WEBVTT - Reciprocal US Tariffs to Take Effect, Trump Threatens Chip Levies

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>Welcome to the Bloomberg Daybreak Asia podcast. I'm Charlie Pellet.

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<v Speaker 2>Doug Prisoner's off. This week, US futures climbed and Asian

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<v Speaker 2>equity futures were mixed after President Trump warned he may

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<v Speaker 2>impose a one hundred percent tariffon chip imports.

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<v Speaker 3>We're going to be putting a very large tariff on

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<v Speaker 3>chips and semiconductors. But the good news for companies like

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<v Speaker 3>Apple is if you're building in the United States or

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<v Speaker 3>have committed to build without question, committed to build in

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<v Speaker 3>the United States, there will be no charge.

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<v Speaker 2>The comments came as Apple CEO Tim Cook unveiled a

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<v Speaker 2>one hundred billion dollar US investment plan alongside Trump at

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<v Speaker 2>the Oval Office. Coming up, we'll get reaction from Emily Benson,

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<v Speaker 2>head of strategy at Minerva Technology. Fewtures. After months of

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<v Speaker 2>trade talks and threats, US reciprocal tariffs are set to

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<v Speaker 2>take effect at twelve oh one am Eastern Time. For more,

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<v Speaker 2>we heard from William Rinch, senior advisor at the Center

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<v Speaker 2>for Strategic and International Studies. He spoke with Bloomberg's Heidi

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<v Speaker 2>Stroud Watts and Hustlinda Amen.

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<v Speaker 4>He previously served as US Under Secretary of Comments for

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<v Speaker 4>Export Administration during the Clinton administration. Good have you with us, William?

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<v Speaker 4>I mean, what's your take? We're seeing headlines still, you know,

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<v Speaker 4>dropping when it comes to those tariffs. It aimed over

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<v Speaker 4>till the fat lady sinks. I mean, where are we

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<v Speaker 4>with these tariffs?

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<v Speaker 5>Well, you know, another day, another tariff that seems to

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<v Speaker 5>be what's happening here? And it's just one thing after another.

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<v Speaker 5>There's so many unanswered questions that it's very hard to

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<v Speaker 5>figure out what's going to happen. You know, on the

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<v Speaker 5>secondary tariffs on India, why not China? You know, how

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<v Speaker 5>is it going to be enforced? Is it going to

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<v Speaker 5>be on everything? Or are there going to be exceptions?

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<v Speaker 5>There tends to be sometimes a list of exceptions that

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<v Speaker 5>gets ruled out later on. On the semiconductor tariffs that you

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<v Speaker 5>were just talking about a few minutes ago, same thing.

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<v Speaker 5>You know, are they going to how they're not going

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<v Speaker 5>to be applied to companies that are producing here or

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<v Speaker 5>have promised to produce here?

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<v Speaker 6>What does that mean? How long do they have to

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<v Speaker 6>keep their word? You know?

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<v Speaker 5>Are the teriffs going to be on the chips or

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<v Speaker 5>the products that contain the chips. And if it's the

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<v Speaker 5>product contains the chips, is it on the full value

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<v Speaker 5>of the product or just the value of the chip.

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<v Speaker 5>None of these questions are answered right now. In a week,

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<v Speaker 5>we may have some answers, but it's really the same

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<v Speaker 5>as the deals.

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<v Speaker 6>That are on screen right now.

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<v Speaker 5>There's a lot of unanswered questions about those too, and

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<v Speaker 5>a lot of cases where the leaders of the other

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<v Speaker 5>countries have interpreted what they agree to somewhat differently than

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<v Speaker 5>what our president has said. So there's just a host

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<v Speaker 5>of things that have to be resolved. This is going

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<v Speaker 5>to go on for a very long time.

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<v Speaker 4>What are the implications, William, I mean you can only

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<v Speaker 4>imagine MODI must be thinking how did a friend become

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<v Speaker 4>a foe? And you have to also question if India's

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<v Speaker 4>non aligned policy might change at this point in time.

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<v Speaker 6>Well, yes, I think that's a very important question.

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<v Speaker 5>Whether these tariffs are coming at the expense of the

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<v Speaker 5>broader US India relationship. Relations with India have improved a

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<v Speaker 5>lot over the last twenty years, starting in the George W.

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<v Speaker 5>Bush administration, mostly for geostrategic reasons. Mostly I think as

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<v Speaker 5>a counterweight to China, and these actions now may be

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<v Speaker 5>sacrificing the good will and credibility that have been built

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<v Speaker 5>up over a long period of time. Trump seems to

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<v Speaker 5>be frustrated by ability to close the negotiation with the

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<v Speaker 5>Indian government. You know, there were many predictions that there'd

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<v Speaker 5>be a deal. There were many optimistic predictions about a

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<v Speaker 5>good deal, meaning for both sides, and none of that

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<v Speaker 5>has happened. And for those of us to watch trade

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<v Speaker 5>negotiations that we weren't really surprised.

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<v Speaker 6>India is a very difficult country to negotiate with.

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<v Speaker 5>So I think the President is frustrated and is taking

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<v Speaker 5>out his ire on the secondary sangards issue first with India.

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<v Speaker 5>He implied today that China might follow so because they

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<v Speaker 5>actually buy more oil, Russian oil than India does. So

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<v Speaker 5>stay tuned for, you know, tomorrow or the next day,

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<v Speaker 5>more tariffs.

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<v Speaker 1>The counterweight element of channing is a really interesting one

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<v Speaker 1>to me because we've seen some of these traditional security

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<v Speaker 1>allies in the region, Japan, South Korea, the Philippines really

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<v Speaker 1>having to scramble to get favorable trade terms. India obviously

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<v Speaker 1>now on the ouse as well, whereas Beijing seems to

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<v Speaker 1>be kind of coasting along with but can being kicked

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<v Speaker 1>down the road on an extended truce. What do you

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<v Speaker 1>make of that dynamic?

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<v Speaker 6>Well, it's puzzling.

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<v Speaker 5>I mean, the irony of a lot of this is

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<v Speaker 5>that we're is how badly we're treating our friends. You know,

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<v Speaker 5>we have friends and allies in the region in Korea, Japan,

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<v Speaker 5>we have friends there in Southeast Asia that are not

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<v Speaker 5>out well. The Philippines is an ally as well, and

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<v Speaker 5>we're treating them really harshly in these things, in these agreements.

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<v Speaker 5>And you think that if the overall policy is to

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<v Speaker 5>maintain the US presence, particularly it's economic presence in the

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<v Speaker 5>Asia Pacific region, you want to have friends and you

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<v Speaker 5>want to have people that are going to side with

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<v Speaker 5>you if conflicts come up.

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<v Speaker 6>And right now it.

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<v Speaker 5>Seems that we're really tossing those people aside.

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<v Speaker 6>It's very worrisome.

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<v Speaker 1>What do you make of the state of play when

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<v Speaker 1>it comes to China? I mean, is it just sort

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<v Speaker 1>of a good news story for now because it is

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<v Speaker 1>such a strategically and competitively difficult relationship that it's kind

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<v Speaker 1>of being put on the back burner. And you know

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<v Speaker 1>the fact that these extensions are probably likely to happen.

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<v Speaker 1>Suggest that this is this is a way to kind

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<v Speaker 1>of make it a good news story.

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<v Speaker 5>Well, it's it's a fascinating it's fascining to watch that

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<v Speaker 5>one play out.

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<v Speaker 6>The President seems to be of two minds about China.

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<v Speaker 5>A lot of the people he appointed to the administration

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<v Speaker 5>are real China hawks that perceived China as an extential

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<v Speaker 5>threat and favor you decoupling to the maximum extent possible.

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<v Speaker 6>The President does not seem to be in that group.

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<v Speaker 6>Although he appointed all these people.

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<v Speaker 5>He does seem to have the view that if he

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<v Speaker 5>and she did and Ping could just sit down together

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<v Speaker 5>one on one, they could work a lot of these

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<v Speaker 5>differences out. He tried that in his first term. It

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<v Speaker 5>didn't work. He appears now to want to try again.

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<v Speaker 5>I don't think it will work any better in the

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<v Speaker 5>second term than it did in the first. But you've

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<v Speaker 5>seen him over the last two months pulling his punches

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<v Speaker 5>with China. The nasty rhetoric about the leadership which he's

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<v Speaker 5>displayed with respect to other countries has gone away.

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<v Speaker 6>He's imposed and then removed some export controls. It's kind

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<v Speaker 6>of a yo yo policy. They're on they're off, and he's.

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<v Speaker 5>Not done anything on the Russian oil issue with respect

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<v Speaker 5>to them, at least so far. I think he wants

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<v Speaker 5>to get the meeting and doesn't want to disrupt the relationship.

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<v Speaker 5>He's also very aware, as I'm sure you reported on

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<v Speaker 5>that China is the one country that has used his

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<v Speaker 5>leverage on US, namely with critical minerals and rare earths,

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<v Speaker 5>and they haven't hesitated to block their export.

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<v Speaker 6>That was a wake up call.

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<v Speaker 5>I think to the administration that this is one of

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<v Speaker 5>the one of the rare cases where Trump does not

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<v Speaker 5>hold all the cards, and I think that forces him

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<v Speaker 5>to proceed more cautiously.

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<v Speaker 4>William, we know that Trump's tariffs face a legal battle

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<v Speaker 4>at home, doesn't even matter. I mean, we know that

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<v Speaker 4>Trump has a way of pushing through everything. Anyways.

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<v Speaker 6>Yeah, I think that's interesting to watch.

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<v Speaker 5>My guess is that whether he wins or loses, it'll

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<v Speaker 5>be very difficult to get rid of the tariffs, at

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<v Speaker 5>least in the short term if he loses, and I

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<v Speaker 5>think this will play out over the next four or

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<v Speaker 5>five months. It's not on a really fast track, but

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<v Speaker 5>it's going to fat be faster than the normal course

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<v Speaker 5>of litigation in the United States. I think by the

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<v Speaker 5>end of the year you'll get a decision out of

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<v Speaker 5>the Supreme Court. If he loses, he'll probably say that

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<v Speaker 5>the agreements that he's already struck are the product of

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<v Speaker 5>the negotiations and not the product of the law that

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<v Speaker 5>he used, so that the court's judgment about the law.

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<v Speaker 6>Doesn't affect the agreements that he's negotiated.

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<v Speaker 5>Now he'll be sued about that, so more lawsuits, more litigation.

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<v Speaker 5>The courts so far have tended to say, let's keep

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<v Speaker 5>the terroriffts in place while we're sorting out all these

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<v Speaker 5>legal issues. So I think even if he loses, they're

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<v Speaker 5>going to stay in place. And if countries are looking

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<v Speaker 5>to the litigation as a fail say for them that

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<v Speaker 5>ultimately it'll get them off the hook.

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<v Speaker 6>I think they're going to be disappointed.

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<v Speaker 1>William Ranch, Senior advisor at CSI is really great to

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<v Speaker 1>have your views.

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<v Speaker 2>Welcome back to the Daybreak Asia podcast. I'm Charlie Peloton

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<v Speaker 2>this week for Doug Chrisner. President Trump says he will

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<v Speaker 2>impose a one hundred percent tariff on semiconductor imports, adding

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<v Speaker 2>he will exempt companies moving production back to the US

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<v Speaker 2>the comments came is Apple CEO Tim Cook unveiled a

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<v Speaker 2>one hundred billion dollar US investment plan alongside Trump at

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<v Speaker 2>the Oval Office. For more, we heard from Emily Benson,

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<v Speaker 2>head of strategy at Minerva Technology Futures. She spoke with

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<v Speaker 2>Bloomberg's Heidi Stroud Watts and has slender Amen.

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<v Speaker 1>Willly really great to have you with us. And so

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<v Speaker 1>when we see an announcement like this, which obviously looks

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<v Speaker 1>big and impressive from the headlines, we know that it

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<v Speaker 1>takes it to a sort of a cumulative six hundred

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<v Speaker 1>billion dollar intended spend by Apple in the US market.

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<v Speaker 1>Are you Are you impressed by it in terms of

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<v Speaker 1>what practically significantly it means and what it means for

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<v Speaker 1>some of these contracts with existing partnerships.

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<v Speaker 7>Thank you for having me. It sounds exactly like the

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<v Speaker 7>type of arrangement that the Trump administration has sought even

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<v Speaker 7>since before it came in. While the one hundred percent

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<v Speaker 7>announcement today on semiconductor imports me seem high, the administration

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<v Speaker 7>actually first telegraphed that idea at that rate as far

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<v Speaker 7>back as January of this year in the Taiwan context.

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<v Speaker 7>And I think this has been a very forward leaning

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<v Speaker 7>posture of the White House to try to induce companies

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<v Speaker 7>to make exactly the sort of announcement. I would also

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<v Speaker 7>add that this comes on the heels of a separate

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<v Speaker 7>five hundred million dollar announcement by Apple in the MP

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<v Speaker 7>materials context, where it is also agreeing to off taake

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<v Speaker 7>critical minerals and earths at a superficial price floor. And

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<v Speaker 7>so Apple is really doubling down on the US market

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<v Speaker 7>in a way that very closely aligns with this new

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<v Speaker 7>posture on economic security in the United States.

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<v Speaker 1>Does has put the pressure then, because you know, President

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<v Speaker 1>Trump obviously says this is a great example of how

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<v Speaker 1>his trade policy, his supply chain policy is working.

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<v Speaker 4>Right.

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<v Speaker 1>How much pressure is there on other tech names. We

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<v Speaker 1>know that there were talks with Jensen Huang today as

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<v Speaker 1>well to also be able to show up in the

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<v Speaker 1>way that the President the White House wants to see.

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<v Speaker 7>So rewinding a couple of weeks, we heard from the

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<v Speaker 7>President and also Commerce Secretary Lutnik in Scotland on the

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<v Speaker 7>sidelines of the EU US negotiations and ultimately deal announcement

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<v Speaker 7>that semiconductor tariffs were inbound. They were going to be

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<v Speaker 7>announced on a short timeframe, and so the administration has

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<v Speaker 7>been teasing out the idea that if you would like

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<v Speaker 7>to make a deal, now is a good time. I'm

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<v Speaker 7>very curious to see what transpires at the end of

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<v Speaker 7>this week and over the weekend heading into next week,

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<v Speaker 7>because it's easy to foresee a scenario in which a

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<v Speaker 7>lot of the big players come to the White House

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<v Speaker 7>with ideas for carve outs, and here I think the

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<v Speaker 7>primary push by a lot of the companies involved would

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<v Speaker 7>be to not have this take place immediately. And that's

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<v Speaker 7>actually something that we see that's transpiring very differently, for

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<v Speaker 7>example in the India context, where tariffs will enter into

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<v Speaker 7>a into force tomorrow and so there will certainly be

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<v Speaker 7>an all hands on doc effort to figure out where

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<v Speaker 7>there's a little bit of give and take, because this

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<v Speaker 7>will ultimately have very significant price pressure, especially for hyperscalers

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<v Speaker 7>and data center build out.

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<v Speaker 4>Emily's all about bringing chip production back home. The thing

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<v Speaker 4>is the US is offshort that production to Asia since

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<v Speaker 4>the nineteen sixties. It doesn't have the ability the capacity

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<v Speaker 4>to do it, and it takes years to build new

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<v Speaker 4>chip fat.

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<v Speaker 7>That's absolutely right, with one exception, which is sort of

0:13:32.440 --> 0:13:35.400
<v Speaker 7>uncomfortable for people who don't really like the direction of

0:13:35.440 --> 0:13:39.360
<v Speaker 7>travel right now with US policy is that TSMC's production

0:13:39.480 --> 0:13:43.480
<v Speaker 7>facilities in Arizona are actually beating expectations, and so I

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<v Speaker 7>do think the Administration has been relatively clear eyed about

0:13:46.640 --> 0:13:50.679
<v Speaker 7>the timeline. That being said, they're willing to apply maximum

0:13:50.760 --> 0:13:54.800
<v Speaker 7>pressure to the likes of TSMC in order to expedite

0:13:54.960 --> 0:13:58.880
<v Speaker 7>what's already a very fast timeframe. Again, I do think

0:13:58.920 --> 0:14:02.200
<v Speaker 7>there will be carbau to extend the timeline of implementation.

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<v Speaker 7>If you talk to a lot of industry analysts, I

0:14:04.840 --> 0:14:07.720
<v Speaker 7>think the four to five to six year timeframe is

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<v Speaker 7>more medable for the industry. We also have to remember

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<v Speaker 7>that this will directly confront one of the administration's other

0:14:15.000 --> 0:14:18.520
<v Speaker 7>hallmark policies, and this was announced two weeks ago in

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<v Speaker 7>the AI Action Plan, And here the White House is

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<v Speaker 7>saying very publicly that it wants to prioritize AI build out,

0:14:26.240 --> 0:14:30.160
<v Speaker 7>it wants to double down on US infrastructure, and very interestingly,

0:14:30.320 --> 0:14:33.400
<v Speaker 7>it also wants to package a lot of that AI

0:14:33.560 --> 0:14:37.520
<v Speaker 7>tech stac into separate bundles that it can then export abroad.

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<v Speaker 7>It of course, will need affordable inputs at the baseline

0:14:41.280 --> 0:14:44.040
<v Speaker 7>in order to be able to export these packages and

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<v Speaker 7>very interested to see what the ultimate price impact is

0:14:47.880 --> 0:14:51.640
<v Speaker 7>on that particular corner of the administration's policy.

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<v Speaker 4>And emily some say it is about quantity, it's also

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<v Speaker 4>about quality. And when it comes to both of them,

0:14:58.880 --> 0:15:02.120
<v Speaker 4>Taiwan and self on subpause, what do you make off

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<v Speaker 4>perhaps equality and quantity that can be expected from the US.

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<v Speaker 7>Well, I'm glad you bring up our allies and partners

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<v Speaker 7>like time in Korea, but also the because a couple

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<v Speaker 7>of weeks ago and the lead up to the expiration

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<v Speaker 7>of the reciprocal tariff pause, the administration has entered into

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<v Speaker 7>these arrangements where foreign partners seem to be under the

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<v Speaker 7>assumption that they would only be subject to a fifteen

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<v Speaker 7>percent teriff freight, and that includes a lot of these

0:15:29.520 --> 0:15:33.520
<v Speaker 7>sectoral products like semi conductors. So one question will actually

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<v Speaker 7>be whether or not today's announcement induces further development on

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<v Speaker 7>shore by those countries, or whether or not we'll have

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<v Speaker 7>to explore further negotiations. I also will note that the

0:15:47.080 --> 0:15:50.320
<v Speaker 7>United States actually does not import a lot of semi

0:15:50.320 --> 0:15:55.200
<v Speaker 7>conductors directly. Most semi conductors actually enter the United States

0:15:55.200 --> 0:15:59.360
<v Speaker 7>in finished goods, so these are items like iPhones or laptops,

0:15:59.640 --> 0:16:02.120
<v Speaker 7>and so it'll be interesting to see how the administration

0:16:02.200 --> 0:16:05.760
<v Speaker 7>starts to calculate the actual value and whether or not

0:16:06.000 --> 0:16:08.360
<v Speaker 7>each finished item will be subject to that one hundred

0:16:08.360 --> 0:16:10.160
<v Speaker 7>percent tare free.

0:16:10.600 --> 0:16:13.600
<v Speaker 1>Emily all of this as we hurdle towards midterms, right,

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<v Speaker 1>and as someone who's worked within the comments deplopmentum within

0:16:16.480 --> 0:16:20.200
<v Speaker 1>sort of broader industrial and supply chain policy, how likely

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<v Speaker 1>or easy would it be for some of these policies

0:16:23.680 --> 0:16:25.920
<v Speaker 1>to be rolled back, particularly if you say that they're

0:16:25.960 --> 0:16:29.520
<v Speaker 1>negotiated carveouts that push the timeline out by half a

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<v Speaker 1>decade or more.

0:16:31.680 --> 0:16:34.440
<v Speaker 7>Well, trade is not top of mind for a lot

0:16:34.440 --> 0:16:36.800
<v Speaker 7>of voters. It typically comes in somewhere in the eight

0:16:36.880 --> 0:16:43.040
<v Speaker 7>to ninth police for priority voting issues. That being said,

0:16:43.240 --> 0:16:46.360
<v Speaker 7>in today's Apple announcement, for example, they've entered into a

0:16:46.520 --> 0:16:51.040
<v Speaker 7>bigger partnership with Corning Glass. Corning will increase its workforce

0:16:51.120 --> 0:16:54.200
<v Speaker 7>related to this one deal by fifty percent in the

0:16:54.240 --> 0:16:57.080
<v Speaker 7>state of Kentucky. So it's also possible that we do

0:16:57.240 --> 0:17:01.280
<v Speaker 7>see sizable job gains and very targeted that's, of course,

0:17:01.320 --> 0:17:04.119
<v Speaker 7>aside from possible job losses and others. But if we

0:17:04.160 --> 0:17:08.040
<v Speaker 7>start to see some economic movement. I definitely could foresee

0:17:08.080 --> 0:17:10.840
<v Speaker 7>it having some political consequences in the midterms.

0:17:11.520 --> 0:17:15.680
<v Speaker 2>Emily Benson, head of strategy of Minerver Technology Futures, speaking

0:17:15.720 --> 0:17:20.119
<v Speaker 2>with Bloomberg's Heidi Stroud Watts and Hustlinda Amen here on

0:17:20.200 --> 0:17:23.000
<v Speaker 2>the Bloomberg Daybreak Asia podcast.

0:17:24.560 --> 0:17:27.960
<v Speaker 8>Thanks for listening to today's episode of the Bloomberg Daybreak

0:17:28.080 --> 0:17:31.480
<v Speaker 8>Asia Edition podcast. Each weekday, we look at the story

0:17:31.520 --> 0:17:35.879
<v Speaker 8>shaping markets, finance, and geopolitics in the Asia Pacific. You

0:17:35.920 --> 0:17:40.040
<v Speaker 8>can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,

0:17:40.160 --> 0:17:43.159
<v Speaker 8>or anywhere else you listen. Join us again tomorrow for

0:17:43.280 --> 0:17:46.800
<v Speaker 8>insight on the market moves from Hong Kong to Singapore

0:17:47.200 --> 0:17:50.960
<v Speaker 8>and Australia. I'm Doug Prisoner and this is Bloomberg