Transcript for:
Impact of Trade War on Asian Markets

We're half an hour away from the open in Hong Kong, Shenzhen, Shanghai. You're watching the China show. I'm not about rulers with Stephen Engle. Our top stories this morning. Asian stocks plunge while Haven assets rise as the market turmoil sparked by Trump's trade war shows no signs of easing. The president says he's not intentionally fueling a sell off. China is signaling rate cuts and other measures to defend the economy from tariffs as investors brace for steep losses when the markets reopen and Southeast Asian nations move to accommodate Trump. Instead of hitting back against tariffs with Vietnam offering to remove all duties on US imports. Well, Steve, I think you said it that Donald Trump says he's not intentionally engineering this market sell off regardless of what he says. It is happening in the session this morning, taking a look at what's happening in bonds this morning, Treasuries, for instance, You're continuing to see them bid particularly noticeable at the front end of the curve. And you're seeing that reflected across in the Asian session today. Currencies, I'll keep it quick. Let's keep moving through. Again, it's that flight to safety. You're seeing the yen, the Swiss franc. We have seen those continuing to climb the Aussie dollar. You can see that you're at $0.60. That is a level that we have not seen going all the way back to the COVID era, 2020. Shifting to commodities now, taking a look at what's happening with weak sentiment here, crossing copper, that is of course the global bellwether for the economy and really reflects those recession fears and all of this tariff risk that we're continuing to see moving through market sentiment. Again, gold even being pulled back below $3,000 an ounce. Brent crude as well, not just the Judy story. You've also got Saudi Arabia that slashed its prices over the weekend. Crypto. Take a look at Bitcoin, for instance, below $80,000 a token And again it US stocks. That's where you're really seeing a lot of this pain here. Futures sharply under pressure. You're getting a lot of commentary coming through Bill Ackman, for instance saying that these Trump tariffs are a mistake. And then again, shifting into the Asian session, we'd already seen circuit breakers in Japan futures before we came on line very, very much under pressure at Taiwan, coming back there from a long weekend here, down around 10%. Now for what we see for China today, I think really the Golden Dragon index on Friday, we saw that really sharp fall in the session. And again, you can see that really reflected ahead of that sentiment and that flight again back into Japan. Government debt. I mean, there are just so many comments coming out of the United States and it's a Sunday, of course, ahead of the market open with the S&P futures down again. Could there be a third straight consecutive sizable downturn in the market? So you mentioned Bill Ackman, Nouriel Roubini, also talking Lawrence Summers, a number of different notable names, talking about the impact, obviously, and the lasting impact of it. And the question is, how can you or do you get the toothpaste back in the tube over the last couple of days? Let's bring in Helen Zhou, a managing partner and CIO NF Trinity. Thanks so much. Is the proverbial toothpaste out of the tube? How do you get it back in? What's going to be the panacea for this market turmoil? Well, I think only part of the toothpaste might come back into the tube, certainly not all of it. The parts that might actually come back first, I would guess, would be those smaller countries that don't really have too many real structural or systematic or philosophical issues with the US that the US probably views as allies historically and actually needs to rely on more to, you know, reduce the reliance on markets like China. So some parts of Southeast Asia, for example, have indicated they've started to negotiate with the current administration. I would guess that those guys can probably get a deal done sooner. So I think we'll have to watch over the coming weeks what happens. But China is probably not going to be a high priority in terms of negotiation, relatively speaking. Right. Okay. So China is not a high priority, but it's also that question of how much has been priced in at this point and how much further selling pressure do we continue to see? Well, for the US, I think unfortunately this is a huge wake up point for everybody, right? I mean, we thought there were tariffs coming on Liberation Day, but nobody thought there were going to be so egregious. And certainly the degree of retaliation from certain markets has been a negative surprise as well. On Thursday, the market selling was somewhat orderly. On Friday, after the China retaliation, people thought, oh, my goodness, this is actually just the beginning and this could actually get worse. And then we saw very rampant de-risking across the board in terms of equities as well as credit spreads, etc.. Would you agree with the likes of Nouriel Roubini who says sort of a Xi Trump phone call in the next day or two, this volatility in sell off likely will continue. Also helped Bill Ackman saying right now Trump needs to impose a 90 day moratorium. A pause to let the market sink in. What the the impact is going to be long term rather than have it on April 10th. Well, I think a 90 day moratorium isn't necessarily going to be his first choice. He obviously wants to use shock and awe to push people to the negotiating table. 90 days is probably a little bit too long. They've also mentioned that whoever comes to negotiate first might get the best deal. So again, that's pushing other people to come first and ASAP rather than wait for 60 or 90 days. So I think the 90 days is not that likely. But I do agree with the other comments in terms of, you know, so long as this uncertainty remains, then I think the markets are going to continue to be under pressure. The US market has degraded from 20 something times to like 18 times, but that's on the current earnings. People are now expecting that recession risk could be as high as 50 or 60%, in which case probably the earnings are a little bit too high and the multiples too high. So if this doesn't get sorted out in a meaningful way, yes, we do think that there could be further downside in the near term. I think we're going to get earnings kicking off as well in the US later this week. So. So what exactly you're going to be listening out of? And companies need to be at least signaling how they intend to deal with these tariffs as well. Well, I think people won't care that much about the backward looking for its corner results. Unfortunately, they're going to be really looking for management for guidance. I think most management are going to be very cautious as to the degree of optimism and confidence that they convey in the message. Many of the companies that say that they plan to pass on the tariffs. But, you know, there could be volume issues in terms of maybe consumers or channel already stocking up in the first quarter or in the fourth quarter of last year ahead of the anticipated tariffs and therefore demand falling off or there could be other types of reactions as well. It's very likely and possible that as you pass on the tariffs to the consumer, the consumers are going to say, well, you know what? I don't actually need this item or I feel very uncertain about my future. So I do think that there is going to be a lot of mayhem in terms of the results, forecasts and guidance in the season upcoming. I know we're going to talk about China more as the morning progresses, but what did you make of their response Friday on a holiday as well and the market opening up again in just a few minutes? It's going to be significantly tumultuous, I would assume. But did you basically feel that the Chinese economy is terror resistant more so now than in the first Trump trade war or less? I think more tariff resistant versus the previous trade war, because a lot of stuff has been migrated offshore. And also, I think China is actually adjusted some of the trading balances according to the some of the settlement of the first trade war. However, the magnitude of the tariffs on the same categories of stuff has certainly gone up substantially more. And therefore I think that will have its own impact as well. I think that it's not a surprise that the Chinese retaliated, as you know, people had been anticipating. But I do believe that there needs to be some kind of deal between the two sides in order for global markets to save lives. And I would actually agree with Bill Ackman's comment as well, that if this thing isn't sorted out soon, not just between the US and China, but as entire trade uncertainty overall, I mean, honestly speaking, the faster the market crashes on a daily basis, the more pressure it's putting on Trump to do something. Otherwise it becomes a self-fulfilling prophecy of recession. Just stay with us, Helen. We're going to bring in our China correspondent Women Low now. And just on that point of of China, how it's been retaliating. I mean, we heard from Trump this morning again talking about how China is being hit much harder than the US and he's not open to making any sort of deal until China solves the trade deficit issue. Yeah, he said China panicked and made the wrong decision with the retaliatory tariffs of 34% on Friday. But let's get to women then. So I mean, panic or not. What has been the response so far? Yeah, I think analysts generally disagree that China panic. I think so far what I've read from strategist is that China had been very targeted and very measured in their response. Yes, they responded earlier than usual. They didn't wait until April 9th when the tariffs kicked in to respond and they responded proportionately. Right. 34% on US goods, as well as some non-tariff measures, including export controls on over a dozen US companies, export controls on some of these rare earth materials as well, but very targeted in the sense that they still focus on certain sectors like the agricultural sectors, the defense sectors, which are Trump's key constituencies. And early this morning we got a people's daily commentary on the front page saying that China is going to take extraordinary measures to support the domestic economy, domestic consumption, stabilize the stock market. They might use a cutting of interest rates or triple R when necessary. So it looks like they are focusing on supporting domestic economy while they take all the necessary preparations against these external shocks. Well, they do have fiscal levers still to pull and monetary as well. But what about the yuan? So far, they've kept it fairly stable throughout all of this. And that is something pangong showing the people. See, governor has talked about the stability of the yuan, the first trade war in those two years. We saw the yuan depreciate some what was it, 11%, 11%, I think over a couple of years. Right. So is that in the cards potentially a weakening? Yeah, I think this is where there is a lot of market chatter and it does look like the market really doesn't know where the yuan is going to go because you have some strategists saying that maybe China will do the same thing as before and weaken the currency by 15 to even 30% within a couple of months. Others are saying they're going to take a more measured response, just weaken it to the tune of maybe 3% in order to push that inflationary pressures back to the US and also take care of all those concerns around capital outflows and a shock to the Chinese equity markets. And then you have Ray Dalio who's arguing the complete opposite, saying that China could come into a deal where they strengthen the currency in order to have lower tariffs. So we have all these very different competing narratives. Actually, it'll be interesting to get Helen's take on this as well. Look, I think there are going to be. Very cautious about devaluing the currency, because that's going to look very antagonistic and belligerent. And frankly speaking, we all know that China has a lot of concerns regarding capital flight and domestic concerns about the stability of the currency to start with. So I think if they were to meaningfully depreciate the currency, that would not be moving towards the direction of getting any kind of compromise with the US. My guess is that the best approach is to keep the currency roughly stable within two or 3% and the dollar index has come off quite substantially versus inauguration day already. So, you know, down five or 6%. So that naturally takes off a lot of the pressure off R&B as well as other emerging market currencies that are affected. All right. Helen Zhu, managing partner and CEO of and at Trinity is staying with us. And that was also our China correspondent, Min Min Loh. And we are very early into the session so far for some of these markets. But Taiwan is just back from an extended break and you're seeing a very, very sharp sell off. So far, we're actually more than 20% now from the July peak. And at TSMC, for instance, one of the names really standing out, you're seeing again pretty much the same magnitude, the heaviest weighting on the benchmark. They're counting down, of course, to to the open of trade in Shanghai, Shenzhen and Hong Kong. And if you take any sort of indication from the Golden Dragon index on Friday, this is going to be a very, very ugly day across markets, ugly Monday after an ugly Friday and ugly Thursday. Right. And probably more ugliness throughout the week. All right. You watching the China show. We'll have more ahead. What's going to happen with the market? I can't tell you, but I can tell you our country has gotten a lot stronger. And eventually. It'll be a country like no other. It'll be the most dominant country economically in the world. That was President Trump dismissing market concerns as he heads back to Washington aboard Air Force One after a weekend of golf actually in Florida. Don't know what to make of that, but one thing I would say is that he's certainly brushing off the market that we're seeing so far is saying that he didn't intentionally put this sort of market action in place. Well, everything the commentary that I've been seeing coming out of Wall Street has been that please call a mulligan a do over on this. But I don't think he plays golf that way. All right. They want fixtures coming out as well. And it's coming line actually pretty far away from what estimates had been so seven 1980 per US dollar. The estimate rather had been for seven 3122 but certainly we had seen a lot of diverging expectations around the yuan fix ahead of that today because it's going to be really critical to try and understand exactly what the U.S. intends to do with the currency, because it really is a very tight tightrope here. Essentially, you can't let it depreciate too far, otherwise you anger Washington. But at the same time, you want to keep the currency competitive as well. Yeah, absolutely. So it's a different approach than the first trade war, as we talked about with min Min. But again, there is some wiggle room there with the yuan having stayed fairly stable. But there is going to be pressure on exporters for sure. Let's bring in our Asia government and economy correspondent Rebecca Chang. Wilkins joins us for more. Is there any sense that the Trump team are possibly rethinking their tariff strategy? I mean, it's defiance from Donald Trump so far, obviously, but Bill Ackman and others saying 90 day pause, put the put a pushed the pause button for now and let the markets digest this. I mean, I think the short answer is no. And we've seen this as you say, this really defiant tone from Trump. And in fact, he sent out all of his top economic planners over the weekend across the airwaves to really reiterate that message that we had while he was playing golf. We had Peter Navarro, the trade czar, for example, you know, emphasizing President Trump's determination to follow through on this. We've also had the likes of a lot, Nic and Bessant, making similar comments by emphasizing that now 50 countries have approached the US to have these discussions and and have this debate over and negotiate over the tariffs, essentially underscoring the success of this so far. And there does seem this feeling that, you know better saying that the market consistently underestimates President Trump and essentially sort of keep calm and carry on things will eventually sort of work themselves out. But at the same time, I mean, you're getting a lot more calls for recession as well. And so what are they saying about those risks? Yeah, that's actually you have the likes of Jp morgan raising their recession risk from 40 to 60%. And so on their side has been very defiant, particularly on this point as well, saying there is no need. But of course, we do. Also parallel to that here, these calls about the Fed and the need for Powell to step in. So President Trump saying this could be a great time for an interest rate hike, for example. And we have had Powell himself coming out and saying this does now significantly increase the chances of inflation and so on. I mean, the sort of lying theme, I suppose, is that during this second presidency, we have seen President Trump focus for less on the stock market performance and far more on that ten year Treasury rate. He has just simply been sort of seeming to be more tolerant of pain in the markets so far. Yeah, that's been really one of the interesting dynamics. Not as much concern for equities, but that laser focus on what the ten year Treasury yield is doing that the that was Rebecca that joining us Rebecca Wilkins and let's bring back Helen now Helen Jus also with us managing partner and CEO of Neff Trinity. So I mean we would you were referring that Steve, to to that interview with Nouriel Roubini early this morning saying that this a game of chicken really that involves Trump Powell and then also Xi Jinping. But essentially Trump wants Powell to act. That's the comment he's making and to do something about about rates as well. But do you see the Fed playing in actually between Trump and the markets at this point? Not necessarily Powell and Xi Jinping. I think from Powell's perspective, as he commented, there are, you know, conflicting aspects at play here. There is potentially much higher risk of recession, which would actually suggest that you should potentially cut rates and faster, which is what Trump is trying to push him to do and probably what most of the market is expecting. On the other hand, you have concerns about inflation coming in, right? So Powell, I think, is going to stay put for a period of time and just watch how things fall out. If credit spreads, I mean, which have already gone, you know, headed up vertically if they actually break through some kind of level that brings systemic risk to the system, maybe he could, you know, relaunch QE or something like that as a emergency backstop. But that's probably not going to be a first priority. I think it's really about Trump watching the market and thinking, gosh, you know, if everybody's wealth effect is going deeply negative of corporates are not going to hire people if people are not. Not going to go out and consume and everybody's just in complete and total disarray and shock. Then what's that going to mean if I don't settle this thing sooner rather than later? Even 90 days might be too long. 90 days is probably enough to potentially accelerate the pace of falling into a recession. So he needs to think about, you know, actually, I think the worse, the better, as in like bad as good. If the market keeps crashing this way for another three or four days, he's going to have to come out and do something or say something. Right. I do want to pick up on your point in there about credit spreads, because we have seen them blow out, particularly in this part of the world, and we're expecting to see that continuing through today. How why do you think we go on Asia investment grade Asia, high yield? And what do you think we might see other countries doing to manage some of that risk? Well, I mean, everywhere has seen credit spreads go up so that actually, you know, by the way, offsets the argument that so long as the ten year is lower than everybody's better off because, you know, the ten year indeed has come off from, you know, 4.3 to 3.9. So 40 basis points. But credit spreads. AIG in the US was 70 something basis point to the beginning is now north of 100. So you're basically offsetting a lot of that. And if you actually think about it, you know, yes, maybe lower end households save a bit on their mortgages, but they're going to have to pay a lot more for everything else that they're buying. So I don't know if that mixture actually works out in the lower end. Households favor. We're just seeing the futures on the Hang Seng China Enterprise Index, the HCI eight share index pointing at a 9.9% fall at the open. The Hang Seng tech index also down another 11%. So. Donald Trump talked about appealing to investors to hang tough. Another World War two saying Rebecca talked about keep calm and carry on. And now we're talking about Hang Tough, which was commonly used during D-Day. I hate to get into historical lessons here now, but how far do we hang on, Hang tough. Well, I think one thing that China has in its favor is that Chinese are better to expectation, managed by the government and hanging tough versus Americans. Americans won't listen to the government even if there was, you know, a huge meltdown of the, you know, not only the economy, but even if aliens invaded and the government said, do this and don't do that or, you know, during Covid, for example. Right. Obviously, Chinese followed Rose very, very closely and follow the directions and Americans simply didn't. So I don't know how long this hang tough message is going to work in the US, especially when the household wealth is so tied to the equities compared to China. In China, really very few percent. A very low percentage of people have their wealth tied up in the equities market and the government is actually actively intervening in the equities market to stabilize expectations versus the US. All right, Helen, you're sticking with us. You're going to be with us for the market open as well in just a few minutes. That's Helen Joo, the managing partner and CIO of Neff Trinity, and as well our Asia economy and government correspondent Rebecca Chung Wilkins with us in studio this morning. But as we said, pre market session just getting underway and there is plenty of red across the screen. It's important to note as well, this is the first time that Asian markets have been able to react to China hitting back at Trump with the tariffs as well. And so you're seeing really very, very steep losses that are being indicated here for the likes of Alibaba, Zhao Mi, HSBC, as well. But across the board, really for pre-market in the session today, we can expect steep losses tracking what we've seen at the end of last week, what's indicated in other Asian markets today as well. We'll have more ahead. This is Bloomberg. I think the hardest thing for the markets right now is not only to try to evaluate where the destination is, but how bumpy will the journey be. There is going to be stickiness to these tariffs. And even if there are some negotiations and some concessions along the way, I think the direction of travel here is very clear. Tariffs are going to be high and I think they're going to be high for a while. If you go back to Friday, the Fed can talk tough. They have to be looking at this. I don't know if they can even make it to the May meeting before they start bringing rates down. I think this is a serious moment. I do not think the Fed can just sit on the side. In the past, the Fed, like in 2008 and 19, blinked when there was a real massive spike in high yield spreads. And if things continue this direction, high spreads are going to go even higher. And that's a breaking point. Yeah, that was some of our guests speaking earlier on a special edition of Bloomberg Surveillance. And if you're just waking up this morning, I mean, maybe actually just snooze the alarm for another 10 minutes, because it's certainly not a session you want to be taking part in today, given how much sailing we are seeing across the screen so far. This is not just Trump putting these tariffs on. It's also that reaction to China retaliating as well because they've included we'll put on a 34% levy on all American goods starting later in the week. And welcome back. You are watching the China show. We're counting down to the opening of the markets in this part of the world as we're seeing, Annabel. Not pretty numbers. No, that's right. I mean, it's certainly we already had the indications of that on Friday when we sold the Golden Dragon index, for instance, closing down nearly 10%. And markets were shut as well in the mainland and Hong Kong for the Qingming Festival as well. So it has been a long weekend. So this is really the first reaction that traders have. Yeah. Is this a third consecutive day of massive sell off or playing catch up in China and Hong Kong? A bit of both. Yeah, that's right. So we've got mainland markets again. We are setting up for some very steep losses here across the board. And as we were saying as well, it's not just it's not just these Trump tariffs, it's also the China response that we had going into the weekend where they said that they were going to be announcing duties, reciprocal duties of more than 30%, and also restrictions on certain rare earth metals, exports of materials exports. But here you can see what yeah, that is a nearly 5% drop that we're seeing for the CSI 300 so far. Again, you're seeing that flight into safety and you've seen the Japan government debt that continues to be bit. And so you're seeing those yields that are moving back in line, I guess, of what we've had for for other bond benchmarks in Asia. Commodities under pressure. Shanghai crude, again, a drop there of 7% that you see not just the concern around tariffs, but also you saw Saudi Arabia over the weekend dramatically slashing their crude prices by the most in more than two years. China is coming out and saying that they're going to have their own measures to try and stimulate domestic consumption. But still, you're not seeing that translating so far into names like Medea, for instance, down nearly 7%. But let's take a look at what's happening in Hong Kong, because in free market, we had seen some indications yet. The tech index, for instance, down 10%. They're really feeling the pain across some of those names, like Alibaba, for instance, Baidu, Meituan. But HSBC, that's a drop of 15% for the stock so far. As we said, one of the areas that could trade a little bit differently in the session today, some of the tech names in particular, just take a quick look at those that we can see. Again, really steep HSBC, as I said, down 15%. But China, rare earths. This is where China says that it's putting export controls in place, is saying it's not going to be impacting the stability of the international supply chain. But you can see some of those I'm not going to say beneficiaries, but just just the market reaction as well. You haven't found too many beneficiaries in last few days. Let's bring it back in. Helen Zhu, managing partner and CIO of NEF Trinity, you're still with us. Of course, that's the beneficiary of our audience here. So what how do you this is a stupid question. How do you play this market? I mean, I know one fund manager that we quoted in one of the Bloomberg most read stories unwinding about 40% of his holdings through this, you know, uncertain times. What's your advice? Look, we think it's a little bit too early to buy into the US market as a whole. Valuations haven't come down that much. The recession risk is not in forecast yet in terms of companies earnings. And certainly the positioning has been very, very concentrated and I think the retail capitulation is just starting. So we don't think that's an area we want to necessarily jump into first. But if you actually think about some of the other areas, like those Asian countries that are actually U.S. ally that maybe are likely to negotiate first, their share prices have come down quite a lot as well. And if they get exempted or some kind of compromise in the coming one or two weeks and they could be the first ones to rally. Mexico got hit very early on, well before the liberation Day because of the concerns about the tariffs. Then it turns out they got no incremental tariffs on Liberation Day. And the market actually performed very, very well, relatively speaking. So I would say be more selective and try to pick your spots and try to bet on which markets might get some alleviation first, if that's the way that you want to look at it. But overall speaking, you know, people were going into defensives early on, but we were thinking we got to get out of defensives, too, because once the rampant selling starts, people want to take profit on the stuff that has done not as badly. And so everything actually comes off equally. So you're at the point where you're just looking at a country basis, you know, even sort of sector specific, because I mean, think about the countries that are most likely to negotiate. First, it could be Korea, for instance, despite the political instability there and and elections on the horizon. But Japan, Taiwan, maybe. What is that where you're at right now? Well, most of the tariffs that came out of Liberation Day were country focused. Right. And we don't know what kind of formula was used to come up with the percentage of tariffs, but they were based on the deficit with that particular country. Of course, there are certain sectors that have individual situations like autos, etc.. There are certain countries that are very overly reliant on certain sectors like tech, which might actually see demand destruction of the US economy, you know, falters. So those are things that we need to take into consideration. But generally speaking, I think the likelihood is that the. Immigration does not want the dollar to sharply appreciate again as the yields on the loan come down because of all the recession concerns, then we probably want to look into potentially buying into non-U.S. markets first for the potential rebound and any compromises or negotiations. And China as well. I mean, there are traditional safe havens in times of turmoil like this. Gold in the currencies, the yen, we've seen a 1% pop upwards today. It's paired some of those gains a little bit now. But there's select areas in China if they can weather this or stay away. China has done really well this year or so far before this. Right. And the market has already normalized to a better valuation, not a high valuation like the U.S., but certainly a better valuation versus where it has been previously. A lot of that was actually led by the tech and Internet sector. But I think those names are actually potentially in the crossfires of all of this geopolitical instability, not necessarily in terms of tariffs, but other types of restrictions that could come in which could actually longer term be even more detrimental than tariffs. But what about the reflationary policy that is probably coming, the further inflationary policies? I think those will certainly help, but it's kind of trying to dilute the negative impact rather than create huge positive impulses. Actually, you're right. If you actually think about it, China's exports to the U.S. are only low single digit of GDP. So the reality is the direct impact is not so significant, but the indirect impact in terms of the sentiment overhang, the uncertainty of the impact on hiring, on consumption and wealth effect, those will continue to be an overhang for quite some time. So you don't see opportunities in China right now, even if you've got officials that are signaling that there are things they can do around stimulus measures or on rates, you know, you don't actually see any opportunities. I think, relatively speaking, if the reliance is on domestic economy, probably the areas to benefit are going to be infrastructure and cyclicals, property. Obviously, they've U-Turned on policy towards property very clearly already and prices are practically stabilizing to some extent and then consumer. But I think that if the global market sells off the way that it is right now, China is not going to be able to go up either in terms of absolute performance in the near term. What further retaliatory steps do you think China will take? Or is it more of a pause and make sure that the United States doesn't do another retaliation as well or add to it? I think China would prefer to pause and see what happens. And then I think if other countries do approach the U.S. first with a very attractive deal, as Trump put it, and Trump does settle a deal with some of those other countries, then I think that's going to give the market some degree of comfort and we might have a little bit of a stabilization. And I think other countries that may have a tougher time with the current administration will try to study that and how that went. And what's the playbook before they actually come to the negotiation table. What's the point at which you you step in, though, Because, I mean, it sounds like we're at least what I've understood is that you're still expecting further losses. What's the point that you think markets start to look a little bit attractive and you see perhaps buying opportunities? I think if there is, you know, collateral damage in areas that have really very little to do with us, but simply because of overall market sell off and areas that are already pricing in recession risk and really have been quite depressed all along. Those might be interesting. Some of the global cyclicals, like chemical industry, for example, has been in a market trough for a very, very long time and has all been trading at historic low multiples and PE. So that might be an interesting area to potentially step into. That has relatively limited downside and some potential upside of the growth outlook should improve. Some rates are actually fairly defensive in terms of the stickiness of the economy, so long as there is no major recession and obviously yields going lower potentially helps their fundamentals as well. Those are some of the areas that we will actually think about, but not necessarily the traditional defensives like the telecoms and so on. You know, those have already performed very, very well in the global markets. And now they're kind of the victims of profit taking as well. If we take a step back and look from an historical perspective, Lawrence Summers is talking about this being the biggest, what, two day selloff in the S&P 500 since World War two, the fourth biggest. I think it's worse than COVID. You have 1987 crash, the 2008 launch of the global financial crisis, then 2020 Covid So what is history told us about how we tend to get out of this? Or are we in unprecedented territory? We came from a relatively high starting point in terms of expectations, positioning, valuations and everything in the US market. So that's why I think the shift or the delta of change worse as a very high point of expectations is very, very sharp. So the way to get out of it would be either we continue to fall to a degree that pretty much their earnings decline as well as the valuation multiple. Are all reflecting recession assumption already. Then I think it's time to step in. I think, you know, if this continues for another couple of days, that we could actually already be there. Right. And you probably do want to step in and start to nibble when there is some panic and blood on the streets or there's all of this lack of stability is pushing Trump to actually inflect and start to show that he's willing to negotiate to some extent. Or the Fed says, you know what, I can't take it anymore. I'm going to come in and do something. But I think the third is actually probably going to be later on, after there is a lot more mayhem. And honestly, the Fed alone cannot resolve this issue without any compromises by the current Trump administration. So I wouldn't rely on the third. Roubini says it's not going to de-escalate until Trump blinks and de-escalate. Well, definitely at this stage he is signaling that he is not going to be the first one to blink either. So, I mean, you can say uncertainties is definitely the word of the day, if not maybe 20, 25. But anyway. All right, Helen, thanks so much for joining us. That was Helen Joo, the managing partner and CEO of Neff Trinity. And taking a look at some of the biggest losers so far in the session today, it's it's I mean, it's very broad base of selling, but a couple of the names that are standing out to us a C technologies Lenovo Ruchi biologics as well sunny optical some of these are Apple supplies. And I think this is a very interesting point because you know and this is what the point that Malcolm and our Apple reporter is making is that in a world that has been so constantly marked by upheaval, one of the few constants has been Apple not shifting on its iPhone pricing and it's kept it very consistently at $999. Well, if I can extrapolate on that, they're likely have to raise prices because they've divested not out of China, but they've diversified. India makes increasingly iPhones and AirPods, Vietnam, iPods, AirPods, I should say, iPads, Macs and watches. Malaysia, Thailand and of course, Taiwan being such a component sourcing place. Yeah. So that's I guess what you're seeing reflected there is just the risk to to a major company like Apple that actually managed to have its iPhones struck off in the last round of tariffs back in the first Trump Trump 1.0 doesn't seem likely. It's going to have that same sort of pass this time around. Yeah, that's right. Well, guess what? We're going to be talking about the rest of the morning coming up in the next hour of the show. Yeah, you guessed it. More talk about what's happening in the markets. We take a closer look at President Trump's moves to stop China's dominance in shipbuilding. The Center for Maritime Strategy and the Mercury Group join us with their insights. Much more ahead. You can guarantee that this is Bloomberg. You're watching the China show and we're taking a look at how some Southeast Asian markets are faring. Manila just coming online on the Philippines of 4%. Not really seeing the magnitude of the losses elsewhere, but that is an economy that's more insulated, more domestically driven. Singapore, though, you're seeing a lot of selling the extending and also India futures, again, a little bit under pressure so far. What was interesting actually, Helen Zhou, who was just joining us earlier, was saying that smaller countries or US allies such as Vietnam, other Asian or ASEAN manufacturing markets like India, Japan, they could actually be able to negotiate with Trump first and maybe get some sort of relief. I think a lot of market participants will look how those negotiations are going and then maybe borrow a few pages from the playbook. We'll have to see, though. China is a bit of a different game, obviously. Southeast Asian nations, though, are among the hardest hit by U.S. tariffs. Malaysian Prime Minister Anwar Ibrahim is pushing a coordinated regional response and Vietnam is offering to remove all tariffs on U.S. imports. Bloomberg's Avril Hong joins us now from Singapore. So, Avril, give us your take on what's happening in Southeast Asia. Vietnam stands out in ASEAN as it was hit by, what, 46% tariffs. How effective might be its offer of zero tariffs? Yeah. Steve, I mean, we heard how in a letter seen by Bloomberg, Vietnam's leadership is offering zero tariffs in exchange for no additional tariffs from the US or a delay of 45 days, the imposition of tariffs set to take effect, of course, in the middle of this week. And this kind of just confirms what Trump had been posting on social media about over the weekend. As to your question about how effective this all could be, I think nobody's really holding their breath, given how Trump's been doubling down and perhaps more helpful to kind of get the take from the trade adviser, Peter Navarro. Right, because he suggests that even if Vietnam lowers the tariffs to zero, that it still has 20 billion in terms of a trade surplus with the US. And it's also he highlights serving as a tariff evading platform for Chinese exports. So it looks like the Trump administration still at this point is pretty determined to take aim at the China Plus one approach. We had our colleagues at Bloomberg Economics, Bloomberg Intelligence, citing the likes of Nike Lululemon as perhaps benefiting the most if Vietnam indeed does get a delay. But it does make you wonder, it kind of kicks the can down the road 45 days. To what extent does this help companies to plan without the clarity? We have also the idea that Vietnam's approach could offer a sort of playbook for ASEAN, as you alluded to just a short while ago, Steve, that they're not considering retaliation at the moment. Indeed, that is approach that's been taken by most of the Southeast Asian countries in the region, including the likes of Malaysia and Indonesia, because this could just make it more difficult ultimately for them to secure any concessions while negotiations are ongoing. And then we also had the likes of Malaysia, which suggested a coordinated response from the bloc. But this is a ten member bloc, so it remains to be seen how something like this would actually work. We have this spectrum of tariff levels, 10% in Singapore, 46% in Vietnam. So very complicated here. Yeah. In India, reciprocal tariffs of more than 25%. So how are they also likely to manage those? Yeah, I think a similar picture applies when it comes to India in that it's not really considering retaliatory tariffs. Certainly that's the sense we're getting from government officials. One that spoke to Bloomberg reportedly also saying that India has a sort of first mover advantage when it comes to these negotiations, because it said that the trade talks have already begun with the Trump administration. Again, is this idea that tit for tat at this point is not going to be very helpful for any forms of discussions, any negotiations when it comes to ironing out some form of a reduction in these levies. All right, everyone. Good stuff this morning. A busy Monday morning, obviously. And later, we will speak to Asia's commerce minister, Piyush Goyal, following Trump's decision to enact 26% tariffs. He joins us live from the India Global Forum in Mumbai. Terminal subscribers can see that on live go at the time. Seen on your screen. Yes, And certainly we're already seeing that the market reaction to these tariffs as well. I mean, China, we're just over 15 minutes into trade and it's been a very, very ugly start to the week. But a Bloomberg Opinion columnist, David Fickling, actually says that Beijing has managed to trade will proof its economy in much more than what the US has done as well. But he joins us now from Sydney. So, David, I guess it sort of comes down to to what China is importing exporting versus what the US is doing, but the picture is quite different between them. Yeah. I mean, I think it's absolutely crucial. And, you know, obviously countries that are the largest manufacturers tend to do pretty well in this. China is by far the world's biggest manufacturer. It's the manufacturing value added is now nearly twice that the US's and also it's about the structure of the of what is important in export between these countries. And I think that's absolutely crucial. If you look at what what China import from the US, it's largely intermediate goods for for industry, whereas what the US imports from China is largely retail our goods for consumers and of course the way you know, the way trade wars in particular, there's retaliation involve as we've got on both sides. Consumers don't like high prices and consumers will complain about high prices and the US tariffs affect consumers. In China, it's very different. The tariffs will largely hit industrial companies, many of which are state owned, and certainly even the ones that are state owned are not likely to speak up the way American consumers are likely to speak up. Look what happened to Jack Ma when five years ago he started talking about, you know, innovation and financial regulation. He basically disappeared from public life for five years. Hey, David, how about, you know, offsetting between China and the United States? Where does China go? Where does the United States go? Because the United States we saw a company like Apple diversify into other markets like India and Thailand and Malaysia, Vietnam. But now those nations have also been hit by tariffs. So it seems as though China's diversification efforts, whether it's soybeans and Brazil and the like, seems to position itself better than the United States, which some say is basically an own goal. Yeah, that is absolutely the case. And and, yes, I mean, crucially, the U.S. can't diversify anywhere else except within the U.S. because it's putting tariffs on everywhere else. So that really limits it. But even before that, even if you weren't having that sort of self-inflicted wound from the U.S. in terms of the major export categories, China has a very dominant position in most of these markets. It's, you know, sort of 30, 40% and things like, you know, smartphones, laptops, it's very hard to displace that into any other market. No other market has the capacity to do that. It's very different in the other direction. As you mentioned, you know, soybeans with Brazil, that was actually an outcome, of course, of the first Trump trade war in the first Trump term, but also crude oil. Obviously, it can import from a whole bunch of places and actually it's import from the US is very recent. LNG is another of the big import categories. Of course, you know, Central Asia gets a lot of gas from Central Asia. You know, the U.S. sorry, Russia has been trying very hard to export more gas to China. So it's got lots of options there. And that means yeah, it is it is more trade war proof than the U.S. and it's much easier to diversify away from the U.S. If you look back in the history of this, obviously, during the sort of 2000 and early 20 tens, China was incredibly dependent on the US as a export market for its goods. And the US wasn't that dependent on China as as a source of goods. That situation has actually flipped in the last few years and at this point the US is more dependent on China than the other direction. Bloomberg opinion columnist David Fickling in Sydney. Thanks so much. I encourage all of our terminal subscribers to read his latest piece on the terminal. All right. Plenty more ahead. You know what we're going to be talking about? We'll be right back. This is Bloomberg. Less than 30 minutes into the session so far for mainland markets and Hong Kong, you are seeing steep selling pressure here across the board. Pain really felt in all corners of the market. That's as we saw, not just Trump pushing back on any of these market concerns, Wall Street concerns around the impact of tariffs. But as well, China into the weekend announcing reciprocal tariffs and restrictions on exports of certain rare earth materials. But that is the market picture there. We're going to have a lot more ahead in the next hour. J.P. Morgan among those that are joining us. But China has ,000,000,000,000 and we have to solve our trade deficit. With China, we have a trillion. Trade deficit with China. Hundreds of millions of dollars a year would lose with China. And unless we solve that problem, I'm not going to make a deal. I'm willing to deal with China, but they have to solve this problem. Well, President Trump there speaking. And welcome back to the China show. And, Anabel, we're going to take a look at how the Hang Seng index is looking. Yeah, well, looking good. It's not looking good 9%. But I am interested to see like we're seeing we were just talking there in the break about the CSI 300, but the Hang Seng is the same. They're actually lifting off a little bit. The lows of the day so far still very much in negative territory. So. So down, I mean, 9% that you can see and very, very broad based selling. So there's really not any sort of beneficiaries except for rare earth materials linked names. We're actually seeing some upside. But every single sector so far in the red for the Hang Seng, again, 30 minutes into the session, if you take a look at how broader markets are faring so far, again, it's this story of global equities that are absolutely plummeting. Investors are moving into safe havens. Let's take a look at the broader gauge now. But we've seen the yen bid, for instance, the Swiss franc as well. Here you can see, as I said, every every sector in the red so far today, bonds. So again, you're seeing that flight into safety. Not every single corner of the market, the gold actually is still a little bit under pressure so far. Yeah, I think we're going to talk a little bit about strategies and bonds coming up in the next block with our next guest. But yeah, it looks like a cherry pie there in the previous screen, obviously. And President Trump has told reporters he's not making a China deal unless the trade deficit is balanced. And that's going to be a long term process, no doubt. Let's bring in our China correspondent, Min Min Loh. So traders rattled by a potential tit for tat trade war. So what's likely to happen next is the big question is how much time do you have? Well, we will be having this conversation for the rest of the year. But I think this is the first sort of clear articulation from Trump in terms of what he wants to get from China, aside from the fentanyl issue, is to reduce that trade deficit. So whether or not China will commit to maybe buy a certain amount of U.S. goods in exchange for lower tariffs is the question. But of course, we have seen Trump being signaling that he's not quite ready to back down. He previously said that he's never going to change that policy. He said that China is overreacting and that China is hurting more than the US. But on the flip side, you look at what China has done, a very clear signal here that they are not going to take it lying down and they don't seem to be in great urgency to negotiate as well. They're not closing that door. That is very clear. It's specifically written in the last paragraph of that of the people's daily commentary that you see on the front page today. And the last paragraph, it says they are not closing the door to negotiation, but they are not taking any other chances either. And that's why they're doing everything they can to ensure the resilience of the Chinese economy, extraordinary measures to boost domestic consumption and to stabilize the stock market as well. That was the message I was referring to earlier, not closing the door to negotiations, but we're not taking any chances. We're making all kinds of preparations to deal with the impact of the yuan fix as well. We had that earlier today and our colleague Mark Cranford on on the terminal is making the point that the dollar yuan fix is another leap higher and the central bank does seem to be avoiding devaluation at this point. But how is the yuan being brought into the equation here? Yeah, it's very interesting. You look at what happened on Thursday and what happened today with the Fix both days. The PBOC, you raised it by about 0.13% high. So very, very moderate weakening of the yuan. They are still keeping it below ¥7.2 per dollar. So they are not really weaponizing the UN in the way they did in the US trade war. Of course we're still in very early days, but we heard Helen Chu earlier saying that it really is not in China's interest to lower it too much because that removes all the leverage that China could have in any trade negotiation, although mid to long term. There are a lot of speculations going around, primarily because of that Xinhua article which mentioned that China is going to take resolute measures to defend its economy even after unveiling those 34% tariffs on US goods. So people are wondering what else is the Chinese Government going to do? So some people are saying maybe they will depreciate the yuan quite quickly, 15 to 30% of a couple of months. Others are saying maybe not so much, just maybe to the tune of 3%. And then of course there's Ray Dalio saying that China could strengthen the yuan in exchange for lower tariffs in a deal with the US. Of course that would be depressing and deflationary for China. It would mean that China will need more monetary and fiscal stimulus to get to that 5% growth. All right. That was how China correspondent there may be low. And no, I think we can just show the game and function again, because I was a little bit stunned, actually, in the top of the hour, just seeing this many black boxes, which tells you you're seeing statistically outsized moves across a lot of different corners of the markets. You've got equities here, commodities as well. Bonds. I mean, it's very, very broad based, these huge shifts that we're seeing. But let's not get more with that equities. Senior reporter Abhishek Bishnoi joining us from Singapore and at. A shake. What are you making of it this morning? And how how are you trying to wrap your head around the moves that we're seeing in markets today? I mean, the moves are definitely coming on the backdrop of China escalating Donald Trump's trade war. And it hasn't been a surprise since the assets in the US got repriced. The only thing is that given how, you know, Asia is moving so widely, there is expectation that like it has happened in in the past several times, that you have had a very weak Friday and then there has been assessment of what has happened, like it happened in 1987. And then Monday was a very big capitulation day. We saw something similar happening in the US, which is getting replicated in Asia now across the board in terms of price action volumes. China is the worst performer. A lot of other indexes are also down looking at grim milestones, a correction, bear markets. But the key would be how the trade sort of pans out in us when it begins trading. Given how U.S. futures are trading right now in all of the risk assets. The signals are that this bear market is deepening and it's worrisome. It may lead to, you know, unknowable, unknowable of obnoxious price moves in a lot of assets where the mother of all markets, the mother of all economies is in trouble. It will definitely have a ripple effect. Well, Abhishek, this looks like it's much more than just catch up from Fridays holiday in China and in Hong Kong. This is it looks as though in lieu of any kind of de-escalation from the White House, which hasn't happened, and in lieu of any kind of overture from China, which doesn't seem to be happening, that this is going to potentially deepen. I mean, that's true. And also, look, one thing to note here is that I think Trump has learned from the trade war one point all of the tariffs earlier were just targeted on China in that regime. And this time around, tariffs are across the board. So China has de-escalated its business model. Its exports are in different countries, but the tariffs that have been imposed across the board. So the the impact on China can be larger in current setup versus what it could have been in trade war one. And that's why we are seeing a, you know, this kind of price reaction. Now, apart from this, yes, Trump has done this de-escalated, but China has also moved from having a cautious, measured approach to one that's escalating a trade war that the US started. All depends on, you know, what happens from now till Wednesday. I think Wednesday is the deadline for the new reciprocal tariffs and let's see if something can be done in between. So far, if you look, I mean the countries which have announced deals of which have had talks with Trump, I mean, it hasn't had any impact on the assets. The assets of all those countries are also down and by big margin. So, you know, the pain is looking like it will deepen. It's worrisome, you know, except some haven currencies and probably treasuries, you know, nothing. It's trading higher today. What are you hearing again from from the different investors and traders that you're talking to? For instance, we've seen Goldman Sachs rethinking the index targets for China. How soon are we going to see these cuts to two index targets, to GDP, to earnings revisions? What can we expect over this week? Supermarkets are trading one year forward, the probability of recession has been increased to 60%. But some of the brokers that is getting priced in, so we are trading one year forward what the future would look like. But the thing is that this and this this price action, if you're not invested or if you're not fully invested, this is opening up a maturity, especially in markets which are inward looking and which also includes China. I mean, our reporting is clearly reflecting. There are expectations that if China continues with its stimulus, probably increases to increase that. And, you know, the continued afterglow of deep seeks advancements in the AI. It might be out by on the market. Asia is a relatively resilient similar playbook for, you know, markets like India and hopefully, you know, markets like the, you know, Vietnam, etc., which are, you know, trying to assuage Trump's concerns, managing its demand. They might also saw some relative buying, but it's not a set up for market wide buying. It's a setup to be selective. It's it's a set up to be a stock specific investor in equities. And inward looking. Markets look better off, but they won't be scared. I mean, you need to remember 2008, remember, you know, the crashes before that, you know, they they would all move in sync in correlation to each other right Abhishek visionary Bloomberg equities senior reporter thanks for joining us. Still ahead on the china show, the Center for maritime strategy and the mercury group both join us for a deep dive into the potential impacts of proposed U.S. port fees on Chinese ships. Yeah, but first and more markets. Of course, they've got J.P. Morgan Asset Management. Joining us to discuss the outlook for the Asian bonds and also affects Trump officials, as we've been hearing this morning, striking a very defiant tone on tariffs. Moorhead This is Bloomberg. You're watching the China show, taking a look at how bonds are faring this morning. And you're continuing to see that flight to safety particularly noticeable at the front end of the curve. Again, it's it's really the reaction to Trump tariffs, China's retaliation. And what we've been hearing from U.S. officials over the weekend pushing back on any sort of concerns in the markets currencies. Why wise Again, continuing to see Haven bid. So for instance, the Japanese yen, the Swiss franc have been some of the ones standing out. You are just seeing Japanese yen bit again, a little firmer once, once again against the greenback. But some call saying we could actually get to one €40. I mean, it was just a story not too long ago expecting parity and and the Aussie dollar of course one to try because $0.60 to the US dollar we haven't actually seen that going back to 2020. Yeah you know that was actually. All right let's get more on the markets and rates and everything. Bring in Jason Pang Asia Fix and rates portfolio manager at Jp morgan Asset Management. Okay. What's your top line take on the the turmoil that we're seeing, the reaction to the tariffs that came in last week and its impact, obviously, and what it will mean for let's start in Asia, what it means for any kind of rate and policy response. Sure. So I think within Asia, we've, of course, seen a fair share of volatility you're seeing in equity markets today. But I think from the bond markets perspective, especially government bonds, that's actually been sort of also the flight to quality flight to safe haven, if you will. The interesting sort of relative perspective within Asia is we haven't seen massive rate cuts actually materialize yet. But if you sort of include this global W growth decompression, we do believe that the impetus for rate cuts is certainly there. And so when do they start to come? Because I think really the story for a lot of Asian central banks has sort of been pause, wait, continue to assess the events over the weekend and last week as well enough to speed up or hasten the move to cut, do you think? I would probably consider that it's not the time to wait. Now, I say that because when you do the street analysis, we are sort of measuring first round impact. So I can tell you regionally point to to 1% GDP impact on the first wave. What I mean, the first wave is we're talking about just the US to RWA, reciprocal tariffs. Here's the thing. We haven't got such a second round and second round. Of course, it's very difficult to estimate, but I would probably say that, you know, as you know, China's goods will become cheaper for any country that's importing. You get the US shocked, you sort of get the China deflationary export side of things. You have a lot of room and reasons to actually ease in that case. And the problem is you don't want to be too late if you it's too late in the rate cut cycle. I think being behind the curve can be very costly for these economies. What if you're too early before you know what Jay Powell is going to do at the Fed? So I think what the cut to the Fed like what was mentioned this morning from our own firm, you know, the ball is indeed. And if that's caught, there is data dependency from what we understand, but also sort of that concern on growth and inflation. So how do you balance that at this juncture remains an unknown. Now, what is known is that either way, if you're a company, your CapEx cycle is going to be reduced employment spending, consumer spending, all of that will reduce within this region in particular. So all that to me still signifies the same thing is either way you are better off and that using the cycle earlier rather than later. And if you look at Indonesia, Philippines, even Thailand, we've actually started seeing signs of that. Mhm. So Jeeves as well, I mean we're continuing to see those being bid. So. So is that sort of an escalation hedge at all, do you think. So. Every quarter when we talk about KPIs, the way to categorize it is you want these bonds in your portfolio on days where you see big headlines coming through. And I think that's playing true within the past 72 hours or even the past week per se. So I think Steve Jobs for us remain a very pertinent part of the portfolio. You want to run this from an overweight duration. Either way, why have we seen a fairly muted response on global currencies? Yes, the yen I know you don't necessarily cover Japan. Yen is a traditional flight to safety in a bit. So it's been up about 1% against the dollar today. But why have other crosses been fairly muted? So I think within Asia, this is a very interesting phenomenon. We've indeed seen that the x Y come down quite substantially, but Asia affects us like what you suggested, Korea, long time but Malaysia ringgit, none of them have had any massive changes. And I believe that the reason for that is more of a capital flow. So people have been selling, as you know, US growth stock that's been being reallocated into European defence or manufacturing. Now because of that flow picture. And to me it warrants and justifies why euro is strengthening versus the dollar and that shows also interest rate differentials. Japan economy is marginally recovering right to some degree. So and also the flight to quality. So all of that makes sense. But I don't believe that capital flow is sort of going into the rest of the region. So we're not seeing, at least from my perspective, flow where people are selling US growth stock into Thailand equity or Malaysian equity. That has not been the case, which explains this sort of relativity of underperformance within Asia affects. And how do you segregate Asian and. Affects further because we've been talking about some of the economies that are a little bit more insulated as well to these tariffs, like the Philippines, for instance. So I think there are very interesting opportunities within the region. So like what you mentioned, you want to focus on particular currency parts, which are either a compensating you enough to run the risk and with lower foreign representation. So I think within the fixed income perspective within our world per se. It's true that the Philippine peso can be one of the more attractive ones, although versus that the why is not entirely clear to me that we want to run a big directional law. So I think we're more caught within the ARB cycle. Ultimately, as you probably saw in the CMI fixing today, which is like a marginally weaker, the somewhat fixed will indeed dictate a lot of what the regional outlook will play out. So I think at this juncture we see stock picking, we see currency picks and bond picks. But of course then, you know, we need to sort of get through the beta first before we play the alpha. Have you read the tea leaves as far as what Pangong Xiang and the PBOC might do on the yuan, allow it to weaken a certain percentage as they've kept it stable through these first couple of months of the Trump administration. So the policy messaging, at least this is, you know, my take per say is that when you see such an extent of external trade shock globally and of course to to China as well, it's not clear to me that you can actually devalue yourself out of the problem. For you to devalue like that, it would be way too substantial. And as you know, when we saw last time, you know, there was a 1 trillion foreign reserve lost because of sort of the affects move. So I think to me it's more about sort of measurably containing the effects, but still marginally weakening on the trade weighted basis. So we've seen the CFS basket underperform. We also think, however, that you shouldn't see the effects in pure isolation, as with all policies that we've seen in China over the past decade as a combination policy during a fiscal and monetary easing, probably more comprehensive than before, and you get a bit of effects weakness to compensate. So that's probably the policy mix that we're expecting within China. Some people, though, are seeing a deliberate depreciation of up to 15 or even 30% over a short period. Others would say maybe a little bit less, but even to the magnitude of 3%, how much do you think or how comfortable do you think officials are to let the yuan weaken? I think 3% would be a more reasonable estimate at 15% levels. That would imply to me that we need to see much further global equity downside to justify that. And if that's the case, then I guess everyone's global growth forecast will revise much, much lower. So that would be the view. Ultimately. What's your take on the dollar if obviously these trade dependent economies here hit by these tariffs, they need to boost their exporters, they weaken the dollar, stay where it is. I think the idea of reaching trade parity in trade balance parity with the US is quite a difficult concept within the region. So first of all, what goods will you import? What's the pull, export or import mix that you're trying to achieve? You won't be able to sort of reach that in the very near term. So I think what I'm trying to say is this will probably be a multi quarter type of adjustment that's required to achieve what the US really wants within these trade policies. So near term, what does that mean? Is it backwards? Are down, right? I need the most liquid flight to quality I can buy again, I can't buy squishy and all those things, but we all know that there's a constraint on liquidity given the massive liquidations we're seeing in stock. So by definition of that, you need to hold some dollars. So I think the point is that as long as you see more volatile volatility within equity, the dollar can remain strong even under those scenarios because there's simply not sufficient liquid flight to quality type of assets. Jason, really great to have you with us here this morning. That was Jason Pang there of Jp morgan Asset Management. And just as we've been speaking, we've actually had Goldman Sachs coming out cutting their oil price outlook for the second time in under a week. And you really are seeing markets are selling off here or commodities at least under pressure as well, down to $62 a barrel. So not just the story of these tariff concerns as well. Over the weekend, you had Saudi Arabia slashing their crude prices by the most in in more than two years, and the Saudi market took a hit as well. Absolutely. All right. You can turn to the bloomberg for more on this. Go to t live. Go to get commentary and analysis from bloomberg's expert editors. Plenty more ahead. You're watching the China show. And this, of course, is Bloomberg. And welcome back to the China show. Here are some of the big stories we are following today. Yes, there are other stories. Bloomberg has learned that President Trump was close to an agreement with Bytedance over tiktok's ban in the U.S. but the deal was called off after China withheld its approval for that following the announcement of reciprocal tariffs. On Friday, President Trump extended the deadline for the sale of Tiktok's US operations for another 75 days. Bytedance says any agreement would need to be approved under Chinese law. Bloomberg has learned that billions of dollars worth of acquisitions and IPOs are on hold as President Trump's trade war upends the global economy. Sources say ticket platform StubHub FinTech giant Klarna and trading platform eToro have all paused their planned listings as markets extend those deep losses. The stock market rout is also affecting M&A, with companies like Saint-gobain and KKR holding holding off on deals and others revising down revenue projections for the year. Taking a look at some of the market movers today in the session as well. Actually, there are some bright spots and we're finding those in in poultry stocks this morning here. This is after China retaliated over the weekend or into the weekend and announced that it was going to be halting imports of poultry products from two American companies. And you are seeing that some of those supplies, poultry supplies in China rising off the back. What else we're tracking and some other bright spots are in the rare earth firms. And this, again, is down to these retaliatory measures. So China has essentially announced a plan to impose new export controls on several rare earth elements and related products. But, you know, there's an interesting point to be made here around whether what are the tariffs or retaliatory measures actually on the raw materials. Or the downstream, the processed materials. Right. So Helen Zhou was telling us earlier that she thinks doesn't think this is necessarily a big issue because these export controls were not on the minerals themselves or were on the minerals themselves, not the processed part, and China processed these downstream. So it might be more an act of showmanship rather than a true retaliatory step that's going to have meaningful impact. Yeah, more than bite maybe. But also taking a look at some of the Apple suppliers because we are seeing those tumbling in the session so far today. Apple, of course, and the iPhone really hit by these Trump administration tariff announcements and Apple as well, especially vulnerable to tariffs given it counts China as a manufacturing hub, but also that it's already diversifying production to places like India, for instance, other markets in Asia. But you're taking a look there at some of the Apple movers. We'll have more ahead. This is Bloomberg. Taking a look at a live shot of Tokyo this morning. And we are seeing Japanese stocks, I mean, really following what we're seeing in other parts of the market as well, but very much under pressure so far. Japan's prime minister Ishiba has been coming out this morning saying he's going to urge Donald Trump to drop the planned U.S. tariffs on Japanese imports. And as well, he says essentially what we're seeing is Tokyo just scrambling to respond to these tariffs and looking at different proposals they can make around LNG, cars, agriculture, national security. But that really does set the trend here of how different governments are trying to essentially look at what they can offer to the Trump administration. Yeah, and obviously every economy is very different. Vietnam is very different from the Japanese economy as well. So they're looking at what kind of negotiations could be taking place and where they can borrow a page or two on how to negotiate with the Trump. And actually, just on that point, I think we already saw Nissan, for instance, again, saying that they were looking to do more production in the US. But this is the state of play here for broader Asian stocks. And you can see, I mean, a near 7% drop. Every single sector is in the red. US futures still gunning for further weakness at the open today. All right. Bell. Let's turn now to one corner of the global supply chain that may become a flashpoint in President Trump's trade war. More than 80% of the world's food, energy and other goods are transported by oceangoing ships. And more than one third of the cargo vessels currently at sea were built in China. Compare that to the U.S., which built only 0.4% of them. But President Trump now wants to change that. Yeah, the U.S. is planning to charge a ship's operator for visiting a US port if the vessel was built in. China belongs to a fleet that contains ships built in China or is operated by a Chinese firm. According to clocks and research that could add up to add up to add up to levies of $3.5 million per visit. But the Port of Los Angeles executive director Eugene Soroka told us it could take decades for American shipbuilding to challenge China's dominance, but to stand up a shipbuilding interest like that across the across the globe is going to take time more than a decade, maybe decades, plural, to really launch now. There may be smaller ships that can be built. Certain crafts will come out pretty quickly. But this is a huge undertaking to ship the world's balance. And let's bring in our guests on this topic. John McNaughton is the non-resident senior fellow at the Center for Maritime Strategy. Also with us is Anton Pozner, CEO of the Mercury Group, a consulting firm specializing in commodity supply chain management. Gentlemen, thanks so much for joining us on this very interesting and timely topic. Jon, maybe I can start with you and ask you, I think you've raised some of these issues with the US Trade Representative's office. What what is your view on this? I mean, I lived in Guam a long time ago and they were beholden to the Jones Act and that caused inflation on that tiny little island to soar. What's it going to mean for these port fees? And also just the length of time it's going to take to get more U.S. shipped, U.S. made ships into the supply chain? Well, at least this piece is proposed, in my view, a blunt, very blunt form of tariff. And then we're going to have an array of adverse consequences that in many respects make them worse than the tariffs. You know, by my calculation, it's kind of a three pronged task. It's going to be about three and a half million for Chinese built ships. But it's really almost as much for most of the others. So I I calculate that, you know, with the 39,000 container port calls per year, my estimate, it's going to be about a million and a half dollars per port calls. So you're looking at about $58 billion if that volume stays. The reality is these these fees are so extraordinary that they would immediately lead to two changes, diversions to Canada and Mexico. You know, there's talk of making some fees to stop that, even if it doesn't do that because it's on a per port call basis. You'll have carriers that go to two or three U.S. ports going to one, so you'll have congestion and a whole bunch of unexpected problems. My biggest concern about it, or one of them that is, I think not terribly thought out, is that these fees would apply to empty ships that arrive in America to load our export some, you know, grain from the Midwest. LNG exports, coal exports. So in that sense, they're really a direct tariff on exports, which my research suggests is illegal. So there's a whole array of bad consequences of these, you know, directly also impacting the shipping industry, but really just be another form of a very large tariff. Yes. As you as you pointed out, I mean, you're not just immediately hurting exports. You're also possibly hurting American jobs that are linked to those exports as well. But and, Tony, I'll bring you in now. These sorts of tariffs or this sort of executive action, I mean, does it does it create the environment in the US as well where people actually want to start putting the funding together and the resources to start to build out ship capacity? Yeah. Thanks, Annabelle. Just to reiterate something that John just mentioned, also the the situation is already taking effect, even though these regulations or rules have not come into full force. We're seeing it right now as we're working with our pre team, working to work on exports, coal exports, other exports that ships are just now wanting to come into the U.S. trade or they're going to pass along those costs. We could talk more about that. But as for stimulating U.S. shipbuilding, you know, no one should count out the ability of the, you know, the American population to accomplish things when they put their mind to it. But is our mind put to it here, Right. With a is there a political will? Is there the ability to build this out and invest and put the infrastructure, the legal, the legislative, the union infrastructure to put in place shipbuilding to last through many administrations of both political parties? That's really the challenge, right? It's not just signing an executive order and then heading out of the White House and then hoping that things come together. It takes real work, real deal making, real negotiating, real work to get to put all of the pieces in place in a government structure like the United States to get that to happen, to put the the build the infrastructure legislatively to make something like that happen. And it's going to take decades, as Jeanne from the Port of Los Angeles said. Right. Well, this question is to John and Tom. Both of you can weigh in on this. And it might sound like the most obvious question that I might have all morning, and that is how inflationary is this going to be? Because again, the tariffs, according to the White House, their first reaction is the tariffs are not necessarily over the long term going to be inflationary. But this if you're going to be charging these millions of dollars per ship, sounds extremely inflationary. Yeah. Yes, I think it is. In my my calculations, it's less precise in terms of what the bulk sector would be. But I think you're looking at over 00 billion a year, which obviously is a significant piece of inflation. I guess the news reports I've seen have the the tariffs themselves, depending on what happens with the volume being more than that. But, you know, 100 billion a year is significant. You know, one of the one of the real issues to me with this proposal is that there are so many of the terms are very precise. It's unclear what that means. And the most basic imprecise thing to me in the proposal is how much of this money is going in to the U.S. flag maritime industry. I'm a I'm a big supporter of our our merchant Marine, but I don't see that much of this is going into that. And I and my comments I proposed something that I thought would be more reasonable, more proportional, but a requirement was that all of the money raised would go into supporting the US merchant Marine, which is arguably the entity or industry that has suffered the most from the, you know, claimed unfair trade. Anton, do you have a comment on that as well? Yeah, absolutely. And I was a U.S. merchant Marine officer, graduate New York Maritime College, my merchant Mariners license right behind me. Right. So. So there's an enormous amount of popular support to have national sealift capacity. And, you know, look, let's go back to Desert Storm. In 1990, we had the United States had to charter a Soviet freighters, amongst others, to carry our military equipment into to Saudi Arabia for the for the retaking of Kuwait. Soviet freighters. Right. Let that sink in. So there's enormous certainly enormous popular support for, when you think about it, to have national sealift capacity and to put investment into building a strong U.S. merchant, Marine and national Security supporting sealift infrastructure. But it's not going to happen by punishing in the short term. And by short term, I mean the next couple of decades, devastating American businesses. You know this from an economic standpoint. Let's look at the example I mentioned before. Right. Working on a 55,000 ton coal export cargo out of the Mississippi River, New Orleans area, the ship owners that are willing to even discuss sending a ship into the river to lift that cargo are going the court They're inserting clauses in the freight contracts that put the threat of that penalty. Right directly onto the trading companies and the mining companies. And that means the miners and the union workers, it flows right back to them. Divide a million and a half dollars for a port call over a 55,000 ton coal cargo. The math is simple. That's how much it adds on top of the cost to export American products immediately. And it's happening right now, even though these regulations haven't gone into effect. We're dealing with it every day. Our clients are dealing with it every day. The ship owners are passing along these ominous clauses in the freight contracts. So it is already a reality. So this is not something being that we're dealing with in some theoretical sense, other potentially we'll come up short. It's not enforced yet, and maybe it gets watered down a bit before it comes into force, But we're already dealing with it. It is already hampering U.S. import and export trade to day. Antonio. Austin Yeah, I was just going to excellent point that he makes that it's already hampering particularly the container sector because the cargoes are so high valued. They're more able to absorb any given amount of a ship we think could be devastating to so many of our our box factories. And so many of those involve export some. But Anton's also right that, you know, some people talk about whether it's this or something else, that it's all negotiating, you know, supply chains that don't change on the dime. I mean, they take months, if not years, to to a fact. And these sort of kind of whipsaw things are already having an effect. You know, people in traffic departments, you know, across the country already making decisions based on this. And, you know, the ship fleet thing will be, in my view, just disruptive and dislocating to so many of our sectors, But particularly in the bulk sector, you have the possibility that these studies will just make that the cargo go somewhere else. Grain is going to come out of Brazil rather than America. You know, coal is going to come out of Australia, just all sorts of adverse consequences that really haven't been thought through very well, in my view. Yup, it's hitting farmers, it's hitting mining miners, it's hitting hitting everybody along the supply chain already, so. And I think we're just seeing there in this chart. China builds the most ships, but also who else builds them? It's Japan and it's Korea. So and John and John. But we'll start with Anton here and your viewers for this. What is the best remedy then, in this situation for for the US to be building up its shipbuilding capacity? Does it need to work with its allies in this region, Japan and Korea? Or does the government need to look at subsidies, for instance, because it's just much, much, much more expensive to build out a ship in the US today than it is in China. Yeah. Annabelle, good point. Right. And there was a great Bloomberg video came out, a video essay, it came out a few days ago on this. And why why China has become the shipbuilding powerhouse that it is and it discussed during in that piece it discussed exactly what you mentioned. Right the we'd be better with a strategy that included included our allies. Right. The allies that we we need that we count on, that we trade with that have extensive shipbuilding capabilities like South Korea and Japan. There is a there are it's going to take work. Right. It's going to take diplomacy. It's going to take alliances. It's going to take a serious amount of deal making. Right. I keep using that term deal making for a reason. I think it all hits home when we know who we're talking about. Right. But it takes basically rolling up our sleeves, having having a government that's serious about this, that's not just looking for the press up. Right. For the for the camera. The camera ready. What the work that needs to be done means getting building a coalition, figuring out what parts, what pieces of the shipbuilding puzzle are best done domestically in the United States, what's best done in partnership with our allies overseas to in employing their expertise, their capabilities, their their infrastructure and capacity. Right. To get this done. So it's not something that, you know, we keep harping back on this. Right. But it's going to take the real work, the not the non sexy work right behind the scenes to get things done. That's not exactly not exactly going going to be a great camera. When I got here. I remember when I looked at our maritime sector, I see our most pressing need is sealift capacity, you know, vessels that have you do us crews, even if they're built overseas. And that's where we can make some real strides and have that be effective right away. And ideally, obviously, I'd love to see more shipbuilding activity. The notion that we need to build ships in the U.S. that will be involved in international commerce, you know, that's going to be a long ways off. I think there should be much more much more cooperation on ships that we've built for international with our allies in Japan and Korea. But, you know, the premise of a lot of this that somehow our problem in shipbuilding relates to China just isn't really factual. I mean, China is certainly the biggest now. But, you know, prior to that, it was Korea and Japan who are our allies. So I think there's a lot that we can and should do. In the proposal that I recommended, I think I suggested a per container fee, but there would be no fee if it was a US funded vessel. And the numbers were such that that would encourage people to re flag a vessel, which can be done very quickly. So I think that's where we can see the most pronounced beneficial effect immediately on our maritime sector is to encourage more U.S. flag vessels. John, thanks for your time. And Anton as well. That was John McCann, then, non-resident senior fellow at Centre for Maritime Strategy, and also Anton Posner, CEO of the Mercury Group, talking about the US's shipbuilding ambitions. And very important topic, especially as we really look at that increasing competition between Beijing and Washington. We'll have plenty more ahead. This is Bloomberg. Taking a look at how metals are faring this morning. And it is a real pressure we're continuing to see here, particularly noticeable in copper. I mean, it's a it's a global bellwether and it certainly expresses concerns around tariffs and also recessionary fears on the horizon. Yeah, that's right. I mean, it was just a couple of weeks ago copper was soaring through the roof. Right. Look what it's doing now. On the fears that a global recession perhaps is on its way, right? Yeah. Let's bring in our Bloomberg Commodities Edge reporter Martin Ritchey joining us and. And exactly that. Martin, I mean, you know, we had seen pretty sharp run up and there were concerns around supply constraints, but it's a very different picture today. That's right. It's been a very wild few weeks, few months for copper. We've saw prices really rally up last month and earlier in the year amid fears of sort of global shortages. A lot of copper rushing to the US to get ahead of potential copper specific tariffs over there. So there's been a lot happening. And this morning we all expected to to wake up obviously and see a lot more mess in the markets. Copper fell as much as 7.7% and that meant it was heading for perhaps the worst three day gain since the great financial crisis. But in a slight twist. Prices have actually started rising again. So erasing all those losses and rising. So you can see that markets are very jittery as they sort of gauge whether all the panic around this in the equities markets. That's obviously our own worries in trade, whether that really translates into worsen demand for copper. So definitely going to see a lot more volatility in the coming days. So where does that leave prices by week's end, say, because I thought there was a tightening supply dynamic. That's kind of the broad theme that underpins copper at the moment, like prices are relatively high versus versus history. So we always talk about the long term for copper, how there's not going to be enough supply to meet demand. But when you have these big macro events like the ruling out of Trump's tariffs last week, China's response and Friday, it really gets caught up in in all that that panic. And I wouldn't like to in fact, I shouldn't make a guess where prices are going for the end of the week. But I did see a quote from one analyst from Citi saying, you know, this is not the time to be trying to catch falling knives. That gives you an idea of the kind of uncertainty in the market. All right. Bloomberg's commodity reporter, Martin Ritchie, thanks for joining us this morning. On an important day here, obviously, on the markets. You can also turn to our bloomberg. For more on this, go to t live. Go to get commentary and analysis from bloomberg's expert editors. Plenty more ahead. You're watching the china show on bloomberg. Taking a look at the market action this morning and begin 90 minutes into the session so far for for Asian or Chinese equities and and taking a look at trading volumes here essentially and we really elevated about 140 times 140% more than normal. You can see here the line in dark blue is average turnover on a 20 day moving average basis. And the dotted line gives us the projection for the session today. So really very active trading sentiment. But investors, as we know, are trying to grapple with a lot of different market dynamics. You've got the tariffs, you've got the Trump administration pushing back on any of concerns around the tariffs. Wall Street weighing into it. Bill Ackman, for instance, saying it's a mistake and you can add to it as well. China's response, even if it is more bark than bite. But taking a look at how Hong Kong is faring intraday so far at the top of the hour, we had sort of started to lift a little bit off the lows of the day, but certainly we're back down to around a 10% drop again on the Markets live blog this morning, Mark Cranford is saying that, you know, investors could be hopeful for onshore authorities to provide market support, but not going to be enough to reverse those losses for today. Taking a look at broader markets here, again, a lot of statistically outsized moves. You can see those black boxes means it's an irregular and it is a very irregular session so far.