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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Charlie Pellan.

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Speaker 2: Doug Chrisner is off this week Asian stocks inch tire

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Speaker 2: at the Friday open after President Trump announced a trade

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Speaker 2: deal with the United Kingdom. Coming up, we'll get reaction

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Speaker 2: from Bloomberg News Senior editor Derek Wallbank, plus a look

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Speaker 2: at the market landscape with Eli Lee, chief investment strategist

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Speaker 2: at the Bank of Singapore. On Thursday, President Trump signaled

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Speaker 2: tariffs on Chinese goods may fall if upcoming talks go well.

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Speaker 2: We got some analysis from former Assistant US Trade Representative

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Speaker 2: for China Affairs, Claire Red now senior counsel at Arnold

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Speaker 2: and Porter. Reid spoke with Bloomberg's Sherry On and Heidi

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Speaker 2: Stroud Watts Clay.

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Speaker 3: Really great to have you with us. So so get

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Speaker 3: your reaction to this agreement that's been secure between the

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Speaker 3: US and the UK. I suppose it's a good starting point,

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Speaker 3: but of course everyone's watching for the main talks between

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Speaker 3: China and the US.

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Speaker 4: Yes, well, I don't think that the UK deal should

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Speaker 4: be viewed as anything like a template for the China deal.

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Speaker 4: It's uh, it's like they're know Yin and Yang maybe

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Speaker 4: where the UK is a very easy deal. There's no

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Speaker 4: trade deficit. You basically don't have a lot of conflict

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Speaker 4: with them and trade, and so it was relatively easy

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Speaker 4: to come up with, you know, a big deal. Uh supposedly, Uh,

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Speaker 4: a quick deal. I think we can definitely say it's quick,

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Speaker 4: and I think it will be. I'm sure text is

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Speaker 4: being written and that it will come out, but you know,

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Speaker 4: no time frames for any of that. So it's uh,

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Speaker 4: it's it's really quite a working progress. I would say,

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Speaker 4: I think Trump probably needed to announce something and Britain

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Speaker 4: was probably willing to participate because it does give them

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Speaker 4: a little bit of a sense of security. China is

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Speaker 4: a totally different story. China has we have a very

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Speaker 4: complex relationship with them. Trump already secured a deal in

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Speaker 4: its first administration that didn't go that well, and I

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Speaker 4: think it's going to be a complicated negotiation that is

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Speaker 4: going to start by trying to see if you can

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Speaker 4: de escalate the tariff levels, which seem to be really

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Speaker 4: harming both sides of the equation right now. So there

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Speaker 4: is definitely self interest in trying to make that happen

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Speaker 4: relatively soon. The other issues could take months, years, or

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Speaker 4: never get sold.

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Speaker 3: Yeah, it's interesting. You know, some critics calling this UK

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Speaker 3: deal a nothing burger, right, so many of the details

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Speaker 3: left to be determined. Clearly, there's sort of the optics

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Speaker 3: politically of seeing an off ramp and a deal to

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Speaker 3: be seen to be made. Is it all so much

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Speaker 3: challenging from China? Because from the outset, their sort of

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Speaker 3: negotiating position is that the US started this, that they've

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Speaker 3: been erroneous in an unfair in the way that they've

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Speaker 3: approached this, and that they need to kind of show

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Speaker 3: some degree of good faith and of contrition before they

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Speaker 3: can even have proper negotiations.

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Speaker 4: That definitely was China's and has been China's line, But

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Speaker 4: you will probably recognize that China also had said that

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Speaker 4: it wasn't going to start any talks until the United

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Speaker 4: States took the tariffs off, And there have been no

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Speaker 4: tariffs taken off, so and the talks are starting. So

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Speaker 4: I think we will see China, which is there are

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Speaker 4: very good negotiators. We will see them exhibit some flexibility

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Speaker 4: to the extent they don't feel they're losing face, and

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Speaker 4: that they feel that it's basically in their self interest.

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Speaker 1: So we'll see, and they definitely don't want to lose

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Speaker 1: faiths when it comes to Hong Kong issues Taiwan issues.

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Speaker 1: Why is President Trump talking about Jimmy and Lai?

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Speaker 4: You never know why President Trump is talking about anyone,

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Speaker 4: and certainly he pays more attention to the very wealthy.

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Speaker 4: I would say, so it probably crossed his TV screen,

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Speaker 4: or maybe there's a Trump insider who has spoken to

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Speaker 4: him about Jimmy Low. Those would be my two highest hypotheticals,

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Speaker 4: I guess.

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Speaker 1: But the point is that this will not help, right

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Speaker 1: I mean, you're conflating political issues with economic issues. We

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Speaker 1: do know that right now the pushback against China is geopolitical.

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Speaker 1: But at the same time, if you put issues like

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Speaker 1: this on the table, what does President Trump hope to

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Speaker 1: achieve in these negotiations with Beijing that he can take

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Speaker 1: back to the American public and say that it's a win.

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Speaker 4: Trump has demonstrated from his first term that he is

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Speaker 4: not someone who's concerned about human rights or various humanitarian

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Speaker 4: issues in the China relationship. He's very good at declaring wins,

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Speaker 4: regardless of what the underlying fats are, so I don't

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Speaker 4: have any doubt that he will declare a win. The

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Speaker 4: question is really going to be what can both sides give.

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Speaker 4: What seems to be the easiest thing to give on

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Speaker 4: both sides is to reduce tariffs on most of the

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Speaker 4: goods down to something other than an embargoed level. But

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Speaker 4: after that, I think there's a huge gap between the

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Speaker 4: two sides. China can also show good faith by demonstrating

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Speaker 4: what it's been doing to help on fentanyl, and that

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Speaker 4: would be a positive. But I think Trump is fundamentally

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Speaker 4: a businessman, and if he sees a deal that he

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Speaker 4: thinks he can sell back in the United States, that's

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Speaker 4: a deal he'll take, but it will be focused on

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Speaker 4: the commercial side largely. I don't think this is a

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Speaker 4: transformed Trump who is now going to be worrying about

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Speaker 4: Hong Kong democracy or Shinjuang forest labor.

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Speaker 3: Claire, What do you think is a level of internal

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Speaker 3: pain that Beijing is willing to accept, given that we

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Speaker 3: know there's a certain level of sort of galvanizing national

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Speaker 3: sentiment domestically, and they've also been on this big outreach

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Speaker 3: program to other partners, you know, allies and perhaps even

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Speaker 3: flows alike to try and garner these new relationships. Do

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Speaker 3: you think there is a certain level whether they'll still

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Speaker 3: hold back even if they don't obviously want these tariffs

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Speaker 3: in place.

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Speaker 4: China is going to be looking at this from a

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Speaker 4: long term perspective, and I think at this point from

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Speaker 4: quite a I would say pessimistic perspective on what they

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Speaker 4: can expect from the relationship from the United States. There

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Speaker 4: will be no more G two a special relationship between

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Speaker 4: the two largest economic forces in the world. I think

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Speaker 4: it's going to be a very pragmatic, very realistic effort

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Speaker 4: to get things to a point where they're as good

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Speaker 4: as they can be. But China is not going to

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Speaker 4: change any of its fundamental economic structure or any of

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Speaker 4: its priorities. It's not going to change the dominance of

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Speaker 4: its state owned enterprises. And if there's going to be

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Speaker 4: anything done to reduce the excess flow of Chinese goods

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Speaker 4: at very low prices into the global trading system that

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Speaker 4: is causing the industries in the trading partners countries to collapse,

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Speaker 4: if any going to be done about that, I think

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Speaker 4: that's going to have to be in the form of

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Speaker 4: export restraints or some mechanical barrier to the exports going

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Speaker 4: out from China. There will be no structural changes that

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Speaker 4: China will accept.

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Speaker 1: Clary always great to get your insights, Senior counselor at

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Speaker 1: Arnold and Porter.

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Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Charlie Pellatt

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Speaker 2: in for Doug Crisner. This week, as the US prepared

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Speaker 2: for the start of talks with China, the biggest target

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Speaker 2: of Trump's tariff onslaught, the President said he believed negotiations

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Speaker 2: might result in tangible progress. For more, we heard from

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Speaker 2: Eli Lee, chief investment strategist at the Bank of Singapore.

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Speaker 2: He spoke with Bloomberg, shrry On and Heidi Stroud Watts.

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Speaker 1: Eli, great to have you with us. I mean, we

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Speaker 1: have seen the optimism and the hope coming from investors

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Speaker 1: right now as we continue to see that risk on

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Speaker 1: gains in the Asian session as well. How much are

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Speaker 1: your banking on these negotiations.

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Speaker 5: Right so, I think you know, the earlier command that

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Speaker 5: this was pretty much nutting burger was interesting. I think

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Speaker 5: beyond the pumping ceremony, there was really very little in

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Speaker 5: the way of substance, and I think there are two

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Speaker 5: important things. That's happening here, Sherry. Number one, the fact

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Speaker 5: that UK, one of is one of us our most

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Speaker 5: favored partners, eventually still got a ten percent rate tells

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Speaker 5: us that this is the probably the lowest we can

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Speaker 5: expect from most of you know, the rest of the

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Speaker 5: trade negotiations. And number two, the fact that I think

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Speaker 5: China is much more entrenched in a tip for ted

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Speaker 5: escalation versus the UK is that we can expect the

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Speaker 5: process with China going forward in terms of trade negotiations

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Speaker 5: to be much more of an odyssey versus the UK. And

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Speaker 5: that means that we should be a little bit circumspect

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Speaker 5: about the positive reaction that we're seeing in the markets

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Speaker 5: of the Nichera.

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Speaker 1: But when it comes to the markets, it's really looking ahead, right,

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Speaker 1: and we have seen investors trying to grasp at anything

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Speaker 1: that potentially could mean more gains. So, relatively speaking, would

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Speaker 1: this be a time to buy or would this be

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Speaker 1: a time to sell?

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Speaker 5: I think this is an interesting point in market, and

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Speaker 5: that's a great question. I think we are seeing these

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Speaker 5: historical almost gap in evaluations between US and the rest.

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Speaker 5: Much of this is a consequence of the US exceptionalism

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Speaker 5: narrative over the last twelve to twenty four months and

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Speaker 5: that is starting to reverse. So we think that the

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Speaker 5: US equities market is probably you know, but its skis

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Speaker 5: a little bit right now. But we see opportunities in

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Speaker 5: the Hong Kong China markets and also in Europe as well.

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Speaker 3: Europe is an interesting one, right, you're neutralizing the US

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Speaker 3: positioning in favor of overweight in Europe. What are youking still?

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Speaker 3: And I guess has that narrative change from earlier the

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Speaker 3: sort of defense rearmament driven story for Europe?

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Speaker 5: All right, So we think that you know the implications

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Speaker 5: of what's happening in Europe, that fiscal easing that we're

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Speaker 5: going to see still, you know, rid cuts in tontal

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Speaker 5: monetary easing really will have a pretty wide ranging effects.

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Speaker 5: So outside of defense, I think infrastructure is going to

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Speaker 5: be a very big theme that we're looking into as

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Speaker 5: well there and within Europe, we continue to think that

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Speaker 5: the energy transition increased energy efficiency narrative continues to be

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Speaker 5: quite strong and there are some interesting names and opportunities

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Speaker 5: there as visually, ELI, what.

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Speaker 3: Is the risk or opportunity that you're seeing from some

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Speaker 3: of the currency volatility, particularly the recent surge in Asian

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Speaker 3: currency strength that we've.

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Speaker 5: Had, right so, I think that's very telling of what

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Speaker 5: international investors are things thinking of, uh, you know, Asia's positioning,

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Speaker 5: especially Chinese positioning in this tariff war versus the US.

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Speaker 5: A lot of this is the function of the weakness

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Speaker 5: of the US dollar, I think, you know, and the

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Speaker 5: twin deficits. I think investors are going to demand a

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Speaker 5: much weaker US dollar, much higher US US to continue

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Speaker 5: financing the twin deficits in the US, and that means

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Speaker 5: a weaker US dollar, stronger Asian currencies. And primarily we

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Speaker 5: think that China is going to be a big you know,

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Speaker 5: uh stakeholder in how Asian currencies perform. And the fact

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Speaker 5: that they've continued to push towards having a relative US

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Speaker 5: and stability over the last month or so tells us

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Speaker 5: that we will likely see steady uptrend, a steady up

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Speaker 5: trained in Asian currencies.

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Speaker 1: Ahead the stability that you talk about when it comes

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Speaker 1: to the Chinese yuon what does that mean for other

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Speaker 1: Chinese assets?

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Speaker 5: Right so, we think that there are three tailwinds for

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Speaker 5: Chinese atsets going forward. I think number one, the fact

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Speaker 5: is that the Chinese economy is much strongly much more,

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Speaker 5: you know, more strongly positioned for a trade war with

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Speaker 5: the US versus Trump's first term. I think US export

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Speaker 5: is now less than three percent of the Chinese GDP. Second,

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Speaker 5: there is still a lot of dry powder in terms

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Speaker 5: of policy easing from China to come that's installed and

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Speaker 5: will come. And finally, we do think that the valuations

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Speaker 5: in Chinese assets continue to be quite undemanding, which will

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Speaker 5: draw interest from international investors, especially if we do see

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Speaker 5: you know, the end of the Russian UK trade war,

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Speaker 5: Russia being a key a lot of China, and that

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Speaker 5: means that you know, the relative strength that we've seen

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Speaker 5: in Chinese assets over the last month or so wildly continue.

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Speaker 3: El I really great to have you with us Cili.

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Speaker 3: He's a chief investment strategist at Bank of Singapore.

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Speaker 6: I believe, but serious, pragmatic in the room negotiations, acting

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Speaker 6: in the national interests are far better than performative politics.

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Speaker 6: People flat slamming the door, floundering out, you know, being

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Speaker 6: performative but not actually delivering for working people. And I'll

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Speaker 6: continue in the same vein We've had two trade deals

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Speaker 6: this week. By acting in that way.

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Speaker 7: Well it could be I mean we're going to see

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Speaker 7: right now, you can't get any higher. It's one hundred

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Speaker 7: and forty five, so we know what's coming down. I

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Speaker 7: think we're going to have a very good relationship UK.

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Speaker 3: Prime Minister Kirstama there and President Trump talking about those

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Speaker 3: trade negotiations, tariffs, the framework of a trade deal. There,

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Speaker 3: let's get some more on this with that, Bloomberg Senior

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Speaker 3: Editor Derek Wallbank and Derek. Framework is sort of the

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Speaker 3: phrase that we're using. Some of the reaction has been

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Speaker 3: pretty scathing, one analyst calling it a nothing burger.

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Speaker 1: What's your take?

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Speaker 8: I mean, my take, Heidi, is that it takes the

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Speaker 8: temperature down. I mean, you look, you have to start

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Speaker 8: there before you get into the substance. And you know,

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Speaker 8: I'm a substance guy. I love my details, I love

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Speaker 8: my policy papers, but you know, I'm also a tone guy.

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Speaker 8: And we had been sitting here in a situation over

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Speaker 8: the last month and a couple of days where the

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Speaker 8: whole world was sort of sat there wondering, what in

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Speaker 8: the world is it going to take to bring the

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Speaker 8: US down a notch on some of these tariffs, especially

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Speaker 8: after the Liberation Day announcements that Trump made, you know,

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Speaker 8: jacking tariff rates up to quite high levels on a

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Speaker 8: lot of trading partners, and then up to one hundred

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Speaker 8: and forty five percent on most everything from China, continued

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Speaker 8: sectoral threats to everything from pharma to lumber, to movies

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Speaker 8: to you name it. And the thing that you and

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Speaker 8: I and Sherry have been talking about over the last

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Speaker 8: month and so was that we were all going to

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Speaker 8: be looking for deal number one. What was going to

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Speaker 8: be the context of deal number one, who was it

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Speaker 8: going to be with, and what was it going to

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Speaker 8: take to get there. There's one way of looking at

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Speaker 8: this that says, this is a top line deal that

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Speaker 8: has a couple of commitments and his scant on a

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Speaker 8: lot of things and bears little resemblance to one of

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Speaker 8: those giant, massive trade packs that gets negotiated over a

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Speaker 8: year or two years or five years or whatever. The

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Speaker 8: other way to look at this is to say, oh,

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Speaker 8: that's what it takes, okay, noted copy paste, And you're

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Speaker 8: going to see a lot of countries around the world

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Speaker 8: trying to figure out how do we get ourselves in

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Speaker 8: the position that Britain was in consider secure. Starmer is

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Speaker 8: not somebody who got elected as some Trump loving individual. Right,

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Speaker 8: he's a Labor Party Prime minister with at least two

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Speaker 8: other parties in the United Kingdom dedicated at their roots

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Speaker 8: to trying to be closer to the Republican side of

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Speaker 8: the isle in a British context, So he's not exactly

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Speaker 8: somebody who's ideological soulmates with this president. Figure out a

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Speaker 8: way to go through, figure out a way to take

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Speaker 8: down the temperature, and that's going to be something that

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Speaker 8: I think every government around the world is going to copy.

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Speaker 8: So in those context, I would say this is a

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Speaker 8: highly consequential moment.

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Speaker 1: And yeah, as you mentioned, it really didn't include a

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Speaker 1: lot of the details, right, especially some of those things

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Speaker 1: that American businesses we're looking for, like the change in

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Speaker 1: the digital services tax that hit many US tech forums

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Speaker 1: already didn't get any change when it comes to street

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Speaker 1: food regulations, when it comes to US agriculture really wanting

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Speaker 1: a piece of the pie as well. So what's next

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Speaker 1: for this relationship.

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Speaker 8: Well, Cherry, I think, look, Trump has signaled he wants

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Speaker 8: to have a very warm relationship with the United Kingdom.

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Speaker 8: I think that if you look at this from a

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Speaker 8: purely British context, this is a country that's been searching

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Speaker 8: for any sort of dividend after Brexit. A lot of

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Speaker 8: the British attention is focused across the Atlantic, but a

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Speaker 8: lot of the British economy is focused across the English

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Speaker 8: Channel and across the Irs c right, and so you

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Speaker 8: have a lot of businesses that have made decisions with

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Speaker 8: the words Paris and Amsterdam and Dublin in their mind

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Speaker 8: that now are sitting there looking at a situation where

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Speaker 8: the UK has better trade terms with America than the

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Speaker 8: European Union does, and certainly better path and prospects there.

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Speaker 8: So that puts the UK into a relative situation that

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Speaker 8: is maybe slightly more advantageous than they were this time

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Speaker 8: a month and a half ago. So that's I think

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Speaker 8: on that context. On the other side, look, we've seen

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Speaker 8: US officials talk about how they're trying to get other

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Speaker 8: things over the table. You know, I know that India, Japan,

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Speaker 8: Israel are all places where we have reported that talks

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Speaker 8: are ongoing or you've seen big kind of outreaches vance

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Speaker 8: to India, net Nyahu, to the White House, Trump stopping

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Speaker 8: by a meeting with Japanese negotiators. You don't have to

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Speaker 8: you know, sort of read into a magic eight ball

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Speaker 8: too much to see where things like that are going

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Speaker 8: and where the levels of seriousness are. So I think

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Speaker 8: there's some work on that. But look my eyes right now.

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Speaker 8: We'll go to this weekend, go to Switzerland and go

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Speaker 8: to the meetings that Scott Bessntt and Jamison Greer are

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Speaker 8: going to have with Chinese counterparts. The question there, asked

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Speaker 8: by our m Marie Hordern and the White House, was

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Speaker 8: you know, is there a chance of not preemptively, but

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Speaker 8: after if things go well, of taking things down on

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Speaker 8: the tariff level. Trump said, there's certainly a chance. You know,

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Speaker 8: all things are possible. We live in the world now

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Speaker 8: where the pope's a Chicago guy who went to Villanova,

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Speaker 8: So all things are possible in this world. And let's

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Speaker 8: see what happens as a result of that. Bessont said

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Speaker 8: that this was about de escalation, not a massive trade deal.

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Speaker 8: De Escalation is certainly a possibility. Let's see where we

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Speaker 8: are this time on Monday, Boom.

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Speaker 1: We're senior editor Derek Wallbank.

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Speaker 8: There.

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Speaker 9: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 9: Asia Edition podcast. Each weekday, we look at the story

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Speaker 9: shaping markets finance and geopolitics in the Asia Pacific. You

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Speaker 9: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 9: or anywhere else you listen. Join us again tomorrow for

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Speaker 9: insight on the market moves from Hong Kong to Singapore

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Speaker 9: and Australia. I'm Doug Prisoner and this is Bloomberg