products in response to tariffs coming up, soybean futures dropped the most since on chinese goods. china but ther soybeans caught in the crosshairs of a trade war, commodity at the top of its list ariffs t causing turmoil for midwest farmers. counterpunch. this is bloomberg. where do you hide in a tit-for-tat trade war? >> welcome to "bloomberg ♪ daybreak." i'm david westin. let's talk about ripping up the script. this is how markets are doing. it looks to be a very brutal open here in the u.s.. s&p futures now down by over 1.5%, 44 points. it is a similar story in the currency market. the yen moves higher as there is a safe haven bid there. what is interesting to me is the lack of bid in the treasury market. twods moving lower i

basis points, but when you expect an even stronger treasury market? we will get to that in a minute. we really only have one story for our quick take this morning, and that is what is going on with china. over night we had an exchange of trade sanctions with the u.s. , on $50 billion of chinese imports on things like semiconductors, lithium has put $50nd china billion in tariffs on things like soybeans, aircraft, automobiles, and chemicals. we will bring in our colleague in beijing, hello brian. she has -- emma o'brien. she has been covering this throughout the night. you were listening in on the news conference that ended a short time ago. what did we learn from that?

it certainly did seem that china was coming out all guns blazing. that did take a lot of people by surprise, which is why we are seeing the market reaction we are. people do not think they would come out the strongly. the press conference we saw, they did strike the tone that we are more used to seeing from chinese officials on this. negotiationsushing ♪ , but with a sort of layer in there as well. the commerce minister repeatedly said if you want a trade war, we will trade war with you, but our door is still open if you want to talk. they've also said that the implementation of this tariff package announced today is dependent on the u.s. coming to david: if you look at that the table and having bilateral negotiations with them. david: the announcement in the united states doesn't take commodities chart, there was a immediately. lot of red. there is 60 days of a comment soybeans at the top of the list period. of u.s. products china punished

what china has announced today, with its tariffs overnight. is that effective immediately, more than 50% of all u.s. or is there a delay on that as exports of soybeans worldwide go well? reporter: it is not effective as to china. yet. mcleod.me mike they are waiting for the u.s. to come to them. they made a very big point, the int sensors -- the ministers , how badly could china hurt our for being the press conference, that these will not be of limited, that farmers? -- our soybean farmers? they have not been implemented >> they import 100 million tons until they hear from the u.s. they are using this as a way of getting trump and the u.s. to of soybeans a year. the table. it was quite a spectacular showing. the u.s. is a big part of that. they pulled out all the stops. where are they going to get their beans? people didn't expect them, for they have to import soybeans. example, to go with soybeans, if they try to import from such a huge trade that is so important for china. anyplace else, they will pay a higher price and mike back to their beans. is a $14 billion trade a it is easy to say, but the marketplace has been expecting this year. year. we had the first move in the people did not expect them to go aircraft. last few months from above 10, all of these big-ticket items typically good being murmured about somehow becoming embroiled in this trade war after it escalated.

they seem to put all those on the table. time of year for soybeans. david: the president tweeting from the rhetoric we are hearing, it seems to be sort of again about this. a ploy to get the u.s. to come and talk. he told us that we are not in a david: thank you so much. trade war with china, saying our viewers might want to look in on tv go live. "the war was lost many years ago by full and incompetent people." there's a lot of great information there. alix: four bloomberg's first take, we are joined by rachel evans and the bloomberg's chief "we have a trade deficit of $500 content officer. billion a year," which he is off this is kind of all you need to know as your waking up this morning. on. futures down, down, down. futures. have soybean 10 year yield also lower. the blue line is the dollar-yen dollar-yen is a redline. index. overreacting? let's try to keep our cool >> i think the downside is they today. >> i think the market is get to break even on the year. grains are up 9% on the so digesting this news and trying to articulate what it actually means. obviously we have this two-month that's on the year or so, -- on it is not timeso the year or so, the to completely panic, but what we best-performing sector. market iseing in the the dollar is reversing.

people who underprice whether what is china going to do, buy china was going to come back. more expensive soybeans? that was a little unwise. china has been measured but this wind does all of firm. they came out with $3 billion in of filtering through the tariffs earlier in the month, inflation conversation? generally have been and they have said all along that is the u.s. does not come back to the negotiating table, relatively modest. they will respond in kind. the u.s. is essentially a closed you are seeing stocks really , so generally speaking selloff where we are seeing the reverse of all of that rebound we had yesterday. when you have inflation in the u.s. it is really about domestic issues and not so much the rest of the world. we are really sort of seeing people digest the fact that a it is overall lifting inflation. trade war is live now. alix: thank you very much. we have two months to wind down the clock. david: stocks are selling off, he's my commodities guy i call all the time. but not indiscriminately. coming up, we are going to look at how the prospect of a foreign the auto companies who had really great numbers out yesterday now are down trade war could affect a global substantially. emily: -- >> yeah. synchronized growth recovery story. more on that next. this is bloomberg. ♪ let's give the chinese some

credit, they have really done their research and knew exactly where to put these tariffs to cause the most pain for donald trump's constituents. soybeans are a big factor in iowa and a lot of the states donald trump won in the last election, so they are being very strategic. don't forget, the chinese have a he is goingrm view to be there long after donald trump is gone, so they are in this for the long haul and playing hardball. david: boeing stock --alix: boeing stock hitting absolutely pummeled in the pre-stock. boeing supplies most of china's planes. what will happen if this continues? you are president trump, and you don't want to hurt the industrial companies here in the u.s.. what do you do when he looks at

it and says, market really getting hit here on boeing? >> i don't think donald trump's brain works the way many normal people's brains work. i think he can separate his views on trade this in china and how it affects the companies. don't forget, he has said publicly that these trade issues will all wind up being good for everybody in the next 60 days -- for everybody. days we could see talks emergency this all revolved. we know donald trump loves to make grand gestures and declare victory for what basically is very little. alix: more than 50% of the cars were lines in china are boeing airplanes, raising its 20 year forecast for aircraft demand. do we have to start rethinking the valuation of these kind of companies, or is that conversation too soon? >> i think it is a little bit

too soon. we still have this kind of grace period. this has been a lot about the rhetoric that has come through. trump likes to be able to claim a victory and move on rather than necessarily taking the long haul on these types of things. i think if we start to see the rhetoric dialed back, if this is a negotiating table to get everybody to the table to try and cut a better deal, we really could see the fundamentals of these companies staying pretty strong. i think that is a tricky thing to say at this stage. everybody has been coming back to that in times of weakness that it might be time to buy. it where these tariffs are implemented, it is going to be a huge issue. the u.s. sent a letter that there is $100 billion of trade deficit we are trying to

fix. talks going on? ♪ alix: it is a deep risk day we are some reports about are seeing. back channel negotiations taking place between chinese and u.s. s&p futures off by 38 points. officials. there's been no formal confirmation of that. selloff started overseas, picked up steam in new york, now spreading as tit-for-tat trade i suspect that there would be negotiations coming in the next to try and make these wars raged between china and the u.s. the dax getting hit particularly go away as i would expect this to happen pretty soon. hard in europe. dollar-yen lower as the yen benefits from that safe haven david: listen to what the vice climb. minister of finance had to say. you are seeing treasuries bid, >> we cannot dictate deficit in the trades service, and it but not by a lot. requires effort on both sides. 276 still on the 10 year yield. y from the u.s., gold after getting that nice safe haven bid. commodities across the board crushed. but they do not want to sell. gold the one beneficiary. they are restricting their export. david: let's find out what is

if you are not exporting to china, how can you cut your going out outside the business deficit? has a point.t, he world with kailey leinz. kailey: special counsel robert mueller has told white house lawyers president trump remains under investigation, but there needs to be both sides to according to "the washington your transaction. post congo he does not consider -- post," he does not consider they must have a partnership with the u.s. in order to make it happen. the president a criminal target at this time. the suspect in a shooting at youtube headquarters in san francisco was angry because she alix: everything has to do with had stopped being paid for videos she posted. oil. thanks so much. that according to her father, up,ng up month -- coming who warned police she might be heading to youtube. the woman killed herself after wounding three people. more on the likelihood of a full on trade war the dax getting china has struck back against proposed u.s. tariffs from chinese goods. hitting hard -- getting hit hard. as we had to break, news that impose 20 have present import taxes on 106 american isn't related to a trade war. products including soybeans, cars, and aircraft. apple is working on touchless that matches the scale proposed by the trump administration for gesture control and curved screens for iphones that may high-tech items such as

semiconductors. help the company differentiate its most important product in a president trump has complained very crowded market. that china violates intellectual is it enough to want to shell property laws. global news 24 hours a day, powered by more than 2700 out $1000 for a phone? journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. this is bloomberg. ♪ alix: officials from both the u.s. and china speaking about the risks of a trade war with >> the hewlett-packard leaders waiting to see who is going to blink first. taking totrump enterprise greenroom is brought twitter. to you in partnership with bloomberg. "we are not in a trade war with china. that war was lost many years ago hewlett-packard enterprise, accelerating next. by the fullest or incompetent people who represented the u.s.. now we have a trade deficit of $500 billion a year, with intellectual property theft of another $300 billion. we cannot let this continue!" so much for camping down rhetoric and taking it with a grain of salt. what is going to be a victory for president trump in the situation? >> i have no idea, and i am not sure he does either. thatems to be saying

reducing the trade deficit with china is a victory, but trade deficits aren't necessarily bad, and of course he gets his numbers all wrong on how big it os and how he is going to g about that is the open question. does he retaliate for china's retaliation? does he escalate this? announcements now bring them to the table to negotiate? reagan went after japan in the 1980's. he negotiated a voluntary quota on automobile sales by the japanese into the united states rather than starting a trade war with japan. that could possibly work. multilateral effort to bring china to the table and tamp down some of the policies we don't like. when president trump came into office, there was a perception that he was aligning

his interest with businesses. he was progrowth, pro-business. do we have to rethink that at this point? >> i think quite consistently over the last year, he has engaged with pro-business policies. corporate tax cuts, obviously corporate tax- cuts obviously foremost among those. this is abnormal rather than a new norm. ♪ i don't think it is any surprise that china came out less than a hits back on $50 day after the u.s. came out with a list of $50 billion in billion of u.s. goods, hitting markets everywhere. tariffs. alix: it is almost like to have 500 points is what we are looking at on the dow. them ready in a drawer. >> but that doesn't struck me as something fundamental in an how will the trade war affect escalation. regional issues, as well as it seems like the chinese are european issues? joining us is the chief u.s. saying, let's sit down and negotiate this. economist from deutsche bank, economy, terms of the and a high net worth cso.

the president says he is progrowth. are these actions progrowth? are your clients calling you and we have ahave -- >> worrying? >> not as much as i anticipate. i was in the agents last week. huge expansion in the pipeline that is going to raise growth, but generally tariffs are not progrowth. people see this as posturing, the issue is that the magnitude the start of a negotiation, and of this is still so small. therefore are using the selloff the key issue becomes, what is in the pipeline? is more coming? to rebalance portfolios and taking the elevated supply sold it is trying to an yield. this could suggest there is not more coming but today it is so trying to hedge those just far relatively modest compared to the bigger picture. in case, or is it not yet >> there is so much focus on conversation? >> it is not yet conversation. whatever probability you want to put on escalation to a trade war david: that was interesting . hence we have seen market --alix: that was interesting, reaction. there is very little focus on retail risk, which could be the lack of response in the 10 year yields. is the bond market telling us positive for growth and risk assets if you move away from the telling using -- rhetoric of increased harris and lower the existing -- increased something we need to pay attention to? tariffs and lowering the existing tariffs.

it would have better outcomes. >> rates really haven't moved if you have better electoral property protection, all of this much, so that is telling you is a very possible outcome, so equities are really worried you wouldn't be taking away from about sums pacific things and global growth. names. you would be adding to it. rates markets are saying, alix: my concern is this chart here. without expectations, it still .t tracks global pmi's looks like things are relatively despite theseg having this backdrop in a world where you're having some of the isolated stories coming on individual names in the stock market. david: are they right? data rolling over a little bit, particularly in europe and some is this idiosyncratic? the big issue on the trade areas of asia, does that pose a broader risk? >> we seem to be peaking in side, if you look at 50 billion terms of global growth. dollars -- $50 billion, that is the question is how long do we a really vividly -- a relatively maintain that level, and what policies would maintain that level? small number. in isolation, the u.s. fiscal stimulus should keep the u.s. what we don't understand is what is coming next, and now we are growing through at least 2019. discussing when exactly this will be implemented, will they come back to the table. given all the other things trump is doing, a lot of these tariffs

is there more retaliation on both sides is the issue. are aimed at intermediate good inputs into factories in the if you look at the west. that can sort of cut down on the impact of the fiscal stimulus. fundamentals come we are talking it is hard to say the u.s. is about $50 billion in china come going to stay at that level. the billion dollars on the united states. none of this actually somee has seen implemented. if they were, the impact has led surprisingly weaker growth numbers people weren't necessarily anticipating. given rates not moving maybe it affects the ecb looks at things. it is kind of an open question as to how the year plays out. alix: you see the dax down and that impact. equity markets are actually , missing now. --got rolling over in europe and inflation rolling over in europe. $100 billion of tariffable >> we still have fairly strong momentum globally. goods, we are talking about what alix: still global synchronized he billion dollars even if this goes through. david: doesn't this depend growth is the story. >> we get a lot of questions quickly on what president trump is really after? from clients about when is the peak fiscal boost. if he is really after the way china is changing the way to deal with intellectual property,

this is not going to change that. >> if you look across the entire range of goods and countries, we enter he sometime in the third or fourth quarter of this you're talking about average tariffs of about 9% when it year when you start to see growth come down to lower levels. comes to china. that is comparable to the level then we can meet again and talk about one of the prospects for earnings growth. of consent for the u.s. >> you've mentioned fiscal expansion two or three times. i fully agree. but we haven't spoken about is i know you have done a bit of work here and may disagree in the monetary support. terms of the magnitude of the divide between the 3.5% and 9%. we have been fixated on interest rates growing up -- going up in the united states. we are still incredibly david: at least up to this point it still seems to be the case supportive amongst the policy environment. that it is relatively modest, rates are -40 basis which is why rates are probably not moving. points. storm services should be that does not compute. listing. you've got very accommodative expansion continues now. monetary policy come a very low we are having small issues here and there doing need to rethinke interest rates, expansion when it comes to the fiscal side.

market world we are -- on the dw is showing ahere become normal? breakout to the top rather than the bottom. when we talk about indicators from it i can out of perspective absolutely. if you look at the scatter rolling over -- from an economic perspective rolling over, it is disappointing to the highest levels we saw last year on the 13 year high. diagram, what the vix is doing is really interesting. as the fed looks at three it is very unusual that there is such a deviation for the language market. ur, do they take into >> i think it is interesting account these terrorist actions? framing. does that affect to their decision-making -- these normallast two months tariffese compared with a longer hto?yes. actions? does that affect their the 18 months up to the end of january was normality, how decision-making? >> it could later on, if there volatile it has been. is a different nafta deal or something like that. they will not look at the markets on a day-to-day basis. the bigger out trade was the vix being at seven or day in the -- but if this hits business seven or eight in the premarket. confidence in the u.s. or europe or around the world, that is the alix: come inside the bloomberg. real danger point.

if businesses pullback because they are not sure what is going to happen, the confidence this is price-earnings rat the s&p. question is out there. alix: when you have a lot of we are now at like 6.2 times. companies saying where they are we haven't seen that since 2016. when a client wants to be going to grow, they always end up saying to asia or emerging markets. what is the filter down to rebalanced, where do you tell emerging markets we see a ton of them to do so? >> typically we have downgrade their currencies getting whacked today that has been a safe for their respective earning haven? >> this is a very big issue at estimates this year and for next year. the moment. is conditional strength it looks robust. that the dollar will go down. we will obviously get that flies in the face of the information for the start of earnings next week. idea that the u.s. is doing well. the u.s. should be going up. agree the macro backdrop still looks supportive for equities in general and risks assets. it is telling you that investors david: not to trivialize, is are voting with their feet and this now a bargain, where before saying the dollar is under a it was fully valued? >> i'm not sure it is a bargain, good deal of pressure, which could change the equation quite a bit. gox: simon, you are going to

but it is cheaper than it was. up on the credit quality scale. let's use -- what do you do got some followers hedging about something like this? simon: we are all in in terms of the relative valuations against , but we think this is a bump in risk assets. a backdrop of being constructive on risk assets more broadly. david: would you invite the most likely scenario is that earning growth will be strong investors to make any decision for the next two quarters. differently today than they did yesterday because of these trade actions? when we get to the other side we the market reaction can have a debate about whether there is a real slowdown coming and potential overreaction, up. there is even more reason to rebalance and read diversify -- and read i diversify the portfolio -- and diversify the portfolio. david: thanks to all of you. we look at greenlight capital's worst slump in history. you can hurt on the radio and listen to our colleagues tom

keene and jon ferro from 7:00 to 9:00. "bloomberg surveillance" can be heard in new york, boston, the bay area, washington, d.c., and london. this is bloomberg. ♪ >> first word is brought to you by athene. we have seen you going places you've only dreamed of. we are athene, and we see you doing more.

♪ kailey: coming up in the next --r, the former fdic chair volckerhe

alliance founder and former fdic chair. apple said to be working on touchless iphone controls. softbank is in preliminary talks re-stake.take in boeing wants to capitalize on the new demand for air freight caused by the boom in e-commerce. the company is considering whether to convert used 777 passenger jets into freighters. that could hurt sales of brand-new jets come sell for more than double the price of used ones. jets,s your -- brand-new

which sell for double the price of used ones. david: sir martin sorrell is being investigated on allegations of personal misconduct. and balance, reports are coming in on differences in pay between men and women in large companies in great britain, and the picture is not pretty. and the short straw. we've learned a good deal more about why david einhorn's fund did so badly in the first quarter. alix: we want to start with sir martin sorrell. the vpp is looking into it -- wpp is looking into allegations of personal misconduct. we don't have a lot of details, but nonetheless interesting. guest: it is interesting because it sounds like the company is investigating misuse of company assets. they are saying it is personal misconduct as well in terms of the allegations. we will see how it unravels, but this is another example of

succession planning and questions that investors and analysts have of key man risks. david: first of all, the company said the misuse of funds that occurred was not material. the second, sir martin has denied it. they couldn't have happened at a worse time for the view ppt -- four wpp. it is not like they were doing very well. is another account of finally ceos being held accountable for stuff, like the me too movement. i must say, i find it's stunning the extent to which hr issues are coming to the forefront in almost every company now. the hr officer is going to be one of the most important people in the company. certainly one of the busiest. peggy: there's got to be departments across the country saying we have to step back and

take a look at not only what is going on right now, but do we have stuff in the past that we may have settled or dealt with in a certain way that now, because the tables have turned so quickly, we may be in trouble for if this gets out to the press because it is not occur anymore? alix: who they are not paying sometimes of u.k. -- sometimes in the u.k. are women. they have been looking at the gender pay gap. when you factor in bonuses, the gap becomes the grand canyon. peggy: i hate to be blunt about this, but it has been an ipod or -- an eye-popper. goldman's report came out as 56% gap in terms of salaries, but then jumps to 72% if you add in the bonuses. david: let's be clear, there is

no reason to believe this is a u.k. specific problem. they have actually required companies to report it. what would happen if the united states if we required companies to report this? peggy: with these companies, bonus toewed a pay and roughly equal portions. i really think that it is being underestimated how much globally companies are now starting to think. tons of companies have operations in the u.k. and all of the world, but if you are looking at your pay and the u.k., you got to be thinking hr department across the world and at the u.s. are thinking, do we need to start potentially giving people more bonuses and salary? david: and also moving up the ranks. that ihave more room and

suspect if you have more women running the companies, you wouldn't have -- i suspect that if you have more women running the companies, you wouldn't have this problem. peggy: this letter to investors came out yesterday, and really had this tone that was striking for us in the sense that he was basically saying, i don't get it. [laughter] [laughter] saying that hey looked at the 20 largest positions on the long and short side, and both essentially dropped more than 5%. he basically was saying a member these long positions i still really believe in, including gm, are just not performing in the market like i would have expected. he is definitely hurting on both the long and short side. david: david einhorn took a run at gm to try and help them change the way they do business in part because he believes in the company more than the market

does. what are the fees again? how are you going to justify your fees? peggy: he has been underwater for a period of time. if they have been underwater for a while they cannot charge fees to investors. that may be the case because he's been underwater for a while. we also noticed that there was no mention of the technology short in the letter, which was also a surprise as we expected him to say something about tesla , maybe netflix, amazon is they did not do well at the end of march, but that was absence in the letter. those still aren't helping him. david: many thanks, peggy thomas. coming up, we take a look at spotify's unusual new york stock exchange debut. alix: and remember, bloomberg users can interact with the charts shown on tv .

you don't have to remember any numbers. you can look at all the charts we are talking about and click on them and view the segment when we are talking about them. this is bloomberg. ♪

♪ david: spotify finally came out. there was a delay on monday they first started trading, starting toabout $165, came down about $149, but it actually is substantially above where the earlier trades had been in the stoxx. -- in the stocks. $27.8market value

billion. is this going to be a template for what we see from more ipos that might not need the money? will uber look at this in a different way? david: i would think it would be a success. there wasn't a lot of volatility. they traded i guess about 33% of the available shares. typically in an ipo i guess they won at least 50%, but it wasn't all over the place, which is pretty successful. alix: they wanted low-key volatility. usually you want pricing until you get that nice pop until you really messed around with it. david: this is bad news, of course, for banks. alix: i know. come on, guys. you can catch much more on tech and spotify on "bloomberg tech ando and tomorrow -- tech,"

tomorrow emily chang will interview facebook coo sheryl sandberg. coming up, more on the top story of the day, china's counterpunch to president trump's tariffs. u.s. commerce secretary wilbur the trade dispute is not world war iii, and that they may end up negotiating on trade. also that he was surprised on market reaction. that was interesting. let's take a look at where we stand. dow jones futures still off by almost 2%, down 482 points. s&p futures on lows in the session. inflation came in at 1.4% for the eurozone. germany getting hit due to that. in other asset classes, safe haven bids all across the board. gold getting a nice pop up. this is bloomberg. ♪

alix: trade turmoil. u.s. says it could tax products in response to u.s. tariffs on chinese goods. industrial pain. companies like boeing duck in the crosshair of this emerging high war and where did you in this tit-for-tat trade war? welcome to "bloomberg daybreak" and that is london, why we arenot sure viewing. alix: it is cloudy. , risk on -- where do you hide. 2%.jones futures off by

gold and treasuries are the safe havens. yields are down by two basis points. i would expect something more ferocious as we open up. hit, off bygetting 1.5%. i have the solution to a trade war. china, five more oil. oil and death knell scum, this is how the world works. oil, this is how the world works. david: let's find out what is going on outside the business world. >> the father of the suspect in the shooting at youtube headquarters says his daughter hated the company. police near san francisco say she killed herself after wounding three people. angryther said she was

that you to quit paying her for videos she posted. robert mueller has told white under theers that -- investigation. he doesn't consider the president a criminal target at this time. says there is still time to avoid escalation of a trade with the u.s.. they will impose an additional on soybeans and cars tariffs. u.s. gave new the chinese government said it does not have to be that way. this is a catalog that is not yet in effect. we are putting everything on the table. it is time for negotiations and cooperations.

we need mutual respect rather than imposing conditions on one side versus the other. tariffs will not take effect for roughly 60 days. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. this is bloomberg. david: thank you. there has been a back-and-forth between washington and china overnight and we had a news the financeith debbie minister and the deputy minister for commerce. and this is what he had to say with negotiating a deal. negotiate the trade in the death -- in the deficit. china alone cannot make this happen. we want to buy from the u.s. but they do not want to sell and they are restricting their exports. other countries are exporting to china but if you are not, how can you cut your deficit?

david: we welcome now isaac stone fish. good to have you with us. you have lived in china and you know the chinese. explain to us what we should take away from the news conference this morning. will there be a negotiation? isaac: an important thing to notice is the speed with which this escalated. usually when beijing would respond, they would take days, weeks or months but in a matter of hours, we had a package from is fairlyat that aggressive. the other thing worth noticing is how smartly they targeted states that are big supporters of trump. to see how much more targeted the chinese plan was than the american plan. the american plan was more general. protecting the consumers.

hurts, them where it though supporters of trump. they want going to affect for 60 days. so who's moved is next? isaac: i think china has, they are trying to keep the door open. they're trying to show that they are aggressive and they "will ."ght to the end or it is the u.s. moved to show. david: trump has said he wants everyone to be happy. is there around you could see where we would wind up with reduced tariffs? because china does have significant tariffs in place and a solution on the intellectual property front? could this work out for the better of both sides?

it could but i don't think i'm optimistic. it probably looks better for beijing. because reformers in the communist party have wanted to rebalance china's economy away from one reliant on exports. and this trade war, the march towards the trade war, it is something that could be beneficial for china in that move. weis certainly possible that reach an agreement where china is more respectful. david: you have lived there. you are fluent in mandarin. you know that society. if this develops into a true trade war, does the president have an inherited advantage over president trump?

the chinese people may go along with that a lot better than pig farmers in iowa. isaac: i think what the chairman of the communist party has is not necessarily the troops behind him but the appearance of unity.nd people support what he does. the reality is a lot more complicated. and there are a lot of interest in china that don't appreciate what he is doing and the way this trade spat is playing out. definitely an advantage that beijing has but there is certainly a risk that the chinese president doesn't do enough to please special interest groups in china and it doesn't work that well for him. david: thank you so much.

that was isaac stone fish joining us from hong kong. alix: tension between the u.s. and china pickup and this is the market reaction. it is risk off. futures down around the lows of the session. the dollar-yen is slightly weaker on the day. what do you do this morning? richard breslow had a great note saying this is a time to slow down and let the market come to you. ground upwant to be like the soybeans that their dow is exports on. .oining us now is troy gayeski is that right? yes. you don't want to overreact. withan into the year stronger offset by the

compression so there is no rush to put money to work in an environment like this when you get more clarity. aren't overrrently their skis in terms of equity risk. they can digest the short-term pain. been difficult is that if you have invested in the markets, it hasn't panned out for you. and gold is moving higher but i wouldn't call it a breakout. >> it seems to be equities pacific. this is not something that the market pricing with broader -- because it became overinflated and overbought, we were excessively enthusiastic about that. look in the equity market, there has not been a tremendous amount of rotation. so you have seen some utilities outperform but

not fast. and that reflects the rotation the risk at large. we are still starting to question how robust some of the profit margin estimates could be. how robust the earnings environment could be. the environment in which we will question impact. david: where is the money going? gina: there is no a lot of evidence as to where it is going. it seems to be going to cash in the extent it comes out of equities or it is destroyed. the destruction of capital in the equity market that is not fleeing to other areas because it is too fast and too robust. alix: if you were a bear on wall street, your argument would be valuation. this is how we have rewritten the valuation story. the ratio for the s&p.

we are at 16.2%. our things cheap enough? best strategythe for investors now because of the uncertainty around trade wars and corporate earnings and that tech is still crowded, don't rush back into equities but you are closer. on highlight and focus sectors and strategies that are more linked to the real economy. we think housing should remain robust regardless of what transpires in a corporate margin impact. if you look at regional banks, they are insulated as well. so these are things we continue to leg into. into a unless this turns trade war disaster, the fundamentals will be strong. david: do you go from large-cap too small cap? that you have seen some of action but they are hyper

correlated. so if large-cap is down 2.5% and you are down two point 2%, does that get you anywhere? gina: with the small cap story, they are largely importers of product and putting tariffs on chinese imports as well. the theention, sensitivity of these groups for the dollar is pretty high. and the dollar has not rallied substantially. you need to see the dollar rally for the multinational story in order to get them to shift from small cap too large. alix: everyone is saying we are not there yet but what do you see when you say, oh my gosh, there it is. start with the 3% growth estimate. it is hard for us to imagine it anything beyond 2% this year.

you would have to knock 1% of gdp. you should be concerned about profit margins and then you get lowering's at the end of the new year. hit list ofe a factors that we watch. thething i'm watching is high yield on threat. a slowdown in the earnings trajectory. you could also watch generally. have been holding up rather well, if we are entering into a slower time of growth. that was gina martin adams and troy gayeski are staying with us. david: boeing gets hit with the

tariffs tit-for-tat. this is bloomberg. ♪

alix: talking about fundamentals, a solid market. says jobs added are 241,000. a different story when it comes to keep broader impact we are seeing on the potential tit-for-tat u.s.-china trade war. one area you see that is boeing shares and all industrials. boeing could raise tariffs on them by 30%. they supply 50% of all of china's planes. still with us are gina martin

adams and troy gayeski. excuse me. david: choking up, gina has that effect on you. gina: i think investors will question the market outlook. a lot of this is the tax benefits that the sector gets even ifer tax rates but you look at margins on a lower basis, they are expected to expand across the board. so if we do have increased exports across the board, because of increased uncertainty in the broader outlook than the industry will suffer significantly. -- not only do they export a lot to china but they import a lot to china. a key point that gina is making. the theory why we wouldn't have

runaway inflation was capital investment. we have capital investment and it is uncertain when tariffs slow down that investment. does it undercut a lot of the theory for investment and growth? expect lower growth because of this. one of the legs would be lower because of uncertainty. this is similar to obamacare in that it didn't directly affect the economy, it just affected uncertainty. in terms of boosting productivity growth, clearly you wouldn't have as big of a surge for supply-side forces with trends that lead to growth. it is hard to say how large of an impact that would be. alix: you brought up earnings estimates. the blue line that you are going to see is per share. so $37 per share. 620.&p index is so we have seen earnings not

keeping up with the estimate. does this keep up with the gap, going forward. probably. across the index, estimates begin to move higher, except for the last few weeks when they have moved lower. contractedtions have well in advance. so they are already trying to price in this risk. will the earnings estimates actually come lower? will the trade policy have an impact on the earning stream going forward? valuations will say that maybe it will. that leaves upside if it doesn't. but it probably continues to restrain risk. david: we should go back to the basic question with industrials. is the market overreacting? we had a bloomberg intelligence expert on with commodities and the same thing is true with boeing.

troy: let's hope this is rhetoric. you went from an environment of with uncertainty of positive outcomes now going into the environment of uncertainty with potentially negative outcomes. so it is to vote in the real-time to say how much is being priced in and how much will occur. boeing started to sell off well in advance of this announcement so maybe half of this is priced in. but it could be difficult to be more precise than that. david: thank you. we had gina martin adams and troy gayeski. staying with us. china punches back and potentially hurts trump. more on that next. this is bloomberg. ♪

david: the retaliatory tariffs get out america's agricultural homeland, states that showed support for trump in the last election. joining us now is troy gayeski and martin schenker. from trumprd a lot and the chinese president. we have three branches of government. they have been largely absent. congress and the gop in a leadership position in the house and the senate and you hear nothing from them. they are out of session but that doesn't explain why the gop leadership is speaking out about the potential trade war. toid: we have talked andblican congressmen

senators who say, what are you doing? we do not need tariffs. china is the largest market for u.s. agriculture products, soybean being dominant amongst them. this will hurt the heartland of donald trump's report. and you hear nothing from them. it will be interesting when they get back next week whether or not we will be starting to hear gop orthodoxy over the whole issue over whether this is the way to approach china trade. david: we forget the fact that the republican party has been against free trade and it is the democrats who are protectionists. and it is interesting that chuck schumer has supported trump on tariffs. i'm not sure he wanted the results that we are getting but there you go. are silent ons

the issue. at on balanceook so far, we have been far more progrowth than what we have seen recently. back to the point you made before, the reason you heard critics is because there is bipartisan consensus that we were getting shafted on trade for decades. so trump destroyed the republican orthodoxy in terms of trade and it is not coming back. winged wisconsin and others if they want a chance in the next elections. alix: are there back channel conversations happening? reportse have various that there are discussions going and wilburower level

ross says he expects talks to begin. and i speculate within the next few weeks there will be high-level talks. ok, bloombergs marty shut her and troy gayeski. thank you. hsbc, according to people familiar with the matter, the company is thinking about exiting from its businesses in a quarter of the countries that the bank operates in. looking to exit the smaller countries like bermuda and uruguay. they're also looking to expand the asset management group. so potentially moving out of some countries -- they are in 67. the stock is around the lows of the session. this is bloomberg. ♪ retail.

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alix: this is "bloomberg daybreak." welcome to your risk off tuesday. s&p off by 40 points. we did have a solid 80 pete lembo report from the u.s., rising 241 thousand. the fundamental story is good but it is the trade war front and center hammering out stocks from the u.s. and china. the dax has a lot of trade exposure to china. in other asset classes, i would say the reaction is more muted. g10yen is one of the only currencies in positive territory. at you have this moving three basis points. and not the huge impact you may have anticipated. this seems like a more measured response. hear aboutant to what is going on outside of the

business world. welcome. going touckerberg is capitol hill. the facebook ceo has agreed to testify before a house hearing next wednesday on the company's use and protection of use of data. that's according to the house energy and commerce committee. there has been a storm over the with cambridge analytica. this aspect of the shooting at the you tube headquarters was angry with the company because it had quit paying her for the video she posted. that is according to the women's father. afterd kill the result wounding three people. and china has struck back tariffs.roposed they say they will import 25% import taxes on soybean products. this matches the scale of tariffs from the trump administration.

thatdent trump claims china violates intellectual property laws. global news, 24 hours a day. powered by our more than 2700 journalists and analysts, in more than 120 countries. this is bloomberg. thank you. for more on the terrace tit-for-tat and how it could affect countries -- it could affect companies here and abroad, we welcome george magnus was the former chief economist at ubs and is the author of a forthcoming book. troy gayeski is still with us. thank you for spending time with us. ands start with the u.s. the announced imposition of tariffs? withinuld that affect china? which chinese companies could be hurt by what they have done?

george: the products, over 1300 of them, there are a lot of products that people have ridiculed as not being terribly important but many of them, half to threebout quarters of the products are concentrated in the 10 sectors which china has designated as being top priority in its industrial policy, which is 2025.""made in china so these are things like energy related equipment and electrical and opticald pumps and photographic equipment. robotics. so the unfortunate thing about this is that there will be a lot of american and foreign

companies who are manufacturing or contributing to manufacturing in china who may be affected by this. strategy ist this earmarks to do is to home in on china's industrial policy. say, china's policy, 2000 25 is the plan? will this have for leverage on the chinese president? will it became where it hurts? george: certainly the measures announced so far, the 25% tariffs, it sounds like a lot but actually in the history of it is a foothill rather than a mountain. so i don't think it will have a direct effect of great magnitude on the chinese economy. people have tried to estimate that it may have an effect of .1% or .3% of gdp.

so in itself it is not significant but it is clearly the whiteo leverage house's position on china and we don't know this will be the last. theould be followed up in six months or a year with new measures. is a pretty serious gesture. what to get perspective on kind of companies we are talking about, we have a chart here that pulls percentage of revenue that chinese companies get from the u.s. and for some, this is quite material. ac technologies, 62%. so where does china go next? george: that is a good question. because the list of products which china announced today, in retaliation to the president's actually, this, $50 billion of products that the or american government

imports from china is 40% of total exports. a let's say we get into tit-for-tat war, trade war, although i don't think it is quite that just yet -- but let's suppose that's what happens. if the white house was to respond in six months or nine months with another $50 billion and the chinese then respond with their own $50 billion in new products, you are soon talking about chinese tariffs on almost all american exports. to get damaging quickly for the chinese economy, particularly because higher prices of soybeans and other agricultural products, food prices, they will quickly see through into the chinese economy. so the first round of

retaliation, i don't think we'll have a material impact, macro economically on china although some companies will be adversely affected. at by the time to get to second or third round, if that is what happens, then it is starting to have a serious effect. "the $50 billion equivalent for the u.s. is four months of shipments of u.s. products into china. the reverse is only weeks of imports." some talk about that potential price inflation. that is probably the reason why trump said it is easy to win a trade war. what about the american point of view? agriculture, as we talked about before, we have to look at

autos, as well. an area of anticipated growth going forward. there is aact that duopoly in aircraft manufacturing, if china buys fewer boeing then they will buy more airbus. it is hard to see that dramatically. so the two that jump out our agriculture and autos. david: this is a sensitive time for automakers. they're relying more on more on the chinese market as growth maxes out in north america. yes, it wasn't that long ago before all of this new up in the last two or three months, in terms of trade tariff announcements, when people were hoping that the chinese might , because theysion impose quite high tariffs on automobile imports. about 25%, five times the terror of the united states levies on

imported vehicles. the thought out the window for the moment. i do have to say to bring it down to earth momentarily, there is still time for this particular round of -- or this particular spot -- to be diffused. that talksagine aren't going on behind-the-scenes between senior officials about how they may diffuse this or lessen the impact. it clearly does serve as a warning that if you start to see your major geopolitical rival as an adversary instead of a partner, you could get into hot water quickly. because if politics plays for both sides. alix: george, great to catch up with you. george magnus from oxford university china center.

gayeski, great to catch up with you as well. tomorrow at 1:00 p.m. eastern, my new show is focused on the biggest opportunities, risks and themes in the commodity market. it will be called "bloomberg commodity edge." we will bring you the smartest and i have this great shred butd the wti now we are ripping it up and it will be about trade. david: this is something you know so well and you do it so well. alix: in one of the segments we go reallya member deep into something specific. so if you want a particular insight, that is where you will get hit. david: there is a pool going in the newsroom about how long it will be before you talk about tango.

another issue on the washington agenda? rewriting bankrolls. you can turn into the radio to listen to our colleagues, tom keene and jonathan ferro. all across united states on sirius xm radio. this is bloomberg. ♪

>> this is "bloomberg daybreak" and i'm in the hewlett-packard enterprise green room. coming up later today, the head of bloomberg markets and asset allocation. ♪ be in recesss may

and all eyes today maybe on the administration's trade actions but there is a bill waiting for congress when they get back which will trim back bank regulations related to dodd-frank. bringing us up to speed his own dekes timer. we just put it up on the screen of a comparison of the house and senate versions. the same are headed in direction. the senate doesn't go quite as far as the house does. what is the state of play right now? elizabeth: the version that the senate passed, all eyes are now on the house when congress gets back next week. jeb hensarling, the chairman of the financial services committee, he has indicated that he wants to put his mark on this bill and make significant changes. outlining 30 different provisions, some of which go much further than the senate would like to go, particularly because there were 16 democrats in the senate who voted for this

who are not looking to see it will back dodd-frank any further. so the question is how those differences are ironed out. is this something that happens in a conference committee or are senate and house lawmakers able to negotiate behind the scenes? does it reach a point where leadership steps in and insists on a boat as the bill looks right now? with: democrats went along the senate version and they need democrats to get this through. is jeff penciling going to run the risk of not doing anything and leaving it as it is because he wants the other changes made? sources i talked to are optimistic that the version the senate passed will get passed into law. that there will be political drama and back and forth with negotiations, i merrily with jeb hensarling over the coming weeks. some of theot differences can be ironed out behind the scenes?

whether or not democrats are willing to consider a digital changes remains to be seen. both sides and moderate democrats in the senate who were crucial to getting this over the ife, they say they will walk the bill comes back to them with any genetic changes so we will see. david: thank you so much. that was bloomberg's elizabeth xheimer. with us now is sheila bair. is -- working with the likes of paul volcker and bill bradley. she comes to us today from washington. good to have you here. to play something for you. we talked to dance rules about -- when he was on the fed. i want your reaction. >> lee can do a lot, i think, to

play with and to dial down some smaller bankss and larger regional banks. bbt or u.s. banks. when we talk about the eight largest systemically important institutions, troubles that any one of which could pose a risk to the financial system, it is there that we want an extra margin of safety and it is there where we need to keep the capital levels up. he was identified with a lot of the push after the financial crisis and focusing on the banks but there is a fair amount we could do to trim back regulation on smaller banks. do you agree with him? sheila: i do. the problem was that this -- you have to water

to make the enhanced standards applicable to regional banks as well. and they are not systemic in that if one of them steals, it wouldn't cause a broader economic disruption. that is the test of whether they are specific enough or whether they need advanced oversight or resolution planning, that is where we need to focus. by looking to broadly we did lose focus on those institutions which is really where regulators need to spend a lot of time. looking at the senate version of this bill. it does a fair amount of trimming back on locals and communities. do you agree with the bill? are there issues you have with it? sheila: i do. i'm fully supportive of most of the release of smaller regionals but there are a couple of juicy tidbits for the large institutions as well.

i wrote an op-ed in the wall street journal a few weeks ago on this is that it significantly dilutes the supplemental leverage ratio, a key constraint on the use of excessive leverage by large institutions. and supposedly it is limited to two or three custodial banks who should not get capital relief. they should have nice cushions of capital. the committee amended the language so it could apply and benefit city bank and j.p. morgan and chase. it is disingenuous for that to be in the bill. isators who are saying this helping smaller institutions, this is not right. there is a provision that could significantly weaken capital standards and should be deleted and i hope that happens as part of the ongoing process. it is probably unlikely that i hope it happens. david: the provisions in the bill were said to be directed at a handful of custodian banks.

if it could be modified so it only applied to them, would you, at that point, think it is a sensible way to approach it? sheila: they are also highly systemic. we need them to be highly resilient during a crisis. it may be appropriate to provide them capital relief if we get into a downturn and we want to give them the capacity to expand their balance sheet but to do it now in times when they just got will reducet, it the cushions they have in the bad times only want them to be able to expand the balance sheet is nonsensical. so i think it is a bad revision but i think i would feel better about it if it was confined to those custodial banks. is aouse bill, there perception that the house bill

is more do regulatory but on this, they had a much more limited probation. alix: what about a re-proposed volcker rule that woodhead regionals? what is the reasonable shift there? sheila: i think the treatment of the volcker rule's is appropriate. though they shouldn't have the smaller banks of less than $10 billion and those that have a large percentage of trading assets, they should not have to comply with the rules but supervisors when they go into the banks should have latitude is noe sure that there gaming or proprietary trading going on. that would be a sensible modification. they trimmed setback in the senate banking committee and i think overall that is a sensible approach. david: it isn't just what the

law says but also who is applying the law and regulations. we have had changes that the fed now. yesterday we heard about mr. williams. what you make of the team that's coming in. sheila: we are not sure yet. -- has signaled that it is ok on the bill because there are right on the release of the community banks but not on the supplemental leverage ratio on the big banks. there have been no major changes in the regulation so far so i will keep my fingers crossed that there is no serious weakening but we just really don't know yet. there are a lot of vacancies to fill on the board and in key spots like the new york fed president, it looks like it will be filled by an insider, john williams. that was disappointing to me as well. there were good women candidates

and i was hoping they would bring in a woman and break the white male tradition. nothing against white males but there are good females as well. my view for the new york fed is that they need someone with supervisory credentials and someone who understands bond markets and they had two women candidates. maryerved on the board and miller who is deep experience with the bond markets and both would have been excellent. another fed needs monetary economist, it is like saying washington needs more lobbyists. it seems this is where they should be looking. david: there is a job open and now.rancisco sheila bair, the director of the volcker alliance.

are set for an ugly open in the u.s., dow futures off by triple digits. 440, off the lows of the session and european stocks are getting hit. michael purvis is joining us. what is the trade? michael: in terms of the u.s. equity dip, i am standing clear now. we have seen price action below support levels over the last couple of days. and it is converging at the same time which is unique to u.s. equities, one of which is the trade discussion, and one is the unwind for the recalibration of the tech trade. so one thing that is interesting to note is that the fix for euro is negative. vix and while european equities have ,he prospect of a tougher euro

european equities are not burn and by. so if you believe global risk is and you need to allocate to risk, that his the relatively stable risk asset. alix: if you are invested, how do you hedge it? michael: it is interesting. ix is up again. it is pretty cheap. thing that may be important to hedge it is payrolls. the 10 year yield might go down.

it is interesting with the potential trade rates. stellar a less than report there. you have to be very careful about the high price of volatility that can fade rapidly. alix: his trade, by european equities on the dip. the dax is getting hit the most in europe. they learnext, then from hsbc, their take on the selloff. a deep risk off tone to the market. europe and asia and the u.s. this is bloomberg. ♪

jonathan: from new york city, 30 minutes until the start of trading. i'm jonathan ferro. this is the countdown to "the open." ♪ coming up, the u.s. proposing new tariffs for china, beijing wasted little time to reveal their own proposals. trade tensions and hitting risk assets, risk off again and the rally is kinder. digesting the difference between rhetoric and real policy, investors grapple with what actually matters. 30 minutes away from the opening bell, the vicious risk off warning, in equities it could be. futures off by 1.3%. elsewhere, this is hardly a gym addict in the treasury market, down two basis points. and in the fx market, a little bit of yen strength with

emphasis on a little and the dollar pushing out one .2298 -- at 1.2298.