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Bloombag Daybak podcast, available every morning on Apples, Spotify or wherever you listen. It's Wednesday, the fifth of March in London. I'm Caroline Hepka coming up today. President Trump concedes that there may be downsides as he defends his use of tariffs in a prime time speech to Congress. Germany up ends its iron cloud controls on borrowing to boost defense spending and sticking to five percent. China holds firm on a bullish growth goal for the year ahead, but says
that it will be difficult. Let's start with a roundup of our top stories. President Trump has delivered a full throated defense of his economic and diplomatic agenda in a joint session of Congress.
In a one hour and forty.
Minute speech, the US leader sought to justify any economic pain that he conceded maybe coming as a result of taris.
Tariffs are not just about protecting American jobs. They're about protecting the soul of our country. Tariffs are about making America rich again and making America great again. And it's happening, and it will happen.
Rather quickly.
There'll be a little disturbance, but we're okay with that. It won't be much.
Despite admitting to the possible downside of his policy, Champ also reiterated his plan to impose twenty five percent tariffs on aluminium and steel and to put in place reciprocal tariffs on all countries with barriers to American imports.
April twond reciprocal tariffs kick in, and whatever they tariff us other countries, we will tariff them. That's reciprocal back and forth. Whatever they tax us, we will tax them.
If they do not monitory tariffs to keep us out of their market, then we will do non monitoring barriers to keep them out of our market.
The president spoke just hours after hitting top trading partners Canada and Mexico with twenty five percent tariffs and doubling levies on the world's second largest economy, China to twenty percent,
moves which risk exacerbating economic pressures. The decision by the US president to double down on wide ranging universal tariffs appeared to be somewhat at odds with the comments of his Commerce secretary only hours earlier, speaking to Fox Business, Howard Lutnik, had said that the administration is looking at a pathway for tariff relief on Mexican and Canadian goods covered by North America's free trade agreements.
Both the Mexicans and the Canadians were on the phone with me all day today trying to show that they'll do better, and the president's listening, because you know, he's very, very fair and verasonable. So I think he's going to work something out with them. It's not going to be a pause and that pause stuff, but I think he's going to figure out, you do more, and I'll meet you in the middle some way, and we're going to probably be announced in that tomorrow.
Lutnik did not explicitly say what actions President shop was considering after imposing across the board tariffs on America's closest neighbors. Lutnik's comments saw equities gain in late trading after a volatile day on markets that saw US stocks plunging, then recovering,
and falling anew. At the end of the session, Trump outed his tariff moves as more effective at bringing jobs to the US than President Biden's efforts, which included the Chips and Science Act and its billions of dollars in subsidies to spur domestic semiconductor manufacturing.
We're not giving them any money. Your Chips Act is a horrible, horrible thing. We give hundreds of billions of dollars and it doesn't mean a thing. They take our money and they don't spend all that meant to them. We're giving them no money. All that was important to them was they didn't want to pay the tariffs. So they came in their building, and many other companies are coming.
We'll have to give them money.
We just want to protect our businesses and our people, and they will come because they won't have to pay tariffs if they build in America. So it's very amazing. You should get rid of the Chip Act.
President Trump's desire to end the Chips Act will bring into question whether this will have an impact on future investments in the semiconductor manufacturing space. This week, TSMSC pledged to invest in additional one hundred billion dollars in advanced plants on US soil. Other companies that have said they'll invest more in the US because of the Chips Act include Micron, Intel and South Koreas Samsung. Trump's speech comes as the latest data shows US economic activity slowing amid
the uncertainties of a global trade war. Bloomberg opinion columnist Mohammad al Arian says he expects some tough economic news in the coming weeks.
I suspect we're going to see a whole series of downward revisions in the next few weeks. I suspect those revisions will be from about half a percentage points as much as one percentage point. And if that happens, we're going to be discussing the risk of what's called stall speed, which means the economy isn't going fast enous to gain the source of subtraction that keeps us out of something worse.
Mohammed el Arian's prediction comes as New York Fed President John Williams says that he anticipates tariffs will contribute to inflation.
Based on what we know today, given all the uncertainties around that I do factory and some effects of cares now on inflation on prices, because I think we will see some of those effects later this year.
Speaking during the Bloomberg invest Conference, he also emphasized there is a lot of uncertainty of how the economy will respond to President Trump's levees. US officials are rush to revive a mineral resources deal with Ukraine after President Zinski
said that he was ready for peace. Speaking to Congress, President Trump said that Ukraine is poised to sign the agreement, which calls for fifty percent of the country's future resource revenues to go into a US managed investment fund, and that Russia is also seeking an end to the conflict.
Regarding the agreement on minerals and security, Ukraine is ready to sign it at any time that is convenient for you. Simultaneously, We've had serious discussions with Russia and have received strong signals that they are ready for peace. Wouldn't that be beautiful?
Trump's comments after the Ukrainian leader took to social media to express regret over an unsuccessful previous meeting in the Oval Office, which led President Trump to walk away from negotiations. Meanwhile, officials say a pause in US arms supplies to Ukraine after that Oval Office clash could have a consequential impact on the conflict. That's as it was announced yesterday that Russia will work with the Trump administration to broker nuclear
talks with Iran. To other news, Germany is set to amend its Constitution to exclude defense and security costs from limits on fiscal spending. The move will unlock hundreds of billions of euros in a dramatic shift that appends its tight controls on government boring. Discussing the decision, the incoming chance that, Fredrick Mertz says, the current geopolitical landscape demands action.
Is our volunteer and coldipsias.
I want to be very clear here, whatever it takes must also go for our defense now in view of the threats to our freedom and to peace on our continent.
Fredrick Mertz, speaking their via translator. He also shared that Germany's major parties have agreed to launch a five hundred billion euro investment fund for priorities like energy and housing. China says that its economy will grow five percent this year, setting a bullish target that has analysts predicting more stimulus is on the cards. The superpower's annual economic forecast comes a day after the US double tariffs on the country.
Speaking at the party's national Congress, Premier Lee Kiang says the goal will only be met by supporting the economy Jesus.
The target of GDP grows of five percent fully takes into account the need to stabilize employment and improve people's well being as more as conditions.
Fun It underscores our resolve to meet difficulties head on and strive hard to deliver.
Kiang, speaking through a translator there, His economic goals drew a mixed response from the market. Some were positive about the high growth number, others thought the announcement lacked any positive surprises. The Hangs saying China Enterprises Index climbed as much as two point six percent in early trading, but pared back that gain to one point eight percent by the midday break. Those are our top stories for you
this morning. Well, speaking of the markets, US equities on the S and P five hundred yesterday at one point fell by two percent, then actually ended up down one point two percent on Tuesday. Futures though appointing higher up seven tenths of one percent. There's been a lot of volatility in US equity markets, a risk though in Asia is trading strongly. European equities yesterday slipped two point one percent.
Futures though, are positive and bouncing higher one point eight percent for the US SOX fifty futures, So it wasn't just the trump announcements to Congress. This speech of Congress, it was also this defense spending plan from Germany five hundred billion euros that seemed to have an impact on the euro dollars, sustaining a break of one oh five trading at the highest levels as of twenty twenty five. For the euro this morning we traded at one oh
six thirty six, another tenth of one percent. And the Canadian and Mexican peso, those currencies they managed to reverse declines yesterday after those comments from the Commerce Secretary Howard Lutnik on a possible trade deal. So those are the most important market movers. Let's discuss though President Trump's addressed shall we to a joint session of Congress? President Trump acknowledging that tariffs could cause a little disturbance, He lambasted
policies on race, gender, and diversity. He offered numerous tax cuts, new projects like a natural gas pipeline, ramping up production of critical minerals. Joining me to go through what was said just in the early hours of this morning London Time, Bloomberg's EMEA news director Roslyn matheson good morning, it was noisy. There were protests from Democrats. There were chants of USA. Trump went through a lot of his policies. What did you make of the speech overall?
It was interesting because Trump's always a campaigner, even when he's president, he doesn't really stop campaigning. But this didn't feel quite as exuberant a presentation as he's done previously.
It was striking in a way that he talked about the economy, but he didn't really dwell on the economy, almost like he was saying to the American people, he realizes there's going to be periods of adjustment here for them, particularly when it comes to prices and the flow on potentially from things like tariffs, and so he didn't really dwell on the economy.
That's probably his weakest point right now.
Instead, as you say, he focused on some of his traditional talking points. He really spent a lot of time talking about migrants and the border area.
And what he's doing there.
He talked about, as you say, issues around DEI as well. He didn't spend a lot of time on foreign policy either, perhaps realizing that's not necessarily something that the American public want to hear a lot about as well. I mean, he really was sending this speech was to the American people. So that was kind of like the key takeaways I think.
Yeah, and there was lots for sort of ordinary voters to catch hold of. No tax on tips, no tax on overtime, no tax on Social Security benefits for seniors, is what the President said. But then it raises this issue of how does the Republican administration pay for it all?
Well, that's right, and there again that he didn't have a lot of answers. I mean, obviously they're leaning heavily on this government cost cutting program DOGE, which is being enacted by Elon Musk, and they're talking about very large sums of money that they say that they are already saving, although it's been very difficult to back that up even with the figures that DOGE is putting out to show that they are indeed saving enormous sums of money.
So that seems to be one effect.
He obviously really wants to get rid of the Chips Act as well, although that's going to be that would be incredibly difficult. But he's saying, essentially, why are we paying all this money to try and get companies to come and build their factories in the US, rather than using other means to draw them over. So he's looking at pulling several things out of the cupboard, it seems, yeah.
And President Trum repeated his grievances also against countries for ripping off the world's wealthiest economy. Tariffs are not just about protecting American jobs, They're about protecting the soul of America. We played you that sound a little earlier in the bulletin because it was quite striking. And yet he admitted that there would be an impact in the US.
He did, he said it, but he said it would be small.
And what a lot of economists are saying is that the impact of tariffs on the US economy could be significant, but not in ways that Donald Trump is really saying, because he's What economists are warning about is the pass on effect of tariffs to US companies and to US consumers, right at a time when obviously inflation is still issuing in the US, and economists are also increasingly warning that tariffs wouldn't just be an issue for inflation but also for.
Growth in the US.
And you can see perhaps already a little bit of signaling from the US that they might walk back some of these size of the tariffs on Canada and Mexico. Howard Litnick, the Common Secretary, indicating something might come today on that, But certainly Trump was indicating more that he feels that tariffs are going to bring in trillions of dollars to the US economy.
Yeah, it was perhaps a more traditional, as you say, maybe a more sedate affair. Yes, there was lots of chanceing, but there were also guests that President Trump referred to, and some of them were people I think that he felt could illustrate the points on the sort of social concerns that he has, the cultural issues that he's raised against DEI, also notably talking about English as the official
language of the United States. How much of the conservative agenda of the Trump administration is going to have influence around the world because he did mention that on diversity, equity and inclusion.
Well, again, he was really talking to his US base with that and throwing I guess a bit of red meat their way when it comes to DEI. But it'll be interesting to see how much that provides companies with the incentive to ditch DEI, not just in the US, but.
In the rest of the world.
Do they adhere to that in the US, but do they quietly keep their DEI goals overseas and their programs, or do they say, well, this gives us the rationale to do that everywhere. That would be one interesting thing because we're seeing a lot of big companies at least shed it when it comes to the US.
But also how much does that further in a way inflame or allow.
The agenda of very right wing parties across Europe alone. We've seen elon mus for example, very much drawing closer to the AfD in Germany, that's the far right group there, and does that kind of give weight to their agendas in their own countries in obviously the AfD is now going to be one of the bigger political forces.
In Germany, but not in government. And does that embolden those movements around the world?
Yeah, okay, Ross, thank you so much for being with me this morning. Blueberg's EA News director Roslin Matheson. So going over some of the points that President Trump made in his address, so that joint session of Congress talking about taxes, about migration, DEI and tariffs, which takes us to our next point. China is targeting growth of five percent this year despite US tariffs and is also ramping up its own defense spending, reflecting President Shijingping's ambition to
build a military that can challenge the United States. Joining me now is Bloomberg's China Government and Economics editor Jenny Marsh to discuss what is cut of the National People's Congress, which is the Chinese government's biggest political meeting of the year. Good morning, Jenny, So the aim of five percent for a third year in a row, how does Beijing plan to reach that? What of any extra stimulus measures? That's right, this is the third year in a row.
It sort of looks a bit like China's now found a flaw of what's an acceptable level of growth to get. They're the main sort of thing they're doing is they've laid out the highest fiscal deficit target and over three decades, a plan to raise local government bond issuance to record levels too, So in short, more government spending.
You know, I think these.
Targets were sort of well telegraphed ahead of the meeting, so they're very much in line with what was expected going in. Of course, you know what wasn't necessarily expected going into this meeting was that China would already be facing a twenty percent caraff hike from Trump. You know, so I think the big question here is the government is clearly sort of very bullisious year about maintaining its growth, and they can roll out stimulus you know, throughout the
year as is needed. If they see things slowing down, you know, they'll look at the economic data and they'll make tweaks. But if Trump does continue to ramp up tariffs, you know, they have a very very big challenge ahead this year that was not there in previous years when they had this goal.
Yeah. Absolutely, and Beijing's response so far has been to call for talks, retaliation, but not escalation, and that is so we kind of wonder how she is going to handle the trade war.
He's approaching it with extreme caution, you know. I think Blue Bay Economics called it a surgical approach to retaliation yesterday, which I think is very accurate. They are hitting back with a far lower tariff level. You know, Trump has gone for twenty percent hike. Now I think the hike on the Chinese side is still under three percent, and they're only sort of targeting these products that they can
easily source some other places. So in yesterday's retaliation, the big aim was American beans, which around fifty percent of American exports go to China. But China since the last trade war, of course, has diversified its options there. It can buy soy beans from Brazil now instead. So it's being very careful in how it sort of responds to the US.
It's trying not to escalate things.
And I mentioned defense spending. There was a social media post on the Chinese embassy in the United States saying, if is what the US wants, been a tariff war, a trade war, or any other type of war, We're ready to fight till the end. I mean, that's the kind of stark, short message. Defense spending in China is going up too.
Yeah, that was some of the toughest language we've seen in this trade war so far. Actually they've been state media has been pretty muted. But the defense budget today, you know that they've hightd it again by seven point two percent, which matches last year's growth level. And I think that just reflects of the ambitions that she has
to build a military that can challenge the US. You know, just since Trump came in, we've seen we've seen the PLA do live fire drills off Australia, which sort of caused quite a bit of reaction their drills off Taiwan, off Vietnam being a lot more sort of assertive in its sort of projecting military power. And you know, with Trump being so occupied with these trade spats with other countries and you know, all the things he has right now, maybe this is a good chance for China to sort
of keep projecting that military power. Maybe Chi Chiping is seeing an opening there.
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Mm hmm.