Trump Seeks Reciprocal Tariffs, HSBC Job Cuts & European Security Concerns
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This is the Bloomberg Daybreak Europe podcast, available every morning on Apple, Spotify or wherever you listen. It's Friday the 14th of February in London. I'm Stephen Carroll. Coming up today, US President Trump moves to impose reciprocal tariffs on its trading partners. You can't trust him. Ukraine's Zelenskyy sends a warning on Vladimir Putin. Plus, cuts are coming. Bloomberg learns HSBC is preparing for a fresh round of layoffs. Let's start with a roundup of our top stories.

US President Donald Trump has ordered his administration to consider imposing reciprocal tariffs on its trading partners. The levies would be customised for each country and aim to offset their tariffs on US goods, as well as non-tariff barriers to trade. Again, whatever they charge us, we're charging them, so it works out very well. It's a beautiful, simple system, and we don't have to worry about, gee, we're charging too much or too little.

Reciprocal tariffs would amount to Trump's broadest action to address US trade deficits. Bloomberg senior economics reporter Sean Donnan says the key focus is on how other countries tax consumers. Value-added taxes or VAT, and that's big in the EU. There's more than 160 countries in the world that use a VAT. The US, of course, does not. This kind of rekindles a battle that the US has had on and off with Europe since the 1960s over how to treat taxes.

and trade. But we're going to end up with some big numbers aimed at some big trading partners. We just don't yet know what those numbers are going to be.

Bloomberg's Sean Donnan speaking there as Trump also told reporters that he would enact import taxes at a later date on cars, semiconductors and pharmaceuticals over and above the reciprocal tariffs. The US president has already imposed 10% tariffs on Chinese goods and plans to put 25% duties on all US steel and aluminium imports next month.

The latest salvo on tariffs came as Trump and India's Prime Minister Narendra Modi met in Washington. The two leaders agreed to begin negotiations to address what Trump described as long-running disparities in their trade relationship.

India has been to us just about the highest tariffed nation anywhere in the world. They've been very strong on tariffs and I don't blame them necessarily, but it's a different way of doing business. It's very hard to sell into India because they have trade barriers, very strong tariffs.

Donald Trump was speaking there in that joint press conference. This is Narendra Modi said the two men had agreed to more than double bilateral trade to $500 billion by 2030. Trump also said the US would take steps to sell the F-35 warplane to India as part of a bigger commitment to deepening defence ties. The US has been reluctant to sell the planes to countries where its technology might be stolen by adversaries.

In Europe, leaders are still coming to terms with the US shift in its policy towards Russia after Trump and Putin's surprise call to discuss Ukraine. Ukrainian leader Vladimir Zelensky says he's warned the US president that Putin cannot be trusted, adding that Ukraine must be part of any peace talks.

"Today we cannot predict how it all will go on, but we must be strong. We will be very careful. We need allies and fair partners. We cannot accept as an independent country any agreements made without us."

That was Vladimir Zelensky there speaking through a translator. The Trump administration also told European allies they should buy American weapons and military equipment to maintain the NATO alliance. This is Bloomberg Economics calculates that protecting Ukraine and expanding Europe's own militaries could cost the continent's major powers an additional $3.1 trillion over the next 10 years.

And just some breaking news this hour. NatWest has reported pre-tax operating profit. The beat estimate's coming in at £1.49 billion. That's above an estimate of £1.4 billion. Net income in the fourth quarter was at £1.25 billion.

Also beating estimates net interest income slightly above estimates at £2.97 billion as well. And also news that the UK Treasury has reduced its stake in that West to 7.98%. That's down from 8.9%.

And staying with earnings, sales at Hermes climbed as the luxury group benefited from a strong appetite over the holiday shopping season. Sales jumped almost 18% in the fourth quarter at constant exchange rates, according to the latest results out from the firm this morning. That's above what analysts had been expecting, which was growth of 11%. Hermes shares have climbed more than 20% since the start of this year.

HSBC is planning a new round of job cuts next week. Bloomberg understands the changes to its investment bank workforce will affect employees globally, starting in Asia. That's as CEO Jean-Gilles Hedry continues his overhaul of Europe's biggest lender. Layoffs could begin as early as Monday and will be based on performance, job duplication and simplification, with some already underway in the firm's markets division.

JP Morgan's CEO says the bank will scale back spending on what he called stupid diversity initiatives that he sees as wasteful. Responding to an employee question, Jamie Dimon said plans to cancel some schemes was about costs rather than backlash from the Trump administration. JP Morgan's longtime leader also reiterated the bank's commitment to working with black, Hispanic and LGBTQ communities, but told staff that he was never a firm believer in bias training.

And the UK's Prime Minister Keir Starmer met China's top diplomat as the two countries look to improve ties. The British leader joined a meeting between Foreign Minister Wang Yi and National Security Advisor Jonathan Powell. Bloomberg's James Wilcock reports. Keir Starmer expressed his intention to build a consistent and respectful relationship between the UK and China. And according to China's Global Times, Foreign Minister Wang Yi said the UK government had started the

process of improving relations and look forward to deepening cooperation on AI and climate change. Both China's top diplomat and the US ambassador to Britain were in Downing Street yesterday. It showcases the balancing act Britain is trying to pull off, trying to build ties to the world's second largest economy while avoiding the ire of the US President Donald Trump. In London, James Alcock, Bloomberg Radio.

Those are your top stories. On the markets, Eurostox 50 futures are down two tenths of 1%. So we're seeing a narrowing of the negative sentiment on European stock markets. The Eurostox 50 index actually hit a record high in trading yesterday. We've had some optimism boosted around the prospect of those reciprocal tariffs not coming until April, leaving some space for negotiation. The MSCI Pacific Index index

six tenths higher as well on the currency markets. The Bloomberg Dollar Spot Index now in the red, a tenth of one percent as well. That's after the drop that we saw yesterday. So the euro is trading at 104.67 against the dollar. The pound at 125.67.

Well, in a moment, we'll bring you more on those announcements out of the US on tariffs. But just a word on another story that caught our eye this morning to do with how one hedge fund is using AI. It's replaced junior analysts at the Australian hedge fund Minotaur Capital. That's according to reporting by our colleagues, Harry Brompton and Jules.

Georgina McKay. So their bets using their large language model have returned almost 14% in the six months to the end of January versus almost 7% for the MSCI All Country World Index. Now, it's not unusual that hedge funds will be using AI for this

sort of work. But Minotaur believes that they have developed a large language model that can digest larger amounts of information and produces 2,000 word reports on any global stock it deems has the potential to double in three years or improve tenfold in the subsequent decades. They combine this with making their own inquiries as a recipe for success. But the co-founder, Armina Rosenberg, telling Bloomberg the cost of developing that AI large language model is about half that of a junior analyst's

salary. You can read more on that story on Bloomberg.com and on the terminal. So let's turn back to tariffs then. The US president now talking about reciprocal tariffs on trading partners in response to levies, regulation or other non-tariff barriers. But the timeline is key here. Let's bring in our senior editor Bill Ferries for more. Bill, what can you tell us about what Donald Trump has announced here?

Well, what he's announced is a really sweeping demand of his U.S. trade representative and his commerce secretary to propose new levies on a country-by-country basis in a bid to kind of rebalance trade relations between the U.S. and every one of its trading partners. So that requires looking at not just what kind of tariffs those countries impose on U.S. goods, but what sort of non-tariff barriers

those countries have too. And a non-tariff barrier could be things like regulations. It could include things like value-added tax. It can include a whole host of things that make selling American goods into that country difficult.

The end result of this is expected to be a list of recommendations for, again, every single country on how much the U.S. should raise tariffs against those countries to try to even things out. President Trump presented it as a very easy way of trying to rebalance trade. But the reality is it's going to be quite difficult and it's going to take quite a bit of time, I think, to go through all of that.

Yeah, indeed. And I mean, those are the key factors that markets appear to be focused on, both the timeline and the fact that this looks like a very complex and potentially unworkable task. It is going to be complex. Howard Lutnick, who is still Trump's nominee to lead the Commerce Department, he told reporters that he thinks all the studies about this could be done by April 1st and that President Trump could act on it, on his recommendations tomorrow.

after that. The reality, of course, is that that also opens up a big space of time for negotiations to start with all the countries involved. So I would imagine any world leader who's talking or meeting with Donald Trump

over the next six or seven weeks between now and April, will be putting in a good word and also trying to say, like, what sort of measures they're willing to take, whether it's buying more American goods or reducing some of those tariffs, to try to make it less likely that they will face the full impact of potential tariffs.

The interesting also to see the comments from Peter Navarro talking, dismissing concerns that this might push up prices for U.S. consumers as well, which is, you know, one of the factors that economists have been thinking about.

Yeah, and it comes, you know, all of this comes, of course, just yesterday, there was a higher than expected inflation reading in the U.S. So the trend is not looking good. The bets on when the Federal Reserve will cut rates have been pushed back even further. The Trump administration and Peter Navarro basically arguing that, hey, we did some tariffs in Trump's first term. And the reality was it was a pretty limited impact. They said, you

Studies have shown that exporters to the U.S. absorbed some of that cost with lower margins, but there were costs passed on. And certainly, as you talk about an inflationary environment in the U.S., when people are worried about the price of eggs, the price of homes, the price of cars, particularly with things like the steel and aluminum tariffs, it's going to be a real difficult question politically about whether the president goes forward with this.

Okay, Bill Ferries, our senior editor, thank you very much for joining us this morning. When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations, and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

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with the threat of tariffs on European countries is also hanging over the security issues being discussed at the Munich Security Conference, which gets underway today. Our correspondent Oliver Crook is there for us and he joins us now live. Oliver, good morning. Trade issues intertwined with security issues at this event. How worried will leaders there be about the latest they've heard from Donald Trump?

I mean, listen, they need to figure out sort of what to prioritize of what they've heard recently from Donald Trump. I mean, the last 48 hours alone has been a complete barrage of information. It's very hard to know really what to take away from it, what to take seriously, what to take literally. I mean, the week began with this conversation between Donald Trump and Vladimir Putin, really kind of out of the blue. Again, a lot of people were surprised by it. But again, people shouldn't be that surprised by it.

the policies that Donald Trump is advancing and not just the substance of them, but their style. Basically, this is not a multilateral system anymore. This is a unilateral system. This is one that is going to be governed by Donald Trump and how he wants to sort of how he wants to sort of pursue foreign policy. And for the Europeans are sort of left scrambling here. They're trying desperately to get a seat at this table. But the concern is that this U.S. delegation is not here to listen. It's here to talk.

This, as we've heard from the Trump administration, that they've told allies in Europe they want them to buy more American weapons. This is part of the continued support for NATO. Does that seem likely? That seems very likely. And again, that is sort of one of the issues, like buying more fossil fuels. That's really for the Europeans and the Americans pushing on an open door, right? The Europeans need more military hardware and they need more fossil fuels. The U.S. is very happy to sell that to them. So that is one way in which that certainly will likely happen.

happen. But again, to your earlier point, Steven, this whole idea that all these issues are intertwined, this is a sort of staple of the Trump policy. There are not discrete trade issues, discrete antitrust regulation issues, discrete defense issues. Everything is banded up together. I spoke to the highest ranking general in the German military yesterday. This is the man who commands the armed forces.

which it needs to bring these things into being. And I asked him, listen, if the United States is willing to use as leverage points, basically anything, even on allies, do you feel secure buying arms and being reliant on the United States for buying arms? And he said, basically, there is no other alternative. So in short, yes, Stephen, they will be buying probably more U.S. arms because they also don't have a choice.

Yeah, indeed. We're going to bring our listeners that interview that you did with Carsten Breuer in a moment on the programme. I'm wondering, though, more broadly about the discussions that are going to be happening around Ukraine's future at the Munich Security Conference. We've had that phone call between Donald Trump and Vladimir Putin, which has really upset the US policy position until now. How is this discussion going to play out in Munich?

Again, this is a big question here. And I think for the Europeans, it's a very, very big question, right? Again, they want to try to get their voice heard in this conversation. It's not clear that they're going to. And we've heard a lot of different things from Donald Trump. I mean, we've even heard from some people that this meeting with Putin could happen in a matter of weeks. Again, we don't know. He also said yesterday that basically there would be meetings between high-level members of the Ukraine delegation, the American delegation, and the Russian delegation here in Munich. That came out of the absolute blue sky.

So again, it's very hard to know where this is proceeding, but the sense that you're getting here from the, certainly from the Europeans, is that this negotiation train has already left the station. And guess what? The Europeans are not on it.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

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