WEBVTT -  Amazon Cancels Some Inventory Orders from China 

0:00:00.240 --> 0:00:10.520
<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. You're listening to the

0:00:10.560 --> 0:00:14.520
<v Speaker 1>Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

0:00:14.560 --> 0:00:18.479
<v Speaker 1>Eastern on Applecarplay and Android Auto with the Bloomberg Business App.

0:00:18.600 --> 0:00:21.800
<v Speaker 1>Listen on demand wherever you get your podcasts, or watch

0:00:21.920 --> 0:00:23.040
<v Speaker 1>us live on YouTube.

0:00:23.960 --> 0:00:27.040
<v Speaker 2>Alex Steal here alongside Paul swe Need this Bloomberg Intelligence Radio.

0:00:27.040 --> 0:00:29.280
<v Speaker 2>You can check us out on YouTube as well, just

0:00:29.280 --> 0:00:31.880
<v Speaker 2>go to YouTube dot com. One story that broke a

0:00:31.880 --> 0:00:35.400
<v Speaker 2>couple hours ago is Amazon canceling orders for multiple products

0:00:35.400 --> 0:00:38.479
<v Speaker 2>made in China and other Asian countries, thinking things like

0:00:38.600 --> 0:00:42.160
<v Speaker 2>beach chairs, scooters, air conditioners and things like that. Joining

0:00:42.200 --> 0:00:44.360
<v Speaker 2>us now is the reporter who broke that story. Spencer

0:00:44.400 --> 0:00:49.080
<v Speaker 2>Soper is Bloomberg News Technology and e commerce reporter. How

0:00:49.159 --> 0:00:51.360
<v Speaker 2>does how does all of this work? For Amazon? So

0:00:51.360 --> 0:00:53.760
<v Speaker 2>they place orders how many months in advance? And then

0:00:53.760 --> 0:00:57.440
<v Speaker 2>what's the ripple effect here?

0:00:56.920 --> 0:00:59.080
<v Speaker 3>That's a that's a great question. And a lot of

0:00:59.080 --> 0:01:00.800
<v Speaker 3>this stuff, you know, the kind of have like a

0:01:00.880 --> 0:01:03.080
<v Speaker 3>target of how much they'll need and then they'll place

0:01:03.200 --> 0:01:07.080
<v Speaker 3>orders maybe monthly or that sort of thing. And so

0:01:07.120 --> 0:01:11.200
<v Speaker 3>these cancelations affect what are called direct import orders. This

0:01:11.240 --> 0:01:13.840
<v Speaker 3>is where Amazon tells vendors, hey, look, you're making this

0:01:13.880 --> 0:01:17.399
<v Speaker 3>stuff in China or some other country in Asia. We

0:01:17.440 --> 0:01:20.200
<v Speaker 3>can actually transport it to the US cheaper than you

0:01:20.280 --> 0:01:22.760
<v Speaker 3>can because we do so much volume. Why don't you

0:01:22.800 --> 0:01:26.280
<v Speaker 3>let us just buy it from you in the source country,

0:01:26.360 --> 0:01:29.000
<v Speaker 3>will import it, We'll pay the tariffs and pass those

0:01:29.040 --> 0:01:32.600
<v Speaker 3>savings onto customers. That makes a lot of sense previously,

0:01:32.720 --> 0:01:35.240
<v Speaker 3>but now with tariffs in the mix, it gives Amazon

0:01:35.319 --> 0:01:38.120
<v Speaker 3>a lot of exposure to tariffs, and that's why they've

0:01:38.200 --> 0:01:40.559
<v Speaker 3>they've abruptly canceled a bunch of these types of orders.

0:01:41.120 --> 0:01:44.720
<v Speaker 4>All right, so Amazon captured, canceleles the order. Presumably the

0:01:44.840 --> 0:01:47.920
<v Speaker 4>vendors left with in your story, five hundred thousand beach chairs,

0:01:49.960 --> 0:01:50.880
<v Speaker 4>What does that vendor do?

0:01:53.320 --> 0:01:53.480
<v Speaker 3>You know?

0:01:53.560 --> 0:01:54.160
<v Speaker 4>You scramble.

0:01:54.320 --> 0:01:59.800
<v Speaker 3>So a lot of this can basically just reset negotiation.

0:02:00.440 --> 0:02:03.360
<v Speaker 3>I mean, first, let's say a lot of these purchase

0:02:03.440 --> 0:02:06.840
<v Speaker 3>orders should be binding. But but these these folks don't

0:02:06.840 --> 0:02:08.680
<v Speaker 3>want to get tied up in court with Amazon. So

0:02:08.720 --> 0:02:11.000
<v Speaker 3>Amazon is kind of flexing its muscle a little bit here,

0:02:12.000 --> 0:02:14.720
<v Speaker 3>and then you know, they can renegotiate with Amazon on

0:02:14.720 --> 0:02:17.720
<v Speaker 3>different terms to still sell them through Amazon, but obviously

0:02:17.760 --> 0:02:20.000
<v Speaker 3>share some of the pain of these tariffs, and then

0:02:20.040 --> 0:02:22.720
<v Speaker 3>other options are going to other marketplaces, and this is

0:02:22.760 --> 0:02:27.440
<v Speaker 3>an opportunity for folks like TikTok Shop, Walmart, UH team

0:02:27.520 --> 0:02:31.440
<v Speaker 3>move to stand out as alternatives. So they do have

0:02:31.480 --> 0:02:34.200
<v Speaker 3>some options, but Amazon's still like the main, the main

0:02:34.200 --> 0:02:36.520
<v Speaker 3>show in town when it comes to US online sales.

0:02:37.520 --> 0:02:39.200
<v Speaker 2>Was this move unusual or expected?

0:02:41.320 --> 0:02:45.919
<v Speaker 3>Very unusual and definitely unexpected? Most of these folks said

0:02:45.960 --> 0:02:48.240
<v Speaker 3>they were, you know, completely caught off guard by it.

0:02:48.960 --> 0:02:51.280
<v Speaker 3>You know, like like I said, what the beach chair

0:02:52.040 --> 0:02:53.880
<v Speaker 3>vendor has been selling for more than a decade on

0:02:53.960 --> 0:02:56.919
<v Speaker 3>Amazon and actually had the stuff made. So it's not

0:02:56.960 --> 0:02:59.639
<v Speaker 3>like they said, hey, this this order way out. Let's

0:02:59.680 --> 0:03:02.360
<v Speaker 3>cancer that this is stuff that he's already you know,

0:03:02.400 --> 0:03:04.680
<v Speaker 3>had had a factory make and and is on the

0:03:04.680 --> 0:03:07.840
<v Speaker 3>hook to pay for so with with with no communication

0:03:08.240 --> 0:03:11.639
<v Speaker 3>or real explanation. So this is definitely showing how these

0:03:11.720 --> 0:03:16.639
<v Speaker 3>uh these tariffs are are, you know, basically disrupting a

0:03:16.680 --> 0:03:19.639
<v Speaker 3>lot of a lot of relationships and and forcing h

0:03:19.800 --> 0:03:21.680
<v Speaker 3>partners to negotiate with one another.

0:03:22.320 --> 0:03:25.359
<v Speaker 4>Have we heard anything from Walmart about kind of how

0:03:25.400 --> 0:03:28.359
<v Speaker 4>they plan to navigate these tariffs?

0:03:30.639 --> 0:03:33.480
<v Speaker 3>I I haven't spoken specifically to Walmart. But a lot

0:03:33.520 --> 0:03:35.880
<v Speaker 3>of these companies are just in the same game. You figure,

0:03:36.280 --> 0:03:40.600
<v Speaker 3>you figure Walmart has an advantage of selling predominantly grocery

0:03:41.000 --> 0:03:42.760
<v Speaker 3>and so if there is a pullback, you know, people

0:03:42.760 --> 0:03:46.080
<v Speaker 3>still need groceries, so so they'll still do well there.

0:03:46.440 --> 0:03:48.680
<v Speaker 3>But then, you know, in terms of like these large

0:03:49.600 --> 0:03:54.000
<v Speaker 3>diversified retailers like Amazon and Walmart, you're you're just likely

0:03:54.080 --> 0:03:58.480
<v Speaker 3>to see shift in a mix of products like more consumables,

0:03:58.560 --> 0:04:02.040
<v Speaker 3>more everyday needs that peopleeople need in their daily lives,

0:04:02.080 --> 0:04:05.200
<v Speaker 3>and less of this kind of discretionary stuff like the

0:04:05.200 --> 0:04:08.600
<v Speaker 3>beach chairs we mentioned, or scooters or that kind of thing.

0:04:09.080 --> 0:04:12.080
<v Speaker 2>How many more levers like this does can Amazon pull?

0:04:14.120 --> 0:04:18.720
<v Speaker 3>Amazon's has many levers and knobs, but so do its partners, right,

0:04:18.800 --> 0:04:22.320
<v Speaker 3>so this is kind of a gamble. So if Amazon's

0:04:22.320 --> 0:04:25.200
<v Speaker 3>pulling back on its orders, you know, then that said that,

0:04:25.279 --> 0:04:27.080
<v Speaker 3>the knock on effect of that is some of these

0:04:27.440 --> 0:04:29.640
<v Speaker 3>folks that sell on Amazon and rely on Amazon for

0:04:29.680 --> 0:04:31.960
<v Speaker 3>sales might have to pull back on ad spend. You know.

0:04:32.080 --> 0:04:34.840
<v Speaker 3>So it's you know, the Amazon can turn one now,

0:04:34.880 --> 0:04:38.799
<v Speaker 3>but then someone else turns another. It's like popcorn popping

0:04:38.880 --> 0:04:39.400
<v Speaker 3>in a kettle.

0:04:40.720 --> 0:04:43.400
<v Speaker 4>What if we heard Spencer from some of the Chinese

0:04:43.680 --> 0:04:47.000
<v Speaker 4>players like Ali Baba, like Timu, how are they planning

0:04:47.040 --> 0:04:48.719
<v Speaker 4>on navigating the new environment.

0:04:50.880 --> 0:04:53.160
<v Speaker 3>I haven't heard much from Ali Baba. And then on

0:04:53.520 --> 0:04:57.000
<v Speaker 3>Timu has basically been kind of anticipating a lot of this.

0:04:57.160 --> 0:05:00.240
<v Speaker 3>A bigger issue for them was this deminimous loophole and

0:05:00.240 --> 0:05:03.320
<v Speaker 3>they've been kind of forward deploying more inventory into the US.

0:05:04.200 --> 0:05:06.000
<v Speaker 3>So that was another thing, is folks just trying to

0:05:06.000 --> 0:05:08.960
<v Speaker 3>get ahead of this and get get inventory into the

0:05:09.040 --> 0:05:11.920
<v Speaker 3>US before these tariffs take effect. And then another option

0:05:12.360 --> 0:05:15.239
<v Speaker 3>for for folks like Timo or Amazon or any vendor

0:05:15.279 --> 0:05:19.920
<v Speaker 3>selling anything is just looking for countries not affected by

0:05:20.000 --> 0:05:24.640
<v Speaker 3>these tariffs, and so that this is making places like Canada, Australia,

0:05:25.160 --> 0:05:28.680
<v Speaker 3>other other markets much more desirable, especially if you've got

0:05:28.720 --> 0:05:31.840
<v Speaker 3>to unload inventory and want to want to avoid these tariffs.

0:05:33.240 --> 0:05:35.000
<v Speaker 2>Does any of this yet? Did you have a sense

0:05:35.160 --> 0:05:38.120
<v Speaker 2>just in your reporting how demand is holding up at all?

0:05:38.160 --> 0:05:40.599
<v Speaker 2>Like we talked a lot about the supplier side, et cetera,

0:05:40.760 --> 0:05:44.000
<v Speaker 2>But are we seeing sort of stockpiling ahead of the

0:05:44.040 --> 0:05:45.839
<v Speaker 2>tariffs in terms of consumer behavior?

0:05:46.839 --> 0:05:49.280
<v Speaker 3>That's that's the million dollar question right now. And there's

0:05:49.400 --> 0:05:51.640
<v Speaker 3>there's definitely a lot of cross currents. And that's the fear,

0:05:51.760 --> 0:05:53.839
<v Speaker 3>right is like, you know, a lot of a lot

0:05:53.839 --> 0:05:57.400
<v Speaker 3>of companies analysts everything they can get real time data

0:05:57.440 --> 0:06:00.919
<v Speaker 3>from sources that track like credit card transit actions and stuff.

0:06:01.160 --> 0:06:03.760
<v Speaker 3>And so that's a big concern right now. Is there

0:06:03.800 --> 0:06:07.600
<v Speaker 3>like almost like a false flag that the consumer's safe

0:06:08.040 --> 0:06:11.120
<v Speaker 3>if in reality they are just like stockpiling on things

0:06:11.560 --> 0:06:13.799
<v Speaker 3>getting ahead of the tariffs and then and then demand's

0:06:13.800 --> 0:06:17.760
<v Speaker 3>going to drop off a cliff in several weeks, you know.

0:06:17.880 --> 0:06:20.960
<v Speaker 3>So that's something that people are actively monitoring and scratching

0:06:20.960 --> 0:06:22.040
<v Speaker 3>their heads about right now.

0:06:23.120 --> 0:06:25.679
<v Speaker 4>All right, Spencer, thank you so much. We appreciate that. Spencer, Sooper,

0:06:25.680 --> 0:06:27.920
<v Speaker 4>Bloomberg News Technology and e Commerce reporter.

0:06:29.760 --> 0:06:33.440
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:06:33.520 --> 0:06:36.919
<v Speaker 1>weekdays at ten am Eastern on Applecarclay, and Android Auto

0:06:37.040 --> 0:06:40.080
<v Speaker 1>with the Bloomberg Business app. Listen on demand wherever you

0:06:40.120 --> 0:06:43.120
<v Speaker 1>get your podcasts, or watch us live on YouTube.

0:06:43.760 --> 0:06:46.359
<v Speaker 2>Let's take a broader look now at the relationship of

0:06:46.640 --> 0:06:49.679
<v Speaker 2>US and China. It's not good. What's the off ramp

0:06:49.720 --> 0:06:53.000
<v Speaker 2>at this point? Joining us now is Leland Miller. He

0:06:53.240 --> 0:06:57.560
<v Speaker 2>is a CEO of the China, beij book Leland. You

0:06:57.600 --> 0:07:01.880
<v Speaker 2>are deep into the China, I mean China US trade relations, etc.

0:07:02.240 --> 0:07:05.719
<v Speaker 2>What levers does China have to pull to help support

0:07:05.800 --> 0:07:08.000
<v Speaker 2>its economy in the middle of a trade war.

0:07:10.160 --> 0:07:12.760
<v Speaker 5>Well, you know, markets have been expecting there to be

0:07:12.800 --> 0:07:15.960
<v Speaker 5>some sort of giant stimulus response for years, and they

0:07:15.960 --> 0:07:19.680
<v Speaker 5>were always disappointed because it wasn't in Chijiping's interest to

0:07:19.800 --> 0:07:22.800
<v Speaker 5>sort of reduce the economy after they've gone through maybe

0:07:22.840 --> 0:07:25.520
<v Speaker 5>not deleveraging, but certainly a tightening of credit to areas

0:07:25.520 --> 0:07:28.920
<v Speaker 5>of the economy outside of the priorities like advanced manufacturing,

0:07:29.320 --> 0:07:33.920
<v Speaker 5>et cetera. We're entering a very new era here, and

0:07:34.000 --> 0:07:38.200
<v Speaker 5>so depending on how severe geopolitics and the trade wars

0:07:38.240 --> 0:07:41.200
<v Speaker 5>get going forward, they're going to start looking at these

0:07:41.280 --> 0:07:44.000
<v Speaker 5>levers more seriously. Obviously, one of the big one is

0:07:44.040 --> 0:07:45.840
<v Speaker 5>fiscal spending. They don't want to do a Bazuka like

0:07:45.880 --> 0:07:48.480
<v Speaker 5>two thousand and eight, and they've already done a lot

0:07:48.480 --> 0:07:50.440
<v Speaker 5>of monetary easing over the course of the past couple

0:07:50.440 --> 0:07:52.280
<v Speaker 5>of years, so there's not that much oomp there. But

0:07:52.360 --> 0:07:54.680
<v Speaker 5>there is spending they can certainly do. And in our

0:07:54.760 --> 0:07:58.120
<v Speaker 5>latest data, we have actually seen our proxy for infrastructure

0:08:00.040 --> 0:08:03.960
<v Speaker 5>structure spending, uh start expanding, it go up by transportation.

0:08:04.000 --> 0:08:07.120
<v Speaker 5>Construction firms are borrowing more, they're investing more, They're hiring more.

0:08:07.200 --> 0:08:10.440
<v Speaker 5>So they are they are readying the AMMO gun in

0:08:10.480 --> 0:08:11.880
<v Speaker 5>case they need to use it. But I think they're

0:08:11.880 --> 0:08:13.760
<v Speaker 5>trying to figure out whether this is going to be

0:08:13.760 --> 0:08:16.160
<v Speaker 5>a short term problem or whether this is the new norm.

0:08:16.800 --> 0:08:20.800
<v Speaker 6>So Leland, nobody knows this better than you. But where

0:08:20.880 --> 0:08:23.600
<v Speaker 6>is a capacity for China and the willingness for China

0:08:23.680 --> 0:08:26.480
<v Speaker 6>to really go toe to toe with President Trump in

0:08:26.480 --> 0:08:27.800
<v Speaker 6>the US on these tariffs.

0:08:28.000 --> 0:08:29.080
<v Speaker 4>What is their capacity there?

0:08:29.120 --> 0:08:32.360
<v Speaker 5>Do you think? Well, their capacity and their willingness are

0:08:32.360 --> 0:08:35.120
<v Speaker 5>two different things. I think their willingness is very high.

0:08:35.240 --> 0:08:37.959
<v Speaker 5>I think we're already seeing a you know, there was

0:08:37.960 --> 0:08:40.320
<v Speaker 5>a signaling before it happened, and then now that it's happened,

0:08:40.400 --> 0:08:43.320
<v Speaker 5>you see there was a you know, the message was always,

0:08:43.520 --> 0:08:46.240
<v Speaker 5>if you do something to us, we're gonna respond. You

0:08:46.280 --> 0:08:48.439
<v Speaker 5>do something else to us, again, we're gonna respond. Now,

0:08:48.480 --> 0:08:51.679
<v Speaker 5>the problem here is that China doesn't have the capacity

0:08:51.760 --> 0:08:53.480
<v Speaker 5>to go one on one in the trade field with

0:08:53.520 --> 0:08:55.600
<v Speaker 5>the United States, simply because the United States is a

0:08:55.640 --> 0:08:58.920
<v Speaker 5>massive importer and China is a very weak importer by comparison,

0:08:59.280 --> 0:09:02.400
<v Speaker 5>So if you just talking about trade, the US has

0:09:02.480 --> 0:09:04.760
<v Speaker 5>much more leverage and can put much more pain on China.

0:09:05.080 --> 0:09:06.959
<v Speaker 5>This is why, once you get to a certain point,

0:09:07.120 --> 0:09:09.320
<v Speaker 5>and to the extent that Beijing is willing to risk

0:09:09.360 --> 0:09:12.520
<v Speaker 5>an escalation, you're going to see things expand outside the

0:09:12.559 --> 0:09:14.360
<v Speaker 5>purely trade realm. It's not going to be just a

0:09:14.360 --> 0:09:17.120
<v Speaker 5>conversation about tariffs. Already we're moving outside of it, but

0:09:17.120 --> 0:09:20.520
<v Speaker 5>you can expand it more dramatically to other areas and

0:09:20.559 --> 0:09:23.880
<v Speaker 5>even punishing US firms on the ground in China.

0:09:24.040 --> 0:09:25.920
<v Speaker 2>I mean, yeah, we already heard the headline that China's

0:09:26.320 --> 0:09:28.640
<v Speaker 2>you know, telling students that want to study in the US,

0:09:28.760 --> 0:09:31.640
<v Speaker 2>like think twice, for example, before you do that. In

0:09:31.720 --> 0:09:33.560
<v Speaker 2>terms of levers that can pull, I know you mentioned

0:09:33.760 --> 0:09:36.599
<v Speaker 2>helping domestic capacity and sort of pumping money into the

0:09:36.600 --> 0:09:38.960
<v Speaker 2>system for consumers might not be the best. But in

0:09:39.040 --> 0:09:43.160
<v Speaker 2>terms of the un evaluation, for example, how orderly can

0:09:43.400 --> 0:09:44.240
<v Speaker 2>China keep that?

0:09:46.120 --> 0:09:48.040
<v Speaker 5>I think they can keep it pretty orderly because they

0:09:48.040 --> 0:09:50.760
<v Speaker 5>want to keep it orderly. You know, it seems like

0:09:50.840 --> 0:09:53.160
<v Speaker 5>every time there's any kind of geopolitical tension to the

0:09:53.280 --> 0:09:56.480
<v Speaker 5>US and China, any trade tension, there's anything going on

0:09:56.559 --> 0:09:59.360
<v Speaker 5>in terms of just a weak Chinese economy. There's people

0:09:59.400 --> 0:10:02.199
<v Speaker 5>screaming to this guy the yuan devalue it to value it.

0:10:03.040 --> 0:10:05.480
<v Speaker 5>They really don't want to do this. It's not that

0:10:05.559 --> 0:10:08.480
<v Speaker 5>it's not a tool in the in the box to use,

0:10:08.679 --> 0:10:11.520
<v Speaker 5>but it's for break the glass emergencies. It doesn't mean

0:10:11.559 --> 0:10:13.400
<v Speaker 5>they're not going to blow off steam against the USD.

0:10:13.559 --> 0:10:15.240
<v Speaker 5>It doesn't mean they're not gonna, you know, have a

0:10:15.280 --> 0:10:18.719
<v Speaker 5>signaling purpose from just from moving it incrementally. But they

0:10:18.800 --> 0:10:21.200
<v Speaker 5>really don't want to do one of these one off devaluations.

0:10:21.320 --> 0:10:23.439
<v Speaker 5>It would be a massive escalation. It would be seen

0:10:23.600 --> 0:10:25.840
<v Speaker 5>very poorly, not just the United States and around the world.

0:10:26.360 --> 0:10:29.360
<v Speaker 5>But you're also you're also sitting in a situation where

0:10:29.640 --> 0:10:31.160
<v Speaker 5>you are going to you're going to create a lot

0:10:31.160 --> 0:10:33.600
<v Speaker 5>of stress inside the Chinese economy. You're going to put

0:10:33.640 --> 0:10:37.480
<v Speaker 5>pressure on having more capital outflows, You're trying to increase consumption.

0:10:37.720 --> 0:10:40.520
<v Speaker 5>By weakening the yu want you're gonna hurt consumption even further.

0:10:40.640 --> 0:10:43.840
<v Speaker 5>So this is not just some piece of a trade

0:10:43.960 --> 0:10:46.959
<v Speaker 5>artillery that they can use willy nilly to go there

0:10:47.000 --> 0:10:48.720
<v Speaker 5>in a big way. They need to really have a

0:10:48.720 --> 0:10:50.240
<v Speaker 5>substantial escalation.

0:10:50.320 --> 0:10:55.800
<v Speaker 4>Hey Leland, does chind of view this US nationalism from

0:10:55.840 --> 0:10:59.760
<v Speaker 4>President trumpet administration, from a global trade, from a global

0:10:59.760 --> 0:11:05.079
<v Speaker 4>mill military political as a real opportunity to expand its influence?

0:11:05.520 --> 0:11:07.000
<v Speaker 4>Did they view this as a once in a lifetime

0:11:07.040 --> 0:11:08.160
<v Speaker 4>opportunity to do that.

0:11:09.720 --> 0:11:11.679
<v Speaker 5>I think there's a lot of voices in China. I

0:11:11.679 --> 0:11:13.560
<v Speaker 5>think that they don't like some of what's happening. I

0:11:13.559 --> 0:11:15.840
<v Speaker 5>think other things they see as an opportunity. Certainly, if

0:11:15.960 --> 0:11:19.719
<v Speaker 5>US allies and partner relationships are breaking down, either in

0:11:19.760 --> 0:11:21.880
<v Speaker 5>the region or around the world, they'd love to take

0:11:21.920 --> 0:11:25.080
<v Speaker 5>advantage of that, and not necessarily by replacing the US,

0:11:25.080 --> 0:11:27.480
<v Speaker 5>by just simply just saying stop helping the US, stop

0:11:27.559 --> 0:11:31.520
<v Speaker 5>stop buying into what they're doing. So so there are

0:11:31.600 --> 0:11:35.000
<v Speaker 5>opportunities in here if it's played wrong by the US government.

0:11:35.080 --> 0:11:37.600
<v Speaker 5>But you know, I think that we're in a We're

0:11:37.600 --> 0:11:41.480
<v Speaker 5>in such a dramatic place differently from you know where

0:11:41.480 --> 0:11:44.040
<v Speaker 5>we were a few months ago. They're trying to digest this,

0:11:44.200 --> 0:11:45.040
<v Speaker 5>just like the rest of us.

0:11:46.280 --> 0:11:50.120
<v Speaker 2>Will this move China to make connections and trade deals

0:11:50.160 --> 0:11:51.960
<v Speaker 2>and more economic ties with the rest of the world,

0:11:51.960 --> 0:11:53.240
<v Speaker 2>And is the rest of the world open to that?

0:11:55.040 --> 0:11:57.280
<v Speaker 5>China would love lots of trade deals, but China wants

0:11:57.320 --> 0:11:59.280
<v Speaker 5>them on their terms, and what they want to be

0:11:59.320 --> 0:12:03.199
<v Speaker 5>able to do is not import on other countries' exports,

0:12:03.200 --> 0:12:05.120
<v Speaker 5>and they want to just shove their exports down everybody

0:12:05.120 --> 0:12:07.560
<v Speaker 5>else's throat. So to the extent that they can strong

0:12:07.679 --> 0:12:11.480
<v Speaker 5>arm countries or there's unique advantages to having some sort

0:12:11.480 --> 0:12:14.800
<v Speaker 5>of bilatter relationship, then you know, maybe these proceed. But

0:12:15.120 --> 0:12:17.760
<v Speaker 5>keep in mind, to the extent the US shuts itself

0:12:17.800 --> 0:12:22.079
<v Speaker 5>off from Chinese goods, we import a lot of Chinese

0:12:22.080 --> 0:12:24.400
<v Speaker 5>goods and have for a long long time, then they're

0:12:24.400 --> 0:12:26.560
<v Speaker 5>going to have to send these goods somewhere else. So

0:12:26.559 --> 0:12:28.880
<v Speaker 5>in addition to all the overcapacity problems you already have,

0:12:29.200 --> 0:12:32.079
<v Speaker 5>you have simply a need to replace the demand for

0:12:32.760 --> 0:12:36.160
<v Speaker 5>Chinese exports elsewhere. They're going to be flooding Southeast Asia,

0:12:36.200 --> 0:12:37.959
<v Speaker 5>they're going to be flooding Europe, They're going to be

0:12:38.040 --> 0:12:40.560
<v Speaker 5>flooding South America. So this is going to have to

0:12:40.679 --> 0:12:43.079
<v Speaker 5>demand a policy response from all these other countries. And

0:12:43.120 --> 0:12:44.920
<v Speaker 5>the question is, you know, do you really want to

0:12:44.920 --> 0:12:46.959
<v Speaker 5>do a trade deal with the Chinese if you're not

0:12:47.000 --> 0:12:48.160
<v Speaker 5>getting anything back in return.

0:12:49.240 --> 0:12:51.360
<v Speaker 4>Leland Millo, thank you so much. We appreciate your time.

0:12:51.400 --> 0:12:54.000
<v Speaker 4>As always. One of our go to voices and all

0:12:54.080 --> 0:12:57.559
<v Speaker 4>things China, all things Chinese Economy, Leland Miller, CEO at

0:12:57.559 --> 0:12:59.800
<v Speaker 4>the China Facebook. One of the things we'd like about

0:13:00.360 --> 0:13:02.560
<v Speaker 4>chatting with Leland because at the Beige Book they have

0:13:02.679 --> 0:13:05.160
<v Speaker 4>really unique data. They have boots on the ground they

0:13:05.160 --> 0:13:07.560
<v Speaker 4>get They don't rely upon the government data because that

0:13:07.920 --> 0:13:11.080
<v Speaker 4>historically has been not quite reliable. So again they have

0:13:11.120 --> 0:13:13.720
<v Speaker 4>their own data sets there that they rely upon to

0:13:13.760 --> 0:13:15.480
<v Speaker 4>give them a sense of ware the Chinese economy.

0:13:15.480 --> 0:13:15.680
<v Speaker 3>ASTs.

0:13:15.679 --> 0:13:18.720
<v Speaker 4>We find out from Leland that he's usually ahead of

0:13:18.760 --> 0:13:20.880
<v Speaker 4>this stuff, so I appreciate getting his time.

0:13:22.600 --> 0:13:26.240
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:13:26.400 --> 0:13:29.480
<v Speaker 1>weekdays at ten am Eastern on Apple Coarclay, and Android

0:13:29.480 --> 0:13:32.800
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

0:13:32.840 --> 0:13:36.120
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

0:13:37.559 --> 0:13:41.520
<v Speaker 4>Joining us in studio, How about that, Christina Hooper, Chief

0:13:41.600 --> 0:13:45.079
<v Speaker 4>Global market strategist at Invesco. We usually do the Zoom thing,

0:13:45.120 --> 0:13:46.880
<v Speaker 4>but we've got her in our studio here in NewYork.

0:13:46.920 --> 0:13:51.360
<v Speaker 4>That's great, Christina, You've got perspective, You've been around. This

0:13:51.400 --> 0:13:53.839
<v Speaker 4>isn't your first Rodeo, What do you make of the

0:13:53.920 --> 0:13:56.559
<v Speaker 4>last three, four, five, six trading days.

0:13:57.960 --> 0:14:01.640
<v Speaker 7>Well, this is an environment in which there is just

0:14:01.840 --> 0:14:06.560
<v Speaker 7>a super high level of uncertainty and that is causing

0:14:06.640 --> 0:14:10.080
<v Speaker 7>all kinds of wild swings in all different corners of

0:14:10.120 --> 0:14:13.679
<v Speaker 7>the market. And I think this is not that dissimilar

0:14:13.760 --> 0:14:16.280
<v Speaker 7>to what we saw in the early days of COVID.

0:14:16.840 --> 0:14:19.560
<v Speaker 7>Now that was a time when there was just an

0:14:19.560 --> 0:14:26.400
<v Speaker 7>incredible amount of uncertainty and markets reacted with an enormous

0:14:26.440 --> 0:14:33.040
<v Speaker 7>amount of fear, wild swings. And the other similarity is

0:14:33.120 --> 0:14:37.040
<v Speaker 7>that it's all about policy. That it's going to the

0:14:37.080 --> 0:14:41.760
<v Speaker 7>outcome of this crisis will be dictated by policy, and

0:14:41.880 --> 0:14:44.840
<v Speaker 7>so in some ways that's helpful because you can you

0:14:44.880 --> 0:14:49.160
<v Speaker 7>can do a scenario map and ask yourself, you know,

0:14:49.640 --> 0:14:52.640
<v Speaker 7>if this effex happens, we think, why will happen? But

0:14:52.760 --> 0:14:56.520
<v Speaker 7>it is. It is a very very unusual environment, just

0:14:56.560 --> 0:14:59.400
<v Speaker 7>punctuated by just an incredibly high level of uncertainty.

0:14:59.400 --> 0:15:04.119
<v Speaker 2>Speaking of that, Amazon canceling orders that affect multiple products

0:15:04.120 --> 0:15:08.440
<v Speaker 2>and vendors after China tear effs. They're citing trade disputes

0:15:08.480 --> 0:15:12.520
<v Speaker 2>as risk factor and this coming out in the annual report.

0:15:13.960 --> 0:15:17.000
<v Speaker 2>The difference and obviously is that this is a self

0:15:17.440 --> 0:15:20.440
<v Speaker 2>inflicted policy. This is not what happened in COVID and

0:15:20.480 --> 0:15:22.880
<v Speaker 2>we shut down and then we had to help to

0:15:22.920 --> 0:15:26.280
<v Speaker 2>go specifically to the treasury market. Are you seeing are

0:15:26.320 --> 0:15:29.760
<v Speaker 2>you hearing? Are you worried about the treasury market not

0:15:29.880 --> 0:15:32.920
<v Speaker 2>functioning properly like we saw back in twenty twenty.

0:15:33.880 --> 0:15:37.080
<v Speaker 7>So I certainly think that's a concern. Right now, I

0:15:37.080 --> 0:15:40.920
<v Speaker 7>don't think we're seeing that, but we do know that,

0:15:42.560 --> 0:15:47.000
<v Speaker 7>you know, our trading partners know some of our big vulnerabilities,

0:15:47.080 --> 0:15:49.360
<v Speaker 7>right and one of them is that we spend an

0:15:49.400 --> 0:15:52.640
<v Speaker 7>awful lot servicing our debt, and so one way to

0:15:52.680 --> 0:15:55.880
<v Speaker 7>punish us would be to sell US treasuries. So I

0:15:55.920 --> 0:15:58.720
<v Speaker 7>certainly think we you know, we should, We are aware

0:15:58.760 --> 0:16:01.240
<v Speaker 7>of the vulnerabilities, and we would be following it closely

0:16:01.880 --> 0:16:02.480
<v Speaker 7>at Investigo.

0:16:02.560 --> 0:16:05.760
<v Speaker 4>What is your I guess economic forecast? Do you have

0:16:05.800 --> 0:16:08.480
<v Speaker 4>a recession in your forecast?

0:16:08.040 --> 0:16:12.240
<v Speaker 7>My base case is that if we see terroriffs remain

0:16:12.360 --> 0:16:16.520
<v Speaker 7>at these relatively high levels, we're more than fifty percent

0:16:16.600 --> 0:16:19.680
<v Speaker 7>probability of going into a recession this year. It doesn't

0:16:19.720 --> 0:16:21.640
<v Speaker 7>mean that it's going to be a deep recession, but

0:16:21.680 --> 0:16:23.920
<v Speaker 7>I think that certainly the odds are in favor of

0:16:23.960 --> 0:16:28.280
<v Speaker 7>recession if we see tariffs remain at relatively high levels.

0:16:28.440 --> 0:16:30.560
<v Speaker 7>But if we were to see a de escalation, we

0:16:30.600 --> 0:16:34.880
<v Speaker 7>could easily see a risk on environment with US assets benefiting.

0:16:35.000 --> 0:16:38.320
<v Speaker 7>So it is very much in the hands of policymakers.

0:16:38.560 --> 0:16:40.320
<v Speaker 2>And then to that point, you just look at delta right,

0:16:40.400 --> 0:16:43.240
<v Speaker 2>pulling guidance. If a company pulls guidance, you would assume

0:16:43.280 --> 0:16:45.760
<v Speaker 2>the stock would sell off and that would be really

0:16:45.760 --> 0:16:47.800
<v Speaker 2>bad news. And the stock is up. It's like it's

0:16:47.800 --> 0:16:49.560
<v Speaker 2>not going to take much to maybe move the needle.

0:16:50.840 --> 0:16:52.360
<v Speaker 2>Where is safety though?

0:16:52.400 --> 0:16:53.920
<v Speaker 4>Now? As you wait?

0:16:55.200 --> 0:16:59.360
<v Speaker 7>So safety clearly is in gold, and that's what many

0:16:59.400 --> 0:17:05.760
<v Speaker 7>investors are articulating through their purchases. But there is also safety,

0:17:05.760 --> 0:17:08.959
<v Speaker 7>of course in Japanese yen, in the Swiss frank some

0:17:09.000 --> 0:17:12.679
<v Speaker 7>of the traditional safe haven asset classes x US. I

0:17:12.680 --> 0:17:14.879
<v Speaker 7>don't know if there's as much safety in treasuries or

0:17:14.880 --> 0:17:16.320
<v Speaker 7>the usd Wow.

0:17:16.920 --> 0:17:21.560
<v Speaker 4>That's a statement. International rest of world stock markets been

0:17:21.600 --> 0:17:24.480
<v Speaker 4>out performing the US pretty well, and that doesn't happen

0:17:24.600 --> 0:17:27.800
<v Speaker 4>very often. Is that a trade? Is that a longer

0:17:27.920 --> 0:17:31.800
<v Speaker 4>term trend? Do you think is our international markets may

0:17:31.800 --> 0:17:33.600
<v Speaker 4>be more attractive from an equity perspective.

0:17:34.320 --> 0:17:39.200
<v Speaker 7>Well, certainly from evaluation perspective, and for some markets from

0:17:39.240 --> 0:17:43.520
<v Speaker 7>a dividend yield perspective, they are more attractive. And you

0:17:43.640 --> 0:17:47.199
<v Speaker 7>have to recognize a very significant catalyst, which is the

0:17:47.200 --> 0:17:52.720
<v Speaker 7>potential for fiscal stimulus material fiscal stimulilus coming from Europe

0:17:53.080 --> 0:17:55.679
<v Speaker 7>and from China, and I think that can be a

0:17:55.720 --> 0:17:59.840
<v Speaker 7>countervailing force to the headwinds that come from these.

0:17:59.760 --> 0:18:03.679
<v Speaker 2>Terror counterbailing force. Could that also come in the US

0:18:03.720 --> 0:18:06.760
<v Speaker 2>in the form of tax cuts. Would that be enough?

0:18:08.400 --> 0:18:10.280
<v Speaker 7>That's a good question. I'd have to see exactly what

0:18:10.320 --> 0:18:12.879
<v Speaker 7>those tax cuts look like, because keep in mind that

0:18:12.960 --> 0:18:15.240
<v Speaker 7>it's lower income households that are going to be hit

0:18:15.280 --> 0:18:19.120
<v Speaker 7>the hardest by these tear wars. Of course, all consumers

0:18:19.160 --> 0:18:21.720
<v Speaker 7>will be hit to the extent that the wealth effect

0:18:22.600 --> 0:18:26.640
<v Speaker 7>is impacted, but I think lower income households the burden

0:18:26.720 --> 0:18:29.760
<v Speaker 7>is higher for tariffs. So what will the tax cuts

0:18:29.800 --> 0:18:32.480
<v Speaker 7>look like and will it benefit lower income households? So

0:18:32.520 --> 0:18:34.760
<v Speaker 7>when I know that, then I can answer that question.

0:18:34.880 --> 0:18:38.399
<v Speaker 4>Another headline China issues warning for students studying in the US.

0:18:39.080 --> 0:18:42.560
<v Speaker 4>So there you go, ripple effect. I guess you'd call it, yeah,

0:18:42.920 --> 0:18:45.760
<v Speaker 4>fixed income. What's the play here? Christina in fixed income

0:18:45.760 --> 0:18:46.240
<v Speaker 4>for you guys.

0:18:47.760 --> 0:18:53.200
<v Speaker 7>So I think there's certainly potential in a number of areas. Again,

0:18:53.200 --> 0:18:55.360
<v Speaker 7>a lot of it has to do with one's time horizon,

0:18:56.080 --> 0:18:59.000
<v Speaker 7>but certainly floating rate. I don't see the Fed cutting

0:18:59.080 --> 0:19:01.840
<v Speaker 7>rates anytime soon. I know four cuts are priced in.

0:19:02.400 --> 0:19:04.919
<v Speaker 7>It's hard to believe that's going to happen in this

0:19:05.040 --> 0:19:08.840
<v Speaker 7>environment where we're seeing market based inflation expectations go up

0:19:08.840 --> 0:19:12.320
<v Speaker 7>and where we're seeing consumer based inflation expectations go up.

0:19:13.920 --> 0:19:18.200
<v Speaker 2>Aside from I guess from where you sit, what would

0:19:18.240 --> 0:19:22.920
<v Speaker 2>certainty look like? Because to some extent we know what

0:19:22.960 --> 0:19:25.840
<v Speaker 2>stuff is like, we know what tariffs are, we know

0:19:26.160 --> 0:19:28.960
<v Speaker 2>that we don't know necessarily what all the response will be.

0:19:29.560 --> 0:19:33.240
<v Speaker 2>So what would it take for you, as someone who'd

0:19:33.280 --> 0:19:35.760
<v Speaker 2>been in the market for a long time to feel confident?

0:19:36.880 --> 0:19:39.879
<v Speaker 7>So I hearkened back to the first Trump administration, definitely

0:19:39.960 --> 0:19:45.000
<v Speaker 7>harken and how that played out. Twenty eighteen was a

0:19:45.080 --> 0:19:47.639
<v Speaker 7>really difficult year. The S and P five hundred was down,

0:19:48.119 --> 0:19:52.760
<v Speaker 7>we saw some foreign markets down much more, but just

0:19:53.440 --> 0:20:01.280
<v Speaker 7>a smodest alleviation in tariffs helped and gave markets confidence.

0:20:01.640 --> 0:20:04.640
<v Speaker 7>So something like that I think is enough in this environment.

0:20:05.080 --> 0:20:09.000
<v Speaker 7>There's really a bias towards optimism, especially in the equity market.

0:20:09.840 --> 0:20:13.920
<v Speaker 7>So there's hope. Even if we were to get some

0:20:14.000 --> 0:20:18.360
<v Speaker 7>kind of reduction, some negotiation, some deals negotiated with some countries,

0:20:18.520 --> 0:20:20.720
<v Speaker 7>I think that could be helpful. That doesn't give us

0:20:21.400 --> 0:20:24.920
<v Speaker 7>the extreme certainty that I think we crave, but it's enough.

0:20:25.520 --> 0:20:28.200
<v Speaker 4>Christina, thank you so much. We really appreciate it. Christina Hooper,

0:20:28.240 --> 0:20:31.720
<v Speaker 4>Global Chief Global Market Strategist for Invesco joining us live

0:20:31.720 --> 0:20:34.879
<v Speaker 4>here in our Bloomberg Interactive Broker Studio, which is a

0:20:35.040 --> 0:20:35.680
<v Speaker 4>good thing.

0:20:36.720 --> 0:20:41.399
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:20:41.600 --> 0:20:45.080
<v Speaker 1>and anywhere else you get your podcasts. Listen live each

0:20:45.080 --> 0:20:48.800
<v Speaker 1>weekday ten am to Noone's durn on Bloomberg dot com,

0:20:48.960 --> 0:20:52.520
<v Speaker 1>the iHeartRadio app, tune In, and the Bloomberg Business app.

0:20:52.920 --> 0:20:55.800
<v Speaker 1>You can also watch us live every weekday on YouTube

0:20:56.240 --> 0:20:58.480
<v Speaker 1>and always on the Bloomberg Terminal.