WEBVTT - Chad Brown Discusses Trade War

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>It is the most talked about book right now across

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<v Speaker 2>the Transatlantic Sami Keynes is wonderful at the Financial Times,

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<v Speaker 2>and she's teamed up with Adam Polson's crew at the

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<v Speaker 2>Peterson Institute. Chad Bound joins us. Chad has thought harder

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<v Speaker 2>about American trade over the last two or three decades,

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<v Speaker 2>and anyone I know. The book is How to Win

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<v Speaker 2>a Trade War? And because you know, Chad wanted to

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<v Speaker 2>do eight hundred pages, and Somia said, are you kidding me?

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<v Speaker 2>It's readable, it's approachable, it's airplane ready. How to Win

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<v Speaker 2>a Trade War? This isn't the trade economics Chad of

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<v Speaker 2>when you were a youngster at Bucknell, isn't it. What

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<v Speaker 2>does the new trade war look like?

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<v Speaker 1>Well, the new trade first, thanks, it's great to see you, Tom.

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<v Speaker 1>The new world is all about trade wars and the

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<v Speaker 1>world has fundamentally changed. Right We used to say, I,

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<v Speaker 1>as an economist, used to say, nobody wins from a

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<v Speaker 1>trade war, so you shouldn't even fight it. Well, unfortunately,

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<v Speaker 1>that's not the world that we are living in right now.

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<v Speaker 1>We have to fight the trade war. President Trump likes

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<v Speaker 1>to use tariffs in the trade war. So that's one

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<v Speaker 1>thing that you have to use. But I think what

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<v Speaker 1>we try to do in this book, and you're right,

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<v Speaker 1>it is an airplane read, but it's not even a

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<v Speaker 1>transatlantic airplane read. You can get it, you know, much

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<v Speaker 1>a couple of hours right. Figure out what's going on here.

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<v Speaker 1>It's about much more than tariffs. It's about stockpiling, it's

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<v Speaker 1>about using subsidies, it's about export restrictions. All these stuff

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<v Speaker 1>now making the headlines when.

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<v Speaker 2>William Klein and the team, the old sters at Peterson

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<v Speaker 2>Institute are thinking about this. We were giving textiles away

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<v Speaker 2>from the Carolinas to China. The distrust in America about

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<v Speaker 2>the labor component is tangible. How do we get the

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<v Speaker 2>trust of American labor back to do.

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<v Speaker 1>Trade well, I think the first thing that we have

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<v Speaker 1>to do is you have to be honest with them

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<v Speaker 1>about what the underlying problems are. Right. And yes, some

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<v Speaker 1>of the problems was the speed of the shock that

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<v Speaker 1>the United States faced with all these imports from China.

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<v Speaker 1>But that's sort of the old trade war. That was

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<v Speaker 1>the thing that we could have maybe should have dealt

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<v Speaker 1>with twenty years ago. But that's not the trade war

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<v Speaker 1>that we need to be fighting today. And so the

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<v Speaker 1>first lesson of the book is fight the right trade war.

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<v Speaker 1>The right trade war today is recognizing that China is

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<v Speaker 1>playing a fundamentally different game than the United States and

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<v Speaker 1>every other major Western economy out there. China wants a

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<v Speaker 1>world where the world outside of China is dependent on

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<v Speaker 1>China for its supply chains. But China doesn't want to

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<v Speaker 1>be dependent on the rest of the world for its

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<v Speaker 1>supply chains, So that lack of interdependence, right, China wanting

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<v Speaker 1>the rest of the world to be dependent on it

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<v Speaker 1>so that it can weaponize it sometimes as we saw

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<v Speaker 1>last year with rare earths, permanent magnets, that Nexpiria semiconductor story.

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<v Speaker 1>I think we have to be honest with the American

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<v Speaker 1>people that this is a trade war, or that actually

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<v Speaker 1>we do have to fight. It may be different from

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<v Speaker 1>what they thought, but it's the important sort of level

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<v Speaker 1>set to getting mistakes right.

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<v Speaker 3>Chad, I think I'm probably like most of our listeners

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<v Speaker 3>and viewers. I didn't even think about logistics and trade

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<v Speaker 3>and all that kind of stuff. Stuff just kind of

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<v Speaker 3>showed up on the shelves, and then the pandemic happened.

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<v Speaker 3>Then then we're like, oh, yeah, now I get it. We

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<v Speaker 3>need to pay attention to this stuff. Did we need

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<v Speaker 3>tariffs and that tariff policy to achieve maybe some of

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<v Speaker 3>our strategic goals of onshoing or near shoring.

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<v Speaker 1>So what we argue in the book is that tariffs

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<v Speaker 1>aren't a part of a part of the story. But really,

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<v Speaker 1>I think where the United States has not quite gotten

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<v Speaker 1>it right so far is the breadth of the tariffs.

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<v Speaker 1>You certainly don't need to have them on all products,

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<v Speaker 1>so strategically use them and the countries with which you

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<v Speaker 1>apply the tariffs. So if you're thinking about what's the problem, right, well,

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<v Speaker 1>we've got excessive concentration of production of certain goods, essential

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<v Speaker 1>product the American manufacturing needs, American consumers need, and it's

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<v Speaker 1>all in China. Well then it might make sense to

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<v Speaker 1>use tariffs. It's part of some other policies against China.

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<v Speaker 1>But you don't simultaneously need to impose those tariffs on

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<v Speaker 1>Europe in Japan, especially if you want those other friends

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<v Speaker 1>and partners to be working with you, because then you've

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<v Speaker 1>got them fighting a trade war, a two front trade war,

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<v Speaker 1>dealing with China, but then also having to deal with

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<v Speaker 1>you the United States, at the same time.

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<v Speaker 2>Shed bing with This is the hottest book in economics

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<v Speaker 2>right now? How do win a trade war? Can't say

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<v Speaker 2>enough about it. We're going to continue here in Optimistic

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<v Speaker 2>Guide to an Anxious Global Economy, Chad, I got two

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<v Speaker 2>ways to go here on your back, blurbs. You've got

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<v Speaker 2>my book of the summer two three years ago, Chip

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<v Speaker 2>Wars by Chris Miller of Tufts and the basic idea

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<v Speaker 2>of technology semiconductors and such. How do we prosecute a

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<v Speaker 2>trade war wrapped around the technology of Taiwan and Korea?

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<v Speaker 1>Yeah, well, that's that I think an important part of

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<v Speaker 1>the trade war story here, and I think there's at

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<v Speaker 1>least two different pieces of that that we have to confront.

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<v Speaker 1>One is and you're right, Chris's book is amazing. The

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<v Speaker 1>first is dealing with the challenge of Taiwan. Right, So

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<v Speaker 1>it is a little bit worrying that ninety plus percent

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<v Speaker 1>of global production of leading edge chips takes place in

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<v Speaker 1>one location, right, it's not China, China, So it's not

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<v Speaker 1>the same sort of problem as you know, are they

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<v Speaker 1>going to weaponize it against us? But having it all

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<v Speaker 1>there in a world that suffers from floods, earthquakes. Not good.

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<v Speaker 1>We've got to diversify. How do you do that? Industrial

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<v Speaker 1>policy a little bit, but it's got to be smarter

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<v Speaker 1>than the way we've done industrial policy in the past.

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<v Speaker 1>You've got to think about demand, what the United States

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<v Speaker 1>did with the Chips Act. But you also sorry supply,

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<v Speaker 1>but you also have to worry about demand. What we

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<v Speaker 1>didn't do necessarily with the Chips Act. All these fabs

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<v Speaker 1>in the United States. Great, we've got the production capacity now,

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<v Speaker 1>but why isn't it that in Nvidia and you know,

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<v Speaker 1>AMD and all the chip design companies want to use

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<v Speaker 1>them yet, Right, We've got to create some other incentives

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<v Speaker 1>there too. But then the second part is the AI

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<v Speaker 1>challenge with China and this race, right, and the use

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<v Speaker 1>of export restrictions and balancing those in the appropriate way

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<v Speaker 1>to make sure that the American side of this story

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<v Speaker 1>does end up.

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<v Speaker 2>Okay, I gotta squeeze this in. This is important, folks.

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<v Speaker 2>I mean, he's doing this tour with Samike knes Paul.

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<v Speaker 2>She shows up with a ukulele. I mean she's playing

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<v Speaker 2>ukulele at their book shows.

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<v Speaker 1>Nice, it's too much.

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<v Speaker 2>Chad's like, you know, a wallpaper. He's like hanging out, Chad.

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<v Speaker 2>Nobody knows that you're the heritage of Fred Bergston, who

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<v Speaker 2>is hugely supportive to my act, to Peter Peterson, who

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<v Speaker 2>is hugely supportive of my act, and Adam Posen, who's

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<v Speaker 2>a bigger Red Sox fan than I am. Does your

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<v Speaker 2>shop the Peterson Institute after your book The Trade War?

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<v Speaker 2>Think we nudge back to the Washington consensus.

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<v Speaker 1>The beauty of the Peterson Institute where I work is

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<v Speaker 1>there is no institutional line. Everybody has their own views,

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<v Speaker 1>that does their own analysis, comes up with their own perspective.

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<v Speaker 1>So I will leave it to my boss, Adam Posen,

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<v Speaker 1>to give his own views. But I agree. You know,

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<v Speaker 1>we're going to have these debates about what's the right

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<v Speaker 1>way to tackle these sorts of problems, and it's great

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<v Speaker 1>that we're doing so. And I'm just super glad to

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<v Speaker 1>be able to bring not a ukulele but a copy

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<v Speaker 1>of the book and to show it here on your show.

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<v Speaker 1>Thanks for having me, Tom.

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<v Speaker 2>John Tucker's going to have a ukulele next time. The

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<v Speaker 2>book is How to Win a Trade War. Airplane reading

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<v Speaker 2>even not trans atlantic to Richmond, New York to Richmond.

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<v Speaker 2>Pretty good, to say the least. I can't say enough

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<v Speaker 2>about this. A lot of other people are on board

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<v Speaker 2>what Canes and Bone have done to really bring us

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<v Speaker 2>up to date on a lot going on in trade.