1
00:00:02,520 --> 00:00:07,000
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

2
00:00:09,800 --> 00:00:12,720
Speaker 2: This is the Bloomberg Day BAC podcast. Good morning, It's Friday,

3
00:00:12,760 --> 00:00:15,480
Speaker 2: the eleventh of July. I'm Caroline, hepkat in London.

4
00:00:15,520 --> 00:00:19,000
Speaker 1: And I'm Stephen Caroline Brussels. Coming up today. US President

5
00:00:19,040 --> 00:00:23,000
Speaker 1: Donald Trump raises the prospect of higher global tariffs after

6
00:00:23,079 --> 00:00:26,599
Speaker 1: threatening Canada with a thirty five percent rate on some goods.

7
00:00:27,160 --> 00:00:31,400
Speaker 2: JP Morgan's Jamie Diamond tells European leaders they're losing to

8
00:00:31,440 --> 00:00:34,600
Speaker 2: the US and China as he warns of market complacency

9
00:00:34,640 --> 00:00:36,040
Speaker 2: over tariffs.

10
00:00:35,800 --> 00:00:39,040
Speaker 1: Plus bumping along the bottom, the UK economy shrinks for

11
00:00:39,080 --> 00:00:41,720
Speaker 1: a second month in a row in a fresh blow

12
00:00:41,840 --> 00:00:43,519
Speaker 1: to Ker Starmer and Rachel Reeves.

13
00:00:43,960 --> 00:00:46,040
Speaker 3: Let's start with a roundup of our top stories.

14
00:00:46,880 --> 00:00:50,239
Speaker 1: US President Donald Trump says he's now eyeing blanket tariffs

15
00:00:50,240 --> 00:00:53,800
Speaker 1: of fifteen to twenty percent on most trading partners. The

16
00:00:53,840 --> 00:00:56,520
Speaker 1: comments in a phone interview with NBC News would mark

17
00:00:56,560 --> 00:00:59,880
Speaker 1: a significant increase from the current US global baseline of

18
00:00:59,880 --> 00:01:04,240
Speaker 1: ten percent. The President also reportedly dismissed concerns that further

19
00:01:04,280 --> 00:01:08,120
Speaker 1: tariffs could negatively affect stocks or inflation, pointing to recent

20
00:01:08,240 --> 00:01:11,440
Speaker 1: rises in the US equity market. Stefan Hoffer, as a

21
00:01:11,480 --> 00:01:14,760
Speaker 1: chief investment strategist at LGT Bank, says that in the

22
00:01:14,800 --> 00:01:17,600
Speaker 1: long term, the impact of tariffs is far harder to assess.

23
00:01:18,360 --> 00:01:22,480
Speaker 4: Frankly, we are in uncharted territory. We've never seen anything

24
00:01:22,560 --> 00:01:22,800
Speaker 4: like this.

25
00:01:22,920 --> 00:01:24,720
Speaker 3: There is no playbook for this.

26
00:01:24,800 --> 00:01:30,560
Speaker 4: We've gone from an effective import tariff pre President Trump's

27
00:01:30,560 --> 00:01:34,360
Speaker 4: second second presidency of just below two percent to the

28
00:01:34,440 --> 00:01:37,640
Speaker 4: Liberation Day twenty seven percent down to you know, it's

29
00:01:37,680 --> 00:01:40,679
Speaker 4: a moving target and these kind of distortions are very,

30
00:01:40,760 --> 00:01:43,480
Speaker 4: very difficult to map out onto model where we land.

31
00:01:44,040 --> 00:01:49,160
Speaker 1: Finally, stefan Hoffer was speaking as US stock futures fell

32
00:01:49,520 --> 00:01:51,960
Speaker 1: on the dollar strengthened on the latest trade comments.

33
00:01:52,760 --> 00:01:55,280
Speaker 2: Well separately, in a post on truth Social President Trump

34
00:01:55,360 --> 00:01:57,680
Speaker 2: said the US will impose a tariff of thirty five

35
00:01:57,720 --> 00:02:01,720
Speaker 2: percent on Canadian products on the first of August. That

36
00:02:01,760 --> 00:02:04,720
Speaker 2: would be ten percent higher than the current rate applied

37
00:02:04,720 --> 00:02:07,880
Speaker 2: to all goods not covered under the US Mexico Canada

38
00:02:07,920 --> 00:02:11,000
Speaker 2: Free Trade Agreement. Bloomberg's Jeal d Sis says the White

39
00:02:11,000 --> 00:02:14,360
Speaker 2: House is so far signaling that the free trade agreement

40
00:02:14,600 --> 00:02:15,880
Speaker 2: holds this.

41
00:02:16,160 --> 00:02:19,240
Speaker 5: USMCA, that the trade agreement between the US and Canada

42
00:02:19,280 --> 00:02:22,280
Speaker 5: and Mexico that those goods aren't included in this thirty

43
00:02:22,320 --> 00:02:25,200
Speaker 5: five percent tariff threat. I think that's really really important

44
00:02:25,280 --> 00:02:28,359
Speaker 5: because what that ultimately tells us then is that what

45
00:02:28,440 --> 00:02:31,800
Speaker 5: Trump's ultimately doing, it appears, and again I have to

46
00:02:31,800 --> 00:02:34,760
Speaker 5: caution this is a very quickly evolving story, but what

47
00:02:34,800 --> 00:02:38,440
Speaker 5: that does mean potentially is that this is essentially a

48
00:02:38,480 --> 00:02:42,360
Speaker 5: ten percent tariff increase over a group of goods that

49
00:02:42,440 --> 00:02:44,560
Speaker 5: were covered already with a twenty five percent tariffs.

50
00:02:45,280 --> 00:02:46,600
Speaker 3: Bloomberg's jeal desis.

51
00:02:47,120 --> 00:02:50,640
Speaker 2: In response to the US person's threat, Canadian Prime Minister

52
00:02:50,840 --> 00:02:53,720
Speaker 2: Mark Carney said that he would continue to defend workers

53
00:02:53,720 --> 00:02:57,160
Speaker 2: and businesses. A large proportion of Canada's exports to the

54
00:02:57,240 --> 00:03:00,440
Speaker 2: US full under the rules of the USMCA, would be

55
00:03:00,520 --> 00:03:01,480
Speaker 2: unaffected by.

56
00:03:01,360 --> 00:03:01,880
Speaker 3: The new rate.

57
00:03:03,560 --> 00:03:07,080
Speaker 1: We're turning next to Jamie Diamond, who's sounding a warning

58
00:03:07,120 --> 00:03:10,480
Speaker 1: about the muted market reaction to the US trade offensive.

59
00:03:10,639 --> 00:03:13,760
Speaker 1: Speaking at an event in Dublin hosted by Ireland's Foreign Ministry,

60
00:03:13,800 --> 00:03:17,679
Speaker 1: the JP Morgan CEO said, Unfortunately, I think there's complacency.

61
00:03:18,280 --> 00:03:20,200
Speaker 1: The Wall Street Stalwort also weighed in and what he

62
00:03:20,240 --> 00:03:24,160
Speaker 1: believes is a major European competitiveness problem, as Bomberg's Chris

63
00:03:24,160 --> 00:03:25,560
Speaker 1: Pitt reports.

64
00:03:26,240 --> 00:03:30,400
Speaker 6: You're losing. That's the stark assessment of Jamie Diamond, who

65
00:03:30,480 --> 00:03:33,440
Speaker 6: says the EU has a huge problem at the moment

66
00:03:33,680 --> 00:03:37,920
Speaker 6: when it comes to competitiveness. Citing the region's sluggish growth.

67
00:03:38,440 --> 00:03:41,920
Speaker 6: The JP Morgan Boss pointed out that Europe's economic weight

68
00:03:42,120 --> 00:03:47,480
Speaker 6: has declined significantly, falling from ninety percent of USGDP to

69
00:03:47,680 --> 00:03:50,840
Speaker 6: just over sixty five percent in the past ten to

70
00:03:50,880 --> 00:03:54,320
Speaker 6: fifteen years. He says the best way to reverse that

71
00:03:54,360 --> 00:03:58,280
Speaker 6: decline is to build an internal market that functions more

72
00:03:58,320 --> 00:04:03,200
Speaker 6: effectively across all industries. Diamonds comments come as the EU

73
00:04:03,320 --> 00:04:06,240
Speaker 6: seeks to conclude an intram trade deal with the US

74
00:04:06,600 --> 00:04:08,600
Speaker 6: that could allow the block to lock in a ten

75
00:04:08,640 --> 00:04:12,320
Speaker 6: percent tariff rate beyond the August first deadline as they

76
00:04:12,360 --> 00:04:17,080
Speaker 6: negotiate a permanent agreement in London. Crispit Bloomberg Radio.

77
00:04:18,160 --> 00:04:20,800
Speaker 2: The UK economy shrank for a second month in a

78
00:04:20,880 --> 00:04:23,479
Speaker 2: row in May, has the country struggled to bounce back

79
00:04:23,560 --> 00:04:26,360
Speaker 2: from the blow dealt by US tariffs and a raft

80
00:04:26,440 --> 00:04:30,120
Speaker 2: of tax increases. GDP declined by tenth of one percent

81
00:04:30,200 --> 00:04:32,919
Speaker 2: in the month before last, after contracting three tenths of

82
00:04:32,960 --> 00:04:36,320
Speaker 2: one percent in April, leaving the economy at risk of

83
00:04:36,360 --> 00:04:39,920
Speaker 2: a contraction over the second quarter. The figures are a

84
00:04:39,960 --> 00:04:43,440
Speaker 2: fresh blow to the promise of Kirstarma and Transerrator Reeves

85
00:04:43,760 --> 00:04:47,960
Speaker 2: after a recent series of political setbacks. However, as inflationary

86
00:04:48,000 --> 00:04:50,920
Speaker 2: pressures is money markets are best in that the Bank

87
00:04:50,960 --> 00:04:54,159
Speaker 2: of England will cut interest rates in August and again

88
00:04:54,240 --> 00:04:56,800
Speaker 2: by the end of the year, with further reductions in

89
00:04:56,839 --> 00:04:57,840
Speaker 2: twenty twenty six.

90
00:05:00,080 --> 00:05:02,560
Speaker 1: As Prime Minister Kiir Starmer says he's agreed on what

91
00:05:02,640 --> 00:05:06,080
Speaker 1: he calls a groundbreaking deal to return migrants arriving in

92
00:05:06,120 --> 00:05:08,880
Speaker 1: small boats from France. The pilot scheme was agreed with

93
00:05:08,920 --> 00:05:11,159
Speaker 1: the French President Emmanuel Macro at the end of his

94
00:05:11,240 --> 00:05:14,120
Speaker 1: state visit to the UK. Starmer says the agreement will

95
00:05:14,120 --> 00:05:16,480
Speaker 1: mean that for every person sent back, the UK will

96
00:05:16,480 --> 00:05:20,040
Speaker 1: accept an asylum seeker who hasn't attempted an illegal crossing.

97
00:05:20,839 --> 00:05:23,640
Speaker 7: This will show others trying to make the same journey

98
00:05:24,600 --> 00:05:27,920
Speaker 7: that it will be in vain and the jobs they've

99
00:05:27,920 --> 00:05:31,599
Speaker 7: been promised in the UK will no longer exist because

100
00:05:31,640 --> 00:05:35,160
Speaker 7: of the nationwide crackdown we're delivering on illegal working.

101
00:05:36,080 --> 00:05:39,440
Speaker 1: Starmer's been politically damaged by record numbers of asylum seekers

102
00:05:39,440 --> 00:05:42,599
Speaker 1: crossing the English Channel. Roughly twenty one thousand people have

103
00:05:42,640 --> 00:05:45,119
Speaker 1: made the journey in small boats so far this year.

104
00:05:46,400 --> 00:05:48,520
Speaker 2: President Donald Trump says that he plans to make a

105
00:05:48,600 --> 00:05:52,919
Speaker 2: major statement on Russia on Monday, as the US prepares

106
00:05:52,960 --> 00:05:56,000
Speaker 2: to send more American weapons to Ukraine paid for by

107
00:05:56,080 --> 00:06:00,320
Speaker 2: NATO allies. In a telephone interview with NBC News, Trump

108
00:06:00,400 --> 00:06:02,680
Speaker 2: said that he also expects the Senate to pass a

109
00:06:02,720 --> 00:06:07,000
Speaker 2: quote biting sanctions bill on Russia after he criticized Lasimir

110
00:06:07,000 --> 00:06:10,680
Speaker 2: Putin for his continued attacks on Ukraine. Russia has been

111
00:06:10,839 --> 00:06:15,279
Speaker 2: pounding Kieven other Ukrainian cities with record numbers of drones

112
00:06:15,320 --> 00:06:19,680
Speaker 2: and missiles. Ukrainian President vlosimiir Zelinsky was optimistic about more

113
00:06:19,760 --> 00:06:23,279
Speaker 2: aid at a meeting of US and European allies in Rome.

114
00:06:24,360 --> 00:06:28,960
Speaker 8: We must stop Russian droms and missiles, and the means

115
00:06:29,080 --> 00:06:34,239
Speaker 8: more air defense supplies and more investments in interceptor drowns,

116
00:06:34,520 --> 00:06:38,160
Speaker 8: air defense systems and of course missans, and I urge

117
00:06:38,200 --> 00:06:44,640
Speaker 8: all our partners increase your investments. When Russia increases its attacks.

118
00:06:44,720 --> 00:06:48,800
Speaker 8: We cannot have a shortage of funding for drum production.

119
00:06:50,040 --> 00:06:54,200
Speaker 2: President Zolinski, speaking there at the Ukrainian Recovery Conference in Rome,

120
00:06:54,240 --> 00:06:57,560
Speaker 2: where Allies announced more than ten billion euros in additional funding.

121
00:06:57,839 --> 00:07:00,920
Speaker 2: The Ukrainian leader said that he'd since had a positive

122
00:07:01,000 --> 00:07:04,719
Speaker 2: dialogue with President Trump over the delivery of Patriot air

123
00:07:04,760 --> 00:07:06,000
Speaker 2: defense batteries.

124
00:07:06,880 --> 00:07:09,039
Speaker 1: Those are your top stories on the markets. The pound

125
00:07:09,040 --> 00:07:12,320
Speaker 1: three tents weaker against the dollar one thirty five forty three.

126
00:07:12,360 --> 00:07:15,160
Speaker 1: The Bloomberg Dollar Spot Index is two tents stronger. On

127
00:07:15,240 --> 00:07:17,800
Speaker 1: equity markets, these stock six hundred up excuse me, down

128
00:07:17,800 --> 00:07:19,679
Speaker 1: by four tens of one percent, The forty one hundred

129
00:07:19,680 --> 00:07:22,080
Speaker 1: is flat. The catcurrent in Paris down by half of

130
00:07:22,120 --> 00:07:24,800
Speaker 1: one percent. Wall Street futures pointing lower as well, down

131
00:07:24,840 --> 00:07:27,440
Speaker 1: four tenths for S and p E many futures.

132
00:07:27,840 --> 00:07:29,520
Speaker 2: Now in a moment, we're going to get more detail

133
00:07:29,600 --> 00:07:33,440
Speaker 2: on the latest tariff news with Bluebergs and Bill Ferries,

134
00:07:33,440 --> 00:07:37,720
Speaker 2: and also the UK economic picture with our UK economist

135
00:07:37,800 --> 00:07:40,640
Speaker 2: Dan Hanson. Are the difficulties that we face, But I

136
00:07:40,680 --> 00:07:44,120
Speaker 2: think it's time for something lighter, don't you. Hotels and

137
00:07:44,600 --> 00:07:48,720
Speaker 2: luxury brand pop ups. Sarah Appaport has been writing about this.

138
00:07:48,720 --> 00:07:53,120
Speaker 2: This is the crossover of fabulous hotels and scenery who

139
00:07:53,320 --> 00:07:57,640
Speaker 2: are now using the fabrics and luxury design of all

140
00:07:57,680 --> 00:08:01,720
Speaker 2: sorts of designers Dolcea and Goomar for one, and also

141
00:08:01,880 --> 00:08:03,360
Speaker 2: my personal favorite Mathsony.

142
00:08:04,200 --> 00:08:06,120
Speaker 1: Yeah, I mean, look, some of the pictures are so fantastic.

143
00:08:06,120 --> 00:08:09,240
Speaker 1: So she has pictures of there's a pool basically at

144
00:08:09,240 --> 00:08:12,840
Speaker 1: the San Domnico Palace in Tarmina and Sicily which has

145
00:08:12,960 --> 00:08:17,880
Speaker 1: dodgingbana tels and umbrellas. Like it's quite a sight when

146
00:08:17,920 --> 00:08:20,000
Speaker 1: you see them all together in one go. It really

147
00:08:20,080 --> 00:08:24,800
Speaker 1: is kind of, you know, a pretty striking style.

148
00:08:24,600 --> 00:08:27,880
Speaker 2: Statement, eye popping, absolutely and.

149
00:08:28,440 --> 00:08:30,120
Speaker 1: I like it, I except that it might not beat

150
00:08:30,160 --> 00:08:32,200
Speaker 1: everyone's taste. I think that's what I'm trying to say.

151
00:08:32,000 --> 00:08:34,439
Speaker 3: But like, yeah, absolutely, look.

152
00:08:34,440 --> 00:08:36,000
Speaker 1: More is more, Caroline.

153
00:08:36,440 --> 00:08:40,080
Speaker 2: I love the stripes Masni stripes on the pool deck.

154
00:08:40,480 --> 00:08:46,600
Speaker 2: You've got Okubetha and Callian Mikanos. Apparently hotels using those Yeah,

155
00:08:46,600 --> 00:08:49,200
Speaker 2: and I think, look, the idea is also that they

156
00:08:49,240 --> 00:08:51,640
Speaker 2: sell all of those goods in the fancy hotel shop.

157
00:08:51,679 --> 00:08:56,480
Speaker 2: I mean, six hundred pounds for adult sho DNG towel

158
00:08:56,760 --> 00:09:00,040
Speaker 2: is pretty eye watching also, but this apparently is a

159
00:09:00,120 --> 00:09:01,080
Speaker 2: hot trend for the summer.

160
00:09:01,120 --> 00:09:02,800
Speaker 3: So I had to just tell everybody about it.

161
00:09:03,040 --> 00:09:04,800
Speaker 1: Yeah, well, look, I mean it's something that particularly in

162
00:09:04,840 --> 00:09:06,880
Speaker 1: places like Making Us, the big luxury brands have been

163
00:09:06,880 --> 00:09:09,040
Speaker 1: doing pop up summer shops there for years to try

164
00:09:09,080 --> 00:09:11,319
Speaker 1: and make sure that, you know, those very high spending

165
00:09:11,360 --> 00:09:13,680
Speaker 1: tourists that are going to what are now very expensive

166
00:09:13,720 --> 00:09:16,520
Speaker 1: destinations like making Us in summer, you know, are getting

167
00:09:16,520 --> 00:09:18,640
Speaker 1: to see those high end products of once of them

168
00:09:18,679 --> 00:09:21,760
Speaker 1: as well, but interesting see them integrated into some of

169
00:09:21,800 --> 00:09:24,360
Speaker 1: the hotels too. So I've just seen the burbery themed

170
00:09:24,400 --> 00:09:27,319
Speaker 1: golf cart. This has gone too far. Okay, it's a

171
00:09:27,320 --> 00:09:29,520
Speaker 1: great piece of Motel's luxury brand. Pop ups are the

172
00:09:29,559 --> 00:09:32,679
Speaker 1: key summer strategy. Sarah Rappaport writing about it. You'll find

173
00:09:32,720 --> 00:09:33,880
Speaker 1: it on bloemberg dot com.

174
00:09:34,240 --> 00:09:36,640
Speaker 2: Okay, right now we get back to the serious stuff.

175
00:09:36,640 --> 00:09:39,480
Speaker 2: And the dollar has strengthened as the US President has

176
00:09:39,520 --> 00:09:43,320
Speaker 2: again ramped up his trade rhetoric, threatening higher towers on

177
00:09:43,360 --> 00:09:46,960
Speaker 2: Canada and also a higher global baseline rate. Our senior

178
00:09:47,080 --> 00:09:50,000
Speaker 2: editor Bill Ferries joins us Now for more on this.

179
00:09:50,280 --> 00:09:53,400
Speaker 2: So it was a big number for Canada, but what

180
00:09:53,480 --> 00:09:55,640
Speaker 2: about the data? How significant is it?

181
00:09:55,760 --> 00:09:58,760
Speaker 3: This? The idea of thirty five percent tariff.

182
00:09:59,320 --> 00:10:02,679
Speaker 9: Yeah, five percent. Definitely a big headline number there, as

183
00:10:02,679 --> 00:10:06,760
Speaker 9: you mentioned. But the reality is, from what we understand,

184
00:10:07,480 --> 00:10:10,320
Speaker 9: is that it's not going to impact a lot of

185
00:10:10,360 --> 00:10:14,720
Speaker 9: the goods that are already covered under the USMCA Trade Agreement,

186
00:10:14,920 --> 00:10:18,439
Speaker 9: and that's really the majority of Canada's exports into the

187
00:10:18,559 --> 00:10:22,559
Speaker 9: United States. It won't affect big, big ticket items like

188
00:10:22,760 --> 00:10:25,679
Speaker 9: energy exports as well, which is subject to a i

189
00:10:25,720 --> 00:10:29,880
Speaker 9: think currently a ten percent tariff. So we're gonna have

190
00:10:29,920 --> 00:10:32,840
Speaker 9: to wait and see if and when this actually gets

191
00:10:32,880 --> 00:10:36,040
Speaker 9: implemented what the range of products is. But it is

192
00:10:36,120 --> 00:10:39,800
Speaker 9: not and across the board tariff like many other countries

193
00:10:39,800 --> 00:10:41,559
Speaker 9: are staring at at this point.

194
00:10:43,040 --> 00:10:45,120
Speaker 1: Bill, this is something that we're watching at the same

195
00:10:45,120 --> 00:10:48,720
Speaker 1: time where we're looking at questions around the baseline tariffs too,

196
00:10:49,040 --> 00:10:51,560
Speaker 1: and whether or not that may end up being much

197
00:10:51,640 --> 00:10:55,040
Speaker 1: higher for countries that don't end up with a specific

198
00:10:55,120 --> 00:10:57,320
Speaker 1: deal as well. Is the sense that we are looking

199
00:10:57,400 --> 00:11:00,319
Speaker 1: at an escalation from Donald Trump, you know, as we're

200
00:11:00,320 --> 00:11:03,959
Speaker 1: getting towards that first of August days, it's certainly looking

201
00:11:04,040 --> 00:11:04,440
Speaker 1: that way.

202
00:11:04,559 --> 00:11:10,400
Speaker 9: I mean countries since the Liberation Day reciprocal tariffs were

203
00:11:10,720 --> 00:11:14,440
Speaker 9: kind of postponed. Most countries have been facing this ten

204
00:11:14,520 --> 00:11:17,960
Speaker 9: percent tariff, which even that is much higher than the

205
00:11:18,120 --> 00:11:22,319
Speaker 9: roughly two percent tariff the US had in January before

206
00:11:22,360 --> 00:11:25,320
Speaker 9: Donald Trump took office. But the numbers he's talking about,

207
00:11:25,400 --> 00:11:27,640
Speaker 9: you know, fifteen to twenty percent is kind of the

208
00:11:28,120 --> 00:11:32,760
Speaker 9: overall general base rate. That's a significant increase compared to

209
00:11:32,800 --> 00:11:35,800
Speaker 9: what countries we're dealing with, you know, six months ago,

210
00:11:35,880 --> 00:11:39,920
Speaker 9: let's say, and it's you know, we're still waiting to

211
00:11:39,960 --> 00:11:42,880
Speaker 9: see if that trickles through to US inflation, but it's

212
00:11:42,880 --> 00:11:46,560
Speaker 9: certainly going to vastly change the trading system that the

213
00:11:46,600 --> 00:11:50,400
Speaker 9: world had grown accustomed to up up until January twentieth.

214
00:11:51,200 --> 00:11:53,440
Speaker 2: Yeah, indeed, Bill, thank you so much for being with

215
00:11:53,520 --> 00:11:56,040
Speaker 2: us this morning, Our senior Edison, Bill Ferries. As we

216
00:11:56,080 --> 00:11:58,760
Speaker 2: think then about the trade rhetoric and how that's going

217
00:11:58,800 --> 00:12:01,679
Speaker 2: to translate in to reality, Yeah.

218
00:12:01,480 --> 00:12:03,320
Speaker 1: Of course we're watching two to see what progress could

219
00:12:03,320 --> 00:12:06,360
Speaker 1: be announced on a deal with the EU as well.

220
00:12:06,440 --> 00:12:09,959
Speaker 1: We've been expecting movement towards it all this week as well,

221
00:12:09,960 --> 00:12:12,679
Speaker 1: and EU Trade Minister's meeting on Monday. The question is

222
00:12:12,720 --> 00:12:14,880
Speaker 1: what they will have to discuss at that point as well.

223
00:12:14,960 --> 00:12:16,520
Speaker 1: Let's turn to the story in the UK that we've

224
00:12:16,520 --> 00:12:19,160
Speaker 1: been following though, the economy shrinking for a second straight

225
00:12:19,240 --> 00:12:21,880
Speaker 1: month in May as the country has struggled to bounce

226
00:12:21,880 --> 00:12:23,920
Speaker 1: back from the blowdout by tariffs and a raft of

227
00:12:24,000 --> 00:12:27,600
Speaker 1: tax increases. The decline zero point one percent in May.

228
00:12:28,040 --> 00:12:31,040
Speaker 1: That's after contracting by zero point three percent in April.

229
00:12:31,120 --> 00:12:33,520
Speaker 1: Let's bring in our chief UK economist at Dan Hansen

230
00:12:33,920 --> 00:12:39,200
Speaker 1: for more. Dan, the difference between minus point one and

231
00:12:39,360 --> 00:12:42,439
Speaker 1: growth of zero point two that you were predicting, I mean,

232
00:12:42,440 --> 00:12:47,319
Speaker 1: what does that mean? Big picture, morning, Stephen. Big picture?

233
00:12:47,520 --> 00:12:49,319
Speaker 10: I mean, I think the way we tend to think

234
00:12:49,320 --> 00:12:51,880
Speaker 10: about it in terms of quarterly growth, So three months,

235
00:12:51,920 --> 00:12:53,920
Speaker 10: the first three months of the year, second three months

236
00:12:53,920 --> 00:12:56,520
Speaker 10: of the year, and so on and so forth. Have we

237
00:12:56,640 --> 00:12:58,800
Speaker 10: changed our view of what we think will happen in

238
00:12:58,840 --> 00:13:02,040
Speaker 10: the second quarter of the year. The is no, And

239
00:13:02,080 --> 00:13:05,320
Speaker 10: that is for a couple of reasons. The main one

240
00:13:05,679 --> 00:13:10,520
Speaker 10: is that monthly GDP it's volatile, but it also gets revised.

241
00:13:10,920 --> 00:13:14,559
Speaker 10: And if you look at the past path of revisions

242
00:13:14,600 --> 00:13:17,560
Speaker 10: and you take account of what we've had today and

243
00:13:17,600 --> 00:13:20,319
Speaker 10: as you say, there wasn't misrelative to our forecast. But

244
00:13:20,800 --> 00:13:23,000
Speaker 10: the net effect of all of those things actually is

245
00:13:23,040 --> 00:13:25,840
Speaker 10: to leave the economy, at least relative to our forecast

246
00:13:26,640 --> 00:13:29,440
Speaker 10: in a similar spot. Now, one thing I would add

247
00:13:29,440 --> 00:13:32,280
Speaker 10: to that is that the Bank of England is thinking

248
00:13:32,320 --> 00:13:35,040
Speaker 10: that the economy would grow zero point three percent in

249
00:13:35,080 --> 00:13:36,760
Speaker 10: the second quarter, so that's what it said in its

250
00:13:36,840 --> 00:13:39,079
Speaker 10: June minute. So there is a bit of a gap

251
00:13:39,120 --> 00:13:42,439
Speaker 10: on that expectation, but we think relative to our expectation

252
00:13:42,559 --> 00:13:45,880
Speaker 10: of a growth of point one on the quarter, we

253
00:13:45,920 --> 00:13:48,360
Speaker 10: think we're still in the same place. And the other

254
00:13:48,600 --> 00:13:50,200
Speaker 10: The big part of the picture is that this is

255
00:13:50,200 --> 00:13:52,440
Speaker 10: obviously a huge slowdown relative to what happened in the

256
00:13:52,440 --> 00:13:55,240
Speaker 10: first quarter. We had point seven percent growth, and this

257
00:13:55,400 --> 00:13:59,040
Speaker 10: is about activity being displaced. So we had sort of

258
00:13:59,080 --> 00:14:01,160
Speaker 10: a lot of activity in in the first quarter of

259
00:14:01,160 --> 00:14:04,240
Speaker 10: the year in anticipation of tariffs, and now we're seeing

260
00:14:04,280 --> 00:14:06,320
Speaker 10: the effect of tariffs coming through. So I think if

261
00:14:06,320 --> 00:14:08,439
Speaker 10: you're going to take it in the round, you'd probably

262
00:14:08,440 --> 00:14:10,480
Speaker 10: want to average the two numbers to get a sense

263
00:14:10,480 --> 00:14:12,560
Speaker 10: of where the underlying growth rate of the economy is.

264
00:14:12,760 --> 00:14:14,800
Speaker 2: Because there's been the other was such a hit and

265
00:14:14,840 --> 00:14:20,640
Speaker 2: so much uncertainty around tariffs. I suppose Britain is struggling

266
00:14:20,760 --> 00:14:24,040
Speaker 2: with low economic growth in low productivity. Are we in

267
00:14:24,080 --> 00:14:26,120
Speaker 2: a lost decade? How do we turn that around? And

268
00:14:26,240 --> 00:14:29,200
Speaker 2: that's the big question, isn't it for the Starma government?

269
00:14:29,600 --> 00:14:32,960
Speaker 2: Are we in this kind of underperformance? Do we stay there?

270
00:14:33,960 --> 00:14:37,760
Speaker 10: So our view is that the recent history of UK

271
00:14:37,840 --> 00:14:40,920
Speaker 10: economic performance and I think I'm going back further than

272
00:14:41,400 --> 00:14:43,480
Speaker 10: the pandemic because obviously you can't take that in the

273
00:14:43,560 --> 00:14:45,960
Speaker 10: energy crisis and we've had this big rise in interest rates.

274
00:14:46,000 --> 00:14:48,160
Speaker 10: But if you go back, if you think of the

275
00:14:48,200 --> 00:14:51,640
Speaker 10: period from twenty ten onwards, and if you compare that

276
00:14:51,720 --> 00:14:55,320
Speaker 10: to say, the previous decade two ninety seven to two

277
00:14:55,320 --> 00:14:57,960
Speaker 10: thousand and seven, there has been this massive step down

278
00:14:58,000 --> 00:15:00,560
Speaker 10: in growth and I think if you're think about what

279
00:15:00,720 --> 00:15:02,960
Speaker 10: is the best guess for where things go from here,

280
00:15:03,600 --> 00:15:06,240
Speaker 10: it's the more recent period of time that is a

281
00:15:06,320 --> 00:15:09,800
Speaker 10: better gauge. Now, is that a lost decade? I'd probably

282
00:15:09,800 --> 00:15:13,000
Speaker 10: say that's that's probably slightly strong. But we're in a

283
00:15:13,160 --> 00:15:16,120
Speaker 10: We're in a world where growth is much much weaker,

284
00:15:16,320 --> 00:15:19,200
Speaker 10: And you're absolutely right to focus on productivity. Growth that

285
00:15:19,360 --> 00:15:22,680
Speaker 10: is the thing that has been lacking and has changed

286
00:15:22,720 --> 00:15:25,600
Speaker 10: since it's really since the financial crisis. It's not a

287
00:15:25,640 --> 00:15:29,600
Speaker 10: new phenomenon. Thinking about what the government can do and

288
00:15:29,640 --> 00:15:31,800
Speaker 10: how things have changed. I think it has done some

289
00:15:31,960 --> 00:15:36,000
Speaker 10: things that are good around planning reform, around boosting investment

290
00:15:36,280 --> 00:15:39,440
Speaker 10: public investment. The challenge with all of this is these

291
00:15:39,440 --> 00:15:42,360
Speaker 10: things take time to come through and impact, and in

292
00:15:42,400 --> 00:15:46,120
Speaker 10: the meantime it feels like we're every year we get

293
00:15:46,120 --> 00:15:48,720
Speaker 10: a new new near term shock, if you like, and

294
00:15:48,960 --> 00:15:51,280
Speaker 10: that feels like it's been the case since Brexits. You

295
00:15:51,320 --> 00:15:54,640
Speaker 10: had Brexit and speculation around that, then the pandemic, the

296
00:15:54,720 --> 00:15:56,680
Speaker 10: energy crisis, you had the rise in interest rates. Now

297
00:15:56,680 --> 00:16:01,120
Speaker 10: we've got tariffs, and the real challenge is moving from

298
00:16:01,320 --> 00:16:05,720
Speaker 10: the near term and having a solid base where sentiment

299
00:16:05,920 --> 00:16:09,560
Speaker 10: is solid. That gives you the base to move forward.

300
00:16:10,040 --> 00:16:12,800
Speaker 10: But we just keep getting knocked back with these various shocks.

301
00:16:13,720 --> 00:16:15,360
Speaker 10: As I say, I think the government should be given

302
00:16:15,600 --> 00:16:17,680
Speaker 10: some credit for the policies it's put in place. It's

303
00:16:17,760 --> 00:16:20,840
Speaker 10: just being hit back by these near term economic shocks.

304
00:16:20,840 --> 00:16:24,080
Speaker 10: And the previous government had the same challenge.

305
00:16:24,760 --> 00:16:27,360
Speaker 1: This is Bloomberg Daybreak Europe. You're a morning brief on

306
00:16:27,440 --> 00:16:30,600
Speaker 1: the stories making news from London to Wall Streets and beyond.

307
00:16:30,880 --> 00:16:34,080
Speaker 2: Look for us on your podcast feed every morning, on Apple,

308
00:16:34,200 --> 00:16:36,920
Speaker 2: Spotify and anywhere else you get your podcasts.

309
00:16:36,920 --> 00:16:39,960
Speaker 1: You can also listen live each morning on London DAB Radio,

310
00:16:40,000 --> 00:16:42,720
Speaker 1: the Bloomberg Business app, and Bloomberg dot Com.

311
00:16:42,760 --> 00:16:45,520
Speaker 2: Our flagship New York station, is also available on your

312
00:16:45,560 --> 00:16:50,280
Speaker 2: Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.

313
00:16:50,520 --> 00:16:53,160
Speaker 1: I'm Caroline Hepka and I'm Stephen Carroll. Join us again

314
00:16:53,200 --> 00:16:55,800
Speaker 1: tomorrow morning for all the news you need to start

315
00:16:55,800 --> 00:17:06,440
Speaker 1: your day right here on Bloomberg Daybreak Europe