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

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Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.

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Speaker 2: President Trump's announcement on US tariffs is sending shockwaves through

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Speaker 2: global markets at this hour. Earlier, the President established a

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Speaker 2: minimum baseline tariff of ten percent now that will go

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Speaker 2: into effect at midnight on Saturday, and it will affect

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Speaker 2: roughly sixty nations with the largest trade imbalances with the US.

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Speaker 2: And the President also announced reciprocal tariffs at rates roughly

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Speaker 2: fifty percent below what foreign countries place on US imports,

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Speaker 2: and those reciprocal tariffs will go into effect April ninth

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Speaker 2: at twelve oh one am. For a closer look, I'm

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Speaker 2: joined now by Sean Donnan, senior economics reporter for Bloomberg News.

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Speaker 2: Sewn is on the line from Washington.

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Speaker 3: D C.

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Speaker 2: Thank you for making time for us. Sean, Let's begin

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Speaker 2: with this baseline tariff of ten percent. It'll happen on

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Speaker 2: all US imports. It goes into effect at midnight on Saturday.

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Speaker 2: Was that at all surprising?

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Speaker 4: Look? I think what was surprising overall about what we've

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Speaker 4: seen today is just the scale of these tariffs. Overall.

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Speaker 4: We will get that ten percent baseline tariff that goes

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Speaker 4: into effect on Saturday, and then a few days later,

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Speaker 4: on April ninth, we will get a second set of tariffs,

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Speaker 4: and these are what the President is calling reciprocal tariffs

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Speaker 4: that will apply to major trading partners like China, the

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Speaker 4: European Union, South Korea, Japan, all of those at much

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Speaker 4: higher rates than that ten percent.

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Speaker 2: So if you look at why this was much worse

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Speaker 2: than feared, is that because there were simply no exemptions.

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Speaker 4: I think that's that's it. There have been some exemptions.

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Speaker 4: Canada and Mexico seem to be exempted for the time being,

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Speaker 4: but that's only because they are facing their own twenty

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Speaker 4: five percent tariffs that were announced already by the President

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Speaker 4: a few weeks ago. And we're seeing some exemptions from

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Speaker 4: further tariffs from other sectors of the economy, like still

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Speaker 4: in aluminum that are the subject of separate tariffs again,

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Speaker 4: but we're not seeing anyone escape this new tariff wall

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Speaker 4: that the President is putting up around the United States.

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Speaker 2: So you mentioned a moment ago that these reciprocal tariffs

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Speaker 2: do not take effect until April ninth. What's the likelihood

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Speaker 2: in your view that there will be some type of

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Speaker 2: last minute negotiation that may ameliorate the threat, the final

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Speaker 2: threat of tariffs.

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Speaker 4: It's very hard to say. All we do know that

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Speaker 4: people at the White House were saying they were fielding

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Speaker 4: a lot of calls from a lot of countries looking

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Speaker 4: to get out of these tariffs. We expect that there

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Speaker 4: will be a lot of conversations going on, but the

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Speaker 4: President seems pretty clear that he wants to put these

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Speaker 4: tariffs in place and then start talking. And the question

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Speaker 4: is then how long do they stay in effect? And

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Speaker 4: a lot of people are already expecting these tariffs to

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Speaker 4: be in place for a long time. I think, look,

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Speaker 4: the bottom line here today is, and this is what

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Speaker 4: President Trump said he was setting out to do, is

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Speaker 4: he is ripping up global trade rules. He's changing the

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Speaker 4: global economic order, and he's imposing his will and his

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Speaker 4: tariffs on imports from everywhere right now. Yes, there will

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Speaker 4: be a lot of talks in the future, but whether

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Speaker 4: those tariffs go away anytime soon seems unlikely. The other

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Speaker 4: thing that we should mention is, you know, in the

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Speaker 4: lead up to this announcement, one of the things we

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Speaker 4: heard a lot from CEOs and investors was they wanted

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Speaker 4: an end to the uncertainty over trade policy and tariffs

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Speaker 4: coming out of Washington. I think a lot of people

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Speaker 4: tonight are thinking that this is only going to extend

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Speaker 4: the uncertain.

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Speaker 2: In the case of China, Treasury Secretary Besant was saying

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Speaker 2: earlier he that China will now see a fifty four

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Speaker 2: percent tariff, the thirty four percent announced today on top

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Speaker 2: of the existing twenty percent levy. That seems pretty dramatic.

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Speaker 2: Very quickly, last question before I let you go, the

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Speaker 2: probability of recession? Does it not seem a lot higher now?

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Speaker 4: I think if you read the notes coming out of economists,

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Speaker 4: and if you talk to economists tonight, all of them

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Speaker 4: will tell you that the odds not just of a

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Speaker 4: US recession, but of recessions and other parts of the

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Speaker 4: world have gone up significantly just in the last couple

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Speaker 4: of hours.

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Speaker 2: That is Sean Donnan, senior economics reporter for Bloomberg News.

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Speaker 2: For more on Wednesday's tariff announcement, we heard from Treasury

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Speaker 2: Secretary Scott Bessant. He spoke with Bloomberg's and Marie hor

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Speaker 2: Dern outside the White House.

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Speaker 5: We're going to have the baseline terriffs come into effect first.

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Speaker 5: Then they're reciprocal tariffs, a little bit more of a

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Speaker 5: different rate for each individual trading partner. Are you preparing

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Speaker 5: to negotiate with some of these trading partners before that

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Speaker 5: tariff frey comes into effect on April nine?

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Speaker 3: Well, I think there's been a lot of discussions, but

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Speaker 3: I think we're just going to have to wait and

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Speaker 3: see what would happen. What I would say and Marie,

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Speaker 3: I would advise none of the countries to panic. I

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Speaker 3: wouldn't try to retaliate, because as long as you don't retaliate,

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Speaker 3: this is the high end of the number, and I

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Speaker 3: think the market could have certainty that this is the

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Speaker 3: number barring retaliation. So we've got a ceiling, and then

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Speaker 3: we can see if there's a different floor.

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Speaker 5: So you sound like you're ready for a negotiation. A

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Speaker 5: number of these partners. Has the European Union, has China?

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Speaker 5: Has India? Have these countries reached out?

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Speaker 3: Well, they've all reached out, but it's going to be

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Speaker 3: up to President Trump to see what he wants to do.

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Speaker 3: I think the mindset might be to let things settle

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Speaker 3: for a while. Their terrifts or non tariff barriers have

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Speaker 3: been on a long time, So we'll see where it

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Speaker 3: goes from here.

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Speaker 5: When it comes to China, they have a much higher

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Speaker 5: rate on this list. On top of that, there's still

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Speaker 5: that twenty percent fentanyl tariff rate. Is all of this

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Speaker 5: coming together to be more than a fifty percent tariff

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Speaker 5: rate for Beijing?

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Speaker 3: Well, yes, I think it is, and I think it's

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Speaker 3: a combination of things. And you know again that I

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Speaker 3: think China said today that solving the fentanyl crisis depends

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Speaker 3: on taking off the fent mayl tariffs, and I'm pretty

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Speaker 3: sure that's not the way the sequencing's.

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Speaker 4: Going to work.

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Speaker 3: They're exporting the precursor chemicals and every every day, every week,

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Speaker 3: every month, Americans are dying and it's going to have

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Speaker 3: to stop.

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Speaker 5: When it comes to places like China, the President has

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Speaker 5: mentioned he's willing to even look at things like TikTok

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Speaker 5: to potentially do a negotiation. Then when it comes to tariffs,

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Speaker 5: I'm sure you're looking at things like the yu Wan.

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Speaker 5: What's on the table when it comes to this trade

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Speaker 5: realignment between Beijing and Washington.

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Speaker 3: Well, we have, we haven't started anything yet. We've been

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Speaker 3: busy with the with the tariffs, I've been busy. As

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Speaker 3: we talked about earlier, the tax bills going very well.

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Speaker 3: So I think that we will move toward the bilateral

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Speaker 3: relationship with China now that we've done the multilateral tariffs.

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Speaker 5: Plans for conversations or a trip to Beijing. Nothing eminent

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Speaker 5: when it comes to this negotiation. April ninth, these tariffs

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Speaker 5: come in place. Do you plan on having negotiations before

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Speaker 5: that date?

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Speaker 3: Again, I'm not part of the negotiation, so we'll see.

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Speaker 3: I am sure that they're going to be a lot

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Speaker 3: of calls. I just don't know if they're going to

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Speaker 3: be negotiations.

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Speaker 5: The President had this huge chart showing all of the

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Speaker 5: different rates. Canada and Mexico notably missing on that chart.

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Speaker 4: Why is that?

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Speaker 3: I'm not sure.

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Speaker 5: Sure, Okay, I imagine that it has to do potentially because

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Speaker 5: they're ready in negotiations previously with the twenty five percent.

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Speaker 5: I'm not sure if you saw the initial market reaction,

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Speaker 5: I haven't, so. Equity futures slid on the news. You

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Speaker 5: had talked about how we're in a detox period. Do

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Speaker 5: you feel that we're still in that period or are

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Speaker 5: you starting to get a little bit concerned.

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Speaker 3: Well, the detox period has nothing to do with the terrorists.

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Speaker 3: The detox period is off this incredible level of government

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Speaker 3: sp that We've had an unsustainable amount of fiscal stimulus

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Speaker 3: and looks that's got to stop. That's got to stop. So, yeah,

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Speaker 3: can we continue weaning ourselves off of that? And as

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Speaker 3: we see private or public sector borrowing go down, private

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Speaker 3: sector borrowing go up, public sector jobs come down, private

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Speaker 3: sector jobs go up? Is it going to be perfectly symmetrical? Note,

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Speaker 3: but we did see an increase of ten thousand manufacturing

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Speaker 3: jobs last.

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Speaker 5: Month, So it doesn't concern you today that during the

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Speaker 5: tariff announcement, equity futures sold off when initially they were

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Speaker 5: rallying when the President only announced a ten percent tariff base,

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Speaker 5: and then they fell when he announced the higher rates

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Speaker 5: for things like the European Union in China.

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Speaker 3: Yeah, and Marie, I've learned not to look what goes

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Speaker 3: on in after hours markets.

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Speaker 5: Okay, but since the peaks in February, stocks are down

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Speaker 5: eight percent. I think the Nasdaq from it's high most

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Speaker 5: recently is down twelve percent. Though these kind of this

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Speaker 5: kind of market downdraft so far this year is not

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Speaker 5: concerning you, well, look.

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Speaker 3: In my old business, I was very concerned about market movements,

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Speaker 3: and I'm trying to be Secretary of Treasury, not a

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Speaker 3: market commentator. What I would point out is that especially

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Speaker 3: the nas nasdeck peaked on Deep Seat Day. That so

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Speaker 3: that's a mag seven problem, not a MAGA problem.

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Speaker 5: Okay, so let's talk about what else you've been spending

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Speaker 5: a lot of your time doing. You have been up

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Speaker 5: on Capitol Hill constantly. You are really working on trying

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Speaker 5: to make sure that this administration can extend the Tax

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Speaker 5: Cuts and Jobs Act on top of that more tax cuts.

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Speaker 5: Right now, how are the conversations going in Congress?

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Speaker 3: Well, I actually think the most underreported story in Washington,

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Speaker 3: not by Bloomberg of course, is the incredible union enemy

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Speaker 3: unity amongst Republicans. And I think it's President Trump's leadership.

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Speaker 3: But Mike Johnson, with a very narrow margin, issued the

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Speaker 3: reconciliation instructions and then he also passed a clean continuing resolution.

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Speaker 3: On the Senate side, they are very attentive, and I

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Speaker 3: think they may have something done by this Saturday.

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Speaker 2: That is Treasury Secretary Scott Bessant, speaking earlier with Bloomberg's

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Speaker 2: and Marie hor Dern bringing it to you here on

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Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.

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Speaker 2: I'm Doug Chrisner. As we continue looking at the fallout

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Speaker 2: from the announcement on those US tariffs. We heard a

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Speaker 2: moment ago from Treasury Secretary Scott Bessant, and among the

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Speaker 2: points he made, China will now see a fifty four

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Speaker 2: percent tariff thirty four percent just announced that would be

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Speaker 2: on top of the existing twenty five That would be

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Speaker 2: on top of the existing twenty percent levy. For a

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Speaker 2: closer look, I'm joined now by Jenny Marsh, China Eco

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Speaker 2: Gov team leader. Jenny joins from our studios in Hong Kong.

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Speaker 2: It's always a pleasure. How do these tariffs kind of

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Speaker 2: measure against expectations?

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Speaker 1: Trump is coming in at the high end here. So

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Speaker 1: I've actually just said this takes the hike to fifty

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Speaker 1: four percent, but Bloomberg Economics says, actually, when you look

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Speaker 1: at the around thirteen percent overall tariffs that China have

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Speaker 1: already facing from the US pre Trump, actually they're looking

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Speaker 1: at more of a sort of sixty seven sixty eight

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Speaker 1: percent hike tariff right now. So that is above the

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Speaker 1: level that last year economists were saying, you know, would

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Speaker 1: decimate trade between the world's biggest economies after Trump was

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Speaker 1: sort of floating that sixty percent figure on the campaign trail.

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Speaker 1: So we've now exceeded that threshold. It's much bigger, I think,

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Speaker 1: or rather it's the top end of sort of what

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Speaker 1: people were thinking could be possible. But of course, the

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Speaker 1: wrinkle here is when economists last year were saying, okay,

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Speaker 1: a sixty percent tariff, which is decimate trade. I think

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Speaker 1: Bloomberg Economics said it would cut eighty percent of Chinese

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Speaker 1: exports to the US. They weren't thinking about an environment

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Speaker 1: where the whole world is being tariffed by Trump, and well,

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Speaker 1: China is sort of at the high end of that.

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Speaker 1: Everyone's facing tariffs now, so it isn't like importers in

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Speaker 1: the US can just sort of choose cheaper products from

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Speaker 1: elsewhere because everything suddenly got a lot more expensive.

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Speaker 2: Yeah, it seems like a full blown trade war at

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Speaker 2: this point. We can talk about whether China retaliates in

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Speaker 2: a moment. I thought it was very interesting that the

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Speaker 2: US has addressed a loophole. It allows packages worth up

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Speaker 2: to eight hundred dollars from either China or Hong Kong

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Speaker 2: to enter the US duty free. But now we were

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Speaker 2: told that's going to end May second, So it shouldn't

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Speaker 2: come as a surprise when you look at markets and

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Speaker 2: see a sell off in shares like Ali Baba ANDJD

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Speaker 2: dot Com. Was that a surprise at all?

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Speaker 1: Not a surprise because he talked about it in the

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Speaker 1: executive order on the first day, and of course they

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Speaker 1: tried sort of putting this break on the dominimous leepart

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Speaker 1: earlier that they had to sort of lift it because

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Speaker 1: logistically it's very hard to sort of logistics of how

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Speaker 1: you actually impose that. So I think that was pretty

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Speaker 1: expected and so now it's just a matter of okay,

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Speaker 1: how do you sort of how do small companies deal

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Speaker 1: with that? But when you add that in as well,

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Speaker 1: actually the tariffrate looks even higher than sixty seven percent.

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Speaker 2: I noticed that today the South China Morning Post was

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Speaker 2: reporting that President she is set to visit Vietnam, Malaysia,

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Speaker 2: Cambodia in mid April. Now we know that all of

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Speaker 2: those nations are being hit by this round of US tariffs.

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Speaker 2: Is this a part of some type of strategy that

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Speaker 2: she has maybe to reconfigure trade relationships.

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Speaker 1: Yeah, I think the itinerary is really interesting. I mean,

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Speaker 1: the first trip that she takes abroad every year always

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Speaker 1: carries huge symbolism. Last year he chose to go to France,

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Speaker 1: just the European Union is sort of way in these

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Speaker 1: big ev tariffs. This year he's picked Vietnam, Cambodia and Malaysia,

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Speaker 1: and you know, Vietnam and Malaysia sort of these two

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Speaker 1: big countries that have sort of been a key part

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Speaker 1: of the China plus one strategy of sort of rerouting

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Speaker 1: trade to the US to sort of skirt tariffs and

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Speaker 1: also now facing their own huge levees. I think Vietnam's

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Speaker 1: tariffs were higher than China's. Forty six percent was the

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Speaker 1: reciprocal figure announced today. So this is a big opportunity

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Speaker 1: for She, I think, to sort of go to these countries,

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Speaker 1: make trade deals, but also just sort of present China

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Speaker 1: as the grown up in the room. Vietnam have been

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Speaker 1: very carefully balancing its ties. You know, it had hosted

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Speaker 1: Biden in I think it was twenty twenty three and

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Speaker 1: then very quickly hosted shooting, paying for a visit and

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Speaker 1: sort of playing this sort of playing both sides equally.

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Speaker 1: And I think now this gives China an opportunity to say, well,

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Speaker 1: actually we are the best part and so this trip.

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Speaker 1: I think the timing of it is very interesting.

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Speaker 2: I'm noticing weakness in the currency, but I would imagine

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Speaker 2: that the BBOC does not want the Chinese you want

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Speaker 2: to weaken greatly in the face of this trade war.

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Speaker 2: Right now, offshore, I think we're trading around seven spot

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Speaker 2: three one seven zero against the greenback. Fair statement to

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Speaker 2: say that the PBOC is going to try to keep

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Speaker 2: the one as strong as it can under the circumstances.

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Speaker 1: Yeah, I think that's the strategy that we have seen

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Speaker 1: so far, and they don't want to invite any more

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Speaker 1: criticism as well from the Trump administration.

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Speaker 2: In terms of the negative impact that this is going

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Speaker 2: to have on Chinese economic growth, particularly as it relates

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Speaker 2: to the exporters. What are you hearing about that.

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Speaker 1: I think it's an interesting reaction this morning from economists

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Speaker 1: who are saying they're sort of seeing a hit on

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Speaker 1: average of sort of a one percentage point to GDP

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Speaker 1: growth this year, but they're not downgraded in their GDP

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Speaker 1: forecasts because I think everyone thinks China will still hit

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Speaker 1: five percent what's going to have to happen now is

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Speaker 1: a massive sort of spending stimulus to fill the whole

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Speaker 1: that is going to be left by the hit to

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Speaker 1: exports to the US, and I think that's sort of

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Speaker 1: what people are going to be looking to. There's the

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Speaker 1: external strategy of does she get on the phone with Trump?

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Speaker 1: I think he's extremely unlikely he's going to try and

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Speaker 1: call him before that eight point nine deadline. Is just

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Speaker 1: on how China does things. They're not going to respond

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Speaker 1: to strength with weakness. Much more likely they focus on

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Speaker 1: shoring up their alliances trade partnerships around the world, and

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Speaker 1: they've been very careful to save stimulus for exactly this moment,

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Speaker 1: and now they have the chance to sort of roll

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Speaker 1: out a big support package.

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Speaker 2: Jenny, I want you to help me look ahead to

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Speaker 2: the inflation data that we're going to get for China

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Speaker 2: in the coming week PPI CPI. We know the deflationary

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Speaker 2: pressures that the economy is facing. Is that going to

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Speaker 2: be underscored by these data points or is something beginning

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Speaker 2: to shift right now?

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Speaker 1: The CPI at the beginning of the year is pretty bad,

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Speaker 1: even when we take out the seasonal factors. It went

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Speaker 1: down to negative point seven. The survey is for it

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Speaker 1: to come back up to zero, but still hovering right

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Speaker 1: on that zero point. You know, China is still facing

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Speaker 1: a lot of deflationary pressures and this is only going

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Speaker 1: to make it worse. So I think we're not seeing

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Speaker 1: those go away. I mean that being said before today,

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Speaker 1: before Liberation Day, we has the economies upgrading their expectations

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Speaker 1: for China this year because the economy has been looking

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Speaker 1: pretty strong on other sort of aspects. The consumer is stirring,

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Speaker 1: these talks of the property market finally bottoming out. Animal

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Speaker 1: spirits are up. So if China can spend enough to

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Speaker 1: compensate for Trump's actions and then actually gets a bit

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Speaker 1: of a Trump bump from other countries, now the sort

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Speaker 1: of turned to China and away from the US, you know,

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Speaker 1: this might not actually be so bad for Beijing.

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Speaker 2: Do you think. Can you imagine, let me put it

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Speaker 2: that way, that sometime between now and the ninth of April,

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Speaker 2: when the retaliatory tariffs are set to kick in, that

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Speaker 2: they're will be some movement here between Washington and Beijing

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Speaker 2: in a positive direction.

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Speaker 1: I don't think there will be, is my hunch, because

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Speaker 1: I think you had one Ye saying just this week,

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Speaker 1: you know, in order to have talks, those the sort

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Speaker 1: of the unfair fentanyl tariffs have got to come off.

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Speaker 1: And when Senator Dane's left Beijing, he said, in order

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Speaker 1: to have talks, China has to stop the fental smuggling.

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Speaker 1: Neither of those things are going to happen in the

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Speaker 1: next sort of seven days, so I don't see. I

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Speaker 1: don't think there'll be sort of scrambles for last minute negotiations.

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Speaker 2: Jenny will leave it there. Thank you so much for

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Speaker 2: making time to chat with us. Jenny Marsh There she

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Speaker 2: is China ecogov team leader, joining from Hong Kong here

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Speaker 2: on the Daybreak Asia podcast. Thanks for listening to today's

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Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple,

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Speaker 2: Spotifyomberg Podcast YouTube channel, or anywhere else you listen. Join

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Speaker 2: us again tomorrow for insight on the market moves from

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Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and

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Speaker 2: this is Bloomberg