Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Monday, the twelfth, the May in London.
I'm Lizzie Burden and I'm Stephen Carroll coming up today. Substantial progress may have been an understatement. The US and China agree to significantly lower tariffs in a ninety day cool augh period.
The US cuts its levees on Chinese goods from one hundred and forty five percent to thirty percent, while China reduces its duties from one hundred and twenty.
Five percent to ten percent.
Markets rejoice, SMP mini futures jump as much as three percent, as equities power ahead and bonds and gold tumble.
Let's start with a roundup of our top stories.
The United States and China have agreed to significantly cut tariffs on each other's goods in a ninety day pause of the trade war between the world's two largest economies. The US will reduce its tariffs from one hundred and forty five percent to thirty percent on Chinese imports, while China will bring its levees down to ten percent from one hundred and twenty five percent. US Treasury Secretary Scott Bessent says neither country wants to see trade between them stop.
The consensus from both delegations this weekend is neither side wants a pecuplin and what had occurred with these very high tariffs, as Investador Reverse said, was the equivalent of an embargo, and neither side want set. We do want trade.
Bessent added that the US still wants supply chain independence in six key industries and will continue with what he called strategic rebalancing in those sectors.
The pause was announced in a.
Joint statement with China, with a Foreign Ministry spokesperson in Beijing declining to give further details.
US Talk features if Sara's bonds are selling off and the dollar is strengthening After the announcement from the US and China, SMP five hundred SMP mini futures are up two point six percent on Wall Street, the NASDAK features are up by three point four percent, as the Bloomberg Dollar Spot Index is up by nine tenths of one percent. Benedict Low Equity and Derivative Strategist for Europe at BNP Parri about markets three point sixty, says the move was a pleasant surprise for investors.
We were actually surprised by the number that came out. The kind of hearing all word on the street was fifty to sixty percent on China. So I think that was a net positive, and you're seeing huge reaction, especially in the US equity market, which makes sense because that was the market that was and the economy as a whole that will be more.
Affected by it.
So I would say it's a bris coonstint at least for the next few days.
That's BNP Parabos Benedict Low speaking there. As we are seeing European stocks rising as well as the dollar has rallied. The euros heading for its worst day this year against the dollar, down currently one point two percent at one eleven, the en also dropping by one point seven percent, goal prices sliding two down two point nine percent, as crude oil has rallied.
The Treasury Secretary also used the press conference to make the case for the way in which the US likes other nations to approach relations. Scott Bessent told the press the positive mood music set by the UK and Swiss teams was in stock contrast to that of the EU.
The UK and Switzerland have moved to the front of the queue for the trade deals, whereas the EU has been much slower, so we value.
That also, Treasury Secretary Scott Best sent speaking there in Geneva after the US and UK last week secured an agreement to roll back some of the Trump administration's recent tariffs on the British economy.
Pharmaceutical stocks have dropped after President Trump announced plans to sign an executive order later aimed at significantly reducing US prescription drug prices in Europe. Obesity drug maker Novo Nordisk fell by as much as eight point six percent at the open, one of the steepest decliners in the stocks six hundred Healthcare Index, which slid by three point three percent. With more details here at Boombergs ta are.
At a bio.
While the details remain unclear, the President claims the order will require that Americans pay no more than the lowest price charged for the same medication in any other country. In a post on truth Social Trump said the move could lower US drug prices buy as much as eighty percent. Americans currently pay the highest prices in the world for prescription medications. However, drug makers argue that such reforms would cut into their revenues and undermine the development of breakthrough
therapies that could extend and improve lives. In London, Tea were at a bio Bloomberg Radio to earnings.
UniCredit has posted first quarter profit that topped analyst expectations, as net income in the first three months of the year rose to two point seven to seven billion euros. The results strengthen the hand of CEO Andrea Orceell as he pursues potential acquisitions, including Germany's comments Bank and an unsolicited bid for ital Italy's Banco BPM. UniCredit, Italy's second largest bank, is now forecasting annual profit exceeding nine point three billion euros.
The shares are up more than three percent.
Vladimir Zelenski says he will be waiting for Vladimir Putin in Turkey on Thursday. The leaders of Russia and Ukraine are being pushed to begin peace talks by the United States and Europe. Ukraine's president says, Kiev is ready to end this war.
Your nas Vukrainian maa.
Ukraine which absolutely no problem engaging in negotiations. We're ready for any format. I will be in Turkey this Thursday, the fifteenth May. I expect Britain to come to Turkey as well.
Zelenski's planned trip comes after US President Donald Trump insisted the two leaders meet despite Moscow's reluctance to agree to a thirty day ceasefire. The UK and other European countries say they're a ready a dramatic increase in sanctions on Russia should Putin not engage with negotiations.
Those are you top stories this morning? On the markets.
The stock six hundred is higher half of eight percent on Wall Street, smp E many futures up two point five percent. Now is that future is up three point three percent, and the tenure US treasure reeled is up seven basis points at four point four to four percent.
In a moment, we'll bring you analysis of the US China trade war pause and take you through the big reaction on markets. But Lizzie listening to the US Treasury Secretary Scott Besant and Jemson Greer, the US Trade Representative, speaking in Geneva announcing those measures that did strike me that both yesterday and today they've mentioned the setting, they've talked about. How you know, the fact that they were in such a beautiful place with lots of tranquility really
helped to steer those discussions along. And even Jemeson Grier going as far as sort of making a dig at hotel diplomacy, saying that because they were in the Swiss ambassador's residence, the Swiss delegation to the United Nations engineer, that's where some of those talks took place, and he was saying that really helped them get the deal across the line. This is a new era for Mountain diplomacy. Maybe late diplomacy a.
Bit harsh on the hotel, but look, we've got the Peak District, the Lake District.
If anyone wants to come.
Here and negotiate build on that UK US trade packed, I'm sure that they could do it.
Well.
That's bringing more details of what we heard from those US representatives on this tariff poles between the US and China, our trades are. Brandon Murray is with us for more in studio. Brandon, good morning. How significant is the relief for both economies from what we heard.
Well, it's very significant for the Chinese economy. What we saw today was a major pullback in the trade war that the US waged against China. Remember yesterday there were one hundred and forty five percent tariffs on almost every Chinese import into the US. That gets reduced down to thirty percent, which, if you recalled, President Trump said just
a few days ago that eighty percent sounded reasonable. So what the US walked out of there today with is less than half of what Donald Trump said was reasonable. If you're on the Chinese side, you got a great deal in given what you gave up. Remember China's China had duties on American imports into China, but much less than the U that than China ships to the U S. So, uh, if you're if you're in Beijing today, you might be calling this uh uh just six weeks from Donald Trump's
liberation Day. Uh, the US retreat day in in a large way because uh, the definitely the heat of the trade war is much lower now, and it gives time three months is what the this period of negotiation will we'll move into next. And it gives, uh, it gives to give them, gives the two sides a chance to work through the pretty major agreement disagreements that they still have. But I think the analysis at the end of the day is going to be that the US gave up a lot of its leverage.
Do you read anything, Brendan into the fact that the China Foreign Ministry offered no further comment on the trade deal.
I'm no analyst of Chinese politics, but they you know, they wouldn't want to be seen as grand standing. But we'll have We'll have to wait and see what the trade hawks and walk Shington say when they get up, when they wake up this morning. But my guess is that there it will be seen as a major, almost too much of a retreat from Washington's perspective.
I mean, what does that mean for trade flows? We've been reporting about how so many of Chinese goods had been moving away from the US to other countries in anticipation of these or as these tires have taken effect as well. What about the prospect that a ninety day pause could be enough for some of that damage to be undone?
It could? You know, a thirty percent tariff on Chinese imports into the US can be managed, one hundred and forty five percent can't be. So you can divert, you can divert products to other countries where you can ship from to avoid tariffs. But this is going to be Remember this thirty percent is divided into two segments, the ten percent baseline that every other country gets and the twenty percent fentanyl tariff that the US put on China.
China can get out of that fentanyl tariff if it does what the US wants it to crack down on the export of the materials used to make vents and all. So at the end of the day, China is in the same place as everybody else is it could be, and most China Hawks in Washington would say they're the biggest violator of trade rules. So it'll be interesting to see how the Trump administration defends what it got here. Certainly markets like it, that will be seen as a positive.
But if you're in a long term trade disagreement with China to rebalance one point two trillion dollar trade and balance, this is going to make it more difficult to apply leverage to China.
So how much hope is this going to give to other countries that they can negotiate good terms too.
Yeah, you would think that that that this would this would give them, uh, you know, some sense of relief between this deal and the and the deal that the UK signed last week. Uh, you know, a lot of these details are still kind of vague, and and you know that there's no there's nothing, uh, there's not a whole lot of fine print on on either of these two.
But you've got to think that the that the US administration has felt, the has heard the concerns from US businesses about how they came out of the gates fast and high with their tariffs and that is applying economic pain to the US and that they are now uh, you know, in a in a situation where they you know, they have to bring those down in a big way. This is this is not uncharacteristic of Donald Trump's style.
He comes in big, with his hardest punch, and then he says, you know, let's you know, then you know, then then will then we'll uh you know, will negotiate things, you know, in a calmer fashion. But and this seems to be what we're hearing. We heard Scott Besson say today that he and the US Trade Representative Jameson Greer say, we don't want to decouple from China, we don't want to trade embargo and what's what that's doing to the
US economy? Right now is causing a lot of disruption and a lot of small companies can't do can't do business if with tariffs of one hundred and forty five percent on their Chinese parts and products. So I think what we're seeing is a pretty sharp pullback from the US administration. Now that could all that could all change too this. You know, they can tariffs can come back as soon as they go away. But it looks today like the US gave more concessions than China did.
Okay, Brendon Murray, our trades are thank you very much.
Well, let's get to the market reaction now. Cridy Gupster, who anchors the opening trade on Bloomberg Television, has been watching the markets move in real time, and she joins us now in the studio. Christy, what stood out for you in the market reaction, particularly the equity maybe seem pretty stoning.
So the bar was high going into this presser. There was a lot of optimism baked in really starting on Friday actually, and you saw it on both sides of the Atlantic, and then over the weekend the substantial progress line even Donald Trump's buy stocks on Friday was or on Thursday night, I should say was quite telling. We didn't expect this kind of optimism though, because, as Brendan was saying, the expectation the line in the sand was
eighty percent. To come down to thirty is massive. A one hundred and fifteen percent reprieve on that tariff freight is enormous. The problem here, and the hiccup here that you're going to see perhaps maybe filter through the markets in the next couple of days, is that this is only for ninety days, and those tariffs initially were meant
to be put on four ninety days. That one hundred and forty five percent was meant to be for ninety days, and we're not even I don't even think we're thirty days through, maybe a little over thirty days, and already we're seeing a reversal. So when you start to see some of the commentary come from Donald Trump or Scott Bessend, that's where the red herrings kind of.
Lie in some of the data.
But right now, again the bar was high, and Scott Bessant already beat. So the optimism is showing up in the equities picture, in the bonds picture, in the currency's picture, and even in oil, which was really weighed down by those growth concerns.
But how sustainable can this sentiment be? To your point that this is only ninety days, so there are a couple of things.
So now this has kind of shown, so you're right, can't it's not sustainable because this can always you turn and that is the kind of word on the street here. But what it is showing is a mechanism with which to de escalate. And that is a crucial piece because thirty days ago we didn't have this mechanism.
We didn't have high level talks.
We didn't even have lower level talks for then ultimately Scott bessen to go over to Geneva and sign the deal. Both sides were not talking and I think that has been the real game changer here, that if there was some sort of hiccup in policy. For example, and you heard that in the press conference from Scott Bessant that he brought up the cartels in terms of the fentanyl trade in Mexico, he brought up currency manipulation, He brought up the fact that both sides, the US and China,
were acting in their national interests. So it wasn't exactly the all friendly, all sunshine and rainbows. There were clear pieces of concerns that were still meant to be the Currncy manipulation is the piece of it. Notably absent was the fact that the Treasury Secretary didn't talk about the massive holdings of treasuries that China has. So you can see that there are still sticking points. But now we know that if things were to ratchet up, there is a way back to de ratcheting.
Okay, Kritty group to opening trade anchor from Bloomberg Television, we thank you. Let's bring in our Hong Kong News Desk editor Jill de Sis Jill, good morning.
Does this count as a win for Beijing?
Here is just trying to parse through all of the numbers along with everybody else, and I do think this is a pretty significant improvement for China. I mean, obviously there's just the headline number, right if you're reducing those tariffs that significant for the next ninety days. I mean, it does indicate that maybe relations are improving. Obviously it's only temporary, but I think that you know, that does indicate that there's you know, that's a step in the
right direction. It certainly isn't you know, I mean, removing the you know, one hundred and twenty five and forty five percent terriffs that we saw in China. That's that's that's a that's a pretty good victory for China. So yeah, I think we have to see where things go from here. But the fact that the progresses even gotten to this point, I think that's pretty promising.
How much could this bring relief for the Chinese economy, Joe, because we've been seeing early signs of the effects the tariffs had already been having, or at least the uncertainty over the tariffs had been having on things like trade flows.
Yeah, I mean I think that you know, when you're looking at you know exactly what this means for the Chinese economy, and you know, taking a look at some of the Bloomberg Economics data that we've been really putting out, I mean, just that the fact that the shock on you know, how much this meaning for US imports is going down significantly. I think the that's you know, a
really really big improvement. I'm talking actually right now with the some of our reporters who have been reaching out to Chinese exporters who are absolutely elated at this news so far. I mean we were, you know, just talking to somebody who has a t moostore selling you know, sort of face and body painting tools, saying that, you know, their entire office was shouting horay. That particular Chinese exporter.
I mean, that's somebody that had a stockpile of about five months supply and a US warehouse, just kind of waiting to see what was ultimately going to happen in this trade war. You know what that person was telling us, you know, just a few minutes ago, is essentially that they're elated because they were actually expecting this to drag
on for quite a bit longer. And the fact that you already have this reprieve not too long, you know, about a month and some change after these tarrots really went into effect, that's actually been really promising for them. So at least from the Chinese exporter side, I mean, people that are doing direct business with American consumers that are really really dependent on these types of trade flows,
We're already seeing a lot of encouragement there. Again, I do have to stress obviously these tariffs, you know, this reprieve, these cuts are.
Only in place for ninety days.
But again, the trajectory is certainly very positive, or at least the sentiment here is that this has been very positive.
Well, Jill, some of those exporters out of China had already moved trade to other countries in Asia worried about the tariff war. We saw that in the data on Friday. Do you think we now just hit undo on that.
Pleissie, I think, you know, obviously too early to say there, because ultimately, you know, I mean, if you're some of these exupporters, sure you do have those ones that are you know, very elated by this, and we're really banking on that business. But you also, you know, have a lot of people that you know, at the end of the day, there's still a lot of uncertainty here here, right, I mean, you know, let's just park it and rewind, you know to where we were about a month or
you know, two months ago. I mean, you know, you had you know, these not just these tariffs on China, but also these reciprocal tariffs that countries all over the world were facing, and there was you know a lot of confusion over what exactly that would ultimately mean for how the United States is doing trade in business with
you know, countries worldwide. I mean, we saw during the first Trump administration, you know, a lot of you know, different companies that were already starting to diversify away from China, trying to put the rigs in different baskets in Southeast Asia. Some of those guys got burned, you know, just a month or so ago when we saw really high tariffs on Vietnam and others. Obviously, some of those have currently
been paused. But I think, you know, that's a long way of saying that there's still a lot of uncertainty
in this environment. Obviously, the cuts that we've seen so far, while dramatic, I'm still only in place for ninety days, so I can imagine that if you're you know, an exporter, if you're considering where exactly you're sort of setting up shop and how you want to do business with the United States, it's still a bit of an uncertain environment until you have something that actually does feel like a definitive deal.
Jill.
Another note of caution, perhaps too, from these comments from Scott best and about the five or six strategic industries where the US is going to seek supply chain independence and this quote strategic rebalancing that he's promising, is that suggests that there'll still be significant bones of contenent and the trading relationship between the US and China.
Yes, Stephen, I think you know, we were talking about this earlier. It's interesting, I think, particularly when you had Scott Besn't call out industry such as pharmaceuticals and steel saying that the US is going to seek supply chain
independence in these types of field. I mean, you know, to go back, you know, just a few months ago to the Biden administration obviously, so you saw a tremendous focus from the United States on ensuring independence, and you know, the strategy toward focusing on semiconductors and immense technology and chips. The fact that the United States now appears to be sort of broadening out the areas in which it's really sort of pursuing supply chain independence, I think is a
pretty significant development. Obviously, we don't know exactly what went on behind closed doors in Geneva this weekend, but that does indicate that, you know, obviously the United States position on trade protectionism, this idea of that supply chain independence certainly seems to be strengthening. So I think, you know,
it's definitely something where to look out for again. I think at the end of the day, while you know, markets are obviously taking things, as you know, incredibly positive from this weekend, you still have a reprieve that's really only in place for the next ninety days. You still have various areas that the United States says, let me to negotiate on. I still think, you know, we're quite a ways from being able to sit here and call
the saga over. It's certainly going to continue over the next few months at least.
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