Trump Tariffs Roil Markets, Treasury's Bessent Issues Warning on Retaliation
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Bloomberg Audio Studios. Podcasts. Radio. News. Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. President Trump's announcement on U.S. tariffs is sending shockwaves through global markets at this hour. Earlier, the president established a minimum baseline tariff of 10 percent. Now, that will go into effect at midnight on Saturday, and it will affect roughly 60 nations with the largest trade imbalances with the U.S.,

And the president also announced reciprocal tariffs at rates roughly 50% below what foreign countries place on U.S. imports. And those reciprocal tariffs will go into effect April 9th at 12.01 a.m. For a closer look, I'm joined now by Sean Donnan, senior economics reporter for Bloomberg News. Sean is on the line from Washington, D.C. Thank you for making time for us, Sean. Let's begin with this baseline tariff of 10%. It'll happen on August.

all U.S. imports. It goes into effect at midnight on Saturday. Was that at all surprising? Look, I think what was surprising overall about what we've seen today is just the scale of these tariffs overall. We will get that 10 percent baseline tariff that goes into effect on Saturday. And then a few days later, on April 9th, we will get a second set of tariffs. And these are what the president is calling reciprocal tariffs.

that will apply to major trading partners like China, the European Union, South Korea, Japan, all of those at much higher rates than that 10%. - So if you look at why this was much worse than feared, is that because there were simply no exemptions?

I think that's it. There have been some exemptions. Canada and Mexico seem to be exempted for the time being, but that's only because they're facing their own 25 percent tariffs that were announced already by the president a few weeks ago.

And we're seeing some exemptions from further tariffs from other sectors of the economy, like steel and aluminum, that are the subject of separate tariffs again. But we're not seeing anyone escape this new tariff wall that the president is putting up around the United States.

So you mentioned a moment ago that these reciprocal tariffs do not take effect until April 9th. What's the likelihood, in your view, that there will be some type of last-minute negotiation that may ameliorate the threat, the final threat of tariffs?

It's very hard to say. We do know that people at the White House were saying they were fielding a lot of calls from a lot of countries looking to get out of these tariffs. We expect that there will be a lot of conversations going on, but the president seems pretty clear that he wants to put these tariffs in place and then start talking. And

The question is then how long do they stay in effect? And a lot of people are already expecting these tariffs to be in place for a long time. I think, look, the bottom line here today is, and this is what President Trump said he was setting out to do, is he is ripping up global trade rules. He's changing the global economic order, and he's imposing his will and his tariffs on imports from everywhere right now.

Yes, there will be a lot of talks in the future, but whether those tariffs go away anytime soon seems unlikely. The other thing that we should mention is, in the lead up to this announcement, one of the things we heard a lot from CEOs and investors was they wanted an end to the uncertainty over trade policy and tariffs.

coming out of Washington. I think a lot of people tonight are thinking that this is only going to extend the uncertainty. - In the case of China, Treasury Secretary Besant was saying earlier that China will now see a 54% tariff, the 34% announced today on top of the existing 20% levy. That seems pretty dramatic. Very quickly, last question before I let you go. The probability of recession, does it not seem a lot higher now?

I think if you read the notes coming out of economists and if you talk to economists tonight, all of them will tell you that the odds, not just of a U.S. recession, but of recessions in other parts of the world, have gone up significantly just in the last couple of hours. That is Sean Donnan, senior economics reporter for Bloomberg News. For more on Wednesday's tariff announcement, we heard from Treasury Secretary Scott Besant. He spoke with Bloomberg's Anne-Marie Hordern outside the White House.

We're going to have the baseline tariffs come into effect first, then the reciprocal tariffs, a little bit more of a different rate for each individual trading partner. Are you preparing to negotiate with some of these trading partners before that tariff rate comes into effect on April 9th? Well, I think there have been a lot of discussions, but I think we're just going to have to wait and see what would happen. What I would say, Anne-Marie, is I would advise none of the countries to panic. I wouldn't try to retaliate.

because as long as you don't retaliate, this is the high end of the number. And I think the market could have certainty that this is the number barring retaliation. So we've got a ceiling.

And then we can see if there's a different floor. So you sound like you're ready for negotiation with a number of these partners. Has the European Union, has China, has India, have these countries reached out? Well, they've all reached out, but it's going to be up to President Trump to see what he wants to do. I think the mindset might be to let things settle for a while.

their tariffs or non-tariff barriers have been on a long time. So we'll see where it goes from here. When it comes to China, they have a much higher rate on this list. On top of that, there's still that 20 percent fentanyl tariff rate. Is all of this coming together to be more than a 50 percent tariff rate for Beijing? Well, yes, I think it is. And I think it's a combination of things. And again, that

I think China said today that solving the fentanyl crisis depends on taking off the fentanyl tariffs, and I'm pretty sure that's not the way the sequencing is going to work. They're exporting the precursor chemicals and aerosols.

every day, every week, every month, Americans are dying and it's going to have to stop. When it comes to places like China, the president has mentioned he's willing to even look at things like TikTok to potentially do a negotiation with them when it comes to tariffs. I'm sure you're looking at things like the yuan. What's on the table when it comes to this trade realignment between Beijing and Washington? Well, we haven't started anything yet. We've been busy with the

with the tariffs. I've been busy, as we talked about earlier. The tax bill is going very well. So I think that we will move toward the bilateral relationship with China now that we've done the multilateral tariffs. Plans for conversations or a trip to Beijing? Nothing eminent.

When it comes to this negotiation, April 9th, these tariffs come in place. Do you plan on having negotiations before that date? Again, I'm not part of the negotiations, so we'll see.

I am sure that there are going to be a lot of calls. I just don't know if they're going to be negotiations. The president had this huge chart showing all of the different rates. Canada and Mexico notably missing on that chart. Why is that? I'm not sure. Not sure. Okay, I imagine that has to do potentially because they're already in negotiations previously with the 25%. I'm not sure if you saw the initial market reaction. I haven't.

So, equity futures slid on the news. You had talked about how we're in a detox period. Do you feel that we're still in that period, or are you starting to get a little bit concerned? Well, the detox period has nothing to do with the tariffs. The detox period is...

off this incredible level of government spending that we've had, an unsustainable amount of fiscal stimulus. And look, that's got to stop. That's got to stop. So, yeah, can we continue weaning ourselves off of that? And as we...

see private or public sector borrowing go down, private sector borrowing go up, public sector jobs come down, private sector jobs go up. Is it going to be perfectly symmetrical? No, but we did see an increase of 10,000 manufacturing jobs last month.

So it doesn't concern you today that during the tariff announcement, equity futures sold off when initially they were rallying when the president only announced a 10 percent tariff base. And then they fell when he announced the higher rates for things like the European Union and China. And Maria, I've learned not to look what goes on in after hours markets.

Okay, but since the peaks in February, stocks are down 8%. I think the NASDAQ from its high most recently is down 12%. So far, though, this kind of market downdraft so far this year is not concerning you. Well, look, in my old business, I was very concerned about market movements, and I'm trying to be a secretary of treasury, not a market commentator. What I would point out is that especially the NASDAQ,

NASDAQ peaked on deep sea day. So that's a Mag7 problem, not a MAGA problem.

Okay, so let's talk about what else you've been spending a lot of your time doing. You have been up on Capitol Hill constantly. You are really working on trying to make sure that this administration can extend the Tax Cuts and Jobs Act. On top of that, more tax cuts. Right now, how are the conversations going in Congress? Well, I actually think the most underreported story in Washington, not by Bloomberg, of course, is the incredible unanimity

UNITY AMONGST REPUBLICANS. AND I THINK IT'S PRESIDENT TRUMP'S LEADERSHIP, BUT MIKE JOHNSON, WITH A VERY NARROW MARGIN, ISSUED THE

reconciliation instructions. And then he also passed a clean continuing resolution on the Senate side. They are very attentive and I think they may have something done by this Saturday. That is Treasury Secretary Scott Besant speaking earlier with Bloomberg's Anne-Marie Hordern bringing it to you here on the Daybreak Asia podcast. Want to understand trends shaping the global investment landscape?

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Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. As we continue looking at the fallout from the announcement on those U.S. tariffs, we heard a moment ago from Treasury Secretary Scott Besant. And among the points he made, China will now see a 54 percent tariff, 34 percent just announced tariff.

That would be on top of the existing 25. That would be on top of the existing 20% levy. For a closer look, I'm joined now by Jenny Marsh, China EcoGov team leader. Jenny joins from our studios in Hong Kong. It's always a pleasure. How do these tariffs kind of measure against expectations?

Trump is coming in at the high end here. As you just said, this takes the hike to 54%. Bloomberg Economics says actually when you look at the around 13% overall tariffs that China has already facing from the US pre-Trump, actually they're looking at more of a 67-68% hike tariff rate now.

So that is above the level that last year economists were saying, you know, would decimate trade between the world's biggest economies after Trump was sort of floating that 60% figure on the campaign trail. So we've now exceeded that threshold. It's much bigger, I think, or rather it's the top end of sort of what people were thinking could be possible. But of course, the wrinkle here is when economists last year were saying, OK,

A 60% tariff would just decimate trade. I think Bloomberg Economics said it would cut 80% of Chinese exports to the US. They weren't thinking about an environment where the whole world is being tariffed by Trump.

And while China is at the high end of that, everyone's facing tariffs now. So, it isn't like importers in the U.S. can choose cheaper products from elsewhere, because everything suddenly got a lot more expensive. Yeah, it seems like a full-blown trade war at this point. We can talk about whether China retaliates in a moment. I thought it was very interesting that the U.S. has addressed a loophole

It allows packages worth up to $800 from either China or Hong Kong to enter the U.S. duty-free. But now we were told that's going to end May 2nd. So it shouldn't come as a surprise when you look at markets and see a sell-off in shares like Alibaba and JD.com. Was that a surprise at all?

Not a surprise, because he talked about it in the executive order on the first day. And of course, they tried sort of putting this brake on the de minimis loophole earlier that they had to sort of lift it because logistically, it's very hard to sort of logistics of how you actually impose that. So I think that was pretty expected.

And so now it's just a matter of, OK, how do you sort of how do small companies deal with that? But when you add that in as well, actually, the tariff rate looks even higher than 67 percent. I noticed that today the South China Morning Post was reporting that President Xi is set to visit Vietnam tomorrow.

Malaysia, Cambodia in mid-April. Now, we know that all of those nations are being hit by this round of U.S. tariffs. Is this a part of some type of strategy that she has maybe to reconfigure trade relationships?

Yeah, I think the itinerary is really interesting. I mean, the first trip that she takes abroad every year always carries huge symbolism. Last year, he chose to go to France, just as the European Union was sort of weighing these big EV tariffs. This year, he's picked Vietnam, Cambodia and Malaysia. And, you know, Vietnam and Malaysia, sort of these two big countries that have sort of been a key part of the China plus one strategy of sort of rerouting trade to the U.S. to sort of skirt tariffs.

And also now facing their own huge levies. I think Vietnam's tariffs are higher than China's. 46% was the reciprocal figure announced today. So this is a big opportunity for Xi, I think, to go to these countries, make trade deals, but also just sort of present China as the grown-up in the room. Vietnam had been very carefully balancing its ties. It had hosted Biden.

in, I think it was 2023, and then very quickly hosted Xi Jinping for a visit, and sort of playing both sides equally. And I think now this gives China an opportunity to say, well, actually, we are the better partner here. And so, this trip, I think the timing of it is very interesting. I'm noticing weakness in the currency, but I would imagine that the BBOC does not want the Chinese yuan to weaken greatly in the face of this trade war. Right now, offshore, I think we're trading around seven spot.

3-1-7-0 against the Greenback. Fair statement to say that the PBOC is going to try to keep the one as strong as it can under the circumstances?

Yeah, I think that's the strategy that we have seen so far. And they don't want to invite any more criticism as well from the Trump administration. In terms of the negative impact that this is going to have on Chinese economic growth, particularly as it relates to the exporters, what are you hearing about that? I think it's an interesting reaction this morning from economists who are saying they're sort of seeing a hit on average of sort of a one percentage point to GDP growth this year, but they're not downgrading their GDP forecasts.

Because I think everyone thinks China will still hit 5%.

What's going to have to happen now is a massive sort of spending stimulus to fill the hole that is going to be left by the hit exports to the US. And I think that's sort of what people are going to be looking to. There's the external strategy of does Xi get on the phone with Trump? I think it's extremely unlikely he's going to try and call him before that April 9 deadline. It's just not how China does things. They're not going to respond to strength with weakness. Much more likely they focus on shoring up their alliances,

trade partnerships around the world. And they've been very careful to save stimulus for exactly this moment. And now they have the chance to sort of roll out a big support package. Jenny, I want you to help me look ahead to the inflation data that we're going to get for China in the coming week. PPI, CPI, we know the deflationary pressures that the economy is facing. Is that going to be underscored by these data points or is something beginning to shift right now? The

The CPI at the beginning of the year was pretty bad. Even when we took out the seasonal factors, it went right down to negative 0.7. The survey is for it to come back up to zero, but still hovering right on that zero point. You know, China is still facing a lot of deflationary pressures, and this is only going to make it worse. So I think we're not seeing those go away. I mean...

That being said, before today, before Liberation Day, we have seen economists upgrading their expectations for China this year because the economy has been looking pretty strong on other sort of aspects. The consumer is stirring. There's talks of the property market finally bottoming out. Animal spirits are up. So if China can spend enough to compensate for Trump's actions and then actually gets a bit of a Trump bump from other countries now that sort of turn to China and away from the U.S.,

You know, this might not actually be so bad for Beijing. Do you think, can you imagine, let me put it that way, that sometime between now and the 9th of April, when the retaliatory tariffs are set to kick in, that there will be some movement here between Washington and Beijing in a positive direction?

I don't think there will be, is my hunch, because I think you had Wang Yi saying just this week, you know, in order to have talks, the sort of the unfair fentanyl tariffs have got to come off. And when Senator Daines left Beijing, he said in order to have talks, China has to stop the fentanyl smuggling. Neither of those things are going to happen in the next sort of seven days. So I'm

I don't see, I don't think there'll be sort of scrambles for last minute negotiations. Jenny, we'll leave it there. Thank you so much for making time to chat with us. Jenny Marsh there. She is China EcoGov team leader, joining from Hong Kong here on the Daybreak Asia podcast.

Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story 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.

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