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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybake podcast, available every morning on Apple,

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Speaker 2: Spotify or wherever you listen. It's Tuesday, the fourth of

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Speaker 2: February in London. I'm Caroline Hepcare.

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Speaker 1: And I'm Stephen Carroll. Coming up today, Trump's ten percent

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Speaker 1: China tariffs take effect in the opening shot of a

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Speaker 1: fresh trade war as China retaliates with new measures.

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Speaker 2: The US president delays twenty five percent tariffs on Canada

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Speaker 2: and Mexico after securing some concessions.

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Speaker 1: Plus walking a diplomatic tightrope. Keir Starmer tries to stay

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Speaker 1: on good terms with both the US and the EU,

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Speaker 1: but is the UK risking its relationship with both.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 1: President Donald Trump has imposed to ten percent tariff on

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Speaker 1: all Chinese goods, triggering a series of retaliatory measures from

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Speaker 1: Beijing and midnight. US deadline for the duties to go

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Speaker 1: into effect passed on Tuesday, hours after Trump reached separate

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Speaker 1: agreements with the leaders of Canada and Mexico to delay

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Speaker 1: twenty five percent duties for a month. Minutes after the

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Speaker 1: deadline passed, China responded Beijing says it will investigate Google

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Speaker 1: for alleged competition law violations. The world's second largest economy

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Speaker 1: also announced fifteen percent levies on coal and liquefied natural

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Speaker 1: gas and ten percent on oil and agricultural equipment from

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Speaker 1: the US for their measures include export controls on tungsten

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Speaker 1: related materials and adding the owner of Calvin Klein and

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Speaker 1: Alumina to an Unreliable entity list.

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Speaker 2: The decision to delay those twenty five percent tariffs on

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Speaker 2: goods from Canada and Mexico for a month came after

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Speaker 2: new commitments from both countries to combat migration and drug trafficking.

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Speaker 2: The concessions include Mexico sending ten thousand National Guard officers

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Speaker 2: to the border and Canada creating a new quote strikeforce

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Speaker 2: with the US to fight organized crime. But Bloomberg's Dan

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Speaker 2: Flatley says President Trump's deal to pause tariffs still leaves

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Speaker 2: a number of unanswered questions.

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Speaker 3: It would seem that he has a victory to declare

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Speaker 3: with this deal with Mexico and Canada at this point,

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Speaker 3: although we really don't know what's to come, what will

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Speaker 3: happen after thirty days, And again we still have those

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Speaker 3: other two things on the table revenue which he needs

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Speaker 3: for the tax cuts and rebalancing trade, which is one

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Speaker 3: of his campaign promises. So I don't think this is

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Speaker 3: over by a long shot, but this is sort of

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Speaker 3: the opening salvo in What's to Come.

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Speaker 2: Dan Flatley. They're referring to the fact that President Trump

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Speaker 2: has previously said that he would use the revenue from

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Speaker 2: tariffs to generate money to pay for US tax cuts.

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Speaker 2: The news takes the three North American trading partners back

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Speaker 2: to the brink of trade war that economists warn will

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Speaker 2: hurt US growth worse than inflation and possibly plunge Canada

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Speaker 2: and Mexico into recession.

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Speaker 1: UK Prime Minister Kiris Starmer says Britain isn't choosing between

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Speaker 1: its alliances with the EU or the United States. That's

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Speaker 1: after Britain appeared to escape Tarerff threats from Donald Trump,

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Speaker 1: who's had measures against the EU are definitely coming. Starmer

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Speaker 1: was speaking in Brussels, where he attended a meeting of

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Speaker 1: EU leaders last night.

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Speaker 4: His early days, and I think what's really important is

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Speaker 4: open and strong trading relations, and that's been the basis

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Speaker 4: of my discussions with President Trump. And I know that

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Speaker 4: intense USCU discussions are planned.

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Speaker 1: Kiris Starmer, speaking there during a joint press conference with

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Speaker 1: the NATO Secretary General in Brussels. I. Meanwhile, the pound

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Speaker 1: is being seen as an unlikely haven in the market.

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Speaker 1: Turmoil provoked by the Tower of Threats, The UK's services

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Speaker 1: focused economy and improving relations with the EU and US

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Speaker 1: are contributing to the pound strength.

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Speaker 2: Meanwhile, when it comes to domestic issues, austerity may be

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Speaker 2: on the cards for the UK once again. That's as

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Speaker 2: the Treasury tells government departments to brace for spending freezer

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Speaker 2: due to pressure on the public finances. Here is Bloomberg's

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Speaker 2: tea were added bio reporting.

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Speaker 5: Before taking up her role as Chancellor, Rachel Reeves vowed

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Speaker 5: there would be no return to austerity under a Labour government,

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Speaker 5: but that promise is becoming increasingly difficult to keep as

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Speaker 5: her party contends with high borrowing costs and stagnant growth.

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Speaker 5: Now unprotected government departments, including Justice and Culture effacing significant

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Speaker 5: budget pullbacks, with some modeling flat cash spending plans or

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Speaker 5: three to five percent real terms cuts. That's despite a

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Speaker 5: fifty billion uptick in overall spending in last October's budget,

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Speaker 5: which saw most funding reserved for Health, Education and Defense

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Speaker 5: who's spending is protected. The government's full review, which will

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Speaker 5: determine how the overall amount of cash is shared between departments,

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Speaker 5: will be published in June. In London, Tea add A

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Speaker 5: Bio Bloomberg.

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Speaker 1: Radio UBS has announced plans to boost share buybacks this

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Speaker 1: year after its profits beat expectations. In the fourth quarter.

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Speaker 1: Net income at the bank came in at seven hundred

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Speaker 1: and seventy million dollars compared to estimates of four hundred

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Speaker 1: and eighty six million dollars. The firm their plans to

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Speaker 1: repurchase a billion dollars of shares in the first half

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Speaker 1: of the year and an additional two billion in the

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Speaker 1: second half. Meanwhile, in France, bnp pariba's fourth quarter profits

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Speaker 1: also beat estimates, coming in at just over two point

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Speaker 1: three billion euros. It also announced it would start paying

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Speaker 1: a semi annual interim dividend this year.

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Speaker 2: French Prime Minister Francois Beer who has forced through his

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Speaker 2: twenty twenty five budget bill using a constitutional provision and

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Speaker 2: bypassing Parliament's lower house. It's a move that will likely

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Speaker 2: trigger a no confidence vote, with the far left France

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Speaker 2: Unbowed already announcing its intention to file emotion, while the

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Speaker 2: socialist leadership has said that it won't support it. Marine

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Speaker 2: le Pen's national rally has yet to give a clear

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Speaker 2: indication of how it will vote. Beau meanwhile has called

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Speaker 2: members of Parliament not to overthrow his government or bebuviros.

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Speaker 6: No country can live without the budget and France lessen

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Speaker 6: all the others. For the first time since the foundation

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Speaker 6: of the Fifth Republic, for the first time in close

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Speaker 6: to seventy years, our country is still without a budget

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Speaker 6: in February. The image of France is a serious democracy,

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Speaker 6: a pillar of the European Union will be affected.

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Speaker 3: Pilier de lugnon.

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Speaker 2: So Prime Minister Francoisberrou speaking there of r A translators

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Speaker 2: of fellow lawmakers. His remarks come after a period of

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Speaker 2: term or for French politics since President demandor in Macon's

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Speaker 2: snap election last summer, which fractured the National Assembly into

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Speaker 2: three opposing blocks.

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Speaker 1: Those are your top stories. On the markets. The MSCIS

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Speaker 1: specific index is nine tens of one percent higher after

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Speaker 1: the news of the retaliatory measures from China. There we

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Speaker 1: have at oil price as sliding brank cruids down one

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Speaker 1: point two percent, down by one point eight percent. European

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Speaker 1: stock futures are slightly negative this morning. On Eurostock's fifty

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Speaker 1: forty one hundred futures down two tenths of one percent,

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Speaker 1: and on Wall Street SMP Mini and nastac features are

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Speaker 1: both two tenths of one percent. Week of the Bloomberg

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Speaker 1: Dollar Spot Index is unchanged on the day.

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Speaker 2: Now, in a moment, we'll bring you more on Donald

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Speaker 2: Trump's tariff's step up with China retaliating in the early

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Speaker 2: hours this morning, just in the past few minutes. Plus

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Speaker 2: why Also, the UK's Prime Minister is in Europe and

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Speaker 2: the difficult balancing act that he faces between the EU

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Speaker 2: and the US. But there's a lighter story that caught

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Speaker 2: my eye.

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Speaker 1: I know, Caroline, what caltry about this story exactly?

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Speaker 2: Oh? The list list of wonderful gifts that you can

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Speaker 2: give somebody that you love for Valentine's Day. Yes, it

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Speaker 2: is sharing this podcast anyone maybe helpfully. One of the

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Speaker 2: producers has listed all of the items for most expensive

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Speaker 2: to least expenses.

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Speaker 1: I went to the very bottom of that list immediately,

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Speaker 1: which is chocolates, which I'm actually probably of all of them,

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Speaker 1: to be honest, because some of these things are let's say,

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Speaker 1: not to my taste, but I mean give me you

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Speaker 1: I must.

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Speaker 2: Say a genius chocolate giver in terms of your gifts.

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Speaker 2: But yes, this is by Kristin Shirley. If you want

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Speaker 2: to have a look at it, it's the luxury Valentine

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Speaker 2: gift idea list for you. So I do recommend it. Yes,

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Speaker 2: there are some very expensive items, lots of sparkly jewels

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Speaker 2: and all sorts of things on there. But if you

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Speaker 2: do want to get that list from Bloomberg, I recommend it.

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Speaker 1: Well, let's turn back to our top story now, China

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Speaker 1: announcing a series of measures in response to the fresh

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Speaker 1: US tariffs, which came into effect at five am UK time.

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Speaker 1: The US President's had his administration plans to hold talks

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Speaker 1: with China. He delayed the tariffs on Canada and Mexico

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Speaker 1: for a month after speaking to leaders of those countries yesterday.

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Speaker 1: Let's bring in our senior editor, Bill Ferries for more. Bill,

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Speaker 1: the China deadline has passed. Then, what does this mean

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Speaker 1: in practice?

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Speaker 7: Well, it looks like we have a, if not of

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Speaker 7: four blown trade war, some kind of a trade skirmish here,

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Speaker 7: because just as we passed that one minute past deadline

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Speaker 7: time zone in the In the US, we got China

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Speaker 7: immediately slapping tariffs on a whole range of US products

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Speaker 7: and announcing a probe into Google. So China not waiting

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Speaker 7: to see if there's a big impact from this they're making.

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Speaker 7: They made them move very quickly. And you know, we

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Speaker 7: had been waiting for a potential call between Donald Trump

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Speaker 7: and Shi Jinping. It doesn't look like that call took place.

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Speaker 7: We you know, it could have taken place, and neither

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Speaker 7: side has said anything so far, but it doesn't look

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Speaker 7: like it did. So there's still a potential for talks

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Speaker 7: in the coming days. But as we've seen in the past,

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Speaker 7: once these tariffs are in place, they can sometimes be

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Speaker 7: politically a little bit harder to remove.

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Speaker 2: Okay, President Trump, though, did manage to get deals and

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Speaker 2: therefore delay the imposition of tariffs or Mexico and Canada,

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Speaker 2: what did those deals achieve?

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Speaker 7: Well, from the US side, I think from the Trump

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Speaker 7: administration side, they feel like they got enough progress promised

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Speaker 7: to them when it comes to securing the border, both

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Speaker 7: the northern border and the southern border, trying to stop fentanyl.

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Speaker 7: Both nations Canada and Mexico is saying that they would

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Speaker 7: deploy ten thousand troops or agents of some kind to

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Speaker 7: try to work to stop the flow of fentanyl and

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Speaker 7: undocumented migrants across the border. Justin Trudeau had basically committed

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Speaker 7: to a plan along those lines in December, a nine

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Speaker 7: hundred million dollar plan, but Trump said that his reiteration

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Speaker 7: of that plan was sufficient. Canada's announcing a fentanyl czar

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Speaker 7: to help oversee those efforts. There's going to be a

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Speaker 7: lot more coordination with US border forces. And it's not

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Speaker 7: clear that these tariffs are never going to happen. They

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Speaker 7: they've bought themselves a month. So our next deadline is

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Speaker 7: March fourth.

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Speaker 1: What about for the rest of the world that's wondering

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Speaker 1: where Donald Trump will turn to next. He said that

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Speaker 1: he would definitely impose measures against the European Union for example.

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Speaker 1: Anything else we should be watching out for.

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Speaker 7: Well, he said, yeah, he said he's looking at the

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Speaker 7: European Union, but he seems to be giving the UK

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Speaker 7: a bit of a reprieve. He said he thinks things

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Speaker 7: can be worked out with the UK, even though he

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Speaker 7: said there's still grounds for having some tariffs or action there.

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Speaker 7: I think the message overall is, you know, we didn't

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Speaker 7: see the steepest tariffs that we were expecting today that

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Speaker 7: those twenty five percent tariffs didn't come in. We did

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Speaker 7: see the ten percent on China. So Trump has shown

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Speaker 7: that he's willing to use this tool. We don't know

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Speaker 7: if he's willing to use it to the maximum power.

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Speaker 7: You know, he talked in a campaign about sixty percent

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Speaker 7: tariffs on China, and economists have come out and talked

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Speaker 7: about how severely that would impact global trade in the

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Speaker 7: US economy, the Chinese economy. So we know he's willing

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Speaker 7: to put these in the place. We just don't know

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Speaker 7: how far he's willing to go if he doesn't get

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Speaker 7: what he wants.

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Speaker 2: Bill, thank you so much for being with us this morning.

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Speaker 2: Bloomberg's senior editor, Bill ferries.

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Speaker 1: Well, the pound is emerging is unlikely haven amid the

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Speaker 1: Trump tariff turmoil, but can that continue? The Prime Minister

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Speaker 1: Kiir Starmer was at NATO headquarters in Brussels yesterday. He

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Speaker 1: attended informal dinner of EU leaders last night as well.

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Speaker 1: Are you UK correspond at Lizzie Burden is in Brussels

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Speaker 1: for us this morning. Lizzie, good morning. This is an

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Speaker 1: interesting place that kir Starmer has found himself. Can he

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Speaker 1: court both the US and the European Union?

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Speaker 8: Yeah, good morning, Stephen. You're right, it's a really interesting

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Speaker 8: moment for Kis Starmer to be at NATO, given the

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Speaker 8: questions of one, whether the US threatening tariffs on Canada

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Speaker 8: means that NATO's breaking down, and two, as you suggest,

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Speaker 8: whose Starmer would pick if Trump made him pick between

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Speaker 8: the US and the EU. Starmer says he's talking to

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Speaker 8: both sides. The NATO Secretary General Mark Rutters said there

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Speaker 8: are always issues among allies, but frankly, these are more

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Speaker 8: than issues, and you do have to wonder how long

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Speaker 8: Trump will let Starmer sit on the fence. I was

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Speaker 8: listening to Bild there. You know, as Trump suggested the

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Speaker 8: UK can escape tariffs just because as the UK trade

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Speaker 8: is at the moment, it's out of line. But as

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Speaker 8: Trump says that one can be worked out. Now you

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Speaker 8: could interpret that as a warning to Starmer don't put

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Speaker 8: a foot wrong or else. But the closest Starmer aligns

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Speaker 8: with Europe, the less room he has to accommodate Trump's

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Speaker 8: demands on trades. And what's for sure is the UK

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Speaker 8: cannot afford a trade war with the US given its growth,

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Speaker 8: and no one is more conscious of that than Keir Starmer.

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Speaker 8: The risk is that Starmer tries to straddle the Atlantic

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Speaker 8: and offense both sides. And you'll remember he already conspicuously

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Speaker 8: failed to back Denmark in the Greenland dispute when he

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Speaker 8: was given the chance on Bloomberg TV. That will have

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Speaker 8: been pretty awkward, I expect around the dinner table last

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Speaker 8: night with those twenty seven EU leaders in Brussels. It's

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Speaker 8: the first time a UK Prime minister has attended an

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Speaker 8: EU summit dinner since Brexit five years ago, and I'm

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Speaker 8: sure it will come up again today when the EU

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Speaker 8: Trade Commissioner meets the UK's EU Relations Minister Nick Thomas

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Speaker 8: Simmons here in Brussels.

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Speaker 2: So, in terms of other issues and the NATO meeting

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Speaker 2: in particular, how did Kits Starmer's message on defense go down,

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Speaker 2: which is also related to the trade store isn't it

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Speaker 2: the pressure from the US for more defense spending?

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Speaker 8: Yeah, I mean he echoed Rutterer's message that to prevent

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Speaker 8: war we must spend more. So Starmer said that the

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Speaker 8: UK will give more military support to Ukraine. NATO allies

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Speaker 8: need to step up. Trump's threatened more sanctions on Russia.

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Speaker 8: Starmer says that's already got Putin rattled. But look, Starmer

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Speaker 8: still hasn't set a deadline to hit this target of

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Speaker 8: spending two point five percent of GDP on defense led

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Speaker 8: alone to raise it above three percent as Trump's advisors want.

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Speaker 8: And remember Trump's called for NATO countries to spend five

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Speaker 8: percent of GDP on defense. So it's something of a

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Speaker 8: sore spot that Starmer appears to be lecturing Europeans to

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Speaker 8: do more. French officials have been calling him the dumn

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Speaker 8: du and when you look at how crunched the UK

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Speaker 8: is fiscally, it's hard to see how Starmer can afford

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Speaker 8: to go full throttle on defense spending anytime soon.

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Speaker 1: Well, on that note, the UK Treasury has told several

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Speaker 1: government departments to prepare for their budgets to be frozen

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Speaker 1: in cash terms. Lizzie briefly is austerity back.

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Speaker 8: Well Reeves promised at Labor conference last year. It wouldn't be,

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Speaker 8: but the public finances are under so much pressure the

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Speaker 8: Treasury's ass departments whose budgets aren't protected, to model flat

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Speaker 8: cash spending plans. This may not materialize, but they are

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Speaker 8: preparing for a worst case scenario if Reeves's headroom is

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Speaker 8: wiped out, and today's she'll get a clue as to

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Speaker 8: whether she'll actually face that choice, because the Office for

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Speaker 8: Budget Responsibility is going to handle a copy of its

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Speaker 8: first updated forecast estimate, and it's the first of five

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Speaker 8: rounds before that all important verdict on her headroom. On

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Speaker 8: March the twenty sixth.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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