Daybreak Weekend: Nike Preview, TheCityUK, China Eco Survey
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and a look at earnings from retail giant Nike. I'm Tom Busby in New York. I'm Caroline Hepka here in London, where we're asking if financial services can deliver for the UK and what the city needs to thrive. I'm Doug Krisner looking at what it will take for an economic recovery to take hold in China.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App. ♪

Good day to you. I'm Tom Busby, and we begin today's program with some key economic data in the U.S., personal consumer expenditure price index for May on Friday, and also we hear from Fed Chair Jerome Powell as he testifies to Congress about monetary policy. For more on what to expect and how it could impact Fed policy moving forward, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent.

Well, Michael, let's get the PCE out of the way. Then we'll talk about Powell. This is the preferred measure of inflation for the Fed. So what are you expecting to see for the month of May? Well, our economist survey shows that people on Wall Street tend to think that we're going to see prices go up a little bit to the PCE price index today.

to 2.3 from 2.1 and core 2.6 from 2.5, which would fit with kind of the pattern of what's been expected that we'll see an increase because of tariffs. But it isn't clear that that's necessarily going to happen because we saw the milder CPI and PPI. There was some tariff-related increases

increases in some sectors, but not as broad as people thought. So it'll be interesting to see what comes out of that. We also get the income and spending numbers. And income after a big rise in April is going to be only a small rise, two-tenths of a percent for May, spending two-tenths of a percent, same as for April. So consumers are

hanging in, but not overly enthusiastic. And it looks like inflation is in check, at least for now. It's in check, and the Fed is kind of where it wants to be. We saw that from their summary of economic projections last week.

They don't need to cut rates right now for any reason or raise rates for right now for any reason. So they're happy just to sit there. Well, Chairman Powell, though, afterwards did say he's still looking at two rate decreases this year, right? Two cuts. That's what the dot plot shows. But I think if you watch the Fed closely, the way that a lot of Fed watchers are interpreting this is,

they don't have enough information to make a decision. So, based on what the economy is doing right now, they could do two rate cuts. Now, by the time you get to the fall, or the time they might start thinking about rate cuts, you can't do two.

Or maybe you need more because the economy has collapsed. I think the basic message from Powell to reporters, which I'm sure he will repeat to members of Congress, is that there's not a lot of conviction among the Fed people about their forecasts. They're thinking this is what could happen, but not what will happen. Wow. Well, let's talk more about Powell. So he addresses the House on Tuesday, Senate Banking Committee on Wednesday.

What is it going to be like for him? We've seen this theater by President Trump again last week. Trump has been doing this for a while, but the last time Powell testified on Capitol Hill, that hadn't begun, this new round of I will insult you's. It'll be interesting to see if Republicans follow up on that. They will probably give Powell a hard time for not cutting rates because the president wants them to and they do what the president wants.

But it'll be interesting to see how political they get. They're in the middle of the one big beautiful bill, the big budget and tax bill. And the issue with that is going to be that Powell doesn't talk about fiscal policy. And he will dodge that question as much as possible. Both sides will try to get him to take a position that they can then say, well, see, he supports us.

And he will do his best not to comment on that, which leaves monetary policy. And as we know, there's not much going on in that right now. And even lawmakers have to understand, President Trump pushed off these tariffs to July 9th.

for now, could be pushed off even further, most of them, the data that he needs. And he always says, maintains every time, this is all data dependent. Everything I say, everything we do. It could be months down the line, right? Absolutely. The chairman was asked in his most recent press conference, and he said it could be September before we have any real indication. We'll get the June data in July, July data in August.

that might give them a better idea of which way the economy is going, which way inflation is going, and which way the unemployment rate is going, which will be their proxy for how the economy is doing. It puzzled me just on Friday. We heard from Fed Governor Christopher Waller, who told CNBC that he doesn't expect tariffs to boost inflation significantly. But

But he also hinted we could see an interest rate cut at the July meeting, which is the end of July, 29th and 30th, right? Does that puzzle you as much? It doesn't puzzle me coming from Chris because he's been sort of the dove on the board and the one who is most certain about what he thinks will happen, which is that we will get a one-time rise in prices because of tariffs, but it won't be continuing, so it won't be an ongoing inflation problem anymore.

He was asked about July, and I think that's always important to put that in context because he didn't volunteer the idea of July. He was asked, is it possible? And he said it's possible, at least as far as he was concerned. But he added he didn't think the rest of the committee would go along. So I don't think that's a realistic possibility because they'll have the June inflation data, but that's it. They won't have anything beyond that.

So they'll still be flying pretty blind. Well, May PCE is out this coming Friday. We hear from the chairman of the Federal Reserve on Tuesday and Wednesday testifying to Congress. And our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent.

We move next to corporate earnings with fourth quarter results from Nike, the world's biggest sneaker and sportswear maker. Those results out after the closing bell on Thursday. For more on what to expect, Nike's turnaround efforts, and how the Trump tariffs may already be impacting the company, we're joined by Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence. Well, Poonam, thank you for being here. So,

What are you expecting to see in Nike's fourth quarter results? And have we already begun seeing tariffs and the broader economic uncertainty affect sales and its results?

Thank you. So for Nike, I think we have two things going on, which is why you won't necessarily see the impact of tariffs directly in the fiscal 4Q results that they're reporting. So two things are going on. One, we're expecting a steep decline in sales. Sales are going to be down in the mid-teens across all regions and down even more in China by 20%. So how

How do you factor in what's happening with tariffs and all of this? It's kind of going to get muddled, but the real impact from tariffs is going to be seen in their fiscal first quarter guidance for 2026. Are tariffs impacting them is what we're looking to see. We do know that they have instituted price increases across items that are over $100.

So we're waiting to hear from them how that's been received, what impact they have from tariffs. There will be some impact, undoubtedly. But we think Nike can weather that with these price increases. Now, Nike has had a lot of missteps the past few years. A botched direct-to-consumer sales rollout, a lot of management changes, a restructuring that led to hundreds of layoffs.

And boy, have we seen a slump in sales and a tumble in shares. Is its new CEO, Elliot Hill, who came out of retirement last year, is he the guy to really turn things around?

He can definitely do it in our mind. It's just a matter of timing. Right now, you know, we had expected originally the turnaround to take hold in fiscal 2026, the back half of it. But with tariffs and consumer uncertainty going into the back half of this calendar year, I think it prolongs the turnaround a little. That said, is he doing the right things to get the turnaround going? Absolutely. He's focused on what matters in retail most, and that is product.

He is bringing back innovation in a more meaningful way, not just a new wave of colors. He is rationalizing inventory. Inventories were not down as much as we'd like them to be given the sales declines that we've seen, but we do expect them to continue to decline through markdowns and that will take time. And as soon as that happens, I think that's when you can begin to see the turnaround take shape.

And sales start to go up. Now, Nike makes about half its footwear, nearly a third of its apparel in Vietnam, a good chunk of it in China, the U.S. and Vietnam are in talks on a trade deal. But boy, we have this looming deadline, July 9th, for higher tariffs to kick back in. Do you know where it stands now and what that could really mean to Nike? So if we go back to the April 2nd tariffs, that is a big...

big headwind for Nike and really everyone else in the apparel space and retail because they will not be able to offset

that level of tariffs with cost efficiencies or with price increases. Which was 46%, right? That's what it was high. Yeah, exactly. It's just too high. They can't do that. But if they stay at 10%, right, if there's an extension or if there is an agreement that 10% is what we're looking at, I think they have the checks and balances in place to weather that with the select price increases that they've already talked about.

And also Vietnam, I would imagine in the eyes of the Trump administration, a very favorable alternative to having all that stuff made in China. Well, they've already done that. Yeah, I mean, I mean, they've done that. If you look at their sourcing exposure, a lot of what they make is already in Vietnam. China is in the teens. So do they need China?

China for the US, you know, I would argue that a lot of the inventory that they make in China could be used for regions outside of the US Nike does have a global presence. So they don't need to ship everything they make in China to the US. And Vietnam and the other countries matter a lot more. If tariffs do rise, notably in Vietnam, it is going to be hard for

any footwear retailer to offset that headwind because Vietnam is where the shoes are made largely. Now, does Nike have an image problem? Its sales have dropped almost double digits in the last couple of years. You talked about innovation and they are always innovating products. They have this new Air Max Phenomena sneaker, low for hybrid. They're 3D printing. I mean, they are always innovating.

But is the brand suffering? So Nike's still the leading footwear brand globally. They definitely have not lost their lead and they still have the mind share with consumers. We ran a survey last fall and Nike was a clear standout.

the number one still brand when you're thinking about shopping for sneakers. But what's happened in the last five years, especially through the pandemic, is that Nike pulled out of wholesale in a meaningful way. It's gone back in now, but when it pulled out, it left open shelf space for newcomers or emerging brands like Hoka, On,

others. It's all come back full circle and we're focused back on product. I think as long as the product pipeline stays fresh and true and real, not just another color wave, they can reignite demand. Nike, fourth quarter earnings out after the closing bell this coming Thursday are thanks to Poonam Goyal, Senior U.S. E-Commerce and Retail Analyst at Bloomberg Intelligence.

And coming up on Bloomberg Daybreak Weekend, we'll look at whether financial services can deliver for the UK and what the City of London needs to thrive. I'm Tom Busby and this is Bloomberg.

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.

Up later in our program, a look ahead to Bloomberg's China economic survey. But first, in the coming days, the great and good of the City of London descending on Westminster for the City UK's annual conference and their aim to chart a path for business leaders and politicians to work together in the pursuit of economic growth. But can the UK keep up and present itself as an attractive investment destination against an uncertain backdrop? For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom.

Tom, 2025 kicked off in less than ideal style for the London market, with research suggesting the Stock Exchange had lost 25% of its companies over the last decade. That was in January of this year. Since then, several important

businesses have shifted their focus away from the city, including the money transfer firm Wise, which announced this month plans to shift its main listing to the US, citing extra liquidity and visibility.

The latest blow to London comes after months of US markets steadily picking off London's prize listings one by one. The former FTSE 100 constituent, the construction firm CRH, Ferguson Enterprises and also Flutter Entertainment have gone

all relocated. The exodus is particularly acute in Britain's tech sector. Artificial intelligence pioneer DeepMind was acquired by Google in 2014. The chip designer Armholding sold to SoftBank in 2016, which really set the tone.

Recently, UK regulators and lawmakers have tried to make it easier for fintechs to raise the money that they need here, looking at dual-class share structures, also private share sales. And the Labour government's been pushing pension funds to allocate more capital to private markets and to the domestic economy.

London's prospects, though, are something that my colleague Francine Lacqua has been discussing with Blackstone CEO Steve Schwarzman. He sees the city and the country's potential. We started here with no one. We now have 650 people here in our office in London. We're building a very significant new headquarters in Berkeley Square. That's probably going to be the nicest office building that's been built.

built really since the wonderful Bloomberg headquarters here in London. So that's worked out. We're in a lot of different business lines and we have a very positive view of the future here in Europe. We think we're going to be able to invest

$500 billion over the next decade in Europe. We see it as a major opportunity for us. They're starting to

change their approach here, which we think could result in higher growth rates. So this has worked out amazingly well for us. That was Bloomberg's Francine Lacroix speaking to Blackstone CEO Steve Schwarzman. So can London make good on its prospects? It's something I've been discussing with Bloomberg's European Asset Management Reporter Leo Kensherpa and our UK Economics Editor Julian Harris.

Leo, thank you so much for being with me. So firstly to you, could you talk us through the landscape then? Companies have obviously been leaving London. Are we at a tipping point? Why are they going? There's been this issue rumbling on for a long time. This year, it seems quite acute. Yes. Thank you, Caroline. So if we're just focusing on the stock market, it's really fair to say that London's equity market is

is really seeing a deep and structural malaise. And it has been going on for years, actually. But just over the past few weeks, if you remember, Wise, the money transfer firm, the one big London-listed fintech star, said it will move its primary listing to the US. And just a week before, we had reports that Chian, the Chinese fast fashion company, which

you know, was expected to have a valuation in the tens of billions is now looking to list in Hong Kong instead of London. So that's two really prominent recent examples here. And there's a couple of underlying problems to that. First of all, it's weak demand by UK investors. You know, the one example that fund managers always bring up with me and also asset management executives is

In the US, everyone talks about the stocks they hold in their 401k savings plans. And in the UK, that's just not the case. And that's also true for Europe, by the way.

And then the other issue is that pension funds also don't really invest in UK stocks because they prefer fixed income and government bonds. And this is driven by accounting regulation that was introduced in the 2000s and essentially forced pension funds to move out of equities. And the trend was then also reinforced by millions of workers retiring, millions of workers who would get defined benefit pensions. And as a result, pensioners

pension funds moved into even more government bonds to make sure they have these guaranteed cash flows to match these liabilities to pensioners. And yeah, so these are some of the structural problems facing the UK stock market. And this has led to the perception that listed companies in the UK face low valuations, low liquidity, and also a high takeover risk. And this has led to this visual cycle that fewer companies want to list,

Valuations fall further and investor interest has dried up pretty much. Well, the Labour government is trying to take steps and so did the previous Conservative government. Also, they've taken a number of steps to try to...

turn this kind of tanker around and return the London Stock Exchange and London as a kind of financial centre, you know, back to the top, I suppose. And also, I'll just give you a quote from David Schwimmer, who is the chief executive of the London Stock Exchange Group, who says that if you take a look at the companies that have gone from the UK to list in New York over the last 10 years, it's about 20 companies of those four are trading up, nine are delisted, and the rest are trading down.

So he gave that quote to a newspaper in the UK. I mean, it's not really necessarily a silver bullet for businesses to list in the US, is it?

Not necessarily. There's certainly data that show that basically your valuation doesn't necessarily go up when you list there. I think it's still fair to say that the US offers what London increasingly doesn't. It's high liquidity. It's growth-oriented investors, investors who want to take more risk, better analyst coverage and performance.

better valuations as a result on the whole. And of course, there's this argument around executive pay, which is definitely higher in the US and of course helps you attract more and better leaders.

Yes, talent is also a big issue, isn't it? Julian, let me bring you into this conversation. It is a huge issue, isn't it? The government wants economic growth. They have targeted the financial services sector as one area that could deliver that, although they've talked about a lot of sectors doing that. It is hugely important for Britain to get business investment, to get companies listing. What do you think?

It really is, yeah. I think Reeves has done well to target the city. Obviously, she has a former city lobbyist on her team, which is not always the greatest political look, but it doesn't necessarily make it a bad thing. We have a bit of a political habit in this country.

of really liking our industries that are smaller or less productive and politically giving a lot of weight to areas like fishing, for example. Whereas the areas that do well, like finance in the city, of course, life sciences, like the arts, like high-level tech, these are often not...

sometimes can be politically neglected or can even be politically very unpopular. So I think in a way, Reeves has done, I think she's caught the moment well. I think the financial crisis is far enough in the past that she has been able to give this sort of

positive focus on the city and indeed it's one of the only areas where she's been well received in the last year when she went to Mansion House it went down fairly well whereas her other meetings with businesses have not gone well given the £26 billion gap

tax hike that she imposed on them. And that seems to have had its own economic effect. Obviously, the economy started the year very well, but then in April, it went backwards. And the effect from that tax hit seems to have had a big effect on jobs.

Of course, what's happening with Trump and his tariffs has not helped either. But all of that just shows how important it is that Labour does target the areas that could drive growth and could improve productivity. And the city is certainly one of those, at least in theory.

And that's why the City UK event in some sense is very important because it is financial services across the UK gathered together in Westminster, so the heart of politics, which I think is quite interesting. Leo, in terms of how the UK is faring then as an investment destination or as a place to list a business versus neighbours in Europe, does the freedom from the EU come with any perks? Yeah, that's a very good question. I mean,

By and large, the sobering answer is that executives in the city still see it as a net negative. Just over the last few weeks, we had the government laying out new immigration rules that will make it take 10 years for immigrants to receive preferential status, independent leave to remain. And it used to be five years previously. And of course, this uncertainty really piles onto highly skilled workers and makes it harder for finance firms to attract talent.

One example I would like to point out here is the insurance industry. It's a quarter of the city's economic output, but of course, arguably less glamorous than say investment banking. And it makes it even harder for them to attract talent in the city. That's what they keep telling me. And if you're looking for

I think, or Brexit dividends, as the government would call it. I would point out Keir Starmer's early trade deal with the Trump administration. I mean, it was the first deal sort of sealed by Trump following April 2nd and March.

I think that can be touted as a win. In terms of how the government is trying to fix what is still a slow-moving UK economy, Julian, what are the factors here at play? What's the thinking at this point?

Yeah, that deal is, I mean, it's positive that it exists. I think this is what Andrew Bailey says and he's right. But there is always a danger in overstating it. It is still an extremely thin deal. There's still a huge amount of uncertainty over steel, which was supposed to be the main point in doing the deal in the first place.

So, I mean, there's a vast amount in general for the government to fix around the economy, of which I think they're aware. Our productivity is still absolutely abysmal. Leo Kentscherper and Julian Harris, thank you so much for both being with me. I'll be reporting live from the City UK conference in London in the next few days.

In the meantime, though, I'm Caroline Hepkin. You can catch us every weekday morning for Bloomberg Daybreak Europe beginning at 6am in London. That's 1am on Wall Street. Tom. Thank you, Caroline. And coming up on Bloomberg Daybreak Weekend to look at how things are looking in the world's second largest economy. I'm Tom Busby and this is Bloomberg.

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This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. This week, we get a fresh perspective on how things are looking in the world's second largest economy, China. For more, let's get to the host of the Daybreak Asia podcast,

Doug Krisner. Tom, in the coming days, Bloomberg will be releasing its China economic survey. Now, to be fair, a great deal is already understood. The Chinese economy is struggling. Yes, there have been some upside surprises in recent official data. I'm thinking here of the latest retail sales reading.

But the property market is still a massive problem, and the story on deflation has been persistently worrisome. Joining me now for a look at what's happening on the mainland is Bloomberg's Eric Zhu. Eric is an economist covering China and Hong Kong for Bloomberg Economics. It's been a while. Thank you for making time to chat with me. What's so curious to me is that the government has been painfully aware of all of the issues that

plaguing the economy. Steps have been taken to provide support, but still something is holding a recovery back. Do you have a sense of what that may be, Eric? Yeah, thank you for having me. So yeah, I think that's a long-standing issue and many people are still struggling, you know, trying to understand why, you know, despite some stimulus effort from the government, but the economy still looks struggling. I think the

Fundamentally, I think even from observations on the ground, I think many businesses, many households, it's still the crucial thing in missing that they don't have a strong sentiment or consumer confidence or business confidence, whatever you call it.

I think it's still quite, you know, it's not there yet. I mean, they think now the government is definitely, you know, pivoting to more growth support. But from what government is doing or saying, it doesn't sound like that, you know, they are making whatever it takes. Okay, the stimulus is coming, but it's not really that massively changes things. I mean, it's more like they are putting a floor on the recovery rate.

we want like five percent growth we just don't want it to slide but it's it's we're not going to you know make whatever it takes to to lift the growth to like a 5.5 or 6 so it's not exactly like what the market or you know many people are expecting i think they're

They're more like managing some crisis management mode. So they don't want to have a crisis. They want to prevent a sharp slowdown. But it's okay with 5% growth. The economy is still holding up as long as it's not a crisis.

Do you have a sense of the degree to which the trade war with the U.S. has really been impacting sentiment? You talked about the weak sentiment among consumers, but I'm going to imagine that businesses have been adversely impacted by the trade war. I think it's probably not as broad as many offshore would think. I think definitely it's affecting some business, but I think it's more about export-oriented business, especially those more exposed to U.S. markets.

But I think for many business which may not directly be exposed to trade war, I think they still feel the same issue. Even without trade war, the economy can be still struggling. The housing sector, the weak consumer sentiment. I don't think the trade war has a big influence on that. I think it's more about...

the domestic structural issues and they are not expecting the government to quickly changing that. So I don't think even a tariff of truce or some trade framework with the US would help a lot of that. Of course, it's going to ease some pressure on the external front, right? The exports might be slump less than without trade war, but I think...

still the domestic issues dominate for many business who are not directly exposed to trade war. You mentioned the property market a moment ago, and I remember the recent data on home prices, both new and used home prices. It seems like the price declines have been accelerating a little bit, and I would imagine that that's

very concerning to Beijing. We don't read too much on the official housing prices because I think it's sometimes different from what we observe on the market, but we don't really have very good data set to measuring the actual price movement. But in any case, we think

you know, the maze housing sector data, you know, sales, investment, prices. It does seem like suggesting that the stronger support since the last quarter of last year is beginning to, you know,

waning off, right? So it does raise some concern that the government needs to do more, you know, to keep the recovery momentum going. I mean, there's still some sign of progress if you look at the jobs in Australia

home sales this year is definitely, you know, smaller than last year, right? So it shows some progress on the policy support, but it's not strong enough. I mean, given its momentum is showing some signs of weakening April and May, I think the government needs to, you know,

prop up with even a quicker delivery of the existing measures or come up with some new supportive measures to keep the momentum going. When you look at the flow of foreign capital, how is that moving? Is it really trying to leave China right now or is capital coming into the economy?

I think ironically, actually this year, the RMB, the yuan currency, I think at the beginning of the year, most people are expecting a depression of the yuan this year due to the US-China conflicts, probably a trade war is happening. But actually, I think if you look at movements so far this year, the RMB currency is actually appreciating against yuan. I think it's more related to some

you know, sell America so people lost some confidence on the U.S. dollar, et cetera. But I think overall, now given the currency is actually stronger than many expected, I think this actually is helping, you know, the capital pressure because especially those exports, we think recent data show that actually many exports, they're willing to settle, you know, the U.S. dollar because they are worried maybe the U.S. dollar

and be well appreciated even further. So I think to some balance, this actually eases some pressure on the China side, I think, about capital outflow. We've been very aware for some time about the weakness in the labor market, especially for young people on the mainland. And I'm wondering how that's beginning to affect them

as they look at the economy, the lack of opportunity, how is this translating and how is it kind of moving through the economy, their feelings about the outlook?

I think that's for me and for many economists, I think that's actually a quite big issue because it's definitely actually affecting, you know, the young people's demand for many things, including housing, you know, including because they have less desire for even marriage, for even having a baby. So actually it's

affecting lots of demand in the future, right? So probably the contraction in the aggregate demand will be more than we had expected given the lower desire for young people about the future. So that's probably posing a big threat

on the long-term economic outlook. They might have some new demand. You think about the booboo, those kind of things that's because young people probably shifting the traditional demand to some new, the so-called emotion consumption, right? They care more about how these things can satisfy that emotion.

but they care less about a new family, new children. They don't want those. So I think this way you have to rethink about what's the future structure of the economy, what's the long-term prospect because we have definitely have some part of demand will be contracting very quickly. Although there could be some new demand being created, but I don't think that's going to offset the contraction of the traditional demand

heart. Eric, we'll leave it there. It's always a pleasure. Thank you so much for your time and insights into the Chinese economy. He is Eric Zhu. He covers China for Bloomberg Economics. And we move now from economics to geopolitics. In a recent piece for Bloomberg Opinion, columnist Karishma Vaswani focused on the Trump administration's review of the AUKUS pact,

This is a security arrangement between the US, the UK and Australia, and the review is rattling one of Washington's closest alliances. I had the chance to catch up with Karishma earlier this week. At the heart of this arrangement was an agreement signed by President Biden in 2021 that would help Australia develop a fleet of nuclear-powered submarines

over a 30-year period. And it would involve both the US and the UK. America would provide superior technology. The UK would help Australia build these nuclear submarines. But ostensibly, it was also a way to counter China's growing influence in the Indo-Pacific. And at the time when it was announced, China was very upset. It saw it as another example of the

American supremacy, the desire to maintain that in the Indo-Pacific and as an attempt by the United States to contain China's influence and military and naval power, which has been, as we've talked about on your program before, growing rapidly over the last few years. But now, given that the White House has come out and said that they're putting this agreement under review,

They're going to look at whether AUKUS is aligned with the president's America First agenda. I'm quoting from the Defense Department there. And, you know, that's really sort of making a lot of allies and partners in the Indo-Pacific nervous, not least the Australians themselves, who are really counting on this commitment from the United States. So how do you think this is being viewed in Beijing?

Oh, I think that this makes China very happy because, you know, on the one hand, there are now real concerns over whether AUKUS will go ahead in its original form. My view is that it will. I think that the United States would...

Even given the Trump administration's transactional nature, I do not think that the White House would allow this security agreement to fall by the wayside. It would be problematic and possibly embarrassing. But I think that there will be compromises and concessions made on the part of the Australians who will feel compelled to do some of the things that the United States may be asking for behind closed doors.

And what that does is play into Beijing's narrative that America first means other countries alone. And, you know, China has consistently positioned itself as the global, sensible, rational leader in the Indo-Pacific, given what appears to be sort of an erratic, you know, behavior, the erratic nature of how Donald Trump does business on the global stage.

And I think that these kinds of agreements and the reviews of these agreements just add credence to that narrative. And even if they're not saying it publicly, because, you know, the Australians have been very quick to sort of defend the review and say,

dismiss it as just business as usual. I've spoken to diplomats who've said to me, well, it's not a great look. And it does mean that countries like Australia are going to have to think and are already thinking about what this means in terms of future alliances. So you're going to start to see, you know, Japan, Australia, South Korea coming together, maybe India as well, to sort of find a way through

working without the superpowers. That is Bloomberg Opinion columnist Karishma Vaswani. You can read her work on the Bloomberg Terminal by typing OPIN, then the green go key, or online at Bloomberg.com slash opinion. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast.

Tom? Thank you, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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