1 00:00:00,240 --> 00:00:07,200 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,119 --> 00:00:11,880 Speaker 2: I have a great relationship with Presidency. I expect to 3 00:00:11,880 --> 00:00:14,960 Speaker 2: be able to make a good deal with him, and 4 00:00:15,000 --> 00:00:16,439 Speaker 2: he'll make a good I want him to make a 5 00:00:16,440 --> 00:00:18,800 Speaker 2: good deal for China, but it's got to be fair. 6 00:00:19,239 --> 00:00:22,600 Speaker 1: Ahead of a high stakes meeting with Chinese President Shijenping 7 00:00:22,720 --> 00:00:26,000 Speaker 1: next week, US President Donald Trump said he looks forward 8 00:00:26,040 --> 00:00:27,120 Speaker 1: to making a trade deal. 9 00:00:27,440 --> 00:00:29,520 Speaker 2: Certainly, there are a lot of people that are waiting 10 00:00:29,560 --> 00:00:32,280 Speaker 2: for it, and maybe it won't happen. Maybe it won't happen. 11 00:00:32,400 --> 00:00:37,480 Speaker 2: Things can happen where for instance, maybe somebody will say 12 00:00:37,560 --> 00:00:40,040 Speaker 2: I don't want to meet it's too nasty, but it's 13 00:00:40,080 --> 00:00:41,800 Speaker 2: really not nasty. It's just business. 14 00:00:42,520 --> 00:00:45,199 Speaker 1: If the meeting on the sidelines of the annual Apex 15 00:00:45,240 --> 00:00:48,360 Speaker 1: summit goes as planned, it would be Trump and She's 16 00:00:48,479 --> 00:00:52,680 Speaker 1: first in person conversation since Trump began his second term 17 00:00:53,000 --> 00:00:56,800 Speaker 1: and launched a trade war that's upended the relationship between 18 00:00:56,840 --> 00:00:58,760 Speaker 1: the world's two largest economies. 19 00:01:00,040 --> 00:01:03,200 Speaker 3: U US went from negligible tariffs on China to ten percent, 20 00:01:03,520 --> 00:01:05,959 Speaker 3: then twenty, then fifty four, then one oh four, then 21 00:01:05,959 --> 00:01:06,840 Speaker 3: one forty five. 22 00:01:07,319 --> 00:01:10,559 Speaker 1: There's no shortage of sticking points in a potential trade 23 00:01:10,600 --> 00:01:14,120 Speaker 1: deal between the US and China, but Bloomberg's Daniel ten Kate, 24 00:01:14,360 --> 00:01:18,000 Speaker 1: Executive editor of Government and Economics in Asia, says he's 25 00:01:18,040 --> 00:01:21,880 Speaker 1: watching one critical element of these negotiations closely. 26 00:01:23,200 --> 00:01:27,640 Speaker 3: As long as China agrees not to really disrupt the 27 00:01:27,640 --> 00:01:31,679 Speaker 3: flow of rareth magnets, then you could see that they 28 00:01:31,720 --> 00:01:34,880 Speaker 3: could come to some sort of agreement where they extend 29 00:01:34,959 --> 00:01:36,399 Speaker 3: this tentative truce. 30 00:01:37,080 --> 00:01:40,480 Speaker 1: When China announced sweeping new controls on its exports of 31 00:01:40,600 --> 00:01:44,760 Speaker 1: rare earth's earlier this month, Treasury Secretary Scott Bessentt accused 32 00:01:44,840 --> 00:01:48,320 Speaker 1: Beijing of pointing a bazooka at the global supply chain. 33 00:01:49,000 --> 00:01:52,280 Speaker 1: Trump threatened to call off talks the sheet altogether and 34 00:01:52,400 --> 00:01:56,240 Speaker 1: add an additional one hundred percent tariff on China, but 35 00:01:56,360 --> 00:01:59,480 Speaker 1: within forty eight hours Trump had backed off. 36 00:02:00,000 --> 00:02:02,800 Speaker 2: I want them to play the rare earth game with US, and. 37 00:02:02,720 --> 00:02:06,280 Speaker 1: On Monday, the President signed a landmark deal with Australia 38 00:02:06,480 --> 00:02:09,639 Speaker 1: to boost the supplies of rare earth as a strategic 39 00:02:09,760 --> 00:02:12,840 Speaker 1: counter to China. The deal outlines eight and a half 40 00:02:12,919 --> 00:02:16,760 Speaker 1: billion dollars worth of projects, with both nations initially committee 41 00:02:16,960 --> 00:02:19,280 Speaker 1: one billion dollars over the next six. 42 00:02:19,440 --> 00:02:21,760 Speaker 2: In about a year from now, we'll have so much 43 00:02:21,800 --> 00:02:24,960 Speaker 2: critical mineral and rarer so that you won't know what 44 00:02:25,040 --> 00:02:25,560 Speaker 2: to do with him. 45 00:02:26,160 --> 00:02:29,680 Speaker 1: His retreat was proof that the rare Earth's bazooka is 46 00:02:29,720 --> 00:02:33,160 Speaker 1: a weapon to be reckoned with and gives China serious 47 00:02:33,280 --> 00:02:35,560 Speaker 1: leverage in this trade war with the US. 48 00:02:35,919 --> 00:02:39,680 Speaker 3: Trump took his biggest swing at China and he was 49 00:02:39,680 --> 00:02:42,920 Speaker 3: forced to back down. And for Shijimping, that was a 50 00:02:42,919 --> 00:02:45,480 Speaker 3: big political win. He was the only leader in the 51 00:02:45,480 --> 00:02:49,320 Speaker 3: world who had enough ammunition to be able to force 52 00:02:50,000 --> 00:02:52,600 Speaker 3: the Americans to back down. It is a game changer, 53 00:02:52,639 --> 00:02:55,560 Speaker 3: and I think the US and China are both coming 54 00:02:55,600 --> 00:02:58,840 Speaker 3: to terms with this. You see the US realizing that 55 00:02:58,919 --> 00:03:01,400 Speaker 3: all of a sudden, China is these rights and China's 56 00:03:01,400 --> 00:03:07,600 Speaker 3: put the US on the back foot a little bit. Here. 57 00:03:13,760 --> 00:03:17,000 Speaker 1: This is the Big Take Asia from Bloomberg News. I'm Wanha. 58 00:03:17,800 --> 00:03:20,080 Speaker 1: Every week we take you inside some of the world's 59 00:03:20,080 --> 00:03:24,080 Speaker 1: biggest and most powerful economies and the markets, tycoons and 60 00:03:24,280 --> 00:03:28,880 Speaker 1: businesses that drive this ever shifting region. Today on the show, 61 00:03:29,160 --> 00:03:32,960 Speaker 1: China has dominated the rare Earth's world for decades, but 62 00:03:33,040 --> 00:03:35,760 Speaker 1: it's only now begun to make the most of that influence. 63 00:03:36,360 --> 00:03:39,480 Speaker 1: We'll look at how it's using American trade tactics to 64 00:03:39,560 --> 00:03:43,320 Speaker 1: press its rare earth's advantage and explore what weapons the 65 00:03:43,400 --> 00:03:52,720 Speaker 1: US has in its arsenal. To fight back, China introduced 66 00:03:52,760 --> 00:03:55,360 Speaker 1: new rules this month, the clamp down on the supply 67 00:03:55,560 --> 00:03:58,720 Speaker 1: and use of rare earths. Bloomberg's Dantan Kate says the 68 00:03:58,800 --> 00:04:02,040 Speaker 1: curbs go much further there then previous restrictions. 69 00:04:02,760 --> 00:04:06,640 Speaker 3: If any product contains even a trace amount of rare earth, 70 00:04:07,280 --> 00:04:12,760 Speaker 3: then China has the right to restrict that product. So 71 00:04:13,240 --> 00:04:15,880 Speaker 3: if you have zero point one percent of rarest to 72 00:04:16,000 --> 00:04:19,000 Speaker 3: make any given product in the world, you need a 73 00:04:19,080 --> 00:04:23,880 Speaker 3: license and permission from China. Previous actions China cut off 74 00:04:24,160 --> 00:04:27,560 Speaker 3: supplies of rare earth to various companies. So if you 75 00:04:27,680 --> 00:04:31,679 Speaker 3: needed rare earth to make an electric vehicle, for instance, 76 00:04:31,720 --> 00:04:34,960 Speaker 3: and you bought that from China, China was saying, you 77 00:04:35,040 --> 00:04:38,400 Speaker 3: need a license to get these rare earths, whereas before 78 00:04:38,440 --> 00:04:41,920 Speaker 3: you could freely buy them. Now, what China has done 79 00:04:42,080 --> 00:04:46,080 Speaker 3: is they're not just stopping the rare earth from getting 80 00:04:46,160 --> 00:04:49,800 Speaker 3: to those factories, but they're saying, even if you use 81 00:04:49,839 --> 00:04:52,359 Speaker 3: those rarest to make that car, if you want to 82 00:04:52,400 --> 00:04:55,160 Speaker 3: sell that car to another country, you're also going to 83 00:04:55,240 --> 00:05:00,240 Speaker 3: need permission now that just seems completely unworkable in reality, 84 00:05:00,240 --> 00:05:03,360 Speaker 3: and that's what raises questions about, Okay, are they going 85 00:05:03,480 --> 00:05:08,040 Speaker 3: to put a stop to global trade. No, that's not 86 00:05:08,080 --> 00:05:11,800 Speaker 3: in China's interest at all, but they are asserting the 87 00:05:11,880 --> 00:05:14,160 Speaker 3: right to effectively intervene whenever they want. 88 00:05:15,680 --> 00:05:18,119 Speaker 1: The rules are set to take effect later this year, 89 00:05:18,480 --> 00:05:21,839 Speaker 1: and while it's unclear how Beijing plans to enforce them, 90 00:05:22,080 --> 00:05:25,600 Speaker 1: Dan says the move shows just how powerful a weapon 91 00:05:26,040 --> 00:05:28,000 Speaker 1: rare earths can be for China. 92 00:05:28,120 --> 00:05:30,760 Speaker 3: They control a lot of the supply, somewhere in the 93 00:05:30,880 --> 00:05:34,719 Speaker 3: neighborhood of about seventy percent of that. But what China's 94 00:05:34,760 --> 00:05:37,800 Speaker 3: real advantage is that they can process the rare eer. 95 00:05:38,000 --> 00:05:40,039 Speaker 3: So once you take the rare eers out of the ground, 96 00:05:40,120 --> 00:05:43,080 Speaker 3: you still need to ship them to somewhere where they 97 00:05:43,080 --> 00:05:46,320 Speaker 3: can be processed into a material that can then be 98 00:05:46,360 --> 00:05:48,200 Speaker 3: sent to a factory that can be used to make 99 00:05:48,240 --> 00:05:50,479 Speaker 3: a phone or make a TV or something like that. 100 00:05:50,960 --> 00:05:55,720 Speaker 3: And China controls nearly all of that technology now. The 101 00:05:55,839 --> 00:05:58,840 Speaker 3: US used to be the world's largest producer of wearers, 102 00:05:59,240 --> 00:06:02,880 Speaker 3: and they let that atrophy and disappear to China back 103 00:06:02,920 --> 00:06:07,719 Speaker 3: in the eighties and nineties. So the issue is now 104 00:06:07,760 --> 00:06:12,200 Speaker 3: that the amount of rarer supply that includes no Chinese 105 00:06:12,200 --> 00:06:19,440 Speaker 3: minerals or any processing by Chinese technology using Chinese technology 106 00:06:19,960 --> 00:06:21,640 Speaker 3: is very small, and is. 107 00:06:21,560 --> 00:06:26,279 Speaker 1: It viable then for the world to somehow very quickly 108 00:06:26,360 --> 00:06:31,400 Speaker 1: establish another supply chain for wearers that doesn't rely on China. 109 00:06:31,520 --> 00:06:34,320 Speaker 3: It depends on who you talk to there. Again, I 110 00:06:34,320 --> 00:06:37,520 Speaker 3: mean Trump will say in a year, will be okay, 111 00:06:37,640 --> 00:06:41,160 Speaker 3: We'll have enough supplies, We'll be able to get the 112 00:06:41,200 --> 00:06:43,480 Speaker 3: processing up and running. In the US is doing I 113 00:06:43,560 --> 00:06:47,800 Speaker 3: mean the Pentagon has taken a steak MP Materials, which 114 00:06:47,839 --> 00:06:51,520 Speaker 3: owned the largest rarest mind in the US, which is 115 00:06:51,560 --> 00:06:55,600 Speaker 3: based in California. We've also seen the US government taking 116 00:06:55,640 --> 00:06:59,760 Speaker 3: equity stakes in some Australian producers. You have Australia pitching 117 00:06:59,760 --> 00:07:04,280 Speaker 3: ITSLF as the savior in this regard. But the problem 118 00:07:04,520 --> 00:07:06,520 Speaker 3: there is that if you talk to certain people in 119 00:07:06,560 --> 00:07:11,680 Speaker 3: the industry, they say, actually getting the technologies up to 120 00:07:11,760 --> 00:07:14,760 Speaker 3: process these heavy rare earths is not that easy. It 121 00:07:14,800 --> 00:07:17,000 Speaker 3: actually takes a lot of time to come up with 122 00:07:17,120 --> 00:07:20,440 Speaker 3: and you're starting from scratch almost because you've lost some 123 00:07:20,600 --> 00:07:23,640 Speaker 3: of the materials to do that. The issue also is 124 00:07:23,680 --> 00:07:27,600 Speaker 3: that even if you have a country like Malaysia processing 125 00:07:27,640 --> 00:07:31,080 Speaker 3: a lot of rare earth, if they're using Chinese equipment, 126 00:07:31,760 --> 00:07:35,080 Speaker 3: then China can also block those wearers from going to 127 00:07:35,160 --> 00:07:38,160 Speaker 3: the US. So the amount of the rare earth's supply 128 00:07:38,280 --> 00:07:42,880 Speaker 3: chain globally that doesn't just include minerals from China, but 129 00:07:43,040 --> 00:07:46,880 Speaker 3: also doesn't rely on Chinese technology to process those minerals, 130 00:07:47,440 --> 00:07:51,800 Speaker 3: that is very small, and that is the fundamental issue. 131 00:07:51,800 --> 00:07:57,440 Speaker 1: Now, China has spent years cultivating its rare earth industry. 132 00:07:57,960 --> 00:08:01,760 Speaker 1: Today it dominates the market as a producer and refiner 133 00:08:01,920 --> 00:08:05,520 Speaker 1: of these vital minerals, but it's only recently been trumping 134 00:08:05,600 --> 00:08:08,320 Speaker 1: the rare earth card in trade negotiations. 135 00:08:08,680 --> 00:08:11,440 Speaker 3: If you look in the nineteen eighties, China's known that 136 00:08:11,520 --> 00:08:14,720 Speaker 3: it has where dung Jopping at one point said the 137 00:08:14,720 --> 00:08:17,920 Speaker 3: Middle East has oil, China has rare earth. So they 138 00:08:17,960 --> 00:08:22,480 Speaker 3: started processing really once China emerged from the mal years 139 00:08:22,520 --> 00:08:25,520 Speaker 3: and they started opening up the country, rare earth was 140 00:08:25,520 --> 00:08:28,400 Speaker 3: one of the first industries that they really started to develop, 141 00:08:28,560 --> 00:08:31,880 Speaker 3: and you saw a lot of the rarest production moving 142 00:08:32,040 --> 00:08:35,360 Speaker 3: from the US and other places to China in the 143 00:08:35,440 --> 00:08:39,600 Speaker 3: nineties and by the two thousands, they've had a very 144 00:08:39,600 --> 00:08:43,280 Speaker 3: firm grip on the supply almost ninety ninety five percent. 145 00:08:44,000 --> 00:08:47,400 Speaker 3: Things really came to a head in twenty ten when 146 00:08:47,440 --> 00:08:50,920 Speaker 3: there was a territorial dispute with Japan, and China cut 147 00:08:50,920 --> 00:08:55,200 Speaker 3: off rare earth then, and that really spooked Japan, and 148 00:08:55,240 --> 00:09:00,559 Speaker 3: the world really had known that, Okay, we can't rely 149 00:09:00,720 --> 00:09:04,280 Speaker 3: on China anymore for supplies of rare earth. China can 150 00:09:04,400 --> 00:09:07,800 Speaker 3: just flip a switch, cut us off, and then suddenly 151 00:09:07,840 --> 00:09:10,280 Speaker 3: we don't have the building blocks we need to produce 152 00:09:10,320 --> 00:09:13,480 Speaker 3: a lot of the technology and products that are used 153 00:09:13,520 --> 00:09:17,520 Speaker 3: in the modern economy. But even after that, we're still 154 00:09:17,559 --> 00:09:20,920 Speaker 3: here fifteen years later, and China still has a stranglehold 155 00:09:20,960 --> 00:09:21,680 Speaker 3: on the world supply. 156 00:09:23,440 --> 00:09:26,880 Speaker 1: Rare earths have been central to negotiations between the US 157 00:09:26,960 --> 00:09:31,120 Speaker 1: and China since Trump relaunched his trade war earlier this year. 158 00:09:31,640 --> 00:09:34,360 Speaker 1: When Trump imposed tariffs of more than one hundred percent 159 00:09:34,480 --> 00:09:37,920 Speaker 1: back in April, she cut off crucial rare earth supplies 160 00:09:37,960 --> 00:09:40,840 Speaker 1: to the US. The resumption of rare earth shipments was 161 00:09:40,880 --> 00:09:43,680 Speaker 1: top of Trump's wish list during trade talks with China 162 00:09:43,720 --> 00:09:46,760 Speaker 1: in June. It was also a key component of the 163 00:09:46,800 --> 00:09:50,240 Speaker 1: trade truce between the two countries that's set to expire 164 00:09:50,320 --> 00:09:50,800 Speaker 1: next month. 165 00:09:51,280 --> 00:09:54,880 Speaker 3: The fundamental part of the truce is that the tariffs 166 00:09:54,960 --> 00:09:59,280 Speaker 3: go down to round fifty five percent, and in return, 167 00:09:59,480 --> 00:10:02,720 Speaker 3: the US gets enough rare earth magnets that it needs 168 00:10:03,080 --> 00:10:06,760 Speaker 3: to function to keep its factories open. The issue is 169 00:10:06,800 --> 00:10:10,480 Speaker 3: that China really wants the US to stop putting any 170 00:10:10,559 --> 00:10:14,040 Speaker 3: other measures on. China saw the deal as we want 171 00:10:14,080 --> 00:10:18,080 Speaker 3: no more export controls, we want no more punitive actions 172 00:10:18,080 --> 00:10:22,720 Speaker 3: against Chinese companies. So they saw the Commerce Department in 173 00:10:22,760 --> 00:10:25,720 Speaker 3: particular doing that and the Hawks of the United States 174 00:10:25,720 --> 00:10:29,880 Speaker 3: continuing to press ahead with that, and they basically just said, 175 00:10:30,040 --> 00:10:31,679 Speaker 3: we need to put a stop to this, and we're 176 00:10:31,679 --> 00:10:35,920 Speaker 3: going to take this opportunity to put this really big 177 00:10:35,960 --> 00:10:36,760 Speaker 3: measure in place. 178 00:10:37,440 --> 00:10:41,520 Speaker 1: China's latest moves pressing its advantage with rare earths were 179 00:10:41,559 --> 00:10:45,319 Speaker 1: met with outrage in the White House, but their tactics 180 00:10:45,400 --> 00:10:49,000 Speaker 1: taken directly from America's own manual on how to wager 181 00:10:49,120 --> 00:10:54,960 Speaker 1: trade war. After the break, well, look at how China 182 00:10:55,080 --> 00:10:58,200 Speaker 1: is trying to beat America at its own game and 183 00:10:58,200 --> 00:11:14,120 Speaker 1: how the US is retaliating. During Donald Trump's first term 184 00:11:14,160 --> 00:11:18,240 Speaker 1: in office, he dropped the hammer on China, blacklisting Chinese 185 00:11:18,280 --> 00:11:22,079 Speaker 1: telecom giants and cutting the country off from critical US 186 00:11:22,160 --> 00:11:24,960 Speaker 1: chips and software. Of course, Huawei not the only one 187 00:11:25,040 --> 00:11:28,560 Speaker 1: affected by these decisions are the blast radius in terms 188 00:11:28,559 --> 00:11:32,880 Speaker 1: of Huawei supplies pretty well. Overnight, Huawei, China's crown jewel 189 00:11:32,920 --> 00:11:35,600 Speaker 1: in tech and the world's biggest maker of telecom gear, 190 00:11:35,920 --> 00:11:40,160 Speaker 1: found itself scrambling, and so did Beijing. For all its 191 00:11:40,200 --> 00:11:43,880 Speaker 1: economic muscle, China had no real way to strike back. 192 00:11:44,440 --> 00:11:47,640 Speaker 1: Bloomberg's Dan ten Kate says that moment was a wake 193 00:11:47,720 --> 00:11:51,040 Speaker 1: up call for Chinese present Shi Jinping to look at 194 00:11:51,080 --> 00:11:54,120 Speaker 1: how the US used the law to shape export rules 195 00:11:54,240 --> 00:11:58,160 Speaker 1: and control global trade and copy that playbook. 196 00:11:58,600 --> 00:12:02,040 Speaker 3: The US basically owed China the way for doing all 197 00:12:02,080 --> 00:12:05,760 Speaker 3: of these things. And so what you saw was after 198 00:12:05,800 --> 00:12:09,840 Speaker 3: Trump's first term, Xijinping went out and he got those tools, 199 00:12:10,360 --> 00:12:13,200 Speaker 3: and in twenty twenty they passed an export control law 200 00:12:13,760 --> 00:12:16,840 Speaker 3: that gave them the ability to do everything that the 201 00:12:16,920 --> 00:12:19,679 Speaker 3: US was currently doing to them. And if you look 202 00:12:19,720 --> 00:12:23,679 Speaker 3: at the current rule, this rule that okay, if there 203 00:12:23,720 --> 00:12:26,160 Speaker 3: is even a trace amount of errors, we can control 204 00:12:26,240 --> 00:12:29,920 Speaker 3: everything that comes directly from something called the foreign Direct 205 00:12:29,920 --> 00:12:33,560 Speaker 3: Product rule, which the US passed that in nineteen fifty nine. 206 00:12:35,679 --> 00:12:39,960 Speaker 1: The Foreign Direct Product Rule, it allows the US to 207 00:12:40,000 --> 00:12:43,120 Speaker 1: ban the sale of products to foreign firms if any 208 00:12:43,200 --> 00:12:46,880 Speaker 1: part of a product is made with American intellectual property. 209 00:12:47,440 --> 00:12:50,720 Speaker 3: Over the years, the US would implement that against China. 210 00:12:51,240 --> 00:12:54,959 Speaker 3: So there was an exchange one in particular where Walter Mondale, 211 00:12:55,040 --> 00:12:57,080 Speaker 3: the Vice president of the time, went to China and 212 00:12:57,080 --> 00:13:00,840 Speaker 3: he spoke with Donghaoping in nineteen seventy, and a lot 213 00:13:00,880 --> 00:13:04,920 Speaker 3: of that conversation was around, okay, what can you sell us, 214 00:13:05,160 --> 00:13:09,480 Speaker 3: and Dung at one point expressed frustration. He said, the 215 00:13:09,600 --> 00:13:12,680 Speaker 3: Japanese and the Europeans won't even sell us a product 216 00:13:12,760 --> 00:13:16,480 Speaker 3: because it as an American component. And that principle is 217 00:13:16,559 --> 00:13:19,760 Speaker 3: essentially what China's doing today. If you have a bit 218 00:13:19,800 --> 00:13:24,839 Speaker 3: of wearers that's been manufactured through our processes, then we 219 00:13:24,960 --> 00:13:27,600 Speaker 3: assert the right to be able to control that. And 220 00:13:27,880 --> 00:13:33,960 Speaker 3: China's ultimate goal here is not necessarily to restrict trade 221 00:13:34,000 --> 00:13:37,400 Speaker 3: and try and shut down the global supply chains. It 222 00:13:37,520 --> 00:13:41,600 Speaker 3: certainly doesn't have the capability to enforce that at all, 223 00:13:42,160 --> 00:13:45,760 Speaker 3: but it does want the same tools as the US, 224 00:13:45,800 --> 00:13:48,800 Speaker 3: and it wants to show the world that, hey, we 225 00:13:48,920 --> 00:13:52,240 Speaker 3: can mess with you any time we want. We can 226 00:13:52,440 --> 00:13:55,800 Speaker 3: assert the right to come in and block you from 227 00:13:55,840 --> 00:13:56,440 Speaker 3: doing things. 228 00:14:00,400 --> 00:14:03,160 Speaker 1: Dan says, the US still has plenty of weapons of 229 00:14:03,200 --> 00:14:06,400 Speaker 1: its own, and China isn't in a good position to 230 00:14:06,480 --> 00:14:10,080 Speaker 1: fight off a sustained attack on trade. It's struggling with 231 00:14:10,200 --> 00:14:15,319 Speaker 1: manufacturing overcapacity, a slump in consumer spending, and an AILNK 232 00:14:15,360 --> 00:14:19,360 Speaker 1: property sector. Dan says it's not that America's trade measures 233 00:14:19,400 --> 00:14:23,320 Speaker 1: wouldn't be highly effective against China, it's that using them 234 00:14:23,440 --> 00:14:25,440 Speaker 1: could be risky to the US. 235 00:14:26,200 --> 00:14:30,160 Speaker 3: The US has a lot in its arsenal. The question 236 00:14:30,320 --> 00:14:33,000 Speaker 3: is what measures can the US put in place that 237 00:14:33,080 --> 00:14:38,760 Speaker 3: won't blow back on America, and that looks limited to 238 00:14:38,960 --> 00:14:44,960 Speaker 3: things like airplane parts, chip design, software, ethane, and a 239 00:14:44,960 --> 00:14:49,640 Speaker 3: few other things that China needs that the US has now. 240 00:14:49,840 --> 00:14:52,840 Speaker 3: The other big one is tariffs. Obviously, if Trump wanted 241 00:14:52,880 --> 00:14:55,960 Speaker 3: to put one hundred and fifty percent tariffs on Chinese 242 00:14:56,000 --> 00:15:00,440 Speaker 3: goods heading into America, that would do serious i economic 243 00:15:00,480 --> 00:15:03,840 Speaker 3: damage to China, but it would also hurt the US. 244 00:15:03,880 --> 00:15:06,680 Speaker 3: Also controls the financial system, so it could do drastic 245 00:15:06,760 --> 00:15:09,680 Speaker 3: things there, but again, anything they do on that front 246 00:15:09,720 --> 00:15:12,120 Speaker 3: will also blow back at the US. So Trump is 247 00:15:12,160 --> 00:15:15,480 Speaker 3: looking for something that he can hit China with that 248 00:15:16,160 --> 00:15:20,400 Speaker 3: wouldn't hurt the US and there's not too many great options. 249 00:15:20,520 --> 00:15:22,840 Speaker 3: He can do some things, but ultimately he wants a 250 00:15:22,880 --> 00:15:24,640 Speaker 3: deal where everybody wins. 251 00:15:24,960 --> 00:15:27,280 Speaker 1: Now, looking ahead, Trump and she will meet at the 252 00:15:27,280 --> 00:15:30,720 Speaker 1: APEX summit in South Korea next week. What are the 253 00:15:30,840 --> 00:15:32,880 Speaker 1: likely outcomes that we can expect from that? 254 00:15:33,200 --> 00:15:38,120 Speaker 3: As long as China agrees not to really disrupt the 255 00:15:38,120 --> 00:15:41,960 Speaker 3: flow of rare earth magnets, then you could see that 256 00:15:42,000 --> 00:15:44,800 Speaker 3: they could come to some sort of agreement where they 257 00:15:44,880 --> 00:15:49,480 Speaker 3: extend this tentative truce. Trump also wants the TikTok deal 258 00:15:49,600 --> 00:15:52,720 Speaker 3: completed and she needs to sign off on that, so 259 00:15:52,840 --> 00:15:55,200 Speaker 3: that's another thing that could come out of it. And 260 00:15:55,240 --> 00:15:58,440 Speaker 3: the other major thing is on soybean purchases. That's a 261 00:15:58,440 --> 00:16:04,040 Speaker 3: big constituency for the US and for Trump. So China's 262 00:16:04,040 --> 00:16:06,840 Speaker 3: not blowing soybeans anymore, and it says it can't because 263 00:16:07,080 --> 00:16:10,440 Speaker 3: the tariffs are too high. But if there's some agreement 264 00:16:10,480 --> 00:16:12,360 Speaker 3: on that, then that could also be something we see 265 00:16:12,400 --> 00:16:12,760 Speaker 3: out of that. 266 00:16:12,840 --> 00:16:17,680 Speaker 1: Meaning So it sounds like there are things that both 267 00:16:17,760 --> 00:16:21,920 Speaker 1: countries want that could still make them walk away and 268 00:16:21,960 --> 00:16:23,360 Speaker 1: say we got to win. Yeah. 269 00:16:23,440 --> 00:16:26,520 Speaker 3: I think the ultimate problem here is that the space 270 00:16:26,600 --> 00:16:29,080 Speaker 3: for a deal is very limited by all the national 271 00:16:29,480 --> 00:16:32,760 Speaker 3: security restrictions that both sides have on each other. I 272 00:16:32,800 --> 00:16:36,320 Speaker 3: think that they don't really see a deal until you 273 00:16:36,400 --> 00:16:40,360 Speaker 3: get particularly Congress and the Hawks and Washington coming to 274 00:16:40,400 --> 00:16:44,320 Speaker 3: the conclusion that it's okay to have China involved. That's 275 00:16:44,400 --> 00:16:47,720 Speaker 3: just politically very difficult to see, particularly with all the 276 00:16:47,760 --> 00:16:53,000 Speaker 3: concerns about Chinese spying, China's military mighty. You'd have to 277 00:16:53,360 --> 00:16:57,560 Speaker 3: fundamentally change the conversation in Washington now. Trump during his 278 00:16:57,640 --> 00:17:02,080 Speaker 3: first term he basically flipped the conversation on China and 279 00:17:02,120 --> 00:17:06,040 Speaker 3: turned it into a bipartisan consensus against China and for 280 00:17:06,160 --> 00:17:10,320 Speaker 3: more hawkish posture towards China. So if anyone can change 281 00:17:10,359 --> 00:17:15,479 Speaker 3: the conversation in Washington toward China, it could be Trump. 282 00:17:15,840 --> 00:17:19,280 Speaker 1: But Beijing's move to leverage its rare earth advantage has 283 00:17:19,440 --> 00:17:24,040 Speaker 1: now boxed Washington in limiting its options and raising the 284 00:17:24,080 --> 00:17:28,720 Speaker 1: possibility that this dispute may have no clear resolution, at 285 00:17:28,800 --> 00:17:30,000 Speaker 1: least not anytime soon. 286 00:17:30,720 --> 00:17:32,919 Speaker 3: If you think about the leverage that both sides have 287 00:17:33,320 --> 00:17:36,359 Speaker 3: on each other. Right now, China has this rare earth card, 288 00:17:36,880 --> 00:17:39,560 Speaker 3: so what is the US doing. They're working over time 289 00:17:39,600 --> 00:17:41,960 Speaker 3: to try and create an alternative supply chain, so they're 290 00:17:42,000 --> 00:17:45,840 Speaker 3: no longer dependent on China's doing the same thing on 291 00:17:45,920 --> 00:17:48,480 Speaker 3: their side. They're trying to maintain this advantage as much 292 00:17:48,480 --> 00:17:50,919 Speaker 3: as possible, and also look at the areas where the 293 00:17:51,040 --> 00:17:54,919 Speaker 3: US has leverage over them, particularly on high end Nvidia chips, 294 00:17:54,960 --> 00:17:56,800 Speaker 3: and they're trying to build their own chips so they're 295 00:17:56,800 --> 00:18:01,560 Speaker 3: not relying on the US. So both economies are necessarily 296 00:18:01,680 --> 00:18:05,840 Speaker 3: looking for ways to work together over the long term. 297 00:18:06,040 --> 00:18:10,640 Speaker 3: They're looking for ways to not be reliant on each other. 298 00:18:11,000 --> 00:18:14,240 Speaker 3: Neither country has any leverage on them, and that's where 299 00:18:14,280 --> 00:18:17,760 Speaker 3: they're heading. And so that dynamic doesn't lead need to 300 00:18:17,760 --> 00:18:19,800 Speaker 3: be optimistic that we're going to get a long term 301 00:18:19,840 --> 00:18:21,320 Speaker 3: conclusion to this anytime soon. 302 00:18:28,359 --> 00:18:32,000 Speaker 1: This is The Big Take Asia from Bloomberg News. I'm wanha. 303 00:18:32,119 --> 00:18:34,760 Speaker 1: To get more from The Big Take and unlimited access 304 00:18:34,800 --> 00:18:38,000 Speaker 1: to all of Bloomberg dot Com, subscribe today at Bloomberg 305 00:18:38,040 --> 00:18:41,440 Speaker 1: dot com slash podcast Offer. If you liked the episode, 306 00:18:41,560 --> 00:18:43,960 Speaker 1: make sure to subscribe and review The Big Take Asia 307 00:18:44,080 --> 00:18:47,080 Speaker 1: wherever you listen to podcasts. It really helps people find 308 00:18:47,119 --> 00:18:49,439 Speaker 1: the show. Thanks for listening, See you next time.