Trade Talk Optimism Caps APAC Trading Week
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Charlie Pellett. Doug Krisner is off this week. Asian stocks inched higher at the Friday open after President Trump announced a trade deal with the United Kingdom. Coming up, we'll get reaction from Bloomberg News Senior Editor Derek Walbank. Plus, a look at the market landscape with Eli Lee, Chief Investment Strategist at the Bank of Singapore.

On Thursday, President Trump signaled tariffs on Chinese goods may fall if upcoming talks go well. We got some analysis from former Assistant U.S. Trade Representative for China Affairs Claire Reid. Now Senior Counsel at Arnold & Porter, Reid spoke with Bloomberg's Sherry Ahn and Heidi Stroud-Watt.

Claire, really great to have you with us. So first, I'll get your reaction to this agreement that's been secured between the US and the UK. I suppose it's a good starting point, but of course, everyone's watching for the main talks between China and the US. Yes, well, I don't think that the UK deal should be viewed as anything like a template for the China deal. It's like...

I don't know, yin and yang, maybe, where the UK is a very easy deal. There's no trade deficit. We basically don't have a lot of conflict with them in trade. And so it was relatively easy to come up with, you know, a big deal, supposedly. A quick deal. I think we can definitely say it's quick. And I think it will be, I'm sure text is being written and that it will come out.

But, you know, no time frames for any of that. So it's really quite a work in progress, I would say. I think Trump probably needed to announce something and Britain was probably willing to participate because it does give them a little bit of a sense of security. China is a totally different story. China has, we have a very complex relationship with them. Trump already

secured a deal in its first administration that didn't go that well. And I think it's going to be a complicated negotiation that is going to start by trying to see if you can de-escalate

the tariff levels, which seem to be really harming both sides of the equation right now. So there is definitely self-interest in trying to make that happen relatively soon. The other issues could take months, years, or never get solved.

Yeah, it's interesting. You know, some critics calling this UK deal a nothing burger, right? So many of the details left to be determined. Clearly, there's sort of the optics politically of seeing an off ramp and a deal to be seen to be made. Is it also more challenging from China? Because from the outset, their sort of negotiating position is that the US started this, that they've been erroneous in negotiating.

and unfair in the way that they've approached this and that they need to kind of show some degree of good faith and of contrition before they can even have proper negotiations. That definitely was China's and has been China's line. But you will probably recognize that China also had said that it wasn't going to start any talks until the United States took the tariffs off.

and there have been no tariffs taken off, and the talks are starting. So I think we will see China, which is, they're very good negotiators. We will see them exhibit some flexibility to the extent they don't feel they're losing face, and that they feel that it's basically in their self-interest.

So we'll see. And they definitely don't want to lose faith when it comes to Hong Kong issues, Taiwan issues. Why is President Trump talking about Jimmy Lai? You never know why President Trump is talking about anyone. And certainly he pays more attention to the very wealthy, I would say. So it probably crossed his mind.

TV screen, or maybe there's a Trump insider who has spoken to him about Jimmy Lai. Those would be my two highest hypotheticals, I guess. But the point is that this will not help, right? I mean, you're conflating political issues with economic issues. We do know that right now the pushback against China is geopolitical. But at the same time, if you put issues like this on the table, what's

What does President Trump hope to achieve in these negotiations with Beijing that he can take back to the American public and say that it's a win?

Trump has demonstrated from his first term that he is not someone who's concerned about human rights or various humanitarian issues in the China relationship. He's very good at declaring wins, regardless of what the underlying facts are. So I don't have any doubt that he will declare a win.

The question is really going to be what can both sides give? What seems to be the easiest thing to give on both sides is to reduce tariffs on most of the goods down to something other than an embargo level. But after that, I think there's a huge gap between the two sides. China can also show good faith by

demonstrating what it's been doing to help on fentanyl. And that would be a positive. But I think Trump is fundamentally a businessman. And if he sees a deal that he thinks he can sell back in the United States, that's the deal he'll take. But it will be focused on

on the commercial side largely. I don't think this is a transformed Trump who is now going to be worrying about Hong Kong democracy or Xinjiang forced labor.

Claire, what do you think is the level of internal pain that Beijing is willing to accept, given that we know there's a certain level of galvanising national sentiment domestically and they've also been on this big outreach program to other partners, allies and perhaps even foes alike, to try and garner these new relationships. Do you think there is a certain level where they'll still hold back, even if they don't obviously want these tariffs in place?

China is going to be looking at this from a long-term perspective. And I think at this point from quite a, I would say, pessimistic perspective on what they can expect from the relationship from the United States.

There will be no more G2, a special relationship between the two largest economic forces in the world. I think it's going to be a very pragmatic, very realistic effort to get things to a point where they're as good as they can be. But China is not going to change any of its fundamental values.

economic structure or any of its priorities. It's not going to change the dominance of its state-owned enterprises. And if there's going to be anything done to reduce the

excess flow of Chinese goods at very low prices into the global trading system that is causing the industries and the trading partners countries to collapse, if any going to be done about that. I think that's going to have to be in the form of export restraints or some mechanical barrier to the exports going out from China. There will be no structural changes that China will accept.

Claire Reed, always great to get your insights. Senior Counselor at Arnold and Porter. Ryan Reynolds here from Mint Mobile with a message for everyone paying big wireless way too much. Please, for the love of everything good in this world, stop. With Mint, you can get premium wireless for just $15 a month. Of course, if you enjoy overpaying, no judgments, but that's weird. Okay, one judgment.

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Welcome back to the Daybreak Asia podcast. I'm Charlie Pellett, in for Doug Krizner this week. As the U.S. prepared for the start of talks with China, the biggest target of Trump's tariff onslaught, the president said he believed negotiations might result in tangible progress. For more, we heard from Eli Lee, chief investment strategist at the Bank of Singapore. He spoke with Bloomberg's Sherry Ahn and Heidi Stroud-Watts.

Eli, great to have you with us. I mean, we have seen the optimism and the hope coming from investors right now as we continue to see that risk on gains in the Asian session as well. How much are you banking on these negotiations? Right. So I think, you know, the earlier comment that this was pretty much a nutting burger.

I think beyond the pomp and ceremony, there was really very little in the way of substance. And I think there were two important things that's happening here, Sherry. Number one, the fact that UK, one of the US most favorite partners,

eventually still got a 10% rate. That tells us that this is probably the lowest we can expect for most of the rest of the trade negotiations.

And number two, the fact that I think China is much more entrenched in a tit-for-tat escalation versus the UK is that we can expect the process with China going forward in terms of trade negotiations to be much more of an odyssey versus the UK. And that means that we should be a little bit circumspect about the positive reaction that we're seeing in the markets overnight, Sherry.

But when it comes to the markets, it's really looking ahead, right? And we have seen investors trying to grasp at anything that potentially could mean more gains. So relatively speaking, would this be a time to buy or would this be a time to sell?

I think this is an interesting point, Imakish, and that's a great question. I think we are seeing this historical almost gap in valuations between the US and the rest. Much of this is a consequence of the US exceptionalism narrative over the last 12 to 24 months, and that is starting to reverse. So we think that the US equities market is probably in over its skis a little bit right now, but we see opportunities in the Hong Kong-China markets and also in Europe as well.

Europe is an interesting one, right? You're neutralizing the U.S. positioning in favor of overweight in Europe. What are you liking still? And I guess has that narrative changed from earlier, the sort of defense rearmament driven story for Europe? Right. So we think that, you know,

The implications of what's happening in Europe, that fiscal easing that we're going to see, still rate cuts in terms of monetary easing, really will have pretty wide-ranging effects. So outside of defense, I think infrastructure is going to be a very big theme that we are looking into as well there.

And within Europe, we continue to think that the energy transition, increased energy efficiency narrative continues to be quite strong. And there are some interesting names and opportunities there as well, Sherry. Eli, what is the risk or opportunity that you're seeing from some of the currency volatility, particularly the recent surge in Asian currency strength that we've had?

Right. So I think that's very telling of what international investors are thinking of Asia's positioning, especially China's positioning in this tariff war versus the U.S.

A lot of this is the function of the weakness of the US dollar. I think, you know, at the twin deficits, I think investors are going to demand a much weaker US dollar, much higher US yields to continue financing the twin deficits in the US. And that means a weaker US dollar, stronger Asian currencies,

And primarily, we think that China is going to be a big stakeholder in how Asian currencies perform. And the fact that they've continued to push towards having a relative CNChain stability over the last month or so tells us that we will likely see a steady uptrend in Asian currencies ahead. The stability that you talk about when it comes to the Chinese yuan, what does that mean for other Chinese assets?

Right. So we think that there are three tailwinds for Chinese assets going forward. I think number one, the fact is that the Chinese economy is much more strongly positioned for a trade war with the U.S. versus Trump's first term. I think U.S. exports is now less than 3% of the Chinese GDP. Second, there is still a lot of dry powder in terms of policy easing from China to come.

that's installed and will come. And finally, we do think that the valuations in Chinese assets continue to be quite undemanding, which will draw interest from international investors, especially if we do see the end of the Russian-Ukraine trade war, Russia being a key ally of China. And that means that the relative strength that we've seen in Chinese assets over the last month or so will likely continue.

Eli, really great to have you with us. Eli Lee, who's a chief investment strategist at Bank of Singapore. I believe that serious, pragmatic, in-the-room negotiations acting in the national interest are far better than performative politics. People slamming the door, floundering out, being performative but not actually delivering for working people. And I'll continue in the same vein. We've had two trade deals this week by acting in that way.

Well, it could be. I mean, we're gonna see. Right now, you can't get any higher. It's at 145, so we know it's coming down.

I think we're going to have a very good relationship. UK Prime Minister Keir Starmer there and President Trump talking about those trade negotiations, tariffs, the framework of a trade deal there. Let's get some more on this with our Bloomberg senior editor, Derek Wallbank. And Derek, framework is sort of the phrase that we're using. Some of the reaction has been pretty scathing. One analyst calling it a nothing burger. What's your take?

I mean, my take, Heidi, is that it takes the temperature down. I mean, look, you have to start there. Before you get into the substance, and you know I'm a substance guy. I love my details. I love my policy papers. But, you know, I'm also a tone guy. And we had been sitting here in a situation over the last month and a couple of days where the whole world was sort of sat there wondering what in the world is it going to take

to bring the U.S. down a notch on some of these tariffs, especially after the Liberation Day announcements that Trump made, you know, jacking tariff rates up to quite high levels on a lot of trading partners and then up to 145 percent on most everything from China continued sectoral threats to everything from pharma to lumber to movies to you name it.

And the thing that you and I and Sherry have been talking about over the last month and so was that we were all going to be looking for deal number one. What was going to be the context of deal number one? Who was it going to be with and what was it going to take to get there?

There is one way of looking at this that says this is a top-line deal that has a couple of commitments and is scant on a lot of things and bears little resemblance to one of those giant massive trade pacts that gets negotiated over a year or two years or five years or whatever. The other way to look at this is to say, oh, that's what it takes. Okay, noted,

copy-paste and you're gonna see a lot of countries around the world trying to figure out how do we get ourselves in the position that Britain was in. Consider, Sir Keir Starmer is not somebody who got elected as a, you know, some, you know, Trump loving individual, right? He's a Labour Party Prime Minister

with at least two other parties in the United Kingdom dedicated at their roots to trying to be closer to the Republican side of the aisle in a British context. So he's not exactly somebody who's ideological soulmates with this president. He figured out a way to go through, figured out a way to take down the temperature, and that's going to be something that I think every government around the world is going to copy. So in those contexts, I would say this is a highly consequential moment.

And yet, as you mentioned, it really didn't include a lot of the details, right? Especially some of those things that American businesses were looking for, like the change in the digital services tax that hit many U.S. tech firms already. They didn't get any change when it comes to street food regulations, when it comes to U.S. agriculture, really wanting a piece of the pie as well. So what's next for this relationship?

Well, Chair, I think, look, Trump has signaled he wants to have a very warm relationship with the United Kingdom. I think that if you look at this from a purely British context, this is a country that's been searching for any sort of dividend after Brexit. A lot of the British attention is focused across the Atlantic, but a lot of the British economy is focused across the English Channel and across the Irish Sea, right? And so you have a lot of businesses that have made decisions

with the words Paris and Amsterdam and Dublin in their mind, that now are sitting there looking at a situation where the UK has better trade terms with America than the European Union does and certainly better path and prospects there. So that puts the UK into a relative situation that is maybe slightly more advantageous than they were this time a month and a half ago. So that's, I think, on that context.

On the other side, look, we've seen U.S. officials talk about how they're trying to get other things over the table. You know, I know that India, Japan, Israel are all places where we have reported that talks are ongoing or you've seen big kind of outreaches, Vance to India, Netanyahu to the White House, Trump stopping by a meeting with Japanese negotiators. You don't have to

you know, sort of read into a magic eight ball too much to see where things like that are going and where the levels of seriousness are. So I think there's some work on that. But look, my eyes right now go to this weekend, go to Switzerland and go to the meetings that Scott Besant and Jameson Greer are going to have with Chinese counterparts.

The question there asked by our Anne-Marie Hordern in the White House was, you know, is there a chance of not preemptively, but after if things go well, of taking things down on the tariff level? Trump said there's certainly a chance. You know, all things are possible. We live in a world now where the Pope's a Chicago guy who went to Villanova. So all things are possible in this world. And let's see what happens as a result of that. Besant said...

that this was about de-escalation, not a massive trade deal. De-escalation is certainly a possibility. Let's see where we are this time on Monday. Bloomberg Senior Editor Derek Wolbank there.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the stories shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Krisner, and this is Bloomberg.

Hiscox Small Business Insurance knows there is no business like your business. Across America, over 600,000 small businesses, from accountants and architects to photographers and yoga instructors, look to Hiscox Insurance for protection. Find flexible coverage that adapts to the needs of your small business with a fast, easy online quote at Hiscox.com. That's H-I-S-C-O-X dot com.

There's no business like small business. Hiscox Small Business Insurance.

It's true that some things change as we get older. But if you're a woman over 40 and you're dealing with insomnia, brain fog, moodiness, and weight gain, you don't have to accept it as just another part of aging. And with Midi Health, you can get help and stop pushing through it alone. The experts at Midi understand that all these symptoms can be connected to the hormonal changes that happen around menopause. And Midi can help you feel more like yourself again.

Many healthcare providers aren't trained to treat or even recognize menopause symptoms. Middie clinicians are menopause experts. They're dedicated to providing safe, effective, FDA-approved solutions for dozens of hormonal symptoms, not just hot flashes. Most importantly, they're covered by insurance. 91% of Middie patients get relief from symptoms within just two months.

You deserve to feel great. Book your virtual visit today at joinmidi.com. That's joinmidi.com. You're listening to an iHeart Podcast.