Speaker 1: Hello, and welcome to another episode of The Odd Lots Podcast.
Speaker 1: I'm Joe, wasn't and I'm Tracy. It's good to have
Speaker 1: you back. I think we haven't been together in the
Speaker 1: last couple of episodes. I missed you quite a bit.
Speaker 1: That that is. I, you know, like I can do
Speaker 1: the podcast, I guess by myself as you can. But
Speaker 1: it's definitely better when you're here. It's better with a
Speaker 1: co host, exactly right. So in the spirit of you know,
Speaker 1: you're in Hong Kong, I'm in the US, you know,
Speaker 1: in the spirit of reuniting, uh, the two sides of
Speaker 1: the Odd Lots Podcast. It makes sense that the topic
Speaker 1: we're going to talk about is the current state of
Speaker 1: US China trade talks, which as of right now, and
Speaker 1: I should specify when we're talking, it is, uh, Tuesday,
Speaker 1: March five. As of right now, people view that there's
Speaker 1: a lot of progress being made on this front. Whether
Speaker 1: that will be the case by the time this comes
Speaker 1: out in a few days, we have no idea. M Well,
Speaker 1: I appreciate your thoughtfulness, Joe, but you're right. The main
Speaker 1: reason to talk about this issue right now is we
Speaker 1: have a lot of breaking news, a lot of fast
Speaker 1: moving news, and the big news over the weekend in
Speaker 1: early March the first week of March was that the
Speaker 1: US and China might be agreeing some sort of trade deal.
Speaker 1: Still a lot of details to be hammered out, of course,
Speaker 1: but all of that happening against the backdrop of one
Speaker 1: of the biggest news events to take place in China,
Speaker 1: and that is the National People's Congress, the big political
Speaker 1: pow wow between the Chinese Communist Party members taking place
Speaker 1: in Beijing. And we're getting all sorts of news on
Speaker 1: not just the China economy but also it's policy outlook.
Speaker 1: So both of these events combining to be a very
Speaker 1: very big week for China in particular, right And obviously
Speaker 1: people in the US, probably those who care uh somewhat
Speaker 1: plugged in and aware of the trade talks going on
Speaker 1: and the status of those. Probably for fewer people are
Speaker 1: aware of the NPC and the implications of that and
Speaker 1: the type of policies and projections to come from it. Yeah,
Speaker 1: so we should definitely be talking about that. The big news,
Speaker 1: by the way, it has to be China ratcheting down
Speaker 1: its growth forecast to a range of six to six
Speaker 1: point five per cent and in particular, the notion that
Speaker 1: they're moving to a range as opposed to just a
Speaker 1: single figure target, which is what they had previously, is well,
Speaker 1: it sounds a little bit wonky. It's probably a detail
Speaker 1: for most people, but it's interesting. It gives policymakers a
Speaker 1: lot more fox flexibility to reach that target, and lots
Speaker 1: of people are talking about it. And of course it's
Speaker 1: directly into the trade discussions. Does China need to eke
Speaker 1: out a trade deal to help prop up its growth
Speaker 1: at a relatively challenging time? All right, well here to
Speaker 1: discuss all of this is a prior guest on the
Speaker 1: Odd Lots podcast, and excited to have him back, we
Speaker 1: have Brad sets Are on today. He's a Senior Fellow
Speaker 1: for International Economics that the Council on Foreign Relations. He
Speaker 1: used to be a Treasury longtime economics blogger, and longtime
Speaker 1: observer of all things trade and China and US trade relations.
Speaker 1: So very timely guest, Brad, thank you very much for
Speaker 1: joining us. It's a pleasure to be here. Uh, Brad,
Speaker 1: let's start. Obviously we don't have a trade deal, but
Speaker 1: from what you've been able to pick up an official
Speaker 1: statements in the media, what's surprised you or hasn't surprised
Speaker 1: you about the progress that's been made between the US
Speaker 1: and China towards the deal. I guess uh. You know,
Speaker 1: I obviously have been falling the negotiations fairly closely, and
Speaker 1: I've been following in the various ideas that China has
Speaker 1: floated UH fairly closely, and so in some sense, the
Speaker 1: surprise to me is that the US more or less
Speaker 1: was willing to accept the broad contours of a deal
Speaker 1: that China has kind of been outlining at least for
Speaker 1: the past six months, if not for a bit longer.
Speaker 1: The center of that deal seems to be UH, a
Speaker 1: Chinese commitment that's sort of slowly being unrolled to buy
Speaker 1: a lot more agricultural products UH and to buy a
Speaker 1: lot a lot more US energy to bring the bilateral
Speaker 1: trade deficit down. And then I would say, there's some
Speaker 1: add ons that sort of address some longstanding commercial disputes
Speaker 1: and that create a process where some of the newer
Speaker 1: UH fights could possibly be resolved or could possibly UH
Speaker 1: not be resolved the easy things that got like or
Speaker 1: that are likely to get fixed, or that some of
Speaker 1: the joint venture caps will be lifted. We have effectively
Speaker 1: already seen that in the auto sector. That's likely to
Speaker 1: occur in the financial services sector. I think you'll see
Speaker 1: some of the retaliatory tariffs that no one remembers were
Speaker 1: put on rolled back. So you know, I think you're
Speaker 1: going to get a mix of small uh settlements of
Speaker 1: past disputes, and then some sort of process to keep
Speaker 1: talking and try to reach a more serious agreement on
Speaker 1: things like subsidies. So I'm curious if if China is
Speaker 1: agreeing basically to import more agricultural goods and energy from
Speaker 1: the US. I mean, they were going to import those
Speaker 1: things from other countries anyway, so just shifting that to
Speaker 1: the U S seems like it might not be that
Speaker 1: big of a deal for them to do. And if
Speaker 1: we're still going to see the US and China talking
Speaker 1: about these bigger structural issue use like technology transfers and subsidies,
Speaker 1: does it mean that China is sort of getting a
Speaker 1: better deal here. China seems to be making the concessions
Speaker 1: that were easiest for China to make. That's not a shock.
Speaker 1: I suspect the Trump administration will say that China is
Speaker 1: going to roll back all of its retaliatory measures immediately.
Speaker 1: You know, the soybean tarrofts were introduced in retaliation for
Speaker 1: the first round of US three oh one uh tariffs,
Speaker 1: where it seems like the US will in the first
Speaker 1: instance only roll back the twollion of tariffs and it
Speaker 1: will keep on the fifty billion, pending more fulsome agreement
Speaker 1: on all the all the details, and pending full implementation.
Speaker 1: One of the things that's been observed is that from
Speaker 1: the US perspective, we know that President Trump has been
Speaker 1: very focused on that bilateral trade deficit. He thinks that
Speaker 1: a trade deficit is a sign that you're losing, whereas
Speaker 1: others in the administration take a probably more complex, nuanced
Speaker 1: view and are less concerned about that and more concerned
Speaker 1: about the subsidies and these deeper structural issues. Is China
Speaker 1: able to get away with and again we don't have
Speaker 1: a signed deal yet, but in the we see the
Speaker 1: direction that it's going. In your view, is China, I
Speaker 1: guess exploiting these internal divisions within the United States to
Speaker 1: get the deal that's best for itself. Well, I mean
Speaker 1: that that puts everything in such a negative like, but
Speaker 1: I just exploiting in a bad sense. Perspective, But in
Speaker 1: just like it's coming to the table and it obviously
Speaker 1: it appears there our divisions in the US perspective, and
Speaker 1: it's getting maximum benefit for itself from these divisions. I
Speaker 1: think that you know, there's there's long been a tension
Speaker 1: inside the US between different objectives. The easy way of
Speaker 1: framing that tension is between the president's focus on reducing
Speaker 1: the bilateral deficit and more structural measures. But even within
Speaker 1: the structural measures, there are tensions. Should the US focus
Speaker 1: on those Chinese barriers that limit US exports or is
Speaker 1: what the US most interested in and the center of
Speaker 1: the negotiations shouldn't be making it easier for US firms
Speaker 1: to invest in China without giving up their technology as
Speaker 1: a price for market entry. They're related, but they're not
Speaker 1: exactly the same thing. I think the Chinese discovered that
Speaker 1: the president was drawn to the their big commitments in
Speaker 1: agriculture and energy UH, and because he was drawn to that,
Speaker 1: that became a bigger part of the deal. The US
Speaker 1: could have taken that off the table and just been
Speaker 1: negotiating over liberalizing China's investment catalog, just been negotiating over
Speaker 1: some of the subsidy issues related to China. You could
Speaker 1: say that's would be a more productive way of going,
Speaker 1: but it also probably would have reduced the space for
Speaker 1: a deal. Well. Joe mentioned the trade deficit there, and
Speaker 1: one of the interesting things we've seen in recent months
Speaker 1: that is that the US trade deficit with China continues
Speaker 1: to widen, even though you know, we ostensibly have all
Speaker 1: these additional tariffs that have been enacted. And I've seen
Speaker 1: a few analysts pinning this on currency moves, and specifically
Speaker 1: that we've had a stronger dollar and a relatively weaker
Speaker 1: when over that period of time, and the FX moves
Speaker 1: have basically mitigated a lot of the impact that you
Speaker 1: would have seen from tariffs. So I'm curious if if
Speaker 1: we do get some sort of trade deal, does that
Speaker 1: leave currencies as the next sort of fighting ground between
Speaker 1: the two sides. Probably not. One component of the deal
Speaker 1: seems to be some kind of n see peace, which
Speaker 1: broadly speaking involves a Chinese commitment, I assume not to
Speaker 1: let the yuan to appreciate further, whether that's not to
Speaker 1: appreciate further against the dollar or not depreciate further against
Speaker 1: the basket. Has been a left a little bit undefined.
Speaker 1: But as long as China is comfortable keeping the yuan
Speaker 1: at roughly as current level, within the the range it
Speaker 1: has been for the last six months, I don't think
Speaker 1: there's going to be a significant issue. On the other hand,
Speaker 1: if China's economy weekends in China really wants a significantly
Speaker 1: weaker currency, I think that would almost certainly upset the
Speaker 1: basic framework for this deal. Something you said was that
Speaker 1: even among the people who care about the deeper structural issues,
Speaker 1: they all have different perspectives. Something we really saw literally
Speaker 1: on display for everyone was the tension between President Trump
Speaker 1: and Robert Ledheiser, where they're literally in the Oval Office
Speaker 1: publicly disagreeing with each other about the significance of what
Speaker 1: a m o U or memorandum of understanding means. Where
Speaker 1: does Lightheiser fit in this camp? So Lightheiser is has
Speaker 1: long been focused on the more structural impediments to fair
Speaker 1: commerce with China. He hasn't been as focused on the
Speaker 1: bilateral deficit, and he's wanted to make sure that any
Speaker 1: any deal is enforceable, and he has prioritized I guess
Speaker 1: as he should. The concerns were at that were at
Speaker 1: the center of the section three oh one complaint so
Speaker 1: concerns about the protection of U. S intellectual property. So
Speaker 1: in your estimation, you know, we've been watching these trade tensions,
Speaker 1: if not a full blown trade war play out on
Speaker 1: either side. Who's suffered the most over this timeframe is
Speaker 1: that the US or is it China? In terms of
Speaker 1: economic fallout? Well, I think there's little doubt that an aggregate,
Speaker 1: the impact has been bigger on China. You know, as
Speaker 1: you noted, the U. S bilateral deficit has gone up.
Speaker 1: US imports from China continue to go up, so it
Speaker 1: doesn't seem like there has been a bigger impact on China.
Speaker 1: But clearly the uncertainty created by the threat of further
Speaker 1: escalation UH played a significant role in the broader slowdown
Speaker 1: of trade that is now playing out in East Asia.
Speaker 1: On the other hand, you know, one of the joys
Speaker 1: of having a heavy state hand in your economy is
Speaker 1: that when you decide not to import something, you don't
Speaker 1: import it. So, in a narrow sense, China cut its
Speaker 1: imports from the US much more than the US cut
Speaker 1: its imports from China. Soybean exports essentially went to zero,
Speaker 1: so did some other agricultural exports. So did energy exports.
Speaker 1: So when when China wanted to show that it could
Speaker 1: influence market outcomes, showed it could influence market outcomes very decisively. Brad,
Speaker 1: you mentioned supply chains there and the uncertainty caused up
Speaker 1: by this entire drama. I suppose if we get that
Speaker 1: trade deal between the US and China, does that mean
Speaker 1: that we are unlikely to return to the previous status quo?
Speaker 1: Doesn't mean that there will always be an element of
Speaker 1: uncertainty hovering over supply chains, that companies will be making
Speaker 1: contingency plans, and that maybe we start to see a
Speaker 1: sort of balkanization of trading regions between Asia and the
Speaker 1: America's well, I think that's an interesting question. In some sense,
Speaker 1: it will go to the basic question of how businesses
Speaker 1: perceive this deal and whether they perceive this deal is
Speaker 1: likely to stick or whether they think that this is
Speaker 1: going to have more the character of a truce, and
Speaker 1: they still have to plan for the possibility that broad
Speaker 1: based tariffs could be introduced into the trading relationship at
Speaker 1: some point in the future, whether by President Trump after
Speaker 1: he feels disappointed by the outcome of his deal, or
Speaker 1: by a future president. My view would be I'm gonna
Speaker 1: have a really boring answer. To be honest, I think
Speaker 1: there will be some companies that start reconsidering their supply
Speaker 1: chain reliance on China and start to make initial moves
Speaker 1: to rejigger operations. But at the current exchange rate, and
Speaker 1: it if we go back to the old tariff rate,
Speaker 1: I think China is still a very competitive location for
Speaker 1: most manufacturers, so that that adjustment will be modest. Let's
Speaker 1: shift gears and talk about the current state of the U.
Speaker 1: S economy and the new domestic economic goals that the
Speaker 1: Chinese government has set. Aside from the trade issue, what
Speaker 1: do you see as the sort of central problem right
Speaker 1: now the Chinese economy? Well, and the the central problem
Speaker 1: of the Chinese economy is that it to exaggerate just
Speaker 1: a bit. Growth stalled in the fourth quarter. I think
Speaker 1: China has been stuck in cycles of leverage and cycles
Speaker 1: of de leveraging. The past few de leveraging cycles have
Speaker 1: ended in significant slowdowns. Why. I think that's because it's
Speaker 1: actually hard to manage an economy that saves for his
Speaker 1: GDP and without the stimulus provided by relatively loose off
Speaker 1: budget fiscal policies and relatively loose credit policies, the internal
Speaker 1: engines of China's economy tend to start to sputter. So
Speaker 1: my interpretation of what happened last year is that China
Speaker 1: started a fairly broad based policy tightening and credit through
Speaker 1: the shadow financial system, so outside of the main banks
Speaker 1: was tightened. And initially early in two thousand and eight,
Speaker 1: there was a sense that wow, China had pulled off
Speaker 1: the magic de leveraging, it had reduced financial risk without
Speaker 1: slowing the economy. But by the end of it was
Speaker 1: fairly clear that the policy tightening had led to a
Speaker 1: very significant slowdown in activity, probably a more significant slowdown
Speaker 1: in activity than was reflected in the Q four GDP data.
Speaker 1: So for now I think the policy challenge for China
Speaker 1: is to get the Chinese the internal growth engines in
Speaker 1: China restarted. So now we have this big policy meeting
Speaker 1: in Beijing, all these policy makers gathering to discuss this
Speaker 1: very issue. Brad, you alluded to this earlier about you know,
Speaker 1: one of the benefits of having a command economy is
Speaker 1: that essentially you have a lot of levers to pull,
Speaker 1: and you're able to pull them reasonably effectively. What's your
Speaker 1: instinct telling you about which lever policymakers reach for now.
Speaker 1: Is it going back to credit creation and sort of releveraging,
Speaker 1: or is it maybe more fiscal stimulus. Well, it's it's
Speaker 1: it's not either or there is going to be more
Speaker 1: fiscal stimulus. There's been a range of tax cuts that
Speaker 1: have been announced. The change in the central government's budget
Speaker 1: balance is actually very modest. China, for some reason which
Speaker 1: I really don't understand, seems to attach some importance to
Speaker 1: the European monstrict three percent of GDP headline fiscal deficit number.
Speaker 1: So it's going to keep the headline deficit at two
Speaker 1: point eight. But you know, there's a credible argument that
Speaker 1: the real central government fiscal deficit is a bit bigger,
Speaker 1: which would be good. I mean, there's no read and
Speaker 1: why the central government shouldn't have a bigger fiscal deficit.
Speaker 1: But there's also been an increase in the quotas for
Speaker 1: prevent for provincial and local borrowing UH an increasing improval
Speaker 1: for a range of investment projects. So you're gonna probably
Speaker 1: see an even bigger move in the broader measure of
Speaker 1: China's fiscal deficit. And there's been an attempt to loosen
Speaker 1: the screws a bit on the credit creation process, UH
Speaker 1: to make credit more available to private firms, but without
Speaker 1: sort of you know, to use the Chinese phrase opening
Speaker 1: the floodgates and letting the water flow freely over the planes.
Speaker 1: So it's UH an attempt to be somewhat calibrated in
Speaker 1: the credit loosening. You could argue that without the trade deal,
Speaker 1: these more calibrated measures might have been too small. So
Speaker 1: I think China now is counting to some degree on
Speaker 1: the lifting of trade uncertainty to combine with its policy
Speaker 1: measures to help it get its growth target. I feel
Speaker 1: like pretty much ever since I've started covering economics and
Speaker 1: finance and all this stuff, there have been people warning
Speaker 1: about the so called or they're coming hard landing in China.
Speaker 1: Is there anything different? I mean, you just sort of
Speaker 1: laid out this idea. It was like, yes, sometimes they
Speaker 1: have deleveraging cycles, sometimes they have easy cycles. We saw
Speaker 1: the leveraging cycle. Is there anything different about this one?
Speaker 1: Because it does feel like there is some anxiety about
Speaker 1: whether stimulus this time, whether it's on the credit channel
Speaker 1: or the fiscal channel, will get traction. There seems to
Speaker 1: be more concerned about whether it will work this time.
Speaker 1: I find the arguments that China is pushing on a
Speaker 1: string a little off. It's it's hard to think that
Speaker 1: fiscal tightening led China's economy to slow significantly over the
Speaker 1: course of twenty teen and then think that fiscal loosening
Speaker 1: in nineteen will have absolutely no impact. So I think
Speaker 1: that you know, on the purely fiscal channels, uh, they
Speaker 1: basically they work, and they still work in China. Uh,
Speaker 1: they're the central government is in no way over indebted.
Speaker 1: It's got a lot of contingent liabilities. But central government
Speaker 1: bonds are like Chinese GDP, there's scope there. I get
Speaker 1: one of the questions, and it was a good Michael
Speaker 1: Pettis piece in January about this, is like, well, sure,
Speaker 1: you can always boost GDP by building a bridge, but
Speaker 1: if it's a bridge to nowhere, it doesn't really do
Speaker 1: anything for the economy. If it's a bridge to somewhere,
Speaker 1: it will actually improve the productive capacity and actually improve things.
Speaker 1: So I guess the question in my mind and in
Speaker 1: your view, is like, Okay, they could boost the economy
Speaker 1: with increased spending. Is their productive stuff in your view
Speaker 1: for them still to be building or will it be
Speaker 1: bridges to Nowhere, well bridges to Taibet. Look, I I
Speaker 1: don't think that the process of coastal urbanization in China
Speaker 1: is fully complete. I think the Woko process has limited,
Speaker 1: for you know, understandable policy reasons, the capacity of residents
Speaker 1: of some of the more inland or the northeastern provinces
Speaker 1: from migrating. So I think that if you loosen some
Speaker 1: of those restrictions on migration, there is still scope for
Speaker 1: some of the bigger, more successful urban areas to expand.
Speaker 1: So in that sense, there's scope to increase investment and
Speaker 1: physical infrastructure. Productively, there is certainly scope to increase investment
Speaker 1: in kind of the soft infrastructure, more public hospitals. So
Speaker 1: I don't I don't think that China has reached the limit,
Speaker 1: uh of where it really can't find incremental projects that
Speaker 1: have some social utility. That said, you know, the fundamental
Speaker 1: reason why China goes through the cycles and why they
Speaker 1: don't become global crises is because China saves so much.
Speaker 1: That's an advantage. It means that China goes through the
Speaker 1: cycles without really borrowing from the world. It levers up internally,
Speaker 1: it de levers internally the external debt, frankly is trivial.
Speaker 1: China still has a very small but still has a
Speaker 1: current account surplus. It has a net for an asset
Speaker 1: position of considerable size, so it just becomes a domestic balance.
Speaker 1: Flip side, though, is that with fort of GDP and savings,
Speaker 1: it's hard to find investments that are great to accommodate
Speaker 1: all of that savings. So I've always had the view
Speaker 1: that the way for China to get out of this
Speaker 1: leveraging and de leveraging cycle in a in a durable
Speaker 1: way would be a set of policy measures that really
Speaker 1: bring down China's very high UH savings rate, So more
Speaker 1: money on public health, a higher basic pension. China really
Speaker 1: under provides basic social services. In China under taxes personal
Speaker 1: income and there's no property tax. It's a system with
Speaker 1: very low tax on capital income. But as a result,
Speaker 1: the state is a little starved for the kinds of
Speaker 1: revenues that help boost consumption. So I mean, I think
Speaker 1: there are there are ways of that China will get
Speaker 1: out of this trap. And each leveraging and releveraging cycle
Speaker 1: ratches up your internal debt to a somewhat higher level,
Speaker 1: so it's not entirely healthy. But I am not convinced
Speaker 1: that China is has hit the limit and can't go
Speaker 1: through one more cycle or even two more cycles. Hm. Well,
Speaker 1: on that note, I mean just going back to the
Speaker 1: trade discussion we were having and the idea of structural reforms,
Speaker 1: Is there any way that changes on things like technology
Speaker 1: transfers or maybe opening up China's financial markets in various
Speaker 1: ways could help alleviate that savings got You know, I
Speaker 1: don't think that letting City Bank open up a branch
Speaker 1: inside China fundamentally changes China's social insurance system. So I
Speaker 1: don't think that there's sort of an easy win by
Speaker 1: letting US financial services firms into China. I think they'll
Speaker 1: be competing at the margin. Maybe they'll set an example
Speaker 1: of more efficient intermediation without some of the crazy risk taking,
Speaker 1: But I don't think that that fundamentally will transform China's
Speaker 1: domestic economic structure. So what if you have big you know,
Speaker 1: tech companies or multinational moles we start entering that market
Speaker 1: because they feel that, you know, the forced technology transfer
Speaker 1: isn't as much of an issue as it once was,
Speaker 1: Assuming that we do get some sort of agreement on
Speaker 1: that issue, well, I don't think big multinationals entering the
Speaker 1: Chinese market suddenly changes the incentives for low wage Chinese
Speaker 1: workers to save. So I don't think you can solve
Speaker 1: the fundamental weaknesses in China's social insurance by liberalizing access
Speaker 1: to China's market. Now, the technology transfer issue is a
Speaker 1: complicated one. China maintains correctly that it doesn't legally require
Speaker 1: as a condition for market entry technology transfer. There's no
Speaker 1: law that says in order to get approval to make
Speaker 1: an investment inside China, you have to transfer technology. There
Speaker 1: are sectors where you have to enter into joint ventures,
Speaker 1: and your joint venture partner may well ask you to
Speaker 1: transfer technology, but China says that's just the result of
Speaker 1: normal commercial negotiations. There are sectors where if you want
Speaker 1: to get a contract from the Chinese government, uh the
Speaker 1: Chinese governments, they say, well, you need to set up
Speaker 1: shop in China and your local joint venture needs to
Speaker 1: have some indigenous Chinese technology. That's just kind of the
Speaker 1: way business is done. But that's technically a commercial negotiation
Speaker 1: as well. China could certainly ratchet back the pressure that
Speaker 1: has been placed on multinationals looking to invest in China
Speaker 1: to also transfer technology. It certainly helps multinationals, it doesn't
Speaker 1: obviously help US workers. One of the ironies of the
Speaker 1: informal pressure for technology transfer is that has kept some
Speaker 1: firms out of China and made them more reluctant to
Speaker 1: use China as an export base. So if you really
Speaker 1: lifted all the requirements on technology transfer, you could imagine
Speaker 1: U S semiconductor firms with full control of their technology,
Speaker 1: perhaps wanting to set up a fab or more fabs
Speaker 1: inside China. So it's on one level, it is a
Speaker 1: it is a clear case where Chinese practices have been egregious.
Speaker 1: They've essentially violated the spirit, though not the letter, of
Speaker 1: their w t O commitment, but ending the technology transfer
Speaker 1: requirement on its own, while leaving some of the by
Speaker 1: China preferences in place, while leaving China's state in charge
Speaker 1: of making China state meaning the big state enterprises in
Speaker 1: charge of deciding who bought it makes big capital investments.
Speaker 1: It doesn't get rid of all the levers that China
Speaker 1: can use to tilt the playing field and in some
Speaker 1: cases to discourage imports before we go, So obviously we
Speaker 1: don't have a trade deal yet. It signs are positive.
Speaker 1: But you know, we just saw in Hanoi they thought
Speaker 1: they were going to sign something between Trump and Kim
Speaker 1: that didn't happen. Where would you be most anxious right
Speaker 1: now based on what you've heard and sort of how
Speaker 1: this could all still fall apart? H Well, uh, from
Speaker 1: everything we've read, this deal has come together now because
Speaker 1: the President decided he wanted a deal. So there's the
Speaker 1: biggest single source of uncertainty is that the president reads
Speaker 1: or hears something that leads him to conclude this isn't
Speaker 1: the good deal, he thinks it is, and he changes
Speaker 1: his mind, and then I guess probably the biggest risk
Speaker 1: is that some of the areas of ambiguity that had
Speaker 1: to get papered over in order to strike a deal.
Speaker 1: There's a report in Politico that China is going to
Speaker 1: commit to get rid of market distorting subsidies, which sort
Speaker 1: of sounds great, but there isn't agreement on what actually
Speaker 1: constitute a market distorting subsidy. Does China's big investment fund
Speaker 1: for the semiconductor industry constitute a market distorting subsidy or
Speaker 1: is it just making investments on market terms? Those kinds
Speaker 1: of sort of difficult definitial issues probably haven't been sorted out,
Speaker 1: and those could come back and emerge over the next
Speaker 1: year or so as a source of significant attention. Bread.
Speaker 1: I think that's a great note to wrap it up on.
Speaker 1: We'll be following those things. I really appreciate you coming on.
Speaker 1: Always feel like I learned a lot and understand current events.
Speaker 1: But thanks and thanks raight well Trades. As I said there,
Speaker 1: I always feel like if I want to understand current events,
Speaker 1: particularly on the trade front and all, especially on trade
Speaker 1: and China stuff, I always feel better after talking to Brad.
Speaker 1: Oh absolutely, And I should say for anyone listening that
Speaker 1: if you're interested in this issue, you should definitely follow
Speaker 1: Brad on Twitter, where he tweets quite prolifically about trade
Speaker 1: and various other things. But I have to say, like
Speaker 1: I come away from that conversation thinking that the deal
Speaker 1: currently on the table seems like it leaves a lot
Speaker 1: of big issues still sort of out in the open,
Speaker 1: particularly some of the definitional ones that Brad mentioned at
Speaker 1: the very end of that conversation. And if you think
Speaker 1: about trade agreements that my understanding is that the bulk
Speaker 1: of the work is often about agreeing on definitions of
Speaker 1: items and various other things. So it seems like there's
Speaker 1: a lot still to work through. Yeah, and you know,
Speaker 1: I also think, like both on the sort of trade
Speaker 1: side and on just the state of China's economy, I
Speaker 1: think journalists and observers and analysts we have this tendency
Speaker 1: to always see turning points or this is a big moment,
Speaker 1: or this is the end of the status quo, and
Speaker 1: to perhaps downplay the possibility that the status quo could
Speaker 1: exist for a lot longer. So you could imagine a
Speaker 1: big trade deal happening, but in the end, the relationship
Speaker 1: maybe doesn't look that different than it does now. And
Speaker 1: you could imagine another Chinese releveraging or a stimulus cycle
Speaker 1: that turns out to gain teeth and gains attraction and
Speaker 1: the hard landing is put off a few years yet again,
Speaker 1: and they could sort of expand the coastal cities. So
Speaker 1: it is a good reminder, I think, to not be
Speaker 1: too quick to call the death of whatever regime we're
Speaker 1: currently looking at. Yeah, it definitely feels a lot more
Speaker 1: nuanced than that. Well, we'll wrap it up there. This
Speaker 1: has been another episode of the Box podcast on trick Yalloway.
Speaker 1: You can follow me on Twitter at trick Yalloway and
Speaker 1: I'm Joe Why Wasn't though, you can follow me on
Speaker 1: Twitter at the Stalwart. Definitely you should follow Brad on Twitter.
Speaker 1: He's at Brad Senser. Great source of information on all
Speaker 1: this stuff, and be sure to follow our producer tofur
Speaker 1: Foreheads on Twitter. He's at foreheads t as well as
Speaker 1: the bloomberg head of a podcast, Prancesca Levie at Francesca Today.
Speaker 1: Thanks for listening.