Belgium has sealed an agreement with the netherlands and france to draw up passenger lists and introduce passport checks on International Rail services. The move will tighten security on the trains and help track criminalses who might be using them. Global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Scarlet u. S. Stocks slipping from record highs but they still notch gains. U. S. Stocks slipping from highs that were made this week. But they still notch gained for gains for the week. Joe the question is, whatd you miss . . Scarlet at a joint press Conference Today with the british Prime Minister, trump stressed americas special relationship with the united kingdom. On the same day i held an hourlong phone call with the president of mexico that follows the mexican leaders decision to cansal meeting over trumps plans for a border wall. Plus, President Trump says he still has not made any decisions regarding russian sanctions. Ahead of a scheduled phone call with russian leader, Vladimir Putin this weekend, the first week at the white house coming p. Reporter once again going into the close, not a lot of action for u. S. Stocks. We have the three major averages or the dow, s p 500 and nasdaq, all trading about flat. Down ever so slightly. Most of the day, flipping between small gains and losses. So not a lot of action once again after the twoday rally earlier this week that did of course put the dow above 20,000. The dow remains above 20,000. And we are looking at weekly gains for u. S. Stocks. Leading the major averages to the down side by just a little bit, the dow transports. We have the dow transports down more than the major averages. And this right here is largely why. We have an absolute collapse in the Airline Stocks today. Led by jetblue and american airlines. American airlines did report earlier this morning they beat estimates, but their forecast is disappointing due to rising costs, including fuel and labor. Jetblue reported yesterday, down even more than american, and jetblue is on pace for its worst day since in about a year. Nearly a year. There are two downgrades there. Wolf research and arch and argis, argic citing rising costs. We were told yesterday that they werent pleased with the capacity numbers there. It was a bit bearish. Today were seeing a sellout here. When we take a look at this, this chart may suggest that there is some down side ahead for the airline sector. This is the s p 500 Airline Index over the last two years in relation to its 200day moving average in yellow. There are a few times where its been really above that 200day moving average by more than 30 . Back here in 2014 and 2015. And now were 31 above the 200day moving average, plus an r. S. I. Thats showing a series of lower highs. That happened the last two times. And we can see that there was a reconnection to that 200day moving average there. Could be some continued down side for the airline sector. One sector or some wins that are are doing very well today, the semiconductor, the chip. We have the stocks up nicely. Up 1 . At its highest level in about 16 years. This comes on a string of bullish earnings reports, including maxim. Intel also beat estimates, Morgan Stanley raised its rating to an l perform, despite the fact that the guidance could be somewhat disappointing and it could be that intel report thats helping inindividualia climb more than 1. 4 . Some weakness in the airline but night strength here for the chips. Joe thanks. Whatd you miss . . Chinese premier league penned a letter in this weeks issue of Bloomberg Business week. And even though he did not mention President Donald Trump in the 640word column, it cuments as trump takes action to reexamine trade agreements like nafta and the transpacific partnership. He writes, the world is a community of shared destiny. Its far preferable for countries to trade goods and services and bond through Investment Partnerships than to trade barbs and build barriers. Should differences arise, it behooves us all to discuss them with respect and a keen sense of equality. Joining us now to discuss chinas stance with the Trump Administration is our Bloomberg Intelligence chief asia economist. Great to you have on the set. This letter in business week comes after the appearance in davos. How would you carningize chinas strategy characterize chinas strategy on the global sphere right now, particularly with the u. S. Perhaps pulling back away from trade . Guest i think the key thing you have to remember is that china is the biggest beneficiary of the status quo. Exports have been a huge driver of chinas development. Theyre less important now than they used to be but theyre still playing a big part, a big positive. China doesnt want to shift away from the status quo necessarily and thats why were seeing a very measured response from china. Theyre certainly noting and responding in official press to things which donald trump and the new administration is saying. But equally theyre not escalating. Scarlet there is an opening for them here, right . The u. S. Withdrawing from the t. P. P. Gives them some room to negotiate their own trade Partnership Agreement across asia. Guest absolutely. To the extent that the u. S. Draws down its trade and security commitments in asia, china, as the regions biggest economy, clearly is one which has the space to move into the gap. The question is, is that a positive or a negative . For china . The consensus seems to be good news, china wants to play an expanded role. The reality, in my view, is that chinas actually been benefit , been free riding on the u. S. Security guarantee. Which is underwritten in the free flow of trade. If thats withdrawn, chinas going to face more frictions or more costs. Joe one key difference between china and the u. S. Is china or the u. S. Runs a big trade surplus and china doesnt. Or sorry, the u. S. Runs a big trade deficit, china runs a big trade surplus. Can china fill in the role for the other Asian Countries that the u. S. Would, given that chinas trade position is different . Guest i think that would just have to happen over a really long period of time. Because the savings investment balance in china, the balance between savings and consumption in china, just isnt going to change overnight. Joe could china use this use this as a moment to start thinking and accelerate the process of shifting more to a domestic consumptionoriented yes consumptionoriented economy . Is this the moment where that accelerates . Joe i think the reality is that this is going to be a 10year process for china. Not a oneyear process for china. What i do see, though, is the potential for a winwin between china on domestic reform and trump on trade. The sects that are are most sensitive for the u. S. , like steal and aluminum, are also the sectors which are the kind of the poster boys for inefficiency, for energy intensity, for credit intensity in china. So domestic reform win for china in accelerating the overcapacity in metals could be a trade win for trump. Scarlet of course investors are watching very carefully on what happens between the u. S. And china. Including the founder and c. I. O. Of heyman capital management. He joined bloomberg earlier. Lets take a listen. Theyve recklessly built a system thats going to need to restructure. That just so happens to be metastasizing right when trump becomes elected. So its going to be the worlds a multivariable equation. Whats happening to china is going to happen on its own. On top of the fact that trump is going to get a better deal for the United States. Those two things concurrently are going to cause profound change in china. Scarlet he sees profound cheney in change in china. You say china benefits from the status quo. What steps is beijing taking in the back drop here to prepare itself . Guest the goldilocks scenario for china is they can benefit from stronger global demand. The u. S. Consumers are coming back, unemployment is low. Absent trade measures, china could have stronger he can ports which would give a bigger cushion to facilitate painful domestic rebalancing, painful domestic deleveraging. To the extent that the Trump Administration is aggressive on trade and china doesnt benefit so much from that stronger global demand, maybe even takes a hit from exports. Those painful domestic moves are going to be even more difficult to accomplish. Joe one interesting facet of chinas relationship with the rest of the world has been, theres a lot of money coming out of china. It often finds itself in Major Property centers, in vancouver, australia, the u. S. And so forth. Theres a great story on bloomberg this week talking about how some of these markets have been cooling down, some of that money isnt coming out as fast. From your perspective, has therein there been a meaningful has there been a meaningful shift in terms of china clamping down and preventing buyers from going overseas . Guest one of the key challenges for china going into 2017 is how to manage the yuan and capital flows as the dollar strengthens. What weve seen so far and what i expect to continue to see is a kind of aggressive muddling through strategy. Partly through slightly higher market rates in china. Partly through aggressive intervention in the f. X. Market. Partly through controls on Crossborder Capital flows. Were already seeing those Crossborder CapitalFlow Controls starting to bite. And that, i would expect, to have some impact on the real estate markets where china parks their funds. Scarlet when china cracks down on its citizens using f. X. For real estate, where does it want that money to go . What is its preference for what happens to that money . Guest i think long term china would like to have a more open capital account with more opportunities for chinese corporates and households to invest around the world. Thats a key part of driving more efficiency, tapping down on asset price bubbles in the mainland market. In the short term, though, the reality is the priority is managing the yuan and tamping down massive capital ice flow flows. That means theyre trying to stop money going offshore. Joe speaking of preventing money from going offshore, interesting chart here on the bloomberg, showing that the last reading did show an increase in chinas capital account. So maybe some of those measures are working. Tom, chief asia economist at Bloomberg Intelligence, great to have you here talking china. Thank you very much. Scarlet we have some headlines here. J. P. Morgan talking about his meeting at the white house. He tells reporters that he met with trump advisor, formerly the president and c. O. O. Of goldman sachs. And again we know that jamie diamond entered the white house about an hour and 10 minutes ago. Hes chairman of the business round table. So that might be one reason why hes making appearances at the white house. Jaymonny dim ombing n saying he met with gary cohn. Joe some notes about what dimon said. He said people are trying to do things to get the country to go faster, get more jobs for americans and we want to do our part to do that. There you see jamie dimon having just met with gary cohn. Scarlet coming up, well hear from what former u. S. Trade representative has to say about the potential implications of a tariff on mexican imports. Scarlet it is time for the Bloomberg Business slash. Look at some of the biggest stories in the news right now. Defense secretary mattis has ordered reviews of the fighter jet and boeings plans to build new air force one president ial aircraft. Two high Profile Defense contracts that have been heavily criticized by the president. The c. E. O. s of boeing and lockheed, americas two biggest defense contractors, are set to promise cost reductions after meeting with the president at trump tower. The leaders have sold more bank stock than insiders from every major u. S. Rival since the trump election triggered an industrywide rally. Regulatory filing showed 15 bb t officers unloaded shares since november 8. Larger than any other company in the bank index. The index has surged 24 since the election. Jpmorgan, the worlds Biggest Investment Bank by revenue, boosted its 2016 bonus pool for traders dealing in government bonds, swaps and other assets tied to Interest Rates. According to people with knowledge of the matter, the increase was about 20 . Another person said rates traders at bank of america got increases that averaged more than 10 . And that is your business flash update. Joe what did you miss . As we reported, President Trump and mexican president nieto say they talked for about an hour over the phone today after pena nieto canceled his schedule visit to the u. S. Next week. Former United States trade representative is tonights guest on charlie rose. The two discussed possible tariffs trump may levy on mexico. Its challenging because both under nafta and under our obligations in the world trade organization, we cannot impose that 20 tariff and not leave the door open to other companies other countries to retaliate. So if we do that, were violating our international obligations, it means that mexico could raise tariffs on our exports and mexico is our, i believe, second largest export market. We export hundreds of billions of dollars of goods to mexico every year, supporting u. S. Jobs. Whether its in manufacturing, in agriculture, or in services. So its the beginning of a trade tit for tat that hopefully will finds its way toward resolution. Charlie what would happen to mexico . Would it then say to the United States, well sell that stuff we were selling to you to china or some other market . Companies will have to reorder their marketing, will have to try to find new markets for their products. Any of the broader issues, really threefold. Its the risk of retaliation. Of mexico raising that are i haves on our products tariffs on our products. Its the risk of imitation. Mexico or other countries say, well, if the u. S. Can violate its international obligations, we can raise tariffs on American Products as well. And since 9 a of the worlds consumers live outside the United States, 80 of the worlds purchasing power is outside the United States, we need access to those foreign markets to support jobs here. And then thirdly, its taxation. When you raise tariffs on mexico imports, that means youre imposing a tax on the consumers of those imports. Lowincome americans spend a disproportionate amount of their income on tradable goods. Clothing, foot wear, food. So youre raising the cost on the people who are least able to afford it. In that regard, it could have pretty broad implications, both economically and in terms of our relationship with other countries. Charlie why was the t. P. P. Good for the United States . It was good in many respects. One, by all of the economic analysis, it would have added more than 130 billion to our g. D. It would have increased exports 350 billion a year. We know that exports charlie how would it do that . By opening other markets to our exports. Were already have very open market. We have low tariffs. We dont use regulations as a disguise barrier to trades. Other countries have higher barriers. We have a 2. 5 tariff on autos. If a Company Comes into the United States, theres a 2. 5 tax slapped on it. Unless it comes in from a free trade country. Vietnam has a 70 tariff on autos. Malaysia has a 30 tariff. Charlie if you sell an auto to vietnam, they put a 70 tax on it . Yes. T. P. P. Would have eliminated that. Charlie would have eliminated the tariffs in malaysia. As well as other barriers they have. These are some of the Fastest Growing markets in the world. Vietnam, 09 million people, growing 6 a year, an emerging middle class. They want what america producers. Whether its autos or tractors or highquality, goodnutrition agriculture, or our services. So for us to be able to get into that market helps support good jobs back here. We have a market like that, 90 million people, you really have two choices. If they have a 70 tariff on autos and you want to sell autos in vietnam, you can either tear down the barrier, keep your production in the United States, and export the product from here. Or you can close your factory here and move it to vietnam to serve that market. Our view was that it was better to tear down the barrier, to keep production in the United States. Thats the argument that donald trump used in the campaign. That these trade agreements are not fair and American Workers are losing their jobs. I think anybody who actually looks at whats in the agreement, whos in the agreement, what the provisions are, if you look at what President Trump has said, hes said we have this unfairness that other countries have barriers to our exports. Thats exactically i will what t. P. Thats exactly what t. P. P. Addressed. 18,000 taxes on american exports eliminated. It wasnt only donald trump. It was Hillary Clinton. And it was Bernie Sanders who opposed t. P. P. And the president couldnt get it through congress. It was never formally introduced in congress. He had a head count. You think it could have . I think there was more support in congress than meets the eye. You never have the votes for something until you actually introduce it, the leadership mobilizes, you have a whip operation. But i spoke to a