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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the All Thoughts podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 3: And I'm Joe. Why isn't thal so, Joe?

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Speaker 2: One thing I find interesting about China, or maybe I

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Speaker 2: should say one thing I find interesting about how the

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Speaker 2: world views China is it seems to be this economy

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Speaker 2: that is always simultaneously a massive competitive threat, especially to

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Speaker 2: the US, and then simultaneously it always seems to be

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Speaker 2: on the verge of some big disaster caused by too

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Speaker 2: much debt or bad demographics or the collapse of the

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Speaker 2: housing market and so on. So for as long as

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Speaker 2: I can remember, China has been a bundle of contradictions.

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Speaker 3: No, totally.

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Speaker 4: And look, they're very good reporters on China, and they're

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Speaker 4: very good analysts on China.

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Speaker 3: But throughout my.

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Speaker 4: Entire career I completely agree with you. There has always

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Speaker 4: been that narrative of the imminent disaster that is the

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Speaker 4: Chinese economy, whether it's the housing bubble is going to collapse,

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Speaker 4: which it kind of did, and maybe we'll talk about that,

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Speaker 4: or you mentioned demographics or you know, all this over

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Speaker 4: capacity that if there's a little bit of reduction demand,

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Speaker 4: they'll have mass unemployment, et cetera. And again, by and large,

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Speaker 4: the Chinese economy, from my outside perspective and I've never

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Speaker 4: been there, continues to grow more robust.

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Speaker 3: You know, there have been obvious hiccups, yes, for sure.

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Speaker 2: Okay, So speaking of hiccups, now that we have this

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Speaker 2: new tariff regime from the Trump administration, I think we're

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Speaker 2: getting even more contradictions. Right, So we hear that tariffs

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Speaker 2: are going to be disastrous for the Chinese economy. Sometimes

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Speaker 2: we hear that they could be a good thing if

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Speaker 2: they encourage Chinese citizens to actually consume more than they save.

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Speaker 2: So maybe this is the impetus for actually finally restructuring

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Speaker 2: the Chinese economy. We hear stuff like export controls are

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Speaker 2: going to impede China's technological development. But then you also

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Speaker 2: hear that the export controls are speeding it up because

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Speaker 2: China now is forced to build domestic capacity. So there

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Speaker 2: are all these competing narratives. We should definitely talk about

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Speaker 2: all of them. And I realize we haven't actually done

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Speaker 2: a China centric tariff episode anyway. That's right.

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Speaker 4: We talk a lot about the US economy and potential

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Speaker 4: of empty shelves and market reactions. But we have not

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Speaker 4: talked about this story from the perspective of the Chinese

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Speaker 4: economy right now, right.

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Speaker 2: And obviously this is important because we're talking about a

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Speaker 2: potential trade war between the world's two biggest economies. But

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Speaker 2: I think it's also important because China so far is

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Speaker 2: the only big country that seems to really have retaliated

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Speaker 2: against the US. And just to make things even more complicated,

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Speaker 2: we've also seen Treasury Secretary Scott Besson basically offering reduced

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Speaker 2: tariffs to countries that agree to implement tougher trade restrictions

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Speaker 2: on China. So it seems to be a special case

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Speaker 2: in the overall trade crackdown for sure, and we should

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Speaker 2: talk about it. And I am very very happy to

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Speaker 2: say that we do, in fact have the perfect guest.

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Speaker 2: We're going to be speaking with, Arthur Kroeber. He is

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Speaker 2: the founding partner and head of research at Gavcal Dragonomics.

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Speaker 2: So Arthur, thank you so much for coming on all thoughts.

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Speaker 3: Hi there, It's great to be here.

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Speaker 2: So I guess my first question is if we assume

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Speaker 2: that China does have a lot to lose in a

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Speaker 2: trade war with America, which I think is a widely

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Speaker 2: held assumption. Why did it choose to retaliate against the US.

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Speaker 3: Yeah, that's a great question for a couple of reasons.

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Speaker 3: First of all, you know, as you both know, China

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Speaker 3: is a very heavily export dependent economy. The pattern of

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Speaker 3: exports has changed a little bit since the first trade

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Speaker 3: war with Trump, but they still depend a lot on

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Speaker 3: the US market directly and indirectly, so there's a clear

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Speaker 3: direct cost there. And also, the government has been struggling

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Speaker 3: for the last year and a half to revive growth

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Speaker 3: that by their standards was very sluggish. So why would

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Speaker 3: you take on an additional, not necessarily required hit to

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Speaker 3: the economy at this time when you're struggling. So it's

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Speaker 3: very good question. I think the basic answer is number one,

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Speaker 3: because of the first trade war in the first Trump

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Speaker 3: administration and the subsequent campaign of export controls and technology

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Speaker 3: constraints by the Biden administration, they've been kind of girding

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Speaker 3: themselves for a long time for more self sufficiency, to

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Speaker 3: insulate themselves against external shocks. So there's a kind of

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Speaker 3: a baseline of confidence that they can take a lot

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Speaker 3: of pounding and they'll still be okay. But then I

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Speaker 3: think the specific reason why they alone, basically of all

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Speaker 3: countries in the world, chose to retaliate against the Liberation

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Speaker 3: Day tariffs was they were really mad. This is very

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Speaker 3: visible to me. When I was in last and Bidjing

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Speaker 3: in late March, I got a lot of comments from

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Speaker 3: people about basically how the Chinese had been trying since

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Speaker 3: the beginning of the year before Trump was inaugurated to

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Speaker 3: get messages to him to kind of lay out, you know,

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Speaker 3: make it clear that they were interested in talking and

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Speaker 3: suggest some things that could be on the agenda, etc.

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Speaker 3: Asking for who's the person that we should talk to,

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Speaker 3: and they just hit a stone wall. Basically, they were

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Speaker 3: unable to establish contact with anyone in the Trump administration

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Speaker 3: who would tell them anything, and instead what they got

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Speaker 3: was twenty percent tariffs, remember, in February and January, on

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Speaker 3: the grounds that they hadn't done enough to control fentanyl flows,

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Speaker 3: which they were also mad about, because they'd spend a

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Speaker 3: lot of time in last year negotiating an agreement with

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Speaker 3: the Biden administration, which they complied with, which made a

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Speaker 3: real dent in the export of fentanyl precursors out of China.

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Speaker 3: It was not complete but they had really made a

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Speaker 3: serious effort. So from their standpoint, they'd been trying to

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Speaker 3: open a conversation and the door had been shut in

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Speaker 3: their face time and time again, and they'd just been

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Speaker 3: whacked with stuff that they thought was completely unfair. So

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Speaker 3: I think they were just kind of fed up. They

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Speaker 3: had a baseline sense of security that if we hit back,

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Speaker 3: we know it's going to be bad, but we'll be

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Speaker 3: able to take it. Then. I think the other consideration

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Speaker 3: was essentially political, which is that, you know, even if

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Speaker 3: they hadn't retaliated, they were still facing tariffs of over

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Speaker 3: sixty percent, so no matter what they did, it was

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Speaker 3: going to be bad. So they had to have a

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Speaker 3: story to tell their people, what are we doing about

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Speaker 3: this bad thing? And it's a lot easier to mobilize

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Speaker 3: domestic support if you're standing tall and pushing back, which

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Speaker 3: actually is you know, it's like what Mark Karney did

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Speaker 3: in Canada. It's how he won that election was by

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Speaker 3: being the guy who pushed back against the so called

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Speaker 3: bolay So I think it was a combination of frustration,

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Speaker 3: a sense of security that they could outlast the US,

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Speaker 3: and war of economictrician and in a sense that this

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Speaker 3: was the best way to get people in China on

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Speaker 3: board for what was going to be a tough time

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Speaker 3: no matter what.

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Speaker 4: Right, So, even in a one party state, there's politics,

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Speaker 4: and there's the requirement to maintain domestic credibility and so forth.

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Speaker 4: You know, this actually gets to something I've wondered about

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Speaker 4: for a long time. Rhetoric that you hear from Chinese

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Speaker 4: officials will often talk about their very long history, going

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Speaker 4: back thousands of years, and then Americans will parrot that

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Speaker 4: and sometimes say it's like, well, you know, they have

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Speaker 4: history going back a long time and they suffered a

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Speaker 4: century of humiliation and etc. How real is that in

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Speaker 4: the sense of like, it's a government that doesn't want

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Speaker 4: to see unemployment go up in the short term, et cetera.

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Speaker 4: I think many Americans have really internalized this idea of

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Speaker 4: they think really long term, they think in century, if

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Speaker 4: they think in millennia.

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Speaker 3: That's true.

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Speaker 4: How should we think about some of this, Righttoray? Yeah,

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Speaker 4: it's sort of half true and half not true. So

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Speaker 4: you know, I've been looking at the Chinese economy for

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Speaker 4: the last thirty five years, basically, and I can tell

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Speaker 4: you there's plenty of short termism and emergency thinking and

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Speaker 4: ignoring problems until they catastrophically become too bad, and then

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Speaker 4: scrambling to come with solutions. So underneath this veneer, there's

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Speaker 4: plenty of chaos, but there are I think a few

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Speaker 4: things that are true about that. So, first of all,

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Speaker 4: this century of humiliation idea that is number one. It's

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Speaker 4: something that is played up by the Chinese educational systems,

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Speaker 4: has drummed into people starting an elementary school. That's part

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Speaker 4: of the nationalist narrative that the CCP has used for.

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Speaker 3: A long time. But I think it's important to recognize

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Speaker 3: that this is not just a communist party thing. This

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Speaker 3: is basically Chinese elites of whatever stripe since the mid

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Speaker 3: nineteenth century have been really distressed at the loss of

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Speaker 3: standing that China has achieved in the world. I mean,

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Speaker 3: you know, up until the early nineteenth century, it was

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Speaker 3: undisputedly this great empire, and people within China had the

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Speaker 3: sense of being part of a great global power, and

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Speaker 3: then that was all taken away and they had a

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Speaker 3: pretty catastrophic hundred years of civil war and famine and

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Speaker 3: all kinds of stuff. So it has been a theme

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Speaker 3: of Chinese elite since the eighteen forties, that they have

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Speaker 3: to rebuild the nation, acquire the technological means to stand

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Speaker 3: on an even footing with the West, and so forth.

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Speaker 3: And the current regime is just the one that has

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Speaker 3: been most effective at sort of realizing that vision. But

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Speaker 3: if you changed the regime tomorrow, whatever came in its

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Speaker 3: place would have the same I think underlying ambitions. So that,

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Speaker 3: I would say, is a common theme. I think. The

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Speaker 3: other thing that is, I don't I'm not a real

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Speaker 3: buyer in the super long term thinking thing. But you know,

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Speaker 3: if you look at Chijinping's utterances, he took over in

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Speaker 3: twenty twelve, and he started laying out some pretty long

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Speaker 3: term stuff right away. He had these various goals that

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Speaker 3: stretched out to twenty thirty five and twenty forty nine,

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Speaker 3: which is one hundredth anniversary of the Communist Party, and

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Speaker 3: so forth. And so there is an ability of the

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Speaker 3: Chinese state, because they don't have to face elections to

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Speaker 3: organize kind of strategic plans that last a little bit

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Speaker 3: longer than would typically be.

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Speaker 2: The case, longer than four years, certainly.

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Speaker 3: Longer than four years. So a good example it's made

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Speaker 3: in China twenty twenty five which is their Industrial Policy Idea,

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Speaker 3: which was released in twenty fifteen. It builds on previous

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Speaker 3: policies that they had. It was not some completely new thing,

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Speaker 3: but they set out some ten year goals for how

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Speaker 3: where we want to be roughly in a whole bunch

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Speaker 3: of technologies, and the reality is they did a pretty

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Speaker 3: good job on a lot of them. So the planning

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Speaker 3: is not I think there's often a mystique about it,

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Speaker 3: but they are able sometimes to sort of point the

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Speaker 3: ship in a particular direction and then get a lot

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Speaker 3: of people in society on board with steering that ship

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Speaker 3: where they want to go.

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Speaker 2: So speaking of long term strategies, one thing that is

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Speaker 2: different in this current bout of trade tension. We could

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Speaker 2: probably call it a trade war at this point.

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Speaker 3: I think that's always it's a complete embargo except for

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Speaker 3: a few things that we've you know, each side is

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Speaker 3: exempted about twenty twenty five percent of what the import.

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Speaker 3: But yeah, otherwise, effectively it's an embargo.

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Speaker 2: I definitely want to ask you about those exemptions too.

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Speaker 2: But one thing that's different about this trade war to

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Speaker 2: the tensions that we saw in the first Trump administration

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Speaker 2: is that China has basically had some practice with increased tariffs,

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Speaker 2: and so what we saw in sort of twenty sixteen

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Speaker 2: twenty eighteen was China just moved a bunch of production

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Speaker 2: over the border to places like Vietnam, basically re routed

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Speaker 2: a bunch of things to get around the tariffs. Is

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Speaker 2: that an option this time around, given that Trump seems

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Speaker 2: to be cracking down on pretty much all of America's

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Speaker 2: trading partners all at the same time.

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Speaker 3: Oh, it's totally an option, and I think it will

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Speaker 3: definitely have And so a couple things here. So, first

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Speaker 3: of all, you can describe that as kind of a

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Speaker 3: government strategy, but actually it was largely just companies on

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Speaker 3: their own deciding. So, like the first companies that did

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Speaker 3: this were the solar panel makers who got whacked by

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Speaker 3: tariffs in the Obama administration twenty twelve, very high ones,

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Speaker 3: and so they immediately moved a lot of their production

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Speaker 3: to Southeast Asia. It wasn't the government saying please do this.

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Speaker 3: It was just they said, well, we want to sell

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Speaker 3: to the US. We can't do it from here. Where

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Speaker 3: do we go? Oh, we can go across the border

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Speaker 3: and it'll be fine. And it was now they've diversified

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Speaker 3: they used to be just in a couple of countries,

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Speaker 3: and now they're in a larger number of countries. It's

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Speaker 3: if you try to go after this stuff, it's like

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Speaker 3: playing a game of whack themole. The other thing I

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Speaker 3: would observe on that, just beyond the solar people, is

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Speaker 3: China is now at a stage of development where they

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Speaker 3: have very sophisticated companies that are very good at what

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Speaker 3: they're doing, increasingly have markets in a wide range of

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Speaker 3: places around the world. And what do companies do when

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Speaker 3: they are in that situation, be they from China or Japan,

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Speaker 3: or the United States or Germany, They invest abroad, They internationalized.

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Speaker 3: And so what we're in right now is kind of

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Speaker 3: act one, I would say, of what is clearly going

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Speaker 3: to be a very long process of Chinese companies turning

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Speaker 3: themselves into multinationals, just like the companies of every other

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Speaker 3: industrialized country have done. And so they don't need the

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Speaker 3: government to tell them do this. They have their own reasons,

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Speaker 3: not just teriff avoidance, but to be closer to different markets,

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Speaker 3: et cetera. So that process, I think is just going

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Speaker 3: to continue because it has many many drivers, not just

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Speaker 3: teriff avoidance.

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Speaker 4: Right and you know, we've certainly talked about bid setting

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Speaker 4: up auto facilities all over the world. They're in Brazil,

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Speaker 4: they're in Hungary, right, they're elsewhere. But it also, like,

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Speaker 4: I mean, this is one of the things that I

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Speaker 4: guess confuses me about the US administration policy, you know,

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Speaker 4: all these other It's like, oh, we're going to like

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Speaker 4: split off Vietnam or gonna make it like it's hard

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Speaker 4: for me to imagine that given the amount of cross

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Speaker 4: border investment that we've seen over the last years and years.

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Speaker 3: Right, well, okay, yeah, basically I would describe it. There's

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Speaker 3: an economics term of art for that strategy. It's looney.

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Speaker 3: So but this gives me an opportunity, I guess to

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Speaker 3: make a little bit of a comment on what I

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Speaker 3: see about what's coming out of the Trump administration, Okay,

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Speaker 3: which is basically chaos. Right. There is not a clear strategy,

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Speaker 3: There is not a clear policy. What you have basically

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Speaker 3: is Trump's impulses, which are number one, I want to

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Speaker 3: sort of demonstrate dominance over everyone and I want them

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Speaker 3: to exhibit difference. And number two, I really like tariffs

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Speaker 3: for some strange reason that I don't think any of

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Speaker 3: us understand but he really likes them. But he also

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Speaker 3: likes them specifically because they are a tool that as

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Speaker 3: the president of the United States, he is the legal

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Speaker 3: authority to use without restraint. So if he wants to

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Speaker 3: hurt people, he doesn't have to go to Congress, he

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Speaker 3: doesn't have to ask anyone in Congress. He just does it.

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Speaker 3: So it's very usef for him. And I've found a

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Speaker 3: lot of the commentary over the last couple of months

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Speaker 3: trying to explain the rational strategy behind this to be

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Speaker 3: completely off target because it isn't. And various people in

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Speaker 3: the administration, like Scott Bessant, would like there to be

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Speaker 3: a strategy, and they are desperately trying to corral the

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Speaker 3: stuff into the semblance of a strategy, but they have

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Speaker 3: to improvise. So that's sort of my general comment on that.

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Speaker 3: And then specifically in the question is does it work. No,

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Speaker 3: The reality is there are now I believe one hundred

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Speaker 3: and forty countries in the world that trade more with

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Speaker 3: China than with the United States. China is now the

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Speaker 3: number two source in the world, behind the United States

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Speaker 3: of direct investment, and it's growing its economic relationships with

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Speaker 3: many countries, including in the Latin America are much deeper

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Speaker 3: than those of the United States, let alone Southeast Asia,

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Speaker 3: where their economies are completely tied to China. So there's

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Speaker 3: no way, no way that any sane leader of any

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Speaker 3: of these countries would sign on to a deal where

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Speaker 3: they would say, oh, we'll get our teriffs on the

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Speaker 3: US lowered from ten percent to five percent in exchange

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Speaker 3: for which we have to sacrifice our principal economic relationship.

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Speaker 3: It's not going to happen.

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Speaker 2: So you mentioned the exemptions earlier, and we've also seen

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Speaker 2: some carve outs for specific things like electronics imports, and

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Speaker 2: at this point, I'm actually finding it kind of difficult

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Speaker 2: to keep track of what's delayed and what's exempt just

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Speaker 2: because it changes so often. But my question is how

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Speaker 2: much signal should we take away from all those exemptions.

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Speaker 2: Do they show that there's potentially a path forward to

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Speaker 2: a US China deal or is it just Trump trying

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Speaker 2: to retroactively protect some pretty important industries.

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Speaker 3: Yeah, it's more of the latter, you know. And remember

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Speaker 3: there's exemptions on both sides. So Trump exempted cell phones

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Speaker 3: and most consumer electronics basically because he was told that

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Speaker 3: you cannot allow the prices of iPhones to double, people

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Speaker 3: will revolt, and he took that seriously. So that was

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Speaker 3: clearly a political move, just to alleviate the domestic political

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Speaker 3: cost of this action. And similarly, if you look at

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Speaker 3: what the Chinese did, they exempted a lot of imports

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Speaker 3: like semiconductors and some key technology inputs. Despite all of

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Speaker 3: their progress, they're still pretty dependent on global supply chains

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Speaker 3: outside of China for a lot of stuff that goes

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Speaker 3: into their tech ecosystem, and they could not afford to

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Speaker 3: have this stuff cost a lot more. So I think

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Speaker 3: in both cases it's roughly twenty percent or a bit

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Speaker 3: more that has been exempted. As you said, it's very

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Speaker 3: hard to know exactly when this is going into effect,

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Speaker 3: and blah blah blah. But both sides have sort of

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Speaker 3: picked out the parts of their economies which are most

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Speaker 3: vulnerable and said, okay, you don't have to take the pain.

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Speaker 3: But it doesn't tell us anything about It's not like

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Speaker 3: both sides are signaling to each other, hey, if you

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Speaker 3: lower your tariffs, all lower mine, and then maybe we

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Speaker 3: can get somewhere. They're just doing what they need to

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Speaker 3: do to protect themselves.

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Speaker 4: So Trump recently said that for gifts that kids could

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Speaker 4: maybe have two dolls instead of thirty dollars. And I

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Speaker 4: completely agree. I spent this weekend taking out a bunch

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Speaker 4: of random plastic garbage, broken toys, etc. For my children's room,

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Speaker 4: five trash bags, and I've barely made a dent in

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Speaker 4: what they have. So I'm completely in agreement on that point.

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Speaker 4: All that being said, two questions about that. So let's

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Speaker 4: say there's a major reduction in buying plastic stuff from China,

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Speaker 4: low end stuff. A. Are we already seeing real in

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Speaker 4: China un parts of the economy from these tariffs that's

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Speaker 4: visible from what you're looking at. And B how much

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Speaker 4: of that stuff is still in China as opposed to

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Speaker 4: that's the low margin stuff that you probably quickly have

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Speaker 4: it some cheaper destination. How important is stuff, the cheap

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Speaker 4: stuff to China's economy these days?

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Speaker 3: You know, it's somewhat important, you know, for employment purposes,

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Speaker 3: because a lot of that stuff is fairly labor intensive

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Speaker 3: Tho's lower end exports, but it certainly is not very

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Speaker 3: relevant from the standpoint of Jinping's grand strategic vision as

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Speaker 3: China's technology superpower. So and if you look in terms

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Speaker 3: of like total value of what they export. The stuff

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Speaker 3: that goes into Walmart is significant, but a shrinking portion

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Speaker 3: of the total. They're moving up the value chain pretty fast.

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Speaker 3: So you are starting to see some softness in the

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Speaker 3: industrial and manufacturing indicators. I mean, you've had an employment

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Speaker 3: a pretty weak employment market since the end of COVID

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Speaker 3: basically that they've been struggling to address. So this is

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Speaker 3: going to have some impact. You know, the Chinese export

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Speaker 3: numbers have still been quite strong. Most people think that's

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Speaker 3: because there's been some front loading, because people are anticipating tariffs,

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Speaker 3: and we're expecting significant weakness, you know, in the coming months.

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Speaker 3: I think that will happen. It will hurt, but I

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Speaker 3: don't think any of that is going to hurt enough

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Speaker 3: for China to feel like it has to make a move.

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Speaker 3: They've clearly signaled Trump wants to have a deal. He

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Speaker 3: has to make the first move. He has to initiate

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Speaker 3: show some good faith. They've laid out their position, they're

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Speaker 3: waiting for him to pick up the phone and call basically.

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Speaker 3: So yeah, this is going to cause some real difficulties,

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Speaker 3: and I think they're going to have a real challenge

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Speaker 3: meeting their growth target this year. If this goes on

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Speaker 3: for much longer, but I think they're willing to wait

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Speaker 3: it out.

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Speaker 2: So speaking of economic transformation, in addition to being a

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Speaker 2: bundle of contradictions, the other thing that has existed for

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Speaker 2: as long as I've been I guess covering China from

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Speaker 2: an economic perspective is this idea that the economy needs

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Speaker 2: to rebalance towards consumption. So Chinese people save too much

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Speaker 2: and we really need to get them to spend on

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Speaker 2: our own domestically manufactured goods, and that will help resolve

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Speaker 2: some of the tensions in the economy. What's your sense

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Speaker 2: of how much Chinese people might actually be able to

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Speaker 2: boost their own consumption right now to offset the trade war.

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Speaker 3: Oh, there's some, not a lot. So just to back

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Speaker 3: up a little bit on that. So, I think it's

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Speaker 3: important to clarify that when people talk about this project

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Speaker 3: of rebalancing the economy from investment consumption, this has been

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Speaker 3: a project of economists, mostly outside China. It has never

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Speaker 3: been a project of the Chinese government itself. They have

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Speaker 3: never really forcefully and clearly stated that it is their

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Speaker 3: objective to do that. They've put out various policies where

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Speaker 3: they say, yeah, we want incomes to rise fast. We

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Speaker 3: would like there to be a stronger services consumption and

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Speaker 3: so forth, But they have never said that, we think

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Speaker 3: we should fundamental out in the shop. Well, they haven't

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Speaker 3: said that. But the other thing is, I think it's

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Speaker 3: really important to understand these people are not They're not Americans,

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Speaker 3: They're Chinese. They have a different concept of how an

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Speaker 3: economy grows. So we grew up in this sort of

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Speaker 3: Canesian world where we believe that demand drives everything, and

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Speaker 3: Chinese authorities don't believe that. They believe that investment drives everything.

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Speaker 3: That progress, productivity, future income growth, it all comes from

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Speaker 3: investing in the right things. So they have been very

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Speaker 3: clear for as long as I've been studying it, including

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Speaker 3: the last decade, on saying to secure the growth of

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Speaker 3: the future that is stable, well balanced, whatever, we need

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Speaker 3: to invest in the right things. That is the principal

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Speaker 3: job of government economic policy is to steer investment. So

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Speaker 3: that's point one. They've never really had an agenda of

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Speaker 3: substantially balancing. Second is, up until COVID, the fastest growing

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Speaker 3: consumer economy in the world by an order of magnitude

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Speaker 3: was China's for twenty years. There is no economy that

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Speaker 3: comes even close to the rate of consumer spending growth

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Speaker 3: that Chin enjoyed between twenty twenty twenty. It was I

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Speaker 3: think the total aggrig growth was more than triple what

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Speaker 3: you saw in India, for example, and much faster than

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Speaker 3: you saw in advanced economies that grows lower rates. So

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Speaker 3: they didn't really have, in my opinion, a consumer spending problem,

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Speaker 3: and I think they look at that, you know, much

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Speaker 3: the same way they say, well, you know, we actually

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Speaker 3: don't need to rebalance. Now I think that's changed a

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Speaker 3: little bit. I think they really in the last few

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Speaker 3: months have started to say, oh, actually, we're going to

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Speaker 3: be facing a lot of head winds in the export economy,

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Speaker 3: largely from the US, but not just the US. They're

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Speaker 3: in a tariff battle with the European Union over electric vehicles,

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Speaker 3: a lot of other kind are beginning to put up barriers,

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Speaker 3: and I think they are beginning to realize that they

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Speaker 3: need to both for the short term, you know, trade

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Speaker 3: war issues, but also for just having a more comfortable

435
00:24:11,240 --> 00:24:12,760
Speaker 3: place in the global economy, that they have to do

436
00:24:12,800 --> 00:24:16,159
Speaker 3: a little bit more to boost the consumer part of

437
00:24:16,160 --> 00:24:18,639
Speaker 3: the economy. But they they're limited in their tools for

438
00:24:18,680 --> 00:24:19,359
Speaker 3: being able to do that.

439
00:24:19,760 --> 00:24:23,480
Speaker 4: When I think about consumer comfort, consumer wealth, et cetera.

440
00:24:23,760 --> 00:24:26,399
Speaker 4: I'm on social media all day, and so I see

441
00:24:26,440 --> 00:24:30,080
Speaker 4: all the videos of like these like amazing futuristic cities

442
00:24:30,240 --> 00:24:35,040
Speaker 4: with these incredible plazas and lights and transportation that zips

443
00:24:35,080 --> 00:24:38,760
Speaker 4: you from one place to another. And I imagine those

444
00:24:38,840 --> 00:24:42,159
Speaker 4: things don't show up in consumption. You know, they're not

445
00:24:42,280 --> 00:24:45,520
Speaker 4: retail consumption, right, but as a form of lifestyle consumption,

446
00:24:45,600 --> 00:24:49,159
Speaker 4: whether your city just has greater amenities and comforts and

447
00:24:49,200 --> 00:24:53,240
Speaker 4: cleanliness and so forth, et cetera, are those all real?

448
00:24:53,560 --> 00:24:53,760
Speaker 3: You know?

449
00:24:53,840 --> 00:24:56,080
Speaker 4: Because like you know, you see like a ninety second video,

450
00:24:56,440 --> 00:24:59,560
Speaker 4: like you've been going to You've been living and traveling

451
00:24:59,560 --> 00:25:04,359
Speaker 4: to China for decades. How different outside of you know, Okay,

452
00:25:04,359 --> 00:25:07,320
Speaker 4: I'm sure you know in multiple cities around the country.

453
00:25:07,800 --> 00:25:11,080
Speaker 4: Is the day to day experience of being a citizen

454
00:25:11,160 --> 00:25:11,720
Speaker 4: or consumer?

455
00:25:11,840 --> 00:25:14,359
Speaker 3: Yeah, well it's a large question. So if you had

456
00:25:14,359 --> 00:25:16,080
Speaker 3: turned this around and you had said, well, you know,

457
00:25:16,160 --> 00:25:18,639
Speaker 3: I look at these pictures of what life in Silicon

458
00:25:18,720 --> 00:25:21,520
Speaker 3: Valley's life, is that really what it's like in America?

459
00:25:22,119 --> 00:25:24,199
Speaker 3: You know your responsibily, Well, America is a big country.

460
00:25:24,200 --> 00:25:26,639
Speaker 3: There's a lot of different things. And China is an

461
00:25:26,680 --> 00:25:28,440
Speaker 3: even bigger country in terms of the number of people,

462
00:25:28,480 --> 00:25:31,560
Speaker 3: so huge variety the stuff that you see there is reel.

463
00:25:31,760 --> 00:25:35,480
Speaker 3: You have a lot of first class urban infrastructure in

464
00:25:35,520 --> 00:25:39,280
Speaker 3: places like Shanghai, Shunjan, Beijing, and increasingly in a couple

465
00:25:39,320 --> 00:25:42,480
Speaker 3: of interior cities like Chungdu and so forth, and things

466
00:25:42,560 --> 00:25:47,359
Speaker 3: work quite well. And you have large swaths of the

467
00:25:47,359 --> 00:25:53,560
Speaker 3: country where people are still living fairly, you know, modest lives,

468
00:25:53,920 --> 00:25:57,399
Speaker 3: one generation removed from the family farm that their parents

469
00:25:57,400 --> 00:25:59,560
Speaker 3: still live on, and so forth. There's parts in the

470
00:25:59,560 --> 00:26:04,400
Speaker 3: northeast which are a super rust belt of these old

471
00:26:04,640 --> 00:26:08,160
Speaker 3: sort of fifties and sixties areas industrial towns built around

472
00:26:08,200 --> 00:26:11,280
Speaker 3: industries that really aren't that important anymore, mining or whatever.

473
00:26:11,640 --> 00:26:15,119
Speaker 3: So they have an enormous variety of things. But I

474
00:26:15,160 --> 00:26:17,040
Speaker 3: would say it is fair if you go around to

475
00:26:17,119 --> 00:26:21,639
Speaker 3: sort of random Chinese cities in sort of eastern and

476
00:26:21,720 --> 00:26:25,920
Speaker 3: central China, most people now have pretty comfortable lives. They're

477
00:26:25,960 --> 00:26:28,800
Speaker 3: not as shiny as you might see in these social

478
00:26:28,840 --> 00:26:33,240
Speaker 3: media egos, but things work, their needs are taken care

479
00:26:33,280 --> 00:26:34,560
Speaker 3: of pretty well.

480
00:26:34,760 --> 00:26:35,920
Speaker 4: Is that true for healthcare too?

481
00:26:36,119 --> 00:26:39,919
Speaker 3: That is true increasingly true of healthcare and pensions they

482
00:26:39,960 --> 00:26:42,320
Speaker 3: went through a period where they basically had abolished the

483
00:26:42,400 --> 00:26:46,240
Speaker 3: old planned economy social safety net, and there was nothing,

484
00:26:46,320 --> 00:26:51,280
Speaker 3: and it was really bad, and it's still not terrific.

485
00:26:51,480 --> 00:26:55,760
Speaker 3: But they have greatly increased the coverage of healthcare. There's universal,

486
00:26:55,760 --> 00:26:58,959
Speaker 3: almost universal pensions. Even for farmers in the countryside, they

487
00:26:58,960 --> 00:27:03,520
Speaker 3: get something, People have access to facilities. The quality of

488
00:27:03,560 --> 00:27:06,760
Speaker 3: care can vary quite a lot. I would say, on average,

489
00:27:06,800 --> 00:27:08,919
Speaker 3: the situation there is quite a bit better than it

490
00:27:09,000 --> 00:27:11,119
Speaker 3: was ten or fifteen years ago, with a lot of

491
00:27:11,160 --> 00:27:11,960
Speaker 3: room for improvement.

492
00:27:12,280 --> 00:27:15,879
Speaker 2: So you briefly mentioned the idea of tools that China

493
00:27:15,880 --> 00:27:18,000
Speaker 2: can use to offset some of the impact from the

494
00:27:18,040 --> 00:27:21,760
Speaker 2: trade war walk US through the levers that it has available,

495
00:27:21,920 --> 00:27:26,560
Speaker 2: and then I guess how policymakers might actually balance the

496
00:27:26,720 --> 00:27:30,960
Speaker 2: use of these levers with the message that China is

497
00:27:30,960 --> 00:27:33,399
Speaker 2: still a great place to do business and invest and

498
00:27:33,440 --> 00:27:35,719
Speaker 2: so on. And I don't mean to single out China

499
00:27:35,800 --> 00:27:38,240
Speaker 2: on this issue, because I think the US faces a

500
00:27:38,359 --> 00:27:42,400
Speaker 2: very similar balancing act, but arguably the US is much

501
00:27:42,400 --> 00:27:45,720
Speaker 2: more developed in its capital markets and has certain advantages

502
00:27:45,720 --> 00:27:47,600
Speaker 2: in global markets that China just doesn't.

503
00:27:47,680 --> 00:27:49,840
Speaker 3: Sure. Yeah, well, so I think you can sort of

504
00:27:49,880 --> 00:27:52,639
Speaker 3: divide it into two buckets. So there are things that

505
00:27:52,720 --> 00:27:56,320
Speaker 3: China is doing to retaliate against the US, and that's

506
00:27:56,320 --> 00:28:01,000
Speaker 3: where it really runs the risk of alienating the business community,

507
00:28:01,000 --> 00:28:03,400
Speaker 3: because part of your retaliation has to be to make

508
00:28:03,480 --> 00:28:07,760
Speaker 3: life difficult for US businesses, either in China or back

509
00:28:07,760 --> 00:28:10,800
Speaker 3: in the US. But then there are also response mechanisms,

510
00:28:10,800 --> 00:28:12,880
Speaker 3: which are basically things that they can do to make

511
00:28:12,920 --> 00:28:16,199
Speaker 3: the economy stronger and able to weather the shock. So

512
00:28:16,280 --> 00:28:19,760
Speaker 3: in retaliation, you know, clearly they have the countervailing tariffs.

513
00:28:19,800 --> 00:28:24,600
Speaker 3: They have increasingly comprehensive export controls on rare earths and

514
00:28:24,680 --> 00:28:30,080
Speaker 3: rare earth based technologies, which are actually not just rare earths,

515
00:28:30,160 --> 00:28:34,080
Speaker 3: but a various sort of critical minerals, antimony being sort

516
00:28:34,080 --> 00:28:36,320
Speaker 3: of the big example of the moment, and those are

517
00:28:36,320 --> 00:28:38,800
Speaker 3: part of that is Yeah, that's actually.

518
00:28:38,560 --> 00:28:40,680
Speaker 2: People don't talk about antimony enough.

519
00:28:40,760 --> 00:28:43,000
Speaker 3: It's a mineral that is used, It has a lot

520
00:28:43,040 --> 00:28:46,280
Speaker 3: of applications, many of them in the defense industry. There

521
00:28:46,360 --> 00:28:49,800
Speaker 3: basically is no viable source of production in the United States,

522
00:28:49,800 --> 00:28:52,880
Speaker 3: and China has i think sixty or seventy percent control

523
00:28:52,960 --> 00:28:56,200
Speaker 3: of sort of global refined supplies, and they have basically

524
00:28:56,240 --> 00:28:58,720
Speaker 3: banned exports of it to the United States, and this

525
00:28:58,840 --> 00:29:02,160
Speaker 3: is starting to create real health headaches in defense and

526
00:29:02,280 --> 00:29:05,880
Speaker 3: other kinds of technology related supply chains. So they have

527
00:29:05,920 --> 00:29:07,880
Speaker 3: a few things that they can do like that. They've

528
00:29:07,880 --> 00:29:11,160
Speaker 3: singled out a few US companies operating you or selling

529
00:29:11,160 --> 00:29:14,960
Speaker 3: into China for various kinds of investigations. Those are more

530
00:29:15,040 --> 00:29:18,760
Speaker 3: kind of shots across the bow. They're kind of gestures.

531
00:29:18,880 --> 00:29:21,120
Speaker 3: I don't think they're really that serious. They don't really

532
00:29:21,160 --> 00:29:24,040
Speaker 3: want to make it harder for Nvidia to do business

533
00:29:24,120 --> 00:29:27,480
Speaker 3: in China than it is already. But basically what they're

534
00:29:27,480 --> 00:29:29,880
Speaker 3: doing is they're picking out companies that may sell a

535
00:29:29,880 --> 00:29:32,000
Speaker 3: lot to China but don't have a lot of investment

536
00:29:32,080 --> 00:29:35,240
Speaker 3: on the ground in China and saying, if you don't

537
00:29:35,440 --> 00:29:37,960
Speaker 3: basically help us get this guy in the White House

538
00:29:37,960 --> 00:29:40,920
Speaker 3: to see reason, we might make it a little difficult

539
00:29:40,960 --> 00:29:42,600
Speaker 3: for you. And they'll only do that if they think

540
00:29:42,600 --> 00:29:46,160
Speaker 3: there are reasonable domestic substitutes. So they're doing a little

541
00:29:46,160 --> 00:29:48,160
Speaker 3: bit of that, but they're being very cautious because they

542
00:29:48,200 --> 00:29:54,000
Speaker 3: are keenly aware that their economy still needs international businesses

543
00:29:54,040 --> 00:29:57,160
Speaker 3: to participate in China at many different levels. They do

544
00:29:57,200 --> 00:29:59,920
Speaker 3: not want to scare them away. So what they're mainly

545
00:30:00,120 --> 00:30:03,520
Speaker 3: left with is response mechanisms, which is, you know, some

546
00:30:03,600 --> 00:30:05,600
Speaker 3: of it is the usual stuff. They can lower interest

547
00:30:05,680 --> 00:30:08,280
Speaker 3: rates and they'll probably do a bit more of that

548
00:30:08,360 --> 00:30:12,040
Speaker 3: this year. They were already planning a big fiscal expansion

549
00:30:12,080 --> 00:30:14,800
Speaker 3: this year, one of the biggest budget deficits in history.

550
00:30:14,840 --> 00:30:18,600
Speaker 3: They're probably going to expand that more. To get up consumption,

551
00:30:18,680 --> 00:30:22,040
Speaker 3: they have this cash for Clunkers kind of trading program

552
00:30:22,160 --> 00:30:24,120
Speaker 3: where you have an old appliance, you can trade it in,

553
00:30:24,200 --> 00:30:27,360
Speaker 3: you can get a discount on the new one. That's

554
00:30:27,480 --> 00:30:30,800
Speaker 3: for both households and for businesses. They can trade in

555
00:30:30,840 --> 00:30:34,320
Speaker 3: old capital equipment and get new stuff at a cheaper price.

556
00:30:35,120 --> 00:30:37,160
Speaker 3: And then the other thing that they've been doing actually

557
00:30:37,400 --> 00:30:40,560
Speaker 3: is to get more money into consumer pockets. They have

558
00:30:40,960 --> 00:30:44,920
Speaker 3: started to expand pension payments, focusing on people lower in

559
00:30:44,960 --> 00:30:49,040
Speaker 3: the income spectrum and just putting an extra five or

560
00:30:49,120 --> 00:30:53,000
Speaker 3: ten bucks into their accounts every month so that they

561
00:30:53,040 --> 00:30:55,240
Speaker 3: have a little bit more cash to spend. And by

562
00:30:55,240 --> 00:30:58,160
Speaker 3: focusing on the lower income, those are people who basically

563
00:30:58,240 --> 00:31:00,320
Speaker 3: spend most of what they have, so it has a

564
00:31:00,360 --> 00:31:03,080
Speaker 3: big impact. But yeah, so they can do all of

565
00:31:03,120 --> 00:31:05,560
Speaker 3: these things and they will all work to some degree.

566
00:31:05,640 --> 00:31:07,760
Speaker 3: The cash for clunquors thing actually worked a lot better

567
00:31:07,760 --> 00:31:10,240
Speaker 3: than I thought it was. I was very skeptical, But

568
00:31:10,520 --> 00:31:13,320
Speaker 3: at the end of the day, consumer behavior is pretty

569
00:31:13,320 --> 00:31:17,640
Speaker 3: sticky in any country. The job market is still not terrific.

570
00:31:18,360 --> 00:31:21,560
Speaker 3: They're going to have a lot of difficulty really really

571
00:31:21,600 --> 00:31:24,959
Speaker 3: moving the needle on boosting domestic demand. They can get

572
00:31:25,000 --> 00:31:26,760
Speaker 3: it up a little bit, but not a lot in

573
00:31:26,800 --> 00:31:42,920
Speaker 3: the short term.

574
00:31:43,200 --> 00:31:47,200
Speaker 2: Joe, I do find it really ironic slash remarkable that

575
00:31:47,320 --> 00:31:50,120
Speaker 2: China has a cash for clunkers program, which we all

576
00:31:50,160 --> 00:31:55,120
Speaker 2: recognize from the post two thousand and eight era. And meanwhile,

577
00:31:55,480 --> 00:31:58,400
Speaker 2: Trump is, you know, going on TV and telling everyone

578
00:31:58,440 --> 00:32:02,000
Speaker 2: to stop buying and you only need two Barbie dolls

579
00:32:02,240 --> 00:32:03,600
Speaker 2: instead of fifteen.

580
00:32:04,040 --> 00:32:09,920
Speaker 4: No Trump, Trump has producrist impulses on some level. Do

581
00:32:10,440 --> 00:32:13,280
Speaker 4: you know, actually, since we're talking about ideology, how much

582
00:32:13,360 --> 00:32:16,080
Speaker 4: continuity in your view, has there been in Chinese policy

583
00:32:16,160 --> 00:32:19,200
Speaker 4: pre Xjinping to now? Because there's debates about this, and

584
00:32:19,240 --> 00:32:23,520
Speaker 4: the party itself always stresses continuity and nothing ever really changes.

585
00:32:23,840 --> 00:32:25,880
Speaker 4: But you've seen the country for a long time. How

586
00:32:25,960 --> 00:32:29,080
Speaker 4: much of a pivot happened in twenty twelve that continues

587
00:32:29,080 --> 00:32:29,600
Speaker 4: to this day.

588
00:32:29,760 --> 00:32:33,240
Speaker 3: That's a really great question. And you know, I hate

589
00:32:33,280 --> 00:32:38,440
Speaker 3: to sound like you know, Harry Truman's hated to handed economist,

590
00:32:38,520 --> 00:32:42,680
Speaker 3: but there is both continuity and change here, there's no question, right.

591
00:32:42,720 --> 00:32:46,280
Speaker 3: So the things I think that are largely unchanged is

592
00:32:46,600 --> 00:32:51,640
Speaker 3: I talked earlier about this kind of view of how

593
00:32:51,680 --> 00:32:55,400
Speaker 3: economies work, that they are driven by the investment cycle,

594
00:32:55,520 --> 00:32:59,320
Speaker 3: and that the government has a important role to play

595
00:32:59,440 --> 00:33:05,040
Speaker 3: in kind of identifying the key top areas for investment,

596
00:33:05,200 --> 00:33:08,440
Speaker 3: not necessarily spending the money, but say pointing and saying

597
00:33:08,480 --> 00:33:12,560
Speaker 3: go there, and then all the entrepreneurs in the country say, oh,

598
00:33:12,600 --> 00:33:15,280
Speaker 3: we should go there, We'll go there. That has not

599
00:33:15,520 --> 00:33:18,680
Speaker 3: really changed. That is a and you can talk about

600
00:33:18,680 --> 00:33:21,200
Speaker 3: people you know before she who were more quote unquote

601
00:33:21,200 --> 00:33:23,760
Speaker 3: reformists and so forth, but if you look closely at

602
00:33:23,760 --> 00:33:25,760
Speaker 3: what they were doing, they had the same objective. They

603
00:33:25,760 --> 00:33:29,480
Speaker 3: wanted to increase state capacity. They wanted to strengthen the

604
00:33:29,480 --> 00:33:34,000
Speaker 3: technological foundations of the economy. The first long term Science

605
00:33:34,000 --> 00:33:36,560
Speaker 3: and Technology Plan actually came out in two thousand and six,

606
00:33:37,120 --> 00:33:39,440
Speaker 3: which was six years before she jent Ping took over.

607
00:33:39,480 --> 00:33:41,560
Speaker 3: It had nothing to do with him, and it was

608
00:33:41,640 --> 00:33:44,640
Speaker 3: very much the product of everyone else in the government

609
00:33:44,640 --> 00:33:49,800
Speaker 3: at that time, so that I think general orientation has

610
00:33:49,880 --> 00:33:53,480
Speaker 3: not changed. What she has done is that he has

611
00:33:53,560 --> 00:33:58,040
Speaker 3: made the coordination of that strategy much more effective. So

612
00:33:58,080 --> 00:34:01,040
Speaker 3: he's increased the capacity the same government to kind of

613
00:34:01,080 --> 00:34:05,920
Speaker 3: mobilize and guide resources. He has reined in what he

614
00:34:05,920 --> 00:34:08,560
Speaker 3: thought were big excesses, notably in the property market, but

615
00:34:08,640 --> 00:34:11,000
Speaker 3: also in the internet sector, where he thought a lot

616
00:34:11,040 --> 00:34:14,040
Speaker 3: of investment was going to stuff that was actually not

617
00:34:14,120 --> 00:34:18,760
Speaker 3: advancing the ball technologically, and it was also creating significant

618
00:34:18,800 --> 00:34:21,520
Speaker 3: social and political risks for the Communist Party, and it

619
00:34:21,600 --> 00:34:25,239
Speaker 3: needed to be rained in. But you know, a lot

620
00:34:25,280 --> 00:34:28,600
Speaker 3: of the concerns that you see expressed about social media

621
00:34:28,680 --> 00:34:31,920
Speaker 3: and the power of internet firms in China totally indistinguishable

622
00:34:31,960 --> 00:34:33,640
Speaker 3: from the discourse that we have here in the United

623
00:34:33,680 --> 00:34:35,960
Speaker 3: States about the same problems. So part of what they

624
00:34:35,960 --> 00:34:39,440
Speaker 3: were doing was try to say, let's have less resources

625
00:34:39,960 --> 00:34:42,160
Speaker 3: to that kind of stuff and more to the kind

626
00:34:42,200 --> 00:34:44,680
Speaker 3: of stuff that we think that will really generate long

627
00:34:44,760 --> 00:34:49,719
Speaker 3: term growth, that is, will enhance productivity and social cohesion.

628
00:34:50,520 --> 00:34:53,120
Speaker 3: So he hasn't changed the sort of the basic orientation,

629
00:34:53,680 --> 00:34:57,680
Speaker 3: but he's made the execution of that generally much more effective.

630
00:34:57,719 --> 00:34:59,480
Speaker 3: And then the other big thing that he did do

631
00:35:00,200 --> 00:35:05,040
Speaker 3: that is a major change, is that he overturned the

632
00:35:05,920 --> 00:35:09,319
Speaker 3: foreign policy that dung Shaping had laid down, which is,

633
00:35:09,600 --> 00:35:12,879
Speaker 3: you know, the idea that you stay quiet and stay

634
00:35:12,920 --> 00:35:16,440
Speaker 3: behind and stay quiet and sort of hyde your capabilities

635
00:35:16,520 --> 00:35:19,880
Speaker 3: or by your time and whatever. And he pretty aggressively

636
00:35:19,920 --> 00:35:22,080
Speaker 3: said no, no, China's great power. Now we have to

637
00:35:22,120 --> 00:35:24,040
Speaker 3: act internationally, and so we're going to take a much

638
00:35:24,040 --> 00:35:26,640
Speaker 3: more aggressive view. And I think you could argue that

639
00:35:26,640 --> 00:35:31,399
Speaker 3: that's a real shift. You could argue that he moved

640
00:35:31,440 --> 00:35:33,440
Speaker 3: a little bit too quickly on that and that has

641
00:35:33,719 --> 00:35:37,560
Speaker 3: you know, created some unnecessary costs for China. Would have

642
00:35:37,560 --> 00:35:41,320
Speaker 3: been wiser to hide and buy for a few years longer.

643
00:35:41,360 --> 00:35:43,319
Speaker 3: But anyway, he did it, and that is a that

644
00:35:43,400 --> 00:35:44,759
Speaker 3: is a material change, I would say.

645
00:35:45,320 --> 00:35:48,040
Speaker 2: So, I think I just have one more question, and

646
00:35:48,160 --> 00:35:51,440
Speaker 2: it's the big one, which is do we have any

647
00:35:51,600 --> 00:35:54,839
Speaker 2: idea or sense of what the off ramp for all

648
00:35:54,880 --> 00:35:57,040
Speaker 2: of this actually is? And do we have a good

649
00:35:57,040 --> 00:36:00,920
Speaker 2: idea of what Trump actually wants China and do we

650
00:36:01,000 --> 00:36:04,480
Speaker 2: have a good idea of what is palatable to China?

651
00:36:04,680 --> 00:36:08,879
Speaker 3: Right, Okay, so what's the off ramp? I think the

652
00:36:08,880 --> 00:36:14,319
Speaker 3: off ramp is basically that Trump and his people have

653
00:36:14,400 --> 00:36:18,120
Speaker 3: to recognize that they've put themselves in an untenable position

654
00:36:18,200 --> 00:36:19,960
Speaker 3: and they need to figure out a way to climb

655
00:36:20,040 --> 00:36:24,319
Speaker 3: down from it as gracefully as they can. I think

656
00:36:24,400 --> 00:36:29,000
Speaker 3: the Chinese have been very clear in their communications that

657
00:36:29,760 --> 00:36:31,719
Speaker 3: they are happy to talk, and they keep saying, we

658
00:36:31,760 --> 00:36:34,400
Speaker 3: are happy to talk, but we're not going to make

659
00:36:34,440 --> 00:36:36,920
Speaker 3: the first move. And if you want to prolong this

660
00:36:37,080 --> 00:36:40,400
Speaker 3: trade war, we think that we can sit with art

661
00:36:40,480 --> 00:36:45,120
Speaker 3: deflation longer than you United States can stick with your stagflation,

662
00:36:45,440 --> 00:36:48,719
Speaker 3: given your political system. So I think the ball is

663
00:36:48,760 --> 00:36:53,279
Speaker 3: really in Trump's court to do something to figure out

664
00:36:53,320 --> 00:36:58,680
Speaker 3: how to unstick this, and the difficulty is, I think

665
00:36:58,719 --> 00:37:01,520
Speaker 3: what does he want. My theory of the case is

666
00:37:01,560 --> 00:37:04,840
Speaker 3: that Trump is not really driven by specific policy outcomes.

667
00:37:05,520 --> 00:37:09,200
Speaker 3: He is a guy who has very authoritary instincts who

668
00:37:09,239 --> 00:37:12,120
Speaker 3: wants to be recognized as the boss. It is basically

669
00:37:12,120 --> 00:37:15,239
Speaker 3: all about power and so everything that he does, and

670
00:37:15,440 --> 00:37:17,080
Speaker 3: I think this applies to a lot of the domestic

671
00:37:17,120 --> 00:37:20,799
Speaker 3: policy too, is to demonstrate that he has power and

672
00:37:20,840 --> 00:37:23,640
Speaker 3: that other people have to show submission and deference. So

673
00:37:23,680 --> 00:37:25,399
Speaker 3: if you really want to get on Trump's good side,

674
00:37:25,440 --> 00:37:28,320
Speaker 3: that's what you do, and the Chinese will not play

675
00:37:28,360 --> 00:37:30,520
Speaker 3: that game. They are too big, they are too strong,

676
00:37:31,040 --> 00:37:33,680
Speaker 3: they have too much at stake domestically in terms of

677
00:37:33,719 --> 00:37:36,920
Speaker 3: their own political credibility to play that. They will not

678
00:37:37,120 --> 00:37:39,960
Speaker 3: do that. So that puts Trump in a bind because

679
00:37:39,960 --> 00:37:42,920
Speaker 3: what he really wants they will not give him. So

680
00:37:42,960 --> 00:37:45,440
Speaker 3: then people on Trump's team need to figure out, Okay,

681
00:37:45,440 --> 00:37:47,839
Speaker 3: what is an agenda that we can put together of

682
00:37:47,960 --> 00:37:53,360
Speaker 3: actual policy aims that could form the basis of a negotiation,

683
00:37:53,600 --> 00:37:57,120
Speaker 3: and then how do we communicate that to China and

684
00:37:57,160 --> 00:38:00,000
Speaker 3: how do we get them to start talking to us.

685
00:38:00,000 --> 00:38:02,319
Speaker 3: It's not an easy problem to solve, right, So what

686
00:38:02,360 --> 00:38:04,920
Speaker 3: it means is that people in the administration who have

687
00:38:05,040 --> 00:38:08,600
Speaker 3: actual policy aims somehow need to seize control of that process,

688
00:38:09,960 --> 00:38:11,920
Speaker 3: and they haven't done that yet. So a couple other

689
00:38:11,960 --> 00:38:15,920
Speaker 3: theories on how this could unwind. So one theory is

690
00:38:17,000 --> 00:38:19,040
Speaker 3: that at the end of the day, nothing is going

691
00:38:19,080 --> 00:38:23,160
Speaker 3: to happen until Trump and She get together face to face,

692
00:38:23,239 --> 00:38:27,280
Speaker 3: because in both systems, no one really has the authority

693
00:38:27,320 --> 00:38:30,520
Speaker 3: lower down to make a move, and so then you

694
00:38:30,560 --> 00:38:32,719
Speaker 3: have to think about, well, how could that happen. It's

695
00:38:32,840 --> 00:38:34,760
Speaker 3: unlikely that you're going to have a trip of one

696
00:38:35,200 --> 00:38:37,040
Speaker 3: leader to the other countries. So you have to start

697
00:38:37,080 --> 00:38:41,200
Speaker 3: thinking about is there some third country that could be.

698
00:38:41,200 --> 00:38:45,200
Speaker 2: Which country is exactly halfway between the US and China.

699
00:38:45,920 --> 00:38:47,080
Speaker 2: Will have to figure that out.

700
00:38:47,560 --> 00:38:48,960
Speaker 4: What's your good what's the third country?

701
00:38:49,040 --> 00:38:51,880
Speaker 3: Well, somewhere in the Middle East. I don't have a

702
00:38:51,880 --> 00:38:55,440
Speaker 3: good theory on that. Arduawan and Turkey, they are kind

703
00:38:55,440 --> 00:38:58,440
Speaker 3: of halfway between, and he sort of has these fantasies

704
00:38:58,480 --> 00:39:00,719
Speaker 3: of being a broker. He tried to do that. I'm

705
00:39:00,719 --> 00:39:03,080
Speaker 3: just making that up. I have no information that he

706
00:39:03,120 --> 00:39:05,879
Speaker 3: actually has any interest in doing that. So that's one

707
00:39:05,960 --> 00:39:09,239
Speaker 3: theory is that you need somehow to get the two

708
00:39:09,280 --> 00:39:12,040
Speaker 3: leaders together, and that will probably require a third party.

709
00:39:12,120 --> 00:39:14,600
Speaker 3: So that's one way of thinking about it. Another way

710
00:39:14,600 --> 00:39:16,680
Speaker 3: of thinking about it is just to say, well, Trump

711
00:39:16,800 --> 00:39:19,080
Speaker 3: is driven by markets to some degree, not quite the

712
00:39:19,080 --> 00:39:20,640
Speaker 3: same way that he was in his first term, but

713
00:39:21,680 --> 00:39:25,799
Speaker 3: right now you have this weird situation where basically, if

714
00:39:25,800 --> 00:39:27,720
Speaker 3: you talk to people in the markets, they are convinced

715
00:39:27,760 --> 00:39:30,719
Speaker 3: that a deal will happen. I keep telling them on

716
00:39:30,760 --> 00:39:33,000
Speaker 3: what basis do you hold this belief? I can see none,

717
00:39:33,560 --> 00:39:37,600
Speaker 3: but they are convinced that essentially because it's impossible or

718
00:39:37,680 --> 00:39:39,759
Speaker 3: they think it's impossible to maintain these high tariffs for

719
00:39:39,760 --> 00:39:44,480
Speaker 3: too long. Therefore something must happen. So markets actually are

720
00:39:44,520 --> 00:39:47,359
Speaker 3: doing okay right now because they're essentially pricing in there

721
00:39:47,400 --> 00:39:49,279
Speaker 3: will be a deal. And if you look at this

722
00:39:49,280 --> 00:39:52,080
Speaker 3: from Trump's standpoint, it's like, oh, markets are happy, I

723
00:39:52,120 --> 00:39:54,880
Speaker 3: have no incentive to deal. So the only way he

724
00:39:54,920 --> 00:39:58,960
Speaker 3: can have more incentive to deal is if markets are

725
00:39:58,960 --> 00:40:03,440
Speaker 3: convinced that there is no deal and the tank and

726
00:40:03,440 --> 00:40:05,360
Speaker 3: then he says, oh, I really got to do something.

727
00:40:05,400 --> 00:40:08,680
Speaker 3: So that's another theory. Full credit. That was suggested to

728
00:40:08,680 --> 00:40:13,040
Speaker 3: be my colleague Andrew Batson, who runs our China team

729
00:40:13,120 --> 00:40:15,800
Speaker 3: very effectively, and I thought that was a very good

730
00:40:15,880 --> 00:40:18,000
Speaker 3: way of thinking about it. So market pressure in the

731
00:40:18,080 --> 00:40:21,480
Speaker 3: US could be a forcing mechanism. You could maybe have

732
00:40:21,600 --> 00:40:24,520
Speaker 3: some kind of intermediary, but I think unless you have

733
00:40:24,600 --> 00:40:27,359
Speaker 3: some kind of force acting like that, or some kind

734
00:40:27,360 --> 00:40:31,880
Speaker 3: of revolution within the White House where actual policy makers

735
00:40:32,000 --> 00:40:36,320
Speaker 3: take over and seize command of things somehow and start

736
00:40:36,360 --> 00:40:39,480
Speaker 3: to work out how do they get a communications channel

737
00:40:39,480 --> 00:40:44,200
Speaker 3: open to the Chinese, communicate some kind of mutual reduction

738
00:40:44,320 --> 00:40:49,239
Speaker 3: of tariffs to a lower level as an opening thing,

739
00:40:49,480 --> 00:40:51,959
Speaker 3: and then a negotiation but I think we're some ways

740
00:40:52,000 --> 00:40:53,280
Speaker 3: away from any of that happening.

741
00:40:53,440 --> 00:40:56,399
Speaker 4: I just have one short comment. One is I've talked

742
00:40:56,440 --> 00:40:59,880
Speaker 4: to an investor who literally used that logic. They said,

743
00:41:00,200 --> 00:41:02,319
Speaker 4: there is going to be a deal because there must

744
00:41:02,360 --> 00:41:04,879
Speaker 4: be a deal, and so therefore there will be one.

745
00:41:05,040 --> 00:41:08,160
Speaker 4: Which one last question our colleague got Anna Wong, us

746
00:41:08,200 --> 00:41:12,200
Speaker 4: economist here at Bloomberg. She thought, one possibility is maybe

747
00:41:12,239 --> 00:41:15,440
Speaker 4: there's a deal that still leaves the sort of like

748
00:41:15,760 --> 00:41:19,799
Speaker 4: Vietnam transshipment open that looks like something tough, and that

749
00:41:19,840 --> 00:41:23,279
Speaker 4: there is some third party country that could still be

750
00:41:23,320 --> 00:41:27,000
Speaker 4: a route for flows, keep high nominal numbers up on China,

751
00:41:27,040 --> 00:41:29,480
Speaker 4: et cetera. Could that be a path out where it

752
00:41:29,520 --> 00:41:32,160
Speaker 4: looks like you've maintained a hard line, but you allow

753
00:41:32,200 --> 00:41:33,520
Speaker 4: an escape valve of some sort.

754
00:41:33,840 --> 00:41:35,640
Speaker 3: You know, I think that's very plausible, because, as I

755
00:41:35,760 --> 00:41:38,480
Speaker 3: mentioned before, I don't think it's just not realistic to

756
00:41:38,520 --> 00:41:40,080
Speaker 3: think that you're going to be able to close off

757
00:41:40,080 --> 00:41:44,160
Speaker 3: the trendshipment channels. So deal or no deal, a lot

758
00:41:44,160 --> 00:41:46,359
Speaker 3: of those channels are going to remain open one way

759
00:41:46,440 --> 00:41:49,279
Speaker 3: or another. So you might as well take advantage of

760
00:41:49,280 --> 00:41:51,920
Speaker 3: that and incorporate it into deal. And one other comment

761
00:41:52,000 --> 00:41:54,399
Speaker 3: on that, because you then get into this question of like, Okay,

762
00:41:54,440 --> 00:41:57,600
Speaker 3: suppose there is a deal, what's in it? And my

763
00:41:57,760 --> 00:42:01,000
Speaker 3: view on this is most of the deal structures that

764
00:42:01,040 --> 00:42:05,000
Speaker 3: seem plausible are not very meaningful others from the standpoint

765
00:42:05,040 --> 00:42:08,040
Speaker 3: of calming markets down. So you have the situation where

766
00:42:08,040 --> 00:42:11,560
Speaker 3: the US and China very adversarial. Most people in Washington

767
00:42:11,600 --> 00:42:14,960
Speaker 3: think we are already in another Cold war. And to me,

768
00:42:15,320 --> 00:42:18,520
Speaker 3: a substantive deal would be one that makes a significant

769
00:42:18,719 --> 00:42:22,920
Speaker 3: change in the quality of the relationship. And so if

770
00:42:22,960 --> 00:42:25,520
Speaker 3: you have something that's like a phase one trade deal

771
00:42:25,800 --> 00:42:29,120
Speaker 3: plus where the China agrees to buy more stuff and

772
00:42:29,160 --> 00:42:32,480
Speaker 3: they make some gestures towards more domestic demand support, and

773
00:42:32,480 --> 00:42:35,840
Speaker 3: we cut tariffs a little bit, Okay, that's fine. Markets

774
00:42:35,840 --> 00:42:37,880
Speaker 3: will be okay with it, but it doesn't really change

775
00:42:37,920 --> 00:42:41,319
Speaker 3: the underlying dynamic, which I think is really bad. And

776
00:42:41,360 --> 00:42:43,680
Speaker 3: I think the thing to look for, which is what

777
00:42:43,800 --> 00:42:46,719
Speaker 3: China really wants. One of the things that they really

778
00:42:46,760 --> 00:42:50,320
Speaker 3: want that could be given to them is the ability

779
00:42:50,320 --> 00:42:52,279
Speaker 3: for their companies to invest a lot more in the

780
00:42:52,400 --> 00:42:56,680
Speaker 3: United States byd c ATL all of these Chinese hi

781
00:42:56,800 --> 00:42:59,720
Speaker 3: tech firms, they would love to be able to invest

782
00:42:59,719 --> 00:43:02,320
Speaker 3: in the UN States and tap into this market more directly.

783
00:43:02,480 --> 00:43:05,000
Speaker 3: They would be very happy to accept. I think a

784
00:43:05,040 --> 00:43:09,680
Speaker 3: lot of different potential structures for that investment, but effectively

785
00:43:09,760 --> 00:43:12,600
Speaker 3: Chinese companies are shut out. And Trump on the campaign

786
00:43:12,840 --> 00:43:15,319
Speaker 3: trail said that he was open to this. So the

787
00:43:15,360 --> 00:43:17,640
Speaker 3: interesting thing there is that basically no one else in

788
00:43:17,680 --> 00:43:20,359
Speaker 3: the administration seems very interested in this, but Trump might be.

789
00:43:21,239 --> 00:43:25,040
Speaker 3: And if you're serious about reindustrializing the United States, you

790
00:43:25,160 --> 00:43:28,239
Speaker 3: cannot do that without significant participation by China. I'm sorry,

791
00:43:28,360 --> 00:43:30,879
Speaker 3: China accunts for a third of global manufacturing production now

792
00:43:31,120 --> 00:43:35,200
Speaker 3: going to forty They are close to or at the

793
00:43:35,320 --> 00:43:38,120
Speaker 3: leading edge of many of the technologies of the future.

794
00:43:38,640 --> 00:43:41,680
Speaker 3: It is as absurd for us to think that we

795
00:43:41,800 --> 00:43:46,200
Speaker 3: can ramp up our industrialization without China as it was

796
00:43:46,239 --> 00:43:48,640
Speaker 3: forty years ago would have been for China to think

797
00:43:48,680 --> 00:43:51,360
Speaker 3: that they could ramp up their industrialization without bringing the

798
00:43:51,480 --> 00:43:54,880
Speaker 3: leaders then the US, Japan, and Germany. So there is

799
00:43:55,040 --> 00:43:57,000
Speaker 3: in principle, it seems to me there is a deal

800
00:43:57,040 --> 00:43:59,640
Speaker 3: to be done there where that's what you give to

801
00:43:59,719 --> 00:44:01,240
Speaker 3: China and then you might be able to get something

802
00:44:01,239 --> 00:44:07,040
Speaker 3: for it that could be quite transformational in terms of

803
00:44:07,080 --> 00:44:11,080
Speaker 3: the basic relationship between these two big economies. Am I

804
00:44:11,120 --> 00:44:11,719
Speaker 3: betting on that.

805
00:44:11,840 --> 00:44:11,880
Speaker 1: No.

806
00:44:12,080 --> 00:44:14,680
Speaker 3: I think the chances of that actually happening are quite low.

807
00:44:14,760 --> 00:44:18,239
Speaker 3: But I think people who are serious about thinking that

808
00:44:18,280 --> 00:44:20,160
Speaker 3: there should be a deal and that the deal is

809
00:44:20,280 --> 00:44:24,840
Speaker 3: economically meaningful, not just like ASoP to markets, they should

810
00:44:24,840 --> 00:44:25,640
Speaker 3: be thinking about that.

811
00:44:26,120 --> 00:44:28,600
Speaker 2: Yeah, are we in a cold war with China? Is

812
00:44:28,600 --> 00:44:30,240
Speaker 2: that even useful framing?

813
00:44:30,680 --> 00:44:33,680
Speaker 3: I think it's not. I disagree vigorously with the people

814
00:44:33,719 --> 00:44:35,480
Speaker 3: who say that we are already there. I mean, we

815
00:44:35,520 --> 00:44:38,080
Speaker 3: could get there. The reason that we're not is a

816
00:44:38,120 --> 00:44:40,799
Speaker 3: couple things. Just if you look at the substance of

817
00:44:40,800 --> 00:44:43,799
Speaker 3: the economic relationship, China's trade with the US direct trade

818
00:44:43,840 --> 00:44:46,719
Speaker 3: with the United States several years ago before Trump's first

819
00:44:46,800 --> 00:44:50,040
Speaker 3: term was the same as our trade was with Japan

820
00:44:50,080 --> 00:44:52,520
Speaker 3: in the mid nineteen eighties. So it's about I think

821
00:44:52,600 --> 00:44:55,839
Speaker 3: seventeen or eighteen percent of our total global trade. Our

822
00:44:55,880 --> 00:44:58,200
Speaker 3: trade with the Soviet Union and all of its successor

823
00:44:58,239 --> 00:45:00,759
Speaker 3: states after the Soviet Union collapsed was more than about

824
00:45:00,760 --> 00:45:04,960
Speaker 3: one or two percent or so. We are linked. We

825
00:45:05,120 --> 00:45:08,279
Speaker 3: have thousands of US companies that operate in China and

826
00:45:08,320 --> 00:45:11,160
Speaker 3: generate somewhere between five and seven hundred million dollars a

827
00:45:11,239 --> 00:45:13,960
Speaker 3: year of annual sales, which is triple or more the

828
00:45:14,000 --> 00:45:16,680
Speaker 3: amount of exports that go from the United States to China,

829
00:45:17,360 --> 00:45:19,640
Speaker 3: the global supply chains or lengthd I could go on

830
00:45:19,680 --> 00:45:23,640
Speaker 3: and on, but the economic linkages are not the linkages

831
00:45:23,719 --> 00:45:25,960
Speaker 3: of countries at war. The reason you could call the

832
00:45:26,000 --> 00:45:30,920
Speaker 3: Cold War a cold war was because it wasn't direct fighting,

833
00:45:31,239 --> 00:45:36,359
Speaker 3: but many of the other conditions, particularly economic, were very,

834
00:45:36,480 --> 00:45:39,319
Speaker 3: very similar to wartime conditions. And this just is not

835
00:45:39,480 --> 00:45:43,520
Speaker 3: It is a completely different beast than I could go on.

836
00:45:43,680 --> 00:45:46,840
Speaker 3: But that's I think the principal thing and the reason

837
00:45:46,880 --> 00:45:48,879
Speaker 3: I think that it's really not only not useful framing,

838
00:45:48,960 --> 00:45:51,600
Speaker 3: but I think toxic framing, is that we have this

839
00:45:52,160 --> 00:45:56,440
Speaker 3: kind of view in the United States that essentially, either

840
00:45:57,080 --> 00:45:59,239
Speaker 3: if you're another country, you are or ally or we

841
00:45:59,280 --> 00:46:02,080
Speaker 3: are at war with you. Those are the two possible states.

842
00:46:03,000 --> 00:46:05,040
Speaker 3: And I think these are conditioned by the fact that

843
00:46:05,080 --> 00:46:10,719
Speaker 3: we thought these multiple wars hot and cold in the

844
00:46:10,760 --> 00:46:14,440
Speaker 3: twentieth century, and our kind of national foreign policy ethos

845
00:46:14,520 --> 00:46:17,320
Speaker 3: was defined by dividing the world into good guys and

846
00:46:17,360 --> 00:46:21,120
Speaker 3: bad guys, beating the fascists, beating the communists. China is

847
00:46:21,160 --> 00:46:22,560
Speaker 3: not a place that can be beat. It is a

848
00:46:22,640 --> 00:46:25,719
Speaker 3: large country. It's not going away. It is very integrated,

849
00:46:25,760 --> 00:46:27,960
Speaker 3: not just with the US but with the entire global economy.

850
00:46:27,960 --> 00:46:32,320
Speaker 3: They're heavily invested in the global order. So the only solution,

851
00:46:32,440 --> 00:46:35,280
Speaker 3: it seems to me, is that you need to figure

852
00:46:35,280 --> 00:46:40,480
Speaker 3: out what is a state of coexistence with China that

853
00:46:40,560 --> 00:46:44,440
Speaker 3: you don't have to define in these martiall terms. It's like,

854
00:46:44,600 --> 00:46:46,799
Speaker 3: and it doesn't have to be we're friends and can

855
00:46:46,840 --> 00:46:51,440
Speaker 3: include we have some very serious adversarial components to the

856
00:46:51,520 --> 00:46:54,279
Speaker 3: relationship in really deep competition, not just in economics of

857
00:46:54,400 --> 00:46:58,239
Speaker 3: geopolitics that can be there. But describing it as war

858
00:46:58,280 --> 00:46:59,320
Speaker 3: I think is not only.

859
00:46:59,120 --> 00:47:04,320
Speaker 2: Not useful but dangerous frenemies the US and China, maybe

860
00:47:04,360 --> 00:47:07,280
Speaker 2: that maybe we can describe it thus. Okay, Arthur Kroeber,

861
00:47:07,400 --> 00:47:09,120
Speaker 2: thank you so much for coming on all thoughts.

862
00:47:09,160 --> 00:47:24,400
Speaker 3: That was great, my pleasure. Thank you, Joe.

863
00:47:24,440 --> 00:47:28,080
Speaker 2: I thought that was a really great state of play conversation,

864
00:47:28,280 --> 00:47:31,920
Speaker 2: and also, you know, sort of considering where things might

865
00:47:31,960 --> 00:47:35,600
Speaker 2: be headed, I realized we forgot one very important thing,

866
00:47:35,680 --> 00:47:37,520
Speaker 2: which is we have to say the day that we're

867
00:47:37,560 --> 00:47:40,320
Speaker 2: actually recording this, because you never know what's going to

868
00:47:40,400 --> 00:47:43,760
Speaker 2: happen in between now and when we actually publish this episode,

869
00:47:43,880 --> 00:47:47,200
Speaker 2: so it is May sixth, two fifty nine.

870
00:47:48,360 --> 00:47:49,160
Speaker 3: I thought it was great.

871
00:47:49,200 --> 00:47:51,960
Speaker 4: I kind of feel stupid for not having had Arthur

872
00:47:52,040 --> 00:47:55,400
Speaker 4: on before because I really thought he was excellent and

873
00:47:55,640 --> 00:48:00,480
Speaker 4: very clear and clear eyed about Chinese economy our relation.

874
00:48:00,719 --> 00:48:00,880
Speaker 3: You know.

875
00:48:01,000 --> 00:48:03,520
Speaker 4: Just there was a lot in there that was very good.

876
00:48:04,239 --> 00:48:07,680
Speaker 4: That last point about like, you know, if we were

877
00:48:07,840 --> 00:48:12,680
Speaker 4: actually serious about quote reindustrializing unquote, that we would want

878
00:48:12,719 --> 00:48:16,920
Speaker 4: to bring Chinese manufacturers give them mistake in the US economy,

879
00:48:16,960 --> 00:48:19,120
Speaker 4: both in terms of selling into the US economy, both

880
00:48:19,120 --> 00:48:21,960
Speaker 4: in terms of owning assets or maybe forty nine percent

881
00:48:22,000 --> 00:48:25,640
Speaker 4: of assets of various factories. Like that makes a lot

882
00:48:25,680 --> 00:48:28,200
Speaker 4: of sense to me. It seems like that's distant politically,

883
00:48:28,520 --> 00:48:31,400
Speaker 4: but it's certainly very intuitively logical to me.

884
00:48:31,719 --> 00:48:35,160
Speaker 2: Yeah, and I also thought the point about demand driving

885
00:48:35,280 --> 00:48:39,400
Speaker 2: everything in the US and versus investment driving everything in

886
00:48:39,560 --> 00:48:42,440
Speaker 2: China to be kind of interesting. Although I would argue

887
00:48:42,440 --> 00:48:45,480
Speaker 2: that those two things, like they're starting to get mingled

888
00:48:45,800 --> 00:48:49,000
Speaker 2: in both America and China, so you're seeing China kind

889
00:48:49,040 --> 00:48:53,439
Speaker 2: of borrow a lot of policies or thoughts that would

890
00:48:53,480 --> 00:48:56,320
Speaker 2: be very familiar to anyone who's lived in the US

891
00:48:56,560 --> 00:48:59,000
Speaker 2: in recent decades, And meanwhile you're starting to see the

892
00:48:59,120 --> 00:49:04,000
Speaker 2: US take gone some Chinese characteristics in various ways.

893
00:49:04,280 --> 00:49:06,800
Speaker 4: Arthur is a good point, and I think you've written

894
00:49:06,800 --> 00:49:08,920
Speaker 4: about this as well, and I think others are confused

895
00:49:08,920 --> 00:49:12,160
Speaker 4: on this. It's like, from Trump's perspective, what does a

896
00:49:12,200 --> 00:49:16,080
Speaker 4: successful outcome look like? We know that he likes the

897
00:49:16,120 --> 00:49:20,200
Speaker 4: forms of things. He likes handshakes, he likes the idea

898
00:49:20,320 --> 00:49:20,760
Speaker 4: of dealing.

899
00:49:20,880 --> 00:49:25,320
Speaker 2: He hates handshakes, doesn't he Oh, he likes deals, he likes.

900
00:49:24,400 --> 00:49:25,680
Speaker 3: He likes tariffs, et cetera.

901
00:49:25,960 --> 00:49:29,080
Speaker 4: But what does say the US economy look like in

902
00:49:29,160 --> 00:49:32,680
Speaker 4: ten years were we to take a correct policy line.

903
00:49:33,400 --> 00:49:36,839
Speaker 4: Really hard to still totally understand. But again, like, yeah,

904
00:49:36,840 --> 00:49:38,840
Speaker 4: maybe it's a lot more factories, and maybe we should

905
00:49:38,880 --> 00:49:40,680
Speaker 4: invite one of the world's you know, some of the

906
00:49:40,680 --> 00:49:42,960
Speaker 4: world's most advanced companies to set them up.

907
00:49:43,160 --> 00:49:45,640
Speaker 2: Yeah, And I guess the question is, you know, he's

908
00:49:45,640 --> 00:49:48,800
Speaker 2: on TV now saying that we don't need fifteen Barbie

909
00:49:48,800 --> 00:49:54,040
Speaker 2: dolls per child. But if we do build that Barbie

910
00:49:54,040 --> 00:49:57,560
Speaker 2: factory in the US, then does that kind of consumerism

911
00:49:57,600 --> 00:49:58,200
Speaker 2: become Okay?

912
00:49:58,239 --> 00:50:00,520
Speaker 4: Again, well, you know, and this is by the way,

913
00:50:00,560 --> 00:50:03,560
Speaker 4: you know, it's like on this point, so I think

914
00:50:03,640 --> 00:50:07,200
Speaker 4: a lot of people can make an intelligent rationale for

915
00:50:07,400 --> 00:50:13,160
Speaker 4: more US manufacturing in certain areas. It's really unclear, you know,

916
00:50:13,239 --> 00:50:15,360
Speaker 4: the White House. I think there was a tweet a

917
00:50:15,360 --> 00:50:17,600
Speaker 4: few days ago talking about how much we import in

918
00:50:17,680 --> 00:50:20,600
Speaker 4: terms of textiles, which is the vast majority of clothing

919
00:50:20,760 --> 00:50:24,879
Speaker 4: et cetera we import. It's really unclear to me why

920
00:50:24,920 --> 00:50:30,520
Speaker 4: it's important at all to have significant domestic capacity in

921
00:50:30,600 --> 00:50:36,399
Speaker 4: these low value, low margin, low strategic areas and what

922
00:50:36,440 --> 00:50:40,160
Speaker 4: that benefits US. I get maybe there's an aesthetic appeal.

923
00:50:40,280 --> 00:50:43,000
Speaker 4: Obviously we want to have a lot of jobs. But

924
00:50:43,719 --> 00:50:45,840
Speaker 4: this is a really difficult thing to wrap my head around,

925
00:50:45,840 --> 00:50:48,000
Speaker 4: which is like you have to make decisions right a

926
00:50:48,000 --> 00:50:50,040
Speaker 4: worker on one line as a worker who's not on

927
00:50:50,160 --> 00:50:52,600
Speaker 4: another line. And so why you want to have more

928
00:50:52,640 --> 00:50:56,600
Speaker 4: clothes manufacturing or more doll manufacturing at a time when

929
00:50:56,640 --> 00:50:58,960
Speaker 4: there's an impulse to sort of build up in these

930
00:50:59,040 --> 00:51:01,279
Speaker 4: higher value is very unclear to me.

931
00:51:01,400 --> 00:51:04,080
Speaker 2: Yeah, there's definitely a tension there. Yeah, all right, shall

932
00:51:04,080 --> 00:51:04,600
Speaker 2: we leave it there.

933
00:51:04,719 --> 00:51:05,480
Speaker 4: Let's leave it there.

934
00:51:05,640 --> 00:51:08,080
Speaker 2: This has been another episode of the Odd Lots podcast.

935
00:51:08,160 --> 00:51:11,440
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

936
00:51:11,239 --> 00:51:13,960
Speaker 4: And I'm Joe Wisenthal. You can follow me at The Stalwart.

937
00:51:14,120 --> 00:51:17,720
Speaker 4: Follow our guest Arthur Krober. He's at aar Krober. Follow

938
00:51:17,719 --> 00:51:21,040
Speaker 4: our producers Carman Rodriguez at Kerman armand Dash, Ob Bennett

939
00:51:21,080 --> 00:51:24,359
Speaker 4: at Dashbot and Kele Brooks at Kilbrooks. For more odd

940
00:51:24,360 --> 00:51:27,120
Speaker 4: Loots content, go to Bloomberg dot com slash odd Lots,

941
00:51:27,120 --> 00:51:29,080
Speaker 4: where we have a daily newsletter and all of our

942
00:51:29,120 --> 00:51:31,920
Speaker 4: episodes and you can chat about these topics twenty four

943
00:51:31,920 --> 00:51:35,440
Speaker 4: to seven in our discord Discord dot gg slash odd Lots.

944
00:51:35,760 --> 00:51:37,960
Speaker 2: And if you enjoy odd Lots, if you like it

945
00:51:38,040 --> 00:51:40,600
Speaker 2: when we check in on how China is dealing with

946
00:51:40,640 --> 00:51:43,280
Speaker 2: the trade war, then please leave us a positive review

947
00:51:43,320 --> 00:51:46,560
Speaker 2: on your favorite podcast platform. And remember, if you are

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00:51:46,640 --> 00:51:49,279
Speaker 2: a Bloomberg subscriber, you can listen to all of our

949
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Speaker 2: instructions there. Thanks for listening in