April 9, 2025 • 21 mins
Watch Alix and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Alix Steel
Today’s Podcast Features are:
Spencer Soper, Bloomberg News Technology and E-Commerce Reporter, discusses Amazon cancelling some inventory orders from China and other Asian countries, according to a document reviewed by Bloomberg and people familiar with the matter. This suggests that the company is reducing its exposure to tariffs imposed by President Donald Trump.
Leland Miller, CEO at China Beige Book, discusses the impact of tariffs on U.S, China relations. China retaliated against new tariffs imposed by President Donald Trump by announcing it would raise duties on US goods, roiling markets and deepening a trade war between the world’s largest economies.
Kristina Hooper, Chief Global Markets Strategist at Invesco, discusses her outlook for the markets and tariffs.
Another chaotic day on Wall Street saw stocks whipsawing as investors tried to price the impacts of President Donald Trump’s trade war, with a slide in bonds stoking fears the US risks losing its haven status.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:21):
us live on YouTube.
Speaker 2 (00:23):
Alex Steal here alongside Paul swe Need this Bloomberg Intelligence Radio.
You can check us out on YouTube as well, just
go to YouTube dot com. One story that broke a
couple hours ago is Amazon canceling orders for multiple products
made in China and other Asian countries, thinking things like
beach chairs, scooters, air conditioners and things like that. Joining
us now is the reporter who broke that story. Spencer
(00:44):
Soper is Bloomberg News Technology and e commerce reporter. How
does how does all of this work? For Amazon? So
they place orders how many months in advance? And then
what's the ripple effect here?
Speaker 3 (00:56):
That's a that's a great question. And a lot of
this stuff, you know, the kind of have like a
target of how much they'll need and then they'll place
orders maybe monthly or that sort of thing. And so
these cancelations affect what are called direct import orders. This
is where Amazon tells vendors, hey, look, you're making this
stuff in China or some other country in Asia. We
(01:17):
can actually transport it to the US cheaper than you
can because we do so much volume. Why don't you
let us just buy it from you in the source country,
will import it, We'll pay the tariffs and pass those
savings onto customers. That makes a lot of sense previously,
but now with tariffs in the mix, it gives Amazon
a lot of exposure to tariffs, and that's why they've
(01:38):
they've abruptly canceled a bunch of these types of orders.
Speaker 4 (01:41):
All right, so Amazon captured, canceleles the order. Presumably the
vendors left with in your story, five hundred thousand beach chairs,
What does that vendor do?
Speaker 3 (01:53):
You know?
Speaker 4 (01:53):
You scramble.
Speaker 3 (01:54):
So a lot of this can basically just reset negotiation.
I mean, first, let's say a lot of these purchase
orders should be binding. But but these these folks don't
want to get tied up in court with Amazon. So
Amazon is kind of flexing its muscle a little bit here,
and then you know, they can renegotiate with Amazon on
(02:14):
different terms to still sell them through Amazon, but obviously
share some of the pain of these tariffs, and then
other options are going to other marketplaces, and this is
an opportunity for folks like TikTok Shop, Walmart, UH team
move to stand out as alternatives. So they do have
some options, but Amazon's still like the main, the main
show in town when it comes to US online sales.
Speaker 2 (02:37):
Was this move unusual or expected?
Speaker 3 (02:41):
Very unusual and definitely unexpected? Most of these folks said
they were, you know, completely caught off guard by it.
You know, like like I said, what the beach chair
vendor has been selling for more than a decade on
Amazon and actually had the stuff made. So it's not
like they said, hey, this this order way out. Let's
cancer that this is stuff that he's already you know,
(03:02):
had had a factory make and and is on the
hook to pay for so with with with no communication
or real explanation. So this is definitely showing how these
uh these tariffs are are, you know, basically disrupting a
lot of a lot of relationships and and forcing h
partners to negotiate with one another.
Speaker 4 (03:22):
Have we heard anything from Walmart about kind of how
they plan to navigate these tariffs?
Speaker 3 (03:30):
I I haven't spoken specifically to Walmart. But a lot
of these companies are just in the same game. You figure,
you figure Walmart has an advantage of selling predominantly grocery
and so if there is a pullback, you know, people
still need groceries, so so they'll still do well there.
But then, you know, in terms of like these large
diversified retailers like Amazon and Walmart, you're you're just likely
(03:54):
to see shift in a mix of products like more consumables,
more everyday needs that peopleeople need in their daily lives,
and less of this kind of discretionary stuff like the
beach chairs we mentioned, or scooters or that kind of thing.
Speaker 2 (04:09):
How many more levers like this does can Amazon pull?
Speaker 3 (04:14):
Amazon's has many levers and knobs, but so do its partners, right,
so this is kind of a gamble. So if Amazon's
pulling back on its orders, you know, then that said that,
the knock on effect of that is some of these
folks that sell on Amazon and rely on Amazon for
sales might have to pull back on ad spend. You know.
So it's you know, the Amazon can turn one now,
(04:34):
but then someone else turns another. It's like popcorn popping
in a kettle.
Speaker 4 (04:40):
What if we heard Spencer from some of the Chinese
players like Ali Baba, like Timu, how are they planning
on navigating the new environment.
Speaker 3 (04:50):
I haven't heard much from Ali Baba. And then on
Timu has basically been kind of anticipating a lot of this.
A bigger issue for them was this deminimous loophole and
they've been kind of forward deploying more inventory into the US.
So that was another thing, is folks just trying to
get ahead of this and get get inventory into the
US before these tariffs take effect. And then another option
(05:12):
for for folks like Timo or Amazon or any vendor
selling anything is just looking for countries not affected by
these tariffs, and so that this is making places like Canada, Australia,
other other markets much more desirable, especially if you've got
to unload inventory and want to want to avoid these tariffs.
Speaker 2 (05:33):
Does any of this yet? Did you have a sense
just in your reporting how demand is holding up at all?
Like we talked a lot about the supplier side, et cetera,
But are we seeing sort of stockpiling ahead of the
tariffs in terms of consumer behavior?
Speaker 3 (05:46):
That's that's the million dollar question right now. And there's
there's definitely a lot of cross currents. And that's the fear,
right is like, you know, a lot of a lot
of companies analysts everything they can get real time data
from sources that track like credit card transit actions and stuff.
And so that's a big concern right now. Is there
like almost like a false flag that the consumer's safe
(06:08):
if in reality they are just like stockpiling on things
getting ahead of the tariffs and then and then demand's
going to drop off a cliff in several weeks, you know.
So that's something that people are actively monitoring and scratching
their heads about right now.
Speaker 4 (06:23):
All right, Spencer, thank you so much. We appreciate that. Spencer, Sooper,
Bloomberg News Technology and e Commerce reporter.
Speaker 1 (06:29):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (06:43):
Let's take a broader look now at the relationship of
US and China. It's not good. What's the off ramp
at this point? Joining us now is Leland Miller. He
is a CEO of the China, beij book Leland. You
are deep into the China, I mean China US trade relations, etc.
What levers does China have to pull to help support
(07:05):
its economy in the middle of a trade war.
Speaker 5 (07:10):
Well, you know, markets have been expecting there to be
some sort of giant stimulus response for years, and they
were always disappointed because it wasn't in Chijiping's interest to
sort of reduce the economy after they've gone through maybe
not deleveraging, but certainly a tightening of credit to areas
of the economy outside of the priorities like advanced manufacturing,
et cetera. We're entering a very new era here, and
(07:34):
so depending on how severe geopolitics and the trade wars
get going forward, they're going to start looking at these
levers more seriously. Obviously, one of the big one is
fiscal spending. They don't want to do a Bazuka like
two thousand and eight, and they've already done a lot
of monetary easing over the course of the past couple
of years, so there's not that much oomp there. But
there is spending they can certainly do. And in our
(07:54):
latest data, we have actually seen our proxy for infrastructure
structure spending, uh start expanding, it go up by transportation.
Construction firms are borrowing more, they're investing more, They're hiring more.
So they are they are readying the AMMO gun in
case they need to use it. But I think they're
trying to figure out whether this is going to be
a short term problem or whether this is the new norm.
Speaker 6 (08:16):
So Leland, nobody knows this better than you. But where
is a capacity for China and the willingness for China
to really go toe to toe with President Trump in
the US on these tariffs.
Speaker 4 (08:28):
What is their capacity there?
Speaker 5 (08:29):
Do you think? Well, their capacity and their willingness are
two different things. I think their willingness is very high.
I think we're already seeing a you know, there was
a signaling before it happened, and then now that it's happened,
you see there was a you know, the message was always,
if you do something to us, we're gonna respond. You
do something else to us, again, we're gonna respond. Now,
the problem here is that China doesn't have the capacity
(08:51):
to go one on one in the trade field with
the United States, simply because the United States is a
massive importer and China is a very weak importer by comparison,
So if you just talking about trade, the US has
much more leverage and can put much more pain on China.
This is why, once you get to a certain point,
and to the extent that Beijing is willing to risk
an escalation, you're going to see things expand outside the
(09:12):
purely trade realm. It's not going to be just a
conversation about tariffs. Already we're moving outside of it, but
you can expand it more dramatically to other areas and
even punishing US firms on the ground in China.
Speaker 2 (09:24):
I mean, yeah, we already heard the headline that China's
you know, telling students that want to study in the US,
like think twice, for example, before you do that. In
terms of levers that can pull, I know you mentioned
helping domestic capacity and sort of pumping money into the
system for consumers might not be the best. But in
terms of the un evaluation, for example, how orderly can
China keep that?
Speaker 5 (09:46):
I think they can keep it pretty orderly because they
want to keep it orderly. You know, it seems like
every time there's any kind of geopolitical tension to the
US and China, any trade tension, there's anything going on
in terms of just a weak Chinese economy. There's people
screaming to this guy the yuan devalue it to value it.
They really don't want to do this. It's not that
it's not a tool in the in the box to use,
(10:08):
but it's for break the glass emergencies. It doesn't mean
they're not going to blow off steam against the USD.
It doesn't mean they're not gonna, you know, have a
signaling purpose from just from moving it incrementally. But they
really don't want to do one of these one off devaluations.
It would be a massive escalation. It would be seen
very poorly, not just the United States and around the world.
But you're also you're also sitting in a situation where
(10:29):
you are going to you're going to create a lot
of stress inside the Chinese economy. You're going to put
pressure on having more capital outflows, You're trying to increase consumption.
By weakening the yu want you're gonna hurt consumption even further.
So this is not just some piece of a trade
artillery that they can use willy nilly to go there
in a big way. They need to really have a
substantial escalation.
Speaker 4 (10:50):
Hey Leland, does chind of view this US nationalism from
President trumpet administration, from a global trade, from a global
mill military political as a real opportunity to expand its influence?
Did they view this as a once in a lifetime
opportunity to do that.
Speaker 5 (11:09):
I think there's a lot of voices in China. I
think that they don't like some of what's happening. I
think other things they see as an opportunity. Certainly, if
US allies and partner relationships are breaking down, either in
the region or around the world, they'd love to take
advantage of that, and not necessarily by replacing the US,
by just simply just saying stop helping the US, stop
stop buying into what they're doing. So so there are
(11:31):
opportunities in here if it's played wrong by the US government.
But you know, I think that we're in a We're
in such a dramatic place differently from you know where
we were a few months ago. They're trying to digest this,
just like the rest of us.
Speaker 2 (11:46):
Will this move China to make connections and trade deals
and more economic ties with the rest of the world,
And is the rest of the world open to that?
Speaker 5 (11:55):
China would love lots of trade deals, but China wants
them on their terms, and what they want to be
able to do is not import on other countries' exports,
and they want to just shove their exports down everybody
else's throat. So to the extent that they can strong
arm countries or there's unique advantages to having some sort
of bilatter relationship, then you know, maybe these proceed. But
(12:15):
keep in mind, to the extent the US shuts itself
off from Chinese goods, we import a lot of Chinese
goods and have for a long long time, then they're
going to have to send these goods somewhere else. So
in addition to all the overcapacity problems you already have,
you have simply a need to replace the demand for
Chinese exports elsewhere. They're going to be flooding Southeast Asia,
(12:36):
they're going to be flooding Europe, They're going to be
flooding South America. So this is going to have to
demand a policy response from all these other countries. And
the question is, you know, do you really want to
do a trade deal with the Chinese if you're not
getting anything back in return.
Speaker 4 (12:49):
Leland Millo, thank you so much. We appreciate your time.
As always. One of our go to voices and all
things China, all things Chinese Economy, Leland Miller, CEO at
the China Facebook. One of the things we'd like about
chatting with Leland because at the Beige Book they have
really unique data. They have boots on the ground they
get They don't rely upon the government data because that
historically has been not quite reliable. So again they have
(13:11):
their own data sets there that they rely upon to
give them a sense of ware the Chinese economy.
Speaker 3 (13:15):
ASTs.
Speaker 4 (13:15):
We find out from Leland that he's usually ahead of
this stuff, so I appreciate getting his time.
Speaker 1 (13:22):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (13:37):
Joining us in studio, How about that, Christina Hooper, Chief
Global market strategist at Invesco. We usually do the Zoom thing,
but we've got her in our studio here in NewYork.
That's great, Christina, You've got perspective, You've been around. This
isn't your first Rodeo, What do you make of the
last three, four, five, six trading days.
Speaker 7 (13:57):
Well, this is an environment in which there is just
a super high level of uncertainty and that is causing
all kinds of wild swings in all different corners of
the market. And I think this is not that dissimilar
to what we saw in the early days of COVID.
Now that was a time when there was just an
(14:19):
incredible amount of uncertainty and markets reacted with an enormous
amount of fear, wild swings. And the other similarity is
that it's all about policy. That it's going to the
outcome of this crisis will be dictated by policy, and
(14:41):
so in some ways that's helpful because you can you
can do a scenario map and ask yourself, you know,
if this effex happens, we think, why will happen? But
it is. It is a very very unusual environment, just
punctuated by just an incredibly high level of uncertainty.
Speaker 2 (14:59):
Speaking of that, Amazon canceling orders that affect multiple products
and vendors after China tear effs. They're citing trade disputes
as risk factor and this coming out in the annual report.
The difference and obviously is that this is a self
inflicted policy. This is not what happened in COVID and
(15:20):
we shut down and then we had to help to
go specifically to the treasury market. Are you seeing are
you hearing? Are you worried about the treasury market not
functioning properly like we saw back in twenty twenty.
Speaker 7 (15:33):
So I certainly think that's a concern. Right now, I
don't think we're seeing that, but we do know that,
you know, our trading partners know some of our big vulnerabilities,
right and one of them is that we spend an
awful lot servicing our debt, and so one way to
punish us would be to sell US treasuries. So I
(15:55):
certainly think we you know, we should, We are aware
of the vulnerabilities, and we would be following it closely
at Investigo.
Speaker 4 (16:02):
What is your I guess economic forecast? Do you have
a recession in your forecast?
Speaker 7 (16:08):
My base case is that if we see terroriffs remain
at these relatively high levels, we're more than fifty percent
probability of going into a recession this year. It doesn't
mean that it's going to be a deep recession, but
I think that certainly the odds are in favor of
recession if we see tariffs remain at relatively high levels.
(16:28):
But if we were to see a de escalation, we
could easily see a risk on environment with US assets benefiting.
So it is very much in the hands of policymakers.
Speaker 2 (16:38):
And then to that point, you just look at delta right,
pulling guidance. If a company pulls guidance, you would assume
the stock would sell off and that would be really
bad news. And the stock is up. It's like it's
not going to take much to maybe move the needle.
Where is safety though?
Speaker 4 (16:52):
Now? As you wait?
Speaker 7 (16:55):
So safety clearly is in gold, and that's what many
investors are articulating through their purchases. But there is also safety,
of course in Japanese yen, in the Swiss frank some
of the traditional safe haven asset classes x US. I
don't know if there's as much safety in treasuries or
the usd Wow.
Speaker 4 (17:16):
That's a statement. International rest of world stock markets been
out performing the US pretty well, and that doesn't happen
very often. Is that a trade? Is that a longer
term trend? Do you think is our international markets may
be more attractive from an equity perspective.
Speaker 7 (17:34):
Well, certainly from evaluation perspective, and for some markets from
a dividend yield perspective, they are more attractive. And you
have to recognize a very significant catalyst, which is the
potential for fiscal stimulus material fiscal stimulilus coming from Europe
and from China, and I think that can be a
(17:55):
countervailing force to the headwinds that come from these.
Speaker 2 (17:59):
Terror counterbailing force. Could that also come in the US
in the form of tax cuts. Would that be enough?
Speaker 7 (18:08):
That's a good question. I'd have to see exactly what
those tax cuts look like, because keep in mind that
it's lower income households that are going to be hit
the hardest by these tear wars. Of course, all consumers
will be hit to the extent that the wealth effect
is impacted, but I think lower income households the burden
is higher for tariffs. So what will the tax cuts
(18:29):
look like and will it benefit lower income households? So
when I know that, then I can answer that question.
Speaker 4 (18:34):
Another headline China issues warning for students studying in the US.
So there you go, ripple effect. I guess you'd call it, yeah,
fixed income. What's the play here? Christina in fixed income
for you guys.
Speaker 7 (18:47):
So I think there's certainly potential in a number of areas. Again,
a lot of it has to do with one's time horizon,
but certainly floating rate. I don't see the Fed cutting
rates anytime soon. I know four cuts are priced in.
It's hard to believe that's going to happen in this
environment where we're seeing market based inflation expectations go up
(19:08):
and where we're seeing consumer based inflation expectations go up.
Speaker 2 (19:13):
Aside from I guess from where you sit, what would
certainty look like? Because to some extent we know what
stuff is like, we know what tariffs are, we know
that we don't know necessarily what all the response will be.
So what would it take for you, as someone who'd
been in the market for a long time to feel confident?
Speaker 7 (19:36):
So I hearkened back to the first Trump administration, definitely
harken and how that played out. Twenty eighteen was a
really difficult year. The S and P five hundred was down,
we saw some foreign markets down much more, but just
a smodest alleviation in tariffs helped and gave markets confidence.
(20:01):
So something like that I think is enough in this environment.
There's really a bias towards optimism, especially in the equity market.
So there's hope. Even if we were to get some
kind of reduction, some negotiation, some deals negotiated with some countries,
I think that could be helpful. That doesn't give us
the extreme certainty that I think we crave, but it's enough.
Speaker 4 (20:25):
Christina, thank you so much. We really appreciate it. Christina Hooper,
Global Chief Global Market Strategist for Invesco joining us live
here in our Bloomberg Interactive Broker Studio, which is a
good thing.
Speaker 1 (20:36):
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Bloomberg Audio Studios, Podcasts, Radio News. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
(00:21):
us live on YouTube.
Speaker 2 (00:23):
Alex Steal here alongside Paul swe Need this Bloomberg Intelligence Radio.
You can check us out on YouTube as well, just
go to YouTube dot com. One story that broke a
couple hours ago is Amazon canceling orders for multiple products
made in China and other Asian countries, thinking things like
beach chairs, scooters, air conditioners and things like that. Joining
us now is the reporter who broke that story. Spencer
(00:44):
Soper is Bloomberg News Technology and e commerce reporter. How
does how does all of this work? For Amazon? So
they place orders how many months in advance? And then
what's the ripple effect here?
Speaker 3 (00:56):
That's a that's a great question. And a lot of
this stuff, you know, the kind of have like a
target of how much they'll need and then they'll place
orders maybe monthly or that sort of thing. And so
these cancelations affect what are called direct import orders. This
is where Amazon tells vendors, hey, look, you're making this
stuff in China or some other country in Asia. We
(01:17):
can actually transport it to the US cheaper than you
can because we do so much volume. Why don't you
let us just buy it from you in the source country,
will import it, We'll pay the tariffs and pass those
savings onto customers. That makes a lot of sense previously,
but now with tariffs in the mix, it gives Amazon
a lot of exposure to tariffs, and that's why they've
(01:38):
they've abruptly canceled a bunch of these types of orders.
Speaker 4 (01:41):
All right, so Amazon captured, canceleles the order. Presumably the
vendors left with in your story, five hundred thousand beach chairs,
What does that vendor do?
Speaker 3 (01:53):
You know?
Speaker 4 (01:53):
You scramble.
Speaker 3 (01:54):
So a lot of this can basically just reset negotiation.
I mean, first, let's say a lot of these purchase
orders should be binding. But but these these folks don't
want to get tied up in court with Amazon. So
Amazon is kind of flexing its muscle a little bit here,
and then you know, they can renegotiate with Amazon on
(02:14):
different terms to still sell them through Amazon, but obviously
share some of the pain of these tariffs, and then
other options are going to other marketplaces, and this is
an opportunity for folks like TikTok Shop, Walmart, UH team
move to stand out as alternatives. So they do have
some options, but Amazon's still like the main, the main
show in town when it comes to US online sales.
Speaker 2 (02:37):
Was this move unusual or expected?
Speaker 3 (02:41):
Very unusual and definitely unexpected? Most of these folks said
they were, you know, completely caught off guard by it.
You know, like like I said, what the beach chair
vendor has been selling for more than a decade on
Amazon and actually had the stuff made. So it's not
like they said, hey, this this order way out. Let's
cancer that this is stuff that he's already you know,
(03:02):
had had a factory make and and is on the
hook to pay for so with with with no communication
or real explanation. So this is definitely showing how these
uh these tariffs are are, you know, basically disrupting a
lot of a lot of relationships and and forcing h
partners to negotiate with one another.
Speaker 4 (03:22):
Have we heard anything from Walmart about kind of how
they plan to navigate these tariffs?
Speaker 3 (03:30):
I I haven't spoken specifically to Walmart. But a lot
of these companies are just in the same game. You figure,
you figure Walmart has an advantage of selling predominantly grocery
and so if there is a pullback, you know, people
still need groceries, so so they'll still do well there.
But then, you know, in terms of like these large
diversified retailers like Amazon and Walmart, you're you're just likely
(03:54):
to see shift in a mix of products like more consumables,
more everyday needs that peopleeople need in their daily lives,
and less of this kind of discretionary stuff like the
beach chairs we mentioned, or scooters or that kind of thing.
Speaker 2 (04:09):
How many more levers like this does can Amazon pull?
Speaker 3 (04:14):
Amazon's has many levers and knobs, but so do its partners, right,
so this is kind of a gamble. So if Amazon's
pulling back on its orders, you know, then that said that,
the knock on effect of that is some of these
folks that sell on Amazon and rely on Amazon for
sales might have to pull back on ad spend. You know.
So it's you know, the Amazon can turn one now,
(04:34):
but then someone else turns another. It's like popcorn popping
in a kettle.
Speaker 4 (04:40):
What if we heard Spencer from some of the Chinese
players like Ali Baba, like Timu, how are they planning
on navigating the new environment.
Speaker 3 (04:50):
I haven't heard much from Ali Baba. And then on
Timu has basically been kind of anticipating a lot of this.
A bigger issue for them was this deminimous loophole and
they've been kind of forward deploying more inventory into the US.
So that was another thing, is folks just trying to
get ahead of this and get get inventory into the
US before these tariffs take effect. And then another option
(05:12):
for for folks like Timo or Amazon or any vendor
selling anything is just looking for countries not affected by
these tariffs, and so that this is making places like Canada, Australia,
other other markets much more desirable, especially if you've got
to unload inventory and want to want to avoid these tariffs.
Speaker 2 (05:33):
Does any of this yet? Did you have a sense
just in your reporting how demand is holding up at all?
Like we talked a lot about the supplier side, et cetera,
But are we seeing sort of stockpiling ahead of the
tariffs in terms of consumer behavior?
Speaker 3 (05:46):
That's that's the million dollar question right now. And there's
there's definitely a lot of cross currents. And that's the fear,
right is like, you know, a lot of a lot
of companies analysts everything they can get real time data
from sources that track like credit card transit actions and stuff.
And so that's a big concern right now. Is there
like almost like a false flag that the consumer's safe
(06:08):
if in reality they are just like stockpiling on things
getting ahead of the tariffs and then and then demand's
going to drop off a cliff in several weeks, you know.
So that's something that people are actively monitoring and scratching
their heads about right now.
Speaker 4 (06:23):
All right, Spencer, thank you so much. We appreciate that. Spencer, Sooper,
Bloomberg News Technology and e Commerce reporter.
Speaker 1 (06:29):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (06:43):
Let's take a broader look now at the relationship of
US and China. It's not good. What's the off ramp
at this point? Joining us now is Leland Miller. He
is a CEO of the China, beij book Leland. You
are deep into the China, I mean China US trade relations, etc.
What levers does China have to pull to help support
(07:05):
its economy in the middle of a trade war.
Speaker 5 (07:10):
Well, you know, markets have been expecting there to be
some sort of giant stimulus response for years, and they
were always disappointed because it wasn't in Chijiping's interest to
sort of reduce the economy after they've gone through maybe
not deleveraging, but certainly a tightening of credit to areas
of the economy outside of the priorities like advanced manufacturing,
et cetera. We're entering a very new era here, and
(07:34):
so depending on how severe geopolitics and the trade wars
get going forward, they're going to start looking at these
levers more seriously. Obviously, one of the big one is
fiscal spending. They don't want to do a Bazuka like
two thousand and eight, and they've already done a lot
of monetary easing over the course of the past couple
of years, so there's not that much oomp there. But
there is spending they can certainly do. And in our
(07:54):
latest data, we have actually seen our proxy for infrastructure
structure spending, uh start expanding, it go up by transportation.
Construction firms are borrowing more, they're investing more, They're hiring more.
So they are they are readying the AMMO gun in
case they need to use it. But I think they're
trying to figure out whether this is going to be
a short term problem or whether this is the new norm.
Speaker 6 (08:16):
So Leland, nobody knows this better than you. But where
is a capacity for China and the willingness for China
to really go toe to toe with President Trump in
the US on these tariffs.
Speaker 4 (08:28):
What is their capacity there?
Speaker 5 (08:29):
Do you think? Well, their capacity and their willingness are
two different things. I think their willingness is very high.
I think we're already seeing a you know, there was
a signaling before it happened, and then now that it's happened,
you see there was a you know, the message was always,
if you do something to us, we're gonna respond. You
do something else to us, again, we're gonna respond. Now,
the problem here is that China doesn't have the capacity
(08:51):
to go one on one in the trade field with
the United States, simply because the United States is a
massive importer and China is a very weak importer by comparison,
So if you just talking about trade, the US has
much more leverage and can put much more pain on China.
This is why, once you get to a certain point,
and to the extent that Beijing is willing to risk
an escalation, you're going to see things expand outside the
(09:12):
purely trade realm. It's not going to be just a
conversation about tariffs. Already we're moving outside of it, but
you can expand it more dramatically to other areas and
even punishing US firms on the ground in China.
Speaker 2 (09:24):
I mean, yeah, we already heard the headline that China's
you know, telling students that want to study in the US,
like think twice, for example, before you do that. In
terms of levers that can pull, I know you mentioned
helping domestic capacity and sort of pumping money into the
system for consumers might not be the best. But in
terms of the un evaluation, for example, how orderly can
China keep that?
Speaker 5 (09:46):
I think they can keep it pretty orderly because they
want to keep it orderly. You know, it seems like
every time there's any kind of geopolitical tension to the
US and China, any trade tension, there's anything going on
in terms of just a weak Chinese economy. There's people
screaming to this guy the yuan devalue it to value it.
They really don't want to do this. It's not that
it's not a tool in the in the box to use,
(10:08):
but it's for break the glass emergencies. It doesn't mean
they're not going to blow off steam against the USD.
It doesn't mean they're not gonna, you know, have a
signaling purpose from just from moving it incrementally. But they
really don't want to do one of these one off devaluations.
It would be a massive escalation. It would be seen
very poorly, not just the United States and around the world.
But you're also you're also sitting in a situation where
(10:29):
you are going to you're going to create a lot
of stress inside the Chinese economy. You're going to put
pressure on having more capital outflows, You're trying to increase consumption.
By weakening the yu want you're gonna hurt consumption even further.
So this is not just some piece of a trade
artillery that they can use willy nilly to go there
in a big way. They need to really have a
substantial escalation.
Speaker 4 (10:50):
Hey Leland, does chind of view this US nationalism from
President trumpet administration, from a global trade, from a global
mill military political as a real opportunity to expand its influence?
Did they view this as a once in a lifetime
opportunity to do that.
Speaker 5 (11:09):
I think there's a lot of voices in China. I
think that they don't like some of what's happening. I
think other things they see as an opportunity. Certainly, if
US allies and partner relationships are breaking down, either in
the region or around the world, they'd love to take
advantage of that, and not necessarily by replacing the US,
by just simply just saying stop helping the US, stop
stop buying into what they're doing. So so there are
(11:31):
opportunities in here if it's played wrong by the US government.
But you know, I think that we're in a We're
in such a dramatic place differently from you know where
we were a few months ago. They're trying to digest this,
just like the rest of us.
Speaker 2 (11:46):
Will this move China to make connections and trade deals
and more economic ties with the rest of the world,
And is the rest of the world open to that?
Speaker 5 (11:55):
China would love lots of trade deals, but China wants
them on their terms, and what they want to be
able to do is not import on other countries' exports,
and they want to just shove their exports down everybody
else's throat. So to the extent that they can strong
arm countries or there's unique advantages to having some sort
of bilatter relationship, then you know, maybe these proceed. But
(12:15):
keep in mind, to the extent the US shuts itself
off from Chinese goods, we import a lot of Chinese
goods and have for a long long time, then they're
going to have to send these goods somewhere else. So
in addition to all the overcapacity problems you already have,
you have simply a need to replace the demand for
Chinese exports elsewhere. They're going to be flooding Southeast Asia,
(12:36):
they're going to be flooding Europe, They're going to be
flooding South America. So this is going to have to
demand a policy response from all these other countries. And
the question is, you know, do you really want to
do a trade deal with the Chinese if you're not
getting anything back in return.
Speaker 4 (12:49):
Leland Millo, thank you so much. We appreciate your time.
As always. One of our go to voices and all
things China, all things Chinese Economy, Leland Miller, CEO at
the China Facebook. One of the things we'd like about
chatting with Leland because at the Beige Book they have
really unique data. They have boots on the ground they
get They don't rely upon the government data because that
historically has been not quite reliable. So again they have
(13:11):
their own data sets there that they rely upon to
give them a sense of ware the Chinese economy.
Speaker 3 (13:15):
ASTs.
Speaker 4 (13:15):
We find out from Leland that he's usually ahead of
this stuff, so I appreciate getting his time.
Speaker 1 (13:22):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay, and Android
Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 4 (13:37):
Joining us in studio, How about that, Christina Hooper, Chief
Global market strategist at Invesco. We usually do the Zoom thing,
but we've got her in our studio here in NewYork.
That's great, Christina, You've got perspective, You've been around. This
isn't your first Rodeo, What do you make of the
last three, four, five, six trading days.
Speaker 7 (13:57):
Well, this is an environment in which there is just
a super high level of uncertainty and that is causing
all kinds of wild swings in all different corners of
the market. And I think this is not that dissimilar
to what we saw in the early days of COVID.
Now that was a time when there was just an
(14:19):
incredible amount of uncertainty and markets reacted with an enormous
amount of fear, wild swings. And the other similarity is
that it's all about policy. That it's going to the
outcome of this crisis will be dictated by policy, and
(14:41):
so in some ways that's helpful because you can you
can do a scenario map and ask yourself, you know,
if this effex happens, we think, why will happen? But
it is. It is a very very unusual environment, just
punctuated by just an incredibly high level of uncertainty.
Speaker 2 (14:59):
Speaking of that, Amazon canceling orders that affect multiple products
and vendors after China tear effs. They're citing trade disputes
as risk factor and this coming out in the annual report.
The difference and obviously is that this is a self
inflicted policy. This is not what happened in COVID and
(15:20):
we shut down and then we had to help to
go specifically to the treasury market. Are you seeing are
you hearing? Are you worried about the treasury market not
functioning properly like we saw back in twenty twenty.
Speaker 7 (15:33):
So I certainly think that's a concern. Right now, I
don't think we're seeing that, but we do know that,
you know, our trading partners know some of our big vulnerabilities,
right and one of them is that we spend an
awful lot servicing our debt, and so one way to
punish us would be to sell US treasuries. So I
(15:55):
certainly think we you know, we should, We are aware
of the vulnerabilities, and we would be following it closely
at Investigo.
Speaker 4 (16:02):
What is your I guess economic forecast? Do you have
a recession in your forecast?
Speaker 7 (16:08):
My base case is that if we see terroriffs remain
at these relatively high levels, we're more than fifty percent
probability of going into a recession this year. It doesn't
mean that it's going to be a deep recession, but
I think that certainly the odds are in favor of
recession if we see tariffs remain at relatively high levels.
(16:28):
But if we were to see a de escalation, we
could easily see a risk on environment with US assets benefiting.
So it is very much in the hands of policymakers.
Speaker 2 (16:38):
And then to that point, you just look at delta right,
pulling guidance. If a company pulls guidance, you would assume
the stock would sell off and that would be really
bad news. And the stock is up. It's like it's
not going to take much to maybe move the needle.
Where is safety though?
Speaker 4 (16:52):
Now? As you wait?
Speaker 7 (16:55):
So safety clearly is in gold, and that's what many
investors are articulating through their purchases. But there is also safety,
of course in Japanese yen, in the Swiss frank some
of the traditional safe haven asset classes x US. I
don't know if there's as much safety in treasuries or
the usd Wow.
Speaker 4 (17:16):
That's a statement. International rest of world stock markets been
out performing the US pretty well, and that doesn't happen
very often. Is that a trade? Is that a longer
term trend? Do you think is our international markets may
be more attractive from an equity perspective.
Speaker 7 (17:34):
Well, certainly from evaluation perspective, and for some markets from
a dividend yield perspective, they are more attractive. And you
have to recognize a very significant catalyst, which is the
potential for fiscal stimulus material fiscal stimulilus coming from Europe
and from China, and I think that can be a
(17:55):
countervailing force to the headwinds that come from these.
Speaker 2 (17:59):
Terror counterbailing force. Could that also come in the US
in the form of tax cuts. Would that be enough?
Speaker 7 (18:08):
That's a good question. I'd have to see exactly what
those tax cuts look like, because keep in mind that
it's lower income households that are going to be hit
the hardest by these tear wars. Of course, all consumers
will be hit to the extent that the wealth effect
is impacted, but I think lower income households the burden
is higher for tariffs. So what will the tax cuts
(18:29):
look like and will it benefit lower income households? So
when I know that, then I can answer that question.
Speaker 4 (18:34):
Another headline China issues warning for students studying in the US.
So there you go, ripple effect. I guess you'd call it, yeah,
fixed income. What's the play here? Christina in fixed income
for you guys.
Speaker 7 (18:47):
So I think there's certainly potential in a number of areas. Again,
a lot of it has to do with one's time horizon,
but certainly floating rate. I don't see the Fed cutting
rates anytime soon. I know four cuts are priced in.
It's hard to believe that's going to happen in this
environment where we're seeing market based inflation expectations go up
(19:08):
and where we're seeing consumer based inflation expectations go up.
Speaker 2 (19:13):
Aside from I guess from where you sit, what would
certainty look like? Because to some extent we know what
stuff is like, we know what tariffs are, we know
that we don't know necessarily what all the response will be.
So what would it take for you, as someone who'd
been in the market for a long time to feel confident?
Speaker 7 (19:36):
So I hearkened back to the first Trump administration, definitely
harken and how that played out. Twenty eighteen was a
really difficult year. The S and P five hundred was down,
we saw some foreign markets down much more, but just
a smodest alleviation in tariffs helped and gave markets confidence.
(20:01):
So something like that I think is enough in this environment.
There's really a bias towards optimism, especially in the equity market.
So there's hope. Even if we were to get some
kind of reduction, some negotiation, some deals negotiated with some countries,
I think that could be helpful. That doesn't give us
the extreme certainty that I think we crave, but it's enough.
Speaker 4 (20:25):
Christina, thank you so much. We really appreciate it. Christina Hooper,
Global Chief Global Market Strategist for Invesco joining us live
here in our Bloomberg Interactive Broker Studio, which is a
good thing.
Speaker 1 (20:36):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to Noone's durn on Bloomberg dot com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
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