WEBVTT - Why Asia Was Hit Hardest by Trump’s Tariff Onslaught

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. In a few moments,

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<v Speaker 1>I will sign a historic executive order instituting reciprocal tariffs

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<v Speaker 1>on countries throughout the world.

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<v Speaker 2>Reciprocal. US President Donald Trump's tariff blitz shocked the world

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<v Speaker 2>and caused a meltdown of global markets, wiping out trillions

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<v Speaker 2>of dollars for investors, and less than a week after

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<v Speaker 2>he announced the steepest American tariffs in more than a century,

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<v Speaker 2>Trump on Monday threatened China with further tariffs an additional

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<v Speaker 2>fifty percent if Beijing didn't remove the retaliatory tariffs it

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<v Speaker 2>recently placed on US imports. Much like China, other export

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<v Speaker 2>powerhouses in Asia have been hit with reciprocal tariffs far

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<v Speaker 2>greater than the baseline ten percent Levey placed on all

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<v Speaker 2>imports to the US. American allies such as your Pan

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<v Speaker 2>and South Korea are facing tariffs of twenty four percent

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<v Speaker 2>and twenty five percent, respectively, and the levee for Vietnam,

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<v Speaker 2>one of the fastest growing trade partners for the US,

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<v Speaker 2>is almost double that and panicked investors sent stock markets

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<v Speaker 2>nose diving. Asian stocks from Shanghai to Tokyo to Mumbai,

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<v Speaker 2>plunged by levels not seen in almost two decades. Hong

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<v Speaker 2>Kong's benchmark Kansang Index had its worst day on Monday

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<v Speaker 2>since nineteen ninety seven, wiping out all of its gains

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<v Speaker 2>for the year.

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<v Speaker 3>Connage, panic, blood bob doesn't even begin to cut it.

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<v Speaker 3>And you look at the declines on the region's benchmar

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<v Speaker 3>since two thousand and eight. It is across all asset classes.

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<v Speaker 3>We're seeing the reeling from this ramped up tariff walk.

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<v Speaker 2>In response to Trump's threats, China took the gloves off,

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<v Speaker 2>vowing to fight to the end if the US insists

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<v Speaker 2>on going its own way.

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<v Speaker 4>The tariffs announced on Liberation Day by President Trump comme

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<v Speaker 4>at the worst time for Chinese economy.

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<v Speaker 2>John lu Is Bloomberg, Senior executive editor for Greater China,

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<v Speaker 2>based in Beijing.

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<v Speaker 4>It takes away the biggest highlight, which was trade, and

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<v Speaker 4>it also means that China is put in a position

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<v Speaker 4>where it feels it has to respond and retaliate, which

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<v Speaker 4>it has done. That means the threat of a real,

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<v Speaker 4>full blown trade war has escalated tremendously. If that happens,

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<v Speaker 4>that's going to be bad for the US. It's going

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<v Speaker 4>to be bad for China. It's going to be bad

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<v Speaker 4>for Asia and the rest of the world because if

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<v Speaker 4>the world and Asia cannot trade with the US and

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<v Speaker 4>the Chinese economy is nowhere in a place to be

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<v Speaker 4>able to take on that additional burden, then where are

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<v Speaker 4>people going to send their goods and products? And what

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<v Speaker 4>are companies going to do about employment?

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<v Speaker 2>Welcome to The Big Take Asia from Bloomberg News. I'm Wanha.

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<v Speaker 2>Every week we take you inside some of the world's

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<v Speaker 2>biggest and most powerful economies and the markets, tycoon and

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<v Speaker 2>businesses that drive this ever shifting region. Today on the show,

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<v Speaker 2>the impact of Trump's tariffs on Asia's economic powerhouses. Is

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<v Speaker 2>this the end of global trade? And how will the

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<v Speaker 2>US tariffs reorder relationships across Asia? John, can you break

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<v Speaker 2>down Trump's tariff announcements on China and what it means?

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<v Speaker 4>The Liberation Day announcement added an additional thirty odd percent

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<v Speaker 4>to the tariffs. There were already twenty percent levied because

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<v Speaker 4>of fentanyl, and so that took tariffs on all Chinese

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<v Speaker 4>products to well over fifty percent. That's crazy, It's the

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<v Speaker 4>world we live in today.

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<v Speaker 2>And that was followed by still more from the White House.

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<v Speaker 2>Last year, Chinese companies shipped more than five hundred and

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<v Speaker 2>twenty billion dollars in goods to the US, accounting for

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<v Speaker 2>some fifteen percent of all of its exports. Exports contributed

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<v Speaker 2>to nearly a third of China's economic expansion. Last year.

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<v Speaker 2>The country's global trade surplus soared to a record of

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<v Speaker 2>almost a trillion dollars as higher US tariffs and the

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<v Speaker 2>threat of more to come drove companies to front load shipments. John,

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<v Speaker 2>what risks do the latest tariffs pose to China? We

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<v Speaker 2>know that it just at a GDP growth target of

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<v Speaker 2>five percent last month, which was already ambitious. Right.

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<v Speaker 4>Trade has been by far the highlight of China's economy

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<v Speaker 4>over the last couple of years. At the same time,

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<v Speaker 4>you had problems like real estate, which was a drag

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<v Speaker 4>on economic growth. You had sedated consumption in China that

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<v Speaker 4>was also a drag. You even't actually had government spending

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<v Speaker 4>falling off and becoming a drag on the economy in

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<v Speaker 4>twenty twenty four, and so going to twenty twenty five

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<v Speaker 4>with what was a fairly ambitious target of five percent

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<v Speaker 4>growth for the year, that looks much harder to achieve

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<v Speaker 4>if you're not going to have that assistance, that input

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<v Speaker 4>that benefit from trade.

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<v Speaker 2>Do we have a sense of what sectors will be

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<v Speaker 2>hardest hit in China? Are there any companies that stand

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<v Speaker 2>to lose a lot?

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<v Speaker 4>The sectors that will be most affected are the ones

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<v Speaker 4>that have the lower margins, so things like clothing, apparel, toys,

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<v Speaker 4>lower end electronics. Those things will suffer the most because

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<v Speaker 4>the companies that were making those things and exporting them

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<v Speaker 4>to the United States had the thinnest of margins of error,

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<v Speaker 4>and when these tariffs come in, it will probably wipe

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<v Speaker 4>out whatever business they had going on in the US.

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<v Speaker 2>It sounds like the tariffs are going to bring on

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<v Speaker 2>a lot of pain for some Chinese manufacturers and exporters.

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<v Speaker 2>How has China then responded to Trump's tariffs so far so?

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<v Speaker 4>In addition to announcing a thirty four percent tariff on

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<v Speaker 4>all American goods and retaliation, China also announced that it

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<v Speaker 4>was going to limit exports of the several rare earth

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<v Speaker 4>metals to the United States. And these metals are used

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<v Speaker 4>in lots of high in manufactured goods, high tech goods,

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<v Speaker 4>and China is the world's largest supplier of rare earth metals.

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<v Speaker 4>It has lots of technologies when it comes to refining

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<v Speaker 4>these metals, and so if China cuts off that supply,

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<v Speaker 4>it's going to have a real impact on the ability

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<v Speaker 4>of American manufacturing to keep going.

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<v Speaker 2>Beijing is now pledging to retaliate and vowing to fight

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<v Speaker 2>to the end. Does that reflect the sentiment on the ground.

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<v Speaker 2>Is Beijing feeling pressure to take off the gloves now?

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<v Speaker 4>Everything so far points to relatively widespread support for retaliation

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<v Speaker 4>against the tariffs that President Trump announced on Liberation Day.

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<v Speaker 4>I think President Trump, having introduced to the tariffs in

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<v Speaker 4>such a loud way in the Rose Garden, I think

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<v Speaker 4>that has gotten populace around the world, certainly here in

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<v Speaker 4>China feeling more aggrieved and wanting more for their governments

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<v Speaker 4>or definitely for the Chinese government to retal to defend

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<v Speaker 4>the Chinese rights.

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<v Speaker 2>John Trump says his policies are designed to bring back

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<v Speaker 2>manufacturing to the US. Is anybody in China talking about

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<v Speaker 2>relocating to the US. Is that even feasible?

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<v Speaker 4>So if you look at some of the companies, foreign

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<v Speaker 4>companies that have pledged to invest in the United States,

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<v Speaker 4>you have companies like TSMC, they make semiconductors. That's a

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<v Speaker 4>very high margin product. They can afford to do something

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<v Speaker 4>like invest one hundred billion dollars in the United States

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<v Speaker 4>to build a factory that manufacturing does not depend on

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<v Speaker 4>cheap labor. It doesn't need to be in China as much.

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<v Speaker 4>The problem there, though, is I think a lot of

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<v Speaker 4>those processes are very automated. I'm not sure how much

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<v Speaker 4>employment they will generate, certainly not as much as President

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<v Speaker 4>Trump wants, and the other things. They are more labor intensive,

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<v Speaker 4>lower in manufacturing. Even if those things are not being

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<v Speaker 4>done in China, it's very hard to imagine how they

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<v Speaker 4>can be competitive in the United States relative to Latin

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<v Speaker 4>America or Southeast Asia or some of these other lower

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<v Speaker 4>cost places. Working in a factory for ten hours a

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<v Speaker 4>day doing hard manual labor is not i would say,

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<v Speaker 4>the American dream.

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<v Speaker 2>No, it's definitely not. Now. The US certainly isn't making

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<v Speaker 2>any friends with this policy. How will this reshape relationships

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<v Speaker 2>in Asia? And really, when you look at China's footprint

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<v Speaker 2>in the region, what does that.

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<v Speaker 4>Mean in Asia? You have many countries in this region

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<v Speaker 4>who have really prospered over the last twenty to thirty

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<v Speaker 4>years by participating in Chinese economic growth. Sending commodities, sending machinery,

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<v Speaker 4>sending all sorts of goods to China, selling to China,

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<v Speaker 4>but at the same time enjoying the security of being

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<v Speaker 4>partnered allied with the United States, and so really in

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<v Speaker 4>a goldilock situation. But that is very clearly coming to

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<v Speaker 4>an end with the tariffs. It raises lots of questions

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<v Speaker 4>about how much countries here in Asia can depend on

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<v Speaker 4>the US, not only for security, but also for economic ties,

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<v Speaker 4>for trade, and when they compare how tumultuous and unexpected

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<v Speaker 4>and uncertain policy is coming out of Washington, DC with

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<v Speaker 4>what has been relative stability from Beijing. I think it

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<v Speaker 4>will lead countries to reconsider how they balance their relationships

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<v Speaker 4>between the United States and China. I don't think that

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<v Speaker 4>necessarily means that we're going to see a broad migration

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<v Speaker 4>away from the US and towards China, because ultimately you

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<v Speaker 4>have a lot of countries Japan, for example, the Philippines,

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<v Speaker 4>Australia that are very suspicious of Chinese intent and they

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<v Speaker 4>have territorial disputes, and so it means they are not

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<v Speaker 4>going to be wholeheartedly embracing Beijing, but they will be

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<v Speaker 4>tweaking the balance of their relationship between Beijing and Washington.

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<v Speaker 2>After the break, how Asian countries plan to navigate the

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<v Speaker 2>tightrope between Beijing and Washington, and how Trump's tariffs are

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<v Speaker 2>rattling manufacturers in Asia's emerging economies. Alongside China, other Asian

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<v Speaker 2>countries Vietnam, Thailand, and India are also hit hard by

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<v Speaker 2>Trump's latest tariffs. These countries are often referred to as

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<v Speaker 2>China plus one economies. That's where companies hedge their bets

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<v Speaker 2>by not just having factories in China, but also setting

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<v Speaker 2>up supply chains in other countries, hence the plus one

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<v Speaker 2>to protect themselves against geopolitical risks. These China plus one

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<v Speaker 2>economies have come to rely on the US as a

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<v Speaker 2>major trading partner. Vietnam, for example, gets about thirty percent

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<v Speaker 2>of its GDP from exports to the US and around

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<v Speaker 2>the world. The country had the third biggest trade deficit

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<v Speaker 2>with US last year, and it's now facing a forty

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<v Speaker 2>six percent duty now. To understand better how the latest

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<v Speaker 2>tariffs are going to affect these emerging China plus one economies,

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<v Speaker 2>we spoke with John Boudreaux, a Bloomberg Southeast Asia editor

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<v Speaker 2>based in Hocheman City, Vietnam's financial capital, John, factory owners

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<v Speaker 2>in Vietnam that supplied to the US are they freaking

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<v Speaker 2>out right now? You know?

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<v Speaker 1>I don't think anyone saw this coming. Words like stunned, shocked, terrifying,

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<v Speaker 1>of being uttered on streets, cafes, factory floors, even in

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<v Speaker 1>government offices. There's fears of lost jobs and incomes for

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<v Speaker 1>many Vietnamese, particularly those who's lies. They were desperately poor,

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<v Speaker 1>and the shifting global supply chains just profoundly change their lives.

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<v Speaker 2>Now, John Trump has been talking about teris for a while,

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<v Speaker 2>and there have been some early indications that Vietnam might

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<v Speaker 2>be targeted. Did Vietnam totally not see this coming or

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<v Speaker 2>was it just not prepared for terras to be so high?

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<v Speaker 1>Yeah, it was the high that that shocked them back.

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<v Speaker 1>During Tom's first term, he actually at one point said

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<v Speaker 1>that Vietnam took advantage of the US quote even worse

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<v Speaker 1>than China. So that could have been an early warning sign.

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<v Speaker 2>And how much can these latest tariffs damage Vietnam's economy.

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<v Speaker 1>Vietnam's exports represent roughly ninety percent of GDP. It's huge,

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<v Speaker 1>and the US is its largest market. Your Nike shoes,

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<v Speaker 1>your Samsung phone, your Apple gadget is coming from Vietnam

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<v Speaker 1>and other countries. And so if suddenly you're seeing a

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<v Speaker 1>you know, forty six percent tax hike on that, that's

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<v Speaker 1>going to hurt. I'm in Vietnam has very aggressive growth

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<v Speaker 1>plans this year eight percent. If this continues, they're going

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<v Speaker 1>to have to be dialing back.

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<v Speaker 2>You mentioned Apple, John, Do we have a sense of

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<v Speaker 2>what other businesses in industries might be the hardest hit

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<v Speaker 2>at first?

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<v Speaker 1>Well, certainly industries like the garment industry here just so

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<v Speaker 1>relies on the US market. Vietnam is like the second

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<v Speaker 1>largest supplier of shoes and clothes to the US. Anything

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<v Speaker 1>that makes their products prohibitedly expensive for consumers just absolutely

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<v Speaker 1>freaks them out. Nike makes about half of its shoes

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<v Speaker 1>in Vietnam. Adidas it's thirty nine percent. Abercrombie and Fitch

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<v Speaker 1>gets thirty percent of its merchandise from Vietnam, On and

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<v Speaker 1>on and on. It's like a who's who of global

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<v Speaker 1>clothes brands and shoe brands are here.

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<v Speaker 2>Is there a risk that could really change very quickly?

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<v Speaker 4>Now?

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<v Speaker 1>I don't know if it could change quickly in the

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<v Speaker 1>sense of suddenly people pivoting away from Vietnam because I

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<v Speaker 1>don't think it's easy to set up a factory. These werekers,

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<v Speaker 1>even workers making shoes. They're very specialized and the factories

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<v Speaker 1>are specialized, so it's not something you can just pick

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<v Speaker 1>up and move. Plus, so many other countries are being

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<v Speaker 1>hit with tariffs too, so the fear would be okay,

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<v Speaker 1>so we all back up and moved to country ts Well,

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<v Speaker 1>who to say you're not going to suddenly have a

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<v Speaker 1>major bullseye on your economy too.

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<v Speaker 2>After Trump made the shock announcement, Vietnam Communist Party chief

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<v Speaker 2>Though Lum reached out to Trump in a phone call

0:14:27.920 --> 0:14:31.880
<v Speaker 2>and offered to drop all tariffs on US goods. Trump

0:14:31.920 --> 0:14:35.440
<v Speaker 2>described the call between them as very productive and indicated

0:14:35.480 --> 0:14:39.080
<v Speaker 2>that the two leaders would meet. Meanwhile, Trump trade advisor

0:14:39.160 --> 0:14:43.520
<v Speaker 2>Peter Navarro suggested that Vietnam's initiative didn't go far enough,

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<v Speaker 2>since that doesn't get rid of the trade deficit it

0:14:46.200 --> 0:14:50.480
<v Speaker 2>has with the US. Now, John, apart from Vietnam, you've

0:14:50.520 --> 0:14:55.960
<v Speaker 2>got Cambodia, Philippines, Thailand, India. These are all emerging countries

0:14:56.000 --> 0:14:59.760
<v Speaker 2>that rely on exports for growth. How are the Southeast

0:14:59.800 --> 0:15:03.880
<v Speaker 2>Asia and South Asian countries interpreting the new tariffs pasink.

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<v Speaker 1>If this continues, if this isn't just a quick shock

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<v Speaker 1>and all move by the US to get people to

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<v Speaker 1>the negotiating tables to cut deals, I think it's gonna

0:15:15.040 --> 0:15:19.280
<v Speaker 1>dent a lot of economies. I think it's very disconcerting

0:15:19.400 --> 0:15:22.040
<v Speaker 1>for a lot of these countries as governments.

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<v Speaker 2>And John do you see these emerging economies perhaps trying

0:15:25.240 --> 0:15:27.840
<v Speaker 2>to make a deal like Vietnam. Will they try to

0:15:27.840 --> 0:15:30.320
<v Speaker 2>play nice by saying, we'll cut all our teriffs if

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<v Speaker 2>you drop yours.

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<v Speaker 1>I think you're going to see a lot of delegations

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<v Speaker 1>going to Washington. These economies in the Southeast Asia, they

0:15:38.600 --> 0:15:42.960
<v Speaker 1>can't match the firepower of China or the EU, and

0:15:43.120 --> 0:15:46.040
<v Speaker 1>their economies are much smaller, so I don't think they

0:15:46.040 --> 0:15:48.160
<v Speaker 1>could make this kind of threats. They have to just

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<v Speaker 1>negotiate their way through this and just hope that they

0:15:51.280 --> 0:15:55.040
<v Speaker 1>can come up with a package of deals that will

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<v Speaker 1>cause the White House to relent and ease some of

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<v Speaker 1>these terrors.

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<v Speaker 2>All of these emerging economies we've mentioned, they've been caught

0:16:03.520 --> 0:16:07.440
<v Speaker 2>between the two superpowers, between the US and China. How

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<v Speaker 2>do the tariffs and Trump's policies change the way that

0:16:10.720 --> 0:16:12.560
<v Speaker 2>they're walking this tight groupe.

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<v Speaker 1>You know, Vietnam has long relied on what it calls

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<v Speaker 1>bamboo diplomacy, the idea that the bamboo moves in the

0:16:21.320 --> 0:16:24.520
<v Speaker 1>wind can move the direction when it has to, and

0:16:24.600 --> 0:16:28.040
<v Speaker 1>perhaps that could be a template for other governments in

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<v Speaker 1>dealing with the Trump administration. They are very adept at

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<v Speaker 1>figuring out what the great powers want and how to

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<v Speaker 1>make sure they don't get caught between the disputes so

0:16:39.760 --> 0:16:44.520
<v Speaker 1>their great powers or get entangled in issues like this. Now,

0:16:45.240 --> 0:16:49.160
<v Speaker 1>it still is not an easy situation to deal with.

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<v Speaker 1>I think this could possibly alter some of the US's

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<v Speaker 1>relationships with countries in this region. Certainly China spends a

0:16:57.800 --> 0:17:01.200
<v Speaker 1>lot of time and effort willing them. Yeah, she's in things,

0:17:01.240 --> 0:17:06.760
<v Speaker 1>planning a trip fairly soon to Vietnam and some other countries,

0:17:07.240 --> 0:17:10.040
<v Speaker 1>and he's not coming in with a big stick of

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<v Speaker 1>terrors and yelling at people. So in the long term

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<v Speaker 1>this could really benefit China geopolitically in this region.

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<v Speaker 2>This is the Big Take Asia from Bloomberg News. I'm wanh.

0:17:23.720 --> 0:17:27.240
<v Speaker 2>This episode was produced by Young Young and Naomi. It

0:17:27.320 --> 0:17:30.000
<v Speaker 2>was edited by Grace Jennings Ed quist and fact check

0:17:30.040 --> 0:17:33.280
<v Speaker 2>by Naomi and David Fox. Mixed and sound designed by

0:17:33.280 --> 0:17:38.000
<v Speaker 2>Taka Yesuzawa and Alex Uguira. Our senior producer is Naomi Shaven.

0:17:38.280 --> 0:17:42.640
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0:17:42.760 --> 0:17:46.919
<v Speaker 2>is Julia Weaver. Our executive producer is Nicole Beemsterbower. Sage

0:17:46.960 --> 0:17:50.560
<v Speaker 2>Bowman is Bloomberg's head of podcasts. If you like this episode,

0:17:50.640 --> 0:17:53.280
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0:17:53.359 --> 0:17:56.320
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