Tariffs on Hold Until US-China Summit; AI Existential Risks

0:02Speaker 1:Bloomberg Audio Studios. Podcasts.

0:05Speaker 2:Radio.

0:06Speaker 3:News.

0:10Speaker 1:Good morning, I'm Nathan Hager.

0:11Speaker 4:And I'm Karen Moscow. Here are the stories we're following today.

0:15Speaker 5:Karen, we begin with China and a look ahead to next week's summit with President Trump and his Chinese counterpart, Xi Jinping, in Washington. Ahead of the meeting, we're learning the U.S. is expected to delay the announcement of certain new tariffs. Bloomberg's Amy Morris has the latest from the nation's capital.

0:32Speaker 6:Sources tell Bloomberg the capacity tariffs, which are over trading partners' excess manufacturing capacity, will be held off until after the summit, at least. Bloomberg earlier reported the administration intended to release a trade report on excess capacity before the leaders' meeting, and that the report would recommend a 7.5% tariff on Chinese goods. The reason for the delay is unclear, and it's not clear if the final tariff rate will change.

1:00Speaker 6:In Washington, Amy Morris, Bloomberg Radio.

1:02Speaker 4:All right, Amy, thank you.

1:03Speaker 7:Well, President Xi heads to the White House for the highest stakes summit with not just trade, but tech and AI are also set to dominate the agenda. Sources tell Bloomberg that leaders of Apple, OpenAI, and Qualcomm are set to attend the White House state dinner for Trump and Xi. Executives are reportedly expected to join other business leaders, including NVIDIA's Jensen Wong. Bloomberg's Tom McKenzie says one area of focus will be China's critical response to Anthropic CEO Dario Amadei's essay about slowing the pace of AI development.

1:35Speaker 8:My reading of that was this is a China that's very annoyed with Anthropic because Anthropic has been very critical of China and they were making the case, Dario, in that essay that there should be greater restrictions on chips into China. I think that's where the criticism was rather than pacing itself.

1:52Speaker 7:Bloomberg's Tom McKenzie says the summit comes with geopolitical tensions simmering over the AI race, international trade, and the Middle East. Trump and Xi are scheduled to hold the bilateral summit at the White House next Thursday, September 24th, following their previous meeting in Beijing in May.

2:08Speaker 5:And ahead of that, Karen, President Trump is telling Axios he is approaching a big decision, in his words, on whether to re-escalate attacks on Iran. Persian Gulf nations are set to meet in New York next week on the sidelines of the United Nations General Assembly. Ahead of that, Reuters is reporting that China has privately asked Iran to help rein in Houthi militants after an appeal by Saudi Arabia. The Tehran-backed militant group has made advances in Yemen toward the Bab el-Mandeb Strait in recent days while also attacking facilities in the kingdom.

2:41Speaker 7:Meanwhile, in Iran this morning, Nathan, hundreds of thousands of Iranians have gathered for a government-organized rally. It's the biggest show of defiance since the U.S. and Israel first attacked in late February. Many of the demonstrators marched through downtown Tehran in combat uniform, pledging to take up arms and receive limited military training in an effort known as, quote, ones who sacrificed their lives for Iran.

3:04Speaker 5:With all that in the background, Karen, oil is falling for a third straight day. Brent is trading around $ 102 a barrel as supply concerns ease. But analysts at J.P. Morgan say it is increasingly impossible to predict how the Iran war might end. Markets are pricing an additional 4 million barrels a day of oil disruption on top of the 10 million now. Bloomberg executive editor for the Middle East and North Africa, Stuart Livingston Wallace, says President Trump currently seems to be looking at diplomacy.

3:32Speaker 9:There is the issue of domestic fuel prices, the cost of this war, the optics of this war. You know, those will all constrain him. And I think certainly from the GCC side, that is the Gulf Arab States. One would presume they're going to be pushing for a more diplomatic solution because of the experience earlier on in this year and what a return to full-scale hostilities might potentially mean for their economies in particular.

3:55Speaker 1:That's Bloomberg's Stuart Livingston-Wallace.

3:56Speaker 5:Meanwhile, the nationwide average price for gasoline rose to nearly $ 4. 47 a gallon today, according to AAA. Regular has risen by nearly 10% over the last month.

4:07Speaker 7:Well, turning to Europe here, Nathan, German Chancellor Friedrich Merz is commenting on U.S.-German relations. He says the era of, quote, unconditional transatlantic friendship between Europe and the U.S.

4:19Speaker 4:Is over for the foreseeable future.

4:21Speaker 7:Merz made the comments in a speech to party members in Berlin ahead of Sunday's state election. His Christian Democrats are under pressure from the far-right AFD after its shock victory in Saxony and Halt earlier this month. President Trump praised the AFD following that result.

4:37Speaker 5:Getting closer to this country's November midterm election, Karen, President Trump's bid to use the Postal Service to limit mail-in voting appears to be on hold. Postmaster General David Steiner says his agency has stopped work on a computer system that was central to the president's effort. It's after the Supreme Court rejected President Trump's executive order this week for the Postal Service to deliver ballots by mail only to voters on state citizenship lists. The president blasted the high court after that decision, but Steiner offered no opinion. He tells the Associated Press he looks at the issue more from the execution side.

5:09Speaker 7:Well, we turn to the markets now, Nathan. In a hawkish week for central banks across the globe, for the first time ever, the Federal Reserve, ECB, and Bank of Japan have all raised interest rates in the same month. The BOJ completed the trio this morning, lifting rates to 1.25% at its fastest pace of tightening since 1990. BOJ Governor Kazuo Ueda spoke to reporters in Tokyo afterwards.

5:33Speaker 10:Now the underlying inflation rate is approaching 2%. Therefore, it has become important to stabilize the underlying inflation rate at around 2% so that the risk of it overshooting the 2% price stability target does not materialize and subsequently have an adverse impact on the economy. In that sense, I believe the stage for setting policy has changed.

5:55Speaker 7:And Japan's currency weakened about 1% to 157.54 against the dollar during Governor Ueda's post-decision briefing. Unlike the Fed's decision this week, two Bank of Japan board members voted against today's rate hike.

6:10Speaker 5:There's more central bank news this morning, Karen. Christine Lagarde is reiterating that she will depart as the European Central Bank's president next year. Though she's declining to say whether that means that she's going to stay on until her term ends next October, Lagarde told Ireland's RTE radio, quote, we'll see. But added, it'll be handled in the most professional way as it should be.

6:33Speaker 7:Well, we turn to the economy now, Nathan. Notable bond investor Jeffrey Gundlach is warning the next U.S. economic downturn could trigger a debt crisis. The CEO of DoubleLine Capital, which manages almost $ 100 billion in fixed income, says bonds could sell off alongside stocks. upending their traditional role as a safe haven. Gundlach told CNBC the U.S. Treasury would likely step in before yields climb too far.

7:00Speaker 3:It's just too economically prohibitive for the Treasury. So you've got to pick a point. When are they going to go big? And when they go big, you're going to get a big rally in the long run. This is something I think about every single day.

7:13Speaker 1:What's the level?

7:14Speaker 3:And what the market's telling you is so far the trend is toward higher yields. And the Treasury Department is only kind of warming up the motor.

7:25Speaker 7:And Jeffrey Gundlach also told CNBC that he is shifting toward low-duration assets to protect against further interest rate increases. More than 60% of respondents to Bloomberg's latest Markets Pulse survey say they expect 10-year Treasury yields to end the year above 5%.

7:41Speaker 5:And current federal regulators are seeking interviews with employees of Guggenheim Partners as they look for evidence of potential wrongdoing at CEO Mark Walters' business empire. The Securities and Exchange Commission has sent requests to current and former employees, including people who've managed portfolios of assets for insurance companies. Now, Guggenheim Investment says it is cooperating with the investigation. It acknowledges accounting practices were the focus of a whistleblower report last year. Walter is also a billionaire sports owner. He's accused of insurance fraud and hiding an ongoing federal investigation from customers.

8:20Speaker 7:Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr.

8:26Speaker 4:Michael, good morning.

8:27Speaker 11:Good morning, Karen. The fight over the Kennedy Center in Washington, D.C., has taken another turn. After President Trump said that the building could be ripped down completely if his name is not put on the side of it, a judge ruled Thursday that any changes to the renovation plans will require 30 days' notice to the court, including demolition. Republican Senator Tom Tillis of North Carolina says the saga has not helped the GOP in the midterm battle.

8:54Speaker 4:This is not what people who grew up like I did want to focus on. We want solutions. And I've got a lot of candidates who want to get that message through.

9:03Speaker 1:And these are distractions that only benefit the Democrats.

9:07Speaker 11:The Kennedy Center broke ground in 1964, a year after President John F. Kennedy's assassination. It opened to the public in 1971. Another person has died of Legionnaire's disease in the South Bronx. New York City Health Commissioner Dr. Alistair Martin in a social media post says, I am saddened to share that a second person has died in connection with the South Bronx Legionnaires Cluster. At least 14 people have been sickened in the South Bronx Cluster. Charges have been filed in that fatal bus crash that happened in a Los Angeles suburb Tuesday.

9:41Speaker 7:L.A.

9:41Speaker 11:County District Attorney Nathan Hockman says the deadly collision was said to be caused by Bailey Rios. Hockman saying he will ask for life in prison if the 36-year-old convicted is not going to get behind the wheel anymore.

9:56Speaker 4:The evidence will show when we present it that she was in prison.

10:00Speaker 1:By drugs at the time.

10:01Speaker 7:In fact, she had narcotics in the car at that time.

10:07Speaker 4:She was driving well beyond the speed limit.

10:10Speaker 11:An NBC4 helicopter crashed to the ground after the bus collision, killing the pilot, the reporter on board covering the story, and one person on the ground. Last night, a vigil was held in L.A. for the five people who died in the crashes. Global News 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen.

10:31Speaker 4:Thanks, Michael.

10:31Speaker 7:Time now for our Bloomberg Sports Update. And for that, we bring in John Stashower. Thanks, Karen.

10:37Speaker 12:Week two began in Buffalo, the new stadium for the Bills. And Josh Allen, the reigning NFL MVP, was in on five touchdowns, three passes, two runs. He had four last week. The Bills dominated the first half, went on to outscore Detroit 41-31. The Dodgers won 8-2 at Cincinnati. They clinched the NL West. They've won the division five straight years, 13 of the last 14. That's your Bloomberg Sports Update.

11:04Speaker 4:Stay with us. More from Bloomberg Daybreak coming up after this.

11:12Speaker 1:Coast to coast on Bloomberg Radio. Nationwide on Sirius XM. And around the world on Bloomberg.com and the Bloomberg Business App. This is Bloomberg Daybreak.

11:22Speaker 12:Good morning.

11:23Speaker 5:I'm Nathan Hager with days to go till the highly anticipated state visit for Chinese President Xi Jinping in Washington. Trade, of course, will figure high in the discussions with President Trump. And now Bloomberg News has learned the U.S. is likely to hold off on announcing any new tariffs on China or any other trading partner until after the summit. Joining us for more on this from Singapore is Bloomberg Chief Asia Correspondent Rosalind Matheson. Ros, what more are we hearing about this? What's the rationale for holding off on a tariff announcement until after the summit?

11:52Speaker 12:Good morning.

11:54Speaker 2:Good morning. Yes, as you were saying, there are these this possibility that they will hold off on new tariffs on China and other trading partners until after the summit between Xi Jinping and Donald Trump. And that could mean a number of things. One is that they simply want the ground into the meeting to be conducive. You still have US and Chinese officials meeting this weekend to pave the way into that summit, so no bumps in the road going into the meeting. It could also be that the US wants to hold fire on that to see how the negotiations go in the minute during the summit.

12:32Speaker 2:Can this be leveraged during those conversations? We know the US has done that before, or could they come out of the other end and decide how they think the summit has gone and perhaps use them then? So it's a bit hard to say why they're holding fire, but there is a sense in all of that either way, that there is a desire on the part of both the US and China to avoid a resumption of a full-blown trade war again. Of course, all eyes on that trade truce that's due to expire. in November, and will it be extended? Will it be extended for just a limited amount of time? But it does seem that despite all the trade actions that have been happening, the tit-for-tat between the two countries, there is that desire to keep tariffs at a level that is consistent with the trade understandings.

13:19Speaker 2:So they are irritated by them, but they're not going to let that explode back into a full-blown trade war.

13:26Speaker 5:Would it be going too far, Roz, to say that the U.S. might be looking for a broader trade deal to come out of the summit with President Xi, given so many issues that both sides still need to work out, not just when it comes to trade, but the Iran war and now artificial intelligence as part.

13:43Speaker 1:Of the discussion? Well, that's right.

13:46Speaker 2:There's a lot on the table and a lot of tension points, including, as you're saying, around AI. But there is an understanding potentially that there might be deals to come out of this when it comes to US agricultural products. There's something very specific like soybeans, where China has been making some progress on its agreements to buy a certain number of US soybeans every year. And we do know that the US and China are discussing cutting tariffs on certain goods, including American energy and agricultural shipments. So that's in the positive column. But, of course, there's also concern around the critical minerals side and that the Trump administration feels that China's not accelerated enough in terms of agreements to hand more critical minerals over and to do so via Japan potentially to avoid disruptions there. in the global supply chain. So that's one issue that could still be contentious.

14:39Speaker 2:There might be some conversations around the level of the yuan. Of course, the US Treasury Secretary, Scott Besant, hasn't been averse to commenting on other countries' currencies, including the yuan. So there are those elements of tension as well in the relationship.

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15:40Speaker 4:I'm Karen Moscow. And I'm Nathan Hager.

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