Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg day Break Weekend, our global look at
Speaker 2: the top stories in the coming week from our Daybreak
Speaker 2: anchors all around the world. It straight ahead on the program,
Speaker 2: What will tariff wars, Wall Street in turmoil, fears of
Speaker 2: a recession, and some key inflation data out this week
Speaker 2: all mean for the bed, Plus a look at the
Speaker 2: potential impact of President Trump's tariffs on the US retail sector.
Speaker 2: I'm Tom Busby in New York.
Speaker 3: I'm Carolyn Hetkee here in London, where we're diving into
Speaker 3: the Bank of England's assessment of the key risks facing
Speaker 3: the UK's financial landscape.
Speaker 4: I'm deg Prisner looking at how the impending reciprocal Trump
Speaker 4: tariffs are resonating through the Asia Pacific.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Tom Busby. We begin today's
Speaker 2: program with a look at the early fallout from President
Speaker 2: Trump's trade war how it may impact next month's Federal
Speaker 2: Reserve decisions on interest rates and economic policy. We're coming
Speaker 2: off a better than forecast March jobs report, and we
Speaker 2: get us CPI data for March on Thursday, PPI data
Speaker 2: on Friday. It is a lot and tariff policies could
Speaker 2: change at any time. We're joined by Michael McKee, Bloomberg
Speaker 2: International Economics and Policy correspondent. How do you and the
Speaker 2: Federal Reserve policymakers try to make sense of everything we've
Speaker 2: seen this past week.
Speaker 5: From an economic theory standpoint, you can't make any sense
Speaker 5: out of it because it makes no sense. But you
Speaker 5: have to deal with the world that you have, and
Speaker 5: so the Fed is going to be modeling out what
Speaker 5: potential effects this could have on the actually economy. They'll
Speaker 5: sit back and say, yeah, this is really stupid economic policy,
Speaker 5: but they're not gonna They have to do something at
Speaker 5: some point about where we are. So they need to
Speaker 5: try to figure that out. And it's still really hard
Speaker 5: to do because the imposition of the tariffs isn't clear
Speaker 5: exactly what gets tariffed and by how much.
Speaker 6: How soon, So it's going to take.
Speaker 2: A while and some haven't even started.
Speaker 5: So what they'll be looking at is the impact on
Speaker 5: inflation and on unemployment and on consumers. Next week we
Speaker 5: get the CPI report for the month of March, which
Speaker 5: isn't going to tell us much because it's for the
Speaker 5: month of March, and that's before almost all the tariffs,
Speaker 5: and the tariffs that were put on in March are
Speaker 5: basically on the producer side. We may see inflation go
Speaker 5: up a little bit on a year over year basis,
Speaker 5: or it may go down a little bit on a
Speaker 5: your year basis, but it's not going to tell the
Speaker 5: fate about anything about where they're going. So it's going
Speaker 5: to be another month or so before they start to
Speaker 5: have some data.
Speaker 2: The big fear of courses inflation, and we've already heard
Speaker 2: from some companies car makers saying it's going to cost
Speaker 2: you more, and there are reports JP Morgan, Chase, GOBN,
Speaker 2: saks A for high end cars could be fifteen thousand
Speaker 2: dollars more. Mercedes Benz says we're not even going to
Speaker 2: send our lowest price car there because people can't afford it.
Speaker 5: I couldn't afford it even if it were the lowest
Speaker 5: price car. But the interesting thing is that when the
Speaker 5: new car situation, if that plays out that way, used
Speaker 5: cars are going to get very expensive because people who
Speaker 5: can't afford to pay the higher prices for new cars
Speaker 5: are going to go buy used cars, and then supply
Speaker 5: and demand, we'll see used car prices go up. Probably
Speaker 5: inflation is the first danger out of the tariffs that
Speaker 5: the FED is going to be looking at, because prices
Speaker 5: can go up immediately. It will take a while for
Speaker 5: companies to figure out what they need to do with
Speaker 5: staffing if there is a recession, and do we want
Speaker 5: to cut people.
Speaker 6: Remember how hard it was to hire people before.
Speaker 5: It's always sticky, so that'll take some time to play out.
Speaker 5: The good thing for the FED about the jobs report
Speaker 5: on Friday was that it was generally solid. Now, again,
Speaker 5: it was March before all most of this stuff started happening,
Speaker 5: but it fits the narrative as Jay Powell has been saying,
Speaker 5: that the labor market is solid, and the Fed's two
Speaker 5: responsibilities are the labor market and inflation, so they can
Speaker 5: lean on inflation. They can leave rates unchanged because the
Speaker 5: inflation rate is either staying where it is or we
Speaker 5: hope not, but it could be going up. So I
Speaker 5: don't think at this point the Fed is thinking about
Speaker 5: cutting rates, even if Wall Street is.
Speaker 2: And more on that March jobs report, because the Challenger
Speaker 2: Grand Christmas came out this past week said two hundred
Speaker 2: and eighty thousand federal workers were laid off. That was
Speaker 2: in two months, but a lot of them still getting severance,
Speaker 2: so they're not counted in these numbers. Still good.
Speaker 5: Actually, actually they are counted as still employed according to
Speaker 5: the BLS. They put out a note in Friday's jobs
Speaker 5: report that said people who are receiving severance or who
Speaker 5: are on administrative leave are counted as employed.
Speaker 6: So we haven't seen the impact yet.
Speaker 2: And we may not for several months.
Speaker 5: The Challenger survey is based on job cut announcements, and
Speaker 5: they basically said, we took the press releases that Elon
Speaker 5: Musk put out about how many people were going to
Speaker 5: be fired, and that's what we're counting. And people don't
Speaker 5: usually put a lot of weight on Challenger because a
Speaker 5: lot of the job cuts that are announced don't happen.
Speaker 5: Either companies do it through attrition or through just not
Speaker 5: hiring additional people as opposed to actually firing people. It
Speaker 5: was a number that got people's attention, and we're certainly
Speaker 5: going to probably see some big federal job losses. But
Speaker 5: I don't know that we get to two hundred and
Speaker 5: eighty thousand very quickly.
Speaker 2: No, be a while. And it could this March report
Speaker 2: be the last really upbeat job support for a while
Speaker 2: because of these.
Speaker 6: Well it could.
Speaker 5: On Friday, John Ferreroll spoke with the new Labor Secretary,
Speaker 5: who said.
Speaker 6: No, this is not going to be the last good report, but.
Speaker 5: I can't see how it would be a good report
Speaker 5: going forward. And the reason why is the uncertainty. If
Speaker 5: you don't know whether you're going to have to be
Speaker 5: letting people go in a month or so, you don't
Speaker 5: want to be hiring people. And if, indeed, as we
Speaker 5: have seen some evidence already, the economy is slowing down,
Speaker 5: then you can probably meet the demand that you have
Speaker 5: with the employees that you have. So I don't know
Speaker 5: that we're going to see another blowout surprise to the
Speaker 5: upside for a while.
Speaker 2: It's going to be a long four weeks before that
Speaker 2: next meeting. Our thanks to Michael McKee, Bloomberg International Economics
Speaker 2: and Policy Correspondent, well more now on President Trump's sweeping tariffs,
Speaker 2: which a're hitting certain countries a lot harder than others,
Speaker 2: impacting some of America's biggest electronics, apparel, footwear makers, and retailers,
Speaker 2: And for more on the potential impact of those tariffs
Speaker 2: on the retail sector. We're joined by Jennifer bartashis Bloomberg
Speaker 2: Intelligence Senior analyst Retail, Staples and packaged food.
Speaker 5: Wow.
Speaker 2: Well, Jennifer, let's start with a look at the countries
Speaker 2: that supply most of the imported clothing, sneakers, gadgets, furniture,
Speaker 2: and other goods aside from autos. I mean, China, Vietnam, Taiwan.
Speaker 2: These are huge numbers, aren't they They.
Speaker 7: Are, indeed, and so it was a bit of a
Speaker 7: surprise how big some of these numbers were given how
Speaker 7: much some of our companies rely on those countries for manufacturing.
Speaker 7: So when you're talking about Vietnam, India, Thailand, Cambodia, you know,
Speaker 7: I think one of the big takeaways here is that
Speaker 7: our retailers in the United States have been making an
Speaker 7: effort to diversify away from China for the past several years,
Speaker 7: and yet, and with the idea that it would help
Speaker 7: insulate them from higher tariffs. And yet with this new
Speaker 7: wave that is just not the case anymore. And so
Speaker 7: that's that's an area for concern.
Speaker 2: No, but the most impacted country will be China. And
Speaker 2: still you to pick up an article of clothing, a toy,
Speaker 2: chances are an Apple iPhone that it is made in China.
Speaker 2: So much is manufactured there. So still they haven't separated
Speaker 2: themselves totally. I know Apple is making iPhones in India
Speaker 2: now they've tried, but it's a global world, no matter
Speaker 2: what we hear from the White House. How is this
Speaker 2: going to impact US companies?
Speaker 7: Yeah, so, as you said very accurately, China is still
Speaker 7: the main trading partner for a lot of US companies
Speaker 7: and so even those attempts to diversify just don't add
Speaker 7: up to really offset the huge impact that these Chinese
Speaker 7: tariffs are going to have. When you talk about real
Speaker 7: big retailers like Target in particular, you know, China is
Speaker 7: still the biggest, the biggest source for their their their
Speaker 7: goods that are imported. When you're talking about apparel and
Speaker 7: electronics and toys and home furniture, even some beauty products,
Speaker 7: it really puts a lot of pressure on retailers like
Speaker 7: Target that skew to more discretionary spending in how they're
Speaker 7: going to manage all this additional cost You know, Walmart also,
Speaker 7: you know, out of the general merchandise that they sell,
Speaker 7: you know, the bulk of it comes from China. And
Speaker 7: then you can't forget to me one of the areas
Speaker 7: of retail that's going to get hit the hardest, and
Speaker 7: that's the dollar stores because they're very low price point stores.
Speaker 7: Most of what they sell comes from China, and so
Speaker 7: figuring out how they're going to be able to manage
Speaker 7: their business when it's so reliant on China and have
Speaker 7: such low price points is really going to be a challenge.
Speaker 2: And let's face it, importers pay those tariffs, the price
Speaker 2: increases are passed along to consumers. There was no doubt
Speaker 2: about that. So these are ore are the hardest hit.
Speaker 2: People are going to be the folks that shop at
Speaker 2: those Dollar Tree, dollar general stores. I mean this could
Speaker 2: be devastating.
Speaker 7: Yeah, exactly. So you know, you've got consumers who are
Speaker 7: already under pressure, You've got prices going up that's gonna
Speaker 7: you know that from tariffs that are going to create
Speaker 7: even more pressure on these consumers, and dollar stores are
Speaker 7: where people go to seek value, right because they don't
Speaker 7: have a lot of money in their pocket and they
Speaker 7: can get things. And so these retailers in particular are
Speaker 7: going to have a very difficult time navigating this new
Speaker 7: tariff landscape. When we heard about earnings from the fourth
Speaker 7: quarter from these companies, they all said that they had
Speaker 7: mitigation plans in place, so they were talking to their
Speaker 7: suppliers to try to share costs. They were thinking about
Speaker 7: what products they could, you know, if they had to
Speaker 7: not carry anymore. But the tariffs announced are so sweeping
Speaker 7: it doesn't leave them a lot of room for negotiation.
Speaker 7: So you know, whether it's Dollar General, dollar Tree, think
Speaker 7: about five below. Again, these companies are are really up
Speaker 7: against the wall with these.
Speaker 2: Tariffs, and not just those companies. I want to break
Speaker 2: down a Vietnam. I think it's a good example. Forty
Speaker 2: six percent tariffs on imports from Vietnam. Nike Footwear fifty
Speaker 2: one half fifty percent of its footwear is sourced from Vietnam.
Speaker 2: That's according to company fi links compiled by Bloomberg. Also Lululemon, Adidas,
Speaker 2: Abercrat I mean, the list goes on and on. I
Speaker 2: don't know if a lot of people know how much
Speaker 2: is made there and how it's going to affect consumers.
Speaker 7: Here exactly when you're talking about the footwear industry, Vietnam
Speaker 7: is the biggest place for manufacturing for footwear. And so
Speaker 7: whether it's All Birds or it's as you said, Nike
Speaker 7: or Puma or Adidas, you know, all of these companies
Speaker 7: are now faced with how they're going to how they're
Speaker 7: going to manage those costs, and you can only pass
Speaker 7: through so much to consumers. You know, I think it's
Speaker 7: inevitable that consumer costs are going to be coming up,
Speaker 7: but there's a breaking point where you can't do that
Speaker 7: and you have to absorb some. So one of the
Speaker 7: things that everyone's watching is, you know, what's going to
Speaker 7: happen with the margins of these companies as costs go
Speaker 7: up and their ability to raise prices gets capped. And so,
Speaker 7: you know, we think that there may still be room
Speaker 7: for negotiation the way President Trump, you know, announce these
Speaker 7: tariffs before they fully go into effect, but you have
Speaker 7: to plan for the worst, and right now it's looking
Speaker 7: a bit dire for apparel companies and for footwear companies.
Speaker 2: Oh what sure is well? Our thanks to Jennifer Bartash
Speaker 2: is Bloomberg Intelligence senior analysts retail, staples and packaged food,
Speaker 2: and coming up on Bloomberg day Break weekend, we'll dive
Speaker 2: into the Bank of England's assessment of the key risks
Speaker 2: facing the UK's financial landscape. I'm Tom Busby and this
Speaker 2: is Bloomberg. This is Bloomberg day Break weekend, our global
Speaker 2: look ahead at the top stories for investors in the
Speaker 2: coming week. I'm Tom Busby in New York. Up later
Speaker 2: in our program a look at how President Trump's tariffs
Speaker 2: on Chinese goods will impact relations with Beijing moving forward.
Speaker 2: But first, the UK Central Bank releases its quarterly report
Speaker 2: on the stability of the UK's financial system this week,
Speaker 2: along with what it's doing to remove or reduce risks.
Speaker 2: But as geopolitical and global economic tensions rise, can policymakers
Speaker 2: really fortify the Bank of England against market turmoil? For more,
Speaker 2: Let's go to London and bring in Bloomberg day Break
Speaker 2: Euro banker Caroline Hepgar Tom.
Speaker 3: The Bank of England's stability report is meant to support
Speaker 3: the resilience of Britain's financial system and therefore support economic
Speaker 3: growth by scanning the risks on the horizon. In the
Speaker 3: last report, released in November twenty twenty four, the Bank
Speaker 3: of England cited a risky outlook driven by geopolitical tensions
Speaker 3: and global fragmentation. Specifically, they called out material pressures on
Speaker 3: government debt levels and increasing borrowing costs. Even if they
Speaker 3: talked about consumers and businesses remaining resilient. In the six
Speaker 3: months or so since that publication, those risks do appear
Speaker 3: to loom large, still complicating the job of policy makers
Speaker 3: looking to steer the UK's financial markets through the storm.
Speaker 3: In the UK, fiscal pressure has increased. Just look at
Speaker 3: how the Chancellor Rachel Reeves lost half of her ten
Speaker 3: billion pound fiscal buffer in the days after her spring
Speaker 3: financial statement. This is something that the Central Bank did
Speaker 3: worn about back in November. The Bank argued then that
Speaker 3: a deterioration in market perceptions about the sustainability of the
Speaker 3: long term path of government's debt globally may lead to
Speaker 3: higher rates and sharp movements in market prices. In particular,
Speaker 3: Bank of England experts believe that increased debt levels and
Speaker 3: servicing costs for governments could also reduce their capacity to
Speaker 3: respond to future shocks that may be to come, and
Speaker 3: also increase the cost of borrowing and refinancing of debt
Speaker 3: for households and for businesses. So how's the Bank of
Speaker 3: England's financial outlook become riskier and how do they plan
Speaker 3: to keep the country on track? I've been asking Bloomberg's
Speaker 3: finance reporter Laura Noonan, and I began by asking her
Speaker 3: simply to begin with, what the point is of this
Speaker 3: financial stability report?
Speaker 8: So the point of a financial stability report is that
Speaker 8: if there is a financial crisis coming, you see the
Speaker 8: warning signs really early, and you step in and do
Speaker 8: what you can to prevent us. So we, notably in
Speaker 8: the UK, didn't have any before the financial crisis, and
Speaker 8: they introduced this concept in the aftermath of the financial crisis,
Speaker 8: because you would all these people saying why were there
Speaker 8: no alarm bells ringing? And part of the reason that
Speaker 8: there were no alarm bells ringing about the belt up
Speaker 8: of risk was that while every regulator and every center
Speaker 8: bank has general oversight of risk, there was no one
Speaker 8: specifically in charge of ringing the bell. So I would
Speaker 8: think of this financial spell report, this is the.
Speaker 3: Bell Okay, so we're waiting for this bell recap what
Speaker 3: happened in November's report, because they come up with a
Speaker 3: list of risks and they explain them in some detail.
Speaker 3: Think about the time frame between that November report and now.
Speaker 8: Okay, so November was a particularly fun report. It was
Speaker 8: a big bell and that's because they do these things quarterly.
Speaker 8: But they also, as well as having the general laundry
Speaker 8: list of these other risks of the financial system, they
Speaker 8: also do special publications during some and we had a
Speaker 8: special publication in November which I was very excited about,
Speaker 8: which was the outcome of this broad market stress test,
Speaker 8: the first one in the world to see how the
Speaker 8: market system would respond to a crisis, and that found
Speaker 8: that that basically non banks were not particularly ready for
Speaker 8: a crisis. The other things that they warned about were
Speaker 8: the general things they've been warning about for some time.
Speaker 8: And often the language is very important here. It's a
Speaker 8: bit like if you watch the interest rate decisions and
Speaker 8: the commentary around that, the exact words you so you
Speaker 8: can say, you know the outlook, the risk is deteriorating,
Speaker 8: the risk is worsening, risks are escalating. So the exact
Speaker 8: language matters in terms of whether they see big risks,
Speaker 8: whether they see moderate risks in different areas. Last time
Speaker 8: they called out the geopolitical risks were increasing very obviously,
Speaker 8: yes they are, and we can expect that geopolitical risks
Speaker 8: have not subsidies between November and now. So if I
Speaker 8: were a betting person, which apparently we're not allowed to
Speaker 8: be and anymore, But if I were a betting person,
Speaker 8: I will be betting on geopolitical risks to feature heavily
Speaker 8: in the report. And with that we can expect to
Speaker 8: see them warning about the different and risks that different
Speaker 8: parts of the financial landscape face. And geopolitical risk can
Speaker 8: manifest in lots of different things, So you can have
Speaker 8: difficulty trading with certain parts of the world, you can
Speaker 8: have sharp corrections of sharp changes to acid prices because
Speaker 8: of geopilical policies. So there's a number of things there
Speaker 8: and I would expect a lot of warning about geopilical risk.
Speaker 8: They also tend to warn about other things. They'll always
Speaker 8: be something about cyber when the geopolitical situation worsens. There's
Speaker 8: often a heightened fear about cyber because you have state
Speaker 8: sponsored cyber attacks and that's something we saw a lot
Speaker 8: last year where there was a lot of concern about
Speaker 8: how would the financial system withstand an attack from a
Speaker 8: negative state actor, and that's something that they have been
Speaker 8: warning heavily about. They has been ongoing concerned about valuation
Speaker 8: in various asset classes, and obviously valuations have fallen recently
Speaker 8: in recent days anyway, so they are still at fairly
Speaker 8: elevated levels. The other repeat one is the links between
Speaker 8: the private equity slash private credit slash private market space
Speaker 8: and the financial system and the way that those links
Speaker 8: could unravel in a problematic way.
Speaker 3: Okay, so quite a list of risks that they that
Speaker 3: you're watching out for in terms of what they may cite.
Speaker 3: How are these reports then so normally received.
Speaker 8: How we actually get them is actually great fun. So
Speaker 8: how we literally receive them is they take a gang
Speaker 8: of journalists three floors underground in the Bank of England
Speaker 8: and they lock us in with them. It's actually very,
Speaker 8: very fun, and then we have an hour and a
Speaker 8: half with them before we can then broadcast. In terms
Speaker 8: of how they're received by the wider world, they so
Speaker 8: the FPC is part of the Bank of England rather
Speaker 8: than the pure which is the regulatory arm. So basically
Speaker 8: the Bank of England warrants and then the PURE and
Speaker 8: the FCA to an extent, decides, okay, what do we
Speaker 8: want to take greater action in. So if they warrant
Speaker 8: about vulnerabilities in a certain part of the market, the
Speaker 8: PRAA may then go and do an exercise to review that.
Speaker 8: So there are two things the FPC can do. They
Speaker 8: can advise or recommend. They can actually make orders for
Speaker 8: some things, but they very rarely do that. The one
Speaker 8: thing they directly control is something called the counter cyclical
Speaker 8: capital buffer, which some of your listeners may be familiar with,
Speaker 8: and that basically sets the capital buffer banks have to
Speaker 8: maintain to deal with a potential crisis. In the UK,
Speaker 8: it's been at neutral level for quite some time, and
Speaker 8: that's because banks are well capitalized. I don't think they're
Speaker 8: going to change that buffer this week, but they might.
Speaker 8: The other things I should have said earlier that they
Speaker 8: talk about a lot is the resilience of households, the
Speaker 8: resilience of businesses to these things. So they'll talk about,
Speaker 8: you know, for a long time during the last interest
Speaker 8: rate cycle, we heard about their percentage of households whose
Speaker 8: mortgage just would jump by a certain amount, and how
Speaker 8: that would play out. I mean, for us from a
Speaker 8: journalistic point of view, disappointingly, the last few time that's
Speaker 8: been households are resilient, banks are resilient, business are resilient.
Speaker 8: That is no crack whatsoever to report on. But I
Speaker 8: guess what I would imparty with is that the level
Speaker 8: of resilience has been high and as interest rates for
Speaker 8: the level of resilience should increase.
Speaker 3: Okay, So then that probably goes to my next thought,
Speaker 3: which is what is your assessment, Bloomboad's assessment currently of
Speaker 3: the UK's sort of risk landscape and how we're thinking
Speaker 3: about it.
Speaker 8: So the UK's risk landscape is not as from a
Speaker 8: macroeconomic perspective, it's not as bad as some of the
Speaker 8: markets where there are bigger policy changes taking place. So
Speaker 8: I don't think it's the risky ast market. The one
Speaker 8: thing that I would that I'm like watching out for
Speaker 8: is what if anything they say about the deregulation risks.
Speaker 8: So the Bank of England's regularly arm the p r
Speaker 8: A and the FCA, which regulates conduct and other parts
Speaker 8: of the financial industry. They've been pulling back a lot
Speaker 8: of rules in the spirit of promoting the UK's competitiveness,
Speaker 8: which is great and all, and they say that they
Speaker 8: are threading the needle in terms of Okay, we're going
Speaker 8: to make the burdens on financial services firm less and
Speaker 8: that's not going to increase risk by too much. It
Speaker 8: is a fine balancing act and the FPC this report
Speaker 8: is independent enough that it could say we see heightened
Speaker 8: risk to financial stability arising from the deregulation which is
Speaker 8: taking part place both in the UK and elsewhere. I
Speaker 8: think that's going to be an interesting trend like we've had.
Speaker 8: The FCA Chief Executive Nikhil Rathi has been talking about
Speaker 8: the government needing to set an acceptable risk level and
Speaker 8: an acceptable failure level. If they want to go down
Speaker 8: this route of taking off all the red tape and
Speaker 8: everything that Richter Reefs has been talking about, there will
Speaker 8: be more failures, there will be more risks, and in
Speaker 8: theory the FPC is I think of them as being
Speaker 8: the guardian of that. They're the ones who I'm hoping
Speaker 8: are going to watch this at a very high level
Speaker 8: and say, is what we're doing increasing risk in the
Speaker 8: financials and is it increasing risk in a dangerous way
Speaker 8: or in a matter way.
Speaker 3: It's interesting, isn't it that this idea of risk that
Speaker 3: Britain needs more risk taking, positive risk taking in order
Speaker 3: to galvanize economic growth or allow investors to put more
Speaker 3: money to work in a better way. That's going to
Speaker 3: deliver more growth for Britain. How do we think about
Speaker 3: financial stability in the UK versus other markets? Is it
Speaker 3: more precarious less precarious? I mean, there's a big world
Speaker 3: out there, but how do we benchmarket?
Speaker 8: I would say more precarious and the EU partly because
Speaker 8: of all these policy changes. The one thing about the
Speaker 8: EU is that you have been talking a lot about simplification,
Speaker 8: about competitiveness, but it is a really slow moving train.
Speaker 8: And one of the things since breaksit breksit made it
Speaker 8: much easier for the UK to directly and quickly enact reforms.
Speaker 8: In the EU, they will be discussing it till the
Speaker 8: end of time. They are doing a review on the
Speaker 8: compassionist of banking, which they report on by the end
Speaker 8: of twenty twenty six, so they are not changing reels
Speaker 8: as quickly. Despite talking about the UK is obviously the
Speaker 8: risks in the US are much much higher because there
Speaker 8: is a lot of quality change going on there at
Speaker 8: every level, and no one quite knows how this is
Speaker 8: going to play out. So if I were to rank
Speaker 8: the hierarchy of fanatibility risks in our major markets US
Speaker 8: top UK second.
Speaker 3: You third, how important a feature are borrowing costs likely
Speaker 3: to be in this report? You did touch on it.
Speaker 3: You know, when it comes to perhaps interest rates maybe
Speaker 3: coming down, but borrowing costs talk about those.
Speaker 8: So I think borrowing costs are not going to be
Speaker 8: a major feature just because they are coming down. So
Speaker 8: when we saw so most people will now have had
Speaker 8: even people on fixed mortgages, they will have had their
Speaker 8: rate increases and they will have adjusted, and the trajectory
Speaker 8: is very much downward. Now there's obviously an open question
Speaker 8: about how quickly the UK moves down, but borrowing costs
Speaker 8: are likely to fall, and that is generally speaking positive
Speaker 8: from a household resilience perspective. The other thing we sometimes
Speaker 8: will get commentary on is the level of availability of
Speaker 8: credit from banks to firms and individuals, and that is
Speaker 8: a kind of a leading indicator because if banks themselves
Speaker 8: are worried about changes, then they will start restraining credit.
Speaker 8: So I tend to think that if there were any
Speaker 8: kind of problems coming, what we first see is banks
Speaker 8: restraining credit, and then we'd see issues in terms of
Speaker 8: borrowing affordability coming later.
Speaker 3: My thanks to Bloomberg's Laura Noonan, and we will have
Speaker 3: full coverage of the Bank of England's Financial Stability report
Speaker 3: and its implications in the coming days right across Bloomberg
Speaker 3: channels and on the terminal. I'm Caroline Hepkee here in London.
Speaker 3: You can catch us every weekday morning for Bloomberg Daybreak.
Speaker 3: You up beginning at six am in London. That's one
Speaker 3: am on Wall Street.
Speaker 2: Tom, Thank you, Caroline. And coming up on Bloomberg Daybreak weekend,
Speaker 2: they'll look at how President Trump's increased s tariffs on
Speaker 2: Chinese goods could impact relations with China. I'm Tom Busby
Speaker 2: and this is Bloomberg. This is Bloomberg day Break Weekend,
Speaker 2: our global look ahead at the top stories for investors
Speaker 2: in the coming week. I'm Tom Busby in New York.
Speaker 2: Resident Trump announcing last week in additional thirty four percent
Speaker 2: tariff on Chinese goods, bringing total levies to at least
Speaker 2: fifty four percent. Now for more on how the new
Speaker 2: tariffs are reverberating through the Asia Pacific region. Let's get
Speaker 2: to the host of the Daybreak Asia podcast, Doug Krisner.
Speaker 4: Tom Bloomberg Economics did the math and discovered the average
Speaker 4: charge on Chinese goods will rise to sixty six point
Speaker 4: eight percent. Earlier estimates from Bloomberg's trade team show a
Speaker 4: sixty percent tariff could cut China's direct exports to the
Speaker 4: US by up to eighty percent over the medium term,
Speaker 4: and under that scenario, some two point three percent of
Speaker 4: China's GDP would be at risk. For more, we turned
Speaker 4: to Jenny Marsh. She is China ECOGUV team lie leader
Speaker 4: for Bloomberg News. Jenny joins us from our studios in
Speaker 4: Hong Kong. I thought it was very interesting that the
Speaker 4: US has addressed a loophole. It allows packages worth up
Speaker 4: to eight hundred dollars from either China or Hong Kong
Speaker 4: to enter the US duty free. But now we're told
Speaker 4: that's going to end. May TEWI. So it shouldn't come
Speaker 4: as a surprise when you look at markets and see
Speaker 4: a sell off in shares like Ali Baba ANDJD dot Com.
Speaker 4: Was that a surprise at all?
Speaker 9: Not a surprise because he talked about it in the
Speaker 9: Executive Order on the first day, and of course they
Speaker 9: tried sort of putting this break on the dominimous lepole
Speaker 9: earlier that they had to sort of lift it because
Speaker 9: logistically it's very hard to sort of logistics of how
Speaker 9: you actually impose that. So I think that was pretty expected,
Speaker 9: and so now it's just a matter of Okay, how
Speaker 9: do you sort of how do small companies deal with that?
Speaker 9: But when you add that in as well, actually the
Speaker 9: tariffrerate looks even higher than sixty seven percent.
Speaker 4: I noticed that the South China Morning Post was reporting
Speaker 4: that President She is set to visit Vietnam, Malaysia, Cambodia
Speaker 4: in mid April. Now we know that all of those
Speaker 4: nations are being hit by this round of US tariffs.
Speaker 4: Is this a part of some type of strategy that
Speaker 4: she has maybe to reconfigure trade relationships.
Speaker 7: Yeah.
Speaker 9: I think the itinerary is really interesting. I mean, the
Speaker 9: first trip that she takes abroad every year always carries
Speaker 9: huge symbolism. Last year he chose to go to France,
Speaker 9: just does the European Union a sort of way in
Speaker 9: these big ev tariffs. This year he's picked Vietnam, Cambodia
Speaker 9: and Malaysia, and you know, Vietnam and Malaysia sort of
Speaker 9: these two big countries that have sort of been a
Speaker 9: key part of the China plus one strategy of sort
Speaker 9: of rerouting trade to the US to sort of skirt
Speaker 9: tariffs and also now facing their own huge levees. I
Speaker 9: think Vietnam's tariffs were higher than China's. Forty six percent
Speaker 9: was the reciprocal figure announced. So this is a big
Speaker 9: opportunity for she I think, to go to these countries,
Speaker 9: make trade deals, but also just sort of present China
Speaker 9: as the grown up in the room. Vietnam have been
Speaker 9: very carefully balancing it's tied. You know, it had hosted
Speaker 9: Biden in I think it was twenty twenty three, and
Speaker 9: then very quickly hosted cheating paying for a visit and
Speaker 9: sort of playing this sort of play on both sides equally.
Speaker 9: And I think now this gives China an opportunity to say, well,
Speaker 9: actually we are the best part to hear and so
Speaker 9: this trip, I think the timing of it is very interesting.
Speaker 4: I'm noticing weakness in the currency, but I would imagine
Speaker 4: that the BBOC does not want the Chinese you want
Speaker 4: to weaken greatly in the face of this trade war.
Speaker 4: Fair statement to say that the PBOC is going to
Speaker 4: try to keep the one as strong as it can
Speaker 4: under the circumstances.
Speaker 6: Yeah.
Speaker 9: I think that's the strategy that we have seen so far,
Speaker 9: and they don't want to invite any more criticism as
Speaker 9: well from the Trump administration.
Speaker 4: In terms of the negative impact that this is going
Speaker 4: to have on Chinese economic growth, particularly as it relates
Speaker 4: to the exporters. What are you hearing about that.
Speaker 9: I think it's an interesting reaction from economists who are
Speaker 9: saying they're sort of seeing a hit on average of
Speaker 9: sort of a one percentage point to GDP growth this year,
Speaker 9: but they're not downgrading their GDP forecasts because I think
Speaker 9: everyone thinks trying to will still hit five percent. What's
Speaker 9: going to have to happen now is a massive sort
Speaker 9: of spending stimulus to fill the whole that is going
Speaker 9: to be left by the hit to exports to the US,
Speaker 9: and I think that's sort of what people are going
Speaker 9: to be looking to. There's the external strategy of does
Speaker 9: she get on the phone with Trump. I think he's
Speaker 9: extremely unlikely. He's going to try and call him before
Speaker 9: that eight PRINL nine deadline. It's just not how China
Speaker 9: does things. They're not going to respond to strength with weakness.
Speaker 9: Much more likely, they focus on shoring up their alliances
Speaker 9: trade partnerships around the world, and they've been very careful
Speaker 9: to save stimulus for exactly this moment, and now they
Speaker 9: have the chance to sort of roll out a big
Speaker 9: support package.
Speaker 4: Jenny, I want you to help. We look ahead to
Speaker 4: the inflation data that we're going to get for China
Speaker 4: in the coming week PPI CPI. We know the deflationary
Speaker 4: pressures that the economy is facing. Is that going to
Speaker 4: be underscored by these data points or is something beginning
Speaker 4: to shift right now?
Speaker 9: The CPI at the beginning of the year is pretty bad.
Speaker 9: Even when we take out the seasonal factors. It went
Speaker 9: right down to negative point seven. The survey is for
Speaker 9: it to come buck up to zero, but still hovering
Speaker 9: right on that zero point. You know, China is still
Speaker 9: facing a lot of deflationary pressures and this is only
Speaker 9: going to make it worse. So I think we're not
Speaker 9: seeing those go away. I mean that being said, before
Speaker 9: Liberation Day, we have seen economies upgrading their expectations for
Speaker 9: China this year, because the economy has been looking pretty
Speaker 9: strong on other sort of aspects. The consumer is stirring,
Speaker 9: These talks of the property market finally bottoming out, animal
Speaker 9: spirits are up. So if China can spend enough to
Speaker 9: compensate for Trump's actions and then actually gets a bit
Speaker 9: of a Trump bump from other countries, now the sort
Speaker 9: of turned to China and away from the US, you know,
Speaker 9: this might not actually be so bad for Beijing.
Speaker 4: Do you think can you imagine, let me put it
Speaker 4: that way, that sometime between now and the ninth of April,
Speaker 4: when the retaliatory tariffs are set to kick in, that
Speaker 4: there will be some movement here between Washington and Beijing
Speaker 4: in a positive direction.
Speaker 9: I don't think there will be, is my hunch, because
Speaker 9: I think you had one Yu saying just this week,
Speaker 9: you know, in order to have talks, those the sort
Speaker 9: of the unfair fentanyl tariffs have got to come off.
Speaker 9: And when Senator Danes left Beijing, he said, in order
Speaker 9: to have talks, China has to stop the fental smuggling.
Speaker 9: Neither of those things are going to happen in the
Speaker 9: next sort of seven days. So I don't think there'll
Speaker 9: be sort of scrambles for last minute negotiations.
Speaker 4: That is Jenny Marsh China ECOGUV team leader for Bloomberg News.
Speaker 4: We go from Hong Kong to Sydney. Now, in contrast
Speaker 4: to China, Australia found itself on the lad low end
Speaker 4: of Trump's tariff spectrum. The country will be subject to
Speaker 4: a minimum ten percent levy imposed on all exports to
Speaker 4: the US. Joining me now for a closer look is
Speaker 4: Bloomberg Australia correspondent Paul Allen. He joins from our studio
Speaker 4: in Sydney. Give me kind of the base level here,
Speaker 4: what is Australia facing right now?
Speaker 10: Well, Australia's facing that ten percent tariff and that the
Speaker 10: narrative in Australia as well. We got off lightly there,
Speaker 10: but at the same time there's just confusion, bafflement. There's
Speaker 10: a lot of We're going to election coming up, and
Speaker 10: both sides of politics are kind of puzzled. Really because
Speaker 10: the US and Australia have a free trade agreement, so
Speaker 10: the Australia doesn't put tariffs on any US products. Australia
Speaker 10: also runs a trade deficit with the United States, so
Speaker 10: we buy more off the US than the US buys
Speaker 10: off Australia, so a lot of confusion there, and President
Speaker 10: Trump signaled out beef as well as a something he's
Speaker 10: got beef with quite frankly, but there is no tariff
Speaker 10: on US beef into Australia, but it imports of beef
Speaker 10: as banned due to a twenty year old concern about
Speaker 10: mad car disease. So there's a biosecurity issue there, and
Speaker 10: it sounds crazy, but if you've ever visited Australia, you
Speaker 10: know how uptight this country is about biosecurity. It's a great,
Speaker 10: big island with lots of weird fauna and flora, and
Speaker 10: the neither government of any stripe wants to put that
Speaker 10: at risk. So that's why that barrier is there. But
Speaker 10: didn't save Australia from President Trump's tariff round.
Speaker 4: Should we dismiss the notion of any type of retaliation?
Speaker 4: Is that even a likelihood, It's very unlikely.
Speaker 10: The Prime Minister was pretty quick out of the gate
Speaker 10: to say that, Look, while it's unwarranted, there's not going
Speaker 10: to be any reaction. We are in an election cycle here,
Speaker 10: so we've had the opposition leader talking tough, but saying
Speaker 10: that he could reach a deal with the US to
Speaker 10: get tariffs removed. But you know that this is the
Speaker 10: type of thing you'd expect to hear or in an election.
Speaker 10: The election is at the start of May, would be
Speaker 10: some time before a new government was installed, regardless of
Speaker 10: what government that is. So yeah, retaliation at this point
Speaker 10: is pretty much off the table for Australia.
Speaker 4: Can you give me a sense of the likely impact?
Speaker 4: What are people talking about as they look to these
Speaker 4: new levies that will take effect. We don't know whether
Speaker 4: there's going to be any wiggle room here. It's not
Speaker 4: until April ninth that the reciprocal tariffs go into effect
Speaker 4: at twelve oh one am. So put aside the flexibility
Speaker 4: that may exist in some type of new trade and negotiation,
Speaker 4: what would be the impact if these tariffs kind of
Speaker 4: go into effect.
Speaker 10: Well, there's it's sort of still sinking in here, but
Speaker 10: there's a sense that it's not as bad as it
Speaker 10: could have been. And look, let's just take the wine
Speaker 10: industry for example. So the US imports a lot of
Speaker 10: Australian wine that will now be ten percent more expensive,
Speaker 10: But the wine industry has just come off the back
Speaker 10: of a bruising tariff battle with China where tariffs were
Speaker 10: put on Australian wine of two hundred and twenty percent.
Speaker 10: So it's like an attitude of okay, we can live
Speaker 10: with this, but again the prevailing sensor, it's just one
Speaker 10: of enormous confusion because there are a few relationships in
Speaker 10: the world that are closer than the US Australia relationship.
Speaker 10: Australia has shown up to every war that the United
Speaker 10: States has fought. It's been a very close partner. As
Speaker 10: I mentioned, it runs a trade deficit. There's just a
Speaker 10: tremendous amount of confusion all around. And even with the
Speaker 10: tariffs that are in place, like the steel and aluminum tariffs,
Speaker 10: we say aluminium. Here a blue Scope Steel. It's Australia's
Speaker 10: only listed steel maker. It makes steel in the US.
Speaker 10: It's got a big plant in Ohio. It's the fifth
Speaker 10: largest steel producer. But it imports well. It exports steel
Speaker 10: to the West Coast of the United States. The reason
Speaker 10: being is it's cheaper to do that than to truck
Speaker 10: it over the Rocky Mountains from Ohio. So the US
Speaker 10: steel consumers are getting a better deal from Blue Scope
Speaker 10: doing that so now that's been chucked out the window.
Speaker 10: The more expensive steel is going to come to the
Speaker 10: West coast from Ohio. So again it's just head scratching.
Speaker 10: It just seems absolutely bizarre.
Speaker 4: So to take us back to Australia and the impact
Speaker 4: of tariffs, is there some type of geographic differentiation that
Speaker 4: we can describe how certain areas of the country will
Speaker 4: be affected, maybe to a greater or lesser degree than others.
Speaker 10: Yeah, well that's true, and this is when I get
Speaker 10: it where it gets even weirder. Australia repaired on that
Speaker 10: big list that the President held up with the ten
Speaker 10: percent next to its name, So yeah, compared to the
Speaker 10: rest of the world, the country to get off lightly.
Speaker 10: But then if you continue reading down that list, you
Speaker 10: get to some rather strange outliers, first of which is
Speaker 10: at Norfolk Island, which is an Australian territory. It's about
Speaker 10: sixteen one hundred miles out to sea, as a population
Speaker 10: of just over two thousand people, that's been hit with
Speaker 10: a tariff of twenty nine percent, And the Prime Minister
Speaker 10: raised this as well. He said he cannot understand what
Speaker 10: goes on in Norfolk Island, population two thousand in the
Speaker 10: middle of the ocean. That is such a threat to
Speaker 10: US trade. But it gets weirder still. Further down the
Speaker 10: list is the herd and McDonald Islands and other Australian
Speaker 10: territory tariff of ten percent signaled out. It's got no
Speaker 10: people at all, but a whole lot of penguins. I
Speaker 10: don't think you've got penguins in the US. Maybe that's
Speaker 10: the problem.
Speaker 4: That's Paul Allen, Australia correspondent for Bloomberg News, joining from
Speaker 4: Sydney and I'm Doug Prisner. You can catch us weekdays
Speaker 4: for the Bloomberg Daybreak Asia podcast. It's available wherever you
Speaker 4: get your podcast.
Speaker 2: Tom, Thanks Doug, and that does it for this edition
Speaker 2: of Bloomberg day Break Weekend. Join us again Monday morning
Speaker 2: at five am Wall Street Time for the latest on
Speaker 2: markets overseas and the news you need to start your day.
Speaker 2: I'm Tom Busby. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now.