Trump Escalates Canada Trade Fight With 35% Tariff Threat

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1:28Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead. With insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily Podcast with Carol Masser and Tim Stenevek on Bloomberg Radio. I mentioned trade certainly front and center. It's front and center for markets because President Trump threatened a 35 percent tariff on some Canadian goods. He also raised the prospect of increasing tariffs on most other countries, ramping up his trade rhetoric and comments that weighed on stocks and boosted the dollar today.

2:16Separately, our Bloomberg News team was the first to report that Vietnam's leadership was caught off guard by the president's announcement of a 20 % tariff. That's according to people familiar with the matter, and that the country is looking to negotiate down that rate. Josh Wingrove is a part of the team that had the exclusive. He's Bloomberg News senior White House correspondent. He joins us from Washington, D.C. Josh, I want to start with this Vietnam story because the president announced last week that Vietnam had agreed to a 20 % tariff. did this come as a surprise to the leaders of Vietnam?

2:49It seems to have come as a surprise to them. And it seems that this deal that the president announced is actually maybe a little bit closer to these tariff letters and that there's a unilateral element to it. It looks like the Vietnamese were hoping for a number, you know, several points below that one. And the number 20 caught them off guard. Our colleagues there are saying that this deal, or if we're calling it that, this announcement of the president, The U.S. president has not been amplified by Vietnamese state media particularly heavily. So it remains a little bit unclear. Now, remember, this is the only deal with one of the countries that was facing a potential tariff hike this week, about the nearly five dozen countries.

3:28He also has sort of a framework deal with the U.K. itself, had some questions. And, of course, they've got that deal with China to essentially keep talking. So, you know, the deals just really aren't materializing. Now, Trump himself has said he's not particularly stressed about that because he simply wants to set unilateral rates anyway. So whether he'll do that or not, we will see. But there have been a lot of developments here on trade this week in the past 48 hours or so. But the Vietnam one is a reminder that even the things that they do announce as deals come with all kinds of caveats on them.

4:00Definitely a lot of news that we're getting this week as it pertains to tariffs. But Vietnam here, can you just put into context here for our reviewers. How big of a trading partner are they for the United States? They're a major trading partner in the United States, and they were sort of a bellwether because there have been longstanding, and I mean pre-Trump administration and bipartisan concerns about what's called transshipment, essentially the Chinese routing stuff through Vietnam to get around whatever tariffs are applied to China. So they were sort of a test case. Hey, how are you going to deal with this?

4:33And what Trump announced was essentially a double tariff for transship goods AND THIS 20 % RATE FOR ALL OTHER GOODS. AND THAT, YOU KNOW, THERE ARE STILL SOME QUESTIONS SWIRLING ABOUT THAT, INCLUDING WHETHER, YOU KNOW, IT WOULD INCLUDE SORT OF ROLL IN PREVIOUS TARRIFTS OR NOT. AND THE SECRETARY BESSENT WAS ASKED ABOUT THAT EARLIER THIS WEEK. BUT IT REALLY DOES LOOK LIKE IT'S, LET'S SAY, MORE FLUID THAN NOT. AND SO THAT, OF COURSE, HANGS IN THE AIR AS WE LOOK FORWARD TO THESE CHINA TALKS. SECRETARY BESSENT, LUTNICK, USTR JAMISON GREER, WE'RE EXPECTING A NEW ROUND OF CHINA TALKS. I said, early next month.

5:08But it also looks like Besson and Ludnik are going to Japan where they could perhaps cross paths with the Chinese or even pick up the talks with the Japanese, which themselves are having problems right now in those negotiations. So lots of moving parts here right now. But remember that market shock on April 2nd when President Trump announced these Liberation Day tariffs initially rolled them back amid that market fallout about a week later. Right now, we're sort of barreling towards another Liberation Day in a few weeks. That's, you know, we're going to be speaking to Ann Maletti exactly about that point, Josh.

5:40As some folks have said, it doesn't seem like the markets are really taking that August 1st deadline seriously. You said there are a lot of moving parts here. Certainly just in the last 10 minutes, we're getting another headline that the U.S. is working toward an interim trade deal with India that could reduce its proposed tariffs to below 20 percent. This, according to people familiar with the matter, and it puts the South Asian nation in a favorable position against its peers in the region. Our Bloomberg News team reporting that. Back to Vietnam, though, because you and the team on this story reporting that Vietnam is looking to negotiate that 20 percent lower to maybe the 10 or 15 percent so level.

6:13How exactly would they do this? Like, what do you think the president wants to see and what concessions could Vietnam make? Your guess is as good as mine, because the way President Trump has announced it. And again, we don't know that the Vietnamese agreed to this was that they agreed to open their market to U.S. goods. Full stop. And therefore, that's kind of what he's looking for. It's hard to imagine offhand what kind of other carrots they can put on the end of that stick. Now, of course, they want a lower rate. Trump has really not been, you know, horse trading. There's not really been an indication of that.

6:46And you mentioned in the top about this sort of musing about setting a higher floor. That is one of the biggest questions I have this week. He told the NBC yesterday, hey, we're looking at maybe 15 percent or 20 percent. We don't know whether he meant just for these countries, about five dozen, the ones where the U.S. has a goods trade deficit. Is he talking about those, the ones that have been paused at 10 percent? Are they going to go up 15? Or is he talking about everyone? He's talking about every country, including ones where the U.S. runs a trade surplus, including ones that are like friends, like Australia, the U.K., that kind of thing.

7:21And if that's what he's talking about, he's talking about a very widespread increase. and not to drone on too much, but last night we had the Canada development, that letter on to Canada saying he'd raise the rate to 35%. Really important caveat here. Right now, it's a three-tiered system for U.S. tariffs on Canada. 25 % for a lot of products, 10 % for some energy products, and 0 % for USMCA-compliant goods. That's Trump's reworked NAFTA from his first term. We are told that the 35 % rate is poised to be applied only to that 25 % rate. The 10 % would stay where it is. And the USMCA would remain with its carve out as of now.

7:57That's the expectation. But our source is cautioning us that this is a fluid situation. And as we know, with Donald Trump, anything's possible. But the Canada one also came a bit out of the left field last night. But it does look potentially like a more targeted increase of that tariff than perhaps other scenarios where it was sort of an across the board 35. Josh, sticking with Canada here, I mean, And of course, this 35 percent threat for tariffs here would be really huge here for Canada. Is Mark Carney doing enough? How much stake do they really have in the game? And how much progress is President Trump making here?

8:30Carney has been more private in his negotiation tactics than his predecessor, Trudeau. And we'll see. The Canadians, when Carney and Trump met at the G7 last month in Alberta, Carney set a public sort of 30-day deadline that we're kind of coming up against in a week or two. The Americans never said that deadline. They never published it. It's not in writing like the July 9th and August 1st deadlines are. And so it's unclear whether or not they're still trying to reach something by then. Now, of course, Trump has put this August 1st date on there. If all that's happening on August 1st with Canada is that the rate goes from 25 to 35, but other things don't change, it's not clear how Prime Minister Carney will react and whether he'll have much incentive to, you know, give stuff in return to get to try to heckled to a lower rate.

9:17I should note, of course, Canadian public sentiment is very sour. People are upset there about how the country is being treated, a major trading partner of the U.S. And so the political push for Carney is not so much to bend the knee and make a deal, but arguably to do the opposite, to dig in and play tough with Trump. Josh, we are bringing up live pictures of President Trump right now. He's touring the devastation in Canada. He's there with the First Lady. He's also there with Governor Greg Abbott of Texas. I'm wondering about the unanswered questions that you still have. You know, we've gotten quite a few letters this week from the president about trade and about different tariff rates on other countries.

9:56You and the team have reported on Vietnam and on Canada. Going into the weekend, what's the unanswered question that remains for investors who are watching this and really for the global investing audience? I mean, if you squint, you can look at these tea leaves in sort of two completely different directions. One, we don't have details on the EU. The China talks are coming, potentially that August deadline is extended. This report today from our great colleagues about India, maybe they get some kind of interim deal. Canada comes in smaller than maybe it could have otherwise been. And if all those dominoes fall that way, the tariff barrage coming on August 1st will be more on the smaller end of the range of outcomes.

10:33The flip side is if he just keeps farming out letters and doesn't get deals that he likes and starts announcing unilateral deals like with Vietnam that maybe the other countries balk at, then we could just have an August 1st filled with announcements, including potentially if things go sideways with, say, the EU, which has been a very silent issue here. You know, big bloc, huge trading partner, had been facing a tariff increase. Trump hasn't said a peep, although he alluded on Thursday in an interview with NBC that there might be a letter to the EU coming. So we'll see. I think there's a few sort of bellwethers, the EU chief among them, but we just don't know the scale of the tariff situation that we're walking into on August 1st.

11:11I should also note that that copper deadline he also set for August 1st. So it's not just the country by country tariffs coming on that day. Yeah, 50 percent. That tiny economy, the EU's economy, certainly one for us to focus on. Josh, always appreciate your time. Josh Wingrove, Bloomberg News, a senior White House correspondent in Washington, D.C. Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, A network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

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13:27You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App. Or watch us live on YouTube. Well, the markets kind of seem to be taking this tariff news in stride. You heard Josh mention April 2nd and then the pivot a few just a little over a week later to that extension to July 9th and then another extension. And look, we're just off of all-time highs. And that's really what I want to talk to Ann Mileti about, the question of complacency in the market, as Jamie Dimon warned yesterday.

14:03Ann Mileti is back with us. She's head of equity investments and chief diversity officer of Allspring Global Investments. They've got about$600 billion in assets under management. She joins us here in the Bloomberg Businessweek studio. Is there complacency in the markets? I think there is a little in certain places. I wouldn't call it broad complacency, though. Well, what is the difference between what's happened since mid-April and the 25 % increase to new records in the S &P 500 versus messaging that we've gotten from the president about tariffs? Because that threat is still there. I totally agree.

14:40The threat is still there. We know tariffs are going higher. I do think investors are a little bit more comfortable that there's a negotiation process going on. So despite the deadlines and changing rhetoric that we get on a daily basis, they know there's some flexibility going on behind the scenes. So it sounds like you're saying the market is not fully pricing in a hard and fast deadline of August 1st. Probably not a hard and fast deadline and probably not peak tariff rates either. And you know, when we, I'm looking at the index right now. We saw it surge about the 52 handle back in April. And if you look at it now, it's about 16 right now.

15:23But I mean, of course, people are really looking to see whether or not it'll rise to 20. At what point would you raise an eyebrow and say, hey, the market is really nervous about what's going on right now? Look, I think volatility can still exist. And I wouldn't be surprised if we woke up next week and we get a sharp rise in volatility because of some announcement that we're not, you know, thinking about today. I mean, typically those sharp rises in volatility happen because of something unexpected. The one thing I do have to say that I feel a little bit better about more recently is the breadth that we're seeing in the market.

16:02And instead of that broad or that intense, deep concentration in just a handful of names, You're kind of seeing positive performance out of almost all industries in the S &P and more broadly even down cap. And within those industries, you're starting to see companies with good fundamentals starting to act more favorably. And that's a healthy sign. And it shows that there's, you know, to the point of complacency, I think there's some real work that is being done to really look at company fundamentals and try to position where you want to be for the next, you know, event. So if you look at the market from New Year's Day to now, it's almost like we're in the same place.

16:49So much has happened in between, but we're still flirting with all time highs here. But that being said, I won't necessarily ask you where are the safe haven areas, but where are the areas for opportunity right now? What are you telling your clients? Yeah, it's a it's a great question. And it's a question we get asked often. Right. So so I always think about it as risk versus reward. And I would say from a market cap standpoint, I really like the kind of the mid cap space. So not all the way down to small cap, but that mid to small area, there's still a lot of names and companies that have continued to perform well, especially ones with strong balance sheets, experienced management teams, and companies that can kind of control their own destiny, have a lot of flexibility, even given all the changing kind of rules and things happening around them.

17:38That's a sweet spot in the kind of size space. In terms of industries like healthcare, I see a lot of our investment teams taking interest there, but not out of the typical healthcare services, drug areas. Underneath, if you think about where the next layer of innovation is going to come from, how are we all going to get healthcare a little bit more efficiently and in a new probably way? there's a lot of companies that are exploring and interesting in that area. And then lastly, from an asset class standpoint, I think emerging markets in international space is really interesting here. Just 30 seconds.

18:21Help us look ahead to the bank earnings next week. We heard from Delta yesterday, Levi's yesterday. Solid reports, stock higher as a result. Good start? I think it's a good start. And I think we're going to see some volatility within earnings. Not all things will be created equally. And this is where I think active managers really do. This is where all the work comes out to play, right? Where, you know, in this environment, some companies really can adjust quickly and others just can't. Ann Mileti, good to see you. Thanks so much for joining us. That's Ann Mileti, head of equity investments, also chief diversity officer over at Allspring Global Investments.

19:01This is the Bloomberg Businessweek Daily podcast. Listen live each weekday starting at 2 p.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130. I want to get to the latest on Russia's invasion of Ukraine. North Korea is now supplying as much as 40 % of Russia's ammunition for the war in Ukraine as the partnership between Pyongyang and Moscow deepens. This is according to the head of the Ukrainian military intelligence. Separately, President Trump said he plans to make a, quote, major statement on Russia as the U.S.

19:40prepares to send more American weapons to Ukraine. Also, President Trump's special envoy to Ukraine, Keith Kellogg, will arrive in Kiev on Monday and spend a week in Ukraine. This, according to a report from the Ukrainian news site Novinai Live. Nick Wadhams is with us. He's a Bloomberg News national security team leader. He's usually based in Washington, D.C., but he is here in New York. Nick, I want to start with what we heard late yesterday, this, quote, major statement on Russia from President Trump that's set to come on Monday. Do we have any idea what this will be? We have some suspicions of what it will be.

20:14What we have seen in the last couple of weeks is the president has dramatically shifted his tone toward Vladimir Putin. So whereas he had previously been effusive in his praise of the president and really condemning President Volodymyr Zelensky of Ukraine, He's now shifted and essentially said he's run out of patience with Vladimir Putin over the fact that he has refused to stop the bombardment of Ukraine. So it could be a couple of things. One could be sanctions. He's talked favorably about a bill working its way through the Senate right now. What's left, though? Well, the bill would go after sales of Russian oil.

20:45So they imposed this price cap that allowed Russia to sell some oil. Basically, they wanted to restrict oil but not tank the oil market. So there is the possibility that they would ratchet that up. So that's the big one. The other is the possibility that he'll really open the floodgates on weapons. So he has not sought more money from Congress in his second term to provide more weapons to Ukraine. A possibility that he'll say we know he's more favorable toward the idea of sending weapons. So he may say we're going to put some money where our mouth is on that. But is that politically tenuous for the president, given the especially during the campaign, there was this idea that, OK, if Democrats win, we're just going to keep sending money and weapons to Ukraine.

21:24There's also this wing in the Republican Party that's like, hey, this is not our war to be fighting. Well, I mean, it's it's the politics of it aren't really clear. But you have this sanctions bill in the Senate that has like 85 senators on board. So it's real bipartisan support. And there is a very strong wing of the Republican Party that supports a lot more aid to Ukraine. And then you have the fact that, you know, President Trump, you know, he has said openly, you know, I get to define what America first is. So get on board, you know, and we've seen a lot of evidence that his the lot of the MAGA supporters have really been supportive of whatever he decides to do, including bombing Iran.

22:00So that's a big question. And there are several people, though, including J.D. Vance and Secretary of Defense Pete Hegseth, who have been much more ambivalent about the idea of the U.S. committing more weaponry to Ukraine. So you could a lot will depend if he does do that on the dollar figure. If it's, you know, a$60 billion supplemental like Joe Biden signed toward the tail end of his term, that would be a very big signal. If it's anything less than$10 billion, I think you'd see that as sort of a hedge by the president. Nick, so with North Korea supplying as much as 40 percent of Russia's ammunition, we know that Russia is providing money and technology to North Korea in exchange for these weapons.

22:40What chapter are we in right now in the war? How big of an asset is this for Russia? Well, it's a huge asset. What they really need is a lifeline. They need continuous weapons. They're spending a lot of their munitions. You've seen this uptick in attacks by Russia against Ukraine, drones, things like that. So they are running low, and they need as much help as they can get. Iran is no longer really part of the procedure, part of the process, because they, you know, obviously everything that's happened in the war with Israel and the strikes by the U.S., they're really sort of scraping the bottom of the barrel with North Korea.

23:16The challenge is that there is no end in sight there. The U.S. cannot really put any pressure on North Korea. So it is a fairly consistent and reliable lifeline for Russia that it just would not otherwise get, and it's becoming more and more dependent on. So, of course, this has been going on for years, this conflict. And as you mentioned, there's not much more that the U.S. can do. It seems as though there's nothing left here. But really, where are we? How would you describe this time period? Who's pushing ahead right now? Well, it's really a crucial moment because Russia has stepped up these air attacks and the weapons that Ukraine needs to defend against these drone and missile attacks from Russia are precisely the things that the U.S.

23:57has been sort of waffling on. So the big question now is, if you have this gap in supplies to Ukraine, who fills it? Is President Trump on Monday going to say, OK, we're going to open up the floodgates again and send all that stuff? or is Europe going to fill in the gap? We do have some indication that Trump is going to be willing to sell weapons to NATO countries that the NATO countries, specifically Germany, France, the UK, would then say, OK, we're going to send those weapons to Ukraine. So rather than seeing the U.S. do it directly, NATO countries would do it. The question is, can they get there fast enough?