Daybreak Weekend: US PCE, CBI Conference, BOK Preview

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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, we discuss some key economic data in the U.S. and how it might impact Fed policy moving forward, plus to look at corporate earnings from the nation's largest department store chain. I'm Tom Busby in New York.

I'm Caroline Hetge in London, where we're looking ahead to a key gathering of the biggest names in British business. I'm Doug Kriesner, looking ahead to next week's policy decision from the Bank of Korea, as well as the state of global trade.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 11-3-0 New York, Bloomberg 99-1 Washington DC, Bloomberg 9229 Boston, DAB Digital Radio London, SiriusXM121, and around the world on BloombergRadio.com and the Bloomberg Business Act.

Good day to you. I'm Tom Busby and we begin today's program with some key data coming out in the U.S. In this holiday shorten week ahead, we get a second read on U.S. 3rd quarter GDP and a read on what Americans are earning and spending with October's Personal Consumption Expenditures Price Index. That's a mouthful. How might this impact Fed policy moving forward?

For more, we're joined by Stuart Paul, US economist with Bloomberg Economics. Stuart, thank you for joining us. Now let's start with what you expect to see this Wednesday, the second estimate as far as Q3 economic growth.

So as we saw in the first estimate, GDP growth ran at an annualized pace of 2.8% pretty robust in the third quarter. We still think that 2.8% is about right, but there is room for an upward revision. When we look at the spending data that we saw over the past few months, there have been some upward revisions, especially to August and September. And so we can see the already exceptional pace of personal spending growth get revised up further to almost an annualized pace of 4%.

Beyond the actual number itself, what I think matters most to the Fed is where that spending is. And some of the categories that were revised up were things like spending out at bars and restaurants, some of the more discretionary categories.

that show that people aren't reigning in their spending habits as much as maybe the Fed had expected, given where rates were. And so when the Fed is starting to think about where policy should go, and it takes into consideration what it is likely to see with these revisions, a potential upward revision to grow at the back of an upward revision to household spending, it's indicative that the Fed should be maybe moving a little bit slower in its rate cut trajectory than it had previously planned.

Well, let's go back to spending. So you think bars, restaurants, I imagine back to school spending. I imagine also travel. Were there laggards and has always come back to housing when it comes to laggards?

Well, so what we're really looking at in next week's data is the revision to Q3 data. And fortunately, we have some monthly data that give us a little bit of an insight into what we can expect for the revision to the quarterly print. And when we look at those monthly figures, households really just were not as frugal in some of those discretionary categories as we had previously believed. And so the Fed, when it started on its rate cut trajectory,

Now has fresher data in hand that shows, well, at the time that you started making those cuts, we previously believe that households were starting to get a little bit more frugal. They were starting to get a little bit worried. So we started cutting rates. Well, now it turns out, based on some of the revisions that we've seen to the monthly data, maybe they haven't been as frugal as we thought.

When we look at the quarterly data, there's room for that upward revision, and so the Fed can sort of slow its pace of cuts going forward. Okay, got it. So we're emboldened by that. Do a little more spending with that first half a percent rate cut. Exactly. All right, let's move on then. Also Wednesday, we get something I know you look at very closely, October's personal income and outlays report, PCE spending and personal income.

What do you see? What are you looking at there? And how is that related to that third quarter growth? So that third quarter growth, we're probably going to get a modest revision upward. And then on the same day, at the same time, we're going to get the October, as you said, personal income and outlays report, which really has three main components to it.

October personal spending, October personal income, and PCE inflation, the Fed's preferred gauge of prices. So taking those in order, we have some income data that again, might make the Fed want to slow its role just a little bit. Personal income growth likely increased at a monthly pace in October of 0.4% per month.

That's up from a pace of 0.3% in September. Now you might be thinking to yourself, we had such a dismal jobs report in October. How could it be that personal income is growing? But wages increased during the month. Headcount increased just very slightly enough to boost labor income. And we also saw transfer payments from unemployment insurance claims.

and interest income likely increasing about 1% during the month. And that's enough to keep personal income growing at a pace that's a bit too hot for comfort for the Fed to cut in these big chunks or even to cut maybe even 25 basis points in October. And then next major line item within that personal income and outlets report spending.

October personal spending really supported by spending on autos. And then when we think about inflation, it's really auto prices, vehicle prices that put the brakes on the disinflation process. We're expecting core PCE inflation, the annual pace of core PCE inflation to register 2.8% in October. That's up from 2.7% where

that figure had been lingering for about three months. So all these numbers sort of point to the Fed, maybe needing to slow down just a little bit. It caught up to the curve with that 50 basis point cut early. We got another 25 basis points off just during the month.

And now when we're thinking about December and 2025, the Fed can move just a little bit slower as it cuts rates. Fed Chair Jerome Powell said the bank is in no rush, no rush to lower that benchmark rate. And of course, as always, it's all data dependent. So he's put the signals out there. Don't get too excited. That's right. The key word from all the Fed speak that we've heard over the past week has been cautious, cautious, cautious.

Well, we got a lot of data dumped this short, this holiday short and week ahead. Our thanks to Stuart Paul, US economist with Bloomberg Economics. We move next to third quarter earning season, which may be winding down, but this Tuesday we hear from retail giant Macy's. How will those results position the chain ahead of the all important holiday shopping season? For more, we're joined by Mary Ross Gilbert, Bloomberg intelligence senior equity analyst covering retail. Mary, thank you so much for joining us.

Well, we know Americans continue to spend a lot of money. Have they been spending their money at Macy's? That's the question. Tom, they have been spending their money at Macy's, but not as much as they're spending money elsewhere. So with their third quarter numbers due out on Tuesday, we're expecting them to miss the top line estimates.

And we think they'll probably beat on the profit line. They've done a really good job managing costs, managing inventories, and they've beat their earnings for the past eight quarters. So we think they beat again on the bottom line, but we think they miss on the top line. So we're showing they could miss consensus estimates for sales to decline about one and a half percent. We think it could decline more like maybe three to five percent. So we'll see when they go to report.

But the big focus really will be once they come out with the results, what comparable sales look like.

And while we think generally they'll be down, we're really looking for the first 50 stores that they've completely transformed. That means they've added personnel to the shoot apartment. So they have more service and also in women's apparel and men's apparel. So we think that with all the improvements that they made to the first 50 stores and the first two quarters of the year, they were able to show positive comps. So we're looking to see if they can still continue that trend.

in the third quarter, and that could show some encouraging signs as they seek to transform the business. So refresh stores, more salespeople on the floor, designer brands, all of that adding up in the last couple of quarters to a little bump in sales, but we think is it the consumer? Is it Macy's? What may have held back sales in the third quarter?

Clearly, department stores has been seeing a weakness. There's been a trend away from department stores going toward more off-price and also on the mass channel. So if you look at Walmart's numbers out, they reported robust results, exceeded estimates on the top line. And they indicated that two-thirds of their beat was related to consumers who have come from households that earn over 100,000.

Now Macy's, their core customer, earns under 100,000. So the largest contingent that shops Macy's. But they're shutting down about 150 stores. So they sort of have two classifications. One would be the go forward stores. We really think that's the most important metric to look at. But we will also look at the 50 refresh door

Performance too is a sign of what could come in terms of improving performance, but generally the department store space has seen a decline and looking at our transaction data.

early, we only have 15 days in their fourth quarter. But we haven't seen an improvement. One of the things that we've noticed in looking at this data is that October was pretty weak across the board. And we think it was because of unusual warm weather around the country. And now that the weather has turned colder, that should improve outerwear sales, which are higher margin. But a change in weather is

The number one reason why consumers will buy something new, according to a survey that we just conducted this week and published. And speaking of weather, how do you think Macy's was impacted by a series of devastating storms? I mean, one affecting about a quarter of the country.

That's exactly right. Florida and North Carolina, but mainly Florida. So yes, they will be impacted by that. We saw that with TJX, which reported their results. And again, they beat and their guidance was sort of light, but they typically beat. So we think generally the news coming out of TJX was very positive, but they did say that they were impacted

by the hurricanes, and then also impacted by unseasonably warm weather in October. So we think we'll hear something similar to that when we get results out of Macy's. And you talked about the discount stores, Walmart. How is Macy's fairing in online sales? And of course, the big bugaboo there is Amazon. Yes, absolutely. Well, it's not just Amazon. If you look at Walmart and Target,

They both reported double digit increases in online sales. So they're actually doing really well on the ecom part. Now for Macy's, Macy's online sales are about, you know, sort of a little, it's over 30% somewhere around that 33, 34% of sales is online.

And that business has been doing okay, but again, they're really more of an omni-channel retailer. So you might have a consumer originate a transaction and then pick it up in store. So I think it's going to follow the trend that the overall business is seeing generally in terms of increases.

A lot to look forward to. Macy's Q3 earnings out this Tuesday are thanks to Mary Ross Gilbert, Bloomberg Intelligence, senior equity analyst covering retail. Coming up on Bloomberg Daybreak Weekend, we look ahead to a key gathering in the biggest names in British business. I'm Tom Busby and this is Bloomberg.

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We just lived through a truly wild presidential race, hitting a Democrat who wasn't on the ballot until June and a Republican who was convicted on 34 felony counts just before receiving his party's nomination for president. But the wildest thing might have been this guy.

You're just signing something you already believe, and you can win $1 million. That's awesome. I'm Max Chafkin, and this is Citizen Elon, a three-part series from Elon Inc, where we investigate Elon Musk's unprecedented support for Donald Trump. Follow Elon Inc on Apple Podcasts or wherever you'd like to listen.

This 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 the program, we look ahead to a meeting from the Bank of Korea. But first, it's been an eventful year for British business, the first change in government in 14 years, a pivotal autumn budget announcement, an uncertain geopolitical environment.

This week, entrepreneurs, finance leaders, politicians all convene at the Confederation for British Industries Annual Conference to discuss what's ahead in 2025. And for more, let's go to London and bring in Bloomberg Daybreak, Europe anchor, Caroline Hepker.

Tom, the UK's business leaders and politicians may be at odds on some matters, but both groups agree on one thing, the need for sustainable economic growth in Britain. It is something that has proven elusive in 2024, but with a new Labour government out the country's helm, many are still hoping that next year will bring more prosperity.

The Confederation for British Industry says that the problem is evident. The economy is faltering and firms are struggling to solve challenges without support. The group has also bemoaned the cost of doing business in the UK against a backdrop of unreliable supply chains and a declining stock market in London.

In response, the Chancellor Rachel Reeves is doing her best to rev up the engine of industry. The Chancellor used her landmark mansion house address to announce a sway that measures, including bringing bonus payments forwards for financial professionals and a reassessment of post-2008 crisis regulation.

But will her efforts be enough to spur growth, given the uncertain backdrop? The threat of headwinds is something I've been discussing with the Director of Research at the Think Tank, the Resolution Foundation, James Smith. I started off by asking him whether recent, hard and expected UK inflation numbers are an indicator of worse to come.

It's a pretty disappointing inflation release all around. As you say, inflation is up. We expected that because energy bills were going up. Some falls in the past were dropping out of the 12-month calculation. But what we've seen is core inflation ticking up a little bit. We've seen services inflation up from 4.9% in September to 5% in October. And those underlying measures of inflation, what?

really the Bank of England is watching so those rises there they're not big but and they have been a little bit erratic in recent months but still there's a disappointing release and doesn't really encourage us to think there's very rapid cuts and interest rates coming inflation still looks quite sticky.

OK, yeah. In terms of the work that you have done then, on the pressures that there might be for higher inflation and also on the data, it's quite fascinating. We've known for two years that the official Labour force survey that's produced by the ARNS has had significant problems. What do you think that the official data has missed because it's close to a million people maybe?

Yeah, we've known for, as you say, for quite some time, that the Labor Force survey, the key measure of employment labor market quantities in the UK has had problems of declining response rates. So what we've been doing is trying to figure out what the labor market might look like if you just use admin

data. So the HMRC real-time indicators, measure of employment, and HMRC data on self-employment to try and give you an overall sense of employment. And if you do that calculation, it suggests that, as you say, something like a million more people might be in employment. So the load force survey could be really seriously underestimating the

the extent to which people are in employment in the UK and we really think that could be quite a big difference but not at all certain about what that level looks like. This is giving you a sense of where employment might be. But the key thing here is in terms of future inflation is if you look

at a measure of unemployment, particularly unemployment relative to the amount of vacancies in the economy, the so-called tightness of the labor market. This doesn't radically change your view there. The counterpart to higher employment is lower inactivity. The thing we've been talking about is lots of people falling out of the labor market. If more people are in employment than we expect,

then the obvious counterparts, that would be the less of a problem on the inactivity side. I'm interested to hear more from you on that front because this is a narrative that we've had in the UK since the pandemic that so many more people were inactive in the workforce. Would looking at the calculations that you've done, I mean, how differently should we be thinking about that problem?

Well, it's still clear that we have got a problem of higher levels of poor health, so more people say that they have disability. We certainly are paying more for our disability benefits, so that's not quite the same thing as a sort of survey measures of

So there's still the types of problems we've been talking about. Those are still there, but the overall effect on inactivity through higher employment might be quite a lot smaller. So there could be other things going on pushing down.

in activities and more people in work, more older people, without problems and more women participating in the labour market, for example, could be the ways in which you reconcile those two estimates.

How much does that mean that government policy has to shift? I mean, only last month, Kiyastama told the Labour Party conference that the long-term sick needed to get back to work where they could, saying, quote, that he was talking to his Labour Party. Obviously, we have to do everything we can to tackle worklessness. Liz Kendall, who's the work and pension secretary, has managed to be launching big reforms of job centres later this month and the way that people get back into work.

Sort of extraordinary, but it doesn't mean that government policy that has flowed from this data probably has to change. I think the key thing here is that the government have said that they want to get the employment rate up to 80%, so that's a very ambitious target. We were in the early 70s in terms of

employment rate at the moment, but if the admin measure of employment is to be believed, we're a lot closer to that target than we were previously. So we still, as I say, we still have a challenge in terms of the overall welfare bill for those receiving benefits related to

health so the set of policy issues that are there and we would be hearing about that in the budget with the Chancellor saying that she would continue to try and make cuts to disability benefits put in place by her predecessor Jeremy Hunt so there are definitely you know still problems there that the government will need to be addressed but it's good news

potentially for them if more people are in work, more people are paying tax and that's the kind of key counterpart to all this.

That was the director of research at the Resolution Foundation, James Smith speaking to me and Stephen Cowell on Bloomberg Radio. So growth is the name of the game. How to get there though? No doubt that will be the question on the lips of different sector leaders and influential voices at the upcoming CBI industry conference. I've been discussing what's ahead with Bloomberg's UK business editor Julian Harris.

I mean, it never ends for British businesses, really. I guess you could say that in a lot of countries as well. Just as they think the coast is clear, something comes up. The latest thing, of course, was the budget. It was expected to be quite severe, but it probably went further than many expected. And the hit from tax is huge. It does depend what kind of business you are, though. Sometimes the CBI

has been accused in the past of just representing the biggest businesses in the UK and not focusing as much on the smaller ones. And then the hit from NI really depends on how the form of your business, how many staff you employ, how many of them are part-time. So businesses are reeling to a certain extent, but they're certainly a big hit from costs.

What do you think is the biggest concern for British businesses currently? Is it the new incoming US president? Is it the regulatory changes, for example, that Rachel Reeves announced at Manchin House? Or is it that budget that is the big issue, perhaps something else?

I think there are the things that they know about and that they can plan for, and then the things that they can't. So from most businesses that we speak to at the moment, when you talk about Trump and the thread of trade war and tariffs, they just kind of shrugged their shoulders. We don't know what's going to happen there. There's so many different factors in play.

Obviously, if Trump did introduce or his tariffs, the effect would be huge and the UK is so exposed to what happens internationally that it can't be neglected. And that's why we're seeing people like Rachel Reeves and even Andrew Bailey kind of almost evangelizing about free trade because that is what the UK needs. But business executives themselves are just saying, well, there's not a huge amount they can do about that. What they do know is happening

are these changes from labour that we talked about? So the taxes, but also the increase in the minimum wage, the workers' rights packages, these things are all written down now and are coming down the line. The workers' rights one is still in negotiation, but the others can be planned for. But from a lot of businesses, we're hearing that the effect is very, very big. So they're figuring out how to manage that. Do they put up prices? Or do they try to stay competitive?

There are a lot of different sectors of British business who are concerned post the budget. Do you think that the government is getting the tone right? What do you think businesses will be saying at this event? Obviously, the Labour leadership courted business assiduously

But then business confidence absolutely slumped ahead of the budget. And then after the budget, as I said, a lot of different sectors have criticised Rachel Reeves' choices and decisions in the budget. What do you think the tone will be like?

Yeah, I don't think they've got the tone right at all. And there has been a real change in the month since Labour came to power. So they had this sort of schmoozy event in Downing Street Garden shortly after their landslide victory. And the mood was said to be absolutely buoyant. I mean, it helped that it was summer.

And it was all very, very positive and people, you know, business leaders were coming out of that and they were talking to journalists and being very upbeat. That's now really changed in terms of sectors you ask about. I mean, retail is the obvious one, hospitality is another. And there are business figures in those areas saying, you know, this really

is not what we expected. We knew that there was going to be some fiscal adjustment, but the scale of it is far beyond what we thought. And there just seems to be a lack of understanding from labour in terms of how devastating that can be. And labour's emphasis growth so much. And a lot of people in business are saying, well, how can the economy grow?

when you're imposing these costs on it, it doesn't really make sense. At the same time, like, Reeves has been very positive towards the city. So there are some people in the city who are probably quite happy, but that's very different from, say, supermarket CEOs.

My thanks to Bloomberg's Julian Harris for looking ahead to the CBI's annual conference. In recent days, they've talked about how the UK economy stalled over the third quarter, uncertainty ahead of the budget probably played a big part in their words and their expectations that bumpier inflation will rule out the prospect of a faster pace of Bank of England rate cuts in the year ahead.

So, it'll be an interesting moment then to get the temperature of business leaders and their biggest trade group in the next few days. And we will have full coverage of the gathering in central London here on Bloomberg Radio. I'm Carolyn Hevke in London. You can catch us every week day morning for Bloomberg Daybreak here at beginning at 6am in London. That's 1am on Wall Street. Tom. Thank you, Caroline. And coming up on Bloomberg Daybreak weekend, a look ahead to a Bank of Korea meeting. I'm Tom Busby and this is Bloomberg.

As criminal ransomware and state-sponsored attacks continue to escalate, a bolted-on approach to cybersecurity isn't cutting it. In fact, the more security tools an organization uses, the more security incidents it has. According to new research from Google, companies that use 10 or more security tools average 14 incidents per year. That's more than double the amount for those that use fewer than 10 tools.

To proactively manage cyber attacks, organizations should invest in productivity tools across email, documents, and video conferencing that are secure by design, hopping off the treadmill of software patching and lightning the load on their embattled IT and cybersecurity teams. To learn more, visit g.co slash workspace slash more secure.

We just lived through a truly wild presidential race, hitting a Democrat who wasn't on the ballot until June and a Republican who was convicted on 34 felony counts just before receiving his party's nomination for president. But the wildest thing might have been this guy.

You're just signing something you already believe, and you can win $1 million. That's awesome. I'm Max Chafkin, and this is Citizen Elon, a three-part series from Elon Inc, where we investigate Elon Musk's unprecedented support for Donald Trump. Follow Elon Inc on Apple Podcasts or wherever you'd like to listen.

This 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. This past week, the IMF lowered its forecast for South Korea's economic growth, pointing to rising headwinds facing the export-reliant nation. Those are the same headwinds that will be weighed by the country's seven central bankers this week. And for more, we turn to the host of the Daybreak Asia podcast, Doug Kriesner.

Tom, in the coming week, will get a rate decision from the Bank of Korea. Now, the BOK has recently tilted toward cutting rates. So question, will the davishness prevail in the coming days? For a closer look, I'm joined by Paul Jackson, Bloomberg, Asia eco-gov editor. Paul joins from our studios in Tokyo. Help me understand the dynamic. I really enjoy talking with you because you're so

abreast of everything that's happening, not just in South Korea but Japan as well. Last month, a BOK cut rates for the first time in more than four years, and it seemed at that time that it was really the concern over the weakness in the economy that outweighed concern about high household debt. Is that going to continue to be kind of the underlying fabric here, the basic assumption that we should be making?

Yeah, I think going forward it's going to be on this rate cutting path. I think next week's meeting we're going to have a hold. I think it's one of those classic central bank okay let's wait and monitor and see how the impact of our

previous decision filters through the economy. So I think it's hold for now. And then the rate cuts start again next year, probably in January and economists are forecasting three rate cuts next year. But of course, we do have the emergence of Donald Trump, which is getting some economists to change their views of how the Bank of Korea will act.

Before we get to the issue of US, South Korea and trade, talk to me a little bit about the inflation story as we understand it right now for South Korea. Are things under control at this point? I think that if you look at the statement that came out in October, the policymakers on the board said that scenes clear signs of stabilization in the inflation trend.

we saw it slow below 2% in September and even further in October. So I think the checkbox of inflation is marked but the matrix of calculations, the calculus for the Bank of Korea is rather complicated because we've got this household debt that you alluded to and obviously you want to keep the rates relatively high and restrictive

to stop that trend continuing. Also, the currency remains weak and, of course, you cut the rates. That's going to encourage further weakness in the currency going forward. On the side in favouring cutting rates, obviously, you've got the economic growth now.

The economy is ticking over well over 2%. Growth doesn't seem too bad for many economies. I think Japan would jump at those kind of figures. But if you look at the trend of Korean growth for the economy over the last 10 years, it's usually around 2.6%. That's been the average over the last 10 years.

2010 is averaging 3.1% so it's looking a bit anemic and one of the key things here is that the Korean economy is very very reliant upon export performance. You know we're talking exports are the equivalent of 40% of GDP in South Korea now look over the over in Japan and the figures closer to 20% which speaks to a kind of broader economy

that they have over in Tokyo. So for South Korea, what happens to the exports going down the line and the policy that is implemented by Donald Trump, that has key implications for growth going forward. So protectionism obviously is a theme that Mr. Trump has been touting. And I would imagine a very strong case

in the future for deeper rate cuts from the BOK, right, to make up for what you're expecting to see as a drag on exports. Do I have that right? That's right. If the Trump administration were to go ahead with 60% tariffs on Chinese goods and 20% blanket rate,

for the rest of the world. Of course, we imagine this is kind of like your starting point for negotiation. Remember, it's all the art of the deal, right? However, if it actually ended up coming out at that extreme, Bloomberg Economics estimates that South Korean exports to the US

would fall by 55% by 2028. So that is a concerning figure, as you can imagine. And that's also leading into Bloomberg economics predicting more rate cuts now that Donald Trump has been voted in. They're seeing four cuts in 2025 and another one to follow up in early 2026. So you mentioned the behavior of the currency and I have to ask because I know the BOK monitors

the financial system quite closely in South Korea. How is that holding up? Is there been volatility right now, particularly since the US election, or are things fairly stable? No, we have had quite a lot of high volatility. We're around close to this 1,400 mark. The Korean won to the dollar. It's not exactly a line in the sand, but it's seen as a very weak level.

I think back in 2022 we got up to 1,450 so any moves in that direction will be a cause of concern and of course Korea does tend to dip into the market to try and

smooth over movements in the currency does spend billions of dollars doing this and recently it was added to the US Treasury's monitoring list for special attention in terms of its currency policy. Paul, thanks so much for your time. That's Paul Jackson, Asia eco-gov editor for Bloomberg News, joining us from Tokyo.

We move next to global trade. As President-elect Trump builds out his cabinet, there are questions as to whether or not he will make good on his campaign promise for those sweeping tariffs, specifically those targeting China. We are joined now by Katherine Thorbeck, tech columnist for Bloomberg Opinion. She joins us from our studios in Tokyo.

Katherine, you write that Trump's policies will only strengthen Beijing's push for self-sufficiency. When I read that, I immediately thought semiconductors. Is that what you're alluding to?

So semiconductors is sort of a big part of this. And I think that's probably the strongest argument from the US side that China won't be able to get ahead. But at the same time, I think there was new research from my Bloomberg economics and Bloomberg intelligence colleagues that came out last month that said, despite years of sanctions and export controls and all of these US efforts to sort of hold China back, it still made pretty good headway in terms of sort of dominating industries of the future and sort of leading the US in the tech race.

It's still behind in some areas, but it's made some significant gains in other strategic areas. Whether it can catch up in chips will ultimately decide if it does come out ahead. Right now, the US has had a tendency to underestimate China, and I worry that when it comes to the current

battle for tax supremacy, that's not a good thing to do at this juncture. So what do we know about the extent to which President Xi Jinping has been allocating resources to a lot of these industries, whether it's semiconductors or anything that may be kind of connected to that ecosystem?

So I think when Xi Jinping has signaled that something is a strategic priority for the country, he really has the power to sort of move a lot of levers to, you know, to boost these industries. And I think how the US plays into this and sort of one example is, you know, Huawei, the US really went all out and this started under Trump's first term to sort of, you know, strangle Huawei and make sure that it doesn't get ahead. And there was a point when it really seemed like Huawei was done for, but then

Xi Jinping and Beijing got involved and sort of used their muscles to sort of prop up its own, you know, domestic tech giant. And now by a lot of measures, Huawei is sort of stronger than ever. And I think that the US should be careful with how it sort of attacks these, you know, Chinese tech industries, because in some senses it's coming back stronger.

You're going to test my memory here because as I recall during the first administration, it wasn't just Huawei, it was ZTE. And the concern was that some of this telecom equipment, the devices that these companies manufactured, the concern was there may have been firmware embedded in those chips that could potentially be used by actors in China to spy on communications. And as I also recall,

The Trump administration tried to gather other countries to think similarly about what the Chinese may have the capability to do, and they were trying to curtail usage of Huawei or ZTE products in telco systems globally, right?

Right, so I think the ZTE example is actually a really interesting example specifically for Trump because he sort of has a history of flip-flopping when it comes to issues related to China's tech sector specifically. And ZTE, for example, you know, it faced punishments from Washington for violating sanctions. And then Trump actually tried to lift those sanctions and he announced this in a tweet at one point saying it was because too many Chinese jobs were lost, which he sort of faced a lot of criticism for.

And then later he said that he was actually negotiating a broader trade deal with Xi and that this move to sort of save ZTE essentially was especially reflective of what he said at the time was his close personal relationship with Xi. So I think for Trump it's like he focuses a lot on sort of transactions and deal making and there's a lot of uncertainty when it comes to what he will actually do.

And sort of going off that I think another sort of more recent high-profile U-turn that we've seen Trump do when it comes to Chinese tech is on TikTok. Which, you know, he initially in his first term sort of spearheaded a lot of the scrutiny on TikTok in Washington. You know, he signed an executive order that would ban it in the U.S. because of these perceived national security concerns over its parent company, being a Chinese parent company by dance.

He tried to broker a sale of TikTok in the US, and that ultimately didn't go through, and his executive order didn't hold up in court. But if you flash forward to earlier this year, President Biden actually signed legislation that would once again force TikTok to divest from its Chinese parent company or face a US ban. Then on the campaign trail, Trump posted a video to his true social platform where he said, if you want to save TikTok in the US, you should vote for me. So he really campaigned on actually saving TikTok.

which is a little bit confusing, but at the same time, it sort of shows this tendency of him to sort of flip-flop. And I think it's interesting because he historically hasn't necessarily been a huge national security hawk when it comes to China. He campaigned a lot on the economy and on sort of the prices that Americans are feeling. But he's surrounded himself in his cabinet, or it seems like he's surrounding himself with some real sort of China security hawks, Marco Rubio to Mike Walz.

So it's going to be interesting to see how this plays out if he can sort of bring his art of the deal making to this US technology, US China tech race, what sort of ends up on the negotiating table and what sort of becomes bargaining chips.

Catherine, I appreciate you taking the time to chat with us. Catherine Thorbeck is Bloomberg opinion columnist joining us from our studios in Tokyo. You can read her work and other stories from Bloomberg opinion at Bloomberg.com slash opinion or on the terminal by typing O P I N. Then the green go key. I'm Doug prisoner. You can catch us weekdays for the daybreak Asia podcast. You can find us on Apple Spotify, the Bloomberg podcast YouTube channel, or wherever you get your podcast, Tom.

Thank you, Doug, and that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.

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