>> welcome to bloomberg markets. i am scarlet fu. 25% tariffs on goods from mexico was set to go into effect at midnight tonight but a phone call between trump and sheinbaum has delayed that by one month. a working deal is in place and the tariff deadline with canada still looms so let's show you what is going on in markets right now. the s&p 500 opening down 1.2 percent, falling as much as 1.9% but then paring its decline after the disclosure that

mexico's president and donald trump spoke and will delay everything by one month. you can see that the peso has rebounded from its earlier decline. it is now firmer against the dollar so the red arrow shows the dollar weakening versus the mexican peso. the loonie does remain weaker versus the dollar. it is hovering near a 22 year low. there is supposed to be a conversation taking place this afternoon between canada and the u.s.. we will keep you posted on how that develops. little moves in the treasury market. uncertainty is perhaps helping to support longer dated u.s. treasuries. the 10 year yield inching lower by one basis point to 4.52%. let's highlight a couple of individual equity movers and we go to bloomberg's isabel lee for that. >> we have cryptocurrency getting hit, coinbase down around 4% and microstrategy down 1.5%. investors are fleeing risk assets more quickly than they should it seems and the deep crypto decline really underscore how trump, the most crypto u.s.

president, has added an element of uncertainty for traders. macro strategy did not buy any bitcoin in the last weekend that is holding a 12 week winning streak that began in october and up next, we are looking at alcohol stocks edging lower. both edging by more than 1.5% and this comes after canada said it is responding with its own measures and that is pulling -- from its shelves. it was also downgraded. the firm makes corona and morello. we are looking at automakers. we have gm and ford both edging lower by 1.5 percent. canada and mexico are really threat in production in north america -- if these tariffs continue. general motors widely expecting to see the worst fallout. given it has the biggest exposure in canada and mexico, that means they will suffer the most and that is what they are looking at, scarlet. back to you. scarlet: while the u.s. did

agree to a delay, terror threats for mexico are not over. -- tariff threats for mexico are not over. take a listen. >> in terms of trade, my proposal was the same one. why don't mexico's secretary of economy and the u.s. secretary of commerce work together so we can also get results and learn about these issues? then he agreed and at the end asked me how much time i wanted to put on pause. i said, well, let's put it on pause forever. he asked how long. i said let's put it on pause for a month. i am sure that in that month, we will be able to have results. good results for his people and good results for mexico. scarlet: for more on this developing story, let's go to carolina milan, bloomberg's bureau chief in mexico city. what do we know about what mexico has conceded in getting

this one-month delay? what is mexico going to do to convince donald trump that it was worth delaying the tariffs by one month? >> yes, scarlet, so this has been a really interesting day in mexico city because when we were preparing for the press conference you just showed a clip of where plans -- where the president talks about how the tariffs were put on hold for a month, we were actually expecting that she was going to announce retaliatory tariffs for the u.s. she has said that earlier over the weekend that she had instructed the economy minister to start -- to get started on that plan and that she was going to announce it, but just about one hour before that press conference, she was able to speak directly with donald trump, the u.s. president, so it is really interesting, the outcome. it seems that the two leaders have agreed to kick off some working groups, three to be more

specific. one on trade, one on security, and one on migration and that will address trump's main concerns with mexico. scarlet: absolutely. can you give us a little sense of whether or how much back channeling through the weekend there was leading up to the conversation that took place today? we know the conversation took place over the phone but i imagine there was a lot of prep that went into that over the weekend. >> yes. something that we have been discussing that was very interesting about how claudia sheinbaum has been -- excuse me. >> ok. let's give her a moment to catch her breath. clearly a very busy day for her and her team there. let's continue this conversation and talk a little bit more about what the drama means for the u.s. and global economy. let's bring in michael smart, managing director at rock creek global advisors where he focuses

on international trade, sanctions, supply chain, an investment policy and he served as director for international trade and investment for the national security council at the white house. michael, very good to speak with you. i guess first off, are you surprised that the tariffs are supposed to go into effect on tuesday and within an hour or two of the u.s. market open for trading, it has now been delayed by one month? >> i think with president trump, i was careful of making any productions about how this will ultimately play out. the news of an agreement with mexico is very welcome for manufacturers, workers, consumers, farmers in the united states and in mexico and we will just have to wait to see whether there will be some similar agreement reached with canada and potentially china before the tariffs are due to take effect later tonight. >> i thought it was interesting what caroline said about how they all thought that claudia sheinbaum was going to announce

retaliatory tariffs in her news conference today. what is your take here on the quantity and quality of the retaliatory tariffs that mexico has been considering and canada has sketched out and floated? >> i think the economic effects on the united states would be severe and they stem both from the u.s. tariffs themselves as well as the retaliatory actions by canada and mexico and of course, the three sectors most in the crosshairs, the united states, would be agriculture, energy, and autos, and in all cases, prices would go up, consumers would pay more including for fruits and vegetables, farmers would lose markets. consumers would pay more for automobiles and potentially, you would have even some shutdown of the u.s. manufacturing that relies so heavily on the supply chains that have been developed over decades thanks to nafta and now the usmca agreement. so very hard hit in canada and

mexico if those tariffs were imposed but certainly pain for the united states focused on the industries i mentioned. >> a lot of people were surprised that perhaps president trump took aim at canada and mexico first given that they recently or maybe not so recently, a years ago, did renegotiate nafta into the usmca . presumably, there were other countries that were bigger targets. if you are looking at what is happening with mexico and canada, what is the takeaway for you? >> the takeaway is that even if tariffs are avoided -- avoided in this instance, every country is at risk of coercive terror threats and of course, foreign governments will try to make offerings to forestall those tariffs but equally, they will work very aggressively to reduce their exposure to the united states by enhancing their relationships with other countries. that is already happening. the european union was south america, the southeast asian countries, updating their

agreement with china, so in the form of actual agreements or simply informal business dealings, the result of this is a diversification away from the united states that is going to make things more difficult for u.s. headquartered firms. >> what kind of role does this leave doesn't -- the wto? do they have a role to play here? >> they do but they are under enormous stress. when the world's largest economy seems to disregard the rules that were agreed and have been in place and provide certainty and global trade and investment relations, those institutions, those rules are weekend. the wto is not going anywhere. there are a lot of other countries deeply committed to preserving it and abiding by those rules but i think you will also inevitably see countries

forming more bilateral and regional blocks again as a way to insulate themselves from economic coercion, no matter what the source might be. >> and mentioned you used to work at the white house and you were there during the end of the bush years and the start of the obama years and he worked on capitol hill as well. trade is normally the purview of congress but the president does get a lot of leeway when it comes to matters of national security so you know, the way that this instance of trade tariffs is being handled invites a lot of question. do you foresee legal challenges to the executive orders on tariffs? >> i foresee legal challenges but i don't see congress intervening. as you say, it is congress that has constitutional responsibility over trade and the orders trump signed on saturday represent the most significant overreach on trade that we have ever seen. and yet i don't think that trump

backed away because of concern the congress might intervene. congress was mostly silent in the aftermath. in some cases, cheering on president trump. will importers mount legal challenges if these imports go into effect? i think they will. i think they will. and you know, the outcome is uncertain but i think that litigation could take years to play out. >> michael smart, thank you so much. managing director at rock creek global advisors. coming up on bloomberg markets, tyson foods earnings did come out today. chicken say -- shares sending those sales higher. we have got more on that, next. this is bloomberg. ♪

>> >> this is bloomberg markets.

i am scarlet fu. we are watching tyson foods. the shares are higher after the company's quarterly earnings beat even the highest analyst estimate and the result underscores a recovery in the u.s. chicken industry while the food producer seeks to manage the potential headwinds of tariffs between the u.s. and mexico. joining us now for more is jennifer, senior analyst at bloomberg intelligence. jennifer joins us now from our princeton bureau. jennifer, you know, of course, we have to start with tariffs because this is something that came up during the earnings call and tyson made clear that it is prepared for tariffs. did we get any details on how exactly or does the upgraded guidance basically gave investors the comfort to give the company the benefit of the doubt? >> well, it is a really good question and a topical one given everything that is happening. if you look at tysons

performance, last year, they had just over $5 billion in sales directly related to exports which is under 1% of their total sales so that alone is not a huge part of their operation but what is most interesting and what investors were trying to get at on the call is that for margins in a meat processing company to be as good as possible, you have to do something every part of the animal and exporting or using parts of the animal the u.s. consumer does not want is an important part of the overall margin profile for each of the businesses tyson has so i think that is the area where there might be a little bit of concern. quite interesting. how much are they willing to divulge all of this or is this still a work in progress? >> i think it is a work in progress especially because events continue to unfold, right? but one of the things that has happened is tyson has worked hard to integrate its supply chain especially with mexico in hog operations so finding different avenues to make sure

that they have a place to sell products if mexican imports or tariffs come in issue is something that is still pretty fluid and we don't really know who those alternative partners might be. >> when you're talking about mexico for tyson, it is the pork products. >> there is a little bit of chicken as well but it's largely the pork industry. >> i bring that up because for the quarter that ended, stronger chicken profits helped the company outperform estimates and that offset losses in beef so when it comes to the different product lines, the poultry product line looks pretty good but i know you have some concerns here about parts of the poultry line, particularly may be oversupply, not now, but down the road. >> is true. the overall production of chicken in the united states on aggregate is scheduled to go up this year according to the usda. there is strong demand for chicken but there is a risk we

enter into an oversupply situation where people chase that demand and we end up with too many chickens. tyson has done a very good job of kind of streamlining their operations to become a lot more efficient and that is part of what really drove the beat today. that longer-term supply and demand dynamic is something to keep close watch on. >> one thing you also notice is the highest margin business over at tyson, and here, we are talking about prepared foods, is seeing lower sales and volume. i wonder how much of that is tied to inflation and people adjusting their pre-year because prepared foods always cost more than the actual ingredients. >> it is an excellent point. consumers remain fairly conservative with regards to their overall spending on food. we have not seen a bounce back to brands as notable as people might have expected. private label is still a big alternative for a lot of people so to see the highest margin segment for tyson see sales contract versus last year and margin contract versus last year

just means we will be watching very closely for the balance of this fiscal year on how they can turn that around and try to grow shares again. >> point out avian flu as another source of potential uncertainty. what is your confidence tyson has a plan to deal with that? >> i think they have a good plan to deal with it. thankfully for tyson at the moment, the large number of outbreaks that we are seeing in avian flu are impacting egg layers, not actual chickens for consumption. right now, the risk is moderately low for avian flu but that could change very quickly because the disease does spread pretty easily. collects great context. jennifer, appreciate you joining us today. jennifer with bloomberg intelligence in princeton. coming up on bloomberg markets, of course, this is the story of the day. the threat of a trade war is chilling the outlook on u.s. relations in the global economy. why is that? we want to break down the anti-tariff thesis. that is next.

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context changes eg. >> we have breaking news here. president trump signed an executive order to create a sovereign wealth fund. he made the comments to reporters at the white house and of course, we will keep you posted on this development. he is of course going to be speaking shortly and when those comments cross, we will bring them to you. in the meantime, president is making tariffs a central theme of his first few days in office. he says trade deficits are his main motivation for the levees but the u.s. lowered trade deficits with both canada and mexico compared to a lot of countries and it's one of the many reasons these tariff threats don't necessarily make a lot of sense. so let's bring in bloomberg opinion columnists john authers and we will get to that and that chart in a moment but just your initial reaction to this idea that the u.s. might have a sovereign wealth fund under this new executive order?

what purpose might that serve? >> my initial reaction is i will have to write 1000 words about it. >> reasonable. quite obviously, there's plenty of other examples of countries who have had a lot of success with sovereign wealth funds. generally, the people who do that other countries that have huge capital account surpluses and because of tariffs, the reason people are talking about tariffs is of course because the u.s. doesn't have one of those so it makes little sense at that level to me and a lot depends on exactly how it is going to be run. if we had somebody who could run a fund as well as that fund has been run, the administration can find quickly, i guess it would be a good idea. >> that makes a lot of sense. it comes back to those trade deficits and of course the overall financing issues that the u.s. has overall and donald

trump wants to change that. when it comes to tariffs, and i know that you have a column that says are stupid is the trade war? let me count the ways. we know where you stand on this. what is this in particular that has you worked up that trump is targeting canada and mexico as opposed to some other countries where perhaps you could argue it has more ground? >> the arguments are making about why this was a particularly dumb maneuver to start is not because i am a free trader and disagree with protectionism or that kind of thing. we had this argument about globalization. he has plainly got a mandate to rollback globalization. that is what the election was about. the point i wanted to make is that this is an incredibly dumb place to start because if you are talking about mexico and canada, they have by far the most integrated supply chains because of course they do. they have immensely long land borders and they are the only

countries that have land borders with the states so if you want the countries where you would most maximize the risk of raising prices like we saw during the pandemic, it would be these two. then you have to look at the fact that both of them actually do buy a lot of stuff from the states. if anybody can hurt the states in retaliation, again, it these two. it would be dreadful for all concerned but they can inflict more pain on the states than most other people. then you have to look at the fact that fentanyl, which is the alleged reason why we are doing this, i think i said in the piece if you had to make a list of 100 policies that might help deal with fentanyl which is obviously a terrible problem for the u.s., i don't think slapping 25% tariffs on canada would make the top 100. it has not got anything to do with that particular problem. >> canada and fentanyl seems less like a directly -- link

than mexico and fentanyl. >> yes. if we come to mexico, there is this fascinating deal which makes it look as though all of this really is a negotiating policy, that this wasn't about trade deficits, it's about trying to do something about the border, which again, no question at all, trump has a mandate to do something very significant about the border and that is obviously what the people voted for. moving 10,000 mexican national guards to the border, these are not 10,000 new recruits. this is a minor redeployment towards a border that is 2000 miles long. it is an incredibly minor concession to have won, having made such a big and dangerous threat and it still strikes me as not a sensible way to behave. >> that is a concession claudia sheinbaum actually made to president trump in their short conversation on delaying the tariffs by one month and it is something we will be continuing to watch for.

thank you so much. rubric opinion columnists john authers there. we are keeping an eye on these headlines. president trump talking about the need to create a u.s. sovereign wealth fund. i am scarlet fu and that does it for this hour of bloomberg markets. balance of power is up next. ♪

>> from the world of politics of the world of business, this is balance of power.

live from washington, d.c. >> what about canada? welcome to the fastest show in politics as president trump prepares for a call with justin trudeau just two hours from now on what is the eve of 25% tariffs taking effect. i am joe mathieu alongside kailey leinz in washington. welcome to the monday edition of balance of power. this follows a call with mexico's president that resulted in a month long delay, if you believe all of this, on tariffs. kailey: mexico, in exchange for having tariffs delayed for a month, has agreed to send 10,000 groups to crack down on the flow of fentanyl and migrants of course is the root of what donald trump says these tariffs were being threatened for. canada still an open question as is china. 10% levees on all chinese goods set to go into effect at midnight tonight barring some kind of