May 30, 2025 • 39 mins
Bloomberg Daybreak Weekend with Tom Busby takes a look at some of the stories we'll be tracking in the coming week.
- In the US – a look ahead to the U.S jobs report.
- In the UK – a look ahead to the ECB’s monetary policy decision.
- In Asia – a look ahead to economic data in Vietnam.
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the
program the upcoming May Jobs report in the US how
that could impact FED policy moving forward. I'm Tom Busby
in New York.
Speaker 3 (00:25):
I'm Caroline Hedge in London, where we're asking if the
ECB can help Europe sees its golden opportunity.
Speaker 4 (00:31):
I'm Dot Christner looking ahead to trade data this week
from Vietnam.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5 (01:02):
Good day to you.
Speaker 2 (01:03):
I'm Tom Busby, and we begin today's program with a
look ahead to the May Jobs Report. Non farm payroll
numbers for May out on Friday eight thirty am. Wall
Street Time Now for more on how those numbers may
impact the FED policy moving forward. And the state of
the US labor market and the economy. We're joined by
Stuart paul, Us, economist with Bloomberg Economics. Stuart, thank you
(01:25):
for being here again. Now, when you look at the
impact of the Trump tariffs, the DOGE cuts, lower corporate profits,
a shrinking US economy, are we starting to see cracks
in the labor market? It was robust for years.
Speaker 6 (01:39):
I think we're just starting to see material cracks, and
we're starting to see the cracks that have been just
minuscule starting to widen. I think that the first labor
market data print that we're going to get next week
or in the coming week is going to be the
number of job openings available in April, and I think
(02:00):
the number of job openings declined all being modestly, just
by about sixty thousand, but that's going to be enough
for the number of workers available, the number of unemployed
workers to exceed the number of job openings for the
first time since the pandemic. So that's the first sign
(02:20):
I think that will really matter for the FED that
there is material slack in the labor market. And then
as we get to the jobs report on Friday, I
think we're going to see a materially slower pace of hiring.
We're estimating just ninety thousand jobs we're added in May.
That's a pretty dramatic slowdown from one hundred and seventy
(02:41):
seven thousand jobs added in April. And it's such a
slow pace that it does not keep up with labor
force or population growth. So we're expecting to see an
uptick in the unemployment rate. It's still going to be
low at four point three percent, but moving in the
wrong direction for the FED.
Speaker 2 (02:58):
That is a big change. Under one hundred thousand ads
is a lot fewer than we saw even a week ago.
Economist who were predicting what has changed in that time.
Speaker 6 (03:08):
The thing that we're seeing in the data when we
look at high frequency data is that there were relatively
few people added in the leisure and hospitality industry. And
going back to your initial point, some of this is
downstream from policy that's coming out of the West Wing.
One of the reasons we think that there were fewer
people added in leisure and hospitality, food service, and accommodation,
(03:30):
for example, is because there's less travel from abroad, and
part of that is retaliation from some of our trading
partners and potential travelers who are canceling their trips in
the spring and early summer travel season.
Speaker 2 (03:46):
Yeah, and not just Canadians, European South Americans. We're seeing
it from all over, big, big decrease in travel.
Speaker 5 (03:54):
All right.
Speaker 2 (03:54):
So now the latest data that we saw also on
jobless claims, are you seeing a pattern there? It held
pretty steady for most of the president's second term, but
I think now we're starting to see things creep up
for it also, long term unemployed. That's a big that's
exactly right.
Speaker 6 (04:10):
For a long time, it was one of the easiest
data prints to forecast initial jobless claims. Two hundred and
twenty thousand a month, no big deal. You wouldn't even
have to look, we wouldn't have to think very hard
about what to expect. But we did see a pretty
swift jump to two hundred and forty thousand in the
previous week. I think the thing that's more important, however,
(04:30):
is the steady rise in continuing claims as workers who
are looking for new employment find it more difficult to
get job offers. And I think that a part of
that is that businesses remain pretty tentative about increasing headcount
in a period of economic policy uncertainty.
Speaker 2 (04:48):
And one of the data points we got last week
was corporate profits in this first quarter, and if they're
not making as much money, they're simply just not going
to hire more people, are they.
Speaker 6 (04:58):
That's right, with less profits going to see slower expansion plans.
Slower expansion plans mean less hiring, and to your point,
that's going to result in widening cracks in the labor market.
Speaker 2 (05:08):
And we've seen a couple of big layoffs announced Microsoft
sixty five hundred workers, three percent of its workforce, match
dot com. I mean, these are very different kinds of
companies thirteen percent of its staff Intel that's a big
twenty percent. They're planning, not all at once. It's going
to be gradual. A lot of this is attrition, but
you added up that's a lot of people who won't
(05:29):
be getting paychecks.
Speaker 6 (05:30):
That's right. I think that the name of the game, though,
is whether this is going to be end mass layoffs
or head count reduction through attrition. The latter is of
course going to be less shocking, less significant. It's going
to result in a less material disruption to growth. If
we end up seeing swift layoffs, that could be enough
for the FED to resume rate cuts right now. Given
(05:52):
the outlook for inflation, we think that the FED is
going to remain on hold until the fourth quarter, but
we do expect the FED to resume cuts because of
that labor market.
Speaker 2 (06:01):
The main jobs report out this Friday ahead of Wall
Street's opening bell our. Thanks to Stuart paul Us, economist
with Bloomberg Economics, we turned out to Apple, the three
trillion dollar tech giant that's facing some unprecedented challenges, including
being way behind rivals in AI, pressure from the White
House about where it makes the iPhone, and seeing open
(06:21):
Ai team up with its legendary former design guru on
a family of devices with AI at their core. How
is Apple responding? What does this mean for Tim cook Well?
For more, we're joined by Mark German, Bloomberg News Managing
editor for Global Consumer Tech.
Speaker 5 (06:38):
Mark.
Speaker 2 (06:39):
That was a blockbuster announcement that moved by chat gpt
A maker open Ai acquiring the AI device maker co
founded by Johnny Ive, the man who designed the iPhone,
the iPad, the iPod and other devices. What does Johnny
Ive mean him and his company and what does this
mean for Apple.
Speaker 7 (06:57):
It's pretty remarkable, isn't it. This is open AI betting
that chat, GPT and artificial intelligence and voice interaction are
again the future of computing and that now is the
time to productize it. An app is quite good, right,
an online service, you know, that's meaningful, But having your
own hardware, your own products that people could buy to
(07:19):
leverage this technology is critical in order to take the
next step. You know. I look at the current state
of generative AI as pretty much similar to the touchscreen
twenty years ago if you really think about it, The iPhone,
the iPad, smartphones and tablets from other manufacturers, those are
basically productizations of a touchscreen. Right now, what open ai
(07:41):
is working on with Johnny Ive is the productization of
generative AI. My belief is that they're eventually going to
roll out a necklace, right, a necklace with microphones, speakers,
cameras and other technology so you can go about your
day and interact with chat, GPT and other AI features
and so voice saying that's going to be the future
(08:03):
voice activated always on AI companion that you wear around
your neck or other parts of your body to interact
with and use throughout your day. Now they see it
as secondary to a phone, right, You're still going to
use a phone to watch video, still going to use
a phone to play games, maybe still use a phone
to make well phone calls, but forgetting a lot of
(08:25):
other stuff done, whether that's asking questions, whether that's sending messages,
whether that's booking a movie or doing a restaurant reservation
or looking up something. Throughout your day, You're gonna do
that with that pendant around your neck. And I think
they see that as the future and the phone eventually
transitioning into that type of product.
Speaker 2 (08:46):
And now they have taught by day I mean Sam
Altman of open Ai and Johnny Ive a reference to
a family of devices, so not just a necklace. Could
they put out their own phone as well.
Speaker 7 (08:59):
I think they're going to start with the necklace, and
then at some point you're going to have a home
companion device, so something that you would put on your
desk to use alongside your iPad or your laptop or
what have you, right, something more ambient than that's just
around your neck, something that as you walk throughout your
home you would have access to. And eventually maybe there
(09:21):
will be a pocketable device, maybe there will be a
product with a screen, but I think that's that's further off,
and I doubt they've done any conceptualization on that to
this point.
Speaker 2 (09:30):
So it's a game changer. It's not glasses, it's not
a phone. This is a whole new category.
Speaker 7 (09:37):
It's a whole new category, a whole new type of product.
And this is their bet. I mean, that's what Johnny
I've is known for right new major product categories and
having the right people, having the right design sensibilities for it.
And so he's the perfect person. Well he's probably the
only person who could successfully. You know, other people have
tried it, but they haven't been successful. But if you're
(09:58):
betting on someone who could do this successfully, it is I've.
Speaker 2 (10:02):
And are you what kind of timeline do you see
for this device?
Speaker 7 (10:05):
What they're telling me is they're going to introduce the
products some point next year. I wouldn't anticipate, given the
economics of manufacturing, given the time it takes to produce
these things, given the fit and finish that I've is
known for, Given basically where we're at with chat Shept
and the quality, probably one another year in the oven
(10:26):
to make sure it's up to stuff for a hardware
product that people are going to pay, you know, hard
cash for I wouldn't anticipate a release before twenty seven.
Speaker 2 (10:35):
Okay, all right, so we have we have some time
until then. Let's talk about some of the other challenges
facing Apple, like the twenty five percent tariff threats from
President Trump on iPhones sold in the US but made overseas.
I mean, if Trump is able to follow through, what
does that mean for iPhone buyers and for Apple?
Speaker 7 (10:55):
Well, it's a big if that if this ends up happening, Right,
we've already seen the news of global organizations deeming the
tariffs illegal. We know that Trump, Tim Cook and other
CEOs of smartphone manufacturers are going to have conversations. We
know that Trump in the past has shown a willingness
(11:18):
or even a strong willingness to make concessions for certain
executives and for certain companies. So let's assume, right that
this does happen, right, because I'm not sure it will,
but let's assume this does happen. Twenty five percent a
small price to pay for Apple when they were looking
at north one hundred percent tariffs on the original setup
related to the Chinese tariffs. But I don't think that
(11:40):
threatening a twenty five percent tariff is going to accomplish
much for Trump. His goal is to force them via
the threat of a tariff, to move production to the US.
First of all, the time it would take to move
production to the US is a decade long, so it's
not going to happen even in the course of the
rest of Trump's three years in office, right, right, So
(12:03):
that's one two tariff, that cost increase that's less than
the cost increase or the operational resources necessary that would
be incurred for a move to the US. So the
twenty five percent doesn't accomplish what Trump wants. It's basically
just a penalty on Apple for not being able to
(12:23):
move to the US. And if he wants to do
a penalty on Apple for not being able to move
to the US, that's up to him. That's his probative.
Speaker 5 (12:30):
Right.
Speaker 7 (12:30):
Apple probably won't love it. The consumers are gonna have
to pay more, aren't going to love it. But he's
going to do whatever he wants it. But it's simply
not going to accomplish the goal he has in place.
Speaker 2 (12:40):
Our thanks to Mark German, Bloomberg News Managing editor for
Global Consumer Tech. Coming up on Bloomberg day Break, weekend,
we'll look at whether the ECB can help europe seas
It's golden opportunity. I'm Tom Busby and this is Bloomberg.
(13:05):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we look ahead to trade data this week from Vietnam.
But first, policymakers in Frankfurt choosing whether to cut, hike
or maintain interest rates. As the European Central Bank undergoes
its quarterly economic review this week, how will the Governing
(13:27):
Council respond to the moving targets of inflation and macroeconomic circumstances. Well,
for more, let's get to London and bring in Bloomberg
Daybreak europe Banker Caroline Hepgar, Tom, it's.
Speaker 3 (13:38):
Not really shaping up to be a relaxing European summer
for Christine Lagarde and her colleagues at the European Central Bank.
If a widely expected eighth successive twenty five basis point
rate cut is passed in the coming days, it will
mean that the deposit rate will have been cut in
half over the past year to two percent. That's as
(14:00):
factions of the ECB's governing Council disagree on how low
is too low when it comes to borrowing costs, and
with growing pressure on EU US trade negotiations to consider
and uncertainty about US tariffs, ECB officials have a lot
to consider. If they play their cards rise, Europe could
(14:20):
be well placed to take advantage of an opportunity presented
by the current geopolitical context. That's according to Karen Ward,
who is EMEA Chief market Strategist at JP Morgan Asset Management.
Speaker 8 (14:34):
The US has had the world's capital flowing to it
for the last fifteen years in abundance. It's been a
huge part of why they've been able to grow, while
their companies have been able to grow, why governments have
been spending a lot more in the US than we
have here in Europe. So are there are big upsides
to having that abundance of capital?
Speaker 9 (14:54):
I mean a lot will depend on the USU urref negotiations,
which we'll talk about, say, but it is now the
moment to be invested in European markets Or are there
too many question marks?
Speaker 8 (15:06):
I've been saying since we came into the year, we
had a situation where the US was believed to be
exceptional and Donald Trump was going to further exacerbate that exceptionalism.
Expectations on the US were too high, expectations on Europe
were too low.
Speaker 3 (15:22):
That was JP Morgan Asset Management's Karen Ward speaking to
Bloomberg's Farcy in Laqwab. So, how can Europe's central bankers
prime the region to grasp hold of what could be
a fleeting chance to access more of the world's capital
And how important a role will interest rates play in
the equation? It's something I've been discussing with Bloomberg Economics
(15:44):
is senior Euro Area economist David Powell.
Speaker 5 (15:47):
Well, if we look at what most of the members
of the Government Council have said recently, they all think
that the impact of the US tariffs and the year
area is going to be disinflation areas. It's going to
lower inflation pressures as cheaper goods come in from China
and weaker demand ways on the economy. So as a whole,
(16:08):
they're pretty much all in favor of a cut. We
don't have complete agreement on that. We never knew. We've
already heard from the ECB's most hawkish member, the governor
of the Central Bank of Austria that he's not in
favor of a cut this month, but he's really an outlier.
The majority of the people will go ahead and vote
for that cut.
Speaker 3 (16:26):
And so we're also do to receive some Eurozone economic
data in the next few days. How do you think
that is going to affect decision making?
Speaker 5 (16:34):
Well, really, what the ECB is doing right now, it's
kind of looking forward to what the impact of these
tariffs will be. When we look at the latest economic
data coming out of the year Area, in particular to
the survey components that relate to exports, they're all holding
up pretty well. And basically what I think most people
(16:56):
think is happening is that American businesses and consumers are
front running this ninety day pause, so they're wanting to
bring all these exports into America before that ninety day
pause ends in July and they potentially face higher tariffs.
So things look good now the data is generally holding up,
but the ECB is going to be more forward looking
and be thinking about, well, what happens when this resilience
(17:20):
comes to an end. That's going to be the focus
of their discussion.
Speaker 3 (17:23):
I mean, there's even more uncertainty about the US tariffs
than ever before now given the recent US court decision.
But there remains that question for the Central Bank about
whether it will end up having to step in at
some point, let's say, if talks fall through, or if
at some point the tariffs from the US actually do
hit Europe even more severely, about whether the Central Bank
(17:46):
will then have a bigger role. I'll have to step
in even.
Speaker 5 (17:49):
If you put US teriff societe. The Central Bank is
in an environment where it can reduce borrowing costs. When
you look at the latest data on cost pressure, it's
all coming down in the un area. In particular, the
ECB's official time series and negotiated wages slowed very sharply
in the first quarter. They also have an experimental wage
(18:09):
tracker which shows wages remaining more subdued later in the year.
So the inflation problem that the area was facing over
the past couple of years is really no longer a problems.
Even the terriff issue aside, that's not a huge problem
right now. They can cut and then looking beyond that
is the impact of the tariffs, and that could determine
(18:32):
more easing later in the year, but in all likelihood
they're going to want to see, given all the uncertainty,
what actually happens, so they're probably not going to rush
cut meeting after meeting. They probably do something more like
moving at a quarterly pace to wait and see what
actually comes out of the US given all that uncertainty
that you mentioned.
Speaker 3 (18:48):
In terms of other things that may affect the euzone
again as a kind of consequence of the tariffs China,
and you know there's been a worry about perhaps more
different disinflation being sported from China into the EU. Is
that amongst the considerations at the.
Speaker 5 (19:05):
Moment definitely will be There are basically three big ways
in which this terriff issue is going to impact your
area inflation to the downside. That is, one, cheaper goods
which are no longer going to America likely to come
to the Euro Area wider EU from China. We have
(19:27):
estimated that could take about zero point four percentage point
off inflation each year. On top of that, oil prices
are down and that's also another disinflationary force, and also
just demand will be weaker so as exports in all
likelihoods slow in the second half of the year, there
won't be as much there won't be as much demand
(19:47):
for labor or for products from the Euro Area from abroad.
Speaker 3 (19:53):
How close do you think we are then, and how
close to economists think we are to the neutral rate
in Europe?
Speaker 5 (19:59):
Well, we're pretty close to that. Most people say it's
about two percent, and that's where we're going to be
after this cut in June. However, we already know that
the ECB is focusing much less on this concept of
the neutral rate than they previously were. At the last
press conference in April, the ECB removed from its statement
this longstanding state incentence that have been focused on about
(20:23):
how restrictive monetary policy is, and the Guard elaborated on
that in the press conference, saying the neutral policy rate
is a concept for a world without shocks, and it's
certainly not the world we are living in.
Speaker 3 (20:34):
The thing is the ECB President Christina Guard sees an
opportunity in those shocks, in the sense that an opportunity
for the Euro maybe to become a stronger reserve currency
versus the dollar. Is the scope maybe for policy makers
also to be thinking about the Euro. Obviously it's not
in their mandate, but do you think that they'll be
thinking about this? What do you make of the ECB
(20:56):
President Christina Guard's comments.
Speaker 5 (20:58):
The Euro has been around for new thirty years now,
and almost that entire time, policymakers in Europe, whether they
be heads of stage or people at the European Union
or people at the European Central Bank, have been playing
up that the Euro could be a secondary reserve currency,
displacing some demand for the US dollar as a reserve currency. However,
(21:20):
it's never really taken on that role because it has
been plagued by number of problems throughout the years. Obviously,
there was the Euro crisis, which scared a lot of
international investors away, and some of those problems that arose
at that time, the lack of a banking union, the
lack of a fiscal union, they persist. And if there
were some big problem again, as there inevitably will be,
(21:41):
because we know from history that financial crisis pop up
from time to time, I think questions still remain about
how exactly the Euro would perform in that environment. Although
the architecture of the monetary union was strengthened significantly after
the last big crisis in twenty twelve, but.
Speaker 3 (21:59):
It goes the question also of the power the strength
of Europe as an economic block, doesn't it, And about
economic growth. You know, the strength of the euro would
be based on the strength of Europe sort of economically,
wouldn't it. That's always a relative game obviously, But how
do you think growth is going now for Europe? We've
(22:20):
got this kind of more disinflationary environment, a lot of
money being rolled out in different countries for more spending
on defense and infrastructure. How do you think the ECB
is thinking about economic growth in the block?
Speaker 5 (22:32):
Well, when you take a step back and look at
growth in the EU Area since the global financial christ
relative to the US, the Urrea has lagged considerably, particularly
in the last few years after the ECB began tightening
the your area has hardly grown and the US economy
has really kind of been then moving forward at full speed.
So the Urrea has fallen behind considerably over the last decade.
(22:56):
There's a lot of ground to make up, and that's
going to come through higher levels of productivity. We had
Mario Draghi release of report earlier this year on his
recommendations for how the EU Area could achieve that none
of those things are very easy to implement. I mean,
increasing the rate of growth is a difficult game and
(23:16):
there's a lot of work to be done before we
see the kind of results that we've seen in America.
Speaker 3 (23:21):
But on the flip side, does that mean no recession?
Speaker 7 (23:23):
Then?
Speaker 3 (23:24):
For Europe? In what is this kind of very volatile
trading world right now, very volatile geopolitical world. How do
you see Europe currently?
Speaker 5 (23:34):
Our own forecast as well as those of the ECB,
are that the economy will economic growth was slow as
a result of this trade war, and it will be
a shock, but it's unlikely to be large enough to
push the EU area into recession at this stage.
Speaker 3 (23:49):
Okay, So then how does the ECB's situation stack up
versus other central banks? Again, we're watching the Federal Reserve closely.
Given that the trade picture in the US markets have
really paused and slowed down the pace at which they
think the Fed's going to cut. How does that influence
the ECB.
Speaker 1 (24:07):
I think you.
Speaker 5 (24:08):
Generally put central banks around the world into two categories,
and one only has the Federal Reserve, and they're having
to worry about the impact GDP of the tariffs as
well as on inflation because this will directly increase prices
in the United States and just about every other central
bank in the world is more focused on the impact
on the economy less so on inflation. Of course, there
(24:30):
could be some inflationary pressures if they were retaliatory measures
put in place, but they're really focused on the damage
to the economy. That is particularly for countries with large
trade surpluses that depend upon foreign demand, in particular US
demand to keep their economies going through the external sector
(24:50):
through those exports to America.
Speaker 3 (24:52):
Is there anything that we should be thinking about, anything
unusual that you think is going to pop up? I
have to ask this question now because I think so
many things moving so rapidly currently. Is there something that
we should think about in the days ahead, you know,
when it comes to the ECB meeting, maybe that our
audiences doesn't have on their radar.
Speaker 5 (25:11):
I think what I'll be looking for. I'm not really
expecting this, but this is something that I'll be looking for.
Is is the ECB looking to take out insurance by
being extra duvish, meaning that do they want to kind
of prepare the market for further easing later in the
year just in case things get much worse? We know
already that you know, well, essentially, as I mentioned before,
(25:31):
they will kind of be it neutral after this, but
how much are they going to look forward to further cuts?
Speaker 3 (25:36):
My thanks to Bloomberg's David Powell for speaking to me,
and of course we'll have full coverage of the ECB
rate decision from Frankfurt here on Bloomberg Radio. I'm Caroline
Hepgar in London and you can catch us every weekday
morning for Bloomberg Daybreak. You're at beginning at six am
in London. That's one am on Wall Street.
Speaker 2 (25:53):
Tom, Thank you, Caroline, and coming up on Bloomberg Daybreak
weekend to look into how Vietnam's economy has been impacted
by tariffs. I'm Tom Busby and this is Bloomberg. This
(26:15):
is Bloomberg day Break Weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Vietnam is under the threat
of aggressive tariffs from the Trump administration. The levees on
hold for now pending trade talks, but Vietnam's economy is
still being affected. For a closer look, let's get to
Bloomberg's Doug Chrisner host of the Bloomberg Asia podcast.
Speaker 4 (26:37):
Tom there is no greater risk for economies in Asia
than US trade policy.
Speaker 5 (26:42):
Now.
Speaker 4 (26:43):
The Trump administration has been using the leverage of tariffs
in attempting to negotiate new trade agreements as a way
of helping to reduce America's many trade deficits. Not to
be fair, there is a big question mark now over
the legality of these levees. In the last week, the
Court of International Trade deemed the tariffs illegal and it
(27:03):
blocked them. Now the Trump administration is appealing this decision
and the case may ultimately be decided by the US
Supreme Court. But before this development, US trading partners were
lining up and many were in the midst of trade
negotiations with the administration as a way of getting tariff relief.
And among the countries at the table Vietnam. In the
(27:24):
coming week we will get trade data for this country,
so we thought it would be a good time to
look at Vietnam's overall economy, the impact that tariffs are having,
as well as the trade relationship between Hanoi and Washington.
I'm joined now by Bloomberg's Katya Dmitrieva. Katya is Asia
economy reporter, She joins us from Hong Kong. Good of
(27:44):
you to make time to chat with me about this. Recently,
I know that Vietnam and the US concluded a second
round of trade negotiations. Do we have a sense of
how well the conversation is progressing well?
Speaker 10 (27:57):
About the same sense that we have with any of
the trade talks at this point. We know that Vietnam
has made in fact, it was one of the first
countries to make concessions and offers to the US. So
even before trade negotiations started, they were talking about buying
(28:17):
more Boeing airplanes or trying to find a way to
sort of narrow the trade gap, which of course is
the biggest focus for the Trump administration is that is
that trade deficit that they have with Vietnam, and Vietnam
has its biggest trade surplus with the US. So there
was already this sense that Vietnam was able to sort
(28:40):
of bend over backwards to secure a good bilateral deal
with the US because the economy depends so much on
the States. The most recent negotiations were a bit tricky because,
of course, going into them as they began, Vietnamese officials
we're talking about how Trump's tariffs were seen is unreasonable
(29:01):
and for a kind of relatively small economy like Vietnam,
a forty six percent tariff would be absolutely punishing and
seem to catch leadership off guard. So there hasn't been
a deal yet, like the UK, like China, there has
not been anything announced even temporarily with Vietnam, and of
(29:23):
course we'll have to wait and see how those negotiations continued.
Speaker 4 (29:27):
Vietnam has been one of Asia's fastest growing economies. It
was only a few years ago that many on the
equity side that put money to work in Asia referred
to Vietnam as still being a frontier economy. And I
think that the US recognizes Vietnam as a non market economy,
does that necessarily put Vietnam at a disadvantage in these
(29:48):
trade negotiations.
Speaker 10 (29:49):
It's definitely coming to the trade negotiations from a position
that's quite different from the EU or China, for example.
It is a smaller economy. It has left ability to
push back on Trump in the way of seeing, for example,
China pushing back on the US and these talks and
sort of making marking out concessions and getting tariffs moved
(30:13):
down substantially, at least temporarily, so it's a smaller economy,
it has fewer levers, and frankly, it depends a lot
on the US. So about thirty percent of its total
GDP is just US exports or exports to the US.
So it's one of the most among Southeast Asian economies,
(30:36):
but also globally. And so if you're in that position
as a nation, you want to do everything in your
power to try to fix that as soon as possible,
even if it means potentially buying more goods, kind of
asking companies to extend themselves in that way, or buying
things maybe that the country doesn't necessarily need, or making
(30:56):
concessions when it comes to their own trade protectionism.
Speaker 4 (31:00):
Many supply chains, as you well know, were reconfigured during
the first Trumpet administration as a way of trying to
reduce exposure to China that seemed to accelerate during the
pandemic Vietnam. I think it's fair to say was a
big beneficiary during that period, and from what I've read,
the country has been under a bit of scrutiny here
to prove that its exports are not actually made in China,
(31:22):
or at least that part of the supply chain is
not strongly linked in a way that kind of mask
the fact that these products essentially are originating in China.
Is that fair?
Speaker 10 (31:34):
Yeah, And this is why the trade data next week
will be so interesting. Vietnam has become a hub for companies,
but I think fair to say for Chinese companies in particular.
During the twenty eighteen twenty nineteen trade war, you had
factories all along the supply chain casting around looking for
(31:56):
places to start producing goods that were not in China
that we're not going to be targeted so heavily and
explicitly by the US, which is the biggest customer. So
they went to a number of places, but Vietnam ended
up being a big hub. And so the ties between
the two countries, between China and Vietnam are quite close,
(32:16):
with exchange of goods and materials and people as well workers.
So there was a growing sense in the US that
this kind of relationship would or could start to bypass
those US rules, and in some cases they did.
Speaker 7 (32:33):
So.
Speaker 10 (32:33):
There was an example of Linoleum flooring that there was
an investigation into in the US and they found that
a lot of the components were actually coming from China.
Because these items have to undergo it's called substantial transformation
in this country in a second country before being shipped out.
You can't just legally, at least in the trade realm,
(32:54):
you can't just ship an item to a second location,
stick a label on it, ship it to the US
and say it's from Vietnam and not China. So there's
sort of a debate about how much of trade is
that is that kind of illegal re routing or transhipment.
Speaker 7 (33:12):
I've seen estimates.
Speaker 10 (33:13):
Anywhere from five to twenty percent, which is a lot
when you think about the flow of trade, but it's
a very difficult to prove. There are limited ways to
sort of target it, even from an administration level. So
that will form an interesting part of the negotiations because
one thing I've been wondering is how are they going
(33:34):
to address that. Will there be sort of more of
an imperative for Vietnam and Vitamese companies to start investigating
this stuff at the factory level, to supply some sort
of documentation or heavier documentation. That's definitely one question in
these talks that might be a bit different from other countries,
and I think the trade data next week, and in fact,
(33:57):
a lot of the figures we're getting next week, as
you say, said, will provide a look at what's happening
in global commerce. Because we had the Libration Day tariffs,
we had the lifting of the Liberation Day tariffs, we
had re routing across and front loading across Asia. We
had last month double digit trade growth from Vietnam as
(34:20):
well as other Southeast Asian economies. So if that's continuing
to roll through, it's positive for Vietnam's economy, which is
aiming for eight percent growth this year, which is pretty
high target even though it's one of the fastest growing
economies in the world. But can they still do that
with this forty six percent tariff threat hanging over them?
(34:41):
And can they do that when increasing trade and this
over reliance on trade is just going to exacerbate this
issue of the trade deficit from Trump's view.
Speaker 4 (34:52):
So recently, Vietnam and France agreed to boost cooperation in
a couple of areas. I think defense security them. It
kind of goes to the area of technology and cybersecurity,
which you don't necessarily think of when you think of Vietnam. First,
can we look at how Hanoi is going about finding
(35:13):
new trade relationships given the tension that exists with the
Trump administration.
Speaker 7 (35:18):
Yeah, it's interesting.
Speaker 10 (35:19):
So Vietnam's leader Tolam recently went on a tour of
Central Asia and Russia, and part of this I think
was aimed at sort of shoring up support diversifying. We
had the Asyon Summit recently in the region, and the
big takeaway from that was countries across the region, from
Cambodia to Vietnam, Malaysia Anddonesia, they need to diversify their sources.
(35:43):
And again, Vietnam is kind of a prime example of this.
It's had such an incredible growth and development story. It's
still a developing economy, but the household incomes and wealth
has the poverty rate has fallen, really mirroring I think
(36:04):
what happened in China during this manufacturing revolution. The question
is now, can the government pivot from that model of
growth to something more a consumer led but also more innovative,
And that's where the technology and the AI comes in.
And the question will be can they do that in
an economy that's still quite controlled and is not necessarily
(36:27):
one that's you know, when you look at the US,
for example, and the export of services, a lot of
that is in the tech sector. It's software, it's development,
it's ingenuity and development. And the question is can Vietnam
do that under its own government system, which is still
quite closed and still quite controlled top down?
Speaker 4 (36:48):
Katya, Before I let you go, I have to ask
about the golf resort that President Trump's real estate company
is intending to build in Vietnam. Can you help me
understand where things at the moment?
Speaker 10 (37:01):
This is such an interesting part of this entire story
because the Trump organization is building a one point five
billion dollar golf resort in the country. It's just outside
of Hanoi, and it's happening at the same time as
these trade negotiations, and the country is desperate to get
a deal with the US, so it's very interesting timing.
(37:24):
And critics have actually pointed out that this process has
been fast tracked in the country. So usually there's a
process in Vietnam for environmental standards, for getting community approval,
and a lot of legal experts have pointed to that
being bypassed or sped through. And this is pretty important
(37:44):
for people who live there because it's a lot of
farmland people, you know, individuals own this land. The fact
that the government could be doing a process or making
this process in a way that they normally wouldn't it
is definitely raising some eyes. There's also, of course, in
ho Chi Minh, there's a skyscraper also part of the
(38:06):
Trump organization that they're trying to build. So there's sort
of this real estate part to this as well, and
of course Trump's connection to all of us.
Speaker 4 (38:14):
It's going to be very interesting to watch. Katya. Thank
you so much for helping us understand more about what's
happening these days in Vietnam as we look ahead to
next week's trade data. Bloomberg's Katya Dmitrieva. Katya is Asia
Economy reporter joining from Hong Kong, and I'm Doug Krisner.
You can catch us weekdays for the Daybreak Asia podcast.
(38:34):
It's available wherever you get your podcast. Tom.
Speaker 2 (38:37):
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Busby. Stay with us top stories and global
business headlines are coming up right now.
Speaker 7 (39:01):
S
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:10):
This is Bloomberg day Break Weekend, our global look at
the top stories in the coming week from our Daybreak
anchors all around the world, and straight ahead on the
program the upcoming May Jobs report in the US how
that could impact FED policy moving forward. I'm Tom Busby
in New York.
Speaker 3 (00:25):
I'm Caroline Hedge in London, where we're asking if the
ECB can help Europe sees its golden opportunity.
Speaker 4 (00:31):
I'm Dot Christner looking ahead to trade data this week
from Vietnam.
Speaker 1 (00:38):
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London,
Sirius XM one twenty one, and around the world on
Bloomberg Radio, dot Com and the Bloomberg Business App.
Speaker 5 (01:02):
Good day to you.
Speaker 2 (01:03):
I'm Tom Busby, and we begin today's program with a
look ahead to the May Jobs Report. Non farm payroll
numbers for May out on Friday eight thirty am. Wall
Street Time Now for more on how those numbers may
impact the FED policy moving forward. And the state of
the US labor market and the economy. We're joined by
Stuart paul, Us, economist with Bloomberg Economics. Stuart, thank you
(01:25):
for being here again. Now, when you look at the
impact of the Trump tariffs, the DOGE cuts, lower corporate profits,
a shrinking US economy, are we starting to see cracks
in the labor market? It was robust for years.
Speaker 6 (01:39):
I think we're just starting to see material cracks, and
we're starting to see the cracks that have been just
minuscule starting to widen. I think that the first labor
market data print that we're going to get next week
or in the coming week is going to be the
number of job openings available in April, and I think
(02:00):
the number of job openings declined all being modestly, just
by about sixty thousand, but that's going to be enough
for the number of workers available, the number of unemployed
workers to exceed the number of job openings for the
first time since the pandemic. So that's the first sign
(02:20):
I think that will really matter for the FED that
there is material slack in the labor market. And then
as we get to the jobs report on Friday, I
think we're going to see a materially slower pace of hiring.
We're estimating just ninety thousand jobs we're added in May.
That's a pretty dramatic slowdown from one hundred and seventy
(02:41):
seven thousand jobs added in April. And it's such a
slow pace that it does not keep up with labor
force or population growth. So we're expecting to see an
uptick in the unemployment rate. It's still going to be
low at four point three percent, but moving in the
wrong direction for the FED.
Speaker 2 (02:58):
That is a big change. Under one hundred thousand ads
is a lot fewer than we saw even a week ago.
Economist who were predicting what has changed in that time.
Speaker 6 (03:08):
The thing that we're seeing in the data when we
look at high frequency data is that there were relatively
few people added in the leisure and hospitality industry. And
going back to your initial point, some of this is
downstream from policy that's coming out of the West Wing.
One of the reasons we think that there were fewer
people added in leisure and hospitality, food service, and accommodation,
(03:30):
for example, is because there's less travel from abroad, and
part of that is retaliation from some of our trading
partners and potential travelers who are canceling their trips in
the spring and early summer travel season.
Speaker 2 (03:46):
Yeah, and not just Canadians, European South Americans. We're seeing
it from all over, big, big decrease in travel.
Speaker 5 (03:54):
All right.
Speaker 2 (03:54):
So now the latest data that we saw also on
jobless claims, are you seeing a pattern there? It held
pretty steady for most of the president's second term, but
I think now we're starting to see things creep up
for it also, long term unemployed. That's a big that's
exactly right.
Speaker 6 (04:10):
For a long time, it was one of the easiest
data prints to forecast initial jobless claims. Two hundred and
twenty thousand a month, no big deal. You wouldn't even
have to look, we wouldn't have to think very hard
about what to expect. But we did see a pretty
swift jump to two hundred and forty thousand in the
previous week. I think the thing that's more important, however,
(04:30):
is the steady rise in continuing claims as workers who
are looking for new employment find it more difficult to
get job offers. And I think that a part of
that is that businesses remain pretty tentative about increasing headcount
in a period of economic policy uncertainty.
Speaker 2 (04:48):
And one of the data points we got last week
was corporate profits in this first quarter, and if they're
not making as much money, they're simply just not going
to hire more people, are they.
Speaker 6 (04:58):
That's right, with less profits going to see slower expansion plans.
Slower expansion plans mean less hiring, and to your point,
that's going to result in widening cracks in the labor market.
Speaker 2 (05:08):
And we've seen a couple of big layoffs announced Microsoft
sixty five hundred workers, three percent of its workforce, match
dot com. I mean, these are very different kinds of
companies thirteen percent of its staff Intel that's a big
twenty percent. They're planning, not all at once. It's going
to be gradual. A lot of this is attrition, but
you added up that's a lot of people who won't
(05:29):
be getting paychecks.
Speaker 6 (05:30):
That's right. I think that the name of the game, though,
is whether this is going to be end mass layoffs
or head count reduction through attrition. The latter is of
course going to be less shocking, less significant. It's going
to result in a less material disruption to growth. If
we end up seeing swift layoffs, that could be enough
for the FED to resume rate cuts right now. Given
(05:52):
the outlook for inflation, we think that the FED is
going to remain on hold until the fourth quarter, but
we do expect the FED to resume cuts because of
that labor market.
Speaker 2 (06:01):
The main jobs report out this Friday ahead of Wall
Street's opening bell our. Thanks to Stuart paul Us, economist
with Bloomberg Economics, we turned out to Apple, the three
trillion dollar tech giant that's facing some unprecedented challenges, including
being way behind rivals in AI, pressure from the White
House about where it makes the iPhone, and seeing open
(06:21):
Ai team up with its legendary former design guru on
a family of devices with AI at their core. How
is Apple responding? What does this mean for Tim cook Well?
For more, we're joined by Mark German, Bloomberg News Managing
editor for Global Consumer Tech.
Speaker 5 (06:38):
Mark.
Speaker 2 (06:39):
That was a blockbuster announcement that moved by chat gpt
A maker open Ai acquiring the AI device maker co
founded by Johnny Ive, the man who designed the iPhone,
the iPad, the iPod and other devices. What does Johnny
Ive mean him and his company and what does this
mean for Apple.
Speaker 7 (06:57):
It's pretty remarkable, isn't it. This is open AI betting
that chat, GPT and artificial intelligence and voice interaction are
again the future of computing and that now is the
time to productize it. An app is quite good, right,
an online service, you know, that's meaningful, But having your
own hardware, your own products that people could buy to
(07:19):
leverage this technology is critical in order to take the
next step. You know. I look at the current state
of generative AI as pretty much similar to the touchscreen
twenty years ago if you really think about it, The iPhone,
the iPad, smartphones and tablets from other manufacturers, those are
basically productizations of a touchscreen. Right now, what open ai
(07:41):
is working on with Johnny Ive is the productization of
generative AI. My belief is that they're eventually going to
roll out a necklace, right, a necklace with microphones, speakers,
cameras and other technology so you can go about your
day and interact with chat, GPT and other AI features
and so voice saying that's going to be the future
(08:03):
voice activated always on AI companion that you wear around
your neck or other parts of your body to interact
with and use throughout your day. Now they see it
as secondary to a phone, right, You're still going to
use a phone to watch video, still going to use
a phone to play games, maybe still use a phone
to make well phone calls, but forgetting a lot of
(08:25):
other stuff done, whether that's asking questions, whether that's sending messages,
whether that's booking a movie or doing a restaurant reservation
or looking up something. Throughout your day, You're gonna do
that with that pendant around your neck. And I think
they see that as the future and the phone eventually
transitioning into that type of product.
Speaker 2 (08:46):
And now they have taught by day I mean Sam
Altman of open Ai and Johnny Ive a reference to
a family of devices, so not just a necklace. Could
they put out their own phone as well.
Speaker 7 (08:59):
I think they're going to start with the necklace, and
then at some point you're going to have a home
companion device, so something that you would put on your
desk to use alongside your iPad or your laptop or
what have you, right, something more ambient than that's just
around your neck, something that as you walk throughout your
home you would have access to. And eventually maybe there
(09:21):
will be a pocketable device, maybe there will be a
product with a screen, but I think that's that's further off,
and I doubt they've done any conceptualization on that to
this point.
Speaker 2 (09:30):
So it's a game changer. It's not glasses, it's not
a phone. This is a whole new category.
Speaker 7 (09:37):
It's a whole new category, a whole new type of product.
And this is their bet. I mean, that's what Johnny
I've is known for right new major product categories and
having the right people, having the right design sensibilities for it.
And so he's the perfect person. Well he's probably the
only person who could successfully. You know, other people have
tried it, but they haven't been successful. But if you're
(09:58):
betting on someone who could do this successfully, it is I've.
Speaker 2 (10:02):
And are you what kind of timeline do you see
for this device?
Speaker 7 (10:05):
What they're telling me is they're going to introduce the
products some point next year. I wouldn't anticipate, given the
economics of manufacturing, given the time it takes to produce
these things, given the fit and finish that I've is
known for, Given basically where we're at with chat Shept
and the quality, probably one another year in the oven
(10:26):
to make sure it's up to stuff for a hardware
product that people are going to pay, you know, hard
cash for I wouldn't anticipate a release before twenty seven.
Speaker 2 (10:35):
Okay, all right, so we have we have some time
until then. Let's talk about some of the other challenges
facing Apple, like the twenty five percent tariff threats from
President Trump on iPhones sold in the US but made overseas.
I mean, if Trump is able to follow through, what
does that mean for iPhone buyers and for Apple?
Speaker 7 (10:55):
Well, it's a big if that if this ends up happening, Right,
we've already seen the news of global organizations deeming the
tariffs illegal. We know that Trump, Tim Cook and other
CEOs of smartphone manufacturers are going to have conversations. We
know that Trump in the past has shown a willingness
(11:18):
or even a strong willingness to make concessions for certain
executives and for certain companies. So let's assume, right that
this does happen, right, because I'm not sure it will,
but let's assume this does happen. Twenty five percent a
small price to pay for Apple when they were looking
at north one hundred percent tariffs on the original setup
related to the Chinese tariffs. But I don't think that
(11:40):
threatening a twenty five percent tariff is going to accomplish
much for Trump. His goal is to force them via
the threat of a tariff, to move production to the US.
First of all, the time it would take to move
production to the US is a decade long, so it's
not going to happen even in the course of the
rest of Trump's three years in office, right, right, So
(12:03):
that's one two tariff, that cost increase that's less than
the cost increase or the operational resources necessary that would
be incurred for a move to the US. So the
twenty five percent doesn't accomplish what Trump wants. It's basically
just a penalty on Apple for not being able to
(12:23):
move to the US. And if he wants to do
a penalty on Apple for not being able to move
to the US, that's up to him. That's his probative.
Speaker 5 (12:30):
Right.
Speaker 7 (12:30):
Apple probably won't love it. The consumers are gonna have
to pay more, aren't going to love it. But he's
going to do whatever he wants it. But it's simply
not going to accomplish the goal he has in place.
Speaker 2 (12:40):
Our thanks to Mark German, Bloomberg News Managing editor for
Global Consumer Tech. Coming up on Bloomberg day Break, weekend,
we'll look at whether the ECB can help europe seas
It's golden opportunity. I'm Tom Busby and this is Bloomberg.
(13:05):
This is Bloomberg day Break weekend, our global look ahead
at the top stories for investors in the coming week.
I'm Tom Busby in New York. Up later in our program,
we look ahead to trade data this week from Vietnam.
But first, policymakers in Frankfurt choosing whether to cut, hike
or maintain interest rates. As the European Central Bank undergoes
its quarterly economic review this week, how will the Governing
(13:27):
Council respond to the moving targets of inflation and macroeconomic circumstances. Well,
for more, let's get to London and bring in Bloomberg
Daybreak europe Banker Caroline Hepgar, Tom, it's.
Speaker 3 (13:38):
Not really shaping up to be a relaxing European summer
for Christine Lagarde and her colleagues at the European Central Bank.
If a widely expected eighth successive twenty five basis point
rate cut is passed in the coming days, it will
mean that the deposit rate will have been cut in
half over the past year to two percent. That's as
(14:00):
factions of the ECB's governing Council disagree on how low
is too low when it comes to borrowing costs, and
with growing pressure on EU US trade negotiations to consider
and uncertainty about US tariffs, ECB officials have a lot
to consider. If they play their cards rise, Europe could
(14:20):
be well placed to take advantage of an opportunity presented
by the current geopolitical context. That's according to Karen Ward,
who is EMEA Chief market Strategist at JP Morgan Asset Management.
Speaker 8 (14:34):
The US has had the world's capital flowing to it
for the last fifteen years in abundance. It's been a
huge part of why they've been able to grow, while
their companies have been able to grow, why governments have
been spending a lot more in the US than we
have here in Europe. So are there are big upsides
to having that abundance of capital?
Speaker 9 (14:54):
I mean a lot will depend on the USU urref negotiations,
which we'll talk about, say, but it is now the
moment to be invested in European markets Or are there
too many question marks?
Speaker 8 (15:06):
I've been saying since we came into the year, we
had a situation where the US was believed to be
exceptional and Donald Trump was going to further exacerbate that exceptionalism.
Expectations on the US were too high, expectations on Europe
were too low.
Speaker 3 (15:22):
That was JP Morgan Asset Management's Karen Ward speaking to
Bloomberg's Farcy in Laqwab. So, how can Europe's central bankers
prime the region to grasp hold of what could be
a fleeting chance to access more of the world's capital
And how important a role will interest rates play in
the equation? It's something I've been discussing with Bloomberg Economics
(15:44):
is senior Euro Area economist David Powell.
Speaker 5 (15:47):
Well, if we look at what most of the members
of the Government Council have said recently, they all think
that the impact of the US tariffs and the year
area is going to be disinflation areas. It's going to
lower inflation pressures as cheaper goods come in from China
and weaker demand ways on the economy. So as a whole,
(16:08):
they're pretty much all in favor of a cut. We
don't have complete agreement on that. We never knew. We've
already heard from the ECB's most hawkish member, the governor
of the Central Bank of Austria that he's not in
favor of a cut this month, but he's really an outlier.
The majority of the people will go ahead and vote
for that cut.
Speaker 3 (16:26):
And so we're also do to receive some Eurozone economic
data in the next few days. How do you think
that is going to affect decision making?
Speaker 5 (16:34):
Well, really, what the ECB is doing right now, it's
kind of looking forward to what the impact of these
tariffs will be. When we look at the latest economic
data coming out of the year Area, in particular to
the survey components that relate to exports, they're all holding
up pretty well. And basically what I think most people
(16:56):
think is happening is that American businesses and consumers are
front running this ninety day pause, so they're wanting to
bring all these exports into America before that ninety day
pause ends in July and they potentially face higher tariffs.
So things look good now the data is generally holding up,
but the ECB is going to be more forward looking
and be thinking about, well, what happens when this resilience
(17:20):
comes to an end. That's going to be the focus
of their discussion.
Speaker 3 (17:23):
I mean, there's even more uncertainty about the US tariffs
than ever before now given the recent US court decision.
But there remains that question for the Central Bank about
whether it will end up having to step in at
some point, let's say, if talks fall through, or if
at some point the tariffs from the US actually do
hit Europe even more severely, about whether the Central Bank
(17:46):
will then have a bigger role. I'll have to step
in even.
Speaker 5 (17:49):
If you put US teriff societe. The Central Bank is
in an environment where it can reduce borrowing costs. When
you look at the latest data on cost pressure, it's
all coming down in the un area. In particular, the
ECB's official time series and negotiated wages slowed very sharply
in the first quarter. They also have an experimental wage
(18:09):
tracker which shows wages remaining more subdued later in the year.
So the inflation problem that the area was facing over
the past couple of years is really no longer a problems.
Even the terriff issue aside, that's not a huge problem
right now. They can cut and then looking beyond that
is the impact of the tariffs, and that could determine
(18:32):
more easing later in the year, but in all likelihood
they're going to want to see, given all the uncertainty,
what actually happens, so they're probably not going to rush
cut meeting after meeting. They probably do something more like
moving at a quarterly pace to wait and see what
actually comes out of the US given all that uncertainty
that you mentioned.
Speaker 3 (18:48):
In terms of other things that may affect the euzone
again as a kind of consequence of the tariffs China,
and you know there's been a worry about perhaps more
different disinflation being sported from China into the EU. Is
that amongst the considerations at the.
Speaker 5 (19:05):
Moment definitely will be There are basically three big ways
in which this terriff issue is going to impact your
area inflation to the downside. That is, one, cheaper goods
which are no longer going to America likely to come
to the Euro Area wider EU from China. We have
(19:27):
estimated that could take about zero point four percentage point
off inflation each year. On top of that, oil prices
are down and that's also another disinflationary force, and also
just demand will be weaker so as exports in all
likelihoods slow in the second half of the year, there
won't be as much there won't be as much demand
(19:47):
for labor or for products from the Euro Area from abroad.
Speaker 3 (19:53):
How close do you think we are then, and how
close to economists think we are to the neutral rate
in Europe?
Speaker 5 (19:59):
Well, we're pretty close to that. Most people say it's
about two percent, and that's where we're going to be
after this cut in June. However, we already know that
the ECB is focusing much less on this concept of
the neutral rate than they previously were. At the last
press conference in April, the ECB removed from its statement
this longstanding state incentence that have been focused on about
(20:23):
how restrictive monetary policy is, and the Guard elaborated on
that in the press conference, saying the neutral policy rate
is a concept for a world without shocks, and it's
certainly not the world we are living in.
Speaker 3 (20:34):
The thing is the ECB President Christina Guard sees an
opportunity in those shocks, in the sense that an opportunity
for the Euro maybe to become a stronger reserve currency
versus the dollar. Is the scope maybe for policy makers
also to be thinking about the Euro. Obviously it's not
in their mandate, but do you think that they'll be
thinking about this? What do you make of the ECB
(20:56):
President Christina Guard's comments.
Speaker 5 (20:58):
The Euro has been around for new thirty years now,
and almost that entire time, policymakers in Europe, whether they
be heads of stage or people at the European Union
or people at the European Central Bank, have been playing
up that the Euro could be a secondary reserve currency,
displacing some demand for the US dollar as a reserve currency. However,
(21:20):
it's never really taken on that role because it has
been plagued by number of problems throughout the years. Obviously,
there was the Euro crisis, which scared a lot of
international investors away, and some of those problems that arose
at that time, the lack of a banking union, the
lack of a fiscal union, they persist. And if there
were some big problem again, as there inevitably will be,
(21:41):
because we know from history that financial crisis pop up
from time to time, I think questions still remain about
how exactly the Euro would perform in that environment. Although
the architecture of the monetary union was strengthened significantly after
the last big crisis in twenty twelve, but.
Speaker 3 (21:59):
It goes the question also of the power the strength
of Europe as an economic block, doesn't it, And about
economic growth. You know, the strength of the euro would
be based on the strength of Europe sort of economically,
wouldn't it. That's always a relative game obviously, But how
do you think growth is going now for Europe? We've
(22:20):
got this kind of more disinflationary environment, a lot of
money being rolled out in different countries for more spending
on defense and infrastructure. How do you think the ECB
is thinking about economic growth in the block?
Speaker 5 (22:32):
Well, when you take a step back and look at
growth in the EU Area since the global financial christ
relative to the US, the Urrea has lagged considerably, particularly
in the last few years after the ECB began tightening
the your area has hardly grown and the US economy
has really kind of been then moving forward at full speed.
So the Urrea has fallen behind considerably over the last decade.
(22:56):
There's a lot of ground to make up, and that's
going to come through higher levels of productivity. We had
Mario Draghi release of report earlier this year on his
recommendations for how the EU Area could achieve that none
of those things are very easy to implement. I mean,
increasing the rate of growth is a difficult game and
(23:16):
there's a lot of work to be done before we
see the kind of results that we've seen in America.
Speaker 3 (23:21):
But on the flip side, does that mean no recession?
Speaker 7 (23:23):
Then?
Speaker 3 (23:24):
For Europe? In what is this kind of very volatile
trading world right now, very volatile geopolitical world. How do
you see Europe currently?
Speaker 5 (23:34):
Our own forecast as well as those of the ECB,
are that the economy will economic growth was slow as
a result of this trade war, and it will be
a shock, but it's unlikely to be large enough to
push the EU area into recession at this stage.
Speaker 3 (23:49):
Okay, So then how does the ECB's situation stack up
versus other central banks? Again, we're watching the Federal Reserve closely.
Given that the trade picture in the US markets have
really paused and slowed down the pace at which they
think the Fed's going to cut. How does that influence
the ECB.
Speaker 1 (24:07):
I think you.
Speaker 5 (24:08):
Generally put central banks around the world into two categories,
and one only has the Federal Reserve, and they're having
to worry about the impact GDP of the tariffs as
well as on inflation because this will directly increase prices
in the United States and just about every other central
bank in the world is more focused on the impact
on the economy less so on inflation. Of course, there
(24:30):
could be some inflationary pressures if they were retaliatory measures
put in place, but they're really focused on the damage
to the economy. That is particularly for countries with large
trade surpluses that depend upon foreign demand, in particular US
demand to keep their economies going through the external sector
(24:50):
through those exports to America.
Speaker 3 (24:52):
Is there anything that we should be thinking about, anything
unusual that you think is going to pop up? I
have to ask this question now because I think so
many things moving so rapidly currently. Is there something that
we should think about in the days ahead, you know,
when it comes to the ECB meeting, maybe that our
audiences doesn't have on their radar.
Speaker 5 (25:11):
I think what I'll be looking for. I'm not really
expecting this, but this is something that I'll be looking for.
Is is the ECB looking to take out insurance by
being extra duvish, meaning that do they want to kind
of prepare the market for further easing later in the
year just in case things get much worse? We know
already that you know, well, essentially, as I mentioned before,
(25:31):
they will kind of be it neutral after this, but
how much are they going to look forward to further cuts?
Speaker 3 (25:36):
My thanks to Bloomberg's David Powell for speaking to me,
and of course we'll have full coverage of the ECB
rate decision from Frankfurt here on Bloomberg Radio. I'm Caroline
Hepgar in London and you can catch us every weekday
morning for Bloomberg Daybreak. You're at beginning at six am
in London. That's one am on Wall Street.
Speaker 2 (25:53):
Tom, Thank you, Caroline, and coming up on Bloomberg Daybreak
weekend to look into how Vietnam's economy has been impacted
by tariffs. I'm Tom Busby and this is Bloomberg. This
(26:15):
is Bloomberg day Break Weekend, our global look ahead at
the top stories for investors in the coming week. I'm
Tom Busby in New York. Vietnam is under the threat
of aggressive tariffs from the Trump administration. The levees on
hold for now pending trade talks, but Vietnam's economy is
still being affected. For a closer look, let's get to
Bloomberg's Doug Chrisner host of the Bloomberg Asia podcast.
Speaker 4 (26:37):
Tom there is no greater risk for economies in Asia
than US trade policy.
Speaker 5 (26:42):
Now.
Speaker 4 (26:43):
The Trump administration has been using the leverage of tariffs
in attempting to negotiate new trade agreements as a way
of helping to reduce America's many trade deficits. Not to
be fair, there is a big question mark now over
the legality of these levees. In the last week, the
Court of International Trade deemed the tariffs illegal and it
(27:03):
blocked them. Now the Trump administration is appealing this decision
and the case may ultimately be decided by the US
Supreme Court. But before this development, US trading partners were
lining up and many were in the midst of trade
negotiations with the administration as a way of getting tariff relief.
And among the countries at the table Vietnam. In the
(27:24):
coming week we will get trade data for this country,
so we thought it would be a good time to
look at Vietnam's overall economy, the impact that tariffs are having,
as well as the trade relationship between Hanoi and Washington.
I'm joined now by Bloomberg's Katya Dmitrieva. Katya is Asia
economy reporter, She joins us from Hong Kong. Good of
(27:44):
you to make time to chat with me about this. Recently,
I know that Vietnam and the US concluded a second
round of trade negotiations. Do we have a sense of
how well the conversation is progressing well?
Speaker 10 (27:57):
About the same sense that we have with any of
the trade talks at this point. We know that Vietnam
has made in fact, it was one of the first
countries to make concessions and offers to the US. So
even before trade negotiations started, they were talking about buying
(28:17):
more Boeing airplanes or trying to find a way to
sort of narrow the trade gap, which of course is
the biggest focus for the Trump administration is that is
that trade deficit that they have with Vietnam, and Vietnam
has its biggest trade surplus with the US. So there
was already this sense that Vietnam was able to sort
(28:40):
of bend over backwards to secure a good bilateral deal
with the US because the economy depends so much on
the States. The most recent negotiations were a bit tricky because,
of course, going into them as they began, Vietnamese officials
we're talking about how Trump's tariffs were seen is unreasonable
(29:01):
and for a kind of relatively small economy like Vietnam,
a forty six percent tariff would be absolutely punishing and
seem to catch leadership off guard. So there hasn't been
a deal yet, like the UK, like China, there has
not been anything announced even temporarily with Vietnam, and of
(29:23):
course we'll have to wait and see how those negotiations continued.
Speaker 4 (29:27):
Vietnam has been one of Asia's fastest growing economies. It
was only a few years ago that many on the
equity side that put money to work in Asia referred
to Vietnam as still being a frontier economy. And I
think that the US recognizes Vietnam as a non market economy,
does that necessarily put Vietnam at a disadvantage in these
(29:48):
trade negotiations.
Speaker 10 (29:49):
It's definitely coming to the trade negotiations from a position
that's quite different from the EU or China, for example.
It is a smaller economy. It has left ability to
push back on Trump in the way of seeing, for example,
China pushing back on the US and these talks and
sort of making marking out concessions and getting tariffs moved
(30:13):
down substantially, at least temporarily, so it's a smaller economy,
it has fewer levers, and frankly, it depends a lot
on the US. So about thirty percent of its total
GDP is just US exports or exports to the US.
So it's one of the most among Southeast Asian economies,
(30:36):
but also globally. And so if you're in that position
as a nation, you want to do everything in your
power to try to fix that as soon as possible,
even if it means potentially buying more goods, kind of
asking companies to extend themselves in that way, or buying
things maybe that the country doesn't necessarily need, or making
(30:56):
concessions when it comes to their own trade protectionism.
Speaker 4 (31:00):
Many supply chains, as you well know, were reconfigured during
the first Trumpet administration as a way of trying to
reduce exposure to China that seemed to accelerate during the
pandemic Vietnam. I think it's fair to say was a
big beneficiary during that period, and from what I've read,
the country has been under a bit of scrutiny here
to prove that its exports are not actually made in China,
(31:22):
or at least that part of the supply chain is
not strongly linked in a way that kind of mask
the fact that these products essentially are originating in China.
Is that fair?
Speaker 10 (31:34):
Yeah, And this is why the trade data next week
will be so interesting. Vietnam has become a hub for companies,
but I think fair to say for Chinese companies in particular.
During the twenty eighteen twenty nineteen trade war, you had
factories all along the supply chain casting around looking for
(31:56):
places to start producing goods that were not in China
that we're not going to be targeted so heavily and
explicitly by the US, which is the biggest customer. So
they went to a number of places, but Vietnam ended
up being a big hub. And so the ties between
the two countries, between China and Vietnam are quite close,
(32:16):
with exchange of goods and materials and people as well workers.
So there was a growing sense in the US that
this kind of relationship would or could start to bypass
those US rules, and in some cases they did.
Speaker 7 (32:33):
So.
Speaker 10 (32:33):
There was an example of Linoleum flooring that there was
an investigation into in the US and they found that
a lot of the components were actually coming from China.
Because these items have to undergo it's called substantial transformation
in this country in a second country before being shipped out.
You can't just legally, at least in the trade realm,
(32:54):
you can't just ship an item to a second location,
stick a label on it, ship it to the US
and say it's from Vietnam and not China. So there's
sort of a debate about how much of trade is
that is that kind of illegal re routing or transhipment.
Speaker 7 (33:12):
I've seen estimates.
Speaker 10 (33:13):
Anywhere from five to twenty percent, which is a lot
when you think about the flow of trade, but it's
a very difficult to prove. There are limited ways to
sort of target it, even from an administration level. So
that will form an interesting part of the negotiations because
one thing I've been wondering is how are they going
(33:34):
to address that. Will there be sort of more of
an imperative for Vietnam and Vitamese companies to start investigating
this stuff at the factory level, to supply some sort
of documentation or heavier documentation. That's definitely one question in
these talks that might be a bit different from other countries,
and I think the trade data next week, and in fact,
(33:57):
a lot of the figures we're getting next week, as
you say, said, will provide a look at what's happening
in global commerce. Because we had the Libration Day tariffs,
we had the lifting of the Liberation Day tariffs, we
had re routing across and front loading across Asia. We
had last month double digit trade growth from Vietnam as
(34:20):
well as other Southeast Asian economies. So if that's continuing
to roll through, it's positive for Vietnam's economy, which is
aiming for eight percent growth this year, which is pretty
high target even though it's one of the fastest growing
economies in the world. But can they still do that
with this forty six percent tariff threat hanging over them?
(34:41):
And can they do that when increasing trade and this
over reliance on trade is just going to exacerbate this
issue of the trade deficit from Trump's view.
Speaker 4 (34:52):
So recently, Vietnam and France agreed to boost cooperation in
a couple of areas. I think defense security them. It
kind of goes to the area of technology and cybersecurity,
which you don't necessarily think of when you think of Vietnam. First,
can we look at how Hanoi is going about finding
(35:13):
new trade relationships given the tension that exists with the
Trump administration.
Speaker 7 (35:18):
Yeah, it's interesting.
Speaker 10 (35:19):
So Vietnam's leader Tolam recently went on a tour of
Central Asia and Russia, and part of this I think
was aimed at sort of shoring up support diversifying. We
had the Asyon Summit recently in the region, and the
big takeaway from that was countries across the region, from
Cambodia to Vietnam, Malaysia Anddonesia, they need to diversify their sources.
(35:43):
And again, Vietnam is kind of a prime example of this.
It's had such an incredible growth and development story. It's
still a developing economy, but the household incomes and wealth
has the poverty rate has fallen, really mirroring I think
(36:04):
what happened in China during this manufacturing revolution. The question
is now, can the government pivot from that model of
growth to something more a consumer led but also more innovative,
And that's where the technology and the AI comes in.
And the question will be can they do that in
an economy that's still quite controlled and is not necessarily
(36:27):
one that's you know, when you look at the US,
for example, and the export of services, a lot of
that is in the tech sector. It's software, it's development,
it's ingenuity and development. And the question is can Vietnam
do that under its own government system, which is still
quite closed and still quite controlled top down?
Speaker 4 (36:48):
Katya, Before I let you go, I have to ask
about the golf resort that President Trump's real estate company
is intending to build in Vietnam. Can you help me
understand where things at the moment?
Speaker 10 (37:01):
This is such an interesting part of this entire story
because the Trump organization is building a one point five
billion dollar golf resort in the country. It's just outside
of Hanoi, and it's happening at the same time as
these trade negotiations, and the country is desperate to get
a deal with the US, so it's very interesting timing.
(37:24):
And critics have actually pointed out that this process has
been fast tracked in the country. So usually there's a
process in Vietnam for environmental standards, for getting community approval,
and a lot of legal experts have pointed to that
being bypassed or sped through. And this is pretty important
(37:44):
for people who live there because it's a lot of
farmland people, you know, individuals own this land. The fact
that the government could be doing a process or making
this process in a way that they normally wouldn't it
is definitely raising some eyes. There's also, of course, in
ho Chi Minh, there's a skyscraper also part of the
(38:06):
Trump organization that they're trying to build. So there's sort
of this real estate part to this as well, and
of course Trump's connection to all of us.
Speaker 4 (38:14):
It's going to be very interesting to watch. Katya. Thank
you so much for helping us understand more about what's
happening these days in Vietnam as we look ahead to
next week's trade data. Bloomberg's Katya Dmitrieva. Katya is Asia
Economy reporter joining from Hong Kong, and I'm Doug Krisner.
You can catch us weekdays for the Daybreak Asia podcast.
(38:34):
It's available wherever you get your podcast. Tom.
Speaker 2 (38:37):
Thanks Doug, and that does it for this edition of
Bloomberg day Break Weekend. Join us again Monday morning at
five am Wall Street Time for the latest on markets
overseas and the news you need to start your day.
I'm Tom Busby. Stay with us top stories and global
business headlines are coming up right now.
Speaker 7 (39:01):
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