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Speaker 2: You gotta talk to China. I mean, okay, so the
Speaker 2: President did announce a ninety day pause on higher reciprocal
Speaker 2: tariffs that hit dozens of trade partners. After midnight, Tho'll
Speaker 2: raise duties on China to one hundred and twenty five percent.
Speaker 2: Shazad Kazi is COO and a managing director for China
Speaker 2: Bagbook International. The company provides data that tracks the Chinese economy.
Speaker 2: He joins us here in the Bloomberg Interactive Brokers Studio.
Speaker 2: This is a very big trading partner of the United
Speaker 2: States that was not affected positively by today's announcement. Still,
Speaker 2: we saw Stock's link to China move higher. We saw
Speaker 2: Apple move higher today. How does the how does the
Speaker 2: fight between the US and China?
Speaker 3: And yeah, that's a big question. I don't think it does.
Speaker 3: This is a new era for sure, or I don't
Speaker 3: think there's a very high chance of there being what
Speaker 3: I call a deal for the ages of centuries between
Speaker 3: these two. You know, where they decide they're going to
Speaker 3: make structural changes to their economy, and they're going to
Speaker 3: you know, get rid of you know, market barriers for
Speaker 3: American companies, et cetera, et cetera. You know, start buying
Speaker 3: a lot of commodities. Perhaps they'll buy a lot of commodities.
Speaker 3: Perhaps they'll buy a lot of advanced chips if you
Speaker 3: sell it to them. But those that big deal concept,
Speaker 3: it doesn't happen. Instead, maybe what you get are a
Speaker 3: series of mini deals between the two countries, and then
Speaker 3: you're still on a course where these are two hostile powers. Decoupling.
Speaker 4: Is it happening.
Speaker 3: Decoupling is absolutely happening. It's happening in complicated ways. Obviously.
Speaker 3: One thing is you see you know, bilateral trade for example,
Speaker 3: between the two if you know, on paper, looks like
Speaker 3: it has come down a bit. But you have the
Speaker 3: problem of transshipment, which is essentially China has completely re routed.
Speaker 3: It's traded the US through Southeast Asian countries, which by
Speaker 3: the way, means that you could go from the one
Speaker 3: hundred and whatever percent to you know, one thousand and
Speaker 3: some percent, and it may not make a difference because
Speaker 3: at this point you're relying on transhipming to get the
Speaker 3: goods to the US anyway, so that number at some
Speaker 3: point is less impactful.
Speaker 4: How vulnerable is the Chinese economy right now? In this
Speaker 4: what right now is a trade war between the United
Speaker 4: States and China.
Speaker 3: Big picture, the economy is obviously slowing down. They didn't
Speaker 3: have a very hot March. That said one month of
Speaker 3: week data. You know, it may bother markets, it does
Speaker 3: not bother the Communist Party or sheet. I think they
Speaker 3: have the capacity to weather the storm for now. Let's
Speaker 3: keep in mind that counter to what we were hearing
Speaker 3: all of flast fall, there was no big bang stimulus
Speaker 3: bazooka this and that. People like to hear that Turma.
Speaker 3: It didn't happen. They have the firepower in reserve because
Speaker 3: they knew they're going to need it this year and
Speaker 3: next year.
Speaker 4: Probably is he also willing, President g willing to deal
Speaker 4: with a little bit of pain in order to kind
Speaker 4: of have a spine here, and.
Speaker 3: Which they have.
Speaker 4: He's obviously already shown in terms of the retaliatory tariff
Speaker 4: like will to kind of go the distance, even if
Speaker 4: it does mean some pain at home.
Speaker 3: President she is not afraid of pain, as we've seen
Speaker 3: with what he's done to his own economy right, and
Speaker 3: China cannot capitulate. As far as he's concerned personally, and
Speaker 3: as far as I think the Communist Party is concerned,
Speaker 3: they will not come to Bision with the begging bowl.
Speaker 3: They're not going to pick up the phone and beg
Speaker 3: for a deal.
Speaker 2: The move today from Apple has been a little puzzling
Speaker 2: to me, and I've been talking to everybody about it.
Speaker 2: I've been asking everybody about it. I know you don't
Speaker 2: cover individual companies, but Apple is a very important company
Speaker 2: in China. It had its best day since nineteen ninety
Speaker 2: eight today, shares rallied by fifteen point three percent. Is
Speaker 2: the optimism that Apple could see an exemption, Is the
Speaker 2: optimism that Apple could move production outside of China and
Speaker 2: more into India, at least for US bound smartphones. You're
Speaker 2: nodding a little bit. Is it all of the above?
Speaker 2: Like why is there optimism for a company that is
Speaker 2: so enmeshed in China when it comes to its supply chain?
Speaker 3: You know, my gut feeling is that markets still don't
Speaker 3: really take this US China tariff war seriously, that there
Speaker 3: is this continuing. Let's keep in mind they did not
Speaker 3: think Trump was going to do all of this. The
Speaker 3: market was ultimately caught by surprise when the big tariff
Speaker 3: announcement in the Rose Garden happened. And I think a
Speaker 3: big chunk of people ultimately think that there is a
Speaker 3: big US China deal that's going to happen, like a
Speaker 3: phase one or a phase two, of course, and things
Speaker 3: are going to go. But I think part of it
Speaker 3: is that sentiment out there. It could be just overplaying
Speaker 3: the thing that the manufacturing can be moved out of
Speaker 3: the India. Stuff is very short term and you know,
Speaker 3: again you're going to recreate you know, iPhone city somewhere else.
Speaker 3: That's going to take a very very long time. So
Speaker 3: I don't truly buy the optimism as much as I
Speaker 3: can understand it.
Speaker 2: Do you not buy the optimism as a whole for
Speaker 2: the market not understanding the ramifications of this trade where
Speaker 2: like you still say that the market doesn't fully grasp
Speaker 2: the tension with China, Yeah that's not price then.
Speaker 3: Well, of course that was a big positive reaction because
Speaker 3: global tariffs is essentially paired back to a large degree.
Speaker 3: So I get it. But the next few days, the
Speaker 3: next few weeks, if the tension with China remains at
Speaker 3: this level or intensifies, I don't think the market should
Speaker 3: be getting much relief in that.
Speaker 4: In that case, Shiza, let me throw out some numbers.
Speaker 4: It was in a story buyer and a curran who
Speaker 4: follows the global economy and knows China really well. Two
Speaker 4: economies US and China, with a combined GDP of forty
Speaker 4: six trillion dollars locked in a game of chicken. His
Speaker 4: words at stake, almost seven hundred billion dollars in two
Speaker 4: way annual goods trade, China's estimated one point four trillion
Speaker 4: dollars of portfolio investments in the United States, and less
Speaker 4: obvious but no less significant variables such as people to
Speaker 4: people links forged over decades at businesses and universities, and
Speaker 4: public opinion that's seering on both sides. I've said this
Speaker 4: a lot on air. I started my career and it
Speaker 4: was all about global companies wanting to get into the
Speaker 4: Chinese market. President Clinton the wto the fight to get
Speaker 4: China in there. It was all about tapping the domestic
Speaker 4: economy in China. That's what everybody wanted to do. They've
Speaker 4: set up shop, they made deals. Is all of that
Speaker 4: at risk? Is that all of that likely to go away?
Speaker 4: And is should we think that that US China relationship.
Speaker 4: It's just kind of this is the beginning of the end,
Speaker 4: or maybe it's already started a few years ago.
Speaker 3: You know. I don't think this all goes away. But
Speaker 3: one point to consider is have US companies have these
Speaker 3: CEOs really contemplated what their own future in China looks like,
Speaker 3: because it seems like that they never understood that China
Speaker 3: would actually do the technology transfers, do the jvs, et cetera,
Speaker 3: and ultimately have its local companies prop up that would
Speaker 3: be competing with their American counterparts and would be heavily
Speaker 3: subsidized and would eventually go on to grab a bigger
Speaker 3: and bigger share of the domestic market. Foreign companies in
Speaker 3: general are struggling against local companies and various sectors in
Speaker 3: China today. So what does that future look like? I
Speaker 3: would suggest the CEOs contemplate that, But no, I don't
Speaker 3: think this means everything's coming to an end and no
Speaker 3: American companies in China.
Speaker 4: All right. Chazak Ka Kazi, of course, the chief operating
Speaker 4: officer and Managing director for China Facebook International