tariffs on chinese goods and more to come. apple avoids the worst-case scenario. china vows retaliation. officials hope for negotiations. market panic -- what market panic? investors opt for calm here and officialshow much bad news is p? david: welcome to "bloomberg markets." it is here. >> the markets are very calm. investor state you need clarity. we have it. if you are ceo, you know what you are up against. david: maybe we warned them. alix: we will talk about market reaction. s&p futures higher and it was a led lower in asia. i should point out the shanghai had its best game in three weeks.

euro-dollar flat. it is a mixed dollar store he could you have 10 year yield -- story. you have 10 year yield selling at the margin. we have a bloomberg report that says saudi arabia is comfortable above oil above $80 a barrel. onid: there are things going besides trade. today, the leaders of south korea and north korea began a two-day summit, the first such summit to take lace for 11 years. at 1230 eastern time, president trump greets polish presidents on his first official visit to the white house. the two are bank will hold a joint -- tour will hold a joint news conference. we'll get data showing money flow in and out of the united states. alix: let's get an update of

what is making headlines outside of the business world. kailey: food water and other inplies handed out to those wilmington, north carolina. some are being delivered by helicopters. a russian reconnaissance plane their shotut down down by syrian forces. the syrians were often attacked and theli planes russian plane was shot by mistake. all were killed. leader isrean visiting north korea. he was greeted by kim jong-un for landmark meeting in that wrestling stalled nuclear talks between north korea and the u.s.. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg.

david: thank you so much. time for bloomberg first take. we are joined by lisa abramowicz and michael mckee. let's start with the u.s. did before what the chinese it did and how the markets reacted. statement released last night from the president is park, four months we have urged china to change unfair practices and give fair trade to u.s. companies. we have been very clear about the changes and have giving china every opportunity to treat us fairly, but so far china has its unwilling to change practices. there are many who would agree with the president's assessment but disagree with his remedy. they do feel china cheats on trade and feel like it is a problem needs to be dealt with.

tariffs don't get you anywhere because they are paid by americans. idea is that eventually we would buy things at home instead of from china. forill take a long time supply lines to ship. not an immediate benefit to the u.s.. the 10% going down from 25% was a curveball. michael: according to officials, it gives the chinese a chance to come back to the united states and say we want to negotiate. some officials saying we don't have any talks scheduled and have not heard from the chinese. alix: there were some exemption with apple, target, and for baby wipes. to look at what was exempt, you can look at what companies were lobbying. lisa: and also midterm elections coming up. it does not seem as though president trump is planning to

delay the and limitation of the 20% -- 45% tariff in january, but he is saying, get your supply chains in orders so you can do it with the least disruption. we do not want the pain to trickle down the same way that affect the keyly constituents into the midterm elections. david: they have written of bicycle riders. most bicycle equipment is made in china. lisa: you have your helmet. is a statement from china this morning. the ministry of commerce says they insist on imposing tariffs and has brought negative consequences and hope they take measures to correct them in a timely manner. the first on the tariffs were levied on china, they had at response within 2.5 seconds good this is taking longer, why?

michael: they have threatened to the $60 billion and that is a tit-for-tat retaliation strategy. it has been to do what exactly what debbie teal law says and trying to take the high road, wto though people say -- law says and trying to take the high road. we go to phase three of the trade war, which is $260 billion. out. that, china is what happens then? people are talking about export restrictions which would mean a lot of things we import from china to put into products into the united states and we re-export. of a lot of source things important to u.s. manufacturers. a lot of potential retaliation from china ahead.

they have talked about potentially doing more business with other countries in asia. i thought that was interesting. there is a more wholesale contemplation of how they do business and trade as well as geopolitical plays. it is a rethink that goes beyond just tariffs. that: jack ma said exactly and he said you should look at that. lisa: it is interesting to see that. you also have to think china is planning infrastructure pushes that was reported in chinese from to offset the decline the gdp, which is the estimate right now should the tariff extravaganza be put into effect. david: this goes beyond

just the products in china. 4% of global trade will be affected by these tariffs on china. this is profound in the markets? michael: not so much. david: look at shanghai, it has been down and down and now it shot up. is it just buying the news? michael: if i could play the stock market, i wouldn't be sitting here. to be happening is there are rumors that the chinese government will come out with reports in the same way the u.s. did for agriculture business. report out this week that said six of 20 sectors expect a hit to profits and nine have lower profit expectations because of this. they expect companies to take a hit. 50% 100% of companies will pass 100% prices to -- 50% to

of companies will pass along prices to consumers. lisa: shanghai has had their worst experience. there has been a response that if you don't get the worst, this is a buying opportunity. every jitter we have had has now an opportunity up until . a lot of analysts are saying we think u.s. stocks should be doing better than they are and they are being held back because of trade concerns. if you don't get the worst-case scenario, we will see a pop. a strange logic. an administration official said yesterday we haven't seen an impact on the united states. the trade takes a long time from the time you place an order and it is on your shelves. this will accumulate as we get

into the year, particularly with christmas buying. we have seen people cutting growth estimates by quite a bit, as much as one percentage point. alix: lisa abramowicz and michael mckee, thank you. general mills earnings reaffirming fiscal 2019 oh, earnings beating gross margins, 33.6%, a solid earnings number. net sales for first quarter came in late that they reaffirmed fiscal 2019 forecasts. if you are looking, look at what they say on the call, but that area seems to be doing well. dollar general will create new jobs. mr. trump will like that. david: i general mills, they are light on the top line and need to return more profits. it does not show up in the gross margins. we will have to look carefully.

for theat do they see full-year forecast and why they are optimistic? digging into this over the next couple of hours, we have all the charts in the gtv . you can save the charts and check them out. coming up, it could've been worse. markets unfazed by the trade tensions between u.s. and china. we will talk with mark mccormick the head of strategy. this is bloomberg. ♪

>> this is "bloomberg daybreak.". i'm kailey leinz with your "bloomberg business flash."

visa and mastercard have agreed to pay money to settle a lawsuit. merchants claim the credit card companies unlawfully got together with banks to set fees when customers pay with cars. it has been another big acquisition in the insurance industry. this will expand and offering and a cash offer represents a premium to the thompson closing price yesterday. dollar general is hiring. the retail chain is creating 7000 new jobs this year. that is your "bloomberg business flash." david: the china u.s. trade dispute ramped up with the u.s. imposing $200 billion on chinese products come monday. china said it would respond in kind.

former trade commissioner warned we could enter new and dangerous territory. >> what is being threatened here ,s not some dispute or spat however difficult to resolve, between china and the united states. we are looking at quite treacherous waters, which could considerably to stabilize -- destabilize and threatened a future recession. that is how serious the stakes we are looking at now. toronto,lcome from mark mccormick. it is treacherous waters, you heard, but if you look at how is reacting, you wouldn't see that. the dollar is strengthening against the yuan. the yuan is up a little but not dramatically so. a lot of the news around

trade and trade tension has been priced in for the past six months. you have seen it in high-frequency economic data. the rest of the world has been underperforming against the u.s., whether currency or equity or general economic data momentum. tradeof the stress around have been pricing over the past six months. when you get to the announcement, there is not a lot of juice left in the exchange rate. -- chinese policymakers want to cap it from breaking seven or reduce volatility or he, which all of these things -- volatility. currency --s to when it comes to currency, isn't that what you are saying? what is the risk to currency if

they say that one way to take care of the problem is to allow devaluation of the yuan? do withrt of it has to what is the trade-off of devaluation -- what do they benefit from? the lines are that they want to maintain stability and show value in global trade and show part of a broader framework where people can rely on this currency as a function of money. there is just not a lot to gain from devaluation. on the other side, one thing they could do is not participate in some u.s. bond options and release treasuries into the market. one thing people are talking about is that they can sit back and do nothing and let the tariffs feed into u.s. consumer prices. on the one hand you are getting fiscal stimulus and tax cuts, on the other hand, trade tariffs which are taxes on consumers.

the economy consider back and let it works through which is a longer-term way to play this. alix: what is the level that changes the narrative? mark: seven is definitely the level and there is a psychological focus on that. whenu look at the prices they put in policy measures to try to reduce the ability to short the currency, they had seven in mind. it is just a psychological factor for the market. david: talk about safe havens. the dollar has gone up on trade and this time does not seem to so much. swiss franc? mark: the way you want to think about dollar, emerging market which has been tradable, dollar bloc dollar, canadian dollar, australian dollar, they are trading market light. like the swisse

franc, euro, yen. sterling has been participating in the rally on the better news for brexit. what i would try to make the point is that people are questioning safe havens and what i liked go back is u.s. assets are out performing, products, equity, the vix. the japanese are not heavily engaged in emerging markets. they are long u.s. assets. ,o see money come back to japan you see a flight to quality. the flight to quality is japanese bringing that home. until you start to see stressing u.s. assets, credit, u.s. equities, you will not see dollar-yen move. you can see the swiss franc doing its job as a safe haven given the move to euro swiss. the interesting part about the whole dynamic is that the dollar

has three phases, and the reserve currency basket is unchanged over the past three months. on the dollarocus and that it should be outperforming, it is five against the major currencies, which makes sense in this regime change toward a new credit cycle. david: mark mccormick of td securities. the company's most at risk for trade war and we look at those companies. this is bloomberg. ♪

alix: escalating tensions between the u.s. and china have implications for companies. if you break it down and highlight what companies are impacted and retail is front and center, amazon, nike, costco, office depot, under armour are all at risk. joining us for impact is our asset reporter.

onsumer discretionary got hit. higher ones that are getting hit. raw materials up and shipping costs up and amazon gets only one of those to be very effective. amazon and tech. nts at the trade war. yesterday. lead they are sensitive to global growth. lagging.tech after risk off, where that becomes important is traditionally we have seen it at the sector level in the u.s. and index level in china. this could be a prelude to we cut our winners generally and that would be bad. alix: tech will be critical

because they have lost some into that. we will highlight this to the next couple of hours. these are stocks that are under 50 day moving average. the nasdaq picking up steam. walk me through that how that reflects where fund managers are positioned. luke: this is the story of the not haveat it does stocks trading at 52 week highs. abovehave stocks trading their 50 day moving. we have been rotating in and out . the idea we could be on the verge of losing something that is a big winner, tech, would be bad. something i thought of is the notion that the next move forward on tariffs would not be wait more expediently from 10% to 25%, ago full on with the remaining $267 billion.

that would hit fitbit and apple more and could be a fundamental suspect that earning weakness linked to trade. david: think the way a politician thinks about it. not just the sectors and silicon valley suspect that earning weakness, but look at the geographic regions. we have a map which shows which states get hurt and when you get to home depot and staples, that could affect midterm elections. it is interesting the number of red states that could get hurt by chinese tariffs that could be part of donald trump's base. be careful what you vote for and this is what was asked for to a certain extent. the president also has a mandate push forward. we have not seen equity market reaction. we have not seen it show up in the real economy. a number of strategists warned that they think this will be a meaningful loss in investment

plans and future confidence in the consumer -- future consumer confidence. it is amazing the extent to which optimism is squarely centered on the united states. expect fund managers from theowth to slow tax reform, they expect global growth slow. kawa, appreciate it. losses in the trade war as it keeps up. we are going to talk with roubini global economics. this is bloomberg. ♪

alix: this is bloomberg daybreak. markets pretty much do nothing. dow jones futures up by 48 points. european stocks are flat.

emerging-market equities are flat. in other asset classes, it is a mixed dollar story. euro-dollar also flat on the day. in they real mover market is brent. brent is moving because potentially saudi arabia likes .il over $80 a barrel i cannot imagine president trump is going to like that before november 6th. david: he told them not to do that but they are doing it anyway. time to find out what is going on outside the business world. we turn to kailey leinz with the "first word news." kailey: president trump has ramped up his trade war with china. the u.s. will impose a 10%

tariff on $200 billion in chinese goods next week and will more than double that rate next year. president trump says china has been unwilling to give fair and reciprocal treatment to american companies. it will be high drama on capitol hill. an exclusive public showdown with a supra -- with a seat on the supreme court at stake. greg kavanaugh and the woman who accuses him of a decades-old sexual assault will testify next week before a senate committee. the hearing has delayed the republican plans to vote on the nomination. saudi arabia is now comfortable with brent oil prices rising above $80 per barrel. largest -- the world ticket largest exporter has tried to keep oil below $80 in part because president trump called for opec to rein in price

hikes. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries. this is bloomberg. late yesterday, president trump ramped up those tariffs on chinese imports but despite the escalation, markets acted rather calmly. joining us now from hong kong is bloomberg's chief asian economics correspondent. what is the reaction? the markets seem to be not too upset. what about chinese officials? >> chinese officials gave somewhat of a restrained response. clear that they will retaliate, but they stopped short of specific details on how they would do that. we know they briefly threatened to respond with tariffs but some

made the point that the fact that they did not repeat that threat today means -- could mean something significant. the did not explicitly rule out returning to the negotiating table with the u.s.. all of this can change in an instant. the mood does not point toward any sort of year-end deal but the response in beijing was a touch more restrained than expected. david: the tariffs imposed will reduce or could reduce chinese gdp growth by half a percentage point. if it ramps up to 25% at the end of the year, it could go up to 9/10 of a percent. is this a difficult problem for president xi because he is trying to manage a cooling economy. it will reach a point where

it becomes material. here, right now, china has been pushing this narrative about getting the economy into a growth path and away from debt fueled rapid growth. but is why overall growth has been slowing down. dealing with this trade war that is only going from bad to worse for them, exports are not what they once were, that they will hit those manufacturing sectors on the east coast. that is why officials are starting to shift gears as central banks become more proactive and we know they are trying to funnel money out to key projects. it is certainly a headwind that they don't need right now. it will take away from their broader deleveraging campaign and it will force china to have to pull of the policy levers of old a bit more. david: thank you so much for your reporting.

alix: equity markets are pretty calm. industrial metals feel downright happy. they have been hit over the last few months but today you have copper up 1%, how does that make sense? joining us now is robert: -- robin bhar, socgen head of metals research. explain the rally we are seeing. the bounce is unexpected perhaps but may be a classic case to sell the room by the facts. the micro fundamentals in our view are pretty strong as we enter the fourth quarter shortly which is traditionally a strong seasonal period for demand. if we look at those micro details, stocks are continuing to draw indicating how much

metal is leaving the warehouses is on the rides -- is on the rise. despite all the fears about trade wars and slower growth, china still remains at elevated levels. some very strong micro factors. alix: which the market has been ignoring up until now. the year toover date, all of these industrial metals and the point you have to know is they are all down. copper and iron ore. which metal is most decoupled from its fundamentals? argue probably because of aluminum specific factors that could be supported, ongoing sanctions.

i would point to lead used in batteries. that is relatively immune to the business cycle. if the battery fails, it has to be replaced. lead would be relatively more resilient, nickel as well perhaps because of all the talk about electric cars and trucks meeting the lithium-ion batteries, where nickel features very heavily. david: mark, we want to bring you in here. another question is global growth. peakmi trend shows the toward the end of last year. the white line is europe and the yellow line is the u.s. and we have china and em. it has come off. how do you take into account

that your view about overall global synchronized growth as you evaluate fx? >> the way you want to think about this is how much is in the price versus what is actually the underlying fundamentals. if you take it back to base , onls or industrial metals a global macro radar, chinese stocks, emerging markets, all of these have been beat up the most year to date. a lot of that comes through the expression of is china rotating to a new growth model? the point i would make is if you look at currencies that are linked to the base metals story, there are two that stick out, the australian dollar in the chilean peso -- and the chilean peso. while we are generally bearish,

-- these are things you don't see on the technical high-frequency models -- tactical high-frequency models. they australian dollar looks cheap which to me is a reflection of the fundamentals are better than what is being priced in right now. i would go back to that point that you have this cross. there is values in some of these currencies. it does not mean they are going to outperform over the longer term but we are in a state of the market right now where there is a lot of value, a lot of tactical opportunities and this is really about how much pain has been priced into the base metals versus what to these currencies be reflecting and to me, the asteroid in dollar is one where things look really australian dollar is one where things look really cheap. alix: and that really pairs with what robin was talking about.

if you look at the medium and longer-term, if you are dealing with this trade battle that does keep escalating and you are looking at a fed that is continuing to hike, there is potential disruption for emerging market demand. how do you look at that? robin: you are right. it is difficult to ignore demand for metals. the growth over the last 20 years has pretty much come from em. i think metals are clearly discounting further pain out through em, china. that is going to cut demand growth for sure. if we were looking at plus 5% growth for the various metals in china this year, that is going to take between anywhere -- go to take anywhere between 1% in 2% off that baseline growth.

next year is going to be softer as well. clearly it is the worry particularly when you look at the emerging market currencies. they are weak. importingite for more those more critical raw materials going forward. alix: the other conversation has been retaliation from china. do you think that rare earth will make it in on that? how do you view it? robin: it is a possibility. we should never say never. the u.s. in the latest round of earths left out rare because they realized how critical it is to u.s. industry. that could be something that china could look to target as well as lifting some of the export restrictions. attacks on primary aluminum exports could come off perhaps.

weakening the currency as we have heard would be another possible measure. they have a few things they could look at because the level of imports, they have not gotten much left -- got much left they can target. it has to be old policy measures like restricting exports of critical materials such as the rare earths. david: robin bhar of societe generale and mark mccormack of td securities, thank you very much for being with us. coming up, the billionaire jack why ticket trade morning, he sees the trade war lasting potentially for two decades. this is bloomberg. ♪

kailey: this is bloomberg daybreak. hour, ericn the next fuller, u.s. express -- u.s. xpress ceo. now to your bloomberg business flash. one of the biggest legal battles in the tech industry may be nearing an end. qualcomm dickey ceo tells bloomberg his company and apple -- qualcomm's ceo tells bloomberg his company and apple -- qualcomm and apple have sued each other over patent infringement and licensing fees. the world's largest food company leans to stick to its most profitable was his -- profitable businesses. theiral does not include unit that makes baby food.

the billionaire founder of japan's at second largest e-commerce company will be the first paying passenger to the moon. the president will be on board a rocket built by elon musk's spacex set to blast off in 2023. no word on what he is paying. that is your bloomberg business flash. alix: would you do it, around the world -- around the moon for a week? david: i don't know. alix: worst-case scenario for me. very risk-averse. now we turn to wall street beat. 's trade war warning. the founder of alibaba says the u.s.-china trade war could last 20 years. adviser white house discusses trump's diamond spent -- diamond spat. david: joining us now is jason

kelly. jack ma. he is saying let's take a longer view. what about down the road? this could be a big problem. jason: to your initial point, i think we are string to see what jack -- what jack ma is going to be all about. without overgeneralizing, this does seem like a very chinese view of the world. life is long, we're looking at this in a much longer term. what jack ma said was last longer and have -- last longer and give it a bigger impact. this is a guy people clearly listen to. he understands how trade goes back and forth between the united states and china. alix: this goes to your point in our editorial meeting. the markets are taking a shorter view because longer-term wto

reconfiguration conversations in some ways is what jack ma is reacting to. david: we have peter mandelson on saying it was treacherous waters. you even heard cutler say we have seen wto does not work. to your point about jack ma, he speaks in proverbs. when problems come, learn how to hide and learn how to trade. president xi has gone out there in a brave way. jason: here you have someone in jack ma who is in the middle of all this despite the fact that he is stepping back. this is a guy who is made a lot of inroads with president trump himself. he came to the united states and promised he was going to create a million jobs in america. lobbyingot someone from another sure.

this is somebody who is intimately familiar. alix: this is not like jamie dimon saying he could totally crush president trump in election. it is not like that at all. jason: you know who does not speak in proverbs is jamie dimon. alix: gary cohn basically said that jamie dimon would be a phenomenal president. i am not surprised. he wants a business leader, he just did not want trump as the business leader. that one.y do not this goes to his whole point. of trumpianttle bit hyperbole in there. some questions last night were around the book because gary cohn is seen as one of the geeks -- were the key sources -- one

of the key sources. i thought it important we include his statement about the book, bob woodward's book. david: i love the master class and how you handle these things. he was asked about it and he said it does not accurately portray my role in the interest rate and now he says i have said everything i have to say. alix: the learned something down in washington -- jason: he learned something down in washington. david: a third thing, wall street pay. if you were worried about the bankers, they are back up to where they were 10 years ago. jason: almost exactly 10 years. the pay is the highest in a decade. the one thing i saw that was analysis,wn in this securities trading in new york still 6% smaller than the

financial crisis. people who are working on it are still getting paid just fine. for: a $422,000 on average 2017. salary but that is hard in new york. david: average. alix: no doubt all the business restaurant locations are very happy and the after drink special world is very happy. jason: interesting in the context of new york. about a quarter of the security industry employees earn more than a quarter million dollars a year. that is compared with 2.5% for the rest of the city. you see how disproportionately wall street gets paid. david: and the city overall gets paid more than a lot of places around the country. jason: you brought in that out

to the rest of the country and you start to see money is politics and politics is money. david: you get populism. many thanks to bloomberg's jason kelly. tune into jason kelly every day from 2:00 to 5:00 p.m. eastern time. coming up, brett kavanaugh's confirmation has been delayed. he will first need to face the senate judiciary committee on allegations of sexual assault. alix: check out tv . watch us online and interact with us directly. this is bloomberg. ♪

david: this is what i am watching and it is the supreme court of the united states. it looked like brett kavanaugh was on his way to be confirmed before the important day of the first day the court meets but now all bets are off because allegations from 36 years ago -- years ago, strongly denied by judge kavanaugh that he accosted and she said attempted to rape a young woman in a closed room. now they're going to have him testify again and they're going to have the young woman, testify as well. it is anita hill all over again in a very different environment. alix: very close to the midterm elections were both sides are not going to give any ground. republicans don't fare as well with women as the democrats. david: republicans want to run on kavanaugh.

they can't make the argument as easily anymore. there is a path and a narrow path the democrats taking over a majority of the senate. if that happens, are they going to get him confirmed at all? the midterms come into play in a big way. alix: when you were still short a judge at the end of the day, if you want to be able to do your job. camporealephilip will talk about the lack of reaction in the markets on president trump throwing down the next gauntlet in the trade battle with china. this is bloomberg. ♪

alix: president trump throws down the gauntlet.

10%white house announces a tariff on $200 billion worth of chinese imports with more to come. dysfunctional wto. economic adviser larry kudlow attacks the organization as the world awaits china's retaliation. we speak with the former director general of the wto. says beware a 20 year trade war. he says the trade battle could last decades. we break down -- we break that down with expert george magnus. david: good morning. is it just temporary or is they -- or is there a longer-term here? alix: if you wait -- if you buy a rare earth metal, you are good to go. though, this is what david is talking about. short-term versus longer-term effects. short-term, s&p futures are up by six.

euro-dollar also higher by about 2/10 of 1%. the story is that china may come into the markets. that is really helping a risk appetite across the board. brent crude getting a lift along with other base metals. saudi arabia saying they like brent around $80. david: limited think the president of the netted states is not paying attention. -- of the united states is not paying attention. the leaders of south korea and north korea began their three-day summit in pyongyang, the first such summit to take place in north korea in 11 years. president trump is going to be greeting the polish president on his first official visit to the white house. the two are connected to hold a joint news conference at 2:00 wes afternoon and at 4:00,

will get money flows in and out of the united states. let's return to the trade story. markets largely to the announcement of u.s. tariffs in stride today in the chinese response as well. some people are warning this is part of a much larger problem, going to the very heart of the wto system of trade. larry kudlow said this at the economic club of new york yesterday. >> countries are raising tariffs , subsidies, the wto has become dysfunctional. the biggest culprit has been china, but not the only culprit. i will say right here on china, we are ready to negotiate and talk with china anytime that they are ready. david: earlier today, alibaba's jack ma warned we could begin

see -- we could see the beginning of a 20 year trade war. joining us is a former wto deputy director. thank you for joining us. one of the things we are trying to sort out is the short-term effect seems to be pretty modest. is there a larger danger here? we heard mr. kudlow say that the wto is dysfunctional. we have heard the president criticize the wto. i don't know why the administration is deciding to trash the wto at this moment. the u.s. and china have now taken their dispute largely outside the wto, but let's not forget that the wto has 160 plus member countries, it governs our trade relationship with a lot of countries around the world. it has succeeded in bringing down tariffs and nontariff barriers and has created a lot of trade rules and for a lot of

u.s. trade, that has been good. it does not help the u.s. to be seen as trying to undermine the system or talk it down. we should be saying that china needs to live more within the rules and that is what this dispute is about. david: in fairness to the president, the wto has not helped sort this out. a quote now from what the president said yesterday. he said for months we urged china to change these unfair practices and give fair and reciprocal treatment to american companies. we have been very clear about the types of changes that need to be made but so far, china has been unwilling to change its practices. have anyu.s. alternative but to deal with this bilateral basis? rufus: i think we do have alternatives. japan, europe, a lot of other countries, the countries that

negotiated tpp with the u.s. were already to help us create stronger rules and more pressure on china to change those practices. there were a lot of things in the tpp agreement that would've been effective in pressuring china to live more within those norms. the u.s. has decided it is going to take a more unilateral approach to china. that raises questions about whether we are ready to live within global norms and it gives the chinese a talking point with countries around the world which is exactly what the chinese are doing. they are cozying up to a lot of countries we should have on our side. what point does that lead the chinese to change their trading patterns and go around the united states? right now, the: u.s. is only about 16% of china's total exports.

we also imposed tariffs on europe, canada, mexico, brazil .nd a lot of countries in steel we are talking about doing the same thing in automobiles. , it is thecountries u.s. that is cracking the rules and this is going to give china a great opening to talk to those countries about closer trade relations. a lot of those countries are negotiating free-trade andements with each other the big danger is the u.s. is raising tariffs on a number of products, isolating itself from world markets while a lot of our trading partners are actually getting together. the negotiate -- the europeans just negotiated a deal with japan. that goes along with what is happening between the u.s. and china at this moment. david: we have heard from the president repeatedly that the

united states really has the cards as our economy is robust and growing faster than a lot of the world. even in china, the growth faces slowing down. does the president have a point that he does have leverage against people like the chinese? rufus: those factors can change very quickly. there are short-term impacts and long-term impacts of this tariff fight with china. for a lot of businesses, it increases uncertainty and cost. the u.s. economy is strong and it continues to grow, so maybe a lot of producers and consumers can absorb those costs but let's not deceive ourselves. this is going to be attacks on shoppers at walmart and home a tax on shoppers at walmart and home depot. longer-term, high tariffs do not have a positive impact on your

economy and that is the most disturbing thing. i listened to some of the president's tweets and he is talking about the fact that tariffs are going to make our economy stronger. that is a misreading of just about all economic history. strengthengoing to the u.s. economy over the long-term by making it a higher price economy. we have to compete with other nations and we have to force china to open their markets more. 80% of the growth in the middle class in the world over the next 20 years is going to be in asia. if the u.s. does not have open markets in asia it is able to compete for, we are going to lose out and we are not going to get those open markets by deciding to retaliate against every country in the world and raise tariffs at home. david: a really powerful point. thanks for being with us, rufus a, the national foreign

trade council president and former deputy director of the wto. alix: experts are warning of new and dangerous territory. >> what is being threatened here is not some dispute or spat between china and the united states. we are looking at quite treacherous waters here, which could considerably destabilize global economic confidence and threaten a future recession. >> people underestimate the impact of this trade war on the theomy because they say indirect impacts are a small matter. >> trade conflicts are actually raising downside risk to the economics. i expect this is going to have negative effects on the impact -- on the economy. >> this is about fti.

you are going to become the globalized -- d -- it is going to become de-globalized. increasing inflation globally. that is the danger of this trade war. alix: joining us is phil multi-assetjpmorgan allocation strategist. the short-term impact versus the longer-term impact. phil: you have to balance those two. you do long-term strategic asset allocation in the near term, you have to be able to trade these markets technically. a classic sell the rumor, by the fact. after the brexit vote, the market went down and went back up in short order. ist we see from last night clarity. 10%, i see that only

know we are looking at 25% by the end of the year, but for us, the sentiment in the emerging markets was so poor that just after the news was released, it allowed e.m. to recover. i don't think people would've expected to wake up this morning and see stocks -- chinese stocks recover 2%. -- short they e.m. come along dollar, part of that you are seeing reversed and yet you have individuals that were surveyed as the most optimistic in u.s. equities in years. how does that make sense? phil: you can make an argument that the u.s. recovery that started in 2009 is the strongest it has been. there are more job openings right now than there are unemployed people. that is spectacular. you think about soft data and hard data. u.s., small the business confidence, the highest since 1974. consumer confidence the highest since 2000.

you are also seeing it in the data. for us, it is a very strong fundamental earnings story. it is almost validated by the data to be alone in the u.s. markets. david: phil camporeale will be staying with us. growg up, trade tensions and they are about the dragon the biggest part of the u.s. economy, the consumer. this is bloomberg. ♪

alix: escalating trade tensions between the united states and china, we will break them down on a sector level. here is the retail and -- retail angle.

nike, cosco, png being directly hit on consumers. still with us is phil camporeale of jpmorgan asset management. start with retail. in some ways, they got a pass. how do you play a consumer staple space right now? phil: we go back to the 10%. that is what has been announced. dollariffs mean the u.s. actually rallied versus the yuan. you could almost make a case that it is a wash. they can still get their supplies from china and a kind of equal price level which means that it won't be passed on to the consumer. the 25% rate can change that. research report said you would if it goes to 25% on $250 billion, it is about 15 basis points worth of gdp and about 2/10 of a percent worth of cpi. while that is not nothing, that

is pretty much contained in the grand scheme of things. alix: we had a nice chart that showed the product that came in from china. cell phones are huge but it is also basic stuff like socks. we have seen tech rotate out. you can see the number of nasdaq companies below their 50 day moving average versus the s&p. the sell the to be stocks that have done well scenario or is this a fundamental shift? was also's -- was almost seen as a flight to quality sector. every time you are going to see at least some specter of rates moving higher in the long end or a steepening of the yield curve, it does not seem like you are going to get it. anytime you see rates around 3% and the specter of it moving higher, tech is going to face a headwind versus some of the value stocks that have been under owned. david: as you look at this

short-term versus longer-term, how does small-cap versus large-cap factor in? it took a big run-up after trump got elected. phil: that is almost like a follow the fed trade. if you believe that interest rates in the u.s. are going to move higher, if you get a re-steepening of the yield curve , that is a large cap story. asmall cap story is more of the u.s. is growing, the rest of the world is not growing. that has certainly happened this year. not something we would expect to continue, especially in 2019 as we see some sort of renal malaise eight hopefully of what the ecb is doing with rates. for this year, it has been a nice run of small-cap. alix: what sectors can you not own because of the macro?

phil: e.m. is still underweight in the portfolio. freight sector of asset allocation perspective, it is underweight. our equities, about 50-50. that has moved to about 70% u.s., 30% non-us. alix: isn't that crowded though? are you overcrowded? phil: it is important to see that data. it is also important to manage that kind of contrarian kind of indicator with fundamentals. underway,m. is still especially -- underweight. the dollar is so important to that em trade. even without the trade concerns, the dollar would be stronger the u.s. --cause

has gone parabolic compared to the rest of the world. you can make the case that the u.s. economy right now is the strongest it has been since this recovery begin. david: phil camporeale of jpmorgan asset management will be staying with us. coming up, rises way -- rising wages weigh on fedex earnings. this is bloomberg. ♪

david: time now for three company stories we are watching today. cvs is back in the news because the department of justice have given them the clearance. they still have to get some state regulation. they basically said they are going to close this deal this year. finally, this is been around for forever. alix: is this more m&a?

nobody was worried too much about the department of justice. the bigger question is in health care, generally. i am paying attention to general mills here. earnings came in better than estimated. their sales were a little bit light. organic growth was down by 1%. gross margins missed estimates by just a touch. maybe not as bad going forward because they did wind up saying they're going to see a better fiscal 2019. gross margins were down but earnings were up. now for our third story, we turn to fedex. shares are down after posting earnings that fell short of expectations. we are joined by helane becker, kalanick company managing company -- cowen and

managing director and senior research analyst. what happened with wages and benefits? up 11%? how can that be? there was this tax act that went into effect in january and normally fedex would give their employees a pay increase october 1 and they pulled that forward to april 1. you have a very tough year over year comes for six months. october,get into past the fourth calendar quarter, the numbers will look so huge. -- won't look so huge. the other big line item you saw that went up was transportation which includes fuel. fuel costs were up 40%. those two conspired on the cost side. they are on track for $70

billion this year. we think they will achieve it. the issues facing the company are obviously higher fuel costs, tariffs, higher wage rates. you are going to hire 50,000 people for the peak shipping season and a lot of those people will stay on after january 1. david: they can only hire that many people if they think the volume is going to grow. what is the capital investment they're going to have to make to offset that? helane: $5.6 billion is this year's cutbacks. if you look over the last decade and a half, they have 8% toically been in that 10% range and they continue to reinvest in the fleet. fleet, them, the younger if the economy turns down or if tariffs hampers trade, you will and thenreplace --

hubs, for ground is down this year, but this is the first year it is down after a number of years or they have invested in automating hubs and building hubs closer to the end user. alix: how do you buy this stock in the midst of a trade battle with china? helane: that is a fair question given the fact that we have the outperform. the way i think about it is so far, all of the tariffs and the trade really ask -- really affects goods that don't get carried on aircraft. i think the next wave of tariffs are the ones that probably affect things like technology items because you think about what goes on in the air and it is all high-value goods, aircraft parts, most of which are manufactured, not actually in china.

you think about auto-parts, you think about technology components and there are life-sciences, health care. those are a lot of areas where fedex is growing small and medium-sized businesses. it is going to affect them, but i think they pointed out last night it is something like 2% of revenue. --x: helane becker, killing helane becker, cowen and company senior research analyst. worrisome on the call. coming up, a serious mistake. the chinese state-run newspaper describes the president ticky decision to impose tariffs. we break it down with george magnus. ♪

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emerging market equities go neither. look at what is going on in the dollar, pretty much flat on the .ay, euro-dollar, dollar-yen you have a bit of selling coming in the back of the bond market. not any kind of rush to safe haven trained at all. went crude of almost 2% on a headline that the saudis like two dollars amost barrel. investors are bearish growth, but like the u.s. they are bullish on u.s. decoupling. how long can you feel that way? as a mystic on everything except for the u.s. david: good for you -- alix: pessimistic on everything except for the u.s. david: good for you. >> president trump has ramped up the trade war in china. he more than double -- you will more than double the rate next

year. beijing again vowed to retaliate. aboutwould be tariffs on $267 billion of chinese imports. president trump says china has been unwilling to give fair treatment to u.s. companies. a south korean leader is visiting the capital of north korea. moon jae-in was greeted by kim atg-un for a meeting aimed rescuing stalled nuclear talks between north korea and the u.s. , the third meeting between leaders this year. a u.s. military reconnaissance plane has been mistakenly shot down by syrian forces. moscow blames israel. , they say, wasne caught in the crossfire. all 15 people aboard were killed. the israelis say their jets were all back in israeli airspace before the russian jet was shot down. news powered by journalists and

analysts in more than 120 countries. this is bloomberg. kaylie just told us, we know more than we did yesterday about trade relations. we welcome on the telephone george magnus, an associate of oxford's china center and former chief economist at ubs. you are the author of "red flags - why china is in jeopardy." something we all have to read. what is the effect the tariffs could have on china? bloomberg economics did a study. if it remains at a 10% rate, it will have a half a percentage point effect on gdp growth in china. if it goes up to 25%, bloomberg economics projects it will go up on the gdp growth.

how concerned should president xi he about this? george: i think those numbers do resonate a bit. the issue for me is that for the moment, even with the 10% tariff on the $200 billion, the impact on the chinese economy is a bit of a rounding error for me. in any event, it may already have been offset by the 7% depreciation of the yuan against the u.s. dollar since the middle of the year, and the combination of easing measures in china, which have been undertaken by the government and by the people's bank of china for other reasons to do with the domestic , and the financial clampdown. i think your bloomberg citation about damage to the economy the longer the trade war goes on, and the higher the terrorists go

, i think is -- i sympathize with that. i could see that happening. think one of the important things we have to watch for, of course, is whether the chinese retaliate, which they have said they are going to, whether president trump decides to expand the tariffs to the whole of the imports of america from china, which he said he would, and how the chinese retaliate. if they start threatening the supply chains and products of american companies, this will have domestic consequences. david: and yet is it more likely they might do something like that, interrupt the supply chains of u.s. companies, rather than the easing measures you describe? does come with a price tag. i said he she -- x wanted to move toward deleveraging. to we leverage, does that put pressure on him and his regime? george: i think it does. in my view, i think president xi

has been wrongfooted by president trump's resolve to prosecute this trade -- i was going to say spat, that it really is a bit of a trade war. jinping regime has been wrongfooted and it has reflected slightly badly on him, because we have started to hear some criticism during the summer from unexpected quarters about his leadership style and characteristics. and of course to the extent that the government is kind of under pressure to relax its stance on deleveraging, it really complicates what they set out to be one of their core objectives, which was financial stability and the clampdown on risk-taking. so this trade war is coming at an on propitious -- un propitious time. alix: what sectors in china are most honorable right now?

george: i know this is not what you are asking me, but i am going to get around to answering the question. china,ernal sector in the foreign trade sector, is at the margin. it is a bit of a drag on the economy, the whole of the external or, which encompasses things like consumer goods and intermediate goods, and finished goods. i do not even think that the tariffs are having that much of an impact on that sector at the moment. it is having some impact. small, china registered deficits of the first half of this year, which is unusual. i do not think this necessarily reflects the huge change in the imbalances within china. but i think it is certainly to do with changes in the structure of trade and trade policy. so yes, what would worry me, i think, is if china starts to

target american companies, which i think is something we might expect, because in past political disputes with countries like japan, south korea, the philippines, and vietnam, they did target the companies of those countries. it is much riskier politically for xi jinping to do this, or for the chinese government to do this, but i do not see what other choices they have, other than devaluing the yuan, which would be even more provocative. avid: an unfair question, but simple 1 -- if 16% of chinese exports are to the u.s. today, if this continues for three happen to thatl number? do they start dealing with other countries more than the deal with us? george: i think it will be a two-sided affair. i think a lot of american will turn, and south korea will look to of aid or

or avoid some of the pressures of doing their supply chain business in china. china will try to find other customers. but there is nobody that is really as big as the united states other than the e.u., and the e.u. feels very similarly toward these issues that the united states is raising. in a sense, i think it is going to be very tough for china to find an external escape route. alix: it is good to get your perspective. george magnus, thank you. onset, phil temporarily -- cam porelli. you mentioned you were overweight e.m. is there something on your buying list as far as the macro tools in the e.m.?

phil: i want to differentiate the underweight in e.m. versus what we were saying in 2015. remember, late august 2015, the becauseat 1000 points of fears of china. we are growing. the world is growing. markets had no emerging for 2015, we probably have 5% to 6%, and another 3% in emerging debt. the world is growing. a global story. but we have to underweight it. first, the dollar -- we see the specter of weakening. the second is the trade concern. trade concerns are alleviating somewhat this morning. we have clarity. but it is not 2015. we have a better global growth

story to say some of it emerging. -- how do'd do you you differentiate emerging markets? especially if you see increased risk from trade? how important does it come how deep the capital markets are and how liquid they are? emerging markets very a fair amount on those indicators. phil: i would say more on the equity side, you are able to differentiate. on the debt side, it is a little more illiquid. on the equity side, there are very liquid instruments we can trade the risk of the market in and out of the portfolio. i think that is critical right now, especially when driving returns. there are good earnings to be found in emerging markets. i think it is a bit of an illiquid story. alix: sector rotation -- what do you like? phil: globally? what are you asking? alix: globally. phil: we like anything that is

-- as i mentioned before, not only did you have an earnings number at the highs of the cycle, but you have more job openings. anything tied to the consumer, we like. in financials have to be overweight when the fed is moving policy rates higher. on the fed, i do not think at this point that they have interest in two going into what is called restricted territory, moving above a neutral rate. i think that has profound implications for asset allocation. emerging markets are going to see a relief rally. it is important to keep your eye on what the fed is signaling. david: if only they can find that magical star. phil: that is it. david: thank you for being with us. and: coming up, flooding road closures from hurricane florence putting a strain on the trucking industry. we sit down with eric fuller of

u.s. xpress. ♪

today onoming up later ceo's, firstkets, on bloomberg. now, to your bloomberg business flash. one of the biggest legal battles in the tech industry may be nearing an end. steve mollenkopf says his company and apple have an increasing incentive to settle their fight. , qualcomm and

apple, have sued each other over patent infringement. the world's largest food company plans to stick to its most profitable businesses. sell gerbergreed to life insurance for a little more than $1.5 billion. the deal will not include the gerber products unit which makes baby food. and the billionaire founder of japan's second-largest e-commerce company will be the first paying passenger to the moon. he will be on board a rocket musk's spacex, scheduled to blast off in 2023. no word what he is paying. that is your bloomberg business flash. david: there is some news crossing the bloomberg that robert lighthizer and christopher and went -- krista freeland say they are going to get together and restart nafta talks on wednesday. alix: you get good headlines from china, playing it tough.

why not go get them? david: get a deal with canada. return back to the extreme flooding from hurricane florence. it is making life very difficult for everybody in the southeast. trucks are trying to get access to certain areas. trucking company u.s. xpress cargo loads were affected by it road closures. joining us from chattanooga, tennessee, is eric fuller, u.s. xpress ceo. good to have you on. give us a status right now. what is going on down there in the southeast? eric: thanks for having me. widespreadng flooding that is affecting not only the coastal regions, that we are seeing things affected further inland than we expected. things continue to deteriorate. i think we expect another day or two before things get to the point where they will start to recover and we will be able to move product into those areas. it is creating a lot of

disruption not only to the coastal regions, what a couple hundred miles inland. david: you own a fair number of your own trucks, as i understand it. did you get your trucks out so you have not lost equipment? eric: for the most part. we had some trailers that were near the coastal regions. anytime we see these storms, we try to move equipment back inland, to position them. as soon as the storm moved away, we are able to move equipment back into the storm area. we typically spend a couple of weeks in the recovery, working with our customers, trying to get product back into the storm-hit areas as quickly as possible. the other story is, this is hitting in a tight labor market. can your workers get to work? are you competing for staff because there will be a reconstruction effort? eric: we saw that in houston. it became a tough hiring market for us a couple of weeks after

the storm. i anticipate the same thing if there is a rebuilding effort. we compete directly with construction. as construction starts to go into rebuilding time, that really does affect our ability to higher in those markets. that is absolutely an issue. david: that comes on top of a challenge. you were talking about how difficult it is, because of lifestyle issues. has that impacted your ability to get new truckers? eric: not at all. i would say it has continued to deteriorate. as we sit below 4% unemployment, you see warehousing, markets we compete directly against, hiring at record levels. it is creating a lot of pressure on her industry. we are trying to do everything we can to provide new opportunities or come up with unique benefits or things to attract new drivers. alix: for the broader macro backdrop, we have the trade

issue between china and the u.s. how does that affect your business? the: definitely affects equipment side. we are seeing the cost of trailers, of tractors, start to go up. i ama shipping standpoint, not seeing a lot of our customers necessarily affect did. we are seeing a lot of our customers ordered her doctor earlier out of asia -- ordered products earlier out of asia, going into the holiday season, thinking they can get out in front of the tariffs. that is a good thing for us. it will extend our peak season, typically november 1 into christmas. we think that will extend it, this early ordering. david: if you put aside trade and the consequences of hurricane florence -- big things to put aside -- what does your business tell you about how the u.s. economy is doing overall? is demand for shipping products in the united states? eric: extremely strong, probably

the strongest demand in our business since 2004, 2005. we are seeing a robust environment. that is coupled in our industry with a very tight supply market for drivers. so we are seeing that market continue to be robust. i do not anticipate that changing in the near term. alix: when we talk about trade we talkconsumer, pricing power. our companies able to pass through prices? how do you deal with that and what have you noticed from clients? eric: we can pass along increases to customers. for the most part, our customers are aware of the driver situation and are concerned enough about being able to find capacity that they are understanding, for the most part, on any type of increases we are asking for, from a pay standpoint. where customers are more focused around is making sure they have capacity, making sure they are comfortable, that they are going

to have a truck whenever they have freight that needs to be moved. david: do you see any difference in demand geographically? are some regions more robust, from where you sit, then others in the u.s.? we havee seen -- eric: seen some weakness on the west coast. recently, products coming off of the ships from asia, we are seeing the west coast start to pick up. i think that is partially because people are ordering early, whether it be terrorists or trying to get ahead of any peak season surge. these storms do not just affect the coastal region. they affect the entire supply chain. capacity in california will be affected by the storm that hit the carolinas. it does disrupt the entire nation. alix: great to get your perspective, eric fuller, u.s. xpress video -- ceo. optimistic,s he is

talking to abc, feeling good. exempt?pple watches are alix: brent crude jumping after reports's audio -- saudi arabia is ok. ♪

alix: what i am watching -- brent crude, jumping near $80 a barrel. saudi arabia now comfortable with oil about $80 a barrel. joining us is stuart wallace. 60 -- $60 to $80. stuart: as we approached $80 on the rent price, -- brent

was assumed saudi arabia would intervene to keep the u.s. on the side. you remember president trump talking about how opec was manipulating the oil price. they were expected to increase supply. it appears the position they are taking is, given that sanctions on iran are effective and the increase in volume from opec is coming from precarious jurisdictions like libya, like nigeria, maybe there is very little they can do to stop oil from going over $80. they do not like it. but this means they will not panic every time it gets to $80. the spare capacity, as well as russia -- they may talk a game, but the reality is far from true. art: they could get a few thousand more barrels out, but the same with saudi arabia. the capacity is enormous, but they have never had to test the

top end of that. something you is can bring on quickly and then maintain. after a month or two, can you really keep it going? it remains to be seen. we are in a very, very tight market. alix: as you pointed out earlier, the midterms -- david: there is an election coming up. alix: coming up, jonathan ferro globale allianz investment strategist. ♪

jonathan: from new york city, i am jonathan ferro. this is the countdown to the open.

coming up, water down tariffs, imposing tariffs on chinese goods. apple coming out unscathed, the trump administration sparing a category of high-tech products, even as the chinese ministry of commerce faster retaliate. futures are positive, up seven points on the s&p 500. higher, upgrinding three basis points on a u.s. 10 year. you wake up on tuesday and it feels like groundhog day again. president trump ups the ante in a trade war with china and china vows to retaliate. >> the most aggravating thing for xi jinping and china's leaders are