>> it is not just the earnings calls of the mag seven that matter, it is the earnings calls of the other companies. >> the expectations for 2025 and 2026 is earnings growth rates will decelerate. >> we will be choppy from next three to six months. >> is a good time to think about these other diversifying hedges. >> i do not think what we saw with deepseek is the canary in the coal mine. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: let's get you to the weekend. good morning.

bloomberg surveillance starts right now. going into that weekend equity futures advancing. on the s&p up .4%. on the nasdaq up .7. we have one question. is this market set to glide with president donald trump's self-imposed deadline? >> we will be announcing the tariffs on canada and mexico for a number of reasons. the people that have poured into our country, the drugs, the massive subsidies we are giving to canada and mexico in the form of deficits. i will be putting the tariff of 25% on canada and separately 25% on mexico. we will have to do that because we have very big deficits with countries. tariffs may or jonathan: may not rise with that jonathan:. jonathan: will he or won't he

slap tariffs on canada and mexico. the wall street journal saying the advisers are considering several off ramps to avoid enacting the tariffs he pledged. annmarie: he is certainly brandishing that in the scope is there for him to do that tomorrow even though the memorandum he signed was to look at the trading partners by april 1. he then throughout february 1 for canada and mexico. the northstar for this has to be fentanyl. kevin hassett was on foxbusiness and talk about the fact that he was serious about using whatever he can to fight fentanyl. what strikes me about what he said is i do not think the market is prepared if he goes as far as oil and trump said he can make that decision as of last night when it comes to canadian imports of crude. jonathan: let's stay on fentanyl. neil dutta wrote this piece and said if this is a silver lining it is that trump is mostly talking about fentanyl, that means there could be an offramp over the weekend, it would not be the first time. annmarie: trump could say he has

these tariffs in place that they have been written up and is not yet signed them to try to get maybe canada and mexico to the table, maybe some phone calls, maybe a trip like you saw justin trudeau take the mar-a-lago. i was in d.c. for a few days. when i asked one of trump's advisors what is the most focused on around the world, i was focused on is it going to be china, russia, they said it is immigration and it is the border and look at everything he is doing to make that point clear. jonathan: the big one to watch going into the weekend. apple and the premarket slightly firmer. the revenue for china is awful, down 11%. for the iphone not much better. no growth in the core hardware business. apparently the outlook was enough to cheer investors with the stock higher more than 3%. annmarie: enough to cheer them but there is a ton of concern when it comes to apple. apple intelligence in china,

people are excited about apple intelligence but if you are in china you do not have access to apple intelligence. they are trying to figure out how to get local services to help them with that. while way is leading the way -- huawei is leading the way. in the eu apple ai will not be offered to customers until april and continued scrutiny in the european union. domestically we are talking about tariffs. we have to plan for potentially higher tariffs. jonathan: tim cook was asked on the call and he said we are monitoring the situation. i think we all are. that stock is higher a few percentage points. coming up, we will catch up with sebastian page of t. rowe price on why he is reluctant but come adam posen of the peterson institute, and pierre fara goo -- and pierre farragu on apples positive outlook.

sebastian page on apple saying his reluctant bull, we remain overweight and -- sebastian joins us for more. it is good to see you. where are you taking profit? sebastian: we are selling stocks and will remain overweight now. we are putting the proceeds in cash so we are underweight bonds and we are also selling five yields and splitting the proceeds between cash and bank loans which i think are attractive when rates surprise on the upside. they are negative duration. jonathan: one way you are selling and the second way you are allocating the proceeds. let's start with why are you selling? why are you coming out of stocks and selling down high-yield? sebastien: i will give you the most boring narrative. we are confident in the economy. the economy looks just fine but

we are worried about valuation. i watch surveillance every day and everyone is on that boat. valuations are expensive. at 22 forward earnings on the s&p it is high. in 2021 remember all the speculation, does it start to feel like 2021? in 2021 someone bought a jpeg of a rock, $1.3 million. when i say that the clients i say someone bought a banana taped to the wall for $6 million. it is starting to feel expensive. jonathan: where you see the froth right now? sebastien: overall stock valuations. there are stocks that are quite fairly priced in the world and we are positioned for the market to broaden but also credit spreads are tight by historical standards. annmarie: what is fairly priced right now? sebastien: if you look at the

average stock in the world you get a price-earnings ratio of 14. that means you have smaller caps value come international small caps, pre-much everything but the technology sector and parts of the technology sector that are also fairly valued. it is all about the broadening. i they we are approaching peak concentration. annmarie: people have been saying this for months. john started off the conversation say you are a reluctant bull. is that what makes you reluctant or are there other things you are concerned about like policy uncertainty. sebastien: i guess lisa is not here so i have to play the bear narrative. i think long end rates are the real risk for the valuations. the perp is come you have tariffs, you have inflation, you have resetting higher on growth expectations and the duration of end rates could be higher and that could put pressure on the valuations. then you have the usual lists. tariffs, geopolitics.

ultimately they do not matter until they do. my view is geopolitics will really matter when you see an oil shock. given the pressure this new a ministration will put on iran and where iran is, i do not know where it will come from, that is one of the risks. jonathan: you have to reallocate capital as you sell down some of those equity positions. you're going into cash and not the long end of the bond market and not into treasuries. the bonds not do what bonds used to do from your perspective? sebastien: we still hold bonds. bonds will do with the need to do only if we get a growth stock. i did not name it as a risk. it is still a risk that some growth related data disappoints. remember in august we had one bad nonfarm payroll print and the market freaked out? jonathan: so did the fed. sebastien: it does not take much

for a growth scare. in that case bonds will diversify your portfolio. rate shock, bonds will not diversify. jonathan: you saw how the fed responded that unemployment had fake. they cut interest rates 100 basis points. things have changed a few months later. i wonder when to their -- i wonder whether the threats of tariffs constrains the dovish bias of the federal reserve. do you think it does? sebastien: i think it does because in the short run is inflationary. you talk about 25% on canada. you get a ton of crude imports from canada. i don't know how oil prices are not reacting more. 20% of oil prices in the u.s. is derived from canadian crude. that ends up being inflationary. annmarie: when it comes to states landlocked the only area where they get crude is from canada. you mentioned earlier, when

everyone heard geopolitical shop and it shocked everyone when we get it and that could be the oil space, could that be this weekend and could it be canada? sebastien: the market does not seem to freak out about it yet. part of this is we do not know what will happen to tariff ever. it could change on a dime. i think once they are on it is harder to take them off. i think it is a small probability of a fairly sizable oil spike. i asked a geopolitical expert what could be the black swan in geopolitics in the oil market? he said once you start hearing that word in the news media, once you start hearing it on surveillance, the golf of her moose -- the gulf of hermuz, that is a large portion of global oil flows. annmarie: at the moment a trump has been quiet about iran and focused on other issues.

you mentioned once you put tariffs on they do not come off. they kept trump's first and ministration tariffs on. it added a little to inflation but not enough. we had an inflation spike hunter biden they did not remove them so wise the fed putting office emphasis they did not remove them. -- sebastien: i don't think the fed is coming out saying we are watching the tariff game and adjusting our policy accordingly annmarie:. they did not assume and they did assume in part of that is because of trade realignment. sebastien: they have to react in right now the fed is wait and see. the first round of tariffs were not inflationary. there are all sorts of effects of tariffs. it is a negotiating tool. jonathan: i hear that all the time. the accusation leveled at the

fed is they seem to be more concerned with trump tariffs than they were with biden fiscal stimulus. you speak about that on the committee? sebastien: we speak about all of it. we debate all of it. the fed is talking about looking at employment and inflation and tariffs are not a driver of inflation the short run, could be a driver of inflation in the short run. it boils down to date of dependency of the fed. to the extent tariffs drives the data itself the fed will adjust. there are several layers of reactions in macro economics that the fed will react to. it is a treacherous environment for them. it might not take much for the talk of rate hikes to start again. jonathan: we will leave it there. that is the big question for 2025. in just a moment we will catch

up with adam posen who made that point way back in the summer. sebastien page, thank you. let's get in update on stories elsewhere with your bloomberg brief. yahaira: good morning. u.s. investigators have found the black box flight recorders from the american airlines jet that crashed in washington after a midair collision with the u.s. army black hawk helicopter. the ntsb is leading the investigation and expects to produce a preliminary report within 30 days. a final report could take up to 24 months. apple shares are rising 3.4% in the premarket after the iphone maker gave a reassuring revenue forecast for the current quarter but the results for the crucial holiday period were mixed. total revenue in the fiscal first quarter rose 4% but sales in china remain a sore spot, falling 11% in the corner. -- in the quarter. the chinese start deepseek is under investigation for allegedly using nvidia chips not

allowed to be shipped to china. u.s. officials are looking whether the chips were acquired through third parties in singapore after the biden administration cut off access to nvidia's most powerful chips. jonathan: remember the story of the start of the week, $5 million compliant. by the end of the week i do not know about that. annmarie: when we heard that everyone around this table was questioning it. not only that but congressional officers are being warned not to use deepseek. jonathan: big concerns. friday morning price action very different to monday morning. we are positive .4% on the s&p. up next, the tariff showdown begins. >> i will be putting the tariff of 25% on canada and separately 25% on mexico. those may or may not rise. jonathan: that conversation is up next. live from new york city, good

morning. ♪

jonathan: peered down about .5% on the s&p 500 -- in the bond market yields higher by a single basis point. going into the weekend, the tariff showdown begins. >> we will be announcing the tariffs on canada and mexico for a number of reasons. the people that have poured into our country, the drugs, the fentanyl, everything else, the massive subsidies we are giving to canada and mexico in the form of deficits and i will be putting the tariff of 25% on canada and separately 25% on

mexico. we will really have to do that because we have big deficits with those countries. those tariffs may or may not rise with time. jonathan: president trump set to hit canada and mexico with 25% tariffs on imports going into effect tomorrow, both countries valley to respond with tariffs against united states. joining us is adam posen, president of the peterson institute for international economics. there is a constructive view. they say they approach the tariffs as transactional, there is scope for negotiation, the backdrop for the broader economy is decent. things will be ok. is there price we have to pay for uncertainty in the meantime? adam: the price we will see not just in equity markets but in specific industries. we will see in energy prices going up, we will see a disruption to the u.s. auto sector, we will see in sharp

retaliation from mexico and canada on specific industries. i am not meeting to be baked by saying specific industries. the thing is it is about chokepoints and things that are hard to replace. the big thing in studies we have done at the peterson institute say there is some range over which you put on a tariff and everyone is like it is a price rise, it is annoying, we will deal with it. there is another range where you are opposing shortages like we did with covid where it becomes unaffordable or inaccessible to get things you need and that is when you start getting big macro effects. i agree with the people who say the underlying strength of the u.s. economy is there. this is frankly nuts. canada and mexico are our two largest trading partners, we are at peace with them, they are our allies, and our economic sector and food sector are integrated. annmarie: the trump hates trade

deficits so he will do everything he can to try to bring the deficit down or bring up negotiations for usmca. what you think is the underlying drives for these kinds of tariffs. i would be more shocked if we do not see them happen tomorrow. is it a negotiation tool or he wants to keep them on? adam: i think your sense is right. we have been talking for months about expecting the tariffs would really happen. i think it is much more likely the negotiations go well with canada than with mexico. the thing is 25%, even if you exempt certain things is an enormous number. when people say the tariffs under trump one were not inflationary, those were a couple percent in a few industries. this is very wide tariffs at a very high level with major retaliation. annmarie: do you think oil is really on the table? trump flirted with it yesterday

in the oval office. adam: we don't know. it does not make any sense to put oil on the table because then you are saying i want to buy more from sally or russia. i want to go back to your last point which is how much is it negotiating versus keeping it on. what the market should fear as they will put on this across the board minimum of tariffs as part of the tax package and then we are in an entirely different world. annmarie: because it is a revenue raiser. adam: onnet it is bad for growth and will not raise enough revenue. annmarie: can you go through what you would expect in your base case as retaliatory because trump is talking about tariffs on canadian crude but for canada that would be a nuclear option for an export tariffs. adam: it is like when they complain china will cut us off from something. mention of canada cut us off from oil. think about the 1973 oil prices

when the petro states decided to cut the u.s. off oil, how is that good for the u.s.. it is destructive. jonathan: the federal reserve has to prepare for all eventualities. he warned in august we should prepare for that. are you more comfortable with where the fed is now compared to where they were going into the end of the year? adam: i am more comfortable but i am not yet comfortable. the fed has the luxury because the fundamentals of the u.s. economy are quite good and we've been getting good news on productivity. the fed has something of the luxury that it is not a crisis, they do not have to make up their minds now. they keep having this inertia of saying we will not cut as much but we will still cut. on the fundamentals of the u.s. economy the idea they need to keep cutting was arguably a mistake. then comes this issue of tariffs. do they play hamlet and agonize if it is a first round one-off effect and we have to wait to

see if it goes beyond oil or beyond autos or do they say we are close to full employment, there is pricing power. jonathan: you think there is pricing power? do think corporations will have to stomach this at the margins? adam: i don't think so. the evidence is not the so-called greedflation that was always a myth. most industries do have pricing power. when the economy is growing 2% people are buying. otherwise the underlying strength of the u.s. economy is stronger than the 2.3 number we had. the idea that there is no pricing power is strange. jonathan: this conversation is important because it is difficult to sit here and say i think the president will do x or y this weekend. we have to think about how inflation from the economy may be. when you think about sources of

inflation what is it about the current state of things that you think this economy is more inflation prone than the federal reserve might believe? adam: there are two categories, there is the pre-existing underlying economics and then the trump tariffs and other effects. financial conditions are not tight, they are just slightly tight and residential real estate. i think we are inflation prone because for all the talk about energy deregulation we have seen how that is not a major determinant of inflation. energy prices came down enormously in the last year of the biden administration and that was not enough to make up inflation. we were inflation prone because the fed has not lost huge amounts of credibility but we are not down to target it is a few years later the memory of inflation is strong. that is the fundamentals. on trump we talked about tariffs. in theory you could have a tariff that is a price shift. anything that is not canadian or mexican becomes cheaper.

in practice it will be experienced as inflation and then people want to catch up with prices and wages. the anti-migration stuff, leave aside the human rights from the anti-migration stuff is partly recessionary and partly inflationary because it creates shortages of labor's in certain industries like home health care, residential construction, food harvesting that documented workers do not want to do. then you have potentially, this will be a few months down the road, very large tax cuts and as annmarie rightly says you get some revenue from the tariffs, nothing compared to the size of the tax cuts. if you are the fed and you are not just supposed to be reacting data dependent but you're supposed to be looking at the forecast it is hard for me to understand why they are not pivoting more. jonathan: your base case is the next move is a hike and not a cut? adam: my base case remains that by september they may be hiking.

they may make my mistaken cut once more but my base case is they will hike. jonathan: it is quite a call but you've been making it a while. i imagine it is not the call you wanted to make. coming up next, we catch up with the former acting the faa administrator as investigators look for clues in the fatal crash at lake -- at reagan national airport. with equity futures positive by .5% on the s&p 500, this is bloomberg surveillance. ♪

jonathan: equity futures posited by .5%. tons of tech earnings to the week so far. the storytelling powerful. as for apple, the bar is pretty low. it was sufficient enough to cheer up apple investors. the stock positive in the premarket. in the bond year, yields shaping up as follows. two-year just about unchanged. around 450 all week on the

10-year. 452.66 right now. two currency pairs to watch going into the weekend. dollar-mex, dollar-can. under surveillance this morning, president trump expected to announce 25% tariffs on canada and mexico tomorrow citing fentanyl and trade deficits as reasons for his decision. trump indicating he will move ahead with 10% tariffs on china without specifying the timeline. annmarie: kevin hassett said on foxbusiness he serious about fentanyl. trump is using these economic levers to try to get what he wants on other issues he would deem national security. the issue with this, i would be more shocked if we did not get them tomorrow based off the conversations i'm having. i heard the president had a meeting yesterday. he told the press they were

considering going after oil. we don't know the scope yet. depending on the scope of what we get tomorrow, we could have a very different reaction, whether it is foreign-exchange, bonds, the oil market come monday morning. jonathan: continue approach compared to the first term. you pointed in the right direction. with china it was about reciprocity. we were open for business. china was not. you need to open up as well. i understood that quite well. the objectives are about the southern border and immigration and fentanyl. he thinks they were clear off ramps here. just provide a commitment to do something on the so them border and the northern border. would that be sufficient to keep tariffs at bay? annmarie: or keep some of the work tariffs at bay, saying tariffs on canadian crude.

we know the u.s. test really needs it and candidates really wants to export to the united states. trump signed a memorandum to look into the trading partners by april 1. maybe he says this is what i drafted. would you like to have a conversation before april 1? i will give you 60 days. jonathan: sets the big one to watch going into the weekend. the earnings we have had, apple delivering and mixed earning report. the revenue from china plunging 11%. iphone sales dropping more than expected. the stock is up by 3.5%. that tells you more about expectations than the numbers themselves. annmarie: they are going to have a challenge when it comes to china. china is building of these national champions that are cheaper and have access to the ai services apple right now cannot use when it comes to china. revenue fell 11% to $8.5

billion, but it still wasn't enough for the stock to goal over. they are dealing with a tremendous amount of problems in china. at the same time, what happens of the walls go up? jonathan: the stock is trading at a lofty forward call. we will catch up with pierre ferragu in about 10 minutes time. u.s. officials probing whether deepseek bought nvidia chips through singapore. the white house and fbi are trying to determine whether the chinese ai startup used intermediaries to circumvent u.s. restrictions on sales of chips to china. annmarie: basically finding a middle man who uses the chips and then get them from some middleman or certain part of the supply chain not blocked by u.s. export controls. they will be a ton of questions about this. it is going to embolden some of the hawks president has surrounded himself with. senator marco rubio, now secretary of state, can now

michael waltz who has been hawkish when it comes to china. jonathan: a different story around deepseek. all this speculation about whether it was done for $5 million, export compliant. we are closing up on friday with a real question about how export compliant that effort actually was. annmarie: think about how efficient is it. everyone was excited and nervous. look at what china is able to do without the amazing chips and without all this money. well, they probably got a ton of money from the ccp and there's potential they are usurping u.s. export controls and getting the advanced chips. jonathan: let's turn to the top story, the national transportation safety board leading the investigation into the air pollution over reagan national airport. confirming it has recovered data recorders from the scene. leading our coverage this morning is tyler kendall. what is the latest? tyler: crews worked overnight on the search and recovery mission.

there are no expected survivors. 64 people were on the commercial american airlines flight. an additional three u.s. service members on the army black hawk helicopter when they collided. the chief of d.c. fire says divers have reached all accessible locations. we are inspecting the search mission to enter the phase two where divers will bring out parts of the plane from the potomac river to try to recover additional bodies. the big questions are still remaining. i was at the ntsb briefing yesterday. official told us we can expect -- officials told us we can expect a preliminary finding within 30 days. information could come out ahead of that. they confirmed they have recovered two of the data recorders and that is critical in their ongoing investigation. there are still big questions here at dca after tense rotation secretary sean duffy said the

tragedy could have been prevented. jonathan: we will catch up with you in the next hour. tyler kendall on the latest from washington, d.c. let's extend the conversation with billy nolen, faa administrator. welcome to the program under difficult circumstances. this is something we have feared after a number of close calls. i wanted to share you the latest reporting for the new york times. they are reporting staffing was not normal at the air traffic control tower. the internal faa report which was reviewed by the new york times to the controller handling helicopters wednesday night was also instructing airplanes that were lending and departing from its runways, jobs typically assigned to two different controllers. when you hear stuff like that how unusual is it to hear stuff like that? billy: it is probably not as unusual as you would think and the audience would imagine.

the faa has worked hard to hit staffing targets in the last couple of years. congress has allocated more funds to the faa to increase the number of air traffic controllers. if you talk to the airlines, they would like to see more controllers to manage the day. let's go back and think about this a bit. a night and a half ago you have clear whether, night via far, visual flight rules. -- vfr. thank gives controllers and pilots able to do self separation. the american airlines and american eagle flight was given clearance to land. they were about 350 feet on short final. the blackhawk pilots were asked if they had preceding traffic and site. they announced they had. this is a critical part of the investigation to determine what

happened in terms of what the blackhawk pilot saw. did they misidentify? i don't want to speculate about that. that is what the investigation is designed to do. annmarie: how unusual is it for these two jobs typically assigned to two controllers being done by one individual? billy: it depends on the time of day. think of operations. this accident happened at a 47 on that night. into the appropriate question ask. normally if you have two controllers in the tower, why weren't there two there? that will be a part of the investigation. annmarie: if they were able to hit their staffing protocols, how long does it take? they hid them in september of last year that hit them -- they hit them in september of last year. how long does it take to train

these individuals? billy: ray point. -- great point. washington reagan is one of our busiest airports. these are the top of the food chain. on average it takes, between two to three years before a controller is fully certified once they come out of the academy in oklahoma city. the faa continues to explore ways to accelerate that training. how to turn -- having them turned universities in the military. in terms of ensuring the staffing model, it is congress that appropriates and gives the faa the funds it needs to operate. this is something that has been talked about over the years. it is one of the valid concerns to look at. jonathan: we have heard audio from the air traffic control tower that night. you have heard the same thing. i would be interested in your

opinion on what you heard. do you think that was standard protocol over is there something ambiguous about the communication from the tower? billy: not in my estimation. i have been a pilot for 44 years. i have fun as an international captain when i retired from the american airlines. i have been in and out of dca and hundreds of airports around the country and the world. it is typical. in a case where you have visual flight rules, where once the american eagle flight called the runway and ideas given, the crew is given clearance to land to that runway. in this case it was runway 33. it was asked of the blackhawk crew whether they saw that traffic in site. they entered the affirmative. they should be proceeding on their course. again, we don't inspect

accidents to ever happen. the faa has worked hard in the industry worked hard on eliminating close calls. this will be one of those critical pieces of the investigation to determine if there was a disconnect, what was it? how do you rectify that and make sure it doesn't happen in the future? jonathan: there are three teams involved. the flight crew of the american airlines plane, the military crew of the black hawk helicopter, and then the staff at the air traffic control tower. as you also know, prominent individuals have put quite a big spotlight on the staffing of the air traffic control tower. we have documented this for years, the shortage of air traffic control. you are aware of those difficulties. the president suggested it could be down to diversity, equity and inclusion practices that have led maybe to not to staffing shortages, but perhaps not having the right people in the job. you have worked to the job. you know these people, these teams.

is there evidence that is taken place? billy: over the arc of my career, 44 years from the military pilot, long time in the commercial aviation business, i have not run into any controller who was not qualified. our air is made -- that is the nature of humans. occasionally unattended errors take place. aviation can be terribly unforgiving. a critical mistake at a critical moment happened on this night. it is right for us to look into that, peel it apart and say we have worked hard. let's remember that it has been almost 16 -- two weeks away from the 16 year anniversary of not having a fatal commercial passenger accident in the u.s. that record comes about as a result of these three parties working together. the pilots, our nation's military, air traffic control,

the faa. all working to ensure airspace is as safe as it can be. where we find errors in well refined trends we have worked very hard to -- and where we find trends we have worked very hard to eliminate that. the faa has done runway safety action teams. meetings with towers around the country. they started to implement more innovation in terms of reducing the number of conflicts we see on the ground. this is the time, and the industry looks for it, the airspace is expanding. all these. if we want the airspace to keep pace with the level of innovation taking place and the number of entrants coming into the airspace, we need to ensure the faa has the resources, the people, and the financial help

that they need from congress to keep us second to none across the world. jonathan: billy, appreciate your time. billy nolen, former acting faa administrator. one of donald trump's many powers is breaking with standard protocol and savings a lot of people are thinking. that is why he connects with the general public in ways other politicians cannot. when you said as president, it can compromise the investigation that a lot of people felt that way yesterday afternoon. annmarie: there's a ton of criticism about him saying this was the fault of dei and saying i have my own opinions. an opinion is fine if you're a regular u.s. citizen. it carries more weight when you're president of the united states. one piece of news we got yesterday is that trump named a new acting director of the faa , billy's old job. we did not have an faa administrator at the time. jonathan: we are in the process of doing that now.

let's get an update on stories elsewhere with your bloomberg brief. yahaira: intel shares are rising 1.4% in the premarket after the chipmaker reported bed than expected fourth-quarter revenue. but executives say the increased sales were partly due to customers in asia ordering ahead of potential u.s. tariffs. as for who will lead intel, the company gave no update. another story. walgreen shares are falling after suspending its dividend, which had not been -- which had been in place for nearly a century. it was from a need to strengthen its balance sheet. the move is suspected to save walgreens about $650 million in fiscal 2025. sam bankman-fried's parents are trying to get donald trump to pardon their son. bloomberg learned joseph backman and barbara fried had meeting

with lawyers in trump's circle. the crypto billionaire was sentenced to 25 years in prison for fraud. jonathan: up next, apple's mixed results. >> at some point apple indulgence will drive services. what we need to wait for is for apple intelligence to drive an iphone upgrade cycle. jonathan: that upgrade super cycle remains elusive. live from new york, you are watching bloomberg tv. ♪ ♪

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jonathan: the threat of tariffs hanging over the market. the market seems to be doing ok.

equity futures on the s&p positive by almost .5%. let's talk about one of those companies now. apple's mixed results. >> at some point apple intelligence will drive services. what we need to wait for is for apple intelligence to drive an iphone upgrade cycle. that is the only way you drive sustainable growth for apple. that will drive. eventually it will drive services growth as well. jonathan: apple delivering a mixed earning report. china revenue plunging 11%. the company forecasting overall revenue to grow for the current quarter. pierre ferragu has a neutral rating on the stock with a $225 price target. the stock is up by 3.5%. good to see you. i am wondering -- pierre: very surprised. the quarter was weak.

within this number you still have quite a strong momentum for the macbook. low to mid single digit growth for the first quarter. i think the stock -- management mentioned it on the call. investors were worried. sentiment was very bleak. i downgrade into the numbers -- a downgrade into the numbers and the market took that like it's not as bad as we feared signal. things are playing out in line with what we are expecting. a very weak cycle for the iphone. nothing dramatic. it means really as we were expecting with the introduction of ai futures, it is not generating a hardware cycle. we had expectations around that for the iphone. we had expectations for the pc

market. what we have said is ai is a software driven phenomenon. you see ai adoption been with software and software adoption. we don't expect people to upgrade faster because of that. if you went better iphone sales, you need hardware -- if you want better iphone sales, you need hardware innovation. you need to have an upgrade. annmarie: one of their core markets is access to the ai service. i want to talk about china. tim cook really is all in on em. when he talked about the decline of what is going on in china, he blamed it on not having enough inventory. what is going on in china? pierre: to be completely honest, it is difficult to make strong sense out of 10's comment --

tim's comment. apple intelligence -- iphone sales are strong where apple intelligence is available. all the feedback we get from users and consumers is bleak and borderline negative. it is unlikely we are in a world where people have apple intelligence. in china, inventories -- we are fighting about the points. small moving parts. i imagine people in charge in china are reporting back to tim issues with the batteries, business as usual. there is no specific situation that would justify a supply issue for the market.

annmarie: what would drive an actual hardware upgrade for individuals? apple seems to think ai -- apple intelligence is what people are going to stop flocking to -- start flocking to for the phones. maybe it is just the true believers but not everyone that needs a new iphone is upgrading immediately to get a hold of ai. pierre: exactly. that is the right question, the key question on the stock. you look at 15 years of history of the iphone. the super cycles where the iphone 6 plus with a larger screen. the iphone x, a revolutionary factor with the full-screen, the full real estate of the phone. you have super cycles only with hardware innovation. if apple wants to generate that, they need to innovate on the hardware. that might be the surprise of

the next cycle. we know apple is working on a superthin iphone, a premium iphone. that might be more interesting to look at fault. jonathan: always appreciate your time. pierre ferragu there. neutral on the stock. we are trading at around $246 and the premarket, higher by 3.5%. this quote came from oppenheimer. "lack of compelling apple intelligence and genitive ai apps to accelerate near-term device replacement." that was ahead of the earnings. annmarie: apple was hoping everyone would be excited about apple intelligence but it is not just driving the super cycle. jonathan: not upgrading just yet. up next, the second hour of "bloomberg surveillance." christian mueller-glissmann, bruce landsberg, nouriel roubini , and michael zezas of morgan

stanley. this is bloomberg. ♪

>> we're now in a fifth year of inflation running well above the fed's target. >> we've been in a economy mommally growing at more than 5 -- mommennally growing at more than 5% a year. >> you look at what the u.s. economy has done over the period of time we've apparently been in restrictive territory and clearly we weren't that restrictive.

>> the economy is more resilient to interest rates than it was in previous cycles. announcer: this is "bloomberg surveilance" with ann marie and jonathan. jonathan: the mood this week in the market is so much better than it was last week. on the nasdaq 100, elevated by 0.8%. apple earnings weren't great but ok but enough to drive the stock higher in the premarket. going into the weekend it's the threat of tariffs hanging over this market. president trump: i'll be announcing the tariffs on canada and mexico for a number of reasons. the people that poured into our country, the drugs, fentanyl and everything else, the massive subsidies we're giving to canada and mexico in the form of deficits. and i'll be putting the tariff of 25% on tariff and separately 25% on mexico.

and we will really have to do that because we have very big deficits with those countries. those tariffs may or may not rise with time. jonathan: what will happen, we have no idea. "the wall street journal," the trump advisers are considering several offramps. the people in this market believe there are several believing they're doing something about fentanyl and immigration. annmarie: what would be the scope of this announcement. i would be shocked if we don't get any announcement. i think the president made it clear now especially from the clip we saw from him, i will be doing something february 1, that's saturday and tomorrow when it comes to mexico and canada. a lot of it is being driven by the action he wants to see on fentanyl and immigration. but the scope of it is really important. he signed a memorandum in that executive order he wanted this process to take place to review trade practices by april 1. maybe he comes out with tariffs and says you have 60 days maybe

for negotiation or maybe he comes out with specific sectors that there won't be as much of an impact on u.s. goods. we don't know the scope and that's the problem. jonathan: one sector, energy. let's talk about energy. yes, there's a trade deficit and you don't want to exclude energy but that's energy america needs. some people watching who might not be familiar with any of this saying we have loads of energy in america but some refiners in the country are set to process a specific type of crude that comes from canada. annmarie: it's heavy crude and you need it when it comes from canada and there are land lock states in the midwest that only import from canada. if it becomes so much more expensive for them you'll see a massive market hit on energy. there's a secondary factor to this. in administration, especially secretary rubio, who just put out a opinion piece yesterday talking about latin america and the push they want to make to countries in their own country, the western hemisphere, where

are the refined products they bring in from canada and they refine it, where does it go? it goes to lat-m and if you don't bring enough to ship, who fills that gap? china. there's so many different spheres that come into play when it comes to this one sector, energy. jonathan: there's nothing obvious about this. i want to turn to foreign exchange because dollar broke out by 1%age point and we're stable and going ok. dollar at 20.7, and i think people say the same thing about this ultimately for the federal reserve, they look at a situation the economy is decent, they don't have to hike interest rates straightaway. i think for broader equity investors, what i hear all the time is the tariff approach from the president is transactional

in nature and the scope for negotiation. you pit those two together they're pullish on the equity market. annmarie: there are two different versions of tariffs we didn't see in 1.0 and kelly was in phase 1 with the negotiations of china and was a trade adviser under trump 1.0 talked about this. there's trump making sure there's realignment when it comes to free and fair trade. he wants to make sure things are realigned, especially in places like china. then there's tariffs to be used because of national security concerns and really when it becomes a negotiation and a carrot stick approach we saw with columbia. jonathan: equity features are ok, looking through this maybe. we'll catch up with christy mihmer. the former vice chair bruce landesburg of the crash in washington and nouiel who thinks

deepseek is bad for equity. and now looking ahead to donald trump's weekend, the tariff announcement. christy saying the markets broadly reflect the review of more u.s. outperformance into the inauguration. lately there has been a growing number of exceptions to the u.s., exceptional us him. christian joins us more. welcome to the program. what are the exceptions to u.s. exceptionalism? christian: yeah, i think you've gone through the sentiment cycles where people price the trade tariffs and the risk from it and the problem is you didn't see them come through and i think there is a problem of buying the rumor and selling the news, not just working like people want to see the tariffs come through. we've started to see exceptions recently. the dollar is one where you see a significant setback and i think generally the european equities have done really well, most better than most people have expected. it feels like the u.s. exceptionals were so well priced

and people really used the assets related to u.s. exceptionals and to diversify but you didn't get any announcement so you have a bit of a setback. jonathan: how forward to the end of the year the federal reserve was looking and the economy looked ok. the federal reserve shifted a bit and wonder if you believe the policy on certainty is constraining the bullish advice from the federal reserve? christian: it feels like it. the market is currently being held back. the fed is holding back on policy on certainty. we know the baseline on macros is friendly and the data comes in friendly but the policy uncertain is very high and sentiment is very bullish and becomes a bit like a speed limit what risky outlets can do and becomes a speed limit for the fed because they care about financial conditions and care about the broader picture so i think we all are just waiting for actual announcements and for policy uncertainty to peak. annmarie: we'll be waiting the entire four years because whether or not we get tariffs

tomorrow, there will be tariffs levied against other countries and a tool this administration wants to use and how could it impact the economy? christian: look at it from two perspectives, there's a market element you can avoid potentially areas that might be targets of the tariffs. there could be opportunities to trade momentum into announcements into official announcements that get rumored and i think markets have tried to do that but what we try to do a lot is build portfolio status robust irrespective of tariff outcomes and the dollar played a key roll. we've been very constructive on the dollar and have a stronger for longer dollar view and you have to be very careful to be bearish to dollar until you do get more kind of actual announcements of u.s. exceptionalism type policies. annmarie: if you consider what's going on in the u.s., where else do you want to look?

christian: what i find interesting is japan where actually you could say a stronger dollar is good for japan just by the currency translation channel and we've seen that for 2 1/2 years where the weaker yen has forced the japanese equities but it was for batteries because the d.o.j. coupled being bearish and everyone was shifting hawkish and you have the process of a weaker yen with the d.o.j. being hawkish which is an interesting setup where you're less worried about hawkish surprises like major unwinds you had in the summer of last year with regards to the yen so suddenly you get a clearer story of divergence driven by the u.s. japan can be interesting but what we certainly discuss with clients since the beginning of the year is euro. i think it's remarkable the amount of bearishness investors had coming into the year with regards to euro. if you look at our conferences

we did surveys from the audience and would say europe in most kind of conference locations was the least preferred location and we haven't gotten ourselves to be bullish europe yet but for example, looking at tariff pricing in equities and x and rates, all of that is incredibly cheap so you can maybe think of hedging the right tail on europe. jonathan: how much or how little needs to go right for the tejada to pay off? -- the trade to pay off? christian: europe has done well surprising people and the earnings rate is difficult to call and has not been terrible. suddenly you see big results being a bit better than expected. i think the rate is lower. when you had the flash announcement which was better than expected it triggered a strong response. positioning and sentiment is quite bearish in europe. jonathan: this is geographic

diversification and talk about cross asset diversification as well. at 450 do bonds deliver on a 10-year treasury yield and are they balanced in the portfolio and do they provide that? christian: the three year average of the u.s. 10-year yield is 450 and you're more than average the last 300 years. the 300 year average is 4.3. i don't think we're in a bad kind of place with regards to bond yields and all know we have a new factor, fiscal deficits, g.d.p., fiscal policy, bond supply. there's a firm premium trend that's upwards but the repricing of term premiere will be short and we've just been through one and have the relief with the inflation data and there would be more. but if you you think about bonds in the portfolio they become invaluable. there's a good yield and i think of relative return and relative risk, correlation benefit and return versus cash. on all those dimensions bonds

look better and always say relative return looks better not because yields are higher but risk premiums are lower and relative risks are lower and if you push bond yields up equities will suffer more and from that perspective there are factors in the portfolio that makes bonds effective and focused on balance. jonathan: what does gold do for me now given the slight drawdown on monday as equities sold off, what's the relationship between broader risk appetite and gold at the moment? christian: it's very difficult because historically you could link gold to risk appetite nicely. there was the real yield channel and the dollar channel but what we've seen the last two years or so, central bank demand has taken over as a structural underlying force behind the scenes and remains very strong and we like gold because of that. the incremental risk of characteristics you still have but haven't even played out yet and there's a very good chance something goes wrong in the global economy either

geopolitically or economically and gold would be a important buffer but isn't our view and based on as friendly. gold can play a really important role in the portfolio and can diversify geopolitical shocks possibly better than bonds but it obviously competes with bonds paying you 4.5%. there's a place for both in the portfolio but gold has a few characteristics we like rather than the bond market. jonathan: record high on gold, 2800. thank you, sir. christian from goldman sachs. with stories elsewhere with the bloomberg brief. >> president donald trump says he doesn't know exactly what caused the midair crash in washington, d.c. wednesday evening but has opinions. in a conference d.e.i. programs may have played a role in the disaster and he also said there may have been a problem with the helicopter pilot. meanwhile, sources say the u.s. defense department employees access deepseek on their work computers two days before the

pentagon blocked access. they say the employees connected the work computers to chinese servers to access the startup's a.i. chatbot and determining the extent to which employees used the system. and chevron shares are up now in the premarket after reporting fourth quarter earnings that fell short of wall street expectations. the miss was due to a slump in crude prices and weak margins and is defining business still and the company announced a 5% diffident increase. that's your bloomberg brief. john? jonathan: china allegedly hacked into the treasury. what are they doing in the defense department? annmarie: surfing on deepseek and asking questions about things. it's kind of dangerous. because if we do know china has access, maybe a backdoor into deepseek and potentially are spying on the d.o.d. jonathan: slightly concerning. equity futures on the g.d.p. positive by 0.5%. up next, searching for answers.

>> we do not know what led to this crash but we have some very strong opinions and ideas. we'll find out how this disaster occurred and will ensure that nothing like this ever happens again. jonathan: that conversation up next, live from new york city this morning. ♪

♪ jonathan: your equity market closing out the week, shaping up as follows, at least for this morning. so far positive by 0.5%, bond yields higher by a single basis point, the 10-year 4.5266. and in washington, d.c., they're searching for answers. president trump: we do not know what led to this crash but have some very strong opinions and ideas. we'll find out how this disaster occurred and will ensure nothing

like this ever happens again. the f.a.a. and the ntsb and the u.s. military will be carrying out a systematic and comprehensive investigation. jonathan: here's the latest this morning. the national transportation safety board leading the investigation into the midair crash between an american airlines plane and military helicopter near washington, d.c. on wednesday night. we are joined from reagan international. good morning. what's the latest? reporter: jon, the d.c. fire chief said they reached the accessible parts of their search and we expect them to enter into phase 2 where divers will remove parts of the plane in the potomac river in a bid to recover additional bodies. all 67 passengers between the two aircraft are presumed dead. now, big question still remaining this morning. i was at the ntsb briefing yesterday they told us reporters we can expect a preliminary finding report within the next 30 days but new this morning the

ntsb said they have recovered the data recorders from the commercial flight and will be pivotal in their investigation as they piece together the altitude and speed of the aircraft at the time of the collision because jon, there are still big questions about air congestion here at d.c.a. has one of the busiest runways in the country but a relative small footprint, 680 acres considering the amount of traffic that comes through here. the transportation secretary sean duffy said they'd monitor the flights out of here which has been a fight in washington as the u.s. officials try to reassure the american public the skies are safe to fly. jonathan: thanks for that. joining the conversation is the former vice chair bruce landesberg. welcome to the program. there are multiple teams involved in all of this. i wonder if we can begin briefly talking about the approach the ntsb takes to conducting an investigation after something

like this tragically takes place? bruce: thank you, jonathan, for being with you this morning. so the investigation follows a very clear path in terms of how things are done. we will have an investigator in charge. multiple teams, human factors, the aircraft themselves, the data recorders, and very importantly our transportation disaster assistance team, which is working very closely with the families to help them get what they need. so the first thing is to gather the perishable evidence which will be getting the pieces of the aircraft off the river bottom and then they'll be moved to most likely a nearby hangar or probably at reagan national and begin the painstaking work of going through all those parts and pieces to determine exactly the angle of contact and that sort of thing. the other thing that i think is

critically important is we'll be looking very closely at the human factors aspect of this, and i want to preface my remarks by saying everything here is preliminary and subject to change. but the key areas are going to be the staffing in the control tower because what we understand at this point is that the helicopter route position and local control position were combined with one person handling both of that. we will be looking at the design of the helicopter route and its proximity to the final approach course to runway 33. the helicopter pilot's compliance with flying that route both laterally and vertically, and then our safety reporting systems, we've heard there have been some previous close calls, and the question is what was done about that? have we figured out whether this is a good setup and should that

route have been moved to accommodate a greater amount of safety? i also want to talk a little bit about the operational aspects of all of this. the controller gave a warning of about 13 seconds to the helicopter crew, and the helicopter pilot reported aircraft in sight and then said request vertical -- excuse me, visual separation. they're in visual flight conditions so that's somewhat unusual. the other point, it's not as easy as people would think. it's a clear night. because when you're in close proximity to the ground and other aircraft, you're going to have a lot of background clutter with all the background lights and there is a lot of aircraft coming into reagan national at that point, so the pilot may have thought he was looking at a different aircraft than the one that was actually in close

proximity. and then the final point -- jonathan: can i jump in if you don't find and then can you complete that point. when you listen to the communication from the aircraft traffic control tower, did you find that ambiguous, then, is that unusual? bruce: not from the tower. it's fairly early in the process. i did not hear the tower's information as being ambiguous. basically they're calling traffic and saying don't hit them. the pilot's response was a little unusual to my way of thinking saying request visual separation because the controller is assuming that once the pilot identifies that he's seeing the other aircraft that he's going to maneuver appropriately in this case most likely to the left or to the east to move away from the runway where the airliner was descending. annmarie: this is where a lot of intrigue is with the helicopter

where this crash happened just under 400 feet. is that outside the helicopter's altitude envelope? bruce: i personally don't know that but i suspect the helicopter routes have a prescribed altitude which is critical for them to adhere to. the other point going back to the design of the helicopter route, 200 feet is not a lot of separation. the other point to be taken into consideration, the airliners create a bit of wake turbulence, that's disturbing the air behind them like a boat and having another aircraft directly below them is not a good safety measure. the last point i'd like to make, which i think people might not understand is the geometry and the limitations of the human eye. because when you're on a collision course with two objects, be it an automobile or

another aircraft, they do not appear to move. so it makes it much, much harder to pick that up, because we're designed to detect motion. if something is not moving, it's just growing in size and then in a collision like this, it will grow very rapidly, it's called blossoming, just literally in the last few seconds. so there's a whole lot of things that ntsb will look at to determine exactly how this happened. jonathan: bruce, we've got about 30 seconds left with you. for people not familiar with this airspace, can you briefly share with us how unique this airspace is in washington, d.c.? bruce: great question, jonathan. this is probably the most secure airspace in the entire world. they were operating in what's known as the flight restricted zone around the capitol which was implemented after the terrorist attacks. and so air traffic control is monitoring it very closely.

the department of defense is monitoring it. so this is extremely unusual, and as i say, i think this is going to give us a lot to think about in the days and months ahead. jonathan: bruce, in the days and months ahead when we learn more from investigators, we'd love your opinion on things as well. thanks for sharing your views with us this morning. thanks very much, sir, the former ntsb vice chair bruce landesberg on the tragic midair collision the last few days. annmarie: given how significant the airspace is, then why wasn't it normal staffing procedures that night? jonathan: it's concerning, let's put it that way. coming up next we'll get news in the market from nouriel. ♪

jonathan: live from new york city with equity futures positive by 0.5% on the s&p. nasdaq a little bit higher on the back of tech results. nasdaq 100 higher by 0.2 percent. let's get to manus cranny with your morning movers. >> some things in the world that are sacrosanct. the dividend of walgreens, not only did they reduce it by 50% last year but it is gone. if you are retail, you are recalibrating, $.25 a share last year but what do you do when you cancel the dividend, reduce the

dividend. td cowan says this is about the retail pharmacy industry and their business and what you'll do to reshape it. right now it is a suspension of the quarterly dividend. in theory, that will save them around $60 million. apple, we were not disappointed. iphone sales underwhelmed. why is the stock up 4%? soothed the nerves, china will recalibrate. the iphone 16 upgrade cycle is better than where we were with the iphone 16, but it is services within apple. if you believe they have not invented anything, it's about services, music store at an all-time high. stop bounces this morning. a note on chevron. when they went into the fourth quarter, down 11%.

they missed on their numbers, way under the estimates. but i year ago, $3.45. there are promises, we are going to constrain capital spending. when it comes to promises, $10 million a day of free cash flow because he is paying out a dividend of $7.5 billion. cash flow at the moment is $4.4 billion. i am not a phd but that is a gap. jonathan: we will be catching up with him soon. looking forward to the conversation. as for apple, telling powerful stories on the earnings call is valuable. we saw that from tesla, apple, despite numbers are really not that great. annmarie: even though they were not that great, we will be fine in china. they continuously mentioned india, how it was a great spot in e.m.

and then they decided not to talk about anything bad. the impact of tariffs, good or bad, we are not going to speculate yet. jonathan: under surveillance this morning, he was authorities investigating a deadly midair crash at the reagan national airport. the ntsb says it has recovered flight data recorders. a report showing staffing at the air traffic control tower was "not normal" wednesday night with only one controller doing two jobs. annmarie: that is concerning, given the overcapacity that people talk about with this airspace. it is not just commercial jets going in and out, you have a tremendous amount of military personnel using this airspace to zip around vips or for training purposes. not normal for that time of day and traffic is concerning. we know that the faa has ramped up a tremendous amount of hiring last year, but how long will it

take to get those hires to a place where they could be sitting in traffic control and know what they are doing? that could take years. jonathan: bruce was fantastic, talked about the d.c. flight restricted zone, one of the most scrutinized airspace is on the planet, which makes it so concerning. annmarie: if it is so scrutinized, why didn't you have enough staff on hand? the current head of the ntsb spoke yesterday and she said something important. we look at the human come in the machine and the environment. every point of where this could break down and why we have the fatal crash. jonathan: the investigation is ongoing. any more headlines we will bring to you. donald barreling toward saturday's trade deadline, saying that he favors duties on canada and mexico, on about $900 billion worth of goods. annmarie: i think you are right

to say, is the market prepared? besides maybe a little bit in the fx market, this market is not taking it in that this is coming down the pipe. i would be more shocked if he didn't do anything. the question tomorrow has to be what is the scope? yesterday, he started flirting with the idea, i am thinking about it, we will decide whether we have tariffs on crude. that would be a huge hit to some of these refineries in the midwest. then you have the retaliatory measures we have to talk about next week. then maybe it could be a grace period and the real terrorists will come on april 1. we don't know. jonathan: it all depends on how it will be calibrated, how the market responds, how people react. ultimately there is consensus that the president is transactional, and there are several off ramps in the mix. whether that turned out to be the right way of looking at things, that is how they are

looking at it right out. annmarie: they have a good example with colombia, they were drafted and signed but never levied, because in the end, they vent there will. potentially just an opening salvo, but one of canada and mexico decide not to play ball? then those tariffs are coming down. he has to use them in some capacity if he wants them to have some weight in his administration otherwise he is the boy that cried wolf. jonathan: pce and personal spending coming up. bloomberg expecting an increase in personal income, and a spending increase driven by consumer stepping up goods had a potential tariffs. annmarie: remember when zero hedge, potentially this threat of tariffs means it is just a stimulus because everyone keeps on buying. we did see this happen yesterday

in the corporate space. intel reported earnings and they beat estimates. part of that came from customers ordering ahead of possible u.s. tariffs, getting ahead of what is potentially coming out of the oval office. jonathan: let's turn back to the markets. tech stocks leading gains this morning after news of the deepseek breakthrough. nouriel roubini taking a bullish stance, posting earlier this week, in my opinion, the deepseek surprise is counterintuitively over time it bullish for u.s. and global stocks. increases u.s. potential growth and makes exponential ai even more exponential. always good to see you, buddy. let's pick up on that theme. why do you think this is good news, do you think it is the real deal, export complying only costing five or six dollars? nouriel: in spite of the

restrictions, they got more gpu, not 5k, probably 100,000. r&d costs were so much more. still, not the 20 x, but 3x. even if this is true, it is one of the biggest total factors of productivity increases in human history, should be increasing potential growth, not just in china. reinforced learning can be used by everyone in open-source. it will increase the productivity of those who are producers of ai and more importantly the consumers of ai. if it is true, it is an intuitive process, we all learn and steal from each other in the u.s.. it increases the fact that ai will change the world for the better. significant increase in potential growth in the united states and also globally. over the medium term it should

actually be positive for u.s. and global stock markets, not negative. so the reaction initially was totally excessive. now there has been some retracing over the week as people digest the news and say this is not the shock that we thought it was. jonathan: positive for stocks and the economy. economic growth. do you think positive for society? nouriel: there has been a huge debate about the risks of ai as opposed to the benefits of ai. in part, a political and philosophical question. misinformation, disinformation, increasing cyber warfare. i would say on net, like any other technological innovation will lead to potential growth and human welfare. we may be able to live to not 90, 100 but 120, longevity, health. it is a benefit to society overall.

there are consequences and risks and we have to manage them. the regulation of ai will be very complicated, like the internet, we will probably do it too little too late. jonathan: if i clipped what you said and used ai and replaced it with globalization, weren't we saying the same thing a few decades ago? nouriel: globalization is being bashed right now by everybody, led to an increase of wealth around the world. the ways of increasing productivity growth. there will be a backlash but the backlash on ai will be massive amounts of job displacement. jonathan: this is what i'm getting at. what will ai do to services, what globalization did to manufacturing? a question that i keep going

back to. how many people will be satisfied with just ubi? i don't want to do nothing and just be paid by the government. we aspire as humans to improve, climb the social ladder. nouriel: in a world of scarcity, the dignity of life was to provide for yourself and family, look for water, food, shelter every day. in a world where scarcity is less of a constraint, we have to produce less because the robots can do it, and we can consume more. what is the meaning of life in that situation? it is a philosophical question. once we get this technology innovation, everyone will work 10 hours, not 60 hours, we will all become poets. maybe if we don't merge with the machine, they become hyper intelligent and we become obsolete. it will take decades.

but those are important philosophical questions. i would argue, provocatively, 20 years from now, potential growth could be 8%, unemployment could be 80%. we are going in that direction over time. ubi by the way cannot being just national. the winners and losers will not only be internal but cross-country. can we have a system of global governance? those are big issues. annmarie: global governance. if you use deepseek today, you cannot even find things about the chinese communist party, things like tiananmen square. how are you supposed to have global governments with these kinds of countries? nouriel: over time, given the geopolitical divisions between the u.s. and china, the world will be divided into two. the group of countries with the

u.s. and others in the global south that preferred the economic, geopolitical system of the west and the rest. then there will be others who will go with the model of china. model economics, geopolitical security, and whatever. and it will be a split world. within the west, friends and allies, if there are winners and losers within countries, cross-country, will have a system of transfer. we have been subsidizing the defense of our allies for now for 80 years because it was in the global interest of the united states. if you need to do global ubi across friends and allies, we will do it, but that is the way we are going. china is doing the same thing. jonathan: i am petrified of the world you just described. annmarie: lisa is not even here and it has gone very existential, this conversation. when it comes to this idea of

global regulation on ai, do you think trump will use a i right now in the next four years as a bargaining chip, as he tries to work on global realignment when it comes to trade? nouriel: biden right before he left in january, his new ai diffusion rule, essentially divides the world into three groups of countries. tier 1, 2, 3. if you are a part of the global technological order of the united states, you have access to unlimited advanced chips, nvidia and others, ai models, access to building data centers, and you are part of our own technological sphere. we are deciding essentially. it is not a question about regulating ai, but who is our friend and ally? even within nato, there were

only 18 countries that qualify for tier one. not all countries. the big five are a part of it, some other nato members. plenty countries are not. tier two is mostly the global south and everyone else. china and others, tier three. the u.s. will set the rules of the global technological order. either i am advancing the technologies, then you can develop the chips, applications, or otherwise you are in the doghouse. jonathan: one more questions. europeans would be deeply upset with this conversation. nouriel: they already accepted it. the same happened with data centers. they try to find an alternative and there were not successful. hi chris killers are providing those data centers in europe, technically in europe, but controlled by aws, microsoft. jonathan: i want to squeeze in a

word on stephen moran, hudson bay capital, which you represent, published a paper about active treasury issuance. he is in the white house now working alongside donald trump. if you believe that janet yellen, the former treasury secretary, was issuing treasuries actively at the front and to have different objectives, how do we unwind that? nouriel: scott bessent and his confirmation hearing was asked about this, and he said effectively, given the impact on long-term interest rates, if you phase it out right away, there will be a shock to bonds going higher. it could be for the next two or three years, at least 50 basis points. they know that, so they will have to wait and phase it out gradually. then when bond yields are going lower, either lower because

growth is slower or because inflation is lower. they will have to gradually phase it out over time but it will not happen overnight. jonathan: always good to see you. lots to think about. scaring me about the future. i want absolutely nothing to do with that. let's get an update on stories elsewhere this morning. here is your bloomberg green with yahaira jacquez. yahaira: the army helicopter that collided with an american airlines jet was manned by an experienced three-person crew. they had 1000 and 500 flying hours respectively. investigators continue to probe the cause of the crash which killed all 67 people aboard both aircrafts. meanwhile, secretary of state marco rubio is heading to panama this weekend as part of his first trip abroad where he will emphasize president trump's ambition to retake the panama canal. he's also expected to visit

guatemala, el salvador, costa rica, and the dominican republic. he will discuss immigration and deportations. paramount is reportedly in settlement talks with president donald trump, this after his lawsuit regarding his "60 minutes" interview with kamala harris that he claims was edited. executives may opt to settle to boost the odds that trump allows its multibillion-dollar merger with sky dance to go through. that's your bloomberg brief. jonathan: more from her in 30 minutes time. barreling toward a tariff showdown. pres. trump: i'll be putting the tariff of 25% on canada and separately 25% on mexico. those may or may not rise with time. jonathan: the view from morgan stanley. you are watching bloomberg tv. ♪

jonathan: live from new york city, equity futures positive by zero point 5% on the s&p 500. under surveillance going into the weekend, barreling toward a tariff showdown. pres. trump: we will be announcing the tariffs on canada and mexico for a number of reasons. the people that have poured into our country, the drugs, fentanyl and everything else, the massive subsidies we are giving in the form of deficits, and i will be putting the tariff of 25% on canada and separately 25% on mexico, and we will really have to do that because we have very big deficits with those countries. those tariffs may or may not rise with time. jonathan: will he or won't he? global markets waiting to see if he unleashes tariffs on mexico and canada tomorrow. several off ramps to avoid the

universal levies. with the late effects they expect most of the inflationary impact in 25, expect a delayed economic growth becoming clearer in the data flow in 2026. michael joins us now. if i was your client, will he or won't he, and will be bullish for treasuries if he does? michael: we have to take it seriously, this is not something in the baseline of our expectations right now. if we were to get these tariffs going on, some of the economic effects being pushing wrote down further in 2026 as opposed to now. however, how these tariffs go on will be instructive in terms of whether or not we really want to change our thinking about growth and inflation and therefore market effects this year. you talk about the potential for off ramps.

definitely different flavors of how this could go on. if it goes on with a time delay or with significant exceptions for a lot of products, that may not change how economists are thinking about things. if it goes on and we see a breakdown in negotiations, which is to say if mexico and canada are arguing if they have given as much as they can give, and it seems like these tariffs will be sticky for a couple of months, we will have to consider growth and inflation effects in the near-term. maybe our preference for equity and growth assets will have to change a little bit, for less risky assets, government bonds. jonathan: cleaning up the southern border, fentanyl is one thing, if it is to offset tax cuts, that is another. can we take this seriously given that it can change anytime? michael: that part of it is meaningful because if you are an investor tracking potential fiscal impacts of how the deficit could expand, tariff

revenues could mitigate that impact. one reason why we are not as concerned about deficit expansion pushing treasury yields higher into 26. the more important effect is what it means for growth and inflation in the near term. more tariffs will create more of a stagflationary effect in the near term. that has to be expressed in a more challenging environment for risk assets. we will see a lot more volatility in foreign exchange in the near-term. right now you are not seeing that in the currency pair that you would expect. our fx strategy team has been all over this. there has been more volatility in these pairs around the election day and now. those are market effects that we will have to watch for next week in particular. annmarie: it seems like the market is almost complacent and trump has been clear, something is coming tomorrow. how inflationary would it be if he is flirting with putting

tariffs on canadian crude? michael: there are near-term inflation effects when you are implementing tariffs, as our economists have pointed out. the more durable effect that will affect monetary policy is the demand degradation and the growth that follows after that. because of that, the real concern is the path potentially for the fed gets more dovish and that is when you could expect to see government bond yields going lower into the end of the year, may have more of a preference for that, more growth effects exit have to feed into equity market valuations, making it a more challenging environment for equities and credit. jonathan: thank you, we will catch up in the studio soon. coming up, anastasia amaroso of icapital. robert tipp of pgim. the third hour of bloomberg "surveillance," up next. ♪

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>> it's not just the earnings calls of the mag seven that matter, it is the earnings calls

of the other companies. >> the expectation is that earnings growth rates are going to decelerate. >> we are seeing a separation of the winners and losers. you're probably going to be choppy for three to six months. >> i don't think what we saw on monday with deepseek is that canary in the coal mine. i really don't think so. >> this is "bloomberg surveillance." jonathan: the opening bell, about 19 minutes away. equity futures on the s&p nicely positive. on the nasdaq, up by .3 percent, supported by apple in the premarket. the numbers out of china, not great. the iphone? still not experiencing any real growth year-over-year, but the outlook apparently sufficient to lift this stock this morning. annmarie: which also, you brought up a great point earlier. what does that say about the base case and how tim cook was massaging a lot of these questions on the call? a lot of money coming in for

services, but the outlook not too bad. and just crazy where we are at the end of the week with tech to where we started on monday. jonathan: and doing this with not very great earnings. a powerful outlook from the likes of tesla. meadow were decent, but apple not tremendous, that is for sure. annmarie: maybe that helped what happened on monday. maybe you brought the bar down lower because they thought this was going to be really bad for all of the tech players. so in people's minds it clear that our people had lowered. jonathan: that is all behind us now. in front of us on the horizon, terror threats. when he 5% on mexico and canada. i'm not sure how seriously you take this deadline, because this deadline is self-imposed. the president of the united states has a decision to make. annmarie: if we don't get anything tomorrow i would be more shocked than if we did get something. the president has made clear

something is coming tomorrow when it comes to canada and mexico. will it be as highs 25%? not sure. will it be a grace. -- a grace period? is this the opening salvo? it is the scope we don't know, but something is coming tomorrow. jonathan: you don't see that fear if there should be in a, and that is a judgment call in this equity market. coming up this hour we will catch up with anastasia amoroso of icapital as apple and intel earnings boost sentiment. tom narayan on the tit for tat tariff war. and claudia sahm on the fed's waiting game. apple and intel earnings boosting tech sentiment. anastasia amoroso saying, all the markets are used to hiding out in mag seven this week proved that the economy and earnings landscape is supportive enough now for the rest of the market to be a pillar of strength. anastasia joins us now for more. anastasia: good morning.

jonathan: i went back to something you said in december. re-examine your ai exposure, think about concentration risk in some eyes. -- semis. anastasia: the reason i think i said that is because when you look at the total addressable market for artificial intelligence semiconductors is a sliver, but certainly not the whole pie. most of the benefit of artificial intelligence sits in that software sector. it makes sense that we focused on building up the ai infrastructure. that is where we have seen tremendous results for the likes of nvidia. we really have shifted to the stage from where we have traded some of the initial models and are shifting to the use cases. i'm not surprised that the market is starting to see that. by the way, the other thing that people actually who focus on tech and focus on energy and power producers, they are not surprised by the efficiency gains. this was coming. some of the efficiencies we saw

with deepseek was in line with expectations. as an investor one other -- one of the calls i had is that you have to broaden out your ai exposure. i still stand behind that. annmarie: was monday a buying opportunity for you? anastasia: absolutely. i would say it is a gradual buying opportunity. the easiest call was to say, step in and buy some of the ai software names. so the software balanced nicely. as the week progressed i really wanted to hear from meta, i wanted to hear from microsoft and the big tech names. what are they going to be doing with their ai? the fact that those budget numbers did not budge and in some cases got upgraded, that reiterated the conviction we are still going to continue to spend the same about but maybe get more bang for auerbach. it's that happened that created a buying opportunity in some semi conductors that are tied to

data center networking. it also created a buying opportunity in power producers. that is the other thing that has not budged. the energy sector, data centers, they did not revise down how much power we are going to need annmarie: do you think deepseek was a massive head fake? the premise was that it was built cheaper and more efficient, and now there is potentially being questions thrown in. maybe they usurp u.s. export controls to get ahead of it. the base case is that we are going to need these to build out models. anastasia: that is what i have heard from companies. they are going to be buying servers and more advanced semi conductor chips. i don't think it was a deepfake in the sense that you are able to do more with less. that is where we are with the development. but there is a huge positive to that. it expands the addressable market.

it makes the inference project -- product that much quicker and it also means we not only are going to focus on digital assistants. we might also focus on ai. and it is not just hyperscalers that are going to invest. enterprises will -- enterprises will join as well. what happened this week really expand the addressable market for ai. jonathan: can we pick up on the energy story? you say you stand behind that. across the pipeline operators, gas producers, some people are making the argument this week that this move we have seen out of china will cap evaluations in that space now. it will be a valuation headline for the rest of this year. do you push back on that? anastasia: i do, because not much has been priced in. you look at the valuations of utilities there was not much benefit priced in for artificial intelligence. when you look at what was priced in, some of those efficiency gains, you might be able to do compute with less power, that

was baked in, but a lot of the analysts were modeling power demand still going up because we are going to need to build data centers and research will are going to likely decarbonizing part of the economy and electrify the transportation fleet. so there are other drivers of power demand. i always look at, what is the expectations versus what is in the model. some of that benefit of ai is not in the model. jonathan: there was one other thing you said at the end of last year, and that was semi's could get caught up in tariff actions. got a report of that earlier this week and it weighed on nvidia. does that make it even less investable? anastasia: semi conductors are investable because you cannot do any of the artificial intelligence possibilities we are talking about. it is a long-term possibility. but i expected to be a much more volatile ride you to export controls. say we do have some sort of it -- of advanced controls.

over time those companies will find a workaround. there models will get de-risk to an the investable. for investors, don't expect same easy ride in semiconductors we had the last couple of years. if you do have policies for pullbacks, consider buying them, but i expect more volatility. annmarie: expanding on tariffs and semi conductors, jonathan and i have been talking about this potential threat of tariffs tomorrow. how do you view all of that and why do you think the market is a little bit complacent at the moment about it? anastasia: the market is shockingly complacent about it. all parts of the market. i think -- not all parts of the market. i think there is a decent chance that tariffs don't go into effect. the reason for that is because the u.s. economy stands to lose a lot less than the mexican economy or the canadian economy does if there was a 25% tariff in position.

i assume those policymakers have an incentive to get something done with the trump administration. if i am wrong about that and you do have the tariff risk i think you will have a market reaction and i know we have an auto analyst joining later in the hour, which will be a great conversation because the auto sector really gets caught up in that, given how much the parts move back and forth across borders. i will be looking for that impact. i mentioned not all parts of the market or ignoring that. the thing to put on your bloomberg monitor this year is some of the policy baskets. if i look at, for example, the on showing beneficiaries, they have done well month to date if i look at the high percentage of domestic sales companies in the u.s. they have done well we date. -- week to date. the last thing i will say about tariffs is, we managed to avoid 25% on canada and mexico, but the trump administration wants

this as a pay for. i don't think we will be able to skirt all tariffs all year. jonathan: this is the point we were making earlier. if you believe this is a negotiation tactic then it raises questions about how useful it would be as something to offset tax cuts. if you think this is going to be a tool to offset tax cuts it is not something you can have a transactional approach. it has to be dead set. it has to be an offset. annmarie: you need to leave them on, right? anastasia: tariffs to date have raised something like $70 billion for the united states. if you have universal tariff, 60% on china, the impact would be 400 billion dollars in revenues raised from tariffs. that actually does start to move the needle on offsets. jonathan: good to see you. anastasia amoroso of icapital. equity futures positive 5.4 percent. with an update with your bloomberg brief, here is ira jack as. -- yahaira jacquez.

yahaira: we start with an upgrade -- update on the washington, d.c. plane crash. the control tower at reagan national airport was understaffed on the night of the collision that killed 67 people. the report says that one controller was doing the work of two employees at the time the crash occurred. sticking to that story, u.s. and russian figure skaters were among those aboard the american airlines get involved in wednesday night's crash. the skaters, coaches, and families were returning from a training camp in kansas. president donald trump is considering withdrawing federal support for new york city's new congestion pricing toll. trump and new york governor kathy hochul spoke about the toll this week. on the campaign trail trump vowed to kill the charge for drivers entering manhattan below 60th street. the white house declined to comment. that is your bloomberg reef. jonathan: the latest update on that front.

thanks started to get busy in new york city. annmarie: the men that sits behind the resolute desk is from queens and he views this as a regression tax. a lot of people from queens would maybe agree with him. jonathan: there might be someone from queens sitting around this table. [laughter] your morning calls, plus tom narayan on the risk of tariffs for the auto sector. from new york city this morning, good morning. ♪

jonathan: equity futures look like this on the s&p. positive by .4%. the opening bell, one hour and 15 minutes away. let's get you some morning calls. evercore raising its prized have -- price target on apple.

from jp morgan, cutting its price target on intel, highlighting macro uncertainty and increasing competition. td callan reiterating its buyer rating on walgreens. let's turn to autos. manufacturers bucking up for donald trump's tariffs on canada and mexico, expected to begin tomorrow. tom narayan writing, while oem's in our coverage can shift some production, most suppliers don't have that ability. mexico tariffs would be disruptive and inflationary to the u.s. auto consumer. tom, good morning. what a sector you cover going into the weekend. what are you telling clients? tom: i know my saturday is not going to be -- i'm not going to be skiing on saturday. i'm going to be busy with this. your last speaker said it right. i think there is a lot of investors who think ultimately

we may not get tariffs. we saw what happened the first go round. ultimately the administration is not -- the goal as a concession from mexico. so, you know, a kind of reminds me of the uaw, right? that whole discussion. ultimately it was not as bad as feared. the deal was struck. if that is -- if this is what is going on here, the administration just wants to get a deal done, maybe he can be averted. if it is projected it would be hugely problematic. we saw what happened with gm when they reported results earlier this week. great results, stock was down 10%. jonathan: nobody believed the outlook. tom: because tariffs really hurt them, right? it is weird. super negativity mixed with, may it doesn't happen so everything is great? annmarie: is your base case that this is a negotiating tool? tom: yes. annmarie: and that is what you are telling clients? and if it's not, how do they

prepare? tom: it's difficult to prepare. maybe you, you know, if you are worried, you risk-adjust. if you are worried about a 10% chance of something horrible happening maybe you stay out of the sector. annmarie: ideology-wise trump talks about this a lot. he wants manufacturing back in the united states. he hates how the auto sector, parts are going between mexico, canada, and the u.s.. do you think there is some concessions that could be made within the auto space to bring more that manufacturing to the united states? tom: that is already kind of happening, right? the question is, how long will that take. oems can do that. gm can move production of pickup trucks to the u.s. the seating industry is totally in mexico. we'll have to source seats from europe. that is inflationary. annmarie: also trump doesn't

want to give europe a necessarily a win. tom: i think it is more a negotiating tactic. that is what we learned from the first trump go-around. if that is the goal it is happening. after the pandemic automakers tried to localize as much as possible too, so it would appear this is more of a negotiating tactic as opposed to just forcing these companies to move production immediately. jonathan: can we spend some time on exposure? who is most exposed? who is least exposed? tom: there is a pecking order. gm is the one that comes up the most. it is one third exposed, from a production point of view. stellantis is not as exposed. on the supplier side there are specific suppliers -- i noted that those who are exposed to seating.

those exposed to those d3's, obviously. those suppliers, if you are making seats, that is where you are making a. if you are making pickup truck's you are making them everywhere. you can just change production. the suppliers could be hit harder from that context. but it is really which suppliers are most levered to those oems that are hit. jonathan: where does tesla fit in? tom: we heard what the sea cfo said this week on the earnings call, that tariffs are happening, that they will have a negative impact on our business i think was the quote. it does explain why they decided not to do gig in mexico. that could have been a smart decision there. it will have an impact. they still source components from suppliers, and so it will have a negative impact. it will be inflationary. but maybe not as negative as the

d3. jonathan: what explains why so much people put so much weight on the outlook of tesla and then they do completely the opposite with gm? gm put out a good outlook, no one believes it. stock crashes. down 10%, something like that. tesla comes out with a powerful story about the future, and the stock rallies. what is the difference? tom: one is a car company and the other is an ai company. that would be the argument. 10% of my valuation for tesla is cars. for gm it is pretty much all of it, right? tariffs, what impact will they have on optimists? or the robotaxi business. that is why. annmarie: for tesla the bigger issue is not mexico or china. canada. it's china, isn't it? tom: that's true, but again, i mean people who are buying tesla's stock are looking at the autonomy, the narrative story.

5, 10 years, 20 years away type of story. they are kind of ignoring the near term. look this week at the gross profit margin missed. i don't think anybody cared, right? annmarie: isn't that a problem, though? they still make cars. tom: it was a problem, right? i titled my tesla report, moon shots are getting real, because we heard we are going to get a robotaxi service in june this year. i used to come on other places and get laughed at by talking about robotaxis. annmarie: i've seen that. [laughter] tom: now thanks to you guys folks are taking this more seriously. we are seeing a real service that is going to be launched in june. people are taking these moon shots, so to speak, seriously now. that is what has changed that. jonathan: there is a difficulty sometimes, often a failure to understand -- and i have heard this from many great investors. a failure to understand why a stock goes up and down. sometimes it doesn't go up or

down for the reasons you would like it. if you focused on deliveries and sales of tesla over the last year or so and placed europe bet accordingly you probably have not done very well. i think you have made the point that the value tesla you have to focus on something else. can we talk about the something else a little more? tom: yeah, i mean it is fsd. we have had some interesting announcements. we are unsupervised fsd by june of this year for not only this robotaxi service, but private cars. just camera-based. look how much waymo i spending on the robotaxi. this is just a camera-based system. also fsd in europe and china looking to get approval this year. these are real near-term things. an auto multiple is 3, 4 times ebita. ai is a 10-times impact on the valuation.

jonathan: how is fsd working out and how does it stack up versus what waymo is doing? tom: it is difficult to compare. waymo is a far more expensive product. there is radars and all kind of systems. it is multiple hundred thousand dollars for one vehicle. the vehicle system is just the price of a car and the software is already there. so, is a good system. obviously it is not going to have the same accuracy as waymo, but people are looking at the trajectory at the miles before intervention. the fsd innovation and improvement is happening exponentially. it is -- is it at the same level as waymo? probably not. annmarie: how far ahead of that is that from where u.s. regulation is? tom: it's approval has to be done more localized, so it would appear -- we don't know how -- but they are doing a service in

june in office -- june in austin. perhaps they have regulatory approval. i'm not sure. i don't know how hard that it will be to get the approval in california. annmarie: then your car is state-specific. that makes no sense. tom: your robotaxi. the reliability -- a liability rests with us, the driver. once the liability goes to the car company it is going to be more difficult to him -- to approve. jonathan: what is the june goal? what needs to happen by june? tom: for service with unsupervised fsd. that means no driver in june in austin. paid service. jonathan: what would happen to the stock if that is not achieved? tom: if it is not june but it's july -- jonathan: just keep rolling this forward? tom: if the goalposts change beyond 2025 that is probably a negative. jonathan: we would have a

different conversation, maybe. appreciate your time. tom narayan of rbc on tesla. that stock down by not even .1% on the premarket. some economic data for you. breaking pce and personal income spending data. we will catch up with claudia sahm and robert tipp, both of which are here to react. in the equity market, equity futures positive by close to .5% and in the bond market, pretty much unchanged. from new york, this is bloomberg. ♪

jonathan: 60 minutes away from the opening bell with equity futures on the s&p elevated nicely by .5%. close to .75% on the nasdaq 100. in a few moments we will get some economic data for you. pce, personal spending. the scores in the bond market shaping up as follows. yields unchanged on a 10 year. on twos, in and around 4.20%. here is mike mckee. mike: good morning. we are starting to get the numbers. personal income up .4% during the month, which is exactly as

forecast, and spending is up .7%. significantly up from the .4% we saw in november. these are december numbers. yesterday we got the quarterly gdp that showed strong consumer spending. this backs that up in terms of december. pce price index is up .3 percent on the month over month. up .2% on the core. i still have to double check and see what we get here in terms of the year-over-year, although powell had told us it will be 2.8% for the core, 2.6 percent for the headline. you will see if that comes out that way. and it does. you can trust the fed chair. 2.6% pce year-over-year. 2.8% for the core. the eci comes in at .9% gain, which is as expected. wages and salaries increased .9%.

then if it costs increasing .8%. so, still seeing americans get ahead of inflation. on the eci basis, which is the feds favorite measure of compensation. have to keep an eye on that, although it is about where we expect it. jonathan: thank you, sir. that is a strong eci, but employment cost index up .9%, so wages decent. you put that together with personal spending, coming in at .7%, that is an upside surprise. pretty powerful numbers. just to check in on the bond market, yields are higher. at the front end of the curve we drop. in the equity market with about 58 minutes until the opening bell you're s&p 500 still positive by .5%. the nasdaq up by .8%. the story this morning

supporting stocks. it's much the economic data. it is all about the earnings, with apple up 3% or 4% in the premarket. annmarie: they are pointing to a rosy future, so that is what is driving this market. also coming off of these economic data, personal spending. last night bloomberg economics was talking about the fact that they do envision u.s. consumers ending 2024 on a high note, especially for big purchase items. may be getting ahead of something we have been talking about all day, potential tariffs down the pipe. jonathan: 25% potentially on mexico and canada. over the last week we had this article published by claudia sahm, even talking about tariffs can cause inflation. claudia sahm of new century advisors joins us. welcome to the program. people who did not have the chance to read that article can we go through it together? what is the standout message from you to people in this

country about tariffs and the uncertainty and the price we have to pay for that? claudia: with the tariffs, they don't have to happen for them to have effects. people, if they change their behavior -- and we have seen it in various polls and surveys -- people are taking the president very seriously on the tariffs. probably more seriously than markets are taking him. and when they are asked, what do you do about this? 25%, 30% tariffs coming down the pike, very large households say, you will get ahead of it. we will do the spending before the prices go up. if you have demand -- and there are some inklings we have gotten from december, whether it is important data or the durable goods spending data, there is some inkling people might put this to work. the issue is, if you get that surge in demand ahead of time that can get you the price increases and inflation if you don't have the supply to match

up. just that anticipation and trying to get ahead of the tariffs can create some of those effects. and then people are adjusting their behavior. in the end the tariffs might not actually happen. annmarie: they might not happen, and i wonder, can act as a natural stimulus in the economy? claudia: right, but we are not -- like, i mean, it is all high you look at what you are trying to accomplish a. the framework i was talking about in the article is, can you get that extra kick to inflation, the surge in demand out of the anticipatory behavior? yeah, i mean it also can give us a pattern. what can be hard right now to read in the data is, the discussion, is the economy re-accelerating? this type of behavior is very temporary. it is trying to move spending around in time. does not people saying, i'm

going to buy two cars, it is, i'm going to buy my car ahead of time. a lot of it is a timing thing. makes it harder to read the economy. does not necessarily that it kickstart a big acceleration in spending. jonathan: there are so many different variables here. how it is calibrated his work -- is important. what happens with foreign exchange is important as well. the you can substitute certain goods. one thing we can talk about is how inflation might be and where the corporations cans -- do you think this economy at the moment is inflation-prone still? claudia: we still have a really strong, resilient economy. just like we learned with the wage numbers still look good, the income still looks good. this is not the cash-flush economy early in the pandemic when we were putting out the relief and had the pent-up demand coming online.

that is absolutely not the environment we are in, so i don't think you can make that comparison in terms of how inflation-prone we are. yet we are not europe, right? there is growing, there is income. there is a cushion that i think steel would allow consumers to absorb some of those price increases. it is not clear that we have gone back to where the consumer is in control. it is kind of unfortunate to be testing that thesis at this point, but that may be where we are at. annmarie: what does this mean for the fed? claudia: they are going to be waiting a while. they get the benefit of, we do have this resilient economy. we do have consumers are spending, we have the income growth. their argument that they don't need to hurry looks like a really solid argument, at least right now, from what we know. and that is good because it is going to get very messy to read

the inflation data. if some of this anticipatory spending is happening we could get -- and we have already seen the goods spending inflation kind of ramp back up a little bit toward the end of last year. he could get signals that are very hard for the fed to read and it makes it hard for them to make the case, yes, we are going sustainably to 2%, we can keep cutting. i would expect the fed to be in a holding pattern for some time, and they are telling us that is where they are at. anything we have data-wise supports that. jonathan: appreciate your time going into the weekend with that self-imposed deadline on tariffs. claudia sahm of new century advisors. for those of you that missed that article, even talking about tariffs can cause inflation. available on bloomberg.com, and of course on the bloomberg terminal. mike mckee is still with us. we had some economic data about eight minutes ago. also some comments as well from governor bowman. mike: the blackout has lifted

from the fed. nikki bowman is the first one with comments on the economy that suggest she would oppose the idea of a rate increase. she says risks are to the upside for inflation, and she doesn't think that current levels of fed interest rates are putting meaningful restraint on the economy. she doesn't use the word rate increase, but she does suggest a need to watch closely, and she is in no hurry to cut rates again. that is the first one. we will see if we get a whole bunch of them next week speaking on the economy. on thing we want to mention again is that incomes are rising faster than inflation. that is an important point for the fed, and would be a talking point politically if the election were still underway. that is the good news. .9 percent increase in wages and salaries for americans. that is a quarterly number. and a .4% increase in wages and salaries in the pce for

december. annmarie: even nikki bowman talking about this may be on the margin she is insinuating they might have to raise rates. doesn't that put a target on her back with white house? mike: that is a good question, especially as people have talked about her taking michael barr's place for supervision when aqaba leaves on february 28. but she has always been an inflation hawk, so i guess she is being true to her philosophy. jonathan: thank you, sir. michael mckee there. i think people think governor waller is running. annmarie: they do. when i saw those headlines i thought to myself, i guess her name is going to go a little bit lower on that shortlist from aqaba's position. robert tipp from pgim joins us. you heard what mike mckee had to say. adam posen of the peterson institute came on the program this morning and made the point,

he thinks this federal reserve will be hiking in september. they may make the mistake of coming between now and then but he thinks in september they will be hiking. where do you stand on that? robert: that is a valid concern. this economy almost has a demand problem. when you take a look at the consumption, gdp, you can make a story that there is an acceleration going on here. this brings back to the late 70 -- rings back to the late 70's where you have an upside inflation shock. then the central bank cut rates because of the weak economy. this time they are not even cutting rates because of a weak economy. they are cutting rates to make sure they don't get a weak economy and now we are coming into the tariffs. i think it is a vulnerable spot. it is great the fed has recognized that. our base case is they wind up cutting but i think it is valid. the paragon shift has been the tough thing to get, and it could be michelle bowman in this case, you know, highlighting that that

is something to watch for. jonathan: painful for members of the general public. mortgage rates went up. because the long end sold off. can you buy the long end, even you think it is a valid concern that inflation picks up again? robert: the best case for the market is the technical backdrop. this is an environment where some money has gone into bond funds and some money has gone into stock funds. twice that has gone into money funds. while demand deposits may be low and that is hurting consumers at some ends of the situation, there is a bit of resident -- reticence on the part of market participants to get yield -- to let yields get above the cash they are more concerned about locking in their yield for the long-term than getting an extra 01 or a short period of time. annmarie: is it because of the policy uncertainty? robert: no, i think, you know, it is the need for income and

the notion we are investing for the long-term and what most investors experience, especially those that have a need to invest at this point is that every time you get a fed rate hiking cycle and you get past the peak that is your last chance to get into the market. so, this fed, even michelle bowman is hinting that the next move in all likelihood is a cot, but that she wants to be open-minded on that. i think the average investor is saying, they are going lower, they see neutral as lower. if i can get 5%, or for higher risk appetite investors 6% or 7%, i should like that in before i find a cash rate at 3% or 2%. annmarie: you think the next one will be a cut. robert: what we need to see? annmarie: labor market? robert: they are sensitive to

wanting to get the soft landing, right? that is something that fixed income investors have on their side, is that they want that. they don't want to lose that. that is giving them this easing bias, that if that goes up they are going to do that. i think that it may take longer with the tariffs. i think they want to see the core inflation come down. and there are a lot of things working against that, and that is what has created what looked like would be a fairly quick rate cutting cycle going down into the threes. anything about the situation in los angeles, is that going to put short term pressure on insurance, all of these things that take a while to go through services inflation? i think they are going to want to get confidence on core inflation. jonathan: i was disappointed that did not come over the news conference. the disaster-hit parts of this country. the hurricanes and then the wildfires in los angeles.

just getting a headline from reuters that the nvidia ceo, jen-hsun huang, will meet with donald trump later today. nvidia in focus for a whole bunch of reasons, including what happened monday with deepseek during i -- deepseek. on wednesday, additional export controls on nvidia chips. annmarie: additional export controls on nvidia chips, especially those going to china, and maybe even caps going to other countries around the world. i remember when ed sat down with jensen huang, and he said, we have not met yet but i hope to. this is not a meeting at mar-a-lago before he was inaugurated. this is a white house meeting. i wonder if this carries more weight. i'm sure someone in that meeting is going to ask about, do you think china was able to develop deepseek without access to your high-level chips? jonathan: i keep going back to that statement from nvidia when they said it was

export-compliant. we will see what jensen huang has to say about that. the stock is down by about 1%. robert, i wanted to fit in some time on corporate credit. high-yield spreads are about 2.60% right now, which is pretty tight. i wonder from your perspective where we are? what your approach to credit looks like? we caught up with sebastian page who made the point he has been selling down just a bit of high-yield, a bit of equity on valuations. where do you stand on that? robert: i think that when investors have seen since the financial crisis, that every time spreads get this tight something really bad happens. i think this is going to be the time that doesn't really pan out. and we have seen ito, but not lately. you know, when you look at the spread levels that existed in 2004 through 2007, especially in european credit, they were much credit -- much tighter. when you look back at the 1990's

spreads were much tighter. those were points in time where the budget was smaller. you have legit deficits pushing treasury yields up against corporate credit. the corporate fundamentals look good, so i think we are going to be in a narrow range for credit. that's going to allow credit to outperform the general. not to say that you don't need to be discerning, but i think this is going to be tighter for longer than a lot of people think. jonathan: robert tipp of pgim fixed income. just getting confirmation of that meeting, that jensen huang will meet with donald trump later on today. annmarie: they are going to have a lot to discuss. just about stargate and trump's idea of putting all of this money into the public-private sector when it comes to ai, but security concerns when it comes to these export controls and china. that was on display at the start of this week with deepseek and everyone talking about that they were able to do this with those lower-level chips, and then we have had a report that actually

national security concerns are that they are going through maybe a third party country like singapore and getting access to these highly-advanced chips. jonathan: i'm hopeful we get a camera in that meeting. for those of you who want to know where the equity market is, equity futures up .4%. with an update on stories this morning, here is your yahaira jacquez. yahaira: u.s. investigators have found the lock box flight recorders from the american airlines jet that collided in midair with an army helicopter in washington. the ntsb is leading the investigation and expects to produce a preliminary report within 30 days. a final report could take up to 24 months. chinese start of deepseek is under investigation for allegedly using nvidia chips that are not allowed to be shipped to china. sources say u.s. officials are looking at whether deepseek brought -- but the advanced chips through firms in singapore. president donald trump and ensign huang our meeting today.

-- jensen huang our meeting today. after clashing with elon musk. the washington post is reporting david lee bric, who served in nonpolitical roles at treasury for several decades is expected to exit. the move coming after disputes with allies of musk over access to sensitive payment systems. jonathan: thank you. going into the weekend there is only one thing to watch. will he or won't he slap 25% tariffs on mexico and canada? we will have a brief conversation about that next and get you some individual stock movers into the opening bell. from new york, this is bloomberg. ♪

jonathan: 38 minutes away from the opening bell. equity futures doing nicely. up .5% on the s&p. the nasdaq up around .8%. with some movers, here is manus cranny. >> tim cook did a good job last night. the headline on walgreens is this. suspending the quarterly dividend. is this the real solution to your problems? or do you have to do something much more aggressive in terms of the business? you can suspend the quarterly dividend. you will save about $650 million. td callan say this. you are still not out of the woods. have to turn around retail pharmacy business. to that extent is this a last will of the die -- full of the dice before something much more significant in terms of adjusting to the reality for the retail investor. apple, i mentioned tim cook there. i like what dan ives said.

we were white-knuckling it into these numbers last night and they were pretty disappointing. but the soothsayer came onto the call, talking about the recalibration of the supply chain. institutions have long been underweight this stock. hedge funds are perennially short this stock. it is about turning the story in china around. the services business gives you a drift up in this stock. the app store, apple music at a record high in terms of revenue. $26.3 billion. i will leave you with a look at chevron. oil prices were down by 11% in the fourth quarter. you've got big risks over the next 24 hours. what mike werth has done is, he is promising you honey tomorrow. kazakhstan will deliver a million barrels of oil by the end of the year. these are promises of a

discounted cash flow of $10 billion by. right now i would say to you, you have a free cash flow of just over $4 billion and you pay 7.5%. that is what i call a gap. jonathan: the stock is softer by 1.3%. some movers there, some single names to look after in about 36 minutes time. he was a look ahead to the next 48 hours and into next week. tomorrow president trump's tariff deadline. on tuesday, durable goods, plus alphabet earnings. on wednesday we will hear from disney. on thursday jobless claims and a bank of england rate decision, plus amazon results. then is it already payrolls friday? just around the corner, payrolls not too far away. annmarie: january is over. or it is just beginning because the trump administration is just beginning and this weekend we are going to get either tariff threat he enacted on, or it is going to be the opening salvo

for fresh negotiations with canada and mexico. jonathan: i think we have gauged where the bias is in this market. there is a consensus that there is scope for negotiation and this will be avoided. the people you speak to in washington, do they take a different view? annmarie: the view it as a two-front approach. national security issue that could be used in negotiation. but also may be blanket tariffs as revenue-razors, as a realignment of global trade donald trump things has been unfair for years if not decades that he wants to fix in the next four years. there is this two-track approach and you have to decide -- or he needs to decide which one he is going to be using. jonathan: the trading week is potentially a day longer and it already feels like a month long. on monday the full team will be together. lisa will be back. we will be catching up with lori kelby see no of rbc, the former senior white house trade advisor

to trump, kelly and shaw, and katie kaminski of alpha simplex. have a wonderful weekend. this was "bloomberg surveillance." ♪

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sonali: ending a week on the heino. i'm sonali basak. remain: and i'm romaine bostick. bloomberg open interest starts right now. sonali: coming up, the fed's preferred inflation gauge remained muted in september -- in december. that data comes as president trump pledges to unleash his first wave of tariffs tomorrow. with canada