June 4, 2025 • 25 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) President Donald Trump has raised steel and aluminum tariffs to 50% from 25%, following through on a pledge to boost US import taxes to help domestic manufacturers.
(2) Chinese Foreign Minister Wang Yi used his first meeting with new US Ambassador David Perdue to complain about recent actions by Washington, underscoring a downturn in relations between the world’s two biggest economies.
(3) Donald Trump ally Elon Musk lambasted the president’s signature tax bill as a budget-busting “abomination” as Republican fiscal hawks stepped up criticism of the massive fiscal package.
(4) Volkswagen AG said about 20,000 employees will voluntarily leave the company by the end of the decade as the carmaker restructures its German operations to cope with uneven demand for its vehicles.
(5) Britain’s ammunition production begins life in the ancestral town of George Washington. Hundreds of technicians and robots work around the clock to manufacture the empty shells that are then filled with explosives and fired from a range of artillery systems.
Podcast Conversation: Taylor Swift’s Catalog Win Is a Masterclass in Business
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Day Baker podcast, available every morning on Apple, Spotify or
wherever you listen. It's Wednesday, the fourth of June in London.
I'm Caroline Hepke.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today, Donald Trump raises
tariffs on steel and aluminium to fifty percent, with the
UK getting a temporary reprieve as it rushes to finalize
it's US trade deal.
Speaker 1 (00:30):
Elon Musk blasts the president's signature tax bill as a
budget busting abomination, pitching the world's richest person against the
world's most powerful.
Speaker 2 (00:40):
Plus on the offense of the UK's Ministry of Defense
calls on the Prime Minister to raise military spending to
three and a half percent of GDP, as defense contractors
tell us rhetoric must now be matched with action.
Speaker 1 (00:53):
Let's start with a roundup of our top stories.
Speaker 2 (00:56):
US President Donald Trump has doubled steel and aluminium tar
to fifty percent from today. In the executive order. Trump
said the move was necessary to protect national security. The
UK is the only country exempted from the levy increase
due to its framework deal with the US signed last month.
Aliminium prices on New York's Comics Exchange its surge to
(01:17):
head of the tariff increase. White House Press Secretary Caroline
Levitt says, the President is protecting jobs.
Speaker 3 (01:23):
This is a president who doesn't just talk the talk,
he walks the walk to and he's delivering on his
promises to bolster our steel and aluminum industries in this
country and to protect those jobs. If not for this president,
that steel plan in Pittsburgh, Pennsylvania, would have closed. Those
jobs would have been lost, and the President saved that company.
He saved those jobs, and he's saving that community.
Speaker 2 (01:44):
White House Press Secretary Karen Levitt, speaking as Washington is
locked in negotiations with a number of trading partners over
the so called reciprocal tariffs. Trump has until the ninth
of July to agree deals before his self imposed pause
ends now.
Speaker 1 (01:59):
China's top diplomat has urged the US to put relations
between the countries back on the right track. Foreign Minister
Wang Ye used his first meeting with the American ambassador
David Perdue to complain about recent measures taken by the
White House. After the meeting, Perdue posted on social media
that he had raised Trump administration priorities, including trade and
(02:21):
illegal migration. Meanwhile, US Treasury Sextuary Scott Bessein said in
a speech that China has a choice on whether or
not to be a reliable partner to other countries.
Speaker 2 (02:32):
Elon Mosk has publicly criticized the President's signature tax bill,
calling it a budget busting abomination. Writing on social media,
the recently departed head of DOGE said shame on those
who voted for it. But Republican House Speaker Mike Johnson
has pushed back with a.
Speaker 4 (02:49):
New respect my friend Elon is terribly wrong about the
one Big, Beautiful Bill.
Speaker 2 (02:54):
Mike Johnson's response comes as the tech titan's public condemnation
pits him against the President and a moment. Trump has
been personally lobbying Senate holdouts on the bill as some
Republicans criticize its impact on the national debt. The tax
bills forecast to reduce federal revenue by about four trillion
dollars over the next decade and add approximately two and
a half trillion to the federal deficit.
Speaker 1 (03:17):
Company news Now Volkswagen says that about twenty thousand employees
will voluntarily leave the business by the end of the decade.
The news comes as the carmaker restructures German operations to
cope with uneven demand, reducing production capacity and headcount. It's
a result that shows the firm's restructuring plans are on track,
according to the head of human relations Gunner Chillian, who
(03:40):
addressed the move in a speech to workers yesterday. Volkswagen
struck a deal in December to cut German production capacity
by more than seven hundred thousand units and also to
decrease headcount by thirty five thousand jobs by the end
of the decade.
Speaker 2 (03:56):
Sources have told Bloomberg that the UK's Ministry of Defense
is asking the government and to increase military spending to
three and a half percent of GDP. It's understo that
the Prime Minister care Starmer is considering the request. Defense
officials are said to be making the case that if
other NATO leaders sign off on the pledge, it'll be
impossible for Britain not to back it. The UK currently
(04:17):
spends about two point three percent of GDP on defense,
and Starmer has promised to raise that to two and
a half percent by twenty twenty seven, with an ambition
to reach three percent by twenty thirty four.
Speaker 1 (04:30):
Well. The reporting comes after the UK government laid out
an ambitious vision in its Strategic Defense with You on Monday,
with a pledge to make the UK battle ready. But
the country's leading military contractors have told Bloomberg that words
will need to be matched with action. Clive Higgins is
the UK CEO of Leonardo, one of the country's leading
aerospace firms.
Speaker 5 (04:51):
I think the ambitions you've seen from the UK givenment
with announcements on significant increases of defense depending are really positive,
but that needs to translate in terms of reality on
the ground.
Speaker 1 (05:02):
Clive Higgins's comments were echoed by a host of other
figures in the industry who spoke to US. Gavin Krimming's
of ba's Munitions Division, told Bloomberg We're not Amazon. We
don't produce just to put things on the shelf. The
call for long term commitments comes as NATO pushes members
to raise military spending to five percent of GDP to
(05:23):
counter the threat from Russia and compensate for American retrenchment.
Bloomberg Economics has calculated that achieving that goal would cost
the UK three hundred and fifty billion pounds.
Speaker 2 (05:36):
I was saying In the UK, the Chancellor Rachel Reeves,
will outline new infrastructure projects when she sets government spending
targets next week. The labor Chancellor's tax raising agenda and
a loosening of the UK's fiscal rules, they've given her
an extra one hundred and thirty billion pounds for investment.
Bloomberg James Wilcock has more.
Speaker 6 (05:53):
The Translor's plan is to point out the upsides of
the difficult choices the UK government is making new rail links,
improved energy infrastructure, investing in schools and hospitals. It's infrastructure
spending that will boost GDP and improve the quality of
life for citizens. But it takes a very very long
(06:15):
time to happen, and the downsides of the chances of
decisions will become very real when Reeve sets out government
budgets next week. Some unlucky government departments face cuts up
to eleven percent in their annual spending. In London, James
Wilcock Bloomberg Radio.
Speaker 1 (06:32):
Those are our top stories for you this morning. In
terms of the market, so we've seen a sharp rise
in shares on the costly two and a half percent
and also the one strengthening as we get a new
Prime Minister in South Korea, so that means some of
the political chaos perhaps is over their Asian stocks overall
up for the first time in four days. We had
a decent US labor market report yesterday ahead of the
(06:53):
non farm payrolls out on Friday. So the S and
P five hundred and the NAS that were high yesterday,
stop futures for the US in the red for European
stock futures on the stocks fifty by a quarter of
one percent. We did the European stocks edge high yesterday.
Your area inflation is more than expected. And then just
in terms of the bond deals, keeping an eye those
long bonds, particularly four ninety seven for thirty year US
(07:17):
treasure yields. Those are the markets.
Speaker 2 (07:19):
In a moment, will bring you our special report on
the challenges the UK faces and building up its defense industry,
plus more on the latest raising of steel and aluminium
tariffs in the US. But a word first. Another story
that caught her this morning on lessons for the music
industry from Taylor Swift's legal battle for her earlier music.
So she finalized the deal just a few days ago
to buy back her catalog. The figure reported to be
(07:40):
above three hundred million dollars. Brian Reeseman, writing for Bloomberg Opinion, says,
hopefully this will encourage other artists to be more business
savvy in their careers and an industry, as he points out,
that's long banked on them not paying attention to the
fine print of fame. These are massive amounts of money
that artists are paying in cases to get back rights
to their catalogs.
Speaker 1 (08:01):
Yeah. Effectively, it's whether you own that master recording, the
original master recording of your songs or not. I mean,
we know that Taylor Swift battle went on for years
and then finally sort of success, and she put a
lot out on social media about it. I thought it
was interesting that Brian Riesman said that he thought that
Taylor Swift had got a good deal three hundred million dollars.
(08:23):
I thought it was amazing that actually everyone who was
really involved in Taylor Swift's early six albums all got
a lot of money from it, and she ended up
paying to have to retrieve it.
Speaker 2 (08:33):
And he says, don't underestimate the value of the Swifties. Essentially,
Taylor swift support from her fan base is a key
part of this whole deal that was the success of
her eras tour part of, of course, what I'll give you
some other money to pay for this as well, and
he says that's something the industry should pay attention to
as well in these deals too. You can read the
full piece Bloomberg dot com slash Opinion. We'll put a
link in our podcast show notes too.
Speaker 1 (08:54):
Now, the latest escalation of Donald Trump's trade war has
come into effect, with the tariffs on steel and aluminium
double as of this morning to fifty percent except for
the UK. Our economics report to Katia Dimitrievia Jones is
now for more on this, Katty, good morning. Who's going
to be hit hardest by this?
Speaker 7 (09:10):
You think, well, these terrotistic effect basically on midnight US time,
so about an hour ago. So essentially every piece of
steel and aluminum that now crosses into the US will
face these much higher levees which have been kind of
expected for some time, even as these countries negotiate with
(09:31):
the US. So when we look at where most US
steel and aluminum comes from, it's really Canada, Brazil, Mexico,
so all very close to the US. And then over
in this part of the world where I am right
now in Asia, it's South Korea and Vietnam, which who
are the biggest steel exporters to the US. China is
(09:54):
also a big one to the world, but because of
previous US tariffs, they've effectively been blocked from entering the
US market. And so really, if you look geographically, this
is a broad swath of countries. Many of these countries
in very intense negotiations with the US right now and
are now facing these much higher producers facing these much
(10:17):
higher levees going into the US.
Speaker 2 (10:20):
And of course the UK has a carve out for now,
the only one that does as talks proceed on its
framework outline trade deal.
Speaker 7 (10:28):
Yeah, because the UK is the only one that has
this temporary agreement with the US right which they reached
last month. So they're going to get that twenty five
percent rate. And then Mexico has also asked for an exemption,
but exemptions in the past, as with Japan's experience, haven't
really panned out, so it remains to be seen. But
(10:50):
the idea is to kind of as they're negotiating with
the UK, to keep those tariffs at a lower twenty
five rate. The problem is that this doesn't really abide
by the temporary agreement that they reached last month, because
that one, like what was supposed to happen is US
imports of metals from the UK dropped to zero and
(11:13):
auto tariffs at about ten percent, and then in exchange,
the UK would sort of fast track US imports and
both sides had agreed at the time this is a
way to lower tariffs, but that doesn't seem to be
the case at this point, so Prime Minister Starmer's spokesperson
said the agreement is a work in process, but it
(11:36):
really is would just be a major hit to the
UK if they're raised to fifty percent. It already is
at twenty five percent. You know, industries facing over capacity,
there have been lower prices, there's been a drop in
demand globally, so this would really hit the country's steel
mills pretty hard.
Speaker 1 (11:54):
Okay. Staying with trade, China's foreign minister meeting the new
US and is there any sign of progress there between
the US and China.
Speaker 7 (12:04):
You know, these meetings are always good. You know, they're
showing the conversation is still going. There's still meetings and
diplomatic channels. In effect, the issue is that there's not
much that's moved from this meeting. It was the first
meeting with basically China's top diplomat, this is Foreign Minister
(12:26):
wangy and it's the first meeting with US Ambassador David Purdue.
They met in Beijing. Both sides just basically outlined where
things stand. So Wang said the US has taken several
unfirst steps recently that undermined China's rights and interests. Also
highlighted equality, mutual respect in discussions. This is something we've
(12:49):
heard time and time again from the Chinese side. And
then Purdue tweeted that he emphasized US priorities on fentanel, trade,
illegal immigration. So not much movement from sort of the
status quo and what has been in recent days kind
of a ramping up of tension. So basically just underscoring
(13:12):
with the process. There's no movement yet on whether a
call is going to take place. White House still thinks
is going to happen. China has still not commented on that.
Speaker 2 (13:21):
So this is the international part of Donald Trump's policies.
But interestingly, at home, Elon Musk lasting out at Donald
Trump's signature tax bill currently making its way through Congress,
calling it a disgusting abomination. How damaging. Are these criticisms?
Speaker 7 (13:35):
Yeah, yeah, big words. And he has been critical of
the bill before. Of course, he was leading up this
Doge effort for government efficiency up until a few days ago.
It's hard to say how much his criticism will hurt
the bill's prospects because he's no longer advising the president.
(13:56):
Of course, it's already also facing a lot of challenges
from Republican senators. So there's several fiscal hawks who want
more spending cuts. At least five oppose changes to Medicaid,
and then a number of senators, Republican senators also oppose
these sudden cuts to green energy credits. So this is
(14:19):
something that actually, you know, maybe ironically but helped a
lot of companies across several red states. And so there's
going to be this back and forth tug of war
on this bill, which you know, big and beautiful but
also very expensive. So we're going to be seeing that
playing out in the coming months.
Speaker 1 (14:36):
Okay, Katif, thank you so much for being with us
this morning. Our economics report. To Katia Dmitrieva, thank you
so much for joining us.
Speaker 2 (14:43):
Now, the UK government is considering whether to raise defense
spending to three and a half percent of GDP ahead
of a NATO summit at the end of twenty twenty five. No, Carolin,
you've spent the past few weeks speaking to the UK
defense industry for special report today.
Speaker 1 (14:58):
Yeah. Absolutely, So. Britain is currently spending two point three
percent of its whole economic output on defense. We know
that the world is rearming, that the threats are increasing,
and now there are rapidly developing demands for even more spending.
For example, a new target potentially from NATO members of
five percent of GDP on overall defense spending. There's obviously
(15:21):
a NATO summit that's coming up in the next few weeks,
and we've had out from the government this week the
Strategic Defense Review, which lays out quite an ambitious sort
of set of targets for the UK. So there's a
lot that is moving very quickly when it comes to defense.
The question basically is whether Britain can pay for this,
(15:42):
how it can deliver on additional defense spending whatever the
targets end up being three percent, three and a half percent,
five percent, which is an enormous ask. So I've been
speaking to a number of defense contractors and others who
basically say they are poised. I mean remember that defense
spending has dropped pretty dramatically over the decade since a
(16:03):
peak in the nineteen fifties, brief peaks for the Falklands War,
for the Iraq and Afghanistan interventions. Now there are efforts
to revive Britain's military industrial base and to try to
produce more homegrown weapons.
Speaker 8 (16:21):
So you're going to go into the forge area. It's
all done at E level und A degree. See so
WYC is red hot material.
Speaker 1 (16:29):
They make all sorts of shells here at the BA
Systems factory in Washington in the northeast of England, including
these one five to five millimeter shells, which are just
about almost a meter long, but like a bit of
a tin can.
Speaker 9 (16:43):
Or a kind of a water bottle.
Speaker 1 (16:45):
That then gets filled with explosives and a propellant. BA
Systems is Britain's largest defense contractor. Steve Krdu has helped
develop the business.
Speaker 8 (16:56):
We are expanding our one five to five capacity by
sixteen fold. So that's a combination of some additional machining
lines here at Washington in the Northeast, and then the
brand new explosive filling and packing facility of glasgowyd and
the real focus to us really is how do we
expand our UK redition's capacity and also how do we
(17:19):
generate resilience in our industrial base and also our supply show.
Speaker 1 (17:23):
How prepared are you? How ready are I?
Speaker 8 (17:27):
You know, the preparation that we're doing around our upscaling
of our production capability, the underpinning of our supply chains
exposed to some repellents. That is all geared around what
we anticipate the global environment is going to need.
Speaker 1 (17:43):
As Steve kard You explains this, BAE System's factory is
working three shifts levels last scene post Iraq and Afghanistan.
They're making artillery shells for the British Army and Ukraine.
There is awing realization according to BAE that munitions are
(18:04):
the weapon needed in war. But BAE Systems wants firmer
spending commitments from customers. In other words, the UK's Ministry
of Defense, the mod's own report two years ago found
a seventeen billion pound equipment black hole. Alan West has
(18:25):
had a long career in the military and beyond. He
was first Sea Lord in charge of the Navy and
Royal Marines, Chief of Defense Intelligence, and a government Minister
Admiral Lord West describes the poor state of the British military.
Speaker 9 (18:42):
Our cupboard is bear in terms of extra weapons, extra ammunition,
extra missiles, things like that. We've cut down on training,
We've not really had enough money to really focus hard
on recruiting and on people. When you add all these
things together, the hollowing out has been catastrophic.
Speaker 1 (18:58):
Actually, how hard then for that pretty long list and
disastrous state of affairs? As you say, a bare cupboard,
how hard do you think it's going to be to rebuild?
Speaker 9 (19:08):
It's going to be extremely difficult, and I think some
politicians and people in Whitehall are deluding themselves about how
quickly it can be done.
Speaker 1 (19:20):
Prime Minister Kirs Starmer has pledged defense spending will reach
two and a half percent of GDP by twenty twenty seven,
up from two point three percent currently, and then get
to three percent over the next decade. But Lord West
says those plans are too tentative.
Speaker 9 (19:37):
The way to do this is rather like when in
nineteen forty six seven Levin said to atle we have
got to have an atomic bomb. There's no question about it,
and the Prime Minister and the Defense Secretary and the
Foreign Secretary in cabinet said right, we're going to do that,
and they found the money and the country was pretty broke.
They found the money and spent the money to get
(19:59):
an atomic bomb, and that meant cutting things that were
very close to their heart, like the new welfare stage
and health service and things. I'm afraid this government, if
it is taking defense seriously, has to say right, we
are going to spend this money, and they need to
start doing it now.
Speaker 1 (20:15):
The urgency is reflected by Leonardo UK, part of the
Italian Global Defence Giant, which focuses on combat air projects
like the Eurofighter Typhoon, with hubs in Newcastle, Joville and Edinburgh.
Clive Higgins is UK chair and CEO. He told me
he recently hosted Prime Minister Starmer for a visit.
Speaker 5 (20:38):
We've needed to increased defense spending for some time. I
would say the threat vector is increased, so that's driven
that need to change. So now increasing to two point
five potentially three percent in the next parliament absolutely critical.
We've seen a lot of transformation coming through defense in
the UK in particular, so you're seeing the structures of
(21:01):
defense in government transforming. Now they want more pace they
want more agility. The flow of funding has to be
improved and also recognized in that post COVID where we
recognize that supply chain resilience was a key attribute, we
need that in defense as well. So I think the
ambitions you've seen from the UK government with announcements on
significant increases of defense spending are really positive, but that
(21:24):
needs to translate in terms of reality on the ground.
Speaker 1 (21:29):
The government has now released its Strategic Defense Review, with
the Prime Minister outlining plans to overhaul the British military,
including expanding the nuclear Deterrent, but still with scant details
about how it will be paid for. Ben Bridge's Chair
of air Bus, Defense and Aerospace UK.
Speaker 5 (21:51):
A lot of the.
Speaker 10 (21:51):
Rhetoric, if you like, is reflecting not only the importance
of defense in the needs to invest in defense and
spend more on defense, but to do that in the UK.
So I think this is the year where we and
the UK defense industry will hope to see those words
turning into action.
Speaker 1 (22:07):
So you think it's a pivotal year, then are you
doing anything to ramp up in the UK now or
are you awaiting all of those reviews and the contracts
to arrive.
Speaker 10 (22:17):
The question I guess will be what further opportunities or
requirements will come from the government, and will be ready
to ramp up as you say, and ready to increase
and invest ourselves if that were to happen.
Speaker 1 (22:32):
So Airbus in the UK is poised but paused. But
Marion Mesmer, senior researcher at Chatham House, explains that other
NATO countries are not standing still.
Speaker 4 (22:43):
For a long time, the UK was one of the
leaders when it came to defense spending in natal, but
actually ever since the for scale Russian invasion in twenty
twenty two, other native member states, especially those along NATO's
eastern border with Russia, have increased defense spending much more
rapidly than the UK. So the UK, with spending around
(23:04):
two point five percent of GDP and intentions to spend
two point seven perhaps over the next several years, is
actually lagging far behind countries like Poland, which are already
spending in excess of four percent of GDP and are
also intending to spend more.
Speaker 1 (23:20):
And so as Europe and NATO ramp up, there is
also the difficult question of what Britain should be preparing
for when it comes to global threats. Marian Mesmer is
clear what may be expected from Britain.
Speaker 4 (23:34):
We know that Russia wants to continue to essentially increase
its own self image as a great power. So I
think the threat from Russia is really real. And what
we know about Russian strategic thinking is that if they
were to attack Natal, a likely line of attack would
be in the Baltic States, where the UK has a presence.
So the UK essentially needs to be ready to help
(23:57):
defend the Baltic States.
Speaker 1 (24:01):
Back at BAE Systems, they are firing up the forges.
Gavin Krimmings from the Munitions Division tells me they're working
on creating sovereign defense supplies for the likes of explosives.
Speaker 11 (24:16):
There are times where we do scale, have to kind
of three shift work in and for the last time
all the factories were kind of at that kind of
scale was probably paused Iraq Afghanistan.
Speaker 1 (24:28):
The government has plans for six new munitions factories to
come soon. The ambition is now to move to a
position of war fighting readiness, but with the growing threat
of war, there are questions about whether the UK is
moving fast enough and how the country will pay for it.
Speaker 2 (24:56):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (25:02):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (25:08):
You can also listen live each morning on London Dab Radio,
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Speaker 1 (25:14):
Our flagship New York station, is also available on your
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Speaker 2 (25:22):
I'm Caroline Hepka and I'm Stephen Carroll. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg Daybreak Europe
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Day Baker podcast, available every morning on Apple, Spotify or
wherever you listen. It's Wednesday, the fourth of June in London.
I'm Caroline Hepke.
Speaker 2 (00:18):
And I'm Stephen Carroll. Coming up today, Donald Trump raises
tariffs on steel and aluminium to fifty percent, with the
UK getting a temporary reprieve as it rushes to finalize
it's US trade deal.
Speaker 1 (00:30):
Elon Musk blasts the president's signature tax bill as a
budget busting abomination, pitching the world's richest person against the
world's most powerful.
Speaker 2 (00:40):
Plus on the offense of the UK's Ministry of Defense
calls on the Prime Minister to raise military spending to
three and a half percent of GDP, as defense contractors
tell us rhetoric must now be matched with action.
Speaker 1 (00:53):
Let's start with a roundup of our top stories.
Speaker 2 (00:56):
US President Donald Trump has doubled steel and aluminium tar
to fifty percent from today. In the executive order. Trump
said the move was necessary to protect national security. The
UK is the only country exempted from the levy increase
due to its framework deal with the US signed last month.
Aliminium prices on New York's Comics Exchange its surge to
(01:17):
head of the tariff increase. White House Press Secretary Caroline
Levitt says, the President is protecting jobs.
Speaker 3 (01:23):
This is a president who doesn't just talk the talk,
he walks the walk to and he's delivering on his
promises to bolster our steel and aluminum industries in this
country and to protect those jobs. If not for this president,
that steel plan in Pittsburgh, Pennsylvania, would have closed. Those
jobs would have been lost, and the President saved that company.
He saved those jobs, and he's saving that community.
Speaker 2 (01:44):
White House Press Secretary Karen Levitt, speaking as Washington is
locked in negotiations with a number of trading partners over
the so called reciprocal tariffs. Trump has until the ninth
of July to agree deals before his self imposed pause
ends now.
Speaker 1 (01:59):
China's top diplomat has urged the US to put relations
between the countries back on the right track. Foreign Minister
Wang Ye used his first meeting with the American ambassador
David Perdue to complain about recent measures taken by the
White House. After the meeting, Perdue posted on social media
that he had raised Trump administration priorities, including trade and
(02:21):
illegal migration. Meanwhile, US Treasury Sextuary Scott Bessein said in
a speech that China has a choice on whether or
not to be a reliable partner to other countries.
Speaker 2 (02:32):
Elon Mosk has publicly criticized the President's signature tax bill,
calling it a budget busting abomination. Writing on social media,
the recently departed head of DOGE said shame on those
who voted for it. But Republican House Speaker Mike Johnson
has pushed back with a.
Speaker 4 (02:49):
New respect my friend Elon is terribly wrong about the
one Big, Beautiful Bill.
Speaker 2 (02:54):
Mike Johnson's response comes as the tech titan's public condemnation
pits him against the President and a moment. Trump has
been personally lobbying Senate holdouts on the bill as some
Republicans criticize its impact on the national debt. The tax
bills forecast to reduce federal revenue by about four trillion
dollars over the next decade and add approximately two and
a half trillion to the federal deficit.
Speaker 1 (03:17):
Company news Now Volkswagen says that about twenty thousand employees
will voluntarily leave the business by the end of the decade.
The news comes as the carmaker restructures German operations to
cope with uneven demand, reducing production capacity and headcount. It's
a result that shows the firm's restructuring plans are on track,
according to the head of human relations Gunner Chillian, who
(03:40):
addressed the move in a speech to workers yesterday. Volkswagen
struck a deal in December to cut German production capacity
by more than seven hundred thousand units and also to
decrease headcount by thirty five thousand jobs by the end
of the decade.
Speaker 2 (03:56):
Sources have told Bloomberg that the UK's Ministry of Defense
is asking the government and to increase military spending to
three and a half percent of GDP. It's understo that
the Prime Minister care Starmer is considering the request. Defense
officials are said to be making the case that if
other NATO leaders sign off on the pledge, it'll be
impossible for Britain not to back it. The UK currently
(04:17):
spends about two point three percent of GDP on defense,
and Starmer has promised to raise that to two and
a half percent by twenty twenty seven, with an ambition
to reach three percent by twenty thirty four.
Speaker 1 (04:30):
Well. The reporting comes after the UK government laid out
an ambitious vision in its Strategic Defense with You on Monday,
with a pledge to make the UK battle ready. But
the country's leading military contractors have told Bloomberg that words
will need to be matched with action. Clive Higgins is
the UK CEO of Leonardo, one of the country's leading
aerospace firms.
Speaker 5 (04:51):
I think the ambitions you've seen from the UK givenment
with announcements on significant increases of defense depending are really positive,
but that needs to translate in terms of reality on
the ground.
Speaker 1 (05:02):
Clive Higgins's comments were echoed by a host of other
figures in the industry who spoke to US. Gavin Krimming's
of ba's Munitions Division, told Bloomberg We're not Amazon. We
don't produce just to put things on the shelf. The
call for long term commitments comes as NATO pushes members
to raise military spending to five percent of GDP to
(05:23):
counter the threat from Russia and compensate for American retrenchment.
Bloomberg Economics has calculated that achieving that goal would cost
the UK three hundred and fifty billion pounds.
Speaker 2 (05:36):
I was saying In the UK, the Chancellor Rachel Reeves,
will outline new infrastructure projects when she sets government spending
targets next week. The labor Chancellor's tax raising agenda and
a loosening of the UK's fiscal rules, they've given her
an extra one hundred and thirty billion pounds for investment.
Bloomberg James Wilcock has more.
Speaker 6 (05:53):
The Translor's plan is to point out the upsides of
the difficult choices the UK government is making new rail links,
improved energy infrastructure, investing in schools and hospitals. It's infrastructure
spending that will boost GDP and improve the quality of
life for citizens. But it takes a very very long
(06:15):
time to happen, and the downsides of the chances of
decisions will become very real when Reeve sets out government
budgets next week. Some unlucky government departments face cuts up
to eleven percent in their annual spending. In London, James
Wilcock Bloomberg Radio.
Speaker 1 (06:32):
Those are our top stories for you this morning. In
terms of the market, so we've seen a sharp rise
in shares on the costly two and a half percent
and also the one strengthening as we get a new
Prime Minister in South Korea, so that means some of
the political chaos perhaps is over their Asian stocks overall
up for the first time in four days. We had
a decent US labor market report yesterday ahead of the
(06:53):
non farm payrolls out on Friday. So the S and
P five hundred and the NAS that were high yesterday,
stop futures for the US in the red for European
stock futures on the stocks fifty by a quarter of
one percent. We did the European stocks edge high yesterday.
Your area inflation is more than expected. And then just
in terms of the bond deals, keeping an eye those
long bonds, particularly four ninety seven for thirty year US
(07:17):
treasure yields. Those are the markets.
Speaker 2 (07:19):
In a moment, will bring you our special report on
the challenges the UK faces and building up its defense industry,
plus more on the latest raising of steel and aluminium
tariffs in the US. But a word first. Another story
that caught her this morning on lessons for the music
industry from Taylor Swift's legal battle for her earlier music.
So she finalized the deal just a few days ago
to buy back her catalog. The figure reported to be
(07:40):
above three hundred million dollars. Brian Reeseman, writing for Bloomberg Opinion, says,
hopefully this will encourage other artists to be more business
savvy in their careers and an industry, as he points out,
that's long banked on them not paying attention to the
fine print of fame. These are massive amounts of money
that artists are paying in cases to get back rights
to their catalogs.
Speaker 1 (08:01):
Yeah. Effectively, it's whether you own that master recording, the
original master recording of your songs or not. I mean,
we know that Taylor Swift battle went on for years
and then finally sort of success, and she put a
lot out on social media about it. I thought it
was interesting that Brian Riesman said that he thought that
Taylor Swift had got a good deal three hundred million dollars.
(08:23):
I thought it was amazing that actually everyone who was
really involved in Taylor Swift's early six albums all got
a lot of money from it, and she ended up
paying to have to retrieve it.
Speaker 2 (08:33):
And he says, don't underestimate the value of the Swifties. Essentially,
Taylor swift support from her fan base is a key
part of this whole deal that was the success of
her eras tour part of, of course, what I'll give you
some other money to pay for this as well, and
he says that's something the industry should pay attention to
as well in these deals too. You can read the
full piece Bloomberg dot com slash Opinion. We'll put a
link in our podcast show notes too.
Speaker 1 (08:54):
Now, the latest escalation of Donald Trump's trade war has
come into effect, with the tariffs on steel and aluminium
double as of this morning to fifty percent except for
the UK. Our economics report to Katia Dimitrievia Jones is
now for more on this, Katty, good morning. Who's going
to be hit hardest by this?
Speaker 7 (09:10):
You think, well, these terrotistic effect basically on midnight US time,
so about an hour ago. So essentially every piece of
steel and aluminum that now crosses into the US will
face these much higher levees which have been kind of
expected for some time, even as these countries negotiate with
(09:31):
the US. So when we look at where most US
steel and aluminum comes from, it's really Canada, Brazil, Mexico,
so all very close to the US. And then over
in this part of the world where I am right
now in Asia, it's South Korea and Vietnam, which who
are the biggest steel exporters to the US. China is
(09:54):
also a big one to the world, but because of
previous US tariffs, they've effectively been blocked from entering the
US market. And so really, if you look geographically, this
is a broad swath of countries. Many of these countries
in very intense negotiations with the US right now and
are now facing these much higher producers facing these much
(10:17):
higher levees going into the US.
Speaker 2 (10:20):
And of course the UK has a carve out for now,
the only one that does as talks proceed on its
framework outline trade deal.
Speaker 7 (10:28):
Yeah, because the UK is the only one that has
this temporary agreement with the US right which they reached
last month. So they're going to get that twenty five
percent rate. And then Mexico has also asked for an exemption,
but exemptions in the past, as with Japan's experience, haven't
really panned out, so it remains to be seen. But
(10:50):
the idea is to kind of as they're negotiating with
the UK, to keep those tariffs at a lower twenty
five rate. The problem is that this doesn't really abide
by the temporary agreement that they reached last month, because
that one, like what was supposed to happen is US
imports of metals from the UK dropped to zero and
(11:13):
auto tariffs at about ten percent, and then in exchange,
the UK would sort of fast track US imports and
both sides had agreed at the time this is a
way to lower tariffs, but that doesn't seem to be
the case at this point, so Prime Minister Starmer's spokesperson
said the agreement is a work in process, but it
(11:36):
really is would just be a major hit to the
UK if they're raised to fifty percent. It already is
at twenty five percent. You know, industries facing over capacity,
there have been lower prices, there's been a drop in
demand globally, so this would really hit the country's steel
mills pretty hard.
Speaker 1 (11:54):
Okay. Staying with trade, China's foreign minister meeting the new
US and is there any sign of progress there between
the US and China.
Speaker 7 (12:04):
You know, these meetings are always good. You know, they're
showing the conversation is still going. There's still meetings and
diplomatic channels. In effect, the issue is that there's not
much that's moved from this meeting. It was the first
meeting with basically China's top diplomat, this is Foreign Minister
(12:26):
wangy and it's the first meeting with US Ambassador David Purdue.
They met in Beijing. Both sides just basically outlined where
things stand. So Wang said the US has taken several
unfirst steps recently that undermined China's rights and interests. Also
highlighted equality, mutual respect in discussions. This is something we've
(12:49):
heard time and time again from the Chinese side. And
then Purdue tweeted that he emphasized US priorities on fentanel, trade,
illegal immigration. So not much movement from sort of the
status quo and what has been in recent days kind
of a ramping up of tension. So basically just underscoring
(13:12):
with the process. There's no movement yet on whether a
call is going to take place. White House still thinks
is going to happen. China has still not commented on that.
Speaker 2 (13:21):
So this is the international part of Donald Trump's policies.
But interestingly, at home, Elon Musk lasting out at Donald
Trump's signature tax bill currently making its way through Congress,
calling it a disgusting abomination. How damaging. Are these criticisms?
Speaker 7 (13:35):
Yeah, yeah, big words. And he has been critical of
the bill before. Of course, he was leading up this
Doge effort for government efficiency up until a few days ago.
It's hard to say how much his criticism will hurt
the bill's prospects because he's no longer advising the president.
(13:56):
Of course, it's already also facing a lot of challenges
from Republican senators. So there's several fiscal hawks who want
more spending cuts. At least five oppose changes to Medicaid,
and then a number of senators, Republican senators also oppose
these sudden cuts to green energy credits. So this is
(14:19):
something that actually, you know, maybe ironically but helped a
lot of companies across several red states. And so there's
going to be this back and forth tug of war
on this bill, which you know, big and beautiful but
also very expensive. So we're going to be seeing that
playing out in the coming months.
Speaker 1 (14:36):
Okay, Katif, thank you so much for being with us
this morning. Our economics report. To Katia Dmitrieva, thank you
so much for joining us.
Speaker 2 (14:43):
Now, the UK government is considering whether to raise defense
spending to three and a half percent of GDP ahead
of a NATO summit at the end of twenty twenty five. No, Carolin,
you've spent the past few weeks speaking to the UK
defense industry for special report today.
Speaker 1 (14:58):
Yeah. Absolutely, So. Britain is currently spending two point three
percent of its whole economic output on defense. We know
that the world is rearming, that the threats are increasing,
and now there are rapidly developing demands for even more spending.
For example, a new target potentially from NATO members of
five percent of GDP on overall defense spending. There's obviously
(15:21):
a NATO summit that's coming up in the next few weeks,
and we've had out from the government this week the
Strategic Defense Review, which lays out quite an ambitious sort
of set of targets for the UK. So there's a
lot that is moving very quickly when it comes to defense.
The question basically is whether Britain can pay for this,
(15:42):
how it can deliver on additional defense spending whatever the
targets end up being three percent, three and a half percent,
five percent, which is an enormous ask. So I've been
speaking to a number of defense contractors and others who
basically say they are poised. I mean remember that defense
spending has dropped pretty dramatically over the decade since a
(16:03):
peak in the nineteen fifties, brief peaks for the Falklands War,
for the Iraq and Afghanistan interventions. Now there are efforts
to revive Britain's military industrial base and to try to
produce more homegrown weapons.
Speaker 8 (16:21):
So you're going to go into the forge area. It's
all done at E level und A degree. See so
WYC is red hot material.
Speaker 1 (16:29):
They make all sorts of shells here at the BA
Systems factory in Washington in the northeast of England, including
these one five to five millimeter shells, which are just
about almost a meter long, but like a bit of
a tin can.
Speaker 9 (16:43):
Or a kind of a water bottle.
Speaker 1 (16:45):
That then gets filled with explosives and a propellant. BA
Systems is Britain's largest defense contractor. Steve Krdu has helped
develop the business.
Speaker 8 (16:56):
We are expanding our one five to five capacity by
sixteen fold. So that's a combination of some additional machining
lines here at Washington in the Northeast, and then the
brand new explosive filling and packing facility of glasgowyd and
the real focus to us really is how do we
expand our UK redition's capacity and also how do we
(17:19):
generate resilience in our industrial base and also our supply show.
Speaker 1 (17:23):
How prepared are you? How ready are I?
Speaker 8 (17:27):
You know, the preparation that we're doing around our upscaling
of our production capability, the underpinning of our supply chains
exposed to some repellents. That is all geared around what
we anticipate the global environment is going to need.
Speaker 1 (17:43):
As Steve kard You explains this, BAE System's factory is
working three shifts levels last scene post Iraq and Afghanistan.
They're making artillery shells for the British Army and Ukraine.
There is awing realization according to BAE that munitions are
(18:04):
the weapon needed in war. But BAE Systems wants firmer
spending commitments from customers. In other words, the UK's Ministry
of Defense, the mod's own report two years ago found
a seventeen billion pound equipment black hole. Alan West has
(18:25):
had a long career in the military and beyond. He
was first Sea Lord in charge of the Navy and
Royal Marines, Chief of Defense Intelligence, and a government Minister
Admiral Lord West describes the poor state of the British military.
Speaker 9 (18:42):
Our cupboard is bear in terms of extra weapons, extra ammunition,
extra missiles, things like that. We've cut down on training,
We've not really had enough money to really focus hard
on recruiting and on people. When you add all these
things together, the hollowing out has been catastrophic.
Speaker 1 (18:58):
Actually, how hard then for that pretty long list and
disastrous state of affairs? As you say, a bare cupboard,
how hard do you think it's going to be to rebuild?
Speaker 9 (19:08):
It's going to be extremely difficult, and I think some
politicians and people in Whitehall are deluding themselves about how
quickly it can be done.
Speaker 1 (19:20):
Prime Minister Kirs Starmer has pledged defense spending will reach
two and a half percent of GDP by twenty twenty seven,
up from two point three percent currently, and then get
to three percent over the next decade. But Lord West
says those plans are too tentative.
Speaker 9 (19:37):
The way to do this is rather like when in
nineteen forty six seven Levin said to atle we have
got to have an atomic bomb. There's no question about it,
and the Prime Minister and the Defense Secretary and the
Foreign Secretary in cabinet said right, we're going to do that,
and they found the money and the country was pretty broke.
They found the money and spent the money to get
(19:59):
an atomic bomb, and that meant cutting things that were
very close to their heart, like the new welfare stage
and health service and things. I'm afraid this government, if
it is taking defense seriously, has to say right, we
are going to spend this money, and they need to
start doing it now.
Speaker 1 (20:15):
The urgency is reflected by Leonardo UK, part of the
Italian Global Defence Giant, which focuses on combat air projects
like the Eurofighter Typhoon, with hubs in Newcastle, Joville and Edinburgh.
Clive Higgins is UK chair and CEO. He told me
he recently hosted Prime Minister Starmer for a visit.
Speaker 5 (20:38):
We've needed to increased defense spending for some time. I
would say the threat vector is increased, so that's driven
that need to change. So now increasing to two point
five potentially three percent in the next parliament absolutely critical.
We've seen a lot of transformation coming through defense in
the UK in particular, so you're seeing the structures of
(21:01):
defense in government transforming. Now they want more pace they
want more agility. The flow of funding has to be
improved and also recognized in that post COVID where we
recognize that supply chain resilience was a key attribute, we
need that in defense as well. So I think the
ambitions you've seen from the UK government with announcements on
significant increases of defense spending are really positive, but that
(21:24):
needs to translate in terms of reality on the ground.
Speaker 1 (21:29):
The government has now released its Strategic Defense Review, with
the Prime Minister outlining plans to overhaul the British military,
including expanding the nuclear Deterrent, but still with scant details
about how it will be paid for. Ben Bridge's Chair
of air Bus, Defense and Aerospace UK.
Speaker 5 (21:51):
A lot of the.
Speaker 10 (21:51):
Rhetoric, if you like, is reflecting not only the importance
of defense in the needs to invest in defense and
spend more on defense, but to do that in the UK.
So I think this is the year where we and
the UK defense industry will hope to see those words
turning into action.
Speaker 1 (22:07):
So you think it's a pivotal year, then are you
doing anything to ramp up in the UK now or
are you awaiting all of those reviews and the contracts
to arrive.
Speaker 10 (22:17):
The question I guess will be what further opportunities or
requirements will come from the government, and will be ready
to ramp up as you say, and ready to increase
and invest ourselves if that were to happen.
Speaker 1 (22:32):
So Airbus in the UK is poised but paused. But
Marion Mesmer, senior researcher at Chatham House, explains that other
NATO countries are not standing still.
Speaker 4 (22:43):
For a long time, the UK was one of the
leaders when it came to defense spending in natal, but
actually ever since the for scale Russian invasion in twenty
twenty two, other native member states, especially those along NATO's
eastern border with Russia, have increased defense spending much more
rapidly than the UK. So the UK, with spending around
(23:04):
two point five percent of GDP and intentions to spend
two point seven perhaps over the next several years, is
actually lagging far behind countries like Poland, which are already
spending in excess of four percent of GDP and are
also intending to spend more.
Speaker 1 (23:20):
And so as Europe and NATO ramp up, there is
also the difficult question of what Britain should be preparing
for when it comes to global threats. Marian Mesmer is
clear what may be expected from Britain.
Speaker 4 (23:34):
We know that Russia wants to continue to essentially increase
its own self image as a great power. So I
think the threat from Russia is really real. And what
we know about Russian strategic thinking is that if they
were to attack Natal, a likely line of attack would
be in the Baltic States, where the UK has a presence.
So the UK essentially needs to be ready to help
(23:57):
defend the Baltic States.
Speaker 1 (24:01):
Back at BAE Systems, they are firing up the forges.
Gavin Krimmings from the Munitions Division tells me they're working
on creating sovereign defense supplies for the likes of explosives.
Speaker 11 (24:16):
There are times where we do scale, have to kind
of three shift work in and for the last time
all the factories were kind of at that kind of
scale was probably paused Iraq Afghanistan.
Speaker 1 (24:28):
The government has plans for six new munitions factories to
come soon. The ambition is now to move to a
position of war fighting readiness, but with the growing threat
of war, there are questions about whether the UK is
moving fast enough and how the country will pay for it.
Speaker 2 (24:56):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 1 (25:02):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (25:08):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 1 (25:14):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa Play Bloomberg eleven thirty.
Speaker 2 (25:22):
I'm Caroline Hepka and I'm Stephen Carroll. Join us again
tomorrow morning for all the news you need to start
your day right here on Bloomberg Daybreak Europe
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