unreliable entities list as they strike back at the u.s. for its huawei ban. president trump threatens higher tariffs on all imports from mexico unless the country fixes illegal immigration to the u.s. as trade morphs into a foreign policy weapon. and the great collapse of bond yields. yields hit a record low in a brutal month for equities that started and ended with trade war's. david: welcome to "bloomberg daybreak" on this friday, may 31. just a short time ago, we had this announcement about unreliable entities that china says it will make a list of. it is suggested that it will be done if it overall damages the interests of chinese companies. it is an retaliation of huawei, in all likelihood. u.s. and you have the mexico, using tariffs as foreign policy, and what that one set

meeting for europe and china. david: i thought it was truly extraordinary. us night, president trump said we would propose across-the-board tariffs because of a national security crisis. this has never been done alix: -- this has never been done alix: and it was not a -- this has never been done. alix: and it was not a tweet. this was a statement from the white house. david: it really raises questions about china, if they did do a deal, how you know it is going to stick. everybody around the world who has trade relationships with the united states saying, what are the rules? alix: seeing a huge move into the bond market in the u.s., and in europe as well. futures off by 1% already. dollar-yen, no shocker, the safe haven of choice. the swissie getting a bid as

well. yield down as well, 2.16. crude continuing its massive slide from yesterday. a brutal, brutal risk off day for the markets. you have to wonder, and of the month headed into the weekend, what kind of position will we see at the close? david: a tricky day for traders. time now for the bloomberg first take. we are joined by gina martin adams and rachel evans. gina, let's start with you. markets were already reacting to that may 5 tweet to impose new tariffs on china. china said they would retaliate. how much does this compound the problem? gina: it is the one million-dollar question. i think the bigger issue here is the uncertainty, which will continue to weigh on markets. if you went to bed last night in the u.s. thinking maybe we are

going to find some stability around these key moving averages , you wake up today and that hope is completely gone. i don't know where this is going to go, frankly. even the european markets are clearly exhibiting a crisis of confidence with respect to where trade is going to go. when you see the dax down nearly 2% on the day, simply reflecting this expansion of risk, i think that is a signal that broadly, the equity market is going to remain very volatile, very uncertain regarding the outlook until we get some resolution. everyone is sort of throwing the towel in on hopes for resolution right now. alix: in terms of flows, that is not going to account today. how bad was it already? rachel: pretty miserable. china etf's have seen a consistent stream of outflows. thatcularly watching ashr s shares on the mainland.

you look at where assets were four weeks ago and today, 40% lower. people have been absolutely getting out of china, a reverse of what we were seeing earlier this year. now everybody has decided they want to bailout and wait an see until we get some resolution. david: we also have mexico now back on the agenda this white house statement, not just a tweet, last night saying that mexico has not treated us fairly, but we are now asserting our rights to address the emergency at the southern border. serving on june 10, the united states will impose a 5% tariff on all goods imported from mexico. there's a lot of trade between the u.s. and mexico. ed affects a lot of u.s. companies. it goes up to 25% if the y don't, as the

president says, fix it. gina: what is the outlook for the tech sector? that is the center of risk for the u.s./china trade story. with mexico, it transfers risks to other industries. our biggest imports our cars, machinery and electrical machinery, and food. if we start tariffing agricultural products coming into this country, how does that impact inflation? these are very low margin businesses. likely, all of that gets transferred as a tax on the consumer, which is a different story than the tech story and tariff story with respect to china. this is something we want to watch for its potential impact on policy, the economy. david: and energy, oil. that is a big issue for the oil industry. alix: the u.s. is getting 10% of mexico, and

venezuela is dropping off a cliff. what i find it is during -- what i find interesting is you can't pricing a trade deal because even if you do, that doesn't mean there aren't going to be more tariffs. how do you end up absorbing that in the market? rachel: this is one of those strange pronouncements regarding tariffs. we are just starting to get the usmca pushing through congress. this threatens to undo all of that. this could have been a real win for the trump administration, and instead it seems that pursuing more of a populist policy to try and get that through. david: one piece of the puzzle for me is we had the vice president of the united states and canada pushing for the usmca , which is being debated in the senate, almost as if mike pence didn't know what was going on. rachel: which base is trump playing to? is he playing to the more sophisticated financial markets base that maybe wants to see a trade deal and wants to see the

new nafta ratified and done, or the populist base? a deal mustn't -- a deal doesn't necessarily play that well with him. they just want to see more strong language around immigration. you can't discount these coming into effect. alix: let's go to our third story, which is the market. they are all interrelated. a -20 basis points . the vix is jumping as well. gina, what do you do? gina: i don't know if you do anything today specifically. one of the things we've been recommending for the quarter at large is generally a rotation into more offensive strategy for stable stocks. that has been clearly justified by the data. we started to see a bit of a turnover in the economic data, certainly the rally and bonds that really began earlier this year, the inversion in the curve

that started march. all of these things indicated in our models that you at least wanted to become more defensive with your strategies in the s&p. that means you move into things like utilities and real estate in lieu of super cyclical sectors like energy and materials. you sort of shift on sector strategy. from a factor perspective, our spectrum suggests that you move into more stable stocks as opposed to the highly volatile momentum shares. i think this is the best strategy right now because you are not seeing enough weakness emerge in the economic data to suggest you're necessarily turning right over into recession, but you want to protect yourself so much defensively -- protect yourself somewhat defensively. you shift risk away from some of these high cyclical segments of the market that are really exposed. alix: for the broader perspective of the whole month, it has been brutal across the board. it started out and ended with trade.

most every asset class in the red. wti selling off the most in correction territory. can you talk to me about flows? how much money is being moved? rachel: looking at this week alone, we've seen $10 billion of outflows from equity funds, which is a big number. we saw another big outflow at the beginning of the month. the two together are kind of with early january for being the worst week of the year. not a great start. when you look at the bond market, we seen $2 billion flow into bonds. one thing i am watching closely is on the credit side. from a price perspective, a lot of these bond funds are overbought because they've been carried out with this rally. however, we are starting to see outflow funds and red flags from the likes of pimco on whether

credit fundamentals are really there to back up this rally. there's an interesting disconnect emerging between the pricing of these bonds and the underlying fundamentals. all right, gina martin adams and rachel evans, thank you very much. you can find all of the charts we are going to use over the next two hours at gtv on your terminal. browse the features, check it out. coming up, fighting back. more on china's trade war retaliation. this is bloomberg. ♪

david: earlier today, chinese state media announced the state list oftablish a

companies that generally damage the interest of chinese companies. curran.me enda what do you know? as i understand, we don't know it all yet. enda: it came out on state radio this evening. what we do know is it looks like it is pretty much in response to the u.s. entity list. in essence, it looks like china is going to target those companies that have cut off supplies or u.s. companies that have cut off supplies. we don't have too much more detail, but they did say it is about not just foreign into these and organizations -- foreign entities and organizations, but also individuals. thatet takeaway tonight is china is getting serious about retaliation and they do have

some options. david: do we have any sense about the appetite of the chinese government to go to trade war at this point with the united states? they've got their own issues back in china. a: we had a soft reading on the economy today. we had pmi in contractionary territory. we have weakness on the employment side of things. economy ande a weak you are targeting american and foreign companies bringing investment into your economy, that is not a great experience there is certainly a hawkish stance coming from the state media in china, but there are those who also say the economic reality will dictate china probably once a deal, and for political reasons, the u.s. will want a deal, too. that's why some economists are saying in the month ahead, the two sides will come together.

david: enda curran, our man in asia, thank you. joining us now is adam posen. thank you for joining us today. let's start out with china and this possible retaliation. what do you expect might be the economic consequences china really does go tit-for-tat with us? adam: thank you for having me back, david. until the mexican threat that president trump made yesterday, i was expecting the macroeconomic implications of the china battle to be pretty limited in the short-term. a futex higher on inflation, 1/2 of 1% off of gdp. the big issue was the medium-term discouragement of free flow of technology in both directions, the deprivation of u.s. multinationals, of access sandilled people, the

thrown in the gears further for investment, which was going to erode our already weak productivity growth. but with the mexico threat, as people have been saying on your program, it means that china has to look and say why should we even bother trying to make a deal. everybody is going to say that. this is when the markets really start to selloff. they already were always underestimating how likely a real breakup with china was going to be for a while, but now i think the wake-up call is here. alix: absolutely right, and we can see that play out in markets as well. i want to take a look at some of the economic data we got out of china. not all good. but does that help china in that they can step in and stimulate? adam: i think you are on the right track.

china, even more than the u.s. in some ways, has room to do fiscal policy, some room to do monetary policy, and it is a big economy mostly driven by domestic growth. if they put enough stimulus in, they can counteract the trade effects, not to preserve particular industries, but the overall economy they can stabilize. i think it is important not to get into this narrative that, just as it was a mistake for the chinese to get to the narrative, the trump was yelling at the fed and was therefore scared about the u.s. economy. it is more about the medium-term disruption of investment. it will be bad. it is wasteful. but it is not because either side is going to have this abrupt collapse. david: i wonder if we can get a sense of how big the breadbox is, so to speak. we thought we were concerned

about increasing tariffs going into effect on the original $200 billion of chinese imports. then there's the issue of some 300 when he $5 billion additional. now it looks like there is going to be some reciprocal out of the chinese. are us a sense of where we in heading towards a larger global problem if america's trading partners really can't trust us on trade. the point.is exactly my colleague at the peterson institute has a chart on our website that has made the rounds, in which it shows the amount of imports in the u.s. subject to so-called special production. chinese next round of tariffs go in, we will be comparable to or higher than what we had come about the bigger point is what you just said. mexico arbitrarily

ignoring the usmca negotiations with respect to something noneconomic, migration, that is the game changer. it is not just escalating with china and europe and japan and mexico. this is the u.s. arbitrarily lashing out and undermining any ability to depend on trade relations with it. with them posen peterson institute, stay with us. president trump is vowing to impose 5% tariffs across the imports.mexican what it means for the u.s. economy and if it can withstand it. this is bloomberg. ♪

david: still with us is adam posen with the peterson institute for international economics.

this illustrates something we are hearing from president trump which is esteemed economists are saying this is heading in the wrong direction, and yet the president says the economy shows i am doing the right thing. what this chart shows is that consumer sentiment is going up, and employment is coming down. why is the president wrong when he and his advisers say you don't understand what you are fine,g about, i am doing and i am going to help the economy? adam: what the u.s. economy is doing right now, we have the momentum of the longest recovery on record, which started with the recovery from the financial crisis under president obama. this is just how the world

works. sure, the president in a narrow political sense can say everything is great, but reality check, underlying growth is going to be revised down from what it is. there's very little investment. everything he's doing on trade is reducing further the amount of investment. -- tax cuts were specialist were supposed to increase investment, but they didn't work because they are being so overwhelmed by everything that is being done wrong. employment is wonderful, and that i am not going to argue with. alix: what does this windup meaning for the fed? you look at that chart that david had, they are going to stay on hold. they are not going to hike, but they are not going to cut either. you add in the tariff issue with mexico coming out of the blue, and it gives new meaning to what richard clarida said yesterday with the requirements for a rate move. this is what he had to say.

>> if the incoming data were to show a persistent shortfall in inflation below our 2% objective or were to indicate the global economic and financial developments present material downside risk to our baseline outlook, then these are develop its the committee would take into account in assessing the appropriate stance for monetary policy. do we seef and when consumer confidence fall? when did we see unemployment rise? adam: that is a good question. i think vice chair clara to -- vice chair clarida has it right. up at aneeds inflation reasonable level to have room to deal with the next crisis. the fed needs inflation up. we all need inflation up because that is more conducive to wage growth and a good market. nice point for the fed.- a knifepoint for the

seehope is that you employment continue to rise. if you throw a lot of fiscal isicy at the economy, it just not going to work for the long term. the fed is also watching the productivity trend. chair powell last summer made a big point of looking back at 90's.reenspan in the if the productivity trend continues to be lousy, then you are going to have to tighten sooner. david: if you take all of that and put it together, you know the fed is going to have meetings next week out of chicago. changing thee dashboard altogether given the fact that we are really in uncharted waters?

bem: i am going to attending the fed conference next week. i will just say that we said very clearly that the fed target should be reviewed every few years, and certainly as economic circumstances change. now are verynces different than they were 15 years ago. ,e are in a low rate, low risk secular stagnation environment. we need something more forward-looking and substantive. alix: coming up, president trump heads to europe with the u.k. as his first stop. we will break down what to expect. this is bloomberg. ♪

alix: this is "bloomberg daybreak." looks to be a very brutal day in the markets. s&p futures down by over 1%. a feels like we are bouncing

little but off the bottom in that the dax was up almost 2%, and we've come off that it little bit, but european autos and european banks getting hit the hardest. low yields in europe come about autos getting wrapped in two potentially tariffs on mexican imports into the u.s.. it is the story of the months of the huge bond bull. yields dropping like a stone, down three basis points in germany. euro-dollar a little bit higher here, but still looking at its longest monthly losses since 2016. crude down by almost a full 2%. be very hardo finding a place to hide. david: it's time to get an update on what is getting headlines outside the business

world. viviana hurtado is here with first word news. viviana: president donald trump is threatening to use tariffs as a weapon in the fight over migration. he's vowed to impose a 5% tariff on imported mexican goods until they stop the surge of immigrants entering the u.s. illegally. as 25%,ld rise as high jeopardizing the new american trade agreement. china appears to be on the verge of striking back at the u.s. for blacklisting huawei. the state radio saying beijing will establish a list of so-called unreliable entities. china says those are foreign companies, individuals, and organizations that damage the interests of domestic businesses. chinese national radio says soon tomorrow be announced. on sunday, president trump leaves for the u.k. in a trip that will mix politics with pageantry. his visit largely consists of

royal engagements monday, including a state banquet at buckingham palace. later he will meet with lame-duck prime minister theresa may. 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 viviana hurtado. this is bloomberg. david: thanks so much. for a view from the united kingdom on that upcoming visit, we welcome now the u.s. consul and trade minister. we thought this visit may be a lot of pomp and circumstance, but it appears there will be some real business. there's a report this morning that he may well say that we will cut back on intelligence sharing if you don't cut off while way. the business -- cut off while i.y -- cut off huawe

how does the u.k. respond? guest: state visits are always an enormous occasion. they are the pinnacle of how you conduct the relationship between two countries. there will be a lot of pageantry, a lot of celebrating the relationship. there will also be an important moment when the government's commemorate the 75th anniversary of d-day on wednesday next week. it is a serious moment. what it is also time to do business and to keep having be discussions that we have between our systems on a whole host of issues, including our crucial intelligence relationship. within that, how we approach the issues around while way is something we have been talking about a lot with our american .olleagues david: would you say the british

government is on the same page overall with the u.s. government on 5g technology? guest: i think we are very much on the same page when it comes to the risks, and i don't think we are far from the same page on how we deal with them. we've been working hard on this and the u.k. for a number of years. how we deal with those going into the future is always a topic of conversation. john bolton, national security group at pfizer, was in london meeting with his counterpart. it is a topic bilaterally. it is always on the agenda. alix: what we learned over the last 24 hours is if you have a trade agreement, it does not necessarily mean there won't be more conflict. how do you look at something that happened -- something like what happened between the u.s. and mexico? president trump is a wildcard, and if you don't do what he wants, he will get upset. guest: obviously this is a fast-moving story, less than 12 hours ago.

i think the key point for us in our discussions with the u.s., whether it is ongoing negotiations, where we are working very hard to roll over the agreements we have while we are a member of the eu, or as we futurerward to our ambitions, we always have to have in our mind what is in our national interest, and have in mind that the u.s. will have their national interest in mind, and we conduct the discussions openly and robustly and try to reach mutual prosperity for our citizens in the future. david: at the same time, there is a transition going on in your government. does that mean everything has to get put on the back burner until we know who the prime minister is and what he or she wants to get done? strengths of the our system is the business of government goes on. this is not like pre-election period, where the civil-service

steps back. we keep contesting -- we keep conducting business, putting advice to the current prime minister until she steps down. we will go through a process of choosing a new leader of the conservative party and a prime minister, and then work with that prime minister to keep conducting the business of government in the uk's national interest. david: is the operating assumption right now with the british government that you will have your own separate trade agreements? there has been some back-and-forth on the question of brexit, what it means, how it works. about talking about the possibility of a trade agreement with the united states? do you wait out what happens with what we work out with brussels? delivering on the referendum from 2016 is the position of the government of

the day. when we get to a position or we can start negotiating once we are out of the eu is still very up in the air, but we are preparing. we have a trade investment working group which is met five times that has discussed a whole host of issues, including appearing to launch a free-trade agreement when we are able to do so. david: thank you for being here today. generalthe uk consul in new york. alix: some of the bigger moves we are seeing in the bond market are over in germany. 1%.-dollar up by 2/10 of record low bund yields in germany. european banks getting totally wiped out here, the lowest level since twice 16. us is adam posen of

peterson institute for international economics. we have to remember the underlying inflation data we got that did not impress. if you take a look at europe, what is the trade noise and what is the real economic weakness? adam: i think the moves we are seeing today are definitely the trump trade news compounded by the response of the chinese. the long bond prices in germany, the bund and the 10 year in the u.s. going so skyhigh, that has been true for a while. that is the underlying message about slow growth. that said, if you look at some of the trade stuff, the day-to-day equity move is what i would focus on right now. might be an unfair question to ask you, but do we go lower from here? is it possible to see bund yields go even lower? what would you think?

it is scary. i do not think they are sustainable at much low here, but what is happening is understandably a flight for safety, a flight for quality. as you said before the break, there's no clear haven to go to, but the thing is, with the u.s. behaving how it is, the u.s. is much less of a haven than it usually is, so at the margin, unds and other government assets are going to get overbought. what is the risk europe is bringing to japan? adam: i think the short answer is demographics matter more than we think. there's a lot of that low bond yield, low growth trend, low risk that does relate to japan. us that japanls isn't quite as bad as we think

it was. capital growth has been pretty good the last several years. you've got to look at both sides of it. i think the thing that is not there in japan is this right wing fragmenting nationalist kind of politics that is dividing within countries and within europe, and of course, japan doesn't have that. alix: it is a great point, and i feel like if we broaden that out a little deeper to the ecb come because we rely on central banks to prop up the economy when things don't go well, but if you don't have the same kind of thing in japan, the ecb will not be able to stop a bun slide into the negative 30's or something. what do you do to fix that? adam: i think you are absolutely right. there was a discussion at the at, and i said all of the major central banks, including ecb, are facing the threat of right wing populism,

the threat of this low growth environment, and room for monetary policy. but europe as a complete additionalion has room for fiscal policy. so i think the ecb has to decide, do they try to play games or just say we are on the brink of when the crisis hits? unfortunately, i think they've got to do everything they can to try to stop it. this, who last one on is the ecb for this purpose? we are about to have a new ecb president. by who be determined gets that job, or is that a reflection of the rest of the ecb? adam: it is somewhere in between. there's the reality of economics , so ideally there's no ,uthority in a central bank

although at times, as we saw initially with the bank of japan, you can mess up. and also, the ecb, even though the president is incredibly important, is a governing council. the key thing is does europe say we don't want ideologues who doesn't believe in qe? that line should be drawn. whoever they are, whatever their they are not fit to run a central bank. david: thank you very much, adam posen of the peterson institute for international economics. coming up, huawei says it will side with apple if china retaliates on the u.s. ban. this is bloomberg. ♪

viviana: this is "bloomberg daybreak." coming up in the next hour, minneapolis fed president. ♪ viviana: this is "bloomberg daybreak." investors unhappy with mark zuckerberg walked away from facebook's shareholder meeting without anything to show for it. they presented eight proposals, many supposed to limit zuckerberg's power. he rejected all of them. zuckerberg has majority control of facebook. is offeringfj buyouts to about 500 directors and managing directors, roughly 1/4 of its workforce in london.

japanese banks expanded abroad home.e up for business at is looking ahead to future attractions. the company plans to do more with its blockbuster marvel superheroes. disney will create lands based on the characters at the theme parks in california and paris. that is your bloomberg business flash. david: thank you. we turn now to our weekly businessweek feature, where we look at stories in the latest issue. while way overtook -- huawei overtook apple this year is the world's largest smartphone ceo toldd yet the bloomberg why he considers apple his teacher. and apple is as big as this. we became a peach, a bit bigger

than an apple. a littlebecome a plum, smaller than an apple. we could become bigger or smaller. we are not a public company. we are not only pursuing growth or profit. it is good enough for us to just survive. there have been caused by some in china for beijing to retaliate against apple. chinat an action that should be looking at taking? happen, first not of all. if it happens, i will be the first to protest. apple is the world's leading company. there was no apple, there would be no mobile internet. we would not see the beauty of this world. apple is my teacher. it is advancing in front of us.

as a student, why should i oppose my teacher? i would never do that. reporter: you talked about having a two-year lead in terms of 5g on your competitors. does that get eroded? >> definitely. if we get slowed down, it is because the wing of the airplane has a lot of holes. of course others can catch up. but we will keep fixing the holes. we will fly fast again once all the holes are fixed. reporter: what exactly have you put in place in terms of contingencies? can you give us a few more details around the contingencies that have been put in place? >> we might have contingency plans for the core of the airplane, the engine and fuel tank, but we may not have a plan for the wings. we need to review the situation all over again and fix those problems. you want to come back into her three years to interview us if we still exist. if we don't, please remember to

bring a flower and put it on our grave. alix: that was way way -- that was while way -- that was huawei's founder and ceo. joining us now, jason kelly, bloomberg's new york bureau chief. "businessweek" did a huge write up on this as well. jason: it is a great interview and it reminds you of how deeply integrated while way -- integrated huawei is into the supply chain. we were talking about zte, but this is a whole different league. this has wide-ranging, long-term implications for the entire world. you heard about the chipmakers. you heard about these massive tech companies. this is a generational change potentially. david: integrated into the supply chain, and also into the chinese government.

the chinese government is not going to go away. they are going to defend h uawei. jason: absolutely. are we seeing the fury ration of a long-standing relationship between these two countries? david: you can catch the full interview in tonight's special that airs at 9:00 new york time, and 9:00 a.m. saturday hong kong time. >> you have more customers that are exploring the flexibility of supply chain changes that, once they made those changes, whether or not we have a trade deal, those changes will

deal reversed. alix: what was your biggest take away from that interview? jason: my take away was how seriously they are taking these trade tariffs. , you can big take away see the whole thing online, is fedex going seven days a week, ups seriously considering. alld: it is clear we are going to get more delivery. there's a real race going on here to deliver more stuff. brooke: --jason: totally. alix: and you know what that means? more warehouse space. david: get stuff instantaneously. many thanks to bloomberg's jason kelly. be sure to catch jason on "businessweek" on bloomberg television every saturday and sunday, the latest issue is on stands now.

coming up, uber is what i am watching after first quarter sales were positive after a a $250 million loss. this is bloomberg. ♪

david: here's what i'm watching, it's uber. shares responded well to the fact that they lost $1 billion in a single quarter. they had a lot to say about competition, actually. alix: it is sort of a now versus later thing. the ceo didn't rule out further heavier spending. but then gene munster said the uber story is going to be more attractive after a year. david: part of it depends, i think, on what you are investing in.

in. they said we can do more things like invest in uber eats and expand, so investors sort of liked it, but this is a pretty dramatic chart, isn't it? the top of that is operating income and losses, comparing lyft and uber. also, the operating margin because it is losing so much money -- or investing, i should say. alix: if they wind up improving that, that would be more significant as well. it was interesting to look at booking, up 30%. that is a solid growth. david: but overall growth is slowing. they are not growing at the same breakneck speed they were before. right, if youare can wind up consolidating, moving into other countries. we think about uber here in the united states, but a lot of that discounting things

was latin america and overseas. alix: we will definitely take a look throughout the market day. in the overall markets, it looks like it is going to be a brutal off day. we are off the lows of the session, though, if that is any consolation. autos and banks getting hit very hard in europe. in other classes, it is the rush into safety. you still have german bund come oft a record low the lowest since september 2017. oil also a part of that risk off trade. next hour,n the minneapolis fed president will be joining us. this is bloomberg. ♪ the latest innovation from xfinity

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unreliable entities list as china strikes back at the u.s. for its while way -- for its -- for is huawei ban. and to cut were not to cut? federal reserve bank president of minneapolis neel kashkari joins us. will they even consider a cut? david: welcome to "bloomberg daybreak" on this friday, may 31. an awful lot going on. last evening, the president of the united states issuing an order invoking emergency powers to say there is a 5% tariff, all imports25%, on from mexico. alix: i think it is fair to say any market preconception of trade deals getting done, therefore you can feel secure about investments, is wrong. david: and the president of

mexico has a news conference about this time every week, and we are going to be looking at that. that is the live shot before he takes the stage. he wrote the president a letter last evening and said that we can't solve social problems through tariffs and coercive action. really not a very hostile letter, but the foreign minister of mexico is on his way up for meetings. alix: and we learned that a trade agreement does not me no more tariffs. david: that is the thing we went through -- that is the thing. we went through two years of negotiating with canada and mexico. we thought his top priority was getting that deal ratified. now he comes out with tariffs. alix: wto can come in and say we can see how tariffs against china are justified, but we have aver seen using tariffs as foreign-policy duel to deal with immigration. how did they rule on something like that?

david: andy specific -- and the specific statute he invoked has never been used. it has never been used to impose a tariff on something. i think there is a substantial legal question about whether it can be upheld. alix: markets really have no idea what to do about that. you can really see across asset classes. we are holding minorly off of the lows of the session. key levels here for the yen. the 10 year yield down an entire six basis points, the lowest level since september 2017. crude also caught up in this risk off feel, but may it could be worse. david: we spent the whole week buying bonds. wherever they are, just buy them. let's turn back to the china

situation for a moment. earlier today, chinese state media announced the government would establish a list of what it called unreliable entities based on whether they obey market rules, violate contracts, cut off supply for noncommercial reasons, or generally damage the interests of chinese companies. we welcome over the telephone the national foreign trade council president and former deputy director general of the wto. thank you for joining us. you spent a career in the wto and the united states trade representative's office. have we seen anything like this before? guest: we haven't seen the chinese government take this kind of a step yet. they've obviously responded with but this is basically mirroring the latest u.s. policy huawei and on chinese entities under our investment laws.

we have seen tit-for-tat retaliations on tariffs. i don't think it is a surprise given the fact that the relations have soured in the last several weeks. we seem to be moving further away from a deal with each other. wto.: alix mentioned the is there anything they can do that would be constructive? china, not regard to very much right now. obviously there's a serious possibility that both the u.s. and china will have found to technically have violated their tariff commitments to each other in a wto dispute, but really when you think about it, what do? is that going to the only real remedy you have in the wto is that a country can be authorized to retaliate against you. well, they are already retaliating against each other, so there is no wto jail you can

put a country in. it depends on countries being willing to observe their obligations, and in the final analysis, the only real remedy in the wto is authorized retaliation. the two countries are already in a tit-for-tat retaliation mode anyway. david: when it comes to china, and for that matter the mexico situation as well, you've been devoted to really i l -- really bilateral and multilateral negotiations. what do trump's actions do to a negotiator when he's gone through and negotiated the usmca , and when we impose tariffs apart from that? rufus: this completely undermines the existing nafta, and certainly throws any new usmca out the window. the most important feature of both of those agreements is tariff free trade between the u.s. and mexico. that is why it's our largest

trading partner. mexicans are incredibly loyal buyers from the u.s.. trade is essential to our industries. anduy tomatoes and avocados all sorts of products from mexico. this not only risks huge harm to key sectors like the auto sector and farmers, because now we will be in a tit-for-tat trade war with mexico. they have capacity to retaliate because they are so -- they have no capacity to retaliate because they are so dependent on trade. if we think we have a problem today, wait until mexico's peso starts collapsing and their exports sector starts to contract. that is when you really see an immigration problem. this is the worst way to try to address those issues. alix: that is a really great point, and we are looking now at a live shot of mexican president

amlo. he says mexico will not fall in provocation, and thinks that all conflicts should be resolved with dialogue. aside from rhetoric and talking, what can mexico actually do? rufus: mexico will have to react , and they are obviously going to try to do things to alleviate the immigration problem, but there's a limited number of things they can do. thing isimportant that no government can sit passively while another country takes a hostile act like this. this was done 30 minutes after presidentobra door -- agreementd since the for ratification. you sign a solemn agreement with them, and six month later

completely violate the spirit and letter of the agreement. david: thank you. alix: taylor riggs is looking at all of the market reaction throughout the weekend today. taylor: really, what a month it has been, particularly for the global bond markets. germany getting a record low print on their 10 year yield, coming in at 21 basis points now, and still seeing negative yields in japan. of negativelion yielding debt worldwide. what that means is we are still getting more inversion of that yield curve, now about 19 basis points. earlier this week, we were or 15g about how five basis points is not really summing to get excited about, but -20, -30 basis points gets is more concerned because that is what gets us really started to look like in the past two

previous recessions we had when we were seeing at inversion. if there is any good news, it could be that china's tech sector is underperforming the best tech sector in the last 19 days since trump's tweet about trade. , at least the u.s. market is holding out a little bit better. david: thank you so much to taylor riggs. joining us from milwaukee is michael antonelli, bayard market strategist. d market- bair strategist. we had a month of this now, going back to may 5. michael: do you think maybe we will get infrastructure week next week? will that be coming down the line? [laughter] david: it won't be the first infrastructure week. i think we've had four of them. michael: i think all we have to do is figure out how u.s.

corporations will react to a multi-front trade war that has escalation guided by an administration that can change its mind at any moment's notice. it seems really clear-cut to me going forward. marketw, really the needs to step up. you were talking earlier about the wto. here's what can solve all of these problems come the market. there's a reason the market is undefeated against politicians. if the market wants to solve this, it is going to have to force our hand. alix: we are going to be sticking with you. we are still looking at a live shot of mexican president obrador, known as m low, -- known as amlo, speaking in mexico city. he says they have to look for options to solve the trade issue, and they will send officials to washington, but the options are limited for what

mexico can do to pressure the u.s.. we will watch those headlines as the peso falls. this is bloomberg. ♪

david: mexico's president lopez now, ands speaking talking clearly about his response to president trump's announcement last night about across-the-board tariffs on mexican imports to target illegal border crossings. we welcome now the president of -- council of guest: good morning. it fundamentally undercuts what president lopez obrador is

trying to do in mexico. the tariffs of 5% could be going on as early as june 10, and they could be escalated up to 25%. that is a poorly dramatic and rapid excavation. rapid escalation. it also undercuts the president's argument that he's been able to work with the united states to achieve some things for the benefit of mexicans, most notably the conclusion of negotiations, although not yet implementation, of the usmca which is designed to replace nafta. it may very well be undermined by the president's actions yesterday. david: what options does president lopez obrador have? obviously president xi has a number of moves within his

economy can withstand whatever happens in the united states. what does president lopez obrador have to work with? eric: in the immediate term, he can try to negotiate and see if there is a result that would please the u.s. administration. and take us back down the path to a second trade , china andted states now potentially mexico, two of our top three trading partners in the world. he really needs the united states as a driver and engine of his own economic growth, and if that relationship is challenged, his own growth is going to continue to struggle. meanwhile, investors have already been a little bit skeptical. he came into office last summer because of some of the things he said in terms of investment

policy, particularly walking back some of the reforms from the previous administration on the energy side, and others. he really needs a positive result here. i'm not sure how he gets there. david: according to the president of the united states, he gets thereby stopping people coming across the border without permission. is that an option at all? if he could do it by deployment of troops or something like that, could he do it without substantially undermining his credibility with his people, and say that he is basically jumping to the snapping of the fingers of president trump? eric: that is the challenge he faces. mexico has a strong, under the surface nationalist streak. they have a long history with the united states. for the president to be at the u.s.and call of the presidency is untenable politically. there are things that could and should be done. i would hasten to say that the's

are not necessarily mexican coming to the border primarily, they are central americans. he is trying to do things that would help address this issue, so the white house is taking a punitive measure that caught a lot of people by surprise and will probably undermine that effort. of theeric farnsworth council of the americas, thank you for joining us. alix: michael antonelli of baird is still with us. what is your position today? michael: you mentioned earlier that the stock market what is only down 1%. these aren't supposed to go into effect until june 10. there could be some negotiation

that goes on before that, so the market is probably looking towards that. the president did threaten to shut the border at one point, so the market might be saying that there is a small chance this doesn't happen, and that is why it is not down more, but i think there is so much uncertainty right now that buyers on a friday at the end of the months are just going to evaporate. alix: do you need to buy treasuries? do you go into cash, gold, the vix? where is your safety over the next 72 hours? estate, utilities, real staples will definitely be the place. if you bailout, the 5-year note is the most overbought it has been and probably a decade, so to fly to safety in the treasury market is to risk buying one of the most overbought markets we have right now. frankly, some people might just sit in a cash account. that might be the best way to go right now. also, giving some

perspective, it's been a really tough months anyway. how much do we need to take it all in stride and say, and of the month, easy does it? michael: and also, we are only down about 5% from the all-time high. this happens about three times a year. could it get worse? sure, but let's not make too much of the fact that we are in, right now, a normal correction. it is month-end. a lot of things can happen at month-end. let's see with the negotiations look like over the next few weeks. david: michael antonelli of baird is going to be staying with us. coming up, we discussed the impact of new tariffs on mexican goods. that is coming up next. this is bloomberg. ♪

♪ alix: time now to look at companies worth watching this morning. today our focus is one sector,

and that is autos. david: autos very much are in the spotlight with respect to the mexican action taken by president trump last night. order, anfter the analyst at deutsche bank made the point that there are intracompany transfers across the board. this is just general motors transferring back and forth across the border. ford doing the same. it shows how much u.s. imports and exports get affected by some thing like this 5%, up to 25%. marketou can tell in the , you are looking at ford, general motors, even fiat chrysler come others are getting hit the hardest. michael antonelli of baird is still with us. so how do you look at the sector now? michael: last night when i heard this news, the first thing i thought was avocados and beer, the things most consumers

consume. but then i thought autos, auto parts, that is the real victim here in this instance. then i thought, how many electoral votes does michigan have? 15? i don't know how long something like that could go on. david: and ohio, if we are talking politics. a lot of auto parts many factors are in ohio. michael: absolutely. this is going at the heart of what i would assume face voters are for this administration's party. the auto sector is really going to be in play today. the amount of uncertainty around this, look at delphi. i think it was down 9% premarket. but again, back to my previous point, the market can solve these problems. the market can force the administration to rethink its policies. it just would get really ugly. david: to what extent is the auto industry retooled since the big crisis back in 2008, 2009 to

respond to some of this? so as they get some real margin pressure, they can cut back? michael: there's probably levers turn,an t -- they can but their supply chains are really integrated between these two countries. it is not as easy as just saying let's switch all of our importing over to vietnam or to another country. this is going to be a real struggle in the near-term. all sure the board meetings over our say and what does our contingency plan look like for something like this? alix: what selloff would we need to see in the market to solve the problem? michael: the market is undefeated against politicians, and it would need to be ugly. it would be a credit type event, the bond market, the equity market. you would have to see one of these panic take moves like the end of last year, where the

market is saying to politicians, i won't stand for this anymore and i am going to force your hand. it is not 5%. it is 10% to 15% kind of selloff. alix: we seen outflows out of junk bond's, for example, but credit spreads have not widened to the point of anything like a crisis. how do you deal with that as an investor? the credit market looks ok. do you need to buy equities, for example? equity: certainly, smart investors are going to be pulling up high-yield or credit indices derivatives to get a sense of what is going on. at this point we need to take our bond friends to help us out and tell us how they are feeling. if they get nervous and we start to credit spreads blowout, credit derivatives fall apart, people are going to run from the equity market. i think the amount of uncertainty in the market is going to keep a lot of people on

the sideline. alix: so good to get your perspective today. michael antonelli, baird market strategist. you have that risk off feel permeating, but it could be worse. s&p futures down just 1%. same thing with autos over in europe, as well as banks. it is money into bonds, but again, yields off the lows of the session. right around record bund yields in germany, sticking to that level as we end this month of may. coming up, neel kashkari will be joining us. is view on trade as well. this is bloomberg. ♪ ñqçsço

alix: this is "bloomberg daybreak." i am alix steel. 30 seconds away from the latest read on inflation in the u.s.. brutal day although we are holding around the lows of the session. euro-dollar stronger on the day.

up .2%. finally president trump was able to put the kabosh on the dollar rally with all of the mexico drama unfolding. crude lower. record low bund yields. personal spending for april coming in stronger than estimated and march revised higher as well. for april up .3%. personal spending flat and income higher. it is backward looking, but as we know the consumers holding up in the backward indicator is telling us that. david: the core deflator is not sending any warning signals. right on track. 1.6% year-over-year. alix: egypt march revised to have march do

revised a 1.5%. david: we welcome neel kashkari. thank you for joining us today. we just read out the numbers. the consumers holding up, at the same time we're not seeing much inflation. what you read from that? neel: that is been the story for the last few years. the job market continues to be strong. wage growth is taking up what only slowly and inflation remains low. i read that is saying the u.s. economy still has capacity. we should allow the economy to continue to strengthen and allow more workers to find jobs. hopefully that will lead to higher wage growth and translate to more inflation so we can hit our 2% target. that is a consistent story but a good news story. alix: how do you read the last 12 hours, when you get the white house statement about tariffs on mexico and china will retaliate and you're looking at the solid

data. how do you interpret that? neel: we have to separate the long-term signals and the fundamentals from a lot of the noise and the volatility. sometimes the data can send us misleading signals. two months ago the job market had a lousy job report. my reaction was let's take our time and see how the job market responded. it turned out that seems to just been noise. on the trade front, it has been more noise and more rhetoric than it has been big actions that have impacted the u.s. economy. tariffs with mexico could begin teaching to the u.s. economy. if the trade fight with china goes down a bad path, that could also be troubling for the u.s. economy. i'm trying to separate out noise and rhetoric and what is going to affect the economy. the fundamentals have been strong. peoplei think a lot of are saying there are just trade clouds on the horizon, how much is a thunderstorm.

fed had chair of the something to say on that subject about when the fed might have step in. this is what he said. toif the incoming data work show a persistent shortfall and inflation below are 2% objective or work to indicate that global economic and financial developments present the material downside risk to our baseline outlook, these are developments the committee would take into account in assessing the appropriate stance for monetary policy. david: the question is what data do we need. he referred to below the 2% target. we have been below the 2% target. what data would you look at to determine whether it is clouds on the horizon or a thunderstorm about to hit? neel: i would separate both things. one is the fundamentals of the economy and the second what is happening to inflation. for 10 years, as we had this 2% inflation target, we've been

consistently under the target this entire time. my reading is that inflation expectations are anchored at 1.7%, which is not seem like a big myth but that sets her ability to respond to future economic downturns. the second is the overall economic fundamentals. if it looked like the u.s. economy were slowing down, if job growth were slowing down, if these tariffs were causing businesses to retrench, that would put the fundamentals of the real economy on a slow trajectory. either of those good because for changing the path of dietary policy. i take a lot of comfort from the fact that the job market continues to be strong. i want to see that continue. we have to see how the data comes in. alix: there was ugly -- there was a great column at bloomberg was morning that talked about president trump. president trump may have found a way for the fomc to do his visit

-- his bidding, ratchet up economic fears by trade threats. the of trade threats, the market sells off, that tightens financial conditions. up cutting.wind how do you get the cover to do what you need to do for the economy? everybody proud that on the federal open market committee has been focused on doing the right thing for the economy based on the data and analysis and not focusing on politics and rhetoric. that is the best thing we can do. we cannot worry about who said what and will it be perceived we are responding or we are over correcting and not responding. the only way through the political noises to focus on the data and our goals. stable prices, which we do finest 2% inflation and maximum employment as many americans are working. that is the only way to cut through it. that is what my colleagues and i are focused on doing.

david: i will put up a chart. the top segment is showing consumer sentiment, which is going up from the middle is unemployment, which is going down, and the bottom is wage growth, about 3.2%. does this tell you you are on the right course? you're getting what you want to get? the right data points to look at. that is what i'm focused on. i want to see more of this. wage growth is taking up, but when you factor in productivity wage growth is not signaling inflation above 2%. that tells me there is more slack in the labor market and more americans who want to work. some ofn opposed to these rate increases over the past few years. i do not think they were justified by the data. all things being equal, i probably have rates at a lower place. for me, let's keep watching the job market.

the u.s. economy continues to create 200,000 jobs a month on average. that means we're bringing more workers and off the sidelines. that should lead to higher wage growth. alix: rather than the chart that david just had versus all of the geopolitical drama with china trade and mexico trade, how long does an increase in tariffs -- when is the transmission mechanism in effect? what is your read on that? neel: mexico is different than china. although we buy a lot from china , trade is a much smaller part of our economy that it is of china's economy during a tit-for-tat america versus china should accrue to america's strength. we are so integrated with mexico that if we got into a tariff battle with mexico that that could be much more costly to the u.s. economy and have a more direct effect on business confidence, which would cause

them to retrench and lead to an economic slowdown. i would hope we do not end up in a terrible battle with mexico. i think mexico is too important a trading partner and ally. i would focus our negotiations on china. alix: how quickly do you think we would see a deterioration in the data? neel: it is hard to know. it depends on when does the rhetoric turning to tariffs and when does it start to bite? it is too hard to forecast. it is something we and your viewers will be paying attention to. david: we've been talking about increasing jobs and wage increases, which are coming but may not be as robust as one would like. let's talk about something you discussed, whether we are creating jobs and raising wages, but for whom? you and other economists are saying we'd be more concerned about income inequality. we have real wage growth.

the lower wage of earners is going up at a higher rate. is that an indication we are headed in the right direction even on the distribution issue? neel: absolutely. that is something i'm paying a lot of attention to. 3%, growth today around productivity around 1.5 percent is still less than are 2% inflation target. wage growth, although it is up,ng up, -- it is picking is not an indicator of the future. that -- the share of income i goes to labor and the sure that goes to capital. labor shares have been going down for 40 years. that is something we need to understand as we evaluate the outlook for inflation. these are all related and are complex. if there is a scarcity of workers and businesses have to compete to find workers, workers should have more power and that should lead to higher wage growth and may a higher share of

national income accruing to labor. this is analysis we need to pay close attention to because it directly affects the outlook for inflation. that is the perspective i am coming. more of the wage growth is coming at lower income workers and that is good news. they are overdue for a raise. david: the share of income to labor has been on to line -- has been on a decline and not rebounded. many think that is because of globalization. is there any role for the federal reserve and monetary policy to play in trying to address that pressing issue? neel: i do not think we want to use monetary policy to undo or reverse some of these effects from globalization and trade technology. i think monetary policy works at the scale of the entire u.s. economy and if we can allow the u.s. economy and do not raise rates prematurely, allow the

u.s. economy to continue to strengthen, bringing more workers and have businesses have to work harder, that should lead to higher wages and give workers more bargaining power and help us achieve our 2% inflation target. to me, it is not a trade-off. to me this is almost a free lunch where we can allow the economy to continue to strengthen and meet our effectives which will help workers. that is the position i've been advocating for. alix: to wrap all this up, i do not want to let you go about asking you about the yield curve signals. if you do not stand in the way of growth, things can get better. does this chart make you worry? it is the three-month 10 year yield spread. no longer five basis points or two basis points, 17 basis points. what is that chart telling you today? neel: it is not a comforting signal. we've been paying attention to

the yield curve for a couple of years. as the fed has been raising rates, the front end has gone up and the back has come down. it is a concerning signal. is telling usit market participants are forecasting slower economic. we should take that as a serious signal. i think it gives us back on where the neutral interest rate is. i think there's a lot of debate, are we at neutral? that is an exact science. t science. an inexac i think we are at neutral, but we might be slightly restrictive and that might be one of the signals the yield curve is telling us. alix: have you separate that read versus the demographics and the global bond rally in that you will want to buy the u.s. at 2.17 and bunds at -20 basis points. right, butnk that is

market participants are saying the growth outlook is slower than it was the year two ago, but still stronger than in europe. the u.s. economy is still fundamentally strongest economy in the world. we have challenges, but europe has bigger challenges. japan is bigger challenges. china has its own challenges. it is a concern individually, but we are better off then other economies. david: that is neel kashkari, minneapolis fed president. alix: coming up, trade war contagion fears. more on that in today's fall the lead. mexican peso front and center. this is bloomberg. ♪

viviana: this is bloomberg daybreak right coming up, our poll exclusive interview with the huawei founder.

it airs at 9:00 p.m. friday new york time. alix: time for follow the lead. a deep dive into stories making headlines and moving markets with insights from industry veterans and insiders. president trump announcing across-the-board tariffs on mexican imports in retaliation for border crossings. mexico's president sailing they will not -- saying they will not respond in a desperate way. we spoke with eric barnes about what mexico can do. farnsworth.c he needs the united states as a driver of his own economic rope. if that is challenged, his own growth will continue to struggle. alix: joining us is damian sassower.

take a look at this dollar-mex. what is the upside in the downside? ian: we are off 3.5% and building. that is a massive move for a bbb rated credit. i think the markets are starting to adjust. david: the question is always is it possible we are overreacting. they will do that today in the next thursday they will say it is not as bad as we thought? damian: i don't think so. i think trump means what he says. this is devastating for mexico. at 5% it is devastating. if you raises it to 25%, it could be worse. this is aimed at china. data, look at china pmi

they just slipped back into reactionary territory. the unemployment component of the pmi does crashing. export orders crashing. business sentiment flipping. things are getting bad in china. alix: walk me through overall emerging markets. where's the threat going to be? damian: it is time to beef up the defensive em playbook. one place to hide his em dollar denominated corporate debt. it. do not hold as much of it has held up well. corporate spreads has not widened as much as em sovereign spread. you go to load builders like the check, shekel, hungary, romania. local denominated debt on a currency hedge basis. the upward sloping return stream over the long-term speaks for itself.

those are some of the areas we are looking at. alix: let's get to the last point you made. the bloomberg looks at e.m. local debt and the spread between the two. the onlyhe reality is difference there is the currency impact. currency accounts for 80% of return and em local currency government debt. the orange line is how volatile that return stream looks. that is one area you might want to take it vantage of. if you're going to go that path, you might want to look at the high guilders like indonesia and brazil. david: what will this do to em effects generally? damian: it will be more volatile. david: which affects your hedging costs. damian: absolutely. if you look at the rate in china, the volatility has gone up considerably. if you look at some of these

indicators, you're right. it is getting more expensive to borrow. people cannot rely on where these levels will be next week or next month. these are things that will affect business decisions, decisions and trade decisions. damian sassower, thank you so much. coming up, stocks are in the red and trade tensions heating up. or on what i'm watching, next. this is bloomberg. ♪

alix: i'm watching the equity market heading for the worst opening loss since may 13. joni us is miller payback equity strategist. my theme is it could have been worse. what you do with equity today? to be honest, i've been cautious on the market, but i always worry about cap openings, especially gap down openings on

the last day of a month, in a marketplace where we have the stock market is very overbought. we could get a bounce anytime soon. i do not want to react to this early this morning, but at the same time, if we do get a bounce, i think it should be one where people would take a few chips off the table. we have seen a significant change in many different issues. the uncertainty means we will move lower. not the worst thing the world. alix: it will be sell risk than not buy dips. what about the bond market? matt: same type of thing. the way the tlt, which is the treasury etf, very overbought. that measures price rather than yield. that is getting very overbought. it should come down at some point in the next week, which

will have interest rates move up. with all of the uncertainty in the marketplace, the biggest thing is what is going on with all of the uncertainty. it draws into question whether we get the kind of growth people have been expecting. interest rates will probably come back down. similar situation. david: you said it is less than a week, less than a month. we had a lot happen since the markets closed yesterday afternoon. as going to the weekend, how do you position yourself to protect yourself? matt: the most important thing is not to react too harshly. people start dumping stocks left and right and causing trouble. one thing i've been saying for several weeks is raise a little bit of cash, get more defensive, and look at the stocks that people pay you to wait through these uncertain times. ones that pay a good dividend and have a record of increasing their dividend on an annual

basis so you do not get in trouble. a defensive play so you can take advantage of when the baby gets turnout with the bathwater. a lot of people have been trying to say that. after 5% or 6% decline, i've not seen that. if we get a 10% move, you will have great opportunities. you will not be able to take advantage of it if you do not have cash to lose. alix: what is on the shopping list when you want to take advantage? matt: i'm looking at the energy stocks. warren buffett jumping into the group. no matter what people say, every time oil prices move up, trump gets worried. he does not want them to go down too far because it is a huge area of job growth in the u.s.. you want to line up your favorite energy stocks and buy them. they have come down quite a bit. alix: that is a call. yourmaley great to get

opinion. david: i know we have not heard the last from the president. alix: gosh, no. [laughter] alix: i am surprised we have not had the tweets. in the markets, it could be worse. s&p futures off 1%. in other assets, a similar story . money coming into the bond market and in germany, also lows in the session. -19 basis points versus a record closing low. crude continuing its downturn by 2%. that wraps it up for bloomberg daybreak: americas on this busy friday. coming up on the open, richard bernstein. this is bloomberg. ♪

jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now. jonathan: coming up, the board market rally resumes. fresh trade tensions bite. president trump taking the battle to mexico, threatening to level tariffs on mexican imports and the economy in china providing little relief. manufacturing data dipping back into contraction territory. 30 minutes until the opening bell. futures negative 30 points. stocks down, yields up. 2.18 on the u.s. 10 year. let's get straight to it and begin with our big issue. the white house opening a new front in the trade war. >> new tariffs on mexico. >> mexico. tension.xico >> what is the incentive to negotiate a deal in good faith? >> the biggest issue is the