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This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along with Lisa Bromwitz and Amrie Hordern. Join us each day for insight from the best in markets, economics, and geopolitics from our global headquarters in New York City. We are live on Bloomberg Television weekday mornings from six to nine am Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen, and as always on the Bloomberg
Terminal and the Bloomberg Business App. Ben later Bradesco joins us now for more, Ben, Welcome to the program sir, it's been too long. Let's just get to sort of base case baseline expectations for the next several days. What are you and the team expected to see?
Well, I'm hoping we see more of the same, right, I guess, continued on certainty, but actually no dramatic changes to this sort of backed off tariff scenario, you know, so this does see it feel a little bit like back to reality. Of course, it never went away. We just forgot about it for ninety days, and markets, you know, ripped off the back of that, and I think we're having a probably a predictable reset here.
Ben, let's talk about how that reset might shape global markets. The bias at the stand of the year was to look to international assets and maybe leave the US behind. The US has snapped back so aggressively, so quickly, I think people are questioning that all over again. Where do you stand on the issue?
Yeah, I sort of think the genie's out of the bottle on US exceptionalism. I'm not a bear on the US. I think the US is fine, but I am looking for much more average returns out of the US, these sort of typical ten percent levels, not the twice that that we've got used to in the last couple of years. And I think the rest of the world looks looks pretty good here. You still and most of the all have this sort of double equity in FX discount the
week of dollars clearly helping. And I think some of these countries have real silver linings to a potential restart of this tower.
Well, when it comes to the restar of the tariff for and you're looking at all these countries who you're most excited about. Everyone was very amped have been excited about Japan, but they've seemed to take in less of a priority with this administration than they did just thirty forty days ago.
Look at Latin if you want to be excited. Cheapest market, cheapest markets in the world, best and fording markets in the world. This year, Mexico one of a tiny handful of company of countries that still have tariff free access to the US and places like Brazil, you know, low ten percent tariff, lots of commodity carveouts, and a market which would actually probably like more of a slowdown potentially coming in from coming in from the rest of the world.
So there are you know, it's a big world.
There are definitely markets out there that I think would you could have silver linings here.
It's interesting you mentioned Brazil because the President was saying that any countries that align themselves with policies of the bricks could be charged an additional ten percent tariff. Brazil is the host country for this week's Brick Summit. Do you think Trump is more embolded now is a question Jonathan's been asking all morning, given the fact that he has had the markets at an all time high and he.
Just passes one big, beautiful bill.
We're going to find out that.
I guess that's the one thing I know with some certainty. But yes, the Trump put is definitely not as strong now as it was, you know, when we were down in the whole, you know, twenty percent, you know, plus ago. You know, I would like to feel it's still in place. I would like to feel, you know, Trump feels he's in a better place. Does he really need to go through that all again, introduce that level of policy uncertainty.
There's even greater drags on us growth. You know, I would hope, you know, cooler heads prevailed, but who knows. You know, we still have ninety percent of this administration to go.
Ben, Investors feel like they're in a much better place compared to where there were a few months ago. Are companies? What are corporations doing now? Ben? And a question we asked on the previous hour. Have we established how these tariffs will be handled? Will it be passed or they have to eait it on margin?
Listen, I think companies are just like the rest of us, right. I think this level of uncertainty, even though it may have come down a bit, is absolutely corrosive to decision making, to confidence, and I think everything else being equal. That means that you are hiring less people, you are doing less capex. And your question on tariffs, I think companies have shown us and the margins are there to prove it. They will pass this on. They will pull that pricing lever at every opportunity.
Then which economy, which center consumers do you think is in a better position to absorb that hit.
Well's the US consumer is going to take most of this, right, So the US consumer is in reasonably good shape. But you know, at the margin, this is all this is all slowing, right, So I'm not sure that the US is in the eye of the storm here. I think the rest of the world, you know, whether it's on the economy side with fiscal stimulus in places like Germany and China, whether it's on the market side with these double discounts on the on the equity market and the FX.
I think international assets and this global rotation has further to go.
Ben, I'd love to get your thoughts on China because that is something that the President is still working on, more of a bigger grand bargain deal he talks about. At the same time, they have a framework when it comes to export controls and critical minerals.
Do you think China is investible.
I think it's definitely investable. We are seeing very strong inflows into into Chinese assets. I was just looking at the numbers this morning from the from the US ETFs was like five hundred million last week into China five hundred million you know the week before. So absolutely the money's going in. This is a very cheap market. I think people are betting there's a deal to be done and there's a there's enough flexibility on the Chinese side too.
They want to deal and they have a policy stimulus to maybe offset some of the costs to the tariffs that having to eat right.
Now, Hi Ben, I appreciate your time, as always been. Later there a Pridesco. It's the type from Dan Eys of Wentbush Rights in the following must diving deeper into politics is exactly the opposite direction. The Tesla investors and shadholders want him to take dan Jo and to surround the type with Danka monic great to be. How much of a problem is this.
It's a huge problem.
I mean, it's what we've been talking about and you're hearing the show, you know for months that you went from Trumdministration Dige BFFs. Obviously there was a huge moment you had to step back from politics, and now that's exactly what investors want to see. And now you poke the bar in terms of Trump and now you're former em political party. So the point is, I believe you've now hit a point. I think the board's going to
have to get involved because this is now over. I think there's a line in the sand that he's now starting across. And that's the frustration that someone that's a huge supporter of Tesla Autonomous, the Golden Age ahead, you cannot kind of go down this path.
And I think that's why the stocks reacting.
Let's some pack that volt himselfman describe what that might look like.
Look, I wouldn't say it's necessarily an ultimatum, but you know, you cannot keep going down this path where you know.
To start a political party ahead.
Of the midterms, I mean the amount of work time and also you alienate potentially whether it's Republican Party, whether it's Trump. So now Trump goes from obviously a huge supporter to is that sort of an enemy or blockade, And I think that's why the stocks reacting the way it is because the last thing you want to see at this point autonomous regulatory that now must goes from front seat in the White House to ultimately you become more of a foe.
When you say ultimatum, you mean the board saying to him, if you continue this behavior, you can no longer be CEO.
Look, I think the board's gonna there.
It's a tricky path right for the board, and this is not a board that this has had such a you know, a huge.
Backbone when it comes to Musk. But I do think, look, investors, there's exhaustion.
Do you want to see a new CEO book.
I want Musk to stay CEO as Tesla because in my view, Musk is Tesla, Tesla as Musk the biggest asset of Tesla.
But this political.
Journey that he continues to go through, I think he just comes down to Investors have hit a point where they want him focused on Tesla and AI, and every time that happens, he just continues.
To go further and further into the political theater.
He might not be just burning bridges in the Beltway. I want to read you this quote from the Wall Street Journal reporting overnight because of the Musk Trump feud, Beijing no longer views the Tesla CEO as a geopolitical asset, will shy away from publicly courting him, so he canna have problems outside of the United States as well because of his political involvement in the United States.
Look, it goes back to like, if you just take a step back here, it's like, let's try in a way to almost alienate every aspect of the ecosystem, right in terms of the core buyer to now maybe even Republicans to what you're seeing in China.
And that's the hearts and lungs of Taska.
I continued, we must is an asset there and it will play that sort of nice in the sandbox, but it does show you become an enemy or a food to Trump. What does that do in the political and obviously the geopolitical.
And I think that's part. Look, that's that's.
Part of the you know, the issue here is that you start to go into a quicksand situation where I think in the view of investors there's really no upside and you can say, okay, if you get mid terms and you have some success and he has political power, but that's independence of their ad really success in the US, but.
It's massive risk. That's where the stock's selling off to where it is.
The ANIX community is not exactly build up on the stock. It's actually very divided. And if you take the twelve month consensus price target, the average is about two ninety eight right now, and that's below where we closed on Satursday. How well understood are these risks they manifest and evolve over the weekend.
Well, I think the risk now they continue to expand, and I think that's part of the issues that Okay for here it did you go back to a few weeks ago road attacks, the autonomous you know, must one hundred percent committed. Now it's like, hey, over the weekend, while you know, hot dog and doing a July fourth barbecue.
Hey let's start a political party. Yeah it's a good idea. Yeah we're going to do that.
So that's as an investor, it's the last thing you and I heard over the weekend. The last thing you want to see is him going on the spat. But I think the bigger worry is as he goes further and further down the path from from a Tesla perspective, does that maybe add risk in terms of Trump becoming more of a blockade rather around autonomous.
And around some of the just describe what that means. What do you mean by that?
What could he take?
A big thing is around the federal roadmap in terms of autonomous. I mean, now, this is a key few years ahead for Tesla going not just from Austin, but twenty five cities over next year. If you start to put more blockades in terms of things that they need to meet in order to get on the road, if instead of more of a green light, it's a little more of a yellow red.
Light, that's the word. That's what the stock's selling off.
It's the fear that over the next six, twelve, eighteen months Trump starts to put little blockades in that.
But even today the president is looking out for America's interest. If he just does that, it might hurt Elon Muss but also might hurt the United States when it comes to competition with China.
And that's why we've said the biggest asset when it comes to autonomous is Tasa because when you think Willima's not going to scale at any level relative to Tessa. So when you're competing with China, Tesla and Musk is an accid no different than Jensen.
That's why. Look, the hope is, at one point, is there.
Some sort of meeting between Musk Trump? Can they sort of get to some resolution. The problem is every week he gets further and further, and this is not what you want to see. Just the amount of the content to every other tech company, from the Della, from Jents and from open Ai, from a Oracle and all down the AI path you don't want to see.
Must now going down the Portico path.
How much time does he have? You've got a pricetocket of five hundred in a pre market right now for at two ninety four. How much time does he have to back away from that?
I mean, I think you basically have what I view is kind of like ninety days three months. I mean, I think there's a ninety days sort of I can see like some sort of ultimatum where if he continues to go on the path no different than how we view with Duge and Trump, or he's on that conference call.
I had to back off.
This is this is a I would just have to say a moment of truth.
But this is a time now for Musk.
He needs to choose and you can't keep having these one step forward, two steps back, one step forward, two steps back. And that's why the exhaustion is starting to play out in Tesla stock.
Then West, It's going to say, certainly exhisted by a lot of this. The stuck is down by close to seven percent in the pre market. Let's turned back to Trade Treasury Secretary Scale Besson saying that some trade partners tariff rates will boomerang back to Liberation Day levels. Joining us now to discusses Kate Kalukowitz, the former White House trade official and former senior USTR trade negotiator. Kate, Welcome to the program. Is this the beginning of the end or just the end of the beginning?
Well, I think this is President Trump at his best, when he's bringing the pressure and supporting his negotiators. I think this is his favorite time of the negotiations, when he can be extremely maximalist. And I think as a trade negotiator, it helps to have a leader like that pushing for the end, pushing for the negotiations to get over the finish line, and providing that sort of threat that helps his team actually tell their counterparts he's serious.
Kate, what determines whether you get a UK outcome, a Viennam outcome, a China outcome, or something much worse.
Well, you know, I actually think that's quite an important question, and the Vietnam deal sort of shows that there are two different trajectories here. Let's set China to the side for now, because I think that's a separate type of negotiation. But you have a UK outcome and you have a Vietnam outcome. And I think for the list of countries with which the United States is actively negotiating, you see
two different pathways here. One for the more developed economies, probably looking for something like the UK god and those more export heavy economies that receive those very high tariff rates. Maybe the Vietnam deal reflects what the Trump administration is putting on the table.
Is a Vietnam deal actually done though, Well.
Back to our end of the beginning, You're right, Anne, Marie. These are framework agreements, and I think you described it perfectly. The truth announcing the Vietnam deal was I think quite gleeful. The Vietnamese, of course later in times said we still have a lot of things to work out here. But let's make no mistake, this is a re really important outcome. The Vietnamese, of course, were on the hook for very
high tariffs. They've been the recipient of the ire of the Trump administration, going back to the first time around, the increasing trade deficit, particularly as it relates to China. The longer term play for the Vietnamese, however, is going to be how it manages this very very challenging place they find themselves between China and the United States. And these will be the details on the transhipment that they're going to have to work out.
When you look at what's coming up this week, the President says at noon he's going to be sending tariff letters out. You have the European Union, the Commission talking about the fact that the President got on the phone with Ursula Vonderline. They're looking to get some sort of framework before July ninth. What buckets are different countries.
In Well, I mean, I think you've seen the President and his surrogates talk about this smaller set of nations or economies which are much further along. I think the President had been quite hopeful last week Vietnam would be the first of several and now Smith's that day and you've seen him signal that talks with India quite forward, that talks with the EU are quite forward. Obviously he's been a little frustrated with where things are with Japan.
But I think these are the countries that we can expect some outcomes this week if negotiators can get a few of these wrinkles, you know, ironed out.
These are also the same countries though that given the fact that they are in these deep talks, will get extensions. And is that what you think Commerce Secretary Howard Lutnik was talking about when we talked about April for August first.
Well, again, I think the President is trying to signal to these countries that they need to stop delaying. You know, he had hoped to have these deals ready last week. I think this new notion of letters going out is really his way of ratcheting up pressure. Typically when we see tariffs go into place, there is somewhat of a delay to allow importers some time to adjust.
So I think we'll still have to see exactly.
When things are implemented. But I really do see this more as the President trying to ratchet up leverage.
How surprised are you they're given the fact that you were a trade negotiator under Trump, that Japan and the European Union have basically swapped fates.
Well Japan is quite interesting because I think the President was surprised when he got the Knee Pond steel deal across the finish line. He probably suspected that would be sufficient to wrap things up. Of course, the Japanese really want to see an outcome on cars, and the President does not seem inclined to deliver that.
Then.
Of course, you know, when you're negotiating with democracies, this is always the challenge. Japan has an election coming up, which constrains its negotiators, so you know, it is quite shocking I think that we've ended up in this place, but this is part of being a trade negotiator with governments which have to be responsive to their own domestic constituencies. Europe I think will get across the finish line so long as we continue to have these leader level discussions,
as we've discussed before. You know, the European Union is a very challenging negotiating partner because it does represent twenty seven different countries, and so if you don't get right to the leader level, you don't get right to these big commercial deals.
It's very challenging.
So if President vonder Land and President Trump maintain this dialogue, I think we can get that one finished.
I Kate, appreciate your view. Kate Kalukowitz there joining us on the latest trade push down in Washington, d C. We begin this hour with stocks pulling back from all time highs as President Donald Trump reignites trade concerns. Kadi Kaminskive out for simplex writing, Equity trend signals are still modestly strong given the volatility and uncertainty in recent months. Candy joins us now for more. Can you welcome to
the program, and good morning. It feels like sentiment is quite one sided now after the massive reversal over the last several months or so. Yet will still come on the program and say the pin tride is higher equities from here? Do you agree?
I would have to agree that that's what we're seeing, especially in the market data. What was interesting, though, is we did see a little bit of a pivot last week where you saw small caps and perhaps more domestic.
Focus being in ahead.
And so I'd say that, you know, the general theme has continually been a little bit more pro growth and positive for equities, which is something I wouldn't have guessed a few weeks ago.
In particular, Okay, you're seeing that inequities, Can you say you're seeing the corresponding thing in the bond market at the same time.
Definitely not. I'd say that the bond market has been very tricky this year.
We've seen very mixed signals across different parts of the curve. We've definitely seen short signals on the long ends suggesting that.
Yields need to be higher over long term.
That may suggest some uncertainty about where rates are going to go over long horizons. But in general, it's been very tricky to trade the bond market recent because there's just been this push and pull between when aer rate's going to be cut and also just you know, in general, what are the impact of all these macro themes on fixed income?
Given this, are you surprised the bond market didn't get a vote on the one big beautiful bill?
Good question. I mean, I think you haven't seen that much movement.
You are seeing some steepening as well recently, like particularly today, or seeing that as well, So I'd say that you know, the bond market is not voting yet it definitely voted on what was going on in Liberation Day. So I think, you know, we just have to wait and see when you know, bond investors are really voicing their opinions. But really, right now very mixed and fixed income.
Do you think bond investors are going to pay close attention to this deadline this week or they feel like it's self imposed and already the administration has signaled that a lot of these trading partners are going to get more time to really work out the agreement with the United States.
Well, I mean, if you look at just how much movement you have today and how the market has responded to recent events, it's almost that the market is sort of shrugging off some of this news because it's nothing is really a big shock. It's everything that we've been discussing along the way, and there's been continual backtracking and.
Back and forth.
So I think people are waiting to know the real results before they start positioning themselves for the impact of those potential trade decisions.
It keady in the meantime. What's working in the commodity market, Not much, I.
Would say, I mean, i'd say that commodities have been up this month, but there hasn't been big swings.
Obviously, people have been following oil and energy in general, but when you look at things.
Like gold, which had also been pretty much on a tear this year, it has been sort of stagnating some as well. So I think, you know, looking for that demand, that demand increase that might potentially occur because of having better stronger growth is something we're kind of seeing right now this month that bodies have been up, but it's not particularly strong yet, but it's the potential for a trend going the next few months.
Kevy, as I listened to you talk about commodities and fixed income, it just sounds like you're seeing convictionless markets in certain asset classes. Would it be fair to describe them as that precisely?
I think what we have seen is strong conviction and equities a week dollar, but everything else has been kind of wavering around in sort of anticipation to understand the impact of these trade negotiations, but also just sort of is the US economy strong enough to actually follow through with this narrative? And that's why I think other asset classes are really trying to really waiting and sort of treading back and forth.
Kenny, do you find that difficult to reconcile while we are seeing that conviction in places like equities and in foreign exchange, why you're not seeing the same thing elsewhere?
Definitely so, But I mean I think these are just at different time horizons. I think equity move quickly.
I think the bond market needs a little bit more clarity on multiple economic factors such as trade as well as you know, the overall health of the US economy and the job market, and those are a lot of themes to reconcile, particularly with the FED that hasn't moved yet.
So I think bonds doesn't surprise me.
But commodities, I think they're sort of in the wake of what you know. I would have expected them to move more, just with the tariffs themselves fundamentally, but we still haven't seen that yet. So that I think helps investors be less worried about this inflation concern or other concerns related to trade in the short term.
Stuck in Limberg, Katy, appreciate the update, Katy Kaminski that of Alpha Simplex. This is the Bloomberg Surveillance podcast, bringing you the best in markets, economics, antiopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern, Subscribe to the podcast on Apple, Spotify, or anywhere else you listen, and, as always, on the Bloomberg Terminal and The Bloomberg Business out
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