US-Canada Trade Breakdown; Warsh Readies for Jackson Hole

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1:29Bloomberg Audio Studios, podcasts, radio, news. Good morning, I'm Nathan Hager. And I'm Alexis Christophorus. Here are the stories we're following today. Alexis, we begin with the new trade war for the U.S. with its northern neighbor. The U.S. has slapped 50 percent tariffs on around 20 billion dollars of Canadian goods after talks collapsed late Friday. Now, Canada is preparing preparing retaliatory tariffs, and Prime Minister Mark Carney says he's also preparing a domestic aid package for businesses affected by the spat. Transportation Secretary Sean Duffy says this won't end well for Canada.

2:06To think that they're going to go to war with Donald Trump and actually win that war with the U.S., I think it's foolish on their part. I think you're going to see Mark Carney come to the table very, very quickly because it's going to be devastating for his country. Transportation Secretary Sean Duffy appeared on Fox News Sunday, heard every Sunday on Bloomberg Radio. Bloomberg Global Trade Editor Brendan Murray reports Canada sees little chance, though, of resuming talks with the U.S. before the November midterms. It looks like the calculus from Ottawa's perspective, to some extent, is that the political costs here for Donald Trump to engage with Canada in a trade war, to slap tariffs on each other, might be detrimental to the Republican Party heading into the midterm elections here.

2:50Bloomberg's Brendan Murray reports Canada's retaliatory tariffs won't take effect until September 8th, but sources tell Bloomberg News Canada's domestic aid package could remain in place through the rest of President Trump's term if need be. And Treasury Secretary Scott Besant is preparing to announce an economic D-Day for Tehran. We get more from Bloomberg Middle East correspondent Abir Abu Amar in Dubai. We have to await, of course, the details of what Scott Besant will lay out in this press conference. But what is widely expected is an announcement of some kind of secondary sanctions against countries that continue or choose to continue to do deals or trade deals with Iran.

3:26Now, that, of course, includes countries in the Gulf, namely the United Arab Emirates. That, of course, includes India and the big one, China, which buys about 90 percent of Iranian oil. China actually came out over the weekend and said that it will continue to support the diplomatic route between the United States and Iran. But any kind of secondary measure against China will bring out a bigger conversation about tariff or trade wars between the United States and other countries. Bloomberg's Abir Abu Omar reports Secretary Besant previewed the effort in a Financial Times opinion piece, writing that the objective is to, quote, sever every economic lifeline that sustains the tyrannical regime until Tehran stands alone.

4:08Ahead of the announcement, Iran's currency weakened to an all-time low against the dollar, falling 4.5 % since President Trump announced the crushing economic operation. Alexis, world leaders have gathered in Kiev to mark 35 years since Ukraine declared independence, and the dignitaries include UK Prime Minister Andy Burnham. Let's go to London and get the latest from Bloomberg's James Wilcock. Good morning, James. Good morning, Nathan and Alexis. Many of Europe's leaders took the overnight train into Kiev, along with fresh pledges of cash for the war effort. It's become a familiar trip for the likes of the EU's Antonio Costa, but it's the first for the UK's relatively new leader, Andy Burnham, who's chairing a meeting of Kyiv's allies to mark the 35th anniversary of Ukraine declaring independence.

4:52It's the independence they've guarded now for more than four years of war with Russia, but it's a war with no clear end in sight. In London, James Wilcock, Bloomberg Radio. Thanks, James. Meantime, the U.S. military has scrapped an amphibious landing exercise with South Korea due to shortages related to deployments to the Middle East. That's according to a spokesperson for South Korea's Marine Corps. The postponement comes after President Trump recently ordered the scaling back of a separate joint military exercise with South Korea. The president cited his desire to maintain his relationship with North Korean dictator Kim Jong-un and Seoul's purported refusal to help Washington with its conflict against Iran.

5:30Let's turn to the markets and the economy now, Alexis. Investors are looking ahead to Fed Chair Kevin Warsh's comments in Jackson Hole, Wyoming this week for clues on the path for interest rates. Jack Manley, global market strategist at J.P. Morgan Asset Management, does not expect Warsh to say much. I think we're going to hear a whole lot of nothing, you know, to probably oversimplify things. I mean, Warsh has made it extremely clear that he wants to hold the cards as close to his chest as he possibly can. He is not particularly interested in forward guidance. I think it's going to be a lot of cryptic talking.

6:03I think we'll probably get an update on where those task forces are and how that progress or how those things are progressing. But don't expect a whole lot of clarity on what the Fed's going to be doing over the next 12 to 18 months. That is not Warsh's story. That's J.P. Morgan Asset Management's Jack Manley. We invite you to join us this Friday for a special edition of Bloomberg Surveillance live from the Jackson Hole Economic Symposium. Tom Keene, Lisa Abramowitz and Michael McKee speak with Fed experts on the path forward starting Friday, 9 a.m. Wall Street time on Bloomberg Radio, Bloomberg Television and the Bloomberg Business App.

6:36We'll be there looking forward to it. Meantime, Treasury yields are trading near multi-year highs ahead of that Jackson Hole meeting. And hedge funds are increasing bearish dollar bets as they await details on Treasury Secretary Scott Besson's new fiscal plan to address high borrowing costs. Federal Reserve Bank of Minneapolis President Neil Kashkari is downplaying concerns over rising U.S. Treasury yields. He spoke on CBS's Face the Nation. There's every indication that the U.S. Treasury market is functioning as it should, that trades are taking place, that there's liquidity in the market. And so that enables us to focus on the federal funds rate as our primary policy tool to get inflation back down.

7:13And so I think we have the freedom to do what we need to do to achieve our goals that Congress has assigned us. Federal Reserve Bank of Minneapolis President Neil Kashkari also expressed concerns that inflation won't cool anytime soon, but he stopped short of saying whether he'd call for a rate hike in September. As for equities, Alexis, tech stocks are leading futures mostly lower as we begin this new trading week and as investors await NVIDIA's earnings on Wednesday. The information is reporting the chip makers discussing investing in perplexity in an equity round, valuing that AI startup at more than$30 billion.

7:47And Nathan, in Asia, South Korea's Kospi index dropped more than 3%. It was led lower by Samsung Electronics. That stock dropped more than 4 % as investors were disappointed by a new shareholder return package that favors dividends. SK Hynix also dropped more than 4%. And shares of Alibaba fell almost 9%, Alexis, after that company raised more than$10 billion in Hong Kong's biggest secondary share sale on record. Alibaba plans to use the proceeds to invest in AI. And SoftBank is planning a record$6.3 billion retail bond sale. That's the biggest by any issuer in Japan. The conglomerate is raising funds for its investment commitments to open AI.

8:28SoftBank has committed more than$60 billion to invest in the chat GPT developer. Looking at cryptocurrencies now, Alexis, spot Bitcoin exchange-traded funds had their strongest weekly inflow in 10 months last week as the original cryptocurrency surged. The 13 U.S.-listed funds drew in a net$1.9 billion. The inflow came as Bitcoin gained about 23 percent last week. And Nathan, California's attorney general has reportedly canceled a scheduled meeting today with Paramount to begin discussing a settlement of the state's lawsuit to block the media giant's acquisition of Warner Brothers Discovery. The New York Times reports that California's attorney general accused Paramount of leaking and misrepresenting earlier settlement talks.

9:09California and 11 other states are suing Paramount to block the deal, arguing it would create a company with outsized market power in cable TV and movie studios. 5.09 on Wall Street. Time now for a look at some of the other stories making news in New York and around the world. For that, we're joined by Bloomberg's Michael Barr. Good morning, Michael. Good morning, Alexis. Days ahead of the 25th commemoration of the 9-11 attacks, There is a continuing effort to formally identify all of the nearly 3 ,000 people killed at the World Trade Center. For the first time, the Medical Examiner's Office and the NYPD have identified a 9-11 victim using genetic genealogy combining DNA testing with family trees.

9:52Dr. Jennifer Odeon is a forensic anthropologist in the office of the Chief Medical Examiner for New York City. It's amazing when we get a possible new ID and then when we are able to confirm it and know that now another family is going to have that information. Officials say an adult female is the newly identified victim. Officials say a fast-growing wildfire in Reno, Nevada was human-caused. The Hawk Fire grew Sunday and is uncontained. Authorities confirmed several structures have been destroyed and that six people have been hurt. About 42 ,000 residents have been ordered evacuated, including this woman.

10:31Grabbed what I could. I couldn't really see anything because there was no lights. There's no power. Nevada Governor Joe Lombardo declared a state of emergency in Washoe County. Shelley Fabre, who starred in several TV series such as The Donna Reed Show and Coach Has Died, so far no word on the cause of death. Shelley Fabre was 82. Tennis fans' tight security is planned for today's start of the U.S. Open. The New York City police have new authority from DHS to counter unauthorized drones. The NYPD will deploy a mobile surveillance center to track drones and use sophisticated technology to hack into their guidance systems.

11:12Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg. Thanks, Michael. Time now for our Bloomberg Sports Update. and for that we bring in Dan Schwartzman. Baseball scoreboard, the Yankees beat the Blue Jays 8-3 while the Mets give up a walk-off homer to lose to the White Sox 2-1. Elsewhere, the Red Sox slip past the Giants 5-4, the Orioles lose to the Rays 3-1, while the Nationals are beaten by the Marlins 6-2. Meanwhile, the Braves double up the Brewers 4-2, Cubs dominate the Mariners 19-2, while the Phillies stun the Cardinals 6-4, scoring all six runs in the bottom of the ninth inning.

11:48NFL preseason Sunday night football saw the Texans outlast the Seahawks 19-16. In the NBA, after waiting to clear waivers, Klay Thompson officially signing his two-year deal to join the Miami Heat. In golf, Wyndham Clark wins the BMW Championship in St. Louis by three strokes over Patrick Cantley. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this.

12:15coast 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 good morning the u.s is gearing up for economic war on multiple fronts now a trade war with canada and an economic d-day on iran canada is preparing retaliatory tariffs on the u.s after the collapse of trade talks but former deputy Canadian Prime Minister Chrystia Freeland says her country does not see trade as a zero-sum game. I think at heart that is not President Trump's view, and that is a real problem. And it's a problem not only for Canada, it's a problem for the United States.

12:54Former Canadian Deputy Prime Minister Chrystia Freeland was on Bloomberg this weekend. Joining us now is Julie Norman, Associate Fellow at Chatham House. Julie, it's great to speak with you this morning. Who has the bigger problem now with the U.S. and Canada apparently headed for trade war. Good morning. Yeah, good morning, Nathan. I mean, obviously for Canada, this is a bold move with about 70 % of Canadian exports going to the U.S. This is going to hit Canada hard, and Carney, I think, knows that. But this is a bigger thing also just for the U.S.'s style of negotiating and Trump's style of negotiating these tariffs, not only with Canada, but with other countries as well.

13:34and seeing a country like Canada that does rely so much on this trade relationship, taking this move, I think is very important. It shows that countries can and will stand up to Trump if they are being essentially bullied into deals that are not in their interests. We saw Canada say that they are going to impose retaliatory tariffs on the U.S. in 15 days, September 8th. Does that leave enough room for negotiation at this point? I think we can assume that there will be some talks resuming at some point. I'm not sure exactly when those will be, but certainly that window does allow for some wiggle room.

14:13And I would say, Carney, I think this was a strategic move for him to very abruptly walk away from these talks, say these weren't working for Canada, and essentially put the U.S. unusually on the back foot in how they're going to respond to this. And so I think, again, because of the economic relationship between these two countries, that's very well known. There will be talks that resume at some point. But again, the political statement, I think, is just as important, if not more so, than the economic one at this point. In terms of that political statement, do you see a desire on the U.S. side to get this resolved before the November midterms?

14:51given some of the comments you've heard in particular from the likes of Republican Senator Susan Collins saying the impact that tariffs could have on her state. Sure. I mean, a lot of northern states rely on this trade relationship with Canada, and a lot of them rely on energy relationships with Canada as well. And the energy sector, we know, is already feeling the squeeze from the Iran war and whatnot. So even though not all these sectors are immediately implicated in this first round, if this does escalate further and deepen these northern states and the U.S. more broadly is going to feel the impacts of this at a time when, you know, when that economic squeeze is already coming from what's happening in other parts of the world.

15:31Speaking of other parts of the world, let's talk about Iran and the economic D-Day that Treasury Secretary Besant says he's going to be announcing this afternoon. Do you see further sanctions having an impact to get Iran back to the negotiating table? You know, Nathan, it's hard to say if that will have an impact right now, largely because the U.S. and many other countries have had longstanding strong sanctions against Iran for years now. There were sanctions prior to the 2015 nuclear deal. Trump famously withdrew from that deal in 2018 and reimposed those sanctions. Countries like the U.K. where I am based have very strong sanctions against Iran.

16:09And so that sanctions regime has been in place for a while. And that in itself is notable, but also that means that Iran has found many ways to work around those sanctions for years, whether through shadow fleets or through front firms or what have you. I think what the U.S. is going to be trying to push for this time is pressuring other states that still do do business with Iran to cease that. But even there, the countries that do the most business with Iran, China, Turkey, Iraq, the U.S. has other interests with those countries that it would be unlikely and just very difficult for them to somehow, you know, do something drastic with China at this point to pressure on that particular front.

16:48So my guess is this is a way that Trump and the administration want to show they are doing something on Iran. They're trying to move this into an economic war. But even that, it's going to be a long slog. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston and nationwide on Sirius XM channel 121.

17:26Plus, listen coast to coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces. And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Alexis Christophorus. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

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