WEBVTT - Tech Scrambles to Adjust Supply Chains, Tariffs Could Backfire on Trump’s AI Goals 0:00:02.520 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news from the heart of 0:00:09.200 --> 0:00:14.920 where innovation, money and power collide in Silicon Valley and beyond. 0:00:15.360 --> 0:00:43.080 This is Bloomberg Technology with Caroline Hyde and Ed Ludlow. 0:00:34.280 --> 0:00:37.600 Live from New York and San Francisco. This is Bloomberg Technology. 0:00:37.760 --> 0:00:41.600 Terrify anxieties are not going away with President Trump's global 0:00:41.680 --> 0:00:45.360 levies going into effect today, including those eyewatering one hundred 0:00:45.400 --> 0:00:47.760 and four percent tarifs on China. This is both China 0:00:47.800 --> 0:00:51.239 and the EU fight back with counter tariffs on US products. 0:00:51.520 --> 0:00:55.120 We cling to gains, but we fade this rally hard quickly. 0:00:55.200 --> 0:00:56.720 We're only up about a tenth of a percent on 0:00:56.760 --> 0:00:58.840 the nasat one hundred, after we managed to sell off 0:00:58.920 --> 0:01:01.480 yesterday as well. And it feels as though the magnificence 0:01:01.480 --> 0:01:03.880 sendmen trying to claw on Ed but no longer what 0:01:04.040 --> 0:01:04.760 you got on the micro. 0:01:05.480 --> 0:01:07.520 I want to go to a story that Bloomberg Spencer 0:01:07.760 --> 0:01:11.440 Soaper broke in the last thirty minutes. That is, Amazon 0:01:11.560 --> 0:01:16.600 has started canceling orders of inventory on specific products made 0:01:16.640 --> 0:01:20.160 in China. I'm talking consumer electronics, household goods. It didn't 0:01:20.200 --> 0:01:23.400 do much to change the fortune of the stock. It's higher, 0:01:23.720 --> 0:01:26.760 as many Mag seven names are, But that is an interesting, 0:01:26.880 --> 0:01:30.800 real time, real term story about the impact of tariffs 0:01:30.840 --> 0:01:35.280 that are now implemented right elsewhere. There's buoyancy in some 0:01:35.319 --> 0:01:38.160 of the MAG seven names. Apple in particular for now 0:01:38.480 --> 0:01:40.640 emphasize the for now why because at one point in 0:01:40.720 --> 0:01:43.520 yesterday's session, Apple was hired by a similar level closed 0:01:43.520 --> 0:01:46.399 down more than double that five percent. There is a 0:01:46.400 --> 0:01:50.360 function on the Bloomberg terminal ECTR. It's our trade flow map. 0:01:50.440 --> 0:01:53.600 The data is backward looking. We care about the relationship 0:01:53.600 --> 0:01:56.280 between US and China. There is a trade deficit. The 0:01:56.360 --> 0:01:58.680 US has a trade deficit with the US and China. 0:01:58.680 --> 0:02:00.600 And later in the program, when it came to tech, 0:02:00.920 --> 0:02:03.880 it is so important to discuss that number two hundred 0:02:03.880 --> 0:02:06.280 and sixty billion in twenty twenty three. We know from 0:02:06.280 --> 0:02:09.080 prelim data it went up in twenty twenty four. And 0:02:09.120 --> 0:02:12.400 we are talking about a US reliance on Chinese computers, 0:02:12.440 --> 0:02:17.000 consumer electronics, hair dryers, electric heated blankets, and that ties 0:02:17.040 --> 0:02:19.239 into that Amazon story that spent so sober broke. 0:02:19.600 --> 0:02:22.480 And Amazon just turned negative as you were talking about 0:02:22.480 --> 0:02:25.079 at ED. Let's just get the perspective of the global 0:02:25.120 --> 0:02:28.600 trade war heating up China the EU both retaliating against 0:02:28.720 --> 0:02:31.560 US tarifs. This is President Trump aims to bring back 0:02:31.720 --> 0:02:34.639 manufacturing in America, setting all his eyes on. 0:02:34.639 --> 0:02:38.160 Apple jobs in advanced technologies. The President is looking at 0:02:38.200 --> 0:02:39.919 all of those, he wants them to come back home. 0:02:40.040 --> 0:02:42.760 But iPhones specifically, is that's something that he thinks is 0:02:42.760 --> 0:02:44.600 the kind of technology that can move to the US. 0:02:44.760 --> 0:02:47.560 Absolutely, he believes we have the labor, we have the workforce, 0:02:47.720 --> 0:02:50.040 we have the resources to do it. And as you know, 0:02:50.160 --> 0:02:53.000 Apple has invested five hundred billion dollars here in the 0:02:53.080 --> 0:02:55.560 United States. So if Apple didn't think the United States 0:02:55.560 --> 0:02:57.040 could do it, they probably wouldn't have put up that 0:02:57.040 --> 0:02:58.720 big chunk of change. 0:02:58.960 --> 0:03:01.600 Well, as we all wait for more US made products, 0:03:01.680 --> 0:03:05.360 Amazon meanwhile canceling orders on some China made goods. So, 0:03:05.360 --> 0:03:09.239 according to sources and those Cadie Nines joins us from Washington, 0:03:09.639 --> 0:03:11.720 and at the moment, the response is a coming thick 0:03:11.760 --> 0:03:14.480 and fast, EU and China. What does the White House. 0:03:14.320 --> 0:03:14.760 Make of it? 0:03:16.240 --> 0:03:18.760 Well, the White House is sticking to its guns here, Caroline. 0:03:18.760 --> 0:03:21.160 President Trump, while he has indicated he wants to make 0:03:21.160 --> 0:03:23.440 a deal with China, wants China to come to him 0:03:23.480 --> 0:03:25.079 and at this point, it doesn't look like China is 0:03:25.120 --> 0:03:28.440 willing to have those conversations, as they have retaliated with 0:03:28.480 --> 0:03:31.120 this eighty four percent tariff against all US imports in 0:03:31.160 --> 0:03:33.320 exchange for one hundred and four percent levies the US 0:03:33.360 --> 0:03:36.760 implemented as of twelve oh one am this morning. So 0:03:36.840 --> 0:03:39.640 obviously an escalation in the trade war between the two 0:03:39.760 --> 0:03:42.440 largest economies and potentially has the ability to choke off 0:03:42.440 --> 0:03:45.360 the vast majority of trade that happens between the US 0:03:45.400 --> 0:03:49.200 and China. Already we're seeing, obviously our reporting on Amazon 0:03:49.240 --> 0:03:51.880 cutting off orders of things like air conditioning units or 0:03:52.000 --> 0:03:54.520 beach shares. That is changing company behavior in terms of 0:03:54.520 --> 0:03:56.680 where they want to source their inventory from. But it 0:03:56.680 --> 0:03:59.520 also has the potential ramification to affect whether or non 0:03:59.560 --> 0:04:03.040 American can access supply of things that don't easily have 0:04:03.120 --> 0:04:06.040 alternative suppliers to China. At the moment, according to data 0:04:06.240 --> 0:04:11.080 from the US Trade Commission, things like laptop computers for example, 0:04:11.160 --> 0:04:14.440 PC monitors, gaming consoles, all of that has about a 0:04:14.600 --> 0:04:17.440 seventy percent or more share of imports that come from 0:04:17.520 --> 0:04:19.560 China specifically, so that is where you could start to 0:04:19.560 --> 0:04:22.880 see some gaps emerging as this depending on how long 0:04:23.200 --> 0:04:26.120 this continues, but the administration argues all of this has 0:04:26.160 --> 0:04:29.320 an aim, and that aim is to bring back American manufacturing. 0:04:29.360 --> 0:04:31.400 As we just heard from the White House Press Secretary 0:04:31.440 --> 0:04:34.240 Caroline Levitt, but we've heard from others and the administration 0:04:34.320 --> 0:04:36.200 as well. If you recalled, just this past weekend on 0:04:36.240 --> 0:04:39.880 Sunday Morning television, the Commerce Secretary Howard Lutnik talked about 0:04:40.000 --> 0:04:42.359 the army of millions and millions of people screwing in 0:04:42.440 --> 0:04:44.760 tiny little screws and iPhones. He says, that's the kind 0:04:44.800 --> 0:04:46.600 of thing they're bringing back to America. 0:04:47.400 --> 0:04:50.960 That aim is so interesting because for the last twenty 0:04:50.960 --> 0:04:53.640 four hours I listened to everybody on Bloomberg Television, read 0:04:53.680 --> 0:04:56.560 every story, and I think the market still thinks, what 0:04:56.680 --> 0:04:59.400 is the aim here? Is it revenue generation for our country? 0:04:59.400 --> 0:05:02.159 Bring manufact uring back. I usually would like to go 0:05:02.200 --> 0:05:04.279 to the politics. I think I'm right in saying that 0:05:04.560 --> 0:05:08.080 away from tariffs, President Trump has not yet spoken to 0:05:08.120 --> 0:05:10.680 President she at any point since he took office. Am 0:05:10.720 --> 0:05:11.040 I right? 0:05:13.440 --> 0:05:16.200 He has spoken to President She and he actually invited 0:05:16.279 --> 0:05:18.920 him to his inauguration, but there hasn't been a conversation 0:05:19.000 --> 0:05:21.600 really since this escalation of the trade war. The initial 0:05:22.000 --> 0:05:24.800 tariffs that went into place regarding fentanyl, which first of 0:05:24.800 --> 0:05:27.080 course was ten percent and twenty percent, then the eighty 0:05:27.080 --> 0:05:30.640 four percent on top that has gone into effect as 0:05:30.680 --> 0:05:32.680 of midnight tonight, But there have not been direct high 0:05:32.760 --> 0:05:34.960 level talks between those two leaders. That there has been 0:05:34.960 --> 0:05:37.880 communication at some lower rungs of the Chinese and US 0:05:38.000 --> 0:05:39.800 government when it comes to trade. I guess we'll see 0:05:39.800 --> 0:05:42.160 if that phone call is scheduled, because again, the President 0:05:42.480 --> 0:05:44.400 and others in the Administration and White House have made 0:05:44.400 --> 0:05:47.120 clear he is looking to make a deal with China here, 0:05:47.160 --> 0:05:50.160 and we understand based off of our reporting and as 0:05:50.160 --> 0:05:52.000 well as what the White House is saying, that there's 0:05:52.040 --> 0:05:54.320 some seventy countries that have called into the White House 0:05:54.360 --> 0:05:56.479 to try to begin negotiations. It's just not clear at 0:05:56.520 --> 0:05:59.080 this time that China is one of them. In the meantime, 0:05:59.080 --> 0:06:02.320 the Administration is our arguing that China fundamentally has been 0:06:02.560 --> 0:06:05.400 messing with the US on trade and has been engaging 0:06:05.400 --> 0:06:08.000 in unfair trade practices for years, and that is what 0:06:08.040 --> 0:06:09.760 they are trying to reverse, which is one of the 0:06:10.200 --> 0:06:12.680 reasons they use to justify tariffs. That it's not just 0:06:12.720 --> 0:06:16.039 about bringing back American manufacturing. They also think it's about 0:06:16.040 --> 0:06:19.200 lowering trade deficits with the US making trade fairer across 0:06:19.240 --> 0:06:19.599 the globe. 0:06:19.600 --> 0:06:20.400 In addition to the. 0:06:20.360 --> 0:06:23.240 Revenue raising aspect, they also argue would be a benefit 0:06:23.240 --> 0:06:25.320 of this. The thing is, if you have tariffs of 0:06:25.400 --> 0:06:28.120 this level, like one hundred and four percent, that is 0:06:28.240 --> 0:06:31.480 likely to reduce important volumes according to most economists you 0:06:31.520 --> 0:06:34.080 would speak with, and that means less imports that you 0:06:34.120 --> 0:06:36.880 actually can tear iff, which actually could mean that you're 0:06:36.920 --> 0:06:39.279 not bringing in the kind of revenue levels you would 0:06:39.279 --> 0:06:41.920 think that you wil Bloomberg Economics estimates that if tariffs 0:06:41.960 --> 0:06:44.359 are intact as it stands now, they could bring in 0:06:44.360 --> 0:06:46.960 about three hundred billion dollars a year because of the 0:06:47.040 --> 0:06:50.080 reduction in imports. That's half of what the White Houses 0:06:50.200 --> 0:06:51.360 argued could generate. 0:06:52.320 --> 0:06:54.640 Blimbers K lines, we appreciate it, Thank you very much. 0:06:54.720 --> 0:06:57.880 Let's get more on the global tech markets perspective amid 0:06:57.880 --> 0:07:00.560 what is an active trade war? A Sema Shah, Principal 0:07:00.560 --> 0:07:03.479 Asset Management Chief Global Strategists, joins us, Now, when you 0:07:03.480 --> 0:07:06.159 think about the mag seven, let's say Apple in particular 0:07:06.279 --> 0:07:10.120 is an example, right, are you preparing for that Scenariokaylee outlined, 0:07:10.160 --> 0:07:13.000 which is the onshoring of jobs in this country or 0:07:13.080 --> 0:07:16.960 is this more about pricing in modeling a fundamental change 0:07:17.360 --> 0:07:19.920 in how the world does trade effectively. 0:07:22.320 --> 0:07:23.960 I think everything is on the table at the moment. 0:07:24.000 --> 0:07:25.840 I mean, one of the things that Cody was talking 0:07:25.840 --> 0:07:28.680 about with regards to having a lot of those other 0:07:28.760 --> 0:07:31.040 jobs that go into making the parts something to move 0:07:31.080 --> 0:07:33.360 to the US, I mean one of the clear impacts 0:07:33.360 --> 0:07:35.480 of that is the US has got much much higher 0:07:35.480 --> 0:07:38.840 wage wages than parts of Asia, So you would be 0:07:38.920 --> 0:07:42.679 looking at significant increase in cost brushes for these companies 0:07:42.680 --> 0:07:46.400 for the mag seven impact on their margins and therefore 0:07:46.440 --> 0:07:49.160 on their earnings growth potential. So there are so many 0:07:49.160 --> 0:07:51.960 offsets of this, so it makes it quite difficult to 0:07:52.040 --> 0:07:56.320 even fathom that you could see this complete alteration and 0:07:56.440 --> 0:07:58.120 change in the way that I think the world has 0:07:58.160 --> 0:08:01.320 got accustom to thinking about trade and a product. But 0:08:01.400 --> 0:08:03.920 this is all encompassing. Of course, It's not just technology. 0:08:03.960 --> 0:08:06.040 This is about every single product that you think through. 0:08:06.720 --> 0:08:09.880 Because of global trade, every single part will have elements 0:08:09.960 --> 0:08:12.280 of different countries about them, and shifting it back to 0:08:12.280 --> 0:08:14.520 the US is simply very inflationary. 0:08:15.720 --> 0:08:18.360 I want to show the earnings calendar for the mag 0:08:18.440 --> 0:08:21.280 seven and those names that have asteriskness to them are 0:08:21.320 --> 0:08:23.960 still tensative right. They haven't confirmed the date. But there 0:08:24.000 --> 0:08:26.559 is a split in the market I see this morning. 0:08:26.600 --> 0:08:28.840 Many believe that we won't see a bottom in equity 0:08:28.880 --> 0:08:32.680 markets until we have earnings calls and a revision to 0:08:32.760 --> 0:08:35.840 guidance that's been given, or a complete removal of guidance. 0:08:36.040 --> 0:08:39.280 Others say that earnings and guidance is not important. All 0:08:39.280 --> 0:08:42.600 we need is a strong positive piece of political news. 0:08:42.760 --> 0:08:47.200 Where do you stand, Seema, I think we need one 0:08:47.280 --> 0:08:47.680 or the other. 0:08:48.559 --> 0:08:50.520 Either one would be important. I think probably the most 0:08:50.559 --> 0:08:53.439 important would be if the administration walks back from tariffs 0:08:54.120 --> 0:08:57.960 very significantly. Then you would see the market centerment improving. 0:08:58.160 --> 0:08:59.720 And I think you see markets start to write, and 0:09:00.080 --> 0:09:01.760 not a very very sharp rally, because I think some 0:09:01.760 --> 0:09:04.640 fundamental damage has been done here, but certainly a rally 0:09:05.240 --> 0:09:07.640 in terms of earnings guidance. I think one of the 0:09:07.640 --> 0:09:09.280 things that we're waiting to see is that, look, if 0:09:09.320 --> 0:09:11.800 recession really is on the cards, we need to see 0:09:11.840 --> 0:09:16.760 a more realistic earnings outlook for companies across all sectors, 0:09:16.800 --> 0:09:21.880 including technology, and it's only once you have that realistic forecast, 0:09:21.920 --> 0:09:24.960 when you have got that forward guidance talking through what 0:09:25.000 --> 0:09:27.600 the impact of tarists and this new global environment is, 0:09:27.960 --> 0:09:29.880 only then can you start to think about where the 0:09:29.920 --> 0:09:31.800 floor is. And then once you know where the flora is, 0:09:31.840 --> 0:09:33.000 then you can start thinking forward. 0:09:33.800 --> 0:09:36.080 Why there are people buying if we're not sure where 0:09:36.080 --> 0:09:38.360 the floor is in the moment, why is Apple in 0:09:38.400 --> 0:09:39.360 the green for example? 0:09:41.040 --> 0:09:42.280 Well, I think one of the things that we've been 0:09:42.320 --> 0:09:44.360 seeing for MAC seven has been really interesting for US 0:09:44.400 --> 0:09:47.560 is I mean, from an asset allocation portfolio perspective, we 0:09:47.640 --> 0:09:49.400 have been trying to move away from the tactical. It's 0:09:49.440 --> 0:09:52.240 very difficult to be tactical when there's such an uncertain environment, 0:09:52.520 --> 0:09:55.720 so you almost go back to your strategic positioning. From 0:09:55.760 --> 0:09:58.199 a strategic perspective, we still like big tech if you're 0:09:58.200 --> 0:10:01.440 looking out over five to ten year horizon. Certainly the 0:10:01.480 --> 0:10:04.079 outlook has deteriorated even on the long term horizon, but 0:10:04.120 --> 0:10:08.000 it's still fairly important from a global or a US 0:10:08.000 --> 0:10:10.720 growth perspective. The other part of this is is that 0:10:11.120 --> 0:10:13.760 typically in this kind of environment, when there is uncertainty, 0:10:14.080 --> 0:10:16.000 when there are fears about what's going to happen, to 0:10:16.000 --> 0:10:18.439 economic growth. You want companies which you've got the big 0:10:18.480 --> 0:10:22.360 balance sheets, the positive cash flow, the fairly large motes 0:10:22.360 --> 0:10:24.840 around them, and the Max seven dies still come into play. 0:10:24.920 --> 0:10:28.679 And you've already seen a very significant valuation rerating in 0:10:28.720 --> 0:10:30.920 the past couple of months, which means that at least 0:10:31.200 --> 0:10:33.160 the Max seven the big tech companies are a little 0:10:33.160 --> 0:10:35.440 bit head of the game in terms of having a 0:10:35.440 --> 0:10:37.760 slightly more realistic pictures attached to them. 0:10:38.160 --> 0:10:40.000 It has to be said Apple having its worst four 0:10:40.040 --> 0:10:42.520 day sell off since the year two thousand, many saying 0:10:42.520 --> 0:10:46.200 from an RSI perspective relative strength index, it was over sold. 0:10:46.280 --> 0:10:48.079 This must be the point at which you pick up 0:10:48.400 --> 0:10:51.559 some of these shares. But seem who are the investor 0:10:51.559 --> 0:10:54.680 base right now who are willing to buy into big tech? 0:10:54.960 --> 0:10:58.160 You yourself sat in London. Are international buyers still coming in? 0:10:58.480 --> 0:11:00.800 Are we seeing it more from not only funds in 0:11:00.840 --> 0:11:02.079 the United States? For example? 0:11:03.800 --> 0:11:05.800 I think we have seen some retail invest is studying 0:11:05.840 --> 0:11:07.719 to do their feed in them. They really believe in 0:11:07.760 --> 0:11:10.400 the brand's perspective. So I think that's where you're seeing 0:11:10.400 --> 0:11:12.319 a bit of a dip bike. But as I said, 0:11:12.400 --> 0:11:14.480 you know, I mean the other thing to consider is 0:11:14.520 --> 0:11:17.200 that whilst you do start to see if we see 0:11:17.200 --> 0:11:20.800 some positive headlines coming through which can be sustained. Again, 0:11:20.840 --> 0:11:22.560 these are the companies which have got that long term 0:11:22.600 --> 0:11:24.640 earnings potential. So I think people have got an eye 0:11:24.720 --> 0:11:27.040 on the idea that there could be a walk back 0:11:27.080 --> 0:11:29.360 at any time. May not come, but certainly could happen 0:11:29.400 --> 0:11:31.960 at any moment. So people do still want to have 0:11:32.040 --> 0:11:35.160 exposure to these companies that can potentially ride out what 0:11:35.200 --> 0:11:38.480 would you most likely be still a challenging economic environment 0:11:38.520 --> 0:11:39.280 for the coming months. 0:11:40.000 --> 0:11:42.200 There's this note from Bank of America out this morning 0:11:42.240 --> 0:11:46.480 that says a US bill typhoon could cost ninety nine 0:11:46.640 --> 0:11:49.880 zero percent more than it currently does. But that is 0:11:49.880 --> 0:11:53.720 a goal of this administration right bring jobs, manufacturing, jobs 0:11:53.760 --> 0:11:56.040 in tech back to the United States or to the 0:11:56.120 --> 0:11:59.040 United States for the first time. Is there any upside 0:11:59.160 --> 0:12:01.760 or sort of silver lining or bright outcome that you 0:12:01.880 --> 0:12:04.160 see with this tariff's process. 0:12:06.559 --> 0:12:07.320 I'm not sure if there's. 0:12:07.880 --> 0:12:10.240 Well, look I think over a long term perspective, you know, 0:12:10.280 --> 0:12:12.000 a four or five year period, then maybe yes, there 0:12:12.040 --> 0:12:14.400 could be some positive. You would have maybe a US 0:12:14.440 --> 0:12:16.840 economy which is a bit stronger, you have a manufacturing 0:12:16.880 --> 0:12:19.640 base which is more formidable, you have less reliance on 0:12:19.679 --> 0:12:22.600 external partners, so that would be the positive, but it 0:12:22.640 --> 0:12:25.040 really comes through in the longside. It's really in the 0:12:25.040 --> 0:12:27.000 short term that you start to see this additional pain 0:12:27.040 --> 0:12:30.160 coming through. So I think it's challenging to see some 0:12:30.240 --> 0:12:32.839 really good positive news coming through. I guess the one 0:12:32.880 --> 0:12:34.960 thing is though, is that you know to that point 0:12:34.960 --> 0:12:38.600 where an iPhone could be significantly more expensive, that inflation 0:12:38.640 --> 0:12:40.520 pressure just puts upper pressure on the long end of 0:12:40.520 --> 0:12:42.520 the yeelk CUB. We're already being seen that playing out 0:12:42.559 --> 0:12:45.160 in the last couple of days, and from our perspective, 0:12:45.160 --> 0:12:47.400 that may be the pressure point from the Trump administration. 0:12:47.679 --> 0:12:52.199 They have repeatedly talked about their focus on treasury yields, 0:12:52.360 --> 0:12:55.040 so maybe this is what necessarily pushes them back from 0:12:55.080 --> 0:12:58.199 the edge and you could see some negotiations coming through 0:12:58.200 --> 0:12:58.920 in the next. 0:12:58.640 --> 0:13:00.800 Couple of days, or of a bio straight on the 0:13:00.800 --> 0:13:03.080 bond market. At least, yealds up about nine basis points 0:13:03.080 --> 0:13:06.360 in the ten ure. Simashah and Principal Asset Management, thanks 0:13:06.400 --> 0:13:07.280 so much for joining us. 0:13:07.280 --> 0:13:07.719 Coming up. 0:13:07.840 --> 0:13:10.560 Look as companies they race to adjust plans amid the 0:13:10.559 --> 0:13:13.600 trade tensions. Neither the US or China appears to be 0:13:13.640 --> 0:13:15.880 backing down. We'll have more on the impact for the 0:13:15.920 --> 0:13:25.920 tech sector. This has been their technology. 0:13:28.440 --> 0:13:32.199 China's paid almost seven hundred billion dollars in tariffs under me, 0:13:32.960 --> 0:13:35.800 and then they say Donald Trump hasn't been tough on China. 0:13:38.320 --> 0:13:41.439 Meanwhile, Apple's lost about seven hundred billion dollars worth of 0:13:41.480 --> 0:13:44.720 its market cap since the tariffs were imposed. Let's get 0:13:44.720 --> 0:13:46.880 more on what the one hundred and four percent tariffs 0:13:46.920 --> 0:13:50.000 on Chinese goods could mean for the tech world, and 0:13:50.080 --> 0:13:52.480 of course the eight percent counter tariff on US exports 0:13:52.520 --> 0:13:56.360 to China. Riva Gujano's with US director for Roodium Group Riva. 0:13:56.480 --> 0:13:59.280 It's really interesting to understand how supply chains are going 0:13:59.320 --> 0:14:01.480 to be impacted by all of this, because we know 0:14:01.679 --> 0:14:04.240 that in many ways China is the assembly point for apples. 0:14:04.320 --> 0:14:06.160 Some of the products in an Apple phone are actually 0:14:06.160 --> 0:14:07.839 made in Kentucky and ship to China and then ship 0:14:07.880 --> 0:14:10.880 back to US. But ultimately, are we in a game 0:14:10.880 --> 0:14:12.559 of chicken when it comes to US China tip for 0:14:12.640 --> 0:14:13.200 tat right now? 0:14:14.240 --> 0:14:16.640 Well, yeah, at one hundred and four percent tariffs, I'd 0:14:16.679 --> 0:14:20.040 say so. And so yeah, there are loaded assumptions on 0:14:20.120 --> 0:14:23.160 both the US and the Chinese sides over this trade war. 0:14:23.280 --> 0:14:26.640 Each side believes the others, in the weaker economic position 0:14:26.680 --> 0:14:29.720 that the other one will fold, and Beijing at this 0:14:29.800 --> 0:14:33.080 point is basically saying bring it right. They're counting on 0:14:33.240 --> 0:14:37.600 US inventories to get shaved down. People checking their Amazon 0:14:37.960 --> 0:14:40.760 orders and seeing that they're not coming through, going to Walmart, 0:14:40.800 --> 0:14:43.800 seeing their shelves empty out, and so at that point, 0:14:43.840 --> 0:14:47.360 this is obviously going to force a conversation, but to 0:14:47.440 --> 0:14:50.960 what end. Right, there's not much fodder for real negotiation here. 0:14:51.040 --> 0:14:54.240 You could have some sort of a reset, maybe getting 0:14:54.240 --> 0:14:58.800 back to let's say fifty four percent tariffs, but that's 0:14:58.840 --> 0:15:01.080 not much of a win here right after this scale 0:15:01.120 --> 0:15:04.600 of disruption, and already supply chains as you as you mentioned, 0:15:04.640 --> 0:15:05.960 are going to be greatly disrupted. 0:15:06.800 --> 0:15:09.080 We've heard time and time again that the US thinks 0:15:09.200 --> 0:15:11.960 China wants to make a deal. Do you think that 0:15:12.080 --> 0:15:14.480 ultimately it does that we ever get to a better 0:15:14.520 --> 0:15:17.760 outcome in this scenario, because there are companies currently locked 0:15:17.840 --> 0:15:19.560 not knowing what to do in this scenario as to 0:15:19.560 --> 0:15:21.720 whether the tariff's a short term a long term. 0:15:22.440 --> 0:15:25.920 Look, China would of course love a real negotiation with 0:15:26.000 --> 0:15:29.960 the US that spans into other domains as well, to say, 0:15:30.080 --> 0:15:33.000 for example, okay, if the US wants to reduce its 0:15:33.000 --> 0:15:36.200 trade deficit with China, then fine, let's talk about large 0:15:36.200 --> 0:15:39.800 scale purchases. Let's talk about importing more in video semiconductors, 0:15:39.800 --> 0:15:42.600 for example, which would in part then blow apart the 0:15:42.600 --> 0:15:45.240 export control regime. You can see how Beijing would be 0:15:45.280 --> 0:15:47.480 angling for that now with that happen, I think that's 0:15:47.560 --> 0:15:50.240 very low likelihood because remember we're just talking about a 0:15:50.240 --> 0:15:53.720 conflict spiral in the trade domain right now. There is 0:15:53.760 --> 0:15:56.040 a whole other layer here when it comes to the 0:15:56.080 --> 0:16:00.440 tech controls trajectory escalation on that front also, so how 0:16:00.520 --> 0:16:03.960 China is getting more creative with its own retaliatory toolkit, 0:16:04.200 --> 0:16:07.880 which is going to put multinationals in China, particularly tech companies, 0:16:07.920 --> 0:16:10.080 in a very difficult position in the months ahead. 0:16:10.880 --> 0:16:13.240 So I want to stay on this point because for 0:16:13.280 --> 0:16:16.760 the technology industry, tariffs are one tool or policy point, 0:16:17.320 --> 0:16:20.320 and the export of technology and the controls and those exports, 0:16:20.320 --> 0:16:24.280 as you point out, were the most significant prior to 0:16:24.400 --> 0:16:28.440 last week. Do you expect both to increase? In other words, 0:16:28.440 --> 0:16:31.880 where we see further specific controls by the United States 0:16:32.280 --> 0:16:35.200 on cutting edge GPUs and other technology. 0:16:36.480 --> 0:16:40.760 So attention span is a question right for the current 0:16:40.840 --> 0:16:44.160 US administration, We'll have to see you as BIS under 0:16:44.200 --> 0:16:47.440 commerce is starting to ramp up, is it going to 0:16:47.480 --> 0:16:50.840 have the latitude to patch up export controls? For example, 0:16:51.160 --> 0:16:54.720 there have been pending controls to expand chip controls to 0:16:54.760 --> 0:16:57.760 cover for example, in VIDEAH twenty chips in the wake 0:16:57.840 --> 0:17:01.600 of deep Seek's big breakthrough. But there's more than that, right, 0:17:01.640 --> 0:17:05.760 there's a bigger conversation around how do you evolve economic 0:17:05.840 --> 0:17:10.520 security standards that effectively exclude China from AI infrastructure build 0:17:10.560 --> 0:17:14.199 outs globally. So there's a lot more that's coming on 0:17:14.240 --> 0:17:18.440 the tech front. And meanwhile, China's looking at a number 0:17:18.440 --> 0:17:21.640 of retaliatory tools where it's singling out US big tech 0:17:21.680 --> 0:17:22.480 companies as well. 0:17:23.280 --> 0:17:27.359 It's REVA. How do you interpret China's responses China's actions. 0:17:26.960 --> 0:17:30.720 In this, Yeah, so a few things, right, So when 0:17:30.720 --> 0:17:34.240 you look beyond the tip for tat on the tariffs, right, 0:17:35.280 --> 0:17:38.720 China's doing some interesting things where, for example, in it's 0:17:38.720 --> 0:17:42.800 implementing provisions for the Anti Foreign Sanctions Law, it's talking 0:17:42.800 --> 0:17:47.400 about countermeasures that include suspending IP rights for US companies 0:17:47.440 --> 0:17:50.920 in China. That's explosive. Right, if China goes down that path, 0:17:51.040 --> 0:17:53.720 that's a very slippery slope. That's something that's going to 0:17:53.720 --> 0:17:56.400 spread alarm, not just to US companies, right, but Japanese, 0:17:56.440 --> 0:18:02.120 European everyone, once you start to break apart those norms. Moreover, 0:18:02.320 --> 0:18:05.840 you know, China has its anti monopoly arm sammer that 0:18:06.320 --> 0:18:08.760 has veto power over a number of strategic m and 0:18:08.840 --> 0:18:11.639 a around the world. There are a lot of strategic 0:18:11.640 --> 0:18:14.240 deals that are supposed to be struck as a result 0:18:14.440 --> 0:18:16.720 of these trade wars. At least that's the intent of 0:18:16.760 --> 0:18:19.560 the administration. We still don't know, for example, what's going 0:18:19.600 --> 0:18:22.560 to happen with Intel and TSMC. Right as Intel has 0:18:22.600 --> 0:18:25.080 been struggling, do you really think that the US is 0:18:25.119 --> 0:18:29.440 going to recognize the Chinese veto over a major merger 0:18:29.960 --> 0:18:34.040 that is based on national security arguments? So we're already 0:18:34.280 --> 0:18:38.960 vearying toward this conflict of law conundrum on that front, 0:18:39.040 --> 0:18:41.399 as well as on the IP front, which again is 0:18:41.400 --> 0:18:43.280 a very slippery slope for tech companies. 0:18:44.280 --> 0:18:47.120 With Gujon, director at Roodium Group, really great having the show. 0:18:47.200 --> 0:18:47.600 Thank you. 0:18:54.960 --> 0:18:58.400 President Trump's AI promises. They started strong with the announcement 0:18:58.400 --> 0:19:01.119 of a five hundred billion dollar style Gate infrastructure project 0:19:01.119 --> 0:19:04.479 back in January. Remember, but his new Liberation Day agenda 0:19:05.000 --> 0:19:08.440 looks set to undermine those earlier AI ambitions. Bluemberg Opinion 0:19:08.480 --> 0:19:12.520 columnists Daily writing, the Trump taroff agenda risks a cascading 0:19:12.560 --> 0:19:15.639 effect that will drag down the America AI effort. The 0:19:15.680 --> 0:19:18.800 new economic order could force the American AI industry to 0:19:18.880 --> 0:19:22.520 compete on China's terms rather than harness its own strengths. 0:19:22.760 --> 0:19:24.719 Davely is with us now. And when you say compete 0:19:24.720 --> 0:19:28.119 on China terms, ultimately it's about forcing them not to 0:19:28.160 --> 0:19:31.880 have access to the most sophistic GPUs and therefore having 0:19:31.920 --> 0:19:34.320 to do more with less. We become more Deep. 0:19:34.200 --> 0:19:37.040 Seek absolutely exactly like Deep Sea. I mean, you remember 0:19:37.240 --> 0:19:39.320 when there was the market sell off when deep Seek 0:19:40.840 --> 0:19:43.879 made its arrival because everyone thought, wow, China knows how 0:19:43.960 --> 0:19:46.760 to do this more cheaply and with less computing power 0:19:47.240 --> 0:19:49.919 and so on. But the American response, and the response 0:19:49.960 --> 0:19:51.679 that we got from the likes of Saturn Adella at 0:19:51.680 --> 0:19:55.000 Microsoft was don't worry, because our differentiate is we can 0:19:55.040 --> 0:19:57.760 do this on a bigger scale with more computing power. 0:19:57.760 --> 0:19:59.920 We can serve more people, we can do more inferencing. 0:20:00.040 --> 0:20:02.920 You know, the powering of AI once you've you've trained it. 0:20:03.359 --> 0:20:05.960 Now if all of that gets more expensive, which these 0:20:06.000 --> 0:20:09.200