Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: The standoff between the US and China continues to escalate,
Speaker 2: which is leading to economic uncertainty worldwide. Bloomberg News now
Speaker 2: reporting China is expanding the ongoing trade war.
Speaker 1: It does not seem like we're getting any kind of
Speaker 1: state visit or to tant anytime soon, or even high
Speaker 1: level talks.
Speaker 2: In the last two weeks, the US has placed tariffs
Speaker 2: of one hundred and forty five percent on Chinese exports,
Speaker 2: and China has retaliated with tariffs of one hundred and
Speaker 2: twenty five percent and export restrictions on critical rare earth minerals.
Speaker 3: China wants to make a deal, they just don't know
Speaker 3: how quite to go about it.
Speaker 1: You know.
Speaker 2: It's one of those things that.
Speaker 3: Are not quite proud people, and President She's a proud man.
Speaker 1: At the moment, it doesn't seem to be working out,
Speaker 1: I think in the way in which President Trump may
Speaker 1: have anticipated or hoped that it would.
Speaker 2: Jennifer Welch helped lead China policy at the National Security
Speaker 2: Council during the first Trump administration and also under President Biden. Today,
Speaker 2: she's chief geoeconomics analyst for Bloomberg economics.
Speaker 1: They think President Trump's mo is to build pressure. There's
Speaker 1: a real contrast of approaches here. President Trump prides himself
Speaker 1: on his unpredictability as well as his hardball tactics right
Speaker 1: whereas Beijing, in particular Chinese President She Jumping, is a
Speaker 1: very methodical player when it comes to negotiations. They like structure,
Speaker 1: having a clear idea of what the agenda's going to
Speaker 1: be so they can prepare for it. And I think
Speaker 1: President Trump's unpredictability really puts them on the back heel
Speaker 1: in a lot of ways.
Speaker 2: For its part, China has signaled its open to talks.
Speaker 2: On Wednesday, Beijing appointed a point person for negotiations, but
Speaker 2: sources close to China's government have told Bloomberg that President
Speaker 2: She wants to see the White House approach talks with
Speaker 2: more respect, and it wants the Trump administration to adopt
Speaker 2: a more consistent position on tariffs. It begs the question,
Speaker 2: with the world's two largest economies in a standoff, which
Speaker 2: leader President Trump or President She will blink first.
Speaker 3: China is not going to engage in negotiations until it
Speaker 3: feels the United States has shown some sincerity.
Speaker 2: John lou Is Bloomberg's executive editor for Greater China. He's
Speaker 2: based in Beijing.
Speaker 3: I think the main concern for the Chinese side is
Speaker 3: that they go into some sort of back and forth
Speaker 3: with Washington and that whatever agreements they reach are either
Speaker 3: scuttled or the US goes back on them. The US,
Speaker 3: the Trump administration does something to embarrass not only the
Speaker 3: Chinese government but also she and so that I think
Speaker 3: is the number one concern for the Chinese side, and
Speaker 3: they want to make sure that does not happen.
Speaker 2: I'm David Gera, and this is the big take from
Speaker 2: Bloomberg News today on the show. What it will take
Speaker 2: for President's Trump and She to come to the negotiating table,
Speaker 2: How the current state of China, this economy, impacts its
Speaker 2: positioning in the trade war, and why hardball tactics are
Speaker 2: unlikely to work this time around. When preston Trump anoun's
Speaker 2: sweeping tariffs on about sixty trading partners earlier this month,
Speaker 2: he made good on a big campaign promise on day one.
Speaker 3: We will throw out Bidenomics and we will reinstate Maganomics. Maganomics.
Speaker 3: We will go right after China. We will not rely
Speaker 3: on them one bit.
Speaker 2: And while China has long been a target of Trump's ire,
Speaker 2: the size and scope of these tariffs caught Beijing by surprise,
Speaker 2: but Bloomberg' John lou says it shouldn't have come as
Speaker 2: a shock.
Speaker 3: I was surprised that there was surprise because I think
Speaker 3: what Donald Trump did was exactly what he said he
Speaker 3: was going to do. Right he said on the campaign trail,
Speaker 3: He's going to take tariffs on China to sixty some percent.
Speaker 3: After he took I think there was a bit of
Speaker 3: optimism here in China that that would not happen, but
Speaker 3: that's exactly what he did. The Chinese, for their part,
Speaker 3: made very clear that if tariffs came into effect that
Speaker 3: they would hit back. And from what I can gleanm
Speaker 3: the US was itself relatively surprised that the Chinese retaliated
Speaker 3: as proactively and aggressively as they did.
Speaker 2: Here in the US. This is all over the place,
Speaker 2: in newspapers and on television. They're in China. How much
Speaker 2: is this a subject of conversation? Is it everywhere as well?
Speaker 3: It's everywhere. It is the thing everybody is talking about.
Speaker 3: There's an overwhelming country wide consensus or sort of broad
Speaker 3: support for China to fight this, and so these tariffs
Speaker 3: have made you know, Shiji being very popular for retaliating.
Speaker 3: It's seen, I think, a broad swelling of patriotic sentiment,
Speaker 3: support for the government, and there is this feeling on
Speaker 3: the ground here amongst ordinary people, business owners that China
Speaker 3: is being wrong by these turriffs. I think the additional
Speaker 3: thing here, though, is there is a sense of foreboding.
Speaker 3: I think there is a sense of what does it
Speaker 3: mean for China economically and could this get even worse?
Speaker 2: John? On Wednesday, China's National Bureau of Statistics reported that
Speaker 2: the country's gross domestic product grew five point four percent
Speaker 2: in the first quarter from a year ago. That's more
Speaker 2: than was expected. How does China's economic position play into
Speaker 2: how it's approaching this trade war.
Speaker 3: I think the longer China can keep the economy ticking along,
Speaker 3: the longer China can hold out. And I think ultimately
Speaker 3: this is sort of a game of chicken, if you will,
Speaker 3: but also I think a game of endurance, and so
Speaker 3: whether or not economically China can keep growth up, I
Speaker 3: think that'll be a determining factor in how this trade
Speaker 3: war unfolds. And you mentioned the GDP data was better
Speaker 3: than expected for the first quarter. I don't know that
Speaker 3: that is super telling of the actual economic conditions here
Speaker 3: on the ground. There was actually a lot of exports
Speaker 3: in the first quarter that will pull ahead that companies
Speaker 3: in the US. Buyers in the US actually moved their
Speaker 3: orders ahead and sort of built up their inventories in
Speaker 3: anticipation that there would be higher tariffs on Chinese goods,
Speaker 3: and so that might be actually hiding some of the
Speaker 3: underlying weakness in the Chinese economy. We've had a terrible
Speaker 3: property crisis that has yet to be resolved. We've had
Speaker 3: weak consumer sentiment, weak consumer spending. The government has promised
Speaker 3: and has already started to roll out lots of stimulus
Speaker 3: measures to try and get households spending again, get companies
Speaker 3: investing again. And I would expect that the government will
Speaker 3: do more of that and at a greater magnitude as
Speaker 3: we go forward, as the impact of these tariffs are
Speaker 3: felt more broadly.
Speaker 2: That's going to determine how negotiations between the US and
Speaker 2: China play out. But another factor will be personality. Bloomberg's
Speaker 2: Jennifer Welch, who worked in the first Trump administration, thinks
Speaker 2: Trump's long standing emphasis on the art of the deal
Speaker 2: will play a huge role.
Speaker 1: From his perspective. He is the deal maker, right, He
Speaker 1: plays hardball. He is very much empowered at home, and
Speaker 1: I think he's trying to leverage that to bring a
Speaker 1: lot of confidence into these negotiations as sort of coming
Speaker 1: in with a mandate from the American people and really
Speaker 1: trying to utilize the fullest extent of America's comprehensive national
Speaker 1: power here and sort of going further than most presidents
Speaker 1: have in the past to challenge the limits of that.
Speaker 1: That's how I think he is approaching not just China,
Speaker 1: but negotiations with all these partners.
Speaker 2: What role does pride play in these conversations? You have
Speaker 2: two leaders here who are extremely proud individuals. I think
Speaker 2: it's fair to say, how does that affect or shape
Speaker 2: talks of this magnitude.
Speaker 1: I think that's one of the main hurdles to talks
Speaker 1: really taking off in a serious way at this point
Speaker 1: in time. Obviously, there's a lot of pain on both sides.
Speaker 1: There's the potential for even deeper pain as these terrorsts
Speaker 1: start to bite, and yet we're not really seeing a
Speaker 1: lot of progress in terms of negotiations, and in fact,
Speaker 1: each side still seems to be saying that the ball
Speaker 1: is in the other side's court, and I think a
Speaker 1: main reason for that is because neither of them wants
Speaker 1: to look weak, right. President Trump, especially after pausing on
Speaker 1: reciprocal terarifts and then even on the electronics exemptions, has
Speaker 1: been kind of pushing back in other ways to demonstrate
Speaker 1: he's still very strong on trade. And I think that's
Speaker 1: especially important for him when it comes to China because
Speaker 1: of the legacy of his campaign promises there and the
Speaker 1: legacy of his first term of wanting to appear tough
Speaker 1: on Beijing. I think likewise, for President She Jim Paying
Speaker 1: he feels as the leader of the second largest economy
Speaker 1: in the world, they need to demonstrate that they can't
Speaker 1: be pushed around by the United States anymore. They took
Speaker 1: those prior tariff hikes on the Chin and have to
Speaker 1: demonstrating their willingness to stand up for China.
Speaker 2: I think we're familiar with President Trump's personality, but President
Speaker 2: she is much more of an enigma for American audiences
Speaker 2: and John, I wonder if you could paint a picture
Speaker 2: for us of him as a leader, how he's responded,
Speaker 2: and what that tells us just about the way he
Speaker 2: approaches leading his country.
Speaker 3: I think he is a leader that projects stability, that
Speaker 3: projects forthrightness and standing his place, not making sudden turns
Speaker 3: in policy. But at the same time, I think when
Speaker 3: push comes to shove, he will make dramatic changes. During
Speaker 3: COVID China had this COVID zero policy. It put a
Speaker 3: tremendous burden on the economy, on the average citizen. And
Speaker 3: then at the end of twenty twenty two, we started
Speaker 3: seeing protests, people going on the street wanting the government
Speaker 3: to end the COVID zero policy. And because of that,
Speaker 3: he did almost overnight, just did away with that policy.
Speaker 3: And he is a man who is willing to make changes.
Speaker 3: But before that, I think he's shown that he's going
Speaker 3: to project strength and he's going to project stability, and
Speaker 3: that he knows where he's going and it's the right
Speaker 3: direction forward.
Speaker 2: Jennifer Welch says what President Trump may have been betting
Speaker 2: on is that China's economic situation, in particular the size
Speaker 2: of its debt, along with the housing and youth unemployment
Speaker 2: crises John mentioned, would make she bend.
Speaker 1: This is me reading the tea leaves a little bit.
Speaker 1: He may have not fully anticipated the extent to which
Speaker 1: Beijing was going to push back on this, so I
Speaker 1: think he engaged in kind of this tip for tat
Speaker 1: with Beijing to try and back them down by escalating
Speaker 1: to de escalate again. But the de escalation never happened,
Speaker 1: and now we have these extremely high terrorf rates on
Speaker 1: both sides.
Speaker 2: After the break where the US China trade war goes
Speaker 2: from here and the weapons Beijing has at its disposal
Speaker 2: to counter additional tariffs. Tensions between the US and China
Speaker 2: are fraught right now, and from the rhetoric coming out
Speaker 2: of the White House, you'd think the two have never
Speaker 2: been further apart on trade, but Bloomberg Economics, as Jennifer
Speaker 2: Welch says, Presidents Trump and She half broke her to
Speaker 2: deal before.
Speaker 1: It was inked in January twenty twenty. It's called the
Speaker 1: Phase one trade deal, and that was meant to be
Speaker 1: the starting point for what we're called Phase two negotiations
Speaker 1: that were supposed to deal with much more contentious issues
Speaker 1: around structural or forums in China that never really took off,
Speaker 1: in part because of the pandemic and in part because
Speaker 1: of deepening US China tensions. The question now is are
Speaker 1: the negotiations that may emerge out of this current round
Speaker 1: of tensions geared towards a Phase one redux where it's
Speaker 1: just going to be addressing the kind of current trade
Speaker 1: imbalance and through purchase agreements, or is it going to
Speaker 1: be trying to attack what those Phase two talks that
Speaker 1: never started were geared towards these larger structural issues. And
Speaker 1: I think different members of the administration probably have different
Speaker 1: perspectives on that. And the key question is going to
Speaker 1: be what's President Trump's view, right, And some of this
Speaker 1: may depend a little bit on the timeline to be
Speaker 1: frank right. I think one of the major incentives for
Speaker 1: him on the Phase one deal was it was inked
Speaker 1: in an election year and he probably wanted to put
Speaker 1: the US China trade war to the side and get
Speaker 1: that resolved before heading into a presidential election.
Speaker 2: Jennifer says it's important to remember that while President Trump
Speaker 2: isn't up for reelection and doesn't seem too worried about
Speaker 2: the fallout from a trade war, many of his allies
Speaker 2: in Congress are, and the midterms are right around the corner.
Speaker 1: That could be an incentive for him where maybe the ambition,
Speaker 1: so to speak, is lowered to something more like a
Speaker 1: Phase one Redux deal. But I think that's a million
Speaker 1: dollar question at this point, and it's also another reason
Speaker 1: why talks probably have nim progressed all that far as.
Speaker 2: The stalemate continues, both the US and China are eyeing
Speaker 2: other trade partners. The Trump administration has been lining up
Speaker 2: potential deals with some of China's biggest economic rivals. Some
Speaker 2: of the President's economic advisors met with leaders from Japan yesterday,
Speaker 2: and the administration has talks scheduled with South Korea and
Speaker 2: India in the coming weeks. For his part, President She
Speaker 2: has made trips to Vietnam, Cambodia, and Malaysia, and John
Speaker 2: lu says she is looking to improve China's trade relationship
Speaker 2: with the EU.
Speaker 3: Not only has Trump put these tariffs on China, but
Speaker 3: he's also put them on lots of American allies, Europe,
Speaker 3: many Southeast Asian countries, and so that gives China an
Speaker 3: opportunity to step in and to have itself be seen
Speaker 3: as a stabilizing force in the global economy as opposed
Speaker 3: to Washington d C, which Beijing will project as being
Speaker 3: unpredictable and as being not so caring about the rest
Speaker 3: of the world and concerned mostly about itself. Xijiping is
Speaker 3: in Southeast Asia this week. He's visiting Vietnam, He's visiting Malaysia.
Speaker 3: In Vietnam, he called on the Vietnamese to partner with
Speaker 3: China to resist the unilateral bullying that's happening in the world,
Speaker 3: which is of course availed reference to the United States.
Speaker 3: There's been reports that we're going to get many European
Speaker 3: leaders visiting Beijing later this year for a summit. That
Speaker 3: would suggest another opportunity for China to enhance its relationship
Speaker 3: with Europe. Whether or not other countries wholeheartedly embrace China,
Speaker 3: I think, is a different question. In Asia, for example,
Speaker 3: you have places like Japan, India, the Philippines, other Southeast
Speaker 3: Asian countries that have territorial disputes with China, and so
Speaker 3: they are not going to be embracing China that quickly.
Speaker 3: There's going to be suspicion in those relationships. Same with Europe.
Speaker 3: China has supported Russia and its war invasion of Ukraine diplomatically, rhetorically, economically,
Speaker 3: and so that is put many European countries off, and
Speaker 3: so there's going to be suspicion as China tries to
Speaker 3: strengthen these relationships.
Speaker 2: You characterize this as a game of chicken, and I'm
Speaker 2: wondering sort of how long China has here, how long
Speaker 2: the runway is for President She to hold out on
Speaker 2: negotiating before the situation becomes difficult for China economically, any
Speaker 2: sense of that At this point.
Speaker 3: I would say the runway for She in terms of
Speaker 3: that game of chicken is very long. Without a doubt,
Speaker 3: there is broad public support for China to fight back,
Speaker 3: and I think that means people are willing to take
Speaker 3: a little bit more pain if it means that that's
Speaker 3: what they need to do to contribute to the fight
Speaker 3: against the United States. And the other thing I would
Speaker 3: say is the Chinese government has a history of enduring
Speaker 3: difficult periods where they've placed additional burdens on local companies'
Speaker 3: local households. COVID is a great example of that. You know,
Speaker 3: I don't know of many countries where the government could
Speaker 3: have imposed lockdowns like they did here in China, and
Speaker 3: so I do think those points suggest that they can
Speaker 3: play this game for quite a while.
Speaker 2: Meaning President Trump might not get that phone call anytime soon.
Speaker 3: And the reason for that is there's a very different
Speaker 3: cultural dynamic at work, where the Chinese believe very strongly
Speaker 3: that at a working level that she will appoint somebody,
Speaker 3: that Trump will appoint somebody, and those two individuals will
Speaker 3: go back and forth and back and forth and back
Speaker 3: and forth and work out all the details of a deal.
Speaker 3: And only after that deal has been finalized and everybody's
Speaker 3: happy with it, only then will Hijinping appear to shake
Speaker 3: hands and sign something. President Trump really just wants to
Speaker 3: get she on the phone and try and work something
Speaker 3: out person to person, one on one, and it's just
Speaker 3: not the way the Chinese system works. It's not the
Speaker 3: way that Chijinping works.
Speaker 2: So that big question who's going to blink first? I
Speaker 2: put it to both Jennifer Welch in Washington and John
Speaker 2: Lou in Beijing.
Speaker 3: The first person to blink is going to immediately get
Speaker 3: a quick response from the other side. So if President
Speaker 3: Trump blinks first, you're going to get something affirmative from
Speaker 3: the Chinese side because they want out of this just
Speaker 3: as badly. If the Chinese blink, I think you probably
Speaker 3: will hear this great sigh of relief from Washington, DC.
Speaker 1: My bet would be that it is going to be
Speaker 1: neither side overtly obviously blinking. I think conversations are going
Speaker 1: to start in a quieter way at more working levels,
Speaker 1: to set this stage eventually for a leader level conversation
Speaker 1: because of sort of their mutual interest in guarding their
Speaker 1: respective pride. So that's my prediction. We'll see when it's
Speaker 1: upe actually occurring.
Speaker 2: This is the Big Take from bloom News. I'm David Gura.
Speaker 2: This episode was produced by David Fox, Rachel Lewis Chrisky,
Speaker 2: and our deputy executive producer, Julia Weaver. It was edited
Speaker 2: by Patty Hirsch, John Low, Jennifer Welch, and Chris Antsy.
Speaker 2: It was fact checked by Andreana Tapia and mixed and
Speaker 2: sound designed by Alex Sagura. Our senior producer is Naomi Shaven,
Speaker 2: Our senior editor is Elizabeth Ponso. Our executive producer is
Speaker 2: Nicole Beemster Boor. Sage Bauman is Bloomberg's head of Podcasts.
Speaker 2: If you liked this episode, make sure to subscribe and
Speaker 2: review The Big Take wherever you listen to podcasts. It
Speaker 2: helps people find the show, thanks for listening. We'll be
Speaker 2: back tomorrow.