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It was another volatile day in global markets. Stocks continued to sell off in Asia, Europe, and the United States. President Trump threatened even more tariffs on China. Since Trump announced a raft of new tariffs on April second, more than nine trillion dollars has been wiped off of msci's index of global stocks. But Trump has not blinked. He and his advisors continue to say the economy is in
what the President calls an adjustment period. Here he is talking to reporters on Air Force one on Sunday Runion Place.
Now, what's gonna happen with the market? I can't tell you, but I can tell you how our country has gotten a lot stronger, and eventually it'll be a country like no other. It'll be the most dominant country economically in the world.
The White House says more than fifty trading partners have reached out to try to negotiate trade. Pop among them is Japan, which faces a twenty four percent tariff. President Trump spoke with Japan's Prime minister, and he also talked trade with Benjamin Nett and Yahoo. When the Prime Minister of Israel visited the White House on Monday.
We have many, many countries that are coming to negotiate deals with US, and they're going to be fair deals. In certain cases, they're going to be paying substantial tariffs.
Meanwhile, as the selloff has deepened, a growing number of market strategists have revised down their targets for where the S and P five hundred will be at the end of the year, and economists that several big banks have updated their forecasts. Some of them now expect to see a recession in the months ahead. Libby Cantrill is the head of public policy at PIMCO, and she told Blomberg there's going to be stickiness to these tariffs, and even if.
There are some negotiations and some concessions along the way, I think the direction of travel here is very clear. I don't mean to be sort of a statement of the obvious here, but the tariffs are are going to be high, and I think they're going to be high for a while.
I'm David Gerra, and this is the big take from Bloomberg News today. On the show, the seismic effect President Trump's tariffs announcement is having John Arthuris joins US a senior market editor for Bloomberg and a columnist for Bloomberg Opinion. To help us better understand what's happening and the impact President Trump's trade policy is going to have on global markets in the future, John, could you just describe the
market reaction that we've seen so far. It hasn't even been a week, But how would you characterize what's been happening in global marketing?
Okay, I would characterize it as a horrified response to what is almost universally regarded as an egregious, terrible, damaging policy era. In terms of the what makes this unusual compared to some other sell offs, it's that there hasn't been much of a bounce at any point other than in response to inaccurate news reports. There has been a
straightforward downward line when it comes to share prices. The other point that I think needs to be taken on board is that when you have negative news development for risk, the Pavlovian responsive markets is to buy the dollar to get into US assets, even if the source of the problem is the US. That's what happened after the subprime crisis. That's what happened after S and P downgraded US Treasury
debt in twenty eleven, people actually bought the dollar. They sold the dollar in the twenty four hours after the tariff announcement. That is very concerning as it suggests that people could be losing their confidence in the US as a jurisdiction. That said, as we're recording this, the dollar has been regained somewhat since early Friday, So I would call that something to monitor.
You and I sitting near each other, we were here late into the night on April second, and there was a moment when you and I walked over to the televisions and sort of saw the Asian market's response in real time. What did you get a sense of how broad based and widespread the reaction was going to be as.
The tariffs announced are as widespread as they could be, like ten percent on everybody, which even without the frankly ridiculous reciprocal tariffs, which are just economically indefensible, even without those ten percent blanket tariffs, would have been the biggest change to the global trading order in many decades. This is going to bite out of companies profits, This is going to bite out of economic growth. That means any assets connected to profits or growth are going to have
to be cheaper. We don't know exactly how much cheaper yet, because of all these concerns about exactly whether this policy happens, because of doubts about exactly how other countries will respond. But this is one of the interesting things. Until Friday, volatility as it's normally measured wasn't that high. This was an orderly, let's get out of here response, rather than my hair is on fire or the sky is falling.
A basic question what is driving this sell off? Is it uncertainty about what these tariffs are going to be eventually and is President Trump going to blink or not? Or is it the certainty that this is going to be something that really upends the world as we know it in terms of markets and the economy.
I mean, we've had the uncertainty for a while, and actually markets were fairly calm about it. A big part of this sell off is that evidently very many people had assumed this wasn't going to happen. There is no other explanation for how extreme the market reaction was other than that we really didn't think you were going to do this, mister president.
And why was that? I mean, as you say, he's been talking about it for so long. Why did it seem if you look at Valatilly, for instance, why did it seem to get to Wall Street off.
I mean, he had been talking about tariffs for just as long minus eight years when he took over the first time, and that time around. You can disagree about protectionism versus free trade, but he went around those tariffs in a fundamentally sensible way. He gave dew warning and then he did targeted tariffs on the countries where there was a real argument to be made that they were behaving unfairly, i China, but he didn't go any further
than that. The other critical point from Trump one point zero is that he does care about the stock market. He really didn't like the stock market going down. He set great store by saying how great he was because the stock market was doing well. This is very hard to explain here, but this is a complete inverse.
We got commentary from the headch of manager, Bill Lackman. We got this letter from Jamie Diamond to JP Morgan shareholders. Every year he writes this many dozens of pages long letter. Yes, and in this year, as he said, terrorists will increase inflation and quote the quicker this issue is resolved, the better because some of the negative facts increase cumulatively over time and would be hard to reverse. Yes, how important is the last part.
Of that very if you can find a way to resolve this which suggests to the rest of the will that they can trust the States, and frankly to American businesses that they can trust US government still not to do something this stupid and arbitrary. This isn't just about protectionism versus free trade. This is about how dumbly this
was done. If you can't resolve this in a way that suggests the system still basically works, that we can follow the will of the people, but do it in a way that doesn't ultimately hurt those people produce results that nobody ever wanted. If we can get to such a situation, then this is that much less damaging. If you're in a position, however, where you have the sense that if what they've done already and the fact that it's been allowed to happen means we have to forget
about trusting Uncle Sam from now on. That's very dangerous.
After the break, we turned to the rest of the world and whether we're heading toward a quick resolution or a drawn out trade war. Trade was on the agenda when Israel's Prime Minister Benjamin NETANYAHUO met with President Trump at the White House on Monday. The White House imposed a seventeen percent tariff on Israel. The President wrote in a post on truth Social that quote, countries from all over the world are talking to us, including Japan. John.
In the run up to April second, many investors thought that these tariffs were going to be a negotiating gambit. From what we're seeing from these meetings phone calls, do you think that they are that.
On balance? No, No, I do think he had in mind that there would be negotiations. He's a transactional guy. The reasons I think otherwise, however, First of all, a number of the big investment banks did huge research on what reciprocal tariffs meant. So this is where you break down product line by product line, work out what tariff's a chance to whom.
If you do it for real, it's a lot of work.
If you do it for real, it needs a lot of computing. Parents like mining of a bitcoin, there are tens of thousands of pairs and ubs, which I wrote up about a month ago, came up with this great report which from memory said that if the US moved to reciprocal tariffs with everything on their fifty biggest trading partners, that would increase the overall tariff level by about one and a half percentage points. This is actually not that
big a deal. It also found out that there were a number of countries, including most of the countries in the EU and Japan, that would need to increase their tariff slightly more than the US would do. The US is actually not as hard done by as some other developed markets. So this is the problem that you can have a big negotiation, but the other countries don't have much to offer because they're not tariffing the US very much in the first place. We've had decades of moving
towards a broadly free trade system. But the idea that has been in circulation is that you could get a bunch of other countries agreeing to revalue their currency higher against the dollar in return for Trump making these tariffs go away. That isn't a stupid idea that there is plain common sense in it. You need China to be a part of it. That is going to be very difficult if you don't have China as a part of it.
There's not much point, and you probably want to start from a basis where people's electorates are going to be okay with you doing this.
There is this old sar that China has the capacity to weather events over a longer time horizon than say the US does. How do you see them responding to the incredibly sizable tariffs that the president has put in place, others that he's threatened. What is that government that economy able to do in the phase of that.
Yes, China is prone to long term thinking. That said, actually, the Chinese Communist Party in recent years has actually been pretty opportunistic and reactionary. If things go wrong, it will, it will weave, it will change. What has happened so far is they can spend a lot of money. They've been doing that and it hasn't necessarily helped, but they can try doing it again. Thanks to the lack of confidence in the Chinese economy to grow, you can borrow
very cheaply. If you're the Chinese government, one and a half percent two percent yields, which is extraordinary. They do have control over their currency. There are some limits on that control. It does have some of the attributes of a normal traded currency, but not all of them. They have they've decided they're not allowing capital to flow fully and.
They're not wringing their hands over central bank independence.
Oh and so you have seen I think you can call it a warning, a shot across the bows. The yuan is still not at its weakest. It's like there's a ceiling that it has come and approach two or three times and bounced from. It's approaching it again. We've just had the sharpest devaluation in the in the yuan in some months. I think that's a warning sign with guys,
we can weaken the yuan if we want to. We haven't been doing that because for we've been kind of agreeing that we left we took things too far in the early years after China joined the WTA, which is plainly true. By the way, if they want to, they can make their currency much weaker again, and that will be a problem for the States. Less of a problem than it was when China was substantially all of the global growth fifteen to twenty years ago, but a problem.
The question that has to reside over China is just that their economy isn't the perpetual growth machine that it was. They are not able to weather this as easily as they did in the past. This will hurt. At the moment, it appears that their response is going to be we will spend more money here, we will really attack them back, and we'll see if we can muddle through.
The message that we seem to be hearing from European policy makers is there is a keenness to negotiate here, but they're not going to wait forever. What does their strategy tell you about their approach.
It's a very difficult situation for Europe because the European economy is not in a good place. The problem they have is that they don't, in fact have all that much to offer, because despite what you might have heard, European Union does not put particularly big restraints barriers on trade from the US. They don't have much to offer
that way. There has been and this is a very intriguing and sensible possibility, the notion that this becomes a big transaction in which they say, Okay, we're going to buy x amount of liquefied natural gas from the US, or we are going to rearm as you ask to, and we're going to buy it all from Lockheed. Those are variance of those things are possible, but I would caution that the way that the administration has gone about things in the last three months makes it really hard
for European leaders to do those things. The last time I was in Britain and when I was in Germany, Donald Trump and JD. Vance have made themselves very, very unpopular. This is not normal. There is a degree of anti Americanism in Britain and Europe. Yes, this is not like that. This is something qualitatively different that does make it harder, not easier, to make a deal.
Let's wrap up here by returning to Wall Street, and I wonder, as you see strategists rethinking there s and p forecasts, and economists uttering the word recession more than they were a few weeks or months ago, what that makes you think about the path forward or how Wall Street sees the path forward.
I think Wall Street still sees the path forward as being that these towers don't last somehow or other, and that we return to a path that is inferior, from their point of view, weaker for growth than it would have been that it was likely to be twelve months ago. The reason we haven't seen even more of a sell off than we have. Is a belief that this will make tax cuts or at least continuation of the first Trump term tax cuts, even more important. It will make
deregulation even more important. It will light a fire under Republicans in Congress to make sure those things happen. But ultimately there is a belief that this cannot hold and that there will be some kind of a climb down. They don't know how it's going to happen. There's a degree there is enough uncertainty about how exactly the climb down will happen and where it will end that you don't have calm in the markets, that you're not going to get stability in the markets. But there is still
an ultimate belief that that's going to happen. If you look at the Fed Fund's futures market, there is confidence that the Fed is going to be cutting by a full percentage point this year, even though j. Powell just said inflation looks worse than it did and I'm in no hurry to cut, but you would have thought would have been a pretty good reason not to be betting
on a percentage points worth of cuts. But there is a belief that this is going to do economic damage and the Fed is going to have no choice but to cut. And there is also a belief but it doesn't appear to be about the stock market. It will ultimately about polls and Republicans in Congress asserting themselves. But there is also a belief that politically there is a level that will force Trump to change his mind to all.
To course, let me take advantage of the fact that you are a columnist and you have the lattitude to opine and play clairvoyant. How long does this last? How long does the sell off gone?
It lasts until there is some clear sign that the tariffs has announced last week won't happen as announced. That could be because a few big countries say they're going to make deals or prepare to talk in a way that could allow a backtrack why without losing face for the administration. It could be because some of the moves
we've seen in Congress actually have an effect. Or it could be I think this is highly unlikely because the White House comes out and says we're not doing this, or we are announcing a delay, but we need some clear sign that this isn't necessarily going to happen. The reason we got continued to sell off some Monday morning was because the administration dug in on Sunday when they could have put up suggestions that they were that they
were ready to talk. But in terms of a stabilized bottom, a return to some kind of normality in marketing, it's where you could feel comfortable investing. You need something to happen to change the policy, Essey, It's been announced, John, Thank you very much. Thank you.
This is the Big Take from Bloomberg News. I'm David Gura. This episode is produced by Rachel Lewis Chrisky and Alex Tie. It was edited by Patty Hirsch and Sid Verma. It was fact checked by Adrian A. Tapia and mixed and sound designed by Alex Sagura. Our senior producer is Naomi Shaven, Our senior editor is Elizabeth Ponso, Our deputy executive producer is Julia Weaver, and our executive producer is Nicole beemster Borg.
Sage Bauman is Bloomberg's head of Podcasts. If you liked this episode, make sure to subscribe and review The Big Take wherever you listen to podcasts. It helps people find the show, thanks for listening. We'll be back tomorrow.