Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
Welcome to the Bloomberg Daybreak Asia Podcast. I'm Dan Schwartzman.
Doug Chrisner is off this week. Coming up, we'll preview
earnings this week from Japanese auto giants Toyota and Honda.
We'll hear from Kota Yasawa, head of Asia Auto research
at Goldman Sachs. But we begin this morning with trade.
The August first tariff deadline imposed by President Donald Trump
has coming gone, with Levy's set to go into effect
(00:31):
later this week. US Trade Representative Jamison Greer says tariffrates
are quote pretty much set and unlikely to change, even
amid ongoing trade talks to the likes of Canada and China.
Greer spoke Sunday to CBS's Face the Nation.
Speaker 3 (00:44):
I think a lot of these well I know a
lot of these are set rates pursue it to deals.
Some of these deals are announced, some are not. Others
depend on the level of the trade deficit or surplus
we may have with the country. So these teriffrates are
pretty much set.
Speaker 2 (00:59):
That's US Trade presentative of Jamison Greer speaking to CBS.
He also described the US China trade negotiations as quote
very positive, citing progress on critical mineral supply chains. Meantime,
President Trump had this to say before boarding Air Force
one late Sunday.
Speaker 4 (01:13):
Yeah, I'm not looking for leverage. I'm looking for fairness.
We want reciprocal as much as possible. Sometimes reciprocal would
be too much for them to handle because it's it
would be a much bigger number. But we want to
see some reciprocity. We want to see reciprocal wherever we can.
Speaker 2 (01:32):
From more we hear from Sharon O'Halleran professor of political
economy and international and public affairs at Columbia University. She
spoke at Bloomberg's Heidi Stroud, Watts, and Paul Allen on
the Asia trade.
Speaker 5 (01:42):
Sharon, really great to have you with us. Nothing's ever
really set in the stone when it comes to President
Trump and this White House policies, Right, do you think
there is still we room, particularly when it comes to
some of these nations that have been hard to hit
than others, for example the sort of extension that we
saw when it comes to tirephrights on Kindada.
Speaker 1 (02:01):
Right. So yes, no, I don't think anything is ever
set in stone with President Trump. Is the ultimate negotiator,
and these are moves to negotiate. They're being done under
three oh one executive authority, which is done in case
is used in cases where they're seen unaffair or discriminatory
(02:25):
types of policies that are being posed on the US
that have damage to both the markets or a particular sector.
That being the case, what we've seen is when you
look at the patterns of those countries that are being
subject to three oh one decisions and these types of
executive orders, that there are the countries where they receive
(02:49):
the largest surpluses intrate, that is, where the US has
a deficit with them, or in the case of Canada,
it has a large surplus with that particular with the
United States. We've seen this across a number of different countries,
and it's not just the size of the country or
the complexity of the trade relations. It seems to be
(03:12):
just if there is a surplus, for example, Cambodia and
other types of smaller countries which do have a trade surplus,
but it's very small relative to the size of the
US economy, so it's hard to claim that's their material damage.
So I think these are very much negotiating pillars. I
(03:35):
do think that there is attempt by the Trumpet administration
to link these tariffs to different types of side deals.
So while there may be they're set in stone for now,
there's still room for negotiation.
Speaker 5 (03:50):
It's interesting to me that when it comes to probably
the toughest and obviously the most implications coming from the
set of negotiations between the US and China, is this
a kicking of the can down the road, that they're
just going to do another extension Because fundamentally, you know,
there are very complex and structural issues in these talks.
Speaker 1 (04:10):
So China is very difficult to manage given them what
the supply chain linkages and what the implications are for
many of you large US companies. And consequently, there is
a there is a sense by just put and posing
a particular tariff, it's not going to actually solve the problem.
(04:33):
Apple isn't going to remove all of its production that's
in China to the US. It's just not a feasible
action to take in order to anticipate. And so the
question is, how does the Trump administration manage what they
perceive as discriminatory or unfair trade practices by raising the
(04:53):
by using just such a blunt instrument as the tariff,
or are they going to have to think more systematically
or holistically about what the actual trade relations are and
why they exist as they do.
Speaker 6 (05:06):
Y ieaf fearing that out. It's not always easy though,
And give you the case of Australia where we are
a ten percent tariff and Australia has a trade surplus
with the US, so it doesn't make a huge amount
of sense. Yet there's no US ambassador in Australia to
even raise this with, and a lot of other countries
are in the same boat. So in terms of trying
to negotiate a bit of deal, I mean, who do
(05:26):
you even pick up the phones of at this point?
Speaker 1 (05:29):
That's a wonderful question. I would suggest Australia is in
the I don't know, I don't call it envis but
they're not on the hit list in the sense is
that they do not have a trade deficit, a tree
deficit with from the US perspective, and consequently they are
not going to be part of these complex negotiations as
(05:53):
we're seeing with China and other countries like Brazil and India,
which actually do have interesting patterns of trade, some of
which are very complementary to the United States and necessary
given what our production process is. Other times it's just
they're just a comparative advantage. It makes much more sense
(06:13):
for the labor intensive country like India to be producing
textiles or more labor intensive goods. This is sort of
the theory of comparative vantage. So we can go on
about each of these individual cases. Unfortunately, what's going to
happen in the end is that there'll be significant pushbacks
(06:34):
from partners and what we'll find is that there'll be
segmentation of the global market. And that's what we're slowly
starting to see with Europe, with these of the Asian
countries start developing their own sort of regional trading patterns.
Speaker 6 (06:52):
Yeah, I wanted to pick up on that point as well.
Is that something you see more of, is that countries
that are still interested in free and open trade starting
to film packs and relationships with each other and put
it to you, perhaps potentially with China at the standup.
Speaker 1 (07:08):
Absolutely, Europe is a good point and example. They are
definitely trying to build up their own types of trade relations.
They too, have found themselves in the situation where they
have an imbalance in trade between themselves in China, and
so what does that look like. But building up different
(07:28):
types of scale and markets within the regional trading partners
is going to be a strategy that we're going to
be seeing both in Europe, both in Asia, Australia, all
of those types of large trading partners. The US has
trading partners with Mexico, Canada. It's other large partner is
(07:53):
the European Union, which really is its largest partner. But
I think that transatlantic trade is going to come under
a lot of all right.
Speaker 6 (08:01):
Sharon O'Halloran, Professor of Political economy and International and Public
Affairs at Columbia University, Thanks so much for joining us.
Speaker 2 (08:15):
Welcome back to the Daybreak Asia podcast. I'm Dan Schwartzman.
Doug Prisner is off this week. We'll get earnings in
the coming week from Japanese auto giants Toyota and Honda.
The reports will offer a fresh look at the automaker's
businesses and the impact US terrifs have had so far.
From more, we hear from Kota Yazawa, head of Asia
Auto Research at gold min Sachs. He spoke at Bloomberg's
Heidi Shroud Watts and Paul Allen on the Asia trade.
Speaker 6 (08:37):
COOTA, thanks so much for joining us today. So looking
ahead to the earnings from Honda and Toyer to this week,
what sort of impact do you expect to see from
tariff's in the trade environment on the outlook?
Speaker 7 (08:49):
Thank you for having me. Yes, we do expect the
type impact to be quite big for most of the
Japanese order, but it's probably less than feared. Based on
twenty five percent tariff over Japanese med vehicle, we were
expecting three point five three and negative impact across the
board for automotive sector in Japan, but now we can
(09:10):
probably see around the two three in en type of
negative impact, still a big number, but the relatively to
the twenty five percent a very recent type update was
a positive event and the lesson feared.
Speaker 6 (09:24):
Yeah, in terms of the quarter that predated the trade
agreement between the US and Japan, what are you expecting
to see in terms of that impact on endings? You
know when it comes to front loading.
Speaker 7 (09:35):
Well, I think we probably have to closely monitor the
situation over Mexico and Canada and the rest of the division.
Japan US trade negotiating went okay, So I think there
a should be a sertain you know, newmaker update from
the company management such as tot and Honda. At the
same time, we said that twotoring en type of negative impact,
(10:00):
there should be a mitigation effort that the Automaica will
probably try, including the price hike action in the United
States starting from September. So we're coustantly monitoring the situation
how much they could actually recover from the negative impact
of tariff.
Speaker 5 (10:17):
Is the outlook when it comes to evs and hybrid
vehicles looking a little like it's going to gain a
bit more momentum.
Speaker 7 (10:24):
I do think that the hybrid momentum will probably accelerate.
It's not directlyated to the tariff argument. I think it's
more like a milder environmental regulation from US government ACC
two councelation and also the milder mapro gallon regulation in
the United States. So starting from October, I do believe
(10:47):
that hybrid sales momentum would even accelerate in the United
States market on the back of the On the other hand,
probably battery to vehicle sales may probably potentially slow down.
For Japanese makers having a large exposure to hybrid sales,
les probably get benefit. In the second half of the year,
we've seen.
Speaker 5 (11:07):
Japanese ought to make a sacrificing margin to an extent
to try and stay competitive, particularly when it comes to
the US market. Do you think this will change if
we start to see major suppliers passing through tarff costs,
logistics costs, and is that going to sort of alter
the pricing dynamic.
Speaker 7 (11:26):
Well, I think not only Japanese makers but also all
you automaker operating in US probably have to think about
the price cycle at any case, and we expect a
model year change sometimes in September could be the one
trigger that all automaker will probably try and raise price
in order to mitigate some of the negative impact of
(11:48):
the tariffs and also the negative impact from the informational
pressure in the United States. Super U, one of the company,
already announced four point five percent price syking US back
in May twentieth, and so far the situation of the
sales momentum for that company not really deteriorating that much.
So I think if the price hike action would probably
(12:13):
happen all together, there could be a certain you know,
acceptance among japan among in the US consumers for this
kind of price hike.
Speaker 6 (12:23):
Well, all Japanese automakers now facing tariffs in the US
that weren't there a year ago. To what degree can
Japanese automakers go to other markets that are now so
heavily protected to make up the gap.
Speaker 7 (12:38):
Well, we see increasing competition in the Southeast Asia, Australia
and also the Latin America. Clearly competition is get intensified
based on this type of argument, not only Japanese makers
but also other Asian players. OEM would probably try to
gain market share in those countries in order to mitigate
(13:01):
the negative impact of the US. Having said that, as
I mentioned, if the incremental type of a Japanese may
be goals a twelve point five percent that's already determined,
then it is not easy, but it's manageable for almost
all Japanese maker to make up certain price action while
keeping market share in the US. So Japanese makers US
(13:22):
situation could be okay, then the rest of the country. Yes,
it's a competition, but all in all, I think Japanese
maker could probably maintain okay type of margin into the
second half of the year.
Speaker 5 (13:34):
Do you expect that japan will have much success in
trying to push for lower towers and autos with the.
Speaker 7 (13:39):
US, I do not think so. They're not really trying
to achieve volume or market share. They're clearly focusing on profitability.
And you know, with this price cycle there could be
a certain negative impact based on price aestheticity. But I
think the non no the Japanese maker would try, you know,
(14:02):
doing a massive promotion in it to just gain market
shia by sacrificing their margin. I don't really think so,
and quite nicely inclemental to one five percent not going
to make any automaka in a critically difficult situation. As
I mentioned, twelve or five percent is something manageable for
Japanese or to makers.
Speaker 5 (14:22):
Cotch really great to have you with us. Kotter Zawa,
the head of Asia Auto Research at Gompen sax Journey,
is from Tokyo.
Speaker 1 (14:30):
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.
Speaker 2 (14:41):
You can find us on Apple, Spotify, the Bloomberg Podcast
YouTube channel, or anywhere else you listen.
Speaker 1 (14:47):
Join us again tomorrow for insight on the market moves
from Hong Kong to Singapore and Australia. I'm dereg prisoner,
and this is Bloomberg