Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world, and straight ahead on the
Speaker 2: program the upcoming May Jobs report in the US how
Speaker 2: that could impact FED policy moving forward. I'm Tom Busby
Speaker 2: in New York.
Speaker 3: I'm Caroline Hedge in London, where we're asking if the
Speaker 3: ECB can help Europe sees its golden opportunity.
Speaker 4: I'm Dot Christner looking ahead to trade data this week
Speaker 4: from Vietnam.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 1: eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC,
Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Speaker 1: Sirius XM one twenty one, and around the world on
Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5: Good day to you.
Speaker 2: I'm Tom Busby, and we begin today's program with a
Speaker 2: look ahead to the May Jobs Report. Non farm payroll
Speaker 2: numbers for May out on Friday eight thirty am. Wall
Speaker 2: Street Time Now for more on how those numbers may
Speaker 2: impact the FED policy moving forward. And the state of
Speaker 2: the US labor market and the economy. We're joined by
Speaker 2: Stuart paul, Us, economist with Bloomberg Economics. Stuart, thank you
Speaker 2: for being here again. Now, when you look at the
Speaker 2: impact of the Trump tariffs, the DOGE cuts, lower corporate profits,
Speaker 2: a shrinking US economy, are we starting to see cracks
Speaker 2: in the labor market? It was robust for years.
Speaker 6: I think we're just starting to see material cracks, and
Speaker 6: we're starting to see the cracks that have been just
Speaker 6: minuscule starting to widen. I think that the first labor
Speaker 6: market data print that we're going to get next week
Speaker 6: or in the coming week is going to be the
Speaker 6: number of job openings available in April, and I think
Speaker 6: the number of job openings declined all being modestly, just
Speaker 6: by about sixty thousand, but that's going to be enough
Speaker 6: for the number of workers available, the number of unemployed
Speaker 6: workers to exceed the number of job openings for the
Speaker 6: first time since the pandemic. So that's the first sign
Speaker 6: I think that will really matter for the FED that
Speaker 6: there is material slack in the labor market. And then
Speaker 6: as we get to the jobs report on Friday, I
Speaker 6: think we're going to see a materially slower pace of hiring.
Speaker 6: We're estimating just ninety thousand jobs we're added in May.
Speaker 6: That's a pretty dramatic slowdown from one hundred and seventy
Speaker 6: seven thousand jobs added in April. And it's such a
Speaker 6: slow pace that it does not keep up with labor
Speaker 6: force or population growth. So we're expecting to see an
Speaker 6: uptick in the unemployment rate. It's still going to be
Speaker 6: low at four point three percent, but moving in the
Speaker 6: wrong direction for the FED.
Speaker 2: That is a big change. Under one hundred thousand ads
Speaker 2: is a lot fewer than we saw even a week ago.
Speaker 2: Economist who were predicting what has changed in that time.
Speaker 6: The thing that we're seeing in the data when we
Speaker 6: look at high frequency data is that there were relatively
Speaker 6: few people added in the leisure and hospitality industry. And
Speaker 6: going back to your initial point, some of this is
Speaker 6: downstream from policy that's coming out of the West Wing.
Speaker 6: One of the reasons we think that there were fewer
Speaker 6: people added in leisure and hospitality, food service, and accommodation,
Speaker 6: for example, is because there's less travel from abroad, and
Speaker 6: part of that is retaliation from some of our trading
Speaker 6: partners and potential travelers who are canceling their trips in
Speaker 6: the spring and early summer travel season.
Speaker 2: Yeah, and not just Canadians, European South Americans. We're seeing
Speaker 2: it from all over, big, big decrease in travel.
Speaker 5: All right.
Speaker 2: So now the latest data that we saw also on
Speaker 2: jobless claims, are you seeing a pattern there? It held
Speaker 2: pretty steady for most of the president's second term, but
Speaker 2: I think now we're starting to see things creep up
Speaker 2: for it also, long term unemployed. That's a big that's
Speaker 2: exactly right.
Speaker 6: For a long time, it was one of the easiest
Speaker 6: data prints to forecast initial jobless claims. Two hundred and
Speaker 6: twenty thousand a month, no big deal. You wouldn't even
Speaker 6: have to look, we wouldn't have to think very hard
Speaker 6: about what to expect. But we did see a pretty
Speaker 6: swift jump to two hundred and forty thousand in the
Speaker 6: previous week. I think the thing that's more important, however,
Speaker 6: is the steady rise in continuing claims as workers who
Speaker 6: are looking for new employment find it more difficult to
Speaker 6: get job offers. And I think that a part of
Speaker 6: that is that businesses remain pretty tentative about increasing headcount
Speaker 6: in a period of economic policy uncertainty.
Speaker 2: And one of the data points we got last week
Speaker 2: was corporate profits in this first quarter, and if they're
Speaker 2: not making as much money, they're simply just not going
Speaker 2: to hire more people, are they.
Speaker 6: That's right, with less profits going to see slower expansion plans.
Speaker 6: Slower expansion plans mean less hiring, and to your point,
Speaker 6: that's going to result in widening cracks in the labor market.
Speaker 2: And we've seen a couple of big layoffs announced Microsoft
Speaker 2: sixty five hundred workers, three percent of its workforce, match
Speaker 2: dot com. I mean, these are very different kinds of
Speaker 2: companies thirteen percent of its staff Intel that's a big
Speaker 2: twenty percent. They're planning, not all at once. It's going
Speaker 2: to be gradual. A lot of this is attrition, but
Speaker 2: you added up that's a lot of people who won't
Speaker 2: be getting paychecks.
Speaker 6: That's right. I think that the name of the game, though,
Speaker 6: is whether this is going to be end mass layoffs
Speaker 6: or head count reduction through attrition. The latter is of
Speaker 6: course going to be less shocking, less significant. It's going
Speaker 6: to result in a less material disruption to growth. If
Speaker 6: we end up seeing swift layoffs, that could be enough
Speaker 6: for the FED to resume rate cuts right now. Given
Speaker 6: the outlook for inflation, we think that the FED is
Speaker 6: going to remain on hold until the fourth quarter, but
Speaker 6: we do expect the FED to resume cuts because of
Speaker 6: that labor market.
Speaker 2: The main jobs report out this Friday ahead of Wall
Speaker 2: Street's opening bell our. Thanks to Stuart paul Us, economist
Speaker 2: with Bloomberg Economics, we turned out to Apple, the three
Speaker 2: trillion dollar tech giant that's facing some unprecedented challenges, including
Speaker 2: being way behind rivals in AI, pressure from the White
Speaker 2: House about where it makes the iPhone, and seeing open
Speaker 2: Ai team up with its legendary former design guru on
Speaker 2: a family of devices with AI at their core. How
Speaker 2: is Apple responding? What does this mean for Tim cook Well?
Speaker 2: For more, we're joined by Mark German, Bloomberg News Managing
Speaker 2: editor for Global Consumer Tech.
Speaker 5: Mark.
Speaker 2: That was a blockbuster announcement that moved by chat gpt
Speaker 2: A maker open Ai acquiring the AI device maker co
Speaker 2: founded by Johnny Ive, the man who designed the iPhone,
Speaker 2: the iPad, the iPod and other devices. What does Johnny
Speaker 2: Ive mean him and his company and what does this
Speaker 2: mean for Apple.
Speaker 7: It's pretty remarkable, isn't it. This is open AI betting
Speaker 7: that chat, GPT and artificial intelligence and voice interaction are
Speaker 7: again the future of computing and that now is the
Speaker 7: time to productize it. An app is quite good, right,
Speaker 7: an online service, you know, that's meaningful, But having your
Speaker 7: own hardware, your own products that people could buy to
Speaker 7: leverage this technology is critical in order to take the
Speaker 7: next step. You know. I look at the current state
Speaker 7: of generative AI as pretty much similar to the touchscreen
Speaker 7: twenty years ago if you really think about it, The iPhone,
Speaker 7: the iPad, smartphones and tablets from other manufacturers, those are
Speaker 7: basically productizations of a touchscreen. Right now, what open ai
Speaker 7: is working on with Johnny Ive is the productization of
Speaker 7: generative AI. My belief is that they're eventually going to
Speaker 7: roll out a necklace, right, a necklace with microphones, speakers,
Speaker 7: cameras and other technology so you can go about your
Speaker 7: day and interact with chat, GPT and other AI features
Speaker 7: and so voice saying that's going to be the future
Speaker 7: voice activated always on AI companion that you wear around
Speaker 7: your neck or other parts of your body to interact
Speaker 7: with and use throughout your day. Now they see it
Speaker 7: as secondary to a phone, right, You're still going to
Speaker 7: use a phone to watch video, still going to use
Speaker 7: a phone to play games, maybe still use a phone
Speaker 7: to make well phone calls, but forgetting a lot of
Speaker 7: other stuff done, whether that's asking questions, whether that's sending messages,
Speaker 7: whether that's booking a movie or doing a restaurant reservation
Speaker 7: or looking up something. Throughout your day, You're gonna do
Speaker 7: that with that pendant around your neck. And I think
Speaker 7: they see that as the future and the phone eventually
Speaker 7: transitioning into that type of product.
Speaker 2: And now they have taught by day I mean Sam
Speaker 2: Altman of open Ai and Johnny Ive a reference to
Speaker 2: a family of devices, so not just a necklace. Could
Speaker 2: they put out their own phone as well.
Speaker 7: I think they're going to start with the necklace, and
Speaker 7: then at some point you're going to have a home
Speaker 7: companion device, so something that you would put on your
Speaker 7: desk to use alongside your iPad or your laptop or
Speaker 7: what have you, right, something more ambient than that's just
Speaker 7: around your neck, something that as you walk throughout your
Speaker 7: home you would have access to. And eventually maybe there
Speaker 7: will be a pocketable device, maybe there will be a
Speaker 7: product with a screen, but I think that's that's further off,
Speaker 7: and I doubt they've done any conceptualization on that to
Speaker 7: this point.
Speaker 2: So it's a game changer. It's not glasses, it's not
Speaker 2: a phone. This is a whole new category.
Speaker 7: It's a whole new category, a whole new type of product.
Speaker 7: And this is their bet. I mean, that's what Johnny
Speaker 7: I've is known for right new major product categories and
Speaker 7: having the right people, having the right design sensibilities for it.
Speaker 7: And so he's the perfect person. Well he's probably the
Speaker 7: only person who could successfully. You know, other people have
Speaker 7: tried it, but they haven't been successful. But if you're
Speaker 7: betting on someone who could do this successfully, it is I've.
Speaker 2: And are you what kind of timeline do you see
Speaker 2: for this device?
Speaker 7: What they're telling me is they're going to introduce the
Speaker 7: products some point next year. I wouldn't anticipate, given the
Speaker 7: economics of manufacturing, given the time it takes to produce
Speaker 7: these things, given the fit and finish that I've is
Speaker 7: known for, Given basically where we're at with chat Shept
Speaker 7: and the quality, probably one another year in the oven
Speaker 7: to make sure it's up to stuff for a hardware
Speaker 7: product that people are going to pay, you know, hard
Speaker 7: cash for I wouldn't anticipate a release before twenty seven.
Speaker 2: Okay, all right, so we have we have some time
Speaker 2: until then. Let's talk about some of the other challenges
Speaker 2: facing Apple, like the twenty five percent tariff threats from
Speaker 2: President Trump on iPhones sold in the US but made overseas.
Speaker 2: I mean, if Trump is able to follow through, what
Speaker 2: does that mean for iPhone buyers and for Apple?
Speaker 7: Well, it's a big if that if this ends up happening, Right,
Speaker 7: we've already seen the news of global organizations deeming the
Speaker 7: tariffs illegal. We know that Trump, Tim Cook and other
Speaker 7: CEOs of smartphone manufacturers are going to have conversations. We
Speaker 7: know that Trump in the past has shown a willingness
Speaker 7: or even a strong willingness to make concessions for certain
Speaker 7: executives and for certain companies. So let's assume, right that
Speaker 7: this does happen, right, because I'm not sure it will,
Speaker 7: but let's assume this does happen. Twenty five percent a
Speaker 7: small price to pay for Apple when they were looking
Speaker 7: at north one hundred percent tariffs on the original setup
Speaker 7: related to the Chinese tariffs. But I don't think that
Speaker 7: threatening a twenty five percent tariff is going to accomplish
Speaker 7: much for Trump. His goal is to force them via
Speaker 7: the threat of a tariff, to move production to the US.
Speaker 7: First of all, the time it would take to move
Speaker 7: production to the US is a decade long, so it's
Speaker 7: not going to happen even in the course of the
Speaker 7: rest of Trump's three years in office, right, right, So
Speaker 7: that's one two tariff, that cost increase that's less than
Speaker 7: the cost increase or the operational resources necessary that would
Speaker 7: be incurred for a move to the US. So the
Speaker 7: twenty five percent doesn't accomplish what Trump wants. It's basically
Speaker 7: just a penalty on Apple for not being able to
Speaker 7: move to the US. And if he wants to do
Speaker 7: a penalty on Apple for not being able to move
Speaker 7: to the US, that's up to him. That's his probative.
Speaker 5: Right.
Speaker 7: Apple probably won't love it. The consumers are gonna have
Speaker 7: to pay more, aren't going to love it. But he's
Speaker 7: going to do whatever he wants it. But it's simply
Speaker 7: not going to accomplish the goal he has in place.
Speaker 2: Our thanks to Mark German, Bloomberg News Managing editor for
Speaker 2: Global Consumer Tech. Coming up on Bloomberg day Break, weekend,
Speaker 2: we'll look at whether the ECB can help europe seas
Speaker 2: It's golden opportunity. I'm Tom Busby and this is Bloomberg.
Speaker 2: This is Bloomberg day Break weekend, our global look ahead
Speaker 2: at the top stories for investors in the coming week.
Speaker 2: I'm Tom Busby in New York. Up later in our program,
Speaker 2: we look ahead to trade data this week from Vietnam.
Speaker 2: But first, policymakers in Frankfurt choosing whether to cut, hike
Speaker 2: or maintain interest rates. As the European Central Bank undergoes
Speaker 2: its quarterly economic review this week, how will the Governing
Speaker 2: Council respond to the moving targets of inflation and macroeconomic circumstances. Well,
Speaker 2: for more, let's get to London and bring in Bloomberg
Speaker 2: Daybreak europe Banker Caroline Hepgar, Tom, it's.
Speaker 3: Not really shaping up to be a relaxing European summer
Speaker 3: for Christine Lagarde and her colleagues at the European Central Bank.
Speaker 3: If a widely expected eighth successive twenty five basis point
Speaker 3: rate cut is passed in the coming days, it will
Speaker 3: mean that the deposit rate will have been cut in
Speaker 3: half over the past year to two percent. That's as
Speaker 3: factions of the ECB's governing Council disagree on how low
Speaker 3: is too low when it comes to borrowing costs, and
Speaker 3: with growing pressure on EU US trade negotiations to consider
Speaker 3: and uncertainty about US tariffs, ECB officials have a lot
Speaker 3: to consider. If they play their cards rise, Europe could
Speaker 3: be well placed to take advantage of an opportunity presented
Speaker 3: by the current geopolitical context. That's according to Karen Ward,
Speaker 3: who is EMEA Chief market Strategist at JP Morgan Asset Management.
Speaker 8: The US has had the world's capital flowing to it
Speaker 8: for the last fifteen years in abundance. It's been a
Speaker 8: huge part of why they've been able to grow, while
Speaker 8: their companies have been able to grow, why governments have
Speaker 8: been spending a lot more in the US than we
Speaker 8: have here in Europe. So are there are big upsides
Speaker 8: to having that abundance of capital?
Speaker 9: I mean a lot will depend on the USU urref negotiations,
Speaker 9: which we'll talk about, say, but it is now the
Speaker 9: moment to be invested in European markets Or are there
Speaker 9: too many question marks?
Speaker 8: I've been saying since we came into the year, we
Speaker 8: had a situation where the US was believed to be
Speaker 8: exceptional and Donald Trump was going to further exacerbate that exceptionalism.
Speaker 8: Expectations on the US were too high, expectations on Europe
Speaker 8: were too low.
Speaker 3: That was JP Morgan Asset Management's Karen Ward speaking to
Speaker 3: Bloomberg's Farcy in Laqwab. So, how can Europe's central bankers
Speaker 3: prime the region to grasp hold of what could be
Speaker 3: a fleeting chance to access more of the world's capital
Speaker 3: And how important a role will interest rates play in
Speaker 3: the equation? It's something I've been discussing with Bloomberg Economics
Speaker 3: is senior Euro Area economist David Powell.
Speaker 5: Well, if we look at what most of the members
Speaker 5: of the Government Council have said recently, they all think
Speaker 5: that the impact of the US tariffs and the year
Speaker 5: area is going to be disinflation areas. It's going to
Speaker 5: lower inflation pressures as cheaper goods come in from China
Speaker 5: and weaker demand ways on the economy. So as a whole,
Speaker 5: they're pretty much all in favor of a cut. We
Speaker 5: don't have complete agreement on that. We never knew. We've
Speaker 5: already heard from the ECB's most hawkish member, the governor
Speaker 5: of the Central Bank of Austria that he's not in
Speaker 5: favor of a cut this month, but he's really an outlier.
Speaker 5: The majority of the people will go ahead and vote
Speaker 5: for that cut.
Speaker 3: And so we're also do to receive some Eurozone economic
Speaker 3: data in the next few days. How do you think
Speaker 3: that is going to affect decision making?
Speaker 5: Well, really, what the ECB is doing right now, it's
Speaker 5: kind of looking forward to what the impact of these
Speaker 5: tariffs will be. When we look at the latest economic
Speaker 5: data coming out of the year Area, in particular to
Speaker 5: the survey components that relate to exports, they're all holding
Speaker 5: up pretty well. And basically what I think most people
Speaker 5: think is happening is that American businesses and consumers are
Speaker 5: front running this ninety day pause, so they're wanting to
Speaker 5: bring all these exports into America before that ninety day
Speaker 5: pause ends in July and they potentially face higher tariffs.
Speaker 5: So things look good now the data is generally holding up,
Speaker 5: but the ECB is going to be more forward looking
Speaker 5: and be thinking about, well, what happens when this resilience
Speaker 5: comes to an end. That's going to be the focus
Speaker 5: of their discussion.
Speaker 3: I mean, there's even more uncertainty about the US tariffs
Speaker 3: than ever before now given the recent US court decision.
Speaker 3: But there remains that question for the Central Bank about
Speaker 3: whether it will end up having to step in at
Speaker 3: some point, let's say, if talks fall through, or if
Speaker 3: at some point the tariffs from the US actually do
Speaker 3: hit Europe even more severely, about whether the Central Bank
Speaker 3: will then have a bigger role. I'll have to step
Speaker 3: in even.
Speaker 5: If you put US teriff societe. The Central Bank is
Speaker 5: in an environment where it can reduce borrowing costs. When
Speaker 5: you look at the latest data on cost pressure, it's
Speaker 5: all coming down in the un area. In particular, the
Speaker 5: ECB's official time series and negotiated wages slowed very sharply
Speaker 5: in the first quarter. They also have an experimental wage
Speaker 5: tracker which shows wages remaining more subdued later in the year.
Speaker 5: So the inflation problem that the area was facing over
Speaker 5: the past couple of years is really no longer a problems.
Speaker 5: Even the terriff issue aside, that's not a huge problem
Speaker 5: right now. They can cut and then looking beyond that
Speaker 5: is the impact of the tariffs, and that could determine
Speaker 5: more easing later in the year, but in all likelihood
Speaker 5: they're going to want to see, given all the uncertainty,
Speaker 5: what actually happens, so they're probably not going to rush
Speaker 5: cut meeting after meeting. They probably do something more like
Speaker 5: moving at a quarterly pace to wait and see what
Speaker 5: actually comes out of the US given all that uncertainty
Speaker 5: that you mentioned.
Speaker 3: In terms of other things that may affect the euzone
Speaker 3: again as a kind of consequence of the tariffs China,
Speaker 3: and you know there's been a worry about perhaps more
Speaker 3: different disinflation being sported from China into the EU. Is
Speaker 3: that amongst the considerations at the.
Speaker 5: Moment definitely will be There are basically three big ways
Speaker 5: in which this terriff issue is going to impact your
Speaker 5: area inflation to the downside. That is, one, cheaper goods
Speaker 5: which are no longer going to America likely to come
Speaker 5: to the Euro Area wider EU from China. We have
Speaker 5: estimated that could take about zero point four percentage point
Speaker 5: off inflation each year. On top of that, oil prices
Speaker 5: are down and that's also another disinflationary force, and also
Speaker 5: just demand will be weaker so as exports in all
Speaker 5: likelihoods slow in the second half of the year, there
Speaker 5: won't be as much there won't be as much demand
Speaker 5: for labor or for products from the Euro Area from abroad.
Speaker 3: How close do you think we are then, and how
Speaker 3: close to economists think we are to the neutral rate
Speaker 3: in Europe?
Speaker 5: Well, we're pretty close to that. Most people say it's
Speaker 5: about two percent, and that's where we're going to be
Speaker 5: after this cut in June. However, we already know that
Speaker 5: the ECB is focusing much less on this concept of
Speaker 5: the neutral rate than they previously were. At the last
Speaker 5: press conference in April, the ECB removed from its statement
Speaker 5: this longstanding state incentence that have been focused on about
Speaker 5: how restrictive monetary policy is, and the Guard elaborated on
Speaker 5: that in the press conference, saying the neutral policy rate
Speaker 5: is a concept for a world without shocks, and it's
Speaker 5: certainly not the world we are living in.
Speaker 3: The thing is the ECB President Christina Guard sees an
Speaker 3: opportunity in those shocks, in the sense that an opportunity
Speaker 3: for the Euro maybe to become a stronger reserve currency
Speaker 3: versus the dollar. Is the scope maybe for policy makers
Speaker 3: also to be thinking about the Euro. Obviously it's not
Speaker 3: in their mandate, but do you think that they'll be
Speaker 3: thinking about this? What do you make of the ECB
Speaker 3: President Christina Guard's comments.
Speaker 5: The Euro has been around for new thirty years now,
Speaker 5: and almost that entire time, policymakers in Europe, whether they
Speaker 5: be heads of stage or people at the European Union
Speaker 5: or people at the European Central Bank, have been playing
Speaker 5: up that the Euro could be a secondary reserve currency,
Speaker 5: displacing some demand for the US dollar as a reserve currency. However,
Speaker 5: it's never really taken on that role because it has
Speaker 5: been plagued by number of problems throughout the years. Obviously,
Speaker 5: there was the Euro crisis, which scared a lot of
Speaker 5: international investors away, and some of those problems that arose
Speaker 5: at that time, the lack of a banking union, the
Speaker 5: lack of a fiscal union, they persist. And if there
Speaker 5: were some big problem again, as there inevitably will be,
Speaker 5: because we know from history that financial crisis pop up
Speaker 5: from time to time, I think questions still remain about
Speaker 5: how exactly the Euro would perform in that environment. Although
Speaker 5: the architecture of the monetary union was strengthened significantly after
Speaker 5: the last big crisis in twenty twelve, but.
Speaker 3: It goes the question also of the power the strength
Speaker 3: of Europe as an economic block, doesn't it, And about
Speaker 3: economic growth. You know, the strength of the euro would
Speaker 3: be based on the strength of Europe sort of economically,
Speaker 3: wouldn't it. That's always a relative game obviously, But how
Speaker 3: do you think growth is going now for Europe? We've
Speaker 3: got this kind of more disinflationary environment, a lot of
Speaker 3: money being rolled out in different countries for more spending
Speaker 3: on defense and infrastructure. How do you think the ECB
Speaker 3: is thinking about economic growth in the block?
Speaker 5: Well, when you take a step back and look at
Speaker 5: growth in the EU Area since the global financial christ
Speaker 5: relative to the US, the Urrea has lagged considerably, particularly
Speaker 5: in the last few years after the ECB began tightening
Speaker 5: the your area has hardly grown and the US economy
Speaker 5: has really kind of been then moving forward at full speed.
Speaker 5: So the Urrea has fallen behind considerably over the last decade.
Speaker 5: There's a lot of ground to make up, and that's
Speaker 5: going to come through higher levels of productivity. We had
Speaker 5: Mario Draghi release of report earlier this year on his
Speaker 5: recommendations for how the EU Area could achieve that none
Speaker 5: of those things are very easy to implement. I mean,
Speaker 5: increasing the rate of growth is a difficult game and
Speaker 5: there's a lot of work to be done before we
Speaker 5: see the kind of results that we've seen in America.
Speaker 3: But on the flip side, does that mean no recession?
Speaker 7: Then?
Speaker 3: For Europe? In what is this kind of very volatile
Speaker 3: trading world right now, very volatile geopolitical world. How do
Speaker 3: you see Europe currently?
Speaker 5: Our own forecast as well as those of the ECB,
Speaker 5: are that the economy will economic growth was slow as
Speaker 5: a result of this trade war, and it will be
Speaker 5: a shock, but it's unlikely to be large enough to
Speaker 5: push the EU area into recession at this stage.
Speaker 3: Okay, So then how does the ECB's situation stack up
Speaker 3: versus other central banks? Again, we're watching the Federal Reserve closely.
Speaker 3: Given that the trade picture in the US markets have
Speaker 3: really paused and slowed down the pace at which they
Speaker 3: think the Fed's going to cut. How does that influence
Speaker 3: the ECB.
Speaker 1: I think you.
Speaker 5: Generally put central banks around the world into two categories,
Speaker 5: and one only has the Federal Reserve, and they're having
Speaker 5: to worry about the impact GDP of the tariffs as
Speaker 5: well as on inflation because this will directly increase prices
Speaker 5: in the United States and just about every other central
Speaker 5: bank in the world is more focused on the impact
Speaker 5: on the economy less so on inflation. Of course, there
Speaker 5: could be some inflationary pressures if they were retaliatory measures
Speaker 5: put in place, but they're really focused on the damage
Speaker 5: to the economy. That is particularly for countries with large
Speaker 5: trade surpluses that depend upon foreign demand, in particular US
Speaker 5: demand to keep their economies going through the external sector
Speaker 5: through those exports to America.
Speaker 3: Is there anything that we should be thinking about, anything
Speaker 3: unusual that you think is going to pop up? I
Speaker 3: have to ask this question now because I think so
Speaker 3: many things moving so rapidly currently. Is there something that
Speaker 3: we should think about in the days ahead, you know,
Speaker 3: when it comes to the ECB meeting, maybe that our
Speaker 3: audiences doesn't have on their radar.
Speaker 5: I think what I'll be looking for. I'm not really
Speaker 5: expecting this, but this is something that I'll be looking for.
Speaker 5: Is is the ECB looking to take out insurance by
Speaker 5: being extra duvish, meaning that do they want to kind
Speaker 5: of prepare the market for further easing later in the
Speaker 5: year just in case things get much worse? We know
Speaker 5: already that you know, well, essentially, as I mentioned before,
Speaker 5: they will kind of be it neutral after this, but
Speaker 5: how much are they going to look forward to further cuts?
Speaker 3: My thanks to Bloomberg's David Powell for speaking to me,
Speaker 3: and of course we'll have full coverage of the ECB
Speaker 3: rate decision from Frankfurt here on Bloomberg Radio. I'm Caroline
Speaker 3: Hepgar in London and you can catch us every weekday
Speaker 3: morning for Bloomberg Daybreak. You're at beginning at six am
Speaker 3: in London. That's one am on Wall Street.
Speaker 2: Tom, Thank you, Caroline, and coming up on Bloomberg Daybreak
Speaker 2: weekend to look into how Vietnam's economy has been impacted
Speaker 2: by tariffs. I'm Tom Busby and this is Bloomberg. This
Speaker 2: is Bloomberg day Break Weekend, our global look ahead at
Speaker 2: the top stories for investors in the coming week. I'm
Speaker 2: Tom Busby in New York. Vietnam is under the threat
Speaker 2: of aggressive tariffs from the Trump administration. The levees on
Speaker 2: hold for now pending trade talks, but Vietnam's economy is
Speaker 2: still being affected. For a closer look, let's get to
Speaker 2: Bloomberg's Doug Chrisner host of the Bloomberg Asia podcast.
Speaker 4: Tom there is no greater risk for economies in Asia
Speaker 4: than US trade policy.
Speaker 5: Now.
Speaker 4: The Trump administration has been using the leverage of tariffs
Speaker 4: in attempting to negotiate new trade agreements as a way
Speaker 4: of helping to reduce America's many trade deficits. Not to
Speaker 4: be fair, there is a big question mark now over
Speaker 4: the legality of these levees. In the last week, the
Speaker 4: Court of International Trade deemed the tariffs illegal and it
Speaker 4: blocked them. Now the Trump administration is appealing this decision
Speaker 4: and the case may ultimately be decided by the US
Speaker 4: Supreme Court. But before this development, US trading partners were
Speaker 4: lining up and many were in the midst of trade
Speaker 4: negotiations with the administration as a way of getting tariff relief.
Speaker 4: And among the countries at the table Vietnam. In the
Speaker 4: coming week we will get trade data for this country,
Speaker 4: so we thought it would be a good time to
Speaker 4: look at Vietnam's overall economy, the impact that tariffs are having,
Speaker 4: as well as the trade relationship between Hanoi and Washington.
Speaker 4: I'm joined now by Bloomberg's Katya Dmitrieva. Katya is Asia
Speaker 4: economy reporter, She joins us from Hong Kong. Good of
Speaker 4: you to make time to chat with me about this. Recently,
Speaker 4: I know that Vietnam and the US concluded a second
Speaker 4: round of trade negotiations. Do we have a sense of
Speaker 4: how well the conversation is progressing well?
Speaker 10: About the same sense that we have with any of
Speaker 10: the trade talks at this point. We know that Vietnam
Speaker 10: has made in fact, it was one of the first
Speaker 10: countries to make concessions and offers to the US. So
Speaker 10: even before trade negotiations started, they were talking about buying
Speaker 10: more Boeing airplanes or trying to find a way to
Speaker 10: sort of narrow the trade gap, which of course is
Speaker 10: the biggest focus for the Trump administration is that is
Speaker 10: that trade deficit that they have with Vietnam, and Vietnam
Speaker 10: has its biggest trade surplus with the US. So there
Speaker 10: was already this sense that Vietnam was able to sort
Speaker 10: of bend over backwards to secure a good bilateral deal
Speaker 10: with the US because the economy depends so much on
Speaker 10: the States. The most recent negotiations were a bit tricky because,
Speaker 10: of course, going into them as they began, Vietnamese officials
Speaker 10: we're talking about how Trump's tariffs were seen is unreasonable
Speaker 10: and for a kind of relatively small economy like Vietnam,
Speaker 10: a forty six percent tariff would be absolutely punishing and
Speaker 10: seem to catch leadership off guard. So there hasn't been
Speaker 10: a deal yet, like the UK, like China, there has
Speaker 10: not been anything announced even temporarily with Vietnam, and of
Speaker 10: course we'll have to wait and see how those negotiations continued.
Speaker 4: Vietnam has been one of Asia's fastest growing economies. It
Speaker 4: was only a few years ago that many on the
Speaker 4: equity side that put money to work in Asia referred
Speaker 4: to Vietnam as still being a frontier economy. And I
Speaker 4: think that the US recognizes Vietnam as a non market economy,
Speaker 4: does that necessarily put Vietnam at a disadvantage in these
Speaker 4: trade negotiations.
Speaker 10: It's definitely coming to the trade negotiations from a position
Speaker 10: that's quite different from the EU or China, for example.
Speaker 10: It is a smaller economy. It has left ability to
Speaker 10: push back on Trump in the way of seeing, for example,
Speaker 10: China pushing back on the US and these talks and
Speaker 10: sort of making marking out concessions and getting tariffs moved
Speaker 10: down substantially, at least temporarily, so it's a smaller economy,
Speaker 10: it has fewer levers, and frankly, it depends a lot
Speaker 10: on the US. So about thirty percent of its total
Speaker 10: GDP is just US exports or exports to the US.
Speaker 10: So it's one of the most among Southeast Asian economies,
Speaker 10: but also globally. And so if you're in that position
Speaker 10: as a nation, you want to do everything in your
Speaker 10: power to try to fix that as soon as possible,
Speaker 10: even if it means potentially buying more goods, kind of
Speaker 10: asking companies to extend themselves in that way, or buying
Speaker 10: things maybe that the country doesn't necessarily need, or making
Speaker 10: concessions when it comes to their own trade protectionism.
Speaker 4: Many supply chains, as you well know, were reconfigured during
Speaker 4: the first Trumpet administration as a way of trying to
Speaker 4: reduce exposure to China that seemed to accelerate during the
Speaker 4: pandemic Vietnam. I think it's fair to say was a
Speaker 4: big beneficiary during that period, and from what I've read,
Speaker 4: the country has been under a bit of scrutiny here
Speaker 4: to prove that its exports are not actually made in China,
Speaker 4: or at least that part of the supply chain is
Speaker 4: not strongly linked in a way that kind of mask
Speaker 4: the fact that these products essentially are originating in China.
Speaker 4: Is that fair?
Speaker 10: Yeah, And this is why the trade data next week
Speaker 10: will be so interesting. Vietnam has become a hub for companies,
Speaker 10: but I think fair to say for Chinese companies in particular.
Speaker 10: During the twenty eighteen twenty nineteen trade war, you had
Speaker 10: factories all along the supply chain casting around looking for
Speaker 10: places to start producing goods that were not in China
Speaker 10: that we're not going to be targeted so heavily and
Speaker 10: explicitly by the US, which is the biggest customer. So
Speaker 10: they went to a number of places, but Vietnam ended
Speaker 10: up being a big hub. And so the ties between
Speaker 10: the two countries, between China and Vietnam are quite close,
Speaker 10: with exchange of goods and materials and people as well workers.
Speaker 10: So there was a growing sense in the US that
Speaker 10: this kind of relationship would or could start to bypass
Speaker 10: those US rules, and in some cases they did.
Speaker 7: So.
Speaker 10: There was an example of Linoleum flooring that there was
Speaker 10: an investigation into in the US and they found that
Speaker 10: a lot of the components were actually coming from China.
Speaker 10: Because these items have to undergo it's called substantial transformation
Speaker 10: in this country in a second country before being shipped out.
Speaker 10: You can't just legally, at least in the trade realm,
Speaker 10: you can't just ship an item to a second location,
Speaker 10: stick a label on it, ship it to the US
Speaker 10: and say it's from Vietnam and not China. So there's
Speaker 10: sort of a debate about how much of trade is
Speaker 10: that is that kind of illegal re routing or transhipment.
Speaker 7: I've seen estimates.
Speaker 10: Anywhere from five to twenty percent, which is a lot
Speaker 10: when you think about the flow of trade, but it's
Speaker 10: a very difficult to prove. There are limited ways to
Speaker 10: sort of target it, even from an administration level. So
Speaker 10: that will form an interesting part of the negotiations because
Speaker 10: one thing I've been wondering is how are they going
Speaker 10: to address that. Will there be sort of more of
Speaker 10: an imperative for Vietnam and Vitamese companies to start investigating
Speaker 10: this stuff at the factory level, to supply some sort
Speaker 10: of documentation or heavier documentation. That's definitely one question in
Speaker 10: these talks that might be a bit different from other countries,
Speaker 10: and I think the trade data next week, and in fact,
Speaker 10: a lot of the figures we're getting next week, as
Speaker 10: you say, said, will provide a look at what's happening
Speaker 10: in global commerce. Because we had the Libration Day tariffs,
Speaker 10: we had the lifting of the Liberation Day tariffs, we
Speaker 10: had re routing across and front loading across Asia. We
Speaker 10: had last month double digit trade growth from Vietnam as
Speaker 10: well as other Southeast Asian economies. So if that's continuing
Speaker 10: to roll through, it's positive for Vietnam's economy, which is
Speaker 10: aiming for eight percent growth this year, which is pretty
Speaker 10: high target even though it's one of the fastest growing
Speaker 10: economies in the world. But can they still do that
Speaker 10: with this forty six percent tariff threat hanging over them?
Speaker 10: And can they do that when increasing trade and this
Speaker 10: over reliance on trade is just going to exacerbate this
Speaker 10: issue of the trade deficit from Trump's view.
Speaker 4: So recently, Vietnam and France agreed to boost cooperation in
Speaker 4: a couple of areas. I think defense security them. It
Speaker 4: kind of goes to the area of technology and cybersecurity,
Speaker 4: which you don't necessarily think of when you think of Vietnam. First,
Speaker 4: can we look at how Hanoi is going about finding
Speaker 4: new trade relationships given the tension that exists with the
Speaker 4: Trump administration.
Speaker 7: Yeah, it's interesting.
Speaker 10: So Vietnam's leader Tolam recently went on a tour of
Speaker 10: Central Asia and Russia, and part of this I think
Speaker 10: was aimed at sort of shoring up support diversifying. We
Speaker 10: had the Asyon Summit recently in the region, and the
Speaker 10: big takeaway from that was countries across the region, from
Speaker 10: Cambodia to Vietnam, Malaysia Anddonesia, they need to diversify their sources.
Speaker 10: And again, Vietnam is kind of a prime example of this.
Speaker 10: It's had such an incredible growth and development story. It's
Speaker 10: still a developing economy, but the household incomes and wealth
Speaker 10: has the poverty rate has fallen, really mirroring I think
Speaker 10: what happened in China during this manufacturing revolution. The question
Speaker 10: is now, can the government pivot from that model of
Speaker 10: growth to something more a consumer led but also more innovative,
Speaker 10: And that's where the technology and the AI comes in.
Speaker 10: And the question will be can they do that in
Speaker 10: an economy that's still quite controlled and is not necessarily
Speaker 10: one that's you know, when you look at the US,
Speaker 10: for example, and the export of services, a lot of
Speaker 10: that is in the tech sector. It's software, it's development,
Speaker 10: it's ingenuity and development. And the question is can Vietnam
Speaker 10: do that under its own government system, which is still
Speaker 10: quite closed and still quite controlled top down?
Speaker 4: Katya, Before I let you go, I have to ask
Speaker 4: about the golf resort that President Trump's real estate company
Speaker 4: is intending to build in Vietnam. Can you help me
Speaker 4: understand where things at the moment?
Speaker 10: This is such an interesting part of this entire story
Speaker 10: because the Trump organization is building a one point five
Speaker 10: billion dollar golf resort in the country. It's just outside
Speaker 10: of Hanoi, and it's happening at the same time as
Speaker 10: these trade negotiations, and the country is desperate to get
Speaker 10: a deal with the US, so it's very interesting timing.
Speaker 10: And critics have actually pointed out that this process has
Speaker 10: been fast tracked in the country. So usually there's a
Speaker 10: process in Vietnam for environmental standards, for getting community approval,
Speaker 10: and a lot of legal experts have pointed to that
Speaker 10: being bypassed or sped through. And this is pretty important
Speaker 10: for people who live there because it's a lot of
Speaker 10: farmland people, you know, individuals own this land. The fact
Speaker 10: that the government could be doing a process or making
Speaker 10: this process in a way that they normally wouldn't it
Speaker 10: is definitely raising some eyes. There's also, of course, in
Speaker 10: ho Chi Minh, there's a skyscraper also part of the
Speaker 10: Trump organization that they're trying to build. So there's sort
Speaker 10: of this real estate part to this as well, and
Speaker 10: of course Trump's connection to all of us.
Speaker 4: It's going to be very interesting to watch. Katya. Thank
Speaker 4: you so much for helping us understand more about what's
Speaker 4: happening these days in Vietnam as we look ahead to
Speaker 4: next week's trade data. Bloomberg's Katya Dmitrieva. Katya is Asia
Speaker 4: Economy reporter joining from Hong Kong, and I'm Doug Krisner.
Speaker 4: You can catch us weekdays for the Daybreak Asia podcast.
Speaker 4: It's available wherever you get your podcast. Tom.
Speaker 2: Thanks Doug, and that does it for this edition of
Speaker 2: Bloomberg day Break Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street Time for the latest on markets
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Tom Busby. Stay with us top stories and global
Speaker 2: business headlines are coming up right now.
Speaker 7: S