Trump Wins Tariff Reprieve as Trade Agenda Faces Roll Back
18:36 Share

Every business starts with an idea. How can you go from daydreamer to industry leader? Amazon Business accelerates your journey. With smart business buying, get everything you need to grow in one familiar place. From office supplies to IT essentials and maintenance tools. Amazon Business takes the buying experience you know and love from Amazon, plus tools that help you save costs and make insights-based decisions.

Ready to bring your visions to life? Learn how at AmazonBusiness.com. Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build a financial roadmap for the future while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more.

Bloomberg Audio Studios. Podcasts. Radio. News.

Welcome to the Daybreak Asia podcast. I'm Doug Krisner. So President Trump's tariffs will remain in place, at least for now. That's because a federal appeals court has stayed a ruling, one that was issued late yesterday by the Court of International Trade, and it found the tariffs to be illegal. And the court said the president overstepped the use of the International Economic Emergency Powers Act to justify them.

So in allowing these tariffs to remain, the Federal Appeals Court said it needs time to consider challenges.

For a closer look at what's happening with the tariff story, I'm joined now by Bloomberg Markets Live strategist Mary Nicola, who joins us from Singapore. Good of you to make time to chat with us, Mary. And there is so much to talk about when it comes to tariffs. Can you begin by giving me a sense of what this appeals court decision has done and what it is set in motion? Yeah, I think initially when actually when the ruling came out, there was a great deal of spectacism. And we wrote that a

quite a bit on the blog because of the fact that we knew there would be a lot of tit for tat and back and forth between the Trump administration and the courts because of how important they have seen tariffs, not only for trade policy, but also for the impact and for as a tariff as a revenue generator as well. And we heard similar comments from Scott Besant, the Treasury Secretary this

for my morning, essentially. And what I think overall is it just adds to the policy uncertainty. So a lot of what was fueling the sell America trade was because of policy uncertainty. And I think that just doesn't go away, but just adds fuel to the fire. Because if one thing we know for sure is that it's likely to drag on, and even if it goes to the Supreme Court, there's still the possibility, as we've seen from previous precedent by the Trump administration,

administration that it gets ignored. - It's very interesting because the data is now beginning to reflect

the price that the American economy is paying for these tariffs. If you take a look at the GDP revision today that we had for Q1, negative two-tenths of one percent overall. And you referred to the fact that Scott Besson, the Treasury Secretary, was making comments very recently. He told Fox News that a call may be required between President Trump and Chinese President Xi Jinping

in order to reach a trade deal because in his characterization, these trade talks with China are a bit stalled. Do you think Beijing is going to take advantage of this situation at all? We have to keep in mind how China is and it always plays the long game. So it's always going to act, obviously, of course, in its own interest.

And I think what we're going to see out of China is just, especially when we saw the exceptionally punitive tariffs that the US had put out on China and then a quick renege as well. So that combination and that what they saw has also set a precedent and indicated to other countries that they should do something very similar. So I think in general,

Of course, for China, it's always about what is best for China, not taking into consideration really what's better for the United States. And of course, they're going to act in their own interests. So overall, I think what we're going to still see from China is just a long drawn out process, similar to what we saw from Trump 1.0 and how...

we saw an actual deal wasn't signed till 2020 when we started the rumblings of the trade war at the very beginning of his administration in early 2017. Let's not forget the fact that there are many trade negotiations happening right now. We've got Japan, South Korea, Vietnam among the countries in Asia that are at the negotiating table right now trying to hammer out agreements.

So I'd like to change gears if we can right now and talk a little about the inflation story in Japan. I'm looking at a much stronger yen right now at around 143.80. We're up against the greenback by around three-tenths of 1%. It seems like

A hot print on Tokyo CPI is driving a lot of this price action. Is that the way you're seeing it? Yeah, absolutely. I think there is, it was stronger, it was an upside surprise on core inflation and there was an upside surprise on the, what they describe as core core, which is ex-food

and energy. So I think there is and that's what is keeping the market jittery especially the bond markets where the BOJ is sitting on the sidelines and has paused rate hikes because of external challenges and the external headwinds but inflation is rising and almost looking that it's

becoming unanchored. And then, of course, you have the combination of weaker data. So that stagflationary environment is bad for bonds, but it's also going to put a lot of pressure on the BOJ to react. Is that the only thing that has been putting upward pressure on yields in Japan right now, or is there something else afoot?

I think there's a concern just generally about debt sustainability. So you have rising yields, and that's also stemming from what we've seen in the U.S.,

There's just a concern of debt sustainability more globally. But then also, there's less, and as a result, there's less demand for longer dated yields. So we had a 40-year auction that wasn't very good earlier this week. We've got a 10-year and a 30-year as well. There's pressure on the Ministry of Finance to reduce issuance given the lack of demand.

Because at the end of the day, if the rise in yields and then you're seeing the global rise in yields is just going to make this ballooning debt that Japan is sitting on just more and more unsustainable. Before I let you go, I want to get your take on what happened today at the White House. President Trump meeting with Fed Chair Jay Powell and basically Trump pushed Powell to lower interest rates.

This is not really a surprise. This is something the president has been wanting Powell to do for some time right now. And apparently Trump said to Powell that,

Not cutting rates is putting the U.S. at a disadvantage to China and other countries. And I'm reading between the lines here and really imagining that what he's talking about is a weaker currency, that that's really what he wants. Is that a fair statement? Yeah, I think so. And overall, we've been getting a weaker dollar largely because of this policy uncertainty, right? Whether it's coming from the pressure on the Fed to cut rates, whether it's coming from tariffs

tariffs, all of that is fueling a weaker dollar. And then of course, you're hearing more and more murmurings about the currency being on the table, especially when it comes to trade talks. We discussed trade earlier and we were talking about talks coming in with Japan, Korea, Vietnam. These are some of the countries where the U S has a, uh,

a huge deficit with and also their currencies remain relatively undervalued when you look at it from a long-term perspective. So the trend for a weaker dollar is very clear in terms of what the administration wants. And that's, again, a way of reading it between the lines. And that's how traders are interpreting it as well. Because of, and we saw that, we will continue to see that, is that the dollar takes the brunt of

of a lot of the moves into a lot of the headlines coming through in terms of just what's happening with the administration and the Fed, as well as what's happening on trade policy. We also heard today from Mary Daly. She is the head of the San Francisco Fed, and she dismissed President Trump's pressure on the Fed to lower interest rates.

Daley basically said, this is part of the job. The Fed's going to do what's right to achieve its congressionally mandated goals. And then when it came to the issue of monetary policy, Daley said, things are in a good place right now. So, Mary, we know that the market is still expecting two rate cuts before the end of the year. Do you think that's about right?

Yeah, I think we have to go back to what is the dual mandate of the Fed. And the Fed is not going to ignore its dual mandate, even if it's looking at uncertainty, the policy uncertainty. So you start seeing cracks in the labor market. The Fed is likely to react. You see maybe softer inflation prints.

they'll think about it in terms of saying that the impact of tariffs is likely to come through. But I think really the key tipping point will come from the labor market. And if you start seeing weaker numbers on a monthly basis, that's really going to get the Fed to perk up and start thinking about cutting rates and being a little bit more

forgiving in terms of easing monetary policy and even forego some of the expectations on inflation as a result of keeping the labor market in a good place. It's always great to talk to you, Mary. Thank you so much. I hope you have a great weekend. Mary Nicola there, Bloomberg MLive strategist, joining from Singapore here on the Daybreak Asia podcast. This is an iHeart podcast.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build the financial roadmap for the future.

while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more. How can you grow your business from idea to industry leader? Bring your vision to life with smart business buying tools and technology from Amazon Business. From fast, free shipping to in-depth buying insights and automated purchase approvals, they deliver everything you need to achieve your goals.

Welcome back to the Daybreak Asia podcast. I'm Doug Krisner. So the U.S. equity market advanced in the last session as it grappled with a number of forces. We did have that solid guidance late in the day on Wednesday from NVIDIA, and today those shares were up by more than 3%. However, the latest data shows that the U.S. equity market has been

on the economy shows a slowdown, essentially, the revised first quarter GDP number contracting at a rate of two-tenths of one percent. Also, the legal uncertainty around the president's trade war and a few questions about monetary policy after the president told Fed Chair Jay Powell he's making a mistake for not cutting interest rates.

For a closer look at some of these issues and at overall U.S. price action, I'm joined by Scott Ladner. He is the chief investment officer at Horizon Investments. Scott, thank you for taking the time. I'm curious, right out of the gate, to get the most important issue for you that has most of your focus right now. Hey, Doug. Thanks for having me on.

I mean, I think it's actually a couple of things. I mean, I think the more medium term, probably more striking and interesting thing is this continued divergence we're getting from between the so-called soft data, I think surveys, ISMs, things like that, and hard data, which is the GDP print this morning notwithstanding, really kind of focused more on labor markets.

which continues to be pretty robust. And so we've got this dichotomy and this sort of this bifurcation between soft data and surveys where consumers and people are just saying that they're really unhappy. They're very dour on the economy. They're very dour on inflation and all these things. And hard data, which just remains to be robust, and especially on the employment side, which is by far the most important of those hard data

I think we're getting a little bit of a clue, you know, continued clue as to why we're getting this sort of bifurcation. And I think it has to do with some of the politicalization of how people feel based on how they voted. You know, the most striking example is just what folks' inflation expectations look like if you're a Republican.

or you're a Democrat post-election, if you voted for Trump, basically, you think there's no inflation. If you didn't vote for Trump and you're a Democrat, you think that inflation is going to be running 9%, 10% over the next year. That's an incredible, incredible divergence and certainly sort of guides

how people are feeling about the world. And I think it really kind of brings in a question how much weight we can put into those soft data, into those surveys, like the conference board and University of Michigan, things like that. And it's been very misleading over the last couple of years to follow that stuff. It's been as

paid much better to listen and follow the hard data in terms of like company earnings and employment data. And I think that's going to continue here, at least for the foreseeable future. So do you think most of that uncertainty or maybe confusion is directly correlated to the tariff story?

That is definitely a big part of it. Yeah, Doug. You know, look, I mean, I don't think anybody really loves the tariffs. I mean, you know, if that is one thing that folks had started to agree on, at least in that first week after Liberation Day, you saw Trump's poll numbers, even in something like Rasmussen, which is really sort of like leans Republican, you know, they really tanked and hit his nadir right as, you know, right, right as Trump basically reversed course and put the pause on everything.

And so that tariff outlook and sort of what it might do to short-term inflation, what it would definitely do to medium-term growth, definitely put a damper on how folks were feeling about their job prospects, their income prospects, and just the overall economy. So I mentioned a moment ago the meeting that took place earlier today in the U.S.,

between President Trump and Fed Chair Jay Powell. Apparently, the President put some pressure on Powell to lower interest rates. We've been here before. That wasn't really much of a surprise.

Right now, the market seems to be discounting two 25 basis point rate cuts before the end of the year. Do you think that's about right? Yeah, I do, actually. I mean, it shouldn't it's not it's not not surprised any of your listeners that Trump would put pressure like that on Powell. He's been very public in his criticism, very public as to what he wants Powell to do. But but the data just don't support what he's saying right now, at least in the very short term.

The Fed is as confused as any of us in terms of what these final economic policies are going to look like. What is it actually going to happen?

And until they get a little bit of clarity, they're just in no rush because inflation has come down. It's still a little bit sticky, a little bit too high, but it's not scary right now. And it's trending still in the right general direction. And the labor market, as I said before, continues to hold up. So time is on the Fed side right now. It won't probably always be that way. But for now, until the Fed gets a little bit of clarity as to what are these policies really going to be and what's actually going to get enacted,

it's really tough to move ahead of what the economic impact would be. So the bond market seems to have calmed down, at least for the moment. But let's remember back a few weeks ago when the House...

was debating the spending bill. The bond vigilantes seem to come out in force and send yields much higher. And I'm wondering whether you expect the same type of price action, possibly, as the Senate takes up the spending bill, and maybe we see a stronger effort at reducing the deficit.

You know, their hands are probably a little bit tied on this, Doug. It's such a thin majority for the Republicans in the House, and they really had to twist a bunch of arms to get to even what they got to. And so, you know, I don't think they're going to be able to do a whole lot to this bill because I think they might end up losing the House. And here's the problem.

The risk for not doing this, the risk for not getting it done is that taxes go up massively. And that is something that the Republicans writ large certainly don't want to happen. And so I think they'll end up finding a way to take a bill that, frankly, not a whole lot of folks are super excited about on the fiscal side. But the alternative is rather disastrous on the tax side.

So I mentioned the solid guidance that we had late in the day on Wednesday from NVIDIA. How are you viewing opportunities in the equity market right now? It seemed like the NVIDIA story helped to push much of the market higher.

Yeah, look, I think that, you know, I still think we are in the mid 90s in terms of the right historical parallels. AI is going to be the big productivity boost globally. The first big one that we're going to get, you know, you get basically one a generation if you're lucky. We're in the middle of it right now.

And so any move for companies that look like they're spending more money, doing more CapEx, trying to figure out how to actually use AI in their businesses can actually drive productivity and margins. And the margin story is really where the rubber hits the road for the equity market. If you get an increase in earnings,

that's sort of a linear impact on your stock, is a linear impact on earnings. You get increases on margins and that ends up being an exponential impact on your earnings ability. And so, you know, as the market continues to sort of grapple with valuations and everything that's having to do with all the uncertainty that's been foisted upon us, you got to kind of like pull back a little bit and just realize this technological change that we're going through and the productivity enhancement capabilities of AI and particularly like agentic AI is just too massive to ignore.

How are you viewing opportunities outside the U.S. right now? Are there any, let's say, maybe in Europe, maybe in Latin America, maybe in Asia?

Yeah, we actually like outside the US a lot right now, Doug. And it's as much a dollar story as it is anything else. We do think that the dollar has started probably a multi-quarter, multi-year downtrend. Nothing disastrous by any stretch of the imagination. We're not in that place at all. But if you do get the dollar continuing to weaken broadly against a bunch of different currencies,

That's going to be a boost towards international equity markets relative to U.S. equity markets. And we all know what the valuation story is internationally. It is a much better spot, a much cheaper spot than the U.S. And you've got a couple of catalysts that are out there in terms of some potential possible resolution someday to this Russian-Ukraine war.

And China, frankly, starting to pivot more towards capitalism than they had over the last five years. You haven't heard the words common prosperity come out of President Xi's mouth for the last couple of years. That's a signal to the market that they really need to embrace private sector to try to win this AI race and this technological race against the rest of the world. Scott, we'll leave it there. Thank you so much. Scott Ladner there. He is the chief investment officer at Horizon Investments. Joining 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 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.

Thrivent can help you plan your finances for the people, causes, and community you love. What makes Thrivent different? Financial services and generosity programs are combined to help you build a financial roadmap for the future while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more.

In business, plans change fast and your brand has to keep up. That's why teams rely on 4imprint for promotional products that deliver. 4imprint offers thousands of options including apparel, drinkware, tech, and trade show gear. Many available with 24-hour turnaround, helping you move quickly and never compromise in quality. You'll enjoy free samples, expert support, and every order back by their 360-degree guarantee. So it arrives right and on time. Explore more at 4imprint.com. 4imprint.

This is an iHeart Podcast.