Speaker 1: Hilda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by The New Zealand Herald. Over the
Speaker 2: last few months or we've been able to talk about
Speaker 2: when it comes to the economy, has been tariffs and
Speaker 2: trade wars behind a lot of what Donald Trump's talk
Speaker 2: has been about is his desire to see more manufacturing
Speaker 2: done in the United States, and that includes everything from
Speaker 2: steel and cars down to smartphones. But how realistic is
Speaker 2: it to demand everything moves production to the US and
Speaker 2: has Trump perhaps touched on a floor in how our
Speaker 2: most popular products are made? Actually on the Front Page,
Speaker 2: we're joined by business desks Deleiper Vonseca to discuss how
Speaker 2: manufacturing actually works. So Deleiper took us through Trump's desire
Speaker 2: to get everything made in the US. What are some
Speaker 2: of the products or materials that he wants made at
Speaker 2: home there?
Speaker 1: Well, he's talked a lot about everything basically, and you've
Speaker 1: actually raised by implication a really good point in there,
Speaker 1: which is to some degree people are kind of wondering
Speaker 1: what Trump is actually trying to do with the tariffs,
Speaker 1: Like is this about relocating a whole bunch of manufacturing
Speaker 1: or is it about raising a whole bunch of money.
Speaker 1: Depending what day it is, it seems to be either
Speaker 1: or answer. But broadly speaking, he had the start, had
Speaker 1: said he was really concerned about all this manufacturing that
Speaker 1: was going to China, and then you know, afterwards we've
Speaker 1: sort of discovered that he's concerned about countries that are
Speaker 1: basically allowing China to continue exporting through them. So you know,
Speaker 1: that's countries like Vietnam and things where exception as China
Speaker 1: is sort of sending goods that are then just getting
Speaker 1: transshipped or it's kind of like a kind of like
Speaker 1: a middleman sort of thing. And then more recently you
Speaker 1: would have seen the memes floating around of Trump Ai
Speaker 1: generated Trump putting together shoes in a switch shop, and
Speaker 1: lots of jokes being made about how Trump is basically
Speaker 1: just trying to get everyone a job in America making shoes.
Speaker 1: He's basically at the start he was talking about high
Speaker 1: value manufacturing that was what somebody wants, so and now
Speaker 1: he's talking more about relocating all manufacturing to the United States.
Speaker 2: Yeah, I mean, why is this such a priority for him?
Speaker 2: What does he hope to gain politically from this pledge?
Speaker 2: I guess the US made mantra is a big one
Speaker 2: for him.
Speaker 1: Yeah, I mean he sees this as like a job,
Speaker 1: you know, when a job opportunity thinks that if he
Speaker 1: goes and moves this manufacturing back, that that's going to
Speaker 1: regenerate some employment. He thinks that there's some kind of
Speaker 1: hostility towards China and that this will represent America being
Speaker 1: kind of more dominant by bringing all this manufacturing back
Speaker 1: into the United States. But actually, the world economy is
Speaker 1: a really different place to what it was, you know,
Speaker 1: post World War Two, or you know, even in kind
Speaker 1: of recent decades. You don't just have one country manufacturing
Speaker 1: one thing. It's actually one product will be a component
Speaker 1: from a whole range of places.
Speaker 2: What is the state of global manufacturing? It does seem
Speaker 2: like basically everything these days is made in China or India.
Speaker 2: Is that fair to say or is that a massive stereotype?
Speaker 1: Well let's think. Let's think of a product, you know,
Speaker 1: the iPhone fourteen, you know, right, so it's a symboled
Speaker 1: in China, so you would say, right, it's manufactured in China.
Speaker 1: It's a that's a Chinese product. Effectively, all these iPhones
Speaker 1: are being manufactured in China, but China actually only produces
Speaker 1: of the iPhone fourteen four percent of the value of
Speaker 1: an iPhone. Right, the actual value of an iPhone, the
Speaker 1: manufactured physical product is not so valuable then tough career
Speaker 1: manufactured you know, twenty five percent of the kind of
Speaker 1: components in there, Japan eleven percent, Taiwan seven percent, and
Speaker 1: the US. In terms of the value of an iPhone,
Speaker 1: it's actually contributing about thirty two percent of the value
Speaker 1: of that iPhone. And if you look at who's making
Speaker 1: the money off selling an iPhone, that's Apple, right, it's
Speaker 1: actually not the manufacturer, you know, the manufacturer. If you're
Speaker 1: talking about fox Con, it's a Taiwanese company in China,
Speaker 1: that factory, and the factory's work is they're earning a wage,
Speaker 1: but they're not making the massive profits that you get
Speaker 1: from an iPhone. The massive profits come from the company
Speaker 1: that's designing it, coming up with the idea and also
Speaker 1: adding a lot of the highest value kind of components
Speaker 1: and software to it. And that is basically still you know,
Speaker 1: an American product in some ways when we talk about
Speaker 1: you know this everything is being manufactured in a particular
Speaker 1: country where it's China or India. That's true that there's
Speaker 1: a lot of industrial sort of manufacturing going on, especially
Speaker 1: not just China, but you know Vietnam and thailandishly some
Speaker 1: of some of those other Southeast Asian countries as well.
Speaker 1: But they are not necessarily contributing all of the value
Speaker 1: of a product, and they don't necessarily control all the
Speaker 1: profits from their product aid.
Speaker 3: And that's not to say that making in China is bad.
Speaker 3: I think made in China is really has changed a
Speaker 3: lot over the years, and some of those factories have
Speaker 3: cutting each technology that you can't find anywhere. It's the
Speaker 3: reason why so many of our designers manufacture in China.
Speaker 3: I think it is quite gyring to see a brand
Speaker 3: that's so world renowned made in these factories. And it
Speaker 3: might be certain categories. For example, you've got the footwear
Speaker 3: in China, but then you've got the ready to wear
Speaker 3: in Paris. So it's kind of like, I think it's
Speaker 3: a good thing. The more the consumers educated, the better
Speaker 3: we are, and it trickles down to how we consume locally.
Speaker 2: Right, really set themselves up to be hubs for production, right,
Speaker 2: So it's not like there's one factory making phones and
Speaker 2: other factory making clothes. There are just hundreds of businesses
Speaker 2: that work cohesively together.
Speaker 1: Yeah, it's like a supply chain of components. And actually,
Speaker 1: in some ways, this is where perhaps if Trump was
Speaker 1: really thinking about it, this is perhaps where the danger
Speaker 1: for America lies in the sense that China over the years,
Speaker 1: you know, it's no longer really the cheapest producer. You know,
Speaker 1: it doesn't have the cheapest laborers, doesn't have the cheapest workers.
Speaker 1: But what it has now because it's been manufacturing the
Speaker 1: iPhone for so long and other other products, it has
Speaker 1: this whole ecosystem of companies. You know, no other sort
Speaker 1: of country really has those small little manufacturers who can
Speaker 1: then feed into the larger manufacturers and can really put
Speaker 1: together a product like that. You know, somebody, there was
Speaker 1: somebody from China recently who, to illustrate the point, pulled
Speaker 1: out their lighter to me and he said, look, you
Speaker 1: know this in one in one place in China, there's
Speaker 1: light where there's lighters manufacturer within two hours or the
Speaker 1: kind of opponent manufacturers of that. Now does that exist
Speaker 1: in some place like New Zealand or the United States?
Speaker 1: Not really? And so if if there was any kind
Speaker 1: of break, diplomatic break, some kind of big issue Taiwan
Speaker 1: or something else, then that would perhaps leave like the
Speaker 1: United States vulnerable in terms of its industrial capacity if
Speaker 1: it needed to manufacture some products.
Speaker 2: You've visited one of these manufacturing areas in India before.
Speaker 1: Hey, yeah, so, Asian New Zealand Foundation Center a group
Speaker 1: of US over to India for a range of related
Speaker 1: to the Raisina dialogues which lux and went and gave
Speaker 1: a speech earlier in this year, and as part of
Speaker 1: that we also went to this I guess you'd call
Speaker 1: it kind of an economic zone, industrial park type arrangement
Speaker 1: called Shri City, which is a huge bit of land
Speaker 1: in the state just north of a next door to
Speaker 1: Tummil Nadu and that area is Tami Nadu, is I
Speaker 1: think India's most industrialized state, the place where Sri City
Speaker 1: is located. That's also where you get the rockets where
Speaker 1: India launches its sort of space missions, so you can
Speaker 1: actually it's written short distance of there. And within this
Speaker 1: kind of harbor there's a sort of free trade zone
Speaker 1: type thing where there's kind of you know, easier sort
Speaker 1: of tariff access for goods that are kind of being
Speaker 1: shipped through, but there's also domestic manufacturing products for different
Speaker 1: types of products, domestic manufacturing facilities, and effectively you we
Speaker 1: saw you know, we went in and we saw kind
Speaker 1: of an in conditioning manufacturer. We we went around the plant.
Speaker 1: There is a fox complant there, but we didn't we
Speaker 1: didn't visit it. And these basically they're kind of in
Speaker 1: some ways putting together a kind of ecosystem there. They've
Speaker 1: got like different manufacturers of things. You know, their conditioner
Speaker 1: manufacturer was talking about how they're drawing on different people
Speaker 1: were located within these areas. But that's a huge investment,
Speaker 1: you know, the and they're just getting started. And in fact,
Speaker 1: you know, when we've when Trump had talked about we
Speaker 1: want to get you have all these products made in
Speaker 1: the United States, or we want to get out of China,
Speaker 1: Apple instantly was like, right, we're gonna send all the
Speaker 1: production to India. But India only recently got up to
Speaker 1: manufacturally about ninety seven percent of the iPhones that itself consumes,
Speaker 1: so if it were to go and do it for
Speaker 1: America would have to wrap up this production even more.
Speaker 2: Well, one company Trump directly called out, and you've already
Speaker 2: said it Apple, he wants them to make their phones
Speaker 2: in the US. I saw one bit of analysis saying
Speaker 2: that it had cost up to three thousand, five hundred
Speaker 2: dollars US if the phones were made there. That's about
Speaker 2: set what's seven a k New Zealand for your phone?
Speaker 2: That's more than I've ever spent. Actually, I'm thinking I've
Speaker 2: ever spent on a car. I think it did get
Speaker 2: us thinking are we relying on cheap labor in Asia
Speaker 2: to make all of our popular products so it doesn't
Speaker 2: get up to three thousand, five hundred dollars.
Speaker 1: I actually don't think that the labory qu is actually
Speaker 1: the most important part of it. I mean China actually
Speaker 1: it installed two hundred and seventy six three hundred robots
Speaker 1: like last year. Yeah, like I said, it's manufacturing now
Speaker 1: is moving into highly automated territory. I think that when
Speaker 1: we think about something like the iPhone, we've got to
Speaker 1: think about, well, we've got our product, and that's the
Speaker 1: product that we're buying, But where's the actual value for
Speaker 1: it for US as a country or as a nation.
Speaker 1: Are we actually ever going to manufacture iPhones in New Zealand? No,
Speaker 1: because then it would really cost like three five hundred
Speaker 1: dollars or four thousand dollars. But if it is, if
Speaker 1: we're able to bring it down by relying on someplace
Speaker 1: where it's maybe more efficient to manufacture these, And that's
Speaker 1: not efficiency isn't only just going to be because of
Speaker 1: the labor. Actually it's going to because of all the
Speaker 1: other producers that are kind.
Speaker 2: Of close by, and they've been doing it for decade.
Speaker 1: Yeah, they've been doing it for a long time. So
Speaker 1: to go rebuild that somewhere else is just going to
Speaker 1: take a lot of money. And you can kind of
Speaker 1: do it. But then suddenly the iPhone is unaffordable for
Speaker 1: a whole bunch of people. So what happens Then people
Speaker 1: might use a Samsung or people might use another ecosystem. Well,
Speaker 1: if you do that, are there certain opportunities that aren't
Speaker 1: open to you? Then if you don't have access to iPhones,
Speaker 1: if it's unaffordable, then does that produce make a whole
Speaker 1: bunch of the Internet now very inaccessible for people? So actually,
Speaker 1: you know, do we get more value out of being
Speaker 1: able to manufacture an iPhone in the country? Do we
Speaker 1: get more value from being able to access some of
Speaker 1: the services that we access on an iPhone or having
Speaker 1: our population being able to access those services.
Speaker 4: We have Apple as you know, it's coming in. And
Speaker 4: I had a little problem with Tim Cooky yesterday. I
Speaker 4: said to him, tell me and my friend I treated
Speaker 4: you very good. You're coming here with five hundred billion dollars.
Speaker 4: But now I hear you're building all over India. I
Speaker 4: don't want your building in India. You can build an
Speaker 4: India if you want to take care of India. Because
Speaker 4: India is the highest, one of the highest tariff nations
Speaker 4: in the world. It's very hard to sell into India,
Speaker 4: and they've offered us a deal. We're basically they're willing
Speaker 4: to literally charge just no tariff, so we go from
Speaker 4: the highest tariff. You couldn't do business in India. We're
Speaker 4: not even a top thirty in India because the tariff
Speaker 4: is so high.
Speaker 2: We've talked here on this podcast before about how TikTokers
Speaker 2: in China were posting videos when the trade war stuff
Speaker 2: started about how cheap some of our most expensive products
Speaker 2: are purely because the factories are all there and they
Speaker 2: can buy things right off the production line. So do
Speaker 2: they quite enjoy having these products made there, do you
Speaker 2: think or is it just a front presented on social media?
Speaker 1: Well, one thing, I should probably say, some of those
Speaker 1: tiktoks can't be one hundred percent surely, Yeah, yeah, yeah,
Speaker 1: I think so. I'm not sure. I'm not sure if
Speaker 1: some of them were real on but some definitely some
Speaker 1: of them were false. So there is that. But to
Speaker 1: your larger point, you know, is this a strategy from
Speaker 1: the Chinese? I think so, Like isn't I think that
Speaker 1: they actually set out to a big manufacturing industrial hub
Speaker 1: and they set out to make components that are important
Speaker 1: for you know, WestEd businesses as well. Theyso wanted to
Speaker 1: be an important part of the global economy, so they
Speaker 1: couldn't just be shut off. So yeah, I mean, I
Speaker 1: guess Jhortly that is a strategy encouraging their industry as
Speaker 1: a strategy, it's not necessarily a cost free sort of
Speaker 1: a strategy. You know, Like we hear a lot about
Speaker 1: the really successful industrial factories, but they are actually a
Speaker 1: whole bunch of factories in China that are struggling. You know,
Speaker 1: there's over capacity, their unemployment rates are kind of going
Speaker 1: high for younger people. There's a whole bunch of overquasity.
Speaker 1: So you know, there's kind of factories there that are
Speaker 1: only capable of manufacturing products that people may not necessarily want.
Speaker 1: And you know they're facing trade restrictions in some countries
Speaker 1: as well, So it's not all of massive benefit to China.
Speaker 1: But I think you're right in terms of you know,
Speaker 1: you were as seeing a bit of strategy there.
Speaker 2: Of course, is there even the demand in the US
Speaker 2: for people to want to work in factories. It sometimes
Speaker 2: feels like Trump thinks we're still live in the nineteen
Speaker 2: twenties and everyone is happy to pop off down to
Speaker 2: their manual labor job, when I think most young people
Speaker 2: today just want to be TikTokers buying cheap leggings.
Speaker 1: Yeah, well, yeah, I mean I think I think that's
Speaker 1: probably pretty fair to some degree. Maybe not TikTokers, but
Speaker 1: maybe they'd like to be the people who are running
Speaker 1: TikTok or something like that, or maybe the people designing
Speaker 1: the TikTok a. This is the whole thing. Right up
Speaker 1: until this point, we've had like this real focus in
Speaker 1: our economy in the US on hell, let's move up
Speaker 1: the value chain. So countries like China, countries like Vietnam,
Speaker 1: they are doing the lower kind of value sort of stuff.
Speaker 1: They're better position for that because they've got lots of
Speaker 1: manual labor, they have, you know, comparatively kind of lower
Speaker 1: levels of education, whereas we can kind of but we
Speaker 1: can move up the value chain. We can be the
Speaker 1: ones who are designing the products, h are coming up
Speaker 1: with the business ideas, and we can you know, we
Speaker 1: can trade you know, you know, our knowledge for their
Speaker 1: sort of their goods or their helping us manufacture. Of course,
Speaker 1: with the breakdown of I guess the international rules based
Speaker 1: order changes in like tarth rates, that becomes tariff rates,
Speaker 1: tariff rules, people not sticking to their words, and naturally
Speaker 1: that then becomes a lot more difficult because part of
Speaker 1: being able to have a supply chain is to be
Speaker 1: able to rely on like that this company is going
Speaker 1: to be able to give you the product in a
Speaker 1: certain period of time.
Speaker 2: So given that it might take a decade or more
Speaker 2: to move some production to the US, and it's all
Speaker 2: going to make things more expensive, do you think it's
Speaker 2: ever going to happen?
Speaker 1: Really, I actually don't think they'll ever move all of it.
Speaker 1: I think that if they move all of it, it's
Speaker 1: going to be very costly, as Trump is sort of discovered.
Speaker 1: You know, don't call them Taco Trump for nothing. Trump
Speaker 1: always chickens out, as they say, and that's you know,
Speaker 1: for some good economic reasons. But I think that there
Speaker 1: is some benefit in countries thinking more deeply about issues
Speaker 1: like resilience and vulnerabilities in their supply chain. I mean,
Speaker 1: I remembering the pandemic talking to a kind of a
Speaker 1: bid manufacturing company and they were talking to me and
Speaker 1: Zealand one actually, and they were talking about how basically
Speaker 1: during the pandemic they actually you know, they manufacture obviously
Speaker 1: the beds here in New Zealand, but is one component
Speaker 1: that's very important for a bid that you actually basically
Speaker 1: could only get from China because China had become the
Speaker 1: sort of mass manufacturer of bed springs. And I think
Speaker 1: they found an alternative in Turkey, but obviously they had
Speaker 1: to scramp around for that that wasn't necessarily something they'd
Speaker 1: thought of before. So I think that you know, people
Speaker 1: like Trump and others in New Zealand who were about
Speaker 1: manufacturing capacity, I think they do have a point in
Speaker 1: the sense that you know, we do have to think
Speaker 1: about resilience. But that doesn't mean that it's wise for
Speaker 1: us to spend a whole bunch of money relocating everything
Speaker 1: to one country, the United States.
Speaker 2: Like how big of an issue is it for someone
Speaker 2: to have to build a bedspring factory in New Zealand.
Speaker 1: Yeah, yeah, exactly, And we wouldn't have a big enough market,
Speaker 1: so any bed springs that we made, we'd basically have
Speaker 1: to ship them off somewhere else find someone to buy them.
Speaker 1: Presumably the next country that's also concerned about this sovereignty
Speaker 1: of their bedsprings is also going to want to have
Speaker 1: a bedspring manufacturing country company. So you know, we have
Speaker 1: to We can't really manufacture everything that we want in
Speaker 1: this country, but that's not only stary bad thing, Like
Speaker 1: we can specialize in things that we're good at.
Speaker 2: Thanks for joining us to Lepa.
Speaker 1: Oh my pleasure.
Speaker 2: That's it for this episode of the Front Page. You
Speaker 2: can read more about today's stories and extensive news coverage
Speaker 2: at enzherld dot co dot nz. The Front Page is
Speaker 2: produced by Ethan Sills and Richard Martin, who is also
Speaker 2: our sound engineer. I'm Chelsea Daniels. Subscribe to the Front
Speaker 2: Page on iHeartRadio or wherever you get your podcasts and
Speaker 2: tune in tomorrow for another look behind the headlines.