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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 Chrissner.

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Speaker 2: On today's episode, we'll look at how Chinese manufacturers are

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Speaker 2: using TikTok influencers in a clever ploy to avoid US tariffs.

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Speaker 2: In a moment, we'll speak with Colin Murphy. He is

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Speaker 2: China ecogov reporter for Bloomberg News in Beijing. But we

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Speaker 2: begin this morning with markets with few signs of progress

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Speaker 2: in negotiations on trade. The US equity market drifted lower.

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Speaker 2: We had the S and P five hundred dropping about

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Speaker 2: two tens to one percent. Joining me now is Ken Stern.

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Speaker 2: He is president of Leedo Advisors. Ken joins me here

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Speaker 2: in the Bloomberg Interactive Broker Studio in New York. Thank

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Speaker 2: you for joining us. I'm curious to get your sense

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Speaker 2: of where we are right now in terms of the

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Speaker 2: price action in the market. We're up one day, we're

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Speaker 2: down the next. I think we can agree we've seen

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Speaker 2: a lot of volatility, and I'm curious as to how

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Speaker 2: you're coping with this. How are you understanding things right now?

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Speaker 3: Yeah, well, I feel like we've seen this movie and

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Speaker 3: We're right in the middle of it, and I think

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Speaker 3: making any knee jerk reaction is probably not the best idea.

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Speaker 3: The fact of the matter is, though, is what you

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Speaker 3: need to look at as the macro, and the macro

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Speaker 3: is is when something comes into your purview, you have

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Speaker 3: to look at it agnostic of some of the microeconomics

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Speaker 3: that's going on. I think we have more behavioral economics

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Speaker 3: happening than micro.

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Speaker 2: We got some data points today that I'd like to

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Speaker 2: explore if we can. The first piece comes from JP

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Speaker 2: Morgan Chase, and it indicates that through Monday's Clothes, retail

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Speaker 2: investors have pumped in about seventeen point seven billion dollars

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Speaker 2: into equities since President Trump unveiled those tariffs. So retail

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Speaker 2: investors seem to be ignoring some of the warnings coming

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Speaker 2: from the street. Then, if you look at the latest

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Speaker 2: fund manager survey from Bank of America, economic prospects the

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Speaker 2: most negative in about three DECs. So it seems as

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Speaker 2: though there is a bit of bifurcation happening. What the

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Speaker 2: retail crowd is expecting versus what the institutional crowd is expecting.

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Speaker 2: How are you making sense of that?

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Speaker 3: But I'd have to really understand what the baseline for

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Speaker 3: what money comes in from retail investors anyways, because that

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Speaker 3: actually might not be the greatest data point and the

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Speaker 3: greatest stamp. The fact is, though, is we tend to

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Speaker 3: see a knee jerk reaction and then it all kind

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Speaker 3: of plays out. And if you look at it pragmatically

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Speaker 3: and you stop trying to read tea leaves in the

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Speaker 3: short term, if there is an economic slowdown, earnings will contract.

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Speaker 3: You could argue multiples are high. You could argue if

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Speaker 3: that's the case, that perhaps we're going to first before

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Speaker 3: earnings go down, we're going to sell. I mean, consumer

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Speaker 3: sentiment you just said is really low, and that tends

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Speaker 3: to be on a contraying perspective, a leading indicator. So

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Speaker 3: if you look at this, you don't want to time

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Speaker 3: the market. You might want to have some protections in.

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Speaker 3: You might want to hedge, you may want to think

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Speaker 3: about protecting your downside.

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Speaker 1: But you don't have the interest rate concerns that we

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Speaker 1: had anymore.

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Speaker 3: Even if there's potential inflation, I don't think even people

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Speaker 3: are talking stagflation, although it's popular to talk about it.

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Speaker 2: It's a possibility.

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Speaker 1: It is a possibility.

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Speaker 2: So if a client comes to you on a day

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Speaker 2: when they see Apple down ten percent and they say,

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Speaker 2: I'd like to take a position, would you advise them

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Speaker 2: to hold off? Do you think there's more downside another

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Speaker 2: maybe leg lower for Apple or a name like that.

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Speaker 1: That's a really interesting question.

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Speaker 3: What I'd say is buying any one stock, as much

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Speaker 3: as we love Apple or any of the others, is

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Speaker 3: still gambling compared to building out an incredible portfolio. That said,

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Speaker 3: if you like Apple and Apple is in your purview

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Speaker 3: and it hits that, I don't think you should have

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Speaker 3: your behaviors impact what your price target is, you may

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Speaker 3: want to hedge it a little bit.

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Speaker 1: But the fact of the.

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Speaker 3: Matter is is do you really think that the long

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Speaker 3: term trend is broken? Do you think we're going to

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Speaker 3: stop buying smartphones? Do you think we're going to stop

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Speaker 3: traveling completely? Do you think that the mobility of the world,

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Speaker 3: United States included is done? Do you think we're going

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Speaker 3: to stop utilizing healthcare? Recessions? Contract and they usually provide

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Speaker 3: at least if you believe in a long term market cycle,

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Speaker 3: you should provide a really great entry point.

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Speaker 2: But a lot of the conversation is around a major

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Speaker 2: reordering of global trade, questions about dollar as a reserve currency,

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Speaker 2: a real level of risk now in the treasury market.

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Speaker 2: So we're in a new piece of territory here totally.

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Speaker 3: And I don't want to minimize that because that is

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Speaker 3: exceedingly important. But if I would have told you a

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Speaker 3: year and a half ago, hey, rates are going up

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Speaker 3: eleven times, what would you do with your money? It

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Speaker 3: probably wouldn't have been long in the market. What we've

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Speaker 3: contracted now, what most of last year? But still, I

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Speaker 3: mean when you look you over year or year over

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Speaker 3: the last two years, we haven't contracted to such a

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Speaker 3: point that you're saying that we've really like thrown the

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Speaker 3: baby with the bathwater out.

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Speaker 2: So if you're constructing a portfolio, then what's wrong with

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Speaker 2: buying the S and P outright?

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Speaker 1: I don't think there's anything wrong with it.

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Speaker 3: In fact, I think in many cases you know, fees

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Speaker 3: is an enemy and performance and so if you can

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Speaker 3: buy an efficient SMP portfolio and you like the entry point,

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Speaker 3: I think you should. But I don't think it should

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Speaker 3: be an all or none. I think that you should

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Speaker 3: be staging in your buys and averaging.

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Speaker 2: What about being more diversified globally in this environment right now, especially,

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Speaker 2: I don't know whether it's Asia Europe, whether that still

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Speaker 2: looks attractive, I don't know. I mean, that's been a

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Speaker 2: pretty phenomenal run that we have seen in Europe so

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Speaker 2: far this year. But do you want to be diversified

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Speaker 2: globally right now?

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Speaker 1: That is a very interesting question.

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Speaker 3: So I think that you have to look at the

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Speaker 3: overall growth prospects. And we've been talking about the rest

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Speaker 3: of the world being a great value you for many,

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Speaker 3: many years. And if you remember the beginning of this year,

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Speaker 3: the world economies, in the world markets started out in

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Speaker 3: a pretty good fashion, and now here we are in

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Speaker 3: this turmoil. I think it's much more important right now

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Speaker 3: to not be making major major bets, and I think

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Speaker 3: you should be looking at how this all unfolds. If

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Speaker 3: you're going to step in, I think you should step

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Speaker 3: in lightly.

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Speaker 2: It's a dynamic environment, you know, and maybe a little

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Speaker 2: mercurial too. We heard from Nvidia after the bell, the

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Speaker 2: chip maker saying that the government is going to require

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Speaker 2: a license for Nvidia to export one of its chips,

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Speaker 2: the H twenty, to China, and as a result of

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Speaker 2: this first quarter charge of around five and a half

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Speaker 2: billion dollars associated with this H twenty product. This really

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Speaker 2: goes to the tension between the US and China on

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Speaker 2: artificial intelligence. How are you playing AI as a theme?

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Speaker 2: I don't think I've met anyone recently that is not

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Speaker 2: invested in this as a theme for the four cs future.

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Speaker 2: How they are exposed as a different story.

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Speaker 3: Every time we've seen these new ideas come out, you

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Speaker 3: see all these great investments and all these great markets,

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Speaker 3: and then it starts to consolidate and starts to consolidate

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Speaker 3: and starts to consolidate. A couple months ago, before the

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Speaker 3: tariff conversation, we were talking about data centers and chips

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Speaker 3: and we were talking about changing.

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Speaker 2: The world power too, right power.

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Speaker 3: The question is has that theme changed? Have we really

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Speaker 3: changed the dynamics so much that that has changed? And

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Speaker 3: so whether you mentioned one chip stock over another chip stock,

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Speaker 3: the question is is do you believe in the secular

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Speaker 3: trend of AI? And I think unless you have such

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Speaker 3: incredible insight on one stock over another, you've got to

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Speaker 3: look at the sectors and the indexes and decide how

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Speaker 3: much you want to be.

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Speaker 1: Over or underweight.

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Speaker 2: So you've been in the markets for a while. I

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Speaker 2: would assume have you ever seen a period like this

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Speaker 2: that is kind of giving you a little bit of

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Speaker 2: an analogue here? How you may approach what we're dealing

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Speaker 2: with now? Is it like the GFC? Is it like

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Speaker 2: what we had around COVID? I mean, how are you

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Speaker 2: making sense of this relative to history?

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Speaker 1: COVID was an anomaly, right? I mean here we.

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Speaker 3: Had this shelter in place order we all of a sudden,

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Speaker 3: the markets, you know, shot first, we went straight down,

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Speaker 3: and then there was within a couple of days a

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Speaker 3: government response, and that stabilization caused for the markets to

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Speaker 3: v back up, So you had to point down and

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Speaker 3: straight back here. I mean, we talk about a trade war.

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Speaker 3: It usually doesn't abate overnight. Usually there's a lot of

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Speaker 3: give and take. So I think to have this idea

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Speaker 3: that we're going to have a v formation would be

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Speaker 3: something more of an outlier, you know, maybe it's a.

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Speaker 2: You Okay, so the Fed, I'm sure as a part

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Speaker 2: of your thinking about this, what are your expectations here?

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Speaker 2: How is the FED going to handle this situation? We

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Speaker 2: talked about stagflation as being apoon possibility. If that's the case,

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Speaker 2: the FEDS on the sidelines for the foreseeable future, may

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Speaker 2: be more concerned about inflation than growth.

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Speaker 3: Yeah, they're really in a pickle, right, I mean they're

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Speaker 3: supposed to be agnostic to what directive of we've given them.

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Speaker 3: Inflation is still higher than their target, So if inflation

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Speaker 3: is still harder than their target, they're not supposed to

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Speaker 3: be ebbing and flowing on the whims of the market.

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Speaker 3: So they're in a pickle. However, do you really think

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Speaker 3: rates go higher today? It's a probability question. Do you

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Speaker 3: think rates stay the same? Do you think rates go down?

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Speaker 3: And when you start thinking of those probabilities, it may

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Speaker 3: not be today or tomorrow. But what usually happens is

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Speaker 3: there is a tomorrow, the sun will rise, there will

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Speaker 3: be some kind of negotiations. There's negative to positive. I mean,

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Speaker 3: we don't like what's going on. I mean, we were

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Speaker 3: all surprised in the bond trading. We were all surprised

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Speaker 3: in the currency trading. You know, could the US dollar

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Speaker 3: be you know, knocked off its blocks as a world

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Speaker 3: say safety currency. There's some real questions that we need

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Speaker 3: to get through.

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Speaker 2: So when you have conversations with clients, number of phone

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Speaker 2: calls that happen during the course of the day. Is

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Speaker 2: there something that you hear yourself repeating again and again

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Speaker 2: and again in these conversations.

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Speaker 3: We have to make sure that whatever we've created and

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Speaker 3: why we created it, we don't let our behaviors get

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Speaker 3: in the way of it. Timing the market, we know,

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Speaker 3: is not a great idea. We believe in the long

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Speaker 3: term effects of the market, the slope being positive. We

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Speaker 3: believe in global expansion and global growth. But there are

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Speaker 3: times that you want to push the pedal down and

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Speaker 3: there are times that you want to be more conservative

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Speaker 3: and wait and see. This is a time to be

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Speaker 3: a little bit more hedged in our opinion.

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Speaker 2: All right, Ken, we'll leave it there. Thank you so

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Speaker 2: much for joining us. Great conversation with Ken Stern, President

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Speaker 2: of Leedo Advisors, joining us here on the Daybreak Asia podcast.

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Speaker 2: Welcome back to the Daybreak Asia Podcast. I'm Doug Prisner.

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Speaker 2: US based TikTok users are being inundated with videos from

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Speaker 2: Chinese influencers. These videos are encouraging them to overcome punitive

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Speaker 2: Trump tariffs by buying directly from the world's factory China.

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Speaker 2: In one video, a user named Luna sourcing China stands

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Speaker 2: outside a factory she says, makes Lululemon yoga leggings for

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Speaker 2: five to six dollars. That's even though they retail here

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Speaker 2: in the US for more than one hundred bucks.

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Speaker 4: Who are the suppliers, Jehi Lula. Some of their Yugo

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Speaker 4: wars are actually from Young Lung clothing and Hauntitionom clothing.

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Speaker 4: And guess what's full factories locating in here? And these

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Speaker 4: two factoris also supplight clothing for Fila and an Arma.

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Speaker 2: Let's bring in Colin Murphy. Now he is China Eco

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Speaker 2: GUV reporter for Bloomberg News. He joins us from our

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Speaker 2: studios in Beijing. Thank you so much for making the

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Speaker 2: time to chat with us. Can we begin column by

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Speaker 2: having you break down the process? How is this actually happening?

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Speaker 1: Okay?

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Speaker 5: So basically, the first thing is that TikTok itself is

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Speaker 5: not available in China. They're using domestic app here called

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Speaker 5: doing so in order for the Chinese influencers to get

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Speaker 5: their messages on TikTok, which is already quite surprising. We

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Speaker 5: are suspecting that there's some element of collaboration here, some

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Speaker 5: sort of planning. So basically, what they're doing is they

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Speaker 5: are making short videos to describe some of the reasons

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Speaker 5: why the US customer and the US buyer has to

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Speaker 5: pay so much money for products that are available in

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Speaker 5: China at knockdown prices. And these messages are basically trying

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Speaker 5: to suggest or encourage, not necessarily ways to avoid the tariffs,

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Speaker 5: but to let's say, minimize the impact of the tariff.

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Speaker 5: But the deeper meaning I think is to to show

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Speaker 5: and to illustrate that China is pushing back against these tariffs,

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Speaker 5: to show that you know, this is kind of mocking

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Speaker 5: in a way, and to undermine the Trump tariffs and saying, hey, look,

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Speaker 5: we have come up with these innovative ways to showcase

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Speaker 5: and to tell you about our products, and we're going

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Speaker 5: to swamp TikTok in order to do that.

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Speaker 2: So it seems maybe to be less about selling goods

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Speaker 2: to US consumers and more about creating outrage among the

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Speaker 2: American consumer right and how tariffs are impacting the prices

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Speaker 2: of the Chinese made products that they are accustomed to.

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Speaker 5: Definitely, I think you know there is this, as I say,

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Speaker 5: broader push by this campaign, which you know, has picked

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Speaker 5: up strength and exploded basically over the weekend, we've had

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Speaker 5: these types of videos from merchants in China saying, you know,

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Speaker 5: we produce this product and you should buy from us.

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Speaker 5: I mean, they've been around for a while, but what

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Speaker 5: we're talking about in this particular instance is, first of all,

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Speaker 5: the sheer volume of such sort of videos and messaging

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Speaker 5: has has gone through the roof. A lot of them

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Speaker 5: display very similar characteristics. They're very polished, most are speaking

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Speaker 5: in very sort of sophisticated use of language, and in English,

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Speaker 5: of course, and it's all happening over this short period

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Speaker 5: of time. So it's hard not to conclude that this

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Speaker 5: is definitely and an effort to, if not at the

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Speaker 5: very least sort of mock the US efforts on tariffs,

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Speaker 5: but probably to you know, in undermine in a way

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Speaker 5: the Trump tariff regime and call the attention of the

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Speaker 5: ordinary American citizen to like how the tariffs will and

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Speaker 5: can impact their bottom line.

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Speaker 2: And it's a little ironic in the platform right during

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Speaker 2: his first term, Trump wanted a band TikTok in the

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Speaker 2: U or force some type of change in ownership. That

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Speaker 2: position later became reflected in US law, but I believe

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Speaker 2: it was March twenty twenty four, when President Trump reversed

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Speaker 2: his position and began advocating against banning the app on

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Speaker 2: the grounds that, okay, we needed it. But this seems

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Speaker 2: to be to the point of maybe there's a national

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Speaker 2: security issue involved here. Is that saying too much?

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Speaker 5: Well, I would just say it does show that there

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Speaker 5: has been a marked increase in the ability of the

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Speaker 5: Chinese message to get to ordinary citizens in the US

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Speaker 5: and on the whole, these messages have been pro China. So,

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Speaker 5: for example, we have this latest incident, which it is

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Speaker 5: ironic because right now TikTok is still under close scrutiny

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Speaker 5: with the talk of a ban or sale. So for

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Speaker 5: this to be happening on this platform right now is

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Speaker 5: somewhat curious. But you know, it does also remind us

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Speaker 5: of something that happened a couple of months ago, which

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Speaker 5: was when the Chinese app Shao Hongshu or Red Note

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Speaker 5: suddenly became hugely popular when the so called TikTok refugees

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Speaker 5: were fleeing to that app when the threat of the

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Speaker 5: ban was imminent. And so this was also the first

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Speaker 5: time when we saw a real sort of outpouring and

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Speaker 5: outreach from Chinese citizens to their American counterparts exchanging information.

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Speaker 5: We saw lots of Americans saying, as a result, oh,

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Speaker 5: what they've been telling us about China is wrong all along.

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Speaker 5: It's very developed, it's very sophisticated, and so on and

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Speaker 5: so forth. So you did have some element of influence

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Speaker 5: and changing of perceptions. And this again, this particular campaign,

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Speaker 5: shall we say, looks like hitting similar points, and that

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Speaker 5: we do have reaction from Americans on the ground who

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Speaker 5: are saying, you know, I never realized that this was

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Speaker 5: the reality. And maybe it's not anger, but it's definitely,

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Speaker 5: you know, increasing awareness and in some cases frustration at

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Speaker 5: some of the narratives that they seem to sort of

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Speaker 5: feel have have been thrown on them by their own

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Speaker 5: government in DC.

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Speaker 2: So, the packages with merchandise shipped from China with a

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Speaker 2: value at less than eight hundred dollars have enjoyed the

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Speaker 2: deminimous exemption from these added duties, and we have seen

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Speaker 2: the impact that that has had on online Chinese retailers

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Speaker 2: like Timu and Chian to sell super cheap items to

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Speaker 2: American consumers. Now, the President has kind of taken executive

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Speaker 2: action here to end that loophole, and I think that

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Speaker 2: begins on May the second. So I'm wondering, just on

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Speaker 2: the commerce side, whether this let's call it a workaround,

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Speaker 2: is facing extinction.

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Speaker 5: Yes, I think, you know, I mean, whether this would

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Speaker 5: actually yield to a spike in sales for the Chinese merchant.

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Speaker 5: I would doubt that at this point for various reasons,

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Speaker 5: including that you know, a lot of these are not

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Speaker 5: the equivalent in terms of they don't come with the

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Speaker 5: brand that they say that they have. So you know,

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Speaker 5: I mean, how many people are going to turn around

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Speaker 5: and start buying more because of this campaign. It's a

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Speaker 5: big question mark. And also, as you mentioned, the Deminimus

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Speaker 5: rule needs to be clarified and whether that's going to

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Speaker 5: stay or not. But I do think another point here

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Speaker 5: is like, yes, this is mocking of the US system.

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Speaker 5: But at the same time, there's also something that we

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Speaker 5: need to reflect from the China side, and that is

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Speaker 5: there are a lot of people here who are dependent

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Speaker 5: on exports, dependent on selling goods to the US, and

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Speaker 5: you know, in another way, we could interpret this as

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Speaker 5: being a sign of desperation. Also on the Chinese side,

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Speaker 5: we have these vendors who are looking at possible bankruptcy

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Speaker 5: or possible you know, difficulties commercially, and this could also

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Speaker 5: be interpreted as an effort by them to try to

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Speaker 5: change their situation. So while on the one hand, it

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Speaker 5: is definitely you know, poking fun and mocking a little

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Speaker 5: bit the US and the tariffs that have been introduced

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Speaker 5: and stopped and paused and reintroduced by Trump, but there's

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Speaker 5: also a message for the Chinese as well. Probably not intentionally,

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Speaker 5: but it does remind us that there's a lot of

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Speaker 5: people here who do stand to suffer if the tariff

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Speaker 5: regime goes into full effect and remain so for an

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Speaker 5: extended period of time.

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Speaker 2: Is it too much to say that the government may

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Speaker 2: be involved in this? Is there any evidence that that

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Speaker 2: may be happening.

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Speaker 5: Well, that's always super difficult to pinpoint right, nobody's going

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Speaker 5: to come out and say we are allowing this to happen.

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Speaker 5: But you know, I mean, there is the element that

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Speaker 5: typically in China, like if there's something online that the

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Speaker 5: government doesn't like, it will get shut down pretty quickly.

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Speaker 5: And then of course there are some sort of legal

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Speaker 5: implications here. For example, many of these brands that are

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Speaker 5: being exposed would have non disclosure agreements in place with

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Speaker 5: their suppliers, and also obviously trading and counterfeit goods is

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Speaker 5: not a legal activity. So the fact that these sort

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Speaker 5: of videos are allowed to stay online, even if it's

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Speaker 5: just for a short period of time, it does sort

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Speaker 5: of suggest some sort of tacit approval at least, or perhaps,

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Speaker 5: if we want to be generous, maybe it hasn't filtered

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Speaker 5: to the right authorities yet and there will be a crackdown.

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Speaker 5: As I say, it did come to the four over

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Speaker 5: the weekend. It is very early to say definitively what

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Speaker 5: are the factors at play. We don't have a comment

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Speaker 5: as of now from the company, from TikTok explaining what's happening.

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Speaker 5: So in the absence of all that, I think we

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Speaker 5: have to hold back judgment for a little while. But

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Speaker 5: coming at this time and in the volume and the

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Speaker 5: quality of the videos, I can help but be quite

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Speaker 5: suspicious that this is some sort of collaboration or concerted

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Speaker 5: effort to send a message.

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Speaker 2: Colin, thank you so much for helping us unpack that story.

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Speaker 2: That is Colin Murphy, China Ecogov, reporter for Bloomberg News

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Speaker 2: in Beijing, joining us here on the Daybreak Asia podcast.

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Speaker 2: Thanks for listening. To today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisner, and this is Bloomberg