Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner.
Speaker 2: President Trump's announcement on US tariffs is sending shockwaves through
Speaker 2: global markets at this hour. Earlier, the President established a
Speaker 2: minimum baseline tariff of ten percent now that will go
Speaker 2: into effect at midnight on Saturday, and it will affect
Speaker 2: roughly sixty nations with the largest trade imbalances with the US.
Speaker 2: And the President also announced reciprocal tariffs at rates roughly
Speaker 2: fifty percent below what foreign countries place on US imports,
Speaker 2: and those reciprocal tariffs will go into effect April ninth
Speaker 2: at twelve oh one am. For a closer look, I'm
Speaker 2: joined now by Sean Donnan, senior economics reporter for Bloomberg News.
Speaker 2: Sewn is on the line from Washington.
Speaker 3: D C.
Speaker 2: Thank you for making time for us. Sean, Let's begin
Speaker 2: with this baseline tariff of ten percent. It'll happen on
Speaker 2: all US imports. It goes into effect at midnight on Saturday.
Speaker 2: Was that at all surprising?
Speaker 4: Look? I think what was surprising overall about what we've
Speaker 4: seen today is just the scale of these tariffs. Overall.
Speaker 4: We will get that ten percent baseline tariff that goes
Speaker 4: into effect on Saturday, and then a few days later,
Speaker 4: on April ninth, we will get a second set of tariffs,
Speaker 4: and these are what the President is calling reciprocal tariffs
Speaker 4: that will apply to major trading partners like China, the
Speaker 4: European Union, South Korea, Japan, all of those at much
Speaker 4: higher rates than that ten percent.
Speaker 2: So if you look at why this was much worse
Speaker 2: than feared, is that because there were simply no exemptions.
Speaker 4: I think that's that's it. There have been some exemptions.
Speaker 4: Canada and Mexico seem to be exempted for the time being,
Speaker 4: but that's only because they are facing their own twenty
Speaker 4: five percent tariffs that were announced already by the President
Speaker 4: a few weeks ago. And we're seeing some exemptions from
Speaker 4: further tariffs from other sectors of the economy, like still
Speaker 4: in aluminum that are the subject of separate tariffs again,
Speaker 4: but we're not seeing anyone escape this new tariff wall
Speaker 4: that the President is putting up around the United States.
Speaker 2: So you mentioned a moment ago that these reciprocal tariffs
Speaker 2: do not take effect until April ninth. What's the likelihood
Speaker 2: in your view that there will be some type of
Speaker 2: last minute negotiation that may ameliorate the threat, the final
Speaker 2: threat of tariffs.
Speaker 4: It's very hard to say. All we do know that
Speaker 4: people at the White House were saying they were fielding
Speaker 4: a lot of calls from a lot of countries looking
Speaker 4: to get out of these tariffs. We expect that there
Speaker 4: will be a lot of conversations going on, but the
Speaker 4: President seems pretty clear that he wants to put these
Speaker 4: tariffs in place and then start talking. And the question
Speaker 4: is then how long do they stay in effect? And
Speaker 4: a lot of people are already expecting these tariffs to
Speaker 4: be in place for a long time. I think, look,
Speaker 4: the bottom line here today is, and this is what
Speaker 4: President Trump said he was setting out to do, is
Speaker 4: he is ripping up global trade rules. He's changing the
Speaker 4: global economic order, and he's imposing his will and his
Speaker 4: tariffs on imports from everywhere right now. Yes, there will
Speaker 4: be a lot of talks in the future, but whether
Speaker 4: those tariffs go away anytime soon seems unlikely. The other
Speaker 4: thing that we should mention is, you know, in the
Speaker 4: lead up to this announcement, one of the things we
Speaker 4: heard a lot from CEOs and investors was they wanted
Speaker 4: an end to the uncertainty over trade policy and tariffs
Speaker 4: coming out of Washington. I think a lot of people
Speaker 4: tonight are thinking that this is only going to extend
Speaker 4: the uncertain.
Speaker 2: In the case of China, Treasury Secretary Besant was saying
Speaker 2: earlier he that China will now see a fifty four
Speaker 2: percent tariff, the thirty four percent announced today on top
Speaker 2: of the existing twenty percent levy. That seems pretty dramatic.
Speaker 2: Very quickly, last question before I let you go, the
Speaker 2: probability of recession? Does it not seem a lot higher now?
Speaker 4: I think if you read the notes coming out of economists,
Speaker 4: and if you talk to economists tonight, all of them
Speaker 4: will tell you that the odds not just of a
Speaker 4: US recession, but of recessions and other parts of the
Speaker 4: world have gone up significantly just in the last couple
Speaker 4: of hours.
Speaker 2: That is Sean Donnan, senior economics reporter for Bloomberg News.
Speaker 2: For more on Wednesday's tariff announcement, we heard from Treasury
Speaker 2: Secretary Scott Bessant. He spoke with Bloomberg's and Marie hor
Speaker 2: Dern outside the White House.
Speaker 5: We're going to have the baseline terriffs come into effect first.
Speaker 5: Then they're reciprocal tariffs, a little bit more of a
Speaker 5: different rate for each individual trading partner. Are you preparing
Speaker 5: to negotiate with some of these trading partners before that
Speaker 5: tariff frey comes into effect on April nine?
Speaker 3: Well, I think there's been a lot of discussions, but
Speaker 3: I think we're just going to have to wait and
Speaker 3: see what would happen. What I would say and Marie,
Speaker 3: I would advise none of the countries to panic. I
Speaker 3: wouldn't try to retaliate, because as long as you don't retaliate,
Speaker 3: this is the high end of the number, and I
Speaker 3: think the market could have certainty that this is the
Speaker 3: number barring retaliation. So we've got a ceiling, and then
Speaker 3: we can see if there's a different floor.
Speaker 5: So you sound like you're ready for a negotiation. A
Speaker 5: number of these partners. Has the European Union, has China?
Speaker 5: Has India? Have these countries reached out?
Speaker 3: Well, they've all reached out, but it's going to be
Speaker 3: up to President Trump to see what he wants to do.
Speaker 3: I think the mindset might be to let things settle
Speaker 3: for a while. Their terrifts or non tariff barriers have
Speaker 3: been on a long time, So we'll see where it
Speaker 3: goes from here.
Speaker 5: When it comes to China, they have a much higher
Speaker 5: rate on this list. On top of that, there's still
Speaker 5: that twenty percent fentanyl tariff rate. Is all of this
Speaker 5: coming together to be more than a fifty percent tariff
Speaker 5: rate for Beijing?
Speaker 3: Well, yes, I think it is, and I think it's
Speaker 3: a combination of things. And you know again that I
Speaker 3: think China said today that solving the fentanyl crisis depends
Speaker 3: on taking off the fent mayl tariffs, and I'm pretty
Speaker 3: sure that's not the way the sequencing's.
Speaker 4: Going to work.
Speaker 3: They're exporting the precursor chemicals and every every day, every week,
Speaker 3: every month, Americans are dying and it's going to have
Speaker 3: to stop.
Speaker 5: When it comes to places like China, the President has
Speaker 5: mentioned he's willing to even look at things like TikTok
Speaker 5: to potentially do a negotiation. Then when it comes to tariffs,
Speaker 5: I'm sure you're looking at things like the yu Wan.
Speaker 5: What's on the table when it comes to this trade
Speaker 5: realignment between Beijing and Washington.
Speaker 3: Well, we have, we haven't started anything yet. We've been
Speaker 3: busy with the with the tariffs, I've been busy. As
Speaker 3: we talked about earlier, the tax bills going very well.
Speaker 3: So I think that we will move toward the bilateral
Speaker 3: relationship with China now that we've done the multilateral tariffs.
Speaker 5: Plans for conversations or a trip to Beijing. Nothing eminent
Speaker 5: when it comes to this negotiation. April ninth, these tariffs
Speaker 5: come in place. Do you plan on having negotiations before
Speaker 5: that date?
Speaker 3: Again, I'm not part of the negotiation, so we'll see.
Speaker 3: I am sure that they're going to be a lot
Speaker 3: of calls. I just don't know if they're going to
Speaker 3: be negotiations.
Speaker 5: The President had this huge chart showing all of the
Speaker 5: different rates. Canada and Mexico notably missing on that chart.
Speaker 4: Why is that?
Speaker 3: I'm not sure.
Speaker 5: Sure, Okay, I imagine that it has to do potentially because
Speaker 5: they're ready in negotiations previously with the twenty five percent.
Speaker 5: I'm not sure if you saw the initial market reaction,
Speaker 5: I haven't, so. Equity futures slid on the news. You
Speaker 5: had talked about how we're in a detox period. Do
Speaker 5: you feel that we're still in that period or are
Speaker 5: you starting to get a little bit concerned.
Speaker 3: Well, the detox period has nothing to do with the terrorists.
Speaker 3: The detox period is off this incredible level of government
Speaker 3: sp that We've had an unsustainable amount of fiscal stimulus
Speaker 3: and looks that's got to stop. That's got to stop. So, yeah,
Speaker 3: can we continue weaning ourselves off of that? And as
Speaker 3: we see private or public sector borrowing go down, private
Speaker 3: sector borrowing go up, public sector jobs come down, private
Speaker 3: sector jobs go up? Is it going to be perfectly symmetrical? Note,
Speaker 3: but we did see an increase of ten thousand manufacturing
Speaker 3: jobs last.
Speaker 5: Month, So it doesn't concern you today that during the
Speaker 5: tariff announcement, equity futures sold off when initially they were
Speaker 5: rallying when the President only announced a ten percent tariff base,
Speaker 5: and then they fell when he announced the higher rates
Speaker 5: for things like the European Union in China.
Speaker 3: Yeah, and Marie, I've learned not to look what goes
Speaker 3: on in after hours markets.
Speaker 5: Okay, but since the peaks in February, stocks are down
Speaker 5: eight percent. I think the Nasdaq from it's high most
Speaker 5: recently is down twelve percent. Though these kind of this
Speaker 5: kind of market downdraft so far this year is not
Speaker 5: concerning you, well, look.
Speaker 3: In my old business, I was very concerned about market movements,
Speaker 3: and I'm trying to be Secretary of Treasury, not a
Speaker 3: market commentator. What I would point out is that especially
Speaker 3: the nas nasdeck peaked on Deep Seat Day. That so
Speaker 3: that's a mag seven problem, not a MAGA problem.
Speaker 5: Okay, so let's talk about what else you've been spending
Speaker 5: a lot of your time doing. You have been up
Speaker 5: on Capitol Hill constantly. You are really working on trying
Speaker 5: to make sure that this administration can extend the Tax
Speaker 5: Cuts and Jobs Act on top of that more tax cuts.
Speaker 5: Right now, how are the conversations going in Congress?
Speaker 3: Well, I actually think the most underreported story in Washington,
Speaker 3: not by Bloomberg of course, is the incredible union enemy
Speaker 3: unity amongst Republicans. And I think it's President Trump's leadership.
Speaker 3: But Mike Johnson, with a very narrow margin, issued the
Speaker 3: reconciliation instructions and then he also passed a clean continuing resolution.
Speaker 3: On the Senate side, they are very attentive, and I
Speaker 3: think they may have something done by this Saturday.
Speaker 2: That is Treasury Secretary Scott Bessant, speaking earlier with Bloomberg's
Speaker 2: and Marie hor Dern bringing it to you here on
Speaker 2: the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast.
Speaker 2: I'm Doug Chrisner. As we continue looking at the fallout
Speaker 2: from the announcement on those US tariffs. We heard a
Speaker 2: moment ago from Treasury Secretary Scott Bessant, and among the
Speaker 2: points he made, China will now see a fifty four
Speaker 2: percent tariff thirty four percent just announced that would be
Speaker 2: on top of the existing twenty five That would be
Speaker 2: on top of the existing twenty percent levy. For a
Speaker 2: closer look, I'm joined now by Jenny Marsh, China Eco
Speaker 2: Gov team leader. Jenny joins from our studios in Hong Kong.
Speaker 2: It's always a pleasure. How do these tariffs kind of
Speaker 2: measure against expectations?
Speaker 1: Trump is coming in at the high end here. So
Speaker 1: I've actually just said this takes the hike to fifty
Speaker 1: four percent, but Bloomberg Economics says, actually, when you look
Speaker 1: at the around thirteen percent overall tariffs that China have
Speaker 1: already facing from the US pre Trump, actually they're looking
Speaker 1: at more of a sort of sixty seven sixty eight
Speaker 1: percent hike tariff right now. So that is above the
Speaker 1: level that last year economists were saying, you know, would
Speaker 1: decimate trade between the world's biggest economies after Trump was
Speaker 1: sort of floating that sixty percent figure on the campaign trail.
Speaker 1: So we've now exceeded that threshold. It's much bigger, I think,
Speaker 1: or rather it's the top end of sort of what
Speaker 1: people were thinking could be possible. But of course, the
Speaker 1: wrinkle here is when economists last year were saying, okay,
Speaker 1: a sixty percent tariff, which is decimate trade. I think
Speaker 1: Bloomberg Economics said it would cut eighty percent of Chinese
Speaker 1: exports to the US. They weren't thinking about an environment
Speaker 1: where the whole world is being tariffed by Trump, and well,
Speaker 1: China is sort of at the high end of that.
Speaker 1: Everyone's facing tariffs now, so it isn't like importers in
Speaker 1: the US can just sort of choose cheaper products from
Speaker 1: elsewhere because everything suddenly got a lot more expensive.
Speaker 2: Yeah, it seems like a full blown trade war at
Speaker 2: this point. We can talk about whether China retaliates in
Speaker 2: a moment. I thought it was very interesting that the
Speaker 2: US has addressed a loophole. It allows packages worth up
Speaker 2: to eight hundred dollars from either China or Hong Kong
Speaker 2: to enter the US duty free. But now we were
Speaker 2: told that's going to end May second, So it shouldn't
Speaker 2: come as a surprise when you look at markets and
Speaker 2: see a sell off in shares like Ali Baba ANDJD
Speaker 2: dot Com. Was that a surprise at all?
Speaker 1: Not a surprise because he talked about it in the
Speaker 1: executive order on the first day, and of course they
Speaker 1: tried sort of putting this break on the dominimous leepart
Speaker 1: earlier that they had to sort of lift it because
Speaker 1: logistically it's very hard to sort of logistics of how
Speaker 1: you actually impose that. So I think that was pretty
Speaker 1: expected and so now it's just a matter of okay,
Speaker 1: how do you sort of how do small companies deal
Speaker 1: with that? But when you add that in as well,
Speaker 1: actually the tariffrate looks even higher than sixty seven percent.
Speaker 2: I noticed that today the South China Morning Post was
Speaker 2: reporting that President she is set to visit Vietnam, Malaysia,
Speaker 2: Cambodia in mid April. Now we know that all of
Speaker 2: those nations are being hit by this round of US tariffs.
Speaker 2: Is this a part of some type of strategy that
Speaker 2: she has maybe to reconfigure trade relationships.
Speaker 1: Yeah, I think the itinerary is really interesting. I mean,
Speaker 1: the first trip that she takes abroad every year always
Speaker 1: carries huge symbolism. Last year he chose to go to France,
Speaker 1: just the European Union is sort of way in these
Speaker 1: big ev tariffs. This year he's picked Vietnam, Cambodia and Malaysia,
Speaker 1: and you know, Vietnam and Malaysia sort of these two
Speaker 1: big countries that have sort of been a key part
Speaker 1: of the China plus one strategy of sort of rerouting
Speaker 1: trade to the US to sort of skirt tariffs and
Speaker 1: also now facing their own huge levees. I think Vietnam's
Speaker 1: tariffs were higher than China's. Forty six percent was the
Speaker 1: reciprocal figure announced today. So this is a big opportunity
Speaker 1: for She, I think, to sort of go to these countries,
Speaker 1: make trade deals, but also just sort of present China
Speaker 1: as the grown up in the room. Vietnam have been
Speaker 1: very carefully balancing its ties. You know, it had hosted
Speaker 1: Biden in I think it was twenty twenty three and
Speaker 1: then very quickly hosted shooting, paying for a visit and
Speaker 1: sort of playing this sort of playing both sides equally.
Speaker 1: And I think now this gives China an opportunity to say, well,
Speaker 1: actually we are the best part and so this trip.
Speaker 1: I think the timing of it is very interesting.
Speaker 2: I'm noticing weakness in the currency, but I would imagine
Speaker 2: that the BBOC does not want the Chinese you want
Speaker 2: to weaken greatly in the face of this trade war.
Speaker 2: Right now, offshore, I think we're trading around seven spot
Speaker 2: three one seven zero against the greenback. Fair statement to
Speaker 2: say that the PBOC is going to try to keep
Speaker 2: the one as strong as it can under the circumstances.
Speaker 1: Yeah, I think that's the strategy that we have seen
Speaker 1: so far, and they don't want to invite any more
Speaker 1: criticism as well from the Trump administration.
Speaker 2: In terms of the negative impact that this is going
Speaker 2: to have on Chinese economic growth, particularly as it relates
Speaker 2: to the exporters. What are you hearing about that.
Speaker 1: I think it's an interesting reaction this morning from economists
Speaker 1: who are saying they're sort of seeing a hit on
Speaker 1: average of sort of a one percentage point to GDP
Speaker 1: growth this year, but they're not downgraded in their GDP
Speaker 1: forecasts because I think everyone thinks China will still hit
Speaker 1: five percent what's going to have to happen now is
Speaker 1: a massive sort of spending stimulus to fill the whole
Speaker 1: that is going to be left by the hit to
Speaker 1: exports to the US, and I think that's sort of
Speaker 1: what people are going to be looking to. There's the
Speaker 1: external strategy of does she get on the phone with Trump?
Speaker 1: I think he's extremely unlikely he's going to try and
Speaker 1: call him before that eight point nine deadline. Is just
Speaker 1: on how China does things. They're not going to respond
Speaker 1: to strength with weakness. Much more likely they focus on
Speaker 1: shoring up their alliances trade partnerships around the world, and
Speaker 1: they've been very careful to save stimulus for exactly this moment,
Speaker 1: and now they have the chance to sort of roll
Speaker 1: out a big support package.
Speaker 2: Jenny, I want you to help me look ahead to
Speaker 2: the inflation data that we're going to get for China
Speaker 2: in the coming week PPI CPI. We know the deflationary
Speaker 2: pressures that the economy is facing. Is that going to
Speaker 2: be underscored by these data points or is something beginning
Speaker 2: to shift right now?
Speaker 1: The CPI at the beginning of the year is pretty bad,
Speaker 1: even when we take out the seasonal factors. It went
Speaker 1: down to negative point seven. The survey is for it
Speaker 1: to come back up to zero, but still hovering right
Speaker 1: on that zero point. You know, China is still facing
Speaker 1: a lot of deflationary pressures and this is only going
Speaker 1: to make it worse. So I think we're not seeing
Speaker 1: those go away. I mean that being said before today,
Speaker 1: before Liberation Day, we has the economies upgrading their expectations
Speaker 1: for China this year because the economy has been looking
Speaker 1: pretty strong on other sort of aspects. The consumer is stirring,
Speaker 1: these talks of the property market finally bottoming out. Animal
Speaker 1: spirits are up. So if China can spend enough to
Speaker 1: compensate for Trump's actions and then actually gets a bit
Speaker 1: of a Trump bump from other countries, now the sort
Speaker 1: of turned to China and away from the US, you know,
Speaker 1: this might not actually be so bad for Beijing.
Speaker 2: Do you think. Can you imagine, let me put it
Speaker 2: that way, that sometime between now and the ninth of April,
Speaker 2: when the retaliatory tariffs are set to kick in, that
Speaker 2: they're will be some movement here between Washington and Beijing
Speaker 2: in a positive direction.
Speaker 1: I don't think there will be, is my hunch, because
Speaker 1: I think you had one Ye saying just this week,
Speaker 1: you know, in order to have talks, those the sort
Speaker 1: of the unfair fentanyl tariffs have got to come off.
Speaker 1: And when Senator Dane's left Beijing, he said, in order
Speaker 1: to have talks, China has to stop the fental smuggling.
Speaker 1: Neither of those things are going to happen in the
Speaker 1: next sort of seven days, so I don't see. I
Speaker 1: don't think there'll be sort of scrambles for last minute negotiations.
Speaker 2: Jenny will leave it there. Thank you so much for
Speaker 2: making time to chat with us. Jenny Marsh There she
Speaker 2: is China ecogov team leader, joining from Hong Kong here
Speaker 2: on the Daybreak Asia podcast. Thanks for listening to today's
Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,
Speaker 2: we look at the story shaping markets, finance, and geopolitics
Speaker 2: in the Asia Pacific. You can find us on Apple,
Speaker 2: Spotifyomberg Podcast YouTube channel, or anywhere else you listen. Join
Speaker 2: us again tomorrow for insight on the market moves from
Speaker 2: Hong Kong to Singapore and Australia. I'm Doug Prisoner and
Speaker 2: this is Bloomberg