Defense because we are going to bring unparalleled technology. Chinese tech giant huawei remains under a microscope. Saying investors should worry about tariffs. Not seen tariffs since the 1930s. There is no playbook for this. That tradeope tensions vanish. We may combine various monetary tools. Its all straight ahead on bloomberg best. Hello and welcome. Im nejra cehic. This is your weekly review of the most important is in his news, analysis, and Business News and analysis from around the world. Global markets breathed a sigh of relief on monday after President Trump announced he would not impose a set of threatened tariffs on mexico. Mexico has won a reprieve after donald trump indefinitely suspended his plans for tariffs. Trump also about mexico and would soon make large agricultural purchases from the u. S. How did he follow up on the announcement he is not imposing tariffs on mexico . It raises a few questions. After that announcement, he came out in red mexico was going to make some large agricultural purchases, although mexican officials said that that really had not been discussed at the talks in washington. President trump than a amended that saying at the appropriate time they would be making an announcement about a deal with mexico. Why are the mexicans denying it then . I dont think they will be denying it. And theiming of this u. S. Announced the threat of tariffs the previous thursday on deal wasday the usmca sent to the Senate Raises concerns about analysts about how committed the u. S. Is to with even theugh its closestth partner and ally, as in the case with mexico. President trump threatening to raise tariffs on china if president xi jinping refuses to me. This is an attempted escalation to president ix. President xi. He wants the meeting. He wants the meeting. President trump doubling down yesterday. China for their part said in a statement from their China Foreign ministry folks, we have noticed the u. S. Publicly stated many times that it looks forward to arranging a meeting between the chinese and the u. S. President on the sidelines of have20 summit. If we this information, we will release it in due time. Most that will be done as they will decide it is worth , but i dont think is a very0 aside likely place for the details of the 2500page agreement to be worked out. That needs to be in a Conference Room with detailed technical people. Demonstrators in hong kong blocking one of the main arteries into the federal Business District as they protest against the governments controversial extradition legislation. What is the latest . There are tens of thousands of protesters who have flooded onto the road. This is extremely reminiscent of what happened during the 2014 occupied central protest, except theres one big difference this crowd is very, very angry. An extremely ominous looking crowd, too. Looks like todays color is black as opposed to the white that was worn as a symbol of justice during the protests that took place in hong kong sunday went up to one Million People came out, although that number is said to be only 240,000, which is still significant. It shows the extent of the opposition to the bill to be discussed later today. Protesters came today wanting this bill, this extradition policy that they very much oppose, to be called off. That did not happen, and they say they are staying until that happens. They have tried to charge forward, the police responded, as you can see in those pictures, with tear gas, with water cannons, with pepper spray. What is causing this, though, is this extradition policy that is opposed by large swaths of hong kong, including the this in his community and the legal community, which says that if this is past, which would allow extradition to china, that it would effectively complicate things that would make it almost impossible to maintain the framework of the one country two systems framework which has allowed hong kong to become today a Major International financial help. How do the chinese react next . How do authorities in hong kong react next . The leader of hong kong who earlier today gave a tearful interview to tv pledging to commit herself to this law has called for calm. Of wiggle little bit room. It is possible that they will pause. In my opinion, the best scenario is for carrie lam to pull this legislation sooner and from mylater place in beijing, do so before donald trump starts tweeting about it. The u. S. Navy says two tankers have been damaged in an incident in the strait of hormuz. The operator described the incident as a suspected attack. How bad can this become . From the point of view of the oil markets, we could see that continuing. Obviously, on a human level, this is a big risk. If there are tankers traveling for allthe persian gulf kinds of cargo, but particularly for the worlds oil supply, it is a huge risk both to shipping, to the sailors, and then to Global Oil Markets here. What happened and what did it do to the markets . Oil spiked by a lot. I was surprised he did not spike more. We did see a rally at some point but backed off that. Supposedly there were two supposedly attacked with a were bursting on fire. You can see that from iranian tv. Those pictures pretty stark. The question is who. The United States government things the government of the iranian republic is responsible for the attacks in oman. The u. S. Released a video they say shows the country was involved. Tehran denies the allegation. U. S. Central command sought to calm tensions saying war with iran would not be in our strategic interests. Isthere any doubt that iran behind this . There is considerable doubt. I think its not clear exactly what has happened. I think the consensus in washington and it seems london the most likely player to have committed this act, but it is still unclear what happened. The finger of suspicion is falling on iran and there are good reasons for that, i think we are a long way from knowing what happened here. What ramifications will this zhou put june Political Tension with iran have on the u. S. Market this geopolitical have onhave with iran the u. S. Market . Iran has commonly been forled black swan potential risk. People have been worried about iran for a long time. Generally speaking, those worries have not materialized. I tend to think these things that overblown because it is iran and you sort of hear the words and generally speaking, it does not pan out as badly us some of the fears and nightmares may suggest. We heard from the president himself. What does that mean for further u. S. Response . Potential additional sanctions. Both secretary of state pompeo and President Trump reiterating the u. S. Believes the iranians. Re responsible bring them tog to the negotiating table to try to with draw their nuclear ambitions. Still ahead as we review the leads theboj governor list of exclusive conversations from the g20 finance meeting in japan. Meeting. Egendary and more of the weeks top business headlines are President Trump presses the fed to bring down rates and the latest inflation data may give them another nudge. I think that is what what is happening is a strong dollar is weighing on the pace of core goods inflation. Nejra this is bloomberg. Nejra this is bloomberg best. In china, a feast of Economic Data gave investors plenty to digest. Chinese imports perform worse than expected as the trade standoff with the u. S. Intensifies. Surprise numbers on the trade front out of china. Up one point 1 in the month of may. We got a drop of almost. 4. In terms of imports, those slumped 8. 5 percent. Again, well off the forecast. At that point, the import number showed weaker domestic demand. The Trump Administration very focused on trying to reduce the deficit it has with china and the set a time when the trade representative is weighing options around the potential of additional tariffs. The pressure continuing to rise in may. Overall, the Consumer Price line ticked up 2. 7 , in with forecasts, but again, this is the highest tick up in terms of Consumer Prices we have seen for 15 months. In terms of producer prices, those softened, zero. 6 , so there is concern, of course, about the erosion of corporate profit, but there will be concerns we could be looking at the specter of deflation for chinas factory sector at a time you already have pressure from the trade war. The impact from the u. S. Trade war beginning to show up in data here. Sales was the bright spot, growing 8. 6 . What do you make of it . Daca i think the data came in line with a weakening economy, so i dont think it was a surprise. Policy china still has room. Certainly they can still cut reserve requirements. They are very high, but i dont think they are going to do an allout stimulus. Lets talk a little bit about what is happening with the u. K. Conomy manufacturing outputs falling in april. Economic growth fell. 3 in the last three months. How much of this is a hangover from stockpiling and all those other factors that seem to give the economy a boost . Are you seeing that fading now . Exactly right. These are not great figures. Ofs is largely an unwind what we saw in the first quarter. There was a lot of stockpiling then. We had 25 growth in the first quarter, which was more than expected, but now we are seeing that unwind. President trump has gone after the fed again, complaining about what he sees as high Interest Rates, tweeting out this morning saying the fed is really making a mistake, the rates are just not low enough. Could he be right, in fact . Theres a piece on the bloomberg theres a piece on the bloomberg that if you look at purchasing power parity, the euro is actually two week compared to the dollar. What is going on internationally and what is currencies tends not to have as big an impact on the u. S. Economy as it does a lot of others, primarily because most of our economy is not exportbased or even import based, as much as the president might lead might like to think so. I think the president is saying these things for political reasons. He needs a scapegoat in case the economy does fall down and he wants to blame the fed as opposed to beijing are cycles or the on geoPolitical Tensions he creates. It still looks to me like sign for the fed. What is wrong with 2 . The fed talking about transient sectors weighing on the days of core inflation. This transitory effect actually normalized in the may report, but inflation is still quite tepid, so it will become a thele bit harder to defend transitory nature of week at a press conference next week. I think what is happening is weighingrong dollar is on the pace of core goods , and that is what really shows in the overall picture for inflation right now. Says he ist trump considering using u. S. Sanctions to stop construction of the gas pipeline between russia and germany, echoing previous threats. He said he is protecting germany from russia because russia is getting billions of dollars from germany. Is he really upping the ante . There are two things owing on. One, there is bipartisan support. A republican senator and democratic senator drafted the bill. Of course, that will have a domino effect for anyone working on the project, which is supposed to be done by the end of the year, which you mentioned, but looks like it will be delayed. This is the u. S. Wanting to get into that market. Freedom gas, molecules of u. S. Freedom. Boris johnson took a huge lead in the race to become britains next Prime Minister members of parliament held their first round of voting. Seven candidates will go on to the second round in the quest to succeed theresa may. Was there anything in todays numbers that caused anybody to hold . The lead just how big was for Boris Johnson and how that has left the rest, if you like, of trading so far behind. Number two at the moment is jeremy hunt, the foreign. Ecretary i think it is worth pointing out that it could still go wrong for Boris Johnson. Will be another round. More candidates will be eliminated, and the final two will go to the conservative grassroots. They low for us, they love brexit and they are not keen on a no deal brexit. As we go to that phase of the campaign, expect the rhetoric to shifted it. The Swiss National bank battles with ultraloose monetary policy, but the township to the Global Economy and the ship by other banks means president Thomas Morton is likely to see lower rates for some time. If you were to cut rates, would you expect to see pushback from the Financial Sector . They are not happy now. It is now it is not our task to make the banks happy. Euro area finance ministers itsurging italy to respect debt pledges, adding that verbal assurances will not cut it this time. It seems your wants to see more action and less talk. That is exactly it. Finance ministers yesterday agreed with the european commissioner. They think italy needs to do pile. O bring down that and they need to do that quickly to avert the financial penalty that could happen if they do not do that. They believe there will be a compromise made by the end of the year that can avoid that penalty, but we understand sources close to the prime Ministry Said he does not bring anything new to the table. Of this weeks mass protest in hong kong are calling for more demonstrations on sunday. Various groups are urging the government to withdraw the controversial extradition bill and pull public discussions. I think the key is we are in towardf a low lull the weekend. Sos is a city of commerce, you are hearing from the hong kong General Chamber of commerce with a statement urging the chief executive to engage in meaningful dialogue with the public. Does that mean the government will change its tony . So far, not yet. Nejra this is bloomberg best. Finance ministers and central bankers from the Worlds Largest this weekt in japan in advance of the g20 summit later this month. Among the most distant with the bank of japan governor who sat down for an exclusive discussion with Kathleen Hays. He says japans economy is in good shape despite the pressure onnegative Interest Rates the banking sector. He insists he still has tools to deploy in the event of a downturn. I would say we have to carefully monitor the situation if we continue or even if we further. Strengthen kathleen in a sense you are saying you are really willing to take on the risk of extraordinary stimulus debt if you need to stimulate the economy. , ines, but at the same time order to avoid as much is possible that affect, we may combine various monetary tools to reduce that sort of dangerous side effect. Big picture do you still all the capacity to show those people who say the boj cannot do anything that you can do something big, even something new . I think so. Options include negatively reducing the interest rate, to anr committing increase of the Monetary Base and so on and so forth. Options i think we can still utilize if necessary. How to use and how these could on theined depends , price, and financial conditions, but, yes, like mario think we can do these things if necessary. We will have more exclusive interviews from g20 finance leaders coming up. Plus, more of the weeks top business headlines including apples backup plan to produce iphones outside china. All those traits are already in process. The question is how much burden how much further they are willing to go. I think they are all going to keep going a long way. This is bloomberg best. Time to revisit more exclusive interviews from the g20 finance meeting in fukuoka, japan. Lets begin with the bank of italy governor, who assured Kathleen Hays that the ecb would take whatever policy steps are necessary to sustain growth in the euro zone. The objective is, in this demand,ndinhand with which is what the Federal Reserve is pursuing in their mandate. We dont have a dual mandate, but it is clear that the revival of inflation towards our priced ability measure and an increasing domestic demand go handinhand. So as long as the u. S. China trade war is unresolved, as long as this uncertainty hangs over businesses, consumers, and financial markets, that at the very least the ecb will maintain the current level of stimulus, even if it doesnt take these additional steps to add more . I think this stands is very clear. There is no question. We call for other policies to complement the ecb fiscal policy in this case. That therewe know are differences across countries, but the countries which have fiscal space are called for helping on the side. It is mostly an issue of composition of public expenditures. Things somehow do not go how it is predicted, we will certainly act. There is no question. We all hope that the trade tensions will vanish, especially because there is an agreement that could be reached between the United States and china. This would be very helpful. If we look at the growth of the world economy, we see that these pending questions are having a real impact on the development of the world. This problem could be solved, it would be a solution. The euro area and euro zone leaders are looking at launching some kind of order because they are falling out of components on their budget. Was that discussed here at the g20 . It to go where you expect it to go . Other and we each have some experience i think it was very wise how they acted at the beginning of last year following the regulations and rules that we have, giving italy the chance to adopt to this. I think this will be the way, how we could proceed. Difficult moment with our relations with china. Course ourowing of extradition agreement with the United States in our approach, which is the right way for us to move forward. We think it is entirely unjust for china to be in christening canadian citizen to be imprisoning canadian citizens and not helpful in any way with ou