US Safe Haven Fears, Trump Admits Tariff Problems & CEO Uncertainty
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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 11th of April in London. I'm Stephen Carroll. Coming up today, questioning safe haven status. Treasuries trade like a risk asset as the dollar plunges in a worrying sign for US market credibility. Dollar

Donald Trump concedes his decision to impose 145% levies on China could cause transition problems, but says it will be worth it.

Plus, we'll have the latest on a helicopter crash in New York that's left six people dead, including three children. Let's start with a roundup of our top stories. The dollar has weakened to a six-month low as an escalating trade war raises further fears over the US economy. The greenback saw its biggest plunge in three years yesterday and is falling further today, driving the euro to its highest since 2022.

The sell-off in Treasuries is continuing too, with yields on long-dated US debt rising. As investors question its safe haven status. Speaking to Bloomberg, Bridgewater Associates founder Ray Dalio warned the tariff turmoil is damaging America's credibility.

I'm not the politician. I'm not the negotiator. I'm not the person to say whether that style of handling it was better or worse. I would say that it dramatically affected psychology and attitude about the United States' reliability.

Dalio went on to say that this was a moment to question if bonds are an effective store of wealth. 30-year Treasury yields surged by 13 basis points on Thursday and are rising further today, close to 4.9%.

The sell-off in the dollar and treasuries was echoed in the stock market. The S&P 500 ended the day down 3.5%. The MSCI Pacific Index is on track for its third consecutive week of losses as market relief turns to angst after the White House clarified that total US tariffs on China are in fact rising to 145%.

founder and CIO of Hayman Capital, Kyle Bass. We must reset our trade relationships with the rest of the world. We also must narrow our fiscal deficit in the United States. And both of those things might be slightly recessionary. And if that's true, we might have to go through a brief recession in order to rebuild our foundation.

Kyle Bass says in the end, America will be stronger. However, many investors are continuing to seek havens and non-US alternatives. The euro climbing to a three-year high, while the yen and gold have also gained.

As the market sell-off once again gathers steam, President Trump has conceded that his approach to tariffs will cause some issues. Even after the pause on higher levies for many countries, Bloomberg Economics says average import taxes for the US will be 24%. Speaking at a televised cabinet meeting, Trump conceded this will have an impact on America. There'll be a transition cost.

and transition problems, but in the end it's going to be a beautiful thing. Trump says he believes the first tariff deals are very close, while also voicing optimism that China will eventually come to the table. He also indicated willingness to be flexible on exemptions for companies or countries from the tariff regime, including the 10% floor he's established for all trading partners.

Top European officials are planning to visit China to discuss trade with President Xi Jinping in late July, according to a report in the South China Morning Post. The European Commission President Ursula von der Leyen and European Council President Antonio Costa have reportedly agreed to the summit in Beijing. Despite President Trump's 90-day levy reprieve, global leaders are still unsure. Germany's Chancellor-in-Waiting Friedrich Merz referred to the maximum uncertainty in America.

while voicing hope that the US and the EU can negotiate the abolishment of tariffs on both sides. Chicago Fed President Austin Goolsbee says the tariffs are a stagflationary shock for the central bank. Speaking at the Economic Club of New York, he went on to argue that the levies pit the goals of price stability and full employment against each other.

A tariff is like a negative supply shock, which is to say it makes both sides of the Fed's dual mandate worse at the same time. Prices are going up while jobs are being lost and growth is coming down. And there is not a generic playbook for how the central bank should respond to a stagflationary shock.

The Fed's Austin Goolsby there. He went on to note growing business anxiety, which he says can lead to lower investment. According to Goolsby, the sooner the uncertainty dissipates, the sooner the Fed can lower borrowing costs. He believes that interest rates will be lower in the next 12 to 18 months, but added that the Fed is currently in a wait-and-see mode.

Tariffs will not only hit UK growth, they might also weaken the pound. That's the warning from the Bank of England's Deputy Governor, Sarah Breeden. She says the currency may lose out if the trade war escalates. And a helicopter has crashed into New York's Hudson River, killing the three adults and three children on board. The aircraft broke apart in mid-air while taking a Siemens executive and his family on a sightseeing trip. New York City Mayor Eric Adams updated the press on the incident.

All six victims have been removed from the water. And sadly, all six victims have been pronounced deceased. The helicopter was operated by New York helicopters and US aviation authorities are investigating the crash.

Those are your top stories on the markets. The MSCI Irish Pacific Index, 8 tenths lower this morning. The Nikkei and Tokyo down by 4.4% after the slide that we saw on Wall Street yesterday when the Nasdaq finished down 4.2%. European stock futures are pointing higher though, up a quarter of 1% for Eurostox 50, 2 tenths higher for FTSE 100 futures.

at the moment. The Bloomberg Dollar Spot Index further weakening today. The euro is 9.10 stronger at 1.13 against the dollar. The Japanese yen is 9.10 stronger as well at 143.18. The 30-year Treasury yield and the 10-year Treasury yield both rising this morning. The 10-year is up two basis points to 4.45%.

Well, today we will be digging into Donald Trump's attempt to reorder global trade, causing more trouble on markets, considering what's next for US-China relations, plus what all this means for Wall Street banks, which he did start reporting earnings later today.

But just a word first on another story that caught my eye this morning about how talking about Trump's policies is getting more difficult, even for some of Wall Street's top names. Michael Sembelest, who's chairman of the Market Investment Strategy for JPMorgan Asset Management, added a caveat to a client presentation that he made earlier this week, saying he'd withheld certain comments with his firm and colleagues in mind. Now, he called the president's tariff plan a sledgehammer brute force approach, saying

But he produced a report last week that actually had several blacked out passages from it. And in the call, he said it was the first time ever he'd had to think about what he was saying beyond how they reflected the bank's views on markets and economics. And Semblist went on to say that people are being held accountable for their views and the things they say in ways they probably shouldn't be. And went on to say, so I've said most of what I wanted to say on this call, but not all of it.

His comments are an illustration of the dilemma that's being described by the former president of the American Civil Liberties Union as a climate of anticipatory obedience. So people are self-censoring for fear of being targeted by the Trump administration. And Dean Strassen says that's not unique to this White House, but it is something that's worrying. And it's yet another minefield apart from the market turmoil that corporate America is having to navigate. You can read more in our reporting on the subject on Bloomberg.com and on The Terminal.

Well, let's get into the latest developments on the tariff story that's rocked markets. Donald Trump acknowledging transition problems as he presses ahead with tariffs on China, which the White House now says reach 145%. Bloomberg Opinion columnist Karishma Vasani is with me now for more. Karishma, great to talk to you. The US upping the ante in the trade war with China again.

This 145% is the 125% the president has announced on top of a 20% levy already in place from earlier this year. How much further should we expect China to go in its response? We've already seen the tariff action from China and we've heard very strong rhetoric from Beijing in terms of how they're not going to give up without a fight. They will see this fight to the end.

And that kind of nationalist rhetoric is something I think that you will consistently see from the Chinese. In terms of policy measures, there's already evidence that some of that is taking place. There was a meeting convened reportedly yesterday to discuss further stimulus for the Chinese economy. And I think what will happen in the days and weeks ahead is that you will understand

see more support domestically from the Chinese state to help boost the economy, which no doubt will be taking a huge hit from these tariffs. But I don't think that means you will see capitulation from the Chinese. And I think the main reason for that, as I've argued in the column today, is that Xi Jinping is in a much better position, both politically and economically, because of the political system in China, to withstand

the pain that these tariffs will bring. And I think he will use this opportunity to remind people in China that this is another example of the US under the Trump administration trying to keep China down. But are there any signs, though, that Beijing could be willing to negotiate with Donald Trump on this?

Well, I thought it was interesting that Donald Trump, as he went about increasing tariffs on China, he also appeared to extend what I imagine they think is an olive branch. But this idea that the Chinese will call him, that there's going to be a phone call very soon, words to that effect.

And, you know, I do wonder what the advice is that he's getting, because Xi Jinping isn't going to show up at a meeting that isn't going to benefit Xi Jinping. I mean, one Chinese academic was saying to me yesterday that what China wants in all of this is a little bit of respect. It's the world's second largest economy, and it has huge relationships in Asia and in Europe and is an integral part of the U.S. economic system. And for Xi,

You know, the likes of the vice president have made comments about Chinese peasants. All of that, you know, doesn't win hearts and minds, does it, Stephen, back in Beijing? And I think it will be very difficult for the Chinese to agree to any sort of meeting with Donald Trump without Beijing also setting the terms and conditions of that meeting. What about the damage to the economy, though, in the meantime, Karishma? How much could be done beyond what we already know about?

Well, it's hard to say at this point because it's such a fast-moving beast. But what we do know from some of the analysis that our own teams have done at Bloomberg Economics, that as much as 3% of GDP could be affected. And that doesn't take into account, on the Chinese side, I should say, the GDP.

the increase in tariffs that we've seen just in the last 24 hours or so. On the American side, you know, they're not spared either. You have a situation where prices are no doubt going to rise. That's going to feed into inflationary expectations. That's going to be a problem for the U.S. Fed.

At a time when, you know, there's already some data to suggest that Trump's approval ratings may be affected by these higher prices. It is the thing that he talked about during his campaign that, you know, he was going to be the person that was going to make America great again and bring back manufacturing to the United States.

But the Chinese aren't losing the opportunity, as again I've discussed this in the column today, to poke fun at this idea. In fact, on Chinese social media, there have been memes circulating of Trump and J.D. Vance hunched over sewing machines in what appear to be factories, presumably making the shoes and garments that have been so integral to the American consumption story.

And of course, it evokes a laugh and a giggle. But certainly the bigger message in all of this is it's not going to be an easy ride for you, America, because you have depended on cheap Chinese goods for decades. What about the international diplomatic strategy that Xi Jinping is adopting, looking at other countries as well? He's visiting Southeast Asia next week. The South China Morning Post talking about him hosting EU leaders in July as well. Yeah.

Yeah, I think this is really interesting and really key. And, you know, if you think back to the first trade war in 2018, which I covered as well, what really struck me at that point was the Chinese were going out onto the global stage, Xi Jinping at Davos, talking about how China was the responsible global player. China wants to keep the world rules-based order intact. And it's that

again, I think that is the messaging from the Chinese and these attempts at building these relationships or strengthening them, I should say, you know, don't forget that Southeast Asia's major trading partner is China. I think this is an opportunity for Xi Jinping to say that, look, we still want to do business. We're not going to be unpredictable. We're not going to, you know, tear up the international rules based order the way Donald Trump has. And I think that

can be quite appealing, notwithstanding the caveat, of course, that China uses international trade rules or any rules, to be fair, to sort of remake the world to its advantage. But when you're faced with two superpowers, Stephen, both of them who are behaving badly, perhaps the one that's not, you know, setting fire to the global economy might be a better bet.

Okay, Karishma Vaswani, Bloomberg Opinion columnist. Thank you very much for joining us. You can read Karishma's latest piece, China Won't Blink First and Fight With the US at Bloomberg.com forward slash opinion.

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where money means more. Well, the dollar has emerged as the latest victim of this week's market turmoil. Bloomberg's dollar spot index tumbling to a six-month low as part of a broader exodus from US assets. Let's bring in our market supporter Valerie Tytel for more on this. Valerie, can you just talk us through, first of all, the scale of the moves that we've seen in the dollar? Because it's big.

Look, I think yesterday really was some unprecedented damage to U.S. assets reputation. And to me, what's happening is that every dollar asset, whether it's the dollar or treasuries,

is having some sort of risk premium now priced into that. And that is going to cause a big reordering of the global financial system, quite frankly, Stephen. What happened yesterday is that alongside an equity market tumble, we had a crash in the U.S. dollar. Dollar Swiss moved 4% as people were fleeing the dollar, going to other safe havens, whether that was Swissie, whether that was the euro or the Japanese yen. The dollar did...

not catch a bid with this risk-off move. And if we look even further under the hood, there is not a scramble into dollar assets, which is what we historically have always seen at times of high volatility, times of high uncertainty. We see a move into the safe haven dollar assets or treasuries. That's really delinked this week, and I think this week is going to go down in history.

As the first week, we really saw evidence in the market of people questioning dollar assets and their safe haven status. Does this go beyond taking fright or short-term moves based on these announcements? Or could this signify what should we be looking for to think about if this is a fundamental shift?

Look, frankly, I would also have my eye on the treasury market. This is a fundamental shift in the demand for dollar assets. So not only are we having foreign buyers who are historically in the last few years have been very over allocated dollar assets. We're seeing that normalize.

That's one thing. But the other thing that we're seeing is the fact that Trump is ripping up global trade is really posing questions over, is there going to be a long-term structural demand for dollars like there has been before? The dollar has been the world's reserve currency. Alongside that has also come the fact that all global trade is denominated in dollars. So you attach those two things together, less global trade, less demand for dollar assets.

And the U.S. is going to lose its ability to fund its deficits easily. And essentially, that means every month that goes by, every year that goes by, it needs another incremental buyer of its assets in order to fund the amount of treasuries that it's issuing to the market. And right now, if you think that trade between the U.S. and China is coming to a standstill, so is China's recycling of those dollars.

into treasury assets. And with that could mean that structurally yields in the U.S. have to be a lot higher. And the U.S. in some way is going to act like the U.K. They have to rely on the foreign investment flows, which are no longer guaranteed. Relying on the kindness of strangers, as I know they've put it in the gilt market. But there is now going to be a baked in premium for dollar assets because the bedrock of the U.S. dollar is now starting to be questioned.

You mentioned the strengthening in the euro that's continuing in trading today as well. What's the other read across that we should be looking for in terms of the European markets today? If investors are fleeing dollar assets, does that mean that they're coming to Europe? I mean, that could be the effect. But this is going to be, you know, this is not just today. This is something that's going to be impacted for the next five years, let's say. We did necessarily see yesterday a big move into the Swiss franc.

And let's be frank, pun there. Let's be frank. Not every country wants to be the safe haven because what comes to that is a stronger currency.

We've seen the problems that's posed for the Swiss National Bank in the past. Exactly, right? But the thing is, if this reputation of dollar assets has been seriously damaged, it has to go somewhere, whether that's the euro, whether that's the yen. But that could also pose big problems for these economies who maybe not necessarily want that enormous flow of funds coming into their economy. Valerie Tartel, our market supporter, thank you very much for joining us with another dramatic day.

On markets, we're looking at European stock futures pointing higher ahead of today's session. Now, investors will be scouring company reports during this earnings season for clues as to how they're thinking about the trade war. JP Morgan and Morgan Stanley kick off Wall Street's earnings season today as banks and other major companies struggle to navigate Donald Trump's policy shifts. Bloomberg's Charlie Wells is here to help us look ahead to...

to that. Charlie, let's start with the banks then. I mean, is there anything in this report apart from forward guidance that analysts are going to be looking at? Stephen, it's all going to be about the future. And I think it's really telling that banks kick off earnings season because, you know, they're not in the direct line of fire of tariffs, but they're sort of in the back

of every other line of fire for every industry in the economy, just because they lend to so many sectors. They lend to the consumer. And so the read-throughs are going to be enormous as this starts. So, you know, J.P. Morgan CEO Jamie Dimon has kind of been telegraphing this week about

I think a lot of the sentiment that we're likely to hear from other CEOs in the industry. So, you know, in his annual letter and in an interview on television midweek, he talked about how, you know, if this tariff chaos continues and these statements were made before the tariff pause, you know, there could be a recession. He talked about how, you know, on the consumer front, he doesn't see loan defaults, but,

those could be likely. And so the picture that we're likely to see in just a few hours is one that's probably darker, but they have to really kind of, you know, dance delicately here. Um,

for a lot of reasons, market-wise and increasingly politically. Yeah, indeed. We were talking a little bit earlier about Michael Samblas' comments and that client call earlier this week as well. Aside from the trade war, though, what else could surprise us in these earnings? So traders are expected to have had

and that's a past construction, a really good quarter. Record revenue from trading at a lot of the biggest banks. I think they're slated to bring in the most that they brought in, I think, like seven years, because there was a lot of volatility. And we know that when there's a lot of volatility, there's a lot of trading. But some commentary to look out on that front today, I think, is this issue that one Goldman analyst brought out, which was, have we reached P&P?

trading, right? Because if you get to a point where there's too much volatility, participants start sitting on the sidelines. So volatility is good up to a point. We know also that we may see, looking back to the prior quarter, some optics at some of the banks and capital markets activity. And I think if there are significant beats there, that could provide a little bit of optimism. But volatility is not good for dealmaking. OK, so that's something else to watch out for as well.

Bigger picture, Charlie, you've been reporting on this all week as well about how corporate America is trying to navigate all of these policy changes, as you say, both politically and financially as well. I mean, how are these companies behaving, acting, making decisions at such an uncertain time? We know that business confidence has been hit, consumer confidence too in the US. How are companies approaching this? Stephen, there's a great big take out today in Bloomberg about this very dynamic

dilemma that companies face because on the one hand, they don't want to provide too much information in forward guidance and then have to retract it. And we've seen some moves similar to that in the past few days just because trade policy has been changing so rapidly. But on the other hand, they don't want to provide too little information to be too vague because in a lot of ways that could leave a company vulnerable to the whims of the market. They need to provide enough information that analysts can act appropriately.

So this is a real challenge. And I think a more skeptical take here as well is that some of this ignorance on how trade could potentially be playing out for these firms, some of that may be a little bit of a cop-out. Some analysts have been saying that because CEOs know what could happen to their companies, at least in the biggest of picture. And so they may be kind of dodging some questions here. And so I think I just said the word questions. I think

in these calls that we're going to hear, not just today, but over the next few weeks, we should be honing in on that point in the presentations when analysts and journalists get to start asking questions. And I think that part of these presentations is going to be even more important because they can be really trenchant and probably get to some topics that others, that CEOs just couldn't. Well, on that point, I mean, what Michael Sambalist was saying in his note, this idea that

you know, he wasn't saying everything that he wanted to. Is that the sort of reticence we should be expecting from corporate leaders? Stephen, I think we should. And I think that there is a real fear that executives get called out, you know, CEOs of banks, certain firms as well have been called out by the administration. And there is this fear that kind of saying the wrong thing, presenting the wrong information could, you

you know, could upset the administration. And that is something that analysts, semblists in particular, focused on this past week, is something that they're not used to. 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.

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