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Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide in depth research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today, we'll look at what comes next for Wall Street Banks in twenty twenty.
Five, plus we'll discuss the potential global impact of future you A tariffs.
But first we begin in the automotive industry.
This week we heard the Tesla's annual vehicle sales dropped for the first time in over a decade for more.
Alex and I were joined by Steve Man Bloomberg Intelligence Global Autos and Industrials Research Channels. We first asked Steve about what testless numbers mean for the automaker.
If you look at the fourth quarter, it's actually up slightly by two percent, but you know they've done a lot throughout the quarter to drive that number, mainly on incentives. So we're likely to see that to continue. But if you look out in twenty twenty five, we expect the company that actually give you rosier guidance. They do have new vehicles coming out, the refresh of the model Why,
the popular model Why. And then there's a new affordable vehicle being launched in the first half that should drive sales in twenty twenty five.
So how important are incentives these days, Steve? For the average EV buyer, it.
Is very important. It's not just EV. We're seeing that throughout the auto industry, including gasoline cars. Affordability continue to be an issue. You know, if you look at delinquency rates on loans are there rising, So the the automakers have to come in and actually support demand. So we'll
probably see that in twenty twenty five. But you know, there's there's reports out there that we, you know, including ourselves, we think that battery costs will continue to come down and then we'll see probably a better an upturn, likely in twenty twenty six, not so much in this year.
When you mentioned that there'll be some product refreshes this year as well as an affordable Tesla, yeah, I've been hearing that for a while. What do we mean by affordable and do we trust this timeline?
Yeah?
So, you know, I think there's been a lot of questions out there in terms of how, you know, if Elon must will actually meet his his own projection. I think that he will launch the affordable EV and that's likely to be under thirty thousand, including the that the includes the seventy five hundred credit incentive by the federal government. Oh, it includes it.
So if that goes away, it no longer becomes affordable.
It still is. It's still one of the cheapest EV's out there. I think the new EV's that they're launching coming going forward will actually be much lower costs than the current model three Model Y, So there's still some room for them to cut prices and also, you know, help maintain the automative gross margin around the you know, eighteen to twenty percent.
Steve, twenty twenty four feels like a year where the evolution towards electric vehicleles hit kind of a speed bump out there. A, Is that in fact the case? And b how do you think about the industry's continued evolution to EV over the twenty twenty.
Five Yeah, I think twenty twenty five EV sales will probably be grown at a single digit and you know, incentives still going to be a bigger part of the story. But I think long term, you know, beyond twenty twenty five, that means twenty twenty six and beyond, I think EV sales will recover, Battery costs will continue to come down. More automakers, not just Tesla, GM and Stillentis are launching newer and cheaper evs. That's going to be that's going
to resonate with the with the mass market. You know, a lot of the early adopters have bought evs, and I think the next leg up is really to get the general population to buy evs and make it more affordable for them.
I guess I just wonder, like without the tax credit, if that goes away. I appreciate that Tesla's still the cheapest one out there, but that's not going to be Like, there's no way Paul's buying a thirty eight thousand dollars Tesla, right, Like, that's not happening. So what has to happen for that price to get even lower? And I know that it's a chicken and an egg thing, right because you need the demand in order to trigger the production, which then
releases lower prices. But that's just not materializing, particularly without that tax credit.
Right.
You know, I think we talked about battery costs is being one of them. The other thing is really the charging infrastructure. You know, I don't think the charging infrastructures has been expanded to a point where it's convenient for a lot of the for owners or potential owners of evs, but there's a lot of money being poured into it. There's one company called EVgo. They just got a huge
loan from the federal government to expand. We got a lot of automakers, major ones, GM, Ford and Hyundai and the likes are actually joining forces together, pulling capital together to expand the infrastructure. So that's why, you know, I think you know beyond twenty twenty six to beyond twenty twenty five, we're going to see improved uptick EV demand because of not only cheaper EV's, but an expanded charging infrastructure.
Our Thanks to Steve Mann Bloomberg Intelligence Global Anos, an industrial research analyst, we.
Moved next to luxury this week. Guest host Matt Miller, Shanala Basik and I were joined by Deborah aichin Bloomberg Intelligence Luxury Goods analysts.
She discussed her outlook for luxury goods in twenty twenty five and my twenty twenty four was so disappointing for some luxury companies.
I began by asking Deborah what happened to luxury in twenty twenty four.
I think if we stepped back to the beginning of the year January February, we had some of those the biggest company CEOs focusing on a normalized year of growth. Now that followed three real years of recovery twenty one, twenty two and twenty three, so normalized growth was set we thought at around four to six percent. It started out okay in the first half, and we were looking
for the second half to pick up somewhat. On the back of that, and that's where the disappointment has been so second of twenty twenty four, a real disappointment because of so much going on economically, politically, but with a big drag in China and travel retail not yet recovering, and also just the fact that we kind of got to peak price twenty five percent price increases over a three year period on average across the sector to pass
on some of those inflationary costs. It all just became too much, especially at entry level.
So what's been the problem Is it just the Chinese economy and the Chinese consumer is so important to this segment because as we look at you know, rich people to have at least the top five hundred in the world, continue to get richer and richer and richer. So I can't imagine there's any kind of upper limit on Burken bags.
Yeah. You know, if we look at the companies that have outperformed MS and the types of product that they offer to the market, the waiting list there is still in place. Other high end names like and Elocutionelle. You know, these companies are focused eight to ten percent growth year in year out, and they're achieving that, but really it's
been twofold. If we think about the China market, just to put it back into context, Chinese consumers when they traveled twenty nineteen as well as spent at home on the mainland, Macau, Hong Kong and others, were around a third of the luxury market, and we think they're nearer twenty three percent or so. We've basically lost ten percent in the market from there. What's happened, though, is that the US has been particularly robust and has picked up some of that.
Europe has picked up.
A little bit, and also rest of the world and other parts of Asia. So when we look, you know, look at an Alviumh's absolute revenue twenty nineteen versus twenty twenty four, even taking out the Tiffany acquisition in twenty one, its sales are still over fifty percent higher than they were twenty nineteen in absolute use road terms. But there's been a big shift and we think that will continue twenty twenty five.
You know, another question I have is how much of this is the macro. Of course, China is a massive story. Perhaps we'll talk about a little more as well. But another thing I'm fascinated by is the rebranding of some of these large luxury items and brands Jaguars, when Matt and I had covered a little earlier this year. That's a pretty extreme example, but there are others as well. How much of this is just customer taste changing and the company is needing to react to those changing preferences.
There are more and more reports coming out because we also need to think about the recycle industry too. If we step back into the China situation, one of the big categories would be watches, and watches are higher indexed in China, so that's been a drag for many companies because most of them will have watches. No jewelry has really stood up well, so that's one side of the equation.
If we think about other sides, though, there have been particularly at the low end with the aspirational side failures and different creative directors moving around. So there's been some question on where the identity of some of these brands are.
But it therefore tends to be the heritage brands, which don't necessarily depend on a single creative director and more really focus on a team and a real high level of workmanship that continue to do better, and I think we'll see more of that play out also in twenty twenty five. If that kind of answers your question.
There, deb of all the luxury companies that you cover from a research perspective for Bloomberg Intelligence, what are the ones that are seem well positioned to you these days as we go into twenty five, And if we're.
Looking across modl it's moved around a lot in the last eighteen months and generally a little bit of a delay, but companies are being really more forthright in explaining what is happening where their investment is to back that future growth. So you have the likes of at the top end,
which we've mentioned Mares, Brune, Brunellocutionelli. If you look the numbers out there for top line growth and earning's growth, earning growth twenty twenty five must fully repair and come in ahead of sales, so you're looking at double digit sales there. We have arranged nine to twelve percent across Air Mayre's leading Brunellocutionelli in the lead proader.
They're doing very very well, but a lot on the me and your brand Richmond doing very well on Cartier van Cleef and our pacids that high find jewelry and that high note worth individual continuing to buy.
And there are some of the names out there as well as ELV made should further repair because we think that they will do better in the second half the year. They do have big exposure with DF into travel retail and also a lot of these companies. So mid single digit growth for LVMH for eachmon high single to double digit growth for some of those more niche individual brands with waiting with big lists waiting lists out there still for some of the very much high your end product.
All right, thanks to Debic and a Bloomberg Intelligence luxury goods analyst, and coming up, we're going to break down why the number of primary dealers in the US treasury market has decreased.
Listening to Bloomberg Intelligence on Bloomberg Radio, providing in research and data on two thousand companies and one hundred and thirty injusries. You can access Bloomberg Intelligence via b I go on the terminal, Paul Sweet.
And am Alex Steel and this is Bloomberg.
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We move next to You.
This week O host Matt Millo, Shanali Bassega, and I rejoined by Shrinanna rodgen Uberg, senior finance reporter.
He discussed his outlook for Wall Street regulation bonuses and how banks are preparing for Donald Trump presidency.
I began by actually shre what he thinks about the prospects for next year on Wall Street.
If you had to see the best indicator for what people are expecting next year for the banks, just look at what the stocks have done this year, and I will tell you all you need to know about expectations and the outlook going into next year. Coleman, Sacks, JP, Morgan, Morgan Stanley. They're all up forty forty five to fifty percent. Jeffries pure play investment bank up something like ninety five percent. That stock is almost double.
You're going to say, none better than Goldman, but Jeffries, yeah.
Sure, not in the same league perhaps, but as a pure play investment bank.
And the percentage rise in their stack.
The percentage rise in their stuff, the fact that the stocks nearly double this year on the back of expectation that there will be a gusher of activity opened up next year. That is where banking expectations are right now. But there are crosswinds and you know, you're never certain how it will pan out. In fact, if you were to look what happened the day after the November election, all the bank stocks rallied up and in the days after that went up even higher. But since then they
have given up half their gains. So what the concern there is isn't entirely clear. Are they're not as certain of that outlook as they were on say November fifth or sixth. We're not sure about that. But net I think if you talk to the c suite at all of these banks, the hope and optimism that they exude is very clear and visible.
So what kind of deregulation do investors want to see?
Specifically, because we.
Throw this term around a lot, and for example, we were talking about deregulation. As I think about it, you know, we did see deregulation, but we also have seen for example, Jet Blue was not allowed to buy Spirit right, so you still have intervention from the government that changes the way these businesses work in bank What do investors? What does Jamie Diamond want to see in terms of deregulation.
I guess deregulation is the word we'd use if you hare to sort of align where the Overton window is right now. But realistically, what the banks really want is not more regulation, and that is what they were looking at had it been a democratic administration. If you look at the action of the Fed, especially the capital rules, the fact that they were facing big increases on their capital requirements was a big headache for banks for much of this year. Even before the election, the Fed did yield.
The banks made an aggressive push. They rolled back some of the proposals. They've not taken effect yet. But with the change in administration and the change in tune banks sends an opportunity to go for the kill and make a bigger ask to make sure that there isn't any increase in capital or wherever they land up is much much better than what it looked like at the start of twenty two.
Guys, it's not even just the capital rules, it's the areas that were being cracked down on that might not be in the future. For example, vak Ramaswami who is co leading that DOGE effort, is looking at the CFPB. The CFPB was really a relic of the two thousand and eight reforms. What does it mean for some of that to be rolled back on?
And that actually is some of one of the most fascinating aspects right now. If you've been addicted to twitter x through the holiday season, shame on you. But if you have been, you would have noticed a lot of discussion on CFPB. Yes, the chief DOJE officers there, vive Ramaswami, Elon Musk, even Project twenty twenty five, these are names that have come out and said the CFPB needs to be eliminated altogether. Elon Musk and Project twenty twenty five
recommendations were very clear. Vivex tweets over the last week or so make it clear that he's not happy with what's happening. And the incoming chair of the Senate Banking Committee, Tim'scott of South Carolina, has also been quite frustrated with what the CFPB has been doing in terms of their rulemaking. Where his point is, it's you're in a lame duck period. The FED, the OCC, the FDIC are not doing anything
yet with this CFPP. We've seen the action on overdraft fees, We've seen the lawsuit against Walmart and one of their FinTechs, and some of the other motions that they're foot in place, including the crackdown going after the banks because of the zel fraud. Clearly they've been very active. The banking industry is not very happy about it. Some old school GOP members are not very happy about it. But I also find a very interesting strand here is there really are
two different kinds of GOP right now. There is one where the faction of populism has been gaining ground and hole, and you can argue that it's coming straight down from the president. For that group, an agency like the CFPP going after overdraft fees, going after things like zelfraud that you would think would normally be encouraged. But your typical pro banking, anti regulation GOP faction would obviously see something
like the CFPB as anathema. So it'll be interesting to see as we get into twenty twenty five and beyond which faction in that administration wins.
I had dinner with the high school buddy mine, who is one of the top lawyers in the city, gets paid a King Ransom every year hates his job. He all did was complain about his job. I'm like, then leave, dude. I mean, he said, the biggest change is going to be Lena Khan at the Federal Trade Commission. Getting anybody in there in the FDC other than Lena Khan is going to be a boom to MNA bankers and m and A lawyers.
Yeah, but this goes back to my previous point again. Yes, Lina Khan has been a bane for the banking industry, and you would think with the Democrats voted outline, that was even the conversation that even if Kamala Harris, who were to win, Lina Khan might not stay in that position because the pressure being put on that seat and the fear in the tech industry and beyond how much it was crimping deal making. But at the same time, listen to some of the comments made by Vice President
leg JD. Vans during the campaigning cycle. He didn't not sound like someone who is the absolute anti Lina Khan type. So again, it remains to be seen which faction of the GOP has the louder voice. But if you didn't have a Lena Khan like figures.
Having been guys, having been, you know, voting for Reagan in nineteen eighty, I can tell you there's only one voice.
But even that one voice has not been the most predictable voice.
So let's admit that I'm never bored of regulation, but I'm bored relative to the other topic that i want to talk about. Money, Right, Yeah, bonus season listen deals did not yet come back, so is there an expectation that bankers are going to get paid? Anyways?
Deals did not come back to the extent you would have wanted to see, but they have been up relative to last year. They're still well below their long term averages, and the expectation is that you will get there. So some of the bonus payouts this year will not only be a recognition for the work done this year, but what you need to pay to keep top talent in their seat. And this is visible not just in bonus payouts. Look at the managing director promotion, Look at the Goldman
Partner class. Some of these top promotions.
They have been.
Bigger sizes than in the past. They are battlefield promotions, recognizing the work that's already been done, but also telling them that there's a lot more opportunity to make a killing in the year ahead.
Our thanks to Shrina Rajan Bloomberg Senior Finance reporter, we.
Moved next to it Bloomberg Big Takes story we focused on this week, entitled Treasury's fifty trillion dollars day loads will test strained dealer pipes.
The story looks at how the number of primary dealers in the US treasury market has now decreased, and it discusses how those remaining are facing mounting pressure is due to post financial crisis regulations and a growing US debtload.
For more, guest host Matt Miller, Shanani Basseg and I were joined by Alex Harris, Bloomberg bond reporter. We first asked Alex why being a primary dealer isn't easy these days.
You look at Citadel in this case, and they have been vuying to become a primary dealer for years, and finally in September said, you know what, thanks, but no thanks. This is just a losing proposition. And I think that's how people are feeling about it now and why you're not seeing the primary dealer community even growth to keep up with the amount of supply and the amount of
debt that the government is issuing. And that's a problem because you need those primary dealers, you need them to facilitate these you know, in these markets from the auctions to secondary market. And remember their balance sheets for these dealers isn't just treasuries. It's a lot of other things. It's equities, it's mortgage backed securities, it's asset back secures.
So you're playing with all these things. And as you can see what happened if you look back to March twenty twenty, I mean, that's a really good example of what happened when the treasury market ceased to function and dealer balance sheets just could not handle what it needed to do across all asset classes. And that's the very thing that it's as a regular recurrence.
Maybe let's take a large set back for a moment here, because there are a lot of confusing dynamics that are happening in the treasury market. One is the size of the US DOT load alone. Then there comes the plumbing questions why overnight funding seems to hit pockets of stress every so often, the dealer balance sheets being constrained as they are, as you say, and then hedge funds trading
with a lot of leverage in this system. What is actually the problem here and the risk in the way the plumbing is working.
So right now, what's happening and where the primary dealers are having problems is when you're asked to facilitate and intermediate in this market, but you don't have the balance sheet to do it, you have to charge higher funding costs. So that means if you are looking to borrow treasuries, say in the rebol market, and you're a hedge fund or an asset manager and you need to borrow to
finance securities, you're going to have to pay more. And there might be a point where they are not equipped to pay as much as the dealers are asking them, and so that's when you get backstops and you get stopping out of positions, and all of that has to make its way back onto the dealer balance sheets, and so that's where they get clogged. And right now there's four hundred billion in aggregate treasuries alone sitting on dealer
balance sheets. And then every time you get a treasury settlement cycle, so the middle of the month and the end of the month, you're getting a backup in repo rates. It's becoming a regular occurrence and we're seeing it quite often. This year July dealer balance sheets were stuck. End of September was a very volatile quarter end that nobody expected. Your end has thankfully been really today it's very mild.
Repo is under control. But it's because the minute the calendar turned to October, everybody said, wait a minute, we have to be better prepared for this. And so you saw repo rates actually back up to five and a half percent in the middle of November because people said, I want to get caught. I got to do this now.
And so Alex another question about this too. We're talking about the treasury market here. It's not only the deepest, most liquid market in the world, it's one of the largest, and it also underpins the cost of every other type of borrowing. And if you're talking about the need to kind of back up rates as you're talking about in certain parts of the market, at what point does this become a larger issue, even a taxpayer issue.
Oh, I mean, well, you can see in some cases it already is. I mean, you know, the auctions are just going to get more expensive because it's just going to get harder and harder for these dealers to continue taking down this supply. And what's interesting is remember not the dealer balance sheets are not created equals, so you know, dealers have the autonomy to decide, you know, where their
priorities are. And you know, during the treasury refunding one year, i think it was last May, you know, they were doing something called Blue Sky and they were just kind of kicking around ideas, you know, what they could do to help improve treasury market functioning. And one of the things they proposed is almost doing a table to see
who the biggest dealers were in the treasury auctions. Is a way to sort of light a fire under the rest of the dealer community to say, hey, like, if you're not doing your part and you're not pulling your weight, you have to because there's just too much supply to leave it to a handful of dealers to be taking down. There's only twenty four of them down from the peak that we saw in terms of the number of dealers
that wasa on nineteen eighty eight. So this is so critical that everybody is playing their partner here, and if they're not, there are serious consequences in the terms of costs the economy, to the taxpayer, and to those just trying to finance their transactions in the financial system.
Our thanks to Alex Harris, Bloomberg Bond Reporter. All right, coming up on the program, we discussed some of the successes and failures in the chip industry last year.
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on two thousand companies and one hundred and thirty industries. You can access Bloomberg Intelligence via b I go on the terminal.
I'm Paul Sweeney and am Malex Steel, and this is Bloomberg.
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We move next to the chip sector.
Of the ten public companies in the world that investors value at more than one trillion dollars, a third are in the chip industry.
In twenty twenty four, Broadcom joined TSMC and Nvidia, and that exclusive club, but the chip industry also saw some failures during the past year as companies like Intel struggled for more.
On these companies, guest hosts Matt Miller, Shanali Basseg and I were joined by Kunjohn sub Honey, Bloomberg Intelligence Senior telecom analyst. I first asked Kunjohn to break down the differences between Broadcom and Intel.
You really have to look at it as the two companies, right. One is your legacy chip company like Nvidia and Broadcom for designs their chips and sells them, and the other is sort of a semiconductor manufacturing company, similar to something like a TSMC or a global foundry. On the product side, this is where they have sort of missed out on that AI train. It was really you know, them not coming to the market with the AI products in time,
and they are still sort of struggling. We don't have a good pipeline for their AI revenue ramp, especially in the GPU or the accelerator space. And on the server side, they're having challenges with their competitor AMD taking share almost
every quarter over the last year or so. The contract manufacturing that you're talking about that comes from the manufacturing side you know, since the XCO now Pat took over the helm, they really the north star for the company for its turnaround was become the sort of leading edge node manufacturer of the vest if I may compare, it
becomes sort of the TSMC of the West. And that's where they're really, you know, have been investing a lot, really focusing to get advantage and manufacturing leadership back here in the US, and that's where all the grants, your chip sack, subsidies, your tax credit, et cetera are designed around that business.
By the way, speaking of tax credits, is Intel just done? Do they bring in somebody to break it up and sell off the pieces or because they are still looking at like twenty billion dollars from Uncle Sam, right, yeah.
I mean, look, they haven't said anything specifically, but from our analysis of the company, including valuation and how the stock is trading right now, we think there's likely going to be definitely some kind of divestitures, some kind of investors brought in. We think the more likely portions of the business are going to be the PSG or the Altra business that they had acquired. There's also a lot of equity stake they have in mobile eye, which they
have a wave to diversify and raise some cash. These two would be I would say the most highest probability exits the discussions around breaking up the foundry business other than the product business. That's something really odd to do, especially how important strategically Intel's manufacturing plans are.
For the US.
Well, speaking of how important the manufacturing plans are for the US, there's a new presidential administration. How do we expect President Trump to approach the industry and would they get any support above and beyond what we've seen under the Biden administration and the Ships Act.
Yeah, I mean there's that's a great question, and there's there's multiple sort of angles to look at it. Just looking at from a manufacturing and subsidy perspective, we don't expect anything to change here. The government has been, you know, very supportive of bringing back manufacturing here, especially leading edge node and advanced manufacturing when it comes to semiconductors. So we don't think we don't think this will be this tailwind will continue to be a tailwind even in the
new administration. However, there are different angles now. One is the MLA and landscape. Will it the new administration be more easier on MNA, which really has not happened in semiconductors because of again government regulation being primary getting factor.
Again this area, when you look at the data versus the sentiment, the data doesn't show that the Trump administration would be significantly a booster for M and A. If you looked at the deals that were sort of blocked or went into a lot of sort of regulatory concerns during his prior term, that data shows that it was similar to you know, what we saw in by then administration. So from that angle, we don't expect, at least from the data, significant things to change. There are different angles here,
especially pertaining to China. We do expect, you know, the scrutinity against China to increase, and that could result into multiple different aspects. One is sanctions on Chinese based companies, and most of the US semiconductor big your giants have significantly high exposure to China anywhere from forty to sixty percent of the revenue, so that could come at risk. The second could be retaliatory measures by China on US
companies who have significantly higher revenues in China. One example recently was China initiating a probe on in media, so we expect something in those in terms of the tariffs or the sanctions to play a larger role on the US semi connector companies.
Kun, John, I'm looking at the real winners in your space, the chip space. Obviously in Vidia, Broadcom, those are the clear winners. What do tech investors feel like twenty twenty five holds for some of those names that have really been propelled by AI? Is there more to go? Is this a market? Is this an earning's growth story that can support more performance out of these names.
Yeah, fundamentally, we expect twenty twenty five to be another really strong year for AI chip names, with a one key caveat that we expect this year not just one name to take all the glory and take all the winnings.
We expect a much more broad based growth going into ASIK names, AI networking names, the one like you said, Broadcom, but there's even others that we expect to continue and take small share of the bigger and growing and growing AI wallet because the hyperscale spending is expected to grow again twenty percent this year, so we think there will be more names than just a handful of them.
This year. What's the risk to that twenty percent growth story for hyperscaler is spending because at the end of the day, we've seen tremendously ambition from big tech companies to be working with Nvideo of course and others. But do you think that that could face over wall of investors also get fatigued.
Yeah, I mean you are seeing that concerns come in. So when you look at from a growth rate perspective, the growth rate is normalizing right when you look at last year, it was somewhere between the mid forties and now sort of half twenties. But you know, we so far have not seen any data showing that at least in twenty twenty five you could see a shock with this number. The second point is, so far since the advent of gen Ai, these estimates have proven to be conservative.
So as we end the year, we have typically for the most companies seen the numbers of the CAPEX numbers come higher than what we had expected at the beginning of the year.
Thanks to Kujan Sobanni Bloomberg Intelligence in your semi analyst.
We move next to trade. Polishmakers around the world are watching the US for potential trade tars when President elect Donald Trump returns to the White House in January.
A trade war triggered by US tarriffs could be extremely negative for the global economy. And this week we heard that China may sell products to Europe but discounted rates if the US and post is new tariffs. And that's according to ECB Governing Council member Class Not.
For More guest host Matt Miller Shanalibasse again I were joined by Brendan Murray, Bloomberg Global Trade Editor. We first asked Brendan if he knew anything concrete in terms of Trump's TWERFF plans.
Nothing concrete. In fact, the word that I keep hearing is uncertainty around tariffs. If if, if, If tariffs are Trump's favorite word, then business's least favorite word is uncertainty. And that's what they're getting. What we heard from the ECB official that was fear about disinflation from China. We
often hear about tariffs causing inflation from the US. If if Trump were to were to put tariffs on on Chinese imports, Uh, the flip side of that is deflation, and China, you know, has has a couple of tools at its disposal. If it wants to use in a trade war, it could subsidize its exporters uh and reduce the costs of the of their production and and and make the make the cost of their exports go down. It could also let its currency weaken.
Uh.
Now the economists are are, you know, kind of mixed on whether the degree to which they think those things will happen. But this ECB official we heard is clearly putting his finger on something that that you that the Europeans are worried about. They have, you know, a much slower growth outlook than the US, and so you know, there's some there's some talk that he has right to be concerned.
You know, it's interesting, Paul, You're you're looking at an interesting function on the terminal. I know that can show you pretty pretty granularly how the US trade partners are planning out.
The CT are fun with it right now. That's why you guys can have a conversation. I'm just clicking on seeing who all the trade partners we have and everybody else has.
But one thing interesting about this is if you kind of change the main bar to China, you can see also just how much China is ingrained into the global economy. And so it's not just China that would be concerned about that kind of slowdown or the ECB. Is it, Brendan. Aren't there many other countries that would share that same concern?
Oh?
Absolutely. You know, China is not just the largest trading partner to you know, countries like you know, Germany and others in Europe, but it's the number one trading partner to a lot of countries. And you know, a full blown trade war would not just take place between the US, China, Europe and China. It would hit lots of different countries.
You know what during Trump one point, Oh we heard China so much about China, big tariffs on China. Trump didn't want TikTok because obviously the Chinese can spy on.
Us with that.
Now he's happy to have them spy on us through TikTok. In fact, he's going to push at the Supreme Court level to try and get the TikTok ban extended or lifted. And the first buddy, Elon Musk does so much business in China that speculation I hear is that he could be much softer on them as a trading partner in this Trump two point zero administration.
What's your take on that.
Yeah, it's something we've reported on quite a bit over the last couple of weeks and point to how how transactional Trump is as a as an executive and and as as as he was during his first presidency. And he will take things, uh, you know, case by case based on what the people who we talk to and something like TikTok or you know, sort of other things
that come along. Uh, you know, he's going to take case by case and and you know he's going to hear these here, hear out the arguments on both sides, presumably and make his decision based on what he thinks is best for him politically and for the economy. So yeah, we'll we'll see it's not a it's not a you know, a black or white issue. It's you know, there's some gray area in there, and and things like TikTok, you know, are a good example of that.
Brandon, do we have any idea how much of this tire stuff is just negotiating ploy versus real economic policy? As anybody kind of weighede in who may have the president ear on this stuff?
Scott Besen, Yeah, I you know, I don't you know, is the poker player sitting across from you bluffering?
Ear?
Is he not bluffing? You know, it's it's any but he's guessed. Really, I think that the answer really is that he will, you know, take things based on what he thinks are threats to national security. Even if he is just putting a negotiating tool out there, it's still having an effect. Companies are still stockpiling, So whether whether it's a bluff or a negotiating tool or not, it's still having an economic effect. We were looking at the state of volumes through the ports of Los Angeles and
Long Beach. They're going through the roof right now. It's normally a quiet time of year. So this may be a tactic, but it's actually affecting the inventory building of companies.
But Brendan, I mean, what's the thinking on TikTok? Not to focus too much on that, but isn't it generally accepted that it is a threat to national security? And the Trump administration now is okay with that?
Look, I think this is getting to the heart of the different kind of presidency we're going to see coming up starting on January twentieth, with advisors like Elon Musk. You know, Elon Musk has has, you know, every motivation to make sure that the US and China still do business together. You know, he's got a two billion dollar you know, megafactory there. You know he wants to he
wants to sell cars to Chinese consumers. So I think this is what you're going to see as kind of a softening of some of these positions like the one TikTok that you.
Raise a right Thanks to Brendan Murray, Bloomberg Global Trade Editor.
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