May 12, 2025 • 16 mins
In a stunning turn of events, the US and China announced a dramatic reduction in tariffs, which President Trump portrayed as a “total reset” with China. Stocks rose following the news, but what lies ahead once the 90-day reprieve expires remains uncertain.
On today’s Big Take podcast, Bloomberg Treasury reporter Dan Flatley joins host David Gura to discuss the major takeaways from these latest negotiations and what they could mean for the world’s two largest economies.
Read more:
- ‘Buy America’ Sweeps Across Global Markets After Trade Talks
- China Tariff Relief Spurs Shipping Rush, U-Turn on Price Hikes
- Nasdaq 100 Enters Bull Market After US-China Truce: Markets Wrap
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Episode Transcript
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Another stunning turn of events in the trade war between
the US and China. Early Monday morning, the country said
in a joint statement that they'd slash tariffs on one
another for ninety days as they continue talks. The combined
one hundred and forty five percent tariffs the US had
levied on Chinese imports are going down to thirty percent
and China is rolling back It's one hundred and twenty
(00:30):
five percent tariffs to ten percent.
Speaker 3 (00:32):
Yesterday, we achieved a total reset with China after productive
talks in Geneva.
Speaker 2 (00:38):
It's a far cry from President Trump's past statements. He
once called the US's trade relationship with China quote the
greatest theft in the history of the world.
Speaker 3 (00:47):
The talks in Geneva were very friendly. The relationship is
very good. We're not looking to hurt China. China is
being heard very badly.
Speaker 2 (00:54):
On Bloomberg TV this morning, US Treasury Secretary Scott Bessett
called the current tariffs quote a floor for further negotiations,
and says there's now a process in place to avoid
further escalation.
Speaker 4 (01:06):
I think they understand that we are focused on fair trade,
that this gigantic deficit that we have with them, that
it didn't happen last year, It didn't happen there before,
It's happened over decades.
Speaker 2 (01:20):
Stocks rebounded sharply following the news and comments by President
Trump that he might speak to President Chieshin Ping later
this week. I'm David Gura, and this is the big
take from Bloomberg News today. On the show, surprisingly fruitful
negotiations over the weekend lowered tariffs with China and buoyed markets,
(01:41):
but a lot of uncertainty remains. I sat down with
Bloomberg Treasury reporter Dan Flatley to discuss the negotiations and
what could lie ahead. Well, Dan wall Street is very
clearly cheering this news. How significant is it this agreement.
Speaker 1 (02:00):
I think it's significant in a couple of ways. One
is that it far exceeded people's expectations going into this weekend.
Treasury Secretary Scott Bessent kind of downplayed the expectations a
little bit. Last week. Trump floated this idea of maybe
taking the tariffs down to eighty percent. Folks that I
talked to ahead of this weekend were sort of saying
the Chinese may walk out of this negotiation. They may
(02:22):
just say this is not worth it to us. I
think that what we got, and the reason why stocks
are on a tear right now is because this is
way below any expectations that we had. So we're talking
about US tariffs on Chinese goods of about thirty percent
when you add everything together, that's way down from one
hundred and forty five percent. It's not nothing. I mean,
it's more tariffs than existed on January first this year.
(02:44):
But certainly it seems to indicate and the folks that
I've heard and talked to in the days an hour
since this deal was worked on and announced sort of
seemed to think that this is a sign that there
will be some deal further on down the line. And
I think Bessent talk about this a little bit in
one of his TV appearances this morning, that it's really
the expectation that there will be some bigger deal down
(03:07):
the road that has kind of stocks where they are today.
Speaker 2 (03:10):
We'll dig into all of that before we get there.
Could you just set the scene for us what these
meetings looked like. They took place in Geneva in Switzerland.
Speaker 1 (03:18):
Yeah, it's interesting the location that was chosen sort of
neutral territory for both parties. And the way that this
was initially kind of talked about by the Treasury was
this idea of, oh, we just were going to be
in Switzerland anyway, so mine as well meet with the Chinese.
It was very nonchalant, and I think that was intentional
because they didn't want to set expectations too high. At
(03:41):
the same time, the meetings were largely sort of on
the Chinese's terms, you know, the negotiators from China on
their terms, in the sense that they didn't want a
lot of media attention around this. They wanted the negotiations
to play out behind closed doors. They really were big
on this idea of the US approaching China with respect,
(04:02):
and so you saw a little bit of that too
in how all this was stage managed. And obviously there
was this idea of Okay, we'll start the talks on Saturday,
we'll see how things go. If things go well, if
there's more to discuss, we'll meet on Sunday. They met
on Sunday. Then they had the announcement early this morning
US time in Geneva. It was very carefully calibrated and orchestrated,
(04:24):
and so what I think you see is this idea
of a mechanism, a quote unquote mechanism. That's what Besson
has talked about, and he's even talked about sort of
this idea of a Geneva mechanism or some way in
which these talks can continue. And I think that it
would reflect broadly this kind of idea, very discrete, carefully
calibrated language around all of this stuff, which is in
(04:44):
part what the Chinese have asked for.
Speaker 2 (04:47):
It's about tariffs, but it's about more than that, isn't it.
I know that they were mentioned here kind of non
tariff countermeasures that have been put in place.
Speaker 1 (04:54):
Right Besstt has been big on this idea of non
tariff barriers. And one of the things that he he
has said and talked about, and that Trump has talked
about a little bit as well, is that China is
going to remove some of those non tariff barriers to
US businesses doing business in China. They want to see
a rebalancing. They want to see China open its markets
to US goods. They want to see China balance its
(05:16):
economic profile toward not just production but also consumption. They
want to see the US up its production manufacturing production
here at home and not just focus on consumption. So
they're trying to strike this balance. So I think if
you were to ask Scott Bessett what he wants to
see out of all of this in the end, it
would be some type of grand rebalancing where you have
(05:37):
a little bit of a national security overlay to all
of this, which is about supply chains and so forth,
but also about economic security. Now, whether we actually get
to that is a kind of a separate question, and
the events of this past weekend seem to suggest that
there is a pain point at which the Trump administration
may be looking at giving up some of those broader
goals in order to not do lasting harm to the economy.
(05:58):
So that's one of the things that we're keeping an
eye on is all this plays out.
Speaker 2 (06:01):
I want to get back to Treasury Secretary Best and
subjectives here in a minute. Before we get there. What
wasn't discussed over the course of the weekend.
Speaker 1 (06:08):
Well, one of the things that came up is this
idea of fentanyl and China shipping precursor chemicals for the
production of fentanyl to Mexico and other countries in order
to basically get that drug into the United States, and
so China sent one of its national security officials to
Geneva to discuss this issue. The US sent a national
security official as well to discuss this issue, but it's
(06:31):
not clear whether the broader national security issues around China
came up at all visa VI Taiwan semiconductor issues, the
steel industry, Pharmaceuticals is another one. Lots of different items
that have been talked about in terms of TIFFs coming
on those products or those services or those goods further
down the road. So that was not really addressed in
(06:52):
this discussion, and this was narrowly focused on trade.
Speaker 2 (06:55):
Dan, I want to have you describe the backdrop to
these talks and maybe the forcing mechan and then brought
these two sides to the table. I don't know if
we know yet who initiated this in earnest, but how
did we get here and sort of what was playing
out more broadly in trade that made this something that
I think both sides recognized needed to happen.
Speaker 1 (07:12):
So I think there are a couple of things. One
of the main things that we've been watching is this
question of empty shelves in the US. So there's been
reporting and We've done some great reporting on container ships
cargo ships coming from China that have not either made
it to US shores or have been held up or
have turned around, or other issues like that. So I
do think that that was a real fear, as well
(07:32):
as what we call rare Earth's basically critical minerals around
magnets and other sorts of things that go into a
lot of consumer products and a lot of defense consumer products.
So I think the US was getting nervous about that.
I think that Chinese were sort of getting nervous on
their end about companies like Apple and others potentially pulling out,
upsetting sort of their long term plans for how they
want to reorient their economy. So I think that both
(07:55):
sides had an incentive to come to the table. I
think long term, as Secretary Besson has talked about, the
US may have had more of an advantage as the
deficit country, as a country that was buying a lot
of these goods, whereas China had more of a short
term advantage in the country that supplies a lot of
these goods.
Speaker 2 (08:10):
President Trump has teased being open to having a call
with President she He did that again today on Monday morning.
Speaker 3 (08:16):
The relationship is very, very good. I'll speak to President
she maybe at the end of the week.
Speaker 2 (08:21):
You mentioned that Geneva mechanism, this agreement to continue talking,
and I wonder if that's kind of as important, We're
almost as important as reducing these tariffs. Just this agreement
that dialogue is going to continue here.
Speaker 1 (08:33):
Whatever we got today, the more important thing going forward
is this idea that these two sides will continue to talk.
Trump has actually talked about the European Union as being
potentially a harder party to negotiate with than China. But
as all of this plays out, the big question was
what happens with China, And just the fact that these
two sides are talking now suggests that there will be
some resolution to this agreement that's not going to do
(08:55):
lasting harmed to global economy at some point. So I
think that that is one of the things that, more
than anything else, has given markets some encouragement.
Speaker 2 (09:04):
After the break. What a trade truce means for the
future of the US China relationship, plus what the upcoming
G seven meeting could reveal about the administration's approach to trade.
(09:25):
What does Secretary beston, what does President Trump want this
relationship to look like going forward, the relationship between the
US and China. Have they been explicit about that.
Speaker 1 (09:33):
I think they have been explicit about it in a
couple of ways. One thing is that they've talked about
this idea of certain goods being critical. You know, Besson
has talked a lot about critical minerals. He's talked about
these ingredients that go into very high end, you know,
weapons systems and things like that, as being something that
the US needs to have access to no matter what
happens in terms of global trade. And right now, China
(09:55):
does most of the world's production around those types of
elements and those types of minerals, and so the US
definitely wants to see a lot of that production and
processing it and those sorts of things moved out of China,
potentially to the US, but maybe to some friendlier countries.
And that's been a longstanding issue for not just the
Trump administration but also the Biden folks as well. There's
also questions around semiconductors, steel industry. I think Bestent said
(10:18):
earlier today that they're going to protect the US steel industry.
There's a lot of these sort of national security focused
supply chain things that they really want to focus on
and that are sort of existing somewhere outside of this
idea of consumer goods. Now, it's interesting to hear them
talk about those things in those terms, because again, this
has been a long standing issue for successive US administrations,
going back to the first Trump administration, so it's not
(10:40):
something that's totally new. What we see more of is
this idea of rebalancing consumption and production, and that's really
something that's unique to Bessent and Trump, and you kind
of have to look at what the administration said that
they were going to do when they started this whole thing,
which was to move more manufacturing to the US and
using Keris as sort of a wall to encourage companies
to come here to do that. What we're seeing now
(11:02):
is sort of a hybrid where we're not seeing as
much of an emphasis on that, but more this idea
of free trade and opening up foreign markets to US goods.
So it's kind of an open question about exactly what
the Trump administration wants when it comes to this sort
of economic policy. Do they want to have a very
protectionist agenda that's going to see more manufacturing moved to
the US, or do they want more free trade where
(11:25):
you see foreign markets like China open up more to
US goods and products. So where this all kind of
ends up at the end of the day is a
little tricky, and one thing we always need to keep
in mind is the midterm elections coming up next year,
and so if we have some type of an economic
downturn that affects the way people are feeling in terms
of what they're paying for, how they're feeling in terms
(11:45):
of their economic security, that could affect the political outlook
for the final two years of Trump's last term in
office as far as we know. So that's all the
sort of things that are kind of hanging in the
balance as this deal is announced today.
Speaker 2 (11:58):
I want to ask you what's likely to play at
out over the next ninety days. What is the US
looking for in specific? Is it just more good faith negotiation.
Speaker 1 (12:07):
I think that they want to keep the talks going.
Number One, There's going to be a few sort of
international fora coming up where Bessant will have a chance
to interact with some representatives from China's government and also
from some other foreign governments. We have the G seven
Finance Ministers meeting coming up in Canada in about a
week or so, where he'll meet with the other G
(12:28):
seven nations. He'll have a chance to talk to some
of his EU counterparts about trade deals with the EU.
With China, I think that it's going to be almost
on this separate track, and it is really the critical track.
So Bessant has talked about fifteen to eighteen nations that
the US runs large trade deficits with, and the eighteenth
nation is China. And for a long time they were
(12:50):
talking about China being sort of on the side, something
that was happening separately from the other negotiations. And I
think you'll continue to see that. And you see how
the the UK announcement was made with Keir Starmer calling
into the Oval office Trump sort of stage managing all
of that. The China negotiations were very different. A couple
of representatives from the US government, high level representatives but
(13:12):
not President Trump, went to Geneva, went to a third
country location, met with their interlock uters from China, did
all this behind closed doors, came out with a major
concession on both sides to the current state of play,
and then with a promise to continue to talk. Now,
what is going to be somewhat elusive is what the
grand Bargain would look like. And again that's where you
(13:34):
kind of get all of this coming into play. What
does Trump actually want out of this deal? And how
do politics play into that as well, because you may
have to not let the perfect be the enemy of
the good and get something that is serviceable to get
through the midterms and to get to the next presidential election.
Speaker 2 (13:52):
Dan, I want to get a sense from you of
what this means for companies who have been dealing with
this dramatic increase in uncertainty. Bloomberg Economics estimating that the
new tariffs could still lead to nearly seventy percent drop
and bilateral trade between the US and China and the
medium term. We see the market reaction. But what does
this do to allay that sense that they that companies
(14:13):
really don't know how this is going to play on?
Speaker 1 (14:15):
Well, I don't think it helps in that regard, David.
You know a couple of things to keep in mind
with all of this. What we've heard from companies is
essentially they're frozen in place. They don't know, for instance,
whether they should continue investing, whether they should lay people off,
what moves that they should make because they don't know
whether the tariffs are going to be permanently in place
or whether they're going to be part of a trade negotiation.
(14:37):
So all of that is kind of locked in place.
And I was reading an economic analysis earlier today that
suggested before any rigorous analysis can be made of this
weekend's agreement, this all needs to be listed in the
federal register. That's not how Trump works. His approach to
these matters is to get things done quickly, to get
(14:58):
them done expeditiously, to get them done on terms that
he sees as most favorable to the United States. And
these sort of niceties of government process, listing things in
their federal register, rolling out policy in a very measured
and methodical way, That's not how he operates. And so
I think businesses are looking to see how this will
all play out, and as they're trying to read the
(15:18):
tea leaves, they have to go by what they're hearing
and seeing from Trump administration officials. And so the idea
that we have a deal or some kind of agreement
to take down the temperature for a period of time
seems to suggest that there will be some deal in
the end, that things are moving in that direction because otherwise,
why would you even do a ninety day pause. There
(15:38):
would be no point in doing that. So I think
that that is one of the things that businesses corporate
entities are digesting and trying to suss out. But again,
let's keep in mind that no matter what happens, there's
still going to be elevated tariff rates, and so that
is going to have an impact on the economy. Exactly
how all that plays out with these deals that are
(16:00):
being negotiated and including with China as yet to be seen,
but that's sort of the state of play at the moment.
Speaker 2 (16:05):
Dan, Thank you very much. Thanks David, this is the
Big Take from Bloomberg News. I'm David Gera. This episode
was produced by Julia Press with support from Eleanor Harrison Dengate.
It was edited by Tracy Samuelson and Sarah Halzac. It
was fact checked by Rachel Lewis Chrisky and mixed and
sound designed by Alex Segura with Julia Weaver. Our deputy
(16:28):
executive producer. Our senior producer is Naomi Shaven. Our senior
editor is Elizabeth Ponso. Our executive producer is Nicole Beemster. Boor.
Sage Bauman is Bloomberg's head of podcasts. If you liked
this episode, make sure to subscribe and review The Big
Take Wherever you listen to podcasts. It helps people find
the show. Thanks for listening, We'll be back tomorrow
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:08):
Another stunning turn of events in the trade war between
the US and China. Early Monday morning, the country said
in a joint statement that they'd slash tariffs on one
another for ninety days as they continue talks. The combined
one hundred and forty five percent tariffs the US had
levied on Chinese imports are going down to thirty percent
and China is rolling back It's one hundred and twenty
(00:30):
five percent tariffs to ten percent.
Speaker 3 (00:32):
Yesterday, we achieved a total reset with China after productive
talks in Geneva.
Speaker 2 (00:38):
It's a far cry from President Trump's past statements. He
once called the US's trade relationship with China quote the
greatest theft in the history of the world.
Speaker 3 (00:47):
The talks in Geneva were very friendly. The relationship is
very good. We're not looking to hurt China. China is
being heard very badly.
Speaker 2 (00:54):
On Bloomberg TV this morning, US Treasury Secretary Scott Bessett
called the current tariffs quote a floor for further negotiations,
and says there's now a process in place to avoid
further escalation.
Speaker 4 (01:06):
I think they understand that we are focused on fair trade,
that this gigantic deficit that we have with them, that
it didn't happen last year, It didn't happen there before,
It's happened over decades.
Speaker 2 (01:20):
Stocks rebounded sharply following the news and comments by President
Trump that he might speak to President Chieshin Ping later
this week. I'm David Gura, and this is the big
take from Bloomberg News today. On the show, surprisingly fruitful
negotiations over the weekend lowered tariffs with China and buoyed markets,
(01:41):
but a lot of uncertainty remains. I sat down with
Bloomberg Treasury reporter Dan Flatley to discuss the negotiations and
what could lie ahead. Well, Dan wall Street is very
clearly cheering this news. How significant is it this agreement.
Speaker 1 (02:00):
I think it's significant in a couple of ways. One
is that it far exceeded people's expectations going into this weekend.
Treasury Secretary Scott Bessent kind of downplayed the expectations a
little bit. Last week. Trump floated this idea of maybe
taking the tariffs down to eighty percent. Folks that I
talked to ahead of this weekend were sort of saying
the Chinese may walk out of this negotiation. They may
(02:22):
just say this is not worth it to us. I
think that what we got, and the reason why stocks
are on a tear right now is because this is
way below any expectations that we had. So we're talking
about US tariffs on Chinese goods of about thirty percent
when you add everything together, that's way down from one
hundred and forty five percent. It's not nothing. I mean,
it's more tariffs than existed on January first this year.
(02:44):
But certainly it seems to indicate and the folks that
I've heard and talked to in the days an hour
since this deal was worked on and announced sort of
seemed to think that this is a sign that there
will be some deal further on down the line. And
I think Bessent talk about this a little bit in
one of his TV appearances this morning, that it's really
the expectation that there will be some bigger deal down
(03:07):
the road that has kind of stocks where they are today.
Speaker 2 (03:10):
We'll dig into all of that before we get there.
Could you just set the scene for us what these
meetings looked like. They took place in Geneva in Switzerland.
Speaker 1 (03:18):
Yeah, it's interesting the location that was chosen sort of
neutral territory for both parties. And the way that this
was initially kind of talked about by the Treasury was
this idea of, oh, we just were going to be
in Switzerland anyway, so mine as well meet with the Chinese.
It was very nonchalant, and I think that was intentional
because they didn't want to set expectations too high. At
(03:41):
the same time, the meetings were largely sort of on
the Chinese's terms, you know, the negotiators from China on
their terms, in the sense that they didn't want a
lot of media attention around this. They wanted the negotiations
to play out behind closed doors. They really were big
on this idea of the US approaching China with respect,
(04:02):
and so you saw a little bit of that too
in how all this was stage managed. And obviously there
was this idea of Okay, we'll start the talks on Saturday,
we'll see how things go. If things go well, if
there's more to discuss, we'll meet on Sunday. They met
on Sunday. Then they had the announcement early this morning
US time in Geneva. It was very carefully calibrated and orchestrated,
(04:24):
and so what I think you see is this idea
of a mechanism, a quote unquote mechanism. That's what Besson
has talked about, and he's even talked about sort of
this idea of a Geneva mechanism or some way in
which these talks can continue. And I think that it
would reflect broadly this kind of idea, very discrete, carefully
calibrated language around all of this stuff, which is in
(04:44):
part what the Chinese have asked for.
Speaker 2 (04:47):
It's about tariffs, but it's about more than that, isn't it.
I know that they were mentioned here kind of non
tariff countermeasures that have been put in place.
Speaker 1 (04:54):
Right Besstt has been big on this idea of non
tariff barriers. And one of the things that he he
has said and talked about, and that Trump has talked
about a little bit as well, is that China is
going to remove some of those non tariff barriers to
US businesses doing business in China. They want to see
a rebalancing. They want to see China open its markets
to US goods. They want to see China balance its
(05:16):
economic profile toward not just production but also consumption. They
want to see the US up its production manufacturing production
here at home and not just focus on consumption. So
they're trying to strike this balance. So I think if
you were to ask Scott Bessett what he wants to
see out of all of this in the end, it
would be some type of grand rebalancing where you have
(05:37):
a little bit of a national security overlay to all
of this, which is about supply chains and so forth,
but also about economic security. Now, whether we actually get
to that is a kind of a separate question, and
the events of this past weekend seem to suggest that
there is a pain point at which the Trump administration
may be looking at giving up some of those broader
goals in order to not do lasting harm to the economy.
(05:58):
So that's one of the things that we're keeping an
eye on is all this plays out.
Speaker 2 (06:01):
I want to get back to Treasury Secretary Best and
subjectives here in a minute. Before we get there. What
wasn't discussed over the course of the weekend.
Speaker 1 (06:08):
Well, one of the things that came up is this
idea of fentanyl and China shipping precursor chemicals for the
production of fentanyl to Mexico and other countries in order
to basically get that drug into the United States, and
so China sent one of its national security officials to
Geneva to discuss this issue. The US sent a national
security official as well to discuss this issue, but it's
(06:31):
not clear whether the broader national security issues around China
came up at all visa VI Taiwan semiconductor issues, the
steel industry, Pharmaceuticals is another one. Lots of different items
that have been talked about in terms of TIFFs coming
on those products or those services or those goods further
down the road. So that was not really addressed in
(06:52):
this discussion, and this was narrowly focused on trade.
Speaker 2 (06:55):
Dan, I want to have you describe the backdrop to
these talks and maybe the forcing mechan and then brought
these two sides to the table. I don't know if
we know yet who initiated this in earnest, but how
did we get here and sort of what was playing
out more broadly in trade that made this something that
I think both sides recognized needed to happen.
Speaker 1 (07:12):
So I think there are a couple of things. One
of the main things that we've been watching is this
question of empty shelves in the US. So there's been
reporting and We've done some great reporting on container ships
cargo ships coming from China that have not either made
it to US shores or have been held up or
have turned around, or other issues like that. So I
do think that that was a real fear, as well
(07:32):
as what we call rare Earth's basically critical minerals around
magnets and other sorts of things that go into a
lot of consumer products and a lot of defense consumer products.
So I think the US was getting nervous about that.
I think that Chinese were sort of getting nervous on
their end about companies like Apple and others potentially pulling out,
upsetting sort of their long term plans for how they
want to reorient their economy. So I think that both
(07:55):
sides had an incentive to come to the table. I
think long term, as Secretary Besson has talked about, the
US may have had more of an advantage as the
deficit country, as a country that was buying a lot
of these goods, whereas China had more of a short
term advantage in the country that supplies a lot of
these goods.
Speaker 2 (08:10):
President Trump has teased being open to having a call
with President she He did that again today on Monday morning.
Speaker 3 (08:16):
The relationship is very, very good. I'll speak to President
she maybe at the end of the week.
Speaker 2 (08:21):
You mentioned that Geneva mechanism, this agreement to continue talking,
and I wonder if that's kind of as important, We're
almost as important as reducing these tariffs. Just this agreement
that dialogue is going to continue here.
Speaker 1 (08:33):
Whatever we got today, the more important thing going forward
is this idea that these two sides will continue to talk.
Trump has actually talked about the European Union as being
potentially a harder party to negotiate with than China. But
as all of this plays out, the big question was
what happens with China, And just the fact that these
two sides are talking now suggests that there will be
some resolution to this agreement that's not going to do
(08:55):
lasting harmed to global economy at some point. So I
think that that is one of the things that, more
than anything else, has given markets some encouragement.
Speaker 2 (09:04):
After the break. What a trade truce means for the
future of the US China relationship, plus what the upcoming
G seven meeting could reveal about the administration's approach to trade.
(09:25):
What does Secretary beston, what does President Trump want this
relationship to look like going forward, the relationship between the
US and China. Have they been explicit about that.
Speaker 1 (09:33):
I think they have been explicit about it in a
couple of ways. One thing is that they've talked about
this idea of certain goods being critical. You know, Besson
has talked a lot about critical minerals. He's talked about
these ingredients that go into very high end, you know,
weapons systems and things like that, as being something that
the US needs to have access to no matter what
happens in terms of global trade. And right now, China
(09:55):
does most of the world's production around those types of
elements and those types of minerals, and so the US
definitely wants to see a lot of that production and
processing it and those sorts of things moved out of China,
potentially to the US, but maybe to some friendlier countries.
And that's been a longstanding issue for not just the
Trump administration but also the Biden folks as well. There's
also questions around semiconductors, steel industry. I think Bestent said
(10:18):
earlier today that they're going to protect the US steel industry.
There's a lot of these sort of national security focused
supply chain things that they really want to focus on
and that are sort of existing somewhere outside of this
idea of consumer goods. Now, it's interesting to hear them
talk about those things in those terms, because again, this
has been a long standing issue for successive US administrations,
going back to the first Trump administration, so it's not
(10:40):
something that's totally new. What we see more of is
this idea of rebalancing consumption and production, and that's really
something that's unique to Bessent and Trump, and you kind
of have to look at what the administration said that
they were going to do when they started this whole thing,
which was to move more manufacturing to the US and
using Keris as sort of a wall to encourage companies
to come here to do that. What we're seeing now
(11:02):
is sort of a hybrid where we're not seeing as
much of an emphasis on that, but more this idea
of free trade and opening up foreign markets to US goods.
So it's kind of an open question about exactly what
the Trump administration wants when it comes to this sort
of economic policy. Do they want to have a very
protectionist agenda that's going to see more manufacturing moved to
the US, or do they want more free trade where
(11:25):
you see foreign markets like China open up more to
US goods and products. So where this all kind of
ends up at the end of the day is a
little tricky, and one thing we always need to keep
in mind is the midterm elections coming up next year,
and so if we have some type of an economic
downturn that affects the way people are feeling in terms
of what they're paying for, how they're feeling in terms
(11:45):
of their economic security, that could affect the political outlook
for the final two years of Trump's last term in
office as far as we know. So that's all the
sort of things that are kind of hanging in the
balance as this deal is announced today.
Speaker 2 (11:58):
I want to ask you what's likely to play at
out over the next ninety days. What is the US
looking for in specific? Is it just more good faith negotiation.
Speaker 1 (12:07):
I think that they want to keep the talks going.
Number One, There's going to be a few sort of
international fora coming up where Bessant will have a chance
to interact with some representatives from China's government and also
from some other foreign governments. We have the G seven
Finance Ministers meeting coming up in Canada in about a
week or so, where he'll meet with the other G
(12:28):
seven nations. He'll have a chance to talk to some
of his EU counterparts about trade deals with the EU.
With China, I think that it's going to be almost
on this separate track, and it is really the critical track.
So Bessant has talked about fifteen to eighteen nations that
the US runs large trade deficits with, and the eighteenth
nation is China. And for a long time they were
(12:50):
talking about China being sort of on the side, something
that was happening separately from the other negotiations. And I
think you'll continue to see that. And you see how
the the UK announcement was made with Keir Starmer calling
into the Oval office Trump sort of stage managing all
of that. The China negotiations were very different. A couple
of representatives from the US government, high level representatives but
(13:12):
not President Trump, went to Geneva, went to a third
country location, met with their interlock uters from China, did
all this behind closed doors, came out with a major
concession on both sides to the current state of play,
and then with a promise to continue to talk. Now,
what is going to be somewhat elusive is what the
grand Bargain would look like. And again that's where you
(13:34):
kind of get all of this coming into play. What
does Trump actually want out of this deal? And how
do politics play into that as well, because you may
have to not let the perfect be the enemy of
the good and get something that is serviceable to get
through the midterms and to get to the next presidential election.
Speaker 2 (13:52):
Dan, I want to get a sense from you of
what this means for companies who have been dealing with
this dramatic increase in uncertainty. Bloomberg Economics estimating that the
new tariffs could still lead to nearly seventy percent drop
and bilateral trade between the US and China and the
medium term. We see the market reaction. But what does
this do to allay that sense that they that companies
(14:13):
really don't know how this is going to play on?
Speaker 1 (14:15):
Well, I don't think it helps in that regard, David.
You know a couple of things to keep in mind
with all of this. What we've heard from companies is
essentially they're frozen in place. They don't know, for instance,
whether they should continue investing, whether they should lay people off,
what moves that they should make because they don't know
whether the tariffs are going to be permanently in place
or whether they're going to be part of a trade negotiation.
(14:37):
So all of that is kind of locked in place.
And I was reading an economic analysis earlier today that
suggested before any rigorous analysis can be made of this
weekend's agreement, this all needs to be listed in the
federal register. That's not how Trump works. His approach to
these matters is to get things done quickly, to get
(14:58):
them done expeditiously, to get them done on terms that
he sees as most favorable to the United States. And
these sort of niceties of government process, listing things in
their federal register, rolling out policy in a very measured
and methodical way, That's not how he operates. And so
I think businesses are looking to see how this will
all play out, and as they're trying to read the
(15:18):
tea leaves, they have to go by what they're hearing
and seeing from Trump administration officials. And so the idea
that we have a deal or some kind of agreement
to take down the temperature for a period of time
seems to suggest that there will be some deal in
the end, that things are moving in that direction because otherwise,
why would you even do a ninety day pause. There
(15:38):
would be no point in doing that. So I think
that that is one of the things that businesses corporate
entities are digesting and trying to suss out. But again,
let's keep in mind that no matter what happens, there's
still going to be elevated tariff rates, and so that
is going to have an impact on the economy. Exactly
how all that plays out with these deals that are
(16:00):
being negotiated and including with China as yet to be seen,
but that's sort of the state of play at the moment.
Speaker 2 (16:05):
Dan, Thank you very much. Thanks David, this is the
Big Take from Bloomberg News. I'm David Gera. This episode
was produced by Julia Press with support from Eleanor Harrison Dengate.
It was edited by Tracy Samuelson and Sarah Halzac. It
was fact checked by Rachel Lewis Chrisky and mixed and
sound designed by Alex Segura with Julia Weaver. Our deputy
(16:28):
executive producer. Our senior producer is Naomi Shaven. Our senior
editor is Elizabeth Ponso. Our executive producer is Nicole Beemster. Boor.
Sage Bauman is Bloomberg's head of podcasts. If you liked
this episode, make sure to subscribe and review The Big
Take Wherever you listen to podcasts. It helps people find
the show. Thanks for listening, We'll be back tomorrow
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