WEBVTT - Trump Tariffs Shows China Has More to Lose 0:00:02.520 --> 0:00:08.039 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:12.680 This is Bloomberg business Week Insight from the reporters and 0:00:12.800 --> 0:00:16.800 editors that bring you America's most trusted business magazine, plus 0:00:17.000 --> 0:00:20.799 global business, finance and tech news. The Bloomberg Business Week 0:00:20.840 --> 0:00:25.760 Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio. 0:00:26.840 --> 0:00:29.160 The US imposing ten percent tariffs on China. 0:00:29.240 --> 0:00:32.479 China retaliated with tariffs on fourteen billion dollars worth of 0:00:32.520 --> 0:00:35.279 American products, as well some other measures. It was what 0:00:35.479 --> 0:00:38.200 many have been said is a calculated response. We wanted 0:00:38.240 --> 0:00:40.040 to look at this latest development when it comes to 0:00:40.080 --> 0:00:43.120 possible trade or actual trade wars, the back and forth, 0:00:43.280 --> 0:00:46.519 the geopolitics perhaps at play, Tim, and also what is 0:00:46.560 --> 0:00:49.760 the current economic relationship between the US and China, which 0:00:49.800 --> 0:00:52.680 economy may have more to lose. We want to kind 0:00:52.680 --> 0:00:55.240 of tie it all together to kind of understand this 0:00:55.480 --> 0:00:58.440 very important relationship and one that's been important for many years. 0:00:58.560 --> 0:01:00.120 Okay, so we're going to talk about the actual back 0:01:00.160 --> 0:01:02.800 and forth on tariffs between the two, to talk about 0:01:02.800 --> 0:01:05.119 what we've seen, what it means. We welcome in Leland Miller, 0:01:05.360 --> 0:01:08.160 CEO of China beige Book International. It's a private in country, 0:01:08.200 --> 0:01:11.240 a data collection network developed to track the Chinese marketplace. 0:01:11.880 --> 0:01:14.600 Leland also a member of the National Committee on US 0:01:14.680 --> 0:01:17.120 China Relations, also the Council of Foreign Relations, and a 0:01:17.120 --> 0:01:20.160 non resident Senior Fellow at the Branch Scoutcraft Center on 0:01:20.200 --> 0:01:23.320 International Security at the Atlantic Council. Also with US Bloomberg 0:01:23.360 --> 0:01:26.280 News Global Economy reporter and a current who's in our 0:01:26.360 --> 0:01:30.399 Washington DC bureau Leland joining us from DC as well. Leland, 0:01:30.400 --> 0:01:31.759 you dig into the Chinese economy. 0:01:31.760 --> 0:01:32.280 That's what you do. 0:01:32.319 --> 0:01:34.360 You try to tell an accurate and a current picture. 0:01:34.600 --> 0:01:37.720 What do we need to understand about the Chinese economy today? 0:01:39.600 --> 0:01:44.640 Well, markets are usually bipolar on China's economy. They either 0:01:44.680 --> 0:01:47.319 think things are going so terribly it's on the vergiic 0:01:47.360 --> 0:01:51.400 collapse disaster disaster weights, or they're really optimistic that we're, 0:01:51.440 --> 0:01:53.480 you know, right around the corner from big stimulus things 0:01:53.520 --> 0:01:55.960 are getting better. It's usually one or the other. We're 0:01:55.960 --> 0:01:58.040 in neither of those positions. That haven't been for a while. 0:01:58.320 --> 0:02:01.919 The economy's week of our latest data, I've actually been better, 0:02:02.840 --> 0:02:04.920 and not just better, but also better than official data. 0:02:05.000 --> 0:02:06.720 So what we're seeing as an economy is not doing 0:02:06.800 --> 0:02:07.400 terribly well. 0:02:07.560 --> 0:02:09.799 And it is certainly under pressure and will be under 0:02:09.840 --> 0:02:12.359 a lot of pressure if there are terriffs put in 0:02:12.360 --> 0:02:15.079 the economy later, because manufacturing has been the growth driver 0:02:15.720 --> 0:02:17.840 for a number of years now, but not in such 0:02:17.880 --> 0:02:20.160 a weak position that she has to come to the 0:02:20.200 --> 0:02:22.320 table groveling. So you know, you've got you're sort of 0:02:22.360 --> 0:02:24.880 in the middle right now, a week economy, but one 0:02:24.960 --> 0:02:26.480 that's still standing up. 0:02:26.520 --> 0:02:29.080 Okay, all right, So maybe she is not groveling and 0:02:29.120 --> 0:02:31.440 don't want to bring you in. You watch the global 0:02:31.480 --> 0:02:33.959 economy for US here at Bloomberg. We talk to you 0:02:34.040 --> 0:02:37.000 a lot about it, but also in particular the China 0:02:37.120 --> 0:02:42.600 US relationship. Do you see she in an okay position 0:02:42.680 --> 0:02:45.760 to negotiate with President Trump? I mean, does one of 0:02:45.800 --> 0:02:47.880 them have the upper hand? I guess I'm asking in 0:02:47.919 --> 0:02:51.840 your view, the. 0:02:51.800 --> 0:02:53.679 Chinese economy is in a week spot at a moment, 0:02:53.720 --> 0:02:57.960 whereas the US economy is going relatively relatively well. And 0:02:58.080 --> 0:03:01.760 of course Chin account at the US dollar for dollar 0:03:01.840 --> 0:03:04.880 on putting tariffs and goods because China doesn't buy as 0:03:04.960 --> 0:03:07.560 much stuff from the US that the US buys from China, 0:03:07.639 --> 0:03:09.360 so there's a big imbalance. If you want to talk 0:03:09.400 --> 0:03:12.160 about tariff tennis. There's a big imbalance in that game 0:03:12.520 --> 0:03:16.160 to begin with. But you know, these things are never binary. 0:03:16.440 --> 0:03:18.040 It's not just as simple as making the point of 0:03:18.080 --> 0:03:19.919 the US has the upperhand. They do have a strong 0:03:19.960 --> 0:03:22.239 advantage when it comes to, as I say, tariffs, but 0:03:22.240 --> 0:03:24.120 Shana can retaliate in ways that at once too. We 0:03:24.160 --> 0:03:27.760 saw those measures announced overnight, putting companies on an anti 0:03:27.800 --> 0:03:31.160 list antiy list, for example, putting some export restrictions on 0:03:31.160 --> 0:03:34.160 some of those critical minerals like tungsten, putting tariffs on 0:03:34.200 --> 0:03:37.200 goods where they can like the farming machinery that China 0:03:37.240 --> 0:03:40.000 buys off the US. So there are ways they can respond, 0:03:40.240 --> 0:03:42.480 as I say, not dollar for dollar, but there are 0:03:42.520 --> 0:03:44.800 ways they can retaliate against the US leland. 0:03:44.800 --> 0:03:45.400 How would you say? 0:03:45.400 --> 0:03:47.680 How would you describe how interconnected the Chinese and US 0:03:47.760 --> 0:03:49.960 economies are right now? We went through this during the 0:03:50.000 --> 0:03:52.840 first Trump presidency and then during COVID. There was a 0:03:52.880 --> 0:03:55.400 lot of concern about, Okay, well, we don't have access 0:03:55.440 --> 0:03:59.600 to ppe because it's all made in China and there's 0:03:59.600 --> 0:04:01.600 a huge supply shortage of that, and there was a 0:04:01.640 --> 0:04:04.880 lot of conversation about decreasing our reliance for certain things 0:04:05.120 --> 0:04:08.480 on countries such as China, but laid out for US today. 0:04:08.480 --> 0:04:10.480 How interconnected are the US and China. 0:04:11.680 --> 0:04:14.720 Well, it's a multi, multi layered story. And on the 0:04:14.720 --> 0:04:17.520 one hand, there's enormous bilateral trade between the two. It's 0:04:17.560 --> 0:04:20.200 mostly the US buying Chinese goods, not the other way around, 0:04:20.200 --> 0:04:22.520 but there's plenty of both. On the other hand, you 0:04:22.600 --> 0:04:25.680 have certain things that China controls the supply chains for 0:04:25.920 --> 0:04:29.400 whether it's ppe, whether it's pharmaceuticals, whether it's with certain 0:04:30.120 --> 0:04:33.120 critical minerals. So on the one hand, you know you'd 0:04:33.200 --> 0:04:35.320 have a lot of trade. The other hand, China has 0:04:35.400 --> 0:04:37.760 leverage over certain supply chains going in the United States. 0:04:37.880 --> 0:04:41.000 On the other hand, you're seeing some aspects of strategic 0:04:41.040 --> 0:04:43.719 to coupling, you know, particularly in the tech sector, where 0:04:43.920 --> 0:04:46.120 the United States and China are both looking at the 0:04:46.120 --> 0:04:47.360 other and saying, you know, we don't want to be 0:04:47.400 --> 0:04:49.400 as reliant on the other country as possible, so we're 0:04:49.400 --> 0:04:52.159 gonna do everything we can to minimize those vulnerabilities. So 0:04:52.240 --> 0:04:56.800 really you have multiple stories here about it. A lot 0:04:56.800 --> 0:05:00.000 of trade interdependence, but also some elements of to coupling 0:05:00.080 --> 0:05:00.960 will continue into. 0:05:00.760 --> 0:05:02.679 The future, you know, And what I do also wonder 0:05:02.720 --> 0:05:05.680 is President Trump has talked about wanting a more balanced 0:05:05.760 --> 0:05:10.080 trade overall from an economics and growth perspective, You know, 0:05:10.200 --> 0:05:12.159 is he right that we should want that And is 0:05:12.160 --> 0:05:16.159 that even possible with the lopsided relationship that we have 0:05:16.400 --> 0:05:19.039 in trade between China and the United States. The US 0:05:19.120 --> 0:05:22.279 obviously buying a lot more from China currently. 0:05:23.240 --> 0:05:24.960 Yeah, I mean, obviously it is in terms of the 0:05:25.000 --> 0:05:27.720 merchandise goods deaths that it's a pretty big hole there. 0:05:28.320 --> 0:05:30.720 China need to buy a lot of US product to 0:05:30.720 --> 0:05:32.680 make up that gap. There was the original agreement, of 0:05:32.680 --> 0:05:35.880 course focused mainly agricultural goods. The new administration is that 0:05:35.920 --> 0:05:37.320 they're going to go back and look at just how 0:05:37.400 --> 0:05:40.080 China performed in that deal. But China can step forward 0:05:40.120 --> 0:05:43.200 to the table and buy goods to make up some 0:05:43.279 --> 0:05:45.200 of that gap, and they have said they have said 0:05:45.200 --> 0:05:47.760 they're willing to do so, by the way, But that's 0:05:47.800 --> 0:05:50.240 only the merchandise goods deaths. Outside of the story, I mean, 0:05:50.279 --> 0:05:52.440 the US China's tension goes way beyond that. It goes 0:05:52.480 --> 0:05:55.880 into the areas of a strategic competition, who's going to 0:05:55.920 --> 0:05:58.480 be the technology leader of the world. It goes into 0:05:58.480 --> 0:06:01.800 concerns over human rights speeds Jiang Hong Kong. Of course, 0:06:01.839 --> 0:06:04.440 you have Taiwan. There's a whole gambit of issues there 0:06:04.560 --> 0:06:07.279 when it comes to US China relations. So there's a 0:06:07.320 --> 0:06:10.320 possibility both leaders and they've said they're going to talk 0:06:10.360 --> 0:06:12.080 over at some point of coming days, there could be 0:06:12.080 --> 0:06:15.760 some conversation around buying more goods, some kind of a 0:06:15.760 --> 0:06:19.479 meeting of minds on the merchandised trade deficit. But that 0:06:19.560 --> 0:06:23.120 one solve all these other much more broader strategic sources 0:06:23.120 --> 0:06:24.920 of competition between the US and China. 0:06:25.080 --> 0:06:26.400 You know, one thing I want to ask you, and 0:06:26.560 --> 0:06:28.000 let me first follow up with you, is. 0:06:28.000 --> 0:06:33.920 That I mean remind our audience what American consumers get 0:06:34.279 --> 0:06:37.880 as a result of the US China trade relationship. 0:06:39.320 --> 0:06:41.520 Look, China has been the world's factory based now for 0:06:41.600 --> 0:06:44.400 the past four plus decades. It's been a cheaper source 0:06:44.440 --> 0:06:49.120 of labor, It's had a less regular, less environmental standards, 0:06:49.360 --> 0:06:51.839 less regulations of the kind you've seen in the Western world. 0:06:51.880 --> 0:06:54.080 So the end the product has been that China has 0:06:54.120 --> 0:06:57.760 been a source of cheaper goods, cheaper white goods, cheaper clothing, 0:06:57.839 --> 0:07:00.800 cheaper electronics, cheaper computers, all of that, and the US 0:07:00.839 --> 0:07:03.279 consumer has benefited from that, not just the US, of course, 0:07:03.480 --> 0:07:06.919 entire world has benefited from that. Now we are, of 0:07:06.960 --> 0:07:09.000 course now at a moment of reckoning where why you 0:07:09.040 --> 0:07:11.160 have President Trump making the point that a lot of 0:07:11.160 --> 0:07:13.600 those products and materials should be sourced and built at 0:07:13.600 --> 0:07:17.280 home anyway to drive investment and create jobs here. And 0:07:17.320 --> 0:07:20.280 we've seen alone as part of this process, we've seen 0:07:20.320 --> 0:07:23.120 these kind of middle connector economies emerges, kind of bridging 0:07:23.120 --> 0:07:26.880 points between China and the US, So Mexico, Vietnam and 0:07:26.960 --> 0:07:29.520 Poland and Morocco and others are kind of setting up 0:07:29.560 --> 0:07:32.440 manufacturing bases and selling into the US as well. So 0:07:32.960 --> 0:07:36.400 you know, writ large, the US consumer and global consumer 0:07:36.440 --> 0:07:39.200 has benefited from China's industrial based over the past few 0:07:39.200 --> 0:07:41.200 decades cheaper goods. But as I say, we now seem 0:07:41.240 --> 0:07:42.880 to be at something of an inflection point. 0:07:42.920 --> 0:07:44.920 And let's not forget that cheaper cost of goods means 0:07:44.920 --> 0:07:47.600 it's cheaper for companies to produce lots of different products 0:07:47.640 --> 0:07:47.960 sell them. 0:07:48.080 --> 0:07:50.640 Margins are maybe improved as a result. 0:07:50.680 --> 0:07:52.720 Lean come on in though, so what is China get 0:07:52.720 --> 0:07:54.720 out of the relationship with the United States in terms 0:07:54.760 --> 0:07:55.720 of trade. 0:07:56.760 --> 0:07:59.560 Well, China buys commodities, China buys advanced technology. 0:07:59.560 --> 0:08:01.120 I'll be the lesson I did before. 0:08:01.280 --> 0:08:02.840 I think they'd buy a lot of want to buy 0:08:02.880 --> 0:08:04.960 a lot of a lot more of it if they could. 0:08:05.680 --> 0:08:09.320 But essentially, you know, the real inequity of the relationship 0:08:09.360 --> 0:08:12.000 is the fact that domestic demand in China's weak and 0:08:12.360 --> 0:08:15.280 the imports have been traditionally weak week week, and exports 0:08:15.320 --> 0:08:17.880 have been strong, strong, strong, So the reason that there 0:08:17.880 --> 0:08:21.840 are trade frictions here is that the imbalance in the 0:08:21.880 --> 0:08:24.600 relationship is bad and has gotten worse and worse and 0:08:24.640 --> 0:08:27.280 worse over time. And now you've got a Chinese government 0:08:27.360 --> 0:08:30.360 plan which is called New Quality Productive Forces, which is 0:08:30.560 --> 0:08:32.640 we're going to manufacture more, We're going to produce more, 0:08:32.679 --> 0:08:36.280 we're going to export more, particularly in advanced technology sectors. 0:08:36.480 --> 0:08:38.959 So you're really taking political friction that. 0:08:38.920 --> 0:08:41.920 Already existed over trade and you're saying, not only are 0:08:41.920 --> 0:08:43.480 we not going to address them, we're going to double 0:08:43.520 --> 0:08:45.560 down and triple down the years ahead. So you know, 0:08:45.640 --> 0:08:48.080 you have a real problem in terms of the structural 0:08:48.120 --> 0:08:51.280 trade balances of the two countries and where it's going next. 0:08:51.559 --> 0:08:56.280 Leland I'm wondering about given that that she, you know, 0:08:56.400 --> 0:09:01.440 was ruling during the first Trumpet minute and experience this 0:09:01.840 --> 0:09:05.520 trade war the first time. How you view what we 0:09:05.600 --> 0:09:09.800 know about how he's responded since, given that there is 0:09:09.840 --> 0:09:12.480 a history here, like what did he learn in the 0:09:12.520 --> 0:09:13.600 first Trump administration? 0:09:15.520 --> 0:09:18.360 I think that they find President Trump less shocking the 0:09:18.480 --> 0:09:21.000 day before. But I think markets have gotten ahead of themselves. 0:09:21.040 --> 0:09:23.040 We are not in a trade war with China, at 0:09:23.120 --> 0:09:25.760 least not yet. What's going on right now is part 0:09:25.760 --> 0:09:28.920 of a sequential rollout of the President's priorities in the 0:09:29.040 --> 0:09:31.679 very early days of the term. So Mexico and Canada 0:09:31.880 --> 0:09:35.040 we're big targets because of fetanyl one A and illegal 0:09:35.080 --> 0:09:35.880 immigration one B. 0:09:36.360 --> 0:09:38.360 What's happening right now is a derivative of that. 0:09:38.559 --> 0:09:40.280 It's the fact that China sends a lot of the 0:09:40.320 --> 0:09:43.679 fetanyl precursors through Mexico. In the United States, they're a 0:09:43.720 --> 0:09:47.360 big problem in terms of fetanyl getting into the United States. Ultimately, 0:09:47.600 --> 0:09:51.160 so the President threatened and then has apparently going forward 0:09:51.160 --> 0:09:55.000 with a ten percent tariff on China for that. That 0:09:55.080 --> 0:09:57.400 is very different than what we may see later in 0:09:57.440 --> 0:10:00.600 the year based on a broader trade war. It has 0:10:00.679 --> 0:10:02.560 to do with the economic imbalance. As I was talking 0:10:02.600 --> 0:10:04.880 about before the fact that the trade deficit is so 0:10:04.960 --> 0:10:07.600 high for the United States bilatterally multilaterally of course too. 0:10:07.880 --> 0:10:10.920 But you know, there are inequities in the trading relationship. 0:10:10.960 --> 0:10:14.680 There are economic restructuring issues that people in administration. 0:10:14.360 --> 0:10:16.360 Care very much about. We're not there yet. 0:10:16.360 --> 0:10:18.680 We're at the very baby steps where we're still addressing 0:10:18.720 --> 0:10:21.680 the fentanyl issue. And that's why, you know, baby stepping 0:10:21.679 --> 0:10:23.960 into the trade war. But this is not a trade war. Yet. 0:10:24.040 --> 0:10:28.600 Another thing that complicates matters and is Taiwan and the 0:10:28.760 --> 0:10:34.280 US reliance on chips and other high tech that comes 0:10:34.280 --> 0:10:37.640 from Taiwan. It's a little different now than it was 0:10:37.720 --> 0:10:41.040 during the first Trump administration. But when you mail geopolitics 0:10:41.120 --> 0:10:44.839 and economics here, how does the equation change. 0:10:44.960 --> 0:10:47.960 Well, obviously, a US has been attended to de risk 0:10:48.000 --> 0:10:50.480 it in very supply chains, and certainly semi conductors is 0:10:50.480 --> 0:10:52.679 one of them. We've seen that big investment pushed by 0:10:52.720 --> 0:10:56.320 the last previous administration, for example, So it's not quite 0:10:56.880 --> 0:10:59.600 as hot a topic as it was. But nonetheless, though 0:10:59.679 --> 0:11:03.000 there's reliance is there obviously, But the real crooks here 0:11:03.080 --> 0:11:08.640 is that President She has made explicitly clear, consistently and 0:11:08.760 --> 0:11:10.760 perhaps even more so over the past here that when 0:11:10.800 --> 0:11:13.680 in terms of his three red lines or his red lines, 0:11:13.720 --> 0:11:15.880 one of them is certainly Taiwan and what they consider 0:11:15.960 --> 0:11:18.920 to be internal interference. And that's that's where the rubber 0:11:19.120 --> 0:11:21.559 hit the road in the US and China relationship. Whether 0:11:21.720 --> 0:11:26.400 how President Trump navigates that, how he comes through terms 0:11:26.440 --> 0:11:30.680 with President She accommodates him or not on his claim 0:11:30.720 --> 0:11:32.839 on over Taiwan. That's certainly going to be one of 0:11:32.880 --> 0:11:35.120 the thorney's topics in all of this and goes well 0:11:35.160 --> 0:11:37.760 above somebody issues us to speaking about. 0:11:37.600 --> 0:11:40.200 Earlier, and it was a stake if this relationship breaks down, 0:11:40.720 --> 0:11:42.800 I mean, it's already been a tense one for a while. 0:11:42.840 --> 0:11:45.120 If you think about the tech war that's been underway 0:11:45.120 --> 0:11:46.640 and so on and so forth. It's not like this 0:11:46.800 --> 0:11:50.080 just happened overnight, you know, go back to certainly the 0:11:50.080 --> 0:11:52.720 first Trump administration even before that, it's been a very 0:11:52.840 --> 0:11:57.400 complicated and increasingly complicated relationship. What happens if the relationship 0:11:57.440 --> 0:12:02.280 geopolitical as well as economical economic wise breaks down between 0:12:02.280 --> 0:12:04.720 the US and China, well, it is very complicated. 0:12:04.720 --> 0:12:06.640 They are both intertwined. I mean, if you want to 0:12:06.640 --> 0:12:08.720 talk about just the economic side of it, if they 0:12:08.760 --> 0:12:11.439 were to say good, down the road of further decoupling, 0:12:11.640 --> 0:12:13.800 the language now uses more about de risking. But if 0:12:13.800 --> 0:12:15.280 it was to go down the road of decoupling, well, 0:12:15.280 --> 0:12:17.560 that's just going to be very expensive for businesses. They're 0:12:17.559 --> 0:12:21.600 going to have to relocate supply chains, relocate sources of manufacturing, 0:12:21.640 --> 0:12:24.240 shuffle production around the world, maybe shuffle production back to 0:12:24.240 --> 0:12:27.560 the US. So there's all kinds of complications, expense delays 0:12:27.920 --> 0:12:29.839 and under like involved in that. Then you get into 0:12:29.920 --> 0:12:33.440 people people exchanges, whether it's at student and university level 0:12:34.160 --> 0:12:37.040 or tourism level, that would be another area impacted. And 0:12:37.120 --> 0:12:38.880 of course if you go beyond that, then you get 0:12:38.920 --> 0:12:42.720 into a you know, a deterioration or collapsive relations between 0:12:42.760 --> 0:12:44.880 both governments. Well, then that obviously speaks to are a 0:12:44.960 --> 0:12:48.599 very difficult position for the world globally geopolitically at a 0:12:49.160 --> 0:12:51.160 time wh they're already our significant tensions. But I think 0:12:51.160 --> 0:12:52.920 the first step in that ladder would be a lot 0:12:52.960 --> 0:12:54.280 of disruption for the world economy. 0:12:54.360 --> 0:12:55.320 Yeah, let's not forget too. 0:12:55.360 --> 0:12:59.480 We've seen China and certainly Russian around or North three 0:12:59.600 --> 0:13:02.280 or right like, we've seen kind of some outreaches, certainly 0:13:02.440 --> 0:13:03.480 among those Leland. 0:13:03.520 --> 0:13:04.680 Let me put the same question to you. 0:13:04.679 --> 0:13:06.800 What's at stake if the relationship between the United States 0:13:06.840 --> 0:13:07.760 and China breaks down? 0:13:09.280 --> 0:13:11.560 Well a lot. But you know, usually when people answer 0:13:11.640 --> 0:13:14.760 this they talk about market volatility and all kinds of threats. 0:13:15.000 --> 0:13:17.240 There's a positive side to this too, because the United 0:13:17.280 --> 0:13:20.760 States has a lot of vulnerabilities to Chinese control supply 0:13:20.840 --> 0:13:23.480 chains going into the United States, and so yes, there 0:13:23.559 --> 0:13:26.760 are all kinds of economic disruptions that are possible when 0:13:26.840 --> 0:13:29.920 you sort of pull these two countries apart from the 0:13:30.480 --> 0:13:33.880 incredibly interwoven manner that they've been operating it for decades. 0:13:34.120 --> 0:13:35.920 But at the same time, if you're the United States, 0:13:35.920 --> 0:13:37.640 you have to look at your supply chains and say, 0:13:37.640 --> 0:13:40.600 what do we not want Beijing to have leverage over 0:13:40.720 --> 0:13:45.960 us on critical minerals, pharmaceuticals, you know, ppe other things 0:13:46.000 --> 0:13:48.360 like that that have a national security element to them. 0:13:48.400 --> 0:13:52.320 So look, there's scary things when you talk about disrupting 0:13:52.640 --> 0:13:55.480 patterns of trade that have been the case for several decades. 0:13:55.640 --> 0:13:57.360 On the other hand, I think people are getting smarter 0:13:57.400 --> 0:13:59.560 on the idea that it doesn't make sense for a 0:13:59.600 --> 0:14:01.760 country to have to not look at this through a 0:14:01.840 --> 0:14:04.640 naw security lens and to minimize the vulnerabilities they have 0:14:04.800 --> 0:14:07.120 to a country that could be its adversary in the future. 0:14:07.559 --> 0:14:10.200 And I'm curious that you know, in twenty twenty five, 0:14:10.600 --> 0:14:13.480 given the global supply chain and what we saw happen 0:14:13.520 --> 0:14:18.679 during COVID and understanding what different countries are good at manufacturing, 0:14:19.320 --> 0:14:23.800 is it possible for the US to decouple from China. 0:14:23.880 --> 0:14:26.280 It's probably not possible. But let's just say there has 0:14:26.400 --> 0:14:30.000 been diversification due to a trade war one point zero. 0:14:30.000 --> 0:14:32.120 When those initial round of tariffs went on. That was 0:14:32.120 --> 0:14:34.200 not a much narrower band of goods, intermediate goods and 0:14:34.200 --> 0:14:36.160 the like, but it was enough to cause some businesses 0:14:36.200 --> 0:14:38.280 to have a look around them and move their production. 0:14:38.360 --> 0:14:41.960 There was that there was COVID. The pandemic absolutely rattled 0:14:42.200 --> 0:14:45.160 supply chains and opened a lot of manufacturing executive's eyes. 0:14:45.200 --> 0:14:47.560 So there's been diversification there as a result of that. 0:14:48.600 --> 0:14:50.120 But you know, in terms of bigger picture cand of 0:14:50.120 --> 0:14:52.640 all of that production come back to say, the US, 0:14:52.640 --> 0:14:55.120 for example, will no account because it's much more expensive here, 0:14:55.200 --> 0:14:58.040 labor is more expensive, there are more regulations. It's a 0:14:58.320 --> 0:15:00.000 very different story in terms of trying to set up 0:15:00.040 --> 0:15:02.560 manufacturing here. The other point is there are a few 0:15:02.600 --> 0:15:05.120 other places on the planet that offered to scale that 0:15:05.240 --> 0:15:08.080 China offers. I mean, there's always talk about alternatives, maybe India, 0:15:08.160 --> 0:15:10.040 but China has the infrasecture in scale in place, and 0:15:10.040 --> 0:15:12.680 that's why it remains so attractive for manufacturing basis. 0:15:12.760 --> 0:15:14.640 Yeah, I'm increasingly as I pick up things seeing things 0:15:14.840 --> 0:15:17.280 that are made out of in India. Hey, Leland just 0:15:17.320 --> 0:15:20.480 got about thirty forty seconds in a sign that deal 0:15:20.560 --> 0:15:22.680 is maybe front of mine. President Trump rote on his 0:15:22.720 --> 0:15:25.880 truth social platforms hour before the US tariffs against China 0:15:25.920 --> 0:15:28.640 took effect that there was great interest in TikTok, adding 0:15:28.680 --> 0:15:31.680 a deal would be wonderful for China on some level. 0:15:32.080 --> 0:15:33.720 Is this is a sign that all of this is 0:15:33.760 --> 0:15:36.280 just jockeying by the president for a win, as some 0:15:36.440 --> 0:15:38.960 have suggested, And forgive me just about thirty seconds. 0:15:39.680 --> 0:15:41.240 Again, this is all about sequencing. 0:15:41.320 --> 0:15:43.520 So if we're talking about taking care of fentanyl, getting 0:15:43.560 --> 0:15:45.680 a deal for TikTok, other things like that, which are 0:15:45.960 --> 0:15:48.000 forefront of the President's mind, sure. 0:15:47.760 --> 0:15:49.320 You can get to a deal and all these things. 0:15:49.360 --> 0:15:52.200 If Beijing is willing talking about the structural and balances 0:15:52.200 --> 0:15:54.600 of the relationship that's a bigger deal that will require 0:15:54.640 --> 0:15:57.640 probably bigger tariffs and a lot more tension. So look, 0:15:57.680 --> 0:15:59.360 can you get to the first step of this Sure 0:15:59.880 --> 0:16:01.640 you get to the next step of this lot? 0:16:02.000 --> 0:16:03.480 Yeah, a lot longer road. 0:16:03.880 --> 0:16:05.440 Listen, both of you. Thank you so much. 0:16:05.520 --> 0:16:09.040 Leland Miller, the CEO of China, beige Book International, Bloomberg 0:16:09.040 --> 0:16:11.480 News Global Economy Reporter, and a current both coming to 0:16:11.520 --> 0:16:12.080 us from DC. 0:16:13.200 --> 0:16:16.760 You're listening to the Bloomberg Business Week podcast. Catch us 0:16:16.840 --> 0:16:20.280 live weekday afternoons from two to five pm Eastern. Listen 0:16:20.320 --> 0:16:23.880 on Applecarplay and the Android Auto with the Bloomberg Business app, 0:16:24.040 --> 0:16:25.840 or watch us live on YouTube. 0:16:27.040 --> 0:16:29.640 Now, let's get to two well known tech companies, both 0:16:29.680 --> 0:16:33.240 with government contracts and with tech billionaires connected to each. 0:16:33.280 --> 0:16:37.360 We're talking about Palenteer and Tesla. Palenteer shares they are 0:16:37.440 --> 0:16:40.600 soaring to a record intraday after the Peter Teal co 0:16:40.720 --> 0:16:43.520 founded company gave a full year revenue forecast that exceeded 0:16:43.560 --> 0:16:47.960 analyst estimates, driven by quote untamed organic growth in demand 0:16:47.960 --> 0:16:50.720 for its AI software. And then there's Tesla and it's 0:16:50.800 --> 0:16:54.280 CEO Elon Musk and his Doze teams seeming takeover of 0:16:54.320 --> 0:16:57.480 the US government. We're following both of these stories on 0:16:57.680 --> 0:17:01.280 Tesla and Elon. President Jump pointing out some para just yesterday. 0:17:02.080 --> 0:17:06.879 Elon can't do and won't do anything without our approval, 0:17:07.560 --> 0:17:10.120 and we'll give him the approval we're appropriate with. There's 0:17:10.160 --> 0:17:12.600 a conflict that we won't let him get near it. 0:17:12.960 --> 0:17:15.240 But he does have a good natural instinct. He's got 0:17:15.240 --> 0:17:18.240 a team of very talented people. We're trying to shrink government, 0:17:18.720 --> 0:17:21.160 and he can probably shrink it as well as anybody 0:17:21.600 --> 0:17:22.639 else if done better. 0:17:22.840 --> 0:17:24.840 All right, that, of course is President Trump yesterday in 0:17:24.880 --> 0:17:27.960 the Oval Office. There's a lot going on and just 0:17:28.040 --> 0:17:30.240 kind of some interesting player around these two companies. Let's 0:17:30.240 --> 0:17:33.159 get to it with Max Chafkin, Bloomberg BusinessWeek columnists, co 0:17:33.200 --> 0:17:35.880 host of the elin Ing podcast, author of The Contrarian 0:17:35.960 --> 0:17:38.880 Peter Tiel in Silicon Valley's Pursuit of Power. He's here 0:17:38.920 --> 0:17:42.439 in studio and then out there in Denver. Is Kurt Wagner, 0:17:42.480 --> 0:17:45.720 Bloomberg News technology reporter. He's author of Battle for the Bird, 0:17:45.800 --> 0:17:47.920 Jack Dorsey, Elon Musk, and the forty four billion dollar 0:17:48.000 --> 0:17:51.280 Fight for Twitter. So so perfect to talk to you. 0:17:51.359 --> 0:17:53.879 I want to start with you, Max. Some earnings business 0:17:53.960 --> 0:17:55.640 just to get it out of the way. But Pallenteer 0:17:55.960 --> 0:17:59.359 soaring to a record interday more than twenty two percent 0:17:59.400 --> 0:18:02.640 after report last night. What is it about this business 0:18:02.760 --> 0:18:04.440 and why are investors so enthusiastic? 0:18:04.640 --> 0:18:07.120 So two things. One is AI. 0:18:07.359 --> 0:18:09.880 This is a company that has sort of made its 0:18:09.920 --> 0:18:12.400 embrace of AI sort of central to how it talks 0:18:12.440 --> 0:18:15.200 about what it does. This is a company that makes 0:18:15.240 --> 0:18:21.240 software that helps governments and big companies organized data. So 0:18:21.240 --> 0:18:23.840 so part of it is that this general sense that 0:18:23.920 --> 0:18:26.720 big companies and the government are going for AI. And 0:18:26.800 --> 0:18:30.080 the second part is related to the other thing you mentioned, 0:18:30.119 --> 0:18:34.320 which is Elon Musk Donald Trump, this sense that the 0:18:34.520 --> 0:18:39.159 Trump administration is likely to embrace things like Palenteer. I 0:18:39.200 --> 0:18:42.320 think both because you have Doge and you have Elon 0:18:42.400 --> 0:18:45.240 Musk saying we need to make things more efficient. Palenteer 0:18:45.359 --> 0:18:48.000 has a value proposition there. But also, of course there 0:18:48.040 --> 0:18:51.000 is a political connection. You know, Palenteer co founded by 0:18:51.040 --> 0:18:55.440 Peter Teel. Peter Teel still a major shareholder in this company. 0:18:56.160 --> 0:18:58.760 You know they are going to have you would think 0:18:58.800 --> 0:19:01.439 at least some kind of inside laye in terms of 0:19:01.480 --> 0:19:05.520 trying to get additional contracts. Both because of the relationships 0:19:05.520 --> 0:19:08.480 with the Teal network because of their AI stuff and 0:19:08.520 --> 0:19:09.439 because of Teal himself. 0:19:09.520 --> 0:19:12.919 Okay, speaking of government contractors, palanteers a government contractor, so 0:19:12.960 --> 0:19:18.720