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

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Speaker 2: Welcome to the Dave Break Asia Podcast. I'm Dog Krisner.

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Speaker 2: Semiconductor stocks are being hard hit right now in South Korea.

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Speaker 2: At the moment, the entire group is down about ten percent,

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Speaker 2: leading the costby lower by roughly six percent. Now, these

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Speaker 2: losses come ahead of second quarter earnings from Taiwan Semiconductor

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Speaker 2: Manufacturing TSMC is set to report its results before the

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Speaker 2: US market opens on Thursday. Yes, guidance will be crucial,

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Speaker 2: and so will the numbers on CAPEC spending, as we

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Speaker 2: hear from Bloomberg Steven Engel.

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Speaker 3: Yeah, well, that previous guidance was for a near record

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Speaker 3: outlays this year of fifty six billion dollars, but UBS

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Speaker 3: for one is saying, you know, given the demand out

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Speaker 3: there right now, there could be a number released upwards

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Speaker 3: of sixty billion, So that is something that we're going

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Speaker 3: to be looking quite closely at. Also, of course, we

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Speaker 3: got those storm delayed sales figures for the second quarter

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Speaker 3: on Monday, which saw thirty six percent rise in sales

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Speaker 3: at TSMC, including a sixty eight percent jump in June alone,

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Speaker 3: So that's a good harbinger for.

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Speaker 4: The revenue side.

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Speaker 3: We'll have to see though, if.

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Speaker 4: Margins are being squeezed though, as they increase ramp up

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Speaker 4: or production of two nanometer technology and two as well

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Speaker 4: as their expansions overseas and most specifically in the United

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Speaker 4: States in Arizona.

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Speaker 2: That is Bloomberg Steven Engel for a closer look at

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Speaker 2: market action. I'm joined by Ross Mayfield. He's investment strategist

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Speaker 2: at Baird and Ross joins from Louisville, Kentucky. Thank you

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Speaker 2: for being here. Give me your sense of what you're

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Speaker 2: seeing in the market today. We had the PPI reading

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Speaker 2: that came in. I don't want to say it was cool,

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Speaker 2: but it certainly allowed the market to breathe a sigh

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Speaker 2: of relief when the conversation lately has been around the

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Speaker 2: Fed hiking interest rates, maybe as soon as this month.

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Speaker 2: That doesn't seem to be in the cards right now.

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Speaker 2: But what are we seeing overall in the market. There

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Speaker 2: certainly has been a lot of volatility.

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Speaker 5: Yeah, absolutely a lot of volatility as this momentum trade

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Speaker 5: kind of takes a pause and unwinds a bit. I mean,

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Speaker 5: it seems like you wake up every morning and see

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Speaker 5: that overnight the Korean cost we was upper down ten

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Speaker 5: plus percent, which is which is crazy for a market

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Speaker 5: of its prominence at this point.

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Speaker 6: You know, today, I think you're right.

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Speaker 5: PPI was far from cool, but it was cool enough

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Speaker 5: that it let investors, you know, focus on the combination

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Speaker 5: of CPI and PPI and say, well, this is heading

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Speaker 5: in the right direction. As long as you know, tensions

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Speaker 5: in Iran don't flare up and send crude back over

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Speaker 5: one hundred dollars a barrel. It gives the FED room

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Speaker 5: to breathe, and I think that's all the market wants

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Speaker 5: at this point, is a little bit of time. You know,

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Speaker 5: core inflation, particularly that core CPI number being down month

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Speaker 5: over month for the first time since the pandemic, I

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Speaker 5: think really underscores, you know, a lot of disinflation in

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Speaker 5: the system that the FED can goob onto if they're not,

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Speaker 5: you know, not wanting to hike grades later this year.

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Speaker 2: I want to get your take on the AI trade

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Speaker 2: because in the last week we had some pretty upbeat

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Speaker 2: guidance from ASML, the Dutch semiconductory equipment maker, and now

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Speaker 2: we're being told to do Anthropic is going to be

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Speaker 2: meeting with investors maybe in the coming weeks about its

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Speaker 2: potential mega IPO. How are you feeling about this AI

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Speaker 2: enthusiasm right now? Is it waning a little bit? Are

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Speaker 2: there questions about whether or not it is too extended

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Speaker 2: or does this still have legs?

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Speaker 6: I think it still has legs, you know.

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Speaker 5: I think a healthy consolidation of some names and industries

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Speaker 5: that have gone you know, parabolic this year is a

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Speaker 5: pretty healthy thing. I think the thing to watch is

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Speaker 5: when you get weakness in leadership, where does the money go?

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Speaker 5: And typically, you know, over the last six eight weeks,

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Speaker 5: we've seen a rotation in to you know, maybe it's

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Speaker 5: financials or industrials. Maybe some money goes back to the

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Speaker 5: mag seven, which has had a nice couple of days,

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Speaker 5: you know, cyber security software adjacent stocks. So money is

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Speaker 5: not leaving and it's not even really chasing defensive assets.

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Speaker 6: So I think there's you know, yes.

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Speaker 5: The recontextualization of what you do with these memory stocks

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Speaker 5: up four five, six year to date, which I think

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Speaker 5: is a totally fair question to ask of them, even

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Speaker 5: though their earnings have been outstanding. But it's where the

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Speaker 5: money is headed that lets me think the AI trade

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Speaker 5: in the bull market still have plenty of legs. Because

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Speaker 5: it's it's not fleeing the asset, it's not a defensive move,

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Speaker 5: more of just a you know, seeking value elsewhere.

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Speaker 2: So the earning season, as you know, is underway. We

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Speaker 2: heard this week from the big banks. It's going to

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Speaker 2: be important, I think, to get the take on what

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Speaker 2: we're hearing from Hyperscalers and some of the big cloud

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Speaker 2: computing companies, whether we're talking about Amazon or Alphabet or

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Speaker 2: even Meta. Are you putting a lot of stock in

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Speaker 2: what we will hear from those companies before you put

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Speaker 2: more money to work.

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Speaker 6: Yeah? Absolutely.

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Speaker 5: I mean I think the bar is extremely high for

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Speaker 5: this earning season, and we you know, I expect a

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Speaker 5: lot of earnings across the board. And so then the

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Speaker 5: next move in the market comes down to, you know,

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Speaker 5: where is guidance. And you know, particularly for the mag seven,

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Speaker 5: they have lagged for the entirety of this year. I

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Speaker 5: think because of nervousness about you know, the cap X

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Speaker 5: and the amount of spending that they're putting into the ground.

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Speaker 5: So I think I think, yeah, the guidance there and

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Speaker 5: what they're seeing as as far as returns on investment

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Speaker 5: is going to be really important for whether you know,

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Speaker 5: investors want to leg back into those stocks because they're

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Speaker 5: a totally different value proposition than they were even a

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Speaker 5: couple of years ago. For a long time, they've been safe,

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Speaker 5: have in trades, almost you know, stall warts when there's

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Speaker 5: volatility in the market because of their cash position, because

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Speaker 5: of their low debt, and now they're basically the opposite.

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Speaker 5: It doesn't mean they can't work, it doesn't mean that

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Speaker 5: they're any less influential, but it's a totally different value

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Speaker 5: proposition for investors. And the capex guidance for the next

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Speaker 5: couple of years, I think is the thing everyone's going

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Speaker 5: to be watching, and then you know, I'll always be

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Speaker 5: watching the consumer facing companies. I was heartened to see

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Speaker 5: the banks have positive things to say about the state

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Speaker 5: of the consumer, but we want an economy that's more

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Speaker 5: than just AI capex, and the state of the consumer

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Speaker 5: matters greatly for the kind of breadth and resilience of

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Speaker 5: the US economy here, because if that capex ever slows,

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Speaker 5: we need a backstop, and consumer spending and the other

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Speaker 5: parts of the economy are that backstop.

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Speaker 2: So there's another question here, and I think fed Scherk

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Speaker 2: Kevin Worsh tried to get at it today when he

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Speaker 2: pushed back on this idea that this big investment that

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Speaker 2: we have seen in AI is stoking inflation, he did

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Speaker 2: say that, yes, this investment has already raised prices in

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Speaker 2: some goods, although I thought it was curious that he's

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Speaker 2: set higher prices at least in the near term, or

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Speaker 2: not necessarily inflationary. You may disagree with that. We have

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Speaker 2: heard from a number of businesses warning of supply crunches

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Speaker 2: in areas resources and materials. I'm thinking energy. Obviously, labor

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Speaker 2: is a component there, chips, definitely, even software to some extent,

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Speaker 2: although the IBM news this week was a little interesting.

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Speaker 2: We can talk about that in a minute. But how

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Speaker 2: are you feeling about this idea that AI is really

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Speaker 2: contributing to upward pressure and inflation.

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Speaker 5: Well, I think it clearly is at this point, at

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Speaker 5: least in you know, chips and memory and kind of

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Speaker 5: consumer facing tech. You know, Apple and Microsoft are raising prices.

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Speaker 5: You know, most consumers are very familiar. Know they might

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Speaker 5: not know sk Heiinex, but they know Apple, and so

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Speaker 5: if Kevin Wors is saying it's not inflationary, I think

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Speaker 5: maybe you could look at, you know, kind of medium

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Speaker 5: term break even rates and say, well, there's no big

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Speaker 5: move higher in inflation expectations. So this is, you know,

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Speaker 5: not all too different than an oil shock. It's a

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Speaker 5: supply shock that you know will work itself out, and

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Speaker 5: the FED doesn't want to hike rates into a supply shock.

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Speaker 6: So I could maybe buy that argument a little bit.

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Speaker 5: But I do think there's clearly inflation throughout the tech

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Speaker 5: supply chain that's starting to show up in consumer prices,

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Speaker 5: and you know what is inflation if not? You know

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Speaker 5: that exactly now, Whether it, you know, impacts whether the

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Speaker 5: FED is hiking down the road is an open question.

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Speaker 5: It seems like worsh wants to push back against that,

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Speaker 5: but there is plenty of pressure in there. I think

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Speaker 5: the one the one thing you can say in today's

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Speaker 5: environment is the market's expectation of inflation is relatively well anchored,

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Speaker 5: and central bankers care greatly about that. The other thing,

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Speaker 5: just quickly is that CPI report yesterday. If you strip

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Speaker 5: out energy and you strip out shelter, which as we know,

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Speaker 5: is kind of its own beast, you know, inflation was

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Speaker 5: about two percent. So I don't think there's much evidence

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Speaker 5: of a wage wage pressure that would cause a wage

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Speaker 5: price spiral.

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Speaker 6: Average hourly earnings are down.

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Speaker 5: People are working, but they don't necessarily have the power

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Speaker 5: to negotiate big wage jumps like we might have seen

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Speaker 5: in twenty twenty one.

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Speaker 2: In twenty twenty two, so I mentioned the story on

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Speaker 2: IBM Tuesday, this stock was down twenty five percent. It's

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Speaker 2: kind of interesting. The company reported preliminary second quarter sales

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Speaker 2: well short of expectations. And what IBM is talking about

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Speaker 2: is customers moving away from products that IBM is associated with,

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Speaker 2: mainframe computers, software and putting more spending in the areas

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Speaker 2: of chips and servers. And I wonder if you feel

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Speaker 2: that this is a durable trend that we've got to

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Speaker 2: be concerned about, or whether this is just kind of

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Speaker 2: a momentary thing that will correct.

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Speaker 5: I think it's you know, durable is hard because this

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Speaker 5: stuff is changing so quickly underneath our feet. But if

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Speaker 5: you look at any of the memory makers or the

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Speaker 5: chip names, I mean, they're talking about shortages at least

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Speaker 5: out through twenty twenty eight. And so if you're a

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Speaker 5: big hyperscaler or you're one of these major buyers, you

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Speaker 5: do have to allocate capital a lot more. I don't know,

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Speaker 5: you have to tighten the belt a little bit. And

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Speaker 5: so if you're pushing more towards chips and infrastructure, you

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Speaker 5: have less definitionally to spend on software products, You have

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Speaker 5: less definitionally to spend on buybacks, You might have less

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Speaker 5: to spend on labor, and so, you know, I do

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Speaker 5: expect that at some point the big hyperscalers are going

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Speaker 5: to come out and talk about CAPEX discipline and slowing spending.

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Speaker 5: And I think that's probably a risk off moment for

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Speaker 5: the market, but I think it helps with the durability

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Speaker 5: of the bull market overall. So yeah, I think this

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Speaker 5: is a trend that's that's going to last. And I

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Speaker 5: think that every quarter we get CAPEX numbers raised higher

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Speaker 5: and higher, and more of that goes to memory and

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Speaker 5: more of that goes to chips. They are going to

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Speaker 5: be tough decisions to be made, and enterprise software might

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Speaker 5: be first in line, especially if there are cheaper alternatives

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Speaker 5: in today's market, which is the whole fear you know,

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Speaker 5: with AI and Anthropicic and Claude code and the reason

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Speaker 5: for the sell off that started last year.

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Speaker 2: That's right, Ross, good stuff, Thank you so very much,

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Speaker 2: Ross Mayfield. There he has investment strategist at Baird. Joining

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Speaker 2: from Louisville, Kentucky here on the Daybreak Asia podcast, Welcome

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Speaker 2: back to the Daybreak Asia Podcast, time deg Krisner. We

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Speaker 2: move next to US trade policy, including the Section three

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Speaker 2: zero one investigation on Brazil, the trade surplus with Switzerland,

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Speaker 2: and whether China is complying with its pact with the US.

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Speaker 2: We heard from US Trade Rep Jamison Greer from the

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Speaker 2: Aspen Security Forum. That's where he spoke with Bloomberg's David Gura.

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Speaker 7: I think there are a lot of folks wondering about Brazil,

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Speaker 7: in particular, seen as this test case for the Section

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Speaker 7: three oh one tariffs statutory deadline is today. Anything that

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Speaker 7: you can say about the process and where it stands

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Speaker 7: and what we can expect it's today.

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Speaker 1: So our Section three oh one investigations, they are legal investigations.

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Speaker 1: We have two sets of hearings, we do two sets

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Speaker 1: of public comments, and we're focused on unfair trading practices

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Speaker 1: by Brazil.

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Speaker 8: So we have to have a legal basis to do this.

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Speaker 1: And there are all kinds of things that Brazil has

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Speaker 1: been doing. They've been censoring our digital tech companies, they've

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Speaker 1: been restricting our access for ethanol to their market. They've

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Speaker 1: been actually engaging in illegal deforestation in the Amazon, which

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Speaker 1: gives them a leg up on all the ag where

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Speaker 1: they displace our ag exports to third countries. So there

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Speaker 1: are a lot of things like this that have been

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Speaker 1: problem for a long time with Brazil. So we've been

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Speaker 1: investigating this. Today we'll announce our final action. I had

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Speaker 1: a conversation a video conversation with my Counterpartnerzil last night,

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Speaker 1: very cordial. We've had intensive negotiations with them. I think

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Speaker 1: there's still a lot of gaps between us, so we

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Speaker 1: probably have to have some kind of action, but then

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Speaker 1: continued discussions.

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Speaker 7: I think expectation five percent in line with what you're

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Speaker 7: thinking in terms of the range.

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Speaker 1: Well, this is what was proposed by my office at

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Speaker 1: the presence direction, so this is probably what we're looking at. Again,

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Speaker 1: I don't want to get ahead of the president. He's

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Speaker 1: signing something today. I just got off the phone with

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Speaker 1: him and so we'll have more details to come. But

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Speaker 1: again I just want to emphasize this is these are

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Speaker 1: unfair trading practices that Brazil has had in place against

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Speaker 1: American exporters and workers for many years. The President is

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Speaker 1: trying to resolve these and we're doing it by negotiation.

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Speaker 8: Where we need to use.

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Speaker 1: Leverage of tariffs, that's what we're allowed to do with

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Speaker 1: Section three oh one. We'll do that where it's necessary.

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Speaker 8: Ask you've got Vietnam as well.

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Speaker 7: I understand representatives of Vietnam have been in Washington meeting

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Speaker 7: with your staff. Any update that you can give us

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Speaker 7: on the status of those negotiations.

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Speaker 1: Yes, So we have Vietnamese officials in Washington this week

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Speaker 1: negotiating with all of the trade deals we've done over

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Speaker 1: the past year and a half, all of them have

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Speaker 1: had some core issues. Obviously tariffs. We want other countries

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Speaker 1: to take down their tariffs, non tariff barriers where they

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Speaker 1: were strits exports of goods and services. Also things like

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Speaker 1: economic security where if we're going to be shipping them

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Speaker 1: some of our high tech equipment, they need to align

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Speaker 1: with us on export controls and other things. So this

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Speaker 1: is something we expect from the Vietnamese. And then there

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Speaker 1: are things like just basic standards of intellectual property and

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Speaker 1: other things. The type of things that the rules that

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Speaker 1: our companies abide by we want them to do so

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Speaker 1: as well. So I have a separate investigation with Vietnam

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Speaker 1: involving electrical property because they've been a bad actor in

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Speaker 1: this space. So these are the types of things intellectual property,

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Speaker 1: economic security, where we still have open areas of discussion.

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Speaker 7: Switzerland's top trade diplomat told Bloomberg there's a good chance

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Speaker 7: they'll get to a fifteen percent deal, something stable. Can

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Speaker 7: you confirm that negotiations with Switzerland are going well?

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Speaker 8: Well, I know that that's what they want.

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Speaker 1: I know that is the substance of a framework agreement

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Speaker 1: we agreed to a few months ago.

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Speaker 8: One interesting thing with Switzerland.

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Speaker 1: We've been very concerned with our trade deaths with Switzerland,

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Speaker 1: but over the past six to seven months, the United

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Speaker 1: States is now ensurplused with Switzerland in goods. So that's

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Speaker 1: a really positive development. The Swiss are investing here in America.

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Speaker 1: In fact, this week I'm going to visit a plant

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Speaker 1: in Utah where they are producing railway equipment. It's a

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Speaker 1: Swiss company. They're coming here that bringing their apprenticeship program.

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Speaker 8: So the Swiss are.

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Speaker 1: Doing a lot of the things they need to do

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Speaker 1: to get right with the US. Negotiations are still ongoing,

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Speaker 1: so I can't guarantee anything, but there's positive direction there.

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Speaker 7: Ask you about the sanctions bill newly elevated after the

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Speaker 7: passive Senator Lindsey Graham. Senator Richard Blumenthal said, you've been

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Speaker 7: involved in conversations about that. Is it in a place

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Speaker 7: now that the White House that you and the White

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Speaker 7: House are happy with?

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Speaker 1: So there are a lot of elements to this bill.

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Speaker 1: There's a teriff element, there's a sanctions element, all of

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Speaker 1: which are designed to give the President discretion to deploy

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Speaker 1: pressure on Russia and those who are supporting Russia. So

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Speaker 1: we've worked very constructively with the Senate on this. There

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Speaker 1: are a lot of good things to be said about it.

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Speaker 1: I just spoke with the President about it as well,

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Speaker 1: so I think there's an openness there. I think we'll

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Speaker 1: see within the next couple of days final views from

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Speaker 1: the President on whether he wants to be supportive. I

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Speaker 1: think that we have it in a pretty good I

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Speaker 1: think it's meaningful that this is something that Senator Graham

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Speaker 1: and I and Senator Blumenthal and others were working on

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Speaker 1: up until his last days, and that's meaningful as well.

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Speaker 7: It would give the present the latitude to impose terarif

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Speaker 7: up to one hundred percent, as I understand it, on

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Speaker 7: the largest importers of Russian oil. Any indication from him,

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Speaker 7: if he's prepared to do that, should this be pasted well?

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Speaker 1: I mean, I think you know, when I talk to

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Speaker 1: the President about this kind of issue, he wants to

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Speaker 1: be careful about the way he deploys this kind of leverage.

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Speaker 1: Geopolitics are very fragile, and this is something whether it's

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Speaker 1: a terrif action or sanctions action or anything, it's something

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Speaker 1: that the President thinks about very carefully. He certainly talks

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Speaker 1: to me, He talks to Secretary Best and Secretary Rubio,

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Speaker 1: Secretary Londik, he.

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Speaker 8: Talks to everybody.

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Speaker 1: He talks to people outside the government wants to He

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Speaker 1: wants to hit the right spot of putting pressure on

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Speaker 1: countries and putting pressure on Russia without creating more conflict

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Speaker 1: or reducing the likelihood of a peace deal.

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Speaker 7: The Section one twenty two tariffs set to expire in

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Speaker 7: just a couple of days, really few days from now

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Speaker 7: July twenty twenty fourth, all but certain that the three

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Speaker 7: one tariffs wuld effect after that. Are we looking at

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Speaker 7: perhaps a lapse kind of in coverage.

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Speaker 1: I mean, the reality is the Section three oh one

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Speaker 1: investigations I'm doing where we've proposed some tariffs, they're on

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Speaker 1: their own track. We're moving quickly, deliberately because we want

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Speaker 1: to resolve the unfair trading practices that we're targeting with

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Speaker 1: these investigations. So we're going to do them as soon

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Speaker 1: as we can to get at these practices, you know,

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Speaker 1: whether they're you know, day before, a day of day after,

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Speaker 1: that's less important to us than making sure we're addressing

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Speaker 1: these unfair trading practices and getting the leverage in place

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Speaker 1: we need to resolve them.

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Speaker 7: Do you have a timetable for one, you're going to

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Speaker 7: bring that report to the President when you might see

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Speaker 7: them enacted.

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Speaker 1: Well, we have a couple, right, So we have a

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Speaker 1: Section three oh one on forced labor, targeting countries who

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Speaker 1: don't ban the import of forced labor goods. We do

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Speaker 1: in America, other countries don't. Some have a law, but

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Speaker 1: they don't necessarily enforce it. So we already have our

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Speaker 1: report out on that and so we can take action

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Speaker 1: I think fairly quickly on that within the next few weeks.

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Speaker 1: We have another investigations targeting a more compact group of

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Speaker 1: countries on structural success capacity. These are countries who have

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Speaker 1: a typically have a big trade death sit with the world,

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Speaker 1: or a big sorry, big trade surplus with the world,

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Speaker 1: or a big trade surplus with US, or even if

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Speaker 1: they don't, they may have practices that generate factories or

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Speaker 1: production that are totally out of whack with global demand.

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Speaker 1: So this is this is a quite intense project. I

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Speaker 1: have dozens and dozens of attorneys and policy makers working

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Speaker 1: on this to really examine all of these practices. So

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Speaker 1: it takes a little longer time than doing this forced

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Speaker 1: labor one, which is a little bit of a binary

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Speaker 1: where you're looking at what do they have in place

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Speaker 1: and are they enforcing it?

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Speaker 8: This is more complex.

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Speaker 7: Does that explain the delay entirely or how long it's

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Speaker 7: taking or there's been reports that maybe China, that China

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Speaker 7: issue is complicating it more than it is with the others.

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Speaker 1: No, No, I don't think that's the case at all, right,

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Speaker 1: I mean China is included in this structural excess capacity

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Speaker 1: section three oh one. The reality is it's a more

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Speaker 1: complex investigation and we have to make sure that we

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Speaker 1: are hitting our milestones. You know, we've received a lot

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Speaker 1: of comments from the public. We have to handalyze those,

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Speaker 1: we have to incorporate them into any responsive action we

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Speaker 1: might take. So we're trying to make sure that we're

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Speaker 1: actually living up to the letter of the law and

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Speaker 1: the spirit of the law. We want to make sure

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Speaker 1: that we're targeting these these unfair trading practices that have

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Speaker 1: led to frankly offshoring in the US and an inability

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Speaker 1: to build new factories at times when you have other

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Speaker 1: countries that are building factories or they're depressing demand in

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Speaker 1: their own country. This is not how market economics are

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Speaker 1: supposed to work, and it creates a situation where there's

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Speaker 1: not enough incentive to build a new factory in America

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Speaker 1: or to employ American workers because we have overcapacity elsewhere.

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Speaker 1: So we want to make sure that that capacity is restrained, restricted,

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Speaker 1: or that we mitigate it somehow in our own economy

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Speaker 1: so we can have market incentives to build here and

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Speaker 1: to make here.

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Speaker 7: I want to ask you about rare earths, and I

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Speaker 7: wonder how you would assess China's performance when it comes

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Speaker 7: to rare earths. And as we get close through October,

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Speaker 7: do you anticipate that agreement will be renewed in due.

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Speaker 1: Course, so China's compliance with the rare earth elements of

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Speaker 1: our agreements. It's not perfect. I think everyone knows that.

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Speaker 1: You can read that in the paper. That being said,

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Speaker 1: we are getting a flow of rare earth. We don't

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Speaker 1: have factory shutting down because they don't have it. But again,

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Speaker 1: we really want to be in a position where we

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Speaker 1: were in twenty twenty four and twenty twenty three in

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Speaker 1: President Trump's first term, where we had a regular flow

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Speaker 1: of rare earth's. We also know that the Chinese they

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Speaker 1: use rare earth for economic coercion. They did it in

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Speaker 1: twenty ten and twenty eleven, they're doing it now, So

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Speaker 1: it's not necessarily surprising.

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Speaker 8: But we're continuing, you know, to have some flow.

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Speaker 1: And where we have gaps, where we have problems the

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Speaker 1: sector of the Treasury and I you know, we work

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Speaker 1: with our counterpart in China to try to loosen that

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Speaker 1: flow up. Sometimes we're more successful than others. One important

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Speaker 1: thing is we're moving forward in the US on rare

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Speaker 1: earth production. One of the things I'm doing on my

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Speaker 1: trip out west here, I'm going to Utah to visit

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Speaker 1: facility where we've already they've discovered rare earth in the

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Speaker 1: Utah Desert, and they're refining them and further manufacturing them

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Speaker 1: metaphasbility in Utah, which is a great development for US

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Speaker 1: national and economic security.

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Speaker 8: You've got rare earths.

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Speaker 7: There's huge pharmaceutical dependence as well, and I wonder how

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Speaker 7: you're thinking about that, the way that you can kind

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Speaker 7: of curb our reliance on Chinese pharmaceuticals and ingredients.

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Speaker 8: We think about this a lot.

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Speaker 1: This is really critical because at the end of the day,

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Speaker 1: if somehow you lose access to Chinese inputs, it can

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Speaker 1: be a huge challenge for our own manufacturing base. And

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Speaker 1: some people will say, well, what about India, Fine, but

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Speaker 1: a lot of the inputs that India uses also come

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Speaker 1: from China. One great thing that we're seeing as we

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Speaker 1: try to encourage companies to reshore is we actually have

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Speaker 1: commitments from seventeen pharmaceutical companies, most the largest and the

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Speaker 1: most major pharmaceutical companies, not only to lower prices of

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Speaker 1: medication here in the US. Pharmaceutical prices have gone down

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Speaker 1: by two point five percent, but they've also agreed to

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Speaker 1: reshore here and to manufacture here. And so we have

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Speaker 1: companies like Eli, Lilly and No Vardes and other actually

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Speaker 1: pouring concrete and superstructures going up in new facilities in

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Speaker 1: North Carolina and Indiana and southern California. So this actually,

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Speaker 1: for me, has been a really bright spot of our

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Speaker 1: efforts to reshort critical production in America.

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Speaker 7: In the Trade REPS glossary, transhipments is a word. Yes,

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Speaker 7: I'm wondering how you are thinking about monitoring and blocking

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Speaker 7: transhipment when it comes to China.

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Speaker 1: So it is a gloss it is a word in

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Speaker 1: our glossary, but it can mean different things. Right, There's

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Speaker 1: kind of like your pure illegal transhipment where something's made

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Speaker 1: in China, they send it to Vietnam and they put

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Speaker 1: a made in Vietnam sticker and send it over. It's

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Speaker 1: just illegal, right, and that's on Customs and Border Protection

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Speaker 1: to enforce that right. So do investigations to identify areas

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Speaker 1: of fraud and go after it.

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Speaker 8: And we and we're doing that.

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Speaker 1: A day or two ago we had a big announcement

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Speaker 1: with DOJ teaming up with CPP. They've already found a

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Speaker 1: billion dollars in customs fraud and some of that is transhipment.

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Speaker 1: And then you have another issue where you have you know,

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00:22:53,359 --> 00:22:57,040
Speaker 1: country it's often Asian inputs, China, Vietnam. They go to

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Speaker 1: a third country, maybe Mexico, and they do just an

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Speaker 1: enough work where they can legally say this is actually

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Speaker 1: from Mexico, so maybe we should get a better terrorfry

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00:23:05,080 --> 00:23:07,600
Speaker 1: than if it were from China. That's an issue, and

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Speaker 1: that's a problem with Mexico right now, for example, and

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Speaker 1: some of our discussions we're talking about rules of origin

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Speaker 1: and saying, if you want to get a better deal

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Speaker 1: bringing something in from Mexico or name your country, you

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Speaker 1: have to make sure it's actually has US content. You

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Speaker 1: have to make sure it actually has you know, Mexican

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Speaker 1: content or whatever it is, and you have to have

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Speaker 1: that as high as possible to protect against this other

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Speaker 1: type of transhipment, which is a little more difficult to detect.

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Speaker 7: Last question here, and you're gonna have to tell me

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Speaker 7: how you tre us your schedule and look at all

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00:23:34,880 --> 00:23:36,639
Speaker 7: of these deadlines. But yeah, you know, there's a long

481
00:23:36,680 --> 00:23:38,440
Speaker 7: way to go until this meeting in September when the

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Speaker 7: Chinese president comes to the United States. But let me

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Speaker 7: ask you lastly sort of how you're thinking about that.

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Speaker 7: You were so integral to the conversations that took place

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Speaker 7: in Beijing. What are you expecting deliverables wise to come

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Speaker 7: out of that meeting in Washington in a couple months.

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Speaker 1: Well, the number one deliverable we always have between President

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00:23:52,920 --> 00:23:55,840
Speaker 1: Trump and President she is to continue the stability of

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Speaker 1: the relationship.

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Speaker 8: Both of these leaders are very.

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Speaker 1: Committed to having a strong and solid personal relationship. Now

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Speaker 1: that doesn't mean we don't have issues in the broader relationship.

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Speaker 1: Obviously we do. China is a big challenge for the

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00:24:08,080 --> 00:24:10,159
Speaker 1: US in a lot of ways, but we want to

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Speaker 1: make sure we're delivering stability. There's never been a situation

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Speaker 1: where the US side or even the Chinese side, has

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Speaker 1: gone out and said everyone should expect a comprehensive.

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Speaker 8: Agreement that resolves all issues.

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Speaker 4: Like.

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Speaker 1: No one's ever promised that, So that's not what we expect.

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Speaker 1: We will have an opportunity to take stock of Chinese

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00:24:26,720 --> 00:24:30,320
Speaker 1: commitments with respect to purchases of soybeans and other agricultural products.

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Speaker 1: Will take stock on the rare of issues we decided,

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00:24:32,920 --> 00:24:35,040
Speaker 1: so I think it'll be a moment for stock taking,

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Speaker 1: confirming the relationship, making sure that China is complying with

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Speaker 1: what it's agreed to do. That's really what we're looking

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Speaker 1: forward to in this meeting.

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Speaker 2: That is US Trade Rep. Jamison Greer at the Aspen

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Speaker 2: Security Forum speaking with Bloomberg's David Gura, bringing you their

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Speaker 2: conversation here on the Daybreak Asia Podcast. Thanks for listening

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Speaker 2: to today's episode of the Bloomberg Daybreak Asia Edition podcast.

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Speaker 2: Each weekday, we look at the story shaping markets, finance,

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00:25:03,600 --> 00:25:06,679
Speaker 2: and geopolitics in the Asia Pacific. You can find us

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00:25:06,720 --> 00:25:10,880
Speaker 2: on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

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00:25:10,920 --> 00:25:14,040
Speaker 2: else you listen. Join us again tomorrow for insight on

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00:25:14,080 --> 00:25:18,240
Speaker 2: the market moves from Hong Kong to Singapore and Australia.

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Speaker 2: I'm Doug Prisner, and this is Bloomberg