EU to Accept 10% US Tariff, Starmer’s Crunch Vote, US Treasury Hacks Exclusive
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Daybreak Europe podcast. Good morning. It's Tuesday the 1st of July. I'm Caroline Hepke in London. And I'm Stephen Carroll in Brussels. Coming up today, Bloomberg learns the EU is willing to accept Donald Trump's 10% baseline tariff but wants lower levies on key sectors. European banking stocks see their biggest gains this century as investors pile into the

Let's start with a roundup of our top stories. Bloomberg has learned that the European Union is willing to accept Donald Trump's 10% universal tariff on goods it sends to the US.

However, the EU is pushing for quotas and exemptions to effectively lower the levies on specific sectors. If no deal is reached by Trump's July 9th deadline, tariffs on nearly all of the EU's exports to the US will jump to 50%. Bloomberg's senior geonomics analyst Adam Farrar says the EU and other countries are now using the UK's deal as a benchmark for negotiations with the White House.

The tariffs are here to stay. The only deal we've had in this 90-day sprint so far was with the United Kingdom. And what we saw from that, while maybe a little more flexibility on sectorals with the quota put forward for autos coming to the United States, the 10% baseline remained. And that sent the message across the board that 10% was likely to remain the lowest that the United States was willing to go. But

I think we're also seeing right now that some countries are likely to get higher tariffs than that for the long term. What we're hearing right now is that Vietnam, one of the largest U.S. trade partners, is likely to accept somewhere near 20 or 25 percent. Adam Farrar was speaking as President Trump threatened to increase tariffs on Japan, citing the country's unwillingness to accept U.S. rice exports despite Japan's massive rice shortage.

Europe's banking sector has recorded its biggest first-half stock gain this century. Investors have piled into the continent's lenders for their strong returns and resilient earnings. But it makes Tiwa Adebayo has more.

The stock 600 banks index has jumped 29% since the beginning of the year. That's the lender's strongest first half showing since 1997, making them the top performing subgroup in Europe. It's thought that an increase in deal making spurred the surge, particularly in Italy, where Unicredit is up 48% as it pursues peer Banco BPM, while doubling its stake in a Greek lender.

Looking ahead, some analysts remain bullish on the sector's chances of increasing its gains despite macroeconomic uncertainty and trade-related risk.

In London, Tia Adabayo, Bloomberg Radio. The UK's Prime Minister Keir Starmer is bracing for a crunch vote on his overhaul of the country's welfare system. Parliament votes later today on a watered-down version of the government's reforms after Labour MPs mutinied over cuts to disability benefits. Working Pensions Secretary Liz Kendall says she's heard their concerns.

Our plans are rooted in fairness for those who need support and for taxpayers. They're about ensuring the welfare state survives so there is always a safety net for those who need it and so it lasts for generations to come. Candell's defence comes as some key rebels have said they were not impressed by the details despite initially welcoming the changes. While government officials initially expected a rebellion would be limited to roughly 60 MPs after the changes, many Labour politicians say they're still making up their minds.

Bloomberg has learned that Apple is in talks with OpenAI and Anthropic to power a new version of Siri. The decision is yet to be made, but the talks suggest that Apple is considering abandoning its own AI models. Bloomberg's chief technology correspondent Mark Gurman says the firm fears that being behind in the AI race will affect iPhone sales.

There are people who buy their first smartphone every day. There are families getting their first smartphones every day, right? And those people have a decision to make about which ecosystem they want to enter. And right now, all the talk is about how Apple's AI is completely behind the times. And so that decision, right, is a lot easier when you realize that the Android ecosystem is a big step ahead in what is perceived as the future of technology.

Mark Gurman adds that the parties still disagree on how much Apple would pay to license the technology. Representatives from Apple, Anthropic and OpenAI declined to comment. Growing worries about cybersecurity are fueling a rift between the US Treasury Department and the banks that regulates Bloomberg's Ewan Potts reports.

The US Treasury has experienced three major hacks in the past five years, including two that have come to light since December. A Bloomberg News review of previously unreported government documents and interviews with more than a dozen people has uncovered new details that underscore long-standing concerns about the Treasury's cybersecurity defences. In all three instances, Bloomberg's investigation shows the department failed to deploy security measures that might have prevented the breaches or flagged the intruders sooner.

The Treasury's ranks of cybersecurity staff have been decimated this year by departures pushed by Elon Musk's Department of Government Efficiency. Bloomberg's findings raise fresh questions about the department's ability to protect sensitive financial data and how it spends an annual cybersecurity budget of more than $1 billion. In London, I'm Ewan Potts, Bloomberg Radio.

U.S. Senators are voting through the night on a series of amendments to President Trump's $3.3 trillion tax and spending bill. There are currently eight major Republican holdouts. Majority Leader John Kuhn can only spare three votes if he wants to pass the measures. U.S. Treasury Secretary Scott Besson says he's confident the bill will move forward. It'll be on the President's desk to sign on July 4th. So the Senate will vote, pass it over to the House. We've seen incredible leadership, and this is what leadership looks like.

Scott Besson speaking on Bloomberg Television. Bloomberg understands the White House remains optimistic that the legislation will get to the President by Friday. The outcome is likely to test Donald Trump's deal-making abilities and determine the bill's fate, with Senate Majority Leader uncertain about having enough support for the proposals.

And those are our top stories for you this morning. Well, the markets certainly don't seem to be too bothered about President Trump's tariff agenda. The MSCI All Country World Index closed at a record high on Monday and it continues to see gains this morning. We're up another tenth of 1%. Also for the S&P 500, that reached an all-time high on Monday, up 25% from the April lows. We topped 6,200 on Monday, Apple climbing the most among the mega caps. You

European stocks, okay, they didn't do so well yesterday, down four-tenths of 1%. European stock futures are up this morning by a tenth of 1%. But, of course, Europe had a very solid first half of the year, outperforming the U.S. in dollar terms. Speaking of which, the dollar down 10.8% in the opening six months of the year. The Bloomberg Dollar Spot Index this morning is down a tenth of 1%. Japanese stocks are down. We've got a stronger yen because of the Trump threat of more tariffs on Japan.

in particular, all of this, of course, ahead of the non-farm payrolls on Friday, Stephen. In a moment, we'll bring you more on what the EU is expecting from its trade talks with the US. Plus, we'll look ahead to a big day for the UK Prime Minister and Westminster as well. But first, Caroline, it's the first day of a brand new era for us and for Daybreak Europe as I'm coming to you from our brand new radio studio in Brussels. I love it. I can actually see you because we've also got a link, a video link too. So I can see you in the radio studio.

It's great. Has anything changed in Brussels since In Bruges and why Brussels now? I think Brussels is giving me a very warm welcome and by that I mean a heat wave because it is even hotter here than it is in London. But it is a good moment to be arriving here. I mean, look at our top story today. You know, we're into the crunch moments for EU trade negotiations and so much because even if this deal that we're talking about, we're going to get to the details of it in just a moment.

you know, this is only the first step of what will likely to be long and further negotiations that will be driven out of here in Brussels. So great for us to be here in the centre of all of that. Lots of other big questions also, of course, you know, the EU's climate targets, where they're going to be pushed back, where are they going to find the compromise for that, given that the US is going in a different direction on that front. You've got budget negotiations are about to kick off for the EU. That's always a very long and difficult political process. And the whole question of competitiveness

Will Europe drive these big changes that so many of the big reports, Draghi, Letta and so on, have called for as well? We're here. We're going to be bringing you more of our reporters from across Europe, our experts here in Brussels as well, and speaking to some of those important key newsmakers. We're Bloomberg Daybreak Europe with even more Europe now.

Yeah, I like it. Very excited to have you in Brussels. So let's talk a bit more in depth then about the latest on the US trade talks now, as time is running out for countries to do deals ahead of President Trump's July 9th deadline. Bloomberg has learned that

that some of what the EU is hoping to achieve. Our EMEA News Director Roslyn Matheson joins us now for more on this. Ros, good morning. What have we learned about what the EU is and is not willing to accept in these talks? Well, as you were noting, they were weighing this 10% universal tariff, whether that would be the baseline for retaliation. And it's

seemingly not at this point. What we're hearing is they're willing to accept 10%, but in turn, they want lower rates on some key sectors. They are really the big ones, including pharmaceuticals, chips, aircrafts,

alcohol. And on top of that, the EU wants various mechanisms which would effectively lower the 25% tariff on autos and car parts and the 50% hit on aluminum and steel. So that would still obviously be an impact for the bloc, but one that as a collective, they feel they could potentially tolerate. This would be an in principle framework, I imagine. So the hope would be to use this as a jumping off point

for further negotiations and to perhaps dangle non-tariff changes there as a trade-off. So this would be to have a deal that's in place and then negotiate further from there. What is the likelihood that the US is going to accept this kind of offer as well, given that the timeline is now so short before the next increase in tariffs is due to take place?

Well, that's right, because these proposals have been going back and forth. So the EU sends a proposal over, the US looks at it, sends it back. But we are hearing that the mood music is a bit better, that both sides are keen to get a deal. And we know that the EU trade chief, Maros Shechevich, will lead a delegation to Washington this week. So it sounds like they're getting very much to the pointy end of trying to get something done.

something done on both sides as you say the question is what is the us response to this the eu belief is that the latest proposal from them that the idea from them is still slightly favorable to the us will the us see it that way will the us say hang on no we're not agreeing to all these terms

conditions. But it's clear that both sides are looking to get a deal. But equally, the EU is a big block. And the feeling is it still has some negotiating power here. What about the other negotiations that the White House is conducting? What do we know about progress there?

Well, we know there's trade talks back on with Canada. There was a hitch over the digital services tax. So they're pushing there. And on countries in Asia, we keep hearing a lot about progress with, say, for example, Vietnam and India. But an emerging question mark is over Japan, which seems to be getting singled out. I mean, Donald Trump had a great relationship with a former prime minister, the late Shinzo Abe. But here things seem to be going a bit wrong. I mean, mostly over what

Trump himself says is Japan being unwilling to accept US rice exports despite a shortage of rice in Japan. And the response from Japan's been muted, probably trying to stop a public spat or something coming from it. But it's clear that Trump now sees rice as his lever with Japan, a bit like possibly the digital services tax was with Canada. But agriculture is a really sacred sector in Japan. It's often been accused of being highly protected by

for many generations. So that's going to be a very tricky one. So we are seeing signs of progress, you know, in other countries in Asia, for example, and it looks like possibly with the EU, but Japan is one that's really starting to stand out as being problematic.

Okay. Our AMEI News Director, Rosalind Matheson, thank you. For enterprise organizations, managing all your food needs is a tall order. But with EasyCater, you get a single workplace food vendor with the tools and resources to make it easy, giving teams across your organization an easy way to order from a huge variety of restaurants, all on one platform, all while consolidating your corporate food spend so you can control costs, streamlining billing and payment and simplifying reporting.

Easy Cater, your business tool for food. To learn more, visit easycater.com slash podcast. We get it. There are too many car insurance companies trying to convince you that they have the best car insurance rates. We don't think we need to convince you. We're rude, and we do car insurance differently. We don't think it makes sense to only base your car insurance rate on things that have nothing to do with your driving, like your occupation or education.

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Now, here in the UK, Keir Starmer faces perhaps the most important vote since becoming Prime Minister tonight. MPs vote on the welfare bill and despite concessions from government, it still risks defeat. Joining us now is Bloomberg's politics reporter, James Walcott. Good morning, James. This is an extraordinary position for a government with a 165-seat majority to be in. What do the rebels say?

I think you have to separate this out to understand it kind of what they're saying short term and sort of the chaos of the past couple of days and long term. So long term in broad strokes, the fear has been that the government is putting the fiscal cart before the moral and political horses. And so these reforms to welfare are intended to get people back into work.

But the fear from Labour MPs, they point to humanitarian think tank research saying reforms will push people out of care and not into work. They say there's no public consultation around disabled people. They say it hits people in their sort of areas where they're worried about reform taking over. So it's a political problem too. And they say sort of the government is making a mistake. And they're joined in that for what it's worth by London Mayor Sadiq Khan and Manchester Mayor Andy Burnham. So it's a broad-based rebellion. That's where we were last week.

Now, over the past kind of 48 hours or so, there have been these crunch talks about bringing back kind of the government's drawing down the sort of bail watering it down and then trying to get people back on side. Now, this is where the two stories meet.

One of the ways of bringing people back on side is this thing called the Timms Review, which is where they would review these policies and see if they worked a few months down the line. A few of the rebels have said overnight, we thought this was a good idea. Now we've seen the details on the day of the vote because they've come out so last minute. We're not convinced this review is serious.

We think the review is instead merely a kind of rubber stamping as a way of getting past fiscal rules. They fear the fiscal rules will always mean this review is going to have to add up by the end of the day to saving five billion. So they're not convinced. And James...

I mean, is this vote going to pass? Your guess is really as good as mine at this point, Stephen. There is so much uncertainty. There is anger at Keir Starmer for how this has all been handled. And there are MPs just making their minds up as we speak, effectively. And they're going to be watching the debate today to decide if this is something they decide to bring down the government over or at least put a massive hole in Keir Starmer's credibility.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

Our flagship New York station is also available on your Amazon Alexa devices. Just say Alexa, play Bloomberg 1130. I'm Caroline Hepke. And I'm Stephen Carroll. Join us again tomorrow morning for all the news you need to start your day, right here on Bloomberg Daybreak Europe. Hey, it's Ryan Reynolds here for Mint Mobile. Now, I was looking for fun ways to tell you that Mint's offer of unlimited premium wireless for $15 a month is back. So I thought it would be fun.

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