>> when you think about the catalysts, the risk is not balanced versus the reward at this point. >> the market has been fighting off her session talk for two or three years. >> tariffs and consumer sentiment will likely be depressing most retail stocks in the weeks and months to come. >> traders and investors are nervous. >> if sustained, these types of tariffs could shave 7/10 off of growth for the year maybe even a full percentage point. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern.

jonathan: good morning for our audience worldwide. coming into wednesday, dazed and confused. equity futures your scores look like this. s&p 500 advancing on the nasdaq 100 up by three quarters of 1%. on the rustle up by 1.2. the project of a compromise choosing equities, have a look at the global economy right now. let's start with germany. two-year, 10 year, 30 year, double-digit moves on the yield curve up by 20 basis points on a 10 year maturity. think about china coming up with a 5% gdp target and pushing more deficit spending as well. we are seeing some changes in the global economy that people up and pushing for for a long time and it looks like we might get it. lisa: an expansion potentially of the deficit in one of the countries that was the example

of what it meant to not borrow any money, that is germany. they expand their spending by 500 billion euros over 10 years for infrastructure on top of doing whatever it takes for the defense spending is shifting the goalposts doesn't actually come through -- does it actually come through is the question. jonathan: we are seeing shift we have not seen for decades. decades upon decades. these are things we have been talking about for such a long time and here we are. we have to use a lot of questions about trade and fiscal policy. just how much space is there for germany to go through with what they are trying to do and bear in mind i know we are not talking about this right now, the president celebrating a big beautiful drop in interest rates and the bond market means a lot at the moment. later this year they will still pass or at least attempt to pass a major tax break at a time when germany is trying to push this through. lisa: the u.s. is pledging fiscal restraint that looks

different from what we are seeing on the surface in germany and china. it's probably not going to -- the u.s. is likely to expand its deficit. i think it's the question to ask. how much capacity is there left in this global market that isn't tired of potential inflation to finance some of this deficit spending around the world that's no longer focused on just potentially in the united states. jonathan: tariffs on dollars stronger. tariffs on, dollar weaker. the fx channel was not assisting. i hope you paid for vacation in europe upfront. lisa: george of deutsche bank will be joining us came out and said this was a seismic shift in germany. this caused him to change his view to outright bullish the year versus the dollar. we are not talking 120, not

talking a new wave of growth. it is not just a question of the u.s. penalizing everyone else with tariffs, the idea of the rest of the world could see signs of growth at the same time the broader -- tariffs have shifted to the disinflationary to the u.s. dynamism. >> the euros stronger, the dollar weaker. we begin with our top story, the president on the american economy. >> for every one new regulation, 10 old regulations must be eliminated. the next phase of our plan to deliver the greatest economy in history is for this congress to pass tax cuts for everybody. i will also impose a 25% tariff on foreign aluminum, copper and steel tariffs. they are about america making america great again. it will happen rather quickly. there will be a little disturbance but we are ok with that. jonathan: how much disturbance and for how long.

howard lutnick suggested the deal that these tariffs on canada and mexico and that could be announced later on tonight. annmarie hordern joins us from washington. a compromise, how soon? annmarie: when it comes to the commerce secretary he says we will get that announcement today preyed it was interesting because the president did not talk about it at this moment when he was addressing the nation he could've talked about this potential offramp they have , what the commerce secretary called meeting in the middle. he said it won't be a pause but the president we could see him meet in the middle. instead the president doubled down on his tariffs. he seems committed to the cause. it was in that moment, there will be a little disturbance but we are ok with that. what is the disturbance? you mentioned earlier at the top he mentioned the bond market. the president did not mention

the elephant in the room if you're a financial investor, the fact we did see a pullback when it comes to equities paid that will be a key question when we speak to the commerce secretary. what exactly is the plan. the president did not sound like he was looking for an offramp when it comes to trade. >> later on this morning do not miss this, a conversation with the commerce secretary, timely conversation coming up later on this morning. pete good morning. where do you start? >> we are talking about trade flows. one of the things they are benefiting from the last several years and i'm wondering if this time if the dollar is weakening on tariffs we are starting to see europe. that's just germany. some will follow germany's lead. all of a sudden they went

straight to this. i think cap it flows. >> love or hate, foreign policy right now. changes we are seeing in germany and china. are they pushing them to do things that are good for them. are we seeing a policy mix track capital or push it away. are we seeing them pull it away at the same time. >> both are true. it is for you to get pulled away and pushed away. it is very hard with 25% tariffs. you look with canada and mexico, this went against the usmca act which trump had been part of outright.

the president to put the deal on is now kind of change the terms pretty dramatically you probably have to do some acceptance because you can't live with a short-term pain. and so far we've been saying china has become the big winner of this. we had bipartisan support the china was our big adversary. china seems to be playing this very coolly. they have not been coming to the table, say they will do their own thing. i think it will outperform, they are having a bigger bounds and china. i think people turn to them which is not a good thing for us longer-term. >> it's only been two days. what we've seen is dollar weaker and yields up. how much do you think this is a lasting trend and how much is this a blip little be much more complicated.

peter: europe will need to issue debt. foreign buyers of our debt might have more terms to say if i can get a better yield in germany i might want that. the tariffs are only in place for a few days. we've been talking about this since the election. part of this is trump playing from a stronger hand as we believe. russia has to come to the table at some point. we haven't heard rush's on any of this how close we are there. all these trading partners what will they do. we saw canada try to impose tariffs. i don't know if they can survive long without finding trade partners. lisa: is there an absolute level where you have so much debt in the world a number of countries that are looking to raise even more, does that elevate yields more broadly.

does this mean we have a higher floor. >> it is not affecting the long end as much. most of the day even when yields were down on the front end, the third-year risk was slightly higher yields. you are not getting that movement and that's because you're going to see competition in that space and we will have questions about where the u.s. is headed on this. they spent hours it felt like talking about some of the stuff they found. it felt fairly trivial. i was kind of personally annoyed we went through social security and talked about the 250-year-old person. that's two people. haven't we figured out from the records don't these two people exist, what's the situation. jonathan: at 350 they probably don't. peter: and are not receiving social security. it was trivial because the

person wasn't receiving money anymore so it fell it we were pulling these things out and i'm not seeing these real efficiencies i was hoping to see. jonathan: let's sit on germany for a while. what a move we are seeing, tends right now up by close to 20 basis points. when you see moves like that, people see this is good news. but when you look at the bond market, is that move to a comet extra issuance or because we are looking at a better profile for economic growth across the continent. peter: i think they are going hand-in-hand. germany has been hard to own because the yields are so low so i think they will see really smart demand and i think that's part of growth and anything that solves russia ukraine will really benefit the eu. you argan a c rebuilding their and i think they will try to get in there. we want the rare earth critical

minerals, so does europe. there will be a lot of competition for the rebuilding that occurs there. i continue to like china. i think i have to add more aggressively europe. this feels ago real change there. i still do not like the nasdaq 100 for an example. i think it is still overdone. on -- i'm less bearish than i was a week and a half ago. i think this continues to go lower. people pull out the valuation questions are there and we have this erratic policy to invest in those and will impact them most. in the u.s. i'm still light some of the chip parts, i continue to like anything that will be part of drill baby drill we've been trying to say refine. anything that's good for national security that equals national production, we are going to become more independent. lisa: is the trump ability to

come in and save a market is that off the table? peter: i think he does not care about that right now. the one thing i think is consistent is if you say he wants a legacy of rebuilding manufacturing in the u.s. he wants to be -- leave the presidency with a real middle class he does not care about those equity markets right now. it's things -- i think he is deadly serious when he says we will have to go through some pain. in his goal he does not care about 10% or 20% on the s&p anymore. jonathan: the bond market gets the mention last night. we don't hear about the stock market at all. i think we've seen that shift building in the past month. lisa: is the decline in yields so far this year considered a victory? i want to ask every corporate executive officer that question at a time where the potentially means.

>> monday on the dax the best day since 2022. tuesday the worst since 2022. this morning the best day since 2022. thank you sir. let's get an update on news elsewhere with your bloomberg brief. >> some more details from a joint address to congress or president trump defended his tariff plan saying it would raise trillions in revenue, rebalance trade relationships and acknowledge there could be some economic pain. trump's speech focused on issues like border policies and d.e.i. with some discussion of consumer prices and inflation. germany the country will amend its constitution to unlock hundreds of billions of euros for defense and infrastructure investments. the chancellor in waiting has planned a 500 billion euro infrastructure fund investing in priorities like transportation, energy grids and housing over 10 years. goldman sachs will look to cut between three to 5% of staff.

a person familiar said the latest round will take place in the spring which is earlier in the year than usual. the wall street journal reporting goldman will focus on cutting after just cutting vice presidents. jonathan: up next on the program, taking up a compromise. >> the mexicans and canadians were on the phone with me trying to show they will do better. the president is listening because you know he is very fair and reasonable so i think he will work something out with them. jonathan: joining us next is dan clifton. later, a conversation with the commerce secretary himself. from new york city, good morning. ♪

>> it is difficult to overstate some of the changes in the global economy. some major stories developing. equity futures posited by 0.6% on the s&p up by three quarters of 1% on the nasdaq. looking at the united states, canada. in the bond market coming from the german government. saying -- a whatever it takes moment, potential for a 500 billion euro infrastructure fight -- fun. 20 basis point move higher on the 10 year bond yield over germany pushing 270. these are huge changes for german fiscal policy. the front-end of the curve up 13 and that ecb meeting just gets more and more interesting as the hours passed by. under surveillance, teeing up compromise.

>> both the mexicans and canadians were on the phone with me trying to show they will do better and the president is listening because you know he is very fair and very reasonable so i think he will work something out with them. it's not going to be a pause. but i think he will figure out you do more and i will make sure and we will probably be announcing that tomorrow. jonathan: may offer a pathway to carefully for mexico and canada. these comments follow the market posting its worst two day slum since december. anne-marie joins us with morbid we talked about this briefly. this is a shift already, a shift that did not last for hours. annmarie: it's a huge shift. the commerce secretary saying they will be potentially this olive branch they will meet in the middle they will be announcing up a was so interesting is the president did not mention any of it last night when he had this prime time

viewing in front of the american public. he did say there will be a little disturbance but we are ok with that. how much of a disturbance are they willing to take on an it comes to this white house and the impact tariffs are having on equity markets. let's bring in dan clifton over at strategic security partner there and head of policy research. let's start with canada mexico. the commerce secretary says there is a pathway for compromise. what does meeting in the middle mean? >> mexico and canada were here negotiating last week. the president put 25% tariffs on both countries. i just want to explain the magnitude of that. that's half a percent of gdp, with retaliation it is more. that would really damage both their economies and the u.s. economy. it just does not look sustainable at that level. the president's staff are saying if there is more than mexico or canada will do, we can meet in the middle.

doesn't mean a lower rate? possibly. maybe autos get exempted because they are combined with the usmca. there are some issues the president is worried about like canada's agile service tax which he thinks is a violation of usmca. he wants to see canada doing what germany is saying they are doing by investing in their nato budget. there's a specific set of requests they will probably need to get to. i think the cultural of putting those tariffs in place is speeding up negotiations. annmarie: last night president trump did say briefly that he spoke to the top three carmakers, of the ceos yesterday and we know the auto sector has not been happy with the tariffs. is that what is your base case? >> this is the equivalent of raising the corporate tax rate by 10% and it disproportionately falls on these sectors like auto. the auto companies are going to the president and his team and saying this is existential.

you like all the support from union workers, they will be out of a job if this happens. they start off very big and then work their way in and say where do we need to provide relief. autos are one potential area that will probably be top of the discussion. annmarie: is it a lower rate or a carveout? dan: it could be a carveout. i think there could be a lower rate as well. overall we think the usmca where it's not just 25%. i think that number has to go lower. members of congress will be hearing about this in districts. the political blowback is very different than china. and they will look at that as it starts to feed into the home districts. annmarie: the president mentioned you like seeing interests -- interest rates drop. we did see an equity market pullback. the commerce circuitry showed up on fox news to talk about this potential meeting in the middle. is that where the trump put is right now? >> i think this trump is going

to be more aggressive and less sensitive to financial markets. we just had a huge 30% run up inequities straight through last year into this year. we will probably get some pullbacks. policy uncertainty at all makes sense to me. what we are starting to see from the president is a major shift in policy moving the country away from big fiscal policy and tight monetary policy and moving it in a reverse direction. tight fiscal policy, tariffs, spending cuts and trying to loosen up monetary policy. getting other countries of germany and china to do things we don't have to do and when you look at the headlines you are starting to see that trump is getting countries to do things they have said no repeatedly they are stunning to come in and the world is probably going to be better offer that but there is a bit of a transition. annmarie: especially forcing out of germany and europe written large but i have to push back on fiscal spending grade the

president said we are seeking permanent income tax group -- cuts and then reiterated calls for no tax on tips, overtime pay and social security benefits. how will we pay for that? >> we will extend all the trump tax cuts. everybody gets the same tax cut next year as they did this year. they will then offset that with spending. onnet you will have austerity in 2026 regardless. will there be enough room to then put no tax on tips which is a small tax cut. at about the domestic corporate tax rate for manufacturers? that would be a big change and offset some of the tariffs. my sense is the deficit is going lower. we will have a huge april tax season because of the run up in the equity market and you are seeing the spending slow. as soon as we get out of tax refund season and we start moving into tax payment season you will see the deficit come down and even if you do half of the usmca tariffs that will be $75 billion of revenue alone and

you've got 40 billion on the china tariffs so the tariff revenue is picking up in places. it's not taxes so it does not look like taxes and my sense is the deficit will be lower by the end of the week. annmarie: are we headed towards the government shutdown? >> i think we could shut down for it i thought we were starting to make progress, cooler heads were begin to prevail. we are trying to see that begin to open up. democrats have to be careful because if we go into a shutdown trump could do anything he wants. right now he's restricted by some laws. republicans need to be careful, this is the way they are presenting themselves to the u.s.. the reason i think the speech was so important is the momentum was starting to wane. he was able to re-energize supporters last night. a shutdown puts a big rot into that next week. my sense is they will figure out some way to do a pond and to a temporary extension. annmarie: classic washington. >> and try to buy themselves some time. we are dealing in probabilities here and i would say it's 50-50 on the shutdown.

annmarie: dan clifton there, strategic -- but i take away from the conversation is today we get that announcement, watch the auto space. jonathan: more on that later on this morning. the day after the president puts 25% tariffs on mexico and canada we have a guest on the program saying the global economy might be better off for it because of the things it's making china and europe do. we will talk about that in just a second. from new york city, this is bloomberg. ♪

jonathan: two-day losing streak on the s&p 500, looking to snap that this morning. the nasdaq up by .3%. the rustle up by 1.2%. in the bond market a big, beautiful drop in interest rates. the president addressing congress yesterday, celebrating the move we have seen in the bond market. two-year, 396.76. it's been off the back of weaker than expected economic data. dull lucite of this later this morning.

smi services. the data point is important. ism manufacturing beneath the surface was ugly. will you see the same thing confirmed later? lisa: when a host of economic data pointing in the same direction. the market seems more attuned to the idea of weaker economic data than it does stronger. to your point about lower yields, there is a question of whether the yields are welcome by the administration that wants growth and also wants to plug a deficit gap with incoming revenues. how much can yields go down before it is no longer a positive put on the economy? jonathan: and they have a tax plan later this year. the shift to germany. check the moves out. euro-dollar briefly breaking 107 . the equity benchmark in frankfurt is higher by 3.4% on the day. check out the moves in the bond

market. 10-year up 19 basis points. 268. we have to reflect when it comes to germany on where they have been in the last century. conditioned by the experience of the 1930's. determined not to repeat that. conditioned. you get the situation -- i will share this story now. the former german finance minister, when he stepped back in 2017, people in the ministry when outside, stood in a circle dressed in black to celebrate the black zero. that is something they were very proud of. the shift you are seeing, i don't think you can overstate this. the shift potentially in germany for the prospect of a 500 billion euro infrastructure plan is massive. lisa: is being supported by some of the architects of that debt break we saw put into effect officially in 2009. questions around how you emerge from that postwar period.

a question of how much gets passed. whatever it takes for defense spending. that is still to come. jonathan: president trump promoting his tariff and trade agenda, saying resulting economic pain is a limited disturbance americans would be able to overcome. lisa: you and annmarie asked the correct question. what is little? what is disturbance? is there a disturbance that is no longer little that they need to respond to? is this president trump saying, remember the trump put on equities? it is no longer in place. a question of what the ultimate goal is. i'm curious to speak with howard lutnick later in the show. people talk about room for negotiation -- he will be talking about room for negotiation. he kept doubling down on tariffs and saying this is the path

ahead. jonathan: the commerce secretary will join in about 90 minutes. look out for that. lots of highlights from the president's address, including this one. president trump reiterating his demand for an end the ukraine-russia were. president trump: regarding the agreement on minerals, ukraine is ready to sign it anytime. that is convenient for you. simultaneously, we've had serious discussions with russia and have received strong signals they are ready for peace. wouldn't that be beautiful? it is time to stop this madness. time to halt the killing. jonathan: the boost for the european markets. get spending. two, that is why you see the moves across the continent. lisa: we will speak with george saravelos who has changed his call. people are changing their call to more optimism. this is not a runaway type of move we are seeing in markets. there's a host of skepticism these things will come together.

there are key questions of what the path of peace looks like at a time when we heard from the ukraine side. we have not heard from the russian side in terms of what the calculus is. jonathan: germany will unleash hundreds of billions for infrastructure and defense investments. frederick mertz saying his administration will do what it takes to defend the country. joining us now is chad thomas. we have to take a step back and think about the history of all of this, the love affair with the so-called black zero. is it facing a divorce? chad: i was listening to you and lisa talking about that photo they took when wilkening stepped back as finance minister. -- wolfgang. what a shift we have seen overnight in germany by the chancellor in waiting. we have to remember this is his

party that put the debt break in the place. the fact is not only saying they will spend this 500 billion on infrastructure, but basically they will take defense completely out of the debt break. they will spend whatever they need to on defense. we are hearing privately that will also be in the hundreds of billions. they don't want to say publicly how much they will spend. they said they don't want to let the russians know. essentially we are expecting the defense side will be a huge pot of money. jonathan: the eurasia group calling this fiscal policy on steroids. that is not something we typically associate with germany. they have the willingness. can we talk about the ability? how easy is it to get this through the german government? chad: that is the interesting twist. in order for this to pass the parliament they need a two thirds majority. they are concerned the parliament that was just voted in, the owego, they want -- the

election only over a week ago, they will not have the votes. the far-right did well in the election and they are not likely to support this measure. they will use the old parliament to push this through. they have a couple of weeks before the new one is sworn in. what it means is the chancellor mertz has his party backing this. they need the greens to support this. they are likely to do that. there are a few steps to go but it looks like this will get through the parliament very quickly by german standards sometimes next week -- sometime next week. jonathan: chad thomas of bloomberg out of berlin. yields higher across the curve by double digits. moves we don't typically see in germany. for the euro, new highs for the year. a stronger european currency against the dollar. george saravelos writing, "it is hard to estimate the scale of change taking place in just a

matter of days." george, welcome to the program. let's start with the euro. talk to me about the change. george: there are two key components. the first is very much the shift out of germany which i will call generational. we have been expecting a shift. it looked like the ingredients were building. we have been on the opportunistic end. we were surprised with the magnitude of the fiscal shift announced. from my perspective, the biggest shift in fiscal policy i have seen in my career, both in terms of magnitude and pace. this has huge consequences for both growth, the ecb, and even europe's strategic autonomy versus the u.s. this is one component. policy is shifting to billy --

to be cyclically relevant. on the flipside, you have the u.s. or tariff policy is taking place in such a haphazard way it ends up creating self-inflicted damage to the u.s. economy. that is one reason why fed expectations in u.s. yields are coming down. the broader physical picture remains murky. we have a situation that is thickly opposite from what i personally would have expected at the start of the year. when the facts change, we change our minds. that is what has happened in the last few weeks. jonathan: let's talk about this. on wall street there are certain phrases that scare people. one is, "this time is different." why should we believe this is happening? george: the first reason is it has been announced. it has cross party support. what i found interesting in

mertz's statement is he used the phrase, "whatever it takes." it was not used in german. it was in english. it was also posted on x on his feet. d. this is a conscious message of wanting to reflect on what draghi did and send the same message for germany. it has to go through parliamentary preapproval. we have -- parliamentary approval. we have high confidence it will. once it does, an immense amount in orders of magnitude. you discussed earlier the shift around the big infrastructure fund, the potential unlimited defense spending. i would add they will reform the debt break to allow a greater degree of fiscal spend at the state level which provides cyclicals as well. if you add this up, they are

going to have a very material economic impact on germany. by extension, the whole of europe. lisa: why is your euro-ust target 110? why isn't it higher? george: great question. one step at a time. everyday we are seeing news flow which would usually take years or decades to potentially feed through. i would say what we need to argue for an even weaker dollar is persistent economic weakness in the u.s. that will be a function of what happens from the administration. overcoming weeks, dashed over the coming weeks do we see a reversal in the tariff policy? there is tremendous uncertainty on the u.s. side. it is a function of fiscal and the u.s. and tariff. there is some execution risk as we discussed around europe.

it is the first step. 110. we are open-minded in terms of how we think about the alec. -- outlook. jonathan: let's finish on the u.s. a question we have gone back to repeatedly on the program since the election. do you see a policy mix that attracts capital to the u.s. or pushes it away? i asked that question. what is your call on that now and has it changed? george: it is becoming a bit more ambivalent over the last couple of months. there are two drivers around that. one relates to the policy mix itself. it is less about the specifics. it is almost about the lack of specifics and the uncertainty around the reaction function. if you're putting tariffs on imports, that is naturally going to be creating economic uncertainty. i think we are seeing that

materialize and that is why the u.s. risk markets are -- the second is broader. you could call it a positive. to the extent that president trump is encouraging other countries to build strategic autonomy and encouraging other countries to spend, all of a sudden you have an investment thesis potentially for europe. that is the more positive angle. for the more negative angle, the policy uncertainty in the u.s. itself which need to bit more clarity. jonathan: george, appreciate your time. george saravelos looking for 110 on euro-dollar. a month ago we were talking about parity dropping below that level. the last two days, tariffs on dollar weaker for three consecutive sessions. lisa: you would not believe it would make the u.s. stronger and everybody else weaker. that narrative has shifted. the most interesting aspect is the u.s. market is losing faith that tariffs will cause the

united states economy to go get stronger at the same time you see fiscal spending or potential for it in germany. jonathan: this time it is different, we are told come out of europe. here is dani burger. dani: president trump has called for ending the bipartisan $52 billion semiconductor subsidy program, the chips act, which spurred $400 billion in investments. trump argued tariffs would achieve the same outcome as the chips act. an investor group agreed to by controlling stake in some panama ports. ck hutchinson said it would receive $19 billion from the sale, the largest infrastructure deal in blackrock's history and a win for president trump who voiced concerns about chinese influence in the panama canal. china has set an economic growth goal around 5% for 2025.

that is the highest on record. the government plans to boost consumption with a focus on benefiting people's lives and will sell a special bond to fund public spending on infrastructure and other areas. that is your brief. jonathan: more from dani and about 30 minutes. up next, the president celebrates a bond market rally. president trump: we will bring down mortgage rates, lower car payments and grocery prices, protect seniors import more money in the pockets -- and put more money in the pockets of american families. today interest rates took a beautiful drop. it's about time. jonathan: bob michele joins us next. you are watching "bloomberg surveillance." ♪

jonathan: equities bouncing back on the prospect of a trade compromise between the u.s., canada and mexico. s&p positive by .6%. up by .3% on the nasdaq. the russell up by one percentage point. the president's elevating bond market rally. president trump: we will defeat inflation, bring down mortgage rates, lower car payments and grocery prices, protect seniors and put our money in the pockets of american families. interest rates took a beautiful drop today. it's about time. in the near future, i want to do what has not been done in 24 years. balance the federal budget. jonathan: here is the latest. the president embracing a big beautiful drop in interest rates as the white house appears to show more interest in the favorable bond market moves

rather than a stumbling equity market. joining us to discuss, bob michele. good morning. we will get to europe quickly but i want to start with the united states. does it bring you comfort that the white house is more interested in the bond market and the equity market? bob: it does to some extent. bond investors will go through a period of discomfort where probably yields have gotten a little ahead of themselves. any kind of backup to the mid- fours looks like a good level. jonathan: can we bring of the curve? two-year, 10-year,. 30-year. the prospect of a lot more supply. 10-year up by 20 basis points. where you stand on europe? bob: steeper curves. you will see a lot of issuance. they have thrown fiscal austerity to the side.

they have looked at what is going on in china and the u.s. and they want to join the party, and they are going to. i see the ecb bringing rates down towards 2%. i think with the amount of supply that is potentially coming in germany they will drift of torch 3%. i think that is fantastic for bond investors. discomfort near-term but the ability to have a bond market that has yield to it and that is durable, fantastic. lisa: there's a fantastic bond market for investors and a fantastic bond market for traders. for investors, there is coupon and yield. for traders is when yields are going down. is that move over? is it not any longer a fantastic market for traders? bob: there is potential for the yield to go down on the front end of the curve. central banks, whether the ecb or the fed are looking for the opportunity to bring yields down, get closer to what they perceive is neutral. the long end is going to stay about where it is.

we are having conversations every day with sponsors who want to get into the bond market. they are looking at it as the anchor in the storm. they can buy the u.s. aggregate bond market at a yield of close to 5%. they are looking to bring money out of cash and out of risk assets, whether it is privates or equities and go into the market. lisa: you said this bond market. are you talking about the united states or developed markets more broadly at a time where we were talking with a number of guests saying maybe europe is going to draw capital away from the united states? bob: i think it is all bond markets. when you look at what equities have done, they have become lopsided in terms of portfolio allocations. the plans we are talking to our embracing yields with er. i met with a plan yesterday. i met with him five years ago. the aggregate bond market was

yielding 2.25%. they did invest. today they have won. yields double dinner coming in and we are hearing -- and they are coming in and we are hearing that from every channel around the world. lisa: you said yields are probably where they are going to stay in the u.s. and not go significantly lower. do you see them going significantly higher? bob: no. we are probably a buyer in the mid-fours because with another round of tariffs coming and the blizzard of policies that come out of washington there will be a lot of volatility. there may be a period where people run to treasuries and you get down towards 3.9% or 4%. i think we will look back on 2025 and they will have spent almost all their time on either side of 4.5%. jonathan: where we run to treasuries. could we be going into a period

where we run away from dollar dominated assets? people who believe the policy mix of the united states at the moment pushes capital away. we have heard that a few times this morning. bob: it should be your view. dollar exceptionalism has ended this week. we have done a lot of work. we have gone back and looked at trump version one. we see a similar path for the dollar peaks early a couple of months into the term and then comes off. we have talked about the dollar being overvalued for a year or so now. i think now you are looking at fiscal spend in china, fiscal spend across europe. we are looking at japan. looking at close to 1.5% 10-year jgb yields. i don't remember the last time i saw that. bob: do you mean for the currency specifically or do you mean the dollar long we have

built over the last decade in dollar assets across fixed income and equities alike? would you go that far? bob: yes, i would go that far. everyone has talked about how expensive u.s. markets have gotten relative to non-us markets. nobody wanted to step in front of the steamroller. now the steamroller is rolling the other way and i think you are going to see this flow out of dollar-denominated assets. i think the dollar comes off of where it is. i think the process is underway. jonathan: substantially, if you are correct. huge changes for financial markets. lisa: i wonder how much it reduces the flows in the u.s. risk markets and how much that gives more fuel to what we have seen, particularly with the most consensus bets, the technology firms. jonathan: all the things we have and asking for for a long time. germany needs to invest more in infrastructure and defense.

headline, you are going to get it. deutsche bank's george saravelos talked about it. you cannot overstate the changes we are seeing in the global economy. a lot of people sit in the media and say big week coming up. forget payrolls. forget the data. these are massive policy shift. lisa: this is something jim read says every morning. years happen in a period of days. re-shifting expectations. the big question is how much and how far does this go in rearranging trade lines? kind of what donald trump wanted. this is the new world. jonathan: payroll is still important. i take that back. bob michele, some big calls. appreciate your time. of next, dan greenhaus, monica guerra, congressman french help, edward yardeni, and then about an hour the conversation -- the commerce secretary howard

lutnick. from new york, this is bloomberg. ♪

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>> we will have to see how the tariffs resonate throughout the economy. >> it is payback, not a turning point. it is hard to say everything is ok. >> when you see the economic data wobble, you are talking about how firm is that foundation. >> we will probably come in faster into the market than it was back in 2018. >> we think the tariff will come

back but be repealed. >> this is "bloomberg surveillance" with jonathan ferro, lisa abramowicz, and and re-hard-earned -- annmarie hordern. jonathan: equity futures on the s&p 500 bouncing from a losing streak on the s&p. higher by about a third of 1%. the nasdaq up by .5%. on the prospect of potential for a trade compromise between the u.s., canada, and that sicko. the german -- and mexico. the german bond market, no compromise. a fiscal regime shift. 20 basis points on the german 10-year. a change in china. a growth target of 5% and more deficit spending. take shifts internationally. lisa: it sounds like the united states is at least speaking that they will reduce the fiscal overhang, the deficit. other countries, germany and

china, increasing their spending at a time when a lot of people have been calling for it. what actually gets done remains to be seen. we are looking at the complete 180 in terms of where the will come from, where the fiscal impulse will come from, and maybe where the capital flows are going to go. jonathan: i headline from bob michele. the end of dollar dominance. the nws exceptionalism. not just -- the end of u.s. exceptionalism. not just for the currency. lisa: how far does this go? that remains to be seen. we don't know what is going to happen in terms of how many of these plans are going to go into effect. what we are hearing now, a host of policies out of the white house. people do not know how to plan around it. we're not sure which ones are going to go on. the market is voting and saying it will probably hamper growth. other countries are saying let's boost growth, boost defense,

boost spending. jonathan: the strategic anchor remains the same. 12 months, you will see a policy mix that is progrowth and pro-risk. we can only judge this journey as we go by the economic data that comes in. the sentiment has not been great. survey data has not been great. ism manufacturing was weak. later this morning, ism services. will. confirm the weakness going into payrolls on friday? lisa: we are getting commentary from a host of chief executive officers. best buy, target. they are seeing some consumer behavior change on the heels of this uncertainty and they will pass along some of the higher prices on the heels of tariffs to consumers in the coming days. that was the best buy ceo. you wonder maybe we are getting too far with this weakness story. it's only been six weeks. i keep inviting myself that. going forward, in terms of the consensus trades on their head

at a time when there were some heavy logs getting upended. jonathan: beaten up in the first few months of 2025. equity futures positive by .4%. coming up, dan greenhaus on a wild day for stocks. monica guerra on president trump's joint address to congress will and congressman french hill secretary. lutnick on a compromise. "we are in a holding pattern for risk assets until the lease the fed meeting on march 19 but perhaps even longer." dan, good morning. what is special about march 19? dan: my point when the inflation data had come out that we were unsure how the fed would respond, before a lot of the tariff stuff exploded.

listen, we've had a good run in asset prices. it is not out of the realm of possibility to get some guidance from the fed and how they think about the inflation backed up. the situation has been compounded by the tariff story. jonathan: we talked about the policy mix of the overall platform, the complete picture is progrowth, progress. has that changed? dan: the problem always was and remains the positive parts of the incoming administration will take longer to implement than the more deleterious policies. out of the gate you have immigration curves, if that is a problem. some tariffs. deregulation in the m&a environment. the extension of the tax cuts or additional tax cuts. tax on tips, etc. that will take many months, if not longer to work out. with the market is wrestling with on the heels of a terrific

rally are the more deleterious policy outcomes resulting in something of a correction in stocks and credit. i don't think it is super unhealthy. with that said, the other options and policies are coming down the pike. the economy is holding up fairly well, although q1 is looking worse by the day. you have to remain optimistic in the larger sense while understanding we are in a correction now, which is not unusual. lisa: i will tip your hand. you said today will be easy. i don't know, i dunno, i don't know. dan: you took my joke. lisa: i wanted to ask you, doesn't that have an effect and ramifications, this level of uncertainty? all the companies that are planning m&a don't know what kind of structure they will be looking at when they actually go to transact those deals. dan: yes and no. m&a transactions are long-lived dealmaking processes.

a lot of people will look at this and say -- the old warren buffett line, "i'm betting on america." the m&a story will be there. we need a handle on how permissive relative to the previous administration the current administration is. jd vance did say -- the idea of unfettered m&a activity lot was probably always a little optimistic. that said, of course what is happening chills investment. chills optimistic risk-taking. you see this playing out in equity and credit. it's on the heels of a terrific rally. i think it is important. if something like this happened at the bottom of 2009, it is different now. lisa: which progrowth policies are you talking about when they are trying to pass a budget that doesn't have any provisions in it for some of what donald trump talked about last night, no tax

on tips, no tax on social security, no tax on a host of other issues? dan: this is a complicated conversation this is a complicated conversation. -- if your going to balance the budget in a year, that is not progrowth. whatever one feels about the level of federal spending, the worthiness of federal spending, removing them as fiscal expenditures from the economy in the short term is not going to be progrowth. it might be down the road but it will not be the short-term. what i'm looking forward to is the more permissive risk-taking environment, the extension of the tax cuts so that uncertainty is taken off the table. perhaps other fiscal its miniatures as well. the immediate budget deficit will expand. all that together with the pro america attitude of the administration, which matters for a lot of risk-taking, both among individual investors and

companies, is being overshadowed by the uncertainty around the tariff debate. as we saw with howard lutnick last night, an hour from now that my not be the case anymore. it is not that i'm looking forward to no tax on tips revolutionizing the tax landscape or putting someone in place at doj that will be incredible different. it is the totality of the attitude of the administration --that on balance will be more optimistic and more pro america and risk-taking. that is not to say that automatically equals higher stock prices and lower credit spreads. s. that is the environment in which you want to be positive on risk assets. jonathan: as long as the economy continues to hold up.

i want the president to succeed. everyone should want the president to succeed regardless of who the president is and what political party they vote for. sentiment was skyhigh into 2025. we said repeatedly i want to see that turn into investment decisions. my fear is something bad has happened in the economy. what are we looking at? the impact of persistent uncertainty around the trait story. you cannot say it is 25% on the neighbors one day and a couple of hours later say we might be dropping them. i have no idea with the commerce secretary is going to say on this program. there is some damage done by that. every time i hear from the banks, they say wait and see. wait and see mode? if you choose to do nothing, you are choosing to do something and that is nothing, as opposed to hiring, investing, getting deals done. i wonder where we will be by the time we get to this summer and the end of the year and we are talking about dropping taxes

down to 15%. the soft data is already softer. i need to work out from you and your opinion whether you think the hard data will weaken between now and then. that unleashes different forces. dan: the soft data, the survey data, has weakened repeatedly over the last couple of years even before covid in the way hard data has not. last summer when the sop fell 10% or something like that, the boj was hiking rates, worries of recession, jobs number starting dipping into double digits. you had a cell at the end of 2023. -- selloff at the end of 2023. we are going through one of those now. do i think the hard data is going to roll over? the answer is no. anna wong wrote about the jobs report on friday owing to the lack of hiring and layoffs at

the federal level. what i don't know, and we will find out, is if that number -- it is within her confidence the number will be negative. others have speculated as well. if you have a bad number on friday but it is 40,000 but the private sector added 90,000, how does the market deal with that? many will say we are laying off federal workers, positive for yields. that is good for risk assets. i don't know the degree to which the market will weigh job losses at the federal level. something we will find out on friday. jonathan: that could be an important test for this market in the coming weeks and months. lisa: how much people look at the details to understand how -- understand what is going on. something we are grappling with. can you put the sequential story on hold?

we will do the bad stuff up front and the good stuff at the end and expect the stuff up front to have no consequence when it is the uncertainty around the plan. jonathan: is journey versus destination. destination could be a good one. we can only look at the data so far to guide us and the data so far has not been phenomenal. lisa: this is the classic life story. the journey can change you. you might not be the same person at that destination. there is a question of how it leaves its mark. that is what we are grappling. jonathan: dan has got to go. dan: dan does not have to go. dan wants to talk about oil prices. oil is just $80. it is now under $70. the rates are down. the inflation story is not just tariffs on goods. the first administration, goods prices went up.

it is a different environment for sure. oil prices don't get enough attention in the conversation. jonathan: crude is down, rates are down. it is not just about economic growth? dan: opec is unwinding some of their supply constraints. the president has said i want lower oil prices. for people who believe in this president and his ability to get deals done, so far he is $10 and. i don't think he is happy until it is $50. jonathan: you need to bring down energy prices, get inflation lower, interest rates down, bond yields lower and then we can talk about doing a lot more on the physical side of things. dan: the first step to being treasury secretary is sitting in the seat. we are on the way. lisa: we will see. these are these ideas of behind generating growth and a fiscally viable structure. this by design? lower yields and lower oil prices, and that is what they

are getting. dan: dan greenhaus, good to see you. your bloomberg brief with the dani burger. dani: breaking moments ago, the u.s. cut off intelligence sharing with kyiv. two officials confirmed that washington had frozen the channels with ukraine, a move that could hamper ukraine's ability to identify and strike russian military targets. it follows president trump's decision to suspend military aid to ukraine. al green of texas was taken from the house chamber. he shouted and shook his cane and protest. senator elissa slotkin of michigan presented the dems' response. >> president trump is trying to deliver an unprecedented giveaway to his billionaire friends. he's trying to pass along it to the wealthiest in america. ps going to make you pay in every part of your life. dani: she went on to argue that

trump's tariffs will hurt u.s. manufacturing, farming, raise cost and lead to a recession. canadian prime minister justin trudeau says president trump's tariffs are an attempt to destroy canada's economy so he can annex the country. 's government will file a dispute with the wto and the free-trade agreement between the u.s., mexico, and canada. canada hit $21 billion worth of u.s. goods, which it says will be expanded if u.s. tariffs stay in place. that is your brief. jonathan: thank you. more from dani in about 30 mass. the trump trade agenda. president trump: the next phase to deliver the greatest economy in history is for this congress to pass tax cuts for everybody. tariffs are about making america rich again and making america great again. it is happening it will happen rather quickly. there will be a little disturbance but we are ok with that. jonathan: we will talk about the

disturbance at a moment with monica guerra from morgan stanley. good morning. ♪

jonathan: we have a bounce this morning. and about 50 minutes, don't miss the conversation with the commerce secretary howard lutnick about trade and potential for compromise between the u.s., canada and mexico. equity futures posited by a quarter of 1% on the s&p 500. bond yields a little lower. 10-year, 422. the trump trade agenda. president trump: for every one new regulation, 10 old regulations must be eliminated.

the next phase of our plan to deliver the greatest economy in history is for this congress to pass tax cuts for everybody. i will impose a 25% tariff on foreign aluminum, copper, lumber, and steel. tariffs are about making america great again. it is happening and it will happen rather quickly. they will be a little disturbance, but we are ok with that. jonathan: president trump reiterating his america first agenda and his joint address to congress. trump pushing for tax cuts and a limiting the chips act while acknowledging tariffs will bring some economic disturbance. "the market could be undercutting the long-term impact of tariffs because of policy uncertainty." monica, good morning. i think this is so important. whether it is 25%, 20%, 15%, the business community just wants certainty and can plan for the next year. that uncertainty, the volatility

of the policy, how much damage could we see? monica: the policy itself could have significant implications depending on the different industries it is impacting. when we think about the policy uncertainty undercounting potential impact, it is what happens next. with mexico and canada, we spoke last week. we thought something like this might happen. tariffs could be incremented. they could be -- implemented. they could be renegotiated. that situation, our relationship with our neighbors is incredibly dynamic. what happens in april? staying on top of the potential tariff risk is important. lisa: there's a question about who president trump is speaking to. markets expected heading into this year he would be catering to them on some level. he would be looking for market approval. it seems like that is not the

case with a little disturbance being just fine. do we have a sense of where president trump is looking to get that approval? monica: the little bit of disturbance peace is key. the selloff we saw is just in the range of 2.5% on the second when the terrace ramp limited. the biggest hits to attack and energy. -- tech and energy. what is important is that that is not the big market downturn. if he had a greater correction that was prolonged, that would get the president's attention. a day point in time, momentary response, is expected in something he is saying we can live with. markets are rebounding. they are looking to the potential of his negotiating tactics long-term. lisa: you are not seeing deals

being announced. beside m&a volumes fall significantly in february. we talked to executives saying we don't have the certainty. the uncertainty drags on growth and you are seeing that in the data. in your conversations in washington, is president trump and his cabinet concerned about that level of uncertainty and some of the soft data rolling over? monica: i don't think they are concerned. what we have seen as far as their strategy in trump 1.0, the growth policies first and then tariffs second. this is the rese -- reverse. they are coming in at extreme geopolitical tension and conflict. they are looking to address that, reinforce the america first agenda, and then hoping off the back of that growth policies pick up. when you think about the budget and taxes, if you get the cuts, additional cuts to corporate,s they are hopin -- corporates,

they are hoping that will create tailwinds. 2025 is a resetting and resizing your. it is going to be choppy. this is something we talk to clients about regularly. this is a bumpy year. you have to see through it. that is what the trump administration is looking at. what happens in 2026 and legacy going forward. jonathan: regarding taxes, 2017, we were talking about tax cuts. 2025, the extension of tax cuts. how different is that and will beget additional cuts beyond the extension? monica: they are different. if you are looking at it from a budgeting perspective, you have to start from where we are now. the impact long-term. if you extend the tax cuts as is, that would add $4 trillion off the bat to the deficit. if you get additional cuts to social security, to no tax on

tips, those types of givebacks, on the corporate side trump said he wants corporate income tax top line as low as 15%. that is significantly stimulative in the long run when you think about corporate america. jonathan: with the u.s. production element attached to it. do we understand how that works? monica: i don't. there is a component here people are missing. you have to pay for those tax cuts somehow. tariffs is one way they are looking to do that through the external revenue service passing through funding through an accounting adjustment. the other thing people are not looking at is the potential for increased corporate taxes on foreign revenues. this is something they did in 2017. it's an easy low hanging fruit if they are looking to raise taxes. it speaks to not only trying to re-incentivize businesses to

bring their production, manufacturing, sales home. it also helps offset any topline corporate income tax reduction. jonathan: you need the tax picture to understand the overall effort alongside the trade effort. lisa: if some of the auto manufacturers had to pay 25% tax on parts of mexico and canada, he would be offset with a 15% tax rate that would come later on, in theory. sequencing does matter. jonathan: monica, appreciate your time. up next, congressman french hill as president trump warns of economic discomfort still ahead. ♪ -honey... -but the gains are pumping!

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jonathan: 30 minutes from now,. must watch howard lutnick on the potential for a compromise between united states, canada, and mexico. that potential unlocking some gains in the equity market. equity futures bouncing this morning. higher by a third of 1% on the s&p. mastec up by .5%. the russell, .8%. let's get some morning movers. manus: manifest in all the older names. i picked on stellantis. what is the recalibration? 4% of u.s. auto production is

now tariffed to 25%. stellantis garners more support from the european union. co2 emissions. you have touched on it. stepping back from the bars they have set. let's see what the commerce secretary has to say. tesla. politics and production. sales in germany fall 76% in february. bb registrations rise in europe -- ev registrations rise in europe. this is about recalibration of model y and the suv. in the u.k., sales rose 11%. it is not all political. crowdstrike. you might have had the interruption in your flight last year. that cost $50 million in 2024. the latest quarter, $21 million. everyone loves a comeback story. jonathan: that story feels like a decade ago. a lot has changed since then.

movers into the opening bell. commerce secretary howard lutnick handing at a possible tariff compromise with canada and mexico as soon as today. tariffs would not be fully brought back but somewhere in the middle. lisa: this is where people are waiting and what hope we are seeing price into the markets. last night president trump did not talk about the idea of rolling back tariffs . he doubled down to talk about how tariffs will make united states ridge again. i am curious about how this goes forward at a time where there's a real fissure between seven the allies and a lot of people are waiting for april 2 to be the reassessment date on retaliatory tariffs. jonathan: the irony is pushing the allies to do things that are good for them. we talked about europe and germany spending a lot more. china overnight setting an economic goal of about 5% for growth for 2025. the country announcing its highs

fiscal deficit target in over three decades. those moves, the kind of moves people have been talking about for years and hoping these countries, china and germany, would go through with it. lisa: china had their annual confab leaders. they talked about trying to boost consumption among the rank-and-file chinese residents. that was interesting. a notable shift from previous iterations where they don't want to give direct subsidies to individuals. europe is the big story this morning to me. probably the biggest shift i could imagine. the always physically restrained germany coming out -- it is 500 billion euros for infrastructure spending. it is an unlimited checkbook for military spending, defense spending. whatever it takes when it comes to beating up what president trump wanted them to beef up. jonathan: experts tell us they

can get a three parliament -- get it through parliament. president trump wanted them to spend more on defense. they are spending more defense. secretary bessent one to china to rebalance their economy. lisa: a lot are suggesting be careful what you wish for. there is an issue if you see capital being sucked out of the united states, will it be a positive with respect to being able to rebuild industries in the u.s.? will it leave a hole in investments that were part of the plan? that part of the plan we still need to see. jonathan: i want to address everything in china. there are big problems with the balances. you will not shift european culture overnight. this is the first step and a start. lisa: that is why people are shifting their entire perspective. what george saravelos said. overnight is opinion changed.

it's a matter of how far he can take it. jonathan: you have a 20 three basis point move on the 10-year yield and germany this morning. up by 13 at the front of the curve. blackrock striking a $19 billion deal to place panama canal ports under american control. president trump taking a victory lap last night. president trump: to further enhance our national security might administration will be reclaiming the panama canal. we have already started doing that. today a large american company announced they are buying both ports around the panama canal. lots of other things having to do with the panama canal and a couple of other canals. jonathan: a fantastic story on the bloomberg terminal i suggest you take a look at on blackrock and on the deal. donald trump promised on day one to seize the panama canal.

we are taking it back, the u.s. president declared in his inaugural address. blustery billionaire larry fink was on the line with the white house. lisa: blackrock's fink used a direct line to trump on the panama canal deal. they are listening to what he says and saying i have a deal for you. i can figure out how to put $19 billion into this and get the net estates ownership over a key trading infrastructure piece the united states helped build. a question of what else is to follow. these are all of the ways people are hearing donald trump speeches differently. if they are in the private sector, what can we do to take on some of those projects? we can expect more of that. jonathan: a 100 minute address. he defended his tariff plan. america may go through "a little disturbance." annmarie joins us from washington for more. over to you. annmarie: that's right.

the president doubling down on his tariff agenda and plan even though he said we could see a little bit of economic disturbance when it comes to those, diluting to the financial markets. potential from corporate executives. i'm very pleased to say we are now joined by congressman french hill of arkansas, chairman of the financial services committee. thank you for joining us this morning. i saw you late last night leaving the chamber. thank you for getting up early for us. trump said he committed to tariffs. one of your biggest employers in in your status walmart. the ceo says it will not be immune to tariffs. what are you telling businesses and corporate america that are concerned with the trade policies? rep. hill: annmarie, good to be with you. as i have said for many years, i think across the board tariffs in a sustained way can lead to higher prices. they may or not lead to

measurable increases in output here. that is what we have seen since 2017 on steel and aluminum tariffs imposed by the trump administer ration and left in place by the biden administration. a modest increase in production. no real impact in major employment. in some instances higher prices if you are buying a washing machine. bottom line is, the best use of tariffs are exactly as i hope i hear from my friend howard lutnick in a few minutes. that they are used for a negotiating tool to get better trade arrangements, open markets with countries. as a relates to the u.s. and ca -- usmca, it is 30% of arkansas output to mexico and canada. but best way to approach this is to simply reopen the usmca and have canada and mexico and the united states continue to look at that agreement and try to

improve it. if you're concerned about shipment of chinese activity to mexico, why not talk about the rules of origin in canada, the u.s., and mexico in terms of foreign components? talk about the share of north american manufacturing component. that is the way i think it is best to handle the trade between the countries. across the board tariffs raise the cost of every automobile in the united states. annmarie: commerce secretary let utnick said they could be a compromise. are you hoping to hear about exemptions, carveouts, or lowering the 25% rate? rep. hill: i would leave that to howard's strong negotiating skills. i'm not going to try to out negotiate either trump or let r lutnick. it is more to consider all the downstream effects from tariffs

and have clear objectives of what you are obtaining. the one border security? remove fentanyl? stop trans shipment of steel or aluminum from another country to mexico or canada into the united states? those are worthy objectives. i think they can be handled through negotiation. annmarie: trump said at the speech yesterday that they can deal with a little disturbance. alluding to the stock market pullback and potentially the concern about how this could mean passing on prices to consumers. do you think the president still cares about the dow jones industrial average? he did mention equities at all last night. he did mention rates. if he's focused only on the 10-year yield? rep. hill: i think the president is focused on bringing broad manufacturing back to the united states. i think united states is the single best location for foreign direct investment in the world for all the reasons you are

panel talked about with jonathan. europe is not surging. europe is slumping. i'm glad to see actions taken by the u.s. are encouraging a be a change economically and militarily in europe. i think that is terrific. xi jinping's effort to take care of his economy last year was a total flop, because he's not addressing consumption or long-term savings or pension plans or internal use in china. both economies are not where you want to invest. people want to invest in the united states with low tax rates, declining regulatory burdens, the stable dollar, the rule of law. president trump's focus on making america great again through that process. annmarie: i'm glad you brought up investments. yesterday trump called for the end of the bipartisan 52 billion of the chips subsidy program. i know you did not vote for it, but more than a dozen of your

republican house colleagues did. the companies signed up for that program and decided to expand capital in the united states, should those contracts be able to go through? rep. hill: i think of the money is obligated and the people were actually designing and incrementing a facility here, that is probably something the united states should honor. it is a law signed into law by president biden. i did not vote for it. i don't believe in industrial policy. i don't think we should be subsidizing directly with taxpayer money, using mandated mandatory spending in the federal treasury to encourage a chip plant to come here and build when they were already coming here to build. that is what i did not support that particular proposal. annmarie: i want to end on a markup you have today that's becoming contentious in terms of politics when it comes to the overdraft rules under the biden administration. if your bill goes through, when you look at banks that -- there is a chance with the biden

administration's rule you can actually see some of those bank overdraft decrease. you are pushing for the status quo at a time when americans are dealing with higher consumer prices. why not allow the rule to go through? rep. hill: the director of the cfpb is essentially the poster child of why you see the chevron deference rollback. we violated the statutory authority of the cfpb and instituted this rule and the midnight rule between the election and inauguration of president trump. look at the reality. i have spent a great deal of my business career dealing with the poor citizens of arkansas and the mississippi delta, providing banking services to them. i know how important competitive overdraft services are to them. tim scott grew up poor as the

chairman another chairman of the senate banking committee. he knows the value of the overdraft protection privilege for families. when you mandate this kind of a price cap, you will deny deposit services and overdraft privilege services to millions of low income american families. that is why the cfpb rule is wrong. i want competition to handle that, as it is today. every customer i had in my company in the mississippi delta was a smart consumer of how to balance their capital needs and income needs for their family every month. chopra took that privilege away from millions of people. to your point about competition, many big banks, citibank, capital one, then even charge for overdraft protection. that is their competition and that is why think is the way to go. before people out of overdraft, -- if you force people out of overdraft, you force them to the payday lending market which had

thing is in their interest. annmarie: congressman, thank you for your time this morning. rep. hill: great to be with you. annmarie: that was congressman french hill, chairman of the financial services committee. what i took away is he's inspecting what he called his friend howard lutnick, a great dealmaker, to come up with something when it comes to mexico and canada. jonathan: looking forward to catching up with his friend and about 15 minutes live on "bloomberg surveillance." here is a bloomberg brief with dani burger. dani: the ukrainian official told bloomberg the country is still receiving u.s. intelligence. that follows a report from the financial times that the u.s. had cut off intelligence sharing with kyiv. if the channels are indeed frozen with ukraine, it could hamper their ability to identify and strike russian military targets. john williams anticipates trump's terrace will continue that contribute to inflation. bespoke at the bloomberg invest

conference in new york. >> based on what we know today given the uncertainty, i do factor in some effect of tariffs on inflation, on prices. we will see some of those effects later this year. dani: williams said monetary policy is in a good place and he does not see a need to change borrowing costs right away. disney is cutting 200 jobs across abc and entertainment tv networks. a memo seen by bloomberg outlines cuts that mostly impact the abc news division in new york with production teams for abc news studios, 2020 and nightline said to be consolidated. disney's broadcasting cable tv business saw a drop in revenue and profit. that is your brief. jonathan: more from dani in about 30 minutes. up next, the trump put. >> the mexicans and canadians were on the phone with me today trying to show they will do better. the president is listening.

he's very fair and very reasonable. i think he will work something out with them. jonathan: up next, edward yardeni. then later, 8:00 a.m. eastern time, 15 minutes away, the commerce secretary howard lutnick. from new york, you are watching bloomberg tv. ♪ ♪ ♪

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jonathan: in the next hour, conversation with the commerce secretary howard lutnick. look out for that. that conversation following yesterday's comments from this individual that maybe we could have a compromise between the united states, mexico, and canada. howard lutnick just moments away.

equity futures off the back of that potential compromise with a little bounce. on the nasdaq come up by .5%. under surveillance, the trump put. >> about the mexicans and canadians were on the phone with me all day today trying to show they will do better. the president is listening because he's very fair and very reasonable. i think he will something out with them. it will not be a pause. none of that positive. he will figure out you do more and i will meet you in the middle. we will probably be announcing that tomorrow. jonathan: global markets signaling tariff relief after howard lutnick suggested there might be a trade compromise as soon as today. ed yardeni writes, "we now see less chance of a stock market melt down scenario and higher ultimate recession and bear market." ed joins for more.

potential changes for you. i stress potential. what underpins them? ed: the administration changes its mind quite often and puts out pretty extreme positions. then weights to see with the other side will come back with. that is what we are seeing now with regards to the tariffs. the treasury secretary a few days ago said he would welcome a situation where canada and mexico and united states had the same tariffs on china. that would create a fortress north america alliance, trade alliance versus chinese imports. this is a fluid situation. as a result my forecast is rather fluid. i think we will get through this. we will probably see lower tariff rates rather than higher tariff rates. i'm confused about what the administration really wants. does the president want all

manufacturing and canada and mexico to come to the united states? if that is the case, that's a completely different and more radical view than just lowering tariffs. lisa: you were the one who coined the roaring 20's. you came a with projections people dismissed as overly ambitious and overly bullish on equities and you are right. in this subtle shift you had this morning in reaction to the volatile nature of policymaking under president trump. not necessarily the policies themselves. how long can the be volatility in policymaking before there is a weigh on economic activity? ed: that's a great question. i don't know but my hunch is we will come to -- the markets will come to recognize the volatility is here to stay and will start to tune it out.

it depends on how the next six months ago. -- months go, if it's just a negotiating position and deals are done we are maybe back to the table with ukraine, maybe with canada and mexico. you will have your interview with lutnick shortly. i have to -- it is like riding a bucking bull. it is not a leisurely stroll. the bull is trying to throw us off. i would stay on because i think the u.s. economy is going to prove resilient. there's a lot of fears we are already falling into recession. a lot of the indicators for january were misleading and we will see the economy is actually pretty strong. lisa: putting aside the economy, and we shall get more data and people are focused on that. how much are you shifting your view about the united states being the best place to invest at a time where suddenly we are seeing massive changes in the

likes of germany suddenly expanding their spending? ed: that's a great point. in your previous interview, which was great with representative french hill, he made the point that america's stances these days are forcing germany to spend more on defense and loosen up their deficit break. they are forcing the chinese government to spend more to stimulate the consumer. this is all adding up to a pretty positive outlook for the global economy, notwithstanding we are in a trade war. if that is the case, you are making a good point. there are opportunities overseas but they have been recognized. the chinese markets had a big move up. the german market had a big move up. there is probably more to come. jonathan: getting the move in germany again this morning. ed yardeni on global markets.

germany, a 3% move today on the equity benchmark in frankfurt. if you check out the bond market, double-digit moves through the curve. 20 basis point moves on a 10-year security in germany. lisa: it raises the question for the ecb tomorrow. how did they respond when they are expected to cut rates by 25 basis points? how long can they do it? jonathan: bob michele saying it is the end of dollar dominance and u.s. exceptionalism. lisa: and having a tone about how bullish he is on long-term yields, saying we are probably range bound as we reset expectations for fiscal spending. jonathan: a long list of unsuccessful people have bet against america in the last decade. let's see if that turns out well this time. up next, commerce secretary howard lutnick, david mericle, mike schumacher. the third hour of "bloomberg surveillance" is up next.

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>> when you think about the

catalyst the risk >> is not worth the reward. >>tariffs and consumer sentiment are the big issues that will likely depress mode reit -- most retail stocks. >> the traders and investors are nervous about what this means. >> this types of tariffs could shave 7% or a full percentage point. >> this is bloomberg surveillance with jonathan ferro, lisa abramowicz and annmarie hordern. jonathan: we have some economic data 15 minutes from now. we get adp jobs data. ism services, why is that so important? earlier ism manufacturing was really soft. new orders are not good and employment in contraction. that will be one to watch. equity futures shaping up on a

bounce. the s&p up by .2%. the nasdaq up by .4%. why? the potential on a compromise between trade in the united states, mexico, lisa: and canada. lisa:there was a fear that it would stake. if there is a relief valve, that will give markets confidence that they have not had. >> we begin with markets bouncing as a trump administration -- administration has a deal with mexico and canada. the 41st united states secretary of commerce, howard lutnick. before, we give you a congratulations on your confirmation. >> i could not have been more proud than president trump. jonathan: let us kick it off

with a question about your comments yesterday when you suggested that there might be a compromise on trade between the united states, mexico and canada and we might get that today. is that still the print -- still the plan? howard: you have the trade ministers and all the people working hard without homeland security people. this is not a trade war but a drug war, we have fentanyl coming into the company doctor the country and it has to stop. they are showing us more ways to stop the flow of fentanyl. if they can the president is open-minded. there are going to be tariffs, but what he is thinking about is which sections of the market that can may be he will consider giving them relief. until we get to april 2. i do not want anyone to forget. april 2 is the day that we

announce reciprocal tariffs and so april 2 is coming. but this is about fentanyl this month. jonathan: one additional clarity. yesterday when you said i think the president will figure out you do more and i will meet you in the middle we will announce that tomorrow, as in today. can we no longer expect that announcement? howard: i did not say that. i said the president is listening to the officer -- to the offers from mexico and canada and thinking about trying to do something in the middle. he is thinking and talking about it. when we leave here i will talk about it with him. earlier this afternoon we expect to make an announcement. my thinking is that it is somewhere in the middle. not 100% of all products and not none. somewhere in the middle because i think mexico and canada are trying their best. and let us see where we end up. somewhere in the middle is a likely outcome. jonathan: do you mean on

tariffs somewhere between zero and 25, or the certain groups and industries will get a carveout. and will that be the autos. the president has spoken that he has -- had said that he had spoken to them. is that the carveout? howard: it is by project and -- product and region. the usmca agreement set up some policies that said you have to have a certain amount of u.s. content in your products to be usmca compliant. i think he is thinking about those categories. it does not make sense -- and doesn't that make sense to you. if you complied with the agreement then you avoid tariffs. and if you did not, you did so at your own risk. you knew you are not complying, and it seems likely that as a place where the president will go. the president gets to make a decision and i am talking with him about it. our expectation is that there

will be categories, 25%. and there will be some categories left out that it could be autos and others as well. usmca, go and look at that. that was the agreement that we made with the u.s., mexico, and canada saying those products are exempt. everyone who did not live under those terms said so at their own risk and new that they wear, always. annmarie: good morning. would you say right now that you think that u.s. autos like gm and ford are compliance under usmca? howard: that is my understanding, the big three say they produce cars that are compliant under usmca, meaning that they have sufficient u.s. content in them to be part of the usmca agreement. so, that is part of our discussion. and the president is really thinking about that. howard: so -- annmarie: it is fair to assume given the constituencies

of autoworkers that the president was able to pick up that it is the auto industry that could get that exemption later that afternoon? howard: it is not really an exemption. we are trying to end fentanyl coming into the country. we are trying to send a message that fentanyl has to and coming in from mexico -- has to end coming in from mexico and canada. they have done a reasonable job on the border and they will do better. it is about fentanyl this month and april 2 it is about the rest. this month that is about fentanyl and the president is trying to give mexico and canada some move forward because they are trying their hardest. and we believe that they are trying their hardest. the fact is that we have to put something on because deaths in america have not decreased in a way that is sufficient. annmarie: i hear you, mr. secretary.

many families will sympathize with these remarks. i know families who have been at the end of the suffering when it comes to fentanyl. yesterday, the president questions the fairness of canadian banks. what is it about? the banking system or really about fentanyl? howard: this month, right now is about fentanyl. when we talked about april 2, we will talk about the bigger trade picture between our trading partners, canada and mexico. april 2, i will be happy to come on and talk to you about our thinking and thoughts about a broad trading model. right now it is about fentanyl. this is a drug-related issue. drugs coming into the united states of america have got to stop. the border has to remain closed. that is the key. you treat your great trading partner with respect, and you

stop letting fentanyl into the country. my view is that the president is thinking about it. he is inking about autos and usmca. he is going to come up with a plan and he will announce that plan. i think it will be in the middle somewhere. there will be 25% tariffs. not the middle as in a number. but i think the middle as usmca and not usmca. the president will decide that and then we will go on from there. if you are compliant with usmca and you did what president trump asked. and if you are not compliant you did that at your own risk. lisa: i just want to make sure i understand this correctly. you are talking about the idea that this also -- this all has to do with the drug wars. and at the same time people have speculated that this could lead to a renegotiation to usmca which would lead to lower tariffs than before. are you are saying that tariffs are still a part of this at the

25% level. howard: remember, april 2 we begin the reciprocity model, which is how you treat us is how we treat you. and that will be part of the exemption and part of the tariff policy. and then he has industries, autos, semiconductor's, pharmaceuticals, steel, aluminum, copper, and lumber. these issues need to come home and we need to help our domestic industries grow and flourish. so we called out those product sets for extra focus. that is april 2. on april 2, the reciprocal trade policy will come out. in 2026 we renegotiate usmca with canada and mexico. and we will have very clear analysis and focus on how that changes. today, let us be clear. today is now -- today is about fentanyl. lisa: the president said he was

fine with a little disturbance. going forward there will be all of the gains realized. secretary, are you concerned about the level of uncertainty expressed not just in markets but from people who you used to work with where they are saying we do not have a clear sense of the goal. i am sure -- i understand you are saying it will come on april 2. in the meantime people are putting plans on hold. howard: i am not seeing all plans on hold. i am seeing the opposite. we saw apple commit to $500 billion and openai and oracle commit to $500 billion of investments. tsmc the other day saying $100 billion investment, softbank, $200 billion investment. a trillion dollars and you think that people are waiting on the sidelines. all of these companies are building and committing to america.

we agree that april 2 is coming and we have to do our work before we announce plans. of course we have to do our work and do it properly and thoughtfully. in this period of time, america needs a president to protect people from fentanyl. it should not be killing people in our country. china still has fentanyl as the highest list of subsidies, subsidies. they subsidized the production of precursors, the ingredients to fentanyl. they send it to mexico and canada and into the country it comes. our president has said enough already. and that is why he has come up with this tariff plan today. april 2 will be a fairness plan. it is not that hard to figure out. lisa: can i jump in on the fairness plan. is that an initial partial assessment and response, or will tariffs actually hit on april 2?

howard: there are a whole variety of laws in the united states that we will follow with precision. some tariffs will come on right away and some will be registered and they will take three or four weeks and and they will come on in due course. there is a process but we will announce the tariffs and we will be negotiating with all of these countries thereafter and then they go into effect over a period of months. we will announce them and then they are coming in. annmarie: because there are months of study is an massive report in public opinion. this can take a long time. so legally, there is no law short enough really to put tariffs in place on the second. so how long between april 2 do the tariffs actually hit you think we will see? howard: as i said, we launched our studies on january 20. so april 2 those are done.

some tariffs can come straightaway and some could come weeks later and some could take over a month or two to come online. but it will be very thoughtful and very organized. and we begin on april 2. we have announced it from january 20 that april 2 is the day. we are sticking with reciprocity. it is time for america to be treated fairly. and that is what president trump will do. he will make sure that we are treated fairly. he talked about it last night. he has made it clear. mexico and canada are about fentanyl for the month of march. on april 2 it is about fairness. and that is a process that is strictly specific to the laws. it will take over a month or two months. once it is in, they will stake witches treat us fairly and treat us properly or do not trade with us. jonathan: i was a man of my word and i promise we would come back

to the address last night so let us finish there. the president talked about a be -- a big beautiful drop for interest rates. a lot of people are curious if the president is no longer sensitive to the equity market. the focus is on the bond market. is that the shift and way to understand things? howard: i think that is too specific. let us face it. if we balance the budget of the united states of america, interest rates will come smashing down. i do not mean 10 basis points about 150. you are going to have an explosion in the housing market. you will have an explosion in the equity markets. this is not a manufactured cut like you saw last time with this huge money supply which created vast inflation. this is the right way to do a. you stop printing money. you stop running deficits. you balance the budget of the united states. you smash interest rates down

and produce enormous amounts of energy and drive those prices down. you will see it the greatest equity market and economy in the united states of america. this president is worried about the united states of america. i get questions am am i worried about canada, mexico and the e.u.. my president is worried about the united states of america and you will see the greatest equity markets under president trump. jonathan: let us worry about the american data. the equity is data has rolled over and we are just softer on the back of the data which is a downside surprise of 77 k. so, we are sub 100 and we will see what we get on the ism and payrolls. as you know, the data over the last few weeks has not been great. the survey data has been softer. a lot of the companies have pointed to tariff uncertainty, do you accept that the business

community needs clarity on whether it is 25, 15, or 10 that the volatility around the trade story, the cumulative effect is starting to eat and to the economy a little bit? howard: no way. the president spoke about it saying that biden left him a pile of poop. he left him a lousy economy that he is trying to fix. you are looking at data that is biden data. do not try to besmirch my president trump with biden's nonsense. jonathan: you think ism is manufacturing numbers. that is your opinion and you are entitled to it. you think those are his numbers. howard: what possibly could change. we are in early march. my president took over january 20. you think economic data coming out in early march jonathan: is donald trump related data? monthly surveys. howard: stop it. jonathan: are you suggesting --

we do not have to get into an argument about it. are you suggesting that when bond yields drop in a market worth trillions of dollars and investors place bets off the back of that that it does not count for anything? that it is misleading? howard: i think that data is leading you to understand that if joe biden was still in charge you would be in trouble. but you have a new president. there is a new sheriff in town. i would bet on the economic growth that is coming from donald trump. you see the investments already, there are trillions of dollars of manufacturing moving to america. it is moving to america, which means that the cavalry is coming. for every trillion dollars that invests that produces 1% of gdp growth. imagine that. you have a president bringing gdp growth directly to his economy. that is amazing. jonathan: mr. secretary, we

appreciate your time and opinion. howard lutnick on the economic data for financial markets and what will happen with trade. [please stand by]

has not been great. maybe that changes in the coming weeks and months but it has been softer so far. >> people are attuned to this. i do wonder when they look at the data that comes in as trump data, how long can it remain biden data and at what point is

it reflecting policies. we don't know yet. i hope there is strong economy and i hope we do not seek playoffs because that is not good for anybody and that is the reason why we are all watching with bated breath. >> michael: a little bit of a weird report. it is the makeup of report that is interesting. we saw a big increase in manufacturing, 18,000 jobs, construction, 26,000 jobs. that is not what we saw in the isa manufacturing report later this week. we saw a loss in education jobs and health services which is normally the biggest gainer in all of the categories. i am not sure how much since this all makes. the one number that does make sense is a loss of 25,000 jobs

in the pacific region which would square up with the los angeles fire is costing us some employment but it is going to be interesting to see now not just what the number we get on friday is but where the breakdown is and how adp matches up with that. it will be all about what the overall number is telling us rather than the headline number itself. jonathan: thank you. let's extend the conversation and talk about retailers. chuck joins us. welcome to the program. tariffs and big changes in the last 24 hours. no amount of certainty about the future. i wonder from your perspective how the likes of target and best buy will make changes if they make any changes at all in the coming days and weeks. chuck: target admitted yesterday that if the prices of goods go up in mexico they will have to raise prices immediately.

the consumer is under stress across the board whether it be home depot or lows. even companies like ross stores had sales that were weaker. consumers are trying to unpack what is going on. these headlines in washington are not helping out. the weather has not been good. flu cases have been on a high. a lot of moving parts right now. lisa: is this embedded weakness or is this due to policy uncertainty? how are you bleeding the difference between the two? one is backing looking -- backward looking and one is forward-looking. chuck: the holiday itself was strong across the board. almost unequivocally the holiday was great sold in the consumer needs to show up, they are showing up. the lulls are deeper right now.

the weather in february was really bad. lisa: how much of the retailers comply with usmca? it sounds like these tariffs on mexico and canada will be removed for companies that are not in compliance. chuck: most of my companies are down south in the u.s.. companies with international exposure, costco, walmart, home depot, i would believe they are compliant. jonathan: appreciate it. we will get more details later this afternoon. we heard from the commerce secretary 20 minutes ago. more clarity on how big the tariffs will be. certain industries, certain places, those tariffs will not apply. lisa: meet in the middle does not mean 50%. it does not mean 12.5 percent. that is the implication, isn't usmca compliant and how do you determine that at a time where

if it seems that someone was not complying, it goes down to the point of when do we get a free market the people can use to understand and preempt some of what might be coming from washington, d.c.. jonathan: coming up, we will be catching up with goldman sachs to get their call on the job data and we will catch up with mike shoemaker of wells fargo. this is a really important moment for the global economy. volumes in america have been falling for consecutive weeks and we are a little bit higher on the week so far. in europe and germany, yields are higher on the 10 year by 23 basis points. the 10 year, 2.72, this is bloomberg. nts possible, and startups start up. that's why pnc bank strives to be boring with your money. the pragmatic, calculated kind of boring.

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scott bessent equity futures turning negative on the s&p 500 following a downside surprise, to go. later this morning, ism services at 10:00 a.m. eastern time and after that tomorrow morning, payrolls data. the soft data has been softer. let's see if this creeps into the hard data. jobless claims tomorrow >> great conversation there. general motors, complaints is everything.

-- compliance is everything. we will find out the calibration of what the tariffs look like for canada and mexico. this is about production and politics. backlash against elon musk. the model y, sales rose by 11% in the united kingdom. going to crowdstrike, when the plan didn't go, it cost it costs. drop might 8% for the ceo said everyone loves a comeback story but it is not in the works this morning. jonathan: whose economic data is it. the politicians can argue but what does this say about where we are? lisa: we did get coming out,

down from the expected in the weakest going back to july. a chief economist at adp said our data combined with other recent indicators suggest hiring hesitancy among employers as they assess the economic climate had, is it their data? we shall see. there is clearly a tone of uncertainty coming out of corporate c-suite's. jonathan: markets will trade on the economic data as it is. we will see if this is a head fake. this is what we have to go on so far. it is not much but this is it. lisa: if there is certainty for tariffs, does that remove some of the uncertainty to allow plans to go forward and those who have been talking about to

move ahead. that is a key question. jonathan: commerce secretary telling us a decision on canada and mexico tariffs update will be announced later on this afternoon. joining us now is david miracle of goldman sachs -- goldman sachs. where are we now and how have things changed over the past few weeks? david: more has changed on the sentiment side. we begin to see some surveys come down from peak post-election optimism. i don't we have yet seen a substantial weakness on the hard data side. we saw one month of weaker consumer spending data but i would highlight this follows six extremely strong months and dan -- january because of weather and the can be volatile. we are still waiting to see and we are seeing more on friday with the impact of the policy uncertainty is on the hiring side and the capital spending

side and that is probably the key question going forward. lisa: are you saying if we get a weaker number for nonfarm payrolls on friday, the uncertainty we keep hearing or are you saying there was weakness in the system that will come to fruition? it is important we can attribute that to. david: it is always probably a little bit excessive to draw too much from one monthly payrolls report and attributing where any strength or weakness came to recent policies to the couple is that would be challenging and what a lot of investors are focused on is over the past couple years health care and government have played a very outsized role in hiring in the u.s. in job growth in the u.s. and those are two industries that might be particularly exposed to some of the recent policy uncertainty. on top of that, we saw in the recent manufacturing survey that

companies, like consumers, are very attuned to the recent policy news. 20 mentions of policies in that report. i would make too much of just the february report but in the coming months we will see what possible effects there are of changes to tariff policy changes to immigration and those on the fiscal side. lisa: will see the beginning of certain analysts predictions going forth. we just are one saying that he thinks the chance of it melted up in stocks is lower and he thinks there is probably a greater chance that there could be more of a weakening in the economic data. do you have enough information so far to adjust your estimate for the remainder of this year or are you sticking with the call of a good deal of strength? david: what we are looking for for gdp to grow and we have a forecast a touch above the

consensus of 2%. but everyone is in the same ballpark waiting to see what happens on the policy side. the last couple of years, the economy grew at a strong pace. part of that was because of immigration and labor force was hired. that is not going to be true going forward. we are going to see labor for -- force growth and gdp slowing but growing somewhere in the neighborhood of potential at 2% was our expectation coming into the year. what we are focused on is trying to understand whether the tariffs that were announced recently and that we might get going forward will wind up being meaningfully larger than what we had anticipated on inauguration day. we had made some allowance for tariffs and some of them have come through let the 20% on imports from china but the key downside risk from our perspective would be if the tariffs wind up more than what

we anticipated and that would probably be something that could lead us to see more downside risk to the economy. not dramatic but depends on the magnitude of the tariffs. jonathan: what about the uncertainty, what if it persists for longer than you anticipate? how much damage does that do? david: this was a question that was worried about even back in 2019 and the first trade war and for a couple of reason, the risks this time around are probably larger. the tariffs being proposed are a lot larger than what we saw last time. the tariffs that have already been implemented are considerably larger than what was in place last time. the more subtle point is that we found in our research that u.s. industry and chinese industry don't overlap that much on the input or output side and retaliation in the first trade war came mostly from china and was mostly directed at agriculture. i think the risks for companies

from the uncertainty now are larger because u.s., canada and mexico do have more interlinked production chains and if you think about some of the other proposals, reciprocal tariff, critical imports, possible tariffs on auto's and the eu, the exposure of u.s. companies on the input side, output side and potential foreign retaliation inside where you need to think about what many foreign governments might do in response. all of those risks are higher and so the uncertainty ought to be more meaningful to u.s. companies and business decisions. jonathan: thank you for an update. equity futures a little bit softer, still positive on the session. softer data from adp. march 19 gets interesting for the federal reserve. the two-day meeting concludes two weeks from today. mike mckee joins us now for

more. the date it is with the data is and that is what we've got. we are only a month into it but i wonder where we will be when we get to the federal reserve meeting. michael: i expect we will be where we are, given what was set about making adjustments this afternoon and the real tariffs come on april 2 even though the fed has some detail now to work with about some tariffs, there is a lot more they don't know. that is what john williams' point was in his interview with us and he said we do know tariffs are inflationary and we expect inflation out of this but we don't know how much because we don't know how long the tariffs will last and how many others will be put on and what costs they are going to impose on the economy. they are not much better off and won't be by the 19th than they are right now. lisa: you are speaking with the

feds yesterday and an interesting nuance about inflation and how it would impact their thinking. how do you characterize how this colors the path of rate cutting head? michael: he is probably in the mainstream in the sense that what he was saying is tariffs are inflationary but we don't know because we don't know what the president's plans are whether that inflation carries through. we will get a rise in the price level and that is what some members of the fed have focused on like chris waller. does that continue because you have a rolling series of tariffs coming through or is it the one time price level rise that the fed can look through? they just don't know that yet and at the same time, they are keeping an eye on the overall economy and whether it is rolling over and the data, talking about it getting softer but the hard data that we

haven't quite seen a lot of evidence on that yet. so the fed is basically going to sit tight on march 19 and not do anything. one of the interesting things we talked about in terms of monetary policy going forward was the summary of economic projections and the dot plot and john williams basically said they won't mean a whole lot, just like they didn't in december because we don't have visibility going forward. jonathan: they never do what -- but we produce them anyway. bond yields in america lower. off the back of the weaker than expected economic data from 20 minutes ago. in germany, we are a big by double digits. the divergence, yields of. mike schumacher joins us now. germany coming up to the united states and the united states coming down to germany.

how much more convergence are you expecting? mike: a fair amount. it is a structural shift and people have been talking about defense rising -- defense spending rising incrementally for a number of years. that is a huge change in europe. i imagine other countries get on board and see what we think could be a massive shift as more issuance and pushing up yields for yours -- u.s. levels. jonathan: issue -- additional issuance celebrating the so-called black zero, balanced budgets. when the money starts to go towards germany to finance the deficit, how do you think about where it is coming from and how the flow start to change? mike: so many implications. the ecb meets tomorrow in four years i and a lot of people have said the ecb is the only game in

town as far as actually easing when you're has a difficult time economically. maybe that is not so much the case anymore. maybe they will get help on the physical side and will have to be as aggressive doing rate cuts when times are tough in europe for that is one aspect. you can think about investors globally, for instance in japan, who say if i want to invest overseas, i want to go to a liquid market, u.s., germany, france, may be the u.k. but now what is more appealing. lots of nuances on the shift of the government in germany. lisa: you might see a convergence with german and other yields coming up to where the u.s. yields are. i wonder how it affects u.s. yields or develop market yields have to be reset a bit higher or stay where they are to absorb all the deficit spending we are seeing around the world. mike: is a great point. there is a gravitational pull. we have not seen that today so

much because incredible news flow out of the u.s. but if german yields go up and sustain an increase in rising a bit more, if that happens in the u.k. and other markets, that will pull up treasury yields and yields in other markets. more issuance globally. that should impact all bond markets to some degree. lisa: earlier we were speaking about michael from jp morgan and he had an exceptional line that he believes dollar exceptionalism peaked this week and you will start to see money flow out of the united states and the dollar long and dollar asset loan really started to get eaten away and money transferred elsewhere. do you agree with that? mike: not yet. i believe it is premature. one reason i say that is when you think about the death of the capital markets here it is extraordinary. when clients we talked to globally, when they want to reallocate risk they almost inevitably due to the u.s.. if there is a quite to quality

in a safe haven move, if i want to move x million in government bond i need to go to the u.s. markets because they are so deep and available. i would make the same statement about equity markets. depth won't change very quickly. could the dollar lose a bit of luster? it already has. we were bearish not too long ago but the facts have changed in our view has changed. jonathan: i appreciate it. mike schumacher there. facing an economy that was stagnating and ecb was lost somewhere and they can work out where they were. the german government that wasn't going to do much any time soon and all of the sudden the president comes in the united states and makes a bigger push on two fronts, a push to secure peace in ukraine and also a push on the trade front as well which has developed two issues, one in germany, or spending and china,

or deficit spending. two shifts of the back of the change we are seeing in the white house. lisa: there was an acceptance that maybe they need to rely on themselves and local partners and there will be the same structure they have relied upon in the past. the idea you could have the german incoming chancellor talk about 500 billion euros of spending on infrastructure in addition to potentially a blank check for the defense department is massive and fundamentally shifting views. jonathan: president trump wanted more spending out of europe and he was about to get it. euro-dollar right now with -- one .0707. >> germany will amend the constitution to unlock hundreds of billions of euros for defense and infrastructure. 500 billion euro infrastructure fund will invest in priorities

like transportation, energy grids and housing over 10 years. disney cutting 200 jobs across abc and and knee attainment -- and entertainment tv's. the cuts mostly in abc news in new york and production twos -- news and dateline said to be consolidated. didn't d -- disney broadcast and cable tv saw a drop in revenue and profit. the brian james made nba history becoming the first player in league history to reach 50,000 points. the 40-year-old came into the game needing just one point to reach the threshold and finish the game with 34 points and a lakers win. that is your brief. jonathan: up next, setting you up for the day ahead. more economic data to come and highlights from our conversation with the commerce secretary howard lutnick. this is bloomberg. ♪

jonathan: 40 minutes away from the opening bell. s&p 500 just about positive, softer up the back of what we saw 30 or 40 minutes ago. adp coming in weaker than expected. lots of economic data to come. 10:00 a.m., -- at 1:00 p.m. a white house briefing and the tomorrow, jobless claims. friday, the big data point, payrolls friday around the corner and comments from fed chair jay powell. we caught up with the commerce secretary howard lutnick talking about a potential shift in tariff policy. >> the president is listening to the offers from mexico and

canada and thinking about trying to do something in the middle. he is thinking about it and we are talking about it. when i leave here i will go talk to him about it and i think this afternoon we expect to make an announcement. my thinking is it is going to be somewhere in the middle. jonathan: we got more clarity about what somewhere in the middle means. annmarie: it sounds like if you are usmca compliant you will get some sort of relief today and the commerce secretary saying that an announcement could come as soon this afternoon. some are in the middle it sounds like if you are at gm or afford an been on the phone with the president as he told us last night in the joint congress that we have an intricate supply chain. if you have to give us relief and the auto sector might get

it. lisa: gm and ford are up on the day as they look to some potential carve out. i'm curious of what you thought about the sequencing and the idea that right now it is a drug war and unsafe -- april it will be the full resume of trade negotiation that people have been trying to plan for. annmarie: he said the magic word that i've been hearing and that is about reciprocity, especially when it comes to april 2. we got more details from the commerce secretary and what april 2 means. this could take months in terms of actually having the legal framework to enact tariffs. it sounds like when it comes for april 2 for some industries, countries and products they might have to announce what they plan on it doing but it might take months until the actual tariffs come into play. for others it might be on april 2. that is going to be fascinating what tariffs hit on april 2 while others are just tariffs

that could come down the pipe. jonathan: looking forward to your coverage. where do we begin this morning? i want to talk about germany, a 20 basis point move on a german 10 year yield. let's get see -- see if this gets to german parliament and getting ready for the biggest shift in europe. lisa: the whole idea that this is a new post reunification germany that has a very different schedule may be pushed into it. maybe push and at my president trump and there is a sentiment of be careful what you wish for and this is giving people hope that europe will see growth. jonathan: will we see the reciprocal tariffs and what we are hearing now in mexico and canada, the commerce secretary explain why it is different. lisa: it is hard to know what is

going to stick. if it is different than the 25 percent on non-usmca compliant companies and how does that fit into the recalibration we get on april 2 about what fairness is. and we heard from one earlier who said could we reset to lower tariffs all around? unclear if that would be the goal. jonathan: we will see how the economy response in between. we have said this a thousand times that the end could be a good one. we will have more data. ism services will be important, does it confirm or deny a soft patch for the u.s. economy in the service sector? lisa: we saw that in the manufacturing sector. in the services sector, you heard about the idea that there are restaurant operators concern going forward but we have seen time and again that sentiment

doesn't translate into action and if people say feel bad, do they say do not go out to eat tonight. jonathan: we have had some head fakes and let's see if this is one. jobless claims coming tomorrow. payrolls on friday. we will catch up with the former chair of advisors, jason furman and andrew sillman from morgan stanley. this was bloomberg surveillance. ♪

matt: we are losing our early-morning mojo as futures dropped. welcome to a special edition of open interest live from bloomberg invest. sonali: we are gathered here, again in the heart of new york's financial district. the of investment makers across the globe. and it is fascinating because where we were yesterday was a little different than