♪ >> doesn't look to me like wall street has priced in these tariffs going into effect on a sustained basis. >> i feel like the risks are much higher than people appreciate. >> the biggest theme is risk off. >> we are at the beginning of a multiyear move out of the u.s. >> we expect nothing but we plan for everything. announcer: this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning, for our audience worldwide, "bloomberg surveillance" starts right now.

coming into tuesday feeling like it's already friday. equity features on the s&p 500 negative, we are off by two tens of 1% on the s&p. we're down by 0.1%. what is the price to pay for all of this uncertainty? the u.k. removing its sales growth target. gm put out guidance only last week, and outlook that very few believed in. the bank of canada, basically providing no guidance whatsoever and the fed officials struggle to even discuss the tariff story because there is a sense that for some of these officials the policymakers, there is a sense of paralysis. lisa: because they don't understand exactly the ramifications and the policies. the whipsaw action that we saw yesterday of the threat of it going into effect, then being

removed, with both canada and mexico because of certain provisions already going into effect. what the benchmark is with success and how exactly we get there. jonathan: threats on columbia, they back off and provide concessions. threats on panama, they back off and provide concessions. canada and mexico, they back off and provide concessions. is it different when it comes to china and europe? peter tchir put this out, we are only just beginning with china and europe, maybe columbia mexico set the precedent. he says i'm increasingly dubious on that front. lisa: it matters exactly how this president is going about trying to inflict tariffs and why mexico and canada were first. because fentanyl and border security was the easier way to try to go for emergency powers and go after these concessions. it also us to get some quick

wins before the harder, more entrenched battles begin. the reason people are having a hard time with outlooks is how do you even game this out when people still don't understand whether this is over, whether march 4 is going to be yet another kind of paralysis moment where they are kicking down the road to another month. people don't have an understanding of what the framework is that trump is even negotiating with. jonathan: how much data and earnings in fed speak would change anything for you? today we get jolts, some factory goods orders as well. some fed speak. after the market you get out of bed earnings. does any of this make a difference? lisa: fed speak i don't think makes a difference right now unless they're willing to raise rates. a lot of people say that is fine including the president so you can put the political discussion on the back burner.

alphabet earnings i think are going to be very interesting. they are coming under attack of china although it is a little of a false pretense because they have been operational in china since 2010. when you listen to some of these earnings, how are they trying to immunize themselves from trade wars, moving production back you're not, are they pulling back on some of their investments? is this leading to a lack of business confidence? and the economy still matters. it matters whether the economy is growing or sinking and that sets the backdrop for just how much this president can do. jonathan: equity features down slightly, just building on yesterday's losses. only recovered so much in yesterday's session. equity futures down by 1/10 of 1%. china hits back, kind of. and frances donald of rbc on the economic impacts of a trade war. we begin with stocks steady following china's restraining

response to u.s. tariffs. joining us from washington, d.c. is anne-marie. what a 24 hours to kick off this week. annmarie: absolutely. when it comes to canada and mexico, that trade war is now really just trade tension. you are seeing donald trump put on pause for 30 days. he only just talked about those tariffs over the weekend that planned to go into place after midnight. they were clawed back after those phone calls with both country leaders. both saying they are going to do more to protect the borders and stem the flow of fentanyl. we should note some of that was already announced especially when it came to canada and having a more robust approach on the border in december but clearly there was a conversation that they are going to look more into this and that was enough to appease the president to clawback these tariffs and wait 30 days. now there is a new deadline of early march. china, we are seeing the start of a trade war. yes china's response was very calibrated, but it was going

after specifics that i'm sure we will get attention. tings like energy, he wants to be an energy mass producer and exporter. also i would note export controls on critical minerals that are used in defense space, that are used in the manufacturing space when it comes to clean energy materials, things like tungsten. they were calibrated but certainly to get his attention. china did say those will not go into effect until next week, and we did hear from the president yesterday and he said he was planning to talk to china in the next 24 hours at his press secretary says yes, he plans to speak to fusion paying. that is the next phone call to watch. jonathan: the question yesterday, how long will all of the last? the question this morning, who is next, is it europe, and what they need to confront? annmarie: with europe it is going to be incredibly challenging. so far reaching the past 24 hours of china, just look at

something like crude oil or lng. if china is putting a tariff on that potentially some of those cargo will not go to china, but europe can take them. but china might have to dump some of those more materials of things they are facing tariffs on. so europe really is going to be potentially the dumping ground and the middle of this trade war and they are going to get caught in the crosshairs. and yet donald trump is still saying europe will be next. we don't have a timeline yet but it is certainly on the horizon. he complained yet again, a long list of grievances especially when it comes to things like auto manufacturing. it really bothers the president. angela merkel talked about this in her biography that you look around germany, a lot of bmw. new york city, not a lot of ford. jonathan: can we save that for next monday, can we do the european story then? lisa: we will see what happens. there is a 10% tariff on all

u.s. cars going into europe and a 2.5% tariff that the u.s. slaps on some bmw and mercedes. jonathan: and even bigger one on the trucks coming into the u.s. lisa: it's a little bit difficult to square and i'm sure we will be discussing ad nausea and. jonathan: warning not to get distracted by the noise, we need to see how this plays out. the key is to remain focused on economic fundamentals and sum total of policy changes which are also likely to be positive. steve, i'm pleased you put in that last line. the sum total of policy changes. can you talk about the trade effort without talking about the tax effort at a still to come? >> know, and i think the timing of hamid karzai. -- of them is positive. in other words we are clearly engaging in trade negotiation

deals. i would not call it a trade war at this point. clearly the president is focused on the western hemisphere and getting concessions and building up to this main event negotiation with china. but i would rather get that out of the way early in the administration. let the market go through this digestion and then look forward to tax cuts, deregulation. i think that is going to set us up for a much better second-half strictly from a market perspective. lisa: this is a really important point, saying that the uncertainty from yesterday has remained and you can see that in the equity price which ended the day down despite some of the reversal of some of the tariffs. if you call it a trade negotiation dance that could end by midyear, what is the statute of limitations, how long could this back-and-forth go before suddenly it becomes a fundamental headwind to your positive view? >> probably not supposed to say

this when you are a talking head on television, but nobody knows. clearly the united states is the economic power of the world and it is the buyer of the world and this president recognizes that. any intends to use that leverage in a way that we really haven't had a president in any of our investing lifetimes use that tool. he's threatening to be less of a buyer unless he can get concessions on a range of things from national security to economic relationships to access to certain materials. and if anybody can say this is exactly how it is going to play out, you are making it up. what i do think is clear about this president this time around, nothing he is doing is random. he had for years to sit and stew and think what would he do if he had the reins of power. there's no apparent look like he just wants to inflict tariffs for the sake of it.

it looks as though he has very specific policy outcomes and to overreact to the dance i think is going to just hurt portfolios. as much as we want to know the answer, we've got to go through the dance. lisa: is it overreacting to the dance to sell gm shares? >> i'm not going to go into individual funds, but more broadly the way you have to think about this is the you have a business that is growing, earnings that you think are high quality? do you want to focus on companies who maybe had a little bit less tariff risks if you're thinking about a short-term perspective, fine, do that. if you think the outcome of the tariffs is going to be a world that is maybe a little bit more friendly to u.s. automakers or you are going to have a more fair playing field, you should look for weaknesses and opportunities. it depends on the timeframe. what i can tell you is a longer-term investor, when we

see dislocations around things like health care stocks freaking out about rfk or stocks overreacting to tariff news or even some of the asteria last week around ai, we certainly start to look at those areas and say this is an opportunity to buy the discount. and i expect we will make some of those moves. jonathan: you were very measured about it last monday. >> we've got to stop meeting like this. >> i will come back on next monday. let's hope they wait for that. do you see a policy mix that attracts capital or pushes it away? we had a guest on yesterday, making the argument that he sees enough policy chaos here that pushes capital away from the united states, doesn't draw it in. what is the biggest push against that call? >> lease i think hit this perfectly a second ago. everyone is in a little bit of wait and see mode.

the market is in wait and see mode. what did we muster yesterday, 1.5% down at the most? we've killed ai and started a trade war still above 6000. everybody is actually doing a pretty good job of taking a deep breath. i expect in the short run businesses are going to want to be cautious. the investment decisions may be a little cautious. i do think however that if at the end of this the president is achieving some of his policy goals, if he uses tariffs to push europe to spend a little bit more on defense, maybe to end the conflict in ukraine, maybe be a little bit fairer on certain trade elements if you secure the border or have less fentanyl coming into the country, i think on the other side of that especially with the regulation you're going to create a more favorable investment environment.

there's going to be negotiations on policy, you're going to get an environment that is attractive for investment and as an investor in public markets, we need to look for those opportunities where you get prices that become discounted as you go in through that adjustment process. jonathan: what do you like right now, and to your point, we have been through a lot but we have done a lot. the s&p 500 still around. have those opportunities opened up, or do you still wait? >> i think you still wait. it is a 3% pullback at this point. we would look for maybe a little more weakness in the markets but i think we would likely be buyers of that. what we seen from a stock market perspective each of the last two mondays is a quality trade. again, like it has been in the last couple of instances, it is

a barbell trade. it is good quality growth companies generating their own earnings growth, their own story. but it's also some of the traditional defenses. look at the last couple of mondays, things like consumer staples, health care. things that are less impacted by some of the trade noise that are good, quality, stable earners. and let's not forget that behind all this, earnings are going 11%, one of the best quarters we had in the last three years. i think it is a stock by stock game but it is the traditional defenses and also some of these growth offensives. jonathan: appreciate it, good to see you. steve with the latest. quite a few mondays that we seen. credit the bank of america at goldman sachs, who basically said this would be short-lived. cooler heads so far have prevailed. if you really thought we were

going to get 25% tariff on canada and mexico, the s&p is not down 2%. gm is not down 3%, more like 30. lisa: it seems as though the people with the hotter heads are in the currency market and trading quick. the people in the stock market are looking at the fundamentals and saying it is not going to move the needle that much. you mentioned diageo and it was the right call to mention that. how many more of those do you hear? does that begin to actually show a toll if we don't see more certainty in the next weeks and months? jonathan: how can they offer any outlook into sales of the u.s. when half of the sales are coming from mexico and canada facing the prospect of 25% tariff. the range that we saw in foreign-exchange just yesterday, 3% to the upside and down 2% plus to the downside. 5% swings on dollar max is kind of unreal.

>> just want to point this out, the swings and sentiment also going further. did you see canadians booing the u.s. at the hockey game? there is this definite visceral reaction. does that go away? or do these entrenched hurt feelings really become pervasive between our neighbor and us? jonathan: i hope that goes away. here is uehara. yahaira: china is retaliating against doldrums tariffs. beijing imposed a 15% tariff on less than $5 billion of u.s. energy imports and a 10% fee on american oil and agricultural equipment. the chinese tariffs are set to kick in february 10, possibly leaving room for negotiation. president trump signed an executive order to create a sovereign wealth fund for the u.s. the president says treasury secretary scott bessent and howard lutnick will spearhead the effort. the action calls for them to

submit a plan within 90 days of details on auditing, investment strategies and governments. and let's take a look at palantir shares, up nearly 20% in the premarket. the company reporting a 36% jump in fourth-quarter revenue and forecasting four-year growth that beat analyst estimates. a tripping the results to untamed organic growth in demand for its ai software. that is your bloomberg brief. jonathan: if there is a phrase i never want to use as a ceo, it is that one. untamed organic growth. that stock was up more than 300% in 24. lisa: the superlatives that ai lends itself to. we heard elon musk using some of the same. it speaks to the moment. jonathan: up next, china hits back. >> we will be speaking to china probably over the next 24 hours. china is involved with the panama canal. they won't be for long and that

is the way it has to be. if we can make a deal with china than the tariffs will be very substantial. jonathan: live from new york city this morning, good morning. ♪

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if we don't keep willing and keep doing well, we will be the pot of gold and then tariffs won't be so good for us. jonathan: china retaliating against the trump tariffs with levies on some u.s. goods. beijing imposing a 15% tariff on less than $5 billion of u.s. energy imports and a 10% fee on american crude and agriculture equipment. team coverage starts now. to the three of you, thank you for being with us. we are told europe is next. what is europe doing to prepare for that? >> listen, the tactic that europe has had for the last couple of months is to say very little, nothing negative about donald trump, to take a very optimistic approach and hope for the best and really hope that these tariffs would be worked out ahead of time and potentially never come into effect.

what we seen in the last 24 to 48 hours may to some degree reassure europeans and on the other hand is saying that trump does mean business. when he talks about 10% tariffs, that is a very substantial part of the economy here. it could be 1% of growth off of gdp, but again what is also interesting is that the e.u. does not work like a country like mexico or canada. what are the things he is going to want to extract out of the european nations? probably it is going to be more spending on lng, fossil fuels, that sort of thing. that is fairly easy for the europeans because they are already in need of that and potentially these chinese tariffs could help get them at a better price and also it is the question of nato spending. 5% is what he wants to see. all of the europeans said they want to spend more. if they are willing to hit 5% is potentially a different story. what we are seeing is that for trump and for the world this may

not be distinct trade and free sample antitrust issues. all of this stuff could be bundled up and that would really concern the europeans. lisa: over in canada they responded with some measures including a fentanyl csar and a joint strike force. is that enough to kick the can down the march 4 deadline to beyond and really gets uncertain of trade agreement in place? >> i don't think there's a true menace amount of optimism yet that this is anything like a permanent solution. as you said there are border security measures, some of which the canadian government had already announced and then they added a few yesterday like the fentanyl czar, but trump was clear that it is 30 days to work at an economic deal with canada and nobody's quite sure yet what that means. the u.s. does have a trade deficit with canada. trump has mentioned that many

times and so obviously there will be further negotiations and in 30 days, who knows, but nobody thinks this is much more than a temporary reprieve up here. lisa: the temporary reprieve is 10,000 soldiers being sent to the u.s. border among the different provisions that mexico has put on the table. what more is necessary, do we have a sense of that? >> if you take at face value that what trump wants is border security and production of fentanyl across the border, the other important thing that came out the call between sheinbaum and president trump yesterday was this idea of creating these working groups of cabinet level officials. secretary of state in the u.s., they are supposed to be meeting regularly to work through these issues and try to find solutions. will they solve migration and fentanyl in 30 days, probably

not. but if they can get enough momentum going, president sheinbaum is hoping that that will be enough to convince president trump to move on from this. jonathan: we've got another deadline. thank you, appreciate it. the dollar-mex is bag sickly -- basically back to where it was on friday. lisa: right now people are saying at least the temperature has been lowered. jonathan: up next we will raise the temperature and talk about big tech with dan ives from wedbush. that conversation up next. ♪ ♪

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jonathan: a little sense of calm, at least for now. unchanged on the nasdaq. a lot of fed speak in the past 24 hours. "there is no urgency for making additional adjustments." profitable stick also saying depending on what the data is, we are waiting a while. this fed is not in a rush. check out the bond market. interesting moves yesterday. not so much on the front end of the curve, but at the longer end where yields were lower. off the back of the terror

threat they might have -- tariff that they might have been focused on the inflationary outcome. for what appears to be the first time since trump's election win, the market is looking beyond tariffs and beginning to contemplate the impact on global growth. that is a change. lisa: when you have every former fed official saying it has in the past been disinflationary and a growth shock. the former state was fed president. 10-year yields did not go down as much as people expected given equities were selling off. part to interpret what the move really means at a time when there was a lot of volatility yesterday. jonathan: and in foreign-exchange. a snapshot of things currently. i want to focus on euro-dollar. euros negative by .2%. europe has escaped nothing so far. the prospect of tariffs lingers.

we see a move towards parity over the next few months, weak macro. it is not just about the tariffs. it is the outlook for the continent. lisa: when you saw the inflation coming harder than expected. this is really inconvenient to lower rates. europe is in a tough spot. that was the best performer last month. the reason why was because people figured the bar was so low any news is good news, including we had not heard about tariffs. we see the reversal of that now. jonathan: of 8% in january. 13.23 right now -- 103.23 right now. china imposing a 50% tariff -- 15% tariff. the measure set to kick in on february 10. this is not a punch.

this is a little pinch. lisa: i love they are investigating google even though google has not operated in the country since 2010. they are also going after the parent company of a couple of retail companies. the big issue is the key mineral supply chain. potential export restrictions. this is saying we can do this. we can have a significant measure. this is a negotiation. they are supposed to talk in the next 24 hours. let see what they have to say. jonathan: china is somehow different than what we have seen from mexico and canada in the last 24 hours? lisa: there's bipartisan support for increasing some of the distance between china and the u.s. there are multifaceted aspects of this. when it comes to fentanyl, national security, there are a lot of questions with china. it is a very different discussion with mexico and canada. it is getting the ball rolling in a multistage process where it might be different for mexico and canada.

jonathan: which bucket is europe in? a bit of a wedge between the eu and the united kingdom. trump reiterated a warning to the eu they were -- would definitely happen and the u.k. would probably be spared for now. lisa: ok, maybe. do they have to choose between the u.s. and the european union? they have an advantage of brexit. they can say we are independent, not part of the continent so don't look at us. by the way, the u.s. has a trade surplus with the united kingdom. very different scenario. that said, a lot of things could change. they are facing a lot of negative growth shocks potentially at a time where they have to put some sort of olive branch out to the european union. it becomes a difficult moment for them. jonathan: there is a lesson from my home country. how badly they managed the pr when they came into power. i'm talking about the labour

government talking down the economy, talking down public finances, talking down pretty much everything across that nation and then saying a few much later we are progrowth and want to do these good things. if you're a business or consumer, it was a lesson for the united states as well. confidence is skyhigh for this administration to deliver a progrowth platform. we have negative growth stuff upfront. it is hard to put the toothpaste back in the tube. don't sacrifice the confidence. we want to see that translate into investment decisions and hiring decisions. you are denting some of that confidence with the action of the past few weeks. there are consequences. lisa: that is why earnings calls will be that much more interesting. how much do people withdraw guidance? how much do they postpone investments? how much do people say we can't make big hiring plans because we don't have a sense of what the

framework looks like? that will tell whether there is a lack of confidence. jonathan: we get earnings from alphabet after the closing bell. expected to deliver growth. the search business very much in the spotlight. we heard from microsoft and meta. we should have a decent read from alphabet. lisa: that was the sticking point for microsoft. they didn't have capacity to meet demand. does google? are they growing share when they are number three based on aws? curious what they say about china. we don't work there so it doesn't matter. jonathan: what are they talking about? auto industry. dan ives not overly concerned about tariffs. "if these tariffs stay in place for 30 to 60 days, we see minimal impact to gm and ford." dan, good morning. 30 days.

if they last 30 days, is it like minimal damage? does that hold the companies back from making big decisions? dan: right now in terms of gm and ford it is contained in terms of the impact. that's probably the one that is least impacted, especially given their supply chain. our view is the bark is worse than the bite, whether it is on the auto side and on the china side with chips. you don't sell the stocks because of it. you talk about where is the spending? another robust number from google tonight. palantir and others. tariffs are not impacting that in our view. lisa: one reason why urinalysis is special is not just because you have been right about a lot of it, but you travel a lot. -- one reason why your analysis is special.

any sort of shift in the optimism because of the uncertainty? dan: i think less in terms of mexico, canada. from a china tariff perspective combined with deepseek. there's mary moore -- may more desk if you go back to the last week, dell double down $80 billion. pc massive capex -- you see massive capex. the worry is can anything spoil the party? the lighting that spoils the party is a rationing off in -- ratcheting up in u.s.-china tensions. that is lazy pressure on nvidia, on overall tech. lisa: gm was supposed to be immune because they moved their operations and business out of china largely to mexico. now they are in the crosshairs.

i wonder if other tech companies are moving operations out of china more aggressively to him unite themselves from this type of shock. -- immunize themselves from this type of shock. dan: the mexico situation, i believe, they navigated that achingly well. gm continues to be a stop we are bullish on. on the china side, if apple decided to move 10% of our supply chain out of china, that would basically take about two years and something that could cost $30 billion to $40 billion. the point is it's easier said than done. that is the conundrum. the reality is, when you look at apple and tesla -- that is why cook and musk are 90% politicians and 10% ceos. jonathan: we talked about the

benefit of the closeness, the halo effect over tesla. foreign nations are seeing this as a potential pressure point. we saw that from a canadian province in the last one for our study to cancel a starlink contract. is that a benefit? dan: there are definitely offsets. the gold at the end of the rainbow is autonomous. we think that is worth $1 trillion in terms of that to the tesla story. you get a federal framework and this is key in terms of the trump administration. that is the path for growth in terms of generational growth for tesla. musk is not going to ultimately peel back. he will continue to go in this direction. there are negatives, no doubt. for positives, it was a bet for the ages on trump and continues to be that. it will be a historical bet. jonathan: he wants to sell the rate the national champions of corporate america, and so he

should. let's be clear about that. i'm asking whether countries begin to punish those national champions. we saw that from europe on tech. tesla is a rare one. dan: tesla and apple you put on a different purge. -- perch. with google, who cares? the only two tech companies, tesla and apple. that is why that is the tight rope. for musk, when it come down to tiktok, we think musk or allison are the front runners. for elon, it is navigating this whole thing by continuing to be more interest in the beltway. it's the best thing to happen to tesla shareholders. lisa: last month tesla sales fell 63% in france. that is because in large part

people were taking a look at the political backdrop and saying this is not our gig. i wonder if there is some reputational damage being done in the longer term where people are looking at what's going on, some of the tactics and saying let's look elsewhere. are you seeing that? dan: it's contained in terms of the demand issues we have seen from a negative perspective. the most important thing is when you think about autonomous, think about robotics, that is tesla. 90% of the story today is about that. there can be some demand issues. what the street is focused on -- you saw last week. the bears scratching their heads. why is the stock not going down? the street is focused on autonomous and robotics. if you look where they are with the trump administration, musk continues to play chess, others playing checkers relative to the

situation. lisa: one big argument is the u.s.-china trade war heats up. there's a question about whether it pushes china more to develop a parallel tech sphere to the u.s. that becomes dominant and more amenable to a number of countries around the world. how realistic is that? does that become more of a possibility? dan: it is not realistic because of nvidia. high scale gp use in terms of true buildouts, you need nvidia. deepseek was kind of the white knuckle moment. does this change the narrative? more has come out about that of people realized maybe the bark was worse than the bite. you will have a decoupling in terms of what's happening with the the u.s. and china. that is why it's important when it comes to chips that this could be the decoupling but not get in the way of a generational

environment in terms of what we see with ai. jonathan: nvidia wants to run up. why hasn't the stock recovered? deepseek's maybe not what people thought it was in here we are still willing over. dan: there are a few reasons. like microsoft, apple, they sold better than feared numbers. there are worries in general about can they continue sustaining it? if any little thing happens, a flight in the light meant, the stock gets crushed -- a fly in the ointment, the stock is crushed. six month we look back at this as a golden buying opportunity, not the time whether something structurally wrong. dan: or we have found better vehicles to play the theme? palantir. dan: that is a -- if you look at

their quarter, they can print out that press release and put in the louvre and choose what they are doing in terms of palantir is one of the best place in ai. as is the second and third derivatives take hold to google and salesforce and others, is not just about the mag7. there are others that play into this. jonathan: next to the mona lisa, untamed ai demand. dan: right to the left. lisa: a qr code to an nft. jonathan: special vip tickets. good to see you. thank you. a lot to talk about in tech right now. dan ives. here is your bloomberg brief with yahaira jacquez. yahaira: president trump says the administration what's access to ukraine's critical minimal resources in return for helping to defend it against russia. ukraine has significant reserves of uranium, lithium and graphite which could be worth trillions

of dollars. president zelenskyy offered alleys access to the resources as part of his victory plan last year. ubs shares are falling in swiss trading is uncertainty over capital requirements overshadowed what were otherwise strong results. the bank reported a $770 million net profit in announced plans to buy back up to $3 billion of its own shares this year. ubs saying it's on track to complete the integration of credit suisse by next year. pepsico shares are falling in the premarket, down 2.3% even of the company posted a beat on earnings. investors are focusing on the beverage and snack giant's quarterly sales which spell short of expectations. jessica said the quaker recalled her performance in international markets remain affected by geopolitical tensions. jonathan: thank you. more in about 30 minutes time. up next, pricing tariff risk. >> i don't think this would

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jonathan: i'm prepared to be criticized. the last 24 hours, a master class in expectations management. threatening to put tariffs on mexico and canada, hasn't happened. 10% on china. people barely blinking. 10% tariffs on china is a story that we are saying good news, no tariffs on mexico and canada for a month. lisa: what actually is going to stick? what is the signal and the

noise? we have a firehose of announcements coming out from washington, d.c. jonathan: pricing tariff risk. >> i don't think this would necessarily be inflationary given the economy has a lot of momentum. i think the growth hit would be significant. we would notice it for sure. the point is to slap tariffs -- is not to slap tariffs on and so the economy down, is to get what he wants out of mexico, canada, china and others. jonathan: the u.s. dollar and canadian dollar under pressure after leaders reached a deal to delay tariffs one month. francis donald writing, "even a fraction of that size could filter into the canadian economy emilio, significantly and then persistently for many years." francis joins us now for more. maybe we have avoided the. maybe they happen in a month. i don't know. i would love to hear the price of the uncertainty. what is the price we have to pay? francis: even though this trait

shock we avoided would be the largest and 100 years for the north american economy, we have some things we know about tariffs and the threat of tariffs from the 2018-2019 experiences. one is the existence that they may occur has historically stalled business investment, household decisions, and creates uncertainty tax on the entirety of the economies as businesses lacked clarity. i would not be surprised to see a boss, a hit to business confidence in the u.s., canada and other countries, and this is distorting the q1 data on top of a period that we have a lot of trouble understanding the data from. lisa: some antigrowth measures were being floated and dealt with now by donald trump, and later the progrowth measures. are these hits to potential growth easily offset with tax

cuts and some other proposals? francis: we have not been able to make the math work on tariff revenue matching tax cut needs. what is critical is the sequence of these events. trade shocks, tariffs, they are stagflationary. they limit growth. they create information. -- inflation. pic tax cuts that come through, the regulation that is progrowth and pro-inflation. almost all the policies floated from washington to have inflationary element. markets will care less about that and the u.s. will be able to absorb more of that inflation as it comes with a side of growth. that is why you are seeing a lot more concerned about the inflationary elements of tariffs then you are the inflationary elements of corporate tax cuts. underlying the services, the real inflationary story and the one that should be concerning us most is the u.s. lacks workers, not jobs. is heading into a peri -- it is

heading into a period with real demographic challenges. we have the least amount of workers ever working in the united states right now. the most amount of retirees. if we see a changed immigration policy -- we are seeing some of that -- we will see more challenges to labor supply. that will be the most nefarious form of inflation as it pushes of wages but flows through the economy more broadly. there are different types of inflation and all these policies carry different variations of good and bad inflation. lisa: there is so much uncertainty and fed officials are saying little. have you seen enough to change your outlook for the year when it comes to growth, when it comes to inflation in the u.s.? francis: we were prepared to downgrade our u.s. growth forecast if we had seen 25% tariffs come through. those would have shocked u.s.

growth by a full percentage point in 2025 and lifted inflation by half. now there's not enough, even with the chinese tariffs, to make a change in the outlook. the u.s. rate strategists have a good line. the fed will be watchful, not reactive. the fed is filled with a lot of economists and economists on the street are going to be doing something similar to that. jonathan: how much has changed in the last three months? i was listening to comments from the chicago fed president austan goolsbee. he seemed out of sync from last year before trump got into power. we have to be careful with how fast to cut rates. what has changed for them? francis: we may see a sense of relief over the news from the past 24 hours. remember this massive trait shock -- i've got to be clear. this trait shock, 25% tariffs, would have brought the average import tariff or americans up to almost 11%. it currently sits at 3%.

it's a quadrupling of the trade pressure in the u.s. economy. it has been paused for one month. we have the april 1 america first trade policy negotiations. we have usmca being negotiated. we're hearing chatter about european tariffs and we have chinese tariffs that came on. that is still a massive economic shock. it would have to be reevaluated, especially if you are a central banker. if you're central banker, you are having to model growth down, inflation up. some central banks only have an inflation target. this central bank has a dual mandate and they go in the opposite direction. jonathan: a rock and a hard place or somewhere in between. up next, sarah hunt, sarah bianchi, sucharita kodali.

that's up next. ♪

>> it is a short-lived, and then we can see more pressure on fiscal. >> this does reduce the growth shock and the upside earnings. >> the growth effects can be large. that would tend to dominate any one-time increase in price. >> it would be significant. >> something like an extra half point of inflation. if you go from 2.5% to 3%

inflation, that's a big difference for the fed. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz and and record turn -- annmarie hordern. jonathan: the day had looked like this. earnings later after the closing bell. those earnings from alphabet. economic data later this morning. jolts. job openings, the big want to watch. fed speak throughout the trading day. the tone you get from the fed speak now, and we heard from collins, goolsby, bostic, the tone is wait and see. lisa: what are they trying to communicate? what is the scenario analysis? we have no need to move. what is the big deal? this will be one of the biggest tests. do they lay out some sort of plan for how they will respond to specific incoming data one way or another? jonathan: if the data point is a

tariff, what do you do with that? chairman powell was waiting for the administration to articulate the policy changes. they did over the weekend and then they did not happen. they backed away. let's say tariffs happen and they meet on march 19 and they last for two or three weeks. they have to put up forecasts. they have to base that on tariffs that might not last that long. that is difficult to set policy for. lisa: that's why i'm looking at job openings and how tight the labor market is. to francis donald's point, we don't have people to fill the jobs. i'm curious about the outlook for different companies and earnings look like. are they retrenching some investment? is there a hit the confidence? are people saying we have a president who wants to move fast, he might break some things but it's a progrowth agenda and a lot of this is in the right direction? jonathan: i want them to succeed. i hope this goes well.

i want to see the confidence translate into economic activity. i am worried about whether that confidence gets damaged and you don't see the hiring decisions, don't see investment decisions which is why you listen to corporate earnings. are they making those calls or getting rid of guidance? look at the economic data. are they worried about positions open and closing them because they don't know what's going to happen in the year ahead? that is how uncertainty can weigh on activity. that is the price of all the uncertainty and there is a price, even if you don't deliver the tariffs. lisa: the uncertainty is greater. in the u.s., there is a risk that the dollar strength and how much that starts to weigh on corporate earnings when there is not that offset to the tax incentives and other progrowth agendas. jonathan: already going to see a policy mix here --tariff is only one part of the story.

there is trade, tax cuts and other initiatives. will we see a policy mix that attracts capital or pushes it away? they will tell you not much has changed on that front. we are looking for a policy mix that will attract capital. i think we are still just about there. i don't want to see people go somewhere else. lisa: there's a statute of limitations for how long the tit for tat can go on before people look for alternatives. that is the argument for gold and white central banks have been investing in gold. the real tell us if the dollar weakens and yields rise in the u.s., that is game over. that is why people want -- what people want to avoid. jonathan: there's no real hysteria right now. equities are still around 6000 on the s&p 500. coming up, catching up with sarah hunt as wall street tries to catch his breath. former debbie u.s. trade representative sarah bianchi as china hits back and george saravelos on a volatile market.

joining us now from washington, annmarie. the hardest question, what's next? annmarie: what comes next is europe. president trump made that clear in the oval office yesterday, complaining again about things like autos, food. he says the european union does not accept them. they do, but it is a very high tariff. when you look at the grievances trump has compared to the numbers, on average, when you look at goods going from the u.s. to europe, there's a 3.9% tariff. vice versa, on average 3.5%. not a huge gap. look at something like the auto sector. a pretty massive gap when you look at european union cars coming to the united states. about 10%. it's a little more than 2% going in the opposite direction. on average, a little more than

3% on those tariffs when it comes to things like farm products. when it comes to europe it looks like the president wants to level the score. we don't know yet what he plans on doing. we don't have a scope. look at his grievances and look at the numbers. that can lead you to what is coming next. he said when it comes to the european union, it's been an atrocity, and that is where he plans to take game. lisa: it matters a lot in terms of what deliverables europe can provide to alleviate some tensions. what provision will this president use to impose tariffs on europe? will it be the same provision of national security and fentanyl that he used for china and canada and mexico? annmarie: probably not when it comes to the european union. you can argue that a lot of things could be put under national security issues. we have seen that with this administration. we have seen that with the prior

administration. they look at a number of provisions in trump 1.0 to go after your. in the first iteration of trump, for a brief period there was 25% tariffs on luxury goods, on french wines, italian cheeses. you start to think it sort of makes sense why bernard arnault showed up to donald trump's inauguration. that's an individual who said he welcomed the new u.s. administration. when he said that he said he also had a caveat, we are looking forward to a 15% corporate tax rate. jonathan: some champagne to sell. you know that. annmarie, thank you. i will do that on behalf -- they have some great wine. lisa: it rhymes with lopis. jonathan: precisely. sarah hunt joins us now. if the camp of the globalized

economy back together again, how do we think about where best to allocate assets? what a question. sara, good morning. i want to talk about red wine. let's talk about this. the policy mix we will see from this administration, does it attract capital? sarah: that is the million-dollar question and something that has been talked about for the first week in a way it was talked about in trump 1.0. there was not argument about capital then. what we are going to see is what we have seen so far, which is going this way, going that way. there will be a zigzag and it's hard to pin those things down. i don't know with the answer is but the fear is it does have a negative effect on capital. jonathan: the consensus seems to be a progrowth administration that will attract capital. the s&p 500 is around 6000. there has been damage done to the automakers. how investable are certain industries with this cloud hanging over them? sarah: it's is a tough

industry anyway. you have seen on the semiconductor side stocks not really recovered even though the market seemed to recover some issues from the deepseek. there's a variety of things going on. people will start to have more enthusiasm or less either for different sectors or different areas. adding in the tariff thing absolutely puts a little bit more of a question mark on going too deep without recognizing there are possible issues coming. lisa: we started with steve from federated. it is tuesday morning. he did his typical, look. hold your horses, look at the fundamentals. there are good things out there. he's looking to buy on the dips in semiconductors or other spaces disrupted by tariffs. at what point do you agree with that? sarah: there have been areas where you have reasonably good value.

the discussion prior to a lot of this was the s&p equal weight would start to catch up to the s&p because it was so heavy in this top mag7 names. there are areas we can look at the valuations and go this is completely reasonable. look at things like some materials, some of the food stocks that have gotten crushed. a couple of different things we like in that area that have good dividend yields and reasonable valuations. that is not crazy given where the s&p is right now. there are areas where you can look at but it's definitely more of a nimbleness and you have to watch things closely. lisa: we have seen the nasdaq underperform considerably and tax stocks for more than a month -- tech stocks for more than a month. you have seen this broadening out. yesterday was instructive in terms of what stocks get most beaten up with trade tensions picking up. it was small caps. how much does the tariff talk threatened the broadening out a lot of people have been hoping

for? sarah: yes, you will get those reactions and then you have to see where the data comes in. can your discussion about the fed, to the extent they might want to do anything, this gives them cover for some period of time as they sort out what's going on. that will matter for the small caps enormously as well as interest rates. that is one of those vulnerabilities that it's an economically sensitive area. not that the rest of the market is economically sensitive, but it's more attuned to the u.s. economy. for those companies what matters is how things are going on the earnings end. lisa: there's a real important message coming from the bond market. we did not see a huge rally in the 10-year yield or a huge selloff from some of the inflationary impacts of potential tariffs. what was the message to you? was it just people paralyzed

because they had no idea had a game it out? sarah: the equity markets had a big reaction in the morning. there was some wait-and-see attitude about where this will really go by the end of the day. we know there is a possibility -- i'm having phone calls. there's a possibility for this not to be as harsh as it sounds at the get-go. on the bond market people were waiting. we are not sure which way this is going to go. if it had gone through to today and nothing changed yesterday, you would have seen a bigger reaction. because it was muted within the same day it changed, that gave people enough time to go it is ok and we can wait before making major decisions. jonathan: on the stress test we can take something away directionally from what happened. yields dropped back at the long end it did not rise. there is something to be said. we discussed it earlier. certain parts of the market and certain investors are talking about the growth risk associated with tariffs and not exclusively

the inflation risk. lisa: frances donald engine it would take a percent off growth in the u.s. if some tariffs that gone into effect. i think you are right. on the long end, the fact we saw a yield curve flattening is people have a clear sense of what kind of disinflationary hit it could have. jonathan: we talked about this repeatedly. by definition, the importer pays the tariff. how it gets distributed is what the goods are. you cannot replace ferrari. they came up with results. one in four vehicles sold in the united states. the stock is up by little more than 3%. lisa: some of us can't afford it. it would be nice to share it once in a while. let me have the keys. you can enjoy it. i can't. jonathan: not many people can afford one either. lisa: the perception is it's a wonderful car. i wonder if this will dent that

perception. jonathan: agreed. sarah hunt, as always. with an update on stories, here's a bloomberg brief. yahaira: president trump is holding talks today with israeli prime minister benjamin netanyahu, the first visit by a foreign leader to trump's white house. the talks will determine the next phase of israel's war against hamas. the leaders are respected to hold a joint press conference around 5:00 p.m. eastern. shares of diagio are falling. the maker of johnny walker is scrapping its sales target as it deals with sluggish growth and the possible tariff battle with the u.s. 45% of their u.s. sales are from products made in canada and mexico. most citi employees can work from home at least two days a week. the ceo is keeping the hybrid work schedule, saying the policy

could be a competitive advantage. that is your bloomberg brief. jonathan: thank you. that is one way of attracting talent. you go hybrid when the rest of the wall street is saying get back to work. lisa: is one way to attract. the other is to offer them rides in their ferraris. if you want to do that, go for it. jonathan: and the stock going up helps. compensation. it'll be the hiring that gets me. lisa: the stock is going up and you are getting paid well. that's a perk. do you want to work from home for a couple of days? jonathan: twice a week. put one of those plasma screens behind me. i might be doing it right now. you don't know. the future of technology. up next -- i hated working from home. tariffs for national security. >> he's taking extraordinary steps to tackle the number one

priority, addressing the flow of fentanyl and illegal immigration and he's willing to take the punch. jonathan: that conversation is up next. how much of a punch to begin from china? not much at all. this is bloomberg. ♪

jonathan: no drama this morning. stocks about unchanged on the s&p 500. yields up just a touch higher. an important -- you will get the jolts job openings. payrolls a few days away, coming up on friday. under surveillance, tariffs and national security. >> this is the first time a president has invoked tariffs on

the basis of national emergency. what you are seeing right now is the president's emphasis on border security. he ran on the border and inflation and he's taking a story mary steps to do something to tackle the number one priority, which is addressing the illicit flow of fentanyl in illegal immigration. he's willing to take the punch. jonathan: president donald trump imposing 10% tariffs on imports from china and calling on the communist party to do more to stop the flow of fentanyl across u.s. borders. china opting for a measured response and enacting a 15% tariffs on energy and points and targeting a handful of u.s. companies. annmarie joins us from washington with a special guest. annmarie: good morning. i'm joined by sarah bianchi. she is now head of international public policy at evercore. thank you so much. an incredible 24 hours when it comes to trump and tariffs. what happens next?

what are you watching? sarah: the canadian and mexican skirmishes are on pause for now while they continue negotiation for the 30 days. i assume they will continue to make progress. i don't expect across the board tariffs on mexico and canada. i do expect they will pivot into a broader conversation about trade and usmca. china. we are just getting underway on that one. i think beijing did need to look strong in responding back, although it's a measured response. that could go on for a while. there's a lot of complexity in that relationship. annmarie: jon called it a punch. almost like a warning -- called a pinch, not a punch. almost like a warning. is there a chance they could

walk these back as well, clawback the terrace when it comes to china? sarah: anything is possible but it's less likely. i expect we will see higher tariffs on china that are lasting. i expect the administration to go back to its additional 301 investigation. i expect there to be a lot to say on export controls. maybe he pulls back briefly but it's much more likely these stay in place. annmarie: mexico and canada are a bigger discussion about usmca. maybe trump wants to enact more. china, a long battle. europe. what happens with the european union? trump was listing out these grievances and told the world they will be next. sarah: trump always had a lot of issues with europe. i do expect -- trump uses tariffs for all sorts of reasons. leverage on other matters.

he uses it for retaliation, for reassuring. with europe, other issues he cares about. natural gas from the united states. participating in nato. he also has grievances about tariff rates. the tariffs on u.s. car exports are higher going into europe and when they come here. there's a lot left to discuss about steel. this will be multifaceted. i think it will take time. annmarie: what do you tell clients for this kind of environment we are dealing with? sarah: you have to watch each time what exact way trump is going forward this particular issue. this one was very clear. it was about immigration and fentanyl. he wanted concessions. that made us think it was easier to resolve. when he does things permanently

we don't tend to see across the board tariffs. we don't see him hitting the auto industry or the gas industry. on those kinds of ones, the offramp is a little easier. when it comes to things like strategic sectors for china and europe, you have to watch a bit more of a balanced negotiation that's ongoing between experts and potentially more lasting tariffs. annmarie: we are waiting for the head of ustr to be confirmed, jamieson greer. howdy think he's going to approach all of this? libby under 301 and his portfolio or will trump try to use 232? how will he enact this agenda? sarah: jamieson greer is a really good guy and a very knowledgeable -- is very knowledgeable about all the tools for trade. even though it's not the ustr's authority, in certain cases he

will argue for that. on china, i expect him to look back to the 301 that jump started and biden re-upped to reopen that conversation. 232, like lighthizer who jami eson worked for, he's knowledgeable about the tools and relationships and stakeholders who will come in on any particular issue. i think he will be a very helpful addition. annmarie: i call him mini lighthizer. robert lighthizer is not part of the administration but it's probably the next x thing. the individual trained under him. when it comes to china, jamieson greer said we should be decoupling. do you see that happening for the trump administration or does trump want to be more nuanced? he wants a deal out of beijing, either with autos or china putting a thumb on putin to

strike a deal in ukraine, or something like tiktok. sarah: very interesting. i think that we are going to see a lot of transactions between the chinese and trump around issues you mentioned. tiktok. whether or not we have some kind of grand bargain that addresses all the issues the united states has with china now, parti around export controls and complex technology, i think that's a little harder to see. i don't think trump or his people feel particularly reassured that china delivered on the phase one agreement last time. all evidence to the contrary. there's a lot of concerns around technology. where i see it, this decoupling in sensitive areas, maybe not across the board as jamieson might want and that leaves an opening for deals. there's a lot of complex things that have to go right.

i really do believe president trump is very interested in resolving this tiktok thing. he sent a message to a lot of people he's on the ball for that. annmarie: that is all the time we have this morning. thank you so much for that, sarah bianchi. she was in the room in the past under the biden administration. one thing that was clear, this is just the beginning. jonathan: annmarie, appreciate your time. up next, we catch up with sucharita kodali on the retail and supply-chain outlook as trade uncertainty lingers. ♪ ♪

so, what are you thinking? i'm thinking... (speaking to self) about our honeymoon. what about africa? safari? hot air balloon ride? swim with elephants? wait, can we afford a safari? great question. like everything, it takes a little planning. or, put the money towards a down-payment... ...on a ranch ...in montana ...with horses let's take a look at those scenarios. j.p. morgan wealth management has advisors in chase branches and tools, like wealth plan to keep you on track. when you're planning for it all... the answer is j.p. morgan wealth management.

jonathan: equity futures unchanged on the s&p 500. two hours away from the opening bell. let's cross to manus cranny. manus: dan ives said the palantir press release was so good that you went to print it off and shove it in the louvre. up 22%. two thirds of the business comes from the government. doge, elon musk, it is like manna from heaven for them. it's a windfall for them. 22.3%. untamed organic growth. like unbridled exuberance in this stock. commercial sales for this year

up 54% had over $1 billion. a new phase. that is the ceo's line. we have done 20% or 50% of the move so far. spotify. this time last year that headline was joe rogan re-signed. they spent a billion dollars on podcast last year. that hurt the market last year. of 10% this morning. premium subscribers are rolling in nicely. in the backorder last year they added 35 million users, the best fourth quarter for them ever, and they turned a profit. this is about raising your subscription prices. are you still in the free version or paid up? coming up, estee lauder. the reality of change costs. it cost nearly 7000 jobs. net sales for this quarter are going to be down by about 10%. duty-free sales are under pressure.

consumer sentiment in china and korea under pressure. double-digit drop in the global travel that is duty-free. that is where the pressure is on this. are you one free spotify? jonathan: i am paid up. i hate commercials. i don't get interrupted by commercials. lisa: i've done that. i have to be honest. jonathan: you haven't paid up? lisa: no. jonathan: you are in the gym, big push, last five minutes any commercial kicks in? lisa: that's what i listen to podcasts. it is to get around that, the obvious logical thing. i don't have this conversation on tv. --want to have the conversation on tv. jonathan: i will pay for you. under surveillance, china retaliating against donald trump's 10% tariffs with levees. beijing slapping at 15% tariff on just under $5 billion of u.s. energy imports and 10% on oil

and agricultural equipment. china adding at least two u.s. firms to a blacklist. this is the pushback from the chinese side. lisa: the smallest amount to save face while not actually inflicting damage. guess what? this goes into effect on february 10. they are supposed to talk today so maybe it can be rolled back. there's a larger question of what this trade skirmish looks like. it will not look like mexico and canada. this is not something you can easily placate with a couple of measures and orders already going into effect. that is what people are looking at. jonathan: china is playing the long game and the united states as well. don't confuse short-term goals with long-term objectives. donald trump has a concessions from certain countries. step one. the long-term objective is the same. this president once the manufacturing production back in the united states of america. we could have debate about the best way of doing that or whether it can be done but that is the objective. bmw's factories, they want

thousands of them, more of them. the best way to do that is to put the walls up in tell people you cannot export into us anymore. trump corporate taxes. i will make the economy a fantastic place to invest, not export to. two different things. lisa: china has a different parameter. is the u.s. going to say we want you to come build your factory here and then send all the data back? there's another national security overlay that makes this conversation more complicated. tiktok., having to do with -- tiktok, having to do with who might be owning it. jonathan: president trump an executive action to create a sovereign wealth fund for the u.s. scott bessent and howard lutnick likely to lead the effort. trump suggesting they could facilitate the sale of tiktok. we've heard rumors of this in

the past two years. lisa: there are a lot of questions. where are they going to get the money? is it from oil and gas the way it has in norway and some states? what are the parameters about what they can invest in? is it a matter of just investing in pharmaceutical companies you are buying syringes and vaccines from? is this something some kind of strategic fund that can be allocating in a very specific way to try to get money? there's a question of who's going to run this? it is the apollo global management co-founder leon black's son. there's a lot of questioning here that needs to be evaluated. it's actually an interesting idea and one that actually biden had a similar thought to. jonathan: do you remember the original deal? the original tiktok deal. this should be on a quiz at the end of the year. wasn't oracle and walmart? -- was it it oracle and walmart?

the president argued treasury should get a cut for brokering the deal. does that even work? lisa: they will getting cut from it? no, it doesn't work. are they going to borrow it for .5% and invest it? full of from certain levees? is this where the tariff money will go and invest in tiktok's potential acquisition by somebody else? jonathan: back at work. lisa: free ideas here. jonathan: elsewhere, benjamin netanyahu set to meet with president trump in the oval office at 4:00 p.m. eastern to discuss the ongoing truce in gaza, which trump's middle east envoy wants to make permanent. lisa: there have been a lot of changes going on with israel given the fact the hostages have come back. there is a hope among a lot of people in israel to continue with the cease-fire, also in gaza.

big questions about who could come into gaza, some sort of two state solution. donald trump has been aggressive saying maybe they should all move to another country. there's been so much pushback to that. a lot of anger on the part of allies in the middle east towards the united states. nonetheless, this goes to the idea that in israel a lot of people think trump is responsible for the cease-fire that has gone into effect. how can he push that when there's a lot of complicated negotiating that has to happen? jonathan: is week three. it's important to keep counting. kind of amazing, the third week of the u.s. administration. the to do list is very long. a lot of people think the previous administration did not get enough done in this region. i think they are just getting started. we have four more years to make a real change. equity futures just about positive on the s&p. we can call it just about unchanged. back to trade. retailers bracing for president trump's tariffs.

sucharita kodali writing, " tariffs will hurt u.s. gdp. most likely impacted our electronics, toys and components like plastics which are nearly in all of our consumer goods." i'm more interested in what happens to the chinese retail players that have been selling into the u.s. at discounted levels. they will not be able to get certain breaks anymore. how much of a change are we going to see with the diminished exception? sucharita: there is the executive order called for the tariffs on all goods. that assumed the dominiumus exception will be eliminated. there's a call for getting rid of those exceptions. there is no question that is not a good thing for players like timo and tiktok shop if they are selling from the chinese sellers

and overseas. this is not a surprise. we have been talking about eliminating the exception for a long time. this should not be a shock to sellers or consumers. yet everyone is acting as if this is some new thing. my hunch is that some sellers may have already started to divert their goods to other regions so the shipments are not labeled as coming from china. that is a way to circumvent it. not something i would advise but likely happening. otherwise they will also be some demand decreases or some compression in profitability. some companies are absolutely going to have to absorb those differences in prices. lisa: something they talked about at the imf. when you put tariffs on,

mortgage funneled through thailand, vietnam, three malaysia, through the philippines. we have seen that with increasing volumes of imports from those regions into the u.s. how much will that accelerate the more that tariff talk continues? sucharita: dennis short-term it will likely accelerate a lot. in the long-term the u.s. will have to figure out how to reduce some of that divergent. -- divergent. sion. doing a better job monitoring what is coming in. in this age of ai and camera vision and being able to automate more things there is really no excuse for not being able to better track what comes into the united states through the ports. yet there seems to be claims that it is incredibly onerous and difficult to do. i would probably allocate more

funds to trying to figure out how to better monitor what is coming in versus some of the expenses we are already doing that are not necessarily the most effective use of some of our artificial intelligence solutions out there. lisa: we were talking about how the ultimate goal of a lot of these tariffs -- there are a number of goals but one of them is to increase production back home. bring it back to the united states. how realistic is it for some of the retail companies to concentrate production in the united states and bring it back at a feasible price? sucharita: in some cases where you can have heavy automation it may actually be fairly viable. you see that in the automotive industry where there are factories that are producing goods like bmw as was mentioned earlier. they are able to do that if there is a heavy amount of automation. for those categories, like

perhaps apparel where it is still very manual, that may not be realistic and we are talking probably more about near shoring to other regions that are closer to the united states. there are a couple of things with china. there are geopolitical issues related -- you can hear me? lisa: we can hear you. sucharita: there are issues related to concerns around taiwan that are related to china. in the case of canada and mexico, what is really there is about improving the number of exports so the balances of trade are not as skewed so we are able -- american companies are able to export more. i don't think it is necessarily about bringing manufacturing back but increasing the manufacturing of the companies that are already sending to those regions. lisa: there was a theory before

some of the started that the biggest companies would have the easiest time negotiating new contracts, navigating supply chain disruptions, rejiggering. do you think that is true that the walmarts of the world, some of the biggest retailers will do better than smaller ones? sucharita: likely that is true. the bigger companies have the ability to move their production to different parts of the world. but there are a number of multinational companies that actually had very, very heavy presences in china. they are absolutely nervous and trying to cut out different exceptions to some of these tariffs. companies like apple, starbucks, even tesla. the casino companies which have a significant percent of the revenue coming from macau. there are a number of different players that absolutely want to

see the situations resolved. regardless of the level of negotiation, they are still dependent on chinese manufacturing or consumers. that puts them in an extremely vulnerable situation. it is a complex story. there are companies that will be winners and all of this and companies that are not going to win because they made bets on china's outward decades ago -- bets on china that were decades ago that are difficult to an rubble. jonathan: sucharita kodali, thank you very much. howard lutnick sat in his chair to the left of me several month ago as the commerce secretary designate. will there be carveouts? he said there will be no carveouts. since then donald trump has won election. i will love his thoughts on that now. lisa: there have not been carveout. it is very early in the process. that might be a different one

down the pike. jonathan: matt cook will dial 1 202580 -- 1-800-whitehouse. yahaira: el salvador promised to accept convicted criminals of any nationality and house them at a mega prison for a fee. marco rubio praised the offer as unprecedented without saying whether the trump administration would accept. spotify shares are rising, up nearly 10%. the company posted as an inspected subscriber growth in his first-ever annual profit. shares rose more than 135% last year as the company's ceo prioritized profitability after years of expanding its audiobooks and podcasting. salesforce is cutting with in 1000 jobs at the same time is hiring workers to sell new ai products. that's according to a person

familiar. they are focusing on maintaining profit margins after pressure from activist investors. salesforce is expected to report earnings at the end of this month. that is your bloomberg brief. jonathan: thank you. , europe and the trade crosshairs. president trump: the european has abused the united states for years. they can't do that. they want to make a deal. in all cases they all want to make deals. jonathan: up next, george saravelos on the volatility in the fx market. ♪ ♪ what does a good investment opportunity look like?

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jonathan: stocks and bonds just about unchanged. going nowhere on the equity benchmark, on the s&p 500.

up two basis point on tens. the euro negative again. 103.26. europe and the trade crosshairs. president trump: the european has abused united states for years. they can't do that. they want to make a deal. they all want to make deals. there is nobody that doesn't want to make deals. all we want is a fair deal. there's a word, reciprocal. reciprocal tariffs on everybody. they charge us tariffs. the european union has a vat tax. jonathan: leaders scrambling to avoid a tariff war with the u.s. as donald trump threatens levees on the block. george saravelos saying, "the drivers cannot broken down into two parts, relative monetary policy and a tariff risk premium." george, welcome to the program.

let's talk about the second part, tariff risk premium. how big is that? george: it is the key question for the next few months. honor and we are not spending much time trying to protect what president trump will do -- one our end. it is not a fruitful exercise. we are trying to figure out what the market is pricing and the risk distribution. when you look at the so-called tariff risk premium, and you can see it in many different parts of the market, the u.s. inflation curve, the deviation of the dollar, can the efp for gold. they have been sending a consistent message that the market is pricing a limited tariff risk premium. it is precisely because the tariff premium is quite low that we see the redistribution is huge towards essentially pricing

and more tariffs if and when they materialize will jonathan: is that just the euro for the same of the chinese currency? george: it is across the board if you are looking at all global markets. whether it's fixed income and the so-called inflation hub pricing and breakevens. it is still very low. when you look at the euro, when we mention parity, that is not a forecast set in stone. if you get a reasonable outcome in terms of tariffs around the midpoint of the range being discussed, that is what we get to. if we get worse outcomes, it could be bigger. china is more difficult. it is a policy determined currency. the market is not free-floating. this one is where the specific policy choices by the authorities will play a much bigger role. lisa: you talk about the trade war risk premium.

that typically has been strong dollar. we have talked on the show about it. at what point the hangover effect of the tit for tat of trade negotiations and trade war's ends up with the rest of the world trying to withdraw money from the united states, cannot put money into the united states -- not put money into the united states. what indicators suggest the appetite for the dollar was starting to wane? george: great question. a very important one. the way we think about it, it is relative economic impact. you have to think about currencies that way. the u.s. possesses a number of unique features. it is the world's largest economy. it has the lowest share of trade. it has a big trade deficit. it is very services intensive. president trump knows all these things. what that means is every time tariffs are threatened, it has an asymmetric impact on the rest of the world. that is why the dollar is

strengthening. what you need to see for unraveling is essentially a big u.s. centric growth slowdown. that is more shock than the rest of the world. that causes the fed to become dovish. so far, especially given the tariffs target with the physical negotiations and expansion -- fiscal negotiations and expansion we don't see that. lisa: if tariffs go into effect or the suggestion of them will slow economies like canada. we heard that from the bank of canada. potentially in the european union. even though this is a single mandate ecb, do you expect them to cut rates more aggressively to counteract some of that potential growth shock? george: the ecb's huge focus -- up until last week the market was pricing the ecb to stop above 2%.

if you think about that, that was at the other end of the neutral range which lagarde alluded to. our view on the ecb has been more dovish than market pricing. if you take a step back, european growth is below trend. forward-looking numbers on inflation are at or below trend. you have a net fiscal stance tightening and tariff risks. we see the ecb cutting down to 150. the market has adjusted but i think versus the fed we see the right differential widening again. i should mention -- jonathan: i'm surprised that is somewhat contrarian right now. get surprising officials are talking about neutral and not talking about getting accommodative. when is that going to change? george: interesting points you raise. the narrative in the market is the ecb should be cutting more. i like to sing wishing between the narrative and what ultimately matters, which is

pricing. if you look at marking pricing, it's been about 2%. why has that been the case? you had some rising energy prices in the ecb -- and the ecb is sensitive to that. crucially it is communication from the hawkish members. for example, what is required to change is for the members to gradually accept the ecb is going to need more, to do more, and we will get that in a few months. jonathan: george, great to hear from you as always. george saravelos of deutsche bank on the risk to return to parity on the euro-dollar. relative monetary policy and eight tariff risk --a tariff risk premium. lisa: when you have german members looking to maybe keep rates a little higher. jonathan: up next, kevin gordon, angelo zino, gregory daco, tony rodriguez.

the third hour of "bloomberg surveillance" is up next. ♪ ♪ where ya headed? susan: where am i headed? am i just gonna take what the markets gives me? no. i can do some research. ya know, that's backed by j.p. morgan's leading strategists like us. when you want to invest with more confidence... the answer is j.p. morgan wealth management

>> it does not look to me like wall street has priced in these tariffs going into effect on a sustained basis.

>> i feel like the risks are higher than people appreciate. >> the biggest theme is risk off. >> we think we are the beginning of a multi-year you -- multiyear move out of the u.s. into non-us. >> we expect nothing but plan for everything. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern were in. jonathan: this is a fantastic example of meeting location -- meeting expectations on a low bar. the headline that you get on terraces actually we have avoid tariffs on mexico and canada of 25%. we are talking about something else when we would typically be talking about china. lisa: this is signal versus noise and this is just the beginning. we are week three? just to wrap your head around that and understand what the destination is at a time when you will hear a lot of potential threats and tariffs and

announcements and etc.. they can get walked back the next day or than the case of china they could not. jonathan: equity futures positive on the s&p 500. the nasdaq 100 up .2%. a big event for the nasdaq comes , you get earnings from alphabet an important economic data. job openings at 10:00 a.m. eastern time and a lisa: sprinkle of fed speak. lisa:it will be what you expect, we do not know, park that. jolts will be interesting because how tight the labor market is but more importantly this week you almost get a quarter of the s&p 500's market cap recording. amazon is later in the week. the earnings calls and how forward guidance can be delivered, that is potentially going to be the big event of the week. jonathan: very dependent of what industry you are in but we have seen fantastic examples. gm came out with guidance.

the u.k. did not bother coming out with guidance and had to suspended sales target because of tariffs. this surprised the central banks. the fed speak cannot offer any kailey already -- clarity about the future. the bank of canada, you are talking about that. they cut interest rates and said we have no point of providing guidance. the only thing we can do is provide some comfort that we are doing what we can just in case it does happen. lisa: all of this has a drag on some level if it continues for long. of time -- for a long period of time. there is a feeling that it is a progrowth moment that if you have companies unable to make some types of investments that could get up in the crosshairs but do not, does that drag on sentiment? we are not there yet, but we see the s&p 500 not recover the same way that some of the other currency pairs did and that is telling. jonathan: the overall policy

platform is progrowth. we have talked about this repeatedly. you want to see that confidence translate into investment decisions and into hiring decisions. in a few months from now i want to see job openings up and not down. i want to see decent payrolls growth and confident that unemployment is not moving in the wrong direction. you need to keep that confidence and do not take it for granted. lisa: i think you run. i think people want to look out over their horizons and have opportunities. i want companies to feel the confidence to go out there and -- and invest. jonathan: i think kevin's job is safe. coming up, charles schwab as markets grapple with trade whiplash. the latest earnings from alphabet and the economic impact of trade uncertainty. we begin with stocks lower and the eyes of the world on donald trump's next move. joining us from washington is

annmarie hordern. annmarie: when it comes to the next move you have to look directly to european union. he dealt with canada and mexico. those tariffs were walked back with a 30 days pause. we see both countries adding more to a robust border security and also canada saying they will have a fentanyl czar and the trump administration is branding that this was for the american people and really him roaming up to what he promised on the campaign trail and doing more when it comes to immigration. "the wall street journal" says that he does not make a mistake but often changes his mind. when it comes to china potentially this is an opening salvo. the tariffs went into place and we saw a rebuttal. they were not massive but calibrated. xi jinping wants to make sure that this will not backfire on his own economy. when it comes to china there is a potential for some deal to

happen, maybe it will take longer but we could see a phone call between xi jinping and trump. finally europe, we do not know what he will do and when he will do it but this is what we do know. in the past he has taken aim at europe and yesterday he listed a number of grievances with the european union with things like cars and farm products. when it comes to those tariffs, the gap is wider than when it comes to normal everyday goods. europe is going to be next. that is what he said. we are waiting on the timing and scope and we are living in an area of uncertainty. we know that trump likes to use tariffs and he is delivering on that promise. lisa: we have been discussing if he is trying to get out of the weight less growth forward types of policies before going into some of the the regulations. do you have any sense of your conversations that that is the case and the goal of doing all of this upfront? annmarie: annmarie: as one

person put it to me, donald trump is doing everything, everywhere, all at once. while he wants to recalibrate trade and he wants to focus on fentanyl and using tariffs as the negotiating tool. at the same time, of course there are people in his administration looking to congress and making sure they get the tax bill done. but tariffs can happen immediately. we saw that overnight when it comes to china. it will take more work for this administration to work with republicans to get through their reconciliation package. some members are still debating on whether or not it should be one or two bills. they need to make sure that they extend government spending 10 chile in march. the government could run out of money and they would have to deal with the debt ceiling. all of that before they get to tax cuts. jonathan: a steve hill to climb think -- steep hill to get that

done. "if we are to learn anything from the 2018 through 2019 trade war it is that the markets do not price everything at once. we do not have clarity in our crystal ball on how this will play out." quite something over the past few weeks and it is only week three. do you stomach the volatility and believe in the progrowth platform of this administration and stay long? kevin: in the sense that you are lengthening your time horizon. if you are shortening and trying to digest day-to-day moves at every single moment it is whiplash and exhausting and it is impossible to try and game out or forecast what will happen. i think that back to when we wrote the outlook for this year you talked about stop making volatility. our view and you sought play out that the dynamic will be flipped versus 2024. 2024 was amazing from an index volatility levels standpoint.

the max drawdown was 8.5%. the scarring that happened was at the individual member level where the average was 20%. you do not see that at the index level because it was happening vl rotation. not that we are expecting some imminent correction in the s&p, there is more of a struggle at the index level because of what we have seen of the mega caps being a drag. also because of the volatility that comes from tariff related and immigration policy related. that makes it a much more challenging index level environment. jonathan: if you put that it goes up into the right. he would not be able to see that one of the biggest weightings has had a more than 20% drawdown, nvidia. what do you do with those names. but the kind of names that are getting beaten up. does it tell you what leadership will be or give you any kind of signal with regards to that? kevin: we have already had the

signal from a sector standpoint. that was in the tech sector. it has gone nowhere since last june, which i find that remarkable. the biggest sector with some of the largest names which has become a dominant ai theme, it has not moved much and it is at its lowest since early november and it has wiped out postelection gains. you have had the signal being telegraphed in some ways where at some point probably late summer last year there was a broadening out trade that moved more into financials and industrials. some of them were commodity sensitive but that has pulled back a little bit. i find it remarkable that even in a group like the mag seven, there are sectors that are representative but it is calm services that have pulled ahead and left technology in the dust. if you view it through the ai lens, it speaks to the fact that there is more to be gained from the rest of the market, not just

a handful of names. call it the ai adopters now starting to catch some of the trade or upside and not just the creators. lisa: i'm going to lean into the folded -- the golden age of volatility. it is very important to talk about. the vix is not actually rising that much. there is every day a feeling that you have no idea what will happen. and the peak to trough is insane for specific names under huge market caps. what is the hedge, at a time where there is volatility and specific spots but overall things will even out in the message is what is coming from the white house? kevin: it is keeping your emotions in check. the hedge -- the volatility is not just in the equity market but cross asset. what becomes more dominant in the next era by policy is in the

fx market. not necessarily in the equity markets. you could see that clearly with the moves you were talking earlier about. the huge downdraft in the peso and then the massive upswing. you do not have that kind of move in the equity market. of course you closed off the lows, but i thought more signal was gonna come from foreign exchange, because of not just the tariffs and the dollar amounts associated but just how more fragile the global system and backdrop is. this time relative to 2018 or 2019. you're talking about two major trading partners and allies. last time it was just china. you had -- you add a layer of volatility because of who is involved. lisa: usually one worries -- when people worry about risk they go into the dollar but now the uncertainty as the united states and policy. at what point does that shift so the dollar does not have that

knee-jerk response? kevin: that is why it becomes the most important thing to watch in the coming years, especially from a fed independence perspective, not that we are worried about that imminently. you have to imagine that there is going to be a little bit of friction where if you do have a potential for slower growth, and administration that one slower rates in an investor rate -- group that has lower rates but a fed that cannot move because there might be an inflation problem stemming from the price level increase from tariffs or inflation from the labor market because we suddenly have a lower labor force and labor supply. that is where there becomes an issue. not that it is imminent, but i can see that becoming a dominant problem. jonathan: let us finish on that component. the bias is still to cut but not hike. is that constrained by this? we had some pushback who said --

and someone said that the bias is still to ease. do you feel like it is constrained -- constrained somewhat? kevin: i would use the three most important words, nobody knows. that is the tough thing about days like yesterday and this era that we are in from a trade dispute perspective and whatever you use to label it -- labor it. the fog is so dense with what this means for business capex and inflation. you think about the outcome of this where you have potentially aggressive tariffs going into place. yes at the outset that is inflationary to some extent, but if we are to learn anything from 2018 to 2019 which is the only modern period for a trade dispute there was a meaningful slowing of business. i do not know if the fourth quarter, the slowdown went negative as we learn from gdp. i am not sure if that is a trend that continues. if you see maybe stabilization

around the 0 line in addition to sentiment surveys that rolls over, that could be a problem. it is not our call right away. it is something that needs to be considered more. jonathan: we have to talk about the timeline. if you wants to stimulate domestic supply-side response it will take a long time but people will night -- will not make lisa: lisa: decisions with long-term clarity. how can you have that and a time where you do not have clarity in minutes from now. there is a sense of paralysis but longer-term it might become easier if there are longer-term, congress led measures. jonathan: the strategist should do a course in psychology because half the job is providing therapy to investors to stay invested. lisa: the hedge is not gold or treasuries, it is sit down and let us talk about that. jonathan: kevin, it is good to see you and we appreciate it.

let us get an update on stories elsewhere. >> president donald trump wants something in return for helping ukraine defend itself against russia. his senses -- his ministration once access to critical mineral resources like uranium and graphite which might be worth trillions of dollars. president zelenskyy offered them access as part of his victory plan last year. the indian prime minister has been invited to the white house according to an official, he will meet with president donald trump next week. he seems to be on good terms with trump. his government has made a series of concessions including an overhaul of its tariff regime to try and avoid any clash over trade. pfizer shares are up one point 8% after beating expectations on strong sales of its covid vaccine and pill. a welcome result for the giant as it seeks to fend off criticism from an activist

investor who argued that the company squandered its pandemic gains and needs a new path forward. jonathan: thank you and we appreciate it. more from her in 30 minutes. morning calls plus angela of cfra previewing the latest earnings from alphabet. that conversation around the corner. ♪

jonathan: the opening bell, one hour and 11 minutes away. equity futures on the s&p 500 just about positive. in the bond market the yields higher by a few basis points. let us get you some morning calls. kew bank reiterating its

overweight on spotify. that stock is almost up 9%. lisa promises to get a premium subscription. the second call from evercore out great -- upgrading marriott to outperform. stock is higher by more than one person. morgan stanley upgrading palantir to overweight. that stock is flying untamed, organic aia demand. more than one headline stock is up 21%. lisa: what can they do corridor. how do you sort of makes this even better but they are the big fish area. your question to dan ives, how much of a shift are you seeing with the real winners come eight very different cohort. jonathan: it is the new ai darling, not video. that stock has performed more than 340%. china launching an antitrust probe into alphabet.

they report earnings after the bell. angelo has a buy rating on the stock with a .220 -- a $220 price target. how pointless is an antitrust investigation into google in china? angelo: very pointless. it was the first thing i thought of when i saw the news. i do not think investors are really going to think twice about this. the stock is not reacting at all. i think it was china trying to add something else to some of the tariff news that they throughout, something on the headline beings and something that you could say we are attacking a mega cap type of things but it is irrelevant for investors. jonathan: let us focus on the earnings. what can we take from what we saw from meta and microsoft to gauge how we might see alphabet perform a little bit later? angelo: as far as alphabet is concerned, you take a little bit from microsoft and meta and on

some respects the meta-side of things is the digital asset side of things and that looks healthy as far as what you can extract for alphabet. alphabet is present just driven by search while meta is more social media side of things. we have expected better than results when surges concern. so, for all intents and purposes the runway looks healthy as far as surge not to mention the presidential election definitely helped meta and alphabet. as far as cloud business, that is probably the most important

thing that we thing from -- more importantly the operating margins look favorable and we are looking at a run rate close to 17% when a year ago it was close to 3%. they are executing all cylinders. growth rates will probably decelerate but based on what we have seen from microsoft and what have you, cloud growth looks good. lisa: microsoft did say that they did not have enough capacity to meet demand. that was a reason why people were tepid with results. do you see a similar method -- message out of google? angelo: as far as alphabet is concerned, on the cloud side they are the smaller of the three big plays. amazon and microsoft continue to have the lion's share of things. alphabet can essentially take as much business as they can

eccentrically expand in terms of capacity. growth is not necessarily going to be an issue. it will continue to be expanding that capacity and doing it in an efficient manner and the street is definitely keeping a close eye on it. you look at the last couple of quarters and the levels they have been able to increase capacity and look at growth rates at a much more kind of attractive pace relative to some of the other big mega cap names. we will see what time -- what type of capex numbers they will throw out. given the last couple of quarters we expect them to be efficient. lisa: i wonder what we will see in terms of efficiencies built in from the ai deployed currently. we have seen a number of tech companies in particular layoff a number of their staff. google or alphabet might be a prime component given that some machine learning programs could do some of the work that previous programmers and others

could do. how much are you looking at efficiencies in some of these earning reports? angelo: i think efficiency is important. you look in the last two years we did not see the efficiencies on some of the anti-adoption kind of things. 2025 into 2026 you will see a lot more efficiencies. alphabet launched gemini 2.0 in december. that is going to we think lead to a lot more significant improvements in terms of reasoning capabilities and what you can kind of deploy in terms of ai agents. we heard meta talking about an ai engineer and you can deploy a mid-level engineer out there at some point this year. you will see more of that as you progress through 2025 and into 2026. that is why there is a shift more to the software side of things because you are going to

see the ai monetization and those use cases pickup through 2025 and into 2026. salesforce is another great example. jonathan: 10 seconds, what is the weymo stake worth? angelo: the valuation right now is way less than what is being priced out for a test lab. i do not necessarily want to throw it out but they are accelerating the investments. we do think there is a lot of upside potential. jonathan: you think of all these powerful stories about tesla and. struck down self-driving and alphabet earns a big stake in that. lisa: hard to know how they will value that. ♪

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jonathan: new reporting out of " the financial times." beijing has reviewed -- revived antitrust investigations into google and nvidia. while considering a new probe against intel. china looks for new leverage against president donald trump. so revising -- reviving antitrust investigations while considering a new probe against intel. lisa: the nature into nvidia has not been specified. if you look at premarket moves the spike of volatility and then it went back to where it was.

this is just trying to seem like there is more muscle, we are investigating a company that has not done business here since 2010. jonathan: that one wish to just stay out of the headlines and they do not want to be in the headlines. they are in the headlines right now and not for good reason. equity futures doing ok and just about positive on the s&p. the -- speaking of the big tech players. the nasdaq 100 higher by a quarter of -- .2 -- .25%. manus: on the back the headlines that is what adam talked about. this is the step up from the normal tit for tat. that is the much bigger risk. palantir, what a press release. that is how good it was. the company is promising untamed organic growth demand in ai software. this is where the rubber meets the road and as for doge, it will be like man for -- from

heaven. two thirds come from the u.s. government and u.s. commercial sales will rise by 54% to just over $1 billion. we are in a new phase, says the ceo and warns against technical complacency so much so that bank of america upped its price target. we have managed 50% of the uplift in price. look at spotify. it is about whether you sign up for the premium product and 206 he 5 million people have and that is ahead of estimates. it is the first ever full year of profitability and this company was lambasted for spending. they re-signed joe rogan for $250 million and the hubris was your spending on podcasts and now it is about the monetization. and they have raised the subscription prices as well. i am still on the free one i have too many subscriptions. estee lauder, about 1.2 billion

to $1.6 billion in restructuring charges. up to 7000 jobs. somewhere between 5800 and 7000 jobs will go. the sales will drop by doug -- by double digits, 10%. the problems are duty-free and with asia and the travel market as well. these pressures will endure. the stock is down 7.4%. maybe i should upgrade myself on spotify, another app. jonathan: i was saying let's get real and you are in the gym and you work out with spotify on and you listen to commercial breaks is that is happening? manus: i am definitely not on that last big push and you want to be focused without any interruption like news. jonathan: what is the "rocky" song? lisa: i have the tiger. -- eye of the tiger.

jonathan: your workouts are different to mine. let us turn back to trade. the economists passing through the potential impacts of the terrace. "tariffs increases -- could creation a stagflationary shock while also triggering financial volatility. we expect that u.s. gdp would contract by 1.5% in 2025 and 2.1% in 2026 relative to our baseline." greg joins us to talk about trade. big changes for about five minutes and than they do not go on. as an economist what do you do with the uncertainty? greg: it is very important to factor in the uncertainty and what we have seen is a desire to work on the trade policy, tax policy, and immigration. there was this pro-business sentiment after the election that businesses would be supported in this environment and it would drive stronger

investment which was the hope. what we are seeing and what we have seen is that there'll also be this layer of uncertainty. if we recall 2018 or 2019 we had a similar mix of policy uncertainty that actually deterred business investment in hiring at a time when we were passing the tax cuts and jobs act. we had trade policy uncertainty that was constraining the boost from tax cuts. jonathan: to think about this logically, i'd cannot imagine why it would hold back domestic cap acts or decisions about investing in things like mexico and canada. for a u.s. based company that we hear -- did we see them hold back on domestic decisions as well? greg: pre-election there was a lot of uncertainty and then after the election there was a lot of uncertainty about what policy would be prioritized and what we are hearing is that there is a little bit of that wait and see approach. it is not retrenchment and we

are still seeing strong trends when it comes to economic activity. the economy is growing 2.5%. the final demand is strong. we are seeing be hesitant. my fear is that we start to see that replicate into the labor market. we have a robust labor market that is a key fundamental pillar to the u.s. strength and outperformance. if that starts to become weaker, that could be a catalyst for weaker income growth and more caution on the consumer end. jonathan: we have some tariffs to talk about. we have 10% on china. let us lean on the experience and discuss the differences because there are many. i want to understand how you think these tariffs in these cost will be distribution. i want to say this so we do not deal with the debate. it is paid by the importer. how the cost is distributed is unclear. you could have the exported drop prices absorb it at the margin or get passed on to the

consumer. on the economy, how does it get distributed? greg: two factors, coming out of a high inflation environment. we have seen inflation come down but it had reached levels we had not seen in four decades. this explores low inflation. the economy is close to capacity. that means that any potential supply pressures that comes on this time could be more inflationary than it has been. you combine the fact that we have more pricing power or sentiment of stronger pricing power with the fact that the economy is evolving close to potential and you have more inflationary risks. both are important when it gets to the overall inflationary dynamics. that is why you are hearing more the fed on the hawkish side that contrary to 2018 when it looks to the tariffs there is a risk

that -- inflation come sneaking in. jonathan: there is some price tolerance for the consumer. that we will not see demand falling off. are we knocking on the doors of consumer price tolerance? greg: lower to median income families are judicious. you are seeing consumer spending trends soften gradually. no major pullback and the growth of consumer spending moderates. that is a key risk. as we should not forget the u.s. economy is in a sustainable state. the outperformer on the global scale and exceptionalism is firmly in place. but the fundamentals underpinning this exceptionalism are at risk. the labor market is at risk of a pullback if business sentiment starts to turn. productivity growth is at risk if they do not drive stronger

supply but focus on managing policy disruptions and income trends are still solid. jonathan: just a look at the signal. there are some people including ian lincoln that made the case that perhaps investors are focusing on the demand and growth consequences and may be less so on the inflationary consequences. based on the consequences that we have just had are you doing the same thing? greg: both elements are important. when you focus on driving that sustainable growth environment you have to be conscious that both are important. having the environment where you are draw -- driving stronger labels -- labor supply those are conducive to growth at a higher level and augment your potential to grow which in -- which reduces inflationary pressures. i am focused on the productivity data at the end of the week to see how strong productivity is.

a higher productivity of level or case of growth affords higher wage growth that feeds into income and allows consumers to spend freely. growth and inflation are important and very important for the fed because let us not forget that the fed has the employment mandate and inflation mandate. they have put more recent -- more emphasis on the risk for inflation that they are extremely data dependent. softness on the labor market would make them turn more debits again -- dovish again. jonathan: for those of you tuning in, the -- the opening bell minutes away. lots of data still to come and on friday we had the productivity data. payrolls is just around the corner and then you have job openings ahead of a lot of fed speak. let us bring in michael mckee. what are you going to be focused on later this morning?

mike: we will be focused on anyone making any kind of news. when you and your lovely bride get invited to a party that you do not want to go to and stand in a corner, that is where the fed is. we will hear from a lot of folks but they will not have much to say. yesterday we started off with three fed officials saying we need to be on hold because do not know what will happen. austan goolsbee, the most important of those because he was a guy who was talking about another 100 basis points in cuts. he was ready to cut rates and now he has on the sidelines because nobody knows what is coming out of the white house. we have a lot more coming up this week. one of the most interesting months will be philip jefferson who is speaking twice. he has the vice chair and he does not often speak. one of his speeches is on the economic outlook. we will get a sense of where the leadership is. and then tomorrow, tom barkin stops by to stock -- to talk

with the three of us. we will chat about what people in his district see and we can literally take the president's views or whether the fed does. jonathan: that is a timely conversation. mike will be leading not tomorrow. look out for that. let us turn to fixed income and tariff uncertainty pushing yields higher yesterday. a little bit lower at the long end of the curve. "we expect tariffs to exert a flattening influence on the curve and to put upward pressure on spreads. tony joins us for more. let us separate those stories. i want to focus on the treasury curve. yesterday was interesting. the yields perished -- pushed higher and at the longer-term the yields dropped. explain that new -- move for you? mike: from our perspective we think the strong influence from this tariff war and situation is the drag on growth.

at the long end you see that put into place. and you think about what happens since the fall of last year, almost the 100 basis point rise in rates was on the positive growth side whether it was deregulation or tax cuts or fiscal, we saw the jump in yields because of the stronger growth picture and we saw fed cuts being priced out. as we sit here today, the drop in yields begins to reflect the longer-term negative impact on growth from longer-term sustained tariff policy, not from these 25 or 50% that get reversed quickly more than a -- more of a sustained story. we will see an increase not from the levels that you see as the initial salvos, but there will be a rise that ultimately does drag on growth a bit. lisa: is there a take away from the action yacht a couple of minutes or days. it is not necessarily where the

benchmark yield is but the trend of yield curve flattening after an entire year of steepening. can you bet on that to continue? mike: we do not think it will be strong. fair value is around 25 basis points. at the margin we are seeing that fed cuts get pushed out when you see these tariff increases get implemented. if you think the first cut might be may or june it might be pushed into 2026. if you see a higher level of tariff sustained against more trading partners. that is the story around the curve. the back end will price in the weaker growth story that comes into play the median term from those higher tariff levels. lisa: that goes to your point about wider spreads. can you talk to us through what is the logic behind that at a time when we are waiting for those progrowth policies to come down the pike? mike: so much --

tony: so much of the good news is priced in. if you see that from a regulatory it standpoint or from taxes we have gotten that into the price on credit spreads. but we are not expecting a large rise we do think that you will see a little bit of recalibration and we will see the faults increase a bit over the course of the year. they will stay below the long-term average is and not be at the almost generational low levels that we have experienced over the past one or three years. jonathan: there is a u.s. bias and let us talk about what happened in europe. i thought the read on european sovereign debt was clear. this is not push and pull between the ecb and the growth going different ways. this is very much about the ecb will have to confront a disinflationary shock because if the walls go up in america they will have to stomach a lot of cheap chinese goods and they will not distribute that around the world and quite the same

way. how bullish are you one sovereign debt with that in mind? mike: we will see -- tony: we will see more cuts from the ecb and possibly it might have to go lower. the growth impact is stronger. so, we do have yields they are that are going to be in decline. when you think about the u.s. story you talk about internal risks and external risks. external is around global growth in europe is one of those stories are huge economies suffered some headwinds and you think of china as a second largest economy and not a growth engine right now. they are trying to implement policies and that is just cutting off the tail risk of a hard landing. that external risk to the u.s. economy comes from weaker growth. that is reflected in positive sovereign yield outlook and europe in particular. jonathan: there is a cliche that

the dollar goes where it is treated best. we have had a conversation about whether u.s. policies would attract capital or push it away. overwhelmingly the responses that it will attract capital. what are the odds that it will push it away. he had a guest who was trying to make a strong case because of the policy chaos it pushes away capital and it will go elsewhere. when i have conversations about europe and china struggled to see how that will attract capital unless we see big changes. where do you stand on that debate? tony: i will say cleanest dirty shirt. the policies are one that while it did dampen capital investment desires by u.s. and foreign companies coming into the u.s.. at the same time looking at the global picture, there are not very many attractive secondary locations that capital to go to. when you work through all the math the u.s. is probably the most attractive destination for capital. it just might be at a lower

level than it would be if you did not have this policy uncertainty or policy chaos. lisa: when we are in europe listening to the messages coming out of the white house the feeling was maybe this will help europe get it stuff together and that you could end up having deregulation. ursula von der leyen said maybe we should loosen the purse strings to maybe invest in defense. maybe it would make that region better. in all these people were talking about optimistic and are you saying that is bogus? mike: mario draghi -- tony: mario laid out the plan and it was not that surprising. those are challenges that europe has faced for decades. i would not say that we are pessimistic on europe, but we are realistic about europe. that we will not implement competitive policy when -- very

quickly. they will have to face the more stress and pressure. we will see that pressure in terms of the economy and then in reaction to that we will see incremental steps. movement in the right direction but we are not expecting some big policy bnag that moves it as competitive as it should be. jonathan: the great irony with european officials with the exception of a couple of others about who they would want to have in the white house. they would tell you that it is not donald trump right now. and the greatest irony is that this president will push them and you have indicated this to do the right thing and nothing to help themselves. another thing about europe has turned out to be correct. everything he said about germany is correct and everything about nato spending is correct. they have slowly come around to this idea that may be this president was right. mark, the touch prime minister who we have interviewed several times said that to us years ago and now as the nato

secretary-general is saying the exact same thing, the president is right. what you were getting to, is whether this president will push them to do something that helps themselves and i hope it does. lisa: a lot of people. everyone is saying that it would and they would get more optimistic and here we are with a lot of that unwound with a suggestion of tariffs. this is one of the big underplayed stories of 2025. jonathan: good to see you. with an update on stories elsewhere. here is your bloomberg brief. >> president trump plans to speak to xi jinping about a potential risk -- reprieve on the tariff. white house press secretary said that talks are expected to take place over the next 24 hours. the president plans to speak to his chinese counterpart about fentanyl. marco rubio told congress that the u.s. agency for international development might be abolished after a review

according to a letter seen by bloomberg. the current foreign aid process does not benefit the american people and he says some usaid operations might be integrated into the state department while others will be shut down. and paypal shares are falling more than 8% in the premarket even after he reported fourth-quarter earnings that topped wall street estimates but investors are focusing on a slow down the growth of its car product -- card processing business. growth slipped to 2% from 29% a year earlier. jonathan: thank you. up next we will go through the trading diary and bring in the calendar for the day ahead. you are watching bloomberg tv. ♪

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minutes away. equities unchanged on the s&p 500. the calendar for the day ahead looks like this. 10:00 a.m. eastern, jobs and durable goods data. and then alphabet earnings after the opening bell. wednesday, adp and disney earnings. thursday, jobless claims and the bank of england results and on friday, the payrolls report. before we leave let us go to washington, d.c. and get a final word. what is on the agenda for you and the team? annmarie: president trump will be sitting down with benjamin netanyahu today, the first foreign official to come to the white house to have this meeting. this happens as the second phase of the gods of cease-fire talks are taking shape. his middle east envoy indicated that he wants to see the truth because that means for president trump he can embark on potentially more regional peace deals when it comes to

normalization of saudi arabia and israel. what is not on the agenda but i'm sure that market participants are looking to, this potential phone call that trump says he will have with china. he said potentially that me and china will get on the call and then his press secretary reiterated that to fox news. no time or scope of what they might talk about. tariffs might be one of them and maybe tiktok. jonathan: these calls are becoming market moving. we sat down and it turned out to be right the calls between the mexican and the canadian leaders. tomorrow this is what to watch. see rosen, the disney's cfo and the richmond fed president and that chevron ceo mike worth, -- wirth, what a lineup. lisa: especially at a time when each of these industries are being challenged by policies that may or may not go into effect. jonathan: from new york city,

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katie: no relief for ali just yet, but we have 30 minutes until the start of trading. remain: bloomberg "open interest" starts right now. katie: china hits back, but in a measured way. beijing slaps tariffs on $14 billion worth of u.s. products. the u.s. put tariffs on $525 billion of chinese goods. on that earnings front, untamed ai de