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Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. President Trump's announcement on US tariffs is sending shockwaves through global markets at this hour. Earlier, the President established a minimum baseline tariff of ten percent now that will go into effect at midnight on Saturday, and it will affect roughly sixty nations with the largest trade imbalances with the US.
And the President also announced reciprocal tariffs at rates roughly fifty percent below what foreign countries place on US imports, and those reciprocal tariffs will go into effect April ninth at twelve oh one am. For a closer look, I'm joined now by Sean Donnan, senior economics reporter for Bloomberg News. Sewn is on the line from Washington.
D C.
Thank you for making time for us. Sean, Let's begin with this baseline tariff of ten percent. It'll happen on all US imports. It goes into effect at midnight on Saturday. Was that at all surprising?
Look? I think what was surprising overall about what we've seen today is just the scale of these tariffs. Overall. We will get that ten percent baseline tariff that goes into effect on Saturday, and then a few days later, on April ninth, we will get a second set of tariffs, and these are what the President is calling reciprocal tariffs that will apply to major trading partners like China, the European Union, South Korea, Japan, all of those at much higher rates than that ten percent.
So if you look at why this was much worse than feared, is that because there were simply no exemptions.
I think that's that's it. There have been some exemptions. Canada and Mexico seem to be exempted for the time being, but that's only because they are facing their own twenty five percent tariffs that were announced already by the President
a few weeks ago. And we're seeing some exemptions from further tariffs from other sectors of the economy, like still in aluminum that are the subject of separate tariffs again, but we're not seeing anyone escape this new tariff wall that the President is putting up around the United States.
So you mentioned a moment ago that these reciprocal tariffs do not take effect until April ninth. What's the likelihood in your view that there will be some type of last minute negotiation that may ameliorate the threat, the final threat of tariffs.
It's very hard to say. All we do know that people at the White House were saying they were fielding a lot of calls from a lot of countries looking to get out of these tariffs. We expect that there will be a lot of conversations going on, but the President seems pretty clear that he wants to put these tariffs in place and then start talking. And the question is then how long do they stay in effect? And a lot of people are already expecting these tariffs to
be in place for a long time. I think, look, the bottom line here today is, and this is what President Trump said he was setting out to do, is he is ripping up global trade rules. He's changing the global economic order, and he's imposing his will and his tariffs on imports from everywhere right now. Yes, there will be a lot of talks in the future, but whether
those tariffs go away anytime soon seems unlikely. The other thing that we should mention is, you know, in the lead up to this announcement, one of the things we heard a lot from CEOs and investors was they wanted an end to the uncertainty over trade policy and tariffs coming out of Washington. I think a lot of people tonight are thinking that this is only going to extend the uncertain.
In the case of China, Treasury Secretary Besant was saying earlier he that China will now see a fifty four percent tariff, the thirty four percent announced today on top of the existing twenty percent levy. That seems pretty dramatic. Very quickly, last question before I let you go, the probability of recession? Does it not seem a lot higher now?
I think if you read the notes coming out of economists, and if you talk to economists tonight, all of them will tell you that the odds not just of a US recession, but of recessions and other parts of the world have gone up significantly just in the last couple of hours.
That is Sean Donnan, senior economics reporter for Bloomberg News. For more on Wednesday's tariff announcement, we heard from Treasury Secretary Scott Bessant. He spoke with Bloomberg's and Marie hor Dern outside the White House.
We're going to have the baseline terriffs come into effect first. Then they're reciprocal tariffs, a little bit more of a different rate for each individual trading partner. Are you preparing to negotiate with some of these trading partners before that tariff frey comes into effect on April nine?
Well, I think there's been a lot of discussions, but I think we're just going to have to wait and see what would happen. What I would say and Marie, I would advise none of the countries to panic. I wouldn't try to retaliate, because as long as you don't retaliate, this is the high end of the number, and I think the market could have certainty that this is the number barring retaliation. So we've got a ceiling, and then we can see if there's a different floor.
So you sound like you're ready for a negotiation. A number of these partners. Has the European Union, has China? Has India? Have these countries reached out?
Well, they've all reached out, but it's going to be up to President Trump to see what he wants to do. I think the mindset might be to let things settle for a while. Their terrifts or non tariff barriers have been on a long time, So we'll see where it goes from here.
When it comes to China, they have a much higher rate on this list. On top of that, there's still that twenty percent fentanyl tariff rate. Is all of this coming together to be more than a fifty percent tariff rate for Beijing?
Well, yes, I think it is, and I think it's a combination of things. And you know again that I think China said today that solving the fentanyl crisis depends on taking off the fent mayl tariffs, and I'm pretty sure that's not the way the sequencing's.
Going to work.
They're exporting the precursor chemicals and every every day, every week, every month, Americans are dying and it's going to have to stop.
When it comes to places like China, the President has mentioned he's willing to even look at things like TikTok to potentially do a negotiation. Then when it comes to tariffs, I'm sure you're looking at things like the yu Wan. What's on the table when it comes to this trade realignment between Beijing and Washington.
Well, we have, we haven't started anything yet. We've been busy with the with the tariffs, I've been busy. As we talked about earlier, the tax bills going very well. So I think that we will move toward the bilateral relationship with China now that we've done the multilateral tariffs.
Plans for conversations or a trip to Beijing. Nothing eminent when it comes to this negotiation. April ninth, these tariffs come in place. Do you plan on having negotiations before that date?
Again, I'm not part of the negotiation, so we'll see. I am sure that they're going to be a lot of calls. I just don't know if they're going to be negotiations.
The President had this huge chart showing all of the different rates. Canada and Mexico notably missing on that chart.
Why is that?
I'm not sure.
Sure, Okay, I imagine that it has to do potentially because they're ready in negotiations previously with the twenty five percent. I'm not sure if you saw the initial market reaction, I haven't, so. Equity futures slid on the news. You had talked about how we're in a detox period. Do you feel that we're still in that period or are you starting to get a little bit concerned.
Well, the detox period has nothing to do with the terrorists. The detox period is off this incredible level of government sp that We've had an unsustainable amount of fiscal stimulus and looks that's got to stop. That's got to stop. So, yeah, can we continue weaning ourselves off of that? And as we see private or public sector borrowing go down, private sector borrowing go up, public sector jobs come down, private
sector jobs go up? Is it going to be perfectly symmetrical? Note, but we did see an increase of ten thousand manufacturing jobs last.
Month, So it doesn't concern you today that during the tariff announcement, equity futures sold off when initially they were rallying when the President only announced a ten percent tariff base, and then they fell when he announced the higher rates for things like the European Union in China.
Yeah, and Marie, I've learned not to look what goes on in after hours markets.
Okay, but since the peaks in February, stocks are down eight percent. I think the Nasdaq from it's high most recently is down twelve percent. Though these kind of this kind of market downdraft so far this year is not concerning you, well, look.
In my old business, I was very concerned about market movements, and I'm trying to be Secretary of Treasury, not a market commentator. What I would point out is that especially the nas nasdeck peaked on Deep Seat Day. That so that's a mag seven problem, not a MAGA problem.
Okay, so let's talk about what else you've been spending a lot of your time doing. You have been up on Capitol Hill constantly. You are really working on trying to make sure that this administration can extend the Tax Cuts and Jobs Act on top of that more tax cuts. Right now, how are the conversations going in Congress?
Well, I actually think the most underreported story in Washington, not by Bloomberg of course, is the incredible union enemy unity amongst Republicans. And I think it's President Trump's leadership. But Mike Johnson, with a very narrow margin, issued the reconciliation instructions and then he also passed a clean continuing resolution. On the Senate side, they are very attentive, and I think they may have something done by this Saturday.
That is Treasury Secretary Scott Bessant, speaking earlier with Bloomberg's and Marie hor Dern bringing it to you here on the Daybreak Asia podcast. Welcome back to the Daybreak Asia Podcast. I'm Doug Chrisner. As we continue looking at the fallout
from the announcement on those US tariffs. We heard a moment ago from Treasury Secretary Scott Bessant, and among the points he made, China will now see a fifty four percent tariff thirty four percent just announced that would be on top of the existing twenty five That would be on top of the existing twenty percent levy. For a closer look, I'm joined now by Jenny Marsh, China Eco Gov team leader. Jenny joins from our studios in Hong Kong.
It's always a pleasure. How do these tariffs kind of measure against expectations?
Trump is coming in at the high end here. So I've actually just said this takes the hike to fifty four percent, but Bloomberg Economics says, actually, when you look at the around thirteen percent overall tariffs that China have already facing from the US pre Trump, actually they're looking at more of a sort of sixty seven sixty eight
percent hike tariff right now. So that is above the level that last year economists were saying, you know, would decimate trade between the world's biggest economies after Trump was sort of floating that sixty percent figure on the campaign trail. So we've now exceeded that threshold. It's much bigger, I think, or rather it's the top end of sort of what people were thinking could be possible. But of course, the wrinkle here is when economists last year were saying, okay,
a sixty percent tariff, which is decimate trade. I think Bloomberg Economics said it would cut eighty percent of Chinese exports to the US. They weren't thinking about an environment where the whole world is being tariffed by Trump, and well, China is sort of at the high end of that. Everyone's facing tariffs now, so it isn't like importers in the US can just sort of choose cheaper products from elsewhere because everything suddenly got a lot more expensive.
Yeah, it seems like a full blown trade war at this point. We can talk about whether China retaliates in a moment. I thought it was very interesting that the US has addressed a loophole. It allows packages worth up to eight hundred dollars from either China or Hong Kong to enter the US duty free. But now we were told that's going to end May second, So it shouldn't come as a surprise when you look at markets and see a sell off in shares like Ali Baba ANDJD dot Com. Was that a surprise at all?
Not a surprise because he talked about it in the executive order on the first day, and of course they tried sort of putting this break on the dominimous leepart earlier that they had to sort of lift it because logistically it's very hard to sort of logistics of how you actually impose that. So I think that was pretty expected and so now it's just a matter of okay, how do you sort of how do small companies deal
with that? But when you add that in as well, actually the tariffrate looks even higher than sixty seven percent.
I noticed that today the South China Morning Post was reporting that President she is set to visit Vietnam, Malaysia, Cambodia in mid April. Now we know that all of those nations are being hit by this round of US tariffs. Is this a part of some type of strategy that she has maybe to reconfigure trade relationships.
Yeah, I think the itinerary is really interesting. I mean, the first trip that she takes abroad every year always carries huge symbolism. Last year he chose to go to France, just the European Union is sort of way in these big ev tariffs. This year he's picked Vietnam, Cambodia and Malaysia, and you know, Vietnam and Malaysia sort of these two big countries that have sort of been a key part of the China plus one strategy of sort of rerouting trade to the US to sort of skirt tariffs and
also now facing their own huge levees. I think Vietnam's tariffs were higher than China's. Forty six percent was the reciprocal figure announced today. So this is a big opportunity for She, I think, to sort of go to these countries, make trade deals, but also just sort of present China as the grown up in the room. Vietnam have been
very carefully balancing its ties. You know, it had hosted Biden in I think it was twenty twenty three and then very quickly hosted shooting, paying for a visit and sort of playing this sort of playing both sides equally. And I think now this gives China an opportunity to say, well, actually we are the best part and so this trip. I think the timing of it is very interesting.
I'm noticing weakness in the currency, but I would imagine that the BBOC does not want the Chinese you want to weaken greatly in the face of this trade war. Right now, offshore, I think we're trading around seven spot three one seven zero against the greenback. Fair statement to say that the PBOC is going to try to keep the one as strong as it can under the circumstances.
Yeah, I think that's the strategy that we have seen so far, and they don't want to invite any more criticism as well from the Trump administration.
In terms of the negative impact that this is going to have on Chinese economic growth, particularly as it relates to the exporters. What are you hearing about that.
I think it's an interesting reaction this morning from economists who are saying they're sort of seeing a hit on average of sort of a one percentage point to GDP growth this year, but they're not downgraded in their GDP forecasts because I think everyone thinks China will still hit five percent what's going to have to happen now is a massive sort of spending stimulus to fill the whole that is going to be left by the hit to exports to the US, and I think that's sort of
what people are going to be looking to. There's the external strategy of does she get on the phone with Trump? I think he's extremely unlikely he's going to try and call him before that eight point nine deadline. Is just on how China does things. They're not going to respond
to strength with weakness. Much more likely they focus on shoring up their alliances trade partnerships around the world, and they've been very careful to save stimulus for exactly this moment, and now they have the chance to sort of roll out a big support package.
Jenny, I want you to help me look ahead to the inflation data that we're going to get for China in the coming week PPI CPI. We know the deflationary pressures that the economy is facing. Is that going to be underscored by these data points or is something beginning to shift right now?
The CPI at the beginning of the year is pretty bad, even when we take out the seasonal factors. It went down to negative point seven. The survey is for it to come back up to zero, but still hovering right on that zero point. You know, China is still facing a lot of deflationary pressures and this is only going to make it worse. So I think we're not seeing
those go away. I mean that being said before today, before Liberation Day, we has the economies upgrading their expectations for China this year because the economy has been looking pretty strong on other sort of aspects. The consumer is stirring, these talks of the property market finally bottoming out. Animal
spirits are up. So if China can spend enough to compensate for Trump's actions and then actually gets a bit of a Trump bump from other countries, now the sort of turned to China and away from the US, you know, this might not actually be so bad for Beijing.
Do you think. Can you imagine, let me put it that way, that sometime between now and the ninth of April, when the retaliatory tariffs are set to kick in, that they're will be some movement here between Washington and Beijing in a positive direction.
I don't think there will be, is my hunch, because I think you had one Ye saying just this week, you know, in order to have talks, those the sort of the unfair fentanyl tariffs have got to come off. And when Senator Dane's left Beijing, he said, in order to have talks, China has to stop the fental smuggling. Neither of those things are going to happen in the next sort of seven days, so I don't see. I don't think there'll be sort of scrambles for last minute negotiations.
Jenny will leave it there. Thank you so much for making time to chat with us. Jenny Marsh There she is China ecogov team leader, joining from Hong Kong here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia Pacific. You can find us on Apple,
Spotifyomberg 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 Prisoner and this is Bloomberg