Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Welcome to the Bloomberg Daybreak Asia Podcast. I'm Charlie Pellan.
Speaker 2: Doug Chrisner is off this week Asian stocks inch tire
Speaker 2: at the Friday open after President Trump announced a trade
Speaker 2: deal with the United Kingdom. Coming up, we'll get reaction
Speaker 2: from Bloomberg News Senior editor Derek Wallbank, plus a look
Speaker 2: at the market landscape with Eli Lee, chief investment strategist
Speaker 2: at the Bank of Singapore. On Thursday, President Trump signaled
Speaker 2: tariffs on Chinese goods may fall if upcoming talks go well.
Speaker 2: We got some analysis from former Assistant US Trade Representative
Speaker 2: for China Affairs, Claire Red now senior counsel at Arnold
Speaker 2: and Porter. Reid spoke with Bloomberg's Sherry On and Heidi
Speaker 2: Stroud Watts Clay.
Speaker 3: Really great to have you with us. So so get
Speaker 3: your reaction to this agreement that's been secure between the
Speaker 3: US and the UK. I suppose it's a good starting point,
Speaker 3: but of course everyone's watching for the main talks between
Speaker 3: China and the US.
Speaker 4: Yes, well, I don't think that the UK deal should
Speaker 4: be viewed as anything like a template for the China deal.
Speaker 4: It's uh, it's like they're know Yin and Yang maybe
Speaker 4: where the UK is a very easy deal. There's no
Speaker 4: trade deficit. You basically don't have a lot of conflict
Speaker 4: with them and trade, and so it was relatively easy
Speaker 4: to come up with, you know, a big deal. Uh supposedly, Uh,
Speaker 4: a quick deal. I think we can definitely say it's quick,
Speaker 4: and I think it will be. I'm sure text is
Speaker 4: being written and that it will come out, but you know,
Speaker 4: no time frames for any of that. So it's uh,
Speaker 4: it's it's really quite a working progress. I would say,
Speaker 4: I think Trump probably needed to announce something and Britain
Speaker 4: was probably willing to participate because it does give them
Speaker 4: a little bit of a sense of security. China is
Speaker 4: a totally different story. China has we have a very
Speaker 4: complex relationship with them. Trump already secured a deal in
Speaker 4: its first administration that didn't go that well, and I
Speaker 4: think it's going to be a complicated negotiation that is
Speaker 4: going to start by trying to see if you can
Speaker 4: de escalate the tariff levels, which seem to be really
Speaker 4: harming both sides of the equation right now. So there
Speaker 4: is definitely self interest in trying to make that happen
Speaker 4: relatively soon. The other issues could take months, years, or
Speaker 4: never get sold.
Speaker 3: Yeah, it's interesting. You know, some critics calling this UK
Speaker 3: deal a nothing burger, right, so many of the details
Speaker 3: left to be determined. Clearly, there's sort of the optics
Speaker 3: politically of seeing an off ramp and a deal to
Speaker 3: be seen to be made. Is it all so much
Speaker 3: challenging from China? Because from the outset, their sort of
Speaker 3: negotiating position is that the US started this, that they've
Speaker 3: been erroneous in an unfair in the way that they've
Speaker 3: approached this, and that they need to kind of show
Speaker 3: some degree of good faith and of contrition before they
Speaker 3: can even have proper negotiations.
Speaker 4: That definitely was China's and has been China's line, But
Speaker 4: you will probably recognize that China also had said that
Speaker 4: it wasn't going to start any talks until the United
Speaker 4: States took the tariffs off, And there have been no
Speaker 4: tariffs taken off, so and the talks are starting. So
Speaker 4: I think we will see China, which is there are
Speaker 4: very good negotiators. We will see them exhibit some flexibility
Speaker 4: to the extent they don't feel they're losing face, and
Speaker 4: that they feel that it's basically in their self interest.
Speaker 1: So we'll see, and they definitely don't want to lose
Speaker 1: faiths when it comes to Hong Kong issues Taiwan issues.
Speaker 1: Why is President Trump talking about Jimmy and Lai?
Speaker 4: You never know why President Trump is talking about anyone,
Speaker 4: and certainly he pays more attention to the very wealthy.
Speaker 4: I would say, so it probably crossed his TV screen,
Speaker 4: or maybe there's a Trump insider who has spoken to
Speaker 4: him about Jimmy Low. Those would be my two highest hypotheticals,
Speaker 4: I guess.
Speaker 1: But the point is that this will not help, right
Speaker 1: I mean, you're conflating political issues with economic issues. We
Speaker 1: do know that right now the pushback against China is geopolitical.
Speaker 1: But at the same time, if you put issues like
Speaker 1: this on the table, what does President Trump hope to
Speaker 1: achieve in these negotiations with Beijing that he can take
Speaker 1: back to the American public and say that it's a win.
Speaker 4: Trump has demonstrated from his first term that he is
Speaker 4: not someone who's concerned about human rights or various humanitarian
Speaker 4: issues in the China relationship. He's very good at declaring wins,
Speaker 4: regardless of what the underlying fats are, so I don't
Speaker 4: have any doubt that he will declare a win. The
Speaker 4: question is really going to be what can both sides give.
Speaker 4: What seems to be the easiest thing to give on
Speaker 4: both sides is to reduce tariffs on most of the
Speaker 4: goods down to something other than an embargoed level. But
Speaker 4: after that, I think there's a huge gap between the
Speaker 4: two sides. China can also show good faith by demonstrating
Speaker 4: what it's been doing to help on fentanyl, and that
Speaker 4: would be a positive. But I think Trump is fundamentally
Speaker 4: a businessman, and if he sees a deal that he
Speaker 4: thinks he can sell back in the United States, that's
Speaker 4: a deal he'll take, but it will be focused on
Speaker 4: the commercial side largely. I don't think this is a
Speaker 4: transformed Trump who is now going to be worrying about
Speaker 4: Hong Kong democracy or Shinjuang forest labor.
Speaker 3: Claire, What do you think is a level of internal
Speaker 3: pain that Beijing is willing to accept, given that we
Speaker 3: know there's a certain level of sort of galvanizing national
Speaker 3: sentiment domestically, and they've also been on this big outreach
Speaker 3: program to other partners, you know, allies and perhaps even
Speaker 3: flows alike to try and garner these new relationships. Do
Speaker 3: you think there is a certain level whether they'll still
Speaker 3: hold back even if they don't obviously want these tariffs
Speaker 3: in place.
Speaker 4: China is going to be looking at this from a
Speaker 4: long term perspective, and I think at this point from
Speaker 4: quite a I would say pessimistic perspective on what they
Speaker 4: can expect from the relationship from the United States. There
Speaker 4: will be no more G two a special relationship between
Speaker 4: the two largest economic forces in the world. I think
Speaker 4: it's going to be a very pragmatic, very realistic effort
Speaker 4: to get things to a point where they're as good
Speaker 4: as they can be. But China is not going to
Speaker 4: change any of its fundamental economic structure or any of
Speaker 4: its priorities. It's not going to change the dominance of
Speaker 4: its state owned enterprises. And if there's going to be
Speaker 4: anything done to reduce the excess flow of Chinese goods
Speaker 4: at very low prices into the global trading system that
Speaker 4: is causing the industries in the trading partners countries to collapse,
Speaker 4: if any going to be done about that, I think
Speaker 4: that's going to have to be in the form of
Speaker 4: export restraints or some mechanical barrier to the exports going
Speaker 4: out from China. There will be no structural changes that
Speaker 4: China will accept.
Speaker 1: Clary always great to get your insights, Senior counselor at
Speaker 1: Arnold and Porter.
Speaker 2: Welcome back to the Daybreak Asia podcast. I'm Charlie Pellatt
Speaker 2: in for Doug Crisner. This week, as the US prepared
Speaker 2: for the start of talks with China, the biggest target
Speaker 2: of Trump's tariff onslaught, the President said he believed negotiations
Speaker 2: might result in tangible progress. For more, we heard from
Speaker 2: Eli Lee, chief investment strategist at the Bank of Singapore.
Speaker 2: He spoke with Bloomberg, shrry On and Heidi Stroud Watts.
Speaker 1: Eli, great to have you with us. I mean, we
Speaker 1: have seen the optimism and the hope coming from investors
Speaker 1: right now as we continue to see that risk on
Speaker 1: gains in the Asian session as well. How much are
Speaker 1: your banking on these negotiations.
Speaker 5: Right so, I think you know, the earlier command that
Speaker 5: this was pretty much nutting burger was interesting. I think
Speaker 5: beyond the pumping ceremony, there was really very little in
Speaker 5: the way of substance, and I think there are two
Speaker 5: important things. That's happening here, Sherry. Number one, the fact
Speaker 5: that UK, one of is one of us our most
Speaker 5: favored partners, eventually still got a ten percent rate tells
Speaker 5: us that this is the probably the lowest we can
Speaker 5: expect from most of you know, the rest of the
Speaker 5: trade negotiations. And number two, the fact that I think
Speaker 5: China is much more entrenched in a tip for ted
Speaker 5: escalation versus the UK is that we can expect the
Speaker 5: process with China going forward in terms of trade negotiations
Speaker 5: to be much more of an odyssey versus the UK. And
Speaker 5: that means that we should be a little bit circumspect
Speaker 5: about the positive reaction that we're seeing in the markets
Speaker 5: of the Nichera.
Speaker 1: But when it comes to the markets, it's really looking ahead, right,
Speaker 1: and we have seen investors trying to grasp at anything
Speaker 1: that potentially could mean more gains. So, relatively speaking, would
Speaker 1: this be a time to buy or would this be
Speaker 1: a time to sell?
Speaker 5: I think this is an interesting point in market, and
Speaker 5: that's a great question. I think we are seeing these
Speaker 5: historical almost gap in evaluations between US and the rest.
Speaker 5: Much of this is a consequence of the US exceptionalism
Speaker 5: narrative over the last twelve to twenty four months and
Speaker 5: that is starting to reverse. So we think that the
Speaker 5: US equities market is probably you know, but its skis
Speaker 5: a little bit right now. But we see opportunities in
Speaker 5: the Hong Kong China markets and also in Europe as well.
Speaker 3: Europe is an interesting one, right, you're neutralizing the US
Speaker 3: positioning in favor of overweight in Europe. What are youking still?
Speaker 3: And I guess has that narrative change from earlier the
Speaker 3: sort of defense rearmament driven story for Europe?
Speaker 5: All right, So we think that you know the implications
Speaker 5: of what's happening in Europe, that fiscal easing that we're
Speaker 5: going to see still, you know, rid cuts in tontal
Speaker 5: monetary easing really will have a pretty wide ranging effects.
Speaker 5: So outside of defense, I think infrastructure is going to
Speaker 5: be a very big theme that we're looking into as
Speaker 5: well there and within Europe, we continue to think that
Speaker 5: the energy transition increased energy efficiency narrative continues to be
Speaker 5: quite strong and there are some interesting names and opportunities
Speaker 5: there as visually, ELI, what.
Speaker 3: Is the risk or opportunity that you're seeing from some
Speaker 3: of the currency volatility, particularly the recent surge in Asian
Speaker 3: currency strength that we've.
Speaker 5: Had, right so, I think that's very telling of what
Speaker 5: international investors are things thinking of, uh, you know, Asia's positioning,
Speaker 5: especially Chinese positioning in this tariff war versus the US.
Speaker 5: A lot of this is the function of the weakness
Speaker 5: of the US dollar, I think, you know, and the
Speaker 5: twin deficits. I think investors are going to demand a
Speaker 5: much weaker US dollar, much higher US US to continue
Speaker 5: financing the twin deficits in the US, and that means
Speaker 5: a weaker US dollar, stronger Asian currencies. And primarily we
Speaker 5: think that China is going to be a big you know,
Speaker 5: uh stakeholder in how Asian currencies perform. And the fact
Speaker 5: that they've continued to push towards having a relative US
Speaker 5: and stability over the last month or so tells us
Speaker 5: that we will likely see steady uptrend, a steady up
Speaker 5: trained in Asian currencies.
Speaker 1: Ahead the stability that you talk about when it comes
Speaker 1: to the Chinese yuon what does that mean for other
Speaker 1: Chinese assets?
Speaker 5: Right so, we think that there are three tailwinds for
Speaker 5: Chinese atsets going forward. I think number one, the fact
Speaker 5: is that the Chinese economy is much strongly much more,
Speaker 5: you know, more strongly positioned for a trade war with
Speaker 5: the US versus Trump's first term. I think US export
Speaker 5: is now less than three percent of the Chinese GDP. Second,
Speaker 5: there is still a lot of dry powder in terms
Speaker 5: of policy easing from China to come that's installed and
Speaker 5: will come. And finally, we do think that the valuations
Speaker 5: in Chinese assets continue to be quite undemanding, which will
Speaker 5: draw interest from international investors, especially if we do see
Speaker 5: you know, the end of the Russian UK trade war,
Speaker 5: Russia being a key a lot of China, and that
Speaker 5: means that you know, the relative strength that we've seen
Speaker 5: in Chinese assets over the last month or so wildly continue.
Speaker 3: El I really great to have you with us Cili.
Speaker 3: He's a chief investment strategist at Bank of Singapore.
Speaker 6: I believe, but serious, pragmatic in the room negotiations, acting
Speaker 6: in the national interests are far better than performative politics.
Speaker 6: People flat slamming the door, floundering out, you know, being
Speaker 6: performative but not actually delivering for working people. And I'll
Speaker 6: continue in the same vein We've had two trade deals
Speaker 6: this week. By acting in that way.
Speaker 7: Well it could be I mean we're going to see
Speaker 7: right now, you can't get any higher. It's one hundred
Speaker 7: and forty five, so we know what's coming down. I
Speaker 7: think we're going to have a very good relationship UK.
Speaker 3: Prime Minister Kirstama there and President Trump talking about those
Speaker 3: trade negotiations, tariffs, the framework of a trade deal. There,
Speaker 3: let's get some more on this with that, Bloomberg Senior
Speaker 3: Editor Derek Wallbank and Derek. Framework is sort of the
Speaker 3: phrase that we're using. Some of the reaction has been
Speaker 3: pretty scathing, one analyst calling it a nothing burger.
Speaker 1: What's your take?
Speaker 8: I mean, my take, Heidi, is that it takes the
Speaker 8: temperature down. I mean, you look, you have to start
Speaker 8: there before you get into the substance. And you know,
Speaker 8: I'm a substance guy. I love my details, I love
Speaker 8: my policy papers, but you know, I'm also a tone guy.
Speaker 8: And we had been sitting here in a situation over
Speaker 8: the last month and a couple of days where the
Speaker 8: whole world was sort of sat there wondering, what in
Speaker 8: the world is it going to take to bring the
Speaker 8: US down a notch on some of these tariffs, especially
Speaker 8: after the Liberation Day announcements that Trump made, you know,
Speaker 8: jacking tariff rates up to quite high levels on a
Speaker 8: lot of trading partners, and then up to one hundred
Speaker 8: and forty five percent on most everything from China, continued
Speaker 8: sectoral threats to everything from pharma to lumber, to movies
Speaker 8: to you name it. And the thing that you and
Speaker 8: I and Sherry have been talking about over the last
Speaker 8: month and so was that we were all going to
Speaker 8: be looking for deal number one. What was going to
Speaker 8: be the context of deal number one, who was it
Speaker 8: going to be with, and what was it going to
Speaker 8: take to get there. There's one way of looking at
Speaker 8: this that says, this is a top line deal that
Speaker 8: has a couple of commitments and his scant on a
Speaker 8: lot of things and bears little resemblance to one of
Speaker 8: those giant, massive trade packs that gets negotiated over a
Speaker 8: year or two years or five years or whatever. The
Speaker 8: other way to look at this is to say, oh,
Speaker 8: that's what it takes, okay, noted copy paste, And you're
Speaker 8: going to see a lot of countries around the world
Speaker 8: trying to figure out how do we get ourselves in
Speaker 8: the position that Britain was in consider secure. Starmer is
Speaker 8: not somebody who got elected as some Trump loving individual. Right,
Speaker 8: he's a Labor Party Prime minister with at least two
Speaker 8: other parties in the United Kingdom dedicated at their roots
Speaker 8: to trying to be closer to the Republican side of
Speaker 8: the isle in a British context, So he's not exactly
Speaker 8: somebody who's ideological soulmates with this president. Figure out a
Speaker 8: way to go through, figure out a way to take
Speaker 8: down the temperature, and that's going to be something that
Speaker 8: I think every government around the world is going to copy.
Speaker 8: So in those context, I would say this is a
Speaker 8: highly consequential moment.
Speaker 1: And yeah, as you mentioned, it really didn't include a
Speaker 1: lot of the details, right, especially some of those things
Speaker 1: that American businesses we're looking for, like the change in
Speaker 1: the digital services tax that hit many US tech forums
Speaker 1: already didn't get any change when it comes to street
Speaker 1: food regulations, when it comes to US agriculture really wanting
Speaker 1: a piece of the pie as well. So what's next
Speaker 1: for this relationship.
Speaker 8: Well, Cherry, I think, look, Trump has signaled he wants
Speaker 8: to have a very warm relationship with the United Kingdom.
Speaker 8: I think that if you look at this from a
Speaker 8: purely British context, this is a country that's been searching
Speaker 8: for any sort of dividend after Brexit. A lot of
Speaker 8: the British attention is focused across the Atlantic, but a
Speaker 8: lot of the British economy is focused across the English
Speaker 8: Channel and across the Irs c right, and so you
Speaker 8: have a lot of businesses that have made decisions with
Speaker 8: the words Paris and Amsterdam and Dublin in their mind
Speaker 8: that now are sitting there looking at a situation where
Speaker 8: the UK has better trade terms with America than the
Speaker 8: European Union does, and certainly better path and prospects there.
Speaker 8: So that puts the UK into a relative situation that
Speaker 8: is maybe slightly more advantageous than they were this time
Speaker 8: a month and a half ago. So that's I think
Speaker 8: on that context. On the other side, look, we've seen
Speaker 8: US officials talk about how they're trying to get other
Speaker 8: things over the table. You know, I know that India, Japan,
Speaker 8: Israel are all places where we have reported that talks
Speaker 8: are ongoing or you've seen big kind of outreaches vance
Speaker 8: to India, net Nyahu, to the White House, Trump stopping
Speaker 8: by a meeting with Japanese negotiators. You don't have to
Speaker 8: you know, sort of read into a magic eight ball
Speaker 8: too much to see where things like that are going
Speaker 8: and where the levels of seriousness are. So I think
Speaker 8: there's some work on that. But look my eyes right now.
Speaker 8: We'll go to this weekend, go to Switzerland and go
Speaker 8: to the meetings that Scott Bessntt and Jamison Greer are
Speaker 8: going to have with Chinese counterparts. The question there, asked
Speaker 8: by our m Marie Hordern and the White House, was
Speaker 8: you know, is there a chance of not preemptively, but
Speaker 8: after if things go well, of taking things down on
Speaker 8: the tariff level. Trump said, there's certainly a chance. You know,
Speaker 8: all things are possible. We live in the world now
Speaker 8: where the pope's a Chicago guy who went to Villanova,
Speaker 8: So all things are possible in this world. And let's
Speaker 8: see what happens as a result of that. Bessont said
Speaker 8: that this was about de escalation, not a massive trade deal.
Speaker 8: De Escalation is certainly a possibility. Let's see where we
Speaker 8: are this time on Monday, Boom.
Speaker 1: We're senior editor Derek Wallbank.
Speaker 8: There.
Speaker 9: Thanks for listening to today's episode of the Bloomberg Daybreak
Speaker 9: Asia Edition podcast. Each weekday, we look at the story
Speaker 9: shaping markets finance and geopolitics in the Asia Pacific. You
Speaker 9: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
Speaker 9: or anywhere else you listen. Join us again tomorrow for
Speaker 9: insight on the market moves from Hong Kong to Singapore
Speaker 9: and Australia. I'm Doug Prisoner and this is Bloomberg