Tariff Whiplash Hits Stocks, Bailey’s UK-EU Trade Pitch, What Is Section 899?
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Friday the 30th of May here in London. I'm Caroline Hepker. Coming up today, markets drop as Trump wins a temporary tariff reprieve in an appeals court ruling and the Treasury Secretary Scott Besant concedes that trade talks with China have stalled.

The Bank of England's Andrew Bailey wades into UK politics and calls for closer EU ties to reverse the damage of Brexit. Plus, hidden in plain sight, we discuss the obscure tax item buried deep in the President's massive tax and spending bill that is giving Wall Street sleepless nights. Let's start with a roundup of our top stories.

President Trump's global tariffs will remain in place for now. That's after an appeals court temporarily paused a ruling on Wednesday that had blocked them. Trump has hailed the ruling in a social media post on Thursday night while calling the original decision, quote, so wrong and so political. Derek Wohlbach is our senior editor for U.S. Economics and Government.

This is going to work through the US legal process. In the meantime, though, it has kind of complicated the idea that the Trump administration in this 90 day pause window was going and trying to do deals with individual countries. We really haven't seen a ton of deals come through with that. We've had the UK, a lot of others are said to be maybe close or near, but haven't gotten over the line.

Derek Warbank says that despite the temporary reprieve, the possibility remains that the appeals court could ultimately back the original ruling and block President Trump's tariff policy. That would reduce the effective U.S. tariff rate to below 6% from a high of almost 27% last month.

However, White House officials stress that Trump has options to pursue similar tariffs through other authorities if appeals ultimately fall short. Now, U.S. Treasury Secretary Scott Bessent says that trade talks with China are currently at a bit of a standstill. Bessent told Fox News a call may be required between President Trump and Chinese President Xi Jinping in order to reach a deal.

I would say that they are a bit stalled. I believe that we will be having more talks with them in the next few weeks. And I believe we may at some point have a call between the president and party chair Xi.

That was Treasury Secretary Scott Besant speaking on Fox News. The last time Trump and Xi spoke was in January, days ahead of President Trump's inauguration. The US president said that he would speak to the Chinese leader in the days after trade talks in mid-May, though the call never materialised. And

And in their first in-person meeting since the inauguration, President Trump pushed the Fed chair Jerome Powell to lower interest rates. The U.S. president has publicly and repeatedly lashed out at the policymaker, calling him a, quote, loser. White House Press Secretary Caroline Leavitt says that Trump urged Powell to cut rates.

The president did say that he believes the Fed chair is making a mistake by not lowering interest rates, which is putting us at an economic disadvantage to China and other countries. And the president's been very vocal about that both publicly and now I can reveal privately as well.

The White House press secretary there. Fed officials have held interest rates steady this year, arguing that a patient approach to policy is appropriate amid economic uncertainty caused by tariffs. The central bank says that Chair Powell, quote, stressed the path of policy will depend entirely on incoming economic information and what that means for the outlook.

Well, moving on to some corporate news, the CEO of Citigroup says that the economic outlook for the US does remain stronger than Europe, despite sweeping policy uncertainty from trade and tariffs. Bloomberg's Ewan Potts has more.

There's nothing like being in Europe to make you feel a bit better about the US. Citigroup's Jane Fraser not mincing her words. She was speaking in a wide-ranging interview at a financial conference where she also expressed scepticism that the EU will pursue its long-delayed plan for capital markets union and drive economic growth. On the prospects for the US economy, Fraser said her eye is on the unemployment figures, but added that consumer spending so far appears to be showing signs of resilience. In London, I'm Ewan Potts, Bloomberg Radio.

Bank of England Governor Andrew Bailey has urged the British government to strike a deeper EU trade deal. The central bank head warned that, quote, something has gone wrong with the global trading system.

If you believe that tariff action is needed to create the shock and awe to get these issues onto the table and dealt with, I'm afraid that means something's gone wrong with the multilateral system. These things ought to be dealt with without having to get to this point, and we need to deal with that something. And it matters to central bankers and economic policymakers because our jobs are much harder, much harder, if we face more inflexible and uncertain supply conditions in our economies, as we appear to do today.

The Bank of England Governor Andrew Bailey, he sees rebuilding ties with the EU as the best way to drive sorely needed UK growth. Since the recent trade deal with Europe, UK business confidence has jumped to a nine-month high in a sharp rebound.

And lastly, a 53-year-old man is due in court later today accused of driving a car into crowds of people at Liverpool's Trophy Parade. Paul Doyle, who is from the West Derby area of the city, is charged with seven offences, including dangerous driving, malicious wounding and intent to cause grievous bodily harm. Jenny Sims is the assistant chief constable of Merseyside Police. This continues to be a large and complex investigation.

And detectives are reviewing a huge volume of CCTV and mobile phone footage submitted by the public and businesses. Jenny Sims speaking there. 79 people were injured in Monday's incident in Liverpool with seven people still in hospital. Those are our top stories this morning. Let me take you through the markets now. So the legal battle over President Trump's tariffs.

And the uncertainty injected by a fresh court decision has weighed on markets. The MSCI Asia-Pacific Index down half of 1%. The Hang Seng dropping 1.5% this morning. We also had data out yesterday showing the U.S. economy shrank at the start of this year, weaker consumer spending and even bigger impact from trade than had been initially thought.

Stock futures for the US and for Europe are in the red this morning. We're down two-tenths for the S&P 500, e-mini futures. You've also got, in terms of the Bloomberg Dollar Spot Index, a stronger dollar, a weaker euro, a weaker pound. Japanese yen, though, is gaining two-tenths of 1%. I read an interesting report that global investors have become net buyers of cash Japanese equities for the last eight weeks in a row. So, this goes to that theme.

of investors looking elsewhere and away from just the kind of U.S. exceptional trade in stocks. Looking at the bond markets this morning, little movement actually in 10-year U.S. Treasury yields. 4.42 is where we stand. So, those are the markets. In a moment…

I'm going to bring you more on the latest when it comes to the Trump administration winning a temporary tariff reprieve in the appeals court, plus also why Wall Street is alarmed by a tax measure that's buried in the big, beautiful bill that's currently working its way through Congress. So we'll get to those stories. But something else caught my eye this morning. Summer is rolling around. And so soon the corridors of your firm, I imagine, and mine and maybe many others will be filled

with interns, which got me to thinking, why in the world of AI do we still have interns? I was staggered to learn, though, how intense the competition for internships is now. 315,000 people applied for an internship at Goldman Sachs for 2,700 places that they offer. J.P. Morgan was even more staggering, almost half a million applications applied.

for 4,000 positions at J.P. Morgan for like a 10-week internship. Much harder to get an internship than it is to get into Harvard. Mark Rubenstein, who writes Bloomberg's Net Interest newsletter, dug out this story for us and has written all about it. He explains that there's been a huge surge in applications because of online platforms making it easier to find out about internships and apply for those opportunities directly.

The salary doesn't hurt. $125,000 is the annual salary, the equivalent of that. But mainly it's that internships are the prime route to get a graduate job and the prime route now into the top ranks of banking and finance. So there you go. Some thoughts for you. It's a real kind of audition for leadership potential from people. So now you can chew on that as you think about interns arriving perhaps in your office this summer.

Now, a reprieve for President Trump on tariffs from a federal appeals court, but a legal fight that threatens to inject even more uncertainty into the global economy. Joining me now is Bloomberg reporter Katya Dmitrieva. Katya, good morning. Just tell me, what did the court actually decide? It seems to extend the timeline now for this legal fight over Trump's tariffs.

Yeah, it certainly does. And we're still, frankly, trying to unpack exactly what this all means, because there are still a lot of questions about where we go from here. But essentially, with the U.S. Court of International Trade there in Manhattan, what they ruled, these three judges,

is that the Trump administration was wrong. They wrongfully invoked this emergency law to justify their reciprocal levy. So for that, we'd have to go back to April 2nd. That was when they announced, you know, on Liberation Day, these reciprocal tariffs against or what they called reciprocal tariffs against a number of countries against

And there was about 60 countries that they had targeted. And so the court found that that was not actually legal. That was not allowed. So they blocked effectively the tariffs. Now, the administration very quickly and as expected filed an appeal. That appeal was granted very recently. And so that effectively stays legal.

that initial order. But basically what this means is a protracted legal fight between the U.S. administration and the courts. It will likely go all the way up to the Supreme Court. And as we know, this takes a lot of time.

Yeah. What workarounds then does the Trump administration have? What is it looking at in order to deliver on its tariffs aims? Because that's what the administration has said it would do given this legal battle now. Yeah. And I think that markets

are assuming, I mean, everyone is assuming at this point that there's no way around tariffs. You know, initially when the ruling came down, there was some optimism, but very quickly soured because of the stay, but also because the Trump administration has a very clear trade strategy they want to impose. They want to add tariffs.

And there are other ways to do that, right? So the emergency law was kind of the biggest, broadest way to do it and the quickest way to do it. There are other methods that take time. So there's, for example, the 232 tariffs, and that would apply sort of pharmaceutical. There's semiconductors.

It also doesn't impact tariffs that were imposed under Section 301, which is to do with unfair trade practices. And the administration can also do a lot of—they could just do investigations. You know, this is the power of the U.S. government to launch investigations against specific products, against specific countries.

And so we do know that there are a lot of these other tools that would use national security powers to be able to add levies. So they're not necessarily going away. Okay. Katya, thank you so much for being with us this morning. Right. So we are awaiting then quite a protracted battle when it comes to imposing tariffs. Bloomberg reporter Katya Dimitrieva, thank you.

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Now, another aspect of what's happening with the Trump administration buried deep in more than a thousand pages of tax and spending information in the bill that President Trump is pushing through Congress is an obscure tax measure that is setting off alarm bells on Wall Street and

beyond. Our opening trade anchor Kriti Gupta is here to explain why this matters. Kriti, good morning. Just tell me about this measure. It's known as Section 899. It is. It is. It's called Enforcement of Remedies Against Unfair Foreign Taxes. At

named for exactly what it does, which is simply this idea that when you're looking or comparing this to other countries that have, as would be deemed by the Trump administration, as tax policies that are discriminatory, which again, is a fairly vague term. So we don't actually know which countries that applies to, but we know it's something that Donald Trump has talked about in his previous iterations in terms of tax

barriers when it comes to the likes of the European Union, for example. This is a measure that would include raising tax rates on passive income, as you suggest, but interest and dividends as well. And the reason this is so important is because when you are talking about international investors and how they are positioned and exposed to the United States, a lot of

of them aren't necessarily trading stocks day in, day out, trading the headline risk. You've seen a little bit of a jump in that at the moment, but a lot of them are talking about saying having the majority of their exposure to the U.S. and sitting in those assets. So to be taxed on that passive income or those dividends actually

threatens trillions of dollars that would incentivize a foreigner to enter the states in the first place. Yeah, I mean, that could be absolutely huge. If signed into law, the sense is that it would therefore drive away foreign investors. It's interesting because there's a couple of ways that this would show up because it also talks about not only the interest, but dividends as well. And we know that right now in this current market environment, something that a lot of

companies are issuing is not only share buybacks, which is a big one, but in times of recession, they will pull back on the share buybacks and issue dividends instead to their shareholders. So to be now taxed on that basically return for shareholders, returns of capital, is a concerning way for a lot of companies actually want to keep their investors interested and not see a sharper decline in their share price. So why has it been put into the bill then?

Two, as a negotiating tactic, it seems, and again, this really falls in line with some of the rhetoric you've heard from Donald Trump. I think the most easiest one, although it's not specifically mentioned in this bill, is the VAT tax. He calls that an unfair, discriminatory tax, something that he thinks the European Union can pull down very easily. Us sitting on the side of the Atlantic know that is a very tricky thing to do just from an internal European perspective. But from the outside, that is how he's viewing it. But it's not just him. He's had these other tax barriers too.

in other places as well, not just in the European Union, but India, Switzerland, several others. Globally speaking, the U.S. has one of the lowest tax rates in the world, and that has been a beneficiary for both corporates and for passive investors.

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 Hepker. 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.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build a financial roadmap for the future while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more.

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