Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: I'm Stephen Caroll, and this is Here's Why, where we
Speaker 2: take one new story and explain it in just a
Speaker 2: few minutes with our experts here at Bloomberg. What a
Speaker 2: difference a few weeks can make. This was on the
Speaker 2: tenth of April.
Speaker 3: Well, we'll see what happens with China. They've really taken
Speaker 3: advantage of our country for a long period of time.
Speaker 3: They've grouped us off. How people stood for it, sitting
Speaker 3: in my position is not even believable.
Speaker 4: Fast forward just over a month to the twelfth of May.
Speaker 3: We achieved a total resehit with China after productive talks
Speaker 3: in Geneva. Both sides now agreed to reduce the tariffs imposed.
Speaker 3: The relationship is very, very good. I'll speak to President
Speaker 3: she may be. At the end of the week.
Speaker 2: After weeks of escalation, the United States and China agreed
Speaker 2: to a ninety day truce, slashing tariffs on each other's
Speaker 2: goods that had spiraled to over one hundred percent. The
Speaker 2: Chinese president has struck a defiant tone ever since Trump
Speaker 2: began raising US tariffs to their highest level in a century.
Speaker 2: In contrast to other world leaders. Cheatingping has refused Trump's
Speaker 2: repeated calls to get on the phone with him, and
Speaker 2: speaking the day after the deal was announced, he wasn't
Speaker 2: toning down his message.
Speaker 4: There are no winners in tariff wars or trade wars.
Speaker 4: Bullying or hegeminism only leads to self isolation.
Speaker 2: So here's why China's trade war strategy is working. Bloomberg
Speaker 2: opinion columnist Karorishima of Aswani joins me. Now for more, Karishma,
Speaker 2: how would you characterize the approach that Cheatingping has taken
Speaker 2: to Donald Trump since his return to the White House.
Speaker 1: I think it's been tough. I think it's been unflinching.
Speaker 1: I think we've seen a lot of nationalists rhetoric out
Speaker 1: of both governments, but in particular from China. When the
Speaker 1: trade tariffs were first announced, we saw sort of tit
Speaker 1: for tat action from Beijing in a way that at
Speaker 1: the time most political analysts and economic analysts had sort
Speaker 1: of said, oh, that won't happen, because China can't afford
Speaker 1: the economic hit of consistently trying to match the tariffs
Speaker 1: on the American side. Instead of a sort of more
Speaker 1: conciliatory approach, we did see a very firm stance from
Speaker 1: Sijenping and Chinese officials, and I think that's paid off
Speaker 1: because I think what that's shown the Americans is that
Speaker 1: the Chinese were not going to back down and were
Speaker 1: not going to come to the negotiating table just because
Speaker 1: there had been tariffs slapped on them by the US.
Speaker 2: When things were escalating rapidly. In April, you quite presciently
Speaker 2: wrote that the Chinese president wouldn't blink first in the
Speaker 2: trade war.
Speaker 4: What led you to that conclusion.
Speaker 1: I think that China in some respects has as much,
Speaker 1: if not more, to lose when it comes to political
Speaker 1: legitimacy and credibility with its own people. Both leaders are
Speaker 1: playing to their domestic audiences, right. So in China, on
Speaker 1: the one hand, you have a political system where the
Speaker 1: Chinese Communist Party doesn't need to win elections like the
Speaker 1: Republicans do, so even with economic pain that was foreshadowed
Speaker 1: as a result of the trade tariffs, they could galvanize
Speaker 1: and mobilize their people and citizens there and sort of
Speaker 1: consistently hammer on that narrative that the US is trying
Speaker 1: to keep China down. It's a really effective narrative. And
Speaker 1: it's been used before. But I think the other reason
Speaker 1: why I felt at the time that the Chinese wouldn't
Speaker 1: blink first is because they see this as part of
Speaker 1: a sort of historical arc, which is that it's China's
Speaker 1: moment to rise while the West is in decline. And
Speaker 1: that's something we've heard consistently from Chinese officials time and
Speaker 1: time again, not just with regards to the trade war,
Speaker 1: but other aspects of the geopolitical squabble between the two sides,
Speaker 1: and I think had they backed down first, it would
Speaker 1: have been counter productive to that narrative. We've seen measures
Speaker 1: on the Chinese side to address prolonged economic issues in
Speaker 1: a way to sort of prepare for the impact of
Speaker 1: the trade war. I'm not saying that there aren't real
Speaker 1: issues at play here, but I think that China is
Speaker 1: more willing to sort of suffer the long term economic
Speaker 1: costs in order to achieve political goals.
Speaker 4: But does that approach, Krishma have limits?
Speaker 2: Is there a place where the risks of the Chinese
Speaker 2: economy could be too great if this strategy is pursued
Speaker 2: long term?
Speaker 4: Well?
Speaker 1: Indeed, and I think the outcome of the weekend's discussions
Speaker 1: will be seen as productive on both sides, and it's
Speaker 1: something that the Chinese definitely wanted as well. And the
Speaker 1: fact that it happened in sort of neutral place they
Speaker 1: could save face. You know, they're not going to the
Speaker 1: United States in any way. Now you also have comments
Speaker 1: from US officials saying we don't necessarily wanted decoupling. That's
Speaker 1: a huge win for the Chinese because that's something they've
Speaker 1: kept saying from the start and throughout this entire trade
Speaker 1: war during the Trump administration, this one and the previous
Speaker 1: Trump administration when you know, arguably all of these tensions
Speaker 1: first began. The Chinese have consistently said that they are
Speaker 1: the champions and upholders of the multilateral rules based order.
Speaker 4: And given the.
Speaker 1: Fact that you know, Trump imposed these tariffs not just
Speaker 1: on the Chinese, but on other countries as well, that's
Speaker 1: a really easy argument to believe in. I mean, I've
Speaker 1: spoken to lots of Asian diplomats, you know, in the
Speaker 1: past couple of weeks, and there's a real degree of bewilderment,
Speaker 1: Stephen about why the Trump administration would go after all
Speaker 1: countries and not necessarily just target China the way that
Speaker 1: we have seen in the Biden administration, so Beijing has
Speaker 1: been able to win and score rather i should say,
Speaker 1: political points with its neighbors as well, not just trying
Speaker 1: to create that narrative back at home.
Speaker 2: Should we expect a shift in tone because neither the
Speaker 2: US nor China have are particularly nice about each other
Speaker 2: over the past couple of weeks and months. But now
Speaker 2: that we're into a further negotiation phase, when this pause
Speaker 2: is in place, should we expect the tone of those
Speaker 2: comments to change.
Speaker 1: I think you will see some of that. A lot
Speaker 1: depends on what happens in the next ninety days. You know,
Speaker 1: there is some speculation that these charps will just keep
Speaker 1: getting postponed, and that allows the Trump administration to say
Speaker 1: they're consistently talking and trying to get to some type
Speaker 1: of deal or negotiation. But you know, tariffs are higher
Speaker 1: than they were when before Trump became president, so that
Speaker 1: is something that will definitely have an impact. I think
Speaker 1: going forward as well, there are going to be key
Speaker 1: issues that you will see as part of the negotiations
Speaker 1: become fact is in whether this deal unravels or not.
Speaker 1: One of the things I'm quite focused on in the
Speaker 1: next couple of days is the fentanyl agreement or you
Speaker 1: know what that actually means, because there are still tariffs
Speaker 1: attached to the negotiations on fentanyl tariffs side that I
Speaker 1: think the Chinese would like to see removed. But you know,
Speaker 1: Beijing consistently says that it is not to blame for
Speaker 1: the US drug epidemic, that it's done as much as
Speaker 1: it can, and it feels that the US needs to
Speaker 1: address this problem at home on the American side. They
Speaker 1: see this as another way that the Chinese sort of
Speaker 1: using what they have in terms of, you know, not
Speaker 1: clamping down on Chinese chemical companies that are using back
Speaker 1: door ways to get into the US via Mexico and
Speaker 1: selling drugs that they believe are killing, which are killing
Speaker 1: thousands of Americans. So that's one thing I think that
Speaker 1: will become a key focus going forward in the trade talks.
Speaker 2: Are there lessons to be learned from for other countries
Speaker 2: on how to handle Donald try from the way that
Speaker 2: China has approached this.
Speaker 4: Could anyone else pull this off?
Speaker 1: Not in Asia? And nobody has the might and scale
Speaker 1: of the Chinese economy. Nobody has the ability to politically
Speaker 1: or economically withstand these tariffs. The way that the Chinese do,
Speaker 1: and I think you've already seen that with the flurry
Speaker 1: of meetings and politicians wanting to meet with Donald Trump
Speaker 1: and negotiate in some way these trade negotiations, and from
Speaker 1: India to Japan to South Korea, all of these countries
Speaker 1: have to some extent been lining up to try and
Speaker 1: get a better deal. And I think that is the
Speaker 1: harsh reality of geopolitics and the way economies work. The
Speaker 1: Chinese can do this, but not anybody else.
Speaker 2: Okay, Korashimavaswani, Bloomberg Opinion columnist, Thank you very much for
Speaker 2: joining us, and you can read Karashima's latest work at
Speaker 2: Bloomberg dot com slash opinion. For more explanations like this
Speaker 2: from our team of three thousand journalists and analysts around
Speaker 2: the world, go to Bloomberg dot com slash explainers.
Speaker 4: I'm Stephen Carol. This is here's why. I'll be back
Speaker 4: next week with more. Thanks for listening.