>> the idea that this tariff as a negotiating tool is consensus. >> we do not know what will happen. >> the president seems to be far more serious about tariffs than most concerned citizens in november. >> i do not >> >> think anyone knows. the policy backdrop are changing and people do not know what to expect. >> this is bloomberg surveillance -- surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: good morning from our audience worldwide, bloomberg surveillance starts right now.

is it friday already? your scores look like this, equity futures down by .10%. we are struggling to balance following the biggest one-day loss of the year. one line from the president shaking up global trade. >> is there any roof -- room to make a deal before midnight and should we expect the chinese tariffs to take effect? >> no room left for mexico or canada. the tariffs are all set and they go into effect tomorrow and china has an additional 10. so it is 10 plus 10. jonathan: 25% levees on imports from mexico into session canada and raising tariffs on endpoints -- imports from china to 20% in the market reacted big-time. lisa: it is falling out of love with the policy mix and you can say that as you see the magnificent seven down more than 10% and the small caps getting hit hard. a question here now is are these on for a longer period, or how

quickly do they come off? the hope is that markets have not fully grappled with the idea of tariffs but retaliatory measures from mexico, canada and china. jonathan: you are right. the people who believe this day would not come now believe that it will not last long and these tariffs will be off in a week or maybe sooner. annmarie: another big question is if you have auto companies and there is a lot of reporting that they were having conversations and dialogue with the administration. will there be carveouts. at trump 1.0 there were carveouts and howard lutnick said that there will not be any carveouts. so now you have this whole game of chicken. when will the levees be lifted and if not what can we see? we know canada is coming out with tariffs and china has done it and we are waiting on mexico. jonathan: it is already in the data. you sought in the ism. the headline number was ok but

beneath the surface prices paid moving in the wrong direction. employment contracting and that is a bad makes. lisa: it is something that rhymes with ragflationary. you have a weaker than expected headline number almost in contractionary territory. at the employment component and new orders component very low. prices paid at the highest levels going back to june 2022, which was the peak of the inflationary boom that we saw after covid. jonathan: welcome to the program, we are softer on the s&p 500, -10%. we are adding to the losses. a green light for tariffs, president donald trump following through on threats to hit canada, mexico, and china. team coverage chart -- starts with tyler kendall and carolina malan in mexico city. first of all to you, a lot of people thought that maybe the stable not come and yet here we are. tyler: you heard president trump saying that there was no room

left for negotiations and we have to keep in mind that this specific batch was tied to tangible policy priorities when it comes to immigration and fentanyl. president trump was tracking overdose deaths as a metric. i pulled the most recent data from the cdc showing that overdose deaths plunged by 24% that it is still the leading cause of death among americans ages 18 to 44. this kicks off a countdown clock that goes beyond this order policy. look at the rhetoric around retaliation for example. he has largely brushed off concern saying that it will just get factored into the country by country tariff plans that we are expecting when his reciprocal plan is released. lisa: i want to bring you into the conversation because we have yet to know what mexico's response will be. what are we waiting for? carolina: there is a lot of expectation around the president's morning press

conference held at 8:30 a.m. eastern time and today is not an exception. yesterday afternoon when president donald trump announced that the tariffs were going forward, her team told us that there would be no statements until she speaks herself. so what are we waiting for in this press conference? to see if there will be retaliatory tariffs leading up to the day. she has been talking about using a cool head but waiting for the measures. she has spoken about how the government has a plan a, b, and c. she has not disclosed those but there is expectation around whether they will be retaliatory tariffs or some other measures. if there would be more measures alongside the border related to security. and all of this comes at a point where mexico's economy is poised to contract. it is a very urgent moment. lisa: we have gotten a plan a

and b from canada. what are the details? >> about 25% of tariffs have been slapped on about already billion canadian dollars, worth of goods. that will take into effect right now and it has been for the last few hours. in about three weeks, canada will slap another 25% tariffs on $125 billion worth of goods. this second amount is really what is key. it is hitting a lot of the big-ticket industries, cars, trucks, steel, and aluminum is where you will see the big hit. could this be seen as a measured response. canada has been talking about doing this since the initial threat. is it possible they are hoping to go back to the negotiation table and have more of a discussion before they have to put the new set of tariffs on in three weeks? there is also the possibility of the fact that trudeau is stepping down in the leadership race and does not call for

something else and is that why we have a few weeks to get tariff goods later. there are a lot of the questions that have not been answered. jonathan: we are not done yet. thank you. on the agenda still on the calendar we have 25% tariffs on steel and aluminum potentially a week away. early april, 25 percent on autos, chips and farmer. julian emanuel joins us around the table. good morning. i will use your words, the sentiment shift during february the type of pessimism, more consistent rather than near all-time highs is nothing short of extraordinary. we are 5% away from all-time highs and yet pessimism is falling off of a cliff. there is no confidence from business leaders, consumers and the people we speak to. either sentiment needs to catch up or the market needs to catch down. julian: two things to highlight it. we looked at bearish sentiment

and that these levels the average drawdown from the high is 29% when you get these levels. the lowest drawdown was 13%. less than 5%. it is really what it is. it is again, as you pointed out earlier, there was not an expectation that we were going to get what we have gotten, that the tariffs are actually on and in place, and to be play -- to be fair our view is that they will not last that long because the damage to the economy is too great. this is classic financial market risk-reward. when you talk to investors, they do not see the potential reward outweighing the risk of being aggressive. lisa: we started saying that people thought it was just a negotiating tool saying that it will not last long and they are still just a negotiating tool. at what point does it become

irreversible on the effect on markets. even if they stay along -- stay on for a prolonged period, it requires a response and supply chains, growth expectations and trade relationships globally? julian: you are starting to see it. the uncertainty is also a function of the geopolitical chess pieces being reconfigured as well. and again, the ism data, incredible. prices paid and elevated in terms of precautionary buying of goods and new orders falling off of the cliff. you already bought the goods. there is a psychology aspect which is very important. i think it is also interesting because if you look back at the original trade war when the stock market backed off, president trump's rhetoric backed off.

the danger here is particularly when you look at 5700 and in our view that is important because that is where the market was on election day 2024. he has never had what we call adverse market to market in 45 or 47. does the rhetoric change in the market is more uncertain. lisa: the test of whether it is still in effect. if it is not, what is the downside? are you becoming bearish or more heightened uncertainty on both sides? julian: we have viewed 20 25 as a continuation of the rally. but with a different character of what we called three steps forward and two steps back, heightened volatility. whatever the baseline was in the vix, 14 or 15. the number is more consistent with the long run average of 19. could you get to a downside

where growth sub 2% and inflation sticky towards 3% without a recession causes the test of a number like 5200? it is not outside of the realm of the possibility. he would treat that as a buying opportunity. when you have this kind of uncertainty, you have to expand. annmarie: we are only six weeks into this administration. if he was to back off he has a boy who cried wolf on every other date in the calendar. julian: that is part of the fact that again, what did he learn from the first administration is that history tells you regardless of circumstances, you are likely to lose the majority in the house in 2018. and we know the way that politics works. they will start running for the 2026 campaign this fall. you have to frontload everything so the accumulated uncertainty is in the first few weeks.

and it has let the chips fall where they are going to fall. jonathan: what you buy stocks? julian: we want to see a little bit more despair. consistent with that bearish reading. yes, the market has acted as if it is approaching despair. but, to us, when you think about all of the catalysts and the speech tonight where clearly he will talk tough, no question about it. you think about the potential for the government shutdown on march 14, which matters now because of the reception of doge. the risk is not quite balanced versus the reward at this point. jonathan: march 19, how does that change that meeting. two weeks tomorrow? julian: i do not know that the rhetoric is going to deviate that much. you know, you might see

downgrades to their economic forecast a little bit. if you are thinking about market confidence, you might want to see a slouch -- a slight downgrade to the inflation forecast and you are not likely to see it because you do not know what the effect of the tariffs are. the bond market is telling you that the inflation problem is not the problem, it is growth. the statistics do not confirm that. jonathan: year end price target, 6800. julian: it is. jonathan: a lot of people made the argument that it was pro-risk and progrowth. trade was going to be a tricky part of it, but it was one piece of a bigger policy platform. is that still the correct way to look at the country? julian: it is. but, again there has to be in understanding how the pieces fit, and the sensitivity around the fact that words clearly,

even before the actions have been implemented have consequences and from our point of view, our guiding lights is that earnings growth still looks 9% to us. we have not moved and we do not anticipate that that will come off of that. jonathan: we appreciate your time. juvenile -- julian emanuel of evercore. look out for tomorrow, ism services, will it confirm the slowdown and then it is onto the jobs data with payrolls on friday. equity futures on the s&p totally unchanged. let us get to your bloomberg brief. >> president donald trump has imposed 25% tariffs on most canadian and mexican imports and has raised a charge on china to 20% affecting 1.5 trillion dollars in annual imports. canada is set to impose phase levies on 107 point -- $1.7 million and china is set to

impose tariffs of 15% on merit -- un-american agricultural shipments. european union will propose extending 150 billion euros in loans to boost defense spending as president donald trump pulls back on american security on the continent. the e.u. plans to activate a mechanism that would allow countries to use their national budgets to spend an additional 600 50 billion euros on defense over four years without triggering budgetary penalties. the fdic is rolling back a biden era policy that requires u.s. bank mergers to face steeper regulatory approval. the bank merger guidance was part of the effort to clamp down on consolidation among financial for -- firms and the fdic is pulling back any plan to enact tougher regulations on brokered deposits. jonathan: more from her a little bit later. next, the president. >> 25% on canada and on mexico.

that will start so they will have to have those tariffs. they cannot come in and steal our money and steal our jobs and take our factories and take our businesses and expect not to be punished. they are being punished by tariffs. jonathan: up next, ed mills as the president of the united states shakes up global trade and markets. equity futures -10%. from new york city, good morning. ♪

(♪♪) (♪♪) what took you so long? i'm sorry, there was a long line at the thai place. you get the sauce i like? of course! you're the man! i wish. the future isn't scary. not investing in it is. nasdaq-100 innovators. one etf. before investing, carefully read and consider fund investment objectives, risks, charges, expenses and more in prospectus at invesco.com you know what's brilliant? investment objectives, risks, charges, expenses boring. think about it. boring makes vacations happen, early retirements possible, and startups start up. that's why pnc bank strives to be boring with your money.

the pragmatic, calculated kind of boring. jonathan: yesterday's session was not just about trade but also about the economic data. "an improvement in the u.s. economic growth outlook will be required to fully reverse the

recent equity market weakness." not turning bullish just yet. equity futures down .1%. the bond market yields are unchanged. the 10 year, 4.1644. the president follows through. >> 25% on canada and 25% on mexico. and that starts. they will have to have the terrace. what they have to do is build their car plants and other things in the united states. in which case they have no tariffs. i will say this to the people in canada and mexico, the people who are doing them are much better off doing here. we are the market where they sell the most. it will be very costly for people to take advantage of this country. they cannot come in and steal our money and our jobs and take our factories and take our business as and expect not to be punished. they are being punished by tariffs. jonathan: president trump

delivering on his promise to hit canada and mexico on a 25% tariff and doubling the levy on china. canada and china responded with tariffs on their own while the mexican president is expected to speak later on today. welcome to the program. we said moments ago that the people who did not believe this day would come now believe it will not last long. what is your message for them? ed: i feel like i have been the paul revere of tariffs this year. i have been like the tariffs are coming and no one has believe me. i think there is an element of this that is absolutely about negotiation and absolutely about using the economic strength of the united states to push our allies in many cases to make changes. and that is the base case. i have also told folks here, expect a lot of these tariffs if it is not a 25% permanently, does it come in at 5% or 10% permanently. bucket one is changing policy

and bucket one is having revenue to pay for policies like the extension of the tax cuts. annmarie: what kind of timeline are you giving for exemptions and the lowering of the tariff rate? ed: it is hard to give a timeline because most if not all of this tariff authority is solely within donald trump's discretion. he can decide at 12:00 today to take it off and he can decide at 12:01 to put it in. clients are expecting them to be exceptions on medical equipment and things for humanitarian aid and things that are going to be specifically important to consumers like energy. we have a lower energy rate from canada. donald trump cares about inflation. but he also wants to be able to show, as we have that joint session of congress and i am not calling it the state of the union, where he is going to push hard and we are going to have reciprocal tariffs, april 1 and

april 2 more tariffs. this is a steady drumbeat that will happen and donald trump turning it on and off will be part of the negotiation. annmarie: what is driving the tariffs are the fentanyl deaths. the president and officials have talked about it. kelly and shaw said that this is the new normal. they seem to be swapping what may be you would use sanctions for for tariffs and this is a new realpolitik. in that sense how do you decipher what is negotiation for natural so -- for national security and what is a revenue raiser? ed: that is up to donald trump as well. donald trump has been very concerned about fentanyl. and with a conversation about china and about mexico, absolutely part of the conversation and absolutely a huge issue that needs to be dealt with. and i talked to my canadian clients, they are not really understanding why fentanyl is as big of an issue.

there have been shipments across the canadian border but it does not actually happen all that often especially compared to others. donald trump will use whatever excuse he has to push forward these tariffs trying to get those changes. it is not quite clear exactly what he asks for. when i talked to my contacts, foreign leaders are concerned about trying to strike a deal with trump only to be embarrassed. look at the oval office meeting with zelenskyy. if you are a foreign leader you say do i actually respond to these and how aggressively do i respond. or if i get to the white house and i think i have a deal and it just evolves, that is a real concern globally. lisa: has there been a shift in tone in this belief being sequenced the -- sequencing and the good stuff comes later? ed: i am at the raymond james institutional investor conference. we have over 1000 companies and investors.

every single conversation i had was is is going to be worse than we expected? we do not have a lot of conviction. there is a lot of angst. ? company by company and they have not disclosed what the impact for them oftentimes because they did not think that this would happen. that uncertainty is a huge shift that concern that it could last. they are hopeful that this comes off in the base case is that the 25% on canada and mexico does not last long. as soon as that gets pulled off, what happens with europe and the rest of the world? those concerns which were completely pushed aside our front and center in every conversation. lisa: how much of the debtors were people saying that they are putting everything on hold. this is a time to wait and see any plans for investment and deals will have to wait until

there is some more clarity? ed: for investors most need to be fully invested so they are trying to figure out where they can hide and what are the opportunities for them to not get hit by a buzz saw on transactions and m&a and on ipo's. and that is a lot more frozen and sluggish than expected. that was a big theme as well as the conversation as what was expected after november and into december. that euphoria, people are like we need to understand where rates and tariffs go and where tax policy is. the long list of trust -- of trump concerns is a new conversation i am having. jonathan: a big change from where we were. ed mills of raymond james. we came into 2020 five incompetence was sky high. we said we wanted to see that translate into hiring an investment. for a lot of people running companies they believe the

prudent decision is to do nothing. doing nothing is showing up in the economic data. inertia is there for all to see. lisa: that is what we saw in the ism manufacturing data and the reason why the services data is important. there is a huge gap between consumer spend and corporate sentiment. corporate sentiment has hung in there until now? has not to shift? jonathan: we will be playing that game day by day, week by week and month by month. the s&p 500 negative by not even .1% following the biggest one-day loss of the year. up next sucharita of forrester on the outlook for retailer's. this is bloomberg. ♪ we're all rock stars. oooo look look at my data driven insights, i'm a rock star. great job putting finance and hr on one platform with workday. thank you! guys, can you keep it down. i'm working.

you people are (guitar noises). hand over the air guitar. i've got another one. our xfinity network is built for streaming

all the stuff people love. how can it get any better? -i'm just spitballin' here, but, what if we offer people apple tv+, netflix and peacock? for one low monthly price. -yes. so, people could stream the shows they love. and we could call it... xfinity streamsaver! mmmmm. what about something like: streamsaver? ooooooo. -i love that. add streamsaver with apple tv+, netflix and peacock included for only $15 a month... and stream all your favorite entertainment, all in one place.

jonathan: this time yesterday we had an equity bounce that collided with weak economic data and tariff headlines. then the biggest one-day drop on the s&p 500 of the year so far. this morning no bounce. on the nasdaq, almost totally unchanged. in the bond market, the front end of the curve. eight consecutive days of low yields, the longest run since march of 2020. when you see runs like that of the front end of the curve it usually means great things in the u.s. economy.

this is off the back of weaker than expected economic data and the expectation there is more weak data to come. i want to talk about crude. near the lows of the year. opec+ talking about reviving output. lower today. wti with a $67 handle. annmarie: there's been a hiatus of this for two years. a lot of notes are coming out. playing it safe with who? the president of the united states in the oval office. jonathan: that is the latest on crude. our top story. canada and china slapping retaliatory tariffs. $107 billion of u.s. goods. china imposing tariffs 15% on agriculture shipments. annmarie: everyone will say we have retaliatory measures for two of the three trumpet higher tariff thresholds on last night. what happens now with mexico?

we are awaiting this anticipated speech from the president. i'm interested when it comes to china. when it comes to china, targeted tariffs on things like soybeans, cotton, chicken, beef, that might hit the president in the heartland where he has his base. that could become a political problem for him. lisa: i was struck by this study by the budget lab at yale. the effect of new tariffs is equivalent to a seven percentage point hike in the was effective tariff rate, levels not seen since 1943. jonathan: there is to how constructive he has been over the last two years. he says it is the first time it is negative in quite a while. tariffs, taxes, doge's austerity. that is why. lisa: they will be a rejiggering tomorrow to mystic production, but how long before it shows up in more positivity? annmarie: the budget lab said tariffs could mean $2000 more on

each u.s. household. the treasury secretary a talking about appointing an affordability czar. what do you think it will give to the white house as a measure to lower the inflationary cost concerns for american consumers? jonathan: when the cost of living crisis kicked in there were questions about whether the administration would remove tariffs. ultimately, they decided to keep the tariffs on china but the conversation started at the white house. lisa: maybe there is a reprieve down the line. the question is, no one has a sense of why the tariffs are being used. are they for national security? a cudgel for fentanyl? bringing back to mystic production? it is hard to know -- domestic production? it is hard to know what kind of tool they are. jonathan: president trump causing military aid to ukraine. a defense department official telling bloomberg trump is

waiting for ukrainian leaders to show a good faith commitment to peace. annmarie: this does not include weapons in ukraine, but any weapons on transit, they are going to get this pause. andrew bishop said last night at cigna this is not the administration's maximalist option. the real tool to harm ukraine is cutting it off from the intelligence. donald trump is taking one more hit to zelenskyy to try to drive him to the negotiating table. they were not happy with what happened in the oval office. jonathan: i wanted to bring the story to you. target numbers crossing the bloomberg. projecting little to no sales growth this year, below estimates in terms of guidance on wall street. the company warning of pressure on profit, citing week february sales and uncertainty around consumer sentiment and tariffs. compare the outlook to the actual numbers in 4q.

numbers coming in better than expected. a eight to the upside for the actual numbers. in terms of guidance, a downside surprise. how much weight can you put on the guidance for a retailer at the moment? lisa: this is a whole bunch of lowering the bar to succeed that bar later on. they talk about meaningful pressure of profit in the coming months with weak february sales attributed to cold-weather. that prompts people to buy jacket and gloves. also uncertainty around consumer sentiment and tariffs. consumers can't omit is key -- sentiment is key between the surveys. jonathan: positive by .6%. this tape with retail, sucharita kodali of forrester joins us for more. welcome to the program. target just about unchanged. tension between the numbers and guidance. how much weight can be put on the guidance at the moment? sucharita: the guidance has been

driving a lot of these retail stock prices. we saw the exact same situation with walmart the other day where their numbers for q4 were strong but they projected weak guidance. if walmart's numbers are going to be weak, it was going to be a foregone conclusion that target was going to have a similar outlook. target is a distant follower in the mass merchandise space. it did really well through the pandemic but has essentially struggled since then. it is not surprising to hear what we did today. i do think that to your point, exactly what was said about tariffs and consumer sentiment are the big issues likely to be depressing most retail stocks for the weeks and months to come. jonathan: do you think tariffs are a scapegoat for a slowdown that already started? is there something else going on here? sucharita: tariffs are going to

affect retailers to the negative because a lot of these tariffs are affecting consumer goods. you have agricultural products in mexico. you have from canada input costs, whether it is lumbar or fuel that are likely going to go up in price. you still have manufacturing and consumer electronics in china. these are all consumer goods. this is going to affect retail. is it going to crush the retail industry? most likely not, because it is going to be on a portion of goods. it is going to be really difficult for the year 2025. we need to wait and see the purpose of these tariffs. is this political theater or is this intended to bring manufacturing back to the united states and reduce the current account deficit?

lisa: are way underestimating or overestimating how much these companies can pass along price increases to consumers? sucharita: it is probably going to be to some degree inevitable that consumers are going to have to face some of the price increases, particularly when you look at agriculture and the grocery sector. the grocery sector simply does not have the margin to absorbable of it. there is definitely some that will be passed on to consumers. in some cases you may see some of it absorbed by companies over time. if you look at consumer electronics manufacturers that are profitable like apple, they may be able to absorb more than a grocer. lisa: there's a question about inventories. we raised this before the earnings call. not seeing a lot of insight into just how much they are adjusting inventories to deal with what is coming down the pike.

what are you hearing about other retailers and how they are adjusting to be a bit proactive? sucharita: it seems what we learned from history is that we don't always learn from history. what we saw during the supply chain crunches in the last few years was that we should be having more resilience in the supply chain, but it is not clear that companies have necessarily managed to have more flexibility, whether they there's diversified -- whether they diversified is much as they should. we have seen off shoring and near shoring to reduce dependency on china. for the most part we still have single nodes of supply. to keep prices down, if that happens to be in china, mexico,

or canada, that is problematic. annmarie: what do these corporations learn from trump 1.0 when it comes to the trade war? sucharita: there was wishful thinking that there was more talk than action. i think that is really what perhaps some of the optimism -- the continued optimism that came through his election was about. the hope it would not affect their industry or it was simply an negotiating tactic. what we see now -- it is still early days. we know there is a lot of uncertainty and things change quickly in a trump administration. we may have tariffs this week. it is likely that in the next few weeks things could be complete different. i think that is adding to the volatility and uncertainty of the market. all we know is what has been announced. the downstream effect on

businesses and an impact on their pricing is still to be seen. jonathan: based on this guidance, is this company effectively conceding that they cannot pass on higher cost to the consumer anymore? is this a change compared to a few years back? sucharita: that is actually the case for some time where the consumer sentiment is largely tied to inflation levels and is largely tied to higher prices. i think retailers for some time now have realized they have limited ability to pass prices -- price increases for consumables and commodities under shoppers. the bigger question is whether or not target believes the u.s. economy is going to be resilient over 2025. what we saw over the last two years is retail spending has been very strong, even in spite

of low consumer sentiment. what is different now is retail spending may actually be down in lockstep with consumer sentiment. that is not a good thing. jonathan: target just about positive and the premarket today. sucharita kodali of forrester on the latest. target coming out with numbers. looking for sales this year and citing risk from trade tariffs. tariffs front and center this morning. there is somewhat of a concession we are not in position to pass on higher costs to the consumer like we were a number of years ago. lisa: that is something we are hearing across the board. you will not get the same price hikes. that said, there are questions but how much they can pass along and where i want to put in perspective target shares are down 10% so far this year. if it is bouncing today, maybe it is on a relief rally. jonathan: down yesterday as well off the back of the straight headlines.

equity futures on the s&p 500 down about 1/10 of 1% on the s&p. an update elsewhere with your bloomberg green. yahaira: recapping earnings, target delivered a disappointing sales outlook for 2025. they expect comparable sales to be flat this year, falling short of what analysts were expecting. net sales are expected to climb around 1%. the company warning of pressure on profit in the coming months, citing uncertainty around consumer sentiment and tariffs. shares are higher in the premarket. china's biggest political event of the year is underway. president xi will unveil the latest stimulus plan at the national people's congress. thousands of delegates and leaders are expected to push china's official budget deficit target to his highest level -- its highest level in three decades after president trump that additional 10% tariff on the country. we end with the latest on the pope. the vatican reporting that pope francis slept well through the

night after they said yesterday the pope had experienced two episodes of acute respiratory failure. his holiness has been receiving treatment for bilateral pneumonia at a rome hospital since february 14. that is your brief. jonathan: appreciate the update. more in about 30 minutes time. up next, he was commodity dominance. -- u.s. commodity dominance. >> we have this wonderful gift that the shale industry gave the u.s. we went from the largest importer of energy to the largest exporter. jonathan: that conversation is up next with dean struyven. from new york city, good morning. ♪ ♪ (background sounds)

investment opportunities are everywhere you turn.

do you charge forward? (background sounds) freeze in your tracks? (♪♪) or, let curiosity light the way. (♪♪) at t. rowe price, we're asking smart questions about opportunities like ai. and how the industries born to support ai might better support us all. better questions. better outcomes. t. rowe price

jonathan: waking up to 25% tariffs on mexico, and canada, 10% on china. the biggest one-day loss of the year so far. no bounce this morning, so far at least. equity futures just about unchanged. 10's at 416s. we are down by 1.26% for crude. under surveillance, u.s. commodity dominance. >> we have this window, this wonderful gift with the shale industry. we went from being the largest importer of energy in the world to the largest exporter. that is a window that will not last forever. jonathan: the latest. oil falling is opec+ moves to halt production.

commodities are front and center in president trump's trade and foreign policies as the ministry -- administration pursues commodity dominance. what happened in riyadh a few weeks ago between three the biggest exporters and producers of u.s. crude on the planet. dean: yesterday opec decided to raise production in line with their schedule bit against consensus expectations. dysreflexia factors. -- this reflects two factors. inventories have fallen. second, since last summer when opec announced the plan, the group is shifting the market to a degree where opec is controlling spot balances and reducing volatility, to now they are discouraging supply growth and supporting cohesion and making sure the compliance

with the cuts is strong enough. jonathan: you did not mention the president of the united states. i will try again. as president trump payroll -- does president trump have a role to play here? dean: i'm bringing additional points of contexts. historically, there have been instances where publicly the u.s. president has discussed oil policies with saudi arabia and russia. in 2020 and also 1986. the problem was that prices were too low for the u.s. producers. we think the current price levels -- we look for brent in the high $70s, they worked reasonably well for the u.s. consumer, u.s. producers, and for saudi arabia and russia. annmarie: he wants to get energy prices lower. bring down the cost of oil. how does he work in bringing down the cost of oil but at the

same time meeting scott bessent's plan for 3 million barrels more at coming out of the united states? what is the price point that is basically worthy of american consumers but also corporations to want to keep drilling? dean: exactly. current price levels are essentially the sweet spot where you have both affordability -- u.s. consumers focus on u.s. gasoline prices. you see a spike in u.s. gasoline once you are above $3.50 per garrett -- per gallon. we are still below that. on the producers side, u.s. crude supply growth slows down more meaningfully when prices

drop into the $60 and brent terms. we are slightly above that level. we are still in a sweet spot. i think you are right. some key members of the administration seem to be publicly more focused on the consumer side and affordability side. other members of the administration also emphasize the need for stronger u.s. exports, a source of economic and geopolitical power which requires prices not to grow much further from here. annmarie: what will be the impact of the 10% tariff on canadian crude? dean: if it is confirmed, we think the burden of a 10% tariff on canadian crude would be borne by canadian producers who would see a sharp discount in canadian crude prices. on the other hand, the u.s. consumer where we would expect a pickup in u.s. refined product prices. a large share of the burden will fall on canadian producers. there are not a lot of alternative outlooks -- outlets for canadian barrels. there are other exports and

transportation mechanisms. the producers would likely be forced to discount barrels. annmarie: we are hearing tough rhetoric from canada. the ontario premier talking about doing anything, even cutting off energy. what would that do to the refiners in the midwest? dean: u.s. midwestern refiners are set up to use the heavy canadian barrels. at the same time you have some bargaining position with canadian producers with limited alternatives. lisa: in the past there have been allies and rivals when it came to the oil patch. are those alliances shifting in a way that could potentially shift the levers you have to watch as you determine what the calculus is behind whether production increases or decreases? dean: we think the key data points are the u.s. customer

where production growth should be solid around current price levels where you can't really afford to fall a lot lower in terms of prices. and, u.s. retail gasoline prices that could be affected by global crude prices but also by tariffs. lisa: in the past it was the u.s. over here versus opec. russia and iran and saudi arabia negotiating and haggling and saying the u.s. is producing without any constraint. has that dynamic shifted fundamentally in a different way? dean: we think there have been instances where russia, saudi arabia and the u.s. discussed global oil markets and discussed what possible price levels and policy levers. in 2020, president trump publicly tweeted that he's convinced opec+ to cut

production to prevent prices from leading to significant u.s. drops. in the mid-1980's, when saudi arabia was incentivizing partners to raise production, the u.s. administration was also discussing oil market policies. if we were to see discussions between saudi arabia, russia, and the u.s. -- markets will need a break from historical pattern. jonathan: tomorrow 25% tariffs on steel and aluminum. what is the base case? dean: we incorporate you have 25% of on steel. aluminum likely later. copper. higher u.s. prices for metals. 100% pass through on the prices of steel, aluminum and copper. production would be mixed with some meaningful upside to u.s. production but limited effect for aluminum where access to cheap our contracts as of

challenge to restarting production at high levels. jonathan: appreciate your time. i'm sure you are busy. everyone is this morning. 25% tariffs on sicko and canada and 10% on china. tomorrow, potentially, according to goldman, 25% on steel and aluminum as well. lisa: which is why people are looking at autos to see if this will hit them in a double with me on all sides, whether it is the production costs or simply where components are coming from, i.e. mexico or somewhere else. jonathan: gm down yesterday but not doing much in the premarket. we will see how that picture changes. up next, the second hour of "bloomberg surveillance." we catch up with stuart kaiser, donald schneider, kit juckes, and the former nec deputy director everett eissenstat. that and more still. ♪ -- still to come. ♪

time delivery. visit for imprint.com. for imprint. for certain goods. let your feet take you wherever your spirit wants to go. the one and only hurricane helps you navigate any surface so you can go anywhere your heart desires. redesigned from top to bottom.

it truly stands alone. now you can walk easier down whatever path you choose. move forward with confidence at hurricane.com. also available at these fine retailers. okay. million dollar deal on the line. you got this. recaps and sales meeting. insights from all my teams calls on. it's you who is man's best friend. for the consumer. >> that's what we will live with for the next few months if not next few years which is the monthly trade policy. >> this is bloomberg

surveillance with jonathan pharaoh, lisa abramowitz and anne-marie hard-earned. >> the second hour starts right now. equity futures on the s&p 500 down by more than a 10th of 1%. yesterday down by them was two percentage points. the biggest one-day loss of 2025 so far. the nasdaq down by more than the s&p yesterday. this morning just about unchanged. waking up to a new dawn of local trade. on mexico -- tariffs on canada, mexico and china. lisa: people receiving a cold dose of reality. it seems like that reality is waking up and taking off soon enough. the question is how much are we seeing a downward move because of the growth data or because of the policy mix. parsing those out getting difficult. >> what we do know is canada has announced tit-for-tat measures,

china has as well. we are waiting on them in mexico to see what the president wants to do. canada's immigration minister said it's a moving target and that is frustrating. they also don't know where there could be a relief valve. jonathan: a distinction to draw about what everyone is saying and what markets are doing. stocks only 5% away from pullback.highs praye in the context of the doom and gloom of the last few weeks only down by 5%. the sentiment has got to catch up or this market as to catch down. something has to give. lisa: when we talk about sentiment who are we talking about. are we talking about consumers, corporate executives. you heard david of goldman sachs yesterday saying he still sees a chance of u.s. recession as

fairly slim. steve schwartzman with a similar tone. these are people who have to run big business and are still investing. seeing consumers bleed into the corporations that have to make these big decisions. >> the chance of it happening aren't zero and the chances went up after the economic data we've seen so far. we came into 2020 five with confidence skyhigh. for consumers and businesses alike. we were hooking into all of these great things, investing higher and now we are seeing some inertia. i think we could sit here and talk about when the tariffs stay on, the impact it will have. it is so early in the data. you are already seeing it in the ism manufacturing. annmarie: overwhelmingly it was about tariffs and those concerns. is trump 1.0 the same as trump to point out right donald trump used to quote and look at the stock market. that used to be a reflection of his policies and his

administration. mike wilson said have you seen many truths about the stock market lately? does he care as much prayed is that going to be a check on some of his policies. jonathan: equity futures negative by 2/10 of 1%. coming up, stewart kaiser of citi. president trump delivers a tear of threats and the former nec deputy director warning a chopping -- of choppy waters still to come looking to recover as tensions continue to escalate. stewart kaiser is watching consumer sentiment writing tariff headlines alone are not insurmountable. the path to consumer confidence is the issue. that process has been stronger, faster and more dramatic. good morning. do these tariffs make it worse? stuart: the tariffs matter but it's the past through economic data and more important for

equity markets we've seen a pullback in retail investor sentiment. a pullback in the inflows into u.s. equity markets. we entered this year with a really strong foundation with earnings growth. the fed you have really big risk reward for policy and things like that. when you see the economic data wobble a little bit you're talking about how firm that is spread it's a different game we are playing and a lot more risky than we had. jonathan: when do interest rates provide support? you wrote in your recent piece we see a three handle on tens which is worse for equity markets than a five handle. when does that mood start to change on that front? stuart: i think you will probably need the fed signaling like they need to come in and we are not near there yet. just the 10 year yield moving lower to the point if it's coming from weaker growth data is not really support for the market.

i think you would need the fed to come in and acknowledge that with the economic data and they maybe want to provide some policy support. the fact is equity markets will be a lot lower if that eventually happens. that is kind of be patient for that to happen. lisa: the market is only down about 5%. rock-bottom among a lot of people. how do you explain that differential? stuart: consumer sentiment is a survey prayed we will have to see that in the hard economic data. the pce data last week was weak. i think this location here is consumer sentiment i think we need to see that flow through probably to the labor market our general view is the unemployed rate is the single most important one that matters. i think its early stages as we talked about earlier in august of last year we did have a wobble in the data already paid the markets been fighting off

her session talk for two or three years. i think there is a little bit of a once bitten twice shy. i think we will need to see that consumer data kind of flow into actual real labor markets. lisa: in previous downturns network revit -- credit driven, credit spreads were a tell. i'm wondering how much this has shifted because it isn't going to be any kind of credit driven selloff. it certainly isn't right now. how much of the financial stocks the tell in terms of that bet on mergers and acquisitions and deals activity falling through. >> the reason the credit market is the way it is right now because court -- corporate balance sheets are healthy. i think if you were to see the bond market impact equities it's going to come from the 10 year down on growth risk or the 30 year on inflation and deficit spending. that's the difference between today and back in 2009. right now it's kind of held by the government. we like, day targets as the

stock performed absently horribly to your point prayed that a risk on sentiment. financials have been totally tough -- unfriendly. the selloff was a bit low. financials were over 2% last week. if you were to see financial selloff and that tells you the institutional investor sentiment has declined i think that would be a red flag. annmarie: how much is the market earning for the other part of trump's policies bring the good stuff, which potentially may not get to the end of the year. >> back in 2017 the order was flipped. we did the good news on the taxes first and the bad news on the tariffs second-grade in my view the next month will be very interesting if you look at the house resolution two weeks ago a trillion dollars in spending cuts, that is a $3 trillion gap that needs to be dealt with. so i do think the budget and deficit headlines reticular over the next four to six or eight weeks will matter. trump does not want to leave

this until december. as you know, once the congressional budget office scores some of these things it will look ugly from a deficit perspective. >> potentially looking at a government shutdown next week. you mention the fact the fed will be focused on unemployment. we have a jobs number this friday, what kind of number do you think there needs to be for the fed to maybe bring up the thinking that they will have to cut sooner? stuart: i think we are a long way away from that. just because we are already at four and having to climb -- they're probably feeling pretty good about things from a labor market perspective. we are probably being able to print those numbers, and you actually see that. the consensus is at 160 with the on and plummet rate staying at four. if you saw like a for one or 42 unemployment rate people step back and say now this consumer confidence tough is appearing in the labor market data so this

around friday is pretty poor. it's going to be yes but if you print the week number it's going to be oh my goodness they've managed to really hurt the labor market. >> the fed knows how to respond to oh my goodness. what they want them to do, what would be a bigger struggle. the target ceo was speaking to the american media months ago and said the price hikes in coming days could be due to tariffs. the pass to the consumers the biggest question we have to ask your this morning. 25% on canada and mexico. additional 10% on china. are we in a different place, are they able to pass on those cuts to the consumer if they try to do they get pushback and what does that mean for topline and bottom-line growth going forward for a bunch of companies. >> is it going to be this idea people are dealing with higher prices of the stores, that stock investors are dealing with profit margins that are comprised across the board or is it yes there will essentially be a little bit of both.

jonathan: you sit down with the economics team, what do they say about that? stuart: the risk on the econ side you describe for the fed in particular is you've got doge/ expense cuts that are negative for growth and tariffs that are on the inflation side so attacking from both sides of the dual mandate. this -- that's what you're trying to figure out. i don't know how many eggs you eat. >> that never makes sense. who has just one egg? >> people eating less eggs, it has to be bad. >> stuart kaiser of city there. >> only if it's an adornment for a dish. then you can have one egg. but other than that, to minimum. >> on avocado toast that makes sense but by itself. i would agree with that. i think minimum three.

two pieces of toast i think that's fair. >> these are first world problems aren't they. let's schedule an update on stories elsewhere. here is your bloomberg brief. >> we start with best buy, shares are rising two .7% in the premarket after its fourth-quarter comparable sales be estimates. 310 bumping it's quarter cash dividend to $.95 per share. best buy expects consumers will remain resilient what will be more value focused as high inflation continues to weigh on them. meanwhile aramco shares or lower after the saudi oil giant slashed its dividend on finances prayed payouts will amount to $85 billion this year down from 124 billion in 2024. aramco reported earnings to weaker oil prices near the lowest level in more than three years.

and nearly 100 thousand california workers are ordered to return to work by gap -- governor newsom starting in july state workers will have to return to their offices for -- four days a week. the 4000 workers are currently required to go into the office at least two days a week with many already required to be full-time in office. that's your bloomberg brief. >> every picture i see of gavin newsom the governor of california always look so happy with himself. lisa: he has very good hair. jonathan: just look so happy every time i see him. some headlines here want to share with you. things of change of the federal reserve so quickly. only a few weeks ago on this program we had this talk under the potential of rate hikes and not rate cuts and now pricing in fully three cuts were 2025. march 19 that meeting for this federal reserve is changing very quickly. now for eight consecutive sessions we are down four prayed

up next on the program following through on tariffs. >> is there any room left to make a deal before midnight, what should we expect the extra 10%. >> no room left. for mexico or canada. jonathan: 25% tariffs on both of those nations. don joins us next. for new york this morning -- from new york city this morning, good morning. ♪

-honey... -but the gains are pumping! dad, is mommy a "finance bro?" she switched careers to make money for your weddings. oooh the asian market is blowing up! hey who wants shots, huh?! -shots?? -of milk. the right money moves aren't as aggressive as you think.

jonathan: this session just beginning to drop this morning. down by one third of 1% on the s&p 500. in the bond market yields lower down by a single basis point on tens. under surveillance this morning

following through on tariffs. >> is there any room left for canada or mexico to make a deal before midnight and should we expect those chinese tariffs to take effect. >> no room left for mexico or canada. the tariffs are all set, they go into effect tomorrow. china had an additional 10. jonathan: president trump hitting canada and mexico with 25% tariffs and doubling the rate on china. canada and china responding with retaliatory levees and mexico's president set to speak later on this morning. tyler kendall joins us from washington. if this is what's on the table now. over the next few weeks there could be more to come. what's on the table over the next month. tyler: ed mills of raymond james told you we are expecting a steady drumbeat and that moving the tariffs up and down is part of that negotiating process. march 12 we are expecting additional tariffs on aluminum

and steel which can impact canada and mexico. april 1 we are expecting reciprocal tariff plans when it comes to the country by country calculations. those go into effect april 2 along with additional goods including pharmaceuticals and chips. this will start to be a tricky needle to thread for this white house when it comes to messaging to the american consumer. i spoke to one republican congressional aide earlier this morning who told me yesterday they saw calls starting to surge to their local offices. not necessarily their capitol hill offices but their local offices embedded in these communities where constituents are asking how tariffs will impact inflation, particularly after that for luminary report that beijing was looking at targeting those u.s. agricultural products. the white house has campaigned on bringing down costs for american consumers. any -- it's against this

backdrop of a broader microeconomic plan that will help to offset these concerns and part of that is president trump's tax-cut using those tariffs as a revenue raiser. the fiscal ops on capitol hill are starting to raise concerns about making his 2017 tax-cut permanent. annmarie: how difficult is the messaging going to be for trump's cabinet. the commerce secretary was howard lutnick signaled it would be tariffs but they may not be as high as 25 percent and donald trump said no more room to negotiate. tyler: this process is evolving. perhaps reporting indicated we asked mexico and canada to up there tariffs against china. it will be a fluid conversation going forward. he's been discussing the consumer sentiment data target in terms of the sales growth forecast. it will come back to the

american public and how they are going to view this white house's policies going forward. jonathan: i keep seeing phrases like wake-up call, reality check, and i think of her consensus is now. it's gone from this would not happen to it will not last very long. i'm not sure that is a wake-up call a reality check just yet. lisa: this is the wake-up call where the lights slowly get brighter. not necessarily the wake-up call -- that kind of thing. jonathan: is that your wake-up call?? lisa: let's move on. jonathan: single egg breakfast. lisa: how did you put that on me? jonathan: this only gets harder if mexico and canada retaliate. is this a plausible justification for tariffs on canada? welcome to the program. can you answer your own question?

don: i don't think there is a clear-cut theory. the fact is that trump believes tariffs are good. he sees him as a win-win. you get concessions on trade and fentanyl or other things. the inverse is you get the reduction built here. it's an economic win. in the case of trump he has the unique ability to declare victory at any time. the criteria is relatively simple. he could declare victory on ending fentanyl shipments. we caught 40 pounds compared to the 21,000 pounds from mexico. he simply likes tariffs and think they will be beneficial for the u.s. annmarie: canada's minister said it's a moving target and that is frustrating. do you know where the target is now? the concessions when it comes to

canada this administration wants to see? don: i don'tdon: think there really is anything on the immigration front. i think it is fentanyl when it comes to the northern border. on the southern border, the illegal border crossings are well below 2019 levels at this point. i think on both of those measures there has been success. what more needs to be seen? trump made comments in the past saying he wants auto production back to the u.s. i think that is -- we are going towards that direction that this is what this is about. bringing production back to the u.s. i think the market reaction becomes too painful, which it isn't, and then he can declare victory and roll the tariffs back and focus on a more product byproduct or a base like steel or aluminum or things like that. annmarie: we have seen retaliation from canada and china. what do you a spec from mexico? don: their response has been

muted. they raised the possibility of tariffing chinese goods. getting creative. is this enough? i do think the nature of the retaliation will be that much different from canada or mexico -- canada or china. the goal is the target products and say they are quintessentially american products that are relatively more painful or sensitive or goods in republican districts. so lawmakers feel pressure and apply the pressure then to trump. lisa: when you talk to clients, do they believe tariffs will stick? don: not up until now. it is a jump ball if people believe they will stay in place. after trump put these -- announced these tariffs, said there is nothing you can do to change my mind it did not implement them people took a much less seriously, either

thinking he got the concessions and said this is what tariffs are all about, you get concessions endocyte said he's worried about the market consequences. either way, people did not believe these were going to come into effect in part because there isn't a good rationale for putting tariffs on our closest trading partners. the reciprocal tariffs made more sense, which is let's threaten tariffs on countries who levy higher tariffs on our products in hopes that both sides can lower tariffs. that is a rationale that makes sense. in this case it doesn't. the market participants are waking up to the fact that trump likes tariffs and they are more likely to stick. even if they do roll offer fentanyl and immigration concerns, there are all sorts of products that trump just wanted tariff and renegotiate usmca. i think we will end with higher tariffs on canada and mexico. lisa: you were the chief

economist of the ways and means committee. you have analyzed these budgets. anyway these tariffs could be less punitive than people are arguing and modeling out in terms of both decreasing growth and on the margins initially increasing inflation? don: there has been great work by the yield budget lab quantifying this. he's 20% on china, 25% on canada and mexico is a tax increase of about $1.3 trillion over a decade. that's about 40 basis points on gdp subtracting year-over-year 60 basis points from real gdp growth. i would say the negative growth consequences in the short run from such a policy outweigh the positive growth impacts of extending the 2017 tax cuts. even some of the smaller progrowth policies they are considering and permitting. -- implement and. it's already -- implementing.

it's already growth negative. we had a 6.5% gdp deficit last year. this is a 40 percentage point reduction in deficits. we are about to expand for choi in dollars in cuts and add more on top -- $4 trillion in cuts and add more on top. it leaves a negative growth picture and sustain high deficits. jonathan: got to leave it there. don schneider of piper sandberg. up to speed on the price action. the market slowly waking up. yields lower for eight consecutive sessions. we are down below 390. traders building bets for more cuts to come. they are looking for three fully priced. kit juckes is up next. ♪ trains. [whoosh] ♪ trains that use the power of dell ai and intel. clearing the way, [rumble] [whoosh] so you arrive exactly where you belong.

mom. mom, look what i got. (laughing) the best way to make family memories in the caribbean is at a place founded by a family from the caribbean.

you think those phone guys will ever figure out is at a place founded by a family how to keep 5g home internet from slowing down during peak hours? their customers have to share a wireless signal with everyone in their area. oooh. you know, it's kinda like when you bring a really big cake for your birthday, and then there's only a little, tiny sliver left for the birthday girl. aw. well, wish her a happy birthday. happy birthday... -it's... ...to her. -no, it's me. have your cake and eat it, too. don't settle for t-mobile or verizon 5g home internet. get super fast xfinity internet you don't have to share. forty's going to be my year.

jonathan: the market rolling over in the last 10 minutes or so. down across the board. s&p 500 negative by .6%. down three quarters of 1% on the nasdaq 100 following the biggest one-day loss of the year so far. the german dax up double digits for the year but down this morning. going into the afternoon in europe. the biggest one-day law since 2023 potentially. yes, 25% tariffs on mexico and canada. europe, you are next. in the bond market, two-year, 10-year, 30-year.

we can make it week eight. 412.85. the front end of the curve, two-year on an eight-day run of lower yields. down six basis points this morning. 388.75. that is the longest run since march of 2020. two hours away from the cash open. let's get some morning movers. manus: the risk today is exceptionalism of the u.s. consumer. walgreens. take me private. see more partners potentially bidding $11.30 to take it private and then break it up. deutsche bank says it will be complicated. talking about the u.s. consumer. target, solid fourth-quarter numbers for the ashlar earnings-per-share is down by 20% year on year. they warn risk and tariffs. weak february sales.

price increases are coming in the next couple of days. that is the reality of these tariffs. you will feel it in your cautious. tesla, china factories -- deliveries down 49% year on year. down 51% on the month. that adds to the pain from germany. 15% of the model y components sold in the u.s. come from, you gotta, mexico. jonathan: manus cranny, what an ugly run for that stock after a massive run up after the election. we will talk about the front end of the yield curve more. traders are bidding we will get three cuts in 2025 from the federal reserve. eight-day move on twos. almost a 40 basis point move lower in the past week or so. lisa: we went to the likelihood of three rate cuts. citi economics says tariffs are dovish for the fed. we expect tariffs to negatively affect u.s. economic activity in

the fed will be considering that. not march though. will this be enough of a support for markets to really get booster risk assets that are falling on risk that this is not just a negotiation? jonathan: the next meeting is march 19. they have to be some forecasts and outlook on the fomc. president trump imposing 25% tariffs on most canadian and mexican imports, braising levies on china to 20%. the president proposing eight tariff on next --a tariff on external agricultural products. annmarie: midnight came and went. tariffs went on. 10% for canadian oil. when it comes to china an additional 20%. two out of the three have responded. we are waiting on mexico's response. they have done a tremendous amount of work in the past five weeks. a flurry of diplomacy to make sure these tariffs did not come

and play. look at the calendar. if you were thinking that tariffs would not happen, what do you think about march 12, april 1, april 2? lisa: i wonder how long the tariffs remain before the is consequences, even not necessarily these tariffs. some tariffs are. is there a sentiment shift of buying american abroad? how does this get translated into longer-term structural trade relationships. it is too early to talk like that but at a certain point even if they come off there are longer-term consequences people are trying to grapple with. jonathan: like a shift in china to some extent? lisa: the consumer preference shift. companies are going to gird against that by shifting supply chain to protect themselves. tesla is a unique story. we have seen this over time with starbucks and mcdonald's, the templates for american consumerism. do we see that again? annmarie: the wall street journal reporting susie wiles

was on a call and addressed and reassured carmakers the admin's we consider carveouts for cars i comply with usmca. the update to the free-trade trade agreement during trump 1.0. howard lutnick may know overtures to their reporting. participants left unsure what trump would do. the conversations have already started. you can potentially see whether carveouts might come to play. jonathan: we have seen limited moves in the past when four hours in autos. we have seen limited moves in foreign exchange for the canadian loonie and mexican peso. we will get to the fx conversation in a moment. up to speed in europe. the eu proposing extending 150 billion euros in loans to boost defense spending as president trump pulls back american security on the continent. countries can mobilize 800 billion euros in defense spending. annmarie: the story is not going away when you have the order last night saying the u.s. military is going to put a pause on some of those weapons that

are supposed to be in transit to ukraine. what if we hear from the incoming chancellor of germany yesterday? an enormous amount of pressure is now on europe to boost defense spending. ursula von der leyen says that is just it. jonathan: a great time to very bad news. let's get you some almost terrible news. a copy and paste error at citi meant transferring $6 billion to a customer after a staffer put the account number into a field for the dollar figure. it was caught and reported the next business day. the story follows from another story we mentioned in the past week. lisa: $81 trillion moving to someone's account. the idea from human error. this happened before. people were secretly relieved this took the pressure off them because $6 billion is a lot less than $81 trillion. at the same time, pay raises the question of manual processes that could be automated. you have to wonder how much this will ask what i debt plan. jonathan: we all want the net

worth to be the length of our account number. lisa: yes. the first of them i not be numbers you would want to have at the front. jonathan: foreign-exchange. traders digesting the 25% tariffs on mexico and canada. kit juckes writing, "the canadian dollar is up despite tariffs arriving. friday's jobs numbers might be important as the u.s. ones." welcome to the program and let's talk about the muted response in foreign-exchange. what gives? kit: the pig response is this is -- big response is this is better growth in the united states. the market is pricing in rate moves -- more than it was. we have seen no shift in consensus forecasts for the u.s. gdp growth. we have seen a series of upward revisions to forecast for this year. what we are seeing is the market

is going ahead away from the economists. strategists are getting negative. traders are nervous. we have a weaker dollar. that protects the canadian dollar. but canadian dollar has been beaten up. it was more of a focus on growth in north america. what is the ism service number tomorrow and the states? what will parables look like on friday? what are canadian jobs going to look like on friday? all the betting on more rate cuts faster is going to need validation reasonably quickly to sustain itself. lisa: are you seeing people expected tariffs to be worse for the rest of the world and the united states? late last year and early this year. and that story has shifted enough people are thinking based on valuations this could be a bigger hit to the u.s. economic growth trajectory based on citations than the rest of the world. kit: we start with the u.s.

exceptionalism position where we are revising the growth forecast for a long time. revising them down everywhere else. talking about how exceptional the u.s. is. expecting higher rates and watching the dollar get to extraordinary heights. we are hypersensitive to anything that suggests actually the u.s. economy might really be able to slow. whether it will slow faster as much as people are contemplating, you have a big position adjustment in the market. a growing awareness of the fact that foreigners own safety $5 trillion with u.s. assets. if they get nervous, that really is a problem. these. stories are beginning to happen the reaction in the market looks big relative to the news so far. that is what happens when your assets are employed. -- argan play. -- are in play. lisa: is a suspending plan

laid out a ursula vanda line today -- ursula von der leyen today? kit: they are painfully close at the moment. we have taken u.s. two-year rates down. there is optimism about the program. there would have been more if europe had a sweeping win for a party and the german government elections last week. it would have delivered an end to the debt break that hamstrings their fiscal policy and is completely ludicrous. that would be a bigger game changer. we have spent the last two years and a -- in a range. we are just drifting up to the middle of it. annmarie: what happens will beget tariffs on the european union -- when we get tariffs on the european union?

kit: that makes me think move to 110 looks unlikely. it anchors us. that is where we have been for a long time, anchored with a very cheap dollar -- cheap euro and expense of dollar. we get a focus on tariffs when we get growth consensus coming through. that keeps us in a range. if i want to go back to the 113 level, the highest it has been in two years, i need some signs of growth helped by easing fiscal policy or anything. i just need growth. annmarie: what about a peace agreement? kit: a proper peace agreement, particularly if i have a peace agreement that we will invest and walk back some of this ridiculously tight fiscal policy, that would be a massive game changer. the regulation and europe would be another -- de-regulation in europe would be another game changer. jonathan: plenty of headline

risk on the horizon. kit juckes there. detention for euro-dollar. if the germans does anything like what reuters is reporting, $400 billion in military spending plus $500 billion in infrastructure spending. euro bullish. we are talking about trade this morning and the prospect of thirst for typical tariff -- reciprocal tariffs hurting europe next month. this is like waking up to a firehose of news every morning. we have 25% tariffs on canada and mexico and most imports from those countries. 10% on china and reaction from the treasury secretary scott bessent speaking to the american media a little earlier, saying this. the chinese export model is not acceptable. this is an argument the administration is made repeatedly. i would say the president has been making consistently for the best part of a decade plus. saying this on the manufacturers in china. the exporters will eat the

tariffs. we know who pays the tariffs, by definition it is the importer. how the cost is distributed is how we will have this debate around the table for the next week, month, quarter, several years. they are trying to make the argue with the chinese exporters will be eating the tariffs. lisa: has an excellent nation for what it will not raise prices for consumers and voters to say this is their number one issue, the cost of living crisis. the emphasis is on the tariffs on china. the emphasis is not on the tariffs on mexico and canada. there are real questions what the rationale is of those because there is not the same kind of bipartisan support as there is for china. annmarie: this is what the treasury secretary has to say. we are in the middle of a transition. pond of to indiana is a great start -- honda moving to indiana is a great start. they will be in agreement when it comes to the trading partners. jonathan: you can be very optimistic and constructive on

the trump agenda. you can say the policy mix is progrowth, pro-risk. we will get there eventually. if we have to concede it takes about two engineer supply-side response, he cannot move a factory overnight. if you implement the tariffs up front all that once, there is a price to pay and the prices on confidence. door is the confidence they will bleed into the hard data. these are things markets have to adjust to everyday. lisa: part of the added uncertainty right now is we don't have a framework of where we are going. is the idea to have all manufacturing done in the united states? for certain sectors? a certain portion that is acceptable and portion that is not? trading partners that are preferable to others? is that consistent or over time? there are questions that are necessary to answer to have the confidence to put parameters of how you even game this out. jonathan: the winner is the bond market. we are rallying again. down five basis points at the front end of the curve on the two-year.

389. an update on stories elsewhere this morning with your bloomberg brief. yahaira: oil prices are lower after opec+ announced it will increase oil production by 138,000 barrels a day in april. it plans to restore 2.2 million barrels a day by 2026. the move may be influenced by president trump's call to lower oil prices despite expectations of a supply surplus later this year. russia has agreed to join the trump administration in talks with iran over issues including its nuclear program and iran's support for the regional anti-u.s. proxies. the issue is raised when president trump and vladimir putin spoke on the phone last month. top officials in both countries advanced the discussions. chinese ev maker byd raised 5.6 billion and the biggest share sale in nearly four years. the company plans to use the

capital to invest in research and development, and expand its overseas business to places like southeast asia, australia, japan, and latin america. that is your bloomberg brief. jonathan: thank you. up next, the trade war. >> they are coming here in huge size because they want to be in the greatest market in the world and avoid the tariffs. if they are not here, they would have to suffer. jonathan: up next, the former nec deputy director everett eissenstat joins us next. from new york city, good morning. ♪

jonathan: what a moment for the global economy for financial markets worldwide. deutsche bank.

delete paragraph of the note. "it is hard to overestimate the scale of change taking place in global economic and geopolitical relations in a matter of days." waking up this morning to the reality of 25% tariffs on canada and mexico. an additional 10% on china. equity futures moving a little lower. building on yesterday's losses. on the nasdaq, down by .5%. the russell down by three quarters of 1%. the bond market. eight consecutive days. 10's and closer to 4%. secretary bessent says we want lower bond yields but on the back of weakening economic data has been the story of the last couple weeks. foreign exchange has been a surprise for a lot of you. we are not seeing big moves. in fact, against the canadian currency, it is stronger, not

weaker on the session. the price action yesterday is quite muted. lisa: part to know what to do and with this given how much has been priced in. this shows how it has shifted to tariffs implying slower growth for the united states, weaker growth, fed response rather than just hurting everybody else. jonathan: under surveillance this morning, the trade war. >> this continues. most incredible path you have ever seen in the first weeks and months of the trump administration of incredible manufacturing coming to america. the keys the president has called that are coming here. they are coming here in huge size because they want to be in the greatest market in the world. they want to avoid the tariffs that if they are not here they would have to suffer. jonathan: china and canada slapping with territory --retaliatory tariffs. mexico's president will speak this morning. everett eissenstat writing,

"business must brace for choppy waters has more actions are likely to come." everett joins us for more. walk us through what you think happens. people who don't believe the tariffs will stay on for very long, what is your message for them? everett: i think they will stay on. the president had an opportunity to delay the tariffs and he decided not to do that. unless there is a change in how canada and mexico are dealing with the fentanyl crisis that satisfies the president, i don't see immediate relief in the near term. i think the tariffs are on for a bit. annmarie: speaking to some sources this morning, they want more private sector growth, less public spending. they went manufacturing back to the united states. how does that work with an intricate supply chain when it comes to an auto sector already under a trade agreement of usmca?

everett: this is pretty incredible honestly. to see a rapid change in the market so quickly with two of our largest trading partners will impact companies in different ways. some can absorb tariffs or put them -- distribute the cost throughout supply chains. others may not have of choice. they are thinking about moving to the united states. the president has a mindset that he's going to do everything he can to facilitate more manufacturing investment in the united states. the tariff action is part of a larger picture of deregulation, investment incentives, and perhaps tax cuts to draw manufacturing back. this is the first part of a long story. i think we are in for some choppy waters in the near-term. annmarie: i was invited by a source this morning that it trump -- in trump 1.0 there were exceptions. do you expect that to happen

this time ? everett: there are some products we cannot get in the united states. we don't produce them. for those i would think it would seem to make sense to include exceptions for those products. there's no reason not to. i think we will see. another thing to keep in mind on top of the tariffs that went into effect last night, we have this deal -- the steel tariffs on march 12. they will cover more products. they will be difficult to administer. over time as these begin to resonate throughout the economy, there are going to be calls for some exceptions. even if we have got exactly what the president wanted, to get all manufacturing back to the united states, it can't happen overnight. it would seem a delay to enable some manufacturing to come back would make sense. to date we are not seeing that we have to see how the tariffs

resonate throughout the economy and what kind of feedback members of congress get and others in the administration about how they are being implement it. -- implemented. there is a demand,'s exception for products coming into the united states duty-free under $800. the president had taken that demenimus exception away. they had to walk back on that. i don't know if we will see something similar but we may see that in certain sectors for certain products. jonathan: got to leave it there. good to catch up. everett eissenstat, former nec deputy director on the trade effort in washington, d.c. this from mohamed el-erian. talking about the difference between the impact on prices and the pass-through effect, the inflation effect. the gap being shorter this time around. the inflation expansive

2021-2020 teaching companies in corporate america a difficult lesson. to move more quickly. he mentioned this a few times. he thinks if the tariffs go on, if they can pass the cost to consumers they will do so way more quickly than they did a few years back. lisa: their condition to be flexible. how often do we hear about a flexible pricing scheme. prices i can change according to the demand in real-time. you have to imagine they are going to be able to respond more quickly. if they can pass it along, they will. annmarie: then what will happen in the polls? this could be politically very difficult for this administration thatwo they believe won on immigration and inflation. jonathan: we will catch up with omar aguilar, john murphy on the automakers, michael gapen and jason draho of ubs. this is bloomberg. ♪

♪ (three little birds remix) ♪

♪♪ [breathing of man through a mask] [woman exhaling] [flames crackling] ♪♪ [water crashing] [scrubbing] [salt falling] [fire crackling] [cheering] [flames roaring] [liquid flowing] [water rushing] [water droplets falling] [water falling] [water running] [wind ruffling] [waves crashing] ♪♪ [seagull screeching] [waves crashing] [frog chirping] [birds chirping] ♪♪ [waves roaring] the way i approach work post fatherhood, ♪♪ has really trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

>> the idea that this tariff as a negotiating tool is to

consensus. >> we don't know what will happen. >> the president seems to be far more serious on terrorist in the consensus. >> i don't think anybody knows but the president. >> people are not sure exactly what to expect. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz, and annmarie hordern. jonathan: i've lost track of my times i've said this, the most fascinating time in the markets since the pandemic. we are lower by .75% on the nasdaq 100. yesterday, the biggest one-day loss so far as the president says tariffs are going on and there isfor negotiation. 25% on most imports from canada and mexico. in the bond market, a bid in the front end of the market. eight consecutive days of lower yields. down four basis points on 2's. 10-year, 4.15.

the surprise in foreign exchange, the canadian currency is not seeing a ton of weakness, actually stronger this morning. the focus of this market over the past few weeks, and you can take our opinions out of it, the potential for soccer growth in the united states of america. that has been the shift in the bond market. lisa: last year and this year, it was the idea that everyone was hurt more than the u.s.. now the u.s. could be hit as well. people parsing through how much this is weakness we saw before the tariff talk started ramping up, seeing in the data. neil. i that point -- neil dutta would make that point. jonathan: this is what we have this morning. we can talk about what can change over the next month.

25% on imports from canada and mexico, an additional 10% on imports from china. next week, 25% potentially on steel and aluminum. early april, talking about reciprocal tariffs, 25% on autos, chips, pharma, and then throw in some ag products. annmarie: as well as lumber, copper. we have that report coming out when it comes to unfair trade practices they deem necessary for those reciprocal tariffs that president trump says is coming april 2. what i find interesting about all of this, what he said yesterday, there is no room left for negotiations with canada and mexico. analysts still think, how long can this last? at some point, there has to be negotiation at the end of the road. jonathan: this is a 5% pullback on the s&p 500. 2018 was worse than that. is this what it will take, a

repeat of 2018, to get the president and other officials to think about a shift in policy? lisa: he is winning if he looks at the 10-year, if that is their metric. people are wondering if the stock market is still the barometer. nvidia down incredibly hard. you look at the pockets of pain. this is what we were talking about earlier with stuart kaiser, a question of how long you can expect this broadening out to continue if you believe that growth is slowing. jonathan: yes, rates are lower, yields are down every week of the trump administration. the treasury secretary talked about it. crude is lower, something else they wanted. it all of this by design? they want consumer confidence to gap lower, weak retail sales, new orders in manufacturing down, employment to contract? lisa: if you take a step back, lots of questions about what the

ultimate goal is. if you have a reduction in consumer confidence and markets, reduction in tax receipts, which makes it more difficult to achieve the closure of the budget gap, there are questions about what the ultimate order is with reordering the global trade system and the most dramatic way we have seen since pre-world war ii. when people say this is an historic moment, this is historic for markets and trade relationships. annmarie: or is it pushing the hand of the fed to cut payment traders know saying we could get three this year. jonathan: i thought march 19 would be a snooze. i was wrong. the next meeting will be very entertaining. this hour, catching up with omar aguilar, john murphy of bank of america on how the levees will impact autos. michael gapen on downside risks to the labor market. stocks coming off their worst session so far this year.

omar aguilar writing, terrorists have the potential to raise inflation in the short run and slow growth in the long run. the impact would affect low income households more as goods imported are not discretionary items. welcome to the program. the facts have changed, we have new tariffs. has your view changed? omar: uncertainty is the name of the game. the discussion about the slower growth is actually more real than it was even a couple of weeks ago. when you look at the u.s. economy, i would probably say the good news is we started the year on a very strong u.s. market and economy. that seems to be the support we have by dealing with this level of uncertainty with these unprecedented changes in the global trade. a big part of the shift is also the barometer is on the 10-year yield when we went from

discussing term premium and inflation expectations to now, 10-year pricing and a lot of the potential low growth going forward. jonathan: the isn came out yesterday, the headline was just about ok. prices paid started to pick up. new orders started to drop, employment as well. do you believe we could see that reflected in ism services tomorrow, payrolls on friday? how long before this starts to hit the hard data? omar: the employment report will take another cycle probably. a lot of what we are seeing that will not necessarily reflect what has occurred in the last couple weeks. i also think that will be a critical data point going into this report and the next report, potentially for the federal reserve meeting coming up. if anything, the fed will be paying a lot of attention to the

labor market dynamics to decide what they will do next. the chances of a fed cut in march was actually very low. our point of view was that there was not going to be any changes. we still believe the chances of a cut are still early, but that being said, potential changes of more cuts down the road has a higher likelihood as opposed to what it was before. i think the manufacturing numbers will continue to deteriorate and a lot of what we've seen already, what we saw on the atlanta gdp numbers estimates, actually everything is going lower. lisa: at what point do fed rate cuts make you more optimistic about assets? omar: there is a big difference here. when you see the fed cutting rates as a mechanism where they see inflation going on the right direction, going, economic growth in the right place, that tends to be very supportive for risky assets.

what we are talking about here, the fed will not change their view, reducing rates not because of inflation going down but really because they see the economic deterioration, which is not the best case for risky assets. risky assets to better when the fed does that more so because the economy is going in an expansionary way as opposed to providing liquidity and stimulus to an economy deteriorating. lisa: we have seen this huge shift in fed rate cut expectations, what the policy will be from the white house. how much have you shifted your allocations, specifically within stocks? omar: we have gone with what we call a more risk off, reduction of risk strategy. we believe for the next, especially in the short and medium-term, a significant level of volatility in risky assets as well as bond yields. that is not necessarily the

worth the risk to take big positions in one way or the other. when you actually look at the range of what we are seeing in the 10-year yield, being almost at five to now almost at four within a few weeks, that level of bond yield volatility is something that we would like our clients to stay out of, stay close to their benchmarks, close to their long-term objectives. our strategy has shifted to be more conservative and trying to use volatility as a mechanism to rebalance their portfolio, look for ways to stay close. emphasizing quality is part of it, emphasizing dividends, something we didn't do last year, but those areas that are more defensive in nature, as opposed to taking more opportunities that are speculative. annmarie: if market participants were complacent and thought these tariffs were not going to

come into play overnight, do they need to start pricing in every single tariff threat we hear from the oval office? omar: i don't think everyone will be taken in the same area. the effects that we are seeing now are still not priced into the market completely. specifically the amount of levees that have to be put in place mexico, china, canada. we are talking about a $1.4 trillion potential impact. that has an impact on gdp. the area that has not been fully priced and is on earnings estimates. in our point of view, they are still pretty high. to answer your question, a big concern is a lot of the earnings estimates that we saw during the last earnings season, they still did not put into consideration the potential impact of what that may do for tariffs going forward. we think there is still a lot to be priced in.

it will take a little while. it will probably be faster than 2018. the mechanism where these tariffs will have an effect on gdp or the economy, earnings will come in faster into the market than 2018. jonathan: appreciate your time, omar aguilar. it is such an amazing moment for so many reasons. nobody believes it. hardly anyone believes this is happening, 25 percent tariffs on canada and mexico. we talk about a concept with foreign policy mutually assured destruction. that is what we have got. it is in effect overnight. we said this a few times on the program, the people that thought this day would never come to think that this will last long. when does the reality check come? we have to wait for the data, the consequences. this morning, this is not a big fallout in the equity market.

within five percentage points of all highs on the benchmark. we have seen a big move in the bond market, but this is not the wake-up call just yet. lisa: there has to be either a lack of response to the white house as this drags on for a longer period of time, but there has to be shifting in the supply chain from these manufacturers. i keep on going back to the idea, if you want to read supply chains in a dramatic way, do you do it slowly the way that scott bessent was talking about or do you do it all at once? curious to hear what ceos have to say. annmarie: you have to bring up the trade negotiations so early on because they are looking ahead to the midterm elections in 2026. you have to do the bad things early on, get it out of the way, and they deliver on the good policies that could help individuals, small businesses, the regulations. jonathan: it was always going to be about the sequencing.

let's get an update on stories elsewhere. here is your bloomberg brief with yahaira jacquez. yahaira: we start with a rundown on president trump's tariffs, 25% on most canadian and mexican imports and has raised the charged to china to 20%. this all affecting $1.5 trillion in annual imports. canada will phase levees on billion dollars of u.s. goods, and china will impose tariffs on up to 15% on american agricultural shipments. goldman sachs ceo david solomon says there is a very small chance the u.s. economy enters a recession amid global trade policy uncertainty. despite the optimism, he also warned investors should carefully monitor how the credit cycle is impacting lenders and changing behavior. citi almost transferred to about $6 billion to a customer's account and a copy and paste

error. it happens when a staff member copied and pasted the recipients account number into a field meant for the dollar amount. it happened last year in april, at the same time that the bank accidentally credited $81 trillion to a different client. jonathan: thank you. citi is not having a good run of stories over the last week. up next, morning calls, john murphy on how automakers are gearing up for tariffs. equity futures are near session lows. down .75% on the s&p. this is bloomberg. ♪

jonathan: close to session lows

on the equity market, negative by zero .7% on the s&p 500. rally at the front end and the backend. down a single basis points on 10's. let's get your morning calls. deutsche bank downgrading jetblue to a halt, saying it's exposed to a soft patch that will weigh on travel demand. your second call from morgan stanley reiterating it's overweight you on target after earnings, saying company got its looks better than expected. that stock falling by 2.5% in early trading. bank of america cutting its price target on tesla to 380 citing rising risks. that stock is down by more than 4%. autos bracing for the impact of president trump's tariffs on canada and mexico. john murphy writing 25% on every good coming through the border,

the auto industry would be burdened by an incremental $50 billion plus in costs. john, good morning. we will get to whether people believe it or not. what do gm, ford do today? john: everyone is in a state of shock to start off, but they have been game planning this for a while. this is essentially a supply shock. we have gone through that recently with covid. you think about that playbook, and when you look at what they will do, they will focus on the vehicles where they make the most money, not produce the lower end vehicles to start. then there will be a longer period of trying to understand if this will stick, how to rework supply chains, if it does stick. jonathan: do prices go up immediately? john: i think you'll see a shock to the system. our estimate with that $50

billion cost increase, you do vehicle on average would go up about $3300, varying degrees. i think we will see some prices rise pretty quickly. lisa: there is a believe that this will not happen because it would hurt these auto manufacturers so much, detrimental to the popularity of the president. how long do you think it will take before we see the ramifications of that? john: we are looking about 50 day supply on vehicle lots. beyond that, you have a couple of weeks of inventory in the channel can be worked through. probably looking within the space of a month, real disruption in vehicles getting to the consumers that want them. the other thing that's important, at the front end of the value chain, over 3 million

jobs affected by this, a lot of folks that you're here in the political sphere talk about, we just have to take the pain in the short run. but those 3 million people have to pay for their kids, food, mortgages, and quickly you hear this echo chamber hopefully from these folks, listen, we have to put food on the table, we have to pay rent. hopefully there is push back quickly from red and blue states throughout the country. annmarie: i am sure that uaw is first on the list wanted to talk to the chief of staff. the administration is saying, scott bessent this morning, honda moving to indiana is a great start. they think this is necessary pain to get more jobs in the united states in the future. how long can that last? john: i think you can see a rebalancing, reshore of some production especially at the assembly level into the u.s.

the real question is what is the endgame? to stop illegal immigration and drugs, bring jobs back to the u.s., or is it to garner more support for political theater? difficult to understand where they are going with this. if they would explicitly say, if we bring more jobs back to the u.s., more manufacturing, that is our endgame, companies would know how to proceed. i think we are seeing some reshore in a production to the u.s. and north america, but once again, shutting of canada and mexico is difficult to do because it is a contiguous supply chain that's been set up for decades to be very efficient. there are lots of parts and mexico that you cannot get americans to make cost-effectively. it would be a higher cost, higher than 25%, to bring it back to the u.s. annmarie: also the renegotiation

of usmca next year. if tariffs stay in place, what is the point of usmca? john: i think that is what is going on, trying to get it done as fast as possible. lisa: if a these goes on, essentially, it could be the equivalent of all the profits for the auto manufacturers in the united states. which do you think are most exposed, is this basically parsing the details on a titanic that is sinking? john: very good question. ford, 20% of their production is in canada and mexico. gm, closer to 30%. nissan and monster are the most impacted because most of their production is in mexico for the north american market. when you look at this, supply shocks in the past, it is essentially an environment where distress is created. in distress there is

convergence, meaning everyone will get hit hard. you are right. there will potentially be greater pain with nissan and mazda. but when you think about this, jim farley had a great statement last time around, a few months ago. vehicles coming from japan, korea, europe are being tariffed at around 2%, 10% even on a reciprocal basis if these other tariffs are put in place, but those coming from mexico and canada are 25%. it advantages the folks importing from japan, europe, and korea, shows that this is not a holistic discussion and framework for tariffs or the entire world in the u.s. at once. there are some oddities here with 25% on canada and mexico, maybe 10% on other imports. very odd structure. jonathan: we will talk about

that in a few months time. you mentioned echoes of the supply shock from the pandemic. stocks were up big time. what is the difference this time around? john: the difference this time around is cost for them will go up significantly from their suppliers. you are going to focus on the higher end products, incremental margins where you can barely break even, small margins. with that, you will see much higher costs passed on to the automakers. the benefit to their profits will be far less than what we saw then. jonathan: you said something interesting that is still rattling in my brain. these tariffs may not be high enough because for some automakers, they would be better taking the 25% and staying in mexico. john: you cannot make certain parts viably or profitably -- jonathan: more expensive to make here. john: the reality is, vehicles

and a certain parts would be made, so certain vehicles wouldn't be made and we are looking at a smaller market, which would put that gdp at risk, 3 million jobs at risk, which is tough to stomach. jonathan: thanks for making it clear for us. john murphy of bank of america on the automakers in the united states. what a tricky moment for those companies. lisa: they have to think about their supply chain and it may not be cheaper in any capacity. jonathan: still so many people out there just don't believe this lasts very long. we have an address from the president to the joint session of congress. coming up, michael gapen of morgan stanley, jason draho of ubs. this is bloomberg. ♪

jonathan: taking another leg lower, 60 minutes away from the opening bell. on by 0.8% on the s&p 500. close to 1% on the nasdaq 100. russell down two point 8% yesterday, done by 1.2% this morning. with your morning movers, here is manus cranny. manus: we have walgreens boots, looks like we have a potential deal between sycamore partners taking the company private. this is a $10 billion take

private deal. what are the consequences? possibly a breakup. it will be complicated. target, get ready, the price rises are coming. price increases in the next couple of days. the reality of cross-border moves. tesla, 15% of the parts for the model y sold in the u.s. come from mexico. you just had some staggering facts on the auto sector, 4% gdp, millions of jobs. i should also say, chinese sales grubbing 49% in february. jonathan: thank you. i want to pick up on target. if they want to pass on higher cost to the consumer, lisa, are those costs going to be borne by the consumer, or does the consumer pushback?

lisa: they are talking about potentially raising prices in the coming days. this is immediately passing it through, and immediate test of what that appetite is. jonathan: economic data will be key. ism manufacturing was weaker than expected. prices paid up, new orders down, employment contracting. will the data this week confirm that? ism services tomorrow, jobless claims thursday morning. friday, payrolls. then we start to talk about this one more. two weeks from tomorrow, march 19, federal reserve meeting. in that meeting, they had to put out some forecasts. mike mckee, march 19 just got more interesting. mike: certainly did. i'm not sure they can give us much on march 19. this is just the first of a series of tariffs the president has threatened so nobody knows exactly what the impact will be on the u.s. economy.

we are looking at basically the playbook from 2018 when fed staff wrote about the trump tariffs at that point, so that they would have a negative effect on the economy. higher cost of imported consumption goods depresses household spending while business spending declines, both as a result of the higher cost of imported capital goods and is lower expected profits because corporate borrowing spreads to rise. the fed staff at that time said there were two possible ways for the fed to react. one, they could raise interest rates because inflation is likely to rise given prices will go up, as we been hearing all morning. or they could look through the price rise, expecting it to be a one time thing, prices spiked but then they stopped rising. but the concern was maybe they don't. in particular, staff said at the time, inflation, inflation

expectations may run persistently higher if the tariff hike leads firms to raise their wage demands or firms to raise their markups. that would be intensified in a tight labor market, which we have right now. at this point, it looks like it will have an impact on inflation, but what the fed does about that is still an open question. we will get the first answer this afternoon. i'll be sitting down with john williams, the president of the new york fed, vice chairman of the open market committee. the vice chair usually doesn't decide to, so where he is. jonathan: 2:20 eastern time, don't miss that conversation. michael gapen of morgan stanley joins us now. much has changed for the federal reserve on march 19? michael: a lot, as mike mckee pointed out correctly. it really makes for a tricky situation.

there scenarios would say eventually we will have to cut rates to support activity. in the near term it pushes inflation higher. we just had inflation well above the 2% target for several years. they have betrayed these two signals on. they want to look through that inflation, but they will not be able to in real time, because if these tariffs stay and, you could see a pce inflation go up three times, up to .6. so you would have a major move higher after being at target. they cannot just look through that. they will have to wait and pause. ultimately, they would ease, but there is a taunting element here. jonathan: the activity piece of it is more interesting from our perspective. higher prices was always going

to be the risk. it was whether the consumer could absorb those higher prices. target was in the media earlier, the ceo saying we will pass on these costs almost immediately in the next couple of days. best buy, tariffs are likely to raise prices and will reduce sales. that is the interesting piece to me. if they put up prices, is the consumer in a position where they can absorb them, or do they pushback? michael: i think they absorbed them but only by buying less. this is the whole argument. tariffs raise the cost of trade, so in the and you get less of it. it is not just that consumers pushback, prices go up, the consumer buys less. that is what ways are growth. if sustained, these types of tariffs could shave maybe even a

full percentage point of a growth. if firms pass it along, it is a tax on consumption, so you will get less. the growth effect will be substantial again if they are sustained, will face into the economy over time. maybe not immediately but you'll see it within three or four months in the activity data pretty clearly. lisa: i'm wondering if we have a sense of where we are now concretely in a way that does not necessarily hinge on what could have been. in other words, are we seeing a true softening in the overall economy, consumer willingness to spend or is this just a seasonal soft batch? michael: up to the data that we have inhaled, we would argue, i would argue that what we are seeing in the january data is just payback from a very strong fourth-quarter. consumption was running 4.2% or so. durable goods consumption at 12%

on an annualized basis. that is way above where it should be. just a snap buying of autos after the storms in the fall. right now, we would see the data on hand tells us it is a payback, not a turning point, but it is hard to look forward and say that is why everything is ok. these types of tariffs, restrictions in immigration, the school preprint -- fiscal blueprint coming out of the house that calls for cuts in federal spending which are transfer payments to households, a lot of things could stack up and say what looks like payback in january turned into something softer over time. we believe that. that is the crux of the problem. the january data is backward looking at this point. we have a bunch of things stacking up, whether it is the labor market or consumer spending or spending.

the next five months are likely to contain a much less robust set of data for the economy. lisa: markets are moving quickly in terms of sentiment. people often describe the economy in the u.s. as something of a barge truck to shift gears, slow down, and it will take a while before it meaningfully hits the underlying dynamism of the united states . do you think that's true? even if these tariffs stay on for a while, if they are removed later this year, we could see recovery of any other kind of loss we would have seen? michael: i think that is generally true. tariffs are inflationary, but i would say it hits trade and manufacturing relatively quickly, it is just that those two things are a smaller share of the economy. to see it more broader based,

you need those spillover effects. that is what takes time. you can make the argument, the more forcefully you move on tariffs, the more widespread they are, maybe you get those effects frontloaded. moving supply chains now is probably a lot harder and more costly. some of the low hanging fruit on that has already been picked. i would say that is right on first blush. it will take time. maybe it is different this time. the models are helpful. we will see how it plays out over time. jonathan: we appreciate it, michael gapen. we are seeing this play out with the mexican president. we were waiting for claudia sheinbaum's response to this, 25%. a news conference just started with the mexican president moments ago. she says there is no justification for u.s. tariffs on mexico, also saying her government delivered on issues around fentanyl and security of the southern border. the pushback just beginning. annmarie: she has not decided

what they will do in terms of the retaliation. we know they have a few options, but she is upset right now, because there has been a flurry of diplomacy between u.s. and mexican officials on what they could do. they extradited 21 cartel members to the united states, put more money toward the border, cracking down on fentanyl. but last night coming from said it was not enough, negotiations are over. jonathan: let's continue the conversations around the table. jason draho of ubs joins us now. a change in the tariffs. is there a change in your outlook? jason: not yet. the issue is trying to figure out how long they will be on. it has been a fast-moving situation, so we try to understand what we can. a pretty good economy. ultimately we think the fed will cut, terrence may come back. jonathan: how long do they need

to stay on to see some damage? jason: if it is a year, that would change the outlook. jonathan: a year, we are down 20% on the equity markets. when do we start to care about this? jason: i would look at this in the context of the other policy going on. there could be further doge cuts. for the next month or two, there will be an air pocket for the economy, the question is how much. how much does the administration say, we can renegotiate now. as we do that, we can suspend the tariffs. the next four weeks will be a telltale of whether they can go longer or whether they want to pivot at that time. lisa: are you starting to question how much momentum the economy has going into an air pocket given we have seen some weakening data before these tariffs were put on? jason: look at the consumption

data we got last week. personal consumption was below expectations. real consumption was down 0.5% month over month. expectations were flat. you're over your numbers are still around 2.5%. second half of last year, americans were spending in the fourth quarter. some pullback in january when it was cold. like last year when inflation was soft. we also know that real income grew 0.9% month over month. if real incomes are growing at 2% this year, that will support the labor market. as long as incomes are growing, we can handle this ok. lisa: when we came into the year, so many acid allocators talking about policy uncertainty in how they had to go back to the fundamentals because there was so much uncertainty. is there still policy uncertainty or do we have more certainty? can you take what we have gotten

as more of a template as to what will come, make some base cases? jason: the view for most investors is we get these reflationary policies, tax cuts, deregulation. right now we are getting tariff s, maybe tax cuts later on. will the administration say we are willing to tolerate pain? secretary bessent said that. there is a trump put four treasuries more so than equity markets. they need eels to go lower, they want inflation to go lower. some might say this is a policy error, but for them this may be a part of the strategic strategy. they are willing to take the pain now. i think the markets are underestimating that possibility. maybe the way we are thinking about this administration is wrong. annmarie: the treasury secretary

excited about where yields were. today, wti is down 1%. what is the pain threshold they are willing to accept when it comes to equities? jason: that canoes will probably correlate with economic data. if you see job gains below 100,000. unemployment rate ticks up, if you see inflation going higher particularly for goods that people buy on a regular basis, then it becomes a political problem. that becomes more of an issue than the stock market. i also go back to 2018. not fun times in the market, but the s&p fell 14%. there was a lot going on. including a government shutdown. that is clearly not the case. jonathan: 5% pullback is not going to get it done.

what a tricky moment for the global economy and for us to work through. let's do two things. let's talk about what we have got in how these countries are responding to it. we have 25% tariffs on mexico and canada on most of their imports, 20% now on china. the response we had from canada and china is as follows. canada imposing levies on u.s. goods. china imposing tariffs of up to 15% on american agricultural shipments. moments ago, we learned this from mexico. the mexican president saying we will announce countermeasures on sunday. so you'll get those countermeasures on sunday, but you've already had quite pushback from the mexican leader. there is no justification on tariffs on mexico. regarding the issues around fentanyl and security, she says her government has delivered. annmarie: they did a lot of work that the administration was

asking for. meeting with individuals like the commerce secretary, the border czar to do more about what the administration is concerned about. what is most interesting is the date, sunday. she is giving trump and his team five days to potentially come to an agreement before she comes out with her plan of retaliatory measures. jonathan: we talked about muted price action in foreign exchange, as that pushback happens, you have a weaker dollar peso. let's get an update on stories elsewhere. here is your bloomberg brief with yahaira jacquez. yahaira: arab leaders will gather in cairo to on their gaza reconstruction plan. the plan faces major hurdles including this agreement over palestinian governments of gaza and the future of hobos. overshadowing it is the risk that fighting resumes between israel and hamas after a cease-fire expired on sunday.

traders are added to bets on interest rate cut from the federal reserve as worries grow about how you as tariffs will weigh on growth. money markets have moved to three full rate cuts this year for the first time since december. starbucks has named' nordstroms kathy smith as their new cfo. she has served as treasurer at nordstrom since 2023. shares are up slightly. jonathan: thank you. the opening bell is 43 minutes away. next on the program, we will count you down to president trump's joint address to congress. equity market lower by .6% on the s&p. from new york, good morning. ♪

the best ai assistant isn't one that knows the whole world. it's one that knows your world. a custom assistant, built on watsonx with ibm's granite models, can leverage your trusted data, be easily trained on your workflows and integrate with your apps. it can be tuned to do just what you need. because the more ai knows about your world the more it can help you do. ibm. let's create.

♪ smiled with the rising sun saying... ♪ sandals jamaica sale is now on. from $199 per person per night. visit sandals.com.

jonathan: here is your market picture. 38 minutes away from the opening bell. equity futures lower by 0.7%. rally at the front end and a long and. 4.13. this is week eight a lower yields in the bond market. in consecutive weeks on the 10-year maturity. 9:00, look out for this, president trump delivering his joint address to congress. tomorrow, adp private payrolls, ism services index. thursday, another round of jobless claims. friday, the job report, and comments from jay powell. here is tyler kendall from the nation's capital for more. what are we looking for later? tyler: according to the white house guidance, they are

allocating two hours for president trump to be on capitol hill. we can go through all of the big themes but no. the economy will be front and center particularly against this tariff backdrop. president trump will try to convince the american public and lawmakers that his economic agenda is working. up to this point, most of his actions have been unilateral, but soon he will need congress to get more of his fiscal items over the finish line. right now we are already starting to hear concerns about making his 20 tax cut plan permanent, as well as concerns to spending programs such as medicaid. we will see if he addresses any of those concerns. and we are 10 days away from a potential government shutdown. the economy no doubt will be a top focus on both sides of the aisle. we will also be closely watching the democratic response. it will be a late night here in washington.

lisa slotkin of michigan will be delivering that once trump finishes. annmarie: excited to make my way down to d.c. after the show to join you. we may hear a lot about the economics from president trump, but what about the foreign policy side, considering they are now pausing weapons in transit to ukraine? tyler: i spoke about with the democratic response will be eight. we will see what the european allies response will be after the speech tonight. you mentioned this pause in shipment, it was not clear how many weapons have been passed when it comes to military aid. what is clear, anything that was in transit has been caused, including in poland, where those weapons are being stored before heading to ukraine. big questions there as ukraine and european allies try to forge a way forth with this white house to get those negotiations back on track. jonathan: look out for coverage from later -- from the team later on this evening.

deutsche bank with this note, the window is open. they say the market has now entered the window where you need to start pricing and policy not aligned with the administration, prioritizing economic growth. they go on to say, the longer time goes by with no reversal, the more u.s. and global growth the downside we have to price in. we are taking this day by day, week by week. lisa: which is why i'm waiting for the downgrades. everyone is feeling like maybe you have a different parameter for what this administration will look like. at what point can you take away the trump put, when scott bessent said this morning, over the medium term, which we are focused on, wall street has done great, will do fine. we have a focus on small businesses and consumers. annmarie: keep a cool head. that is how claudia sheinbaum just ended her address. we will keep a cool demeanor

when dealing with the president of the united states. but she said on sunday, tariff and non-tariff measures. jonathan: not looking at a 5% pulled down on the s&p 500. much bigger pullback in the bond market. lisa: what would it take for them to care? at what point are yields lower not a positive signal that reflects slow growth? jonathan: more data tomorrow and through the week. we will catch up with peter tchir, bob michele of jp morgan, and congressmen french hill of arkansas. what a change for the global economy. will these tariffs stay on? people are still asking these questions. are we living in denial? 25% on mexico and canada, and additional 10% on china.

from new york city, thanks for choosing bloomberg tv. this was bloomberg surveillance. ♪ the way i approach work post fatherhood,

has really trying to understand the generation that we're building devices for. here in the comcast family, we're building an integrated in-home wifi solution for millions of families like my own. in the average household, there are dozens of connected devices. connectivity is a big part of my boys' lives. it brings people together in meaningful ways.

matt: 30 minutes until the start of recruiting. welcome to a special edition of open interest live from bloomberg invest in downtown manhattan. katie: you are matt miller, i am katie greifeld. sonali: i am sonali basak. a lot of people on the agenda today. we are in the heart of the new york financial district. we have executives,