Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight Ahead on the program, we'll look ahead to jobs data in the US and what they may mean for FED policy. I'm Nathan Hager in Washington.
I'm Carolin Hedgod London, where we discussed what the Maid in Europe plan means for countries and companies.
I'm deg Prisner looking ahead to the reading on sentiment among Chinese purchasing managers.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three zero, New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius XM one twenty one, and around the world on Bloomberg Radio, dot Com and the Bloomberg Business App.
Good day to you. I'm Nathan Hager. We begin today's program with some key economic data in the US. We get non farm payrolls for the month of February at eight thirty am Wall Street Time on Friday. For more on how this latest jobs report could affect FED policy and interest rates. Let's bring in Bloomberg International Economics and Policy correspondent Michael McKee. Mike, thanks for being here. Of course,
this comes after that surprisingly strong January jobs report. Is that going to be a one off or could it be the start of a trend.
Well, that's the question that this whole data release will turn on. And for once we can say that this is an important number because we've had several FED officials say, particularly Chris Waller, say that if we get the same kind of number this month, then he would think that he probably would vote to hold instead of dissenting in favor of a rate cut on March eighteenth. So it does have somess. Of course, the other side of that
is does unemployment go up? The forecast at the moment is for it to tick up to four point four percent from four point three. That might not move the needle for the FED, but if it were anything more than that, then they might get nervous and cut rates. So there's gonna be a lot of scrutiny of this number this time.
So it sounds like it could really go one way or the other at a time when a lot of market participants have been thinking maybe the FED might stay on hold just until we get a new chair.
Well that's probably the case. It would I think take a lot for the FED itself to change its views. In general, the majority are in favor of being on hold for right now, because they think they're tight enough that they can bring down inflation if they leave rates where they are without hurting the labor market. Now, the question is what hurts the labor market these days, because with the lack of people entering the labor force, in
large part because of all the deportations. What you're seeing is maybe fifty sixty thousand being a neutral rate, the level that keeps the unemployment rate unchanged. And so if you get something much higher like we got last month, then it looks really good for the labor market and you don't need to cut rates. If you get something significantly below that, then they'll get a little concerned going
into it. We're looking at about sixty thousand as an estimate, but that could change over the week.
Of course, as you know, a lot of the discussion that's been cropping up in the FED is about how artificial intelligence might be affecting the labor market. As well, not just the immigration story. Do you expect that to feed into the February numbers or is that kind of a broader discussion.
It's a broader discussion at this point. Most economists, I think the vast majority, don't think AI is showing up in the data yet other than the money that's being spent on being a building AI. Yeah, but the technology is too new and hasn't been adopted by enough companies in enough scale to really change the way companies are organized, and so it's not going to be in the labor market data, and it's not been adopted widely enough to
change the inflation data yet. This is something that's on the horizon and it's certainly got everybody talking about it, but it's not there yet.
Well, one phrase I keep hearing from you and your coverage of this labor market is low higher, low fire. Is that still where we are? And if we do get some job growth in this report, where do you think it's going to show up?
Well, the best bet for job growth is going to be in healthcare services, because that's where almost all the job growth has been for some months. The people who take care of all the baby boomers who are retiring that sort of thing. We haven't seen much job growth anywhere else. There has been some construction because of the AI build out, but I think what we're still seeing at this point is a lot of companies sitting on the sidelines, not sure what the business climate is going
to be like. And now even more so it wouldn't show up in these February numbers, but even more so because of the tariff decision by the Supreme Court. We don't know what tariffs are going to be, We don't know what they'll put them on again, and so you don't know what companies are going to do. So at this point, don't look for a huge amount of hiring, and you're right, it's low firing. Jobless claims remain extremely low. Don't give any indication that companies are making big layoffs.
So does that mean we're in kind of wait in C mode as far as a company thinking is going in terms of where wages go as well, because we have heard at least some talk from the administration that they think that wages are keeping up with or even outpacing inflation.
At this point, wages have been growing a little faster than inflation, which is what you want to see. You don't want to see wages shooting up because then that could create inflation issue. But that's not the historical pattern. We did see wages rise significantly coming out of the pandemic because companies were desperate to try to get workers
to come work for them. But now since they're not hiring, wages have been coming down and they're just about at a kind of a neutral level where they're not an inflation problem, but they're still enough to get you ahead of inflation. So the wage issue isn't going to change much probably either.
Appreciate this, Mike, ahead of another Jobs Friday later on this week. That's Michael McKee, international economics and policy correspondent for Bloomberg Radio and Television. Let's take a look now at some stocks making news in the week ahead. I'm Nathan Hager, joined by Bloomberg Equities reporter Carmen Reinikey. On another pretty busy week for earnings, despite the fact almost everybody's reported already, but we hear from a big name
in retail this week, Target on Tuesday. It seems like it's been tough for Target for several quarters now.
Carmen, Yeah, it's true, So a key figure for them is comparable sales growth. It's been negative in the last three quarters, and it's something that analysts are expecting will fall again. So that's something I'm definitely going to be watching. Shares have actually gotten a little bit of a resurgence so far this year. They're up about seventeen percent after four consecutive years of falling, so that's going to be
really important. You know, earnings generally speaking, move stocks. I'm also watching this after Walmart's report earlier in the month. It forecasts less earnings growth for the year than Wall Street anticipated and had a pretty conservative view of the US economy and sort of unpredictable times for consumers, which I think raised a little bit of a red flag. So Walmart usually does offer a kind of conservative guidance at the start of the year and then raises it
in the following quarters. But this is still one that people are really watching, as you know, a bell weather for the US economy, and Target is right in line sort of after that.
Yeah, absolutely. You mentioned that the stock has been on the rise since the start of the year despite all the troubles. Does that really kind of raise the bar for Target? When it comes to meeting those earning expectations, it certainly could.
It's the next catalyst for sure that investors will be watching for, you know, deciding if they want to continue to buy the stock or sell. I think the target's gotten so beat up in the last few years that it's maybe not the biggest indicator that the bar is raised. And especially because we know they're in the turnaround, I think expectations aren't super high for them, so we'll see. I mean, certainly bulls want to see this rally continue.
And we also hear from another software name, CrowdStrike on Tuesday as well. You know, every time I think about CrowdStrike, I think about the outage from a year or so ago. Is that something investors still think about?
You know, that's such a good question.
I think.
I think the CrowdStrike was able to really move past that quite quickly. It's not something that I've necessarily seen is the biggest problem for CrowdStrike in the last few months. I mean, certainly, the bigger thing that I'm kind of looking at is that we've seen really broad based weakness in software and this was actually one of the stocks that got hit recently when Anthropic announced a new security feature and it's clawed AI models, so it's a cyber
security company. And other companies sort of in that space, Cloud flare Z scaler sale point slumped, so Crowdstrikes regained some of those losses. It's down still though, nineteen percent almost twenty percent on the year. So that's actually something that I'm looking for sort of most in these earnings is what are they going to say about AI going
forward and how they're incorporating it. If they're you know, they are worried about disruption, or if they sort of have plans to maybe integrate it and you know, build their business going forward.
You know what that kind of decline and with you know, the way that software stocks have been hammered so far in this discussion around AI disruption, you have to wonder whether after these earnings maybe some investors might see CrowdStrike as a buy opportunity. Is that something that you're thinking about, Oh, totally.
I mean, we've seen so many valuations kind of come in because of these big sell offs. So if you are a value investor, if you're even just looking for you know, stocks at a discount, there are a lot of names in software that maybe makes sense. So definitely going to be watching there and seeing if investors you know, hear good things in the report and say, Okay, this is definitely the time to buy.
And then on Wednesday, Broadcom reports its results. With all this nervousness around the AI spending story, where is the bar for the AI infrastructure company Broadcom.
You know, especially after Nvidia. I think it's going to be really interesting to see how investors react to this report. So it's another chip maker, it's also kind of gotten some shine as maybe you know, moving in and the kind of grabbing more market share in the chip making space. But that being said, it's also kind of moved sideways.
This year.
We've seen you know, investors really rotating out of these sort of big tech companies, these you know, early sort of picks and shovels AI companies and into you know, just maybe safer parts of the market. So broad comes down ten percent so far this year, and I'm I'm just really interested to see how investors react to this report.
Analysts still expect really solid figures out of Broadcom, so they're estimating you know, adjusted earnings per share growth and revenue growth of more than twenty seven twenty eight percent for this company, So we could see another kind of similar reaction where you know, the results are really good and investors just still aren't convinced and you know, buying shares here.
Yeah, I mean it used to be you know, it's twenty something percent earnings growth was huge, but after Nvidia reporting something like sex and d plus percent, the bar is kind of in a different place for these companies, isn't it totally?
And it's also just under this umbrella of the like wide based anxiety around AI and kind of coming from two sides. I mean, we talked about software people worried about disruption there, but then on the flip side, you know all of the CAPEX spending that's you know, boosted Nvidia and you know Broadcome would also be a beneficiary of is worrying to investors. They're worried about cyclicality. They're
worried that it's going to stop at some point. So that's really you know, overshadowed one just stocks in the e eye trade, but the broader market.
You have some big names to keep an eye on this week. Thank you of Carmen really appreciate this. That's Carmen Rhynie equities reporter for Bloomberg News, and coming up on Bloomberg day Break weekend, we'll look at the Maid in Europe plan and what it'll mean in the EU and me on I'm Nathan Hager and this is Bloomberg. This is Bloomberg day Break Weekend, our global look ahead at the top stories for investors in the coming week.
I'm Nathan Hager in Washington. Up later in the program, we'll look ahead to manufacturing data in China, but first made in Europe. That's the tagline of a new scheme to rejuvenate Europe's defense, energy and manufacturing sectors. The raft of policy ideas proposed by the EU Commission is drastic. They include forcing government procurement processes to look locally, tying foreign investors into joint ventures, and hiring European workers. The Act is set to be adopted by the EU Parliament
next week. Let's get more now from Bloomberg Daybreak Europe banker Caroline Hepger in London.
For decades, Europe has advocated for and been built on free trade. But in the next few days, the European Union is hoping to introduce a strategy to reverse the continent's d industrialization. The so called Made in Europe plan will enforce strict rules to keep investment factories and know how inside the EU, but it's causing fights not just internally between countries within the EU's borders, but externally from
those who are warning against protectionism. Recently, Stephen cowl and I spoke to the US Ambassador to the EU, Andrew Pozda. He called the idea a serious mistake.
Well, they made in europeuels would be a direct contravention of not only the terms but the spirit of the framework trade agreement that was agreed to in Scotland, because we've agreed not to have those kinds of preferences between our two countries, and I think adopting them would be a serious mistake. I would say, particularly in the area of defense, because we have a very intermixed defense industrial
base between the United States and Europe. Many of the weapons, the armaments that were using not only in NATO but also shipping to Ukraine, have production capacities in Europe as well as the United States, and the machines that make them. Some are made in the Czech Republic in Finland, some are made in the US, there's a very intermixed supply chain, a defense industrial base, and a focus on having our
defense products be interoperable. In other words, that if we are, if we're a NATO member and we're producing military hardware we wanted to be, we want to you know, we can't have it. You know, you're working for different sized train rails or weights that are that don't work on
European highways. We have to have these things interoperable, and these by europe preference, particularly in these defense procurement initiatives, is a real threat to our defense industrial base, and that worries me a lot.
That was the US is Ambassador to the European Union, Andrew Posda, speaking to Stephen Cowl and I on Bloomberg Radio. Joining me now to discuss is our Brussels Bureau chief Suzanne Lynch and our chief europe correspondent Oliver Krook Susan firstly, what is the plan from the European Commission when it comes to this legislation.
Look, I think this is the culmination of a long running discussion here in Brussels about the EU's competitiveness problem. We've been hearing for a long time about problems within this single market, that businesses field, that there are.
Too many regulations.
And I think those reports, that those twin reports from two former Italian leaders, Mario Dragy and Rico Letta really focused mind in Brussels. So I think this Made in europeplan, this Industrial Accelerator Act is going to be the full
crumb of this plan to boost European competitiveness. And I think it can be seen as a kind of follow up document or repost if you like, to these calls for better European competitiveness, a stronger European economy that Mario Dragy in particular articulated in his report.
This seems to be coming in some part from France, but it also has seen a lot of delays. Why does it keep getting delayed?
I think it's a sign you're absolutely right.
Look, France has been vocal for years about, you know, it belief that Europe needs to be, as they put it, more strategically autonomous, that it needs to stand on its own when it comes not just to defense, but also to the economy. And you know, I think some of the stereotypes Caroline and Europe are sometimes close to the bone.
I think France has taken a more we would say.
Protectionist approach to how the single market works. For years in the EU it's been always a strong voice for that. So yes, France has been pushing this, and the French Commissioner says, your na is in the lead on this. However, I think what we've seen is pushback or at least deep questioning by a lot of other stakeholders in Brussels. So firstly within the European Commission itself, that's where this plan is going to be published, for this is the
starting point for EU legislation. There have been several other commissioners or their you know, their dgs, their their sections of the European Commission, who've had questions about this, about how it's going to work in practice, about how is it still in tune with the European Union's free trade policies for example. So you've got initial blowback within the Commission itself before they even publish their document, and then outside the European Commission you've got EU member states also
questioning this. So you've got this coming down the on the usual path those more free trade economies, maybe the Nordics, Ireland, Germany as well. I mean, we've already had Friedrich mart saying yes, we agree there should be a bit of a made in Europe policy, but let's make sure that this is just in certain sectors and we don't go too far down that route. And then there's kind of a third pillar, and that's the the other partners of.
The EU, so be it the UK and the United States.
They've also raised questions about at a time when these third countries are trying to move.
Closer to Europe and are working closer with Europe, for.
Example on defense, why is the EU potentially putting off barriers as they see it, to collaboration. So I think that's why there has been a delay at the European Commission is trying to get it right, and even though they know what always happens in the EUS, this is just the first step. They will put out this Industrial Accelerator Act and then everyone will pile in and try and get concessions and try and make changes.
But they're trying as.
Much as possible to get this to as close of a consensus document as they can before it's published here in Brussels.
Indeed, I mean embedding European preference into public procurement. Of course, it has unleashed a lot of questions within Europe and without Oliver in terms of your assessment of what's driven Europe into this new phase maybe of industrial strategy. You know, I suppose to remind us of why we're here and just what's at stake.
Well, what's really funny is that actually the Drag Report came out before Trump was elected president of the United States, right, and so there was this idea that this might just sort of end up in a drawer somewhere. It might just be, you know, make for yet another report and
a door stop, you know, for somewhere in Brussels. And then there was the election and inauguration of President Donald Trump, and then all of these questions about European competitiveness, the lack of it, the fact that they're not these big companies. I mean, you can really go through some many of the sort of superlatives used by Mario Draghi.
One of my.
Favorite was that basically, no, I think it was no company that was founded in the last fifty years in Europe's market cap exceeds something like two hundred billion dollars. And of course every single one that exceeds a trillion dollars in the United States was founded within the last fifty years, and so that is sort of the issue
that is trying to be addressed here. And it was really brought home obviously with the maga sort of foreign policy of the America first, and then this American foreign policy that was obviously not just obsessed with tariffs, which it obviously was, but also taking a much more sort of active role in economic stake craft and you know, buying equity stakes in companies across the United States to try to stave off again some of the major issues
that the United States saw within their own supply chains and within their own sovereignty, namely critical raw materials and
things like that. And the problem is that under this Trump administration that has a much more sort of solidified and consolidated ability to exert power in the United States, the Europeans have sort of come up against the issue and the sort of obstacle that they now face in this sort of new magaled world, which is that politically they're still so sort of fragmented and they cannot move with the same speed and effectiveness as the United States.
So really this is about trying to get the European economy further on sort of more economic footing, and it's really made brought to urgency and brought out of the abstract I think by the Trump administration.
Yeah, absolutely, Suzanne. Do you think that there will be a target for the share of European products that are domestically produced for example? Will it go that far? Do these rules have the potential also to make your more self sufficient in certain really really key areas, like in a defense for example.
Yeah, I think there will be.
I think this is where the you know, the point of contention will be, you know, who is a trusted partner and how far or how much or what percentage of any rules you know, it made in Europe only for example. Now, I mean I think there's a couple of things at play here. For example, there is a division, if you like, between you know, the EU is made
of twenty seven countries with very different economies. So there's always been a suspicion by the smaller countries frankly that big countries like France and Germany they have the resources to plow money into their own economies. But if you're from Finland or Ireland or you know, a smaller country Estonia. You don't necessarily want to build a factory in your country, do you know? You don't you want? Actually, you have
thrived through free trade. You like this foreign investment by other countries, and that's what made you successful as an economy. So I think there are very different visions of economic success, and you're back to this age old problem with the EU. One of the reasons Ali just explain perfectly there why the European Union is like this is because the europe Union is not a country, you know, it's a collection of different countries. So it's always been.
Held back by this obvious fact that.
Even though the single market does work in lots of ways free movement of people, of capital.
Of labor, etc. There are barriers.
And I mean I think with Earthena vander Lyon who used the example of a truck in Belgium and there are certain restrictions on how much tonnage it can carry, and then and then when it goes over the border to France that changes. Now as an aside, that sometimes happens in the US between different states, but look, that does illustrate these issues and that is replicated all over
the place. If you're an accountant, you want to work in one country, but it's too hard to move your profession to that country.
It's got different rules.
But at the end of the day, these measures to fix that would require a seeding of national sovereignty a lot of key areas by countries, and I don't think
they're prepared to do that. So I think what we may see in this proposal is that sometimes the European Commission aims high because they know that it will be watered down eventually when it goes through the other EU institutions, for example, But they know there's always this in built break if you like, on developing the European Union Single market.
But look, I do think, even though I mentioned about these divides about certain countries, even the most free trade minded countries, except that over the last few years, particularly on defense, but also since COVID, that the European Union does need to look after itself more, that there needs to be a turning inwards of such that you can't just depend on China for example, for resources, or on the United States for trade. So I think everyone the page has turned on that.
Also.
I think another important dynamic is and you're asking about the specifics of this when it comes out of the Commission is that the European Commission and the EU leadership has.
Shifted a bit to the right on this.
When the European Union talks about reassessing some EU regulation and they're doing this through the so called Omnibus builds, you will always have figures around the EU table who say, hang on, we can't sacrifice Europe's strict rules and regulations. That is part of what the public wants, but also
certainty for businesses. I think there are fewer of those voices now, so I think that's one of the reasons the EU is kind of moving now, because it's kind of shifted more for want of a better phrase, to the right on this issue since the last European elections.
Suzanne, thank you, My thanks to Suzanne Lynch, Bloomberg's Brussels Bury chief, and to Oliver Cook, our chief Europe correspondent. I'm Caline Hepge here in London. You can catch us every weekday morning for BlueBag Daybreak you at beginning at six am in London. That's one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend we look ahead to PMI data in the world's second largest economy. I'm Nathan Hager, and this is Bloomberg. This is Bloomberg Daybreak weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. This week we get official PMI data for China. For a preview, let's get to Doug Prisner, host of the Bloomberg Daybreak Asia podcast.
Thanks Nathan. It's not a secret China's economy has faced many challenges in recent years. The most glaring is weak domestic demand. This is largely a reflection of a prolonged downturn in the property market, and with that soft demand there has been entrenched deflationary pressure. Beyond that, there is US tariff policy and an ensuing trade war, which really forced China to expand markets outside the United States. So will we learn anything new this week with the release
of the official PMI data. Let's bring in Bloomberg's Alan Wong. Alan is China ecogov editor and he joins us from our studios in Hong Kong. Thank you so much for being here. Help me understand what's going on right now. I know we're just coming off of the Lunar New Year holiday. Can you give me a sense of what's happening in the big picture in regard to the Chinese economy.
I think the underlying weaknesses that you described at the start still remain, and then coming off of the holiday season, we now have more data points, but they do not paint a very clear picture of whether the Chinese economy is improving in a meaningful way. I'll just give you a couple of examples. We're seeing hotels, days, spending, and
travel trips being up on all measures. But that is not as bullish as many people might think, because the per capita spending actually was flat and the total spending went up partly because the national holiday this year was nine days long, which is one day longer than the previous year. And as you can imagine, if you get people more holidays, they probably spend more time spending and consuming. So that is some sort of a statatistical noise that
distors the picture. And in terms of the PMI, the Chinese New Year is also injecting some uncertainty into just exactly how we can read it. We know that back in January, China's manufacturing sectors contractor based on the official PMI and economists forecasted the same degree of contraction almost in February, and you can imagine that because of the long Chinese Lunar New Year holiday period, factories just operates
at a lower capacities and orders my slow. So if those two months are contracted consecutively, that would be a pretty rare event. We've only seen that happen twice over the last ten years, that with the manufacturing contractions seen at the first two months of the year.
So is the problem in manufacturing and in turn the export economy in China solely the result of what's been going on with those US tariffs and US trade policy or are there other factors at play here?
There are certainly many factors at play, and the tariff policy actually worked in a way that was quite counterintuitive. We know China said that it achieved its five percent
growth target last year. It actually surprised lots of people because at the start of the year, with Trump returning to the White House, people expected the tariff policy to really slow China's exports to the United States, but export turned out to be a major driver of growth of China last year, but that was partly because of the tariffs, because how tariffs accelerated buyers in the US and globally to front load their orders, so people bought more than
they would have otherwise, and that actually ended up helping China's economy grow as much as it did. So the question now is whether that effects has been exhausted and whether we're now seeing some sort of a payback period.
So my understanding is that China in the meantime has been looking for other markets for its goods. I know that the ev story as it relates to Europe is a big concern, but hasn't the business community in China been doing a very effective job at finding newer export markets.
They have. In fact, growth in exports to markets such as Southeast Asia, Europe and Africa had been overperforming since the start of last year, and they more or less they actually they more than make up for the loss
to the US market. But note that some of those shipments are meant for the US at the end because of some of the goods of being rerouted to avoid tariffs, so there's actually not a very clear picture of how much those increase in exports to non US markets actually ended up in the US and was tied to the US demand.
So Alan, I'm curious when it comes to the story on weak domestic demand, what do we know about efforts on the part of the government to change the narrative.
I think a government's efforts has mostly been to put a floor on the consumption trend more than really drastically boosting how much people spend, because one long time weakness in the Chinese demand side of the equation is just how wage growth has been slow and people are not feeling economically secure enough to spend more of their savings, and that has continued, and the government has used policies such as subsidies for certain purchases to encourage people to buy.
But economists see those as short term effects, because people might as well buy a refrigerator earlier than they expect it, not necessarily buy more appliances than they plan to. So this is one way that the economist plane is how those subsidies are just front loading the purchases to use that word again, and not necessarily improving a demand for products.
So the Communist Party will hold the annual parliamentary meeting in a couple of weeks. The NPC. What do you think we're going to learn from that event?
The NPC will set the next five year plan for China's social and economic development. A lot of people we will be watching very closely as to just how seriously
China's looking to boost consumption. As we know, more developed economies rely a lot more on consumption, especially in the services sector, to keep their economy growing, and China has been a laggard in that regard, and the policy makers have for years try to improve people's consumption, but that hasn't had a meaningful effects so far, and from the policy we've seen in the last two years, we can engauge how the underlying weakness is still a main drag
on people's mood to consume. The other thing to watch out for from the NPC and in the five year plan in particular, is just how important China see's technology as a future growth pillar. And there's so many different
ways to look at this. AI is a big sector that China wants to grow, but there's also worries that automation and AI adoption could actually replace some workers, which, as you can imagine, will not help with consumption right if people aren't earning more money or earning enough, then they wouldn't feel confident enough to go and job is.
The government involved in supporting research and development? Are there funds available for companies to tap into if they're trying to develop new forms of technology, whether it's related to robotics or artificial intelligence?
The government has some sort of national strategy to accelerate the use of AI and to make sure that it's spread to industrial use in a responsible way in their words, But it's mainly the private companies, the private sector that've been pouring money into R and D in AI, building data centers. Our Bloomberg Intelligence Research estimates that China's AI companies will have spent ninety billion dollars between twenty five
and twenty seven on AI. That number is mostly a private company spending on these services and hardware just to stay ahead in the AI race.
So Alan, in the last week in the States, we heard from in Nvidia and on the call with analysts, the company said that competitors in China are making progress. So where is China right now in the race to produce advanced computer chips?
China buy, most estimates are still a couple of years behind. It really cutting edge chip making technologies, but it is catching up in many ways, and as Nvidia flagged, there's real worry that if left to freely compete, China could really catch up with the US. But it's a constantly moving target, so it's up to anyone's guess as to just when China will catch up and in what sectors
In particular. There are areas where China is lacking behind more than others, but there are also areas that China is seen as closer with the cutting edge applications, such as when it comes to large language models. China is constantly coming out with models as surprise the US competitors and leaders, and the US leaders in this field like open Ai and Anthropic have complained that China has been using their models to train their models to accelerate their development efforts.
In the next few weeks. We know that President Trump is expected to visit Beijing in the last week. During his State of the Union address, he vowed to keep fighting for his tariffs, and that seems very much related to the China story, although it is a little unclear at the moment. Trump did not mention China in his speech, and I think it's fair to say, there's still a little bit of intrigue into how these new tariffs from the administration may impact China and obviously trade flows as well.
Have you seen any clues on this.
I think the overall picture is that the bilateral ties will continue to be stable. There have been some recent developments tariffs, but those are more marginal than compared to them broad a trajectory of stabilized ties. For example, after the Supreme Court struck down some of Trump's terroriffs on China among our countries, the trade representative James and Korea said the administration would use probe into China's compliance with an earlier trade deal as a way to keep tariff
levels up. So after that, China responded with a statement saying that if they use these so called excuses to put new tariffs on China, China will have no choice but to use necessary measures to respond to the US. But after that very quickly, Grea also said in a
Fox Business interview that the US doesn't seek escalation. So based on this exchange alone, you can tell that both countries still want to make sure that their relations are on stable footing until at least the summit between She and Trump.
So what about the trade relations that China has with both Japan and South Korea. Obviously those countries are US allies. How would you describe the current flow of trade.
Well, China and Japan, they've engaged, and China and Japan are still locked in a pretty bitter diplomatic dispute over what Japan's leader previously said about possibly defending Taiwan in the event of an invasion by the by China's military. So trade has been affected to some extent. It's mostly the tourism sector and a few small pockets of the trade relationships where things are obviously being affected, but in the broad scheme of in the grand scheme of things,
they're not that important to China's overall trade. But there are some areas that even small steps might hurt either countries more. For example, if China uses this to further withhold the shipments of rare earths to Japan, it might
impact some of Japan's sectors more than others. China to recently impose new export control measures on twenty Japanese companies and then to put another twenty Japanese companies on a so called watch lists, so that just shows that China isn't giving up on his pressure campaign on Tokyo and on Japanese Prime Minist Takaichi to drop her previous comment on Taiwan.
Alan will leave it there. Thank you so very much, Bloomberg's Alan Wong. There. He is China Eco guv editor, joining from our studios in Hong Kong. I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast.
Nathan, Thanks Doug, and that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at five am Wall Street Time for the latest on markets overseas and the news you need to start your day. I'm Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now.