Trump: Willing to Lower China Tariffs, Australia PM Albanese Wins Re-Election
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Welcome to the Bloomberg Daybreak Asia podcast. I'm Charlie Pellett. Doug Krisner has the week off. On today's episode, reaction to Saturday's federal election in Australia. Prime Minister Anthony Albanese shocked Australia by securing a historic win in that election. Now the question is whether he will use that mandate to push through tough measures to overhaul the nation's economy.

We bring you a roundtable discussion with AMP's Diana Mussina, alongside Andrea Carson, professor at La Trobe University.

But first, President Trump says he is willing to lower tariffs on China because the levies are now so high that the world's two largest economies have essentially stopped doing business with each other. And for a look at how markets are digesting the comments, we heard from Kerry Craig, global market strategist at J.P. Morgan Asset Management. He spoke with Bloomberg Sherry Ahn and Heidi Stroud-Watts.

Kerry, great to have you with us. There's been a lot of question marks about the job that Fed Chair Powell is doing, given the focus of President Trump right now. This week, what are we expecting when it comes to the Fed's rate decision? And what do you think the policy path will look like as we continue to hear all this criticism and pressure coming from President Trump?

Good morning, Heidi. Well, I think the Federal Reserve and Chair Powell has fairly thick skin when it comes to the criticism. It's nothing they're not used to. Regarding the policy path, again, I think this week's meeting will be not necessarily a non-event, but certainly no meeting change that would see rates be adjusted at this meeting. There's no statement of economic

projections which will give us new forecasts. So I think the messaging will be relatively consistent with what we've heard before, focusing on the incoming economic data to really assess the weakness given what we've seen in the survey data. And again, a focus on thinking about the performance of the labour market as well, given the Fed's

dual mandate around full employment as well as assessing the implications for inflation. So I think the Fed will be limited in terms of forward guidance, reassessing and re-establishing that view that they have room to move should they need to. But again, our view is that there'll be basis towards supporting growth and looking through that inflation. That does appear a little bit more. And so we still see them cutting rates potentially three or four times this year. The timing of that is a little bit up for grabs, but we do think they could start in June.

How do you assess the state of the U.S. economy right now, given, of course, the data that we got last week, whether it's the Fed's preferred inflation gauge or also the jobs numbers, and what are the implications for U.S. assets? And we've seen significant pressure given the potential of growth being hit because of all of these trade tensions. Nothing in W.

I mean, yeah, obviously the weak first quarter numbers for growth, bringing forward a lot of that imports from the tariffs, trying to front run that. Now, they may get some pullback on that in the second quarter numbers that come back, a bit more of a lift in growth. But certainly that's when we'll start to see some of the economic damage being done from these higher prices coming through, as well as the downshift in both consumption and the corporate outlook. So I think the second quarter numbers won't see a massive bounce in terms of the rise in GDP when we do get them. But certainly,

you know, a bit better than the negative numbers that we've had in the first quarter. And I think the other economic data you've seen come through, take the non-farm payrolls last week or the jolts numbers, they're really only capturing the first, you know, couple of weeks of April when we only had that initial announcement from the U.S. government. And so you haven't really seen the data really capture that weakness that may start to transpire. So we do expect the growth outlook to get a lot softer in the coming quarters in the U.S.,

And the market is kind of looking through that. They're saying, well, we've passed the peak in this tariff narrative. We're hearing more around potential trade deals. We're seeing some small adjustments to these tariffs that have been announced and the effective tariffs coming down. And so perhaps they're looking through this and seeing some light at the end of the tunnel.

For us, there's still a long way to go in terms of those trade negotiations where that tariff may end up and the prospects for further tariffs to be announced at the sectorial level, as we've heard. So we're still a little bit cautious on that, given we have seen a big bounce in the market and the valuations have gone back up across equities, given that we're going to see a lot more weakness in the economy still to come. And I think that's still to be reflected in a lot of the earnings growth from U.S. corporates.

When you look at global diversification, where are you seeing opportunities at the moment? I think it is a case of thinking around the dynamics of growth internationally. Obviously, the US has been a front and centre for many investors given the performance of the last couple of years. I think we still view the US as having some really good, high-quality companies, and so we wouldn't shy away from it completely, taking more of a neutral view. But if we look towards Europe a little bit more, if we look towards Europe,

Japan, yes, they are countries that are going to be impacted by tariffs to a degree, but we can see quite a strong consumer story coming through there in Japan. We can see a bit more reflation in that economy. And we're also looking towards Europe where we're seeing, you know, the prospects of more fiscal support coming through. We're seeing ECB cutting rates, financial conditions loosening, which should boast some

growth or at least offset that drag from trade growth coming through. And thinking about valuations that have again have moved up in Europe, but still relative basis looking fairly attractive both to their own history and a little bit more towards the US. For Australia, it's often been talked about particularly in light of the trade war as being sort of a haven market. Does that become more appealing now that we've had that resounding re-election result?

You've had two months of outperformance of US equities over Australian equities. A third month of outperformance is relatively rare, but I think when we look at the Australian market more broadly, we still take a relatively defensive stance given that those second order effects are particularly significant downgrowth or downshift in growth around the world could still transpire.

But, you know, again, it's a market where you have high income, which is attractive in these kind of times, where you do have policy continuity now that we've got the outcome of the election and perhaps more so given the strength of that outcome. And you've also seen, you know, a consumer base that's still rising given some of the impacts of falling inflation, easing policy rates and rising real household incomes all being quite supportive for the outlook here. So the Australian market has done very well. I think valuations are worth watching completely.

I think some of those more defensive sectors. And again, I think if we're looking at the Australian market, we'd expect it to be one that's probably doing a little bit better than we had expected at the start of the year. But again, the earnings growth numbers aren't especially strong here. And those valuations have started to rise back up a little bit. Kerry, always great to chat with you. Kerry Craig, Global Market Strategist at J.P. Morgan Asset Management.

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Welcome back to the Daybreak Asia podcast. I'm Charlie Paladin for Doug Krisner, who is off this week. Prime Minister Anthony Albanese won a significant victory for his center-left Labour Party, becoming the first Australian leader to win consecutive elections in over two decades.

For some analysis, we heard from Diana Mussina, Deputy Chief Economist at AMP. She was joined by Andrea Carson, Professor of Political Communication at La Trobe University, and they spoke with Bloomberg's Sherry Ahn and Heidi Stroud-Watts. Really great to have you both along with us. And Andrea, I'll start off with you in terms of kind of trying to make sense of exactly what happened over the weekend, because it was interesting.

Abanisi didn't exactly style himself as the anti-Trump, the way that we've seen from the likes of Mark Carney, for example, in Canada. But clearly, the sort of global uncertainty, the trade war, some of the sort of culture war politics were at play here.

Yeah, that's right. It was a very stable type of campaign. Albanese favoured hope over fear. And it was in times of global turmoil that you've pointed to with the trade war, not to mention the war in Ukraine and the Gaza Strip. This was a time, I think, for Australians to seek stability. And that's what they've got with Anthony Albanese.

So, Diana, what does this win mean for the broader markets, given that it wasn't necessarily a surprise, but just how much of a landslide the outcome was? How will investors be taking this city?

I don't really think that there's too much of an implication for markets here, especially not in the long term. I mean in the short to medium term I guess that the fact that the Labor Party has a majority in both houses or in the Senate if you include the Greens as well, then it will make it easier for them to pass some of their policies. But some of those policies might not necessarily be seen as business friendly for example.

the higher tax on larger superannuation balances and the Coalition Party is generally seen to be a bit more friendly to businesses. So if we did see a coalition win, maybe markets could have rallied a bit more under that situation. But to be honest, there's not really too much here in terms of the implications for markets. The more important thing will be what the Reserve Bank does at its next meeting, which is coming up soon.

And to that point, I guess with such a strong mandate, perhaps Labor has less pressure for bigger fiscal spending. Obviously the campaign was run on cost of living, inflation and the property crisis, right? Does that take the pressure off the RBA to be able to do what it needs to do?

Well, to be fair, I guess both sides of politics were running with quite large spending campaigns. I was quite surprised that even the coalition was going out there so strongly with all these plans for large spending measures. So for the Reserve Bank, I really think that they will be watching. They obviously have been watching the inflation data quite closely. We just got the March quarter figures. That is really what's key to them when they're going to meet and think about their next policy.

policy move, they take into account what the government does in terms of the implications for interest rates once we see a change

in any spending measures. So if the Labor Party was to change its current spending measures or if it was to announce new policies, that's what the Reserve Bank would move on. But we know what was announced in the budget. That's what the outlook for fiscal spending is going to be in the next six to 12 months. We know that the government sector is still going to be at a very large share of the economy. It's currently at a record high. It's probably going to stay there, maybe move down a little bit. So that's what the RBA is really going to move on. I don't think that...

the landslide majority win for the Labour Party will really change anything for the Reserve Bank. Andrea, we know that the soaring cost of living was a key issue in this election campaign. How challenging is the economic landscape for Prime Minister Albanese and his Labour Party right now?

Well, it will be challenging, but there'll also be a great expectation that now that they've got a clearer pathway through the Senate, it looks like they'll have minority control along with the Greens and not have to negotiate with independents as they did in the last election. And of course, I've got this whopping majority in the House of Representatives

one that was quite unexpected. So there'll be an expectation that they will roll their sleeves up and get on with delivering policy, something that they've been criticised for for not doing in the first term of having a fairly lacklustre government. So that will involve an expenditure and there will be implications for that, but people will want to see real policy outcomes, particularly on the housing crisis.

Andrea, what next for the Liberals? Because obviously it's a period of soul-searching, there'll be a leadership race, but this is an election where the demographics were against them. Certainly that's not going to change. There's not a whole lot of moderate sentiment within this party now, and the French bench has been roiled so badly and Dutton losing his seat and all the rest of it. So what's the path to be able to find that appeal in the next three years?

Yes, you've summed it up nicely there. There will be a long post-mortem. There will be a lot of bloodletting. This is a party that has moved away from its sensible centre just to the right and is now largely a party outside the major capital cities. It's a regional and rural party.

The Nationals did very well. They actually increased their overall share. And for the Liberals, it's catastrophic. So there'll be negotiations going on within that coalition partnership about what that looks like. And also negotiations about what it means for the core of the Liberal Party. It's moved away...

A long way from its ideological centre from when it was held by Malcolm Fraser. Will it return back to a more moderate position? These are the questions that I'll be watching, among many others.

Andrew, as we speak right now, we're hearing that President Trump plans a 100% tariff on all movies produced overseas. Of course, we continue to follow the latest headlines from the Trump administration on more potential tariffs to come up. And right now, we're now getting the latest headline that President Trump is planning a 100% tariff on all movies produced overseas, 100% tariff of movies that are imported into the United States.

Andrea, as we continue to watch the latest uncertainty coming from the Trump administration, how interesting is the latest outcome in the Australian election as also reflecting what we've seen around the world, where instead of punishing the incumbents, which has been sort of the latest trend, we're seeing this more leaning towards safety, towards knowing what's coming up from the local government for more stability.

Yeah, that's right. I think that latest tariff move shows the uncriticability of Trump. You never know what policy he's coming out with next. And there has been a move away from punishing the incumbents. Keir Starmer...

perhaps the exception, but there is a return to centre politics. We've seen that with Canada, with the UK and now Australia, and there's strong relationships between those three countries. And increasingly, although Australia is just a middle power, there'll be an expectation that it will form coalitions with those other governments to rebuff some of the more extremes of the US administration.

Deanna, we were talking a little bit about the property crisis. What do you think now potentially emboldens this new government in the next three years to be able to perhaps take more significant measures to try and fix that problem?

Well, I think that they will be bolstered by the fact that their base and that a lot of mortgage holders and renters voted for the Labor Party. So that could definitely embolden them to go forth with trying to actually achieve more of those plans around increasing supply, which is really sort of key from here if we're to see more sustainable growth in home prices in the next five to ten years to get more supply onto the market.

And basically to do that we need to move from building 180,000 homes a year, which we're doing right now, to something closer to around 240,000 homes a year. That means working closely with the state and local governments to ultimately get that supply up. And hopefully Labor Party's large win is going to see some of that occurring.

The other question is how this government continues to deal with Beijing. What secondary effects are you seeing for the Australian economy or is it holding up okay at the moment?

Well, so far we haven't really seen too many impacts. I think it's too soon because we've also seen Trump and his team pause their reciprocal tariffs so far. I know that the tariffs on China have gone ahead to 145% and that's actually the average tariff rate on some items. It's actually even more than that, which is just crazy. So basically the US and China can't trade with one another. So far we haven't seen any implications for Australia, but what's likely to happen, I think, is that we're actually likely to see lower consumer goods prices here in Australia from a flooding of

goods from overseas markets and particularly from China, but we just haven't seen that yet. I think it's too soon. We need to wait for the reciprocal tariff deadline, which is the beginning of July, so we have to see how Trump and his team negotiate with other countries around some of these rates, but at the same time we haven't seen the full extent of

where tariffs are going to go. We know that Trump wants to put higher tariffs in place on pharmaceutical products. That's one of Australia's largest exports to the US. So there's more bad news to come from here. Uncertainty is the only certainty as we go forward, right? Deanna, always great to have you with us. That was also Andrea Carson, Professor of Political Communication at Taroub University. Deanna Mussina, who's a Deputy Chief Economist at AMP with us.

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.

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Yeah.

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