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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Bloomberg

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Speaker 1: Daybreak Asia Podcast. I'm Doug Chrisner. The uncertainty around those

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Speaker 1: ever changing tariffs from the Trump administration has fueled the

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Speaker 1: debate as to whether a global recession is inevitable. The

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Speaker 1: head of JP Morgan Chase, Jamie Diamond, at this point,

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Speaker 1: is not willing to take it off the table. Diamond

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Speaker 1: spoke exclusively to Bloomberg and said, there is still a

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Speaker 1: lot of uncertainty, although some of it preceded the Trump administration.

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Speaker 2: We had large deficits, instur rates going up, inflation going

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Speaker 2: up in summer, you know, tariffs and things, and of

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Speaker 2: course the geopolitical situation is very tense, very difficult and

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Speaker 2: hard to resolve.

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Speaker 1: Jamie Diamond there, the CEO of JP Morgan Chase, speaking

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Speaker 1: to Bloomberg from the bank's Global Markets conference in Paris.

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Speaker 1: In a moment, we'll be taking a look at the

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Speaker 1: ev industry in China and preview next week's earning from

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Speaker 1: expun We'll be hearing from Linda Leu, China auto reporter

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Speaker 1: for Bloomberg News. But we begin this morning with markets

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Speaker 1: and in the States, where the latest economic news was

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Speaker 1: on the soft side and very much supportive of FED

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Speaker 1: rate cuts. Wholesale prices unexpectedly fell last month by the

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Speaker 1: most in five years. Growth in retail sales decelerated notably,

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Speaker 1: factory production fell for the first time in six months,

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Speaker 1: and confidence among homebuilders slumped. So now, at this point,

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Speaker 1: markets are betting on at least two FED rate cuts

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Speaker 1: this year to prevent a recession. For a closer look,

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Speaker 1: I'm joined now by Michael Green. He is the chief

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Speaker 1: strategist at Simplify Asset Management. Michael is on the line

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Speaker 1: from here in New York City. Good of you to

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Speaker 1: make time to chat with us. Michael, Where are you

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Speaker 1: on the recession call right now?

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Speaker 3: So I lean towards what Jamie is reiterating, which is

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Speaker 3: that we have to consider that the prospect of the

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Speaker 3: economy slowing markedly and continuing to slow, given the disruption

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Speaker 3: of tariffs, given the uncertainty around interest rate, and much

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Speaker 3: more importantly, I would actually argue giving the now acknowledged

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Speaker 3: deterioration in household balance sheets, where we're seeing student loan

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Speaker 3: debt come on very quickly, We're seeing credit card delinquencies

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Speaker 3: and defaults start to rise. Dramatically. Auto repossessions and delinquencies

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Speaker 3: are also rising. The evidence is very clear that at

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Speaker 3: least the lower fifty percent of the US consumer is

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Speaker 3: under tremendous amounts of stress that was largely camouflaged by

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Speaker 3: the coverage that was provided. And when we decided not

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Speaker 3: to collect student loans for example, now we're actually going

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Speaker 3: in the opposite direction. We're beginning the process of garnishing wages, etc.

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Speaker 3: People cannot escape from this. It's important to remember that

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Speaker 3: the combination of tariffs and the resumption of student loan debt,

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Speaker 3: as well as the increase in reporting around things like

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Speaker 3: buy now, pay later, are effectively forcing austerity onto a

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Speaker 3: sizable fraction of US households. That can feel like caution,

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Speaker 3: but it actually very quickly turns into they can't do

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Speaker 3: what they want want to do, and that shows up

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Speaker 3: as reduced corporate earnings, it shows up as reduced economic vitality.

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Speaker 3: Introduce even more uncertainty into that with only a ninety

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Speaker 3: day pause around tariffs, and it really does feel like

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Speaker 3: we are setting up for something that will ultimately be

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Speaker 3: called a recession.

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Speaker 1: So a ninety day pause while the two sides, the

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Speaker 1: US and China, negotiate. There is still a risk that

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Speaker 1: some of the tariffs that are already in place will

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Speaker 1: produce a higher level of inflation. Look at Walmart today

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Speaker 1: saying that it will begin raising some prices. Is there

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Speaker 1: the risk now that we could see a reacceleration in

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Speaker 1: the level of inflation.

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Speaker 3: Well, I think there's absolutely a risk, but I think

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Speaker 3: we have to keep it in context. Right, we've experienced

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Speaker 3: largely goods deflation for the past two years. That is

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Speaker 3: meant that the price of eggs has fallen relative to

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Speaker 3: its peaks during the COVID component's, toilet paper has fallen,

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Speaker 3: new car prices have fallen, et cetera. There have really

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Speaker 3: only been two or three key areas that have sustained

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Speaker 3: or accelerated pricing. Those would be things like insurance. To

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Speaker 3: a certain extent. Home prices and certainly the costs associated

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Speaker 3: with homes, whether that is maintenance, insurance, taxes, etc. Have

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Speaker 3: all risen dramatically and placed additional stress on us households.

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Speaker 3: But buying large goods has been a very good story

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Speaker 3: from the inflation front for the past two years or so,

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Speaker 3: and now that is coming under pressure at exactly the

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Speaker 3: time that we're starting to see the services component, things

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Speaker 3: like owner's equivalent rent or rent itself begin to turn negative,

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Speaker 3: and so it's going to be a We're going to

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Speaker 3: be skating a very very fine line. Those things that

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Speaker 3: have helped for the past two years are going to

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Speaker 3: become less important. The things that have hurt us over

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Speaker 3: the past two years are finally starting to get the

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Speaker 3: catalysts to push the more negative. The net result is

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Speaker 3: it's a toss up, and I think we'll probably see

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Speaker 3: a little bit of inflation, but certainly nothing that strikes

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Speaker 3: me as anything like what we experienced in twenty twenty

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Speaker 3: and twenty twenty one.

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Speaker 1: Well, let's talk a little bit about how the FED

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Speaker 1: may navigate this. Today we heard from FED Governor Michael

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Speaker 1: Barr and he was saying the econ yes, HiT's on

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Speaker 1: solid ground, but he added that terraff related supply chain

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Speaker 1: disruptions could lead to lower growth and higher inflation. Kind

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Speaker 1: of what we've been talking about a little bit. Where

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Speaker 1: is the FED right now in your view and the

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Speaker 1: degree to which we could see some sort of accommodation

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Speaker 1: between now and the end of the year.

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Speaker 3: Well, I think it's really important to remember that when

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Speaker 3: you introduce inflation. And I'm using that almost in air quotes.

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Speaker 3: When you introduce inflation that is tied to tax increases,

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Speaker 3: things like tariffs, et cetera, that's restrictive. It's not the

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Speaker 3: sign of inflation that is being driven by excessive demand.

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Speaker 3: It's being driven by costs that are being imposed upon

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Speaker 3: the system. To raise interest rates or to resist cutting

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Speaker 3: interest rates in response to that is beyond any economic

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Speaker 3: policy that I know. The FED itself explicitly addressed this,

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Speaker 3: and it's twenty eighteen or it's analysis of the twenty

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Speaker 3: eighteen teriffs saying the right answer is simply to have

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Speaker 3: done nothing, to have allowed it to pass through the system.

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Speaker 3: And I'm hopeful that they will do something like that.

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Speaker 3: I think the FED, like many of us, though, is

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Speaker 3: at this point so scarred by the transitory inflation, which

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Speaker 3: it was. It was transitory in terms of the rate

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Speaker 3: of price change, but it has been durable in terms

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Speaker 3: of the level of prices. And so we all look

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Speaker 3: at the eggs that we buy, in the milk that

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Speaker 3: we buy, and we recognize that we pay more for it.

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Speaker 3: Now that has created effectively a scar or a scab

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Speaker 3: that we just can't help but pick at and the

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Speaker 3: FED is unfortunately kind of trapped by that. They're very,

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Speaker 3: very frightened that inflation could pick up again, even though

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Speaker 3: forward looking metrics inflation swaps and in particular, long dated

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Speaker 3: inflation swaps, have shown absolutely no sign that the market

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Speaker 3: is trying to price in significant inflation risks.

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Speaker 1: So, to go back to the tariff story briefly, we

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Speaker 1: know that the aim, at least articulated by the Trump

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Speaker 1: administration was to reshore American manufacturing. Do you have a

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Speaker 1: sense of whether this is going to be effective? Is

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Speaker 1: it too soon to know given what you're hearing from

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Speaker 1: the administration? And I know now the President is in

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Speaker 1: the Middle East where he is trying to kind of

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Speaker 1: drum up a lot of foreign direct investment into the

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Speaker 1: United States. But do you have a sense of whether

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Speaker 1: or not this tariff policy is going to produce the

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Speaker 1: desired outcome?

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Speaker 3: Well, again, I think you have to be very careful

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Speaker 3: in terms of interpreting what is being used as press

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Speaker 3: versus what is being used as an actual objective. With

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Speaker 3: unemployment in the four percent range, with a very few

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Speaker 3: Americans trained or desiring work, and in a traditional assembly

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Speaker 3: line type framework, we're not going to see manufacturing, at

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Speaker 3: least in its traditional form. Come back. What we have

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Speaker 3: provided is significant cover for items that are of national

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Speaker 3: security importance to be reshored to at least be friendshored

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Speaker 3: in terms of their underlying components, and equally important, I

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Speaker 3: think it's it would be you would be remiss if

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Speaker 3: you did not acknowledge that, for all the bluster and

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Speaker 3: for all the headline about how terribly this was going

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Speaker 3: for the United States, in this ninety day cooling off period,

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Speaker 3: China has accepted significantly higher trade barriers on its products

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Speaker 3: into the United States and largely lifted restrictions and trade

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Speaker 3: barriers and tariffs on products from the United States. So

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Speaker 3: it's very hard to score this as anything other than

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Speaker 3: a win for the Trump administration. We may not like

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Speaker 3: the manner in which it transpired, but it does bring

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Speaker 3: home the real heart of the message, which is, at

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Speaker 3: the end of the day, when you are talking about

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Speaker 3: trade policy, the customer is always right. The US runs

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Speaker 3: a massive trade surplus in goods with China and largely

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Speaker 3: with the rest of the world. We run a significant

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Speaker 3: trade surplus in services. Those in many situations, things like

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Speaker 3: Google searches or AI searches, etc. Are somewhat irreplaceable chashki's

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Speaker 3: from China. We can figure out how to get by

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Speaker 3: without them, right, most of the stuff that we're buying

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Speaker 3: from China, Americans, if forced to economize and have one

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Speaker 3: less potato peeler for a six month period, we'll probably

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Speaker 3: figure out how to do it with a knife again.

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Speaker 3: And so again, I'm not trying to denigrate the incredible

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Speaker 3: innovation stuff that China produces, but the simple reality it's

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Speaker 3: the customer is always right. And the stage that we

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Speaker 3: are in this trade negotiation suggests that that logic has

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Speaker 3: played through.

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Speaker 1: One of the major developments that occurred during the President's

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Speaker 1: tour of the Mid East his team working out with

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Speaker 1: agreements for parties in Saudi Arabia to acquire tens of

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Speaker 1: thousands of semiconductors used for artificial intelligence from both in

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Speaker 1: Nvidia and advanced micro devices. Where are we right now

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Speaker 1: in the global race for AI and has this visit

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Speaker 1: by the President to the Mid East changed the landscape

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Speaker 1: in any way? Well, again, I.

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Speaker 3: Would just emphasize that it's very early to know. Right,

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Speaker 3: we know what we've been told, we know the articulation,

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Speaker 3: the attraction of AI and surveillance hardware is incredibly attractive

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Speaker 3: to many of these governments, so I'm not the least

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Speaker 3: bit surprised that they're very happy to increase their spend

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Speaker 3: in these areas. But the simple reality is that AI

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Speaker 3: is somewhat the real deal. I will tell you from

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Speaker 3: a professional standpoint, I have flipped a massive amount of

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Speaker 3: the time that I would have spent doing Google searches

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Speaker 3: or traditional data analysis using cell side research. Much of

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Speaker 3: that has now migrated over to chat, GBT or to GROCK.

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Speaker 3: If I want to seek out inflammatory positions or to

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Speaker 3: perplexity with their clawed AI, I am increasingly using those.

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Speaker 3: I would suggest that somewhere around fifty to sixty percent

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Speaker 3: of my search activity has been now replaced by various

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Speaker 3: forms of AI utilization. And I liken it to having

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Speaker 3: an almost unlimited number of first year analysts. Are they

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Speaker 3: really smart?

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Speaker 4: Yes?

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Speaker 3: Can they be trusted to arrive at the right answer,

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Speaker 3: right answer and have extraords nearly high quality work product? No,

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Speaker 3: I have to manage them in that process. But it

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Speaker 3: is an incredible revolution, and I think we're seeing both

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Speaker 3: the combination of fear and recognition that this is a

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Speaker 3: true revolutionary framework that is not significantly different than what

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Speaker 3: we saw with the Internet. It's starting to sync in.

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Speaker 1: Michael will leave it there, great conversation. Thank you so

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Speaker 1: much for joining us. Michael Green, he is the chief

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Speaker 1: strategist at Simplify Asset Management. Joining from here in New

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Speaker 1: York City on the Daybreak Asia podcast. Welcome back to

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Speaker 1: the Daybreak Asia Podcast. I'm Doug Krisner. The Chinese EV

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Speaker 1: maker Xpong is gearing up for its earnings report, and

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Speaker 1: according to options data compiled by Bloomberg, Xpong shares may

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Speaker 1: move by nearly eight percent. Xpong, if you're wondering, is

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Speaker 1: set to release results next Wednesday before the market opens.

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Speaker 1: For a closer look now at what we may hear

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Speaker 1: from this automaker. I'm joined by Bloomberg's Linda Liu. She

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Speaker 1: is China autos reporter. She's on the line from Hong Kong. Linda,

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Speaker 1: thank you for making time to chat with me. This

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Speaker 1: is such a competitive space when you talk about EV

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Speaker 1: manufacturers in China. How does x pun differentiate it self

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Speaker 1: from the crowd.

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Speaker 4: So x Pung is a really interesting EV maker. It's

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Speaker 4: been tilted as the Tesla of China because their advanced

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Speaker 4: driver assistance technology that's similar to Tesla's FSD is considered

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Speaker 4: one of the best in China, so they use that

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Speaker 4: as a strong selling point to set themselves apart from

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Speaker 4: the other competition, which can go from very affordable mass

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Speaker 4: market models sold by BYD to a very upscale large

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Speaker 4: family size SUVs sold by rivals like Neo.

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Speaker 1: There was recently the Auto show in Shanghai, and I'm

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Speaker 1: curious about what x pun unveiled at that exhibit.

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Speaker 4: It's actually it was really funny at the Shanghai Auto

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Speaker 4: Show because the object that stole the show was a

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Speaker 4: humanoid robot that X Punk's CEO brought with him to

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Speaker 4: the stage. And again you can see the similarity to

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Speaker 4: Tesla there, who is also working on their own humanoid robots.

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Speaker 4: So the robots took a walk around the stage. But

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Speaker 4: the CEO, you know, also introduced new models for the

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Speaker 4: company as well as projecting very strong confidence for the

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Speaker 4: rest of the year. Its sales have been on the

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Speaker 4: roll is growing pretty fast and that's driven largely by

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Speaker 4: a new affordable model called the Mona, which they launched

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Speaker 4: last year. So the year ahead, I think x punk

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Speaker 4: is very confident of a good performance to.

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Speaker 1: What extent is this company looking to markets outside of China.

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Speaker 1: I'm thinking in particular of Europe and perhaps to a

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Speaker 1: lesser extent in South America.

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Speaker 4: Yes, x said that they are ramping up global sales

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Speaker 4: this year. They marked their expansion drive with a really big,

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Speaker 4: glitzy event in Hong Kong where they invited media as

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Speaker 4: well as EV owners to fly in from all over

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Speaker 4: the world to see their latest flagship MPV, which is

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Speaker 4: a luxury minivan launch. X Pong is going to start

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Speaker 4: localizing production in Indonesia this year, and they said they've

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Speaker 4: also set up operations in Germany. Obviously, Europe is going

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Speaker 4: to be a very important market for them because it's

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Speaker 4: a market where they're very friendly to evs and has

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Speaker 4: the spending power. Latin America is definitely another place where

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Speaker 4: x pong is working to expand into, but they are

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Speaker 4: also going to face intense competition there because other Chinese

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Speaker 4: EV makers like Byd as well as another automaker called

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Speaker 4: great Wall Motor, already has factories in Brazil. So x

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Speaker 4: pong is also going to have to contend with a

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Speaker 4: lot of competition globally.

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Speaker 1: When I think of some of the Chinese EV makers

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Speaker 1: automakers generally speaking, I think about the degree to which

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Speaker 1: the smartphone has been integrated into some of the designs.

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Speaker 1: Is that the case very much with x Pong.

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Speaker 4: Yes, x Pong has a very i would say advanced

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Speaker 4: entertainment system in their evs, although I will have to

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Speaker 4: say that's becoming very common amongst Chinese evs. So not

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Speaker 4: only x Pong, You've got an actual smartphone maker, sell

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Speaker 4: Me that has entered the industry their first EV that

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Speaker 4: s U seven are sold really well, and that just

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Speaker 4: shows how fast the Chinese market is kind of adapting

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Speaker 4: to this changing, changing case. You've got customers are very

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Speaker 4: open to technology. So now cars are not just I guess,

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Speaker 4: the transportation tool that takes you from A to B,

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Speaker 4: but people now also expect to be able to look

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Speaker 4: up their roots on a very large screen mounted on

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Speaker 4: the dash and be able to talk to their car

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Speaker 4: as well as watch movies because some of these cars

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Speaker 4: have theater screens installed. So yeah, the pace from Chinese

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Speaker 4: customers are very tech focused.

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Speaker 1: When you and I have spoken in the past about

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Speaker 1: the EV market in China, one of the issues has

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Speaker 1: been over capacity or certainly a crowded industry to the

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Speaker 1: extent that we may see even more consolidation. Is that

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Speaker 1: still the case right now?

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Speaker 4: Yes, you're right, Doug, So over capacity is still quite

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Speaker 4: a big issue for legacy automakers, especially foreign joint ventures.

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Speaker 4: You've got companies like the Japanese automakers Toyota, Nissan, and Honda,

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Speaker 4: as well as American ones GM and Ford. Are they

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Speaker 4: facing slumping demand in China? They are trying very hard

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Speaker 4: to come up with new models that probably fit more

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Speaker 4: to the taste of Chinese customers. We also saw Toyota

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Speaker 4: announce a new EV factory that's for the Lexus brand

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Speaker 4: in Shanghai, So you see they are trying to grow

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Speaker 4: EV capacity, but that means they are going to have

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Speaker 4: to slash internal combustion engine capacity, which just is not

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Speaker 4: selling well these days.

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Speaker 1: What do we know about the research and development that

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Speaker 1: x pund has undertaken, maybe for something like a flying car.

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Speaker 1: Is that a reality?

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Speaker 4: Yes, x PUND is very confident about rolling out their

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Speaker 4: flying car. It's more of a like a package. They

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Speaker 4: have kind of a package where you have the flying

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Speaker 4: car part that also lands onto a land vehicle. So

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Speaker 4: for this product, they are expecting mass production within the

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Speaker 4: next couple of years, and they're hoping that with regulatory

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Speaker 4: approval also coming online, they'll be able to sell this

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Speaker 4: to the mass market soon. And so we're watching this

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Speaker 4: space closely as well, because xpongs not only not the

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Speaker 4: only company exploring this new type of technology. Other automakers

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Speaker 4: like another Guangzhou based automaker called GAC is also working

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Speaker 4: on their evy toll slash flying car. Another area of

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Speaker 4: research that x poem is focusing on is their own

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Speaker 4: chip development. Given how much geopolitics is impacting the auto

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Speaker 4: supply chain, expunks that they are hoping to launch their

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Speaker 4: own AI chip and start fitting it into the evs,

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Speaker 4: So hopefully with more of bringing more of these technology

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Speaker 4: in house, they can minimize the impact to their supply

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Speaker 4: chain from geopolitics.

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Speaker 1: You mentioned a moment ago that expectations are that we

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Speaker 1: will see pretty strong sales from x PUNK. I'm curious

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Speaker 1: about the extent to which the government may be trying

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Speaker 1: to stimulate demand for evs to an even greater extent.

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Speaker 1: Is that happening, Yes.

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Speaker 4: For the second year, Chinese government has extended ash cash

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Speaker 4: for Clunker's scheme where buyers who purchase qualifying evs or

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Speaker 4: even fuel efficient gasoline cars may qualify for a subsidy

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Speaker 4: of up to twenty thousand yen. That subsidy has been

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Speaker 4: a key driver for maintaining EV sales because a previous

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Speaker 4: subsidies scheme ended in twenty twenty three. So I think

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Speaker 4: the government probably will extend our programs like this in

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Speaker 4: the future to try to keep up consumption because the

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Speaker 4: economy slowdown is weighing on sentiment in China, so we

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Speaker 4: expect support to continue from the government's.

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Speaker 1: Linda, thank you so much for helping us preview the

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Speaker 1: earnings in the week ahead from x punk. Linda Liu

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Speaker 1: is a Bloomberg China autos reporter joining from Hong Kong

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Speaker 1: here on the Daybreak Asia podcast. Thanks for listening to

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Speaker 1: today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 1: we look at the story shaping markets, finance, and geopolitics

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Speaker 1: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 1: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 1: Join us again tomorrow for insight on the market moves

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Speaker 1: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 1: and this is Bloomberg,