Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Another stunning turn of events in the trade war between
Speaker 2: the US and China. Early Monday morning, the country said
Speaker 2: in a joint statement that they'd slash tariffs on one
Speaker 2: another for ninety days as they continue talks. The combined
Speaker 2: one hundred and forty five percent tariffs the US had
Speaker 2: levied on Chinese imports are going down to thirty percent
Speaker 2: and China is rolling back It's one hundred and twenty
Speaker 2: five percent tariffs to ten percent.
Speaker 3: Yesterday, we achieved a total reset with China after productive
Speaker 3: talks in Geneva.
Speaker 2: It's a far cry from President Trump's past statements. He
Speaker 2: once called the US's trade relationship with China quote the
Speaker 2: greatest theft in the history of the world.
Speaker 3: The talks in Geneva were very friendly. The relationship is
Speaker 3: very good. We're not looking to hurt China. China is
Speaker 3: being heard very badly.
Speaker 2: On Bloomberg TV this morning, US Treasury Secretary Scott Bessett
Speaker 2: called the current tariffs quote a floor for further negotiations,
Speaker 2: and says there's now a process in place to avoid
Speaker 2: further escalation.
Speaker 4: I think they understand that we are focused on fair trade,
Speaker 4: that this gigantic deficit that we have with them, that
Speaker 4: it didn't happen last year, It didn't happen there before,
Speaker 4: It's happened over decades.
Speaker 2: Stocks rebounded sharply following the news and comments by President
Speaker 2: Trump that he might speak to President Chieshin Ping later
Speaker 2: this week. I'm David Gura, and this is the big
Speaker 2: take from Bloomberg News today. On the show, surprisingly fruitful
Speaker 2: negotiations over the weekend lowered tariffs with China and buoyed markets,
Speaker 2: but a lot of uncertainty remains. I sat down with
Speaker 2: Bloomberg Treasury reporter Dan Flatley to discuss the negotiations and
Speaker 2: what could lie ahead. Well, Dan wall Street is very
Speaker 2: clearly cheering this news. How significant is it this agreement.
Speaker 1: I think it's significant in a couple of ways. One
Speaker 1: is that it far exceeded people's expectations going into this weekend.
Speaker 1: Treasury Secretary Scott Bessent kind of downplayed the expectations a
Speaker 1: little bit. Last week. Trump floated this idea of maybe
Speaker 1: taking the tariffs down to eighty percent. Folks that I
Speaker 1: talked to ahead of this weekend were sort of saying
Speaker 1: the Chinese may walk out of this negotiation. They may
Speaker 1: just say this is not worth it to us. I
Speaker 1: think that what we got, and the reason why stocks
Speaker 1: are on a tear right now is because this is
Speaker 1: way below any expectations that we had. So we're talking
Speaker 1: about US tariffs on Chinese goods of about thirty percent
Speaker 1: when you add everything together, that's way down from one
Speaker 1: hundred and forty five percent. It's not nothing. I mean,
Speaker 1: it's more tariffs than existed on January first this year.
Speaker 1: But certainly it seems to indicate and the folks that
Speaker 1: I've heard and talked to in the days an hour
Speaker 1: since this deal was worked on and announced sort of
Speaker 1: seemed to think that this is a sign that there
Speaker 1: will be some deal further on down the line. And
Speaker 1: I think Bessent talk about this a little bit in
Speaker 1: one of his TV appearances this morning, that it's really
Speaker 1: the expectation that there will be some bigger deal down
Speaker 1: the road that has kind of stocks where they are today.
Speaker 2: We'll dig into all of that before we get there.
Speaker 2: Could you just set the scene for us what these
Speaker 2: meetings looked like. They took place in Geneva in Switzerland.
Speaker 1: Yeah, it's interesting the location that was chosen sort of
Speaker 1: neutral territory for both parties. And the way that this
Speaker 1: was initially kind of talked about by the Treasury was
Speaker 1: this idea of, oh, we just were going to be
Speaker 1: in Switzerland anyway, so mine as well meet with the Chinese.
Speaker 1: It was very nonchalant, and I think that was intentional
Speaker 1: because they didn't want to set expectations too high. At
Speaker 1: the same time, the meetings were largely sort of on
Speaker 1: the Chinese's terms, you know, the negotiators from China on
Speaker 1: their terms, in the sense that they didn't want a
Speaker 1: lot of media attention around this. They wanted the negotiations
Speaker 1: to play out behind closed doors. They really were big
Speaker 1: on this idea of the US approaching China with respect,
Speaker 1: and so you saw a little bit of that too
Speaker 1: in how all this was stage managed. And obviously there
Speaker 1: was this idea of Okay, we'll start the talks on Saturday,
Speaker 1: we'll see how things go. If things go well, if
Speaker 1: there's more to discuss, we'll meet on Sunday. They met
Speaker 1: on Sunday. Then they had the announcement early this morning
Speaker 1: US time in Geneva. It was very carefully calibrated and orchestrated,
Speaker 1: and so what I think you see is this idea
Speaker 1: of a mechanism, a quote unquote mechanism. That's what Besson
Speaker 1: has talked about, and he's even talked about sort of
Speaker 1: this idea of a Geneva mechanism or some way in
Speaker 1: which these talks can continue. And I think that it
Speaker 1: would reflect broadly this kind of idea, very discrete, carefully
Speaker 1: calibrated language around all of this stuff, which is in
Speaker 1: part what the Chinese have asked for.
Speaker 2: It's about tariffs, but it's about more than that, isn't it.
Speaker 2: I know that they were mentioned here kind of non
Speaker 2: tariff countermeasures that have been put in place.
Speaker 1: Right Besstt has been big on this idea of non
Speaker 1: tariff barriers. And one of the things that he he
Speaker 1: has said and talked about, and that Trump has talked
Speaker 1: about a little bit as well, is that China is
Speaker 1: going to remove some of those non tariff barriers to
Speaker 1: US businesses doing business in China. They want to see
Speaker 1: a rebalancing. They want to see China open its markets
Speaker 1: to US goods. They want to see China balance its
Speaker 1: economic profile toward not just production but also consumption. They
Speaker 1: want to see the US up its production manufacturing production
Speaker 1: here at home and not just focus on consumption. So
Speaker 1: they're trying to strike this balance. So I think if
Speaker 1: you were to ask Scott Bessett what he wants to
Speaker 1: see out of all of this in the end, it
Speaker 1: would be some type of grand rebalancing where you have
Speaker 1: a little bit of a national security overlay to all
Speaker 1: of this, which is about supply chains and so forth,
Speaker 1: but also about economic security. Now, whether we actually get
Speaker 1: to that is a kind of a separate question, and
Speaker 1: the events of this past weekend seem to suggest that
Speaker 1: there is a pain point at which the Trump administration
Speaker 1: may be looking at giving up some of those broader
Speaker 1: goals in order to not do lasting harm to the economy.
Speaker 1: So that's one of the things that we're keeping an
Speaker 1: eye on is all this plays out.
Speaker 2: I want to get back to Treasury Secretary Best and
Speaker 2: subjectives here in a minute. Before we get there. What
Speaker 2: wasn't discussed over the course of the weekend.
Speaker 1: Well, one of the things that came up is this
Speaker 1: idea of fentanyl and China shipping precursor chemicals for the
Speaker 1: production of fentanyl to Mexico and other countries in order
Speaker 1: to basically get that drug into the United States, and
Speaker 1: so China sent one of its national security officials to
Speaker 1: Geneva to discuss this issue. The US sent a national
Speaker 1: security official as well to discuss this issue, but it's
Speaker 1: not clear whether the broader national security issues around China
Speaker 1: came up at all visa VI Taiwan semiconductor issues, the
Speaker 1: steel industry, Pharmaceuticals is another one. Lots of different items
Speaker 1: that have been talked about in terms of TIFFs coming
Speaker 1: on those products or those services or those goods further
Speaker 1: down the road. So that was not really addressed in
Speaker 1: this discussion, and this was narrowly focused on trade.
Speaker 2: Dan, I want to have you describe the backdrop to
Speaker 2: these talks and maybe the forcing mechan and then brought
Speaker 2: these two sides to the table. I don't know if
Speaker 2: we know yet who initiated this in earnest, but how
Speaker 2: did we get here and sort of what was playing
Speaker 2: out more broadly in trade that made this something that
Speaker 2: I think both sides recognized needed to happen.
Speaker 1: So I think there are a couple of things. One
Speaker 1: of the main things that we've been watching is this
Speaker 1: question of empty shelves in the US. So there's been
Speaker 1: reporting and We've done some great reporting on container ships
Speaker 1: cargo ships coming from China that have not either made
Speaker 1: it to US shores or have been held up or
Speaker 1: have turned around, or other issues like that. So I
Speaker 1: do think that that was a real fear, as well
Speaker 1: as what we call rare Earth's basically critical minerals around
Speaker 1: magnets and other sorts of things that go into a
Speaker 1: lot of consumer products and a lot of defense consumer products.
Speaker 1: So I think the US was getting nervous about that.
Speaker 1: I think that Chinese were sort of getting nervous on
Speaker 1: their end about companies like Apple and others potentially pulling out,
Speaker 1: upsetting sort of their long term plans for how they
Speaker 1: want to reorient their economy. So I think that both
Speaker 1: sides had an incentive to come to the table. I
Speaker 1: think long term, as Secretary Besson has talked about, the
Speaker 1: US may have had more of an advantage as the
Speaker 1: deficit country, as a country that was buying a lot
Speaker 1: of these goods, whereas China had more of a short
Speaker 1: term advantage in the country that supplies a lot of
Speaker 1: these goods.
Speaker 2: President Trump has teased being open to having a call
Speaker 2: with President she He did that again today on Monday morning.
Speaker 3: The relationship is very, very good. I'll speak to President
Speaker 3: she maybe at the end of the week.
Speaker 2: You mentioned that Geneva mechanism, this agreement to continue talking,
Speaker 2: and I wonder if that's kind of as important, We're
Speaker 2: almost as important as reducing these tariffs. Just this agreement
Speaker 2: that dialogue is going to continue here.
Speaker 1: Whatever we got today, the more important thing going forward
Speaker 1: is this idea that these two sides will continue to talk.
Speaker 1: Trump has actually talked about the European Union as being
Speaker 1: potentially a harder party to negotiate with than China. But
Speaker 1: as all of this plays out, the big question was
Speaker 1: what happens with China, And just the fact that these
Speaker 1: two sides are talking now suggests that there will be
Speaker 1: some resolution to this agreement that's not going to do
Speaker 1: lasting harmed to global economy at some point. So I
Speaker 1: think that that is one of the things that, more
Speaker 1: than anything else, has given markets some encouragement.
Speaker 2: After the break. What a trade truce means for the
Speaker 2: future of the US China relationship, plus what the upcoming
Speaker 2: G seven meeting could reveal about the administration's approach to trade.
Speaker 2: What does Secretary beston, what does President Trump want this
Speaker 2: relationship to look like going forward, the relationship between the
Speaker 2: US and China. Have they been explicit about that.
Speaker 1: I think they have been explicit about it in a
Speaker 1: couple of ways. One thing is that they've talked about
Speaker 1: this idea of certain goods being critical. You know, Besson
Speaker 1: has talked a lot about critical minerals. He's talked about
Speaker 1: these ingredients that go into very high end, you know,
Speaker 1: weapons systems and things like that, as being something that
Speaker 1: the US needs to have access to no matter what
Speaker 1: happens in terms of global trade. And right now, China
Speaker 1: does most of the world's production around those types of
Speaker 1: elements and those types of minerals, and so the US
Speaker 1: definitely wants to see a lot of that production and
Speaker 1: processing it and those sorts of things moved out of China,
Speaker 1: potentially to the US, but maybe to some friendlier countries.
Speaker 1: And that's been a longstanding issue for not just the
Speaker 1: Trump administration but also the Biden folks as well. There's
Speaker 1: also questions around semiconductors, steel industry. I think Bestent said
Speaker 1: earlier today that they're going to protect the US steel industry.
Speaker 1: There's a lot of these sort of national security focused
Speaker 1: supply chain things that they really want to focus on
Speaker 1: and that are sort of existing somewhere outside of this
Speaker 1: idea of consumer goods. Now, it's interesting to hear them
Speaker 1: talk about those things in those terms, because again, this
Speaker 1: has been a long standing issue for successive US administrations,
Speaker 1: going back to the first Trump administration, so it's not
Speaker 1: something that's totally new. What we see more of is
Speaker 1: this idea of rebalancing consumption and production, and that's really
Speaker 1: something that's unique to Bessent and Trump, and you kind
Speaker 1: of have to look at what the administration said that
Speaker 1: they were going to do when they started this whole thing,
Speaker 1: which was to move more manufacturing to the US and
Speaker 1: using Keris as sort of a wall to encourage companies
Speaker 1: to come here to do that. What we're seeing now
Speaker 1: is sort of a hybrid where we're not seeing as
Speaker 1: much of an emphasis on that, but more this idea
Speaker 1: of free trade and opening up foreign markets to US goods.
Speaker 1: So it's kind of an open question about exactly what
Speaker 1: the Trump administration wants when it comes to this sort
Speaker 1: of economic policy. Do they want to have a very
Speaker 1: protectionist agenda that's going to see more manufacturing moved to
Speaker 1: the US, or do they want more free trade where
Speaker 1: you see foreign markets like China open up more to
Speaker 1: US goods and products. So where this all kind of
Speaker 1: ends up at the end of the day is a
Speaker 1: little tricky, and one thing we always need to keep
Speaker 1: in mind is the midterm elections coming up next year,
Speaker 1: and so if we have some type of an economic
Speaker 1: downturn that affects the way people are feeling in terms
Speaker 1: of what they're paying for, how they're feeling in terms
Speaker 1: of their economic security, that could affect the political outlook
Speaker 1: for the final two years of Trump's last term in
Speaker 1: office as far as we know. So that's all the
Speaker 1: sort of things that are kind of hanging in the
Speaker 1: balance as this deal is announced today.
Speaker 2: I want to ask you what's likely to play at
Speaker 2: out over the next ninety days. What is the US
Speaker 2: looking for in specific? Is it just more good faith negotiation.
Speaker 1: I think that they want to keep the talks going.
Speaker 1: Number One, There's going to be a few sort of
Speaker 1: international fora coming up where Bessant will have a chance
Speaker 1: to interact with some representatives from China's government and also
Speaker 1: from some other foreign governments. We have the G seven
Speaker 1: Finance Ministers meeting coming up in Canada in about a
Speaker 1: week or so, where he'll meet with the other G
Speaker 1: seven nations. He'll have a chance to talk to some
Speaker 1: of his EU counterparts about trade deals with the EU.
Speaker 1: With China, I think that it's going to be almost
Speaker 1: on this separate track, and it is really the critical track.
Speaker 1: So Bessant has talked about fifteen to eighteen nations that
Speaker 1: the US runs large trade deficits with, and the eighteenth
Speaker 1: nation is China. And for a long time they were
Speaker 1: talking about China being sort of on the side, something
Speaker 1: that was happening separately from the other negotiations. And I
Speaker 1: think you'll continue to see that. And you see how
Speaker 1: the the UK announcement was made with Keir Starmer calling
Speaker 1: into the Oval office Trump sort of stage managing all
Speaker 1: of that. The China negotiations were very different. A couple
Speaker 1: of representatives from the US government, high level representatives but
Speaker 1: not President Trump, went to Geneva, went to a third
Speaker 1: country location, met with their interlock uters from China, did
Speaker 1: all this behind closed doors, came out with a major
Speaker 1: concession on both sides to the current state of play,
Speaker 1: and then with a promise to continue to talk. Now,
Speaker 1: what is going to be somewhat elusive is what the
Speaker 1: grand Bargain would look like. And again that's where you
Speaker 1: kind of get all of this coming into play. What
Speaker 1: does Trump actually want out of this deal? And how
Speaker 1: do politics play into that as well, because you may
Speaker 1: have to not let the perfect be the enemy of
Speaker 1: the good and get something that is serviceable to get
Speaker 1: through the midterms and to get to the next presidential election.
Speaker 2: Dan, I want to get a sense from you of
Speaker 2: what this means for companies who have been dealing with
Speaker 2: this dramatic increase in uncertainty. Bloomberg Economics estimating that the
Speaker 2: new tariffs could still lead to nearly seventy percent drop
Speaker 2: and bilateral trade between the US and China and the
Speaker 2: medium term. We see the market reaction. But what does
Speaker 2: this do to allay that sense that they that companies
Speaker 2: really don't know how this is going to play on?
Speaker 1: Well, I don't think it helps in that regard, David.
Speaker 1: You know a couple of things to keep in mind
Speaker 1: with all of this. What we've heard from companies is
Speaker 1: essentially they're frozen in place. They don't know, for instance,
Speaker 1: whether they should continue investing, whether they should lay people off,
Speaker 1: what moves that they should make because they don't know
Speaker 1: whether the tariffs are going to be permanently in place
Speaker 1: or whether they're going to be part of a trade negotiation.
Speaker 1: So all of that is kind of locked in place.
Speaker 1: And I was reading an economic analysis earlier today that
Speaker 1: suggested before any rigorous analysis can be made of this
Speaker 1: weekend's agreement, this all needs to be listed in the
Speaker 1: federal register. That's not how Trump works. His approach to
Speaker 1: these matters is to get things done quickly, to get
Speaker 1: them done expeditiously, to get them done on terms that
Speaker 1: he sees as most favorable to the United States. And
Speaker 1: these sort of niceties of government process, listing things in
Speaker 1: their federal register, rolling out policy in a very measured
Speaker 1: and methodical way, That's not how he operates. And so
Speaker 1: I think businesses are looking to see how this will
Speaker 1: all play out, and as they're trying to read the
Speaker 1: tea leaves, they have to go by what they're hearing
Speaker 1: and seeing from Trump administration officials. And so the idea
Speaker 1: that we have a deal or some kind of agreement
Speaker 1: to take down the temperature for a period of time
Speaker 1: seems to suggest that there will be some deal in
Speaker 1: the end, that things are moving in that direction because otherwise,
Speaker 1: why would you even do a ninety day pause. There
Speaker 1: would be no point in doing that. So I think
Speaker 1: that that is one of the things that businesses corporate
Speaker 1: entities are digesting and trying to suss out. But again,
Speaker 1: let's keep in mind that no matter what happens, there's
Speaker 1: still going to be elevated tariff rates, and so that
Speaker 1: is going to have an impact on the economy. Exactly
Speaker 1: how all that plays out with these deals that are
Speaker 1: being negotiated and including with China as yet to be seen,
Speaker 1: but that's sort of the state of play at the moment.
Speaker 2: Dan, Thank you very much. Thanks David, this is the
Speaker 2: Big Take from Bloomberg News. I'm David Gera. This episode
Speaker 2: was produced by Julia Press with support from Eleanor Harrison Dengate.
Speaker 2: It was edited by Tracy Samuelson and Sarah Halzac. It
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