yvonne: 7:00 a.m. in hong kong. we are live from bloomberg's asia headquarters. i'm yvonne man. welcome to daybreak asia. the yen climbed as president trump prepares new tariffs on china. they involve 10% duties on $200 billion of products. beijing has already vowed to retaliate dollar for dollar. critics say the escalating trade were could threaten global growth. ramy: from bloomberg's global headquarters, i'm ramy inocencio in new york, where it is just past 7:00 p.m. singapore's investment giant is turning cautious after years of spending. thomas it sees global growth slowing down. renewed tension in nato. washington says members should pay more.

europe says america should appreciate its allies. yvonne: starting off with some breaking news, data coming from south korea, the unemployment rate for june falling to 3.7%, better than we expected at 3.9%. the unemployment rate edging lower, perhaps suggesting a tighter labor market. we have to see how the youth breakdown and how that plays out, given we still see the youth and employment at multiyear highs. when it comes to south korea, the jobs picture may not be in as important as the trade front. ramy: speaking of trade, the other big story that has been developing in the past few hours is the white house confirming it has that list of $200 billion of chinese products, among them

possibly electric vehicle batteries, refrigerators and freezers, air-conditioning machines. we will get more of that over the next few hours. let's take a look at the u.s. close, because there is a night and a look. you can see the dow and nasdaq up. that was their highest in the past three weeks or so. the s&p 500 also up by about a third. flip up the boards, because this is more important in terms of futures. we are seeing acceleration of losses for the dow and s&p, down about .8%. gold catching a slight bit. the u.s. 10 year falling a tad, 2.85%. yvonne: let's see how things are faring when it comes to asian currencies. we did see a slide to safety into the japanese currency.

we are breaking below the 111 level right now. the swissie seeing a bid, but thewe are breaking below aussiee chen, down .4% given how trade dependent it is with china. the offshore remedy weakening to 666 -- 6.66. china has vowed to retaliate. we will see if we get a response from beijing. asia futures on the back foot, down .1%. , up about 16% on the nikkei 225. down 125 when it comes to nikkei futures. .1%. moderately higher by the u.s. has released a $200 billion last of chinese goods for possible tariffs. let's get the latest with greg sullivan. i guess we knew this was possibly going to happen, given the fact that last month we heard from the president telling robert lighthizer to consider this $200 billion of goods. what is the latest and what is

next? greg: that's correct. the trump administration just released a list of $200 billion worth of chinese imports they could potentially move forward imposing tariffs on, a tariff of about 10%. i had a chance to glance at the list before coming here. it included things from electric vehicle batteries to air-conditioning machines. it is wide-ranging. --lication of the list official publication will kick off a weeklong process that will include public hearings, public comment periods, and no final decision on whether to move forward with harris will, until -- with tariffs will come until late august. the move comes as the trump administration already initiated tariffs on $40 billion of chinese goods last week, a move that came after trump friend to do so for months -- trump threatened to do so for months.

also eyeing tariffs on an additional $16 billion of chinese goods. china has vowed to retaliate and has retaliated on the previous tariffs. watch closely for this moving forward. ramy: what strikes me as interesting is one of the lines that we broke, the white house has been taking an eye to the consumer so as not to affect them as much. but some of the possible things on the tariff list include leather goods, air conditioners, refrigerators, electric vehicle batteries -- things that go to the consumer. try to make heads or tails of this. how does somebody figure out what will be affecting the consumer and not? greg: great question. you are right, a senior administration official speaking anonymously did say they took into account consumer effects. of yet here is a wide swath goods that consumers will be buying and prices could potentially go up. the best way to look at this is through the rhetoric of the

trump administration on trade. they see this as a move to rebalancing the trade framework with china. trump has frequently made the argument that china has tilted the trading relationship to their favorite and it takes these blunt tools such as these round of tariffs to correct that. potentially this is a negotiating move to force china back to the negotiating table and make concessions in the trade relationship. what ever it is clear the trump administration is not backing down from their aggressive trade rhetoric. ramy: it is clear that trade war is getting real. washington reporter greg sullivan, thank you. let's cross live to beijing, where tom mackenzie is standing by. we are waiting for chinese reaction. what might that be? no official reaction from china yet. we may get some comments shortly. we will be looking for those. don't expect a knee-jerk response.

that has not been the playbook they have been used to or sticking to in the last few months at least. it should be a measured response, possibly some strong rhetoric from some officials and state media. but even the state media, the government told them to tone down criticism of president trump, no doubt aware this is a president with thin-skin. what the strategy appears to be is on the geopolitical front forming these alliances with the european union, at least making moves to that -- you have seen that play out the last few days -- showing that countries that continue to work with china on trade will get access, showing they are going to continue to open their markets and reform. we got an example with germany investing $10 billion in a wholly-owned business here. and also betting that corporate in the u.s. in the farm states are going to leverage pressure on washington. in terms of tariffs, china is

going to struggle to match the u.s. blow for blow because it only imports between $130 billion in $150 billion of u.s. goods, depending on which numbers you look at. then you get to qualitative measures being outlined by china around issues of licensing and putting pressure on u.s. companies. it seems china is reluctant to make an official move, but of course that is an option in their back pocket. other options, reducing forests from china- tourists to the u.s. interesting to see how china response given they cannot match the u.s. tariffs for tariff, unless they push up the level of duty to match them that way. yvonne: as we mentioned, the list is 205 pages long. it seems like this is a broad swath of chinese goods. what does this mean for china?

how vulnerable is the economy at this point? tom: it is not perfect timing for china. they have a bit more runway when you talk to the economists. you look at the inflation data that came out yesterday, showing factory prices have picked up. they have a bit of support there in terms of pricing, being able to continue to deliver profits and pay down debts. the runway it seems is running out. it is becoming more difficult, particularly if china wants to pursue the de-risking campaign. we have seen moves to increase credit into the system to support some areas of the economy. whether or not they switch up to focus more on that to try to relieve pressure from tensions is something we are watching. exports make of gdp than they once did. if you get big job losses in southern china, that does put pressure on the chinese authorities.

they are concerned about civil unrest. that is something they will be a rare of -- will be aware of. they said they are going to lay out a plan to support companies that are hit by these tariffs, so that is something we are watching for, as we will be with trade data on friday. that will flesh out the picture in terms of how badly china's economy is being hit. yvonne: tom mackenzie, our china correspondent, with the latest on beijing. let's get you caught up with the first word news. jessica: president trump has arrived in europe ahead of a nato meeting and a one-on-one summit with president clinton -- president putin. he said the talks would be the easiest leg of the trip. he repeated his demands that nato members contribute a larger share of the buzz it -- the budget. he declined to label his russian counterpart a friend or foe. tesla is to build a new factory in shanghai. its first plant outside the u.s.

will make it the first wholly-owned foreign automaker in china. financial details not released, but has less second option -- says construction will begin soon. theghai authorities said plant will be the biggest foreign investment in the city. >> the biggest question right now for investors, bulls and bears alike, is how they are going to pay for it. you will see something similar to what they did in nevada with a partner like panasonic. not saying panasonic will be the partner, but you will see someone. those details will be announced over the next months. jessica: a former apple engineer is being accused of stealing trade secrets for china. he was arrested and is said to have downloaded information on apples driverless car project for his new employer. the news comes as washington plans emergency laws that call for more scrutiny of information

housed in sensitive u.s. industries. france will meet either england or croatia in sunday's world cup final after defeating belgium in st. petersburg. in 1998 champions held off a fast start to gain the upper hand. a defender had the only goal of the game in the 51st minute. tomorrow croatia will play for a chance at their first ever world cup final as they meet in 1966 champions, england. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. yvonne: jessica, thank you. still ahead, president trump heads into the nato summit with a fresh round of potential tariffs and ready to press allies on defense spending. ramy: plus, how markets could react to the latest shots of the trade war. we are speaking to marvin loh. this is bloomberg. ♪

ramy: welcome back. i am ramy inocencio in new york. yvonne: i'm yvonne man in hong kong. let's get a quick recap of the u.s. market close, where stock balls took advantage -- stock bulls took advantage of a lull before trade worries push stocks. a lot of optimism before this announcement. sue: a lot of market watchers that have said if you x out the trade war top, the market moves higher. let's go to the pepsico story, because this grabbed the optimism of the bulls. you saw pepsico exceed expectations. this has been a badly be enough stock. soda stocks have been hurt by americans' move away from sugar. it was the move away from salt

that caused pepsico to be one of the big movers. analyst,rom an including they continue to have strong performance in macau. a downgrade on autonation concerns that americans are moving away from buying cars to sharing cars. pg&e has continued to be under pressure on concern it will be found liable for wildfires in california. the biotech and tech stocks were under pressure. ebay under pressure on concern of the supreme court taxing online procedures -- purchases. facebook looking to be perhaps liable with the scandal at cambridge analytica. twitter continuing to take hits as they get rid of some of the boy were fake accounts -- the bot were fake accounts. bloomberg gtv is where you find charts. earnings on friday. banks, including jpmorgan, which continues to outshine its peers.

a lot of focus on what they will have to say. after hours, we see the s&p futures dipping lower after four days higher. a lot of this having to do with the headlines that are coming out about this list of tariffs. we are hearing in some of the latest headlines it might take two months to formalize this process, but that is going to pressure stocks or at least the premarket as we head towards the open. ramy: su keenan, thank you very much. meantime, we now know president trump is ratcheting up the trade fight with china with those initial $200 billion in tariffs. let's assess the implications with marvin loh. in the break, we were talking $50 billion, it is almost like a wine glass. and you a sonic polls don't see it vibrate at first, but now we are seeing it. the markets do react. >> one of the constants we have

had to deal with has been this trade discussion. it has been the one topic that has kept investors' attention, from either concern and/or opportunity when the rhetoric went down. earlier on the year, it was interesting to see the risk off assets, stronger yen, lower treasury yields, did not react that way. investors were sanguine about what might involve. haverecently as numbers been bigger, you do see the risk off trade making its way in the market. it is a representation of investors taking it more seriously than earlier in the year. ramy: a lot of analysts at this point have been saying, it is not going to get worse. pagesearly with this, 205 , $200 billion, $100 billion average per page -- expensive paper, right? [laughter] ramy: looking ahead, what will be the biggest hurt?

the dow down .9%, s&p down .8%. >> i think equities are somewhat valued. valuations have improved a bit over the year, but they are by no means cheap. they will be one of the first asset classes to feel this. globally whether or not this leeches and other global forces on the equity side is also legitimate. if we start to get a more significant risk off move -- treasury yields starting to collapse and messages associated with that -- we start to worry this might domino. i think we are going to come tomorrow with the list, go through the list. at the same time, we are going to wonder, is this real, is it bluster, posturing and sending a message to what might be difficult conversations in europe? it is all on the table. yvonne: are treasuries still the right place to head amid these trade tensions?

you mentioned we did not see a huge reaction to treasury yields when we heard the escalation. are we likely to see more of a top when it comes to the u.s. 10 years? >> i think so for a couple different reasons. one of the main reasons is i am not in the camp that we will see treasury yields move significantly higher, even as we have a fed that feels good about the economy and says they're going to hike rates. inflation internals and other things, the risk that is around the world, keeps treasury yields around here. i don't see that must downside in trying to get into a safe asset like treasuries at this time of the discussion. yvonne: you have been talking in your notes about the fed's prescribed tightening schedule. we are about halfway there. you are saying we have seen some cracks, especially when it came to dollars scarcity. tell us what the situation is when it comes to dollar shortage and what that could lead the fed to do. >> it is early in the

discussion. it is something i am noticing, something some fed members have talked about, but they glossed over it in the minutes. they are not concerned about it. it is interesting that the reserves within the banking system are declining at a faster rate than the assets within the portfolio. it is something to be aware of at this point. if in fact we do have gdp implications from some of these trade discussions and credit is potentially tighter then maybe some financial looseness indicators indicate, we might start to change our view on how aggressive the fed can be going into late next year and 2020. yvonne: so that means slowing at the balance sheet unwinds? or does it also impacts stalling when it comes to fed rate hikes? >> there is a lot of information that needs to be gathered before changes. certainly they have a prescribed

message and they have stuck with it, but i do think slowing the sheet is a sheet is a possibil. whether they take a pause to see how these things shake out is the potential. ramy: earnings season is almost here. i am looking at this as a support for the tradewinds. with this $200 billion, to what degree will this paul everything down? i want to show what is happening in terms of earnings expectations. this is in the gtv library. through the0% or so second quarter, third quarter, possibly fourth quarter. three for a 19, coming off the sugar high ending from corporate tax return. >> that is probably one of the biggest questions. we always look between nine and 10 months in advance to figure out what that is going to look like. earnings have been strong. there is no doubt the first quarter beat, second quarter

will likely be. you will be talking about 20 plus percent for the first half of this year. gdp growth numbers are coming and fairly strong. all of that does provide support. once those headlines come out and get more serious, the markets do experience volatility. up until now they have proven to be buying opportunities, but it is something i think we need to get used to and ultimately accept and/or moved to the sidelines if it is volatility we are not comfortable with. from a before you go, credit perspective, which is your forte -- i have a chart that highlights what we have been seeing when it comes to high-yield -- when you take a look at the spreads, they still are fairly tight, barely budged. do you expect the spread to remain tied for the second half? >> have not but that much -- have not budget that much. when you start at a lopez, we are working -- at eight lopez --

at a low pace, it is not without pain. there are interesting developments in terms of where investors are comfortable with the investment grade part of the market. very comfortable at the front end. when we see them preference, we are supposed to take that seriously and position ourselves around what those things are, whether there are more longer-term concerns with recessions, whereas short-term things look pretty good because of the tax package and economic gdp numbers that are expected to get stronger. yvonne: we are going to leave it there. managingh, bny mellon director from new york. bloomberg users can interact with the charts. you can browse the charts featured on bloomberg tv and catch up on analysis and save charts. this is bloomberg. ♪

ramy: a quick check of the business flash headlines. jefferies has upgraded tighter consultancy to buy from hold after first income -- first quarter net income jumped 20%. asia's largest software services provider reported a net income of $1.1 billion, 5% above the estimate. they see further growth in digital sales after revenue from the cloud and big data jumped 45% in a quarter. yvonne: investigators in switzerland say malaysia's 1mdb investment fund was a ponzi scheme to pay bribes. the attorney general says six people are under investigation and two swiss banks remained under suspicion. malaysia says at least $4.5 billion disappeared from the fund. the former prime minister has been charged with corruption. ramy: blackstone is said to be nearing a first close of $3 billion for its firstenergy fund.

it's energy partners will start investing after closing the around. the fund was targeting $4.5 billion, the same as it on a 15 predecessor. blackstone's total assets ridged -- reached a record $450 billion in the first quarter. ♪ in the first quarter. ♪ phones have made our lives effortless.

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>> 7:30 a.m. wednesday in hong kong. it's sunny out there today, but of course new developments of the trade war potentially escalating further here with the u.s. now targeting $200 billion of goods to put tariffs on. ramy: 7:30 p.m. here in new york. work its will be close before that news hit, up about .3%, the highest since february. we will see what happens on the markets, the first to feel the pain possibly could be in the asia-pacific.

>> you're watching daybreak asia. the in strengthens our reports that president is preparing tough you tariffs on china that could be worth up to $200 billion. a list of targets may be released any moment that would ratchet up tensions between the world's two biggest economies. i natural markets shrugged off the initial tariffs u.s. stocks up since friday's decision. the european union says the uk's divorce settlement is 80% complete, but warns the irish border remains the biggest dumpling block. negotiators as much progress has been made while floating ideas about how financial services would interact after brexit. the deals of our includes protection for u.k. citizens living in the block and for easy citizens in britain. also a 21 month transition period. two contenders have emerged in the race to succeed the morgan

stanley chief. another possible candidate will become head of international operations. seniorhas been shuffling executives but indicates he plans to stay on for several years. all 12 boys and their soccer coach having rescued from a flooded cave system in northern thailand. fouravy says the remaining players and the coach were brought out safely. they are now recuperating in a hospital. missingts team went while exploring the cave after soccer practice. the governor said the rescue teams have done something no one thought possible. global news, 24 hours a day, on-air and at tictoc, powered by more than 2700 journalists and analysts in more than 120 countries. i jessica summers. this is bloomberg. yvonne: where can down to some of the major market open here in the asia-pacific.

what is this the -- what is the senate so far? we're seeing a drop in u.s. futures, the dollar, the yen retreating and the yuan could face another leg lower. this knee-jerk reaction -- to prepare this extended list. the game ofure is chicken between the u.s. and china is not likely to stop anytime soon. bear in mind that the final decision of the u.s. on these provisional tariffs will be expected after august 30. it took into account the impact on american consumers, so watch for reaction and companies that could be affected, stuff like

furniture, refrigerators and electric vehicle batteries. it looks like the tesla plan for a china factory is gaining even more urgency and whether or not we see the pain in asia, let's check out the futures board to see how that set up is looking. so far it looks like were seeing a hint of a negative start in aboutwith the futures off .8%. some resilience potentially from seoul, but it could overshadow the positive earnings story and push that out of the way for now. is holding gains as u.s. supplies are expected to fall for a fourth week in a row. outlook for prices from here? >> ever higher, given the u.s. pressure, as you pointed out rent is at a high with $80 and

hour. standard chartered today said oil could push beyond for your settlement highs as the market is underestimating the reduction of iranian exports. a break to the upside could be imminent after oil prices have been trading down. and recently raising the forecast for print and wti this year. sophie checking the markets on what could be a volatile day. one of the world's largest and most aggressive investors is turning cautious as the global risks continue to mount. they poured $95 billion into everything from startups to asset managers in the past five years, but it is now planning to slow its pace of investment as those trade tensions rise. the head of strategy told us exclusively how he sees this trade war playing out. we've seen sos far are still pretty small in terms of the actual implementation of tariffs.

what has been worrying is the escalation of the rhetoric to very large numbers in terms of the number of products that would be hit by tariffs, but also the broadening out of that to include other trading partners like europe and canada. so that is also a significant concern and is part of the reason for us to tim burke are pace of investment. -- for us to timber our pace of investment. concerns ands its some opportunities. u.s., iting in the still very robust. but with that could eventually come a greater chance of u.s. recession, and that of course causes problems. but there could still be a lot of interesting opportunity in spacelogy and the biotech in the u.s., so we are still investing there. in europe as well, will be impacted if there is the u.s.

recession. china will be impacted by that but again there are some exciting opportunities in specific things we are investing. i think the combination of the trade tensions with the normal cyclical recession in the u.s. is the largest risk we are worried about. the trade tensions here, we don't expect a full-blown trade war with high punitive tariffs on wide variety of countries perhaps, but just a high level of trade tension, that's already going to have an impact on business confidence and plants. so that creates a risk, and with the late stage fiscal expansion in the u.s., that's going to complicate monetary policy for the fed. so that creates the risk that it becomes a little harder for them to get monetary policy calibrated exactly right. so that combination of events is the largest risk. perhaps i should just like that what we're talking about is a

normal, cyclical recession in the u.s.. we are not talking about a very large financial crisis type of event. >> if there wasn't escalation into a full-blown trade war, the u.s. could come off worse than china because you mention of it start tod see hurt in terms of hiring and in terms of. >> everyone is a loser in that environment. hascally the country that the large account surplus is the one you would think ordinarily would be the most at risk because the demand will disappear. case, china does still have some policy tools. escalate,de tensions they can use monetary fiscal policy and so on to help insure domestic growth continues. so they have at least some of those additional trade tensions and that's something the u.s. would find it harder to do.

there's much less fiscal room than her has been in the past in the u.s. yvonne: that was michael buchanan speaking to our very own juliette saly. a former apple engineer has been arrested on charges of stealing driverless car secret for a start up. the story is in san francisco. mark, good to see you. at certain levels, the story kind of speaks to the frictions were seeing because that's between the u.s. and china regarding tech. give us some background. >> the background is the autonomous striving car world is one of the hottest deals right now within china and silicon valley. pretty much every tech company that you can think of is working technologies, whether apple, google, amazon, europeanlift, all the car companies. all these companies are fighting for supremacy in this key field that's going to dominate the

roads of not only today but tomorrow and for decades to come. -- what a former apple engineer is accused of doing his prior to resign from apple, taking key details and proprietary information from apple campus and presumably or allegedly planning to export that to a chinese autonomous carmaking company based in china. where does apple stand in the autonomous car space? where are they now, given the likes of uber right now? >> they are working on a core cars on to manipulate the road and talk to each other, but also the fundamental software platform for cars themselves. we know they been working on this for a few years now. the lawsuits confirm much of the people applehoney

has working on this. there are dozens of different autonomous cars on the road. apple is working on exporting but what we don't know is what they're going to do with it on the consumer side. also what we really don't know, we don't know how good it is apple has not been doing this long enough, they've not had to register with the california dmv to note how many times the cars have been involved in accidents. we can gauge that from uber and other companies that have been doing this longer, how reliable the technology is, but it is still to see how good apples is because they are still so fresh in the game comparatively. suppose it's a matter of flattery if people just take your stuff and they're not sure if it works or not. hasn't there been a situation like this before? mark: there was a situation wheren google and waymo an engineer went from google to

uber and took information to uber and the engineer was really at the center of the big california-based trial and alleged crimes over the past year or two. that was a really big topic here that we were covering eight votto. this feels like a mirror image of that. it's not as high profile a case and thenou have apple you have this chinese automaker on the other side of things that's really not a big name. the prior lawsuit between uber , they are two of the titans in silicon valley and that's why got so much attention. it is to be seen what happens here with this charged employee, but it's still an alleged crime and we don't know the outcome yet. ramy: and the idea of i.t. theft is something we been discussing on bloomberg 48 long time especially as these trade tensions ratchet up. mark, always great to speak with

you. up next, president trump finally touches down in brussels, saying many nato members are not paying their way. heather.analysis with this is bloomberg. ♪

yvonne: now for a look at some of the story streaming across the bloomberg universe. credit suisse is said to have dismissed as senior banker after allegations of inappropriate behavior with an intern. over on tictoc, apple's app store is celebrating its 10th earth day come after a decade, there are over 2 million apps for the iphone alone. ahead of the nato summit and a visit to the u.k., president trump said meeting russian leader vladimir putin will be easier than meeting british prime ministers theresa may. check out some of those stories online or on the terminal. ramy: let's talk more about

where the stories just mentioned, president trump at the nato meeting in brussels, repeating his claim that the members just are not paying their way. and he tweeted this. many countries in nato, which were expected to defend, are not only short of their current commitment of 2% but are also delinquent for many years of payments that is not been made. will they reimburse the u.s.? council president donald tusk hit back. take a listen. your allies,ate after all come you don't have that many. you have spent more on your defense because everyone expects -- ramy: let's cross to washington and speak to heather conley, senior vice president at the center for strategic and international studies. heather, great to speak with you here. i want to hop into the bloomberg

terminal to show you what's happening in terms of the percentage spent for some of the biggest guns, so to speak. germany here, the white line, 1.2%, not hitting the 2% target. states 2.2%, the united 3.14%. looking at these numbers, does donald trump have a point? >> he deftly has a point, that europe has not been spending sufficiently on its defense, but the allies knew this back in 2014, which is why they made a commitment to increase their gross domestic product in defense spending by 2% over the next decade, by 2024. then came the migration crisis in europe in 2015 and then president trump election. so that gotten the message, they are increasing their defense spending, but it came from a very low point, and the have to do more. that is clear. ramy: the fear among many is

that donald trump is going to be focusing on the numbers and the budget. to what degree will this guide or derail whether this is a success or not? you're absolutely right. this summit is poised to be very successful that for president trump. it's doing things he wants the oniance to do, focus more counterterrorism and increased defense spending. nato will announce and iraq training mission and will continue its vital mission in afghanistan. 2%,if he makes it all about about what have you done for us lately, it actually will destroy many benefits the positive summit could produce for the president. why do you think there is such an obsession with that 2% guideline from the president? it seems like it's almost like a magic number for strong defense spending. is that the right way to look at it? i had a goodsh

answer to take my the president is so fixated on that number. but i would take a step back and say i think the president has a strong misunderstanding of what allies are. allies support the united states, they amplify our power and influence. the president seems to think that allies are enemies and our enemies are our allies. i wish he would understand that while europe has to spend more on its defense, it has sent his soldiers to die in support of u.s. interest in afghanistan and in iraq. we are so much stronger when our allies are with us. you could see that just last ofth with the expulsion russian diplomat. over 28 country supported the kripal kingdom after the s poisoning. we are weaker when we are alone. yvonne: what does this mean for it to go president trump's way?

ofit pulling troops out europe? the second part of the tweet, something that allies 08 bill or they are due to the nato alliance. that is not true. , butve a shared interest you are absolutely right, we know the white house has commissioned the pentagon to look at u.s. forces in germany and others. could he basically put a grand bargain, if you don't pay 2%, we don't supply your security. if he does that, you fundamentally weakens the nato alliance and then of course he is on next to helsinki where he will meet with president clinton p -- presidentutin -- president putin. yvonne: we have some breaking that it coming out from japan.

expected, economists were expecting the fall of nearly 5% but much slower hear from the 10.1% that we saw in the previous month. year on year still looking at bit better, up to 16.5%, slightly better from what was 7%.cted of nearly still in negative territory. on month, 0.2%, both in line with expectations. mentioned the reception the president could get from russian president vladimir putin. what should we be watching out for? it's the first summit between these two leaders. are we likely to see any concessions whether on crimea or?

syria -- crimea boards syria? >> they have actually met three times, twice on the margins of they sat down and with each other, but this is the first formal summit with her should be clear agenda items, arms control is probably number one. can the two countries set forward a framework that deals with russian violations of the imf treaty, potential violations of the new start treaty. by 2021o be extended comes so hopefully there will be some greater transparency as new weapons that violate a number of arms regimes. syria, you're right, rush is dominant militarily in syria, with the assad regime is really broken the the conviction johnson south -- zones in southwest syria.

i think he will say you will even you have to make sure that iran does not create a land bridge in syria. it is unclear how that will work. finally, ukraine, would president trump attempt to recognize crimea as russian? yes hinted at that. we've seen joint statements coming out of congress, bipartisan, to say if the president does this, congress will immediately put legislation in place for the u.s. never to recognize crimea while it is illegally annexed by russia. ramy: a great rundown of the possibilities that could come out of that meeting. also the optics with vladimir putin and donald trump standing side by in terms of possibilities for success, what could be the easiest low hanging fruit that everyone potentially comes away at least a little happy? heather: the alliance is going iraq trainingw

missions, and continued hard work in afghanistan. the were looking at an alliance that is focusing on military mobility and readiness, moving 30 squadrons, 30 ships, 30 battalions, what response, two new commands, and atlantic command and a logistics command. this is an alliance that stepping forward to meet 21st century challenges, those that are presented by russia as well as isis. that is what is on offer at the summit today. ramy: we will have to leave it there, but a great discussion with heather conley. don't forget our interactive tv function, you can watch us live in cash upon past interviews as well as diving to any of the securities are bloomberg functions that we talk about. become part of the conversation by sending us instant messages during our shows. this is for bloomberg subscribers only. check it out at tv .

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yvonne: about three minutes away from the market open in japan. australia expect some shots in the asia session, despite what we saw on wall street overnight. the latest of elements from the trump white house that the proposing more tariffs on yet another $200 billion on chinese goods. we did see that risk off by to safety, nikkei futures seeing the biggest downside about .9%. coffee future still up about .10%. we kind of reverse some of the gains earlier. take a look at currencies as well, a flight to safety into the in, dollar-yen breaking above 111. .6%.ussie down about blackrock's global cheap investment strategist

joins us to talk about the latest in the u.s.-china trade war and his outlook for the global trade war. that's coming up next. this is bloomberg. ♪

yvonne: we are live from bloomberg's asian headquarters. welcome to "bloomberg daybreak: asia." as presidentgthens trump prepares new tariffs on china. he wants 10% duties on $200 billion worth of product. already vowed to retaliate dollar for dollar. critics say the escalating trade war could threaten global growth. ramy: and from bloomberg's global headquarters in your, it's just past 8:00 p.m. on a tuesday. asia has the first reaction to the escalating spat. the expectation is that it will snap two days of market gains. switzerland says the fun was simply a ponzi scheme to pay

bribes and enrich conspirators. yvonne: and just got that wake-up call and morning from the trump white house, said to be considering another round of tariffs on this site, $200 billion of chinese goods. this chart highlights were seeing in the u.s.-china relationship right now. if you include the $34 billion we saw last week, also potential 60 billion in the next week or so and you added to the 200 billion right now, it pretty much covers a majority of chinese exports to the u.s.. the sharp escalation will see how the markets react to that. there's a lot of questions on if it's all been priced in even the fact that was telegraphed a month ago. we'll see if the reaction is overdone.

taking a look at u.s. futures, were seeing the initial reaction to this, whether it holds later into the trading day tomorrow is another thing, but take a look at the numbers. believe the dow jones is at the lowest that we been looking at over the last few hours. taking a look at gold, just a u.s. 10er there and the year, we can see that falling a little bit further. earlier it had been 2.58%. we seeing a bit of a bloodbath. >> taken a look at what happened to the drop in u.s. futures, the market certainly being put to the test in seoul as well as tokyo with a halt of a three-day rise for the nikkei 225 and the kospi.

this as the aussie is on the -- extending its late tuesday decline. the offshore yuan moving back toward 6.70 in reaction to the news --ew -- terrace tariff news. we're seeing treasury yields nudged lower here and we'll see falls belowot it 2.8%, and that could provide support for that yen as it halted two-day retreat. this week's data will be closely watched, given the potential inflationary pressures to import prices. speaking of data we are watching this morning, we did get the latest read on japanese producer prices, coming in as expected,

plus machine orders better than expected for japan, although still registering a month on month drop of 3.7%. and malaysia's rate decision expected to hold. the forecast drops for a and we have indonesian retail sales on the agenda. very busy day, sophie kamaruddin on the markets. let's get the first word news with jessica summers. says theeuropean union u.k. divorce settlement is 80% complete but warms the irish border remains the biggest stemming block -- stumbling block. a floating ideas about how financial services would interact after brexit. the deals of our includes protection for u.k. citizens living in the block and for you citizens in britain. also at 21 month transition period.

bill gross has fired a warning shot at the fed. he said he expects no more than two rate hikes in the next year, warning of recession if they stick to the current faster outlook. he said he agrees with the current odds for tightening but much depends on inflation and the fed's willingness to tolerate it running above 2%. tesla is to build a new factory in shanghai, its first plant outside the u.s. will make it the first wholly-owned foreign automaker in china. financial details were released but tesla says construction will begin soon. it's aiming for production of a half cars annually about two or three years later. it will be the biggest foreign investment in shanghai. biggest question for investors is how are they going to pay for it. i think you will see something similar to what they did in nevada with a partner like panasonic. you'll see someone step in there. i think those details will be

announced over the next two or three months. >> president trump has arrived in europe ahead of a one-on-one summit with president putin. president trump said those talks maybe the easiest late of his trip. he also repeated his demand that nato members contribute a larger share of the budget. saying he is a competitor. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers, this is bloomberg. jessica, thank you very much. the front administration has now pushed ahead with those plans to impose tariffs on additional $200 billion in chinese products by releasing a list of targets. this is an escalation of the trade war between the world's two largest economies. tom mackenzie joins us from beijing with more. any reaction from china yet?

tom: not yet, but we can be pretty sure that china will come out with a statement or at least some comments pretty shortly. so expect them to lambaste the trump administration for this escalation in the trade tensions and they will probably no doubt reiterate their determination to retaliate in kind. the question is how they do that, talked about the fact they cannot match the u.s. blow for blow on terrorists because the level of imports into the chinese market as much lower but they may race the level of duties. on the broader picture, the strategy appears to be crystallizing for china. in terms of the global political staff, china trying to build up its alliance with the european union, we will get more details next week when you get senior european union leaders here in beijing for two days of talks. watch out for that. in terms of the other side of the china strategy, it's betting that u.s. corporate in some of the farm states over there will

start to leverage pressure to try to change the course of action from washington. we have until august 3 for this consultation, so that the window of opportunity for consultation and talks to start. giveswill be hoping u.s. them the chance to restart these conversations, but certainly we're listening for what the reaction will be officially from china later today. yvonne: i guess you could say we've seen this telegraphed before, it's not a surprise, but althoughomes to china, we're seeing a structural slowdown, how vulnerable is it at his point? tom: we're seeing some of it play out in terms of the current he the yuan seeing the pressure equity today and the markets have faith something of a bloodbath over the last few weeks. we will see how they react as well. policymakers trying to come out with some calming words around the action or see how the current stock market.

they come out and said they would work some of companies in the sectors that hit all caps and that hit by the tariffs and they got the cash available to do that. we may see further action to channel some more credit to the sme parts of the world here in china. a more complex issue. the question is to what degree it diverts policymakers attention away from their campaign to the risk the economy and tackled the debt. that's something that will be closely watched. we'll get some export data out on friday and the latest gdp prints on monday. so all kind of fleshing out the picture in terms of china's economy and to what degree does being put under pressure by the trade war. thank you, tom mackenzie, our china correspondent joining us from beijing. that's get more from our -- our guest this hour, richard turnill . how much has the trade war

dominated your thinking and thought process? could we see things escalate further? richard: thanks for having me here. trade escalation is at the forefront of investors minds. seeing this uneasy balance in markets. very strong earnings growth coming through, but under rising uncertainty about future growth of the economy. byt has been exacerbated trade tension but also uncertainty around geopolitical risk. right now are seeing the balance swing back and forth. economic strong outlook, the rising uncertainty implies it's time to put more resilience in. yvonne: leading up to today we saw the risk rally mount up all over again. we're no longer talking about to steel and aluminum tariffs. how inflationary could it be in terms of a headwind when it

comes to rising prices or even just market access being limited between the u.s. and china? richard: scale is still relatively small. to about 0.1% of u.s. gdp. meaningful, but not dramatic. in terms of a direct impact on the economy and inflation, is likely to be small. but investors are worried about is the indirect effect come at what point does it start to hit business confidence and defer investment spending? commentinge ceos more and more about these issues. so were looking for any evidence of the trade tension leading to an impact on the growth outlook. as yet we are not seeing that, but that's what we have to focus on going over. yvonne: i guess you could say popular withre trump but easily reversible. with china it's kind of a change

in terms of how they are addressing this. bce on musk and tesla building a plant in china. these are moves that are not easy to flip a switch and reverse. perspective,ngs how are we accounting for these types of changes? --ther: possibly a trade richard: ultimately a trade war is not in anyone's interest. in the short run, it's difficult to see what will bring an in to this escalation of tit-for-tat. concerts will weigh on market returns and cause investors to look for resilience in their portfolio to invest in higher quality assets. ramy: let's go into that a little further. in terms of the access that might be a bit safer moving ahead, now that we see that is not just $34 billion, it could very well be 200 and $2 billion here.

the areas we would be looking at to invest in right now, i'll start with the u.s. equity market. it's the highest quality market dependablehe most earnings growth. the strongest earning growth, looking for over 11% earnings growth out of the s&p next year think that provides a significant cushion to investors when looking for higher returns. when we look outside the equity market, we're seeing increasing opportunity and short-term interest rate for the first time in many years. you can get a positive, real return by owning to your government bonds in the u.s. and adding investment-grade paper or you can now on over 3% return in relatively safe haven assets. we are seeing more flows into those areas as well. you think that is appropriate going forward is client focus on whether they can get say income growth in anle uncertain economic outcome. -- past four days

the markets have been on a tear. it's been a story of whether people focus on earnings or trade. it had been the former versus the latter. you intimated just now talking about earnings, for this year, each quarter of more than 20% in terms of s&p returns. 2019 possibly only about 10%. triggeredit see saw from one side to the other where earnings no longer may be able to support? richard: at present we are seeing clear signs that the u.s. economy is strong and actually accelerating, and that is feeding through two upgrades to earnings expectations into 2019. we are not seeing any macro applications of higher trade. the situation where the economy and earnings are strong and the markets are much softer and trade tensions are rising is

ultimately unsustainable. it contributes to growth slowing and we see consumer and corporate confidence crack, or trade tensions ease, which we seen the last few days. it's hard to call, and is that uncertainty that implies you want to focus on those assets were you have the greatest confidence that earnings and return come through. ramy: we're going to have more with you, richard, we will find out why blackrock decided to downgrade japanese and european stocks as well as what other risk by ahead. come the lowater down tesla's groundbreaking auto plant in shanghai. this is bloomberg. ♪

yvonne: this is "bloomberg daybreak: asia."

yvonne man in hong kong. asian markets just getting underway. we've been talking about trade tensions escalating one step further. we are seeing risk off day here when it comes to equities. the cost be taken into the heart is so far this morning, down 1% and the nikkei 225 as well, down .8%. rallying, given some of the trade tensions that are escalating. $200 billion the u.s. is considering when it comes to goods were there could be potential more tariffs on china. ll is still with us. neutral in japan. tell us why, is it because of the trade tensions? and global financial conditions leading to lower return zone over equities. there is greater uncertainty. in want to reduce exposure

some of the more cyclical markets and some that are more vulnerable to explanation -- escalation, also in the case of your in domestic and political risk. we feel the long-term outlook for japan is positive, it's relatively inexpensive market where monetary conditions are favorable and we see positive earnings growth, but in the short run don't see the catalyst for japan to move statistically higher. yvonne: when it comes to the mill to we saw for the four days, now we are seeing the renminbi losing a little bit of that strong lift that we saw this week as well. chinese stock have been recovering as well. do you think the latest development could stall the whole rally all over again? richard: we think investors should focus on the long-term. you want to look at where your being paid to take risk. emerging markets are trading around 11 times earnings, below

their long-term average. one of the few assets globally can look at today, at a time when international equities are more highly valued. premium isant risk priced into emerging markets today. calling on the short-term when the trade tensions are going to it works are better, it's in -- it's an impossible task to you can say you're being paid an attractive premium a time when chinese work is holding up well. growth is being sustained at significant levels and when the fed is being gradually raising interest rates, and for us, when we take the long-term view, that creates a favorable backdrop for investing in emerging markets. didn't see these trade tensions, would we still be in a bear market right now? so the: emerging market airy that will be the greatest beneficiary for that.

it's a graded short-term outflows in the last few weeks as concerns have risen. that's for you see the value appearing in the market today. you want to buy into some of that weakness. yvonne: where would you look within the em space? the economic fundamentals, so to speak. richard: i want to differentiate across to criteria. you want to be wary of areas are you see high degrees of financial leverage, particularly as interest rates rise in the u.s.. that points is more toward asia and less to latin america and europe. within asia want to focus on countries where you are seeing structural growth and where valuations are relatively attractive. that's india indonesia, and china. china, iting back to have a chart i want to bring up.

support,bout earnings the route really has not shaken endless bets on turkey. it sounds like he would say the same here. chinese equities are your the cheapest since back in february of 2016. you can see in the blue line. to what degree do you think this movingtinue to hold out ahead, still wearies headwinds as were seeing them grow with these trade tensions? richard: when we look forward we see that low level of valuations that chart is pointing to as attractive, at a time when growth is holding up, earnings are improving, and international investors are starting to pay more attention to china. it's clear as the chinese market opens up, chinese equities will play a larger role in international indices. run difficult in the short but we see long-term opportunities for investors in the chinese market and in

emerging markets or broadly. ramy: we have to talk about happening with the fed. what are your thoughts there in terms of the differential? richard: the fed has set out an increasingly clear path. the going to raise interest rates was the quarter and going into the first half of 2019. most that is now priced into markets. globally,f investing it creates an environment where investors can be a little more confident and there's less potential for surprises. i think it implies lower returns globally, and for the first time in 10 years, that path of short-term interest rate hikes priced into the market means you can get a positive, real return when investing in relatively short duration assets right now. think that has invocations not just for treasuries but for lower returns and all financial

assets going forward. it's more more important to focus on where you get sustained growth. we're getting closer to the offshore renminbi. is this mostly due to dollar strength? richard: it's been exacerbated by dollar strength. we don't see the chinese using the currency as a policy to going forward. think some potential continued dollar strength looks reasonable to us given the path of interest rates. there's a lot of good use dow in the price for the dollar. thanks forhard, joining us here in hong kong. you can get a roundup of the stories you need in today's edition of daybreak. this is bloomberg. ♪

yvonne: a quick check of the business flash headlines. toyota has launched a car sharing service that allows smart phones to pick up a car by the hour or day. is designed to disrupt traditional car rentals and was developed with the local sugar. toy: leasing electric buses cities, schools, and corporations. is partnering with generate capital to provide electricity across the country and investment cost of $200 million. despite america's low interest electric vehicles, venture has already sold buses in three states to facebook as well as to stanford university. a $5e: jetblue is making billion bet on airbus. youcarrier is ordering 16 planes to replace older aircraft jetblue currently uses on short

hop such as new york to boston. did you planes could see up to 60 more passengers than earlier models and airbus claims the a220 first 20% less fuel. next

yvonne: take a look at singapore, a: 30 in the lion city. we see markets on the back foot here as president trump ratcheting up china trade tensions with the new tariffs list. watching "bloomberg daybreak: asia." the first word news now with jessica summers. jessica: all 12 boys and a coach have been rescued in thailand. the navy says the remaining four players in coach brought out safely and are now recuperating in hospital. 23 team in missing on june when exploring the case after soccer practice. the provincial governor said the rescue team at done something

nobody thought possible. the yen strengthened us president trump prepared tough new tariffs on china. they will involve 10% duties on up to $200 billion of goods and are expected to cause retaliation from beijing. generally positive reaction to the initial tariff exchange. treasuries rose as news about the plan emerge. two contenders have emerge in the race to succeed morgan stanley chief james gorman. willer possible candidate become head of international operations. corn has been shuffling senior eventuals to bring his successor although he's indicated plans to stay on for several years. france will be either england or croatia in sunday's world cup final. that's after defeating belgium and st. petersburg.

the champion held off a fast start to gradually gain the only one goal in the first minute. tomorrow a chance for the first ever world final as they meet the 1966 chevy, england. global news, 24 hours a day, on-air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. jessica, thank you. time to see how the asian markets are shaping up so far this morning. >> getting served a reality worsenand it could depending on how china responds to tariff that could widen the economic impact. currencies under pressure while the dollar and bonds with a slight uptick in treasuries.

the stakes are being raised here, check out the offshore ,uan, it could be edging back falling the most in eight weeks. taken a look at the damage in equities, you do have japanese stocks falling for the first day in for with electronics and banks weighing heavily. let's take a look at some stock movers in the region. i want to highlight with going in players like mitsubishi motors. the carmaker said one plant remain suspended, that stock down nearly 2%, and kobe steel losing ground. japanese prosecutors are reportedly pursuing a charge of unfair competition law over the data falsification scandal. that duringreport president moon's visit to india he met with a chairman who spoke of investing 1.3 trillion won in the carmaker. at the latest on the markets.

many asian central banks have taken more hawkish stance as fed rate hikes hit emerging-market currencies. malaysia is in the interval position of being able the wait out the storm. kathleen hays is here with more. i think it's pretty resilient with the trade tensions. kathleen: definitely we see no pressure on the central bank of malaysia to raise its key rate as it did in january. shielding it from the forces on central banks and indonesia to racer key rates to support the currency. meanwhile, higher oil prices are boosting inflows into the country and boosting the current surplus. they are scrapping a consumption tax that will help curb inflation. that's not really a problem in malaysia right now.

in fact is one more reason for them not to repeat that january rate hike. let's jump into the bloomberg library and what you can see is the key rate of in january by 25 basis points, the first rate hike since 2014. of to 3.25%. look at inflation, it got as low as 1.2%, it's back up to 1.8%, but the central-bank target is up here and they have a long way to go. one of the big reasons why every time a survey said they will keep the key rate at 3.25%. no reason to hike or no reason to think about cutting at this point. ramy: what is the biggest challenge for the new central bank governor? is she up to the task? kathleen: i would certainly say yes. she is the former deputy governor, so she knows central banking and she knows the situation in malaysia and has

helped formulate policy in the past. so i would say definitely yes. i think of challenges supporting growth by keeping rates on hold. that's what people expect her to do. the malaysian government is in flux. pipeline new energy development china, high-speed rail in singapore. at the same time the trade war for threatening the very export dependent nation. nevertheless, here's a bright note again for malaysia, putting her in a sweet spot as the new central bank governor. it's true that their economy is slow, 5.4% in the first quarter, not nearly as fast as 6.2, but still very healthy. most economists do expect malaysia to keep that rate going well above 5%. this is a rate that certainly will be good for the country and the economy, but as long as

inflation stays as low as it has been, this gives simply neoprene to just let things go. iny: one interesting thing our latest news report is that the trade risk definitely comes into factor here. the economic policy is still in flux. so they'll be looking to support growth by keeping the rates on hold. to try they have to do to figure out the trade risk that are rising? kathleen: what can anybody figure out, because you are caught between china and the u.s.. malaysia like so many nations is a big exporter, all they can do is hope the worst doesn't happen and they are able to rise away from the trade storm. i think that's another reason why the government is considering some of these spending projects in the midst of all this. get domestic demand going and keep things on track, but it's a tricky time for every country in the world. we will leave it there.

kathleen hays, thank you very much. switzerland's top prosecutor there was aa's -- ponzi scheme where a group of conspirators pocketed funds as well as bribed officials. authorities have been investigating how billions of dollars made its way into swiss banks. more on this from our asian news desk editor in singapore. what are the swiss actually saying about what they have discovered so far? >> the swiss have been investigating for several years now, since about 2015. the deputy general was in malaysia yesterday. like you were mentioning, it was a ponzi scheme where about $7 over a. of about six years. so they're looking at how much

was misappropriated. us more about the swiss connection here. had we follow the paper trail hear from malaysia all the way to switzerland? in terms of the biggest banks , they believe swiss banks for use as a conduit for some. the swiss are looking at at least six people there investigating for a connection. they've find a couple of banks for their roles. signaling that illegal transactions has taken place. yvonne: we've been talking about this for years, but what you think it's taken this long for the investigations to wrap up on the swiss side? what is at tate about the investigation? -- what does it say about the

investigation? >> they're saying no funds were swissso that's why the had help from the previous administration terms of inventing the investigation, but they changed in may when the new government said yes, the money was missing, so they stepped up cooperation with the u.s. in singapore. yvonne: thank you for that from singapore. coming up next, tesla becomes the first wholly-owned automaker in china. critics question how much is all going to cost. know about the plan so far, coming up next. know about the plan so far, coming up next. this is bloomberg. ♪ omberg. ♪

ramy: welcome back. this is "bloomberg daybreak: asia."

tesla and shanghai have announced a groundbreaking deal for the biggest name electric vehicles to build cars in china. however, analysts are already asking how the land will be funded. his comes at the white house announced new tariffs and sales of cars seem to dip in china. let's bring in our chief north asia correspondent, stephen engle. thing that will talk about these ambitious targets but also the price tag. stephen: this could cause up to $5 billion. tesla has been burning through a lot of cash back home and ramping up capacity for the model three and all those other problems. billion could be needed in an external funds and also debt refinancing until 2020 to handle all these ambitious plans for tesla.

muskw, we knew that elon wanted to and kind of had to go into china. for the last year they been trying to work this deal. they signed a memorandum of understanding with china in shanghai for the new factory that could have cars rolling off it in a couple of years, in heating the capacity target of 500,000 a year within two to three years after that. so about a five year time frame. and elon musk is in beijing today, we understand, probably meeting a lot of different people on how to get this going smoothly. past u.s. automakers coming to china had to have a 50-50 joint venture. this is a wholly-owned subsidiary that tesla will be setting up. really they have little choice but to do this. if you look at some of the numbers, tesla has been forced to raise prices by as much as 20% in china, one of its lucrative markets, because they are all imported and the trade

war is impacting them. first-quarter sales before the tariffs were imposed, sales in china had fallen to 15% of global total sales. in the fourth quarter it was 30%. this is something he had to make a move on now. the big question is how they're going to pay for it. yvonne: and this has been the dream of elon musk to build this plant in china. how has this alleviated trade tensions as we see sales fall in china? that were pretty surprised it happened yesterday or is sent to happen. in the middle of all this. , but are pretty surprised they face a lot of hurdles still. tag, alluded to the price $20 billion, that's about right. if you look at her sadie's, b&w recently built plants in the ast three years, it cost them

billion dollars just for 100,000 units. now they're looking to build 500,000 units. so on top of that, they have to think of the supply chain. where are they going to source the batteries? is aboutn dollars right. the question is, where are they going to get that money? they already went to the market a number of times. from our perspective, they are going to have to build some really strong relationships in china. tencent already owns 5% of tesla. you may see more of that type of chinese investment in that company to fund some of that expansion. question for you just thought that here. this is diving into the bloomberg terminal, taking a look at teslas three cash flow. is belowhat cash flow the red line here, $1 billion in the most recent order. $2.7 billion in free cash at the end of the first quarter. furtherahead, how much

do you think they need to -- they can go to try to fund this thing? year, that begs the question of realism on whether they can actually hit that. steve: they got time, 500,000 unit to give, i think that target is a little bit stretched. you know elon musk, he has really grand plans for the company, for his companies. so it's going to take some time to build up the cash. from our perspective, some of our analysis suggests that if you look at the model three, they probably have to produce more than 10,000 units a month just to meet some of the current cash needs in the u.s.. beyond that, it's really going

to be expensive for them. the current debt i think is can go to depending on what they need the remainder of the year, it could go to triple c, and that will really be costly for them. going to the market may not be an option. that's what i was talking about earlier, maybe there is a potential partner in china that they need to work with. don't they primarily have panasonic as their battery partner? but china has a lot of battery makers, there is a long list of them. i saw and that you tariff list, ev battery makers. that would make it more catalyst for chinese or other auto parts suppliers to possibly partner with tesla. we have a company that was just listed which is the

largest ev battery maker in the world now. so that is a potential partner for tesla. maybe another internet company. one reason they partner with tencent is probably for the tool.g in china you cannot really use google or yahoo! maps. you have to use something local. there may be some of those related partnerships. but that brings up another huge hurdle for tesla, because president donald trump is really trying to steer away from chinese companies grabbing u.s. technology, and tesla obviously is known as a high-tech company. bring inla does another chinese partner, it's going to go through a lot of regulatory scrutiny. we've heard him target harley davidson already when it comes to building a plant

outside of the country. do you think he will start targeting tesla now? a good question. i was interested in your point about tencent. it was revealed that have about a 5% stake. they have a lot of money, i hear. that could be another partner. alibaba, they've fallen back on -alibaba trifecta. >> at $23 you quoted that they need to expand in china, one it worked for the other auto company, it allowed them to expand, work within the regulatory framework in china to expand distribution and potential manufacturing in china. havebviously tesla doesn't a jb partner, so they will have to think of other ways to do that and maybe partnering with

alibaba a work because they don't really sell a lot of cars through to your ships. yvonne: but when it comes to the trade tensions, it seems like one of the things that people try to retaliate is through the boycotting of u.s. goods. we're starting to see signs of that when it comes to some of the u.s. car automakers. which ones are hit currently and could tesla be on that list? steve: it's very possible. we have started to see potentially some of that happening, the boycotts. last year, the chinese boycotted the self driving -- the south korean autos. they dropped 50%. and they boycotted south korean autos because they were involving you it -- missiles along the border. back in 2012 the chinese

boycotted japanese autos and 50% at thatwn about time because there was some demonstration about the islands off to the east. ramy: they were attacking people driving toyotas at that time. so it's possible they may boycott u.s. cars in china. market. cars have a share of 12% compared to south korea, 5%. back then, japan may be between 8%-10%. so it's a much bigger impact to the chinese economy if they do what caught u.s. autos. much, greatk you so analysis there. and stephen engle there. we've teamed up with tender -- with twitter to lots of first global news network designed for social media offering hourly

updates. this is bloomberg. ♪

ramy: let's do a quick check of the latest business flash headlines. pfizer is putting price hikes on hold one day after being attacked by president trump. he said the drugmaker should be ashamed for rising prices and responded with a congratulatory tweet, saying american patients

won't have to pay more. companies tother follow pfizer's example and keep prices under control. to be: blackstone said nearing a first closing about $3 billion for its first energy fund. told it will start actively investing shortly after closing the round. targeting about 4.5 billion come the same as its 2015 predecessor. total assets under management reached a record in the first quarter. ramy: google is expected to be hit with a multibillion euro antitrust fine after the e.u. accused the company of harming rival browser makers. if so, it would be a big win for who hasion commissioner long campaigned against google's practices. regulators may require google to amend contract terms to allow samsung and others to preinstall competing apps. watching?at are you

the risk off tone, it wasn't supposed to be like this until six clock a.m. this morning in the news hit. down.tures also i would imagine that will carry through into the chinese markets here. atlanta'soman at investment manager will join us. she is always frank and honest about where she thinks the market is going to go. toward a lotshift of hedge funds that have been focused stocks. we will as for her thoughts on that. well.rk lucas joins us as and the longer term view for emerging markets. is going to be an interesting show. before we handed over to

bloomberg markets: asia, a quick look at how the markets are trading. the nikkei, cosby, and the asx 200 are all down, the first markets in the world feeling the effects from the news that donald trump has released this list of $200 billion in terms of chinese goods that are now being targeted. yvonne: it certainly caught markets off guard. you can see a nervous they are when it comes to any headline risk when it comes to trade. singapore with a relief rally, perhaps. after the unexpected launch of property terms as well. taiwan down .9%. this is bloomberg. ♪

>> 9:00 a.m. here in hong kong. 9:00 in the evening on the eastern seaboard of the u.s. david: this is "bloomberg markets -- asia." rishaad: president trump announcing new tariffs on china. $200 billion worth of goods. david: critics city escalating trade war could threaten global