1 00:00:02,560 --> 00:00:07,040 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:09,320 --> 00:00:11,880 Speaker 2: I'm Stephen Caroll, and this is Here's Why, where we 3 00:00:11,920 --> 00:00:14,079 Speaker 2: take one new story and explain it in just a 4 00:00:14,120 --> 00:00:19,200 Speaker 2: few minutes with our experts here at Bloomberg. What a 5 00:00:19,239 --> 00:00:22,400 Speaker 2: difference a few weeks can make. This was on the 6 00:00:22,440 --> 00:00:23,360 Speaker 2: tenth of April. 7 00:00:23,840 --> 00:00:27,880 Speaker 3: Well, we'll see what happens with China. They've really taken 8 00:00:27,920 --> 00:00:30,160 Speaker 3: advantage of our country for a long period of time. 9 00:00:30,240 --> 00:00:34,040 Speaker 3: They've grouped us off. How people stood for it, sitting 10 00:00:34,080 --> 00:00:37,000 Speaker 3: in my position is not even believable. 11 00:00:38,560 --> 00:00:41,959 Speaker 4: Fast forward just over a month to the twelfth of May. 12 00:00:42,080 --> 00:00:47,040 Speaker 3: We achieved a total resehit with China after productive talks 13 00:00:47,040 --> 00:00:52,040 Speaker 3: in Geneva. Both sides now agreed to reduce the tariffs imposed. 14 00:00:52,680 --> 00:00:55,360 Speaker 3: The relationship is very, very good. I'll speak to President 15 00:00:55,440 --> 00:00:57,200 Speaker 3: she may be. At the end of the week. 16 00:00:57,680 --> 00:01:00,960 Speaker 2: After weeks of escalation, the United States and China agreed 17 00:01:01,000 --> 00:01:04,160 Speaker 2: to a ninety day truce, slashing tariffs on each other's 18 00:01:04,160 --> 00:01:07,880 Speaker 2: goods that had spiraled to over one hundred percent. The 19 00:01:07,959 --> 00:01:11,000 Speaker 2: Chinese president has struck a defiant tone ever since Trump 20 00:01:11,040 --> 00:01:14,600 Speaker 2: began raising US tariffs to their highest level in a century. 21 00:01:15,319 --> 00:01:18,760 Speaker 2: In contrast to other world leaders. Cheatingping has refused Trump's 22 00:01:18,760 --> 00:01:21,560 Speaker 2: repeated calls to get on the phone with him, and 23 00:01:21,640 --> 00:01:24,360 Speaker 2: speaking the day after the deal was announced, he wasn't 24 00:01:24,360 --> 00:01:27,200 Speaker 2: toning down his message. 25 00:01:27,360 --> 00:01:30,800 Speaker 4: There are no winners in tariff wars or trade wars. 26 00:01:32,200 --> 00:01:36,800 Speaker 4: Bullying or hegeminism only leads to self isolation. 27 00:01:37,400 --> 00:01:44,839 Speaker 2: So here's why China's trade war strategy is working. Bloomberg 28 00:01:44,880 --> 00:01:49,080 Speaker 2: opinion columnist Karorishima of Aswani joins me. Now for more, Karishma, 29 00:01:49,120 --> 00:01:52,400 Speaker 2: how would you characterize the approach that Cheatingping has taken 30 00:01:52,440 --> 00:01:55,040 Speaker 2: to Donald Trump since his return to the White House. 31 00:01:55,520 --> 00:01:59,160 Speaker 1: I think it's been tough. I think it's been unflinching. 32 00:01:59,680 --> 00:02:02,640 Speaker 1: I think we've seen a lot of nationalists rhetoric out 33 00:02:02,640 --> 00:02:06,200 Speaker 1: of both governments, but in particular from China. When the 34 00:02:06,320 --> 00:02:09,880 Speaker 1: trade tariffs were first announced, we saw sort of tit 35 00:02:09,960 --> 00:02:13,359 Speaker 1: for tat action from Beijing in a way that at 36 00:02:13,400 --> 00:02:17,079 Speaker 1: the time most political analysts and economic analysts had sort 37 00:02:17,120 --> 00:02:19,760 Speaker 1: of said, oh, that won't happen, because China can't afford 38 00:02:20,160 --> 00:02:25,560 Speaker 1: the economic hit of consistently trying to match the tariffs 39 00:02:25,600 --> 00:02:28,880 Speaker 1: on the American side. Instead of a sort of more 40 00:02:28,919 --> 00:02:34,240 Speaker 1: conciliatory approach, we did see a very firm stance from 41 00:02:34,600 --> 00:02:38,040 Speaker 1: Sijenping and Chinese officials, and I think that's paid off 42 00:02:38,280 --> 00:02:41,840 Speaker 1: because I think what that's shown the Americans is that 43 00:02:41,880 --> 00:02:44,600 Speaker 1: the Chinese were not going to back down and were 44 00:02:44,600 --> 00:02:48,480 Speaker 1: not going to come to the negotiating table just because 45 00:02:48,600 --> 00:02:51,880 Speaker 1: there had been tariffs slapped on them by the US. 46 00:02:52,120 --> 00:02:56,200 Speaker 2: When things were escalating rapidly. In April, you quite presciently 47 00:02:56,280 --> 00:02:59,760 Speaker 2: wrote that the Chinese president wouldn't blink first in the 48 00:02:59,760 --> 00:03:00,519 Speaker 2: trade war. 49 00:03:00,600 --> 00:03:02,839 Speaker 4: What led you to that conclusion. 50 00:03:03,800 --> 00:03:07,519 Speaker 1: I think that China in some respects has as much, 51 00:03:07,600 --> 00:03:10,239 Speaker 1: if not more, to lose when it comes to political 52 00:03:10,400 --> 00:03:14,360 Speaker 1: legitimacy and credibility with its own people. Both leaders are 53 00:03:14,400 --> 00:03:17,440 Speaker 1: playing to their domestic audiences, right. So in China, on 54 00:03:17,480 --> 00:03:20,080 Speaker 1: the one hand, you have a political system where the 55 00:03:20,200 --> 00:03:23,720 Speaker 1: Chinese Communist Party doesn't need to win elections like the 56 00:03:23,760 --> 00:03:29,200 Speaker 1: Republicans do, so even with economic pain that was foreshadowed 57 00:03:29,240 --> 00:03:32,480 Speaker 1: as a result of the trade tariffs, they could galvanize 58 00:03:32,720 --> 00:03:36,160 Speaker 1: and mobilize their people and citizens there and sort of 59 00:03:36,200 --> 00:03:39,960 Speaker 1: consistently hammer on that narrative that the US is trying 60 00:03:40,000 --> 00:03:42,800 Speaker 1: to keep China down. It's a really effective narrative. And 61 00:03:42,800 --> 00:03:45,560 Speaker 1: it's been used before. But I think the other reason 62 00:03:45,640 --> 00:03:48,480 Speaker 1: why I felt at the time that the Chinese wouldn't 63 00:03:48,480 --> 00:03:51,760 Speaker 1: blink first is because they see this as part of 64 00:03:52,000 --> 00:03:55,680 Speaker 1: a sort of historical arc, which is that it's China's 65 00:03:55,760 --> 00:03:58,960 Speaker 1: moment to rise while the West is in decline. And 66 00:03:58,960 --> 00:04:02,160 Speaker 1: that's something we've heard consistently from Chinese officials time and 67 00:04:02,200 --> 00:04:04,480 Speaker 1: time again, not just with regards to the trade war, 68 00:04:04,800 --> 00:04:09,080 Speaker 1: but other aspects of the geopolitical squabble between the two sides, 69 00:04:09,160 --> 00:04:13,240 Speaker 1: and I think had they backed down first, it would 70 00:04:13,240 --> 00:04:17,960 Speaker 1: have been counter productive to that narrative. We've seen measures 71 00:04:17,960 --> 00:04:22,680 Speaker 1: on the Chinese side to address prolonged economic issues in 72 00:04:22,720 --> 00:04:24,839 Speaker 1: a way to sort of prepare for the impact of 73 00:04:24,880 --> 00:04:27,640 Speaker 1: the trade war. I'm not saying that there aren't real 74 00:04:27,720 --> 00:04:30,680 Speaker 1: issues at play here, but I think that China is 75 00:04:30,839 --> 00:04:34,400 Speaker 1: more willing to sort of suffer the long term economic 76 00:04:34,520 --> 00:04:37,040 Speaker 1: costs in order to achieve political goals. 77 00:04:37,320 --> 00:04:39,360 Speaker 4: But does that approach, Krishma have limits? 78 00:04:39,520 --> 00:04:41,640 Speaker 2: Is there a place where the risks of the Chinese 79 00:04:41,680 --> 00:04:44,799 Speaker 2: economy could be too great if this strategy is pursued 80 00:04:44,839 --> 00:04:45,480 Speaker 2: long term? 81 00:04:45,760 --> 00:04:45,960 Speaker 4: Well? 82 00:04:46,000 --> 00:04:51,000 Speaker 1: Indeed, and I think the outcome of the weekend's discussions 83 00:04:51,040 --> 00:04:55,479 Speaker 1: will be seen as productive on both sides, and it's 84 00:04:55,480 --> 00:04:59,000 Speaker 1: something that the Chinese definitely wanted as well. And the 85 00:04:59,040 --> 00:05:01,400 Speaker 1: fact that it happened in sort of neutral place they 86 00:05:01,400 --> 00:05:03,960 Speaker 1: could save face. You know, they're not going to the 87 00:05:04,040 --> 00:05:07,640 Speaker 1: United States in any way. Now you also have comments 88 00:05:07,680 --> 00:05:11,440 Speaker 1: from US officials saying we don't necessarily wanted decoupling. That's 89 00:05:11,480 --> 00:05:14,640 Speaker 1: a huge win for the Chinese because that's something they've 90 00:05:14,760 --> 00:05:19,240 Speaker 1: kept saying from the start and throughout this entire trade 91 00:05:19,279 --> 00:05:22,320 Speaker 1: war during the Trump administration, this one and the previous 92 00:05:22,320 --> 00:05:25,600 Speaker 1: Trump administration when you know, arguably all of these tensions 93 00:05:25,640 --> 00:05:28,560 Speaker 1: first began. The Chinese have consistently said that they are 94 00:05:28,600 --> 00:05:32,480 Speaker 1: the champions and upholders of the multilateral rules based order. 95 00:05:32,880 --> 00:05:33,520 Speaker 4: And given the. 96 00:05:33,480 --> 00:05:36,839 Speaker 1: Fact that you know, Trump imposed these tariffs not just 97 00:05:37,000 --> 00:05:40,159 Speaker 1: on the Chinese, but on other countries as well, that's 98 00:05:40,200 --> 00:05:43,040 Speaker 1: a really easy argument to believe in. I mean, I've 99 00:05:43,040 --> 00:05:46,280 Speaker 1: spoken to lots of Asian diplomats, you know, in the 100 00:05:46,320 --> 00:05:49,960 Speaker 1: past couple of weeks, and there's a real degree of bewilderment, 101 00:05:50,040 --> 00:05:53,719 Speaker 1: Stephen about why the Trump administration would go after all 102 00:05:53,800 --> 00:05:57,000 Speaker 1: countries and not necessarily just target China the way that 103 00:05:57,080 --> 00:06:00,240 Speaker 1: we have seen in the Biden administration, so Beijing has 104 00:06:00,279 --> 00:06:02,680 Speaker 1: been able to win and score rather i should say, 105 00:06:02,720 --> 00:06:07,000 Speaker 1: political points with its neighbors as well, not just trying 106 00:06:07,040 --> 00:06:09,160 Speaker 1: to create that narrative back at home. 107 00:06:09,760 --> 00:06:12,760 Speaker 2: Should we expect a shift in tone because neither the 108 00:06:12,839 --> 00:06:15,479 Speaker 2: US nor China have are particularly nice about each other 109 00:06:15,520 --> 00:06:18,920 Speaker 2: over the past couple of weeks and months. But now 110 00:06:18,920 --> 00:06:22,240 Speaker 2: that we're into a further negotiation phase, when this pause 111 00:06:22,320 --> 00:06:25,000 Speaker 2: is in place, should we expect the tone of those 112 00:06:25,040 --> 00:06:26,280 Speaker 2: comments to change. 113 00:06:27,000 --> 00:06:28,840 Speaker 1: I think you will see some of that. A lot 114 00:06:28,920 --> 00:06:31,560 Speaker 1: depends on what happens in the next ninety days. You know, 115 00:06:31,600 --> 00:06:34,839 Speaker 1: there is some speculation that these charps will just keep 116 00:06:34,839 --> 00:06:39,840 Speaker 1: getting postponed, and that allows the Trump administration to say 117 00:06:39,880 --> 00:06:43,440 Speaker 1: they're consistently talking and trying to get to some type 118 00:06:43,480 --> 00:06:46,800 Speaker 1: of deal or negotiation. But you know, tariffs are higher 119 00:06:46,839 --> 00:06:50,719 Speaker 1: than they were when before Trump became president, so that 120 00:06:50,839 --> 00:06:53,760 Speaker 1: is something that will definitely have an impact. I think 121 00:06:53,800 --> 00:06:55,560 Speaker 1: going forward as well, there are going to be key 122 00:06:55,600 --> 00:06:59,360 Speaker 1: issues that you will see as part of the negotiations 123 00:06:59,440 --> 00:07:02,479 Speaker 1: become fact is in whether this deal unravels or not. 124 00:07:02,560 --> 00:07:04,159 Speaker 1: One of the things I'm quite focused on in the 125 00:07:04,160 --> 00:07:08,359 Speaker 1: next couple of days is the fentanyl agreement or you 126 00:07:08,360 --> 00:07:12,480 Speaker 1: know what that actually means, because there are still tariffs 127 00:07:12,480 --> 00:07:16,720 Speaker 1: attached to the negotiations on fentanyl tariffs side that I 128 00:07:16,800 --> 00:07:19,600 Speaker 1: think the Chinese would like to see removed. But you know, 129 00:07:19,800 --> 00:07:23,080 Speaker 1: Beijing consistently says that it is not to blame for 130 00:07:23,200 --> 00:07:26,080 Speaker 1: the US drug epidemic, that it's done as much as 131 00:07:26,080 --> 00:07:28,360 Speaker 1: it can, and it feels that the US needs to 132 00:07:28,360 --> 00:07:31,480 Speaker 1: address this problem at home on the American side. They 133 00:07:31,600 --> 00:07:35,920 Speaker 1: see this as another way that the Chinese sort of 134 00:07:36,080 --> 00:07:39,040 Speaker 1: using what they have in terms of, you know, not 135 00:07:39,160 --> 00:07:43,520 Speaker 1: clamping down on Chinese chemical companies that are using back 136 00:07:43,560 --> 00:07:46,280 Speaker 1: door ways to get into the US via Mexico and 137 00:07:46,360 --> 00:07:49,040 Speaker 1: selling drugs that they believe are killing, which are killing 138 00:07:49,200 --> 00:07:52,080 Speaker 1: thousands of Americans. So that's one thing I think that 139 00:07:52,120 --> 00:07:55,120 Speaker 1: will become a key focus going forward in the trade talks. 140 00:07:55,360 --> 00:07:58,400 Speaker 2: Are there lessons to be learned from for other countries 141 00:07:58,440 --> 00:08:01,160 Speaker 2: on how to handle Donald try from the way that 142 00:08:01,320 --> 00:08:02,400 Speaker 2: China has approached this. 143 00:08:02,520 --> 00:08:04,240 Speaker 4: Could anyone else pull this off? 144 00:08:04,640 --> 00:08:07,480 Speaker 1: Not in Asia? And nobody has the might and scale 145 00:08:07,520 --> 00:08:13,480 Speaker 1: of the Chinese economy. Nobody has the ability to politically 146 00:08:13,640 --> 00:08:18,600 Speaker 1: or economically withstand these tariffs. The way that the Chinese do, 147 00:08:19,280 --> 00:08:21,960 Speaker 1: and I think you've already seen that with the flurry 148 00:08:22,160 --> 00:08:26,320 Speaker 1: of meetings and politicians wanting to meet with Donald Trump 149 00:08:26,360 --> 00:08:31,000 Speaker 1: and negotiate in some way these trade negotiations, and from 150 00:08:31,040 --> 00:08:34,520 Speaker 1: India to Japan to South Korea, all of these countries 151 00:08:34,600 --> 00:08:37,280 Speaker 1: have to some extent been lining up to try and 152 00:08:37,320 --> 00:08:41,040 Speaker 1: get a better deal. And I think that is the 153 00:08:41,080 --> 00:08:46,480 Speaker 1: harsh reality of geopolitics and the way economies work. The 154 00:08:46,600 --> 00:08:48,839 Speaker 1: Chinese can do this, but not anybody else. 155 00:08:49,200 --> 00:08:52,320 Speaker 2: Okay, Korashimavaswani, Bloomberg Opinion columnist, Thank you very much for 156 00:08:52,400 --> 00:08:55,120 Speaker 2: joining us, and you can read Karashima's latest work at 157 00:08:55,120 --> 00:08:59,840 Speaker 2: Bloomberg dot com slash opinion. For more explanations like this 158 00:09:00,080 --> 00:09:02,800 Speaker 2: from our team of three thousand journalists and analysts around 159 00:09:02,800 --> 00:09:05,280 Speaker 2: the world, go to Bloomberg dot com slash explainers. 160 00:09:06,600 --> 00:09:09,360 Speaker 4: I'm Stephen Carol. This is here's why. I'll be back 161 00:09:09,400 --> 00:09:11,320 Speaker 4: next week with more. Thanks for listening.