Boeing Becomes a Trade War Casualty; Harvard Rejects Trump's Terms
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Good morning, I'm John Tucker. And I'm Karen Moscow. Here are the stories we're following today. And Karen, Boeing may be caught in the crosshairs of the U.S.-China trade war. Bloomberg News has learned China has ordered its airlines not to take any further deliveries of Boeing jets. And Bloomberg Aviation reporter Danny Lee is following the story this morning.

This is really quite a blow for Boeing in the sense that we have seen more companies increasingly being caught up and caught in by this tit-for-tat trade war between Washington and Beijing. But increasingly where something like Boeing is increasingly marginalized in such a thriving aviation market.

Bloomberg Aviation reporter Danny Lee says China is forecast to make up to 20% of global aircraft demand over the next two decades. In 2018, nearly a quarter of Boeing's output ended up there. Shares of Boeing this morning down 2.7% in early trading.

Well, John, President Trump's administration is pressing forward with plans to impose tariffs on semiconductor and pharmaceutical imports by initiating trade probes led by the Commerce Department. And we get more on that with Bloomberg's Trade Czar, Brendan Murray. The Trump administration wants semiconductors to be made in the U.S. rather than mostly in Asia, in places like Taiwan and China. This is going to be especially important with the next generation of chips, the ones that power artificial intelligence.

The other issue, and this is one that came up during the pandemic, was the drugs production and the pharmaceutical issue. Both of these are the Trump administration is seeking to ground them in the legal rationale of national security.

Bloomberg Trades Czar Brendan Murray says President Trump is also floating a potential pause in auto tariffs and that has shares of Nissan, Toyota and other auto stocks on the rise this morning. And Karen, the New York Daily flow of tariff announcements adding to the confusion for companies and countries trying to navigate President Trump's evolving trade policies.

Speaking exclusively to Bloomberg's Anne-Marie Hordern, the Treasury Secretary Scott Besant was asked how many of these deals he expects to have signed by the end of the pause.

I think there will be advantage to our allies especially and a first mover advantage. Usually the first person who makes the deal gets the best deal. So who do you think will be first? It's their choice. Is there a handful of countries that you expect to have a deal before the 90 days is up? Oh, I think there could be numerous countries.

countries. And it may not be the actual trade document, but we will have agreement in principle and be able to move forward from there. Treasury Secretary Besson also playing down the recent sell-off in the bond market, rejecting speculation that foreign nations were dumping their holdings while flagging that his department has the tools to address dislocation if needed.

And you can hear the full conversation on the Bloomberg Talks podcast feed or watch it on the Bloomberg podcast page on YouTube. Well, John, former Treasury Secretary Janet Yellen is criticizing the Trump administration's trade policy. She says the entire approach is muddled. The objective's unclear. The rationale for the tariffs that have been—

announced really unclear and not at all sensible steps toward removing the tariffs, lowering them are positive, but we're in a world of tremendous uncertainty. Despite uncertainties, Yellen told Bloomberg's balance of power, the U.S. economy is still strong and does not see a need for a central bank intervention.

And another major story we're following this morning, Harvard University fighting back against President Trump's demands for what he calls reforms at the school. Let's get details this morning from Bloomberg's Lisa Mateo. Lisa, good morning. Good morning, John. The university's president, Alan Garber, says that the requests pose threats to academic freedom and also interfere in higher education. A government task force on anti-Semitism, well, they responded saying it plans to freeze $2.2 billion of multi-year grants for

which could impact the school's research, medicine, public health programs. U.S. agencies, while they previously said they're reviewing about $9 billion of Harvard's grants and contracts and the university's rejection of the demands, it's winning the support from Democratic lawmakers, alumni, including former President Barack Obama. Now, already the government has canceled $400 million in funding to Columbia University. They paused funds to Northwestern and Cornell and suspended money for

Princeton, claiming that they're not doing enough to fight anti-Semitism on campus. Now, unlike those institutions, however, Harvard, the richest university with a $53 billion endowment, but the school does say about 70% of the annual distribution is restricted by donor terms to specific

programs, departments, or purposes. Lisa Mateo, Bloomberg Radio. All right, Lisa, thank you. Let's turn to the markets now. And futures, they're higher this morning following gains on Wall Street to kick off the trading week. The S&P 500 and Dow gained nearly a tenth of a percent. David Sowerby, Managing Director and Portfolio Manager at Ancora, says it's a good time to buy for long-term investors.

This is my 12th bear market, sadly. It's not going to be my last. And I think with the average stock now trading at a free cash flow yield of 6%, that compares very favorably to the 10-year treasury. So if you're willing to buy...

and be a little wrong before you're ultimately very right, you should be in there selectively buying. And of course, David Sowerby notes the S&P 500 is down 8% so far this year. And investors are going to get another batch of bank earnings this morning. Let's get more from Bloomberg Intelligence Senior Analyst Allison Williams.

For Bank of America and Citigroup, we expect to see similar trends as we've seen for their peers, Goldman Sachs, JP Morgan, Morgan Stanley, and Wells Fargo. And that is strength in equities trading, powering the top line, risk to investment banking fees related to uncertainty, and strength in buybacks really representing a benefit to lesser regulation expected on the capital front.

A key thing we'll be focusing on is the health of clients. Bank of America is likely to give us a view into the U.S. consumer, while Citigroup has relatively more exposure to the card business. And Bloomberg Intelligence Senior Analyst Allison Williams says look for Bank of America earning $6.45 Citigroup at 8 a.m. Wall Street time.

John, the Federal Trade Commission's antitrust trial seeking to break up Meta platforms continues today. Mark Zuckerberg testified in federal court yesterday about Facebook's acquisition of Instagram. We get more from Jennifer Rhee of Bloomberg Intelligence. The allegation is that for both of those companies, Facebook, at the time called Facebook and not Meta, was concerned that they would grow or be bought.

by a Google or somebody like some other big tech platform and become a real competitor to Facebook and give them a tough time in social networking. And so they bought them instead. It's sort of what they call a buy and bury, although they didn't bury, strategy. And they're saying that just those acquisitions, that itself was anti-competitive. Jennifer Rhea, Bloomberg Intelligence, says if the FTC prevails, a spinoff of Instagram and WhatsApp would undo years of integration between the apps. The trial is expected to last about two months.

Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. President Donald Trump's top advisors and El Salvador's president say that they have no basis for the small Central American nation to return a Maryland man who was wrongly deported there last month. The Supreme Court has called for the Trump administration to facilitate the return of Kilmar Abrego Garcia.

from the U.S. to a notorious, from the notorious prison. Family attorney Benjamin Osorio. Our Department of State works with other countries all the time for detained U.S. citizens. So this is not a new thing that we're asking the government to do. We're just asking them to follow the Supreme Court's order. President Nea Bukele, who has been a vital partner for the Trump administration in its deportation efforts, said, of course, he will not release him back to U.S. soil.

Another Columbia student has been detained by immigration officials. Moshin Madawi, a permanent resident of the U.S. and student at the university, was arrested after attending his naturalization interview in Vermont. Court documents claim the Palestinian refugee led protests on campus along with Mahmoud Khalil, another international student now facing possible removal.

Investigators are working to uncover the motive behind an arson fire last weekend at Pennsylvania Governor Josh Shapiro's mansion, the latest act of political violence in the U.S. Cody Ballmer was detained, denied bail Monday after a brief court appearance.

Authorities also say Ballmer had planned to beat Governor Shapiro with a hammer if he encountered him early Sunday. Judge Esther Salas sounded the alarm about the new threats. The judge's son, Daniel, was killed in 2020 at their New Jersey residence in a deliberate attack.

I think we're in unprecedented times. I think we can look to statements that are coming out from our leaders and these positions of power and say we're in new territory when we see members of Congress calling for the impeachment of judges for doing their jobs. Global News 24 hours a day and whatever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen. All right, Michael Barr, thank you.

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

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where money means more. Time now for the Bloomberg Sports Update. Here's John Stashower. John, good morning. Good morning, Karen. It's early in the baseball season, but Yankee fans quick to point out that so far their number 22, Ben Rice, has better numbers, more production than the Mets' number 22. Juan Soto Rice has a $700,000 contract. Soto has a $700 million contract. Soto and the Mets in Minnesota. The Mets led 3-1 with a man on in the seventh inning.

Soto's 0-3 today, his fourth straight at bat with a runner in scoring position. Unable to come through the first three times, he lifts this one out to right center field. Pretty well hit. Back goes Buxton, back near the wall, and it's out of here! A two-run homer for Juan Soto! His second home run as a Met, and the Mets extend their lead.

their lead to 5-1. And that was the final SNY to call. Twins had only three hits at the stadium. The Royals had only two hits. The Yankees hit four home runs, including one by Rice. Also, Jazz Chisholm, Trent Grisham, and Austin Wells. They beat Kansas City 4-1. The Red Sox lost at Tampa Bay

16 to 1. Taylor out gave up the first 12. The Nationals lost in Pittsburgh 10 to 3. The first player named to play for Team USA in next year's World Baseball Classic, Aaron Judge. And like with the Yankees, he'll be the team captain. Rangers won 5-3 at Florida. Their season will end on Thursday. The NBA play-in begins tonight. Atlanta at Orlando. Memphis at Golden State. The winners advance. The losers play another game on Friday. Phoenix Suns fired coach Mike Budenholzer.

Dallas Wings took UConn star Paige Beckers with the first pick of the WNBA draft. John Stasiewicz, Bluebird Sports, Karen and John.

That brings us to 5.13 this morning and a breaking news story. Another salvo in the trade war. China has ordered its airlines not to take any further deliveries of Boeing aircraft. Bloomberg aviation reporter Danny Lee joins us now this morning from Hong Kong to walk us through this story. Danny, China has been reducing its reliance on Boeing in recent years, but this still has to be a big blow for the company.

This still stings for Boeing. And this directive is, you know, given how important still Boeing plays in the Chinese aviation sphere, it still provides around 40 to 45 percent of

of all jets into the Chinese aviation market. And it's a huge market as well. So Boeing is more broadly yet another company that is caught up in this ongoing tit-for-tat trade war between Washington and Beijing. What specifically has Beijing said?

So Beijing has ordered the carriers not to take any further deliveries, as you said. And also on top of that, they have asked the airlines not to take any orders of any plane-related equipment or parts from U.S. companies. So it's quite a broad mandate that they're asking of. And this came at a time last week, in fact, when China retaliated against Beijing

against the US with its own tariffs of 125% on Chinese goods. And when you think just purely on the economic terms of when you buy an aircraft, that kind of doubles the cost of an aircraft over its lifetime and becomes unrealistic for an airline to take delivery of. And this broader headache that airlines are worried about of tariffs and the cost that they may have to foot in terms of these hiking tariffs around the world.

Is there any indication this could be reversed if there's some progress in talks with the United States? Well, it does remain to be seen, well, on the China side at the very least. They haven't backed down on the tariffs that it has responded to from the U.S., whereas in terms of Washington, there has been some kind of rowback on some policies of some of the tariffs, and particularly related to China.

Chinese-made iPhones. So we do have to wait and see whether there will be any high-level talks between China and the U.S. So there can be some de-escalation. But for the moment, all this does mean it does catch these prestige companies in the middle. It seems like Boeing just can't get a break lately, right?

No, true. And given how Boeing has come so far in China, where China used to be one of its most important foreign markets, selling billions and billions of aircraft into the country every year. And over the last several years, it has not won a single major aircraft order. And

And it does come against the backdrop of how China is pursuing its own aviation plane-making development. So slowly, ever slowly, Boeing is getting squeezed out in one of the world's biggest aviation markets. And those shares were down over 2% pre-market. Bloomberg Aviation Reporter Danny Lee with us this morning from Hong Kong. Danny, thanks. Karen.

Well, John, we want to turn our attention now to our interview with U.S. Treasury Secretary Scott Bess, and he sat down in Buenos Aires exclusively with Bloomberg's Anne-Marie Hordern for a wide-ranging discussion. They talked about making trade deals with countries following President Trump's tariff rollout, negotiating with China, and whether he's concerned about rising yields and a weak dollar. Let's go to part of their discussion.

Oh, I think there could be numerous countries. And it may not be the actual trade document, but we will have agreement in principle and be able to move forward from there. So are we talking about a dozen or 70 plus? I think it's going to depend, but we're going to move with all deliberate speed. And again, it's going to be a process. It's going to be USTR, who just has...

mountains of data that they've been collecting over the years because in a funny way the tariffs are the easiest part.

So a country with high tariffs, you can just say, okay, this, this, this, this, get rid of it. It's the non-tariff trade barriers that are more insidious, more difficult to spot. And it's probably going to take a little longer to exercise those demons. China's commerce ministry came out when the tariff rates were going above 100% and called it, quote, a joke.

Has there been negotiations on any level between Beijing and Washington right now? Well, look, it'll come from the top. President Trump, Chairman Xi have a very good relationship. And I wouldn't say that these are not a joke. I mean, these are big numbers. I think no one thinks they're sustainable, wants them to remain here. But it's far from a joke.

Well, they just say that the rate is so high it's become a joke. Basically, does it just stop trade between Washington and Beijing altogether? Do you see a decoupling of these two economies? Well, maybe the trade minister has a different sense of humor than I do, but I don't see anything funny about it. Do you see a decoupling, though, between Washington and Beijing? There doesn't have to be. There could be. There's a big deal to be done at some point, but...

Look, what is different with China that is different in the history of trade that normally, if you go back to the big trade deals or the currency deals in the 80s, the Plaza Accord, the Louvre Accord, the Reagan Auto deals, we were our leading economic partners.

competitors were our military allies. China is both our biggest economic competitor and our biggest military rival. So that's going to require a special kind of formula. So shifts in tariff policies has had markets on edge. Even the president recently remarked that the bond market was, quote, queasy. Do you have a sense of who is dumping U.S. assets? Who's been dumping U.S. treasuries? I don't think there's a dumping. And I think we saw in the tick

data either today or Friday that actually foreign ownership's picked up

We had two, we had three big auctions last week and on the longer end auction, 10 year, 30 year, we saw increased foreign competition. So I actually think this is one of those occasional VAR shocks that you get in the trading community. I think a lot of people got very leveraged maybe out over their skis and then you combine that with some real money

selling and you get these moves. So you don't think it's sovereigns, potentially it's hedge funds unwinding? I have no evidence that it's sovereigns. And look, Anne-Marie, not you, but the nature of journalism is to create a headline that 10 days ago when 10-year yields hit 390 said, well,

Secretary Besson got what he wanted. He got 10-year yields down, but it's the wrong reason. Now, I forget what they hit on Friday, maybe 440-something. We saw a 50-basis move last week in 10-year yield at the same time that the dollar was weakening nearly 3%. How do you simultaneously look at

at that situation. It feels like investors are dumping US assets. Well, look, I've learned that not to look at what happens over a week. I, for better or worse, have lived through a lot of these things and in trading, in one's personal trading history, it's the scar tissue that sticks with you the most. I can tell you exactly where I was standing in 1998 when the long-term capital

the debacle happened. And that had nothing to do with anything other than a bunch of geniuses up in Greenwich who had too much leverage. So you're not concerned at this moment about the U.S. dollar or the U.S. Treasury losing safe haven asset?

No, look, we're still a global reserve card. We are still a global reserve currency that the we have a strong dollar policy. The dollar can go up and down. If you go and look back at President Trump's first term, I don't remember the exact number, but the dollar is.

In 2017, went down, I can't remember, 7, 8, 9 percent. And then once the tax bill was done, took off, took off for the remainder of his term. Have you spoken to the Fed at all about contingency plans, though, if financial stability risks flare up? Chair Powell and I have breakfast every week.

and we discuss a wide range of things and our staffs are always in contact. We have a markets room, they have a markets room, but specifically did we discuss some kind of a break the glass? I think we're a long way from that. So when was the last time you guys spoke? We had breakfast last week? We had breakfast last week and

It was an away game. I was over the Fed. And no concern so far from the Fed chair on what he saw in the Treasury market? I think we would have heard from the Fed chair. I think we heard from Governor Collins of Boston on Friday. We heard from Governor Weller today on his thoughts on what tariffs mean. So it seems like business as usual.

Secretary Scott Besson speaking with Bloomberg Television's Anne-Marie Hordern. Catch the full interview on the Bloomberg Talks podcast. Subscribe to hear all of our high-profile discussions anywhere you get your podcasts. John, repeating some of our top stories this morning, China has ordered its airlines not to take any further deliveries of Boeing jets as part of the tit-for-tat trade war. Now the Trump administration moving forward with plans to impose tariffs on semiconductor and pharmaceutical imports. The move threatens to broaden the president's sweeping trade war.

And Harvard University is rejecting the Trump administration's demands to make sweeping changes on campus. The university cites threats to academic freedom and interference in higher education. We'll have more on those stories coming up on Bloomberg Daybreak. And now we turn to another discussion with a former U.S. Treasury Secretary, now Janet Yellen. She joined Bloomberg TV's Kayleigh Lyons yesterday on Bloomberg's Balance of Power, discussing President Trump's tariff

policy and the outlook for U.S. markets, as well as the health of the U.S. economy. Let's listen in. It was suggested that these reciprocal tariffs are in response to unfair trade practices. That clearly wasn't the case. And, for example, with the European Union, the trade barriers are very, very low. So I must say I'm confused about

what the Trump administration will be looking for with Vietnam, for example. We actively encouraged Vietnam to begin to produce goods that we were dependent on China for. For national security purposes, we wanted diversification of supply chains. I don't think there was anything unanticipated or inappropriate

about having a trade deficit with Vietnam, I find it very difficult to know what the Trump administration will be looking for or expecting. Well, and of course, China's Xi Jinping himself was discussing trade with Vietnam today. On the subject of Xi and of the Chinese government, which, of course, you discussed,

had many conversations with over your tenure as Treasury Secretary. You made tracks to Beijing yourself. Given your interactions with China and the way in which they have responded to the tariffs the administration has levied on Chinese imports, do you see them as willing to come to the table on this one? Or are we stuck in a dangerous game of chicken?

Well, I think they have made clear that they would like to de-escalate this conflict and remove their own trade barriers, the retaliation they have announced, and see our trade

barriers come down as well. I think they're tremendously damaging. They're at levels that are almost prohibitive of trade. And I think it would be beneficial for both sides.

I will say, in the case of China, and I have made this clear during my own visits there, we have legitimate grievances with some of the policies that China has followed

to massively subsidize its export sector, its manufacturing sector, particularly advanced manufacturing, and its overall macroeconomic strategy, which places unusually low emphasis on consumer spending as a source of demand.

and really relies on flooding the world with Chinese goods. I think this is legitimately damaging to the U.S. economy and something that we were discussing, and I think there should be dialogue and an attempt by the Trump administration to pursue this issue. Working together with our allies, I think, would have been

desirable approach. It's one that we were committed to. But now the Trump administration has really engaged in some very antagonistic

initiatives relative to our closest allies. And that looks like a less promising approach than I would have hoped. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify or anywhere else you listen.

You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast-to-coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces.

And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. I'm John Tucker. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak. Big news. Verizon Small Business Days are here.

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