Daybreak Weekend: Tesla Results, Europe Earnings, China Tariff Reaction
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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. Straight ahead on the program, we look at corporate earnings from EV maker Tesla. I'm Tom Busby in New York. I'm Caroline Hepka here in London, where we're asking what's next for European equities as some of the continent's biggest names prepare to deliver their results. I'm Doug Krisner with a new way Chinese retail suppliers are looking to circumvent U.S. tariffs.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. We begin today's program with a look at the U.S. housing market and what could happen if the president's tariff policies drive inflation and mortgage rates higher. Home sales data for March out this week could give us an early look at the impact of those tariffs on mortgage rates and home sales during this critical time for the industry. For more, we're joined by Erica Adelberg, Bloomberg Intelligence Chief Mortgage-Backed Securities Strategist.

Well, Erica, thank you so much for being here. Thank you for having me. We are in the heart of the spring home buying season. Just last week, average long-term mortgage rates, though, rose. First time we've seen that in six weeks, 6.81%, according to the Mortgage Bankers Association. How big a factor are mortgage rates in housing right now? Hi. Yeah, it's interesting. We actually wrote a note just this week that talked about

the different factors that enter into a homebuyer's decision. And we started with everything. You know, the equity market was taking. That's actually what drove our inquiry. We're like, hey, is the wealth effect going to, you know, make people shy away from the housing market? The number one important thing for people's homebuying decisions right now, historically and currently, is mortgage rates.

Even more so than the sticker price on that home? Even more so than the sticker price on the home because of the leverage involved in mortgage rates. Even a small shift in mortgage rates is going to shift your monthly payment a lot more than $10,000 more for a home.

And there are a lot of factors, I know. But if that's number one. And affordability does matter, don't get me wrong. And so home prices factor into that. And I think in this era where people are stretching as far as they can get to buy something, with debt to incomes for new homes above 40% for most borrowers, that's one of the reasons that mortgage rates matter so much. But as I say, it's math. Just a small tweak up in mortgage rates and all of a sudden the mortgage payment goes up a lot.

And wait till they learn about property taxes and insurance. Right, right. Well, in the latest University of Michigan Consumer Sentiment Survey, expectations for inflation were the highest since Ronald Reagan was president. How could tariff-driven inflation, even if it's 3 or 4 percent, not 6 percent like people are afraid of, affect mortgage rates and housing? Our concern in terms of tariff-driven inflation is that it will paralyze the Fed.

And while the Fed doesn't control mortgage rates, it might keep the Fed on hold for longer. And even if the Fed does find room to ease a little bit, long-term inflation expectations are likely to keep the longer end of the Treasury rate curve and therefore mortgage rates higher.

So mortgage borrowers who are looking for some relief from Fed easing if rates are able to come down a little bit in the short end may not see that at all in the longer end of the Treasury curve and therefore may not see it at all in their mortgage rates. And the Fed has made no indication that they're willing to step in before their next meeting, which is only...

two weeks away, but they're still waiting to see what happens. - Well, the other interesting element to this is, after the 2008 crisis, and even in the 2020 pandemic crisis, the Fed stepped in and bought mortgages themselves. So they actually did have a direct lever to affect mortgage rates to some degree.

They have shown no indication they're interested in doing that again. I can't tell you how many times they've said they want the portfolio to run off to be more of a treasury-only holding that they're holding. So, you know, can it never happen again? Could. Is it likely to happen? They will try very hard, I think, not to add mortgages to their... to buy mortgages outright again. Wow. Well, it already looks like there's some fear that may have hit sales in March. We have expectations for...

for home sales, newly built homes, one-third what they were in February, and existing home sales rose more than 4% in February, forecast a decline 3% in March. I mean, is this tied back to mortgage rates and the fear of inflation going even higher?

I think this is tied back to mortgage rates. On the positive side, we have seen the MBA purchase index, which is a good indication of people who are looking to take out loans to buy homes, has actually gone now up above 2023 levels for the first time.

It had already broken above 2024, about a month ago. But yeah, we are seeing signs that, and I think existing home sales had begun to improve. It was finally improving on a year-over-year basis until I think last month, just because there were more homes that are coming on the market availability. A lot of people were sitting on these very low coupon mortgages and didn't want to sell their homes, which really tanked existing home sales, even as new home sales were growing.

That is home sales of new construction. But, you know, at the same time, what we found is that inventories rising may have limits because pending home sales were down 7% year over year in March and could continue down as mortgage rates go up. Now, speaking of new homes, home builder sentiment we got just last week. Was that expected to go a little higher? It kind of surprised me.

It's still well below 50, which is where there's more pessimists than optimists. That's a diffusion index, and 50 means there are as many pessimists as optimists. But it was expected to tick down slightly, and instead it ticked up slightly. It was expected to kind of go to a long-term low of 38, and it went up to 40%. What do you think they see? What it seems like they're seeing, from what I've read, having not talked to them directly, is it seems like they're seeing an increase in current traffic

And again, that might be as much of a reflection of rates having dipped down a little bit at the end of March and in March. But forward-looking, they're very concerned about tariffs increasing their prices. I think the estimate is they think on a per-home basis, they think tariffs are going to increase the price of their new construction by an average of $11,000. New home sales for March out on Wednesday. Existing home sales for that same month out on Thursday.

Our thanks to Erica Edelberg, Bloomberg Intelligence Chief Mortgage-backed Security Strategist. We move next to earnings and one of the most highly anticipated first quarter releases from the EV giant Tesla that's out on Tuesday. How did the threat of tariffs and the backlash against CEO Elon Musk for his Doge task force and politicking in Europe impact sales? Well, for more, we're joined by Craig Trudell, Bloomberg Global Autos Editor.

Well, Craig, thank you for joining us. Now, so far, we know that the first three months of this year have been tough for Tesla, delivering 337,000 autos. That's 13% fewer than a year ago and a lot fewer than Wall Street was hoping to see. Shares down 40% so far this year about. Now, what are the factors behind that?

Well, so you mentioned off the top, I mean, the decline in vehicle deliveries in the first quarter, I think everybody was braced for that number to be weak, and yet it was much weaker even than I think expectations were going into the company reporting that at the beginning of the month. And I think

What's really remarkable is just how much the expectations for these earnings have declined over the last, say, just a couple of years. In the beginning of 2023, analysts on average were expecting this company to earn about $2 per share per year.

The average SBIT now is below $0.50, and it's a similar story when you look at revenue at the top line. So, the expectation back then was more than $40 billion. That's now fallen to below $22 billion. So, what we have here is a company that for a long time was viewed as a growth stock that is no longer growing, and that's really spelled trouble for us.

a stock that is priced for that growth. Now, how much of a factor is Elon Musk himself? And we could go on and on, talking about the 14 children and the doge, but how much of that is him?

Yeah, I mean, I think, you know, there's obviously a lot of attention on what he's doing in Washington, and there's been a lot of blowback over that. And that was absolutely something that came into play in the first quarter. But I think this is also, you know, about Musk in the –

sense that he was making decisions, making changes to Tesla's plans long before he was becoming part of MAGA, if you will. Tesla was going to bring to market a much cheaper electric vehicle that would be priced below the Model 3. And in early 2023, the company decided that it wasn't going to do that anymore. This has been a company that's priced for growth and must

Musk made a fateful decision really last year, where the company was going to bring this cheaper electric vehicle to market. It was going to be priced below the Model 3, which is the most affordable car you can buy from Tesla. He made the decision to scrap that car because, in his eyes, Tesla was on the verge of being able to deliver fully autonomous vehicles. That's something that he's been promising for many years, but not

actually been able to deliver. And that was a really big risk. And it's a risk that Tesla is now paying for because the plan was to bring that to market roughly around this time. And without that, Tesla doesn't have the cheaper car that more consumers can afford that would have given the company a shot at sort of a next leg of growth. I want to talk to you about tariffs. Now, every Tesla, including the Cybertruck, sold here in the U.S.,

mostly from parts in the U.S. A couple of chips, maybe a couple of electronics, right? So how do you think, and we know that these Trump tariffs can change and do change day to day, hour to hour, it seems, but how do you think tariffs are impacting the company? Yeah.

Yeah, I think, you know, in general, there's been a view that because Tesla has its final assembly of the vehicles that it sells in the U.S., you know, carried out in the U.S., that they would be relatively insulated. But I think what we've learned is also that there's not going to be a winner in these trade wars that Trump is waging. There's going to be sort of relative losers. And

even Tesla, while it has a supply chain close to where it assembles, even Tesla relies on suppliers for an awful lot of parts. And a lot of those parts come from places like Canada and Mexico, even, you know, in the past decades,

the industry viewed the U.S.'s neighbors as, you know, local. And that is changing in really dramatic fashion early this year. And so even Tesla is at risk here. And Musk himself has acknowledged that where, you know, he's talked on X, formerly Twitter, about the fact that they too will feel the pain. And also, you know, some real concern about, you know, how much

sort of low cost components maybe would be coming over from China. We know that the amount of, you know, tariffs, the level of tariffs that Trump is putting on China is really dramatic. And we know that the

EV battery supply chain is so reliant on China. So that is absolutely going to be something that analysts are going to be listening for closely when Musk talks on the earnings call. Oh, well, a lot to look forward to. Tesla Q1 earnings out this Tuesday after Wall Street's closing bell. Our thanks to Craig Trudell, Bloomberg Global Autos Editor. Coming up on Bloomberg Daybreak Weekend, what's next for European equities as some of the continent's biggest names prepare to post their latest earnings results?

I'm Tom Busby and this is Bloomberg. When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? A combination of financial services and generosity programs. Thrivent offers advice, investments, insurance, banking, and generosity, as well as resources to fund service projects or direct dollars to causes you care about. With more than 120 years serving clients, you can plan your finances with confidence. Visit Thrivent.com to learn more. Thrivent.

where money means more. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, we'll look at how some Chinese companies are trying to navigate President Donald Trump's tariffs. But first, as investors around the world try to make sense of the always involving tariffs, companies across Europe and beyond are preparing to share their latest financial performances with the market.

How will equities fare against a backdrop of such uncertainty? And how will the prospect of a global trade war affect 2025's outlook? Let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker.

Tom, European stocks have seen a hugely tumultuous period as a trade war sparked by President Trump's tariffs has threatened to upend global trade and supply chains. Well, in the coming days, companies will report first quarter earnings and attention will focus on what they reveal about the impact of tariffs on businesses, decision making, demand and logistics.

Now, those first out of the gates to report earnings have faced mixed fortunes, namely LVMH, which faced a steep share price drop on the news of slowing demand both in China and in the United States amid the threat of an escalating trade war.

Will the other European names, due to share their latest balance sheets in the days ahead, face a similar fortune? Well, Canadian Imperial Bank of Commerce Chief International Strategist Jeremy Stretch doesn't think so. He told Bloomberg the continent's prospects are overwhelming.

on the rise again with the backdrop of US uncertainty. Well, I think if we scroll back to the first quarter, I mean, go back to pre-liberation day on April the 2nd, and we looked at what we'd seen in the equity space during the first quarter of the year, we were seeing a massive rotation out of the US and into the Eurozone. And I think that's a recognition that US economic exceptionalism, which of course has been the driving factor

of US asset performance over the course of the last three or four years is no longer, was no longer quite so relevant. And of course, then we're overlaying that with the uncertainty that is now being writ large by the tariff narrative. And so we're getting investors saying, well, if the US is no longer quite the reliable trade partner or no longer the reliable defence partner, obviously in the context of the NATO considerations as well,

it makes sense to gradually or progressively consider those asset flows to the same sort of magnitude going into U.S. assets. So do you see more dollar weakness ahead? I think what we've seen, we've seen a substantive move in a very short space of time. So I think what we've seen is a significant positioning digression over the course of the last few sessions. In fact, even the last few weeks in a sense. So obviously we've seen euro long positions moving up quite significantly here.

So I think it may be the case if we get a slight dialing down or at least less tariff negativity, at least for a few sessions. Now, of course, in the context of what we've seen over the course of the last week or two, a few sessions seems like an awfully long time. But if we can actually get through the Easter period without a further acceleration in tariff negativity, then we might just see a little bit of a consolidation in the dollar. We might just find the dollar finding a little bit of residual value. But I think there is a solid appetite to try and buy more.

by the sort of extreme. So if we do see the dollar rallying, then I think we will find all the euro dollar dipping down to sort of maybe 1.12 and a half. There will be appetite to try and buy that dip. So I think that's the sort of mentality. It is selling dollar rallies or buying euro dips, I think is probably going to be the mentality that's going to prevail. In the uncertainty that you mentioned, I wonder how do you see the,

the market perception of what uncertainty is now versus, I mean, only a couple of weeks ago where, of course, the world was a very different place. I mean, is the volatility now just going to be part of, you know, our sort of immediate and perhaps medium term future?

Well, I think quite clearly the world has somewhat changed. So in a sense, if we went back to the middle of March and said, well, the global environment is going to see a minimum of a 10% tariff, most people would have said that would have been hugely detrimental to the global growth trajectory and we would have seen risk being priced accordingly. Now we're in a scenario where we've seen a much worse set of parameters potentially being laid out and then theoretically...

10% or some degree of derivation of that if there can be further trade negotiations are seen as a better case scenario. So I think we've certainly moved the parameters. The goalposts have shifted quite significantly as to what is the base case and what is the extreme risk-off or risk-dynamic scenario. So I think that's the reality that investors are going to have to shift to this new global world order. And that is the fundamental factor that is driving investor sentiment.

That was Jeremy Stretch from Canadian Imperial Bank of Commerce there, speaking to Bloomberg's Stephen Carroll and Valerie Tytel.

So what is in store as Europe's biggest corporates prepare to update the market? I asked Bloomberg's earnings specialist, Chloe Millay. We had some big names reporting so far that have kind of given us a flavour of what to expect for this earnings season. Let's start with maybe the less impressive, the more disappointing reports. We had LVMH with sales coming in weaker than expected.

which is not the best start to the luxury reporting season and really signals a weakening of demand that is concerning for the rest of the year for AV Image, but also for the rest of the sector. We also had ASML with also lower than expected orders, and that comes amid kind of the context of a slowdown in AI demand. For one kind of positive update, we had Ericsson with a first quarter beat, a

quite good print because operators are really kind of ramping up spending on 5G equipment. So that could be – that could kind of bode well for the rest of the telecom sector for this earnings season. But of course, the key theme across all of this was of course the impact of trade uncertainty on the outlook for all of those companies. Yeah, the results won't take into account

the tariffs announced on the 2nd of April, how much underperformance can you put down to pre-tariff anxiety weighing on these businesses? Yes, so of course tariff announcements came at the very beginning of the second quarter but the chatter around tariffs and the uncertainty that it brought really started much earlier. So there is no way really to quantify how much those pre-tariff ditches mattered but

of course, that may have been a contributing factor. You know, if we look at LVMH, for instance, there was continued weakness in China, but also new weakness in the US, with shoppers really reining in spending on things like cognac, beauty products, etc., which is something that would occur within a period of kind of economic uncertainty.

Talk us through other major headwinds then that firms faced in the first three months of the year. If we look at the kind of biggest EPS earnings per share decline that we're expecting for the first quarter, we have three main sectors that are going to be leading that decline. So materials, car makers and energy. So for materials, they were already weak at the previous earnings season, but what affected

them throughout the first three months were really weak in markets and including very soft construction activity in China. They also faced supply chain issues and they faced high energy costs. If we look at the auto kind of car making sector, they've been struggling with weak demand in China as well because consumers are opting for local brands instead. So, we had Porsche, for example, cutting estimates in March due to a slump in sales

in the country. And all of that has likely kind of been happening over the first quarter. And we'll hear about that over the coming weeks. The weakness in the carmaking sector, of course, also impacts other sectors, semiconductor companies, for example, that specialize in that end market as well. For the energy sector, the oil prices fell over the course of the first quarter, which would have also pressured earnings. So, those are the kind of key headwinds for those sectors.

How big a factor then do you think geopolitics has been? Well, tariffs and obviously the shape and the extent and the scope of them really dominated the conversation from the very beginning of the year. So that was and that will continue to be the main talking point, really. What do you expect to hear from companies in the outlook of the results that they're going to present this

more kind of expect the unexpected do you think there'll be lots of euphemisms for tariffs lots of cost cutting exercises yeah so we're expecting a fair amount of warning some of them kind of explicitly addressing addressing tariffs some of them addressing euphemisms you know like macroeconomic uncertainty etc but obviously that refers to the same thing and we're expecting guidance being cut guidance being pulled um we've already seen that with a couple of companies we had

Page Group in the UK, CarMax in the US. The global uncertainty is making it kind of very difficult for companies to see into the future and to make predictions about what's going to happen for their business. We're also maybe expecting some companies to cancel capital expenditure plans to hold off on hiring plans, perhaps. If you kind of look at what recruitment companies have been saying, they have mentioned that all of this uncertainty is making people kind of hold back on more hiring.

We might also see a pause in buybacks. So we saw that with with Bonzo, even though that was not directly related to tariffs. There may be something else that we see, which, of course, investors would not really react very kindly to. On the other hand, some companies might also decide not to speak about tariffs at all. You know, JD Sports did it on the recent call and they might do that until it all becomes clearer.

In terms of clarity, let's dive into one sector in particular. You mentioned LVMH, their difficulties. Caring Group reports in the days ahead. What are we expecting? So Caring already started from a weaker position really than what LVMH started with. They had a tough 2024 overall because the flagship brand Gucci is kind of undergoing this whole turnaround, which makes it quite difficult.

The report from LVMH doesn't bode well for caring because it really highlighted that aspirational fashion isn't really doing well in a period of economic uncertainty. Obviously, you know, kind of more high-end luxury like Hermes is more resilient because consumers at that level are less price sensitive. But the problem for caring is that it's much more kind of entry-level aspirational fashion than LVMH on the whole.

which means it's much more exposed to this pullback in discretionary spending. If we look at estimates for carrying, we're looking for an organic revenue decline of about 12%, which would be on a similar level as the fourth quarter and doesn't indicate any kind of recovery. And yet there's been such renewed interest in European assets from the euro to individual stocks and bonds.

Which equity sectors do you expect to actually perform strongly? I mean, you've got to think about defence, surely? Yes, so defence should definitely still kind of be riding that high of all the defence spending announced in Europe, though that may not have fully materialised into earnings yet. So we'll have to see that in the coming weeks.

Banks as well should have a fairly resilient quarter, even though the one major drag will be kind of on the outlook for higher provisions, perhaps for loan losses because of the economic environment deteriorating. And of course, net interest income also kind of falling as rates are cut further and further. But they should be overall doing quite well for the first quarter within the tech sector.

even though we had ASML, semiconductors and kind of software and services sectors are expected to have an earnings per share rise as well compared to a flat growth in the fourth quarter. And also communication services, so things like telecom, so as I mentioned with Ericsson, should be relatively resilient as well. So there are some pockets of optimism. Claire?

Chloe, the next few days and weeks are really going to test your metal, your analytical skills, your speed of writing. Just tell us what other big European names you're going to be watching out for. So in the coming days, we have some major companies that Enexizen is really ramping up. We have a few consumer names like Nestle, Unilever, Danone. The focus there will be really...

on their ability to boost volumes while trying to keep prices affordable. We've got BNP also opening the ball for the European banks. And there the focus will be on deal activity, on net interest income and also on loan loss provisions.

And then we also have some key names and sectors that might be involved in the tariff conversation as well, which, you know, we have Pharma with Sanofi and Roche and also Volvo and Renault on the kind of vehicle car making side. So loads of things to look out

My thanks to Chloe Millay. We'll be right across all the biggest corporate stories for you in the coming days right here on Bloomberg. I'm Caroline Hepke in London. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Tom. Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look at how some Chinese companies are dealing with President Trump's tariffs. I'm Tom Busby and this is Bloomberg. ♪

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on emirates.com. Fly Emirates. Fly better.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? A combination of financial services and generosity programs. Thrivent offers advice, investments, insurance, banking, and generosity, as well as resources to fund service projects or direct dollars to causes you care about. With more than 120 years serving clients, you can plan your finances with confidence. Visit Thrivent.com to learn more. Thrivent.

where money means more. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. With President Trump's ever-increasing tariffs on imports from China, some Chinese companies are looking to creatively skirt those tariffs. For a look at how that could happen, let's get to the host of the Daybreak Asia podcast, Doug Krisner. Tom, not a day goes by when we're not talking about the U.S.-China trade war and the fallout from those higher tariffs. So,

So if you're a Chinese manufacturer facing these new levies, what are you feeling right now? Is there a way for you to react? Some way to circumvent these tariffs and move products to U.S. consumers without that additional cost? Well, TikTok influencers in China apparently have found a way. They are showing videos to users in the U.S., encouraging them to buy directly from Chinese factories, bypassing not just the tariffs,

but US brands as well. - Who are the suppliers behind Lululaman? Some of their yoga wear are actually from Xianglong Clothing and Huang Qisheng Clothing. And guess what? Both factories located in Yiwu here. And these two factories also supply clothing for Fila and Under Armour. I guess most of you know the price of Lululaman or other big brands. They sell you a legging pants

for $100. And guess what? Here in these two factories, you can get them for around $5 to $6. For more on this story, I'm joined by Colm Murphy, China EcoGov reporter for Bloomberg News. Colm joins us from our studios in Beijing. Thank you so much for making the time to chat with us.

Can we begin, Colm, by having you break down the process? How is this actually happening? Okay, so basically, first thing is that TikTok itself is not available in China. They're using domestic platforms.

app here called Douyin. So in order for the Chinese influencers to get their messages on TikTok, which is already quite surprising, we are suspecting that there's some element of collaboration here, some sort of planning. So basically what they're doing is

is they are making short videos to describe some of the reasons why the US customer and the US buyer has to pay so much money for products that are available in China at knockdown prices.

And these messages are basically trying to suggest or encourage not necessarily ways to avoid the tariffs, but to, let's say, minimize the impact of the tariff. But the deeper meaning, I think, is to...

to show and to illustrate that China is pushing back against these tariffs, to show that this is kind of mocking in a way and to undermine the Trump tariffs and saying, hey, look, we have come up with these innovative ways to showcase and to tell you about our products and we're going to swamp TikTok in order to do that.

So it seems maybe to be less about selling goods to U.S. consumers and more about creating outrage among the American consumer, right? And how tariffs are impacting the prices of the Chinese-made products that they are accustomed to. Definitely. I think, you know, there is this, as I say, broader push by this campaign, which, you know, has...

picked up strength and exploded basically over the weekend. We've had these types of videos from merchants in China saying, you know, we produce this project and you should buy from us. I mean, they've been around for a while. But what we're talking about in this particular instance is, first of all, the sheer volume of such

sort of videos and messaging has gone through the roof. A lot of them display very similar characteristics. They're very polished. Most are speaking in very sort of sophisticated use of language and in English, of course.

And this all happening over this short period of time. So it's hard not to conclude that this is definitely an effort to, if not at the very least, sort of mock the US efforts on tariffs, but probably to undermine in a way the Trump tariff regime and call the attention of

of the ordinary American citizen to like how the tariffs will and can impact their bottom line. And it's a little ironic in the platform, right? During his first term, Trump wanted to ban TikTok in the US or force

Some type of change in ownership. That position later became reflected in U.S. law. But I believe it was March 2024 when President Trump reversed his position and began advocating against banning the app on the grounds that, OK, we needed it. But this seems to be to the point of maybe there's a national security issue involved here. Is that saying too much?

Well, I would just say it does show that there has been a marked increase in the ability of the Chinese message to get to ordinary citizens in the US. And on the whole, these messages have been pro-China. So, for example, we have this latest incident, which it is ironic because right now TikTok is still under close scrutiny with the talk of a ban or a sale.

So for this to be happening on this platform right now is somewhat curious. But, you know, it does also remind us of something that happened a couple of months ago, which was when the Chinese app Xiaohongshu, or Red Note, suddenly became hugely popular when the so-called TikTok refugees were fleeing to that app when the threat of the ban was imminent.

And so this was also the first time when we saw a real sort of outpouring and outreach from Chinese citizens to their American counterparts exchanging information. We saw lots of Americans saying as a result, "Oh, what they've been telling us about China is wrong all along. It's very developed, it's very sophisticated," and so on and so forth. So you did have some elements of influence and changing of perceptions.

And this again, this particular campaign, shall we say, looks like hitting similar points and that we do have reaction from Americans on the ground who are saying, I never realized that this was the reality. And maybe it's not anger, but it's definitely, you know,

increasing awareness and in some cases frustration at some of the narratives that they seem to sort of feel have been thrown on them by their own government in DC. So the packages with merchandise shipped from China with a value at less than $800 have enjoyed the de minimis exemption from these added duties.

And we have seen the impact that that has had on online Chinese retailers like Timu and Shein to sell super cheap items to American consumers. Now, the president has kind of taken executive action here to end that loophole. And I think that begins on May the 2nd. So I'm wondering just on the commerce side, whether this, let's call it a workaround, is facing extinction. Yes, I think, you know, I mean, whether this would actually yield to extinction.

a spike in sales for the Chinese merchants. I would doubt that at this point for various reasons, including that, you know, a lot of these are not the equivalent in terms of they don't come with the brand that they have. So, you know, I mean, how many people are going to turn around and,

start buying more because of this campaign? It's a big question mark. And also, as you mentioned, the de minimis rule needs to be clarified and whether that's going to stay or not. But I do think another point here is like, yes, this is mocking of the US system. But at the same time, there's also something that we need to reflect from the China side. And that is,

there are a lot of people here who are dependent on exports dependent on selling goods to the US. And you know, in another way, we could interpret this as being a sign of desperation. Also, on the Chinese side, we have these vendors who are looking at possible bankruptcy or possible, you know, difficulties commercially. And this could also be interpreted as an effort by them to try to change their situation. So

So while on the one hand, it is definitely, you know, poking fun and mocking a little bit the U.S. and the tariffs that have been introduced and stopped and paused and reintroduced by Trump. But there's also a message for the Chinese as well, probably not intentionally, but it does remind us that there is a lot of people here who do support

stand to suffer if the tariff regime goes into full effect and remains so for an extended period of time. Is it too much to say that the government may be involved in this? Is there any evidence that that may be happening? Well, that's always super difficult to pinpoint, right?

Nobody's going to come out and say, we are allowing this to happen. But, you know, I mean, there is the elements that typically in China, like if there's something online that the government doesn't like, it will get shut down pretty quickly. And then, of course, there are some sort of legal implications here, for example, that

Many of these brands that are being exposed would have non-disclosure agreements in place with their suppliers. And also, obviously, trading in counterfeit goods is not a legal activity. So the fact that these sort of videos are allowed to stay online, even if it's just for a short period of time, does sort of suggest some sort of tacit agreement.

approval, at least, or perhaps, you know, if we want to be generous, maybe it hasn't filtered to the right authorities yet, and there will be a crackdown. It is very early to say definitively, what are the factors at play? We don't have a comment as of now from the company, from TikTok, explaining what's happening. So in the absence of all that, I think we have to hold back judgment for a little while. But coming at this time and in the volume, the

and the quality of the videos, I can't help but be quite suspicious that this is some sort of collaboration or concerted effort to send a message. So we know that the Trump administration was working towards negotiating some type of sale of the US operations of TikTok to a group of private investors.

When the tariff war began, those talks seemed to be scuttled. I can only imagine that this illustrates some of the downside that may exist if you're in the administration wondering about what co-ownership may look like. Let's say if Beijing were to have a 50% stake in TikTok still, even after the U.S. divestiture, what type of problems may exist down the road? This could be a prime example of that, right?

Right, and you know some experts on disinformation that I spoke to

do say that this underscores the importance of a ban or a sale. That, of course, would be their point of view at this point because that's what they're supporting. It does raise the question. It also brings up the point whether a deal will happen at all because the Chinese have now, as you said, made it quite clear that the TikTok issue...

is dependent on clearing the tariff issue first. And, you know, it's sort of a grand bargain where everything is thrown into one bag and includes TikTok, includes tariffs. We've seen in recent days that the chances of that happening are declining constantly. So I wouldn't hold out too much hope for that in the immediate term.

But yes, it does illustrate some of the concerns that were raised by lawmakers and other advocates calling for a ban or a sale of TikTok. And it's curious that this would be

allowed to happen at this very sensitive time. Colm, thank you so much. That is Colm Murphy, China EcoGov reporter for Bloomberg News, joining us from Beijing. And I'm Doug Krisner. You can catch us weekdays here for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom?

Thank you, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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