Daybreak Weekend: Pfizer Deal, Nobel Peace, Golden Week

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1:20Bloomberg Audio Studios. Podcasts. Radio. News. This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week. from our Daybreak anchors all around the world. Straight ahead on the program, a look at how tariffs on lumber and timber could impact the U.S. housing market. I'm Tom Busby in New York. I'm Caroline Hebker in London. What's in a prize? Specifically, the Nobel Prize decisions. I'm Doug Krishner looking at Chinese consumers during Golden Week, plus trouble with some Hong Kong real estate. That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C.

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2:20Good day to you. I'm Tom Busby. We begin today's program with a new batch of tariffs announced by President Trump on imports of softwood timber and lumber, as well as levies on kitchen cabinets, vanities and upholstered wood products brought into the U.S. How will this impact the housing market moving forward? And what about housing prices? For more, we're joined by Drew Redding, Bloomberg Intelligence, U.S. home building analyst. Well, Drew, thank you so much for being here. Appreciate it. Homebuilders, homebuyers, now they've already been paying sky-high prices, elevated mortgage rates. They've been paying tariffs on imported kitchen appliances, washers and dryers.

2:54And now, October 14th, they'll be paying 10 % levies on softwood, lumber and timber. 25 % on kitchen cabinets, vanities, other pre-assembled. I mean, this is looking, this is not good, is it? Yeah, well, certainly, you know, the consumer doesn't need higher costs when it comes to housing, given the affordability constraints that they've been under for the last several years. Just to take a step back on the tariffs to put it in perspective, the U.S. imports about$13 billion or 7 % roughly of the goods used in new residential construction. So at the headline level, it's not necessarily a massive piece, but there are particular areas where tariffs will be felt perhaps more than others.

3:36If you look at the top three countries that we import from, it's China. That's about 27 % of imports. From there, we're talking about things like appliances, lighting, electrical components, hand tools. The second is Mexico. And from there, we're primarily talking about gypsum products. So think drywall. Mexico is about 72 % of imports And then third, you know, which has really come into focus now is Canada, which accounts for 85 % of lumber imports. So when you put all this together, the previously announced tariffs, you know, country specific fentanyl and reciprocal tariffs, along with these newly announced tariffs, we think that the costs, the total cost to a builder will be about$10 ,000 per home, which is a pretty staggering number.

4:24Now, we don't think the builders will ultimately absorb all of these costs. I think, you know, they'll probably be spread throughout the supply chain. And when you think about the large public builders, they're really better positioned in this environment, given, you know, their scale. Now, in terms of their ability to pass on to consumers, you know, I think that could be tough. And, you know, you've got prices already coming down for a lot of builders due to affordability. And then they're still having to use an elevated degree of incentives, which is accounted for as a reduction in sales price.

4:56So there's a lot of moving pieces. But at the end of the day, the point is that it becomes increasingly expensive to build a home. And I mean, this could really deter a lot of builders. Like you said, we're not worried about the KB homes and the Pultys of the world, but a lot of smaller ones from constructing new homes, at least initially, right? No, it's a good point. And while we haven't seen a huge impact on tariffs to this point, one of the things we have heard, and to your point, really from the smaller private builders, is that there hasn't been a lot of certainty. So they don't know what their costs are going to be.

5:29When you don't know what your costs are going to be, it's hard for you to plan out into the future and put new production into the ground. So I do think it is definitely more challenging for the smaller names in the group. One thing that I think that's worth pointing out on the lumber side of this is that prior to this announcement of a 10 % tariff on software imports, we already had duties on lumber coming in from Canada. You're talking about 45 % on Canadian lumber imports, which again is 85 % of all the lumber imported into the U.S. I mean, it sounds like some of these Canadian lumber makers, these manufacturers could really be struggling now if sales get hurt.

6:09Yeah, it's a great point. And, you know, the announcement really came because the administration wanted to open an investigation as to whether or not the lumber trade was a risk to national security, which they determined that it was. So the question becomes, well, can can the U.S. produce enough lumber domestically to meet all the demand? And I think the answer for now is no. And, you know, as I mentioned, we produce about 70 percent of the lumber utilized in the U.S. and to get that to 100 % would really require a lot of time. The National Association of Home Builders estimates somewhere around 10 years to be able to achieve this, so certainly no small feat.

6:48And not only the industrial resilience, but also Trump said the high-quality jobs that this would create. Would they really be high-quality jobs? I mean, that remains to be seen. And like I said, it will take a lot of time to add new capacity the industry. But, you know, there are a lot of jobs along the supply chain in terms of, you know, just not only jobs you're creating at the mills, but logistics and, you know, getting wood to factories, to job sites and things like that. So it would certainly help. Now, let's talk about the other tariffs. And these are big. They're 25 percent on kitchen vanity, bathroom vanities, kitchen cabinets, that type of thing.

7:27We know that Ethan Allen, Lazy Boy, source and manufacture a lot of their products in the U.S. But there are big retailers that import a ton of goods, Wayfair, Williams-Sonoma, RH, formerly Restoration Hardware. I mean, they may really be impacted by these tariffs, right? You know, I think from their perspective, you know, the impact isn't going to be as great as you might expect. But if you think about the individual consumer who is going out and making a single purchase, you know, on a kitchen cabinet or vanity and was looking for a low cost option, all of a sudden to them, that becomes significantly more expensive.

8:00So I think there's a big difference between how a home improvement retailer can manage the situation versus an individual consumer. A lot of challenges. Well, our thanks to Drew Redding, Bloomberg Intelligence, U.S. home building analyst. We move next to a turning point for big pharma this past week. Pfizer negotiated a three-year reprieve on drug import tariffs in exchange for a promise to reduce what it charges Medicaid for some prescription meds. Also, to price future drugs on par with what it charges other wealthy nations, and to sell certain drugs at discounted prices to the public. Now, how might this impact the pharmaceutical space?

8:36What other drug makers are working on their own deals? And what does it mean for consumers? For all that, we're joined by Madison Muller, Bloomberg health reporter. Madison, thanks for being here. Thanks for having me. I appreciate it. Can you kind of detail the finer points of this agreement with the White House? And I'm most curious about Trump Rx. It sounds a little like his answer to Obamacare. Yeah, it's an interesting concept. And I think we knew that they were working on something like this. I mean, for the last few months, the administration has been talking about direct-to-consumer websites and platforms.

9:11Some drug makers had already started doing that. Eli Lilly, for example, has Lilly Direct. Novo Nordisk has been doing this for some of the really high-demand drugs like GLP-1 weight loss drugs. And so we knew the administration was thinking about doing something like this. And it's answer to, you know, one of the biggest priorities in terms of health care is lowering drug prices. And this is sort of one of the one of multiple things that the administration thinks could help address that by making a website where drug makers can put their drugs on there and at a steep discount to the list price and have consumers sort of directly buy them from the manufacturers as a way to cut drug prices.

9:52But it's an interesting concept, and cash pay might not necessarily be super popular for other medications like it has been for the GLP-1 weight loss drugs. Is that because so many of those other medications are so expensive? Exactly. And the insurance landscape for weight loss drugs is quite patchy still. It's very difficult to get insurance coverage. The drugs are expensive. So a lot of people are willing to pay out of pocket for those medications. But in terms of this Pfizer deal, some of the medications that we know that Pfizer will be discounting, like it's blood thinner, eloquence, those are usually covered by insurance anyway.

10:28So people with insurance will have coverage for that. There wouldn't really be a reason for them to buy it directly from the manufacturer on a website like TrumpRx. And those who don't have insurance, it's probably still going to be pretty expensive for. Now, some of the drugs that are made by Pfizer, by Lilly, by Johnson & Johnson, all made or mostly made in the U.S. Let's talk about what Trump threatened to impose on branded drugs from outside the U.S., a 100 percent tariff. Now, that's not going to help a whole lot of consumers, is it? Right, exactly. I mean, that's one thing that's been sort of in conflict with the administration's efforts to lower drug prices, is if there are tariffs on pharmaceutical products that could end up raising drug prices because it will make it a lot more expensive for manufacturers to make these medications.

11:15And like you said, all of the big U.S. and international drug makers have manufacturing plants in the U.S. They're building more in the U.S. But the pharmaceutical supply chain is really complex and they do have some elements of their manufacturing or supply outside of the U.S. Eli Lilly, for example, makes the critical first step in their weight loss and diabetes drugs, Monjaro and Zetbound, in Ireland. And then they ship it here and the rest of the manufacturing process happens here. So tariffs really had huge potential implications for this industry. And what Pfizer has been able to do is negotiate a three-year reprieve.

11:53And it's the assumption that other drug makers are going to try to follow suit with this. Well, part of Pfizer's deal is they made a$70 billion pledge to expand manufacturing and research and development here. So what is in Pfizer's plans and what are some of the other U.S. manufacturers doing? Yeah, so like we said, there are other U.S. manufacturers and international manufacturers that have pledged billions of dollars of investments over the last couple of months. We've seen, I mean, I think Lilly was the first one back in February. And since then, And there's been a lot of other pledges to invest.

12:28And so right now, what we're hearing is that these negotiations are sort of on hold for the time being in terms of this 100 percent tariffs that Trump had threatened. And there was also this ongoing 232 investigation, which is a national security investigation into the pharmaceutical supply chain, sort of as to lay the groundwork for eventual tariffs. So we're hearing right now, as these sort of deals are going on, that all of that is on pause for the time being. And I guess it was a couple months ago, the Trump administration sent letters to 17 drug makers laying out a couple of specific demands, you know, to lower drug prices, looking to direct to consumer, you know, offer discounts through Medicaid.

13:11And so what we're seeing is Pfizer follow through on some of those demands and make promises that they will discount a lot of their drugs on this Trump Rx website, that they'll discount drugs through Medicaid, which that it sort of actually for the industry was a bit of a relief because they thought it was going to be worse than this. And it could be worse than this if there were sweeping most favored nation policies or tariffs implemented. And so for Pfizer, actually, it was a good thing. And there was some, you know, I guess, follow through for the rest of the industry that this would be a good thing, too.

13:46Well, a lot to look forward to and a lot of deals likely in the pipeline. Our thanks to Madison Mueller, Bloomberg health reporter. And coming up on Bloomberg Daybreak Weekend, we'll look at the global political implications of the Nobel Prize decisions. I'm Tom Busby and this is Bloomberg.

14:39Thank you.

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16:08This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. Up later in our program, a look at the Golden Week holiday in China and what it'll mean for consumer spending. But first, a new batch of recipients for the Nobel Prize, one of the world's most prestigious accolades. Established in the will of Swedish chemist and inventor Alfred Nobel to honor individuals who made outstanding contributions to humankind, the awards have become an emblem of achievement, even capturing the interest of U.S. President Donald Trump.

16:40For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, it's no secret that President Trump has been courting the idea of winning a Nobel Peace Prize for some time. According to Bloomberg Opinion columnist Andreas Kluth, it's one of the reasons he's been pushing so hard for a ceasefire between Russia and Ukraine. Other political leaders, including the Congolese president, have weighed into the debate, saying Trump will have earned the award if he can end more than three decades of conflict between Rwanda and the Democratic Republic of Congo. And of course, previous US presidents have managed to impress the Nobel Committee in the past.

17:23Prior winners include Theodore Roosevelt, Jimmy Carter and most recently Barack Obama in 2009. The current president mentioned the prize during his recent address to the United Nations General Assembly, although he did remain philosophical about his chances of winning. I didn't think of it at the time because I was too busy working to save millions of lives. That is the saving and stopping of these wars. But later I realized that the United Nations wasn't there for us. They weren't there. I thought of it really after the fact, not during, not during these negotiations, which were not easy. That being the case, what is the purpose of the United Nations?

18:09The UN has such tremendous potential. I've always said it. It has such tremendous, tremendous potential, but it's not even coming close to living up to that potential. For the most part, at least for now, all they seem to do is write a really strongly worded letter and then never follow that letter up. It's empty words, and empty words don't solve war. The only thing that solves war and wars is action. now after ending all of these wars and also earlier negotiating the abraham accords which is a very big thing for which our country received no credit never receives credit everyone says that i should get the nobel peace prize for each one of these achievements but for me the real prize will be the sons and daughters who live to grow up with the mothers and fathers because millions of people are no longer being killed in endless and undlorious wars.

19:12That was Donald Trump speaking there at the UN General Assembly in New York. So just how likely is it that he'll walk away with Nobel recognition? And how important is the upcoming prize giving? It's something I've been discussing with our Nordic Managing Editor, Katty Poyanpalo and Stockholm Bureau Chief Charles Daly. Charles, can I start with you firstly? So the Nobels are obviously hugely prestigious. They are known around the world. Just in terms of the history and where we are for this year, tell us a bit about the history of the Nobels and how they've come about. Yeah, sure. I mean, to do that, we have to go back to 1895 and the last will and testament of a Swedish engineer and chemist by the name of Alfred Nobel.

19:58who is known really as well as the Nobel Prizes he's also known for inventing dynamite as his claim to fame. In that will he listed five prizes for those who have conferred the greatest benefit to mankind in the preceding year and there were five categories of prizes in the will physics, chemistry, physiology or medicine, literature and peace and they were first awarded in 1901. Some years later, in 1968, however, a prize was added in memory of Alfred Nobel, and that was established by the central bank here in Sweden, which is called the Riksbank. And not surprisingly, that is called now the Economics Prize.

20:44So how important do you think it is then to Swedish people? I think the fact that a Nobel Prize is seen as, you know, the most prestigious award in the world in its field is really a source of national pride for a country that, you know, let's be honest, is only 10.5 million people on the northern edges of Europe. I think it's worth also noting that Sweden is a nation that looks outward beyond its borders in many respects. So the international attention that these prizes garner is of huge importance to the country. Nobel Day on December 10th, which is the anniversary of Nobel's death, is when the prizes are awarded by the king.

21:28And there is a lavish banquet in Stockholm City Hall. And it's probably fair to say that that is the biggest academic and cultural highlight of the year in Sweden. So deliberations normally do take place in secret. So what do we know about the process for this year? Yeah, the process for this year is as with other years. So Nobel in his will listed the institutions responsible for awarding the prize, for example, the Royal Swedish Academy of Sciences. And for the Peace Prize, it is a committee of five elected by Norway's parliament. Then there is an approved list of nominators, for example, former winners, members of the Swedish academies or professors or chair people affiliated with universities.

22:18And they can then put forward a name and a voting committee then decides on the winner or winners. There can only be three winners per prize is the maximum number of winners per prize. and disclosure about nominations is restricted for 50 years. So a process shrouded in secrecy. So, Katty, let me turn to you. The history of awarding the Peace Prize by Norway to foreign leaders. It has at times been controversial. Well, absolutely, it's been controversial. So one thing to know about this prize is you cannot ever give it to a person that has deceased. And so living people tend to, after being awarded, continue their careers and lives.

23:07And sometimes they do things that don't really kind of fit in with the spirit of why they were awarded a Peace Prize. One super well-known example is 2009, when Barack Obama was awarded the Nobel Peace Prize just nine months after becoming U.S. president. And he, of course, went on to take a lot of US troops into Afghanistan. Yes. And of course, we know that President Trump has been talking about wanting to win the prize for some time. And so, again, this perhaps put some pressure, adds some pressure to these awards. When did we first find out about his ambitions? Trump has been talking about this for almost a decade.

23:59He keeps bringing up the fact that Obama was given the prize and says, you know, if he were named Obama, he would have been given this prize in 10 seconds. Trump talks about having brokered peace or helped end seven wars, but many of these are actually a little bit questionable. Indeed. In terms of the political implications then, the pressure, I wonder whether that is being felt. And maybe also, we don't know, were the US president to win, what might be the implications and the fallout? I think the big question is, what if he doesn't win? This is where the main implication is on Norway, really.

24:45Very recently, Trump declared that not winning would represent a big insult to our country. He there sort of applied some pressure on the Norwegians. Norwegians are really worried about this. They're bracing for what's happening if Trump doesn't win. now if Trump were to win I think a lot of people would put to question the sort of foundation of the Nobel Peace Prize and what it stands for but the same question has been raised with the previous winners you know Obama himself questions his own victory indeed but then of course the Peace Prize is separate from the Norwegian government so whilst there might be trepidation, how does that factor into the kind of decision making?

25:34The committee is independent, we know that. And some of the controversial decisions it's taken in the past were precisely because it is independent. The Norwegian government wanted no conflict with China in 2010. And yet the committee, you know, went and awarded the Chinese dissident that year. Yeah. Charles, just coming back to you in our specific sphere there's always lots of interest in the prize in economics as well as the other sciences that are awarded in literature and so on and again we don't know very much about those awards but what do you think might be in the mix here for all of those other yeah hugely important nobels that's a very difficult question because it's it really is It's hard to name names.