July 6, 2025 • 17 mins
Major US trading partners hurried over the weekend to secure trade deals or lobby for extra time, while Treasury Secretary Scott Bessent indicated that some countries lacking an agreement by the deadline Wednesday will have the option of a three-week extension to negotiate. Also, central banks in Australia, South Korea, and Malaysia are expected to keep interest rates on hold in the week ahead. We speak to Paul Dobson, Bloomberg's Executive Editor for Asia Markets.
Plus - for more insight on President Trump's tariff deadline nearing and the economic week ahead for Asia, we heard from Trinh Nguyen, Natixis Senior Emerging Asia Economist.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner. So
we will begin today with tariffs and the July ninth
deadline for deals with the US. Ostensibly, it's pretty simple,
secure a deal by the deadline and avoid those higher
reciprocal tariffs. So we know that Japan, South Korea, and
India are among those jurisdictions scrambling. Earlier today here in
(00:32):
the States, Treasury Secretary Besson suggested some countries will have
the option of a three week extension to negotiate. He
did acknowledge the sheer number of ongoing talks is complicating
the final stages. So far, there have been announcements on
a limited framework with the UK, a truce with China,
(00:52):
and the outline of an agreement pact with Vietnam. For
a closer look, I'm joined by Paul Dobson. He is
Bloomberg Executive at A for Asia Markets, joining from our
studios in Singapore. Paul, thank you for making time to
chat with me on this. To what extent is there
murkiness here as we walk up to that July ninth deadline.
Speaker 3 (01:11):
Plenty of murkiness and not very promising signs. You know,
the fact that they're already talking about a three week
extension for some countries suggests that, you know, there's not
that much progress being made in a lot of cases,
or that there's still sticking points and matters that need
to be able to come even to achieve some of
(01:32):
the more advanced trade negotiations that have been going on.
So as the market opened in Asia on Monday, there
was a little bit of cautious optimism on the idea that,
you know, the US isn't going to move to impose
very strict tariffs again on trading partners right away. On
the other hand, the market is pretty cautious now about
(01:54):
this because it really doesn't know. And at the same
time as the administration has been talking about the possibility
of an extended three week for you know, kind of
trying to get over the line, at the same time,
it's saying that it is going to be sending out
letters to some nations as soon as this week telling
them what their new tariffs are going to look like.
(02:14):
So we don't know what the details of that are,
we don't know what countries that's going to go to,
and that's keeping everybody a little bit in watching wait
mode as we get off to a new week of trading.
Speaker 2 (02:23):
So maybe we can focus on some of the trading
partners in the Asia Pacific because I think the initial
deal with Vietnam maybe a little instructive here in terms
of how the Trump administration is pushing countries to cut
back on trade with China, and this is something that
Beijing has explicitly addressed. How is this playing out?
Speaker 3 (02:44):
Yeah, So I think that the Vietnam dealers you said
was really interesting and important. Vietnam itself had twenty percent
tariffs imposed. That was seen as being Okay, it's more
than the existing ten percent, but it's less than what
had been initially muted, which was somewhere quite a lot higher.
So for Vietnamese stocks, that was seen as a reasonably
(03:05):
positive sign. The other part of that detail, though, that
we got was the idea that Chinese transshipments would receive
tariffs of forty percent rather than twenty percent for Vietnam's exports,
and so that points to this idea that you know,
the US is trying to get at China in various
different ways. Then again, even with that, the market was
(03:25):
not completely perturbed by the idea of forty percent transhipments. Basically,
there's sort of three ways of thinking about this. One,
the Chinese manufacturers had been so clever already at finding
loopholes and ways around it that they'd probably be able
to so converent it in some way or too, that
they'd be able to find ways to add enough value
(03:46):
in the supply chain in Vietnam that they became inverted
commas Vietnamese exports and so avoided the transshipment costs. And
the third thing is that the market thing's a combination
of those would mean that the producers on the one
hand and the vendors in the US on the other hand,
would between them be able to manage those costs and
(04:07):
pass them through in an equitable way. And so what
we saw was companies that link to US manufacturers with
supply chains in Vietnam actually did well in trading last week,
so they continued to post some gains, some relief there
that things could have been a lot worse.
Speaker 2 (04:25):
So let's talk a little bit about the performance of
markets in Asia in the first half of the year,
given the fact that we are now at the half
yere mark. What was it like in the first six
months of calendar twenty twenty five.
Speaker 3 (04:37):
Yeah, so I was really excited about it. I think
that Asia's markets are starting to look a lot more
positive across the board. You know, we've been at the
highest level since twenty twenty one in a number of
our markets. Even China has showing greater science of recovery.
And there's lots of other signs of more excited market.
Plenty of IPOs going on, not just in Hong Kong,
(04:57):
but particularly in Hong Kong as well as that we've
seen in Australia, we've seen India, we've seen Malaysia, all
all with plenty of interesting ECM activity. And for that matter,
the DCM markets are buzzing along quite nicely as well.
So it feels like things that are heating up a
little bit. Part of that is helped by the fact
that a weaker US dollar is buying Asian currencies across
(05:19):
the board. I was really excited about that until I
talked to my colleagues who are covering Eastern Europe, who
are covering Latin America, who told me, you know, calm
down a little bit. If you look at your market's performance,
if you look at Asia relative to those other parts
of em actually, you know, kind of like it's still
training in the wake of some of those places where
we're really seeing a hubbub of excitement and particularly strong
(05:41):
gains this year. So Asia's doing well and it's hew
performing the US, particularly if you look at it in
dollar terms, but relative to some of the other parts
of the world could be better still.
Speaker 2 (05:51):
So as long as we're talking currencies, it's going to
be a busy week for some of the big central
banks in the APAC. I think we'll hear from the
Reserve Banks of Australia and New Zealand. We'll also hear
from the Bank of Korea and the Central Bank in
Malaysia as well. I know, it's a lot to cover
under one kind of broad brush stroke. Is there a
(06:11):
general trend here to kind of easier credit, to kind
of accommodating the market and supplying great cuts. Is that
really what we're talking about.
Speaker 3 (06:19):
Yeah, And let's put it this way, Doug. I mean,
everybody's still looking to the FED, right and what we've
heard recently from the FED has been the idea that
policymakers are starting to think about when they're going to
be cutting interest rates. Now. Last week, some of the
payrolls data and the other economic data meant that people
ruled out the idea the Fed would move as soon
(06:40):
as July. But nonetheless people are looking for two cuts
by the Federal Reserve this year, and that opens the
door for Asian central bankers to also feel a little
bit more confident that they'll be able to ease monetary
policy and tandem with that, so in the Australia and
New Zealand region we're looking at easier monetary policy, but
(07:00):
across them Asia as well, we might be moving into
that area where policymakers are a little bit more comfortable
about cutting rates, particularly because their currencies have been strong,
so that gives them that little bit more bigal.
Speaker 2 (07:10):
Run Inflation, I think is the other part of that story,
and I think if you look at Japan, inflation this
year has been surprisingly strong. Is Japan really the outlier
here and very unique in terms of what we're seeing
across the region?
Speaker 3 (07:25):
It is? It is. It is an outlier, and it
is really interesting, you know, and they've been so desperate
for inflation for so long that the central bank is
you know, really happy that it's finally starting to see
it in the economy and very keen to kindle it
and make sure that it doesn't snuff it out by
moving too quickly, which is why we see so much
(07:46):
caution from the central bank in terms of how quickly
it's raising interest rates. Nonetheless, you know it is it
is the fact that the inflation is high and it's
actually starting to hurt a little bit consumer sentiment and
the outlook for the economy too. So what does the
central bank do in a bit of a bind. It
doesn't want the currency to appreciate too rapidly either, but
it will be, you know, gradually signaling that it wants
(08:08):
to continue with that rate hike cycle based on everything
that we've heard from the central bank governor and particularly
the hawkish elements of the BOJ already, So.
Speaker 2 (08:16):
Part before I let you go, I know, we have
Chinese inflation data this week. Is this going to be
another story about deflation on the producer side and maybe
disinflation when it comes to consumer inflation?
Speaker 3 (08:29):
Yeah, And I think that, you know, the China story
is interesting because a lot of what's driving that has
been this really kind of cutthroat price competition that you've
seen in various parts of Chinese manufacturing, be it the
sort of solar tech industries, all the platform economies, you know,
(08:51):
the delivery firms, all of that they seem to be
and the electric vehicle companies too, they all seem to be,
you know, really thriving to try to gain more share.
And actually, what we've heard from Chinese policy makers recently
is enough is enough. They're fed up of this kind
of like desperate sort of race to the bottom in
terms of pricing on razor thin margins, and they'd rather
you know, people took out some capacity and that allow
(09:13):
prices to stabilize. So while that might not show up
in the data immediately, that is something that is clearly
on the minds of the Chinese officials. If you look
at what the bond market is telling us, you know,
yields are still rooted at very low levels. It shows
that people are betting interest rates. Our policy is going
to have to remain easy for a long time because
of that disinflationary impulse. But at least we see scigns.
(09:33):
The policy makers, both on the fiscal side and on
the monetary side, are trying to find smart ways to
try to try to prevent that from getting any worse.
Speaker 2 (09:43):
Paul, We'll leave it there, Thank you so much. Paul Dobson.
He is Executive editor for Asia Markets here at Bloomberg,
joining from our studios in Singapore on the Daybreak Asia podcast.
Back to the Daybreak Asia Podcast. I'm Doug Prisner. So
(10:03):
major US trading partner is hurried over the weekend to
secure deals with the US or in some cases lobby
for extra time before that July ninth deadline. Now on Sunday,
Treasury Secretary Best indicated some countries lacking an agreement by
the deadline will have an option of a three week
extension to negotiate. However, later in the day, President Trump
(10:25):
indicated that letters regarding tariffs will begin going out to
between twelve to fifteen partners on Monday. Now, some of
these countries are expected to reach agreements, others are expected
to be hit with higher tariffs. We got some insight
on this from trend un She is the senior Emerging
Asia economist at ned Tixas Trend spoke earlier with Heidi Stroud,
(10:45):
Watts and Cherry On. Heidi asked the first question on
what may appear to be a conflicting picture from the administration.
Speaker 4 (10:52):
Well, one thing is very clear is that tariff's op
under the Trump administration two point zero. But the US
also needs trade partners. The maximalist position we saw on
Reciprocal Trade Day is likely maximalist, and we're probably going
to settle much lower. And that's why markets are comfortable
in that the US needs trade partners and there's room
for Asian policy makers to strike a deal, meaning extensions
(11:16):
are likely. Secondly, there's room for India, there's room for Japan,
there's room for South Korea and across the spectrum in
Asia to have trade relationship with the US. But there's
still certainly a lot more friction to trade and we
have to accept that certainty.
Speaker 5 (11:33):
We've seen some good news when it comes to sort
of frameworks with Vietnam, for example, Does that matter as
much when there's not as much certainty when it comes
to China because it is still sort of the anchor
economy across Emerging Asia.
Speaker 4 (11:49):
Absolutely, what the Vietnam deal shows is that the US
needs Vietnam. Obviously, Vietnam needs the US more proportionally than
any country in Asia, given the huge, huge exposure to
the US and trade in general. That being said, the
fact that it climbed down from forty six to twenty
percent with a caveat of forty percent on transhipment means
that it does need Vietnam to do labor intensive manufacturing
(12:12):
in particular, and the China plus one if it's going
to go hawkish on China and does need other trade
partners within the region. So the Vietnamnam deal shows that
the US will also need countries lined India, also Japan
and South Korea to do trade for supply chains to
reshuffle away from giving the fact that labor market in
the US is very very tight at the moment and
(12:35):
it is not competitive in manufacturing, and US firms need
Vietnam as much as the US as well.
Speaker 1 (12:44):
But will other countries not need Vietnam as much if
we're talking about that forty percent levy when it comes
to tranship goods. I mean, there was a lot of
investment going into these economies because other countries wanted to
manufacture there. But will that become an issue long term?
Speaker 4 (13:01):
The ESMN shows that it's roughly around at a maximum
sixteen percent if you look at the Harvard study. The
second thing is that the forty percent actually will encourage
more localization in Vietnam. That's a key issue is that
when you attract FDI into a country, you don't just
want to add the final packaging, the final assembling. You
do want your inputs to rise over time, and this
(13:23):
puts the onus on Vietnam and countries like it over
time to move up the value chain, just like China.
So I do think that this is a positive. The
second one is the fact that China was able to
reshuffle its supply chains via these countries means that the
US will try to block this around and an example
of Vietnam the cost for it is the solar sector.
(13:44):
The US left four hundred tariffs percent tariffs on Vietnam
solar and that means that if a Vietnamese companies firms
I want to export to the US, that market is
now shut. And the reason why I did that is
due to the rerouting of Chinese solar via Vietnam. Vietnam
is a country that has a lot to lose and
it also has a lot to gain to protect its
(14:04):
number one markets. The China PPI today shows that the
US remains the market where the highest profit margins for
US traders because on shore in China, we have a
situation where demand remains very weak and producers prices are
very very low, which means the competition for China is
very fierce, not just within China, but when it exports
(14:26):
to the rest of the region, for the for the Vietnamese,
and for the rest of the Asian The US market
therefore remains the most competitive, particularly if tariffs on China
remains relatively high and higher than the rest of the
Asian countries.
Speaker 1 (14:42):
How is the two track economy in China evolving right
now when it comes especially to that slump that we
continue to see in the property space, Well, I.
Speaker 4 (14:51):
Think it's one of the situations where it's lowing down,
but it's still I think it's a problem that it's
going to auvantize over years versus the US where you
have a massive crush and recovery. For China, it will
need the government help versus just such as cutting interest rates.
At the moment, given the fact that the dollar is
very weak, it gives it more space to do so.
(15:12):
But it's also very vigilant right in helping a lot
of these deflated sectors, and that it also looks with
a keen eye on what's happening with trade. Export to
the US has slowed down materially because of higher turfs
and higher friction, and that's a key driver to growth
historically for China in recent decades. So for it, the
yuon is an important one. It has appreciate against the dollar,
(15:35):
but that appreciation is very weak visa v countryside the
European Union for example, where it's gone up shot up
fourteen percent, but the yuon is only roughly two dollars
versus to two percent versus the dollar. So for China,
I think it wants to balance both being able to
help the domestic economy but at the same time making
sure that external sectors are still competitive, so it needs
(15:58):
export that deflation abroad at the same time shore up
domest to demand.
Speaker 1 (16:04):
Super quickly because we're out of time central back decisions.
We have them from Malaysia. In South Korea, anything you're watching,
brake cuts up.
Speaker 4 (16:12):
In front loading. Obviously the RBA will cut, but four
countries like South Korea, we now have stable government, which
means fiscal policy is at the forefront. So at the
same at the moment, Korea is actually sitting pretty comfortable
in that the center Bank does not have to pull
the trigger as aggressively as it did because we have
stable politics to negotiate trade and to front load fiscal spending.
Speaker 1 (16:35):
Trin Newian. Great to have you back Emerging Markets, Asia,
Economists and the Taxis.
Speaker 2 (16:42):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
or anywhere else you listen. Join us again and tomorrow
for insight on the market moves from Hong Kong to
(17:03):
Singapore and Australia. I'm Doug Prisoner and this is Bloomberg
Bloomberg Audio Studios, podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast. I'm Doug Krisner. So
we will begin today with tariffs and the July ninth
deadline for deals with the US. Ostensibly, it's pretty simple,
secure a deal by the deadline and avoid those higher
reciprocal tariffs. So we know that Japan, South Korea, and
India are among those jurisdictions scrambling. Earlier today here in
(00:32):
the States, Treasury Secretary Besson suggested some countries will have
the option of a three week extension to negotiate. He
did acknowledge the sheer number of ongoing talks is complicating
the final stages. So far, there have been announcements on
a limited framework with the UK, a truce with China,
(00:52):
and the outline of an agreement pact with Vietnam. For
a closer look, I'm joined by Paul Dobson. He is
Bloomberg Executive at A for Asia Markets, joining from our
studios in Singapore. Paul, thank you for making time to
chat with me on this. To what extent is there
murkiness here as we walk up to that July ninth deadline.
Speaker 3 (01:11):
Plenty of murkiness and not very promising signs. You know,
the fact that they're already talking about a three week
extension for some countries suggests that, you know, there's not
that much progress being made in a lot of cases,
or that there's still sticking points and matters that need
to be able to come even to achieve some of
(01:32):
the more advanced trade negotiations that have been going on.
So as the market opened in Asia on Monday, there
was a little bit of cautious optimism on the idea that,
you know, the US isn't going to move to impose
very strict tariffs again on trading partners right away. On
the other hand, the market is pretty cautious now about
(01:54):
this because it really doesn't know. And at the same
time as the administration has been talking about the possibility
of an extended three week for you know, kind of
trying to get over the line, at the same time,
it's saying that it is going to be sending out
letters to some nations as soon as this week telling
them what their new tariffs are going to look like.
(02:14):
So we don't know what the details of that are,
we don't know what countries that's going to go to,
and that's keeping everybody a little bit in watching wait
mode as we get off to a new week of trading.
Speaker 2 (02:23):
So maybe we can focus on some of the trading
partners in the Asia Pacific because I think the initial
deal with Vietnam maybe a little instructive here in terms
of how the Trump administration is pushing countries to cut
back on trade with China, and this is something that
Beijing has explicitly addressed. How is this playing out?
Speaker 3 (02:44):
Yeah, So I think that the Vietnam dealers you said
was really interesting and important. Vietnam itself had twenty percent
tariffs imposed. That was seen as being Okay, it's more
than the existing ten percent, but it's less than what
had been initially muted, which was somewhere quite a lot higher.
So for Vietnamese stocks, that was seen as a reasonably
(03:05):
positive sign. The other part of that detail, though, that
we got was the idea that Chinese transshipments would receive
tariffs of forty percent rather than twenty percent for Vietnam's exports,
and so that points to this idea that you know,
the US is trying to get at China in various
different ways. Then again, even with that, the market was
(03:25):
not completely perturbed by the idea of forty percent transhipments. Basically,
there's sort of three ways of thinking about this. One,
the Chinese manufacturers had been so clever already at finding
loopholes and ways around it that they'd probably be able
to so converent it in some way or too, that
they'd be able to find ways to add enough value
(03:46):
in the supply chain in Vietnam that they became inverted
commas Vietnamese exports and so avoided the transshipment costs. And
the third thing is that the market thing's a combination
of those would mean that the producers on the one
hand and the vendors in the US on the other hand,
would between them be able to manage those costs and
(04:07):
pass them through in an equitable way. And so what
we saw was companies that link to US manufacturers with
supply chains in Vietnam actually did well in trading last week,
so they continued to post some gains, some relief there
that things could have been a lot worse.
Speaker 2 (04:25):
So let's talk a little bit about the performance of
markets in Asia in the first half of the year,
given the fact that we are now at the half
yere mark. What was it like in the first six
months of calendar twenty twenty five.
Speaker 3 (04:37):
Yeah, so I was really excited about it. I think
that Asia's markets are starting to look a lot more
positive across the board. You know, we've been at the
highest level since twenty twenty one in a number of
our markets. Even China has showing greater science of recovery.
And there's lots of other signs of more excited market.
Plenty of IPOs going on, not just in Hong Kong,
(04:57):
but particularly in Hong Kong as well as that we've
seen in Australia, we've seen India, we've seen Malaysia, all
all with plenty of interesting ECM activity. And for that matter,
the DCM markets are buzzing along quite nicely as well.
So it feels like things that are heating up a
little bit. Part of that is helped by the fact
that a weaker US dollar is buying Asian currencies across
(05:19):
the board. I was really excited about that until I
talked to my colleagues who are covering Eastern Europe, who
are covering Latin America, who told me, you know, calm
down a little bit. If you look at your market's performance,
if you look at Asia relative to those other parts
of em actually, you know, kind of like it's still
training in the wake of some of those places where
we're really seeing a hubbub of excitement and particularly strong
(05:41):
gains this year. So Asia's doing well and it's hew
performing the US, particularly if you look at it in
dollar terms, but relative to some of the other parts
of the world could be better still.
Speaker 2 (05:51):
So as long as we're talking currencies, it's going to
be a busy week for some of the big central
banks in the APAC. I think we'll hear from the
Reserve Banks of Australia and New Zealand. We'll also hear
from the Bank of Korea and the Central Bank in
Malaysia as well. I know, it's a lot to cover
under one kind of broad brush stroke. Is there a
(06:11):
general trend here to kind of easier credit, to kind
of accommodating the market and supplying great cuts. Is that
really what we're talking about.
Speaker 3 (06:19):
Yeah, And let's put it this way, Doug. I mean,
everybody's still looking to the FED, right and what we've
heard recently from the FED has been the idea that
policymakers are starting to think about when they're going to
be cutting interest rates. Now. Last week, some of the
payrolls data and the other economic data meant that people
ruled out the idea the Fed would move as soon
(06:40):
as July. But nonetheless people are looking for two cuts
by the Federal Reserve this year, and that opens the
door for Asian central bankers to also feel a little
bit more confident that they'll be able to ease monetary
policy and tandem with that, so in the Australia and
New Zealand region we're looking at easier monetary policy, but
(07:00):
across them Asia as well, we might be moving into
that area where policymakers are a little bit more comfortable
about cutting rates, particularly because their currencies have been strong,
so that gives them that little bit more bigal.
Speaker 2 (07:10):
Run Inflation, I think is the other part of that story,
and I think if you look at Japan, inflation this
year has been surprisingly strong. Is Japan really the outlier
here and very unique in terms of what we're seeing
across the region?
Speaker 3 (07:25):
It is? It is. It is an outlier, and it
is really interesting, you know, and they've been so desperate
for inflation for so long that the central bank is
you know, really happy that it's finally starting to see
it in the economy and very keen to kindle it
and make sure that it doesn't snuff it out by
moving too quickly, which is why we see so much
(07:46):
caution from the central bank in terms of how quickly
it's raising interest rates. Nonetheless, you know it is it
is the fact that the inflation is high and it's
actually starting to hurt a little bit consumer sentiment and
the outlook for the economy too. So what does the
central bank do in a bit of a bind. It
doesn't want the currency to appreciate too rapidly either, but
it will be, you know, gradually signaling that it wants
(08:08):
to continue with that rate hike cycle based on everything
that we've heard from the central bank governor and particularly
the hawkish elements of the BOJ already, So.
Speaker 2 (08:16):
Part before I let you go, I know, we have
Chinese inflation data this week. Is this going to be
another story about deflation on the producer side and maybe
disinflation when it comes to consumer inflation?
Speaker 3 (08:29):
Yeah, And I think that, you know, the China story
is interesting because a lot of what's driving that has
been this really kind of cutthroat price competition that you've
seen in various parts of Chinese manufacturing, be it the
sort of solar tech industries, all the platform economies, you know,
(08:51):
the delivery firms, all of that they seem to be
and the electric vehicle companies too, they all seem to be,
you know, really thriving to try to gain more share.
And actually, what we've heard from Chinese policy makers recently
is enough is enough. They're fed up of this kind
of like desperate sort of race to the bottom in
terms of pricing on razor thin margins, and they'd rather
you know, people took out some capacity and that allow
(09:13):
prices to stabilize. So while that might not show up
in the data immediately, that is something that is clearly
on the minds of the Chinese officials. If you look
at what the bond market is telling us, you know,
yields are still rooted at very low levels. It shows
that people are betting interest rates. Our policy is going
to have to remain easy for a long time because
of that disinflationary impulse. But at least we see scigns.
(09:33):
The policy makers, both on the fiscal side and on
the monetary side, are trying to find smart ways to
try to try to prevent that from getting any worse.
Speaker 2 (09:43):
Paul, We'll leave it there, Thank you so much. Paul Dobson.
He is Executive editor for Asia Markets here at Bloomberg,
joining from our studios in Singapore on the Daybreak Asia podcast.
Back to the Daybreak Asia Podcast. I'm Doug Prisner. So
(10:03):
major US trading partner is hurried over the weekend to
secure deals with the US or in some cases lobby
for extra time before that July ninth deadline. Now on Sunday,
Treasury Secretary Best indicated some countries lacking an agreement by
the deadline will have an option of a three week
extension to negotiate. However, later in the day, President Trump
(10:25):
indicated that letters regarding tariffs will begin going out to
between twelve to fifteen partners on Monday. Now, some of
these countries are expected to reach agreements, others are expected
to be hit with higher tariffs. We got some insight
on this from trend un She is the senior Emerging
Asia economist at ned Tixas Trend spoke earlier with Heidi Stroud,
(10:45):
Watts and Cherry On. Heidi asked the first question on
what may appear to be a conflicting picture from the administration.
Speaker 4 (10:52):
Well, one thing is very clear is that tariff's op
under the Trump administration two point zero. But the US
also needs trade partners. The maximalist position we saw on
Reciprocal Trade Day is likely maximalist, and we're probably going
to settle much lower. And that's why markets are comfortable
in that the US needs trade partners and there's room
for Asian policy makers to strike a deal, meaning extensions
(11:16):
are likely. Secondly, there's room for India, there's room for Japan,
there's room for South Korea and across the spectrum in
Asia to have trade relationship with the US. But there's
still certainly a lot more friction to trade and we
have to accept that certainty.
Speaker 5 (11:33):
We've seen some good news when it comes to sort
of frameworks with Vietnam, for example, Does that matter as
much when there's not as much certainty when it comes
to China because it is still sort of the anchor
economy across Emerging Asia.
Speaker 4 (11:49):
Absolutely, what the Vietnam deal shows is that the US
needs Vietnam. Obviously, Vietnam needs the US more proportionally than
any country in Asia, given the huge, huge exposure to
the US and trade in general. That being said, the
fact that it climbed down from forty six to twenty
percent with a caveat of forty percent on transhipment means
that it does need Vietnam to do labor intensive manufacturing
(12:12):
in particular, and the China plus one if it's going
to go hawkish on China and does need other trade
partners within the region. So the Vietnamnam deal shows that
the US will also need countries lined India, also Japan
and South Korea to do trade for supply chains to
reshuffle away from giving the fact that labor market in
the US is very very tight at the moment and
(12:35):
it is not competitive in manufacturing, and US firms need
Vietnam as much as the US as well.
Speaker 1 (12:44):
But will other countries not need Vietnam as much if
we're talking about that forty percent levy when it comes
to tranship goods. I mean, there was a lot of
investment going into these economies because other countries wanted to
manufacture there. But will that become an issue long term?
Speaker 4 (13:01):
The ESMN shows that it's roughly around at a maximum
sixteen percent if you look at the Harvard study. The
second thing is that the forty percent actually will encourage
more localization in Vietnam. That's a key issue is that
when you attract FDI into a country, you don't just
want to add the final packaging, the final assembling. You
do want your inputs to rise over time, and this
(13:23):
puts the onus on Vietnam and countries like it over
time to move up the value chain, just like China.
So I do think that this is a positive. The
second one is the fact that China was able to
reshuffle its supply chains via these countries means that the
US will try to block this around and an example
of Vietnam the cost for it is the solar sector.
(13:44):
The US left four hundred tariffs percent tariffs on Vietnam
solar and that means that if a Vietnamese companies firms
I want to export to the US, that market is
now shut. And the reason why I did that is
due to the rerouting of Chinese solar via Vietnam. Vietnam
is a country that has a lot to lose and
it also has a lot to gain to protect its
(14:04):
number one markets. The China PPI today shows that the
US remains the market where the highest profit margins for
US traders because on shore in China, we have a
situation where demand remains very weak and producers prices are
very very low, which means the competition for China is
very fierce, not just within China, but when it exports
(14:26):
to the rest of the region, for the for the Vietnamese,
and for the rest of the Asian The US market
therefore remains the most competitive, particularly if tariffs on China
remains relatively high and higher than the rest of the
Asian countries.
Speaker 1 (14:42):
How is the two track economy in China evolving right
now when it comes especially to that slump that we
continue to see in the property space, Well, I.
Speaker 4 (14:51):
Think it's one of the situations where it's lowing down,
but it's still I think it's a problem that it's
going to auvantize over years versus the US where you
have a massive crush and recovery. For China, it will
need the government help versus just such as cutting interest rates.
At the moment, given the fact that the dollar is
very weak, it gives it more space to do so.
(15:12):
But it's also very vigilant right in helping a lot
of these deflated sectors, and that it also looks with
a keen eye on what's happening with trade. Export to
the US has slowed down materially because of higher turfs
and higher friction, and that's a key driver to growth
historically for China in recent decades. So for it, the
yuon is an important one. It has appreciate against the dollar,
(15:35):
but that appreciation is very weak visa v countryside the
European Union for example, where it's gone up shot up
fourteen percent, but the yuon is only roughly two dollars
versus to two percent versus the dollar. So for China,
I think it wants to balance both being able to
help the domestic economy but at the same time making
sure that external sectors are still competitive, so it needs
(15:58):
export that deflation abroad at the same time shore up
domest to demand.
Speaker 1 (16:04):
Super quickly because we're out of time central back decisions.
We have them from Malaysia. In South Korea, anything you're watching,
brake cuts up.
Speaker 4 (16:12):
In front loading. Obviously the RBA will cut, but four
countries like South Korea, we now have stable government, which
means fiscal policy is at the forefront. So at the
same at the moment, Korea is actually sitting pretty comfortable
in that the center Bank does not have to pull
the trigger as aggressively as it did because we have
stable politics to negotiate trade and to front load fiscal spending.
Speaker 1 (16:35):
Trin Newian. Great to have you back Emerging Markets, Asia,
Economists and the Taxis.
Speaker 2 (16:42):
Thanks for listening to today's episode of the Bloomberg Daybreak
Asia Edition podcast. Each weekday, we look at the story
shaping markets, finance, and geopolitics in the Asia Pacific. You
can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel,
or anywhere else you listen. Join us again and tomorrow
for insight on the market moves from Hong Kong to
(17:03):
Singapore and Australia. I'm Doug Prisoner and this is Bloomberg
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