Daybreak Weekend: US CPI, London Tech Summit, China Eco
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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, a look ahead to some key inflation data in the U.S., how that may impact monetary policy for the Fed. I'm Tom Busby in New York. I'm Caroline Hepka in London, where we're asking if the U.K. has what it takes to become a global tech superpower. I'm Doug Krisner, looking at what we may learn from next week's data on the Chinese economy.

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. I'm Tom Busby. We begin today's program with some key inflation data here in the U.S. The consumer price index for May on Wednesday, the producer price index for that same month out on Thursday. For more on what to look for and how that data may impact the Fed's next decision on rates, we're joined by Edward Harrison, senior editor at Bloomberg and author of Bloomberg's The Everything Risk newsletter. Edward, thank you so much for being here.

Good to talk to you, Tom. A slightly better than forecast May jobs report this past week after a lot of incoming data, not as upbeat. So what does this jobs report tell you regarding the Fed and what are you expecting to see in these May CPI and PPI reports?

ED HARRISON: Yeah, so Tom, I think that the headline number tells the equity market that the jobs market is not falling apart. The economy is not falling apart. We got 139,000 added to nonfarm payrolls, which was ahead of expectations. And we had the unemployment rate staying solid at 4.2%. Those numbers just on the surface, it says that

the labor market's not falling apart. And that's what you actually would have needed to get to galvanize the Federal Reserve to cut rates more quickly than anticipated. So given that, the Fed's going to be on hold. And as a result of that, the CPI and the PPI are less important in terms of the Fed's thinking in terms of the rate decision going forward.

Well, what are the big drivers for inflation right now, both for consumers and businesses? And you say it's a little less important, still key for them, still maybe not so much as the PCE, but they're still going to look at it very closely.

Well, there are two things. One is that we still have services inflation, which is above where they would like it to be. That's still sticky. And then the second thing is that we're seeing a pass through of the goods inflation that comes from the tariffs into markets.

into the numbers. Companies are talking about passing on the price increases. So these numbers that we're going to see are from May, and as a result, you can think of them as after the fact, after the tariffs were put on. But they're not...

they're not consistent with the data, the incoming data that we're seeing, which is that there is inflation in the pipeline. And so given that, that means that the Fed is going to continue to be on hold. The only reason that they would actually cut rates more aggressively is if we had numbers that came out last week from the jobs report that showed the economy stalling in a very precipitous way.

Well, let's continue on with the tariffs because in these, these reports that we're going to see this coming week, maybe just at least a hint, a little hint of the impact of the tariffs, but we have that 90 day reprieve on most tariffs expires in July. Is that when we're really going to see the impact? Well, you know, I, I think that actually the June CPI and PPI numbers will show you a little bit more of what's there. Um,

it is interesting that if you look at just the month on month numbers, uh, uh, the consensus is for 0.3% CPI, uh,

taking out food and energy, so sort of the core CPI number, which is higher than it was in April. If that number is actually high, let's say 0.4% as a miss to the upside, then you could say to yourself, already in May, we're seeing these numbers impacted. We certainly will see them, therefore, impacted in June. That would make the Fed even more reticent about

lowering interest rates, despite, by the way, the fact that Donald Trump last week was saying that Powell should lower interest rates by one full percentage point. Now, a little more about the tariffs. We know there are talks slated to happen. They're supposed to happen with China, the European Union. They've been on and off, even Japan. But is there any clear read that you're seeing on what these negotiations are going to bring as far as, you know,

a tariff deal, a trade deal with these countries and the EU? No, there's no clear deal that's there. I think there are three countries, Japan, the EU, and China that are outstanding, which are definitely going to impact inflation and therefore the economy. There was actually a report from Bloomberg that

the trade negotiators for the United States were fighting amongst each other in front of the Japanese delegation. And that certainly doesn't lead to any sort of positive outcome. Moreover, this whole taco trade that people talk about, the fact that Trump eventually backs down, only leads to the negotiators from the other side thinking,

we have some leverage here if we play chicken, because eventually he'll cave on or he'll back out in some regard. So I think that there's a lot of risk associated with that. And just going back to the jobs numbers for a second, really, even though the equity market,

thinks of this in a positive way and it's not going to galvanize the Fed, the internals of the numbers were actually not as good as you might think. The household survey showed labor participation going down. There were a negative 95 two-month payroll net revision. So that means that really we only saw 44,000 net jobs if you take revisions into account. So the labor market is slowing. It's just not slowing enough

to galvanize the Fed to start to cut rates. And then you have the backdrop of these negotiations, which aren't really going anywhere at this point. And that's sort of downside risk for equities in particular. Well, a lot of variables for the Fed to consider, including the May CPI out on Wednesday, the May PPI on Thursday. Our thanks to Edward Harrison, senior editor at Bloomberg and author of Bloomberg's The Everything Risk newsletter.

We turn now to the EV maker Tesla, which is scheduled to launch its long-delayed robo-taxi service this week in Austin, Texas. For more on that expected launch, we're joined by Craig Trudell, Bloomberg's Global Autos Editor. Well, Craig, thanks so much for joining us. Let's start with what is Tesla expected to do this Thursday in Austin? And after all the delays and setbacks, will it be ready?

You know, that's the big question, but there are so many questions about Tesla's plans for this upcoming week that are still very much unanswered. I mean, even starting with that timing, right, where Bloomberg was first to report that a company was aiming for June 12th. We haven't heard anything to the contrary, at least to the point where you and I are speaking, but that number still has not been confirmed by the company. And, you know, what we do know is Elon Musk has talked about, you know, sort of

Starting slow, starting with a small number of Model Y vehicles that they'll run around Austin. We don't know sort of, you know, specifics about what areas of the city that they expect to run these driverless vehicles.

you know, rides. We don't know what time of day. And some of these details are important because it can make real differences as to, you know, how many other cars are out on the road. How challenging is it for these cars to sort of navigate those situations? And so, you know, there's a lot of specifics that the company has yet to address that will be really important to sort of suss out, you know, in the days to come. Yeah. Not even how many cars they're going to put on the road this week.

Yeah, what we've heard Musk say is something on the order of 10 or 20. So we're talking really small. This is, you know, I guess what you would call in the tech business a soft launch. And, you know, Musk has talked about, you know, scaling up quickly. But I think we have to kind of take that with a grain of salt because he's talked about, you know, putting driverless cars on the road, you know, anytime now, year after year. And, you know, we will see if 2025 is his year.

Well, we know that Tesla has, for years, been doing a lot of work. It's been testing these autonomous cars out on closed roads. It's been gathering data for years, working on machine learning. And it has, of course, that controversial, some would say misnamed, full self-driving mode, which I know you reported on just last week, involved in a recent string of sometimes deadly crashes. So,

With all that, can it still compete against Waymo and GM's Cruise, which packed it in after 10 years because it was just too expensive? Yeah, you know, I think with Cruise, the sort of thing that we took away from – one of the things to take away from that was, you know, it can –

come down to a single crash, a single crash that in Cruz's case actually didn't result in a fatality, but it was a gruesome one and unfortunate one nonetheless. The company's handling of that and sort of running afoul of, you know, the local regulators it was working with in San Francisco, you know, really ultimately led to GM deciding, you know what, we're going to pull the plug on this company. And I go back to, you know, 2018,

there was a similar incident in the case of Uber, right, where they had a self-driving test vehicle that was involved in a fatal crash. And that ultimately led Uber to decide to get out of this space. So part of the reason why this is such a big story in terms of having a closer look at one of the fatal crashes that has resulted from people using full self-driving is we, the public, are much less tolerant of crashes

in which a robot or sort of something other than a human is involved in running the car. And in this case, it was a crash that sort of avoided the headlines initially. It took the US safety regulator, the National Highway Traffic Safety Administration investigating

full self-driving on the basis of this and a few other crashes for it to really come to light and get our attention and lead to us seeking out some public records to learn more about what happened. And these aren't isolated incidents with Tesla and its full self-driving. I mean, there is a paper trail on this, right? A number of incidents. Yeah.

That's right. Full self-driving has not been around as long as autopilot, but that's the other sort of branding that Tesla has used for sort of lower level capability of driver assist features.

And I would say, when you look at this long track record of autopilot and full self-driving, there have been a string of investigations into whether these systems are defective. And one of those investigations involving autopilot actually got to the point where NHTSA said to Tesla, look, we think that there's a safety risk here that you need to address for the recall. It led to Tesla recalling 2 million cars

And in a matter of a few months, NHTSA came back to Tesla and said, you know what, we're not sure that the remedy that you offered to address what we were raising was sufficient. And so not only is Tesla under investigation with respect to full self-driving, it's also under a pending investigation, a query as to whether that recall that it did to sort of make autopilot safer to use, whether or not that went far enough.

Well, Thursday, June 12th, the expected launch date for the Tesla RoboTaxi in Austin, Texas, our thanks to Bloomberg's Global Autos Editor, Craig Trudell. Coming up on Bloomberg Daybreak Weekend, we'll look at whether the UK has what it takes to become a global tech superpower. I'm Tom Busby, and this is Bloomberg.

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Up later in our program, we'll look ahead to some key economic data coming out in China. But first, tech leaders from around the world will gather in the U.K. capital for the London Tech Summit. With speakers ranging from the inventor of the World Wide Web to renowned professors, even some tech CEOs. 40,000 tech enthusiasts set to flock to Olympia for a week of panel discussions.

But with stiff competition from innovators around the world, can the UK keep up with the global tech revolution? For more, let's get to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, the great tech race has been a permanent feature of the corporate world for much of 2025. The rise of the Chinese artificial intelligence startup DeepMind.

has only added attention to the issue. In February, the company released an open-source model that it said rivaled software from the top American AI developers, and it claimed to have done so for a fraction of the development cost using less powerful hardware.

And now global businesses, including Meta, are busy buying several hundreds of acres in a bid to build data centres capable of fuelling their AI-focused dreams. Bloomberg Intelligence's senior tech industry analyst says the world's biggest tech firms are all in.

in when it comes to leveling up their artificial intelligence capabilities. Just look at how far they have come in terms of, you know, infrastructure. Like a company like Google, not only are they designing their own data centers and, you know, creating their own chips, and now they are, you know, procuring power to the extent that

They want to make sure that these AI chips, which can have volatile power needs, are most optimized when it comes to the efficiency of their infrastructure. And that's why these hyperscaler companies really have got so many different aspects to their mode. So it's not just about the infrastructure.

search algorithm or in the case of Meta, their social media knowledge graph. It is about the entirety of how they run their infrastructure and that is what is a long-term mode because nobody else can operate at the scale at which these hyperscalers are operating right now.

That was Bloomberg Intelligence's Mandeep Singh speaking there. Well, the UK's role in the AI and wider technology arms race is something that I've been discussing with Bloomberg Daybreak Europe anchor Tom McKenzie as London Tech Week approaches.

This is always a really exciting week, isn't it, in London? CEOs and visionaries are going to be arguing, surely, that the UK can be one of the AI capitals of the world. Absolutely. And we're going to have government presence there at London Tech Week. You have London Tech Week.

And you have Founders Forum as well. In Paris, by the way, you have VivaTech, which is also drawing a lot of these big names there. There's a competition between Paris and London next week as well. But certainly the government's involved. Peter Carr will be there. Of course, the Secretary of State in terms of science and innovation and technology. You also have the likes of Matt Clifford, who is the Prime Minister's advisor on AI technology.

And they will be making the case that London is the place to invest and to innovate. And there is some data that backs that up in terms of fund flows. You have seen more money moving into the tech sector last year from venture capital into London, into the UK than into France and Germany combined.

combined. And we have some big name startups now that are raising real capital and have an impact. Companies like Wave in the mobility space, which is valued at a little over $2 billion US. You have companies like Synthesia, Eleven Labs, Poly AI, Luminance, Revolut, which is huge in terms of fintech. So we do have examples of successful startups here. There is money flowing in, but there is a

In terms of positioning the UK when it comes to AI, that is going to be crucial in terms of the conversations, I think, going forward and the kind of traction that government ministers can get and that companies can get in terms of fundraising. Yeah, I mean, the UK government website talking about London becoming the epicentre of global innovation. That's one side of things. On the other, in recent days, we've seen Wise saying that it's going to move its listing, primary listing to the US. So there are some concerns also, aren't there?

And I'm glad you brought up Wise because that really points to one of the key hurdles, one of the key headwinds for the UK. This, of course, the money transfer business listed in 2021 to great fanfare. It's been one of the few...

tech companies listed in the UK now, as you say, making that decision to put its prime listing in the US, which tells a bigger story. It tells a story about the valuations these companies think they can get in the US market versus here in the UK. It tells a story about companies including, for example, Deliveroo that was bought over and bought by DoorDash.

Darktrace, which is bought by Private Equity. The companies that are able to build here in terms of the tech sector, they often then go to the US to raise the bigger funds and to list. And that is not a trend that we have seen stopping despite changes the London Stock Exchange have tried to make.

So capital, access to capital and the capital markets is really key when it comes to the question of how you scale and how you grow these businesses. What about regulation when it comes to tech? I mean, obviously, global companies have...

have a huge market in Europe and the UK being sort of attached to that. What about the idea of deregulation or how we regulate artificial intelligence and other bits of the tech sphere? Keir Starmer's government is actually taking a more proactive approach in terms of

looking at the opportunities versus the risks. So the emphasis has shifted. Some would say that's because the growth needs of this economy are so much more acute that if you're looking for one elixir of growth, AI could be that. And so you have to reach for the opportunities. The UK is still trying to carve out what the regulatory framework is going to be. We have an AI strategy. The European Union does have its AI Safety Act that is being implemented gradually towards the end of this year and into 2026.

There's a lot of pushback against that regulation still from the tech industry. Where the UK lands on this will be interesting. Will it line more with a kind of laissez-faire approach that we're starting seeing at least at the federal level in the US when it comes to AI? Or will it start to take account of the risk factors and take lessons from what Europe has crafted in terms of their regulations? It may find a middle spot.

So do you think that artificial intelligence will dominate given the questions about take-up, about disruption? How important is that going to be on the agenda, artificial intelligence? There is one name that I have not mentioned yet, and that is Jensen Huang of NVIDIA. Of course, the CEO of that company that makes the AI accelerators, that has become the litmus test of AI demand, that

underpins so much of this AI revolution that we're seeing. Jensen Huang will be a keynote speaker at London Tech Week. He will also be at VivaTech, the event taking place in Paris. So watch for any announcements from the CEO of NVIDIA. They are building and funding the build-out, of course, of data centres in the US. They've announced plans to invest in data centres in the UAE. What is the data centre story in the UK? What is the data centre story globally?

in Europe? How much is NVIDIA going to be investing in the infrastructure that underpins the advancements and innovations that we're seeing in AI? And how is the UK trying to get a piece of that? I think that's going to be something really worth watching next week, what we hear from Jensen Huang. Yeah, although I have sort of heard...

This idea that maybe those data centres are going to become less energy hungry. And so maybe, you know, as we get the leaps forward in tech, that might be something in the future. Going back to your point about the UK and its non-EU status, does that help or hinder when it comes to tech firms moving?

with regulation, with fundraising? How are we seeing things now? If you look just at the data in terms of fund flows, in terms of talent, in terms of the numbers of start-ups, then the UK, again, is ahead of a number of its European partners.

I think on the regulatory question, the jury is probably still out. The screaming question when you're in continental Europe, when I was at an event a few weeks ago, and the CEOs and the investors I spoke to there in Germany talking about regulation in Europe, regulation, regulation, regulation. That's what they were banging on about in terms of one of the key headwinds that are holding back, that is holding back Europe.

the build-out of tech and the ability to invest and scale in that economy, whether it's ESG or DEI or AI regulations. One person at this event quoted this line saying, you need to invest in Asia, do business in the US and holiday in Europe, and they want to get away from that. In the UK, it is slightly different. We do not have the EU AI Act. We don't have the same ESG and DEI regulations that they have in Europe that those particular participants were complaining about.

We're still trying to find our footing in terms of what the AI regulation is going to look like here in the UK. We have seen, again, the talent flow as well. Some evidence that talent is being drawn to the UK from the US in small numbers. But some venture capitalists I've spoken to have said that as a result of the politics of the US, we're seeing some of that talent move to the UK. So we're benefiting from that. But talent is another key piece of this because you can have investors and you can have founders. But then finding the people, the CFOs and the COOs to actually implement that strategy is...

That is proving a challenge. That kind of talent, there's still a shortage there when it comes to the UK. Yeah, and the UK doesn't often perform well when it comes to management in the UK. If you look at the kind of indices and yeah, we've, you know, the government here really wants Oxford and Cambridge in that arc there to be a kind of Silicon Valley-esque, don't they? But look, again, on this, on the big picture, the UK and Europe have to compete with the US government.

And China, when it comes to kind of transformational technology, don't they? They do. They have to compete with real innovation in the Chinese market, not just from DeepSeek, which, of course, created all those headlines, the large language model that is open source and that was much cheaper to build, according to the team who run that. There's all sorts of innovations coming through from key tech players in China, and it is a

a race right now between China and the US. That is where the race is at. Can Europe catch up? It remains a key question. We do have players, a large language model company called Mistral over in France. Can the UK play? Where is the value in this? Is the value in those large language models or is it in the companies that are building the solutions on top of that, like Eleven Labs, which does things like audio translation here in the UK?

Is it in legal and finance? We're very strong, of course, in terms of financial services and legal services. Companies like Luminance AI, which does AI for the legal sector. Is that where our strength is rather than foundation models? Where is the value? And that still remains a debate.

This makes me laugh because months ago, Tom, you were telling me about how important it was to understand how those apps work, which kind of leads me to my last thought, which is that you're not just at London Tech Week, but you're also launching a brand new show covering all things tech. It's such an important time now, more than ever. What are you going to hope to bring us in that show? I don't think I can overstress what this moment is in terms of the significance.

You look at the defence space, you look at energy, you look at space technology. In all those areas, the UK and Europe need to be stepping up. These changes are going to happen rapidly with all of those sectors. AI is going to be powering a lot of it, whether it is energy defence or space tech. And what we hope to do with Bloomberg Tech Europe is to chart some of that innovation, talk about where the gap is and how we close that gap, and speak to some of the key leaders, whether it is Demis Hassabis, whether it is...

arms ceo renny has who i'll be speaking to next week and key funders venture capitalists and key founders as well across europe and the uk i bet it's going to be a great show and of course we'll have lots of those snippets of all of those great interviews on bloomberg radio thank you so much tom for being with me bloomberg's tom mckenzie we'll have full coverage of all the key moments for you from london tech week across bloomberg platforms

I'm Caroline Hepke here 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 ahead to some fresh economic data out of China. I'm Tom Busby and this is Bloomberg.

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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. Last week, we learned China's services activity expanded at a faster pace in May. It was a positive sign for the country as it looks to stabilize trade relations with the U.S. following a call between Presidents Trump and Xi Jinping.

This week, we'll get fresh data and a clearer view of the health of the world's second largest economy. For more, let's get to the host of the Daybreak Asia podcast, Doug Krisner. Tom, the trade truce between the U.S. and China is a month old, and it appears to be on shaky ground.

Distrust between Washington and Beijing is running deep, and the question is whether a talk between Presidents Trump and Xi will produce a positive outcome. So how well is the Chinese economy holding up under the weight of this trade conflict?

We'll get some insight in the week ahead with readings on Chinese exports, as well as industrial production and retail sales, to name a few. Joining me now for a closer look at the broader Chinese economy is John Liu. He is Bloomberg executive editor for Greater China. John joins us from our studios in Beijing. Good of you to make time to chat with me. There's a lot to cover here, but can we just start with kind of a summary of how you see the macro in China right now?

I would describe it as being relatively stable, but in a relatively weak state. So I think the data that we've gotten, as it refers to manufacturing, as it refers to trade, has shown that the economy has taken a hit from the tariffs imposed by the United States. We saw a pretty sharp drop off in shipments to the United States, a 20% decline in exports in the month of April.

As we understand it, after the sort of detente that came together in Geneva, trade did pick up. So we are expecting to see better trade numbers for the month of May because American importers are trying to get their goods in while the getting was good.

But still, we're expecting inflation, factory gate prices to remain weak in May. That speaks to domestic consumption, domestic demand still not picking up. We had comments recently from Treasury Secretary Scott Besant.

saying that China needs to shift to a more consumption-led economy to help ease global imbalances. It seems to be stating the obvious right now. What is the government in Beijing doing to try to address the issue of stronger domestic demand?

So at a very high 3,000 foot level, Beijing and Washington are in agreement on that. Chinese officials back 10, 15 years have been saying the Chinese economy is unbalanced. It needs more domestic consumption. It needs to depend less on exports and investment.

The problem is how to do that restructuring, reconfiguration of what is the world's second biggest economy, well over $10 trillion.

How to do that without causing some hiccup in growth that would be destabilizing for the country, that is the problem. And so what we have instead seen is it's much easier when growth is slow, when it's weak, for the government here in Beijing to double down on what has worked and that has been manufacturing, that has been investment, that has been exports.

And we've seen that through the course of COVID and in this most recent set of trade tensions that we've had. Deflation continues to be a huge problem. Are authorities worried about it reaching a dangerous level, do you think?

I think there's a lot of concern about deflation. I don't think we are at a point yet where it is causing alarm amongst policymakers here in Beijing. The PPI, the factory gate prices for Chinese companies has been declining for the better part of three years. It speaks to Chinese companies not having the pricing ability when they're trying to offload, to distribute, to sell their products. That speaks to excess capacity in the Chinese economy.

That's the result of trade barriers on one hand, but also the real estate problems that have happened here and there being a weakness in domestic demand. So there is worry, but we are still not at a level where I think it's going to trigger the Chinese government to go into overdrive stimulus mode and start churning out new policies to try to address it.

One of the things that I think Beijing would like to have happen as part of any negotiation in dealing with the trade war, if we can call it that, certainly the situation with these very, very drastic tariffs, is some type of relaxation when it comes to export controls on high technology. How is the high-tech sector, and I use that term very broadly, John, how is it performing in China right now?

So I think we've seen some breakthroughs in 2025. DeepSeek is probably the best known of those. There have been some breakthroughs in terms of robotics here in China. And so I think the state of the Chinese technology at the moment is it is still able to be innovative and come up with new products. The problem, I think, is scale. How quickly can China scale AI?

AI applications, how quickly can China scale robotics. And I think this is where the technology, the limitations that the United States has placed on Chinese access to technology, I think this is where that comes in and starts to hurt the Chinese economy.

If China could get its hands on more Nvidia chips, for example, it could roll out AI at a much larger scale than what it's been able to do now. And so there is a real eagerness and interest in Beijing to have some of these technology curbs removed. But at the same time, I think you have also seen Beijing trying to use its leverage when it comes to rare earths, when it comes to critical minerals and how that affects technology companies and manufacturers in the United States.

as a way to try and bring that issue onto the table. And so I think it is ultimately going to be a negotiation between the two governments. To put a finer point on some of the controls that the U.S. has established, when you look at a company like Huawei, are they moving closer to being able to compete with a company like NVIDIA when it comes to those very sophisticated AI chips?

So I think this is where the issue of scale comes into play. Huawei can design some of the world's most leading AI chips. They can produce a few of them.

at a time, small lots. The problem becomes they cannot produce large amounts at economically very viable prices because they don't have access to the latest chip manufacturing technology, the things that TSMC has, the things that NVIDIA has access to. And that has been the real hurdle for Chinese technology, Chinese semiconductors, Chinese AI. And that is why Beijing really wants

some relaxation in these curbs that the United States has put in. So I mentioned a moment ago the monthly activity data, industrial production, retail sales, two critical data points. Talk to me a little bit about the health of the Chinese consumer right now and what we may see in that retail sales number.

So we've just come off of a holiday at the beginning of May, a three-day weekend here for the Dragon Boat Festival. And that showed while overall consumer spending during the holiday was up, the spending per trip was down. And so I think it speaks to the fact that

People are still going out there. They're going to lunches and dinners and they're going shopping and they're going out to, you know, have a holiday, but they're doing it less. And when they're doing it, they're trying to spend a little less. They're holding on to their wallets a little tighter. And that is still, I think, ultimately a reflection of

The real estate crash that we've had here in China, the fact that so much of household wealth is tied up in the home. And when people see the value of their homes go down, they feel poorer themselves, even if their financial situation hasn't actually changed. Are consumers caught up in a lot of the rhetoric around the trade war? Do they have a point of view when it comes to what Donald Trump and the Trump administration is imposing on China?

So I think this is a it goes two ways. On one hand, it is affecting consumer confidence.

The average individual here in China understands that trade is an important part of the economy. And if China is not able to sell products into the United States, that's going to make the job market less stable. It's going to make it weaker. People are going to be a little bit more concerned about their future prospects. And so as a result, they may constrain some of their discretionary spending. But at the same time, one of the other effects has been

people broadly see the tariffs as being American aggression. And that has resulted in a lot of on the ground support for Xi Jinping and for the government here to retaliate, to play hardball with the US. And so it kind of creates a situation where people are feeling the effect and feeling the hit in terms of confidence, but at the same time, ready to continue going on, ready to continue fighting this trade war. - To what extent is the government

working to try to create new markets right now to compensate for the fact that demand coming from the U.S. may be much less? So I think April was a very interesting month as an illustration of that. In April, Chinese exports to the U.S. fell by 20%.

but Chinese exports to India, to Southeast Asia, increased by 20%. And so there is an effort by the Chinese government, by Chinese companies, to look for new markets where they can send their products if those products cannot go to the United States.

That is one thing that they're doing now. The question is, how long can that last? Because if companies are diverting all those products, about half a trillion dollars worth of exports to the United States in 2024, if that's all or much of that is being diverted to other markets, much smaller markets in Southeast Asia and India relative to the United States,

How long will those markets allow those products to come in freely without they themselves putting up trade barriers? And so this is a question of, yes, this is working now, but how long will it work into the future? What about the trading partners that China already relies heavily on? And I'm thinking of South Korea, Japan, to some extent, certainly Australia. How are those relationships?

They're tense because part of what is happening in these negotiations between the United States and South Korea and Japan and Australia is this push to try and get those countries to cut off

Chinese sort of Chinese manufacturers sending their goods to South Korea, for example, so that they can be on sent to the United States. We saw that when the US reached an agreement with the UK. We've seen that with the US pushing for Mexico to stop Chinese manufacturers from doing that. And so there is an effort

by the United States to put pressure on these allies to cut themselves off from the Chinese supply chain. China, on its part, is putting pressure on those same countries to not do that. And so it's actually caused a lot of these countries to be put in a very difficult position, and they're having to play a balance that none of them wants to be in.

John, thank you so much for helping us set the stage as we look forward to the data in the coming week on exports along with industrial production and retail sales. He's John Liu, Bloomberg Executive Editor for Greater China. And I'm Doug Krisner. You can catch us weekdays 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. This is an iHeart Podcast.