1 00:00:00,240 --> 00:00:07,680 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,080 --> 00:00:13,399 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,400 --> 00:00:15,600 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,640 --> 00:00:18,080 Speaker 2: anchors all around the world. It straight ahead on the program, 5 00:00:18,079 --> 00:00:21,439 Speaker 2: What will tariff wars, Wall Street in turmoil, fears of 6 00:00:21,480 --> 00:00:23,920 Speaker 2: a recession, and some key inflation data out this week 7 00:00:24,120 --> 00:00:27,319 Speaker 2: all mean for the bed, Plus a look at the 8 00:00:27,320 --> 00:00:31,160 Speaker 2: potential impact of President Trump's tariffs on the US retail sector. 9 00:00:31,360 --> 00:00:32,880 Speaker 2: I'm Tom Busby in New York. 10 00:00:33,000 --> 00:00:35,640 Speaker 3: I'm Carolyn Hetkee here in London, where we're diving into 11 00:00:35,720 --> 00:00:39,720 Speaker 3: the Bank of England's assessment of the key risks facing 12 00:00:39,760 --> 00:00:41,760 Speaker 3: the UK's financial landscape. 13 00:00:41,800 --> 00:00:45,479 Speaker 4: I'm deg Prisner looking at how the impending reciprocal Trump 14 00:00:45,560 --> 00:00:48,120 Speaker 4: tariffs are resonating through the Asia Pacific. 15 00:00:49,920 --> 00:00:53,960 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 16 00:00:54,000 --> 00:00:57,680 Speaker 1: eleven to three zero, New York, Bloomberg ninety nine to one, Washington, DC, 17 00:00:58,160 --> 00:01:03,280 Speaker 1: Bloomberg ninety two to nine, DAB Digital Radio London, Serious 18 00:01:03,480 --> 00:01:06,600 Speaker 1: XM one twenty one, and around the world on Bloomberg 19 00:01:06,720 --> 00:01:09,240 Speaker 1: Radio dot Com and the Bloomberg Business App. 20 00:01:13,080 --> 00:01:15,520 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 21 00:01:15,560 --> 00:01:18,440 Speaker 2: program with a look at the early fallout from President 22 00:01:18,480 --> 00:01:21,639 Speaker 2: Trump's trade war how it may impact next month's Federal 23 00:01:21,680 --> 00:01:25,039 Speaker 2: Reserve decisions on interest rates and economic policy. We're coming 24 00:01:25,040 --> 00:01:27,920 Speaker 2: off a better than forecast March jobs report, and we 25 00:01:27,959 --> 00:01:31,920 Speaker 2: get us CPI data for March on Thursday, PPI data 26 00:01:31,959 --> 00:01:35,040 Speaker 2: on Friday. It is a lot and tariff policies could 27 00:01:35,120 --> 00:01:38,160 Speaker 2: change at any time. We're joined by Michael McKee, Bloomberg 28 00:01:38,200 --> 00:01:41,880 Speaker 2: International Economics and Policy correspondent. How do you and the 29 00:01:41,880 --> 00:01:45,320 Speaker 2: Federal Reserve policymakers try to make sense of everything we've 30 00:01:45,360 --> 00:01:46,680 Speaker 2: seen this past week. 31 00:01:46,600 --> 00:01:49,280 Speaker 5: From an economic theory standpoint, you can't make any sense 32 00:01:49,320 --> 00:01:51,760 Speaker 5: out of it because it makes no sense. But you 33 00:01:51,920 --> 00:01:54,040 Speaker 5: have to deal with the world that you have, and 34 00:01:54,080 --> 00:01:55,880 Speaker 5: so the Fed is going to be modeling out what 35 00:01:55,960 --> 00:02:00,960 Speaker 5: potential effects this could have on the actually economy. They'll 36 00:02:00,960 --> 00:02:03,800 Speaker 5: sit back and say, yeah, this is really stupid economic policy, 37 00:02:03,800 --> 00:02:07,040 Speaker 5: but they're not gonna They have to do something at 38 00:02:07,080 --> 00:02:09,960 Speaker 5: some point about where we are. So they need to 39 00:02:09,960 --> 00:02:11,959 Speaker 5: try to figure that out. And it's still really hard 40 00:02:12,000 --> 00:02:16,560 Speaker 5: to do because the imposition of the tariffs isn't clear 41 00:02:16,639 --> 00:02:19,720 Speaker 5: exactly what gets tariffed and by how much. 42 00:02:19,760 --> 00:02:21,600 Speaker 6: How soon, So it's going to take. 43 00:02:21,440 --> 00:02:23,360 Speaker 2: A while and some haven't even started. 44 00:02:23,760 --> 00:02:27,400 Speaker 5: So what they'll be looking at is the impact on 45 00:02:27,600 --> 00:02:32,000 Speaker 5: inflation and on unemployment and on consumers. Next week we 46 00:02:32,080 --> 00:02:36,080 Speaker 5: get the CPI report for the month of March, which 47 00:02:36,120 --> 00:02:38,400 Speaker 5: isn't going to tell us much because it's for the 48 00:02:38,400 --> 00:02:41,560 Speaker 5: month of March, and that's before almost all the tariffs, 49 00:02:41,680 --> 00:02:43,640 Speaker 5: and the tariffs that were put on in March are 50 00:02:43,680 --> 00:02:47,240 Speaker 5: basically on the producer side. We may see inflation go 51 00:02:47,440 --> 00:02:49,200 Speaker 5: up a little bit on a year over year basis, 52 00:02:49,320 --> 00:02:50,600 Speaker 5: or it may go down a little bit on a 53 00:02:50,639 --> 00:02:52,760 Speaker 5: your year basis, but it's not going to tell the 54 00:02:52,760 --> 00:02:55,520 Speaker 5: fate about anything about where they're going. So it's going 55 00:02:55,560 --> 00:02:57,600 Speaker 5: to be another month or so before they start to 56 00:02:57,600 --> 00:02:58,440 Speaker 5: have some data. 57 00:02:58,840 --> 00:03:02,040 Speaker 2: The big fear of courses inflation, and we've already heard 58 00:03:02,080 --> 00:03:05,320 Speaker 2: from some companies car makers saying it's going to cost 59 00:03:05,320 --> 00:03:08,280 Speaker 2: you more, and there are reports JP Morgan, Chase, GOBN, 60 00:03:08,360 --> 00:03:11,320 Speaker 2: saks A for high end cars could be fifteen thousand 61 00:03:11,400 --> 00:03:14,280 Speaker 2: dollars more. Mercedes Benz says we're not even going to 62 00:03:14,320 --> 00:03:16,960 Speaker 2: send our lowest price car there because people can't afford it. 63 00:03:17,240 --> 00:03:19,760 Speaker 5: I couldn't afford it even if it were the lowest 64 00:03:19,760 --> 00:03:23,680 Speaker 5: price car. But the interesting thing is that when the 65 00:03:23,919 --> 00:03:27,600 Speaker 5: new car situation, if that plays out that way, used 66 00:03:27,600 --> 00:03:29,600 Speaker 5: cars are going to get very expensive because people who 67 00:03:29,639 --> 00:03:32,480 Speaker 5: can't afford to pay the higher prices for new cars 68 00:03:32,600 --> 00:03:35,000 Speaker 5: are going to go buy used cars, and then supply 69 00:03:35,040 --> 00:03:39,360 Speaker 5: and demand, we'll see used car prices go up. Probably 70 00:03:39,680 --> 00:03:43,200 Speaker 5: inflation is the first danger out of the tariffs that 71 00:03:43,240 --> 00:03:45,920 Speaker 5: the FED is going to be looking at, because prices 72 00:03:45,920 --> 00:03:48,520 Speaker 5: can go up immediately. It will take a while for 73 00:03:48,560 --> 00:03:50,640 Speaker 5: companies to figure out what they need to do with 74 00:03:50,760 --> 00:03:53,640 Speaker 5: staffing if there is a recession, and do we want 75 00:03:53,640 --> 00:03:54,240 Speaker 5: to cut people. 76 00:03:54,320 --> 00:03:56,440 Speaker 6: Remember how hard it was to hire people before. 77 00:03:56,880 --> 00:04:00,520 Speaker 5: It's always sticky, so that'll take some time to play out. 78 00:04:00,840 --> 00:04:05,520 Speaker 5: The good thing for the FED about the jobs report 79 00:04:05,880 --> 00:04:09,320 Speaker 5: on Friday was that it was generally solid. Now, again, 80 00:04:09,400 --> 00:04:13,720 Speaker 5: it was March before all most of this stuff started happening, 81 00:04:14,200 --> 00:04:17,920 Speaker 5: but it fits the narrative as Jay Powell has been saying, 82 00:04:18,160 --> 00:04:22,240 Speaker 5: that the labor market is solid, and the Fed's two 83 00:04:22,400 --> 00:04:25,680 Speaker 5: responsibilities are the labor market and inflation, so they can 84 00:04:25,760 --> 00:04:30,760 Speaker 5: lean on inflation. They can leave rates unchanged because the 85 00:04:30,760 --> 00:04:35,520 Speaker 5: inflation rate is either staying where it is or we 86 00:04:35,560 --> 00:04:38,479 Speaker 5: hope not, but it could be going up. So I 87 00:04:38,520 --> 00:04:41,679 Speaker 5: don't think at this point the Fed is thinking about 88 00:04:41,839 --> 00:04:43,760 Speaker 5: cutting rates, even if Wall Street is. 89 00:04:44,720 --> 00:04:48,080 Speaker 2: And more on that March jobs report, because the Challenger 90 00:04:48,120 --> 00:04:50,680 Speaker 2: Grand Christmas came out this past week said two hundred 91 00:04:50,720 --> 00:04:54,200 Speaker 2: and eighty thousand federal workers were laid off. That was 92 00:04:54,240 --> 00:04:56,799 Speaker 2: in two months, but a lot of them still getting severance, 93 00:04:56,920 --> 00:04:59,240 Speaker 2: so they're not counted in these numbers. Still good. 94 00:04:59,400 --> 00:05:03,880 Speaker 5: Actually, actually they are counted as still employed according to 95 00:05:04,040 --> 00:05:06,800 Speaker 5: the BLS. They put out a note in Friday's jobs 96 00:05:06,839 --> 00:05:11,960 Speaker 5: report that said people who are receiving severance or who 97 00:05:12,000 --> 00:05:15,000 Speaker 5: are on administrative leave are counted as employed. 98 00:05:15,640 --> 00:05:17,640 Speaker 6: So we haven't seen the impact yet. 99 00:05:17,480 --> 00:05:18,880 Speaker 2: And we may not for several months. 100 00:05:19,040 --> 00:05:22,280 Speaker 5: The Challenger survey is based on job cut announcements, and 101 00:05:22,320 --> 00:05:26,040 Speaker 5: they basically said, we took the press releases that Elon 102 00:05:26,160 --> 00:05:28,240 Speaker 5: Musk put out about how many people were going to 103 00:05:28,240 --> 00:05:31,760 Speaker 5: be fired, and that's what we're counting. And people don't 104 00:05:31,960 --> 00:05:34,240 Speaker 5: usually put a lot of weight on Challenger because a 105 00:05:34,240 --> 00:05:38,320 Speaker 5: lot of the job cuts that are announced don't happen. 106 00:05:38,760 --> 00:05:43,320 Speaker 5: Either companies do it through attrition or through just not 107 00:05:43,480 --> 00:05:48,400 Speaker 5: hiring additional people as opposed to actually firing people. It 108 00:05:48,520 --> 00:05:50,880 Speaker 5: was a number that got people's attention, and we're certainly 109 00:05:50,880 --> 00:05:55,560 Speaker 5: going to probably see some big federal job losses. But 110 00:05:56,480 --> 00:05:57,720 Speaker 5: I don't know that we get to two hundred and 111 00:05:57,720 --> 00:05:58,800 Speaker 5: eighty thousand very quickly. 112 00:05:59,120 --> 00:06:02,960 Speaker 2: No, be a while. And it could this March report 113 00:06:03,040 --> 00:06:06,240 Speaker 2: be the last really upbeat job support for a while 114 00:06:06,279 --> 00:06:07,120 Speaker 2: because of these. 115 00:06:07,360 --> 00:06:08,039 Speaker 6: Well it could. 116 00:06:08,839 --> 00:06:13,080 Speaker 5: On Friday, John Ferreroll spoke with the new Labor Secretary, 117 00:06:13,480 --> 00:06:14,160 Speaker 5: who said. 118 00:06:13,960 --> 00:06:16,920 Speaker 6: No, this is not going to be the last good report, but. 119 00:06:16,920 --> 00:06:20,160 Speaker 5: I can't see how it would be a good report 120 00:06:20,200 --> 00:06:24,960 Speaker 5: going forward. And the reason why is the uncertainty. If 121 00:06:25,000 --> 00:06:27,919 Speaker 5: you don't know whether you're going to have to be 122 00:06:28,000 --> 00:06:30,279 Speaker 5: letting people go in a month or so, you don't 123 00:06:30,279 --> 00:06:34,159 Speaker 5: want to be hiring people. And if, indeed, as we 124 00:06:34,320 --> 00:06:38,119 Speaker 5: have seen some evidence already, the economy is slowing down, 125 00:06:38,440 --> 00:06:40,640 Speaker 5: then you can probably meet the demand that you have 126 00:06:40,720 --> 00:06:43,400 Speaker 5: with the employees that you have. So I don't know 127 00:06:43,440 --> 00:06:47,120 Speaker 5: that we're going to see another blowout surprise to the 128 00:06:47,240 --> 00:06:48,839 Speaker 5: upside for a while. 129 00:06:49,360 --> 00:06:51,240 Speaker 2: It's going to be a long four weeks before that 130 00:06:51,279 --> 00:06:55,159 Speaker 2: next meeting. Our thanks to Michael McKee, Bloomberg International Economics 131 00:06:55,240 --> 00:06:59,480 Speaker 2: and Policy Correspondent, well more now on President Trump's sweeping tariffs, 132 00:06:59,480 --> 00:07:02,440 Speaker 2: which a're hitting certain countries a lot harder than others, 133 00:07:02,480 --> 00:07:08,000 Speaker 2: impacting some of America's biggest electronics, apparel, footwear makers, and retailers, 134 00:07:08,040 --> 00:07:10,840 Speaker 2: And for more on the potential impact of those tariffs 135 00:07:10,840 --> 00:07:14,400 Speaker 2: on the retail sector. We're joined by Jennifer bartashis Bloomberg 136 00:07:14,520 --> 00:07:18,200 Speaker 2: Intelligence Senior analyst Retail, Staples and packaged food. 137 00:07:18,960 --> 00:07:19,280 Speaker 5: Wow. 138 00:07:19,440 --> 00:07:22,280 Speaker 2: Well, Jennifer, let's start with a look at the countries 139 00:07:22,280 --> 00:07:25,760 Speaker 2: that supply most of the imported clothing, sneakers, gadgets, furniture, 140 00:07:25,760 --> 00:07:30,240 Speaker 2: and other goods aside from autos. I mean, China, Vietnam, Taiwan. 141 00:07:30,320 --> 00:07:33,640 Speaker 2: These are huge numbers, aren't they They. 142 00:07:33,440 --> 00:07:35,840 Speaker 7: Are, indeed, and so it was a bit of a 143 00:07:35,880 --> 00:07:39,880 Speaker 7: surprise how big some of these numbers were given how 144 00:07:39,960 --> 00:07:45,320 Speaker 7: much some of our companies rely on those countries for manufacturing. 145 00:07:45,400 --> 00:07:50,200 Speaker 7: So when you're talking about Vietnam, India, Thailand, Cambodia, you know, 146 00:07:50,280 --> 00:07:52,720 Speaker 7: I think one of the big takeaways here is that 147 00:07:52,880 --> 00:07:56,280 Speaker 7: our retailers in the United States have been making an 148 00:07:56,320 --> 00:08:00,240 Speaker 7: effort to diversify away from China for the past several years, 149 00:08:00,600 --> 00:08:02,840 Speaker 7: and yet, and with the idea that it would help 150 00:08:02,880 --> 00:08:05,960 Speaker 7: insulate them from higher tariffs. And yet with this new 151 00:08:06,000 --> 00:08:09,320 Speaker 7: wave that is just not the case anymore. And so 152 00:08:09,560 --> 00:08:11,240 Speaker 7: that's that's an area for concern. 153 00:08:11,680 --> 00:08:14,480 Speaker 2: No, but the most impacted country will be China. And 154 00:08:14,560 --> 00:08:17,760 Speaker 2: still you to pick up an article of clothing, a toy, 155 00:08:18,240 --> 00:08:21,400 Speaker 2: chances are an Apple iPhone that it is made in China. 156 00:08:21,640 --> 00:08:26,560 Speaker 2: So much is manufactured there. So still they haven't separated 157 00:08:26,560 --> 00:08:29,840 Speaker 2: themselves totally. I know Apple is making iPhones in India 158 00:08:29,920 --> 00:08:33,880 Speaker 2: now they've tried, but it's a global world, no matter 159 00:08:33,920 --> 00:08:37,000 Speaker 2: what we hear from the White House. How is this 160 00:08:37,080 --> 00:08:39,720 Speaker 2: going to impact US companies? 161 00:08:40,920 --> 00:08:44,360 Speaker 7: Yeah, so, as you said very accurately, China is still 162 00:08:44,400 --> 00:08:47,960 Speaker 7: the main trading partner for a lot of US companies 163 00:08:48,600 --> 00:08:51,800 Speaker 7: and so even those attempts to diversify just don't add 164 00:08:51,880 --> 00:08:55,040 Speaker 7: up to really offset the huge impact that these Chinese 165 00:08:55,040 --> 00:08:57,840 Speaker 7: tariffs are going to have. When you talk about real 166 00:08:58,320 --> 00:09:03,560 Speaker 7: big retailers like Target in particular, you know, China is 167 00:09:03,600 --> 00:09:07,080 Speaker 7: still the biggest, the biggest source for their their their 168 00:09:07,120 --> 00:09:09,920 Speaker 7: goods that are imported. When you're talking about apparel and 169 00:09:10,000 --> 00:09:14,360 Speaker 7: electronics and toys and home furniture, even some beauty products, 170 00:09:15,080 --> 00:09:18,960 Speaker 7: it really puts a lot of pressure on retailers like 171 00:09:19,040 --> 00:09:23,480 Speaker 7: Target that skew to more discretionary spending in how they're 172 00:09:23,480 --> 00:09:26,839 Speaker 7: going to manage all this additional cost You know, Walmart also, 173 00:09:27,240 --> 00:09:29,600 Speaker 7: you know, out of the general merchandise that they sell, 174 00:09:29,920 --> 00:09:32,959 Speaker 7: you know, the bulk of it comes from China. And 175 00:09:33,000 --> 00:09:35,960 Speaker 7: then you can't forget to me one of the areas 176 00:09:36,000 --> 00:09:38,560 Speaker 7: of retail that's going to get hit the hardest, and 177 00:09:38,600 --> 00:09:43,199 Speaker 7: that's the dollar stores because they're very low price point stores. 178 00:09:43,840 --> 00:09:46,400 Speaker 7: Most of what they sell comes from China, and so 179 00:09:47,120 --> 00:09:49,520 Speaker 7: figuring out how they're going to be able to manage 180 00:09:50,320 --> 00:09:53,679 Speaker 7: their business when it's so reliant on China and have 181 00:09:53,840 --> 00:09:56,839 Speaker 7: such low price points is really going to be a challenge. 182 00:09:56,920 --> 00:10:00,000 Speaker 2: And let's face it, importers pay those tariffs, the price 183 00:10:00,200 --> 00:10:03,680 Speaker 2: increases are passed along to consumers. There was no doubt 184 00:10:03,720 --> 00:10:06,880 Speaker 2: about that. So these are ore are the hardest hit. 185 00:10:06,880 --> 00:10:08,440 Speaker 2: People are going to be the folks that shop at 186 00:10:08,440 --> 00:10:11,480 Speaker 2: those Dollar Tree, dollar general stores. I mean this could 187 00:10:11,480 --> 00:10:12,800 Speaker 2: be devastating. 188 00:10:12,320 --> 00:10:15,520 Speaker 7: Yeah, exactly. So you know, you've got consumers who are 189 00:10:15,520 --> 00:10:18,840 Speaker 7: already under pressure, You've got prices going up that's gonna 190 00:10:18,920 --> 00:10:21,480 Speaker 7: you know that from tariffs that are going to create 191 00:10:21,840 --> 00:10:25,320 Speaker 7: even more pressure on these consumers, and dollar stores are 192 00:10:25,360 --> 00:10:28,360 Speaker 7: where people go to seek value, right because they don't 193 00:10:28,400 --> 00:10:30,000 Speaker 7: have a lot of money in their pocket and they 194 00:10:30,040 --> 00:10:33,480 Speaker 7: can get things. And so these retailers in particular are 195 00:10:33,520 --> 00:10:36,280 Speaker 7: going to have a very difficult time navigating this new 196 00:10:36,360 --> 00:10:39,959 Speaker 7: tariff landscape. When we heard about earnings from the fourth 197 00:10:40,040 --> 00:10:42,920 Speaker 7: quarter from these companies, they all said that they had 198 00:10:43,000 --> 00:10:46,319 Speaker 7: mitigation plans in place, so they were talking to their 199 00:10:46,320 --> 00:10:49,200 Speaker 7: suppliers to try to share costs. They were thinking about 200 00:10:49,520 --> 00:10:51,560 Speaker 7: what products they could, you know, if they had to 201 00:10:51,800 --> 00:10:56,640 Speaker 7: not carry anymore. But the tariffs announced are so sweeping 202 00:10:57,160 --> 00:10:59,840 Speaker 7: it doesn't leave them a lot of room for negotiation. 203 00:11:00,520 --> 00:11:04,080 Speaker 7: So you know, whether it's Dollar General, dollar Tree, think 204 00:11:04,080 --> 00:11:08,560 Speaker 7: about five below. Again, these companies are are really up 205 00:11:08,559 --> 00:11:09,800 Speaker 7: against the wall with these. 206 00:11:09,679 --> 00:11:13,000 Speaker 2: Tariffs, and not just those companies. I want to break 207 00:11:13,040 --> 00:11:16,560 Speaker 2: down a Vietnam. I think it's a good example. Forty 208 00:11:16,559 --> 00:11:21,480 Speaker 2: six percent tariffs on imports from Vietnam. Nike Footwear fifty 209 00:11:21,559 --> 00:11:25,120 Speaker 2: one half fifty percent of its footwear is sourced from Vietnam. 210 00:11:25,120 --> 00:11:29,679 Speaker 2: That's according to company fi links compiled by Bloomberg. Also Lululemon, Adidas, 211 00:11:29,840 --> 00:11:31,880 Speaker 2: Abercrat I mean, the list goes on and on. I 212 00:11:31,880 --> 00:11:33,920 Speaker 2: don't know if a lot of people know how much 213 00:11:34,000 --> 00:11:36,960 Speaker 2: is made there and how it's going to affect consumers. 214 00:11:36,440 --> 00:11:41,720 Speaker 7: Here exactly when you're talking about the footwear industry, Vietnam 215 00:11:41,920 --> 00:11:46,400 Speaker 7: is the biggest place for manufacturing for footwear. And so 216 00:11:46,600 --> 00:11:49,120 Speaker 7: whether it's All Birds or it's as you said, Nike 217 00:11:49,240 --> 00:11:52,280 Speaker 7: or Puma or Adidas, you know, all of these companies 218 00:11:52,360 --> 00:11:56,120 Speaker 7: are now faced with how they're going to how they're 219 00:11:56,120 --> 00:11:59,679 Speaker 7: going to manage those costs, and you can only pass 220 00:11:59,760 --> 00:12:02,800 Speaker 7: through so much to consumers. You know, I think it's 221 00:12:02,840 --> 00:12:05,360 Speaker 7: inevitable that consumer costs are going to be coming up, 222 00:12:05,440 --> 00:12:07,720 Speaker 7: but there's a breaking point where you can't do that 223 00:12:07,760 --> 00:12:09,880 Speaker 7: and you have to absorb some. So one of the 224 00:12:09,920 --> 00:12:12,000 Speaker 7: things that everyone's watching is, you know, what's going to 225 00:12:12,080 --> 00:12:14,600 Speaker 7: happen with the margins of these companies as costs go 226 00:12:14,760 --> 00:12:18,880 Speaker 7: up and their ability to raise prices gets capped. And so, 227 00:12:19,320 --> 00:12:22,439 Speaker 7: you know, we think that there may still be room 228 00:12:22,480 --> 00:12:26,120 Speaker 7: for negotiation the way President Trump, you know, announce these 229 00:12:26,160 --> 00:12:29,920 Speaker 7: tariffs before they fully go into effect, but you have 230 00:12:29,960 --> 00:12:32,000 Speaker 7: to plan for the worst, and right now it's looking 231 00:12:32,040 --> 00:12:35,960 Speaker 7: a bit dire for apparel companies and for footwear companies. 232 00:12:35,679 --> 00:12:38,240 Speaker 2: Oh what sure is well? Our thanks to Jennifer Bartash 233 00:12:38,360 --> 00:12:42,560 Speaker 2: is Bloomberg Intelligence senior analysts retail, staples and packaged food, 234 00:12:42,920 --> 00:12:45,079 Speaker 2: and coming up on Bloomberg day Break weekend, we'll dive 235 00:12:45,120 --> 00:12:48,080 Speaker 2: into the Bank of England's assessment of the key risks 236 00:12:48,320 --> 00:12:51,840 Speaker 2: facing the UK's financial landscape. I'm Tom Busby and this 237 00:12:52,280 --> 00:13:01,800 Speaker 2: is Bloomberg. This is Bloomberg day Break weekend, our global 238 00:13:01,800 --> 00:13:03,880 Speaker 2: look ahead at the top stories for investors in the 239 00:13:03,920 --> 00:13:07,079 Speaker 2: coming week. I'm Tom Busby in New York. Up later 240 00:13:07,120 --> 00:13:09,680 Speaker 2: in our program a look at how President Trump's tariffs 241 00:13:09,679 --> 00:13:13,360 Speaker 2: on Chinese goods will impact relations with Beijing moving forward. 242 00:13:13,679 --> 00:13:16,920 Speaker 2: But first, the UK Central Bank releases its quarterly report 243 00:13:17,000 --> 00:13:19,760 Speaker 2: on the stability of the UK's financial system this week, 244 00:13:19,840 --> 00:13:24,120 Speaker 2: along with what it's doing to remove or reduce risks. 245 00:13:24,480 --> 00:13:28,080 Speaker 2: But as geopolitical and global economic tensions rise, can policymakers 246 00:13:28,320 --> 00:13:32,200 Speaker 2: really fortify the Bank of England against market turmoil? For more, 247 00:13:32,600 --> 00:13:34,520 Speaker 2: Let's go to London and bring in Bloomberg day Break 248 00:13:34,559 --> 00:13:37,160 Speaker 2: Euro banker Caroline Hepgar Tom. 249 00:13:37,280 --> 00:13:40,080 Speaker 3: The Bank of England's stability report is meant to support 250 00:13:40,120 --> 00:13:44,360 Speaker 3: the resilience of Britain's financial system and therefore support economic 251 00:13:44,440 --> 00:13:48,280 Speaker 3: growth by scanning the risks on the horizon. In the 252 00:13:48,360 --> 00:13:51,199 Speaker 3: last report, released in November twenty twenty four, the Bank 253 00:13:51,280 --> 00:13:56,400 Speaker 3: of England cited a risky outlook driven by geopolitical tensions 254 00:13:56,480 --> 00:14:01,960 Speaker 3: and global fragmentation. Specifically, they called out material pressures on 255 00:14:02,040 --> 00:14:06,120 Speaker 3: government debt levels and increasing borrowing costs. Even if they 256 00:14:06,280 --> 00:14:11,760 Speaker 3: talked about consumers and businesses remaining resilient. In the six 257 00:14:11,800 --> 00:14:15,240 Speaker 3: months or so since that publication, those risks do appear 258 00:14:15,640 --> 00:14:19,800 Speaker 3: to loom large, still complicating the job of policy makers 259 00:14:20,080 --> 00:14:24,360 Speaker 3: looking to steer the UK's financial markets through the storm. 260 00:14:24,680 --> 00:14:28,800 Speaker 3: In the UK, fiscal pressure has increased. Just look at 261 00:14:28,800 --> 00:14:32,280 Speaker 3: how the Chancellor Rachel Reeves lost half of her ten 262 00:14:32,480 --> 00:14:37,080 Speaker 3: billion pound fiscal buffer in the days after her spring 263 00:14:37,240 --> 00:14:41,280 Speaker 3: financial statement. This is something that the Central Bank did 264 00:14:41,360 --> 00:14:45,040 Speaker 3: worn about back in November. The Bank argued then that 265 00:14:45,200 --> 00:14:50,040 Speaker 3: a deterioration in market perceptions about the sustainability of the 266 00:14:50,040 --> 00:14:54,120 Speaker 3: long term path of government's debt globally may lead to 267 00:14:54,360 --> 00:14:59,960 Speaker 3: higher rates and sharp movements in market prices. In particular, 268 00:15:00,240 --> 00:15:04,040 Speaker 3: Bank of England experts believe that increased debt levels and 269 00:15:04,280 --> 00:15:09,320 Speaker 3: servicing costs for governments could also reduce their capacity to 270 00:15:09,400 --> 00:15:12,840 Speaker 3: respond to future shocks that may be to come, and 271 00:15:12,960 --> 00:15:17,080 Speaker 3: also increase the cost of borrowing and refinancing of debt 272 00:15:17,160 --> 00:15:20,320 Speaker 3: for households and for businesses. So how's the Bank of 273 00:15:20,360 --> 00:15:25,600 Speaker 3: England's financial outlook become riskier and how do they plan 274 00:15:25,760 --> 00:15:29,560 Speaker 3: to keep the country on track? I've been asking Bloomberg's 275 00:15:29,680 --> 00:15:33,720 Speaker 3: finance reporter Laura Noonan, and I began by asking her 276 00:15:33,840 --> 00:15:38,120 Speaker 3: simply to begin with, what the point is of this 277 00:15:38,400 --> 00:15:40,000 Speaker 3: financial stability report? 278 00:15:40,560 --> 00:15:43,240 Speaker 8: So the point of a financial stability report is that 279 00:15:43,280 --> 00:15:46,200 Speaker 8: if there is a financial crisis coming, you see the 280 00:15:46,280 --> 00:15:48,880 Speaker 8: warning signs really early, and you step in and do 281 00:15:48,960 --> 00:15:52,640 Speaker 8: what you can to prevent us. So we, notably in 282 00:15:52,680 --> 00:15:55,960 Speaker 8: the UK, didn't have any before the financial crisis, and 283 00:15:56,040 --> 00:15:59,480 Speaker 8: they introduced this concept in the aftermath of the financial crisis, 284 00:15:59,480 --> 00:16:02,000 Speaker 8: because you would all these people saying why were there 285 00:16:02,000 --> 00:16:04,800 Speaker 8: no alarm bells ringing? And part of the reason that 286 00:16:04,840 --> 00:16:07,120 Speaker 8: there were no alarm bells ringing about the belt up 287 00:16:07,160 --> 00:16:10,760 Speaker 8: of risk was that while every regulator and every center 288 00:16:10,840 --> 00:16:14,480 Speaker 8: bank has general oversight of risk, there was no one 289 00:16:14,560 --> 00:16:18,080 Speaker 8: specifically in charge of ringing the bell. So I would 290 00:16:18,080 --> 00:16:20,280 Speaker 8: think of this financial spell report, this is the. 291 00:16:20,240 --> 00:16:24,720 Speaker 3: Bell Okay, so we're waiting for this bell recap what 292 00:16:24,920 --> 00:16:28,000 Speaker 3: happened in November's report, because they come up with a 293 00:16:28,080 --> 00:16:31,080 Speaker 3: list of risks and they explain them in some detail. 294 00:16:31,760 --> 00:16:35,000 Speaker 3: Think about the time frame between that November report and now. 295 00:16:35,120 --> 00:16:37,640 Speaker 8: Okay, so November was a particularly fun report. It was 296 00:16:37,680 --> 00:16:40,600 Speaker 8: a big bell and that's because they do these things quarterly. 297 00:16:40,920 --> 00:16:43,720 Speaker 8: But they also, as well as having the general laundry 298 00:16:43,720 --> 00:16:46,240 Speaker 8: list of these other risks of the financial system, they 299 00:16:46,280 --> 00:16:49,920 Speaker 8: also do special publications during some and we had a 300 00:16:49,920 --> 00:16:52,840 Speaker 8: special publication in November which I was very excited about, 301 00:16:52,920 --> 00:16:56,800 Speaker 8: which was the outcome of this broad market stress test, 302 00:16:57,040 --> 00:16:58,640 Speaker 8: the first one in the world to see how the 303 00:16:58,760 --> 00:17:02,320 Speaker 8: market system would respond to a crisis, and that found 304 00:17:02,320 --> 00:17:05,639 Speaker 8: that that basically non banks were not particularly ready for 305 00:17:05,680 --> 00:17:08,800 Speaker 8: a crisis. The other things that they warned about were 306 00:17:09,240 --> 00:17:11,320 Speaker 8: the general things they've been warning about for some time. 307 00:17:11,359 --> 00:17:14,000 Speaker 8: And often the language is very important here. It's a 308 00:17:14,000 --> 00:17:16,080 Speaker 8: bit like if you watch the interest rate decisions and 309 00:17:16,119 --> 00:17:19,800 Speaker 8: the commentary around that, the exact words you so you 310 00:17:19,840 --> 00:17:23,480 Speaker 8: can say, you know the outlook, the risk is deteriorating, 311 00:17:23,520 --> 00:17:26,879 Speaker 8: the risk is worsening, risks are escalating. So the exact 312 00:17:26,960 --> 00:17:30,160 Speaker 8: language matters in terms of whether they see big risks, 313 00:17:30,160 --> 00:17:33,960 Speaker 8: whether they see moderate risks in different areas. Last time 314 00:17:34,000 --> 00:17:38,440 Speaker 8: they called out the geopolitical risks were increasing very obviously, 315 00:17:38,600 --> 00:17:41,800 Speaker 8: yes they are, and we can expect that geopolitical risks 316 00:17:41,800 --> 00:17:45,399 Speaker 8: have not subsidies between November and now. So if I 317 00:17:45,440 --> 00:17:47,600 Speaker 8: were a betting person, which apparently we're not allowed to 318 00:17:47,640 --> 00:17:49,760 Speaker 8: be and anymore, But if I were a betting person, 319 00:17:50,160 --> 00:17:53,760 Speaker 8: I will be betting on geopolitical risks to feature heavily 320 00:17:54,000 --> 00:17:56,679 Speaker 8: in the report. And with that we can expect to 321 00:17:56,720 --> 00:18:01,040 Speaker 8: see them warning about the different and risks that different 322 00:18:01,240 --> 00:18:04,640 Speaker 8: parts of the financial landscape face. And geopolitical risk can 323 00:18:04,640 --> 00:18:07,080 Speaker 8: manifest in lots of different things, So you can have 324 00:18:07,600 --> 00:18:10,520 Speaker 8: difficulty trading with certain parts of the world, you can 325 00:18:10,760 --> 00:18:15,040 Speaker 8: have sharp corrections of sharp changes to acid prices because 326 00:18:15,520 --> 00:18:18,120 Speaker 8: of geopilical policies. So there's a number of things there 327 00:18:18,160 --> 00:18:21,120 Speaker 8: and I would expect a lot of warning about geopilical risk. 328 00:18:21,160 --> 00:18:23,359 Speaker 8: They also tend to warn about other things. They'll always 329 00:18:23,400 --> 00:18:28,920 Speaker 8: be something about cyber when the geopolitical situation worsens. There's 330 00:18:28,960 --> 00:18:32,600 Speaker 8: often a heightened fear about cyber because you have state 331 00:18:32,640 --> 00:18:35,120 Speaker 8: sponsored cyber attacks and that's something we saw a lot 332 00:18:35,240 --> 00:18:37,320 Speaker 8: last year where there was a lot of concern about 333 00:18:37,920 --> 00:18:42,120 Speaker 8: how would the financial system withstand an attack from a 334 00:18:42,200 --> 00:18:45,000 Speaker 8: negative state actor, and that's something that they have been 335 00:18:45,040 --> 00:18:49,760 Speaker 8: warning heavily about. They has been ongoing concerned about valuation 336 00:18:49,920 --> 00:18:54,600 Speaker 8: in various asset classes, and obviously valuations have fallen recently 337 00:18:54,760 --> 00:18:57,879 Speaker 8: in recent days anyway, so they are still at fairly 338 00:18:57,920 --> 00:19:01,840 Speaker 8: elevated levels. The other repeat one is the links between 339 00:19:02,440 --> 00:19:05,560 Speaker 8: the private equity slash private credit slash private market space 340 00:19:05,680 --> 00:19:08,240 Speaker 8: and the financial system and the way that those links 341 00:19:08,720 --> 00:19:10,840 Speaker 8: could unravel in a problematic way. 342 00:19:11,200 --> 00:19:14,399 Speaker 3: Okay, so quite a list of risks that they that 343 00:19:14,400 --> 00:19:16,879 Speaker 3: you're watching out for in terms of what they may cite. 344 00:19:17,560 --> 00:19:21,840 Speaker 3: How are these reports then so normally received. 345 00:19:21,920 --> 00:19:24,119 Speaker 8: How we actually get them is actually great fun. So 346 00:19:24,400 --> 00:19:26,440 Speaker 8: how we literally receive them is they take a gang 347 00:19:26,440 --> 00:19:29,040 Speaker 8: of journalists three floors underground in the Bank of England 348 00:19:29,080 --> 00:19:30,880 Speaker 8: and they lock us in with them. It's actually very, 349 00:19:31,000 --> 00:19:33,119 Speaker 8: very fun, and then we have an hour and a 350 00:19:33,119 --> 00:19:35,400 Speaker 8: half with them before we can then broadcast. In terms 351 00:19:35,440 --> 00:19:39,119 Speaker 8: of how they're received by the wider world, they so 352 00:19:39,240 --> 00:19:43,119 Speaker 8: the FPC is part of the Bank of England rather 353 00:19:43,200 --> 00:19:46,080 Speaker 8: than the pure which is the regulatory arm. So basically 354 00:19:46,480 --> 00:19:49,320 Speaker 8: the Bank of England warrants and then the PURE and 355 00:19:49,359 --> 00:19:53,199 Speaker 8: the FCA to an extent, decides, okay, what do we 356 00:19:53,280 --> 00:19:57,560 Speaker 8: want to take greater action in. So if they warrant 357 00:19:57,560 --> 00:20:01,119 Speaker 8: about vulnerabilities in a certain part of the market, the 358 00:20:01,160 --> 00:20:04,199 Speaker 8: PRAA may then go and do an exercise to review that. 359 00:20:04,960 --> 00:20:07,680 Speaker 8: So there are two things the FPC can do. They 360 00:20:07,720 --> 00:20:11,960 Speaker 8: can advise or recommend. They can actually make orders for 361 00:20:12,000 --> 00:20:14,520 Speaker 8: some things, but they very rarely do that. The one 362 00:20:14,560 --> 00:20:17,560 Speaker 8: thing they directly control is something called the counter cyclical 363 00:20:17,720 --> 00:20:20,479 Speaker 8: capital buffer, which some of your listeners may be familiar with, 364 00:20:20,800 --> 00:20:24,800 Speaker 8: and that basically sets the capital buffer banks have to 365 00:20:24,840 --> 00:20:27,480 Speaker 8: maintain to deal with a potential crisis. In the UK, 366 00:20:27,560 --> 00:20:29,879 Speaker 8: it's been at neutral level for quite some time, and 367 00:20:29,960 --> 00:20:34,880 Speaker 8: that's because banks are well capitalized. I don't think they're 368 00:20:34,920 --> 00:20:38,000 Speaker 8: going to change that buffer this week, but they might. 369 00:20:38,160 --> 00:20:40,000 Speaker 8: The other things I should have said earlier that they 370 00:20:40,000 --> 00:20:43,080 Speaker 8: talk about a lot is the resilience of households, the 371 00:20:43,160 --> 00:20:47,240 Speaker 8: resilience of businesses to these things. So they'll talk about, 372 00:20:47,840 --> 00:20:49,639 Speaker 8: you know, for a long time during the last interest 373 00:20:49,680 --> 00:20:52,400 Speaker 8: rate cycle, we heard about their percentage of households whose 374 00:20:52,400 --> 00:20:54,440 Speaker 8: mortgage just would jump by a certain amount, and how 375 00:20:54,520 --> 00:20:57,520 Speaker 8: that would play out. I mean, for us from a 376 00:20:57,600 --> 00:21:00,440 Speaker 8: journalistic point of view, disappointingly, the last few time that's 377 00:21:00,480 --> 00:21:04,040 Speaker 8: been households are resilient, banks are resilient, business are resilient. 378 00:21:04,320 --> 00:21:07,919 Speaker 8: That is no crack whatsoever to report on. But I 379 00:21:07,920 --> 00:21:10,160 Speaker 8: guess what I would imparty with is that the level 380 00:21:10,200 --> 00:21:13,760 Speaker 8: of resilience has been high and as interest rates for 381 00:21:14,000 --> 00:21:15,800 Speaker 8: the level of resilience should increase. 382 00:21:16,160 --> 00:21:19,359 Speaker 3: Okay, So then that probably goes to my next thought, 383 00:21:19,359 --> 00:21:23,480 Speaker 3: which is what is your assessment, Bloomboad's assessment currently of 384 00:21:23,880 --> 00:21:26,639 Speaker 3: the UK's sort of risk landscape and how we're thinking 385 00:21:26,640 --> 00:21:27,160 Speaker 3: about it. 386 00:21:27,600 --> 00:21:30,720 Speaker 8: So the UK's risk landscape is not as from a 387 00:21:30,760 --> 00:21:35,199 Speaker 8: macroeconomic perspective, it's not as bad as some of the 388 00:21:35,240 --> 00:21:38,520 Speaker 8: markets where there are bigger policy changes taking place. So 389 00:21:38,560 --> 00:21:40,200 Speaker 8: I don't think it's the risky ast market. The one 390 00:21:40,200 --> 00:21:42,560 Speaker 8: thing that I would that I'm like watching out for 391 00:21:42,840 --> 00:21:45,880 Speaker 8: is what if anything they say about the deregulation risks. 392 00:21:45,920 --> 00:21:48,920 Speaker 8: So the Bank of England's regularly arm the p r 393 00:21:48,960 --> 00:21:52,119 Speaker 8: A and the FCA, which regulates conduct and other parts 394 00:21:52,119 --> 00:21:55,120 Speaker 8: of the financial industry. They've been pulling back a lot 395 00:21:55,160 --> 00:21:58,000 Speaker 8: of rules in the spirit of promoting the UK's competitiveness, 396 00:21:58,040 --> 00:22:00,240 Speaker 8: which is great and all, and they say that they 397 00:22:00,240 --> 00:22:03,400 Speaker 8: are threading the needle in terms of Okay, we're going 398 00:22:03,440 --> 00:22:07,920 Speaker 8: to make the burdens on financial services firm less and 399 00:22:07,960 --> 00:22:10,240 Speaker 8: that's not going to increase risk by too much. It 400 00:22:10,359 --> 00:22:14,080 Speaker 8: is a fine balancing act and the FPC this report 401 00:22:14,320 --> 00:22:18,040 Speaker 8: is independent enough that it could say we see heightened 402 00:22:18,119 --> 00:22:22,639 Speaker 8: risk to financial stability arising from the deregulation which is 403 00:22:22,680 --> 00:22:25,440 Speaker 8: taking part place both in the UK and elsewhere. I 404 00:22:25,480 --> 00:22:27,360 Speaker 8: think that's going to be an interesting trend like we've had. 405 00:22:27,359 --> 00:22:32,560 Speaker 8: The FCA Chief Executive Nikhil Rathi has been talking about 406 00:22:32,600 --> 00:22:36,680 Speaker 8: the government needing to set an acceptable risk level and 407 00:22:36,720 --> 00:22:39,720 Speaker 8: an acceptable failure level. If they want to go down 408 00:22:39,760 --> 00:22:41,679 Speaker 8: this route of taking off all the red tape and 409 00:22:41,720 --> 00:22:44,400 Speaker 8: everything that Richter Reefs has been talking about, there will 410 00:22:44,400 --> 00:22:47,040 Speaker 8: be more failures, there will be more risks, and in 411 00:22:47,119 --> 00:22:50,000 Speaker 8: theory the FPC is I think of them as being 412 00:22:50,000 --> 00:22:53,399 Speaker 8: the guardian of that. They're the ones who I'm hoping 413 00:22:53,640 --> 00:22:56,000 Speaker 8: are going to watch this at a very high level 414 00:22:56,040 --> 00:22:59,280 Speaker 8: and say, is what we're doing increasing risk in the 415 00:22:59,320 --> 00:23:02,520 Speaker 8: financials and is it increasing risk in a dangerous way 416 00:23:02,640 --> 00:23:03,640 Speaker 8: or in a matter way. 417 00:23:04,000 --> 00:23:06,600 Speaker 3: It's interesting, isn't it that this idea of risk that 418 00:23:06,640 --> 00:23:11,480 Speaker 3: Britain needs more risk taking, positive risk taking in order 419 00:23:11,560 --> 00:23:15,960 Speaker 3: to galvanize economic growth or allow investors to put more 420 00:23:16,000 --> 00:23:18,399 Speaker 3: money to work in a better way. That's going to 421 00:23:18,440 --> 00:23:22,080 Speaker 3: deliver more growth for Britain. How do we think about 422 00:23:22,560 --> 00:23:26,560 Speaker 3: financial stability in the UK versus other markets? Is it 423 00:23:26,680 --> 00:23:29,280 Speaker 3: more precarious less precarious? I mean, there's a big world 424 00:23:29,280 --> 00:23:31,240 Speaker 3: out there, but how do we benchmarket? 425 00:23:31,640 --> 00:23:34,200 Speaker 8: I would say more precarious and the EU partly because 426 00:23:34,240 --> 00:23:36,679 Speaker 8: of all these policy changes. The one thing about the 427 00:23:36,680 --> 00:23:40,480 Speaker 8: EU is that you have been talking a lot about simplification, 428 00:23:40,560 --> 00:23:43,320 Speaker 8: about competitiveness, but it is a really slow moving train. 429 00:23:43,640 --> 00:23:46,040 Speaker 8: And one of the things since breaksit breksit made it 430 00:23:46,119 --> 00:23:49,480 Speaker 8: much easier for the UK to directly and quickly enact reforms. 431 00:23:49,760 --> 00:23:51,560 Speaker 8: In the EU, they will be discussing it till the 432 00:23:51,640 --> 00:23:53,600 Speaker 8: end of time. They are doing a review on the 433 00:23:53,640 --> 00:23:56,240 Speaker 8: compassionist of banking, which they report on by the end 434 00:23:56,280 --> 00:23:58,560 Speaker 8: of twenty twenty six, so they are not changing reels 435 00:23:58,600 --> 00:24:01,680 Speaker 8: as quickly. Despite talking about the UK is obviously the 436 00:24:01,760 --> 00:24:04,840 Speaker 8: risks in the US are much much higher because there 437 00:24:04,920 --> 00:24:07,840 Speaker 8: is a lot of quality change going on there at 438 00:24:07,920 --> 00:24:09,960 Speaker 8: every level, and no one quite knows how this is 439 00:24:10,000 --> 00:24:11,800 Speaker 8: going to play out. So if I were to rank 440 00:24:11,840 --> 00:24:15,280 Speaker 8: the hierarchy of fanatibility risks in our major markets US 441 00:24:15,320 --> 00:24:16,840 Speaker 8: top UK second. 442 00:24:17,320 --> 00:24:21,879 Speaker 3: You third, how important a feature are borrowing costs likely 443 00:24:21,920 --> 00:24:24,120 Speaker 3: to be in this report? You did touch on it. 444 00:24:24,520 --> 00:24:27,200 Speaker 3: You know, when it comes to perhaps interest rates maybe 445 00:24:27,280 --> 00:24:29,720 Speaker 3: coming down, but borrowing costs talk about those. 446 00:24:30,040 --> 00:24:31,600 Speaker 8: So I think borrowing costs are not going to be 447 00:24:31,640 --> 00:24:33,800 Speaker 8: a major feature just because they are coming down. So 448 00:24:33,840 --> 00:24:36,520 Speaker 8: when we saw so most people will now have had 449 00:24:36,840 --> 00:24:39,200 Speaker 8: even people on fixed mortgages, they will have had their 450 00:24:39,280 --> 00:24:42,879 Speaker 8: rate increases and they will have adjusted, and the trajectory 451 00:24:42,920 --> 00:24:45,040 Speaker 8: is very much downward. Now there's obviously an open question 452 00:24:45,119 --> 00:24:50,400 Speaker 8: about how quickly the UK moves down, but borrowing costs 453 00:24:50,400 --> 00:24:54,520 Speaker 8: are likely to fall, and that is generally speaking positive 454 00:24:54,520 --> 00:24:57,800 Speaker 8: from a household resilience perspective. The other thing we sometimes 455 00:24:57,960 --> 00:25:01,959 Speaker 8: will get commentary on is the level of availability of 456 00:25:02,040 --> 00:25:05,439 Speaker 8: credit from banks to firms and individuals, and that is 457 00:25:05,440 --> 00:25:08,200 Speaker 8: a kind of a leading indicator because if banks themselves 458 00:25:08,240 --> 00:25:12,000 Speaker 8: are worried about changes, then they will start restraining credit. 459 00:25:12,119 --> 00:25:15,080 Speaker 8: So I tend to think that if there were any 460 00:25:15,359 --> 00:25:18,280 Speaker 8: kind of problems coming, what we first see is banks 461 00:25:18,280 --> 00:25:21,760 Speaker 8: restraining credit, and then we'd see issues in terms of 462 00:25:22,560 --> 00:25:24,280 Speaker 8: borrowing affordability coming later. 463 00:25:24,680 --> 00:25:27,600 Speaker 3: My thanks to Bloomberg's Laura Noonan, and we will have 464 00:25:27,720 --> 00:25:31,280 Speaker 3: full coverage of the Bank of England's Financial Stability report 465 00:25:31,640 --> 00:25:35,560 Speaker 3: and its implications in the coming days right across Bloomberg 466 00:25:35,680 --> 00:25:39,399 Speaker 3: channels and on the terminal. I'm Caroline Hepkee here in London. 467 00:25:39,440 --> 00:25:42,399 Speaker 3: You can catch us every weekday morning for Bloomberg Daybreak. 468 00:25:42,440 --> 00:25:44,760 Speaker 3: You up beginning at six am in London. That's one 469 00:25:44,800 --> 00:25:45,800 Speaker 3: am on Wall Street. 470 00:25:45,880 --> 00:25:49,359 Speaker 2: Tom, Thank you, Caroline. And coming up on Bloomberg Daybreak weekend, 471 00:25:49,400 --> 00:25:51,920 Speaker 2: they'll look at how President Trump's increased s tariffs on 472 00:25:52,040 --> 00:25:56,520 Speaker 2: Chinese goods could impact relations with China. I'm Tom Busby 473 00:25:56,640 --> 00:26:10,159 Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend, 474 00:26:10,200 --> 00:26:12,560 Speaker 2: our global look ahead at the top stories for investors 475 00:26:12,560 --> 00:26:15,160 Speaker 2: in the coming week. I'm Tom Busby in New York. 476 00:26:15,680 --> 00:26:19,240 Speaker 2: Resident Trump announcing last week in additional thirty four percent 477 00:26:19,280 --> 00:26:22,400 Speaker 2: tariff on Chinese goods, bringing total levies to at least 478 00:26:22,720 --> 00:26:25,160 Speaker 2: fifty four percent. Now for more on how the new 479 00:26:25,160 --> 00:26:28,560 Speaker 2: tariffs are reverberating through the Asia Pacific region. Let's get 480 00:26:28,600 --> 00:26:31,840 Speaker 2: to the host of the Daybreak Asia podcast, Doug Krisner. 481 00:26:32,240 --> 00:26:36,120 Speaker 4: Tom Bloomberg Economics did the math and discovered the average 482 00:26:36,200 --> 00:26:39,840 Speaker 4: charge on Chinese goods will rise to sixty six point 483 00:26:39,880 --> 00:26:43,480 Speaker 4: eight percent. Earlier estimates from Bloomberg's trade team show a 484 00:26:43,640 --> 00:26:47,080 Speaker 4: sixty percent tariff could cut China's direct exports to the 485 00:26:47,200 --> 00:26:50,359 Speaker 4: US by up to eighty percent over the medium term, 486 00:26:50,520 --> 00:26:53,879 Speaker 4: and under that scenario, some two point three percent of 487 00:26:53,960 --> 00:26:57,440 Speaker 4: China's GDP would be at risk. For more, we turned 488 00:26:57,440 --> 00:27:00,240 Speaker 4: to Jenny Marsh. She is China ECOGUV team lie leader 489 00:27:00,280 --> 00:27:03,240 Speaker 4: for Bloomberg News. Jenny joins us from our studios in 490 00:27:03,320 --> 00:27:05,720 Speaker 4: Hong Kong. I thought it was very interesting that the 491 00:27:05,840 --> 00:27:10,040 Speaker 4: US has addressed a loophole. It allows packages worth up 492 00:27:10,080 --> 00:27:13,120 Speaker 4: to eight hundred dollars from either China or Hong Kong 493 00:27:13,200 --> 00:27:16,240 Speaker 4: to enter the US duty free. But now we're told 494 00:27:16,240 --> 00:27:18,719 Speaker 4: that's going to end. May TEWI. So it shouldn't come 495 00:27:18,800 --> 00:27:21,159 Speaker 4: as a surprise when you look at markets and see 496 00:27:21,640 --> 00:27:25,680 Speaker 4: a sell off in shares like Ali Baba ANDJD dot Com. 497 00:27:25,920 --> 00:27:27,080 Speaker 4: Was that a surprise at all? 498 00:27:27,359 --> 00:27:30,480 Speaker 9: Not a surprise because he talked about it in the 499 00:27:30,560 --> 00:27:33,199 Speaker 9: Executive Order on the first day, and of course they 500 00:27:33,359 --> 00:27:36,040 Speaker 9: tried sort of putting this break on the dominimous lepole 501 00:27:36,080 --> 00:27:38,000 Speaker 9: earlier that they had to sort of lift it because 502 00:27:38,040 --> 00:27:42,640 Speaker 9: logistically it's very hard to sort of logistics of how 503 00:27:42,680 --> 00:27:46,119 Speaker 9: you actually impose that. So I think that was pretty expected, 504 00:27:47,119 --> 00:27:48,760 Speaker 9: and so now it's just a matter of Okay, how 505 00:27:48,760 --> 00:27:51,919 Speaker 9: do you sort of how do small companies deal with that? 506 00:27:52,000 --> 00:27:55,720 Speaker 9: But when you add that in as well, actually the 507 00:27:55,760 --> 00:27:58,119 Speaker 9: tariffrerate looks even higher than sixty seven percent. 508 00:27:58,880 --> 00:28:01,600 Speaker 4: I noticed that the South China Morning Post was reporting 509 00:28:01,600 --> 00:28:05,720 Speaker 4: that President She is set to visit Vietnam, Malaysia, Cambodia 510 00:28:06,000 --> 00:28:08,400 Speaker 4: in mid April. Now we know that all of those 511 00:28:08,480 --> 00:28:11,240 Speaker 4: nations are being hit by this round of US tariffs. 512 00:28:11,480 --> 00:28:13,399 Speaker 4: Is this a part of some type of strategy that 513 00:28:13,480 --> 00:28:17,000 Speaker 4: she has maybe to reconfigure trade relationships. 514 00:28:17,160 --> 00:28:17,400 Speaker 7: Yeah. 515 00:28:17,400 --> 00:28:20,639 Speaker 9: I think the itinerary is really interesting. I mean, the 516 00:28:20,680 --> 00:28:24,000 Speaker 9: first trip that she takes abroad every year always carries 517 00:28:24,160 --> 00:28:27,320 Speaker 9: huge symbolism. Last year he chose to go to France, 518 00:28:28,440 --> 00:28:30,280 Speaker 9: just does the European Union a sort of way in 519 00:28:30,320 --> 00:28:34,040 Speaker 9: these big ev tariffs. This year he's picked Vietnam, Cambodia 520 00:28:34,080 --> 00:28:37,480 Speaker 9: and Malaysia, and you know, Vietnam and Malaysia sort of 521 00:28:37,520 --> 00:28:40,160 Speaker 9: these two big countries that have sort of been a 522 00:28:40,200 --> 00:28:42,400 Speaker 9: key part of the China plus one strategy of sort 523 00:28:42,400 --> 00:28:45,640 Speaker 9: of rerouting trade to the US to sort of skirt 524 00:28:45,680 --> 00:28:50,840 Speaker 9: tariffs and also now facing their own huge levees. I 525 00:28:50,840 --> 00:28:54,640 Speaker 9: think Vietnam's tariffs were higher than China's. Forty six percent 526 00:28:55,080 --> 00:28:58,360 Speaker 9: was the reciprocal figure announced. So this is a big 527 00:28:58,400 --> 00:29:02,360 Speaker 9: opportunity for she I think, to go to these countries, 528 00:29:02,880 --> 00:29:07,040 Speaker 9: make trade deals, but also just sort of present China 529 00:29:07,080 --> 00:29:09,320 Speaker 9: as the grown up in the room. Vietnam have been 530 00:29:09,440 --> 00:29:12,760 Speaker 9: very carefully balancing it's tied. You know, it had hosted 531 00:29:13,120 --> 00:29:17,200 Speaker 9: Biden in I think it was twenty twenty three, and 532 00:29:17,240 --> 00:29:19,760 Speaker 9: then very quickly hosted cheating paying for a visit and 533 00:29:19,800 --> 00:29:22,760 Speaker 9: sort of playing this sort of play on both sides equally. 534 00:29:23,240 --> 00:29:26,200 Speaker 9: And I think now this gives China an opportunity to say, well, 535 00:29:26,200 --> 00:29:29,080 Speaker 9: actually we are the best part to hear and so 536 00:29:29,200 --> 00:29:31,800 Speaker 9: this trip, I think the timing of it is very interesting. 537 00:29:32,000 --> 00:29:34,600 Speaker 4: I'm noticing weakness in the currency, but I would imagine 538 00:29:34,600 --> 00:29:38,000 Speaker 4: that the BBOC does not want the Chinese you want 539 00:29:38,080 --> 00:29:40,480 Speaker 4: to weaken greatly in the face of this trade war. 540 00:29:40,840 --> 00:29:43,959 Speaker 4: Fair statement to say that the PBOC is going to 541 00:29:44,000 --> 00:29:46,880 Speaker 4: try to keep the one as strong as it can 542 00:29:47,000 --> 00:29:48,120 Speaker 4: under the circumstances. 543 00:29:48,560 --> 00:29:48,840 Speaker 6: Yeah. 544 00:29:48,960 --> 00:29:51,720 Speaker 9: I think that's the strategy that we have seen so far, 545 00:29:52,240 --> 00:29:54,320 Speaker 9: and they don't want to invite any more criticism as 546 00:29:54,320 --> 00:29:56,400 Speaker 9: well from the Trump administration. 547 00:29:56,040 --> 00:29:58,200 Speaker 4: In terms of the negative impact that this is going 548 00:29:58,280 --> 00:30:01,640 Speaker 4: to have on Chinese economic growth, particularly as it relates 549 00:30:01,640 --> 00:30:04,240 Speaker 4: to the exporters. What are you hearing about that. 550 00:30:04,840 --> 00:30:08,080 Speaker 9: I think it's an interesting reaction from economists who are 551 00:30:08,120 --> 00:30:11,440 Speaker 9: saying they're sort of seeing a hit on average of 552 00:30:11,480 --> 00:30:13,960 Speaker 9: sort of a one percentage point to GDP growth this year, 553 00:30:14,280 --> 00:30:18,320 Speaker 9: but they're not downgrading their GDP forecasts because I think 554 00:30:18,440 --> 00:30:21,400 Speaker 9: everyone thinks trying to will still hit five percent. What's 555 00:30:21,440 --> 00:30:23,280 Speaker 9: going to have to happen now is a massive sort 556 00:30:23,280 --> 00:30:26,640 Speaker 9: of spending stimulus to fill the whole that is going 557 00:30:26,640 --> 00:30:29,720 Speaker 9: to be left by the hit to exports to the US, 558 00:30:30,160 --> 00:30:31,600 Speaker 9: and I think that's sort of what people are going 559 00:30:31,640 --> 00:30:35,280 Speaker 9: to be looking to. There's the external strategy of does 560 00:30:35,360 --> 00:30:37,640 Speaker 9: she get on the phone with Trump. I think he's 561 00:30:37,680 --> 00:30:39,920 Speaker 9: extremely unlikely. He's going to try and call him before 562 00:30:39,960 --> 00:30:42,440 Speaker 9: that eight PRINL nine deadline. It's just not how China 563 00:30:42,480 --> 00:30:45,760 Speaker 9: does things. They're not going to respond to strength with weakness. 564 00:30:46,080 --> 00:30:48,920 Speaker 9: Much more likely, they focus on shoring up their alliances 565 00:30:49,600 --> 00:30:52,840 Speaker 9: trade partnerships around the world, and they've been very careful 566 00:30:52,880 --> 00:30:55,920 Speaker 9: to save stimulus for exactly this moment, and now they 567 00:30:55,920 --> 00:30:57,760 Speaker 9: have the chance to sort of roll out a big 568 00:30:57,760 --> 00:30:58,720 Speaker 9: support package. 569 00:30:58,880 --> 00:31:01,080 Speaker 4: Jenny, I want you to help. We look ahead to 570 00:31:01,320 --> 00:31:04,000 Speaker 4: the inflation data that we're going to get for China 571 00:31:04,400 --> 00:31:08,600 Speaker 4: in the coming week PPI CPI. We know the deflationary 572 00:31:08,640 --> 00:31:11,720 Speaker 4: pressures that the economy is facing. Is that going to 573 00:31:11,760 --> 00:31:15,440 Speaker 4: be underscored by these data points or is something beginning 574 00:31:15,480 --> 00:31:16,400 Speaker 4: to shift right now? 575 00:31:16,840 --> 00:31:19,480 Speaker 9: The CPI at the beginning of the year is pretty bad. 576 00:31:19,760 --> 00:31:21,640 Speaker 9: Even when we take out the seasonal factors. It went 577 00:31:21,800 --> 00:31:26,080 Speaker 9: right down to negative point seven. The survey is for 578 00:31:26,080 --> 00:31:28,440 Speaker 9: it to come buck up to zero, but still hovering 579 00:31:28,800 --> 00:31:31,520 Speaker 9: right on that zero point. You know, China is still 580 00:31:31,560 --> 00:31:34,440 Speaker 9: facing a lot of deflationary pressures and this is only 581 00:31:34,520 --> 00:31:36,920 Speaker 9: going to make it worse. So I think we're not 582 00:31:36,960 --> 00:31:40,000 Speaker 9: seeing those go away. I mean that being said, before 583 00:31:40,040 --> 00:31:43,800 Speaker 9: Liberation Day, we have seen economies upgrading their expectations for 584 00:31:43,880 --> 00:31:47,000 Speaker 9: China this year, because the economy has been looking pretty 585 00:31:47,040 --> 00:31:50,640 Speaker 9: strong on other sort of aspects. The consumer is stirring, 586 00:31:51,080 --> 00:31:53,920 Speaker 9: These talks of the property market finally bottoming out, animal 587 00:31:53,960 --> 00:31:57,880 Speaker 9: spirits are up. So if China can spend enough to 588 00:31:57,960 --> 00:32:01,239 Speaker 9: compensate for Trump's actions and then actually gets a bit 589 00:32:01,280 --> 00:32:04,000 Speaker 9: of a Trump bump from other countries, now the sort 590 00:32:04,000 --> 00:32:06,560 Speaker 9: of turned to China and away from the US, you know, 591 00:32:06,640 --> 00:32:09,040 Speaker 9: this might not actually be so bad for Beijing. 592 00:32:09,400 --> 00:32:11,800 Speaker 4: Do you think can you imagine, let me put it 593 00:32:11,840 --> 00:32:15,960 Speaker 4: that way, that sometime between now and the ninth of April, 594 00:32:16,040 --> 00:32:19,680 Speaker 4: when the retaliatory tariffs are set to kick in, that 595 00:32:19,680 --> 00:32:23,320 Speaker 4: there will be some movement here between Washington and Beijing 596 00:32:23,520 --> 00:32:24,720 Speaker 4: in a positive direction. 597 00:32:25,120 --> 00:32:27,800 Speaker 9: I don't think there will be, is my hunch, because 598 00:32:27,800 --> 00:32:29,960 Speaker 9: I think you had one Yu saying just this week, 599 00:32:30,040 --> 00:32:32,920 Speaker 9: you know, in order to have talks, those the sort 600 00:32:32,960 --> 00:32:36,200 Speaker 9: of the unfair fentanyl tariffs have got to come off. 601 00:32:36,520 --> 00:32:39,360 Speaker 9: And when Senator Danes left Beijing, he said, in order 602 00:32:39,400 --> 00:32:42,400 Speaker 9: to have talks, China has to stop the fental smuggling. 603 00:32:42,680 --> 00:32:44,240 Speaker 9: Neither of those things are going to happen in the 604 00:32:44,280 --> 00:32:47,920 Speaker 9: next sort of seven days. So I don't think there'll 605 00:32:47,960 --> 00:32:50,320 Speaker 9: be sort of scrambles for last minute negotiations. 606 00:32:50,520 --> 00:32:54,160 Speaker 4: That is Jenny Marsh China ECOGUV team leader for Bloomberg News. 607 00:32:54,360 --> 00:32:57,719 Speaker 4: We go from Hong Kong to Sydney. Now, in contrast 608 00:32:57,720 --> 00:33:00,600 Speaker 4: to China, Australia found itself on the lad low end 609 00:33:00,680 --> 00:33:03,800 Speaker 4: of Trump's tariff spectrum. The country will be subject to 610 00:33:03,840 --> 00:33:07,360 Speaker 4: a minimum ten percent levy imposed on all exports to 611 00:33:07,440 --> 00:33:10,160 Speaker 4: the US. Joining me now for a closer look is 612 00:33:10,160 --> 00:33:14,440 Speaker 4: Bloomberg Australia correspondent Paul Allen. He joins from our studio 613 00:33:14,560 --> 00:33:17,920 Speaker 4: in Sydney. Give me kind of the base level here, 614 00:33:18,120 --> 00:33:20,040 Speaker 4: what is Australia facing right now? 615 00:33:20,320 --> 00:33:23,440 Speaker 10: Well, Australia's facing that ten percent tariff and that the 616 00:33:23,520 --> 00:33:26,240 Speaker 10: narrative in Australia as well. We got off lightly there, 617 00:33:26,280 --> 00:33:30,920 Speaker 10: but at the same time there's just confusion, bafflement. There's 618 00:33:30,920 --> 00:33:33,160 Speaker 10: a lot of We're going to election coming up, and 619 00:33:33,240 --> 00:33:36,440 Speaker 10: both sides of politics are kind of puzzled. Really because 620 00:33:36,480 --> 00:33:40,520 Speaker 10: the US and Australia have a free trade agreement, so 621 00:33:40,760 --> 00:33:46,040 Speaker 10: the Australia doesn't put tariffs on any US products. Australia 622 00:33:46,080 --> 00:33:48,840 Speaker 10: also runs a trade deficit with the United States, so 623 00:33:48,880 --> 00:33:51,920 Speaker 10: we buy more off the US than the US buys 624 00:33:51,920 --> 00:33:55,840 Speaker 10: off Australia, so a lot of confusion there, and President 625 00:33:55,840 --> 00:34:00,840 Speaker 10: Trump signaled out beef as well as a something he's 626 00:34:00,840 --> 00:34:04,280 Speaker 10: got beef with quite frankly, but there is no tariff 627 00:34:04,560 --> 00:34:07,880 Speaker 10: on US beef into Australia, but it imports of beef 628 00:34:07,920 --> 00:34:10,960 Speaker 10: as banned due to a twenty year old concern about 629 00:34:10,960 --> 00:34:13,799 Speaker 10: mad car disease. So there's a biosecurity issue there, and 630 00:34:14,000 --> 00:34:17,319 Speaker 10: it sounds crazy, but if you've ever visited Australia, you 631 00:34:17,480 --> 00:34:21,200 Speaker 10: know how uptight this country is about biosecurity. It's a great, 632 00:34:21,239 --> 00:34:24,399 Speaker 10: big island with lots of weird fauna and flora, and 633 00:34:25,280 --> 00:34:28,239 Speaker 10: the neither government of any stripe wants to put that 634 00:34:28,320 --> 00:34:31,000 Speaker 10: at risk. So that's why that barrier is there. But 635 00:34:31,680 --> 00:34:35,040 Speaker 10: didn't save Australia from President Trump's tariff round. 636 00:34:35,160 --> 00:34:38,160 Speaker 4: Should we dismiss the notion of any type of retaliation? 637 00:34:38,400 --> 00:34:41,080 Speaker 4: Is that even a likelihood, It's very unlikely. 638 00:34:41,800 --> 00:34:43,839 Speaker 10: The Prime Minister was pretty quick out of the gate 639 00:34:43,920 --> 00:34:46,719 Speaker 10: to say that, Look, while it's unwarranted, there's not going 640 00:34:46,760 --> 00:34:50,600 Speaker 10: to be any reaction. We are in an election cycle here, 641 00:34:50,920 --> 00:34:54,240 Speaker 10: so we've had the opposition leader talking tough, but saying 642 00:34:54,239 --> 00:34:56,120 Speaker 10: that he could reach a deal with the US to 643 00:34:56,120 --> 00:34:58,680 Speaker 10: get tariffs removed. But you know that this is the 644 00:34:58,719 --> 00:35:00,760 Speaker 10: type of thing you'd expect to hear or in an election. 645 00:35:01,520 --> 00:35:04,160 Speaker 10: The election is at the start of May, would be 646 00:35:04,200 --> 00:35:08,600 Speaker 10: some time before a new government was installed, regardless of 647 00:35:08,600 --> 00:35:11,960 Speaker 10: what government that is. So yeah, retaliation at this point 648 00:35:12,680 --> 00:35:14,719 Speaker 10: is pretty much off the table for Australia. 649 00:35:14,840 --> 00:35:17,800 Speaker 4: Can you give me a sense of the likely impact? 650 00:35:17,840 --> 00:35:20,080 Speaker 4: What are people talking about as they look to these 651 00:35:20,120 --> 00:35:22,600 Speaker 4: new levies that will take effect. We don't know whether 652 00:35:22,640 --> 00:35:25,319 Speaker 4: there's going to be any wiggle room here. It's not 653 00:35:25,480 --> 00:35:28,800 Speaker 4: until April ninth that the reciprocal tariffs go into effect 654 00:35:28,800 --> 00:35:33,160 Speaker 4: at twelve oh one am. So put aside the flexibility 655 00:35:33,160 --> 00:35:36,600 Speaker 4: that may exist in some type of new trade and negotiation, 656 00:35:37,480 --> 00:35:40,560 Speaker 4: what would be the impact if these tariffs kind of 657 00:35:40,560 --> 00:35:41,440 Speaker 4: go into effect. 658 00:35:41,960 --> 00:35:45,440 Speaker 10: Well, there's it's sort of still sinking in here, but 659 00:35:45,480 --> 00:35:48,480 Speaker 10: there's a sense that it's not as bad as it 660 00:35:48,520 --> 00:35:50,720 Speaker 10: could have been. And look, let's just take the wine 661 00:35:50,719 --> 00:35:53,920 Speaker 10: industry for example. So the US imports a lot of 662 00:35:53,960 --> 00:35:59,000 Speaker 10: Australian wine that will now be ten percent more expensive, 663 00:35:59,040 --> 00:36:01,120 Speaker 10: But the wine industry has just come off the back 664 00:36:01,120 --> 00:36:04,920 Speaker 10: of a bruising tariff battle with China where tariffs were 665 00:36:04,960 --> 00:36:07,680 Speaker 10: put on Australian wine of two hundred and twenty percent. 666 00:36:08,120 --> 00:36:11,399 Speaker 10: So it's like an attitude of okay, we can live 667 00:36:11,440 --> 00:36:14,879 Speaker 10: with this, but again the prevailing sensor, it's just one 668 00:36:14,880 --> 00:36:19,319 Speaker 10: of enormous confusion because there are a few relationships in 669 00:36:19,360 --> 00:36:23,160 Speaker 10: the world that are closer than the US Australia relationship. 670 00:36:23,200 --> 00:36:26,440 Speaker 10: Australia has shown up to every war that the United 671 00:36:26,480 --> 00:36:30,040 Speaker 10: States has fought. It's been a very close partner. As 672 00:36:30,080 --> 00:36:32,960 Speaker 10: I mentioned, it runs a trade deficit. There's just a 673 00:36:32,960 --> 00:36:35,880 Speaker 10: tremendous amount of confusion all around. And even with the 674 00:36:35,960 --> 00:36:39,360 Speaker 10: tariffs that are in place, like the steel and aluminum tariffs, 675 00:36:39,400 --> 00:36:43,560 Speaker 10: we say aluminium. Here a blue Scope Steel. It's Australia's 676 00:36:43,600 --> 00:36:47,640 Speaker 10: only listed steel maker. It makes steel in the US. 677 00:36:47,719 --> 00:36:50,360 Speaker 10: It's got a big plant in Ohio. It's the fifth 678 00:36:50,440 --> 00:36:55,080 Speaker 10: largest steel producer. But it imports well. It exports steel 679 00:36:55,200 --> 00:36:57,960 Speaker 10: to the West Coast of the United States. The reason 680 00:36:58,040 --> 00:37:01,200 Speaker 10: being is it's cheaper to do that than to truck 681 00:37:01,239 --> 00:37:04,919 Speaker 10: it over the Rocky Mountains from Ohio. So the US 682 00:37:04,960 --> 00:37:07,640 Speaker 10: steel consumers are getting a better deal from Blue Scope 683 00:37:07,680 --> 00:37:10,760 Speaker 10: doing that so now that's been chucked out the window. 684 00:37:11,200 --> 00:37:13,080 Speaker 10: The more expensive steel is going to come to the 685 00:37:13,080 --> 00:37:17,080 Speaker 10: West coast from Ohio. So again it's just head scratching. 686 00:37:17,320 --> 00:37:19,600 Speaker 10: It just seems absolutely bizarre. 687 00:37:19,760 --> 00:37:22,840 Speaker 4: So to take us back to Australia and the impact 688 00:37:22,880 --> 00:37:27,080 Speaker 4: of tariffs, is there some type of geographic differentiation that 689 00:37:27,120 --> 00:37:30,520 Speaker 4: we can describe how certain areas of the country will 690 00:37:30,560 --> 00:37:34,160 Speaker 4: be affected, maybe to a greater or lesser degree than others. 691 00:37:34,880 --> 00:37:36,440 Speaker 10: Yeah, well that's true, and this is when I get 692 00:37:36,440 --> 00:37:39,759 Speaker 10: it where it gets even weirder. Australia repaired on that 693 00:37:39,840 --> 00:37:42,759 Speaker 10: big list that the President held up with the ten 694 00:37:42,760 --> 00:37:45,480 Speaker 10: percent next to its name, So yeah, compared to the 695 00:37:45,520 --> 00:37:47,640 Speaker 10: rest of the world, the country to get off lightly. 696 00:37:48,040 --> 00:37:50,680 Speaker 10: But then if you continue reading down that list, you 697 00:37:50,760 --> 00:37:54,719 Speaker 10: get to some rather strange outliers, first of which is 698 00:37:54,760 --> 00:37:59,480 Speaker 10: at Norfolk Island, which is an Australian territory. It's about 699 00:37:59,520 --> 00:38:02,759 Speaker 10: sixteen one hundred miles out to sea, as a population 700 00:38:02,840 --> 00:38:05,799 Speaker 10: of just over two thousand people, that's been hit with 701 00:38:05,800 --> 00:38:08,920 Speaker 10: a tariff of twenty nine percent, And the Prime Minister 702 00:38:09,040 --> 00:38:12,920 Speaker 10: raised this as well. He said he cannot understand what 703 00:38:13,160 --> 00:38:16,080 Speaker 10: goes on in Norfolk Island, population two thousand in the 704 00:38:16,120 --> 00:38:18,239 Speaker 10: middle of the ocean. That is such a threat to 705 00:38:19,440 --> 00:38:22,520 Speaker 10: US trade. But it gets weirder still. Further down the 706 00:38:22,520 --> 00:38:25,320 Speaker 10: list is the herd and McDonald Islands and other Australian 707 00:38:25,400 --> 00:38:29,120 Speaker 10: territory tariff of ten percent signaled out. It's got no 708 00:38:29,360 --> 00:38:33,360 Speaker 10: people at all, but a whole lot of penguins. I 709 00:38:33,360 --> 00:38:35,440 Speaker 10: don't think you've got penguins in the US. Maybe that's 710 00:38:35,480 --> 00:38:36,080 Speaker 10: the problem. 711 00:38:36,200 --> 00:38:40,040 Speaker 4: That's Paul Allen, Australia correspondent for Bloomberg News, joining from 712 00:38:40,120 --> 00:38:43,040 Speaker 4: Sydney and I'm Doug Prisner. You can catch us weekdays 713 00:38:43,239 --> 00:38:46,960 Speaker 4: for the Bloomberg Daybreak Asia podcast. It's available wherever you 714 00:38:47,040 --> 00:38:47,960 Speaker 4: get your podcast. 715 00:38:48,320 --> 00:38:51,160 Speaker 2: Tom, Thanks Doug, and that does it for this edition 716 00:38:51,200 --> 00:38:53,879 Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning 717 00:38:53,920 --> 00:38:55,759 Speaker 2: at five am Wall Street Time for the latest on 718 00:38:55,920 --> 00:38:58,520 Speaker 2: markets overseas and the news you need to start your day. 719 00:38:58,880 --> 00:39:01,880 Speaker 2: I'm Tom Busby. Stay with us. Top stories and global 720 00:39:01,920 --> 00:39:03,879 Speaker 2: business headlines are coming up right now.