WEBVTT - Trump Defends Tariffs, Attacks Chips Act & German Defense Game-Changer 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.840 --> 0:00:10.200 This is the. 0:00:10.200 --> 0:00:13.600 Bloombag Daybak podcast, available every morning on Apples, Spotify or 0:00:13.640 --> 0:00:16.720 wherever you listen. It's Wednesday, the fifth of March in London. 0:00:16.760 --> 0:00:20.520 I'm Caroline Hepka coming up today. President Trump concedes that 0:00:20.560 --> 0:00:23.520 there may be downsides as he defends his use of 0:00:23.640 --> 0:00:27.400 tariffs in a prime time speech to Congress. Germany up 0:00:27.480 --> 0:00:31.120 ends its iron cloud controls on borrowing to boost defense 0:00:31.160 --> 0:00:35.720 spending and sticking to five percent. China holds firm on 0:00:35.800 --> 0:00:38.680 a bullish growth goal for the year ahead, but says 0:00:38.720 --> 0:00:41.600 that it will be difficult. Let's start with a roundup 0:00:41.600 --> 0:00:45.000 of our top stories. President Trump has delivered a full 0:00:45.120 --> 0:00:48.640 throated defense of his economic and diplomatic agenda in a 0:00:48.760 --> 0:00:50.400 joint session of Congress. 0:00:50.680 --> 0:00:52.519 In a one hour and forty. 0:00:52.159 --> 0:00:55.880 Minute speech, the US leader sought to justify any economic 0:00:56.040 --> 0:01:00.360 pain that he conceded maybe coming as a result of taris. 0:01:01.080 --> 0:01:05.720 Tariffs are not just about protecting American jobs. They're about 0:01:05.760 --> 0:01:11.400 protecting the soul of our country. Tariffs are about making 0:01:11.440 --> 0:01:15.240 America rich again and making America great again. And it's happening, 0:01:15.280 --> 0:01:16.039 and it will happen. 0:01:16.280 --> 0:01:17.040 Rather quickly. 0:01:17.080 --> 0:01:21.840 There'll be a little disturbance, but we're okay with that. 0:01:22.520 --> 0:01:23.360 It won't be much. 0:01:24.720 --> 0:01:28.360 Despite admitting to the possible downside of his policy, Champ 0:01:28.360 --> 0:01:32.240 also reiterated his plan to impose twenty five percent tariffs 0:01:32.240 --> 0:01:36.240 on aluminium and steel and to put in place reciprocal 0:01:36.319 --> 0:01:40.119 tariffs on all countries with barriers to American imports. 0:01:40.880 --> 0:01:46.800 April twond reciprocal tariffs kick in, and whatever they tariff 0:01:46.920 --> 0:01:52.040 us other countries, we will tariff them. That's reciprocal back 0:01:52.080 --> 0:01:58.840 and forth. Whatever they tax us, we will tax them. 0:01:59.040 --> 0:02:04.880 If they do not monitory tariffs to keep us out 0:02:04.920 --> 0:02:09.000 of their market, then we will do non monitoring barriers 0:02:09.560 --> 0:02:11.120 to keep them out of our market. 0:02:11.880 --> 0:02:16.040 The president spoke just hours after hitting top trading partners 0:02:16.080 --> 0:02:19.680 Canada and Mexico with twenty five percent tariffs and doubling 0:02:19.760 --> 0:02:23.520 levies on the world's second largest economy, China to twenty percent, 0:02:23.760 --> 0:02:28.680 moves which risk exacerbating economic pressures. The decision by the 0:02:28.760 --> 0:02:32.600 US president to double down on wide ranging universal tariffs 0:02:32.600 --> 0:02:35.160 appeared to be somewhat at odds with the comments of 0:02:35.200 --> 0:02:39.680 his Commerce secretary only hours earlier, speaking to Fox Business, 0:02:39.720 --> 0:02:42.560 Howard Lutnik, had said that the administration is looking at 0:02:42.600 --> 0:02:47.120 a pathway for tariff relief on Mexican and Canadian goods 0:02:47.400 --> 0:02:50.480 covered by North America's free trade agreements. 0:02:51.080 --> 0:02:53.200 Both the Mexicans and the Canadians were on the phone 0:02:53.200 --> 0:02:55.480 with me all day today trying to show that they'll 0:02:55.480 --> 0:02:58.399 do better, and the president's listening, because you know, he's very, 0:02:58.520 --> 0:03:01.519 very fair and verasonable. So I think he's going to 0:03:01.600 --> 0:03:03.400 work something out with them. It's not going to be 0:03:03.440 --> 0:03:06.679 a pause and that pause stuff, but I think he's 0:03:06.680 --> 0:03:09.280 going to figure out, you do more, and I'll meet 0:03:09.280 --> 0:03:11.040 you in the middle some way, and we're going to 0:03:11.080 --> 0:03:12.639 probably be announced in that tomorrow. 0:03:13.000 --> 0:03:16.680 Lutnik did not explicitly say what actions President shop was 0:03:16.720 --> 0:03:21.320 considering after imposing across the board tariffs on America's closest neighbors. 0:03:21.520 --> 0:03:25.400 Lutnik's comments saw equities gain in late trading after a 0:03:25.520 --> 0:03:29.480 volatile day on markets that saw US stocks plunging, then recovering, 0:03:29.880 --> 0:03:33.800 and falling anew. At the end of the session, Trump 0:03:33.880 --> 0:03:37.640 outed his tariff moves as more effective at bringing jobs 0:03:37.680 --> 0:03:41.400 to the US than President Biden's efforts, which included the 0:03:41.600 --> 0:03:45.120 Chips and Science Act and its billions of dollars in 0:03:45.160 --> 0:03:48.640 subsidies to spur domestic semiconductor manufacturing. 0:03:49.280 --> 0:03:52.000 We're not giving them any money. Your Chips Act is 0:03:52.160 --> 0:03:55.840 a horrible, horrible thing. We give hundreds of billions of 0:03:55.920 --> 0:03:58.920 dollars and it doesn't mean a thing. They take our 0:03:58.960 --> 0:04:02.560 money and they don't spend all that meant to them. 0:04:02.720 --> 0:04:06.000 We're giving them no money. All that was important to 0:04:06.040 --> 0:04:07.840 them was they didn't want to pay the tariffs. So 0:04:07.880 --> 0:04:10.400 they came in their building, and many other companies are coming. 0:04:11.160 --> 0:04:12.320 We'll have to give them money. 0:04:12.840 --> 0:04:15.200 We just want to protect our businesses and our people, 0:04:15.560 --> 0:04:17.400 and they will come because they won't have to pay 0:04:17.440 --> 0:04:20.839 tariffs if they build in America. So it's very amazing. 0:04:21.080 --> 0:04:23.280 You should get rid of the Chip Act. 0:04:24.480 --> 0:04:27.599 President Trump's desire to end the Chips Act will bring 0:04:27.640 --> 0:04:30.440 into question whether this will have an impact on future 0:04:30.440 --> 0:04:35.400 investments in the semiconductor manufacturing space. This week, TSMSC pledged 0:04:35.440 --> 0:04:38.320 to invest in additional one hundred billion dollars in advanced 0:04:38.400 --> 0:04:42.080 plants on US soil. Other companies that have said they'll 0:04:42.080 --> 0:04:44.680 invest more in the US because of the Chips Act 0:04:44.720 --> 0:04:49.840 include Micron, Intel and South Koreas Samsung. Trump's speech comes 0:04:49.880 --> 0:04:53.880 as the latest data shows US economic activity slowing amid 0:04:53.960 --> 0:04:57.320 the uncertainties of a global trade war. Bloomberg opinion columnist 0:04:57.360 --> 0:05:00.880 Mohammad al Arian says he expects some tough economic news 0:05:00.920 --> 0:05:01.920 in the coming weeks. 0:05:02.200 --> 0:05:04.599 I suspect we're going to see a whole series of 0:05:04.640 --> 0:05:08.120 downward revisions in the next few weeks. I suspect those 0:05:08.160 --> 0:05:11.200 revisions will be from about half a percentage points as 0:05:11.279 --> 0:05:15.200 much as one percentage point. And if that happens, we're 0:05:15.240 --> 0:05:18.839 going to be discussing the risk of what's called stall speed, 0:05:19.400 --> 0:05:22.760 which means the economy isn't going fast enous to gain 0:05:22.800 --> 0:05:25.560 the source of subtraction that keeps us out of something worse. 0:05:26.240 --> 0:05:29.080 Mohammed el Arian's prediction comes as New York Fed President 0:05:29.160 --> 0:05:33.960 John Williams says that he anticipates tariffs will contribute to inflation. 0:05:34.160 --> 0:05:37.000 Based on what we know today, given all the uncertainties 0:05:37.040 --> 0:05:41.760 around that I do factory and some effects of cares 0:05:41.760 --> 0:05:44.920 now on inflation on prices, because I think we will 0:05:44.960 --> 0:05:47.400 see some of those effects later this year. 0:05:48.360 --> 0:05:52.200 Speaking during the Bloomberg invest Conference, he also emphasized there 0:05:52.360 --> 0:05:55.400 is a lot of uncertainty of how the economy will 0:05:55.440 --> 0:06:00.400 respond to President Trump's levees. US officials are rush to 0:06:00.440 --> 0:06:04.320 revive a mineral resources deal with Ukraine after President Zinski 0:06:04.440 --> 0:06:07.600 said that he was ready for peace. Speaking to Congress, 0:06:07.640 --> 0:06:10.720 President Trump said that Ukraine is poised to sign the agreement, 0:06:10.920 --> 0:06:14.799 which calls for fifty percent of the country's future resource 0:06:14.880 --> 0:06:19.240 revenues to go into a US managed investment fund, and 0:06:19.320 --> 0:06:23.040 that Russia is also seeking an end to the conflict. 0:06:23.320 --> 0:06:27.000 Regarding the agreement on minerals and security, Ukraine is ready 0:06:27.040 --> 0:06:33.560 to sign it at any time that is convenient for you. Simultaneously, 0:06:33.720 --> 0:06:37.920 We've had serious discussions with Russia and have received strong 0:06:38.000 --> 0:06:41.359 signals that they are ready for peace. Wouldn't that be beautiful? 0:06:42.080 --> 0:06:45.239 Trump's comments after the Ukrainian leader took to social media 0:06:45.279 --> 0:06:49.359 to express regret over an unsuccessful previous meeting in the 0:06:49.400 --> 0:06:54.400 Oval Office, which led President Trump to walk away from negotiations. Meanwhile, 0:06:54.440 --> 0:06:58.640 officials say a pause in US arms supplies to Ukraine 0:06:58.800 --> 0:07:03.080 after that Oval Office clash could have a consequential impact 0:07:03.240 --> 0:07:06.320 on the conflict. That's as it was announced yesterday that 0:07:06.400 --> 0:07:10.040 Russia will work with the Trump administration to broker nuclear 0:07:10.160 --> 0:07:14.160 talks with Iran. To other news, Germany is set to 0:07:14.200 --> 0:07:18.160 amend its Constitution to exclude defense and security costs from 0:07:18.320 --> 0:07:21.720 limits on fiscal spending. The move will unlock hundreds of 0:07:21.760 --> 0:07:25.480 billions of euros in a dramatic shift that appends its 0:07:25.560 --> 0:07:29.680 tight controls on government boring. Discussing the decision, the incoming 0:07:29.760 --> 0:07:33.920 chance that, Fredrick Mertz says, the current geopolitical landscape demands action. 0:07:34.880 --> 0:07:36.800 Is our volunteer and coldipsias. 0:07:37.640 --> 0:07:41.000 I want to be very clear here, whatever it takes 0:07:41.320 --> 0:07:44.480 must also go for our defense now in view of 0:07:44.520 --> 0:07:47.520 the threats to our freedom and to peace on our continent. 0:07:49.120 --> 0:07:52.160 Fredrick Mertz, speaking their via translator. He also shared that 0:07:52.200 --> 0:07:56.240 Germany's major parties have agreed to launch a five hundred 0:07:56.240 --> 0:08:01.000 billion euro investment fund for priorities like energy and housing. 0:08:01.760 --> 0:08:04.360 China says that its economy will grow five percent this year, 0:08:04.440 --> 0:08:07.840 setting a bullish target that has analysts predicting more stimulus 0:08:07.880 --> 0:08:11.720 is on the cards. The superpower's annual economic forecast comes 0:08:11.920 --> 0:08:15.040 a day after the US double tariffs on the country. 0:08:15.280 --> 0:08:20.119 Speaking at the party's national Congress, Premier Lee Kiang says 0:08:20.280 --> 0:08:25.160 the goal will only be met by supporting the economy Jesus. 0:08:25.280 --> 0:08:29.480 The target of GDP grows of five percent fully takes 0:08:29.520 --> 0:08:34.120 into account the need to stabilize employment and improve people's 0:08:34.160 --> 0:08:37.640 well being as more as conditions. 0:08:40.760 --> 0:08:45.400 Fun It underscores our resolve to meet difficulties head on 0:08:45.559 --> 0:08:47.040 and strive hard to deliver. 0:08:48.200 --> 0:08:51.640 Kiang, speaking through a translator there, His economic goals drew 0:08:51.760 --> 0:08:54.400 a mixed response from the market. Some were positive about 0:08:54.400 --> 0:08:57.600 the high growth number, others thought the announcement lacked any 0:08:57.679 --> 0:09:01.600 positive surprises. The Hangs saying China Enterprises Index climbed as 0:09:01.679 --> 0:09:04.760 much as two point six percent in early trading, but 0:09:05.080 --> 0:09:08.040 pared back that gain to one point eight percent by 0:09:08.120 --> 0:09:10.320 the midday break. Those are our top stories for you 0:09:10.400 --> 0:09:13.319 this morning. Well, speaking of the markets, US equities on 0:09:13.360 --> 0:09:15.480 the S and P five hundred yesterday at one point 0:09:15.480 --> 0:09:18.160 fell by two percent, then actually ended up down one 0:09:18.200 --> 0:09:22.560 point two percent on Tuesday. Futures though appointing higher up 0:09:22.600 --> 0:09:24.439 seven tenths of one percent. There's been a lot of 0:09:24.520 --> 0:09:28.040 volatility in US equity markets, a risk though in Asia 0:09:28.120 --> 0:09:34.080 is trading strongly. European equities yesterday slipped two point one percent. 0:09:34.440 --> 0:09:37.560 Futures though, are positive and bouncing higher one point eight 0:09:37.559 --> 0:09:40.559 percent for the US SOX fifty futures, So it wasn't 0:09:40.679 --> 0:09:45.000 just the trump announcements to Congress. This speech of Congress, 0:09:45.080 --> 0:09:47.959 it was also this defense spending plan from Germany five 0:09:48.040 --> 0:09:50.560 hundred billion euros that seemed to have an impact on 0:09:50.600 --> 0:09:53.480 the euro dollars, sustaining a break of one oh five 0:09:53.960 --> 0:09:56.760 trading at the highest levels as of twenty twenty five. 0:09:56.840 --> 0:09:58.840 For the euro this morning we traded at one oh 0:09:58.920 --> 0:10:02.440 six thirty six, another tenth of one percent. And the 0:10:02.480 --> 0:10:07.120 Canadian and Mexican peso, those currencies they managed to reverse 0:10:07.160 --> 0:10:10.680 declines yesterday after those comments from the Commerce Secretary Howard 0:10:10.720 --> 0:10:12.840 Lutnik on a possible trade deal. So those are the 0:10:12.840 --> 0:10:18.520 most important market movers. Let's discuss though President Trump's addressed 0:10:18.520 --> 0:10:21.680 shall we to a joint session of Congress? President Trump 0:10:21.720 --> 0:10:25.640 acknowledging that tariffs could cause a little disturbance, He lambasted 0:10:25.679 --> 0:10:30.079 policies on race, gender, and diversity. He offered numerous tax cuts, 0:10:30.400 --> 0:10:33.959 new projects like a natural gas pipeline, ramping up production 0:10:34.040 --> 0:10:37.680 of critical minerals. Joining me to go through what was 0:10:37.760 --> 0:10:41.000 said just in the early hours of this morning London Time, 0:10:41.200 --> 0:10:45.440 Bloomberg's EMEA news director Roslyn matheson good morning, it was noisy. 0:10:45.520 --> 0:10:48.679 There were protests from Democrats. There were chants of USA. 0:10:49.240 --> 0:10:53.040 Trump went through a lot of his policies. What did 0:10:53.080 --> 0:10:54.760 you make of the speech overall? 0:10:55.440 --> 0:10:59.000 It was interesting because Trump's always a campaigner, even when 0:10:59.000 --> 0:11:03.560 he's president, he doesn't really stop campaigning. But this didn't 0:11:03.600 --> 0:11:09.040 feel quite as exuberant a presentation as he's done previously. 0:11:10.040 --> 0:11:12.200 It was striking in a way that he talked about 0:11:12.240 --> 0:11:15.400 the economy, but he didn't really dwell on the economy, 0:11:15.440 --> 0:11:17.480 almost like he was saying to the American people, he 0:11:17.520 --> 0:11:21.240 realizes there's going to be periods of adjustment here for them, 0:11:21.320 --> 0:11:24.720 particularly when it comes to prices and the flow on 0:11:24.960 --> 0:11:28.600 potentially from things like tariffs, and so he didn't really 0:11:28.679 --> 0:11:29.840 dwell on the economy. 0:11:29.880 --> 0:11:32.480 That's probably his weakest point right now. 0:11:33.120 --> 0:11:36.040 Instead, as you say, he focused on some of his 0:11:36.120 --> 0:11:38.680 traditional talking points. He really spent a lot of time 0:11:38.679 --> 0:11:41.720 talking about migrants and the border area. 0:11:41.520 --> 0:11:42.800 And what he's doing there. 0:11:43.200 --> 0:11:46.520 He talked about, as you say, issues around DEI as well. 0:11:47.040 --> 0:11:49.480 He didn't spend a lot of time on foreign policy either, 0:11:49.800 --> 0:11:53.680 perhaps realizing that's not necessarily something that the American public 0:11:53.720 --> 0:11:55.880 want to hear a lot about as well. I mean, 0:11:55.920 --> 0:11:59.080 he really was sending this speech was to the American people. 0:11:59.200 --> 0:12:01.760 So that was kind of like the key takeaways I think. 0:12:01.679 --> 0:12:04.640 Yeah, and there was lots for sort of ordinary voters 0:12:04.679 --> 0:12:08.160 to catch hold of. No tax on tips, no tax 0:12:08.200 --> 0:12:12.199 on overtime, no tax on Social Security benefits for seniors, 0:12:12.240 --> 0:12:14.640 is what the President said. But then it raises this 0:12:14.880 --> 0:12:19.120 issue of how does the Republican administration pay for it all? 0:12:19.760 --> 0:12:21.880 Well, that's right, and there again that he didn't have 0:12:21.920 --> 0:12:24.280 a lot of answers. I mean, obviously they're leaning heavily 0:12:24.800 --> 0:12:28.640 on this government cost cutting program DOGE, which is being 0:12:28.720 --> 0:12:33.040 enacted by Elon Musk, and they're talking about very large 0:12:33.080 --> 0:12:36.880 sums of money that they say that they are already saving, 0:12:37.120 --> 0:12:40.559 although it's been very difficult to back that up even 0:12:40.600 --> 0:12:43.960 with the figures that DOGE is putting out to show 0:12:44.000 --> 0:12:47.360 that they are indeed saving enormous sums of money. 0:12:47.400 --> 0:12:48.920 So that seems to be one effect. 0:12:48.960 --> 0:12:51.560 He obviously really wants to get rid of the Chips 0:12:51.600 --> 0:12:55.360 Act as well, although that's going to be that would 0:12:55.360 --> 0:12:58.760 be incredibly difficult. But he's saying, essentially, why are we 0:12:58.880 --> 0:13:01.880 paying all this money to try and get companies to 0:13:01.920 --> 0:13:04.840 come and build their factories in the US, rather than 0:13:04.920 --> 0:13:09.160 using other means to draw them over. So he's looking 0:13:09.200 --> 0:13:12.679 at pulling several things out of the cupboard, it seems, yeah. 0:13:12.720 --> 0:13:16.880 And President Trum repeated his grievances also against countries for 0:13:17.240 --> 0:13:20.520 ripping off the world's wealthiest economy. Tariffs are not just 0:13:20.559 --> 0:13:24.000 about protecting American jobs, They're about protecting the soul of America. 0:13:24.320 --> 0:13:26.640 We played you that sound a little earlier in the 0:13:26.679 --> 0:13:30.040 bulletin because it was quite striking. And yet he admitted 0:13:30.120 --> 0:13:33.240 that there would be an impact in the US. 0:13:34.120 --> 0:13:36.160 He did, he said it, but he said it would 0:13:36.160 --> 0:13:36.760 be small. 0:13:37.760 --> 0:13:41.240 And what a lot of economists are saying is that 0:13:41.320 --> 0:13:45.400 the impact of tariffs on the US economy could be significant, 0:13:45.400 --> 0:13:48.200 but not in ways that Donald Trump is really saying, 0:13:48.320 --> 0:13:51.240 because he's What economists are warning about is the pass 0:13:51.320 --> 0:13:56.360 on effect of tariffs to US companies and to US consumers, 0:13:56.880 --> 0:14:00.400 right at a time when obviously inflation is still issuing 0:14:00.800 --> 0:14:05.040 in the US, and economists are also increasingly warning that 0:14:05.120 --> 0:14:07.800 tariffs wouldn't just be an issue for inflation but also for. 0:14:07.800 --> 0:14:09.440 Growth in the US. 0:14:10.200 --> 0:14:13.440 And you can see perhaps already a little bit of 0:14:13.440 --> 0:14:16.440 signaling from the US that they might walk back some 0:14:16.559 --> 0:14:19.760 of these size of the tariffs on Canada and Mexico. 0:14:20.400 --> 0:14:24.360 Howard Litnick, the Common Secretary, indicating something might come today 0:14:24.520 --> 0:14:27.840 on that, But certainly Trump was indicating more that he 0:14:27.920 --> 0:14:30.800 feels that tariffs are going to bring in trillions of 0:14:30.880 --> 0:14:32.240 dollars to the US economy. 0:14:32.480 --> 0:14:36.280 Yeah, it was perhaps a more traditional, as you say, 0:14:36.360 --> 0:14:39.200 maybe a more sedate affair. Yes, there was lots of chanceing, 0:14:39.240 --> 0:14:42.240 but there were also guests that President Trump referred to, 0:14:42.320 --> 0:14:45.040 and some of them were people I think that he 0:14:45.120 --> 0:14:48.240 felt could illustrate the points on the sort of social 0:14:49.440 --> 0:14:52.560 concerns that he has, the cultural issues that he's raised 0:14:52.720 --> 0:14:58.000 against DEI, also notably talking about English as the official 0:14:58.160 --> 0:15:01.560 language of the United States. How much of the conservative 0:15:01.640 --> 0:15:04.440 agenda of the Trump administration is going to have influence 0:15:04.480 --> 0:15:07.000 around the world because he did mention that on diversity, 0:15:07.040 --> 0:15:08.560 equity and inclusion. 0:15:09.400 --> 0:15:12.080 Well, again, he was really talking to his US base 0:15:12.280 --> 0:15:14.160 with that and throwing I guess a bit of red 0:15:14.200 --> 0:15:17.040 meat their way when it comes to DEI. But it'll 0:15:17.080 --> 0:15:22.160 be interesting to see how much that provides companies with 0:15:22.240 --> 0:15:25.840 the incentive to ditch DEI, not just in the US, but. 0:15:25.840 --> 0:15:26.880 In the rest of the world. 0:15:27.320 --> 0:15:29.600 Do they adhere to that in the US, but do 0:15:29.680 --> 0:15:34.280 they quietly keep their DEI goals overseas and their programs, 0:15:34.600 --> 0:15:36.720 or do they say, well, this gives us the rationale 0:15:36.720 --> 0:15:40.240 to do that everywhere. That would be one interesting thing 0:15:40.240 --> 0:15:42.120 because we're seeing a lot of big companies at least 0:15:42.160 --> 0:15:44.320 shed it when it comes to the US. 0:15:44.800 --> 0:15:48.160 But also how much does that further in a way 0:15:48.280 --> 0:15:49.560 inflame or allow. 0:15:49.320 --> 0:15:53.920 The agenda of very right wing parties across Europe alone. 0:15:53.960 --> 0:15:58.440 We've seen elon mus for example, very much drawing closer 0:15:58.520 --> 0:16:03.480 to the AfD in Germany, that's the far right group there, 0:16:03.960 --> 0:16:07.400 and does that kind of give weight to their agendas 0:16:07.400 --> 0:16:10.960 in their own countries in obviously the AfD is now 0:16:11.000 --> 0:16:13.680 going to be one of the bigger political forces. 0:16:13.280 --> 0:16:16.680 In Germany, but not in government. And does that embolden 0:16:16.720 --> 0:16:18.000 those movements around the world? 0:16:18.640 --> 0:16:20.800 Yeah, okay, Ross, thank you so much for being with 0:16:20.800 --> 0:16:24.560 me this morning. Blueberg's EA News director Roslin Matheson. So 0:16:24.720 --> 0:16:27.080 going over some of the points that President Trump made 0:16:27.080 --> 0:16:31.040 in his address, so that joint session of Congress talking 0:16:31.080 --> 0:16:36.680 about taxes, about migration, DEI and tariffs, which takes us 0:16:36.720 --> 0:16:41.320 to our next point. China is targeting growth of five 0:16:41.360 --> 0:16:45.920 percent this year despite US tariffs and is also ramping 0:16:46.040 --> 0:16:50.560 up its own defense spending, reflecting President Shijingping's ambition to 0:16:50.600 --> 0:16:54.320 build a military that can challenge the United States. Joining 0:16:54.320 --> 0:16:58.160 me now is Bloomberg's China Government and Economics editor Jenny 0:16:58.200 --> 0:17:02.160 Marsh to discuss what is cut of the National People's Congress, 0:17:02.200 --> 0:17:06.240 which is the Chinese government's biggest political meeting of the year. 0:17:06.280 --> 0:17:08.679 Good morning, Jenny, So the aim of five percent for 0:17:08.720 --> 0:17:11.560 a third year in a row, how does Beijing plan 0:17:11.640 --> 0:17:15.560 to reach that? What of any extra stimulus measures? That's right, 0:17:15.600 --> 0:17:16.800 this is the third year in a row. 0:17:16.800 --> 0:17:18.920 It sort of looks a bit like China's now found 0:17:18.920 --> 0:17:22.600 a flaw of what's an acceptable level of growth to get. 0:17:22.640 --> 0:17:24.560 They're the main sort of thing they're doing is they've 0:17:24.600 --> 0:17:27.800 laid out the highest fiscal deficit target and over three decades, 0:17:28.560 --> 0:17:31.080 a plan to raise local government bond issuance to record 0:17:31.119 --> 0:17:34.080 levels too, So in short, more government spending. 0:17:35.520 --> 0:17:36.480 You know, I think these. 0:17:36.359 --> 0:17:38.879 Targets were sort of well telegraphed ahead of the meeting, 0:17:38.960 --> 0:17:41.560 so they're very much in line with what was expected 0:17:41.640 --> 0:17:44.920 going in. Of course, you know what wasn't necessarily expected 0:17:44.960 --> 0:17:47.720 going into this meeting was that China would already be 0:17:47.760 --> 0:17:51.439 facing a twenty percent caraff hike from Trump. You know, 0:17:52.160 --> 0:17:55.040 so I think the big question here is the government 0:17:55.119 --> 0:17:58.800 is clearly sort of very bullisious year about maintaining its growth, 0:17:58.880 --> 0:18:01.879 and they can roll out stimulus you know, throughout the 0:18:01.960 --> 0:18:05.000 year as is needed. If they see things slowing down, 0:18:05.160 --> 0:18:07.120 you know, they'll look at the economic data and they'll 0:18:07.119 --> 0:18:11.120 make tweaks. But if Trump does continue to ramp up tariffs, 0:18:11.160 --> 0:18:13.560 you know, they have a very very big challenge ahead 0:18:13.560 --> 0:18:15.560 this year that was not there in previous years when 0:18:15.560 --> 0:18:16.280 they had this goal. 0:18:16.800 --> 0:18:19.600 Yeah. Absolutely, and Beijing's response so far has been to 0:18:19.680 --> 0:18:25.720 call for talks, retaliation, but not escalation, and that is 0:18:25.960 --> 0:18:28.919 so we kind of wonder how she is going to 0:18:28.960 --> 0:18:30.320 handle the trade war. 0:18:31.880 --> 0:18:34.920 He's approaching it with extreme caution, you know. I think 0:18:34.960 --> 0:18:39.000 Blue Bay Economics called it a surgical approach to retaliation yesterday, 0:18:39.000 --> 0:18:42.680 which I think is very accurate. They are hitting back 0:18:42.720 --> 0:18:45.639 with a far lower tariff level. You know, Trump has 0:18:45.640 --> 0:18:47.880 gone for twenty percent hike. Now I think the hike 0:18:47.920 --> 0:18:50.520 on the Chinese side is still under three percent, and 0:18:50.560 --> 0:18:53.640 they're only sort of targeting these products that they can 0:18:53.680 --> 0:18:57.560 easily source some other places. So in yesterday's retaliation, the 0:18:57.600 --> 0:19:02.159 big aim was American beans, which around fifty percent of 0:19:02.200 --> 0:19:05.560 American exports go to China. But China since the last 0:19:05.560 --> 0:19:08.480 trade war, of course, has diversified its options there. It 0:19:08.480 --> 0:19:11.240 can buy soy beans from Brazil now instead. So it's 0:19:11.240 --> 0:19:13.240 being very careful in how it sort of responds to 0:19:13.280 --> 0:19:13.760 the US. 0:19:13.760 --> 0:19:15.879 It's trying not to escalate things. 0:19:16.400 --> 0:19:20.040 And I mentioned defense spending. There was a social media 0:19:20.080 --> 0:19:23.119 post on the Chinese embassy in the United States saying, 0:19:23.480 --> 0:19:25.800 if is what the US wants, been a tariff war, 0:19:25.840 --> 0:19:27.920 a trade war, or any other type of war, We're 0:19:27.960 --> 0:19:30.720 ready to fight till the end. I mean, that's the 0:19:30.800 --> 0:19:34.480 kind of stark, short message. Defense spending in China is 0:19:34.520 --> 0:19:35.480 going up too. 0:19:36.640 --> 0:19:38.840 Yeah, that was some of the toughest language we've seen 0:19:39.000 --> 0:19:42.080 in this trade war so far. Actually they've been state 0:19:42.119 --> 0:19:44.920 media has been pretty muted. But the defense budget today, 0:19:44.960 --> 0:19:47.320 you know that they've hightd it again by seven point 0:19:47.359 --> 0:19:50.960 two percent, which matches last year's growth level. And I 0:19:50.960 --> 0:19:53.639 think that just reflects of the ambitions that she has 0:19:53.960 --> 0:19:57.040 to build a military that can challenge the US. You know, 0:19:57.240 --> 0:20:00.159 just since Trump came in, we've seen we've seen the 0:20:00.160 --> 0:20:04.320 PLA do live fire drills off Australia, which sort of 0:20:04.400 --> 0:20:08.080 caused quite a bit of reaction their drills off Taiwan, 0:20:08.280 --> 0:20:12.040 off Vietnam being a lot more sort of assertive in 0:20:12.119 --> 0:20:14.760 its sort of projecting military power. And you know, with 0:20:14.800 --> 0:20:18.040 Trump being so occupied with these trade spats with other 0:20:18.080 --> 0:20:20.560 countries and you know, all the things he has right now, 0:20:20.800 --> 0:20:22.600 maybe this is a good chance for China to sort 0:20:22.640 --> 0:20:26.040 of keep projecting that military power. Maybe Chi Chiping is 0:20:26.080 --> 0:20:27.120 seeing an opening there. 0:20:28.600 --> 0:20:31.320 This is Bloomberg Daybreak Europe, your morning brief on the 0:20:31.400 --> 0:20:34.440 stories making news from London to Wall Street and beyond. 0:20:34.720 --> 0:20:38.720 Look for us on your podcast feed every morning, on Apple, Spotify, 0:20:38.800 --> 0:20:40.760 and anywhere else you get your podcasts. 0:20:40.800 --> 0:20:43.800 You can also listen live each morning on London Dab Radio, 0:20:43.840 --> 0:20:46.560 the Bloomberg Business app, and Bloomberg dot Com. 0:20:46.600 --> 0:20:49.359 Our flagship New York station is also available on your 0:20:49.400 --> 0:20:54.119 Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty. 0:20:54.359 --> 0:20:55.640 I'm Caroline Hepka and. 0:20:55.600 --> 0:20:58.240 I'm Stephen Carroll. Join us again tomorrow morning for all 0:20:58.280 --> 0:21:00.680 the news you need to start your day right here 0:21:00.720 --> 0:21:02.080 on Bloomberg Daybreak Europe. 0:21:05.520 --> 0:21:10.200 Mm hmm.