Speaker 1: The war in Ukraine taking center stage when the United
Speaker 1: Nations General Assembly meets in New York. From the packed agenda,
Speaker 1: escalating tensions with China and Russia's war in Ukraine launched
Speaker 1: early last.
Speaker 2: Year, but some key players are expected to skip that gathering. Specifically,
Speaker 2: four out of the five permanent members on the Security
Speaker 2: Council China, the UK, France.
Speaker 3: And Russia.
Speaker 4: The high level talks about economics, energy, trade, and war
Speaker 4: at the UN this week highlight the geopolitical schisms that
Speaker 4: are reshaping the balance of power in the world and
Speaker 4: increasingly forcing nations to choose sides. But not just nations,
Speaker 4: corporations too are looking at the shifting political map when
Speaker 4: they make decisions that will impact their business for decades,
Speaker 4: like where to build a new factory. A just release
Speaker 4: Bloomberg analysis puts numbers to these decisions for the first time.
Speaker 4: It shows how political divides like those exposed by Russia's
Speaker 4: war in Ukraine and increasing tensions between the US and China,
Speaker 4: are also disrupting decades of commercial relationships, and it reveals
Speaker 4: how the world is splitting into economic blocks that resemble
Speaker 4: political fault lines.
Speaker 5: Lot has happened in the last five years in the
Speaker 5: global economy started. I think with the trade wars between
Speaker 5: the US and China, what we've seen is that when
Speaker 5: you look at tide numbers, you can already see some
Speaker 5: decupling happening between the countries.
Speaker 4: That's Bloomberg economists Mevak Cousin. She and senior economics writer
Speaker 4: Sean Donnin are here to talk about how companies are
Speaker 4: seeking to insulate themselves from political turmoil.
Speaker 1: We know that companies hate uncertainty, so we have a
Speaker 1: kind of level of uncertainty that is being created by
Speaker 1: governments that is just making it hard to do business
Speaker 1: in the world.
Speaker 4: I'm west Kosova today on the Big take when politics
Speaker 4: and business collide.
Speaker 1: Sean, welcome back. Thanks so much for having me back here.
Speaker 4: So you know, we've been hearing for years about how
Speaker 4: companies put factories where they can manufacture their goods cheaply,
Speaker 4: or put them closer to their customers so they don't
Speaker 4: have to have long supply chains. But what's so fascinating
Speaker 4: about the story that you and Mava, along with our
Speaker 4: colleagues Enda Kerran and Jenna Hawk wrote is that there
Speaker 4: are so many more hidden factors into where companies choose
Speaker 4: to do their business these days.
Speaker 1: And they're new factors, right. So for decades, the decisions
Speaker 1: that CEOs and boards made in terms of where they
Speaker 1: were alca their capital, the big business bets that they
Speaker 1: were making, were based on returns and profits and where's
Speaker 1: the big market, Where can I sell underarm deodorant, Where
Speaker 1: can I sell a car? Where can I make the
Speaker 1: biggest buck? And what we're seeing in the last few years,
Speaker 1: and this is something that's really confounding economists because it's
Speaker 1: not the way it's supposed to happen in a normal economy.
Speaker 1: This is not how they teach economics in college. Is
Speaker 1: that geopolitics is starting to drive decisions and that is
Speaker 1: a whole new ballgame, and we're just starting to be
Speaker 1: able to kind of see the data. And that's what
Speaker 1: we've tried to do with the story and Mava.
Speaker 4: This question of how politics is driving some of the
Speaker 4: decisions that big companies make is very hard to measure,
Speaker 4: which is why what you've done in the story is
Speaker 4: so new.
Speaker 1: Yeah, that's very high.
Speaker 5: It's difficult to measure. We are used to measure things
Speaker 5: like the size of the economy, the distance between countries,
Speaker 5: the tariffs that exist even non tariff barriers when there
Speaker 5: are some regulations that make it difficult to import and exports.
Speaker 5: But the geopolitics, and in particular the concerns about geopolitical
Speaker 5: tension and the fact that maybe in the future there
Speaker 5: could be restrictions, there could be export controls and bands,
Speaker 5: this is much harder to measure. So we can start
Speaker 5: to see in the data that this is having an impact.
Speaker 5: We can use some poxies. We've used UN votes in
Speaker 5: the UN resolution on whether to condemn Russia's invasion of Ukraine.
Speaker 5: We've used those voting patterns as a proxy to understand
Speaker 5: the geopolitical similarities between countries. But you're right, it's actually
Speaker 5: something that's much more intangible than standard economic tools.
Speaker 4: Sean, What gave you the idea to look at this,
Speaker 4: What was the thing that made you think, huh, it
Speaker 4: looks like geopolitics getting into the middle of these decision.
Speaker 1: We've been trying to think about all of the different
Speaker 1: things that are happening out there in the global economy
Speaker 1: and how it's being shaped, and we're trying to get
Speaker 1: our head around what's really happening to globalization in the world,
Speaker 1: and what was clear and what we're starting to hear
Speaker 1: from more and more economists, is that geopolitics was a thing. Now,
Speaker 1: that's kind of obvious. We've heard here in Washington people
Speaker 1: every day are talking about China and the competition with
Speaker 1: China in Europe likewise, they are exercised by this. Certainly
Speaker 1: in China. China feels under assault and is trying to
Speaker 1: build new alliances. We know that geopolitics is shaping the world,
Speaker 1: but it's harder to get a hold on how you
Speaker 1: actually measure capital decisions capital allocation decisions, which has been
Speaker 1: important to us at Bloomberg Right because that's kind of
Speaker 1: what we write about. And that's when we started noticing
Speaker 1: that a lot of economists were starting to latch on
Speaker 1: to un voting patterns and other measures of geopolitics. People
Speaker 1: look at the number of mentions on Earth calls of
Speaker 1: the word geopolitics. So far this year, there's been some
Speaker 1: twelve thousand mentions by executives of standard Ports five hundred companies.
Speaker 1: These are the world's largest companies, and that's three times
Speaker 1: what it was just two years ago. Economists have looked
Speaker 1: at other trading relationships, arm sales, or other kind of
Speaker 1: measures of geopolitical proximity, whether you're members of the G
Speaker 1: seven for example, or the G twenty or different blocks,
Speaker 1: and there is this whole effort by economists to try
Speaker 1: and understand this new force, and this seemed like the
Speaker 1: cleanest way for us to do it.
Speaker 4: Maybe, can you tell us exactly what the numbers show,
Speaker 4: what you were looking for and what you've found.
Speaker 5: We looked in particular at what we call green field
Speaker 5: for indirect investment. That's investment in new projects in factory
Speaker 5: is that will sometimes take years to build. So that's
Speaker 5: really the sort of decision today about where you want
Speaker 5: to do business in the future.
Speaker 4: And so this is companies deciding where they want to
Speaker 4: build a new plant. So Toyota, should they build it
Speaker 4: in China, the US or Mexico.
Speaker 5: That's right, That's exactly what we've been looking at in
Speaker 5: this World Investment Report. What we did is that we
Speaker 5: focused on those greenfield investment reports and we looked at
Speaker 5: where the new flows of investments were going, and we
Speaker 5: focused in particular on whether countries had been voting to
Speaker 5: condemn Russia's invasion of Ukraine in February twenty twenty three
Speaker 5: in the United Nations or if that voted against containing
Speaker 5: the invasion or abstained. And what we noticed is that
Speaker 5: the share of those new projects that was going to
Speaker 5: countries that did not condemn the invasion of Ukraine by Russia,
Speaker 5: this share of new investment going to those countries has
Speaker 5: fallen very substantially. It was about thirty percent of all
Speaker 5: investments in the decade to twenty nineteen. By twenty twenty
Speaker 5: two it was only fifteen percent. And within those countries
Speaker 5: there are two big losers. One is Russia in twenty
Speaker 5: twenty two that received no investment at no new investment
Speaker 5: at all. That means no investment from the US or Europe.
Speaker 5: But that also means no investment from China, for example,
Speaker 5: which is quite striking I find. And the other big
Speaker 5: loser China. So in the decade twenty nineteen, China was
Speaker 5: receiving an average about ten percent of all the flows
Speaker 5: of new investment in new projects. In twenty twenty two
Speaker 5: they received less than two percent. So we really see
Speaker 5: this sort of decisions, companies deciding that they don't want
Speaker 5: to invest at a moment in those countries anymore.
Speaker 4: Sean, let's pull that apart just a little bit. Why
Speaker 4: did you focus in particular on this vote about Russia's
Speaker 4: invasion of Ukraine. Why was that such an important dividing
Speaker 4: line when looking at investment decisions about where to put factories.
Speaker 1: We know that Vladimir put in decision to invade Ukraine
Speaker 1: was the geopolitical moment of the last couple of years,
Speaker 1: and so where countries position themselves on that, whether they
Speaker 1: choose to condemn the vote or just simply abstained, told
Speaker 1: you a lot about their thinking and how they were
Speaker 1: kind of positioning themselves and their alliances, their geopolitical alliances.
Speaker 1: So there's that To be clear, we're not saying in
Speaker 1: this that the only reason people are moving their factories
Speaker 1: is because of the war in Ukraine. There are other
Speaker 1: reasons why people are choosing to invest in the United
Speaker 1: States or in Western Europe, including a whole surge in
Speaker 1: industrial policy and subsidies that we've seen here in the
Speaker 1: United States in particular. We also know that China in
Speaker 1: twenty twenty one, in twenty twenty two was largely shut
Speaker 1: down because of a zero COVID policy that was putting
Speaker 1: off a lot of foreign investors. But there is a
Speaker 1: clear divide at the same time that is happening in
Speaker 1: the world, and we see it in summits of leaders.
Speaker 1: We see in different policy areas in Washington efforts to
Speaker 1: try and stop technological exports to China, for example, the
Speaker 1: export of semiconductors and semiconductor making equipment to China. So
Speaker 1: we know this broader geopolitical tensions are happening. We're just
Speaker 1: using this vote to kind of sort through this data.
Speaker 4: And maybe what does the data tell us about how
Speaker 4: much the war in Ukraine is driving investment decisions versus
Speaker 4: the war in Ukraine exposing divisions that were there even before.
Speaker 5: It's a very good question, and a lot has happened
Speaker 5: in the last five years in the global economy started.
Speaker 5: I think with the trade wars between the US and China,
Speaker 5: what we've seen is that when you look at tide numbers,
Speaker 5: you can already see some decupling happening between the countries.
Speaker 5: When you look at tide numbers, you have a very
Speaker 5: clear cut. In twenty eighteen, with the start of the
Speaker 5: trade wars between the US and China, US imports from
Speaker 5: China have fallen thirty five percent across all the tarift products.
Speaker 1: So that's a big gap.
Speaker 5: At the same time, China's imports from the US have
Speaker 5: also fallen. They've fallen for trift products, but they also
Speaker 5: have declined. And that's what Sean was saying. All those
Speaker 5: semiconductors related technology. Some of it is likely directly link
Speaker 5: to export restrictions imposed by the US on RUEWEI on
Speaker 5: SMC from October twenty twenty, to the sort of broad
Speaker 5: based export restrictions on semiconductor technologies. But some of it
Speaker 5: is probably geopolitical decopling's China trying to move away in
Speaker 5: this very strategic technology. Actually, if you were to look
Speaker 5: at Russia as well, you can see that Russia was
Speaker 5: already starting to decoupel Western economies since twenty fourteen, since
Speaker 5: the invasion of Crimea and the start of sanctions. So clearly,
Speaker 5: for me, the un vertes and the invasion of Ukraine
Speaker 5: and votes around the invasion of Ukraine have actually crystallized
Speaker 5: some of the growing divisions and tensions that we're already
Speaker 5: growing under the surface in the global economy.
Speaker 4: Seans, where we have this broad divide that you show
Speaker 4: in this story, and we know, of course there's China
Speaker 4: on one side, the US on the other, but there's
Speaker 4: every other country in between what is the divide which
Speaker 4: countries are on each side.
Speaker 1: On one side you have you know, the big Western economies,
Speaker 1: the United States, Europe Asian allies like Japan and South Korea,
Speaker 1: and on the other side you have China and a
Speaker 1: lot of developing countries. And to be clear, there are
Speaker 1: a lot of countries that are trying to have a
Speaker 1: bet both ways, right, and this is actually an interesting
Speaker 1: set of economies that we're going to be looking further at.
Speaker 1: Countries like India, Vietnam that abstained when it came to
Speaker 1: this big United Nations vote that we've been looking at
Speaker 1: that has kind of crystallized this geopolitical divide, and at
Speaker 1: the same time, and they're trying to have strategic relationships
Speaker 1: with the United States as well. President Biden was recently
Speaker 1: in Vietnam and India and in both of those visits
Speaker 1: was trying very hard to strengthen the relationship there and likewise,
Speaker 1: the leaders of India and Vietnam were very happy to
Speaker 1: see the American president there. At the same time, they're
Speaker 1: trying to kind of maintain a relationship with China and
Speaker 1: so on. So you know, these are not clean blocks, right.
Speaker 1: We should also be clear that these are not equal blocks.
Speaker 1: About two thirds of the global economy is on the
Speaker 1: kind of US and G seven side. About a third
Speaker 1: of the world economy is on the Russia China side,
Speaker 1: if you will. One of the ways you can really
Speaker 1: track what is happening and this divide in the global
Speaker 1: economy is how folks have voted at the United Nations
Speaker 1: on whether to condemn russia invasion of Ukraine or not.
Speaker 4: After the break, Which countries have the most to win
Speaker 4: and lose in this shifting global structure. Maybe Sean said
Speaker 4: earlier that on earnings calls, when executives of big companies
Speaker 4: talk about their performance, they've been talking about global tensions
Speaker 4: quite a lot. What are some of the companies that
Speaker 4: were caught up in all of this that are making
Speaker 4: these decisions in part based on global politics.
Speaker 5: What I found fascinating in the latest World Investment report
Speaker 5: is really the weight of semiconductors in those decisions. It's
Speaker 5: fascinating to see that greenfield projects, the new projects in
Speaker 5: fabs in semiconductor factories have jumped by about two hundred
Speaker 5: percent multiplied by three since twenty nineteen or twenty twenty.
Speaker 5: And in fact, you can see that companies like TSMC
Speaker 5: based in Taiwan, one of the geopolitical hotspots who used
Speaker 5: to have factories mostly in Taiwan and Menan. China is
Speaker 5: building factories in the US, in Japan, and his index
Speaker 5: to build in Germany.
Speaker 1: And it's not just semiconductors, right. We've been talking a
Speaker 1: lot since the pandemic about the importance of semiconductors to
Speaker 1: building everything from cars to cell phones to washing machines.
Speaker 1: If you listen to the earnings calls and you look
Speaker 1: at the transcripts, what you see is Wall Street giants
Speaker 1: like Black Rock and Larry Fink their chairman, talking about
Speaker 1: geopolitics and how it's going to hit returns.
Speaker 6: These forces include a fragmented geopolitical landscape causing a rewiring
Speaker 6: supply chains, a transition to a lower carbon economy, and
Speaker 6: the aging population in the developed world, all of which
Speaker 6: are likely to be inflationary over time.
Speaker 1: You see big consumer giants like Coca Cola and Tesla
Speaker 1: and Elon Musk talking about geopolitics. You also see big
Speaker 1: industrial companies like three M talking about geopolitics and worrying
Speaker 1: about it. It's hard to find a big company right
Speaker 1: now that isn't thinking about geopolitics in a way that
Speaker 1: they just weren't a few years ago.
Speaker 4: And what do they say on those calls, What are
Speaker 4: their specific concerns when they talk about geopolitics.
Speaker 1: The first concern is, this is a big risk, right.
Speaker 1: We are worried that a big geopolitical event and that
Speaker 1: these geopolitical tensions could affect our ability to do business
Speaker 1: in the world. The second thing they say is, we
Speaker 1: are working to reorganize our supply chains because of the
Speaker 1: geopolitical risk, and we don't want our supply chains to
Speaker 1: be caught up in a big geopolitical event. And the
Speaker 1: third thing they say is we're trying very hard to
Speaker 1: find a way around geopolitics. And so Elon Musk in July,
Speaker 1: when he was talking to Tesla investors, had this fascinating
Speaker 1: line where he said, look, this is a really strange
Speaker 1: period in terms of geopolitical tensions in the world.
Speaker 7: The best we can do is have factories and many
Speaker 7: past the world such that if is get cut in
Speaker 7: one part of the world, we know we can still
Speaker 7: keep things going in the rest of the world.
Speaker 1: And we're seeing him do that. Right. Elon Musk has
Speaker 1: factories in Texas. He has factories in China outside Shanghai.
Speaker 1: He's building a big new factory just outside Berlin. And
Speaker 1: he's got a big factory in Mexico as well that's
Speaker 1: under development. And he, like a lot of big companies
Speaker 1: and like a lot of CEOs, is making sure that
Speaker 1: he is both respecting these new geopolitical interests but also
Speaker 1: finding a way to kind of survive this geopolitical time
Speaker 1: as well.
Speaker 4: Maybe earlier you talked about how Russia and China are
Speaker 4: some of the bigger losers in this new divide. Who
Speaker 4: are the winners who are inheriting new companies, new factories
Speaker 4: where before they wouldn't have gotten that business.
Speaker 5: I think so far what we've seen is that some
Speaker 5: of the big winners are actually in the G seven
Speaker 5: United States. He's a country that has seyn the credits
Speaker 5: increase in its new projects, Germany, Italy. So clearly at
Speaker 5: the moment, I guess it's a bit of a flight
Speaker 5: to safety, going to the sort of very safe place.
Speaker 5: The blocks are starting to get identified, but I think
Speaker 5: it's still a bit in flex and so I guess
Speaker 5: that's maybe why at the moment companies are choosing the
Speaker 5: sort of safe bets and going where they really know
Speaker 5: on which side it's going to fall. That's a big winners.
Speaker 5: In our data, we can see other winners. We know that,
Speaker 5: for example, some countries have taken up some of the
Speaker 5: slack left by China in US imports. We know it's
Speaker 5: actually quite a lot of Asian countries. It's China, it's Vietnam,
Speaker 5: it's also India. So you see two countries that actually
Speaker 5: didn't vote to condemn Russia's invasion have taken up a
Speaker 5: lot of the sex in the US.
Speaker 1: And there's another important point to make here, which is
Speaker 1: on the kind of loser. And this is what a
Speaker 1: lot of economists and smart people really worry about, and
Speaker 1: that is the story of globalization over the last half
Speaker 1: century has been one of yes, production shifting from places
Speaker 1: like the United States to Mexico and China, but it's
Speaker 1: also been shifting and manufacturing has been growing rapidly in
Speaker 1: other poor countries, developing countries, and that has meant for
Speaker 1: the world a huge reduction in poverty. There are far
Speaker 1: fewer people living in extreme poverty in the world today
Speaker 1: than there were fifty years ago. That said, if you
Speaker 1: look forward now, if geopolitics has this big influence, and
Speaker 1: we are doing this thing that some people call friend shoring, right,
Speaker 1: We're putting factories in friendly countries. A lot of those
Speaker 1: friendly countries are other rich countries. That means that that
Speaker 1: investment is not going to poor countries. That means that
Speaker 1: those poor countries are likely to stay poorer for longer.
Speaker 1: It's likely to increase in equality in the world world,
Speaker 1: it's going to increase poverty in the world, and that
Speaker 1: is going to lead to all sorts of other problems.
Speaker 1: And so if you are sitting at the International Monetary
Speaker 1: Fund or the World Bank and you are looking out
Speaker 1: at the global economy beyond these rich economies, you are
Speaker 1: worrying about the impact of this fragmentation on the world
Speaker 1: and sean.
Speaker 4: About three decades ago, we saw another bipolar system come
Speaker 4: crashing down with the collapse of the Soviet Union. How
Speaker 4: does what's happening now compare to that.
Speaker 1: It's really tempting to say this is the new Cold War,
Speaker 1: right the US and China, There's going to be an
Speaker 1: iron curtain descending on the world. And that is not
Speaker 1: what we are saying in this piece. We're not talking
Speaker 1: about a new Eastern Bloc and Western Bloc because the
Speaker 1: world is just so much more complicated than it was then.
Speaker 1: The fact is that the US and China still have
Speaker 1: an incredibly complicated and pretty rich economic relationship. Gina Romando,
Speaker 1: the Secretary of Commerce, was just in China literally trying
Speaker 1: to sell Boeing aircraft to the Chinese. US still wants
Speaker 1: to sell to China, and vice versa now. Ten years
Speaker 1: from now, twenty years from now, fifty years from now,
Speaker 1: that iron curtain may be a lot harder than what
Speaker 1: we envision now. But if there is an iron curtain
Speaker 1: coming down on the world right now, it's really porous.
Speaker 1: It's really easy to get around and walk through even
Speaker 1: I think.
Speaker 5: One thing I find quite interesting is the return of
Speaker 5: export controls and export bands wielding the economic weapon for
Speaker 5: geopolitical purposes. It's something that more or less had disappeared
Speaker 5: since the United States actually decided they could start selling
Speaker 5: pieces to the USSR at the time, so that was
Speaker 5: for me. It's one of the proper code war type tool.
Speaker 5: So it's quite interesting and a little bit worrying to
Speaker 5: see it coming back in this sort of tried policies back.
Speaker 4: What will this emerging system mean for the things we
Speaker 4: buy and how much they cost. Is there any upside
Speaker 4: to the world being divided into different economic blocks?
Speaker 1: You know, I've been talking with economists at the IMF
Speaker 1: about this. You've been doing a whole series of deep
Speaker 1: dives into different parts of the global economy and looking
Speaker 1: at the impact of a fragmenting world. And they will
Speaker 1: tell you we've looked at it many different ways, and
Speaker 1: we don't see a scenario where the global economy as
Speaker 1: a whole gains. We see this is something that destroys
Speaker 1: kind of economic output in the world. In the worst case,
Speaker 1: if you had a kind of hard iron curtain, if
Speaker 1: you had a real Cold war, it would be the
Speaker 1: equivalent of wiping out the French and German economies from
Speaker 1: the global economy. Right now, it's about seven percent of
Speaker 1: the global comody.
Speaker 5: That's huge from a pure economic perspective. It's going to
Speaker 5: be costy. How costly, it's quite difficult to know. But
Speaker 5: we had done some estimates using a large scale model,
Speaker 5: and we had estimated that if we had the twenty
Speaker 5: five percent starif between the two blocks of countries, we
Speaker 5: would probably see trade flows fall by about twenty percent
Speaker 5: relative to what they are today, and twenty percent. That
Speaker 5: would take us back to the early two thousand, so
Speaker 5: just before China joined the World Trade Organization. Based on
Speaker 5: our estimate of past relationship between trade integration and growth,
Speaker 5: we think it could reduce global GDP by about three
Speaker 5: point five percent. That it would be relatively broad based,
Speaker 5: because in some places producers would lose, in some places
Speaker 5: consumers would lose, but generally everyone would be a bit
Speaker 5: worse UF.
Speaker 4: So you can see how a politician would make a
Speaker 4: decision based on a certain set of circumstances. But for
Speaker 4: a company that is really trying to make decisions based
Speaker 4: on how it's going to affect their business, is there
Speaker 4: any concern that because it's so hard to measure it,
Speaker 4: they're going to get it wrong.
Speaker 1: Absolutely. So. I mean, one of the people I called
Speaker 1: when we were working on this story is a woman
Speaker 1: called Penny Goldberg, who is a former chief economist at
Speaker 1: the World Bank. She's now at Yale. She's one of
Speaker 1: the world's leading trade economists and experts on globalization, and
Speaker 1: she made a really good point. She said, geopolitics is
Speaker 1: man made uncertainty, and we know that companies hate uncertainty.
Speaker 1: So we have a kind of level of uncertainty that
Speaker 1: is being created by governments that is just making it
Speaker 1: harder to do business in the world today. We have
Speaker 1: a very recent example that kind of illustrates it all.
Speaker 1: Look at how quickly sanctions went into place on Russia
Speaker 1: after the invasion of Ukraine. We saw McDonald's pull out
Speaker 1: in the matter of reasons, man.
Speaker 3: The Possby chain will sell it's Russian business and take
Speaker 3: a write off of up to one point four billion dollars.
Speaker 3: Donald said that in the way the war in Ukraine continued,
Speaker 3: ownership of the business in Russia is not consistent with
Speaker 3: the company's values.
Speaker 1: We saw other companies pull out their employees in a
Speaker 1: matter of days after the invasion. We have seen the
Speaker 1: Russian economy shut off by Western banks. The reality is
Speaker 1: geopolitics can change things very quickly, and big companies, whether
Speaker 1: it's Coca Cola, McDonald's, Walmart, Tesla, can feel the impact
Speaker 1: very quickly.
Speaker 4: Mayva for listeners, say living in the US on one
Speaker 4: side of this block, or listener in Beijing on the
Speaker 4: other side of the block, what would you tell them
Speaker 4: about how it's going to affect them. Just people going
Speaker 4: about their lives, trying to make ends meet buying products.
Speaker 4: What does it mean for average.
Speaker 5: People having been the US? Generally, it means that there
Speaker 5: are greater risks that consumers may face some short or
Speaker 5: some inflation as their products, products that used to being
Speaker 5: imported from China get relocated or resourced from a different country.
Speaker 5: And we know that sometimes it can be difficult, So
Speaker 5: I think that's probably the sort of thing that may happen.
Speaker 5: I would don't tell them to run to the shop
Speaker 5: and hold I think they will be fine. But generally
Speaker 5: I think that the sort of greater risk for the
Speaker 5: sort of households or risk in the US maybe a
Speaker 5: bit more inflation volatility in China, I imagine, or his
Speaker 5: probably lies more of the producers. It means that depending
Speaker 5: on how it goes. So far China has managed we
Speaker 5: know they have lost market shares in the US. So
Speaker 5: far they've managed to recover those market shares. I think
Speaker 5: it means that maybe China's market share in other parts
Speaker 5: of the US analyze word could become a bit more constrained,
Speaker 5: and that could probably mean some jobs. So that's probably
Speaker 5: more a job risk, has it than a consumption risk
Speaker 5: in China?
Speaker 1: And you know, in the background of your question is
Speaker 1: a world where we see the two economic giants on
Speaker 1: two very different economic paths right now. So, China's economy
Speaker 1: is slowing and it's facing some huge structural problems like
Speaker 1: actually a declining population, an aging population, in a way
Speaker 1: that the United States is not. In the same way.
Speaker 1: It has recovered more slowly from the pandemic than the
Speaker 1: United States. There are a lot of people in Washington
Speaker 1: and other Western capitals now who see China not as
Speaker 1: a kind of endlessly rising power, but as one that
Speaker 1: is starting to either peak or kind of the client.
Speaker 1: So that is a very different path. The United States
Speaker 1: has recovered incredibly quickly from the pandemic in a lot
Speaker 1: of ways. There's still a lot of problems on the
Speaker 1: ground in still very real for a lot of families
Speaker 1: and so on. But we have a job market unemployment
Speaker 1: rate that is at historic lows, and the Biden administration
Speaker 1: would argue that there's all of this investment in the
Speaker 1: future that means that the US economy is going to
Speaker 1: be growing vigorously for a long time, and that is
Speaker 1: going to be felt by families in the longer term. Right,
Speaker 1: it may not be you and me who feel it
Speaker 1: at you know, in the grocery line or when we
Speaker 1: go out to buy our new iPhones or cars, it's
Speaker 1: going to be maybe our kids who feel it in
Speaker 1: a different way. And once upon a time, the story
Speaker 1: was that by the time my kids were entering the workforce,
Speaker 1: China would be the world's largest economy and they would
Speaker 1: be competing in a very different way with China. It's
Speaker 1: not so clear that that's going to be the case anymore,
Speaker 1: and vice versa for young Chinese people.
Speaker 4: Sean Mav thanks so much for talking with me today.
Speaker 1: Thank you so much. Thanks finding us.
Speaker 4: Thanks for listening to us here at The Big Take.
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