caroline: from bloomberg in new york and london, i'm caroline hyde. romaine: cyclicals rally but everything else fell. joe: the question is "what'd you miss?" caroline: we knew the next round of stimulus would be big but maybe not this big. joe biden is set to unveil a

$1.9 trillion relief package, the first phase of a two-part strategy with a broader program coming in subsequent weeks. biden is seeking bipartisan backing. we saw bond yields hit session highs when we saw the details. how much will markets factor in these sorts of quantities that will be needed to finance this? joe: we heard from powell today, there is no doubt the increased spending expected to lift growth and put upward pressure on inflation. we see that move in rates, i'll be at from very low levels. what caught my eye was the move in small caps and cyclicals, massively outperforming major industries. let's bring in our white house reporter. jordan, this deal, we are expecting more news soon. help us think about what will be

stimulus, as in immediate aid for the economy, versus broader democratic priorities that may not be part of this specific immediate bill? jordan: i think what you will see first is the immediate covid relief phase where the president-elect will lay out his plan later this evening. we are looking at $1.9 trillion package. after that, we are expecting him to release those priorities you were talking about. think about something he talked about for a long time, infrastructure spending and also measures targeted to address climate change. those are some things we can expect down the road. the most immediate concern is the massive covid relief package he is proposing. romaine: the last couple times we had a major stimulus package it was members of congress who were out front and center pitching and promoting this. this is different. we are seeing the president to

be pitching this himself. i'm wondering, how much does that change the equation with regards to not only this getting past but implemented in an efficient manner? jordan: it changes it in a huge way. president trump was never engaged in the legislative process. that made a difference because the demands he was asking for, like $2000 checks, he wasn't getting because he wasn't engaged in the process. biden spent decades in the senate, has relations on capitol hill and if he wants something he knows who to talk to and how to get it done. you can expect biden to be more engaged in the process. i think you will see especially with the democratic senate taking power, he might be able to get those priorities across the finish line. caroline: talk to us about how they get across the finish line, which parts are going to need bipartisan support? how much will need the majority in the senate and he can push through no matter what?

jordan: right now he is looking to do everything on a bipartisan basis as far as covid goes. we are talking 60 votes. they are optimistic they can get that bipartisan support. but we will see when the rubber meets the road if that will hold up or if they do some procedural trickery in the senate than try to use this process called budget reconciliation to get it across with a majority vote. we will have to see whether they need to do that. but right now they are optimistic they can get republicans on board. joe: for bills that just need the majority vote, it is a narrow majority the democrats will have come a 50-50 plus one. will virginia voters begetting $3000 checks? jordan: that might be something for them to think about, the all-important senator joe mansion -- manchin who will be a

force in making or breaking deals. he was putting up complaints about $2000 checks. i think we will see something like the bifurcated approach that might please him. we will have to see. it speaks to the dynamics, the joe biden will be dealing with, and it will be difficult to get these bipartisan deals even though the president-elect's optimistic about his chances. romaine: we expect to hear from the president-elect about this plan in a little less than three hours. in addition to the actual fiscal elements of economic relief, are there elements in the legislation that are specifically targeted towards vaccine distribution and really, getting covid itself under control? can you explain? jordan: that's right. you pointed out something important, this isn't just for the economy. this is to get the vaccine out. they will be talking about new policy changes to distribution, talking about trying to make the

vaccine, this is something the trump administration starting to do now but, make it available to everyone 65 or older and also those who are 16 and older and with conditions that might exacerbate covid. they will try to pump more money into vaccine distribution to ensure the states and cities have enough doses to ensure everyone gets vaccines. joe: jordan fabian reporting at the white house. romaine: we are expecting to hear from the president-elect a little later tonight. next on this program we will turn our focus to trade, particularly what we saw in the chip space. a company rallying in the u.s. on plans on a $28 billion spending. we discuss the sector with a professor at harvard business school, next. this is bloomberg. ♪

romaine: we are turning our attention to semiconductors. there was a big story overnight, taiwan semi says it will pour about $28 billion into capital spending this year, well above what it spent last year, and that will amount to half of its projected revenue. joe: absolutely extraordinary. the chip contract manufacturer come already with a dominant lead in technical production. i watering amounts of capex plan but it is paying off, look at the taiwan semi chart versus intel. taiwan semi come off to the races. caroline: checking in on what

intel has been doing, rising slightly as of late because of changes at the top. bob swan out. it will be interesting to see how the new leader takes hold. joe: joining us is willy shih, expert in manufacturing supply chains, product development. putting into context the staggering amount cap -- taiwan semi will spend, how much will this cement their current technological edge and dominance in chip production? willy: $28 billion, while that seems like a lot of money, typically they have been spending $20 billion plus per year. when you look at this business, one of the things that characterizes it is, it is so capital-intensive. they are bringing up the new fab

18 in taiwan, that will be the fourth, what they call gige fab and these fabs are very capital-intensive. that is why it is not attractive to wall street, to be in this business, because it is so capital-intensive. romaine: i'm curious not only what taiwan semi is doing but at one point, silicon valley, it was named silicon valley for a reason. a lot of production was there. there isn't much anymore. we know the trouble with intel now and a lot of the rumors that they are looking to set -- to outsource manufacturing. is there a market or an environment in the u.s. that would support large-scale chip manufacturing? willy: i think one of the problems, if you have looked at the history of the industry over time, there is a design side of

the business, which is very profitable and also very asset-light. there is the manufacturing part, and that is very asset-heavy. you really have to execute well. what happened is, starting in the 1990's, we saw this separation of the so-called fab-less companies like qualcomm, nvidia, now apple of course, who would do the design, then they would outsource manufacturing. for a long time people were happy about that. intel in comparison has been what we call an integrated device manufacturer. in other words, they do the design and they do the manufacturing. that formula actually served them very well because of course, starting in the late 1980's and through the 1990's, the microprocessor business was so profitable that they could afford to pour a lot of money

into manufacturing. they were the world leader in manufacturing. they were ahead of everybody else, and that gave them an advantage over competitors. once they lost that lead, and you have companies like anb going to tsmc for their manufacturing, that became a big problem. caroline: talk to us about tsmc looking to set up manufacturing capabilities on u.s. soil in arizona. how much will there be a worry about lack of u.s. manufacturing capability? will they want to bring it back to the u.s., not owned by a foreign company? willy: i think the ownership is less of an issue but if you look at the tsmc proposal in arizona, that is $20 billion fab, and if you look at the capacity of that fab, it is about 20,000 wafers

per month. that is not a significant amount of capacity when you look at how much capacity tsmc has. for example, tsmc has three, going on four gige fabs and each of those has a quarter billion wafers starts per month. this arizona thing is kind of, it won't be at the leading edge. the most advanced technologies will continue to be in taiwan. i think that is where the concern comes from, because without intel, really, the three leaders in the industry are intel, samsung and tsmc and tsmc is out ahead. the question becomes, if you don't have that most advanced capacity in the u.s., how do we really feel about that? joe: we have seen intel shares rally a little lately on change at the top and reports that may

be they may at into outsourcing manufacturing. do you think intel can right the ship and have a good strategy? more importantly, is there in tension between the business models wall street likes to see versus national security? willy: can intel right the ship? i hope so. because they are the u.s.'s last chance at leadership in the sector. they have a lot of good people, pat coming back, we can hope for the best. he joined intel originally when he was 18 years old. they will have to invest a lot to catch up. and it won't be pretty for a number of years. when you lose a lead like that, it takes sustained effort to get back into it. i think the big problem is, as you mentioned, what is the

business model? wall street rewards the fabless models. we see qualcomm, andy and others, and those companies are asset light and the high-margin part is the design and marketing. so how do you feel about the manufacturing part? in order to make the manufacturing part successful, you also need volume. because it is through perfecting products, by moving a lot of volume through your factories, that is how you improve your yields and how you improve the economics of that process. tsmc has commend us volume that they have been able to aggregate over customers like apple, nvidia, qualcomm and the people i mentioned before. when you have companies like apple with their new processor,

taking their volumes away from intel, and we have seen the success apple has had with m1 and the rave reviews, that is a warning flare to everybody in the world that says, look what happens when you take control of this yourself. companies that have the resources, amazon, microsoft, google, they look at that as, wide why need to use intel? -- why do i need to use intel? that starts pulling volume out of intel's fabs. joe: very insightful. willy shih from harvard business school. you can hear more conversations with professor shih on our podcast. you can check that out at apple podcast and spotify. semis are a key part of the global supply chain. we focus on trade with a professor of political economy.

this is bloomberg. ♪

caroline: over the past four years, one of the major talking points for outgoing president trump is his global trade war with china. it is interesting, the focus our colleague took a look at how both countries are faring when you look at china versus the u.s.. who has won? joe: if you look now, especially after almost a year of this coronavirus crisis, chinese exports, absolutely booming right now. that is the blue line -- sorry, that is the blue line. romaine: it is turquoise, joe. joe: i am colorblind. chinese exports aren't as big but you have to figure about the americans cooped up, buying stuff at amazon and walmart.

that is the blue line. romaine: lots of people want to see whether u.s. policy actually changes under the biden administration. for all the criticism of trump's policies, he was kind of reflecting to a large degree the thoughts and feelings of a lot of folks in congress. joe: seems like there is a new consensus. joining us with insight is sharon o'halloran. professor of international public affairs at columbia university. thanks for joining us. when trump came in it marked a big change, took a 90 degree turn for 180 on u.s. policy towards china. is it going to go back to pre-trump normal or is this the new normal? sharon: seems like this is the new normal. in many ways, trump captured the democratic agenda on trade and so he was, buy american, free trade for free people and in that sense you don't expect to see a large change in the actual

policy respective to preferences. you will see a difference in the method. trade really focused on unilateral action, the use of national security provisions for tariffs on steel, aluminum, different types of satellites types of technologies. we will see biden will really look towards taking a multilateral approach, working through the wto and multilateral trade agreements to get back out, get u.s. trading going on so forth. but but you should not seep the preference change because he captured the democrats agenda. caroline: when you say multilateral approach, we did see a tough stance taken unusual allies. thinking of europe, alcohol being tariffed in some way.

how will that have to change? will we see the u.s. and europe aligned to take on china to ensure there is perhaps not a standout winner going forward? sharyn: there will definitely be a push korea open, if you will -- to reopen, if you will, transatlantic partnership said that will focus on the eu. the u.s. may start coming up with different alliances with the u.k. in particular where there is compatibility. i anticipate that biden has a limited trade agenda for the first couple years but if there are areas where they will make headway it will be in those two areas. there may be some discussion that goes out for sort of revisiting the comprehensive progressive agreement on transpacific partnership. that was dead in the water for a while. now that we have these imbalances again with china, attacking china, using the approach for multilateral trade

agreements, they may go forward but i don't see biden doing that in the first two years of his term. joe: he has a full agenda that he seems to be trying to get up and running even before he takes office. romaine: we have to address the elephant in the room and that is the impeachment of the current president, the potential that there will be a senate trial beginning, overlapping with the beginning of the biden administration. how much does that complicate things? sharyn: it makes, it is a distraction. he has to get his cabinet in place to pursue any of these policy items, so that will be his big push. however, if you have the senate engrossed in these types of hearings and all the grandstanding that goes along with that and the different types of testimony and trials, it can get to be problematic. moreover, things that should go through easily become highly politicized.

biden shouldn't want his cabinet members to be sort of the retaliation for trump getting convicted. he has to be careful. in saying all of that, though, it is not clear biden is actually going to want to pardon trump. that is something you have seen happen previously with the ford administration. it depends if you wants to be a one timer and get a lot done or if he is willing to get in the fray and have to deal with the potential fallout for having this trial go ahead. joe: there is some surrealness that we have the market hitting new highs every day, lots of optimism about the economy recovering in 2021, even as other parts of society, particularly the political parts, seem to continue to

deteriorate. is there attention bigger picture where the rubber meets the road for some of these things that are distractions, to put it mildly, ceased to be distractions and become real impediments? sharyn: if he can't pursue his agenda, which isn't trade oriented but very infrastructure oriented, like getting different types of government projects will actually improve telecom or transportation, if he can't at that stuff done, -- get that stuff done that acts as a stimulus towards the economy as well as the other stimulus proposals, then this will be really hindering his ability to keep the circus, it will hinder it. that is really the problem. what we are seeing is that there is a recovery going, but it is a very bifurcated recovery. that, to me, is going to be the real problem that unless we get

that type of stimulus that activates, grows the entire pie, it will be limited. caroline: sharyn o'halloran of columbia university, great to have you with us. that is offer "what'd you miss?" -- that is offer "what'd you miss?". ♪

emily: -- . >> breaking news from bloomberg. joe biden's stimulus package, $1.9 trillion. let's look at some key details. a high of $350 billion in state aid