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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 Doug Krisner.

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Speaker 2: Anxiety is high as President Trump pushes ahead with these

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Speaker 2: new tariffs on many Chinese goods. They will take effect

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Speaker 2: at twelve oh one a m. New York time Wednesday morning,

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Speaker 2: and this rate is one hundred and four percent. These

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Speaker 2: new tariffs, by the way, come after the Chinese government

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Speaker 2: refuse to back down, keeping its retaliatory tariffs in place

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Speaker 2: and saying it will fight to the end if the

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Speaker 2: US insists on new tariffs. In a moment, we'll be

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Speaker 2: speaking with Stuart Thomas. He as the founding principal at

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Speaker 2: Presidian Investments. But we begin this morning in the Lion's

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Speaker 2: City and joining us Bloomberg opinion columnist and friend of

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Speaker 2: the program, Karishma Vaswami. Karishma, let's begin by this the

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Speaker 2: latest column that you penned, where you're indicating that Washington's

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Speaker 2: tariffs are driving Asian nations to strengthen cooperation with each other.

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Speaker 2: This is a stunning development, is it not.

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Speaker 1: Yes, I think it is a really remarkable development, and

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Speaker 1: as I argue in my column, it's a bit of

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Speaker 1: an own goal for the United States under Donald Trump's administration. Now,

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Speaker 1: you know, in the short term, I think we have

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Speaker 1: to acknowledge that what these tariffs have done, or the

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Speaker 1: fear the possibility that they will be placed, the burden

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Speaker 1: of them will be placed on these Asian countries. You

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Speaker 1: have seen a whole host of countries and governments line

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Speaker 1: up to effectively kiss the ring and negotiate with Donald

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Speaker 1: Trump and say, look, can we find a way out

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Speaker 1: of this. You know, You've got Japan, South Korea, Vietnam,

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Speaker 1: everybody say, look, you know, we don't want the full

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Speaker 1: brunt of these tariffs on our economy and on our people.

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Speaker 1: And so I think in the short term you will

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Speaker 1: see those sort of deals come to bear. But in

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Speaker 1: the long term, what does this tell you, Doug right, Like,

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Speaker 1: You've basically got an administration and an unpredictable world leader

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Speaker 1: who is negotiating or trying to do a deal with

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Speaker 1: you with a gun point at your head. That doesn't

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Speaker 1: make for a great feeling or the sort of kind

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Speaker 1: of business environment that you need to be able to

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Speaker 1: really proceed well in with a good with the kind

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Speaker 1: of goodwill and the gestures that you need in order

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Speaker 1: to feel secure in these relationships, and I think in

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Speaker 1: the longer term there is a real sense that these

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Speaker 1: countries will move closer towards Beijing.

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Speaker 2: Yes, I think that's the next thing for us to

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Speaker 2: unpack here, that drift back towards China. You write about

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Speaker 2: how the US is alienating countries like Indonesia, Taiwan, Vietnam, Singapore,

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Speaker 2: and the Philippines. Now, in the past they have been

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Speaker 2: useful in helping Washington combat the rise of China. But

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Speaker 2: now if they were to forge, let's say, much stronger

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Speaker 2: relationships with China, I'm wondering about the possibility to which

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Speaker 2: the US may get shut out a little. What do

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Speaker 2: you think, Well, I.

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Speaker 1: Don't think it will get shut out entirely. I think,

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Speaker 1: you know, we have to accept that for now, the

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Speaker 1: US consumer is still the most powerful consumer in the world.

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Speaker 1: And the spending that you see taking place from the

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Speaker 1: American economy, the buying up of all of these goods

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Speaker 1: in Southeast Asian nations, that is what has helped to

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Speaker 1: lift incomes and livelihoods and living standards across the region

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Speaker 1: for decades. But I think what you will see is

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Speaker 1: a recognition that the United States under Donald Trump is

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Speaker 1: quite a different beast from the US that was the

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Speaker 1: architect of globalization, free trade rules, freedom of navigation, and

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Speaker 1: all of the things that helped to make this part

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Speaker 1: of the world the region that I grew up in,

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Speaker 1: you know, a really strong economic force, and I think

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Speaker 1: there's a soft power point to be made here as well,

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Speaker 1: right Doug, because you know, millions of people across this

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Speaker 1: region look to the United States as a sort of

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Speaker 1: emblem of democracy. There's a real sense of, you know,

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Speaker 1: the America that provides innovation, the America that they want

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Speaker 1: to send their kids to to go to university in

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Speaker 1: and get a better life for themselves. And I think

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Speaker 1: when they look at the States now under Donald Trump,

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Speaker 1: it doesn't feel like that place anymore. And so you

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Speaker 1: will start to see and this has been happening for

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Speaker 1: some time economically as well. China is the main trading

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Speaker 1: partner for so many countries out in this region, and

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Speaker 1: I think you will start to see as sort of,

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Speaker 1: you know, an understanding that while Donald Trump is in charge,

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Speaker 1: the United States is not that kind of place anymore.

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Speaker 2: So a real damage to American credibility, That's what I'm hearing.

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Speaker 2: And I would imagine if that's the case, it's going

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Speaker 2: to take many, many, many years to repair.

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Speaker 1: Yeah, and you know, again, this is such a wasted opportunity.

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Speaker 1: And just to show or highlight this for our audiences,

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Speaker 1: you know, last year, there was a very well publicized

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Speaker 1: survey that was conducted by the Singapore based thing tank,

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Speaker 1: the ISAs yusuf Isshak Institute, where they asked, you know,

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Speaker 1: a bunch of Southeast Asian more than two thousand at

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Speaker 1: the time, I think, who would you choose if you

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Speaker 1: were forced to between the United States and China in

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Speaker 1: terms of sort of aligning yourselves to these countries if

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Speaker 1: there was a choice to be made last year, more

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Speaker 1: countries felt in favor of China this year, And the

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Speaker 1: important point to be made here is that this survey

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Speaker 1: was conducted before the tariffs were announced. This year, they

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Speaker 1: chose the United States by a small margin, and primarily

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Speaker 1: because of Beijing's aggressive actions in the South China Sea

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Speaker 1: that are affecting countries, you know, like the Philippines, Malaysia,

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Speaker 1: and Indonesia as well. And there has been a lot

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Speaker 1: of disquiet, regional disquiet about the way that China's flexing

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Speaker 1: its military might in this part of the world. The

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Speaker 1: US has a real moment of opportunity here to show

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Speaker 1: itself as the global grown up and to say, look,

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Speaker 1: you know, we are here for EU Asia. The US

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Speaker 1: Asia pivot is a serious one. We're going to be

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Speaker 1: there for you militarily, We're going to be there for

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Speaker 1: you economically. There's no reason to turn to Beijing. But

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Speaker 1: instead you have this deal making by hostage and massive

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Speaker 1: tarifs that are being implemented the possibility of them being

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Speaker 1: implemented across the region, and that's really making the prospect

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Speaker 1: of those tariffs is really making life oneris for governments

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Speaker 1: and economies around the region.

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Speaker 2: Some of the analysis that we have heard with regard

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Speaker 2: to price action in markets is that the magnitude of

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Speaker 2: these tariffs were a lot greater than what markets were expecting.

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Speaker 2: But I'm wondering whether the same could be said for

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Speaker 2: China or not. It seems like Beijing, having had the

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Speaker 2: experience of the first Trump administration, and having listened to

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Speaker 2: all of the campaign rhetoric that Trump spouted during the

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Speaker 2: lead up to the election, when he used the word

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Speaker 2: tariff again and again again, I'm only imagining that China

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Speaker 2: was well prepared for this type of outcome.

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Speaker 1: Yes, I think they were well prepared, but I think

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Speaker 1: a few things have changed. I think they understand that

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Speaker 1: Donald Trump in his second term is a very different

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Speaker 1: animal to the one that they encountered in Trump one

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Speaker 1: point zero. And I think Si jen Ping himself has

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Speaker 1: also recognized that the appetite for a trade war, you know, domestically,

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Speaker 1: although it isn't going to be great for the Chinese economy,

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Speaker 1: the Chinese economy isn't a different place to what it

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Speaker 1: was in twenty eighteen. It's a little bit more self sufficient,

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Speaker 1: even though it's in a sort of precarious economic position

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Speaker 1: as well. And I think the other thing is that

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Speaker 1: the way that the US has sort of upped the

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Speaker 1: ante with the Chinese, when they have consistently said that

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Speaker 1: they want dialogue, they want to talk, that's not going

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Speaker 1: down well across the country. I speaking to a Chinese

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Speaker 1: academic yesterday who said to me, all we want is respect.

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Speaker 1: You know, we're powerful country, we are the world's second

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Speaker 1: largest economy, and we have a situation now where there

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Speaker 1: is no room for dialogue. There's no room for discussion.

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Speaker 1: It's just you know, trade policy by truth, social and

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Speaker 1: if the Trump administration is really serious about talking about

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Speaker 1: unfair trade and getting rid of some of these market

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Speaker 1: access barriers, then come to Beijing and, you know, really

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Speaker 1: sit down and have a discussion with us. But to

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Speaker 1: be honest, the prospect for a dialogue at this point

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Speaker 1: in time, given how much the Chinese are hardening their stunce,

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Speaker 1: and of course we'll find out in the next few

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Speaker 1: hours whether or not that position continues. My suspicion is

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Speaker 1: it will that. I don't see the prospect for dialogue

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Speaker 1: taking place anytime soon.

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Speaker 2: So, Karrishma, to what extent do you believe this has

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Speaker 2: the potential to mushroom well beyond the trade issue and

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Speaker 2: to get into areas like military relationships, defense policy. Does

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Speaker 2: that seem to you it's a possibility.

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Speaker 1: I think there is a possibility. But you know, for

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Speaker 1: the time being, what you're seeing or the messaging that's

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Speaker 1: coming out from Asian nations, and this was happening even

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Speaker 1: before the trade war. I think countries recognized that Donald

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Speaker 1: Trump has no appetite or limited appetite to keep funding

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Speaker 1: defense budgets and other parts of the world, and so

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Speaker 1: you're starting to see more countries take that burden on

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Speaker 1: themselves or take on the you know, spending more on

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Speaker 1: defense in order to find a way to negotiate with

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Speaker 1: Donald Trump on other aspects. So I think that was

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Speaker 1: the strategy, but obviously it hasn't worked longer term. What

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Speaker 1: that means is everybody arms up, and again there is

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Speaker 1: data to prove this. I've written about this in previous

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Speaker 1: columns as well. We had a relative degree of peace

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Speaker 1: and stability in the Indo Pacific, you know, notwithstanding some

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Speaker 1: of these skirmishes between China and the Philippines, particularly over

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Speaker 1: the South China Sea in recent months, but you know,

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Speaker 1: for the large part of the last forty years or

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Speaker 1: so have been relatively stable. I don't think we're going

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Speaker 1: to see that in the near term and even in

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Speaker 1: the longer term in the future anymore. I think what

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Speaker 1: you are going to see is calculations about nuclear power,

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Speaker 1: nuclear weapons coming as prominent discussions amongst governments, increasingly more

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Speaker 1: so in the future. You're already starting to see that

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Speaker 1: in South Korea and even possibly in Japan. And I

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Speaker 1: think that's really dangerous because I think you're getting to

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Speaker 1: a point where Asian countries don't feel they have a

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Speaker 1: security umbrella that they can count on with Donald Trump

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Speaker 1: in power in the United States, and that removes a

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Speaker 1: really stabilizing force for so many countries in this region,

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Speaker 1: and I think that's a shame.

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Speaker 2: Karishma, thank you so much. Karrishima Vaswani, who is Bloomberg

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Speaker 2: opinion columnist, joining us this morning from Singapore on the

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Speaker 2: Daybreak Asia podcast. Welcome back to the Debreak Asia podcast.

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Speaker 2: I'm Derek Krisner. This standoff between the US and China

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Speaker 2: has produced a lot more in the way of volatility

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Speaker 2: for the equity market, and at the end of the day,

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Speaker 2: a lot more selling in the process. Today we had

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Speaker 2: the S and P five hundred narrowly missing a bear market.

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Speaker 2: The daily trading range for the S and P five

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Speaker 2: hundred today was greater than seven percent, although at one

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Speaker 2: point the S and P was down twenty percent from

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Speaker 2: that record high of mid February, that's when buyers emerged.

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Speaker 2: At the end of the day, the S and P

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Speaker 2: was down about one point six percent, and if you're wondering,

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Speaker 2: we did close below five thousand. Joining me now for

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Speaker 2: a closer look is Stuart Thomas. He is founding principal

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Speaker 2: at Presidian investments, Stuart, thank you for joining us. Anxiety

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Speaker 2: obviously is high. I'm curious as to how you're navigating

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Speaker 2: this terrain right now.

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Speaker 3: Doug. Lovely to be back with you. I know people

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Speaker 3: are biting in nails, and I think the last time

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Speaker 3: we spoke, I said, hey, buckle up, it's going to

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Speaker 3: be a bumpy ride. And that's certainly proven to be

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Speaker 3: to be true. But look, this is short term first

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Speaker 3: and foremost. Everybody's talking about almost unprecedented movements over such

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Speaker 3: a short period of time. But that, of course, as

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Speaker 3: you and I both know, we've been doing this for

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Speaker 3: a very long time, that's not even close to being

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Speaker 3: the truth. Right. This isn't in October eighty seven months

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Speaker 3: where it's down twenty one and a half percent. This

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Speaker 3: market we've had two back to back years, the S

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Speaker 3: and P five hundred returning and access it's twenty percent.

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Speaker 3: Generally about every eighteen months, we could expect at least

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Speaker 3: a ten percent correction. We haven't seen any of that.

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Speaker 3: So all the tariff talk, all the jitters in the market,

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Speaker 3: I think are the excuse to jure for a long

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Speaker 3: overdue correction.

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Speaker 2: You know, we were talking earlier in the day with

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Speaker 2: former Treasury Secretary Larry Summers, and he was saying, this

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Speaker 2: is the first time the US is facing a recession

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Speaker 2: caused by its own policy actions. Does he have a point?

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Speaker 3: I would take some exception to Larry Summers of views

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Speaker 3: on the matter. I these are these are all that

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Speaker 3: of the same experts that got us into this mess

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Speaker 3: in the first place. So I would say, I think

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Speaker 3: it is way too early to start talking about recession.

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Speaker 3: These these tariff moves, and Doug, you and I've been

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Speaker 3: doing this a long time. Every We've been taught our

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Speaker 3: entire lives, don't tariffs are a really bad thing for

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Speaker 3: an economy, right, It's going to create trade wars, It's

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Speaker 3: going to lead to inflationary pressures ultimately into recession. Somebody

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Speaker 3: answered me this question. Maybe this is for Larry Summers.

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Speaker 3: If tariffs are so bad, if our policies are so bad,

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Speaker 3: how is it that every other country on the planet

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Speaker 3: that does business with the US has effectively used punitive

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Speaker 3: tariffs against the US to great effect. And we're talking

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Speaker 3: about decades. So I'm sorry, I'm going to take exception

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Speaker 3: with Larry Summers. I don't believe it. It's way too early

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Speaker 3: to be calling a recession.

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Speaker 2: Do we need to consider the role of the dollar

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Speaker 2: and all of this though, the fact that it is

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Speaker 2: still the world's reserve currency, and when money is flowing

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Speaker 2: offshore to buy goods from other markets in other economies,

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Speaker 2: ultimately that money finds its way back to the US

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Speaker 2: treasury market and helps keep interest rates at lower levels.

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Speaker 3: And I completely agree with you. And if you take

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Speaker 3: a look at what's happened since the second right Literation,

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Speaker 3: as President Trump calls it, I don't almost have to

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Speaker 3: say to you that this may be the greatest robinhood

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Speaker 3: like redistribution of wealth the US has ever seen. We

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Speaker 3: have to remember that at least fifty percent of our

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Speaker 3: population owns no stocks at all. Who's this affecting? People

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Speaker 3: like you and me? We're the ones affected by it most.

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Speaker 3: This markets have been driven higher over the last four

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Speaker 3: years by an abundance of loose capital that's driven asset

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Speaker 3: prices higher. And this is from printed money that we

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Speaker 3: could ill forward to print. So what's the real impact

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Speaker 3: on our economy. It's actually benefiting the fifty percent of

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Speaker 3: the population that need it most. You mentioned interest rates

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Speaker 3: going down. That impacts people who don't own stocks, but

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Speaker 3: are a wash in debt. Energy prices are coming down,

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Speaker 3: oil is down, food prices are down. These are the

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Speaker 3: things that matter to the majority of our population. So overall,

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Speaker 3: I think this is extremely beneficial. And I know it's

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Speaker 3: ugly for people when they take a look at their

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Speaker 3: stocks and their four oh one ks, but again, buckle up,

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Speaker 3: it's going to be a bumpy ride. But I still

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Speaker 3: believe in the common sense policies that have been put

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Speaker 3: forth by this administration.

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Speaker 2: So the administration has been pretty transparent about the fact

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Speaker 2: that it's not paying so much attention to the equity market,

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Speaker 2: more so to the treasury market, particularly the ten year

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Speaker 2: I think at last check, Chinese government had about trillion

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Speaker 2: dollars worth of US treasuries. Is there the risk in

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Speaker 2: your mind that as the tension between Washington and Beijing

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Speaker 2: continues to spike, that maybe China starts to lighten its

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Speaker 2: load of US treasuries and maybe that has an adverse

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Speaker 2: impact in the market.

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Speaker 3: Well, there's always that possibility. But the benefit to lower rates,

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Speaker 3: and I think this is a brilliant move on the

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Speaker 3: part of the administration is remember the last administration left

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Speaker 3: them with almost ten trillion dollars worth of debt that's

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Speaker 3: coming due this year needs to be refinanced. So for

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Speaker 3: every fifty basis points and reduction in the interest rate,

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Speaker 3: that saves the American taxpayer hundreds of billions of dollars

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Speaker 3: a year in interest payments, and that's incredibly important and

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Speaker 3: will benefit our economy. So is it possible that the

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Speaker 3: Chinese sell treasuries? Always possible. The same way it's possible

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Speaker 3: they continue to manipulate their currency to try to negate

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Speaker 3: the impact of the tariffs on their exports.

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Speaker 2: Just as a rule, in terms of the tariff story,

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Speaker 2: are you looking at these tariffs being in place for

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Speaker 2: the foreseeable future or are you hopeful that we'll get

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Speaker 2: down to the brass tax of negotiation.

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Speaker 3: The negotiations are already happening. I mean, we're already seeing

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Speaker 3: that fifty plus countries have reached out. We're seeing we're

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Speaker 3: seeing a willingness to negotiate on behalf of our of

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Speaker 3: some of our biggest trading allies, like the EU and

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Speaker 3: the UK. India has come forth, Israel has come forth.

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Speaker 3: It's already happening. Let's let's let's remember these these aren't

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Speaker 3: punitive tariffs that are being arbitrarily placed on trading partners.

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Speaker 3: These are simply tariffs being placed on trading partners who

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Speaker 3: have had punitive tariffs in place against our exporters for decades.

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Speaker 3: Only thing the President has said is we are open

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Speaker 3: for business, but we want to level playing fields, and

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Speaker 3: I am going to focus on US businesses getting a

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Speaker 3: fair shake in your markets. You want access to the largest,

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Speaker 3: most resist resilient consumer consumer market on the planet, we will.

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Speaker 3: We're open for business, but we will do it on

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Speaker 3: the fair terms.

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Speaker 2: So, given the volatility that we've been seeing in markets,

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Speaker 2: I'm curious, Stuart, how are you playing this? What type

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Speaker 2: of strategies are you employing right now?

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Speaker 3: I have been a long term investor. If there's one

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Speaker 3: thing I have learned in the thirty five year plus

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Speaker 3: years in this business, trying to time up the market,

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Speaker 3: at least from my perspective, is a fools game. Long

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Speaker 3: term investing quality stocks, sometimes there's a shift whether you

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Speaker 3: go whether you go defensive, or you take a look

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Speaker 3: at the policies that are in place. I mean to me,

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Speaker 3: there's some clear uh sectors that I would be taking

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Speaker 3: a look at. Drill Baby, drill, energy, his policies to

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Speaker 3: bring businesses on shore, industrials, financials. Though you mentioned that

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Speaker 3: M and A activity, we all expected to pick it up,

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Speaker 3: you pick up faster. But I think that so many

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Speaker 3: things are changing. The only thing that's changing now is

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Speaker 3: the timeline and of course utilities. Great defensive play and

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Speaker 3: also an incredible play on AI.

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Speaker 2: Okay, we'll leave it there, Stewart, Thank you so much.

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Speaker 2: Stuart Thomas, founding principle at Presidian Investments, joining us here

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Speaker 2: on the Daybreak Asia Podcast. Thanks for listening to today's

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Speaker 2: episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday,

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Speaker 2: we look at the story shaping markets, finance, and geopolitics

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Speaker 2: in the Asia Pacific. You can find us on Apple, Spotify,

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Speaker 2: the Bloomberg Podcast YouTube channel, or anywhere else you listen.

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Speaker 2: Join us again tomorrow for insight on the market moves

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Speaker 2: from Hong Kong to Singapore and Australia. I'm Doug Prisoner

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Speaker 2: and this is Bloomberg