1
00:00:02,520 --> 00:00:10,880
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

2
00:00:10,920 --> 00:00:14,120
Speaker 1: Day Baker podcast, available every morning on Apple, Spotify or

3
00:00:14,160 --> 00:00:17,040
Speaker 1: wherever you listen. It's Wednesday, the fourth of June in London.

4
00:00:17,239 --> 00:00:18,480
Speaker 1: I'm Caroline Hepke.

5
00:00:18,480 --> 00:00:21,480
Speaker 2: And I'm Stephen Carroll. Coming up today, Donald Trump raises

6
00:00:21,560 --> 00:00:24,720
Speaker 2: tariffs on steel and aluminium to fifty percent, with the

7
00:00:24,800 --> 00:00:28,320
Speaker 2: UK getting a temporary reprieve as it rushes to finalize

8
00:00:28,320 --> 00:00:29,520
Speaker 2: it's US trade deal.

9
00:00:30,120 --> 00:00:34,120
Speaker 1: Elon Musk blasts the president's signature tax bill as a

10
00:00:34,240 --> 00:00:39,080
Speaker 1: budget busting abomination, pitching the world's richest person against the

11
00:00:39,120 --> 00:00:40,800
Speaker 1: world's most powerful.

12
00:00:40,560 --> 00:00:43,559
Speaker 2: Plus on the offense of the UK's Ministry of Defense

13
00:00:43,640 --> 00:00:46,199
Speaker 2: calls on the Prime Minister to raise military spending to

14
00:00:46,320 --> 00:00:50,200
Speaker 2: three and a half percent of GDP, as defense contractors

15
00:00:50,240 --> 00:00:53,520
Speaker 2: tell us rhetoric must now be matched with action.

16
00:00:53,880 --> 00:00:56,040
Speaker 1: Let's start with a roundup of our top stories.

17
00:00:56,640 --> 00:00:59,920
Speaker 2: US President Donald Trump has doubled steel and aluminium tar

18
00:01:00,280 --> 00:01:04,120
Speaker 2: to fifty percent from today. In the executive order. Trump

19
00:01:04,120 --> 00:01:07,600
Speaker 2: said the move was necessary to protect national security. The

20
00:01:07,760 --> 00:01:10,560
Speaker 2: UK is the only country exempted from the levy increase

21
00:01:10,720 --> 00:01:13,759
Speaker 2: due to its framework deal with the US signed last month.

22
00:01:14,080 --> 00:01:17,000
Speaker 2: Aliminium prices on New York's Comics Exchange its surge to

23
00:01:17,040 --> 00:01:20,000
Speaker 2: head of the tariff increase. White House Press Secretary Caroline

24
00:01:20,040 --> 00:01:22,560
Speaker 2: Levitt says, the President is protecting jobs.

25
00:01:23,280 --> 00:01:25,640
Speaker 3: This is a president who doesn't just talk the talk,

26
00:01:25,720 --> 00:01:28,319
Speaker 3: he walks the walk to and he's delivering on his

27
00:01:28,400 --> 00:01:31,720
Speaker 3: promises to bolster our steel and aluminum industries in this

28
00:01:31,800 --> 00:01:34,560
Speaker 3: country and to protect those jobs. If not for this president,

29
00:01:34,840 --> 00:01:38,120
Speaker 3: that steel plan in Pittsburgh, Pennsylvania, would have closed. Those

30
00:01:38,200 --> 00:01:42,120
Speaker 3: jobs would have been lost, and the President saved that company.

31
00:01:42,120 --> 00:01:44,200
Speaker 3: He saved those jobs, and he's saving that community.

32
00:01:44,920 --> 00:01:48,280
Speaker 2: White House Press Secretary Karen Levitt, speaking as Washington is

33
00:01:48,280 --> 00:01:51,080
Speaker 2: locked in negotiations with a number of trading partners over

34
00:01:51,120 --> 00:01:54,240
Speaker 2: the so called reciprocal tariffs. Trump has until the ninth

35
00:01:54,240 --> 00:01:57,880
Speaker 2: of July to agree deals before his self imposed pause

36
00:01:58,200 --> 00:01:59,440
Speaker 2: ends now.

37
00:01:59,520 --> 00:02:02,760
Speaker 1: China's top diplomat has urged the US to put relations

38
00:02:02,800 --> 00:02:06,120
Speaker 1: between the countries back on the right track. Foreign Minister

39
00:02:06,160 --> 00:02:09,360
Speaker 1: Wang Ye used his first meeting with the American ambassador

40
00:02:09,480 --> 00:02:13,440
Speaker 1: David Perdue to complain about recent measures taken by the

41
00:02:13,480 --> 00:02:16,919
Speaker 1: White House. After the meeting, Perdue posted on social media

42
00:02:16,960 --> 00:02:21,200
Speaker 1: that he had raised Trump administration priorities, including trade and

43
00:02:21,320 --> 00:02:25,720
Speaker 1: illegal migration. Meanwhile, US Treasury Sextuary Scott Bessein said in

44
00:02:25,760 --> 00:02:28,840
Speaker 1: a speech that China has a choice on whether or

45
00:02:28,919 --> 00:02:31,600
Speaker 1: not to be a reliable partner to other countries.

46
00:02:32,160 --> 00:02:36,240
Speaker 2: Elon Mosk has publicly criticized the President's signature tax bill,

47
00:02:36,360 --> 00:02:40,520
Speaker 2: calling it a budget busting abomination. Writing on social media,

48
00:02:40,600 --> 00:02:44,200
Speaker 2: the recently departed head of DOGE said shame on those

49
00:02:44,280 --> 00:02:47,320
Speaker 2: who voted for it. But Republican House Speaker Mike Johnson

50
00:02:47,320 --> 00:02:48,960
Speaker 2: has pushed back with a.

51
00:02:49,040 --> 00:02:52,800
Speaker 4: New respect my friend Elon is terribly wrong about the

52
00:02:52,800 --> 00:02:53,760
Speaker 4: one Big, Beautiful Bill.

53
00:02:54,720 --> 00:02:57,960
Speaker 2: Mike Johnson's response comes as the tech titan's public condemnation

54
00:02:58,080 --> 00:03:01,440
Speaker 2: pits him against the President and a moment. Trump has

55
00:03:01,480 --> 00:03:04,400
Speaker 2: been personally lobbying Senate holdouts on the bill as some

56
00:03:04,440 --> 00:03:08,000
Speaker 2: Republicans criticize its impact on the national debt. The tax

57
00:03:08,040 --> 00:03:11,080
Speaker 2: bills forecast to reduce federal revenue by about four trillion

58
00:03:11,120 --> 00:03:14,200
Speaker 2: dollars over the next decade and add approximately two and

59
00:03:14,240 --> 00:03:16,359
Speaker 2: a half trillion to the federal deficit.

60
00:03:17,080 --> 00:03:21,240
Speaker 1: Company news Now Volkswagen says that about twenty thousand employees

61
00:03:21,280 --> 00:03:24,399
Speaker 1: will voluntarily leave the business by the end of the decade.

62
00:03:24,560 --> 00:03:28,480
Speaker 1: The news comes as the carmaker restructures German operations to

63
00:03:28,520 --> 00:03:33,800
Speaker 1: cope with uneven demand, reducing production capacity and headcount. It's

64
00:03:33,840 --> 00:03:37,080
Speaker 1: a result that shows the firm's restructuring plans are on track,

65
00:03:37,080 --> 00:03:40,160
Speaker 1: according to the head of human relations Gunner Chillian, who

66
00:03:40,200 --> 00:03:44,040
Speaker 1: addressed the move in a speech to workers yesterday. Volkswagen

67
00:03:44,080 --> 00:03:47,440
Speaker 1: struck a deal in December to cut German production capacity

68
00:03:47,480 --> 00:03:50,480
Speaker 1: by more than seven hundred thousand units and also to

69
00:03:50,640 --> 00:03:54,520
Speaker 1: decrease headcount by thirty five thousand jobs by the end

70
00:03:54,560 --> 00:03:55,280
Speaker 1: of the decade.

71
00:03:56,120 --> 00:03:58,960
Speaker 2: Sources have told Bloomberg that the UK's Ministry of Defense

72
00:03:59,040 --> 00:04:02,040
Speaker 2: is asking the government and to increase military spending to

73
00:04:02,200 --> 00:04:05,520
Speaker 2: three and a half percent of GDP. It's understo that

74
00:04:05,520 --> 00:04:08,880
Speaker 2: the Prime Minister care Starmer is considering the request. Defense

75
00:04:08,920 --> 00:04:11,160
Speaker 2: officials are said to be making the case that if

76
00:04:11,200 --> 00:04:13,920
Speaker 2: other NATO leaders sign off on the pledge, it'll be

77
00:04:13,920 --> 00:04:17,080
Speaker 2: impossible for Britain not to back it. The UK currently

78
00:04:17,120 --> 00:04:20,279
Speaker 2: spends about two point three percent of GDP on defense,

79
00:04:20,520 --> 00:04:23,120
Speaker 2: and Starmer has promised to raise that to two and

80
00:04:23,160 --> 00:04:26,400
Speaker 2: a half percent by twenty twenty seven, with an ambition

81
00:04:26,560 --> 00:04:29,240
Speaker 2: to reach three percent by twenty thirty four.

82
00:04:30,040 --> 00:04:32,760
Speaker 1: Well. The reporting comes after the UK government laid out

83
00:04:32,800 --> 00:04:36,279
Speaker 1: an ambitious vision in its Strategic Defense with You on Monday,

84
00:04:36,320 --> 00:04:39,479
Speaker 1: with a pledge to make the UK battle ready. But

85
00:04:39,520 --> 00:04:42,760
Speaker 1: the country's leading military contractors have told Bloomberg that words

86
00:04:42,800 --> 00:04:46,039
Speaker 1: will need to be matched with action. Clive Higgins is

87
00:04:46,080 --> 00:04:49,200
Speaker 1: the UK CEO of Leonardo, one of the country's leading

88
00:04:49,240 --> 00:04:50,440
Speaker 1: aerospace firms.

89
00:04:51,279 --> 00:04:53,640
Speaker 5: I think the ambitions you've seen from the UK givenment

90
00:04:53,680 --> 00:04:57,600
Speaker 5: with announcements on significant increases of defense depending are really positive,

91
00:04:58,200 --> 00:05:00,520
Speaker 5: but that needs to translate in terms of reality on

92
00:05:00,560 --> 00:05:00,960
Speaker 5: the ground.

93
00:05:02,000 --> 00:05:04,640
Speaker 1: Clive Higgins's comments were echoed by a host of other

94
00:05:04,680 --> 00:05:07,600
Speaker 1: figures in the industry who spoke to US. Gavin Krimming's

95
00:05:07,600 --> 00:05:12,120
Speaker 1: of ba's Munitions Division, told Bloomberg We're not Amazon. We

96
00:05:12,160 --> 00:05:15,080
Speaker 1: don't produce just to put things on the shelf. The

97
00:05:15,160 --> 00:05:19,440
Speaker 1: call for long term commitments comes as NATO pushes members

98
00:05:19,680 --> 00:05:23,440
Speaker 1: to raise military spending to five percent of GDP to

99
00:05:23,600 --> 00:05:28,039
Speaker 1: counter the threat from Russia and compensate for American retrenchment.

100
00:05:28,279 --> 00:05:32,000
Speaker 1: Bloomberg Economics has calculated that achieving that goal would cost

101
00:05:32,040 --> 00:05:35,720
Speaker 1: the UK three hundred and fifty billion pounds.

102
00:05:36,040 --> 00:05:37,960
Speaker 2: I was saying In the UK, the Chancellor Rachel Reeves,

103
00:05:37,960 --> 00:05:41,560
Speaker 2: will outline new infrastructure projects when she sets government spending

104
00:05:41,640 --> 00:05:45,560
Speaker 2: targets next week. The labor Chancellor's tax raising agenda and

105
00:05:45,640 --> 00:05:48,560
Speaker 2: a loosening of the UK's fiscal rules, they've given her

106
00:05:48,560 --> 00:05:51,520
Speaker 2: an extra one hundred and thirty billion pounds for investment.

107
00:05:51,680 --> 00:05:53,280
Speaker 2: Bloomberg James Wilcock has more.

108
00:05:53,960 --> 00:05:57,080
Speaker 6: The Translor's plan is to point out the upsides of

109
00:05:57,120 --> 00:06:01,520
Speaker 6: the difficult choices the UK government is making new rail links,

110
00:06:01,680 --> 00:06:06,000
Speaker 6: improved energy infrastructure, investing in schools and hospitals. It's infrastructure

111
00:06:06,040 --> 00:06:09,920
Speaker 6: spending that will boost GDP and improve the quality of

112
00:06:10,040 --> 00:06:14,839
Speaker 6: life for citizens. But it takes a very very long

113
00:06:15,000 --> 00:06:18,480
Speaker 6: time to happen, and the downsides of the chances of

114
00:06:18,600 --> 00:06:22,120
Speaker 6: decisions will become very real when Reeve sets out government

115
00:06:22,120 --> 00:06:26,480
Speaker 6: budgets next week. Some unlucky government departments face cuts up

116
00:06:26,480 --> 00:06:30,239
Speaker 6: to eleven percent in their annual spending. In London, James

117
00:06:30,240 --> 00:06:31,599
Speaker 6: Wilcock Bloomberg Radio.

118
00:06:32,480 --> 00:06:35,159
Speaker 1: Those are our top stories for you this morning. In

119
00:06:35,240 --> 00:06:37,599
Speaker 1: terms of the market, so we've seen a sharp rise

120
00:06:37,760 --> 00:06:39,839
Speaker 1: in shares on the costly two and a half percent

121
00:06:40,000 --> 00:06:42,640
Speaker 1: and also the one strengthening as we get a new

122
00:06:42,640 --> 00:06:44,880
Speaker 1: Prime Minister in South Korea, so that means some of

123
00:06:44,920 --> 00:06:48,360
Speaker 1: the political chaos perhaps is over their Asian stocks overall

124
00:06:48,440 --> 00:06:50,680
Speaker 1: up for the first time in four days. We had

125
00:06:51,080 --> 00:06:53,960
Speaker 1: a decent US labor market report yesterday ahead of the

126
00:06:53,960 --> 00:06:56,400
Speaker 1: non farm payrolls out on Friday. So the S and

127
00:06:56,400 --> 00:06:58,600
Speaker 1: P five hundred and the NAS that were high yesterday,

128
00:06:58,680 --> 00:07:01,920
Speaker 1: stop futures for the US in the red for European

129
00:07:02,000 --> 00:07:04,720
Speaker 1: stock futures on the stocks fifty by a quarter of

130
00:07:04,760 --> 00:07:07,760
Speaker 1: one percent. We did the European stocks edge high yesterday.

131
00:07:07,839 --> 00:07:11,240
Speaker 1: Your area inflation is more than expected. And then just

132
00:07:11,240 --> 00:07:13,400
Speaker 1: in terms of the bond deals, keeping an eye those

133
00:07:13,480 --> 00:07:17,640
Speaker 1: long bonds, particularly four ninety seven for thirty year US

134
00:07:17,720 --> 00:07:19,120
Speaker 1: treasure yields. Those are the markets.

135
00:07:19,480 --> 00:07:21,320
Speaker 2: In a moment, will bring you our special report on

136
00:07:21,360 --> 00:07:24,600
Speaker 2: the challenges the UK faces and building up its defense industry,

137
00:07:24,800 --> 00:07:27,280
Speaker 2: plus more on the latest raising of steel and aluminium

138
00:07:27,320 --> 00:07:30,240
Speaker 2: tariffs in the US. But a word first. Another story

139
00:07:30,240 --> 00:07:32,760
Speaker 2: that caught her this morning on lessons for the music

140
00:07:32,840 --> 00:07:36,640
Speaker 2: industry from Taylor Swift's legal battle for her earlier music.

141
00:07:36,680 --> 00:07:38,800
Speaker 2: So she finalized the deal just a few days ago

142
00:07:38,840 --> 00:07:40,840
Speaker 2: to buy back her catalog. The figure reported to be

143
00:07:40,880 --> 00:07:45,080
Speaker 2: above three hundred million dollars. Brian Reeseman, writing for Bloomberg Opinion, says,

144
00:07:45,240 --> 00:07:48,160
Speaker 2: hopefully this will encourage other artists to be more business

145
00:07:48,200 --> 00:07:50,920
Speaker 2: savvy in their careers and an industry, as he points out,

146
00:07:50,920 --> 00:07:53,200
Speaker 2: that's long banked on them not paying attention to the

147
00:07:53,240 --> 00:07:57,280
Speaker 2: fine print of fame. These are massive amounts of money

148
00:07:57,360 --> 00:08:00,480
Speaker 2: that artists are paying in cases to get back rights

149
00:08:00,480 --> 00:08:01,400
Speaker 2: to their catalogs.

150
00:08:01,520 --> 00:08:05,200
Speaker 1: Yeah. Effectively, it's whether you own that master recording, the

151
00:08:05,240 --> 00:08:08,680
Speaker 1: original master recording of your songs or not. I mean,

152
00:08:08,720 --> 00:08:11,320
Speaker 1: we know that Taylor Swift battle went on for years

153
00:08:11,520 --> 00:08:13,840
Speaker 1: and then finally sort of success, and she put a

154
00:08:13,840 --> 00:08:16,640
Speaker 1: lot out on social media about it. I thought it

155
00:08:16,680 --> 00:08:19,200
Speaker 1: was interesting that Brian Riesman said that he thought that

156
00:08:19,480 --> 00:08:22,920
Speaker 1: Taylor Swift had got a good deal three hundred million dollars.

157
00:08:23,360 --> 00:08:26,080
Speaker 1: I thought it was amazing that actually everyone who was

158
00:08:26,160 --> 00:08:30,520
Speaker 1: really involved in Taylor Swift's early six albums all got

159
00:08:30,560 --> 00:08:32,080
Speaker 1: a lot of money from it, and she ended up

160
00:08:32,080 --> 00:08:33,160
Speaker 1: paying to have to retrieve it.

161
00:08:33,400 --> 00:08:36,520
Speaker 2: And he says, don't underestimate the value of the Swifties. Essentially,

162
00:08:36,559 --> 00:08:38,760
Speaker 2: Taylor swift support from her fan base is a key

163
00:08:38,800 --> 00:08:40,800
Speaker 2: part of this whole deal that was the success of

164
00:08:40,840 --> 00:08:42,840
Speaker 2: her eras tour part of, of course, what I'll give you

165
00:08:42,920 --> 00:08:45,120
Speaker 2: some other money to pay for this as well, and

166
00:08:45,200 --> 00:08:47,600
Speaker 2: he says that's something the industry should pay attention to

167
00:08:47,720 --> 00:08:49,240
Speaker 2: as well in these deals too. You can read the

168
00:08:49,240 --> 00:08:51,480
Speaker 2: full piece Bloomberg dot com slash Opinion. We'll put a

169
00:08:51,480 --> 00:08:53,000
Speaker 2: link in our podcast show notes too.

170
00:08:54,040 --> 00:08:56,719
Speaker 1: Now, the latest escalation of Donald Trump's trade war has

171
00:08:56,720 --> 00:08:59,640
Speaker 1: come into effect, with the tariffs on steel and aluminium

172
00:08:59,720 --> 00:09:03,240
Speaker 1: double as of this morning to fifty percent except for

173
00:09:03,280 --> 00:09:06,520
Speaker 1: the UK. Our economics report to Katia Dimitrievia Jones is

174
00:09:06,520 --> 00:09:09,640
Speaker 1: now for more on this, Katty, good morning. Who's going

175
00:09:09,679 --> 00:09:10,800
Speaker 1: to be hit hardest by this?

176
00:09:10,960 --> 00:09:16,880
Speaker 7: You think, well, these terrotistic effect basically on midnight US time,

177
00:09:16,960 --> 00:09:20,440
Speaker 7: so about an hour ago. So essentially every piece of

178
00:09:20,440 --> 00:09:23,079
Speaker 7: steel and aluminum that now crosses into the US will

179
00:09:23,120 --> 00:09:27,199
Speaker 7: face these much higher levees which have been kind of

180
00:09:27,240 --> 00:09:30,960
Speaker 7: expected for some time, even as these countries negotiate with

181
00:09:31,000 --> 00:09:35,680
Speaker 7: the US. So when we look at where most US

182
00:09:35,760 --> 00:09:41,720
Speaker 7: steel and aluminum comes from, it's really Canada, Brazil, Mexico,

183
00:09:41,920 --> 00:09:44,199
Speaker 7: so all very close to the US. And then over

184
00:09:44,440 --> 00:09:46,400
Speaker 7: in this part of the world where I am right

185
00:09:46,440 --> 00:09:50,440
Speaker 7: now in Asia, it's South Korea and Vietnam, which who

186
00:09:50,480 --> 00:09:54,440
Speaker 7: are the biggest steel exporters to the US. China is

187
00:09:54,440 --> 00:09:56,880
Speaker 7: also a big one to the world, but because of

188
00:09:57,080 --> 00:10:01,560
Speaker 7: previous US tariffs, they've effectively been blocked from entering the

189
00:10:01,679 --> 00:10:05,559
Speaker 7: US market. And so really, if you look geographically, this

190
00:10:05,640 --> 00:10:09,040
Speaker 7: is a broad swath of countries. Many of these countries

191
00:10:09,600 --> 00:10:13,200
Speaker 7: in very intense negotiations with the US right now and

192
00:10:13,240 --> 00:10:17,520
Speaker 7: are now facing these much higher producers facing these much

193
00:10:17,600 --> 00:10:20,000
Speaker 7: higher levees going into the US.

194
00:10:20,720 --> 00:10:23,120
Speaker 2: And of course the UK has a carve out for now,

195
00:10:23,160 --> 00:10:25,680
Speaker 2: the only one that does as talks proceed on its

196
00:10:25,920 --> 00:10:27,680
Speaker 2: framework outline trade deal.

197
00:10:28,840 --> 00:10:31,680
Speaker 7: Yeah, because the UK is the only one that has

198
00:10:31,920 --> 00:10:35,960
Speaker 7: this temporary agreement with the US right which they reached

199
00:10:36,280 --> 00:10:39,120
Speaker 7: last month. So they're going to get that twenty five

200
00:10:39,160 --> 00:10:42,760
Speaker 7: percent rate. And then Mexico has also asked for an exemption,

201
00:10:42,960 --> 00:10:46,760
Speaker 7: but exemptions in the past, as with Japan's experience, haven't

202
00:10:46,760 --> 00:10:50,160
Speaker 7: really panned out, so it remains to be seen. But

203
00:10:50,240 --> 00:10:54,200
Speaker 7: the idea is to kind of as they're negotiating with

204
00:10:54,240 --> 00:10:57,880
Speaker 7: the UK, to keep those tariffs at a lower twenty

205
00:10:57,960 --> 00:11:01,280
Speaker 7: five rate. The problem is that this doesn't really abide

206
00:11:01,480 --> 00:11:05,760
Speaker 7: by the temporary agreement that they reached last month, because

207
00:11:05,760 --> 00:11:09,840
Speaker 7: that one, like what was supposed to happen is US

208
00:11:09,920 --> 00:11:13,240
Speaker 7: imports of metals from the UK dropped to zero and

209
00:11:13,320 --> 00:11:16,119
Speaker 7: auto tariffs at about ten percent, and then in exchange,

210
00:11:16,520 --> 00:11:20,520
Speaker 7: the UK would sort of fast track US imports and

211
00:11:21,040 --> 00:11:23,560
Speaker 7: both sides had agreed at the time this is a

212
00:11:23,559 --> 00:11:28,520
Speaker 7: way to lower tariffs, but that doesn't seem to be

213
00:11:28,559 --> 00:11:32,600
Speaker 7: the case at this point, so Prime Minister Starmer's spokesperson

214
00:11:32,720 --> 00:11:36,480
Speaker 7: said the agreement is a work in process, but it

215
00:11:36,600 --> 00:11:39,480
Speaker 7: really is would just be a major hit to the

216
00:11:39,600 --> 00:11:42,120
Speaker 7: UK if they're raised to fifty percent. It already is

217
00:11:42,120 --> 00:11:45,760
Speaker 7: at twenty five percent. You know, industries facing over capacity,

218
00:11:46,160 --> 00:11:48,280
Speaker 7: there have been lower prices, there's been a drop in

219
00:11:48,320 --> 00:11:52,120
Speaker 7: demand globally, so this would really hit the country's steel

220
00:11:52,120 --> 00:11:52,920
Speaker 7: mills pretty hard.

221
00:11:54,080 --> 00:11:59,079
Speaker 1: Okay. Staying with trade, China's foreign minister meeting the new

222
00:11:59,200 --> 00:12:02,200
Speaker 1: US and is there any sign of progress there between

223
00:12:02,240 --> 00:12:03,439
Speaker 1: the US and China.

224
00:12:04,600 --> 00:12:09,520
Speaker 7: You know, these meetings are always good. You know, they're

225
00:12:09,640 --> 00:12:12,440
Speaker 7: showing the conversation is still going. There's still meetings and

226
00:12:12,480 --> 00:12:17,240
Speaker 7: diplomatic channels. In effect, the issue is that there's not

227
00:12:17,600 --> 00:12:20,480
Speaker 7: much that's moved from this meeting. It was the first

228
00:12:20,480 --> 00:12:26,080
Speaker 7: meeting with basically China's top diplomat, this is Foreign Minister

229
00:12:26,160 --> 00:12:30,520
Speaker 7: wangy and it's the first meeting with US Ambassador David Purdue.

230
00:12:30,840 --> 00:12:35,560
Speaker 7: They met in Beijing. Both sides just basically outlined where

231
00:12:35,760 --> 00:12:40,160
Speaker 7: things stand. So Wang said the US has taken several

232
00:12:40,240 --> 00:12:45,400
Speaker 7: unfirst steps recently that undermined China's rights and interests. Also

233
00:12:45,480 --> 00:12:49,960
Speaker 7: highlighted equality, mutual respect in discussions. This is something we've

234
00:12:49,960 --> 00:12:52,640
Speaker 7: heard time and time again from the Chinese side. And

235
00:12:52,679 --> 00:12:58,720
Speaker 7: then Purdue tweeted that he emphasized US priorities on fentanel, trade,

236
00:12:58,760 --> 00:13:03,320
Speaker 7: illegal immigration. So not much movement from sort of the

237
00:13:03,360 --> 00:13:07,240
Speaker 7: status quo and what has been in recent days kind

238
00:13:07,240 --> 00:13:11,760
Speaker 7: of a ramping up of tension. So basically just underscoring

239
00:13:12,400 --> 00:13:14,880
Speaker 7: with the process. There's no movement yet on whether a

240
00:13:14,960 --> 00:13:17,439
Speaker 7: call is going to take place. White House still thinks

241
00:13:17,559 --> 00:13:20,560
Speaker 7: is going to happen. China has still not commented on that.

242
00:13:21,360 --> 00:13:24,720
Speaker 2: So this is the international part of Donald Trump's policies.

243
00:13:24,720 --> 00:13:27,439
Speaker 2: But interestingly, at home, Elon Musk lasting out at Donald

244
00:13:27,440 --> 00:13:30,760
Speaker 2: Trump's signature tax bill currently making its way through Congress,

245
00:13:30,800 --> 00:13:34,760
Speaker 2: calling it a disgusting abomination. How damaging. Are these criticisms?

246
00:13:35,280 --> 00:13:39,160
Speaker 7: Yeah, yeah, big words. And he has been critical of

247
00:13:39,200 --> 00:13:42,800
Speaker 7: the bill before. Of course, he was leading up this

248
00:13:43,160 --> 00:13:47,280
Speaker 7: Doge effort for government efficiency up until a few days ago.

249
00:13:48,360 --> 00:13:52,640
Speaker 7: It's hard to say how much his criticism will hurt

250
00:13:52,760 --> 00:13:56,360
Speaker 7: the bill's prospects because he's no longer advising the president.

251
00:13:56,600 --> 00:14:01,480
Speaker 7: Of course, it's already also facing a lot of challenges

252
00:14:01,559 --> 00:14:06,079
Speaker 7: from Republican senators. So there's several fiscal hawks who want

253
00:14:06,280 --> 00:14:11,400
Speaker 7: more spending cuts. At least five oppose changes to Medicaid,

254
00:14:11,679 --> 00:14:16,320
Speaker 7: and then a number of senators, Republican senators also oppose

255
00:14:16,480 --> 00:14:19,160
Speaker 7: these sudden cuts to green energy credits. So this is

256
00:14:19,200 --> 00:14:22,360
Speaker 7: something that actually, you know, maybe ironically but helped a

257
00:14:22,360 --> 00:14:25,600
Speaker 7: lot of companies across several red states. And so there's

258
00:14:25,600 --> 00:14:27,640
Speaker 7: going to be this back and forth tug of war

259
00:14:27,760 --> 00:14:30,880
Speaker 7: on this bill, which you know, big and beautiful but

260
00:14:30,920 --> 00:14:33,760
Speaker 7: also very expensive. So we're going to be seeing that

261
00:14:33,840 --> 00:14:35,160
Speaker 7: playing out in the coming months.

262
00:14:36,560 --> 00:14:38,720
Speaker 1: Okay, Katif, thank you so much for being with us

263
00:14:38,760 --> 00:14:41,680
Speaker 1: this morning. Our economics report. To Katia Dmitrieva, thank you

264
00:14:41,720 --> 00:14:42,680
Speaker 1: so much for joining us.

265
00:14:43,600 --> 00:14:47,040
Speaker 2: Now, the UK government is considering whether to raise defense

266
00:14:47,080 --> 00:14:50,760
Speaker 2: spending to three and a half percent of GDP ahead

267
00:14:50,760 --> 00:14:53,840
Speaker 2: of a NATO summit at the end of twenty twenty five. No, Carolin,

268
00:14:53,880 --> 00:14:55,880
Speaker 2: you've spent the past few weeks speaking to the UK

269
00:14:56,040 --> 00:14:58,400
Speaker 2: defense industry for special report today.

270
00:14:58,560 --> 00:15:01,680
Speaker 1: Yeah. Absolutely, So. Britain is currently spending two point three

271
00:15:01,720 --> 00:15:06,360
Speaker 1: percent of its whole economic output on defense. We know

272
00:15:06,440 --> 00:15:09,160
Speaker 1: that the world is rearming, that the threats are increasing,

273
00:15:09,440 --> 00:15:14,000
Speaker 1: and now there are rapidly developing demands for even more spending.

274
00:15:14,360 --> 00:15:17,960
Speaker 1: For example, a new target potentially from NATO members of

275
00:15:18,000 --> 00:15:21,840
Speaker 1: five percent of GDP on overall defense spending. There's obviously

276
00:15:21,840 --> 00:15:24,760
Speaker 1: a NATO summit that's coming up in the next few weeks,

277
00:15:24,800 --> 00:15:27,040
Speaker 1: and we've had out from the government this week the

278
00:15:27,080 --> 00:15:30,480
Speaker 1: Strategic Defense Review, which lays out quite an ambitious sort

279
00:15:30,520 --> 00:15:34,280
Speaker 1: of set of targets for the UK. So there's a

280
00:15:34,360 --> 00:15:37,880
Speaker 1: lot that is moving very quickly when it comes to defense.

281
00:15:38,200 --> 00:15:41,840
Speaker 1: The question basically is whether Britain can pay for this,

282
00:15:42,200 --> 00:15:46,000
Speaker 1: how it can deliver on additional defense spending whatever the

283
00:15:46,040 --> 00:15:48,840
Speaker 1: targets end up being three percent, three and a half percent,

284
00:15:48,960 --> 00:15:52,600
Speaker 1: five percent, which is an enormous ask. So I've been

285
00:15:52,600 --> 00:15:55,920
Speaker 1: speaking to a number of defense contractors and others who

286
00:15:55,960 --> 00:15:59,440
Speaker 1: basically say they are poised. I mean remember that defense

287
00:15:59,440 --> 00:16:03,880
Speaker 1: spending has dropped pretty dramatically over the decade since a

288
00:16:03,920 --> 00:16:08,920
Speaker 1: peak in the nineteen fifties, brief peaks for the Falklands War,

289
00:16:09,040 --> 00:16:13,680
Speaker 1: for the Iraq and Afghanistan interventions. Now there are efforts

290
00:16:13,680 --> 00:16:17,200
Speaker 1: to revive Britain's military industrial base and to try to

291
00:16:17,240 --> 00:16:19,360
Speaker 1: produce more homegrown weapons.

292
00:16:21,440 --> 00:16:24,840
Speaker 8: So you're going to go into the forge area. It's

293
00:16:24,840 --> 00:16:26,600
Speaker 8: all done at E level und A degree. See so

294
00:16:27,160 --> 00:16:28,960
Speaker 8: WYC is red hot material.

295
00:16:29,640 --> 00:16:32,440
Speaker 1: They make all sorts of shells here at the BA

296
00:16:32,480 --> 00:16:37,280
Speaker 1: Systems factory in Washington in the northeast of England, including

297
00:16:37,320 --> 00:16:40,480
Speaker 1: these one five to five millimeter shells, which are just

298
00:16:40,520 --> 00:16:42,880
Speaker 1: about almost a meter long, but like a bit of

299
00:16:42,880 --> 00:16:43,880
Speaker 1: a tin can.

300
00:16:43,680 --> 00:16:45,600
Speaker 9: Or a kind of a water bottle.

301
00:16:45,480 --> 00:16:49,840
Speaker 1: That then gets filled with explosives and a propellant. BA

302
00:16:49,920 --> 00:16:54,640
Speaker 1: Systems is Britain's largest defense contractor. Steve Krdu has helped

303
00:16:54,680 --> 00:16:56,360
Speaker 1: develop the business.

304
00:16:56,600 --> 00:17:00,000
Speaker 8: We are expanding our one five to five capacity by

305
00:17:00,040 --> 00:17:04,040
Speaker 8: sixteen fold. So that's a combination of some additional machining

306
00:17:04,080 --> 00:17:07,600
Speaker 8: lines here at Washington in the Northeast, and then the

307
00:17:07,640 --> 00:17:12,320
Speaker 8: brand new explosive filling and packing facility of glasgowyd and

308
00:17:12,400 --> 00:17:14,280
Speaker 8: the real focus to us really is how do we

309
00:17:14,680 --> 00:17:19,399
Speaker 8: expand our UK redition's capacity and also how do we

310
00:17:19,440 --> 00:17:23,280
Speaker 8: generate resilience in our industrial base and also our supply show.

311
00:17:23,640 --> 00:17:26,679
Speaker 1: How prepared are you? How ready are I?

312
00:17:27,080 --> 00:17:29,520
Speaker 8: You know, the preparation that we're doing around our upscaling

313
00:17:29,560 --> 00:17:33,760
Speaker 8: of our production capability, the underpinning of our supply chains

314
00:17:33,800 --> 00:17:36,879
Speaker 8: exposed to some repellents. That is all geared around what

315
00:17:36,920 --> 00:17:39,640
Speaker 8: we anticipate the global environment is going to need.

316
00:17:43,400 --> 00:17:48,199
Speaker 1: As Steve kard You explains this, BAE System's factory is

317
00:17:48,359 --> 00:17:53,520
Speaker 1: working three shifts levels last scene post Iraq and Afghanistan.

318
00:17:54,160 --> 00:17:58,320
Speaker 1: They're making artillery shells for the British Army and Ukraine.

319
00:17:59,280 --> 00:18:04,280
Speaker 1: There is awing realization according to BAE that munitions are

320
00:18:04,640 --> 00:18:10,040
Speaker 1: the weapon needed in war. But BAE Systems wants firmer

321
00:18:10,119 --> 00:18:15,440
Speaker 1: spending commitments from customers. In other words, the UK's Ministry

322
00:18:15,440 --> 00:18:19,880
Speaker 1: of Defense, the mod's own report two years ago found

323
00:18:19,960 --> 00:18:25,720
Speaker 1: a seventeen billion pound equipment black hole. Alan West has

324
00:18:25,760 --> 00:18:28,760
Speaker 1: had a long career in the military and beyond. He

325
00:18:28,920 --> 00:18:31,520
Speaker 1: was first Sea Lord in charge of the Navy and

326
00:18:31,640 --> 00:18:36,080
Speaker 1: Royal Marines, Chief of Defense Intelligence, and a government Minister

327
00:18:36,800 --> 00:18:41,280
Speaker 1: Admiral Lord West describes the poor state of the British military.

328
00:18:42,440 --> 00:18:45,760
Speaker 9: Our cupboard is bear in terms of extra weapons, extra ammunition,

329
00:18:45,960 --> 00:18:49,360
Speaker 9: extra missiles, things like that. We've cut down on training,

330
00:18:49,640 --> 00:18:52,720
Speaker 9: We've not really had enough money to really focus hard

331
00:18:52,800 --> 00:18:55,320
Speaker 9: on recruiting and on people. When you add all these

332
00:18:55,320 --> 00:18:58,320
Speaker 9: things together, the hollowing out has been catastrophic.

333
00:18:58,359 --> 00:19:01,920
Speaker 1: Actually, how hard then for that pretty long list and

334
00:19:02,560 --> 00:19:05,680
Speaker 1: disastrous state of affairs? As you say, a bare cupboard,

335
00:19:05,720 --> 00:19:08,440
Speaker 1: how hard do you think it's going to be to rebuild?

336
00:19:08,840 --> 00:19:11,760
Speaker 9: It's going to be extremely difficult, and I think some

337
00:19:12,200 --> 00:19:16,760
Speaker 9: politicians and people in Whitehall are deluding themselves about how

338
00:19:16,840 --> 00:19:17,760
Speaker 9: quickly it can be done.

339
00:19:20,000 --> 00:19:23,359
Speaker 1: Prime Minister Kirs Starmer has pledged defense spending will reach

340
00:19:23,440 --> 00:19:26,679
Speaker 1: two and a half percent of GDP by twenty twenty seven,

341
00:19:27,080 --> 00:19:30,480
Speaker 1: up from two point three percent currently, and then get

342
00:19:30,520 --> 00:19:34,159
Speaker 1: to three percent over the next decade. But Lord West

343
00:19:34,160 --> 00:19:36,760
Speaker 1: says those plans are too tentative.

344
00:19:37,359 --> 00:19:39,679
Speaker 9: The way to do this is rather like when in

345
00:19:39,800 --> 00:19:43,399
Speaker 9: nineteen forty six seven Levin said to atle we have

346
00:19:43,480 --> 00:19:46,600
Speaker 9: got to have an atomic bomb. There's no question about it,

347
00:19:46,760 --> 00:19:50,320
Speaker 9: and the Prime Minister and the Defense Secretary and the

348
00:19:50,320 --> 00:19:53,119
Speaker 9: Foreign Secretary in cabinet said right, we're going to do that,

349
00:19:53,680 --> 00:19:56,119
Speaker 9: and they found the money and the country was pretty broke.

350
00:19:56,520 --> 00:19:58,960
Speaker 9: They found the money and spent the money to get

351
00:19:59,000 --> 00:20:02,320
Speaker 9: an atomic bomb, and that meant cutting things that were

352
00:20:02,400 --> 00:20:04,639
Speaker 9: very close to their heart, like the new welfare stage

353
00:20:05,119 --> 00:20:08,199
Speaker 9: and health service and things. I'm afraid this government, if

354
00:20:08,240 --> 00:20:11,280
Speaker 9: it is taking defense seriously, has to say right, we

355
00:20:11,320 --> 00:20:13,359
Speaker 9: are going to spend this money, and they need to

356
00:20:13,400 --> 00:20:14,959
Speaker 9: start doing it now.

357
00:20:15,280 --> 00:20:19,280
Speaker 1: The urgency is reflected by Leonardo UK, part of the

358
00:20:19,320 --> 00:20:24,040
Speaker 1: Italian Global Defence Giant, which focuses on combat air projects

359
00:20:24,400 --> 00:20:30,120
Speaker 1: like the Eurofighter Typhoon, with hubs in Newcastle, Joville and Edinburgh.

360
00:20:30,440 --> 00:20:34,159
Speaker 1: Clive Higgins is UK chair and CEO. He told me

361
00:20:34,240 --> 00:20:37,280
Speaker 1: he recently hosted Prime Minister Starmer for a visit.

362
00:20:38,040 --> 00:20:40,560
Speaker 5: We've needed to increased defense spending for some time. I

363
00:20:40,600 --> 00:20:44,359
Speaker 5: would say the threat vector is increased, so that's driven

364
00:20:44,800 --> 00:20:48,160
Speaker 5: that need to change. So now increasing to two point

365
00:20:48,160 --> 00:20:52,080
Speaker 5: five potentially three percent in the next parliament absolutely critical.

366
00:20:52,400 --> 00:20:56,600
Speaker 5: We've seen a lot of transformation coming through defense in

367
00:20:56,640 --> 00:21:00,520
Speaker 5: the UK in particular, so you're seeing the structures of

368
00:21:01,080 --> 00:21:05,040
Speaker 5: defense in government transforming. Now they want more pace they

369
00:21:05,040 --> 00:21:07,960
Speaker 5: want more agility. The flow of funding has to be

370
00:21:08,480 --> 00:21:11,800
Speaker 5: improved and also recognized in that post COVID where we

371
00:21:11,840 --> 00:21:14,919
Speaker 5: recognize that supply chain resilience was a key attribute, we

372
00:21:14,920 --> 00:21:17,679
Speaker 5: need that in defense as well. So I think the

373
00:21:17,720 --> 00:21:20,479
Speaker 5: ambitions you've seen from the UK government with announcements on

374
00:21:20,800 --> 00:21:24,000
Speaker 5: significant increases of defense spending are really positive, but that

375
00:21:24,080 --> 00:21:26,359
Speaker 5: needs to translate in terms of reality on the ground.

376
00:21:29,000 --> 00:21:32,679
Speaker 1: The government has now released its Strategic Defense Review, with

377
00:21:32,760 --> 00:21:37,040
Speaker 1: the Prime Minister outlining plans to overhaul the British military,

378
00:21:37,200 --> 00:21:42,360
Speaker 1: including expanding the nuclear Deterrent, but still with scant details

379
00:21:42,440 --> 00:21:46,400
Speaker 1: about how it will be paid for. Ben Bridge's Chair

380
00:21:46,480 --> 00:21:49,240
Speaker 1: of air Bus, Defense and Aerospace UK.

381
00:21:51,080 --> 00:21:51,480
Speaker 5: A lot of the.

382
00:21:51,520 --> 00:21:54,520
Speaker 10: Rhetoric, if you like, is reflecting not only the importance

383
00:21:54,520 --> 00:21:57,000
Speaker 10: of defense in the needs to invest in defense and

384
00:21:57,040 --> 00:22:00,520
Speaker 10: spend more on defense, but to do that in the UK.

385
00:22:00,840 --> 00:22:03,399
Speaker 10: So I think this is the year where we and

386
00:22:03,520 --> 00:22:06,879
Speaker 10: the UK defense industry will hope to see those words

387
00:22:06,880 --> 00:22:07,600
Speaker 10: turning into action.

388
00:22:07,960 --> 00:22:09,920
Speaker 1: So you think it's a pivotal year, then are you

389
00:22:10,000 --> 00:22:13,080
Speaker 1: doing anything to ramp up in the UK now or

390
00:22:13,119 --> 00:22:16,960
Speaker 1: are you awaiting all of those reviews and the contracts

391
00:22:17,000 --> 00:22:17,880
Speaker 1: to arrive.

392
00:22:17,920 --> 00:22:21,560
Speaker 10: The question I guess will be what further opportunities or

393
00:22:21,600 --> 00:22:23,800
Speaker 10: requirements will come from the government, and will be ready

394
00:22:23,840 --> 00:22:26,000
Speaker 10: to ramp up as you say, and ready to increase

395
00:22:26,760 --> 00:22:28,520
Speaker 10: and invest ourselves if that were to happen.

396
00:22:32,040 --> 00:22:35,800
Speaker 1: So Airbus in the UK is poised but paused. But

397
00:22:36,200 --> 00:22:40,560
Speaker 1: Marion Mesmer, senior researcher at Chatham House, explains that other

398
00:22:40,760 --> 00:22:43,399
Speaker 1: NATO countries are not standing still.

399
00:22:43,840 --> 00:22:46,520
Speaker 4: For a long time, the UK was one of the

400
00:22:46,640 --> 00:22:49,399
Speaker 4: leaders when it came to defense spending in natal, but

401
00:22:49,560 --> 00:22:52,680
Speaker 4: actually ever since the for scale Russian invasion in twenty

402
00:22:52,800 --> 00:22:57,000
Speaker 4: twenty two, other native member states, especially those along NATO's

403
00:22:57,000 --> 00:23:00,439
Speaker 4: eastern border with Russia, have increased defense spending much more

404
00:23:00,520 --> 00:23:04,320
Speaker 4: rapidly than the UK. So the UK, with spending around

405
00:23:04,359 --> 00:23:07,879
Speaker 4: two point five percent of GDP and intentions to spend

406
00:23:08,040 --> 00:23:11,320
Speaker 4: two point seven perhaps over the next several years, is

407
00:23:11,359 --> 00:23:15,199
Speaker 4: actually lagging far behind countries like Poland, which are already

408
00:23:15,200 --> 00:23:18,320
Speaker 4: spending in excess of four percent of GDP and are

409
00:23:18,359 --> 00:23:19,840
Speaker 4: also intending to spend more.

410
00:23:20,440 --> 00:23:23,440
Speaker 1: And so as Europe and NATO ramp up, there is

411
00:23:23,480 --> 00:23:26,800
Speaker 1: also the difficult question of what Britain should be preparing

412
00:23:27,000 --> 00:23:31,199
Speaker 1: for when it comes to global threats. Marian Mesmer is

413
00:23:31,359 --> 00:23:34,080
Speaker 1: clear what may be expected from Britain.

414
00:23:34,520 --> 00:23:39,240
Speaker 4: We know that Russia wants to continue to essentially increase

415
00:23:39,320 --> 00:23:41,639
Speaker 4: its own self image as a great power. So I

416
00:23:41,640 --> 00:23:44,600
Speaker 4: think the threat from Russia is really real. And what

417
00:23:44,640 --> 00:23:47,480
Speaker 4: we know about Russian strategic thinking is that if they

418
00:23:47,520 --> 00:23:50,960
Speaker 4: were to attack Natal, a likely line of attack would

419
00:23:50,960 --> 00:23:53,320
Speaker 4: be in the Baltic States, where the UK has a presence.

420
00:23:53,760 --> 00:23:57,320
Speaker 4: So the UK essentially needs to be ready to help

421
00:23:57,440 --> 00:23:58,720
Speaker 4: defend the Baltic States.

422
00:24:01,520 --> 00:24:05,600
Speaker 1: Back at BAE Systems, they are firing up the forges.

423
00:24:06,080 --> 00:24:10,320
Speaker 1: Gavin Krimmings from the Munitions Division tells me they're working

424
00:24:10,359 --> 00:24:15,720
Speaker 1: on creating sovereign defense supplies for the likes of explosives.

425
00:24:16,080 --> 00:24:19,000
Speaker 11: There are times where we do scale, have to kind

426
00:24:19,000 --> 00:24:22,120
Speaker 11: of three shift work in and for the last time

427
00:24:22,160 --> 00:24:24,800
Speaker 11: all the factories were kind of at that kind of

428
00:24:24,840 --> 00:24:27,800
Speaker 11: scale was probably paused Iraq Afghanistan.

429
00:24:28,200 --> 00:24:32,600
Speaker 1: The government has plans for six new munitions factories to

430
00:24:32,680 --> 00:24:36,000
Speaker 1: come soon. The ambition is now to move to a

431
00:24:36,040 --> 00:24:41,000
Speaker 1: position of war fighting readiness, but with the growing threat

432
00:24:41,040 --> 00:24:44,800
Speaker 1: of war, there are questions about whether the UK is

433
00:24:44,880 --> 00:24:49,120
Speaker 1: moving fast enough and how the country will pay for it.

434
00:24:56,520 --> 00:24:59,240
Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

435
00:24:59,320 --> 00:25:02,360
Speaker 2: stories making news from London to Wall Street and beyond.

436
00:25:02,640 --> 00:25:06,600
Speaker 1: Look for us on your podcast feed every morning, on Apple, Spotify,

437
00:25:06,720 --> 00:25:08,639
Speaker 1: and anywhere else you get your podcasts.

438
00:25:08,720 --> 00:25:11,720
Speaker 2: You can also listen live each morning on London Dab Radio,

439
00:25:11,760 --> 00:25:14,480
Speaker 2: the Bloomberg Business app, and Bloomberg dot Com.

440
00:25:14,520 --> 00:25:17,280
Speaker 1: Our flagship New York station, is also available on your

441
00:25:17,320 --> 00:25:22,040
Speaker 1: Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.

442
00:25:22,280 --> 00:25:24,920
Speaker 2: I'm Caroline Hepka and I'm Stephen Carroll. Join us again

443
00:25:24,960 --> 00:25:27,560
Speaker 2: tomorrow morning for all the news you need to start

444
00:25:27,560 --> 00:25:31,240
Speaker 2: your day right here on Bloomberg Daybreak Europe