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

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Speaker 2: Welcome to the Daybreak Asia podcast. I'm Dog Chrisner. President

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Speaker 2: Trump has moved quickly to impose new tariffs after the

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Speaker 2: Supreme Court struck down the legal basis for his tariffs

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Speaker 2: under emergency powers. He's put in place global tariffs under

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Speaker 2: section one twenty two of the Trade Deck of nineteen

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Speaker 2: seventy four. So the rate is fifteen percent, but these

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Speaker 2: tariffs are limited to one hundred and fifty days. Kind

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Speaker 2: of underscores just how central tariff policy is to the

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Speaker 2: President's agenda. For a closer look, I'm joined by Carol Schleife.

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Speaker 2: Carol is the chief market strategist at BEMO Private Wealth.

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Speaker 2: Carol joins us from Los Angeles. Thank you for being here.

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Speaker 2: I think we can agree that the decision by the

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Speaker 2: Supreme Court wasn't surprising, but I'm wondering about the level

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Speaker 2: of uncertainty. Now do you have a sense of that?

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Speaker 3: Piece of it depends on the size of business. The

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Speaker 3: small medium sized businesses are scratching their head trying to

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Speaker 3: figure out what to do because first we had ten percent,

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Speaker 3: then we had fifteen percent. It's only good for one

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Speaker 3: hundred and fifty days, and actually it expires the day

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Speaker 3: that Congress goes on recess. On the one hand, you know,

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Speaker 3: these small medium sized businesses would benefit greatly from being

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Speaker 3: able to get some refund, especially if the administration would

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Speaker 3: turn around and say, okay, we'll pay some refund, because

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Speaker 3: that gives them the opportunity then to turn around and

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Speaker 3: pass some of that refund back to clients in terms

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Speaker 3: of either holding prices steady or not increasing them because

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Speaker 3: they're at the point where they might have to increase them.

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Speaker 3: I think bottom line, it does increase the uncertainty and

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Speaker 3: the short run here. I think initially most businesses were

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Speaker 3: pretty relieved is probably the wrong word, but gratified if

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Speaker 3: you will, that the Supreme Court did come down and say, look,

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Speaker 3: countrywide tariffs are not doable. But it does make the

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Speaker 3: administration go search out other particular industries and such in

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Speaker 3: terms of it does have alternative methods. And we know

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Speaker 3: we've said all along, as everybody has said all along,

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Speaker 3: that President Trump really likes tariffs and he's been on

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Speaker 3: that theme for decades, and so we're gonna have some

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Speaker 3: level of tariffs that goes on. But it really is

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Speaker 3: tougher for businesses. I was hopeful that they'd get a

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Speaker 3: little more clarity. But all that said, it's really still

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Speaker 3: important to remember that maximum uncertainty was probably April second

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Speaker 3: last year, and yet companies did okay anyway, They actually

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Speaker 3: did better than okay when you look at GDP and

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Speaker 3: where earnings came in and broadly that way. But yeah,

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Speaker 3: it would be nice for business if they had some

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Speaker 3: level of certainty. You've even got countries pushing back now

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Speaker 3: in terms of India stepping back and saying that they're

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Speaker 3: going to reassess things before before coming to do trade

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Speaker 3: negotiation to finish up the trade negotiations, so we'll see.

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Speaker 2: Yeah, the same is true for Europe. The EU's top

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Speaker 2: trade chief basically saying that he will propose freezing the

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Speaker 2: ratification of the trade deal with the US until the

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Speaker 2: Trump administration kind of offers some clarity. One of the

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Speaker 2: things that I'm wondering about though, because if you look

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Speaker 2: at what the court had to say in its decision,

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Speaker 2: the power of Congress really is an issue here, and

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Speaker 2: obviously if a tariff is attacks, then that is the

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Speaker 2: purview of Congress. Now we know we have the State

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Speaker 2: of the Union coming up Tuesday, And I'm wondering whether

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Speaker 2: you think that Trump will use this as an opportunity

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Speaker 2: to pressure Congress into codifying something with rest back to

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Speaker 2: tariffs that has more of a bite and maybe could

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Speaker 2: be more lasting.

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Speaker 3: I think he'll try. I am not certain I would

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Speaker 3: put it as very successful, especially because you've already had

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Speaker 3: you know, you've had Congress start to push back on

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Speaker 3: some of that, with the House making the commentary around

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Speaker 3: the Canadian tariffs and things like that, and because I

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Speaker 3: think a lot of the Congress folks are hearing from

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Speaker 3: their constituents that they don't like tariffs. They understand that tariffs,

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Speaker 3: in the long run, our attacks on individuals, even if

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Speaker 3: the suppliers pay have paid part of it, because they've

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Speaker 3: worked some of these deals through by and large, no

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Speaker 3: matter who you look at. You know, there have been

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Speaker 3: not just the New York Fed's analysis last week, but

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Speaker 3: there have been multiple other analysis that show the bulk

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Speaker 3: of who pays it is the consumer and or the

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Speaker 3: America the US business, and those folks are speaking to

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Speaker 3: their Congress people saying, don't you dare codify anything that

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Speaker 3: gives the president power to tax more. So I think

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Speaker 3: he can try and I'm sure he will, but I'm

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Speaker 3: not sure it'll go very far with in congress.

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Speaker 2: Maybe we can talk a little bit about earnings. We've

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Speaker 2: got some key results due this week. In Vidia right

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Speaker 2: at the top of the list. Obviously, you've been tracking

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Speaker 2: a lot of the narrative around AI disruption in markets,

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Speaker 2: particularly in certain sectors like wealth management software obviously a

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Speaker 2: big one. Where are you right now and looking at

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Speaker 2: a company like in Vidia and what it may say

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Speaker 2: about where we are in this AI cycle right now?

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Speaker 3: Well, I think a couple of things on AI, and

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Speaker 3: we've been saying this from any quarters that you know,

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Speaker 3: sooner or later the spend was going to need to taper, because,

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Speaker 3: I mean a lot of people forget some of my

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Speaker 3: conductors are cyclical industry. I mean people are acting like

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Speaker 3: they're not like their long term but for decades semiconductors

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Speaker 3: have been a cyclical industries, So sooner or later that's

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Speaker 3: kind of taper. On the other hand, I actually I

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Speaker 3: started the week at a women in Manufacturing conference in Florida,

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Speaker 3: and I went to the same conference a year ago

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Speaker 3: in the same timing, and I was really struck at

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Speaker 3: how far along many of these manufacturing companies are in

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Speaker 3: deploying AI, robotics, lots of other things. It's not just AI,

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Speaker 3: it's also autonomous vehicles in the factories, it's robotics in

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Speaker 3: the factories, and they're very far along in deploying that,

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Speaker 3: and so I think that helps a lot of different

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Speaker 3: use cases and things, so that it's not just about

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Speaker 3: the EI data center build, it's not just about in

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Speaker 3: videos earnings. It's about broader use and the fact that

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Speaker 3: we've got stronger productivity that predates a lot of this,

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Speaker 3: but it's really starting to accelerate and there's a chance

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Speaker 3: that you continue to see even more of that. Now

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Speaker 3: that said, we don't think it's going to do a way.

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Speaker 3: It's not like regulated industries like wealth management or insurance

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Speaker 3: or real estate or anything else can just ditch all

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Speaker 3: of their regulated processes and start deploying chat GPT by

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Speaker 3: the end of the week. Because it's not like we

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Speaker 3: can upload client information into those things. There's a lot

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Speaker 3: of stuff that has to happen, and so I think

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Speaker 3: AI as an amplifier and not a job replacer is

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Speaker 3: a key thematic that comes to these companies are looking

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Speaker 3: for employees who will roll up their sleeves, figure out

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Speaker 3: how to use AI to make existing processes better. It

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Speaker 3: requires employees to think differently and behave differently, and maybe

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Speaker 3: have a different set of skill sets where they're willing

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Speaker 3: to lean into a lot more strategic thinking, a lot

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Speaker 3: a lot of clients, service sorts of things. There's I

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Speaker 3: think AI doesn't replace employees. It amplifies what they do

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Speaker 3: and maybe changes the tenor of what they do.

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Speaker 2: You know what you just described there has been happening

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Speaker 2: in China for quite some time. Before I let you go, Carol,

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Speaker 2: I want to ask about opportunities offshore. I know we

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Speaker 2: started the conversation with reference to this US tariff policy,

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Speaker 2: but I'm wondering whether you're seeing opportunities offshore, particularly in

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Speaker 2: the Asia Pacific.

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Speaker 3: Yeah. We are all around the globe actually, and in

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Speaker 3: terms of you did have international courses that outperformed the

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Speaker 3: US markets last year. You had Aquay up for over

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Speaker 3: twenty percent for I think the third year running. And

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Speaker 3: so there are a lot of opportunities. And it's interesting

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Speaker 3: because if you look at like the World Bank and

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Speaker 3: IMF numbers, they will tell you that global trade actions

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Speaker 3: increase less. You're despite all of the trade machinations going

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Speaker 3: on with tariffs coming out of the US, and so

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Speaker 3: I think those opportunities continue, particularly because in Southeast Asia

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Speaker 3: you've got you know, Japan and the recent elections, and

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Speaker 3: part of that was predicated on increasing fiscal spend. You've

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Speaker 3: got China that's been rumored for ages to be increasing

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Speaker 3: domestic fiscal policy to get their consumer markets rolling again.

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Speaker 3: You've got increased defense spend all around the globe, including

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Speaker 3: Japan at record levels posts World War Two. You've got Germany,

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Speaker 3: so there's a lot of infrastructure and spend in general,

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Speaker 3: there's a lot of trade that's rearranging itself. And that's

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Speaker 3: all constructive because it means business is happening. It's happening

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Speaker 3: in different places. It's more difficult for investors to keep

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Speaker 3: track of. But it's a great environment for active managers

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Speaker 3: and non US or global managers and long short hedge funds.

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Speaker 3: It's you got to do the work, but it's a

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Speaker 3: great environment for it.

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

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Speaker 2: Carol Schlife is the chief market strategist at BEMO Private

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Speaker 2: Wealth on the road and joining us from Los Angeles

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Speaker 2: today here on the Daybreak Asia Podcast. Welcome back to

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Speaker 2: the Daybreak Asia Podcast. I'm Doug Prisner. So, as you know,

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Speaker 2: the Trump administration is keeping US tariffs in place even

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Speaker 2: after the Supreme Court struck down the legal basis for

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Speaker 2: those tariffs enacted under emergency powers. So global tariffs are

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Speaker 2: now in place. They have been put there under Section

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Speaker 2: one twenty two of the Trade Act of nineteen seventy four.

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Speaker 2: That rate is fifteen percent. Here's the thing, these tariffs

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Speaker 2: are limited to one hundred and fifty days now. At

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Speaker 2: the same time, the Trump administration said the trade deals

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Speaker 2: made with the EU, Japan, and South Korea will remain

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Speaker 2: in place. Even so, Europe's trade chief said he'll propose

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Speaker 2: freezing the ratification of a trade deal until the Trump

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Speaker 2: administration clarifies its policy. Meantime, in India, officials cited similar

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Speaker 2: reasons for postponing talks in the US this week on

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Speaker 2: finalizing an interim trade agreement. So where does this leave China. Well,

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Speaker 2: that's where we begin our conversation with Sean Stein. Shawn

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Speaker 2: is president at the US China Business Council, and he

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Speaker 2: spoke with Bloomberg TV host Avril Hong and Sherry on.

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Speaker 4: I think the most important thing is that for China

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Speaker 4: this is really a bit of a win. And that's

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Speaker 4: because under the rubric that the President has set to

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Speaker 4: replace his IVA teriffs, it's potentially a ten percent or

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Speaker 4: a fifteen percent.

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Speaker 5: Global search arge.

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Speaker 4: So overall, what that means is it means that once

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Speaker 4: those go into effect, then the overall teriff rate for

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Speaker 4: most Chinese goods is lower than it was before. And so,

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Speaker 4: unlike with the EU, where it creates a lot of uncertainty,

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Speaker 4: in the case of China, it means that the terms

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Speaker 4: are now much more favorable to China than they were

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Speaker 4: just before. And remember, if you think about the magnitude

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Speaker 4: of this, you know, if the surcharge is ten percent

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Speaker 4: compared to where it was before, that's you know, potentially

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Speaker 4: one hundred billion dollars on a one hundred million dollars

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Speaker 4: for every billion dollars of trade that's affected. So the

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Speaker 4: cost reduction is really substantially lower. So it's a win

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Speaker 4: for China.

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Speaker 1: Well, they see it as a win, given that also

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Speaker 1: it causes a lot of uncertainty. I mean, just trying

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Speaker 1: to decipher whether this is a ten percent tariff for

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Speaker 1: a fifteen percent tariff. How does this compare with fentanyl

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Speaker 1: tariffs most favored nations and other countries as well.

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Speaker 5: Okay, that's a great question.

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Speaker 4: So unlike most countries, the terriff situation on China before

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Speaker 4: the Supreme Court ruling was really pretty complex. They had

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Speaker 4: the baseline MFN rate, which was a few percent. They

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Speaker 4: had the three ho one Section three oh one tariff

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Speaker 4: rates from Trump one point zero and from the Biden administration,

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Speaker 4: which were about twenty five percent. Then on top of

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Speaker 4: that they had ten percent fentanyl tariffs and now ten

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Speaker 4: percent tariffs for reciprocal tariffs. So the part that's in

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Speaker 4: play because the Supreme Court's ruling are just those last two,

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Speaker 4: the fentanyl tariffs and the reciprocal tariffs. So those today

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Speaker 4: have fallen to zero, but when they go into effector

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Speaker 4: with the new surcharge under Section one two too, whether

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Speaker 4: it's ten percent or fifteen percent, that's still going to

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Speaker 4: be a substantial reduction.

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Speaker 5: From where they were before.

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Speaker 4: So the NFN rate won't change, the three on one

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Speaker 4: rates won't change, but the other tariffs will be lower

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Speaker 4: once those go into effect under either Sinnario ten percent

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Speaker 4: or fifteen percent.

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Speaker 5: So yeah, China we'll see that as a win.

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Speaker 6: And to your point, I suppose is also the idea

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Speaker 6: that the Supreme Court striking down these terraffs also means

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Speaker 6: does let's leave it for the US present it in?

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Speaker 6: I mean, what does that mean for the contours of

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Speaker 6: the gathering between the two leaders laid March into early April.

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Speaker 4: That is such an important question. I'm glad you asked that.

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Speaker 4: And so leverage in a negotiation only really matters if

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Speaker 4: one side has got more leverage than the other side.

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Speaker 4: If both sides have leverage, the effect is much more

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Speaker 4: ambiguous or it tends to cancel the other side out.

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Speaker 5: So where we've.

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Speaker 4: Been is that you may remember that after Liberation Day

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Speaker 4: last year, when the US raised tariffs unilaterally on China,

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Speaker 4: China responded tariff for tariff. They went toe to toe

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Speaker 4: with the United States, and that's how we got into

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Speaker 4: this escalatory spiral, you know, of triple digit tariffs, which

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Speaker 4: didn't serve either country's interest. And then you may remember that,

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Speaker 4: you know, despite the posturing, the US blinked first and

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Speaker 4: asked China to go meet them in Geneva so they

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Speaker 4: could reduce those so Ever, since Geneva tariffs have really

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Speaker 4: lost most of their edge as leverage for the United

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Speaker 4: Stas States. And so if you look at that as

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Speaker 4: the first truce in the US China trade war of

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Speaker 4: twenty twenty five, or of trump two point zero tariffs,

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Speaker 4: then that was a front on that war.

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Speaker 5: There was foughts to.

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Speaker 4: A standstill, and then the trade war moved to other areas,

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Speaker 4: things like export controls and sanctions.

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Speaker 5: And this is a case.

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Speaker 4: Where also both sides have demonstrated they've got potentially significant

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Speaker 4: leverage over the other and they've largely foughts to a standstill.

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Speaker 4: Most notably, China has played the rare Earth's card, which

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Speaker 4: not only hurt industry in the United States but also

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Speaker 4: around the world. And so this is a case where

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Speaker 4: the US absolutely has leverage, but the Chinese have counter leverage.

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Speaker 4: So what that sets us up for is a meeting

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Speaker 4: in Beijing in maybe less than forty days where the

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Speaker 4: two presidents are not going to be able to use

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Speaker 4: that leverage. And that means ideally, this will be a

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Speaker 4: situation where both sides have to focus on what would

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Speaker 4: be a win for both countries, and as you've implied previously,

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Speaker 4: what would be the biggest win for both countries is

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Speaker 4: to bring some predictability to the business and investment climate,

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Speaker 4: so companies know how to invest them, they know how

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Speaker 4: to plan. Where we've been for the last year has

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Speaker 4: been the constant instability and predictability has meant that investment

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Speaker 4: decisions have gone un made. It's meant the US has

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Speaker 4: lost manufacturing jobs every month since Liberation Day. So this

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Speaker 4: potentially will bring a chance to bring some much needed

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Speaker 4: stability into this relationship.

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Speaker 5: That'll be the biggest outcome.

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Speaker 1: The Trumpet administration has not necessarily even said who he's

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Speaker 1: taking from the business community to China. So how well

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Speaker 1: is the administration preparing for that state visit into Beijing?

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Speaker 1: And what would your members like to see being achieved

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Speaker 1: in order to bring some more ceignty to the relationship.

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Speaker 5: Yeah, this has been shocking.

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Speaker 4: I was just in Beijing before the holiday and meeting

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Speaker 4: at meeting after meeting. What bled into all of those

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Speaker 4: from Chinese officials was a mix of somewhere between being

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Speaker 4: irritated and being apoplectic at the US not preparing for

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Speaker 4: this visit. Normally, when you've got a presidential visit, planning

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Speaker 4: starts months in advance. By now, the two sides should

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Speaker 4: be having regular calls, they should have exchange lists of deliverables,

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Speaker 4: they should have planned out the actual physical mechanics of

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Speaker 4: the visit, but none of that has happened. And so

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Speaker 4: it just shows that on the US side, the US

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Speaker 4: side hasn't done its homework yet to decide what it

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Speaker 4: wants out of this trip, and the longer they wait,

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Speaker 4: the harder than becomes to deliver real deliverables. They could

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Speaker 4: help us competitiveness for the US economy. But you also

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Speaker 4: hit it one other thing that I think is really important,

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Speaker 4: and as if we look at the President's other trips,

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Speaker 4: he's always taken CEOs with him because business is what's

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Speaker 4: on his mind and that's what he's been focused on.

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Speaker 4: That's especially true with China. But even now as of Friday,

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Speaker 4: they haven't decided if they want CEOs to go on

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Speaker 4: this trip, much less started to extend invitations. So for

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Speaker 4: a trip that's less than forty days away, we don't

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Speaker 4: have a single CEO that knows if he or she

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Speaker 4: is going to be invited. But that just is I

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Speaker 4: think sort of emblematic of the administration not having really

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Speaker 4: done its homework on this visit yet.

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Speaker 5: If I can ad just one more thing that I.

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Speaker 4: Think is really important to frame this visit, and that is,

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Speaker 4: you know, China is a country that takes protocol extraordinarily seriously,

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Speaker 4: much more than most countries that I've dealt with around

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Speaker 4: the world, and I think in this case it's important

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Speaker 4: because the Chinese recognized three levels of state level visit

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Speaker 4: or of leader level visits, and so you've got working

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Speaker 4: level visits where a state leader will come and have

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Speaker 4: official meetings. They have official visits where you have which

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Speaker 4: are much larger with more protocol. This is, for example,

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Speaker 4: like Kirs Starber's visit from the UK just a few

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Speaker 4: weeks ago, that was an official visit. But Trump's visit

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Speaker 4: both sides have announced it's a state visit, and that

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Speaker 4: takes everything up to eleven. It takes everything up much

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Speaker 4: higher on the protocol front. And so you know, as

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Speaker 4: part of that, there's the state dinner in the Great

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Speaker 4: Hall of the People that could involve hundreds of people,

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Speaker 4: and if President Trump shows up with a delegation of five,

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Speaker 4: then that just doesn't work out protocol wise.

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Speaker 5: And you can understand.

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Speaker 6: Why Sonya Raiser the point about how the state level

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Speaker 6: meeting is going to also perhaps raise the stakes. I mean,

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Speaker 6: could you talk a bit more so about the extent

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Speaker 6: in which there will be clarity for businesses as they

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Speaker 6: have to adjust in the meantime their investment, they're hiring

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Speaker 6: decisions as well.

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Speaker 4: Yeah, so that's what everyone's hoping for, right, What is

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Speaker 4: the US one out of the trip.

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Speaker 5: The US wants some access to markets.

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Speaker 4: It wants to sell aviation, it wants to sell airplanes,

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Speaker 4: it wants to sell agriculture and maybe some other things.

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Speaker 4: And what business is pressing the administration to do is

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Speaker 4: what it hasn't yet done, and that's to talk about

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Speaker 4: the long standing market access issues, the long standing non

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Speaker 4: tariff barriers that discriminate against American products, American exports, and American.

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Speaker 5: Business in China. And so that's what American business is

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Speaker 5: looking for.

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Speaker 4: And then what American business is looking for and what

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Speaker 4: the Chinese are looking for again is a stable and

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Speaker 4: predictable business climate so companies can plan. So if we're

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Speaker 4: talking about what the level of tariffs will be coming

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Speaker 4: into the United States, you know, the administration wants to

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Speaker 4: emphasize manufacturing in the US, but remember what does the

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Speaker 4: US import from China. It imports final goods like say

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Speaker 4: television sets, but it also imports a huge number of

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Speaker 4: intermediate goods, things that go into American manufacturing and.

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Speaker 5: Power American factories.

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Speaker 4: And tell me know in the long term what that's

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Speaker 4: going to cost, how do you build a new factory

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Speaker 4: and how do you price that in. So until we

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Speaker 4: get stability, jobs will continue to hemmer from the United

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Speaker 4: States because it's just impossible to invest.

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Speaker 2: That was Seawan Stein, president at the US China Business Council,

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Speaker 2: speaking with Bloomberg TV host Sherry On in April Hong,

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Speaker 2: bringing you their conversation here on the Daybreak Asia podcast.

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Speaker 2: Thanks for listening to today's episode of the Bloomberg Daybreak

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Speaker 2: Asia Edition podcast. Each weekday, we look at the story

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Speaker 2: shaping markets, finance, and geopolitics in the Asia Pacific. You

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Speaker 2: can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

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Speaker 2: or anywhere else you listen. Join us again tomorrow for

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Speaker 2: insight on the market moves from Hong Kong to Singapore

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Speaker 2: and Australia. I'm Doug Prisoner and this is Bloomberg