Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is the.
Speaker 3: Bloombag Daybak podcast, available every morning on Apples, Spotify or
Speaker 3: wherever you listen. It's Wednesday, the fifth of March in London.
Speaker 3: I'm Caroline Hepka coming up today. President Trump concedes that
Speaker 3: there may be downsides as he defends his use of
Speaker 3: tariffs in a prime time speech to Congress. Germany up
Speaker 3: ends its iron cloud controls on borrowing to boost defense
Speaker 3: spending and sticking to five percent. China holds firm on
Speaker 3: a bullish growth goal for the year ahead, but says
Speaker 3: that it will be difficult. Let's start with a roundup
Speaker 3: of our top stories. President Trump has delivered a full
Speaker 3: throated defense of his economic and diplomatic agenda in a
Speaker 3: joint session of Congress.
Speaker 2: In a one hour and forty.
Speaker 3: Minute speech, the US leader sought to justify any economic
Speaker 3: pain that he conceded maybe coming as a result of taris.
Speaker 4: Tariffs are not just about protecting American jobs. They're about
Speaker 4: protecting the soul of our country. Tariffs are about making
Speaker 4: America rich again and making America great again. And it's happening,
Speaker 4: and it will happen.
Speaker 2: Rather quickly.
Speaker 4: There'll be a little disturbance, but we're okay with that.
Speaker 4: It won't be much.
Speaker 3: Despite admitting to the possible downside of his policy, Champ
Speaker 3: also reiterated his plan to impose twenty five percent tariffs
Speaker 3: on aluminium and steel and to put in place reciprocal
Speaker 3: tariffs on all countries with barriers to American imports.
Speaker 4: April twond reciprocal tariffs kick in, and whatever they tariff
Speaker 4: us other countries, we will tariff them. That's reciprocal back
Speaker 4: and forth. Whatever they tax us, we will tax them.
Speaker 5: If they do not monitory tariffs to keep us out
Speaker 5: of their market, then we will do non monitoring barriers
Speaker 5: to keep them out of our market.
Speaker 3: The president spoke just hours after hitting top trading partners
Speaker 3: Canada and Mexico with twenty five percent tariffs and doubling
Speaker 3: levies on the world's second largest economy, China to twenty percent,
Speaker 3: moves which risk exacerbating economic pressures. The decision by the
Speaker 3: US president to double down on wide ranging universal tariffs
Speaker 3: appeared to be somewhat at odds with the comments of
Speaker 3: his Commerce secretary only hours earlier, speaking to Fox Business,
Speaker 3: Howard Lutnik, had said that the administration is looking at
Speaker 3: a pathway for tariff relief on Mexican and Canadian goods
Speaker 3: covered by North America's free trade agreements.
Speaker 6: Both the Mexicans and the Canadians were on the phone
Speaker 6: with me all day today trying to show that they'll
Speaker 6: do better, and the president's listening, because you know, he's very,
Speaker 6: very fair and verasonable. So I think he's going to
Speaker 6: work something out with them. It's not going to be
Speaker 6: a pause and that pause stuff, but I think he's
Speaker 6: going to figure out, you do more, and I'll meet
Speaker 6: you in the middle some way, and we're going to
Speaker 6: probably be announced in that tomorrow.
Speaker 3: Lutnik did not explicitly say what actions President shop was
Speaker 3: considering after imposing across the board tariffs on America's closest neighbors.
Speaker 3: Lutnik's comments saw equities gain in late trading after a
Speaker 3: volatile day on markets that saw US stocks plunging, then recovering,
Speaker 3: and falling anew. At the end of the session, Trump
Speaker 3: outed his tariff moves as more effective at bringing jobs
Speaker 3: to the US than President Biden's efforts, which included the
Speaker 3: Chips and Science Act and its billions of dollars in
Speaker 3: subsidies to spur domestic semiconductor manufacturing.
Speaker 4: We're not giving them any money. Your Chips Act is
Speaker 4: a horrible, horrible thing. We give hundreds of billions of
Speaker 4: dollars and it doesn't mean a thing. They take our
Speaker 4: money and they don't spend all that meant to them.
Speaker 4: We're giving them no money. All that was important to
Speaker 4: them was they didn't want to pay the tariffs. So
Speaker 4: they came in their building, and many other companies are coming.
Speaker 2: We'll have to give them money.
Speaker 4: We just want to protect our businesses and our people,
Speaker 4: and they will come because they won't have to pay
Speaker 4: tariffs if they build in America. So it's very amazing.
Speaker 4: You should get rid of the Chip Act.
Speaker 3: President Trump's desire to end the Chips Act will bring
Speaker 3: into question whether this will have an impact on future
Speaker 3: investments in the semiconductor manufacturing space. This week, TSMSC pledged
Speaker 3: to invest in additional one hundred billion dollars in advanced
Speaker 3: plants on US soil. Other companies that have said they'll
Speaker 3: invest more in the US because of the Chips Act
Speaker 3: include Micron, Intel and South Koreas Samsung. Trump's speech comes
Speaker 3: as the latest data shows US economic activity slowing amid
Speaker 3: the uncertainties of a global trade war. Bloomberg opinion columnist
Speaker 3: Mohammad al Arian says he expects some tough economic news
Speaker 3: in the coming weeks.
Speaker 7: I suspect we're going to see a whole series of
Speaker 7: downward revisions in the next few weeks. I suspect those
Speaker 7: revisions will be from about half a percentage points as
Speaker 7: much as one percentage point. And if that happens, we're
Speaker 7: going to be discussing the risk of what's called stall speed,
Speaker 7: which means the economy isn't going fast enous to gain
Speaker 7: the source of subtraction that keeps us out of something worse.
Speaker 3: Mohammed el Arian's prediction comes as New York Fed President
Speaker 3: John Williams says that he anticipates tariffs will contribute to inflation.
Speaker 8: Based on what we know today, given all the uncertainties
Speaker 8: around that I do factory and some effects of cares
Speaker 8: now on inflation on prices, because I think we will
Speaker 8: see some of those effects later this year.
Speaker 3: Speaking during the Bloomberg invest Conference, he also emphasized there
Speaker 3: is a lot of uncertainty of how the economy will
Speaker 3: respond to President Trump's levees. US officials are rush to
Speaker 3: revive a mineral resources deal with Ukraine after President Zinski
Speaker 3: said that he was ready for peace. Speaking to Congress,
Speaker 3: President Trump said that Ukraine is poised to sign the agreement,
Speaker 3: which calls for fifty percent of the country's future resource
Speaker 3: revenues to go into a US managed investment fund, and
Speaker 3: that Russia is also seeking an end to the conflict.
Speaker 4: Regarding the agreement on minerals and security, Ukraine is ready
Speaker 4: to sign it at any time that is convenient for you. Simultaneously,
Speaker 4: We've had serious discussions with Russia and have received strong
Speaker 4: signals that they are ready for peace. Wouldn't that be beautiful?
Speaker 3: Trump's comments after the Ukrainian leader took to social media
Speaker 3: to express regret over an unsuccessful previous meeting in the
Speaker 3: Oval Office, which led President Trump to walk away from negotiations. Meanwhile,
Speaker 3: officials say a pause in US arms supplies to Ukraine
Speaker 3: after that Oval Office clash could have a consequential impact
Speaker 3: on the conflict. That's as it was announced yesterday that
Speaker 3: Russia will work with the Trump administration to broker nuclear
Speaker 3: talks with Iran. To other news, Germany is set to
Speaker 3: amend its Constitution to exclude defense and security costs from
Speaker 3: limits on fiscal spending. The move will unlock hundreds of
Speaker 3: billions of euros in a dramatic shift that appends its
Speaker 3: tight controls on government boring. Discussing the decision, the incoming
Speaker 3: chance that, Fredrick Mertz says, the current geopolitical landscape demands action.
Speaker 7: Is our volunteer and coldipsias.
Speaker 8: I want to be very clear here, whatever it takes
Speaker 8: must also go for our defense now in view of
Speaker 8: the threats to our freedom and to peace on our continent.
Speaker 3: Fredrick Mertz, speaking their via translator. He also shared that
Speaker 3: Germany's major parties have agreed to launch a five hundred
Speaker 3: billion euro investment fund for priorities like energy and housing.
Speaker 3: China says that its economy will grow five percent this year,
Speaker 3: setting a bullish target that has analysts predicting more stimulus
Speaker 3: is on the cards. The superpower's annual economic forecast comes
Speaker 3: a day after the US double tariffs on the country.
Speaker 3: Speaking at the party's national Congress, Premier Lee Kiang says
Speaker 3: the goal will only be met by supporting the economy Jesus.
Speaker 2: The target of GDP grows of five percent fully takes
Speaker 2: into account the need to stabilize employment and improve people's
Speaker 2: well being as more as conditions.
Speaker 1: Fun It underscores our resolve to meet difficulties head on
Speaker 1: and strive hard to deliver.
Speaker 3: Kiang, speaking through a translator there, His economic goals drew
Speaker 3: a mixed response from the market. Some were positive about
Speaker 3: the high growth number, others thought the announcement lacked any
Speaker 3: positive surprises. The Hangs saying China Enterprises Index climbed as
Speaker 3: much as two point six percent in early trading, but
Speaker 3: pared back that gain to one point eight percent by
Speaker 3: the midday break. Those are our top stories for you
Speaker 3: this morning. Well, speaking of the markets, US equities on
Speaker 3: the S and P five hundred yesterday at one point
Speaker 3: fell by two percent, then actually ended up down one
Speaker 3: point two percent on Tuesday. Futures though appointing higher up
Speaker 3: seven tenths of one percent. There's been a lot of
Speaker 3: volatility in US equity markets, a risk though in Asia
Speaker 3: is trading strongly. European equities yesterday slipped two point one percent.
Speaker 3: Futures though, are positive and bouncing higher one point eight
Speaker 3: percent for the US SOX fifty futures, So it wasn't
Speaker 3: just the trump announcements to Congress. This speech of Congress,
Speaker 3: it was also this defense spending plan from Germany five
Speaker 3: hundred billion euros that seemed to have an impact on
Speaker 3: the euro dollars, sustaining a break of one oh five
Speaker 3: trading at the highest levels as of twenty twenty five.
Speaker 3: For the euro this morning we traded at one oh
Speaker 3: six thirty six, another tenth of one percent. And the
Speaker 3: Canadian and Mexican peso, those currencies they managed to reverse
Speaker 3: declines yesterday after those comments from the Commerce Secretary Howard
Speaker 3: Lutnik on a possible trade deal. So those are the
Speaker 3: most important market movers. Let's discuss though President Trump's addressed
Speaker 3: shall we to a joint session of Congress? President Trump
Speaker 3: acknowledging that tariffs could cause a little disturbance, He lambasted
Speaker 3: policies on race, gender, and diversity. He offered numerous tax cuts,
Speaker 3: new projects like a natural gas pipeline, ramping up production
Speaker 3: of critical minerals. Joining me to go through what was
Speaker 3: said just in the early hours of this morning London Time,
Speaker 3: Bloomberg's EMEA news director Roslyn matheson good morning, it was noisy.
Speaker 3: There were protests from Democrats. There were chants of USA.
Speaker 3: Trump went through a lot of his policies. What did
Speaker 3: you make of the speech overall?
Speaker 9: It was interesting because Trump's always a campaigner, even when
Speaker 9: he's president, he doesn't really stop campaigning. But this didn't
Speaker 9: feel quite as exuberant a presentation as he's done previously.
Speaker 9: It was striking in a way that he talked about
Speaker 9: the economy, but he didn't really dwell on the economy,
Speaker 9: almost like he was saying to the American people, he
Speaker 9: realizes there's going to be periods of adjustment here for them,
Speaker 9: particularly when it comes to prices and the flow on
Speaker 9: potentially from things like tariffs, and so he didn't really
Speaker 9: dwell on the economy.
Speaker 2: That's probably his weakest point right now.
Speaker 9: Instead, as you say, he focused on some of his
Speaker 9: traditional talking points. He really spent a lot of time
Speaker 9: talking about migrants and the border area.
Speaker 2: And what he's doing there.
Speaker 9: He talked about, as you say, issues around DEI as well.
Speaker 9: He didn't spend a lot of time on foreign policy either,
Speaker 9: perhaps realizing that's not necessarily something that the American public
Speaker 9: want to hear a lot about as well. I mean,
Speaker 9: he really was sending this speech was to the American people.
Speaker 9: So that was kind of like the key takeaways I think.
Speaker 3: Yeah, and there was lots for sort of ordinary voters
Speaker 3: to catch hold of. No tax on tips, no tax
Speaker 3: on overtime, no tax on Social Security benefits for seniors,
Speaker 3: is what the President said. But then it raises this
Speaker 3: issue of how does the Republican administration pay for it all?
Speaker 9: Well, that's right, and there again that he didn't have
Speaker 9: a lot of answers. I mean, obviously they're leaning heavily
Speaker 9: on this government cost cutting program DOGE, which is being
Speaker 9: enacted by Elon Musk, and they're talking about very large
Speaker 9: sums of money that they say that they are already saving,
Speaker 9: although it's been very difficult to back that up even
Speaker 9: with the figures that DOGE is putting out to show
Speaker 9: that they are indeed saving enormous sums of money.
Speaker 2: So that seems to be one effect.
Speaker 9: He obviously really wants to get rid of the Chips
Speaker 9: Act as well, although that's going to be that would
Speaker 9: be incredibly difficult. But he's saying, essentially, why are we
Speaker 9: paying all this money to try and get companies to
Speaker 9: come and build their factories in the US, rather than
Speaker 9: using other means to draw them over. So he's looking
Speaker 9: at pulling several things out of the cupboard, it seems, yeah.
Speaker 3: And President Trum repeated his grievances also against countries for
Speaker 3: ripping off the world's wealthiest economy. Tariffs are not just
Speaker 3: about protecting American jobs, They're about protecting the soul of America.
Speaker 3: We played you that sound a little earlier in the
Speaker 3: bulletin because it was quite striking. And yet he admitted
Speaker 3: that there would be an impact in the US.
Speaker 2: He did, he said it, but he said it would
Speaker 2: be small.
Speaker 9: And what a lot of economists are saying is that
Speaker 9: the impact of tariffs on the US economy could be significant,
Speaker 9: but not in ways that Donald Trump is really saying,
Speaker 9: because he's What economists are warning about is the pass
Speaker 9: on effect of tariffs to US companies and to US consumers,
Speaker 9: right at a time when obviously inflation is still issuing
Speaker 9: in the US, and economists are also increasingly warning that
Speaker 9: tariffs wouldn't just be an issue for inflation but also for.
Speaker 2: Growth in the US.
Speaker 9: And you can see perhaps already a little bit of
Speaker 9: signaling from the US that they might walk back some
Speaker 9: of these size of the tariffs on Canada and Mexico.
Speaker 9: Howard Litnick, the Common Secretary, indicating something might come today
Speaker 9: on that, But certainly Trump was indicating more that he
Speaker 9: feels that tariffs are going to bring in trillions of
Speaker 9: dollars to the US economy.
Speaker 3: Yeah, it was perhaps a more traditional, as you say,
Speaker 3: maybe a more sedate affair. Yes, there was lots of chanceing,
Speaker 3: but there were also guests that President Trump referred to,
Speaker 3: and some of them were people I think that he
Speaker 3: felt could illustrate the points on the sort of social
Speaker 3: concerns that he has, the cultural issues that he's raised
Speaker 3: against DEI, also notably talking about English as the official
Speaker 3: language of the United States. How much of the conservative
Speaker 3: agenda of the Trump administration is going to have influence
Speaker 3: around the world because he did mention that on diversity,
Speaker 3: equity and inclusion.
Speaker 9: Well, again, he was really talking to his US base
Speaker 9: with that and throwing I guess a bit of red
Speaker 9: meat their way when it comes to DEI. But it'll
Speaker 9: be interesting to see how much that provides companies with
Speaker 9: the incentive to ditch DEI, not just in the US, but.
Speaker 2: In the rest of the world.
Speaker 9: Do they adhere to that in the US, but do
Speaker 9: they quietly keep their DEI goals overseas and their programs,
Speaker 9: or do they say, well, this gives us the rationale
Speaker 9: to do that everywhere. That would be one interesting thing
Speaker 9: because we're seeing a lot of big companies at least
Speaker 9: shed it when it comes to the US.
Speaker 2: But also how much does that further in a way
Speaker 2: inflame or allow.
Speaker 9: The agenda of very right wing parties across Europe alone.
Speaker 9: We've seen elon mus for example, very much drawing closer
Speaker 9: to the AfD in Germany, that's the far right group there,
Speaker 9: and does that kind of give weight to their agendas
Speaker 9: in their own countries in obviously the AfD is now
Speaker 9: going to be one of the bigger political forces.
Speaker 2: In Germany, but not in government. And does that embolden
Speaker 2: those movements around the world?
Speaker 3: Yeah, okay, Ross, thank you so much for being with
Speaker 3: me this morning. Blueberg's EA News director Roslin Matheson. So
Speaker 3: going over some of the points that President Trump made
Speaker 3: in his address, so that joint session of Congress talking
Speaker 3: about taxes, about migration, DEI and tariffs, which takes us
Speaker 3: to our next point. China is targeting growth of five
Speaker 3: percent this year despite US tariffs and is also ramping
Speaker 3: up its own defense spending, reflecting President Shijingping's ambition to
Speaker 3: build a military that can challenge the United States. Joining
Speaker 3: me now is Bloomberg's China Government and Economics editor Jenny
Speaker 3: Marsh to discuss what is cut of the National People's Congress,
Speaker 3: which is the Chinese government's biggest political meeting of the year.
Speaker 3: Good morning, Jenny, So the aim of five percent for
Speaker 3: a third year in a row, how does Beijing plan
Speaker 3: to reach that? What of any extra stimulus measures? That's right,
Speaker 3: this is the third year in a row.
Speaker 10: It sort of looks a bit like China's now found
Speaker 10: a flaw of what's an acceptable level of growth to get.
Speaker 10: They're the main sort of thing they're doing is they've
Speaker 10: laid out the highest fiscal deficit target and over three decades,
Speaker 10: a plan to raise local government bond issuance to record
Speaker 10: levels too, So in short, more government spending.
Speaker 2: You know, I think these.
Speaker 10: Targets were sort of well telegraphed ahead of the meeting,
Speaker 10: so they're very much in line with what was expected
Speaker 10: going in. Of course, you know what wasn't necessarily expected
Speaker 10: going into this meeting was that China would already be
Speaker 10: facing a twenty percent caraff hike from Trump. You know,
Speaker 10: so I think the big question here is the government
Speaker 10: is clearly sort of very bullisious year about maintaining its growth,
Speaker 10: and they can roll out stimulus you know, throughout the
Speaker 10: year as is needed. If they see things slowing down,
Speaker 10: you know, they'll look at the economic data and they'll
Speaker 10: make tweaks. But if Trump does continue to ramp up tariffs,
Speaker 10: you know, they have a very very big challenge ahead
Speaker 10: this year that was not there in previous years when
Speaker 10: they had this goal.
Speaker 3: Yeah. Absolutely, and Beijing's response so far has been to
Speaker 3: call for talks, retaliation, but not escalation, and that is
Speaker 3: so we kind of wonder how she is going to
Speaker 3: handle the trade war.
Speaker 10: He's approaching it with extreme caution, you know. I think
Speaker 10: Blue Bay Economics called it a surgical approach to retaliation yesterday,
Speaker 10: which I think is very accurate. They are hitting back
Speaker 10: with a far lower tariff level. You know, Trump has
Speaker 10: gone for twenty percent hike. Now I think the hike
Speaker 10: on the Chinese side is still under three percent, and
Speaker 10: they're only sort of targeting these products that they can
Speaker 10: easily source some other places. So in yesterday's retaliation, the
Speaker 10: big aim was American beans, which around fifty percent of
Speaker 10: American exports go to China. But China since the last
Speaker 10: trade war, of course, has diversified its options there. It
Speaker 10: can buy soy beans from Brazil now instead. So it's
Speaker 10: being very careful in how it sort of responds to
Speaker 10: the US.
Speaker 2: It's trying not to escalate things.
Speaker 3: And I mentioned defense spending. There was a social media
Speaker 3: post on the Chinese embassy in the United States saying,
Speaker 3: if is what the US wants, been a tariff war,
Speaker 3: a trade war, or any other type of war, We're
Speaker 3: ready to fight till the end. I mean, that's the
Speaker 3: kind of stark, short message. Defense spending in China is
Speaker 3: going up too.
Speaker 10: Yeah, that was some of the toughest language we've seen
Speaker 10: in this trade war so far. Actually they've been state
Speaker 10: media has been pretty muted. But the defense budget today,
Speaker 10: you know that they've hightd it again by seven point
Speaker 10: two percent, which matches last year's growth level. And I
Speaker 10: think that just reflects of the ambitions that she has
Speaker 10: to build a military that can challenge the US. You know,
Speaker 10: just since Trump came in, we've seen we've seen the
Speaker 10: PLA do live fire drills off Australia, which sort of
Speaker 10: caused quite a bit of reaction their drills off Taiwan,
Speaker 10: off Vietnam being a lot more sort of assertive in
Speaker 10: its sort of projecting military power. And you know, with
Speaker 10: Trump being so occupied with these trade spats with other
Speaker 10: countries and you know, all the things he has right now,
Speaker 10: maybe this is a good chance for China to sort
Speaker 10: of keep projecting that military power. Maybe Chi Chiping is
Speaker 10: seeing an opening there.
Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the
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Speaker 2: Mm hmm.