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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Blooe Big Dabic Curate podcast, available every

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Speaker 2: morning on Apple, Spotify or wherever you listen. It's Tuesday,

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Speaker 2: the third of June in London.

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Speaker 3: I'm Caroline Hipki.

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Speaker 1: And I'm Stephen Carroll. Coming up today, The Art of

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Speaker 1: No Deal. As the clock ticks down on Donald Trump's

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Speaker 1: global tariff pause, trade deals with China, the EU and

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Speaker 1: others remain elusive.

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Speaker 2: Investors demand higher yields for thirty year US debt as

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Speaker 2: uncertainty remains front of mind.

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Speaker 1: Plus China's team You and she In want to crack Europe,

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Speaker 1: but the lure of the US consumer makes it hard

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Speaker 1: to quit.

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Speaker 3: Let's start with a roundup of our top stories.

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Speaker 1: The White House says President Donald Trump and China's President

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Speaker 1: chi Jing PingER likely to speak this week. Beijing hasn't

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Speaker 1: commented on the prospect of a direct conversation. The leaders

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Speaker 1: of the world's two largest economies have not spoken since

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Speaker 1: Trump's inauguration. Mean While says the US has seriously undermined

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Speaker 1: a recent tariff truce with its decision to impose a

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Speaker 1: range of new restrictions on the country Bloomberg's chief geenomics analyst,

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Speaker 1: Jennifer Welch is couraging caution over expectations off an imminent call.

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Speaker 4: If a phone call happens this week, I think that

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Speaker 4: is a good thing for training negotiations that probably will

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Speaker 4: help restart momentum or at least clear the error in

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Speaker 4: a way in which these tensions are kind of boiling

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Speaker 4: on the back burner. But I think a call is unlikely,

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Speaker 4: And what that means is that tensions could continue to

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Speaker 4: boil because they're only being addressed really at lower levels,

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Speaker 4: and it would take a higher level engagement to put

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Speaker 4: them to rest or at least to put them into

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Speaker 4: the background to the point where they're not interfering with

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Speaker 4: talks further.

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Speaker 1: Jennifer Wells from Bloomberg Economics was speaking as a private

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Speaker 1: survey showed China's manufacturing sector had its worst slump since

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Speaker 1: September twenty twenty two. The kaishin Manufacturing Purchasing Managers Index

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Speaker 1: fell to forty eight point three in May, as higher

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Speaker 1: US tariff took a toll on the country's smaller exporters.

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Speaker 2: Now, the weaker than expected data from China comes as

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Speaker 2: President Trump's ninety day pause on his so called reciprocal

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Speaker 2: tariffs is coming to an end soon, but as the

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Speaker 2: deadline looms, the White House is struggling to secure trade deals.

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Speaker 2: The European Union is preparing for another round of talks

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Speaker 2: with the US tomorrow. The BLOCK is trying to fast

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Speaker 2: track negotiations before the ninth of July deadline, when President

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Speaker 2: Trump said that he would hit nearly all of their

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Speaker 2: imports with a fifty percent tariff. However, the EU has

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Speaker 2: now warned that it may speed up retaliatory measures if

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Speaker 2: the President follows through on his repeated threats. Despite promising

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Speaker 2: that a range of deals are just around the corner.

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Speaker 2: So far, only the UK has reached an outline trade

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Speaker 2: agreement with the US on tariffs, and even that deal

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Speaker 2: is not in place yet.

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Speaker 1: Carline investors, meanwhile, are warily watching those trade negotiations as

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Speaker 1: the US faces broader questions over its fiscal outline. Thirty

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Speaker 1: year treasury bond yields once again tested five percent on Monday,

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Speaker 1: and it concerns over President Trump's tariff policies and a

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Speaker 1: budget bill that could push the deafic at higher. Christian

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Speaker 1: Lawrence's head of Cross Asset Strategy at Rabobank.

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Speaker 5: When it comes to the yields, I do think another

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Speaker 5: thirty basis points of term premium would make sense. I mean,

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Speaker 5: if you look at term premium for the last in

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Speaker 5: a few decades, it's been very low compared to historical standards.

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Speaker 5: We are in a world where the fiscal stance is

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Speaker 5: of course getting worse, and that isn't going to change

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Speaker 5: anytime soon. Everything points in that direction, and there is

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Speaker 5: just I would say a lot of faith in US

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Speaker 5: institutions is far too sensationalist.

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Speaker 6: But versus a year ago, are.

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Speaker 5: There some concerns about how big a role the dollar's

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Speaker 5: going to play globally?

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Speaker 1: I think that's fair, Christian Lawrence speaking there. As a

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Speaker 1: slate of labor market reports to this week could play

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Speaker 1: a key role in shaping the next moves and treasury

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Speaker 1: yields and the Fed's rate path. Traders now anticipate two

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Speaker 1: quarter point rate cuts and twenty twenty five, down from

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Speaker 1: expectations of three earlier in May.

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Speaker 3: So that's for the US.

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Speaker 2: Meanwhile, French President Emmanuel Maco and Italian Prime Minister Georgia

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Speaker 2: Maloney are to meet in Rome today as Europe grapples

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Speaker 2: with the seismic geopolitical shifts caused by the Trump administration,

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Speaker 2: Bloomberg's un Potts has.

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Speaker 7: More Now it's being seen as a reset of relations

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Speaker 7: between two of the EU's key players, ahead of major

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Speaker 7: NATO and G seven summits scheduled for later this month.

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Speaker 7: Mccron and maloney's meeting comes amide heightened concerns around trade

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Speaker 7: and security after President Trump's abrupt moves upended established ties,

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Speaker 7: and Lisa Official has acknowledged the two leaders divergent positions

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Speaker 7: on Trump, with the Italian PM being much more ideologically

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Speaker 7: aligned with the US presidents and as well as geopolitics,

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Speaker 7: some testy business issues are likely to come up the prize.

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Speaker 7: If all goes well, the future possibility of a high

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Speaker 7: level summit between the two countries in London, I'm youw

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Speaker 7: in pots Splinberg Radio.

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Speaker 1: Russia and Ukraine have laid the groundwork for a new

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Speaker 1: prisoner swap during their latest round of PA talks. The

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Speaker 1: two countries agreed to prepare for an exchange of heavily

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Speaker 1: wounded and young soldiers as well as six thousand bodies.

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Speaker 1: Ukrainian Defense Minister rustam Umurov says it's up to Moscow

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Speaker 1: to make the next move.

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Speaker 8: We propose to Russian side to hold a meeting by

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Speaker 8: the end of this month. We've been telling Russia for

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Speaker 8: a very long time this war must end, and the

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Speaker 8: whole world supports us in that if Russia is serious

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Speaker 8: about the ending the war, it will move forward on this.

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Speaker 1: Ukraine's defense minister speaking there also during discussions, Kiev called

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Speaker 1: for an unconditional truce, while the Kremlin proposed a two

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Speaker 1: to three day ceasefire in certain areas. The latest direct

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Speaker 1: peace talks in Istanbul lasted only about an hour and

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Speaker 1: came a day after Kiev stage one of its boldest

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Speaker 1: aerial attacks inside Russia, destroying long range bombers and other aircraft.

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Speaker 2: Now to the UK, which wants to take on a

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Speaker 2: larger role as part of NATO's nuclear deterrent as Europe

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Speaker 2: doubts America's commitment to the all, Bloomberg has learned that

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Speaker 2: the government is exploring new capabilities, such as fighter jets

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Speaker 2: able to find nuclear weapons. UK Prime Minister Kiss Starmer

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Speaker 2: announced at major new spending plans yesterday to revamp Britain's military, a.

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Speaker 6: Blueprint to make Britain safer and stronger. A battleready, armor

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Speaker 6: clad notion with the strongest alliances and the most advanced capabilities,

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Speaker 6: equipped for the decades to come.

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Speaker 2: Although Starmer's speech was supposed to be a show of

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Speaker 2: British strength, he failed to explain where the billions of

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Speaker 2: pounds in extra spending will come from. This leaves the

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Speaker 2: UK leader facing a major challenge in the future as

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Speaker 2: his party pushes for more welfare spending and bond markets

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Speaker 2: fresh over Britain's.

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Speaker 3: Debt levels well.

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Speaker 1: Meanwhile, the UK Immigration Minister says the government isn't ruling

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Speaker 1: out making new restrictions on migrants retroactive. Siema Malhatra told

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Speaker 1: the House of Commons that the Home Office is still

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Speaker 1: consulting on plans whi would affect millions of people who

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Speaker 1: come to Britain to work.

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Speaker 9: Bloomberg.

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Speaker 1: James Wilcock has more.

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Speaker 10: Labour doubled how long migrants have to live in Britain

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Speaker 10: before applying for the right to stay to ten years.

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Speaker 10: That toughest stance is partly response to the populist reform

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Speaker 10: UK Party overtaking them in the polls, but it's also

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Speaker 10: a question of budgets. There are roughly three million people,

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Speaker 10: many in low paid caring roles who have arrived in

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Speaker 10: the UK since the pandemic. Bloomberg has learned that the

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Speaker 10: Home Office is concerned about the strain that many people

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Speaker 10: would put on the welfare system if they settled in

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Speaker 10: the UK, and it's now seeking to tighten the rules

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Speaker 10: retroactively in London. James Orcock Bloomberg Radio, and.

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Speaker 2: Those are our top stories for you this morning. Let's

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Speaker 2: have a look at the markets. So yesterday we saw

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Speaker 2: the dollar selling off a six cents of one percent lower.

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Speaker 2: This morning a small rebound for the dollar on the

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Speaker 2: Bloomberg Dollar Spot Index up two tents of one percent.

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Speaker 2: The euro rose yesterday almost one percentage point, the euro

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Speaker 2: retreating somewhat this morning.

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Speaker 3: In terms of futures.

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Speaker 2: Then for the European markets we are up by about

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Speaker 2: a tenth of one percent. Trade worries are dampling optimism

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Speaker 2: about European stocks which have had such a strong run

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Speaker 2: dominating global stock since the start of the year. And

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Speaker 2: remember European defense names had a big boost yesterday, particularly

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Speaker 2: UK defense names also be a systems roles.

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Speaker 3: Royce shares were up yesterday.

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Speaker 2: You US stock futures are sliding now this morning. Mainland

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Speaker 2: Chinese indexes are climbing despite the kaishin PMI data being

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Speaker 2: weak and ten year US treasury yields this morning trade

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Speaker 2: at four forty three, So down one of our basic points.

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Speaker 3: There's the markets in the moment.

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Speaker 1: We'll bring you more on the latest in US China

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Speaker 1: trade relations, plus why Chinese sellers seem reluctant to shift

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Speaker 1: into European markets despite the American tariff threats. But first,

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Speaker 1: another story that calls AAI this morning, and how making

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Speaker 1: an ideological AI might be more difficult than it seems

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Speaker 1: so our opinion columns. Davely has been writing about grauk

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Speaker 1: on Lon Musque's X platform, which promised to be a

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Speaker 1: non woke alternative to chat GPT in its rivals. Dave

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Speaker 1: writes the problem is when the answers the AA provides

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Speaker 1: are based on data, the technology can either be non

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Speaker 1: woke or truthful, but not both. His argument is the

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Speaker 1: data doesn't care about culture wars, or what's dominating conversations

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Speaker 1: on cable news networks, or what stance anyone has to

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Speaker 1: be to be on the right side, in his words,

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Speaker 1: of the MAGA group on any given week. So he says,

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Speaker 1: you know, if you take the example of things like,

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Speaker 1: for example, climate change. If you're ki about climate change,

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Speaker 1: it's likely to tell you that it is real and

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Speaker 1: that it's urgent, or it's going to tell you that

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Speaker 1: vaccines are effective, and that's not because of a woke bias,

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Speaker 1: it's just what the data essentially provides. And he points

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Speaker 1: to the example of when you try to manage the

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Speaker 1: results that an AI chatbot will provide to you, and

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Speaker 1: that causes problems too. Xai, which created Grock, was criticized

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Speaker 1: for interventions that it made when it was found to

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Speaker 1: have directed users away from any news sources that suggested

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Speaker 1: that Elon Musk or Donald Trump was sources of misinformation,

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Speaker 1: for example. So you can be causing controversy on both

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Speaker 1: sides as well. Dave's argument is that you can improve

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Speaker 1: AI by giving it more data, not steering it away

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Speaker 1: from certain sources, and artificial selective intelligence, as he describes it,

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Speaker 1: as of pretty limited practical use.

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Speaker 8: Yeah.

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Speaker 2: Look, I think Dave does a really fantastic job of

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Speaker 2: sort of summarizing and analyzing the difficulties of AI. What

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Speaker 2: you want AI to look like and the sources that

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Speaker 2: it should look at. But I want to kind of

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Speaker 2: play devil's advocate because I can. I can see, despite

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Speaker 2: Dave's points, which I think are absolutely valid, right, that

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Speaker 2: more data is better to give us a better understanding

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Speaker 2: of the world. But I can also see sort of

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Speaker 2: reasonable people on the right of politics which obviously not

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Speaker 2: agree with the idea that more data will basically prove

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Speaker 2: that all left leaning ideas are correct and truthful.

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Speaker 1: Sometimes are measurable by data, which I think is kind

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Speaker 1: of what contributes to the problem. I think there are

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Speaker 1: some very clear cut issues, and Dave sites examples of

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Speaker 1: them as well, But then there are things that are

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Speaker 1: going to be m you know, how do you measure happiness?

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Speaker 2: Don't have enough research, you know, I mean there were

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Speaker 2: so many hurries of the world.

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Speaker 1: More data, carline, that's the answer, right. We can read

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Speaker 1: the piece at Bloomberg dot com slash opinion and we'll

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Speaker 1: put a link to it in our show notes if

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Speaker 1: you're listening to our podcast. Well, that's bringing more now

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Speaker 1: in US China trade relations, the White House pushing for

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Speaker 1: this phone call between Donald Trump and Shi Jingping later

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Speaker 1: this week. No sign though, of interest in a direct

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Speaker 1: conversation from Beijing. Let's bring in our eight economic supporter

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Speaker 1: Katio Dmitrieva for more on this Katia. We reported yesterday

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Speaker 1: on China saying the US was undermining the tariff truce,

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Speaker 1: and Washington in return accused Beijing of dragging its feet

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Speaker 1: in this deal was only agreed a couple of weeks ago.

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Speaker 1: What's gone wrong between the US and China.

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Speaker 11: Well, we're kind of back to a war of words, right,

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Speaker 11: and we're just a few weeks after Geneva and that

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Speaker 11: temporary trade truth. I mean that was May twelfth, right,

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Speaker 11: So it kind of began when Trump last week was

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Speaker 11: in the Oval Office and he lashed out at China

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Speaker 11: and said officials weren't up holding they're part of the

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Speaker 11: trade deal. And the issue really centers on rare earths.

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Speaker 11: It's the US wanting China to speed up sending the

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Speaker 11: US these rare earth metals. These are things that go

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Speaker 11: into critical technologies smartphones, computers, wind turbines, and China produces

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Speaker 11: seventy percent of these minerals globally, so it's very important

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Speaker 11: they restart production and export to the US. But China

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Speaker 11: shot back and said the US engages in discriminatory trade

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Speaker 11: practices when it comes to semiconductors. And that's likely referring

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Speaker 11: to sort of a raft of US restrictions on China

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Speaker 11: and that sphere and unrelated to trade. But of course

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Speaker 11: we've had this back and forth on education and the

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Speaker 11: US threatening to in their words, aggressively revoke Chinese student visas.

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Speaker 11: And about one in four international students in the US

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Speaker 11: is from China, so it carries these very real implications.

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Speaker 11: And of course we've heard from China about this issue

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Speaker 11: as well. Just very tense right now.

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Speaker 3: Very tense.

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Speaker 2: But then again, the Trump administration advocating direct discussions, a

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Speaker 2: very kind of mono amano style of negotiation. They want

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Speaker 2: a conversation between g and Trump. Is that likely? Will

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Speaker 2: it really help?

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Speaker 11: Well, the White House seems to think it's likely, and

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Speaker 11: it's happening this week. You know, we had comments from

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Speaker 11: several officials, including US Treasury Secretary saying that a call

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Speaker 11: is needed to break the deadlock. Kevin Hassett, who's the

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Speaker 11: White House Economic Advisor, he was also part of Trump's

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Speaker 11: first administration, saying that he's hopeful for a call this week,

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Speaker 11: but you know, it's not looking likely when you look

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Speaker 11: at past experiences with this, and also the fact that

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Speaker 11: we haven't heard from Chinese officials yet. So we've had

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Speaker 11: the White House and the US side saying a call

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Speaker 11: is necessary, a call is good, a call will probably

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Speaker 11: happen in this week. China has been very quiet on this,

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Speaker 11: and in the past when this has happened, when the

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Speaker 11: Trump administration has said a call is necessary, call is happening,

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Speaker 11: it hasn't happened. And the reason why it's so important

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Speaker 11: is that it's two different styles of negotiation, right, A

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Speaker 11: lot hinges on this call. Trump wants it to sort

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Speaker 11: of get negotiations going, as you said, Mono Amano, get

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Speaker 11: these two world leaders on a call. But for she

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Speaker 11: and Chinese officials, it's you know, they don't want to

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Speaker 11: get on the phone until there's equality and there's a

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Speaker 11: deal to be done, when there's something on the table

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Speaker 11: and there's mutual respect, is what we've heard from officials before.

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Speaker 11: So will it happen A big, big question mark.

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Speaker 1: And of course, Katy, this is coming after we've had

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Speaker 1: the latest kitin Manufacturing survey showing the sector had its

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Speaker 1: worst slump since September twenty twenty two in terms of

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Speaker 1: activity in manufacturing. How much pain is the trade war

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Speaker 1: causing China in the meantime.

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Speaker 11: Yeah, it's China in the entire region, right, So we

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Speaker 11: had manufacturing data from May and from China to Vietnam

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Speaker 11: to Japan. Productions down really led by weaker outlook, lower exports,

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Speaker 11: new export orders, i should say, and especially to the US.

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Speaker 11: And when an economy like China relies on exports so much,

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Speaker 11: it's of course going to hit growth, not just directly,

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Speaker 11: but also labor market demand means less investment as companies

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Speaker 11: wait for more direction, there's less hiring and it's hitting

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Speaker 11: small and medium sized businesses particularly hard. Large companies can

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Speaker 11: tend to absorb it better. So we know uncertainty means

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Speaker 11: weaker investment. But the question is just how much in

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Speaker 11: the coming months and how much pain frankly will China

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Speaker 11: be able to withstand because the industrial production numbers, the

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Speaker 11: manufacturing numbers have really not been good.

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Speaker 3: Yeah, Katya, thank you so much for being with us.

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Speaker 2: Caratedomtriavia are Asia Economics reporter.

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Speaker 8: Well.

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Speaker 1: After Donald Trump's tariffs on China, European countries have embracing

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Speaker 1: for a flood of ultra cheap Chinese goods, but that

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Speaker 1: might not becoming, at least not yet. Despite a massive

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Speaker 1: marketing push in Europe, Chinese sellers seem to be sticking

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Speaker 1: to the American market for now. Our European consumer goods

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Speaker 1: reporter Sonya Bend joins us from Fankfort for more. Sonya,

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Speaker 1: good morning. Why are Chinese sellers hesitating over shifting to

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Speaker 1: Europe even with all of the risks that doing business

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Speaker 1: with the US seems to hold?

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Speaker 9: Yes, well, on the surface, it looks like Timo engine

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Speaker 9: they're really pushing into Europe with pouring money into advertising spending.

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Speaker 9: But the sellers, they are more hesitant and more cautious,

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Speaker 9: and that's because of when they're trying to enter Europe,

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Speaker 9: they experienced hell mood, as one of the merchants described

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Speaker 9: it to us. And what they mean that that is

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Speaker 9: that Europe is more complex than the US. They are

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Speaker 9: are rules and regulations that differ from country to country.

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Speaker 9: There are various languages that require user manuals four times

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Speaker 9: the length of those in the US. More generally, it's

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Speaker 9: also more complex to understand the consumer dynamics there. And

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Speaker 9: so when the Chinese merchants initially took a look at

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Speaker 9: Europe in an attempt to move away from the trade

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Speaker 9: tensions in the US, they realized it won't be a

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Speaker 9: quick fix, and it's not as easy as in the

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Speaker 9: US to scale quickly and make short term and quick returns.

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Speaker 9: So once the terror for brief happened, it was kind of,

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Speaker 9: you know, a relief for many Chinese merchants, and they

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Speaker 9: shifted back to the US at least for now for

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Speaker 9: those higher short term returns. They can make them way

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Speaker 9: more easily than in Europe.

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Speaker 3: Okay.

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Speaker 2: On the other hand, though, Europe is you know, eyeing

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Speaker 2: up the fact that that Teamy and She and all

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Speaker 2: of those sellers on those platforms could lead to a

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Speaker 2: possible surge in cheap imports into Europe.

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Speaker 3: So how are they thinking and preparing for that.

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Speaker 9: Yes, so Europe is definitely trying to get ahead of it.

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Speaker 9: And while we are not seeing right now that Europe

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Speaker 9: is necessarily becoming a dumping ground for the cheap Chinese products,

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Speaker 9: while there are attentions in the US, there has been

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Speaker 9: a massive increase in low value parcels over the past years.

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Speaker 9: It doubled last year compared to the previous one, and

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Speaker 9: Europe and the European Union are really ramping up efforts

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Speaker 9: to become more strict here So, for example, the European

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Speaker 9: Commission is investigating both Timo and Sheen over harmful products,

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Speaker 9: and we're already seeing more custom checks. So examples that

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Speaker 9: market authorities mentioned to me were laser pointers that were

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Speaker 9: so powerful that they could cause blindness and toys that

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Speaker 9: exceeded the legally allowed threshold of certain chemicals. So they're

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Speaker 9: definitely cracking down. And part of that effort is also

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Speaker 9: to scrap the deminumus threshold of one hundred and fifty

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Speaker 9: euro in the European Union and also the UK is

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Speaker 9: considering that, and that could really change the dynamics and

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Speaker 9: could also make Europe a tougher place for e commerce platforms.

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Speaker 1: We're talking about this, sonya a point where we're in

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Speaker 1: the tariff pause. We've forgot about, you know, just over

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Speaker 1: a month left to go on the ninety day reprieve.

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Speaker 1: What could happen then when that period ends, if the

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Speaker 1: tariffs do come into force.

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Speaker 3: Yeah, that's the.

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Speaker 9: Big question, and it really depends on what exactly will

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Speaker 9: be agreed upon. One of the people we talked to

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Speaker 9: mentioned that at a tariff level of fifty four percent,

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Speaker 9: the US becomes unprofitable for Chinese merchants. So there might

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Speaker 9: be a point where Chinese sellers are forced to move

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Speaker 9: into Europe, but what's clear is that they'll be walking

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Speaker 9: into a more heavily police environment and Temo also seems

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Speaker 9: to be preparing for that already. So despite hiking advertising spending,

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Speaker 9: they're also working to increase the share of their local merchants.

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Speaker 9: So they said that they won't half of their UK

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Speaker 9: sales to come from local sellers and warehouses by the

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Speaker 9: end of twenty twenty five, and this is a model

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Speaker 9: they're trying to expand across Europe, and they're evening for

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Speaker 9: eighty percent of European sales to come from local sellers

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Speaker 9: over time. So yeah, we're seeing the dynamics are changing,

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Speaker 9: and it's clear that even when the Chinese sellers are

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Speaker 9: forced to move into Europe, it will be a bit

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Speaker 9: more tricky.

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