And Paul Tudor Jones saying investors should worry about tariffs, he just doesnt know how much. We have not seen tariffs since the 1930s. There is no playbook for this. Nejra and the governor of the bank of japan speaks exclusively with with bloomberg about critical challenges. We all hope that trade tensions vanish. We may combine various monetary tools. Nejra its all straight ahead on bloomberg best. Hello and welcome. Im nejra cehic. This is bloomberg best, your weekly review of the most important Business News and analysis from around the world. Lets start with a day by day look at the top headlines. 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 has also vowed mexico would soon make large agricultural purchases from the u. S. How did President Trump follow up on the announcement that he is not imposing tariffs on mexico . It raises a few questions. After that announcement, he came out and said 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. There really was not a Side Agreement to do so. President trump then sort of amended that, saying at the appropriate time they would be making an announcement about a deal with mexico, indicating it could be on agriculture products. Why are the mexicans denying it then . I dont think they will be denying it very long. The timing of this and the fact that the u. S. Announced the threat of tariffs the previous thursday, on the same day mexico sent the usmca trade deal to its senate for consideration raises concerns from analysts about how committed the u. S. Is to following through with even the best deal with its closest partner and ally, as in the case with mexico. President trump threatening to raise tariffs on china again if president xi jinping refuses to meet at the upcoming g20 summit in osaka. This is an attempt to escalate pressure on xi. Its rather risky. The president threatened he could increase tariffs by more than 25 on all of the goods that china exports to the u. S. That would certainly increase tensions. 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 spokesman, we have noted 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 the g20 summit. If we have this information, we will release it in due time. Probably at the 40,000 foot level, the level of the two president s, the most that will be done is they will decide it is worth reopening, but i dont think that a g20 pull aside is a very 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 here in hong kong blocking one of the main arteries into the Central Business district as they protest against the governments controversial extradition legislation. What is the latest . There are tens of thousands of protesters here who have flooded onto harcourt road. This is extremely reminiscent of what happened during the 2014 occupy central protest, except there is 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, when up to one Million People came out, although that number was said to be only 240,000 by the police, but still, 240,000 is very significant and shows the extent of the opposition to the bill to be discussed later today in hong kong. 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. And they provoked the police, things were being thrown. 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 Business Community and the legal community, which says that if this is passed, which would allow hong kong residents to be extradited 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 hub. How do the chinese react next . How do the authorities in hong kong react next . Carrie lam, the leader of hong kong, who earlier today gave a tearful interview on tv pledging to commit herself to this law, has called for calm. She did talk about whether the legislation proceeds. There is a little bit of wiggle room. It is possible that they will pause. In my opinion, the best scenario here is for carrie lam to pull this legislation sooner rather than later. And hopefully, from my opinion about beijing, do so before donald trump starts tweeting about it. The u. S. Navy says two tankers have been damaged in an incident near the strait of hormuz. The operator of one of the ships, which was sailing from saudi to singapore, described the incident as a suspected attack. Crude prices jumped on the news. How bad can this become . There is already nervousness in the oil markets, so from the point of view of the oil markets, we could see that nervousness continuing. Obviously, on a human level, this is a big risk. If there are tankers traveling through the persian gulf, the strait of hormuz it is a heavily trafficked area for all 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 . In the market reactions, oil spiked by a lot. I was surprised it did not spike more. We did see a rally at some point but backed off that. That shows how traders are looking at demand. Supposedly there were two tankers that were supposedly attacked, with them bursting on fire. You can see that from iranian tv. Those pictures are pretty stark. The question is who . The United States government thinks 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. The countrys foreign minister is reiterating calls for dialogue, while u. S. Central command sought to calm tensions, saying war with iran would not be in our strategic interests. Is there any doubt that iran is 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 is that iran was the most likely player to have committed this act, but it is still pretty unclear exactly what happened to both of these ships. While the finger of suspicion is falling on iran, and there are good reasons for that, i think we are a long way from knowing exactly what happened here. Global bond yields heading lower. What ramifications will this geopolitical tension with iran have on the u. S. Market . Will it have any . Iran has commonly been labeled as a black swan potential, a reason for risk. People have been worried about iran for a long time. Generally speaking, those worries have not materialized. I tend to think these things get overblown because it is iran and you sort of fear the worst, and generally speaking, it does not pan out as badly as some of the fears and nightmares may suggest. We heard from the president himself today. What does that mean for further u. S. Response . Potential additional sanctions. Both secretary of state pompeo and President Trump reiterating that the u. S. Believes the iranians are responsible for the mining of those two tankers in the persian gulf. They are looking to impose more economic sanctions on the iranians to bring them to the negotiating table to try to withdraw their nuclear ambitions. Nejra still ahead, as we review the week on bloomberg best, boj governor kuroda leads the list of exclusive conversations from the g20 finance meeting in japan. Plus, legendary manager paul jones explains how he is factoring rate cuts into his trade. 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 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. Im nejra cehic. Lets continue our tour of the the cozy top business stories in china, where 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. The Key Takeaways surprise numbers on the trade front out of china. Exports up 1. 1 in the month of may. We got a drop of almost 4 . That was the forecast, but the actual number was a 1. 1 increase for the month of may. In terms of imports, those slumped 8. 5 . Again, well off the forecast. At that point, the import number showed weaker domestic demand. The trade surplus, by the way, about 42 billion. That is one in the eye for the Trump Administration which is very focused on trying to reduce the deficit it has with china and this at a time when the trade representative is weighing options around the potential of additional tariffs targeting 300 billion worth of chinese exports. The pressure continuing to rise in may. The supply shocks pushed up food costs. Overall, the Consumer Price index ticked up 2. 7 , in line with the forecast, but again, this is the highest tick up in terms of Consumer Prices we have seen for 15 months. In terms of producer prices, factory gate prices, those softened, 0. 6 , so there is concern, of course, about the erosion of corporate profit, but there will certainly be concerns we could be looking at the specter of deflation for chinas factory sector at a time when you already have pressure from the trade war. The impact from the u. S. China trade war beginning to show up in some china data here. Take a look at the terminal. Industrial production rising, but retail sales was the bright spot, growing 8. 6 . What do you make of it . Can the pboc and the Government Support china . I think the data came in line with a weakening economy, so i dont think it was a surprise. I think china still has policy 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. Economy. It is not particularly good. Manufacturing outputs falling the most in almost 17 years in april. Economic growth fell 0. 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 a few quarters ago . Presumably that is fading now . Exactly right. These are not great figures. Down 0. 4 in april alone is a fairly dismal figure, so this is largely an unwind of what we saw in the first quarter. We saw a lot of stockpiling then. We had 0. 5 growth in the first quarter, which was more than expected, but now we are seeing that unwind. Depends 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 just arent low enough. Could he be right, in fact . Theres a piece on the bloomberg that says if you look at purchasing power parity, the euro is actually too weak compared to the dollar. What is going on internationally and what is going on with currencies tends not to have as big an impact on the u. S. Economy as it does on a lot of others, primarily because most of our economy is not exportbased or even import based, as much as the president might like to think so. I think the president is saying these things for political reasons. He needs a scapegoat in the event that the economy does fall down, and he wants to blame the fed as opposed to regular cycles or his own geopolitical issues that he creates with all of these trade tensions. U. S. Inflation headlines trailing the forecast in may, which might lead for the fed to discuss cutting Interest Rates. It still looks to me like this is a sign for the fed. What is wrong with 2 . The fed was talking about transitory, or transient factors weighing on the pace of core inflation. This transitory effect actually normalized in the may report, but inflation is still quite tepid, so it will become a little bit harder for chair powell to defend this transitory nature of weak inflation at a press conference next week. I think what is happening is that a strong dollar is weighing on the pace of core goods inflation, and that is what really shows in the overall picture for inflation right now. President trump says he is considering using u. S. Sanctions to stop construction of the nordstream 2 gas pipeline between russia and germany, echoing previous threats about german support for the project. He said he is protecting germany from russia because russia is getting billions of dollars from germany. So is he really upping the ante . There are really two things going on here. One, there is bipartisan support. We have a republican senator and democratic senator drafting the bill for sanctions, sanction the vessels that are laying the pipework this will have a domino effect on anyone else working on the nord stream 2 pipeline. It was supposed to be done by the end of the year, which you mentioned, but looks like it will be delayed. Actually, this is the u. S. Wanting to get into that market. They dubbed it freedom gas, molecules of u. S. Freedom. Boris johnson took a huge lead in the race to become britains next Prime Minister today after 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 pop . If there was any surprise, it was just how big the lead was for Boris Johnson and how that has left the rest, if you like, trailing so far behind. Number two at the moment is jeremy hunt, the foreign secretary. He is the continuity candidate, if you like, and i think it is worth pointing out that it could still go wrong for Boris Johnson. His team are very aware of that. This is a gaffeprone candidate with a rich history. Tuesday, there will be another round. More candidates will be eliminated, and the final two will go to the conservative grassroots. They love boris, they love brexit, and they are keen on a nodeal brexit. As we go to that phase of the campaign, expect the rhetoric to shift. The Swiss National bank battles with ultraloose monetary policy, but the downshift to the Global Economy and the shift by other banks means president Thomas Morton is likely to see his hands tied for quite 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 not our task to make the Financial Sector happy, it is our task to maintain price stability in switzerland and support the economy. We are taking decisions to achieve those goals. Euro area finance ministers are urging italy to respect its debt pledges, adding that verbal assurances will not cut it this time. So it seems europe wants to see more action and less talk. That is exactly it. European finance ministers here yesterday agreed with the european commissioner. They think italy needs to do more to bring down that debt pile. More than 130 of gdp. And they need to do that quickly to avert the financial penalty that could happen if they do not do that. The italian finance minister believes that there will be a compromise made by the end of the year that can avoid that penalty, but we understand sources close to the Italian Finance Ministry said this does not bring anything new to the table. Organizers 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 hold public discussions. I think the key point right now, we are in a bit of a lull towards the weekend and next week. Is the response towards the Business Community in hong kong, because this is a city of commerce. So 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. So does that mean the government will change its tone . So far, not yet. Nejra this is bloomberg best. I am nejra cehic. Finance ministers and central bankers from the Worlds Largest economies met in japan this week in advance of the g20 summit taking place later this month. Among the most distinguished attendees, 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 of negative Interest Rates on the banking sector. And he insists he still has policy tools to deploy in the event of a downturn. At this moment, the situation is quite stable, but we have to carefully monitor the situation if we continue even if we expand or strengthen further. Kathleen in a sense you are saying you are willing to take on this risk of the rising cost of the stimulus debt if you need to stimulate the economy.