Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: High stakes negotiations in Busan, South Korea between Presidents Trump
Speaker 2: and She. This was a chance for both sides to
Speaker 2: stabilize relations after some rocking months thanks to Trump's agree.
Speaker 3: On Thursday, Presidents Donald Trump and Shihin Ping of China
Speaker 3: reached an agreement a one year truce in their trade war.
Speaker 2: I thought it was an amazing meeting. He's a great leader,
Speaker 2: great leader of a very powerful, very strong country, China.
Speaker 3: She, through an interpreter, said he and Trump didn't always
Speaker 3: see eye to eye, but they had found a way forward.
Speaker 4: You and I at the helm of China US relations
Speaker 4: should stay the right course and ensured a steady sailing
Speaker 4: forward of the giant ship of China US relations.
Speaker 3: The agreement capped six contentious months, starting when Trump announced
Speaker 3: his global tariffs and threatened retaliatory arabs as high as
Speaker 3: one hundred and forty five percent. The highly anticipated meeting
Speaker 3: between Trump and She in South Korea started with a
Speaker 3: long and awkward handshake.
Speaker 2: We're kind good to see you again. There seemed to
Speaker 2: be some chemistry between the two men. They were shaking
Speaker 2: hands at the doorway. Trump even went in and whispered
Speaker 2: something to Shiji Ping, who knows what he said.
Speaker 3: John lou is Bloomberg's executive editor for Greater China. He's
Speaker 3: based in Beijing. He says the agreement, which brought China's
Speaker 3: tariffs back to where they were roughly when Trump rolled
Speaker 3: them out earlier this year, buys China some breathing room.
Speaker 2: While I think China is happy that there can be
Speaker 2: a trade truths for maybe the next twelve months, I
Speaker 2: think the concern that ultimately the United States is trying
Speaker 2: to put the strategy in place that would restrain China's
Speaker 2: rise is going to continue to be at the forefront
Speaker 2: of Shiji Ping and these leadership's minds.
Speaker 3: Brendan Murray is Bloomberg's Global Trade editor, and he says,
Speaker 3: now that the meeting is over, it will be fascinating
Speaker 3: to see how news of the agreement is received in
Speaker 3: Beijing and DC.
Speaker 1: I do think that there will be some people in
Speaker 1: Washington who will look at this as China getting the
Speaker 1: better of Trump, given the breakdown of the concessions that
Speaker 1: each side gave up. So now we'll hear the debate
Speaker 1: about the actual substance. If what we're seeing is a
Speaker 1: truce for the next twelve months.
Speaker 3: I'm David Gura, and this is the big take from
Speaker 3: Bloomberg News Today. On the show, parsing the details of
Speaker 3: the new US China trade agreement and why both countries
Speaker 3: are moving forward without a permanent deal. Thursday's agreement marks
Speaker 3: a temporary truce in a US China trade war that
Speaker 3: President Trump set off in April. I asked Bloomberg's Brendan
Speaker 3: Murray and John lou to dig into what each country
Speaker 3: won and law in the agreement.
Speaker 1: Here's Brendan, So here's the scorecard that I've been keeping.
Speaker 1: The US concessions. The US is lowering fentanyl tariffs from
Speaker 1: twenty percent to ten percent. The US is suspending this
Speaker 1: fifty percent expansion of its US entity list, the ownership
Speaker 1: list that so irritated the Chinese a few weeks ago.
Speaker 1: The US is backing away from the one hundred percent tariff
Speaker 1: threat that President Trump put out there a few weeks ago.
Speaker 1: China's reciprocal tariff rate stays at ten percent for another year,
Speaker 1: and they're suspending ship fees. Both countries are, but that
Speaker 1: was much more damaging to China than it was to
Speaker 1: the US. So those are the US concessions. What China
Speaker 1: gave up its rare earth controls, the most extreme of
Speaker 1: which it announced a few weeks ago. It's suspending those
Speaker 1: for a year. It says it's going to resume buying
Speaker 1: American soybeans and potentially there's some energy deals to be
Speaker 1: done there. It's going to crack down on the export
Speaker 1: of the chemicals used to make fentanyl. And Trump said
Speaker 1: that China agreed to some vague promises of investments and
Speaker 1: then agreed to work on a solution for TikTok So.
Speaker 1: I think any way you add those up, China comes
Speaker 1: up a little bit, you know, giving up less than
Speaker 1: what the US gave up. And I believe that the
Speaker 1: Hawks in Washington would support that view.
Speaker 3: John, as you here, Brendan described that scorecard. As he
Speaker 3: put it, there are some things that these two leaders
Speaker 3: didn't talk about. They didn't get into great detail about
Speaker 3: these Nvidia Blackwell chips. Sounds like they didn't talk about Taiwan.
Speaker 3: If you believe the President of the United States, how
Speaker 3: surprising is that what wasn't talked about in Busan.
Speaker 2: On the question of Taiwan. From what I've heard from
Speaker 2: President Trump, he seems to be very aware of how
Speaker 2: sensitive a topic that is and how potentially explosive on chips,
Speaker 2: you know, I think China wants the Nvidia Blackwell chips.
Speaker 2: If they could get their hands on the most advanced
Speaker 2: technology that's out there, they definitely would do that. Again,
Speaker 2: I think it's some consideration of how likely it would
Speaker 2: have been for them to get that, and if putting
Speaker 2: too much, it's putting too much emphasis on that would
Speaker 2: have meant giving up on something else. Ultimately, Beijing is
Speaker 2: going to walk away feeling like it got a pretty
Speaker 2: good deal, and going forward it's going to try to
Speaker 2: hold the United States to what has been agreed to.
Speaker 3: On that point, I mean, this is not a deal
Speaker 3: that's going to continue in perpetuity. And Brendan, I think
Speaker 3: I've seen this described as subscription diplomacy. You can kind
Speaker 3: of analogize this to your Netflix subscription. You had this
Speaker 3: three month pause on tariffs, and now you have a
Speaker 3: year long pause on tariffs. It just keeps getting extended
Speaker 3: and there's no kind of permanent resolution to all of this.
Speaker 3: What does that mean for US China relations long term?
Speaker 1: So, the Phase one trade deal that President Trump signed
Speaker 1: in his first term. What they had achieved was a
Speaker 1: ninety page, multi chapter agreement that President Trump said would
Speaker 1: transform the relationship between the US and China. So fast
Speaker 1: forward to what we've seen come out of the latest
Speaker 1: Shi Trump deal. We have a couple hundred word social
Speaker 1: media posts from President Trump and basically a relationship that
Speaker 1: is no longer based on something that's in writing, that
Speaker 1: will be based on a series of talks going forward.
Speaker 1: And John, I'd be curious to hear your reaction to this,
Speaker 1: but that really plays into China's strategy of let's just
Speaker 1: kind of string them along and things can escalate and
Speaker 1: de escalate, but we'll have this series of discussions rather
Speaker 1: than something in writing that will abide by and the
Speaker 1: two sides will kind of try to maintain some sort
Speaker 1: of stability going forward. And given the volatility of the
Speaker 1: temperament of President Trump, I'm not really sure that plays
Speaker 1: into his strengths.
Speaker 2: I think the fundamental relationship is one of rivalry and
Speaker 2: I don't think any deal that is struck today or
Speaker 2: in a year is going to change that. And what
Speaker 2: it means is, yes, there's a truce, but at the
Speaker 2: same time both countries are using that time to try
Speaker 2: and build up an arsenal that they can bring to
Speaker 2: bear in the future. So I think we are inherently
Speaker 2: going to have lots of volatility. We're going to have
Speaker 2: deals that come together only to fall apart, because fundamentally
Speaker 2: the two countries are at odds, are competing, and it's
Speaker 2: not a relationship that lends itself to stability.
Speaker 3: After the break, with many negotiations still in progress, what
Speaker 3: does this US China deal mean for other countries still
Speaker 3: stuck in the trade war With several issues unsettled between
Speaker 3: the United States and China. I spoke with Bloomberg's Brendan
Speaker 3: Murray and John lou about what's next. So it seems
Speaker 3: like after this meeting, lower level officials advisors are going
Speaker 3: to hammer out some of the details here. But there
Speaker 3: was such a build up to these two leaders meeting
Speaker 3: face to face, and I wonder if this is what
Speaker 3: we're going to see going forward here the big decisions
Speaker 3: are going to be made when these two men get together.
Speaker 3: That's just going to be kind of the contour of
Speaker 3: these conversations, the way that these countries deal with each
Speaker 3: other going forward.
Speaker 2: Leaderal leader, I think that's the way it will be.
Speaker 2: We had this announcement by President Trump saying that he
Speaker 2: was going to visit China in April, and the President
Speaker 2: she would then do a reciprocal visit to the US
Speaker 2: after that. We also know that China is hosting APEC
Speaker 2: next year and the United States is hosting the G
Speaker 2: twenty in Miami at the end of the year, and
Speaker 2: so there's going to be a lot of opportunity for
Speaker 2: these two men to get together. And I think that
Speaker 2: just means that a lot of the problems that pop
Speaker 2: up between these two countries will ultimately have to be
Speaker 2: decided and resolved or sort of tempered by these two men.
Speaker 3: In looking at the state of trade negotiations with the
Speaker 3: US globally, Brendan has described them as fitting into different buckets.
Speaker 3: There's the first bucket, appeasement.
Speaker 1: You've got basically countries that are just having to accept
Speaker 1: the tariffs.
Speaker 3: Then there's the second bucket, the kicking and screaming bucket.
Speaker 1: Per se Canada is the perfect example. They've been back
Speaker 1: and forth with the threats between the US and Canada
Speaker 1: for months now.
Speaker 3: Then the third bugget the country's putting up a fight.
Speaker 1: And China, I think really has shown compared to at
Speaker 1: least Trump's first term dealings with shijiping, that it can
Speaker 1: play hardball the way Trump likes to play hardball. The
Speaker 1: ability to use the threat of rare earths and China's
Speaker 1: dominance with them really changed the game this year. The
Speaker 1: US has a technology advantage and they will use that
Speaker 1: as leverage over China. But China has this rare earth's
Speaker 1: advantage that really hasn't come to the fore the way
Speaker 1: it has until now. So I think that that's really
Speaker 1: where the game has changed. China has said you want
Speaker 1: to play rough, we can play rough too, and everyone
Speaker 1: else realized that, yeah, they can do some damage if
Speaker 1: they want, or threaten it at least to get what
Speaker 1: they want.
Speaker 3: China's advantage on rare earth's is not going away soon.
Speaker 3: Even with the US building up its capabilities and partnerships,
Speaker 3: It'll be many years before it could conceivably replace China
Speaker 3: as a supplier. Brendan give us a bit of context
Speaker 3: here is you look at the long sweep of this
Speaker 3: trade war. Is global trade now in a better place
Speaker 3: than it was yesterday or a week ago, last year
Speaker 3: or so. How has this meeting kind of changed the
Speaker 3: way that this war is unfolding.
Speaker 1: Yeah, I mean, global trade has been pretty resilient through
Speaker 1: all of this. I mean you could go back to
Speaker 1: the first US China tariff conflicts in Trump's first term
Speaker 1: through COVID and then the return of Trump with the
Speaker 1: reciprocal tariffs kind of shocking every country, and trade has
Speaker 1: held up pretty well. The World Trade Organization will tell
Speaker 1: you that seventy five percent or so of trade globally
Speaker 1: still runs by rules by low tariffs. But that number
Speaker 1: is going down the more the US puts tariffs up,
Speaker 1: and we'll have to see how long that that can
Speaker 1: hold out. And remember President Trump went around he calls
Speaker 1: them deals, but he's putting higher tariffs these countries in
Speaker 1: Asia and they won't be liking it. So how long
Speaker 1: will these countries be able to withstand the headwinds of
Speaker 1: these higher tariffs. Once their industries start to suffer, they
Speaker 1: then here comes the political pressure. So I think the
Speaker 1: big question is, you know, we've seen over the past
Speaker 1: half century or so free trade being used to ensure peace,
Speaker 1: the peace dividend. If we've traded with one another, we
Speaker 1: won't go to war with one another. Now President Trump
Speaker 1: is using the threat of tariffs to tell countries to
Speaker 1: not be in disputes, and so tariffs are being really
Speaker 1: turned into something completely different than they have been for
Speaker 1: the past fifty years. And I think we don't really
Speaker 1: know how it's going to end up. But the economic
Speaker 1: consequences are going to be slow, and perhaps they'll deliver
Speaker 1: jobs in the US and investments, and you know, maybe
Speaker 1: that's what will end up. But I think there's going
Speaker 1: to be a lot of disruption and uncertainty in the meantime.
Speaker 3: And I guess I should note here too, Brandon, that
Speaker 3: even though this deal did knock the US tariffs down
Speaker 3: by ten percent, the overall China tariff is much higher
Speaker 3: than it was a year ago, about thirty percent on average,
Speaker 3: according to Bloomberg Industries, with many products facing tariffs as
Speaker 3: high as forty seven percent.
Speaker 1: Yeah, China is still something in the thirty percent range,
Speaker 1: thirty to forty percent, and it will be more competitive
Speaker 1: than it otherwise would have been with its manufacturing rivals
Speaker 1: across Southeast Asia, which came in somewhere around the twenty
Speaker 1: percent mark. But China has found markets for goods that
Speaker 1: are no longer being bought by Americans and has maintained
Speaker 1: that the question is is China going to export problems
Speaker 1: to other countries that will have a backlash the way
Speaker 1: the US has reacted.
Speaker 3: And that getsuon my last question to you, John, we
Speaker 3: see a country that is looking many years down the road.
Speaker 3: I think on the eve of this meeting, China announced
Speaker 3: its next five year plan will significantly boost the shriff
Speaker 3: of Chinese consumerism, domestic consumption. Seems intentional to me. What
Speaker 3: is the strategy there on the Chinese part.
Speaker 2: I think China sees it's dependence on trade as a weakness.
Speaker 2: I think China has come away from the last you know,
Speaker 2: eight to ten years believing that any dependency that can
Speaker 2: be weaponized will be weaponized. And so, you know, Chinese
Speaker 2: trade has been booming, as Brenda was saying, you know,
Speaker 2: China's selling stuff to Europe, to Latin America, to Africa,
Speaker 2: around the world, and it's trade surplus, I think is
Speaker 2: on pace for like one point five trillion US dollars
Speaker 2: this year. I think there's a general recognition in China
Speaker 2: that that is not a sustainable path forward, that that
Speaker 2: is just going to peeve off all of their trading partners,
Speaker 2: and so they are putting a lot of effort in
Speaker 2: trying to develop a domestic consumer economy. The problem is
Speaker 2: how do you do that? If they can do that,
Speaker 2: and I think there are a lot of reasons to
Speaker 2: think it's going to be a real challenge.
Speaker 1: The other issue there is that Trump's political clock is
Speaker 1: ticking a lot faster than China's on this, and China
Speaker 1: has the advantage of time and they can drag this along.
Speaker 1: President Trump needs to deliver something economically before the midterm
Speaker 1: elections start heating up in nine months or so. So
Speaker 1: I think the time is not on President Trump's side here,
Speaker 1: and China plays a much longer game than the US does.
Speaker 3: This is the Big Take from Bloomberg News. I'm David Gura.
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