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The news again crossing the tape here geopolitical front. The US will demand that Russia accept Ukraine's right to have its own army and defense industry as part of the peace agreement between Moscow and keV. The Trump administration also wants Moscow to return Ukraine's nuclear power plant. In short, Ukraine has passage over the Debay River and return land occupied by Russia in the Kharkiv regen. So so it seems to like some really big news on this front. So
let's get talkd to somebody who knows this stuff. Nick Wadams is a US national security reporter for a Bloomberg News. He is based in Washington, DC. Nick, this seems like big news coming from the administration. Put in context for.
Us, please, yeah, I mean the big thing here is that a lot of what we've been hearing so far out of the administration and the conversations between the US, Ukraine and Russia have been a lot of demands on Ukraine.
So we recently heard that the US wanted to recognize Russian sovereignty over Crimea, they wanted to block Ukraine from getting NATO membership, a host of other issues at Critical Minerals agreement, and that had provoked a lot of fears among European allies and critics of the Trump administration that essentially this deal was going to be really heavily favored towards Russia and Ukraine wasn't going to get anything in return.
We are starting now to get some sense of what the US is asking Russia, and what we know so far from our reporters source based work is that they are going to rebuff or push back strongly against this Russian demand that Ukraine essentially demilitarized. This has been a central war aim that Russia has made clear since the start of its invasion in twenty twenty two, and the US is now saying, listen, we want to do this peace deal and you're not. We're not going to let
you get away with that. This is going to be something you're going to have to agree to. And then this energy issue, we know energy has been very important to President Trump. So the Zaparisia power Plant, a massive, massive power plant in Ukraine that Russia seized during the war. The US is essentially saying, you've got to give it back. So we now understand the US is going to present these terms of a potential deal to Russia and we'll see what the answer is.
And how do you think Russia will respond to that? Because the US is demanding this military right force. But will Russia agree to it? You think?
I mean, that's the great question, and that's we're going to learn a lot about the viability of these negotiations. I mean, you know, the Russian idea that Ukraine essentially demilitarized was always seen as an extremely maximalist goal. I mean, it's hard to conceive of the US or any other mediator basically acceding to the idea that a country be left totally demilitarized. I mean, that was something that you
saw out of World War Two with Japan. But otherwise this has not been repeated in modern history, so it would have been an extremely difficult demand to meet. The US is saying, essentially, that's not going to fly, And you know, I think what we'll see is depending on how Russia responds, will have a better sense of whether they see these negotiations as a viable path toward an actual ceasefire or whether they have no interest in peace and are just going to press ahead with the war.
So we should have a strong indication of the next of that in the next few days when President Trump's on boyheads to Moscow.
Nick, is there any sense as to what kind of leveraged the US has here on the campaign trail, Kennedy, Trump at the time was very confident about his ability to get what he turned to a good piece deal and negotiated quickly.
Do we have the leverage to actually do that? Well?
I mean, the US definitely does have some points of leverage. It also has some weaknesses. I mean, the big leverage it has, obviously, for one thing, is the sanctions, the massive sanctions regime that have essentially choked off the Russian economy, separated it from the West. Though Russia has been able to keep its war machine going, the economy is in pretty grim shape, and the US could just keep up
with the flow of weapons and support to Ukraine. You know, under the idea that hey like Russia, they did this invasion in twenty twenty two. They've taken over about a fifth of Ukraine's territory, but they did not topple proud of President Zelenski's government as they had hoped. Ukraine doesn't seem to be going anywhere, so the US could certainly exercise leverage in those ways. Russia, though, also sees that
it has its own leverage. Trump does not want to give Ukraine the amount of military aid that it's gotten so far, and they have bide battlefield gains in the last several months. So in some ways for Russia, there is a continued interest in prolonging this thing and drawing it out, and hope that President Trump turns his ire again toward Vladimir Zelenski rather than toward Russia. Whether that's a gamble they're going to be willing to make, though, is another question.
All Right, fascinating development here, Nick, thanks so much for your time. We appreciated. Nick Wadams, US national security reporter for Bloomberg News. He is based in Washington, DC. And again the headline crossing the Bloomberg terminal and a significant shift in this story in Ukraine US to demand putin except Ukraine's right to military force. So we'll continue on that reporting throughout the day.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Just get back to discussions on this market. Joey Yang Joints is here, head of index product management at market Vector Indexes.
Joints is here in our Bloomberget Active Broker studio. Joy, thanks so much for joining us here.
Thank you.
How are you approaching these markets these days? The volatility is significant.
We've got a VIS twenty seven, we've got to Move index very showing some volatility in the fixed income market.
How are you guys approaching the markets?
I think, you know, as with everybody, we're in new territories. Nobody is certain what the outcome of this tariff negotiation is. And even if we do reach a positive win win outcome for every party involved, which is the best case, I think there's still going to be uncertainty around how long will this last? You know, what are the second and third order impacts? So I think This is structurally a new environment for everyone, which is we're at elevated volatility,
uncertainty will remain high. So I think for us, you know, we're watching indicators and those are gold prices, bitcoin prices, on what investors are thinking. And at the moment, you know, businesses can't make decisions, they can't give proper guidance, and
those who have investors can't rely on those. So I think people are really either parking their money into safe havens or seeking liquid assets which they can move in and out without kind of structural damage that we're seeing across asset classes.
I feel like with all this political rhetoric, people are maybe forgetting that it's earning season. NBRE in the thick of it, and around forty four percent of the SNP five hundred companies that have reported mentioned the word recession. That's a little higher than the previous quarter. What is your read on earning so far? It's also been interesting companies have withheld forward outlook or they've had two scenarios, the base case and the tariffic case. What is your read on it?
I think it's probably impossible to rely on this quarter's you know, earnings, guidance, and this is going to be short term. So I think it's still proven for investors to focus on the long term and really focus on the fundamentals, which is, you know, we'll get over this. You know, there's got to be something after tariff negotiations. And I think structurally every industry still has a story narrative that's focused on the long term. You know, if
you're an AI, that's a real story. You know, innovation will not break down, disruption will not break down. But you know, at the moment, there's so many things shifting that to give any kind of short term guidance, it's really not reliable.
Talk to us about the risk controlled indexes ETFs, the market vector, Gamma road US Equity Strategy Index, like what is that?
Yes, So I think this is the type of strategies that I think investors should be focused on because I think we're so focused on equities and fixed income, right, But you know, you really have to think about other alternative ways of looking at the world and structuring portfolio solutions. And one is to look at these indicators out there that are independent of any single country or any single asse class. Is to understand how elevated uncertainty is or
you know what sentiment is. And I think right now our Gamma Road index is telling us to get out of equities, you know. But if you're out of equities and you're sitting on cash, that's not a great place either, as we see the dollar weakening and weakening. So I think investors should also look at alternative assets like gold or bitcoin that are not driven by the same macro factors.
It's interesting gold, as we know, is just ripping, but bitcoin as well. And I feel like with bitcoin it's you choose the narrative. Some people would say it moves and locks that with tech companies like cues, but some would say no, actually it's an inflation hedge. I feel like it's still figuring it out. But can you talk to us about how different this is, this global macroshop compared to others. Because I said, let's look at the long term.
Yeah, So I think definitely when you mentioned you're choosing the narrative, because this is still a niscent asset class and we've seen a structural shift in bitcoin also because it is a very volatile asset. But you know, fundamentally it should act like a store value. So we're seeing this as speculative players move out and we get more
institutional players and more clarity around regulation. We're seeing it bring out the strengths that bitcoin naturally has, which is it's it's immutable, it's decentralized, so it's not dependent on any single government, and it doesn't require trust because trust is built into the code. And fundamentally, you know, what we're seeing is that investors have lost trust, whether it's US acids or just the correlation that happens between equities
and bonds. So they're looking for things that you know, they can actually depend on. Right now, we're seeing gold and bitcoin as one of those assets.
How about international markets?
If people have been selling the US, whether it's the dollar, stocks, and maybe putting their money internationally, how do you think about that.
I think we've you know, if you take a step back, I think the problem was people had too much bias towards US assets and weren't really reflecting on where relative value is happening. And if you still look at international markets, even though globally every market has dropped, international markets still look cheap. You know, they still look better from a pevaluation point of place. So if you're focused on fundamentals and not sentiment, this is a better place.
To be in.
Does that include emerging markets as well?
It includes emerging market but all all markets will be impacted by terrorists.
Yep. So that's that's kind of the issue here. But so we'll see how it plays out. But again we've got Green on the screen here today. Joey Yang, thank you so much for being with us. Joey Yang is head of Index Product Management and Market vector Indexes, joining us live here in our Bloomberg Interactive, a broker's studio.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Is Beldie sitting in for Alex Steele on Paul Swinging. We're live here in our Bloomberg Interactive broker studio. We are streaming live on YouTube as well, so go over to YouTube dot com search Bloomberg Podcasts Live and all that kind of stuff you'll find us there. Let's get the latest reporting from Washington, DC on the tariffs. It is a fluid situation, to say the least. Tyler Kendall, she's been following it for she's a reporter for Bloomberg News.
She is down in Washington, DC. So, Tyler, is there a sense in DC at the White House that perhaps is tariff policy could be more I don't know, measured, or more consistent or more formal. It seems to be a little bit ad hoc here, and that's one of the reasons maybe the markets are a little spooked.
Yeah, Hey, Paul, there's a lot of mixed messaging currently at the moment when it comes to a tariff policy related to China, even with China saying earlier today that there currently are no negotiations happening between Beijing and Washington,
calling reports about recent developments to be groundless. That was particularly interesting after President Trump yesterday in the Oval Office contended when he was asked if he's actively involved in negotiations with China, he said that, quote, everything is active now. We do know that there were some preconditions that Beijing does need to see before talks can really kick off, including that they would like appoint person other than President
Trump to lead the negotiations. But he still says that he is very much directly involved here, even though we haven't gotten any real confirmation that Jijingping is willing to pick up the phone. Moving forward the moment, the latest escalation is that Beijing is now calling on the US to eliminate all unilateral tariffs, something that the Treasury Secretary Scott Vesant said yesterday really is just not an option
on the table. But when it comes to this back and forth, in the mixed messaging yesterday again in the Oval Office, President Trump saying that he does think that one hundred and forty five percent levee on Chinese imports is very high, and that it's leading to essentially a trade embargo, which has prompted some to think that that level that levee very much will end up being.
A lower here.
But then at the same time he followed that remark by saying that if a trade deal with Beijing is not reached, that will ultimately be okay because the US will just set what he called a quote fair price. He then suggested that the White House is preparing to release some revised teriff rates for all countries, including China, in the next two to three weeks, ultimately so I'll have to see how that ends up developing here, but
it's something that we're closely watching. If we are going to get some potentially new tariff rates.
Talk to us more about china attempt to repair tize with the European Union and as it proves to be as it tries to prove itself to be the more reliable trading partner compared to the US. What exactly is Beijing doing.
Right exactly so trying to reach out here to the European Union in a bid to try to shore up ties as a counter against the US. Most recently we have reporting, for example that European Union leaders as well as Ujingpain we're actually together on a call having to do with climate change. Now, there has been sort of a distance between the European Union and China, particularly when it comes to their criticism of how China has assisted
of Vladimir Putin amid the ongoing war in Ukraine. But there does appear to be some easy here, particularly when
it comes to negotiations around electric vehicles. So this is a very important partner that we are watching, particularly as there hasn't really been that much movement when it comes to talks between the US and the European Union, re'll called just a few weeks ago, the Eaves Trade chief left Washington with a very little clarity, according to our reporting, about exactly what this White House needs to see done
in order to get a deal. And then I would also just quickly highlight one other trading partner, and that is Japan. There is new reporting this morning from Bloomberg News according to Japanese officials that if the US ends up asking Japan to corbett's own trade against China, they will push back on that.
We should make clear our reporting.
Indicates that the US has not asked Japan to do that's just yet, but we do know it's something that this White House has been mulling. And also importantly, China has come out and said that it will take its own countermeasures against any countries that try to realign here, particularly when it comes with the US, and what Treasury Secretary Scott Besson has floated could be a plan to then approach China as a block. One statistic that I'll leave you with is that China does about twenty percent
of its commerce. Japan does about twenty percent of its commerce with China. That is more than it does in trade with the US, but at the same time, the country does export more material.
To the US.
Tyler, thank you very much for your reporting. Appreciate you taking a few minutes. Tyler Kendall. She's a reporter for Bloomberg News. She is based down there in Washington, DC. Giving us the latest on the tariff situation is a fluid situation, to say the least.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Merk what it's some earnings.
They actually put a number on the tariff costs for them, two hundred million dollars. I mean for Mark, I mean it's got a market cap of like two hundred million dollars, So two hundred million doesn't seem like that big a deal, but at least it's a company putting a number on what they see as maybe some of their their cost there. Damien Garde joins us here. He's a healthcare reporter for Bloomberg News. Joinings live here in our Bloomberg Interactive Brokers
Studio Damian. What did we hear from MERK today, what did a what did they report and how did they talk about tariffs and maybe some of the costs they see.
Well, it's interesting because, yeah, as you mentioned, they disclosed that two hundred million dollars that's what they expect in twenty twenty five to pay on account of teriffs. But these are just already announced tariffs. So principally the ones affecting imports from China of certain goods and then obviously exports to China the retaliatory tariffs that we know about.
And so there's a lot of interest in this because in the pharmaceutical world in particular, there's a huge anxiety over how the kind of like sort of damicles of specific pharmaceutical tariffs might affect the industry, what the percentage will be, how they might shake out. So Mirk giving us at least some sense of how it's been so
far is helpful. But listening to the earnings call, it's like a certain form of theater where analysts find new and inventive ways to ask the company, will you tell us what you're actually expecting from pharmaceutical tariffs if they come through as the President has promised to bring them about, and Merk kind of artfully dodging actually committing to that.
How exposed is Merk do China and maybe broader pharma companies in general, because they do have this drug and they're facing stiff competition in China, and that's one of the really downfalls that the company face in a previous quarter.
Yeah, I think Merk in particular faces teriff issues on two fronts. Staliatory tariffs imposed by China make it difficult to sell products into China for any American company. They are sort of in the crosshairs of what Beijing is doing in retaliation to the White House. But then you know, maybe an even larger headwind for them is the potential of the United States imposing tariffs on the importation of pharmaceuticals.
Because Mirk, like most of its peers, has a huge global manufacturing network and in many cases will ship products to the US from, for example, Ireland, where they have a lot of manufacturing. And then this gets a little into the weeds of trade policy. But Mirk, like many companies, has offshore the intellectual property behind some of its biggest drugs, So ki Trudah the biggest drug in pharmaceutical history, which is Mark's cancer drug. The IP lives in Ireland, and
so that gets cop Ireland. That gets complicated in the if and these are all ifs because we don't know. But if, for example, the President were to impose a twenty five percent tariff on pharmaceuticals, then Mirk could end up paying quite a bit simply to import its own product and basically the intellectual property of its own produc
from Ireland to the United States. So that's really the number that analyst are trying to get their heads around, both in terms of Merk and in global pharmaceuticals in general. And it remains a mystery because we don't know Merk based where.
John Tucker, that would be New Jersey, that would be New Jersey. Yes, it would be Rawway, New Jersey. Johnson Johnson, New Brunswick, New Jersey. Just for those out there wondering, And we got sharing Plow, Bristol, March Squib all over the state.
I still have to visit New Jersey.
Have to visit New Jersey. How long have you been in New York? Seven years? But I stay in the City. Absolutely. Jeez, all right, Damien, let's so frame out Merk.
I mean, the stock is down twenty one percent this year to date. That's the worst of the big pharma here. I've got a Lily up ten percent.
What's what's the story on Mark?
What's the concern in the marketplace about Mark?
I think it boils down to Gardasil, which is Merk's blockbuster vaccine for HPV, which is a cancer causing virus. It's one of the more I mean, it's the only vaccine you can say prevents cancer. So this is a massive product around the world that Merk developed and has been marketing for more than a decade. The issue came about last year related to China, which is that there had been this massive boom and demand in China for
this vaccine, which is paid for out of pocket. It's a luxury product for basically the wealthy of China, and then suddenly that demand seemed to fall off a cliff last year, and Merk didn't have initially much in the way of convincing explanation as to why that happened and why it might ameliorate, and slowly, quarter after quarter the story got worse until in the first quarter of this year, they halted all shipments of Guardacil to China so voluntarily, yes,
because the inventory had built up, the demand had fallen off, as such that their partner in China was apparently unable to sell the doses at the level that they were previously scrambling to meet the demand of. And so if you just subtract all of Gardasil's potential revenue in China, you're probably talking about three to four billion dollars a year, which, in as you mentioned in the context of merk is
not that big of a deal. Especially key true to the cancer drug can make that up in half a quarter. I think the issue really with the stock move you mentioned, and they're down forty percent since first disclosing the guard Sil problems in China relates to the fact that the company has not had a very convincing explanation for why it happened and why it's going to be ameliorated. And so you're seeing both a sort of you know, reputational kind of risk taking place there and then furthermore, not
unlike Wiley Coyote running off a cliff. I think when the Gardasil situation worsened investors started taking a hard look at the rest of merks portfolio heading into the rest of the decade, especially key Truda, which will face lower cost competition around twenty twenty eight, and kind of start to panic, like, are we sure this company has a plan to withstand what's going to be a massive pattern?
Cliff, what are your sources telling you? Why are they not explaining at them?
I think they.
In fairness to Merk, I think they have been probably about as forthcoming as they can be. It's a little bit of a black box for them because, as I mentioned, they do business in China with respect to Gardasil through a Chinese company that is their distributor. So Mirk on the US end is basically shipping doses according to what that company orders. They don't necessarily have as that company would the sort of like boots on the ground selling
doses in China. So I think they were probably caught a little flat footed, and I think reasonably you could say that they didn't read the market well. We had a story earlier this week looking at the rise of biotech companies in China which have rapidly come to develop vaccines of their own and are now seeking to supplant gardasil in the country. And I think it's fair to say, and we've heard analysts say this that Merk did not adequately assess the competitive dynamics on the ground.
There.
Where is the University of New Mexico, Albuquerque? Okay, and you're from New Mexico originally, that's right, like a native Oh.
Yeah, I mean in fact, I'm going back in a month.
Virtually everyone to whom I'm related.
Lives within about one hundred miles of Albuquerque, no kidding.
So what town were you born in? Los Lunas Los Lunae.
So it's south of Albuquerque, between Albuquerque and the isleta Indian.
Reservation that's west of New Jersey. That's little west of New Jersey. Have you been in New Jersey? I have see delightful place. All right, Damon GARDI thank you so much for joining us.
Amen Guarde Healthcare reporter, Bloomberg News, proud graduate of the University of New Mexico. They are the Lobos.
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