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Welcome to the Daybreak Asia podcast.

I'm Doug Krer. President Trump has moved

quickly to impose new tariffs after the

Supreme Court struck down the legal

basis for his tariffs under emergency

powers. He's put in place global tariffs

under section 122 of the Trade Act of

1974.

So the rate is 15% but these tariffs are

limited to 150 days. Kind of underscores

just how central tariff policy is to the

president's agenda. For a closer look,

I'm joined by Carol Schlife. Carol is

the chief market strategist at Beimo

Private Wealth. Carol joins us from Los

Angeles. Thank you for being here. I

think we can agree that the decision by

the Supreme Court wasn't surprising, but

I'm wondering about the level of

uncertainty now. Do you have a sense of

that?

A piece of it depends on the size of

business. The small and medium-sized

businesses are scratching their head

trying to figure out what to do because

first we had 10% then we had 15%.

It's only good for 150 days and actually

it expires the day that Congress goes on

recess. On the one hand, you know, these

small and medium-sized businesses would

benefit greatly from being able to get

some refund, especially if the

administration would would turn around

and say, "Okay, we'll pay some refund."

Because that gives them the opportunity

then to turn around and pass some of

that refund back to clients in terms of

either holding prices steady or not

increasing them because they're at the

point where they might have to increase

them. I think bottom line it does

increase the the uncertainty in the

short run here. I think initially

most businesses were pretty

relieved is probably the wrong word but

um gratified if you will that the

Supreme Court did come down and say look

countrywide tariffs are are not doable.

But it does make the administration go

search out other particular industries

and and such in terms of it does have

alternative methods and and we know

we've said all along as everybody has

said all along that President Trump

really likes tariffs and he's been on

that theme for decades and so we're

going to have some level of tariffs that

goes on but it it really is tougher for

businesses. I was hopeful that they'd

get a little more clarity.

But all of that said, it's really still

important to remember that, you know,

maximum uncertainty was probably April

2nd last year. And yet companies did

okay anyway. They actually did better

than okay when you look at GDP and where

earnings came in and and broadly that

way. But yeah, it would be nice for

business if they had some level of of

certainty.

You've even got countries pushing back

now in terms of India stepping back and

saying that they're going to reassess

things before

um before coming to do trade negoti to

finish up the trade negotiations. So,

we'll see.

>> Yeah, the same is true for Europe. uh

the EU's top trade chief basically

saying that he will propose freezing the

ratification of the trade deal with the

US until the Trump administration kind

of offers some clarity. One of the

things that I'm wondering about though

because if you look at what the court

had to say in its decision,

>> the power of Congress really uh is at

issue here and obviously if a tariff is

a tax then that is the purview of

Congress. Now, we know we have the State

of the Union coming up Tuesday, and I'm

wondering whether you think that Trump

will use this as an opportunity to

pressure Congress into cottifying

something with respect to tariffs that

has more of a bite and maybe could be

more lasting.

>> I think he'll try. I'm not certain I

would put it as very successful,

especially because you've already had,

you know, you've you've had Congress

start to push back on some of that with

um the House making the commentary

around the Canadian tariffs and things

like that. And because I think a lot of

the Congress folks are hearing from

their constituents that they don't like

tariffs. They understand that tariffs in

the long run are attacks on individuals

even if the suppliers pay have paid part

of it because they've worked some of

these deals through by and large no

matter who you look at. You know, there

have been not just the New York Fed's

analysis last week, but there have been

multiple other analysis that show the

the bulk of who pays it is the consumer

andor the the American the US business.

And those folks are speaking to their

Congress people saying, "Don't you dare

codify anything that that gives the

president power to to tax more." So, I I

think he can try and I and I'm sure he

will, but um I'm not sure it'll go very

far with in Congress.

>> Maybe we can talk a little bit about

earnings. We've got uh some key results

due this week. Nvidia right at the top

of the list. Obviously, you've been

tracking a lot of the the narrative

around AI disruption in markets,

particularly in certain sectors like

wealth management, software obviously a

big one. Where are you right now in

looking at a company like Nvidia and

what it may say about where we are in

this AI cycle right now?

>> Well, I think a couple things on AI and

we've been saying this for many quarters

that you know sooner or later the the

spend was going to need to taper because

I mean a lot of people forget

semiconductors are a cyclical industry.

I mean, people are acting like they're

not like they're long-term. But for

decades, semiconductors have been a

cyclical industry. So sooner or later,

that's going to taper. On the other

hand, I actually I started the week at a

women in manufacturing conference in

Florida and I went to the same

conference a year ago at in the same

timing and I was really struck at how

far along many of these manufacturing

companies are in deploying AI, robotics,

lots of other things. It's not just AI,

it's also autonomous vehicles in the

factories. It's uh robotics in the

factories and they're very far along in

deploying that. And so I think that

helps a lot of different use cases and

things so that it's not just about the

AI data center build. It's not just

about Nvidia's earnings. It's about

broader use and the fact that we've got

stronger productivity that predates a

lot of this but is really starting to

accelerate and there's a chance that you

continue to see even more of that. Now

that said, we don't think it's going to

do away. It it's not like regulated

industries like wealth management or

insurance or real estate or anything

else can just ditch all of the regulated

processes and start deploying chat GPT

by the end of the week because it's not

like we can upload client information

into into those things. There's a lot of

stuff that has to happen. And so I think

AI as an amplifier and not a job

replacer is is a key thematic that comes

too. These companies are looking for

employees who will roll up their

sleeves, figure out how to use AI to

make existing processes better. It

requires employees to think differently

and behave differently and maybe have a

different set of skill sets where

they're willing to lean into um a lot

more strategic thinking, a lot a lot of

client service sorts of things. There's

it I I I think AIP doesn't replace

employees. It amplifies what they do and

maybe changes the tenor of what they do.

You know what you just described there

has been happening in China for for

quite some time. Before I let you go,

Carol, I want to ask about opportunities

offshore. I know we started the

conversation with reference to this US

tariff policy, but I'm I'm wondering

whether you're seeing opportunities

offshore, particularly in the

Asia-Pacific.

>> Yeah, we are all around the globe

actually. And in terms of you did have

international bores that outperformed

the US markets last year. You had aqui

up for over 20% for I think the third

year running. And so there are a lot of

opportunities. And it's interesting

because if you look at like the World

Bank and IMF numbers, they will tell you

that global trade actually increased

last year despite all of the the trade

um machinations going on with tariffs

coming out of the US. And so I think

those opportunities continue

particularly because in Southeast Asia

you've got um you know Japan in the

recent elections and part of that was

predicated on increasing fiscal spend.

You've got China that's been rumored for

ages to be increasing domestic fiscal

policy to get their consumer markets

rolling again. You've got increased

defense spend all around the globe,

including um Japan at record levels post

World War II. You've got Germany. So

there there's a lot of infrastructure

and spend in general. There's a lot of

trade that's rearranging itself and

that's all constructive because it means

business is happening. It's happening in

different places. It's more difficult

for investors to keep track of, but it's

a great environment for active managers

and non US or global managers and long

short hedge funds. It it's you got to do

the work, but it's a great environment

for it.

>> Okay, Carol, we'll leave it there. Thank

you so very much. Carol Schlife is the

chief market strategist at Beimo Private

Wealth on the Road and joining us from

Los Angeles today here on the Daybreak

Asia podcast.

Welcome back to the Daybreak Asia

podcast. I'm Doug Krer. So, as you know,

the Trump administration is keeping US

tariffs in place even after the Supreme

Court struck down the legal basis for

those tariffs enacted under emergency

powers. So, global tariffs are now in

place. They have been put there under

section 122 of the trade act of 1974.

That rate is 15%. Here's the thing.

These tariffs are limited to 150 days.

Now, at the same time, the Trump

administration said that trade deals

made with China, the EU, Japan, and

South Korea will remain in place. Even

so, Europe's trade chief said he'll

propose freezing the ratification of a

trade deal until the Trump

administration clarifies its policy.

Meanwhile, in India, officials cited

similar reasons for postponing talks in

the US this week on finalizing an

interim trade agreement. So, where does

this leave China? Well, that's where we

begin our conversation with Shan Stein.

Shawn is president at the US China

Business Council and he spoke with

Bloomberg TV host Averil Hong and

Sheron. I think the most important thing

is that for China, this is really a bit

of a win. And that's because under the

rubric that the president has set to

replace his AIPA tariffs, it's

potentially a 10% or a 15% global search

charge. So overall, what that means is

it means that um once those go into

effect, then the overall tariff rate for

most Chinese goods is lower than it was

uh before. And so unlike with the EU

where it creates a lot of uncertainty,

in the case of China, it means that uh

the the the terms are now much more

favorable to China than they were just

before. And remember, if you think about

the magnitude of this, um you know, if

the sir charge is 10% uh compared to

where it was before, um that's you know,

potentially a hundred billion dollars on

a bill hundred million for every billion

dollars of trade uh that's affected. So

the the cost reduction is really

substantially lower. So it's a it's a

win for China.

>> Will they see it as a win given that

also it causes a lot of uncertainty? I

mean just trying to decipher whether

this is a 10% tariff or a 15% tariff.

How does this compare with fentinil

tariffs most favored nations and other

countries as well?

>> Okay, that's a great question. So unlike

most countries, the tariff situation on

China before the Supreme Court ruling

was really pretty complex. They had the

baseline MFN rate which was a few

percent. They had the 301 section 301

tariff rates from Trump 1.0 and from the

Biden administration which were about

25%. Then on top of that they had 10% uh

fentinil tariffs and now 10% tariffs for

reciprocal tariffs. So the part that's

in play because of the Supreme Court's

ruling are just those last two, the

fentinel tariffs and the reciprocal

tariffs. So those today have fallen to

zero, but when they go into effect with

the new search charge under section 122,

uh whether it's 10% or 15%, that's still

going to be a substantial reduction from

where they were before. So the MFN rate

won't change, the 301 rates won't

change, but the other tariffs will be

lower once those go into effect under

either scenario, 10% or 15%. So yeah,

China will see that as a win.

>> And to your point, I suppose it's also

the idea that the Supreme Court striking

down these tariffs also means there's

less leverage for the US president. I

mean, what does that mean for the

contours of the gathering between the

two leaders late March into early April?

>> That is such an important question. I

I'm glad you asked that. And so leverage

in a negotiation only really matters if

one side has got more leverage than the

other side. If both sides have leverage,

the effect is much more ambiguous or it

tends to cancel the other side out. So

where we've been is that you may

remember that after liberation day last

year when the US raised tariffs

unilaterally on China, China responded

tariff for tariff. They went toe-to-toe

with the United States and that's how we

got into this escalatory spiral of you

know of tripledigit tariffs which didn't

serve either country's interest and then

you may remember that you know despite

the posturing the US blinked first and

asked China to go meet them in Geneva so

they could reduce those so ever since

Geneva tariffs have really lost most of

their edge as leverage for the United

States and so if you look at that as the

first truce in the you know US China

trade trade war of 2025 or of Trump 2.0

tariffs then that was a front on that

war that was fought to a standstill and

then the trade war moved to other areas

things like export controls and

sanctions and this is a case where also

both sides have demonstrated they've got

potentially significant leverage over

the other and they've largely fought to

uh to a standstill. uh most notably, you

know, China has has played the rare

earths card which not only hurt industry

in the United States but also uh around

the world. And so this is a case where

the US absolutely has leverage but the

Chinese have counter leverage. So what

that sets us up for is a meeting in

Beijing uh in maybe less than 40 days

where the two presidents are not going

to be able to use that leverage. And

that means ideally this will be a

situation where both sides have to focus

on what would be a win for both

countries. And uh as you've you know

implied previously what would be the

biggest win for both countries is to

bring some predictability to the

business and investment climate so

companies know how to invest and they

know how to plan. Where we've been for

the last year has been the constant

instability and unpredictability has

meant that investment decisions have

gone unmade. It's meant the US has lost

manufacturing jobs every month since

liberation day. So, this potentially

will bring a chance to bring um some

much needed stability uh into this uh

into this relationship. That'll be the

biggest outcome.

>> The Trump administration has not

necessarily even said who he's taking

from the business community to China.

So, how well is the administration

preparing for that state visit into

Beijing? And what would your members

like to see being achieved in order to

uh bring some more uh certainty to the

relationship?

>> Yeah, this has been shocking. I was just

in Beijing uh before the holiday and in

meeting after meeting after meeting,

what bled into all of those uh from

Chinese officials was uh a mix of

somewhere between being irritated and

being apoplelectic at the US not

preparing for this visit. Normally when

you've got a presidential visit,

planning starts months in advance. Uh by

now the two sides should be having

regular calls. They should have

exchanged lists of deliverables. They

should have planned out the actual

physical mechanics of the visit. But

none of that has happened. And so um it

just shows that on the US side, the US

side hasn't done its homework yet to

decide what it wants out of this trip.

And the longer they wait, the harder it

then becomes to deliver real

deliverables that could help US

competitiveness for the US economy. Uh

but you also hit at one other thing that

I think is really important and that is

if we look at the president's other

trips, he's always taken CEOs with him

because business is what's on his mind

and and that's what he's been focused

on. That's especially true with China.

But even now, as of Friday, they haven't

decided if they want CEOs to go on this

trip, much less started to extend

invitations. So for a trip that's less

than 40 days away, we don't have a

single CEO that knows if he or she is

going to be invited. Uh but that just

is, I think, sort of emblematic of of

the administration not having really

done its homework on this visit yet. If

I can add just one more thing that I

think is really important to frame this

visit and that is you know China is a

country that takes protocol

extraordinarily seriously um much more

than most countries that uh that I've

dealt with around the world and I think

uh in this case it's important because

the Chinese recognize three levels of

state level visit or of leader level

visits and so you've got working level

visits where a state leader will come

and and have official meetings. They

have official visits where you have

which are much larger with more

protocol. Um this is for example like

Kier Starmer's visit from the UK just a

few weeks ago that was an official visit

but Trump's visit both sides have

announced it's a state visit and that

takes everything up to 11. it takes

everything up much higher on the

protocol front. And so, you know, as

part of that, there's the state dinner

in the great hall of the people that

could involve hundreds of people.

>> And if President Trump shows up with a

delegation of five, then that just

doesn't work out protocol-wise. And you

can understand why.

>> Sean, you rais a good point about how

the state level meeting is going to also

perhaps raise the stakes. I mean could

you talk a bit more also about the

extent in which there will be clarity

for businesses as they have to adjust in

the meantime their investment their

hiring decisions as well

>> yeah so that's what everyone's hoping

for right what does the US want out of

the trip the US wants um some access to

markets it wants to sell aviation it

wants to sell airplanes it wants to sell

agriculture and maybe some other things

and What American business is pressing

the administration to do is what it

hasn't yet done, and that's to talk

about the long-standing market access

issues, the long-standing non-tariff

barriers that discriminate against

American products, American exports, and

American business in China. And so

that's what American business is looking

for. Um and then what American business

is looking for and what the Chinese are

looking for again is a stable and

predictable um business climate so

companies can plan. So if we're talking

about what the level of tariffs will be

coming into the United States, you know,

the administration wants to emphasize

manufacturing in the US. But remember

what does the US import from China? It

imports final goods like say television

sets, but it also imports a huge number

of intermediate goods, things that go

into American manufacturing and power

American factories.

>> Until we know in the long term what

that's going to cost, how do you build a

new factory and how do you price that

in? So until we get stability,

>> jobs will continue to hemorrhage from

the United States because it's just

impossible to invest. That was Sean

Stein, president at the US China

Business Council, speaking with

Bloomberg TV host Sheron and Averil

Hong, bringing you their conversation

here on the Daybreak Asia podcast.

Thanks for listening to today's episode

of the Bloomberg Daybreak Asia Edition

podcast. Each weekday, we look at the

stories shaping markets, finance, and

geopolitics in the Asia-Pacific. You can

find us on Apple, Spotify, the Bloomberg

Podcast YouTube channel, or anywhere

else you listen. Join us again tomorrow

for insight on the market moves from

Hong Kong to Singapore and Australia.

I'm Doug Krer, and this is Bloomberg.