Speaker 6: one hundred percent, not.

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Speaker 2: One hundred percent, surely far from one hundred percent from

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Speaker 2: the answer that you've just given us. So if it's

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Speaker 2: not going to work. From a purely US perspective, what

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Speaker 2: does the announcement also mean for the global economy.

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Speaker 6: I believe the globalization created efficient companies, lowered prices for consumers,

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Speaker 6: raised standards of living, and many other good things. And

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Speaker 6: if you ascribe to that thesis, then the reversal of

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Speaker 6: globalization can help but raise prices, diminish standards of living,

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Speaker 6: and also create quite a bit of disruption in the

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Speaker 6: lives of many who are working in industries that are

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Speaker 6: international in scope. Also, I think while the focus has

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Speaker 6: been on US tariffs, and to be fair, we've been

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Speaker 6: the first in the ring, the retaliation coming in the

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Speaker 6: other direction is also just getting warmed up. And if

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Speaker 6: we have a full flung trade war, there are analogs

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Speaker 6: in history that illustrate just how damaging that can be,

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Speaker 6: and I certainly hope that we do not get to

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Speaker 6: that extent.

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Speaker 1: Did we massively underestimate how real the threats of tyres?

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Speaker 1: Because Donald Trump has talked about this subject for a

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Speaker 1: very long time, Are you surprised by how much we're

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Speaker 1: actually getting in reality in terms of announcements?

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Speaker 6: Well, speaking only for myself, absolutely, on the campaign trail

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Speaker 6: last year, the President said that tariff was his favorite

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Speaker 6: word in the dictionary. Now I could think of several

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Speaker 6: that I like a little bit better, puppy cookie, sunset,

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Speaker 6: pick your favorite. But we were unnoticed that tariffs would

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Speaker 6: at least be threatened. But most of us thought that

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Speaker 6: the threats would give way to negotiations long ago. But

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Speaker 6: we haven't seen any negotiations, and the size and scope

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Speaker 6: of the tariffs has been much larger, and many of

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Speaker 6: us are beginning to wonder whether disruption is a means

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Speaker 6: to an end or an end in itself.

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Speaker 2: I will put the counterpoint. Charlene Barshevski, who is who

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Speaker 2: was the former top trade official under US person Bill Clinton,

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Speaker 2: has talked about trade surpluses, and this is the thrust

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Speaker 2: of the Trump argument that China is running such a

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Speaker 2: huge trade surplus with the rest of the world that

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Speaker 2: it must rebalance. Maybe that the auto tariffs are not

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Speaker 2: specifically targeted at China, but they are part of that

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Speaker 2: Trump thesis that actually, you know, the US is lost

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Speaker 2: out to the rest of the world, and that the

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Speaker 2: Chinese have to make better efforts for them to boost

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Speaker 2: their domestic economy to rebalance things.

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Speaker 6: Is there a point there absolutely, and China is a

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Speaker 6: special case because of the way that they've operated in

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Speaker 6: the trade arena. I would just note at the outset

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Speaker 6: that if a country has a trade surplus with the

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Speaker 6: United States, it isn't premium face evidence that they've been cheating,

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Speaker 6: but there is evidence that China has been doing that. China,

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Speaker 6: to its credit, has been trying to stimulate its own

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Speaker 6: consumers to rebuilance their trade position, and the consumers share

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Speaker 6: consumer spending share of their GDP is about the same

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Speaker 6: as it was twenty years ago, and so over the decades,

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Speaker 6: China has continued to pull in market share and develop

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Speaker 6: bigger trade deficits, and I don't think it's inappropriate to

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Speaker 6: call them to account.

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Speaker 1: These announcements are are headwinds for the global economy, but

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Speaker 1: let's talk about a potential tailwend. Progress on talks. Potentially

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Speaker 1: first ease far in the Russia Ukraine war. Certainly Europe

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Speaker 1: moving to ramp up its defense spending. How much of

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Speaker 1: a boost do you see that being for European economies?

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Speaker 6: For many reasons, a truce between Ukraine and Russia would

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Speaker 6: be very much welcome, but there are some hard yards

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Speaker 6: to be walked before we achieve that outcome, and absolutely

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Speaker 6: the forecasts for Europe are actually going up when they

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Speaker 6: from major centers elsewhere in the world, they're going down.

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Speaker 6: I'm sure that the Europeans would have preferred to stimulate

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Speaker 6: other than at the end of a figurative bayonet. But

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Speaker 6: the fact is that the prompting that this did to

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Speaker 6: have the Germans and the Europeans open their budgets will

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Speaker 6: be favorable for their growth picture and their markets.

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Speaker 2: Reflect that. You've said that it's difficult and that you underestimated,

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Speaker 2: along with many others, the reality of the tariff I'll

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Speaker 2: call it a tariff war from President Trump. In terms

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Speaker 2: of the tensions, how do you think about the tensions

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Speaker 2: between the US and the EU? The EU says that

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Speaker 2: there really wasn't any negotiation, particularly that they had no

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Speaker 2: success with negotiating with the Trump White House. What does

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Speaker 2: that mean economically that those ties are now so much

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Speaker 2: more difficult.

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Speaker 6: The risk of the current strategy is that the alienation

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Speaker 6: that comes from the first steps will make it very

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Speaker 6: difficult to come back together in any meaningful way. There's

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Speaker 6: an injury felt by counterparts to the United States and

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Speaker 6: the way that this is being done, and voices that

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Speaker 6: might have normally been heard have yet to be accounted for.

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Speaker 6: I certainly hope that the damage done is not lasting,

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Speaker 6: and that there is a phase to come yet this

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Speaker 6: year where there will be more consultation and less provocation.

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Speaker 6: But I hope that comes right soon. It's taken longer

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Speaker 6: than I would have thought.

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Speaker 1: Carl, great to talk to you. Thanks so much for

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Speaker 1: joining us in studio this morning. Carl Tanam Bambar, chief

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Speaker 1: economist at Northern Trust, giving us some of the views

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Speaker 1: on where next really after the latest announcement that we're

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Speaker 1: watching markets react to this morning. European stop features sinking

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Speaker 1: on that news of a twenty five percent tariff on

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Speaker 1: all car imports into the United States coming into force

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Speaker 1: from next week. This, of course, as we are expecting

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Speaker 1: details on a broader tariff announcement from Donald Trump before that.

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Speaker 1: This is bloom Daybreak Europe, your morning brief on the

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Speaker 1: stories making news from London to Wall Street and beyond.

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Speaker 2: I'm Caroline Hepka.

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Speaker 1: And I'm Stephen Carol. Join us again tomorrow morning for

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