From the heart of where innovation, money and power collide in Silicon Valley and beyond. This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Live from New York. I'm Caroline Hayden. This is Bloomberg Technology.
Tariffs.
They have come for Big Tech, the sector among the worst hit as higher duties target their Asian supply chain and investors brace for retaliation. Bloomberg spoke with Treasury Secretary Scott Lesson yesterday, who says the tech sell off is actually not a MAGA problem.
In my old business, I was very concerned about market movements, and I'm trying to be a Secretary of Treasury, not a market commentator. What I would point out is that especially the nasdeck peaked on deep set day. That so that's a mag seven problem, not a MAGA problem.
But today investors do think the tariffs a mag seven's problem.
Let's check in on those markets.
We fall hard on the NAZAT one hundred Tech underperformance. The other benchmarks, We're off by almost five percent. This is the worst day for the benchmark since twenty twenty two. We move on to those Magnificent seven players, which we're all in the red even the software services sector being hit by anticipation of what the EU levies back in terms of digital services taxes. Alphabet lower, Meta off by eight percent, Amazon off by eight point eight percent.
We move on and have a look at what the hardware impact is in Vidia.
Even though semiconductors are exempt from current tariffs, we anticipate further to come and retaliation.
We're off by almost seven percent.
Tesla wipes out seven percent, and Apple falls the hardest. We're off by almost nine percent. We are having the biggest erasion.
Of mark kick cap for Apple.
Ever, it's on pace for the biggest single day wipeout in the company's history, more than three hundred billion dollars in one go. Apple supply chain w was we dig into them. Blomberg's Dana Woolman is with us, Dana, why is Apple in the eye of the storm here? We thought they were diversifying out of China, but that has backfired at this moment.
Yes, diversity, diversifying out of China does not mean so much in this moment, especially given that the Trump administration has just taken aim at, if not every country in the world, seemingly every country in the world, and certainly levying very high tariffs on some of the very countries where Apple thought it was making progress by diverting some of its manufacturing countries like Vietnam, Thailand, others, even Ireland, not a company necessarily think of as core to Apple
supply chain. So Apple did spend years trying to reduce its dependence on China, only to have bits as the outcome.
I mean a certain analyst reaction Rosenblat Securities, for example, saying this just blows up Apple's business model that you question how Trump could be targeting such an iconic company. They say, it's hard for us to imagine Trump blowing up an American icon. But at this moment it looks pretty tough. Many out there think eventually they'll get some sort of exemption. But for the here and now, it seems as though Tim Cook tried to be at the inauguration.
He's promised investment in the United States, but it's not enough.
Absolutely, and I would not go so far as to say this these measures were targeted at Apple, but certainly, as we can see Apple as one of the hardest hits, and as you said, Tim Cook's personal efforts to curry favor the Trump administration clearly did not yield the outcomes that her investors would have wanted or expected.
Dane Woman, we thank you for the update on all things Apple, and then we turn our attentions to the services side, the software side too. France, Germany, they are pushing for a stronger response as President Trump's taris pushing for the EU to target US tech companies in particular, and Alan Katz can tell us exactly how this seems to be coming down to the digital services tax in particular. They really want to target big tech as the way forward here.
Well, they do really want to target a big tech but it's actually broader than that. So Emanuel maccin is actually meeting with a whole variety of industries that are going to be affected by the tariffside meeting is happening right now, and speaking just before the meeting, he actually asked EU companies to pause all investment in the United
States for the moment. So this is not just this is not tech specific, this is all companies in all sectors saying, you know, if the US is hitting us right now, how can you be investing in the United States? And you need cohesion among these sectors that are being affected by the United States. But to come back to your point about tech, the EU and more specifically France and Germany, and France, I suppose more than anyone else, really thinks that going after digital services is the way
to hit the United States. Now this has come up before, It's been a fight before between Francs the United States. France does have a digital services tax on companies like Google and Amazon, which levies which makes about seven hundred million dollars a year for France's coffers, and it wants to use that or it thinks that is the way to respond the best way to respond to the US decision to Donald President Donald Trump's decision that said, it's
going to be difficult to get everyone to agree. Those digital taxes that exist in Europe are pretty different country by countries, say France versus Polands, for example, are quite different, and some countries have really been very, very reluctant within Europe to impose that kind of tax. So if France getting sort of everybody on board, all twenty seven members of the EU really is a tall task.
And I suppose what's interesting is Germany seems to be aligned on wanting to go hard in response. In Germany was one of the company's countries that hadn't want to align itself on this sort of a tax. Will we see big tech pull and retrench from Europe? Even willing to mentally get round that, are we going to start to see bifurcation here?
That's that's not a million dollar question, that's a multi trillion dollar question. It would be impossible to say at the moment. I mean, your point is a good one, right. Germany really was pretty opposed to the idea of digital taxation before now it seems to have come around to it. Habek was quite strong, the Economy Minister was quite strong in his comments earlier today. So it does seem that
Germany at least is on board with the idea. That doesn't mean again, that all other European countries will be on board. And Europe is trying to do this with more or less one voice, if not exactly one voice, because the things it will be much stronger if it responds that way. So even if France and Germany, which traditionally are the motor for the European Union, even if they agree on something, it doesn't it doesn't necessarily mean that's going to happen on the question of bifurcation. That's
of course the question immediately came to me too. France has four years tried to create alternatives to you know, search engines and AI companies, and it's generally hasn't worked out because France is too small a market, and it hasn't There hasn't really been one single European market functionally for these digital services. Will that come as a result of these tariffs? That's that's It's a good question and
one that many people are asking themselves. Will We really don't have an answer to that yet.
And Kat's great to catch up with you. Thank you for giving us the tech nuance. I mean, while joining us now for more on the global tariff impact, Mark Mahaney ever core is I seenior managing director joining us now, and I start with retaliation. Many of the Internet names that you cover could well be in the eye of the storm if Europe does increase those digital services at taxes that they already hate.
I think that's right, Caroline. I don't have any particular insight into that, but that makes logical sense to me. What I senses the way these stocks are trading today. The degree of sell off is kind of determined by retaliatory risk and recession risk. So there are companies that I look at that are just off modestly because they're perceived to have relative they're received to be relatively recessionary resilient. That's names like a Netflix or Spotify, which are inexpensive
consumer subscription businesses. But at the other end are the three megacap names that I look at, Amazon, Google, and Meta, which are trading off ford to nine percent. Amazon at the top of that list because of pure terrif exposure. There's most of those products that they sell are produced, manufactured, and then exported from Asia, so there's going to be costs that Amazon's going to have to decide whether to eat or pass al on to consumers and therefore depressed demand.
Meta also has this exposure to she and Timu, some of those kind of exporters retailers that got hit by the removal of the Deminimus exemption. So there's a lot of different issues in here, but retaliation and recessionary risks are sort of bifurcating some of the stock movements today.
How do you foreseen this mark?
Many have been surprised by the aggression shown in the reciprocal tariffs. But do we think this is knee jerk? Is this in any way a buying opportunity?
Okay, then yes, I think it's a buying opportunity if you can, if you tell me that I can buy Meta at less than twenty times earnings and Google at fifteen times earnings and Amazon at twenty three times earnings. Even I know, I understand that there's going to be earnings risk from the imposition of tariffs, from a slow down economy, from a recession. You know, you're talking about mid single digit percent earnings growth you step in and
take on a full position today? Absolutely not, But like at these levels, yeah, this is you know, I hunt for what I call d HQ's, dislocated high quality companies. Look, we had a two and a half year bullmarket, uper bowl market and tech stocks, particularly in some of these internet stocks that went through the end of last year. Here's your negative catalyst, and you know, you now got it.
You didn't have any real dhq's at the beginning of the year, but now you do, And so you want to step in on the highest quality names when they're trading at trough multiples. So yeah, I think you want to be picking away at these. I think what you have to also be very cognizant of is there's going to this terrify is she is going to play out for a while with retaliations, so you can get all
that volatility. Then you've got increasing risk of recession. So you're going to have to be careful about those estimates and they're going to come down you know, probably mid singles dit you percent again in a modest recessionary environment. But with these kinds of multiples, Yeah, you want to start picking away at them.
Could you in the next earning season.
As soon as that see a retrenchment in purchasing of it right now?
See we see that in the earning season. I think most of these companies are going to be we're just finishing up our previews now, or most of these companies are going to be reporting reasonably solid March quarter results. My guess is that what's going to be consistent across almost all these tech earnings is cautious commentary about end market demand for the June quarter, and therefore you're going to see cautious guidance that's in life with her below
the street for most of these estimates. The only silver lining here is currency, which was a massive which looked to be a massive headwind for the year, doesn't look like it's going to be as much of a headwind as thoughts, So there's a little bit of help there. But at the whole, I think the March quarter results, I think we're going to be fine. I think there's just the guidance is just going to be cautious about
the June quarter. So I don't think there's any particular reason for the stocks to trade up on the upcoming prints.
You can totally understand why enterprises would just slow down their commitment to spend on some of your names and some of the technology that they sell.
What about the AI trade, though.
Mark it does affect some of your names like Meta, like Amazon.
Does the wind come out of the sales there too?
I think it has been coming out. I saw that Treasury Secondary's comments about deep seek being one of the key factors behind the mag seven trade on wine. I think there's some truth to that now. I think there's also policy that's just been just as much, probably more of a factor in the in the in the in the market sell off and then the mag seven unwind
the AI trade. I don't think these companies are going to be slowing down their AI capex anytime soon, and I think we're going to see more and more evidence that they're getting a return on that. On that, you know, we're going to get a lot of these good productivity data points. Google is telling you twenty five percent of their code now is being generated by AI, which means that their programmer headcount is probably going to be flat
for a couple of years. Amazon telling you that they have twenty five percent lower cost to serve in their most advanced automated distribution centers. That's a massive efficiency gain for a name like Amazon. So I think that's going to come through in terms of margins. The question is what's happening to demand and is that going to depress the margin expansion we would normally expect from the AI trade.
That's the big unknown to me. But I don't think these companies are going to slow down their AI expenses.
Mark as someone who is every day having to respond to the headlines that we're.
Going to get, many feel that you will come there'll be carve outs.
Potentially Nearly every analyst anticipating that for Apple, for example, with your names, how are you going to keep abreast of how this changes, how we see other countries respond and try and carve out certain names, or at least will try and curry favor with the administration.
Well, I think I'm going to focus. I mean the sector I look at Internet sector has very little direct terrific exposure except for you know, the retailers like particularly Amazon. It's really kind of the indirect exposure. What impact the terriffs have on consumer confidence and on consumer spend and so then what you really want to do is look at the stocks that I look at, and I kind of put it together a recessionary spectrum, like who's the
most recessionary resistant, who's the most recessionary exposed? And you know, I think names like Netflix and Spotify are the least recession they are the most recessionary resistant. That's why they're trading off better today. They'll hold up better. The stocks have here todayta actually outperform the market materially. You're to date because of this, PODi.
Spify for example, Mark just to jump in a Shopif I would be on the other end of that, yes.
It would be and so with the travel names too, your Bookings, your expedias, your Airbnb, the kind of discrete consumer discretionary spends also advertising names with a lot of exposure to brand advertising. Brand advertising always gets cut before performance marketing. So that's why I particularly find Meta very intriguing here. You brought it down to a very attractive price point. It's the largest performance marketing platform out there that isn't called Google, and I think it actually will
hold up fundamentally better than most assets. So that's why I'd be chipping away at the stock here.
Mart mahoney with news you can use. We thank you so much.
Ever caught ISI coming up, will take a look at how the twenty five percent auto tariff is going to be impacting the electric vehicle market.
This is blue meg technology.
Now let's take a look at how tariffs from the auto industry. That's Trump's twenty five percent tariff on the US imports is already taking effect, expected to increase costs and disrupt industry supply chains from most Credudell joins US. Now these aren't promises, these are delivered. And how much we already seeing auto sector and EV's respond to it.
Yeah, I think we will see significant disruptions to supply chains. I think that is part of why you're seeing some of these stocks trade down. I think you're also likely going to see some of these companies caught up in retaliation, you know, potentially in the in the days and weeks to come. We haven't necessarily seen that, you know, from countries that are newly you know, newly facing higher tariffs
from the Trump administration. But we did get at least a whiff of that already with you know, Canada, for instance, kind of taking aim at Elon Musk's companies as a result of the tariffs that do you is put on Canada and Mexico in the last few weeks.
So yeah, go there for us because Tesla is down hard, even though many would anticipate, look, it makes more of its cars here in the United States should be less exposed. But you think it's a retaliation trade here, I.
Think retaliation is likely something that the market would be, you know, concerned about. I do wonder too looking at Tesla's shares. You know, they really were down quite a bit yesterday. They had this you know, really furious rally and response to this report by Politico that maybe Musk would be looking to exit his roles in you know,
advising the Trump administration. And I think you know, not only did the White House Press Secretary and Musk himself, you know, sort of knock that down, but you heard jd Vance today, you know, come out and say that, you know, he will continue to kind of have our ear even after he you know, officially leaves. And so this notion that that that TESLA is you know, going to make a clean break from this situation where it's CEO so closely tied to the Trump administration just seems pretty misguided.
I think the one other thing I would.
Point out is, you know, Tesla likes to and you know rightfully so likes to to tout you know how you know US you know, made in America, it's its cars are. But in order to rely on this parts content to you know, share that data with folks, it relies on US government data that loops in US and Canadian parts content. So you know, that just speaks to this notion that I think, you know, for decades we've sort of thought of, you know, what happens in Canada
and what happens in the US. It's sort of one and the same in this you know automotive supply chain, and you know for us to move to this you know new paradigm where that's no longer the case is really disruptive to everybody, even companies that make all their vehicles in the US.
Really thoughtfully put crejd ow thank you. Let's get more for you on auto tariffs how they could impact electric vehicles in particular.
John Desusar is.
With US co founder and president of Ample, which is working to accelerate the transition to electric mobility. And what's so interesting about you is you basically offer to swap out the actual batteries to make charging that much swifter and cleaner. But John, you've made real inroads into building in America. How is this going to back far for you with tariffs?
So as you look at the tariffs, there are actually three things that you need to look at. One is where do you go through and produce it whereo factories. The second thing is where you get your materials from, and the third is what you do to finnshurds.
So I think we were ahead of the curve. We do all of our production in the US in California. We have our factories there.
The two other parts though, one is where do you get the goods When you don't have the capacity or you don't have the necessary skill set domestically to go through and form itt you buy those things from abroad. So the tariff for us, that means everything we bring into this country, we need to go pray tariffs on it because we're doing all our production in the US. The last part of it is once you produce it,
we export, and export helps our trade surplus. But I think part of the tariffs has this new provision and where it takes back duty drawbacks. Duty drawbacks says you get your tariffs back, so you paid the trattfs when you bring it in, but when you explot.
It you get it back. If you take that back or if.
You take it away, it makes you goods exceedingly expensive and uncompetitive. So I think as we think about the full cycle, it's important to look at all three components. We are doing all the production in the US, but the tariff sitters on two paths. The stuff that we buy in and then when we send stuff off you don't get any full stars back.
How hard does this make your decision making is uncertainty.
I think there are three things, and I think what COVID shows is that the full supply chain is very complicated. So the three things that I think make it difficult is one is the number the number of different tariffs that are coming out there. They're also complicated. Second is the speed at which they come out and change, and I think the third is the speed at which they are implemented. So supply chains have a very long life cycle, so it's hard to go through and change it quickly.
So think where the difficulty comes when you put those together. We try to make long term decisions on our supply chain, but with the speed at which come out change and then you don't have the time to react, it puts a lot of stress, especially on smaller companies, and I feel it what we should do is is help the smaller companies through this because it's for the US is known for the innovation, the stuff we create, and I think it's exceedingly burdensome for small companies like ours.
John briefly, will the longer term impact be for you to make even more in the US. You have optimism that you'll be able to get the skilled labor, you'll be able to get well, some of the rare earth minerals you need right here in the US, or you're always going to be exposed three three thirty seconds.
So I believe that we can produce in the US, but we need the time to be able to do it. So given enough time, I think we can keep on bringing it here.
But if you do it.
Very quickly, many companies will not survive that time.
To be able to do it.
So I think we just need to have a partnership with the government to make sure that we're working in concert to make sure we can get your goals, which I think the goals are really important to produce in the US and the increase our exports.
John Deer susan really great to speak with your co founder and president of AMPLE.
We thank you.
Microsoft has pulled back on data center projects around the world's sources say, suggesting that the company is taking a harder look at its plans to build the server farms powering AI and the cloud. Microsoft shares now they're down, as you can see, eleven percent this year. Those concerns
of an AI infrastructure bubble. They've been weighing on global tech stocks in recent weeks, especially in video, which sucks up a significant share of data center budgets, of course, but as we had to break, let's just take a look at in Video and all the other big tech
names which are under significant duress today. We think about the knock on effects of tariffs, about the exposure of countries that many of them have donevers fight away from China into and that is why even with an carve out for semiconductors, the semiconductor indexes off by eight percent, we worry about retaliation coming from these countries.
In Video off by six percent.
Move on and have a look at what's happening more broadly, is then, as that one hundred has its worst day since twenty twenty two, Apple or having its single biggest market cap sell off, will almost three hundred billion dollars wiped off of Apple in one single training day, as we worry about the exposure to Asia, to Vietnam, not just China, and what reciprocal nature from other companies and
countries will mean. From New York, this is Bloomberg Technology, Welcome back to Bluemberg Technology and Caroline hired in New York. A quick check on these markets which are well and truly in the red We're off five five percent, almost on the nast that one hundred worst days.
Since twenty twenty two be drill.
Into individual moves of certain players within Magnificent seven, in particular because the big tech tariffs have come for mag seven, Meta having its worst day in a year since April twenty twenty four. We're down by seven percent. This iss Wei what the EU response might be. Could it be a higher digital services taxes is going to effect Meta?
Amazon off by eight percent as it's in the eye of the storm when it comes to commerce, even though the Dominimus ruling being removed from Chinese competitors not enough to help the stock. We're off by eight percent again, the worse since twenty twenty four August of that year. Meanwhile, President Trump's tariffs entirely have the markets on edge global stocks selling off as well. But US Treasury Sectory Scott Bessence says the equity plument in the Magnificent seven is
a Magnificent seven problem, It's not a MAGA problem. Let's get into that with Bloomberg's round Vlastelica. Really interesting from Scott Besson that he's saying, look, we peaked in tech back when deep Sea happened, it's been a sell off since then. It is not because of our tariff policy, but today it feels like it is Magnificent Seven's problem.
These tariffs.
Absolutely, I would say that tarifs are one hundred percent driving to move lower today. A lot of the Magnificent seven companies, notably Apple, notably Nvidia, a lot of chip makers, they have a ton of manufacturing out of China, out of Vietnam, out of Taiwan, countries that were really hit with some a lot with tarifs that were a lot higher than some people were expecting. So they are now facing a really rough decision, assuming they don't get any
kind of exemption or there's no change in policy. Either they're going to have to raise prices, which would hurt demand, or they're going to have to absorb higher costs, which is going to hurt profitability. It's obviously a not a great position for them to be in.
Not a great position, such a bad position. Ryan, that you brought a quote to your story You've assessed to some of the analyst reactions. Rosenblat is the one that took my attention, and I'll repeat it that they're saying that this basically is blows up Apple in many ways, and it's hard for us to imagine Trump blowing up an American icon. It does feel like a lot of analysts out there think there might be exemptions going forward.
We did see that during the first Trump administration. I wouldn't say that the terror policy there were anything nearly as aggressive as we're seeing today. So far, we haven't seen any real indication that there will be an exemption. But a lot of these companies have been working, you know, probably behind the scenes first and foremost, trying to get
some kind of exemption. We saw, you know, Zuckerberg was at the White House, I believe it was yesterday looking for you know, help with the anti trust stuff.
So I it.
You know, obviously they're hoping for something, but so far we haven't seen anything yet, and I think the longer we have to wait, or until there's clarity one way or the other, I think we're going to continue to see a lot of uncertainty in markets.
There's an inauguration, seats not paying off stuffs. Far run Vastelica. We thank you very much. Now let's get more on the markets. Janet mue is with US obviously ruined Dolphin head of market analysis, risk Off just everywhere you turn, is that the right move?
I have Carolin, thanks for having me.
Yeah.
Unfortunately, we're in the eye of the storm and we're entering a period of significant uncertainty and risk of periods.
I think the thing is there's still likely to be a retaliation going forward, and I think Marqus actually am enterprising in more severe economic slow down and more you know, behavioral response from companies, which is likely to be a freeze in investment and lower hiring, etc. So I would say the path down here is likely to be volatile and also very bumpy and more likely tutor to the downside.
Janet, just focusing in on what you just said. You think there's more downside to come. You think that we haven't priced in enough the retaliation already. We get France Germany looking at saying they're not going to invest as much in the US, in particular Macron asking French companies not to invest in the United States.
Yeah.
I think the problem is that.
I think there's still so much uncertainty. We never really had this sort of high tariffs going on that is blanket across the globe. In the modern ages. So this
is like uncharted territory we're talking about here. And I think the most significant area that is affectedly is the Asian nations that have deeply and better supply chains, and you know, multinationals over the past decades have been investing heavily in the China and the China plus one branch sharing strategy, and that is being appenticed at the moment. So huge uncertainty, huge changes to the trade flow and cost structures, and huge compression to margins potentially if this
go on for a longer time. I think what I worry about is really the portfolio flows going forward, which you know and overseas investors contemplate whether they should continue to reduce that US exposure, and you know, it could be going on for more sustained period of time.
What still needs to go on for a sustained period of time is clarity with semiconductors. There's a carve out for semis from this particular round of tariffs, but there's ongoing discussion around support for building here in the United States. As the chip SAT gets reworked. How many more shoes to drop O are there in the semi space?
Yeah?
Again, I think it's the really complex supply chain we're talking about here. There's just so much uncertainty and I think, you know, TSMC has already pledged over one hundred billion dollars of investment. But again Taiwan is being hit with thirty four percent of TARRAF. But it seems it's just you know, not not much as certainty and potential room for negotiation. So I think it is just very bad for the center, which is a highly complex of supply
chain related. I mean, what we'll have to see. But ultimately this is going to increase costs for a lot of the foundaries semiconductor companies in the States, right, So I think this is not a great outcome.
It's all the situation.
Janet, mean, we have to leave it there, thank you so much. Obviously bruin Dolphin header market analysis. We now have to move over to Ottawa where the leader Karne is speaking. Take a listeners, we articulate its potentially his retaliation.
At the same time, President Trump confirmed that the terroriffts announced last week against our auto industry will come in and indeed have come into effect today. So while it's progress that further tariffs were not imposed on Canada yesterday. The President's actions will reverberate here in Canada and across the world. Three sets, three different sets of US tariffs remain in place and will continue to pose significant threats to Canadian workers and Canadian businesses. And while they have
been imposed under different premises, some things are consistent. They are all unjustified, unwarranted, and in our judgment, misguided, and we are already seeing the consequences. Just last evening, workers from unifour Local four four four, with whom I met last week, learned that their auto assembly plant in wis Win will be shutting down for at least the next two weeks.
That's three thy six hundred.
Workers who are now out of work by their choice, workers who now worry how they're going to put food on the table and pay their bills.
I and my government stand in solidarity.
With those workers in Windsor and all those workers hurt by President Trump's tariffs. And that's why we committed from the very start that all and I repeat all of our terror proceeds will go to protect workers affected by the tariffs.
They plum me serhif.
Canadian Prime Minister Mark Connie there speaking regarding the US tariffs the impact being had on his country. You can watch much more on Live Go if you have a terminal President Trump's new tariff where they are sending shockwaves across global markets, sparking a trade What is both China and the eu' out to retaliate. Canada just now saying they will match US taris on passenger vehicles. Most end the current joins US. Now, your economic expertise is so valuable,
so too is your experience in Asia. This has come as a surprise, particularly for the countries other than China.
Yeah, I think it's certainly up at the worst case if I'm beyond the worst case Scenaric Harlan. There's been a hammer blow to China to begin with. You know, you're talking about tarifrd's there of around sixty seven percent according to Bloomberg Economics as of next week, across all goods. That's going to both hurt Chinese economic growth maybe take one to two percentage points of growth there, and really hammered the volume of exports out of China to the
US maybe by as much as eighty percent. That then, by extension, if that's happening in China, that's also going to spill over to the rest of the region. In particular, you have Southeast Age looking very exposed, Vietnam, Cambodia, also Bangladesh among those now facing very high tower freights on the goods that they do ship to the US. Remember, some of these economies had become very important in recent years as kind of connector economies between the US and Asia.
So certainly a hammer blow coming from both exports and growth in that part of the world.
And a hammer blow for US giants that have relocated a lot of their production from China into Thailand, into Vietnam, into Malaysia.
Top of mind for US is of course apple.
But how much are these countries now going to have to worry that that foreign direct investment pulls away?
Well, that's right.
These economies had emerge as something of connector economies we like to call them here, as you mentioned call in your Vietnams in Southeast Asia, a lot of companies moved there to get out of the tariff drag net in hope they could still produce cheaply in Asian sell into the US. Will see that model is now under severe scrutiny.
The question, of course becomes two things. A. Do these governments retaliate and the trade war worsens, or do they negotiate and those president Trump comes to the table and reach some kind of agreement whereby the tariffs are reduced. Now, a lot of observers are saying in all framp on, this won't be so simple. It's unlikely the tariffs will go back to zero, given the kind of ideological outlook that President Trump has bringing to this. But nonetheless, the
benign take is these could be negotiated away. If not, then to your point, companies are going to have to pace face again very expensive decisions on their supply chains.
Even those areas that you think might be a little bit more protected. For example, Chinese internet giants, which are very focused on their home domestic consumer, well, if their consumer is hurt, they from knock on will be hurt a little bit. But talk us through the deminimus impact as well, because that too is another announcement from President Trump.
He's ending the.
Ability for Chinese chants to ship cheaply.
To the US.
Yes, this is an important announcement in a self law by the significance of all the other news. But like the likes of Shine and Temu Caroline. The bottom line is, currently you can buy in goods on these e commerce platforms from China without paying a tariff on it up until a threshold of eight hundred dollars, and that's been very popular with households. There's literature that says, especially popular with lower income households buying goods from China at a
cheaper costs than they would get here. Now the new rule will take away that threshold, will bring it down to zero, so you'll have to put pay the tariff on all the goods coming in from China. And that will both have obviously a specific company impact in terms of those e commerce platforms who are lying that business model. That's one, but two will also impact the course to
consumers here who've been buying those goods at a cheaper price. Now, again, the Trump administration says this is necessary, it's all about driving investment, creating more manufacturing at home, and creating jobs at home in the US.
But near term, e columns are saying.
That at the very least, there's going to be prices going up for consumers.
And to Karen, thank you so much much for that deep dive. Let's talk more about the consumer impact. Verizon, in fact, has just announced an offer for a three year price lock free phone trade in as it tries to win customers in a facely competitive wireless market, and
of course when they're experiencing inflation somewhere. And Nrian Sampath is the CEO of Verizon's consumer business, joining us now on the back of these announcements and just having changed the timeline on this because of a consumer that is currently facing a lot of inflationary headwinds.
Calin we've over the last three or four quarters, we've been listening to our customers and they're telling us two things pretty consistently. The first thing is they want price certainty. There's so much uncertainty in their lives, but on the category that they love most, which is connectivity, they want price certainty. The second thing is flexibility. No one wants
to pay for things they don't use. So a combination of those two made us get to this point where we have this really incredible value prop for our customer. And this was always in our plan. You know, we have a sustained turnaround start for the consumer group, and this was always in our plans to do it right.
Now, the investors like it.
Shares push higher on the news of this focus, But tell us about the costs you incur because of that. If I'm suddenly able to trade in my phone no matter what the damage and get a new one for free, if I'm able to lock in prices, how do you bear that from a cost perspective.
Look, largely, we are an American company. We have almost no export revenue. We are an American company. We you know, we rely on America for all our revenues, So we're very comfortable with that second thing on costs. Look, we work with our partners on this. You know, we work with handset partners, we work at the suppliers, so we will work to mitigate a lot of the risk on
the inflationary pressure that we get. But more importantly, we want to offer customers something they really like and love, and we want to take away uncertainty in their life, at least in the category that we are involved in.
I'm really interested in your working with the partners. We are looking today at Apple, which Rosenblat Securities are saying, this is going to blow up their entire business model if they can't are exposed to the sort of tariffs you're getting from China imposed on Vietnam and where India as well. Do you think Apple will have any more pressure to increase the prices on their phones?
And how do you respond?
Look, we had a big partner to Apple. It's a great relationship and you put the best network together with a great handset, you know, it creates a really good value prop for customers. You know, last year we had said that, you know, our upgrade rate, which is code for how long people keep the handsets, is probably reached its highest point in twenty twenty four, and in twenty twenty five you're going to see that dropping people keep
the handsets for a little over forty months. Right now, we think in twenty twenty five we're going to see that number fall a little bit. So the low point was last year, and we'll work with them to mitigate all the price and other risks that we have in the piece. But we do think there's going to be a slightly higher upgrade rate in twenty five compared to twenty twenty four, and a lot of that has to do with how well we work with our partners.
Samav I'm going to go to your experience here because you have such a long tenure as a management consultant, then when around the enterprise business side of Arizon before moving to the consumer side, as just someone looking at the market right now, do you have optimism that you'll be able to have resiliency for those businesses that you serve and indeed the consumers that you serve at this time.
Look, we think so because part has to do with our category. You know, we provide connectivity, we provide resiliency, We provide cybersecurity both to our business customers and to retail customers everywhere. This is a core category. I mean, this is a category people don't have a much choice. They're going to have to rely on the best offer they have and that's with Verizon for.
The last part.
So I do think it creates a very resilient business model for us.
But you're going to.
See our customers having to zig and zag a lot more, having to mitigate risks, be more flexible where they can and supply chain and other pieces. But as far as our category is concerned, we see a lot of resiliency in.
That and investors like it.
They're coming into you because you're deemed haven in this trade. But very briefly, some have what about your willingness to invest in your business right now, particularly around AI and more data revenueded, Have you got the certainty to do that?
Definitely.
Look, we play a long game here, you know, whether it's investment in our spectrum, it's investment in fiber, whether it's investment in AI. Those are big three themes for us where we make really long term investments, and they're using a I'll give you a sense for this current announcement. You know, we have hundreds of thousands of our customers
who call us every single day. We now using generative AI, are able to capture every morning at nine am, I get a report that tells me exactly what the sentiment was yesterday from our customers. We use that in real time to make decisions. So I think it's part of our operating model, and we want to be the world's best AI applied company. So we are very comfortable with our investment profile and long term status for that.
Somehow, it's always great to catch up with you. Thank you very much, Verizon's consumer CEO. There currently seeing market sell off in response to tariff's announced yesterday by the White House. Much more aggressive than many and thought, particularly facing Asian nations. We therefore see tech fool hard four and a half percent. Now's that one hundred having its worst day since September thirteenth, twenty twenty two. Bitcoin another risk sentiment for off by almost five percent eight hundred
and sixty eight is where we trade. Let's get you to another story geopolitical in nature and one that might be embroiled in taris in some way. TikTok owner Byte Dance set to be hit by a privacy fine of close to five hundred and fifty five million dollars for I legally shipping European users data to China.
This adds to the.
Growing global backlash over the video sharing app. This is the app, of course, faces potential ban here in the United States on Saturday, Blue Mergs Kurt Wagner can piece it all together for US. First that EU find basically they're taking issue with exactly what the US has been fearing for a long while.
This is the concern, and this is the driver of this band that you mentioned, Caroline, which is that can the US government do they feel that they can trust TikTok and parent company by Dance to handle American user data. Appropriately, when you see headlines and stories like this, it just adds fuel to that fire of, you know, the idea that this company can't be trusted, and that's what we saw elected officials vote for last year when they passed this law that will ban the app on Saturday unless
there's a deal struck. So I think this is the kind of thing people were worried about.
If there's a deal struck, are though suddenly that has accelerated. Talk to us about the Amazon offer, whether it's a real one, and what's going on with jd Vance in particular.
Yeah, everyone's sort of coming out of the woodwork at the last minute here because we've been talking about a
deal for months now. But you know, I think the expectation at this point is that the deal that's being considered by Trump is a lot of the existing by Dance investors from the US Oracle would be involved, Blackstone would be involved, and it would sort of minimize by Dance's ownership stake and TikTok, so it would bring it below that twenty percent threshold that the law requires, and so it would sort of fill in the other eighty
percent with a bunch of US investors. Now, I think we're still a ways away from an actual resolution because even if Trump presents this solution, it requires approval not only from ByteDance but from the Chinese government. And we don't know the specifics around the algorithm, you know, does that change hands?
Who gets to control that?
So we're kind of hearing I think, the thinking from one side of the fence, but we don't know what China is thinking.
And that's a big player here.
Thirty seconds, Kurt met to under pressure your.
Name too, goshcha, Yeah, I feel like you know, we saw that headline yesterday that Mark Zuckerberg is trying to ask Donald Trump to help them with THEFTC trial. Not surprising. Why else would you build that relationship with Trump if you're not going to make that request. But I also don't think Trump has a lot of incentive to do that right now. He may as well hang that over Meta's head for a little longer.
Meta in the eye the storm when it comes to Taris instead and an EU potential response. Kurt Wagner, We thank you so much. That does it for this addition of bloombog technology quite check on these markets a sea of red, particularly for the technology space. This is Bluemberg Technology