1 00:00:00,240 --> 00:00:03,240 Speaker 1: This is Dana Perkins and you're listening to Switched on, 2 00:00:03,600 --> 00:00:06,160 Speaker 1: the podcast brought to you by B and EF. And 3 00:00:06,200 --> 00:00:09,200 Speaker 1: today we're also joined by a guest from our Bloomberg 4 00:00:09,280 --> 00:00:13,560 Speaker 1: Economics team for a discussion around geoeconomics and the rapidly 5 00:00:13,680 --> 00:00:17,759 Speaker 1: changing world of tariffs and trade. President Trump announced the 6 00:00:17,840 --> 00:00:21,319 Speaker 1: Liberation Day tariffs on April second, earlier this year. The 7 00:00:21,400 --> 00:00:25,480 Speaker 1: US is now renegotiating positions with trading partners around the world, 8 00:00:25,760 --> 00:00:28,200 Speaker 1: but only a handful of trade deals have been signed, 9 00:00:28,320 --> 00:00:31,560 Speaker 1: so the true impact of these announcements is still to come. 10 00:00:32,000 --> 00:00:36,400 Speaker 1: What we do know is that geoeconomics is at the four. Meanwhile, 11 00:00:36,560 --> 00:00:39,040 Speaker 1: companies around the world are trying to figure out just 12 00:00:39,159 --> 00:00:42,120 Speaker 1: how much their business will change from the global supply 13 00:00:42,240 --> 00:00:45,120 Speaker 1: chains they rely on and where they manufacture their goods 14 00:00:45,360 --> 00:00:47,760 Speaker 1: to the costs of their end product. There's a lot 15 00:00:47,840 --> 00:00:51,720 Speaker 1: in flux in the energy transition. Everything from batteries and 16 00:00:51,760 --> 00:00:56,000 Speaker 1: electric vehicles to solar and semiconductors are affected. To help 17 00:00:56,080 --> 00:00:58,600 Speaker 1: us make sense of where we are now and what 18 00:00:58,640 --> 00:01:02,040 Speaker 1: we might be able to expect, I'm joined by two experts. 19 00:01:02,280 --> 00:01:05,280 Speaker 1: Bn EF's head of Trade and Supply Chains, Antoine Wagner, 20 00:01:05,400 --> 00:01:10,759 Speaker 1: Jones and from Bloomberg's geoeconomics team, chief analyst Jennifer Welsh. 21 00:01:11,000 --> 00:01:14,679 Speaker 1: BNF clients can find some of Antoine's team's work, including 22 00:01:14,880 --> 00:01:19,000 Speaker 1: the US Energy Trade and Tariff Indicators series, at bn 23 00:01:19,040 --> 00:01:22,280 Speaker 1: EF go on the Bloomberg terminal or on bn EF 24 00:01:22,319 --> 00:01:25,160 Speaker 1: dot com. If you'd like to learn more about our 25 00:01:25,200 --> 00:01:29,600 Speaker 1: geoeconomics offering, shoot us an email at geoeconomics at Bloomberg 26 00:01:29,760 --> 00:01:32,680 Speaker 1: dot net. All right, let's get to talking to Jenny 27 00:01:32,720 --> 00:01:45,039 Speaker 1: and Antoine about the changing world of trade and tariffs. Jenny, 28 00:01:45,040 --> 00:01:46,280 Speaker 1: thank you for joining the show today. 29 00:01:46,400 --> 00:01:48,880 Speaker 2: Thank you so much for having me and Antoine. 30 00:01:48,440 --> 00:01:50,200 Speaker 3: Welcome back, Thanks for having you DAYA. 31 00:01:50,520 --> 00:01:53,720 Speaker 1: So I like to start most shows with definitions, and 32 00:01:53,960 --> 00:01:56,680 Speaker 1: there is a term that we are going to rely 33 00:01:56,800 --> 00:02:00,080 Speaker 1: upon very heavily during today's show, and that is geoeconomics, 34 00:02:00,120 --> 00:02:03,080 Speaker 1: which has become increasingly a part of the vernacular. But 35 00:02:03,120 --> 00:02:05,040 Speaker 1: I would say, you know, five years ago, not everybody 36 00:02:05,080 --> 00:02:07,000 Speaker 1: knew what this meant. And let's assume that there are 37 00:02:07,040 --> 00:02:10,320 Speaker 1: people listening now who would like a more precise definition 38 00:02:10,600 --> 00:02:14,399 Speaker 1: of what geoeconomics is. So, Jenny, could you start off 39 00:02:14,440 --> 00:02:17,320 Speaker 1: by telling us what geoeconomics is and how does it 40 00:02:17,520 --> 00:02:21,520 Speaker 1: differ from the traditional study of economics. 41 00:02:21,160 --> 00:02:23,000 Speaker 2: Sure thing, Dana. So it's a little bit of a 42 00:02:23,000 --> 00:02:26,239 Speaker 2: contentious term. Many people would define geoeconomics as the use 43 00:02:26,280 --> 00:02:30,960 Speaker 2: of economic tools like sanctions, expert controls to achieve geopolitical ends. 44 00:02:31,080 --> 00:02:33,400 Speaker 2: Here at Bloomberg, we define it a little bit more broadly. 45 00:02:33,480 --> 00:02:37,320 Speaker 2: We're looking at the intersection of geopolitics and economics, markets 46 00:02:37,360 --> 00:02:40,119 Speaker 2: and industries, which it turns out is in many places 47 00:02:40,160 --> 00:02:41,079 Speaker 2: at many times. 48 00:02:41,480 --> 00:02:44,639 Speaker 1: And then when we're approaching this in this broader term, 49 00:02:44,680 --> 00:02:47,799 Speaker 1: invariably trade and supply chains, which is actually what your 50 00:02:47,840 --> 00:02:51,400 Speaker 1: team specifically focuses on. Antoine is very much wrapped up 51 00:02:51,400 --> 00:02:54,639 Speaker 1: in this. But what tools do we use to give 52 00:02:54,720 --> 00:02:57,400 Speaker 1: us context and what are the frameworks that we use 53 00:02:57,520 --> 00:03:00,160 Speaker 1: in order to think about this and provide context. 54 00:03:00,440 --> 00:03:02,639 Speaker 3: That's a great question. At BANF, we've been really good 55 00:03:02,639 --> 00:03:06,040 Speaker 3: at linking things together when it comes to deployment and 56 00:03:06,080 --> 00:03:08,880 Speaker 3: coming up with scenarios for the uptake of different types 57 00:03:08,880 --> 00:03:12,600 Speaker 3: of clean technology and how the power makes the energy 58 00:03:12,600 --> 00:03:15,000 Speaker 3: mixed changes over time. What we're doing with the Trade 59 00:03:15,040 --> 00:03:16,800 Speaker 3: and Supply Chains team, and what we've been doing over 60 00:03:16,840 --> 00:03:19,520 Speaker 3: the last years is trying to join up the dots upstream, 61 00:03:19,720 --> 00:03:22,080 Speaker 3: and that means looking at three things in detail and 62 00:03:22,120 --> 00:03:25,240 Speaker 3: breaking it down into manufacturing where are things made? And 63 00:03:25,240 --> 00:03:26,960 Speaker 3: we've got lots of asset data that we sort of 64 00:03:26,960 --> 00:03:29,640 Speaker 3: rely on, so that trade flows, tens of thousands of 65 00:03:29,720 --> 00:03:32,840 Speaker 3: rows of trade data that we pour over. And on 66 00:03:32,880 --> 00:03:37,400 Speaker 3: the policy front, sort of subsidies, tariffs, local content requirements 67 00:03:37,480 --> 00:03:40,240 Speaker 3: and rules. That's a third bucket that we look at 68 00:03:40,280 --> 00:03:42,040 Speaker 3: and we try and divide it up between those three 69 00:03:42,080 --> 00:03:45,120 Speaker 3: different things, align our coverage across the different sectors that 70 00:03:45,160 --> 00:03:47,560 Speaker 3: we look at, and that lets us respond to the 71 00:03:47,640 --> 00:03:50,720 Speaker 3: volatility and madness of the last few months well. 72 00:03:50,760 --> 00:03:52,720 Speaker 1: And in the wide array of the sectors that benef 73 00:03:52,800 --> 00:03:55,560 Speaker 1: cover is looking at the energy transition, are there some 74 00:03:55,840 --> 00:03:59,360 Speaker 1: sectors or even industries that you are keeping the closest 75 00:03:59,400 --> 00:04:01,240 Speaker 1: eye on? And I know we'll get to some more 76 00:04:01,280 --> 00:04:04,200 Speaker 1: detail on those specifically, because that is part of what 77 00:04:04,200 --> 00:04:05,800 Speaker 1: we want to talk about in the show. But there's 78 00:04:05,840 --> 00:04:08,640 Speaker 1: so many which ones are you keeping the closest eye 79 00:04:08,640 --> 00:04:09,360 Speaker 1: on at the moment? 80 00:04:09,680 --> 00:04:12,880 Speaker 3: So true BNF fashion, we've started with the sectors that 81 00:04:13,040 --> 00:04:15,720 Speaker 3: are widely considered our bread and butter, so looking at 82 00:04:15,800 --> 00:04:18,840 Speaker 3: renewable energy, wind and solar, looking at batteries, looking at 83 00:04:18,839 --> 00:04:21,599 Speaker 3: electric vehicles. For all of those three categories, we've got 84 00:04:21,640 --> 00:04:23,479 Speaker 3: a pretty good view of what's going on, and we're 85 00:04:23,520 --> 00:04:25,680 Speaker 3: branching out and we're also looking at all kinds of 86 00:04:25,680 --> 00:04:29,080 Speaker 3: things like grid equipment, heat pumps. We started looking at 87 00:04:29,120 --> 00:04:31,360 Speaker 3: gas turbines for reasons that we can get into a 88 00:04:31,400 --> 00:04:33,880 Speaker 3: bit later. The world's are oyster in terms of, you know, 89 00:04:34,160 --> 00:04:37,960 Speaker 3: this intersection between climate and trade. Another topic that is 90 00:04:37,960 --> 00:04:39,919 Speaker 3: going to get a lot of attention next year is 91 00:04:39,960 --> 00:04:44,000 Speaker 3: that of carbon border adjustments or carbon bordered tariffs, and 92 00:04:44,040 --> 00:04:50,160 Speaker 3: then that concerns a host of industrial goods like steel, fertilizer, cement, aluminium, 93 00:04:50,200 --> 00:04:52,680 Speaker 3: and looking at sort of that through the lens of 94 00:04:52,720 --> 00:04:54,839 Speaker 3: how trade is going to be impacted by measures that 95 00:04:54,920 --> 00:04:58,400 Speaker 3: are designed to address the emissions linked to their production. 96 00:04:58,680 --> 00:05:00,920 Speaker 3: So there's a number of sectors that we look at. 97 00:05:00,960 --> 00:05:03,320 Speaker 3: The ones that we focus on in most detail are 98 00:05:03,360 --> 00:05:05,360 Speaker 3: the sort of traditional keen energy sectors. 99 00:05:05,640 --> 00:05:08,679 Speaker 1: So let's zoom out and talk about tariff's more broadly. 100 00:05:08,880 --> 00:05:11,280 Speaker 1: The second of April there were big announcements out of 101 00:05:11,320 --> 00:05:13,880 Speaker 1: the US and since then that has been something that 102 00:05:13,920 --> 00:05:17,080 Speaker 1: has been very much dominating conversations in the news cycle 103 00:05:17,120 --> 00:05:20,360 Speaker 1: and certainly for our teams what these tariff announcements could 104 00:05:20,360 --> 00:05:23,520 Speaker 1: mean and how they have been changing. So I would 105 00:05:23,560 --> 00:05:26,440 Speaker 1: like to understand of these what is it that is 106 00:05:26,600 --> 00:05:30,400 Speaker 1: firm and what is still shifting and how clear of 107 00:05:30,440 --> 00:05:32,680 Speaker 1: a view do we have on tariffs. 108 00:05:33,000 --> 00:05:35,400 Speaker 2: So the short answer, which is not going to be 109 00:05:35,400 --> 00:05:38,400 Speaker 2: of comfort to most listeners, is that everything is shifting 110 00:05:38,440 --> 00:05:41,920 Speaker 2: and could potentially shift further. President Trump announced, as you mentioned, 111 00:05:42,080 --> 00:05:44,880 Speaker 2: a heap of reciprocal terraffs on April second, that are 112 00:05:44,920 --> 00:05:49,039 Speaker 2: based on an authority called AEPA for shorthand International Emergency 113 00:05:49,040 --> 00:05:52,160 Speaker 2: Economic Powers Act, and that is something that has been 114 00:05:52,240 --> 00:05:56,120 Speaker 2: challenged in court as not legally sound ground upon which 115 00:05:56,200 --> 00:05:59,080 Speaker 2: to declare those terraffs. It allows the President to declare 116 00:05:59,120 --> 00:06:01,279 Speaker 2: them without having to run it by Congress, which in 117 00:06:01,320 --> 00:06:04,479 Speaker 2: the US system technically is supposed to have control over 118 00:06:04,520 --> 00:06:07,400 Speaker 2: those sorts of decisions. That court case is still pending, 119 00:06:07,440 --> 00:06:09,719 Speaker 2: it's working its the way through the court system. There 120 00:06:09,880 --> 00:06:12,800 Speaker 2: is the risk that a court could say that indeed, 121 00:06:12,839 --> 00:06:15,680 Speaker 2: these terrafts are not on legally sound ground, throws them out, 122 00:06:15,760 --> 00:06:18,040 Speaker 2: throws out the authority, and forces the US to pay 123 00:06:18,040 --> 00:06:20,440 Speaker 2: back terrafs that have been collected which would force the 124 00:06:20,520 --> 00:06:23,600 Speaker 2: United States to then either stand back on that global 125 00:06:23,640 --> 00:06:26,520 Speaker 2: trade war or to say we're going to create or 126 00:06:26,839 --> 00:06:30,359 Speaker 2: use a different authority to maintain these terraffs in place. 127 00:06:30,520 --> 00:06:32,200 Speaker 2: So all this is to say there's a lot of 128 00:06:32,240 --> 00:06:35,720 Speaker 2: uncertainty even about the framework upon which these terrafts were announced. 129 00:06:35,839 --> 00:06:38,600 Speaker 2: Then the terrafts themselves, we've seen them shifts several times. 130 00:06:38,680 --> 00:06:41,280 Speaker 2: We've seen the deadline for collecting them shifts several times. 131 00:06:41,440 --> 00:06:44,480 Speaker 2: Now it does look like the reciprocal terrafts piece of 132 00:06:44,520 --> 00:06:46,520 Speaker 2: it is in place. There have been a number of 133 00:06:46,520 --> 00:06:49,160 Speaker 2: trade deals that have been announced, but even those are 134 00:06:49,160 --> 00:06:51,560 Speaker 2: on somewhat shaky ground in the sense that we have 135 00:06:51,680 --> 00:06:54,400 Speaker 2: what President Trump has announced as the trade deal, but 136 00:06:54,520 --> 00:06:58,040 Speaker 2: in some cases the other partner either hasn't confirmed that 137 00:06:58,040 --> 00:07:00,640 Speaker 2: that is indeed the trade deal in via Noam's case. 138 00:07:00,760 --> 00:07:03,400 Speaker 2: In other cases it seems that those deals are not 139 00:07:03,480 --> 00:07:06,560 Speaker 2: in place. Those countries are still paying the higher tariff 140 00:07:06,600 --> 00:07:08,560 Speaker 2: rate that they were supposed to be paying under the 141 00:07:08,720 --> 00:07:12,400 Speaker 2: April second and then subsequent tariff modifications, they are not 142 00:07:12,520 --> 00:07:15,960 Speaker 2: yet paying the trade deal agreed upon rate. So there's 143 00:07:16,040 --> 00:07:18,240 Speaker 2: a tremendous amount of uncertainty, and I don't think it's 144 00:07:18,280 --> 00:07:20,920 Speaker 2: going to go away anytime soon because of the variety 145 00:07:21,000 --> 00:07:23,400 Speaker 2: of trade war factors at play in this so ongoing 146 00:07:23,440 --> 00:07:23,960 Speaker 2: court case. 147 00:07:24,440 --> 00:07:27,480 Speaker 1: Let's talk about the court case, because court cases the 148 00:07:28,040 --> 00:07:30,520 Speaker 1: wheels of justice grind slowly. Is a term that many 149 00:07:30,520 --> 00:07:33,000 Speaker 1: people have heard as a no obled adage, But this 150 00:07:33,120 --> 00:07:36,160 Speaker 1: isn't critically important for the US and for all countries 151 00:07:36,200 --> 00:07:39,600 Speaker 1: trading with it so invariably a priority. Are we expecting 152 00:07:39,680 --> 00:07:42,720 Speaker 1: to see some sort of a resolution regarding the legality 153 00:07:42,840 --> 00:07:44,960 Speaker 1: inside of this year, at least. 154 00:07:45,080 --> 00:07:48,120 Speaker 2: Most likely not from what I'm hearing. What the next 155 00:07:48,120 --> 00:07:51,000 Speaker 2: step is is where we're waiting on a pending court decision. 156 00:07:51,280 --> 00:07:54,960 Speaker 2: That decision will very likely uphold the lower court's decision 157 00:07:55,000 --> 00:07:58,160 Speaker 2: that these RIfS are are not on sound legal ground, 158 00:07:58,400 --> 00:08:00,440 Speaker 2: but we'll stay the order in the sun that they 159 00:08:00,480 --> 00:08:03,680 Speaker 2: won't immediately request that the administration roll back these terrorfs 160 00:08:03,720 --> 00:08:06,440 Speaker 2: and payback any duties that have been collected since they 161 00:08:06,440 --> 00:08:09,280 Speaker 2: were put in place, so essentially a continuation of the 162 00:08:09,320 --> 00:08:11,720 Speaker 2: status quo. It will move on to the next level 163 00:08:11,720 --> 00:08:14,080 Speaker 2: in the court system to make a decision ultimately will 164 00:08:14,120 --> 00:08:16,400 Speaker 2: have to probably go to the Supreme Court for decision. 165 00:08:16,640 --> 00:08:19,200 Speaker 2: That process can take a very long time. The issuance 166 00:08:19,200 --> 00:08:21,800 Speaker 2: of a judgment of final judgment could also take quite 167 00:08:21,880 --> 00:08:24,320 Speaker 2: some time, so we may be looking at something early 168 00:08:24,360 --> 00:08:26,920 Speaker 2: next year, possibly later than that, depending on what else 169 00:08:26,960 --> 00:08:28,000 Speaker 2: is on the court stocket. 170 00:08:28,400 --> 00:08:31,720 Speaker 1: But invariably business continues and countries are coming to the 171 00:08:31,720 --> 00:08:35,280 Speaker 1: table negotiating. So if we put the tariff announcements a 172 00:08:35,320 --> 00:08:38,079 Speaker 1: bit to the side as the backdrop to all of this, 173 00:08:38,320 --> 00:08:41,480 Speaker 1: there are then trade agreements which are legally binding and 174 00:08:41,520 --> 00:08:43,840 Speaker 1: have gone through the process. So assuming that that is 175 00:08:43,880 --> 00:08:47,640 Speaker 1: what is being negotiated by many of the largest trading 176 00:08:47,640 --> 00:08:50,360 Speaker 1: partners that the US has, can you walk me through 177 00:08:50,600 --> 00:08:53,360 Speaker 1: kind of the anatomy of a trade agreement how these 178 00:08:53,559 --> 00:08:56,120 Speaker 1: come to life, how binding they are, and essentially what 179 00:08:56,240 --> 00:08:59,640 Speaker 1: good looks like once to countries or a group of 180 00:08:59,640 --> 00:09:02,120 Speaker 1: countries have come together to actually make a decision. 181 00:09:02,360 --> 00:09:05,240 Speaker 2: So in a normal worlds, in normal order, these trade 182 00:09:05,280 --> 00:09:09,640 Speaker 2: agreements are legally binding. Usually they are often multi chapter agreements, 183 00:09:09,760 --> 00:09:13,360 Speaker 2: very complicated, worked out over months, if not years, of negotiation. 184 00:09:13,600 --> 00:09:16,679 Speaker 2: In the United States, are usually ratified by Congress. However, 185 00:09:16,960 --> 00:09:19,360 Speaker 2: those aren't necessarily the deals that we see President Trump 186 00:09:19,440 --> 00:09:23,320 Speaker 2: making right now. With a number of trade partners. These deals. Again, 187 00:09:23,360 --> 00:09:26,520 Speaker 2: there's a lot of ambiguity about what was actually agreed to. 188 00:09:26,720 --> 00:09:29,760 Speaker 2: The details of the deals themselves have come out, yet 189 00:09:29,800 --> 00:09:33,839 Speaker 2: they seem to be more frameworks or handshake agreements than 190 00:09:33,920 --> 00:09:37,640 Speaker 2: what we would consider that multi chapter legally binding trade agreement. 191 00:09:37,679 --> 00:09:40,760 Speaker 2: And I think that isn't yet another source of uncertainty here, 192 00:09:40,800 --> 00:09:43,440 Speaker 2: which is, if this isn't something that's been ratified by 193 00:09:43,600 --> 00:09:46,400 Speaker 2: in the US's case, Congress, if it's not necessarily legally 194 00:09:46,440 --> 00:09:49,000 Speaker 2: binding in the same way that traditional trade agreements are, 195 00:09:49,280 --> 00:09:51,400 Speaker 2: how easy is it for one of the parties to 196 00:09:51,440 --> 00:09:53,720 Speaker 2: that agreement to either change the terms of it or 197 00:09:53,840 --> 00:09:57,560 Speaker 2: to jettison it completely. And given that there's already some 198 00:09:57,720 --> 00:10:01,280 Speaker 2: disagreement among the trade partners about what specifically was agreed to, 199 00:10:01,440 --> 00:10:03,679 Speaker 2: I think that leaves a lot of uncertainty still hanging 200 00:10:03,840 --> 00:10:05,800 Speaker 2: even for the handful of countries that have managed to 201 00:10:05,800 --> 00:10:06,920 Speaker 2: strike a deal with US. 202 00:10:07,240 --> 00:10:09,440 Speaker 1: And what are those handful of countries that have struck 203 00:10:09,440 --> 00:10:11,439 Speaker 1: a deal with the US up until this point? 204 00:10:11,720 --> 00:10:14,000 Speaker 2: So my count is seven, but Anton should jump in 205 00:10:14,000 --> 00:10:17,760 Speaker 2: in case I'm missing anyone, But they include Japan, South Korea, 206 00:10:17,960 --> 00:10:22,280 Speaker 2: the EU, Pakistan, Indonesia, Philippines, and Vietnam. 207 00:10:22,600 --> 00:10:26,560 Speaker 1: And interestingly enough, of the US's largest trading partners of 208 00:10:26,600 --> 00:10:29,400 Speaker 1: the top five, Japan is the only one that's struck 209 00:10:29,440 --> 00:10:33,160 Speaker 1: an agreement, so Mexico, Canada, China, Germany, well, Germany is 210 00:10:33,160 --> 00:10:36,920 Speaker 1: a part of the EU still very much actively under discussion, 211 00:10:37,120 --> 00:10:40,440 Speaker 1: which is a huge part of global trade. Well, so 212 00:10:40,480 --> 00:10:43,920 Speaker 1: then let's get into what this means for the energy transition. 213 00:10:44,200 --> 00:10:47,160 Speaker 1: So when we think about the trade agreements that are 214 00:10:47,160 --> 00:10:50,120 Speaker 1: already in place and the tariffs, are there some that 215 00:10:50,320 --> 00:10:53,200 Speaker 1: particularly stand out to you in Antoine as being most 216 00:10:53,280 --> 00:10:56,760 Speaker 1: significant in having the biggest impact on the energy transition 217 00:10:57,040 --> 00:10:57,840 Speaker 1: and the speed of it. 218 00:10:58,040 --> 00:11:00,839 Speaker 3: Yeah, what we found helpful is we really monthly piece 219 00:11:00,880 --> 00:11:04,080 Speaker 3: which gives our clients access to a view of the 220 00:11:04,120 --> 00:11:06,959 Speaker 3: effective tariff that's in place on various products. So whether 221 00:11:06,960 --> 00:11:09,600 Speaker 3: that's batteries or whether that's cvs or SODO modules from 222 00:11:09,600 --> 00:11:12,319 Speaker 3: different countries. That's helpful because things are shifting really fast. 223 00:11:12,559 --> 00:11:15,200 Speaker 3: Is helpful to have a comparative view across different geographies 224 00:11:15,200 --> 00:11:18,120 Speaker 3: and countries of origin for the US specifically, And it's 225 00:11:18,160 --> 00:11:20,559 Speaker 3: also really important because a lot of these tariffs stack 226 00:11:20,679 --> 00:11:23,800 Speaker 3: and we've talked about the reciprocal tariffs imposed on specific 227 00:11:23,840 --> 00:11:28,000 Speaker 3: geographies under EPA, but there's also, for example, tariffs that 228 00:11:28,000 --> 00:11:31,760 Speaker 3: are sector specific under section two three two of the 229 00:11:31,800 --> 00:11:34,720 Speaker 3: Trade Expansion Act of nineteen sixty two, which have been 230 00:11:34,720 --> 00:11:39,000 Speaker 3: affecting things like trade and steel, aluminium, automotives, and those 231 00:11:39,080 --> 00:11:40,800 Speaker 3: tend to stick around for a bit longer and to 232 00:11:40,840 --> 00:11:44,319 Speaker 3: be a bit more stable, so there's a shifting general backdrop. 233 00:11:44,600 --> 00:11:47,040 Speaker 3: We try and stack up these tariffs and work out 234 00:11:47,080 --> 00:11:49,760 Speaker 3: what the effective rates are, and then when we start 235 00:11:49,800 --> 00:11:51,720 Speaker 3: to look at what the impact is on different sectors, 236 00:11:51,920 --> 00:11:53,880 Speaker 3: we're able to do so from a firm of fitting. 237 00:11:54,240 --> 00:11:57,600 Speaker 3: One example of a sector where this particularly relevant too 238 00:11:57,920 --> 00:12:01,160 Speaker 3: is stationary storage in the US, and stationary storage was 239 00:12:01,160 --> 00:12:03,839 Speaker 3: a sector where we were seeing a runaway deployment cumulative 240 00:12:03,840 --> 00:12:08,240 Speaker 3: doublings year on year of installations of batteries that were 241 00:12:08,240 --> 00:12:11,000 Speaker 3: hooked up to the grid in the US in various states, 242 00:12:11,200 --> 00:12:14,439 Speaker 3: and that has sort of been threatened pretty drastically by 243 00:12:14,440 --> 00:12:17,720 Speaker 3: the fact that there's currently tariffs of above forty percent 244 00:12:17,800 --> 00:12:20,559 Speaker 3: of stationary storage batteries coming from China, which could rise 245 00:12:20,640 --> 00:12:23,480 Speaker 3: further over the next few months. And that matters because 246 00:12:23,520 --> 00:12:25,960 Speaker 3: the US gets sixty nine percent of its batteries from 247 00:12:26,080 --> 00:12:28,440 Speaker 3: China and even larger share of the batteries used for 248 00:12:28,440 --> 00:12:32,520 Speaker 3: stationary storage come from that specific country, and the impact 249 00:12:32,880 --> 00:12:35,560 Speaker 3: is pretty drastic because of the fact that the upfront 250 00:12:35,640 --> 00:12:38,960 Speaker 3: capital requirements for installing a battery are considerable. So if 251 00:12:38,960 --> 00:12:41,200 Speaker 3: you make the equipment more expensive, it means that the 252 00:12:41,240 --> 00:12:44,480 Speaker 3: competitiveness of batteries against say a natural gas plant are 253 00:12:44,520 --> 00:12:46,600 Speaker 3: impacted to a large degree, and then you have all 254 00:12:46,640 --> 00:12:48,920 Speaker 3: these knock on effects because then you're like, okay, so 255 00:12:49,040 --> 00:12:51,280 Speaker 3: stationary storage batteries are going to get much more expensive, 256 00:12:51,320 --> 00:12:53,840 Speaker 3: it seems. So then there's we've got all of this 257 00:12:53,960 --> 00:12:56,240 Speaker 3: load growth on the grid. We want to integrate more 258 00:12:56,360 --> 00:12:59,320 Speaker 3: data centers, We're going to need to figure out, you know, 259 00:12:59,400 --> 00:13:02,400 Speaker 3: other options. Gas turbine supply chains are also having a 260 00:13:02,400 --> 00:13:04,480 Speaker 3: hard time, and we can't get our hands on a 261 00:13:04,520 --> 00:13:07,200 Speaker 3: new gas turbine for another four years. So that's what 262 00:13:07,240 --> 00:13:08,679 Speaker 3: we're trying to do in our team is to sort 263 00:13:08,679 --> 00:13:11,040 Speaker 3: of look at cases like the case of stationary storage 264 00:13:11,040 --> 00:13:13,840 Speaker 3: batteries see how it interacts not just from a trade 265 00:13:13,880 --> 00:13:17,240 Speaker 3: perspective with what the picture is in terms of imports, 266 00:13:17,240 --> 00:13:19,200 Speaker 3: but also what the knock on effects are on the 267 00:13:19,200 --> 00:13:22,000 Speaker 3: competitiveness of other sectors, which has then led us to 268 00:13:22,040 --> 00:13:24,880 Speaker 3: take a deeper look at supply chains for areas that 269 00:13:24,880 --> 00:13:26,400 Speaker 3: we weren't looking at in the past. 270 00:13:26,559 --> 00:13:28,880 Speaker 1: And Antoine, you pickt your words very carefully, so you 271 00:13:28,920 --> 00:13:32,360 Speaker 1: said the effective rate. Explain what you means very specifically 272 00:13:32,400 --> 00:13:32,800 Speaker 1: about this. 273 00:13:33,440 --> 00:13:36,000 Speaker 3: Yeah, So when you're looking at import tariff for duty 274 00:13:36,240 --> 00:13:38,640 Speaker 3: in the US, you can have a series of different 275 00:13:38,640 --> 00:13:40,600 Speaker 3: tariffs which stack up on top of each other. So 276 00:13:40,640 --> 00:13:42,280 Speaker 3: you can have the base rate, which is the most 277 00:13:42,320 --> 00:13:45,240 Speaker 3: favored nation rate, which applies to all countries for which 278 00:13:45,280 --> 00:13:48,319 Speaker 3: you know there's no specific agreement that's been signed, and 279 00:13:48,559 --> 00:13:51,400 Speaker 3: on top of that, you can have various additional tariff 280 00:13:51,440 --> 00:13:54,360 Speaker 3: stat adducts to what we would call the effective rate 281 00:13:54,520 --> 00:13:57,400 Speaker 3: that's imposed on a given product that's coming in, and 282 00:13:57,440 --> 00:14:00,120 Speaker 3: that can be really hard to work out, especially now 283 00:14:00,160 --> 00:14:02,720 Speaker 3: when things are changing so much, and especially now when, 284 00:14:02,760 --> 00:14:06,160 Speaker 3: as we've mentioned, we have lots of conflicting announcements and agreements, 285 00:14:06,160 --> 00:14:10,199 Speaker 3: the implementation of which is not always evident. So figuring 286 00:14:10,200 --> 00:14:12,360 Speaker 3: out you know, what is actually being levied and what 287 00:14:12,559 --> 00:14:14,880 Speaker 3: is the multiplier that's being applied to goods coming in 288 00:14:15,120 --> 00:14:17,640 Speaker 3: is something that is easier than done at the moment. 289 00:14:18,679 --> 00:14:20,680 Speaker 1: Let's also talk about the fact that I mean you 290 00:14:20,800 --> 00:14:24,000 Speaker 1: mentioning a bunch of different sectors that are very global 291 00:14:24,000 --> 00:14:26,360 Speaker 1: by nature. And if we even think about just a 292 00:14:26,360 --> 00:14:30,280 Speaker 1: specific piece of kit, so batteries found in stationary storage, 293 00:14:30,360 --> 00:14:32,320 Speaker 1: the metals come from one part of the world and 294 00:14:32,320 --> 00:14:34,280 Speaker 1: then are refined in another part of the world, and 295 00:14:34,320 --> 00:14:36,120 Speaker 1: then are you know, maybe assembled in a car and 296 00:14:36,200 --> 00:14:38,840 Speaker 1: another part of the world. So these are truly global 297 00:14:38,840 --> 00:14:41,400 Speaker 1: supply chains before they even end up in the US. 298 00:14:41,560 --> 00:14:44,160 Speaker 1: And recently there's been a lot of talk about transhipment 299 00:14:44,200 --> 00:14:48,400 Speaker 1: that has been a strategy for many companies when trying 300 00:14:48,400 --> 00:14:50,640 Speaker 1: to figure out how to get their goods in How 301 00:14:50,880 --> 00:14:53,120 Speaker 1: relevant is transhipment going to be in the future and 302 00:14:53,160 --> 00:14:55,320 Speaker 1: how much complexity is it going to be adding to 303 00:14:55,440 --> 00:14:57,680 Speaker 1: this discussion, and also maybe Jenny, you can give us 304 00:14:57,680 --> 00:14:59,920 Speaker 1: a bit of a definition of what transhipment is for 305 00:15:00,040 --> 00:15:01,680 Speaker 1: those who are not familiar with the term. 306 00:15:02,080 --> 00:15:03,840 Speaker 2: Sure, so I'll kick it off and then hand it 307 00:15:03,840 --> 00:15:06,320 Speaker 2: over to Antoine for the specifics on the supply chains 308 00:15:06,320 --> 00:15:10,400 Speaker 2: he covers. So, transhipment typically referred to as an effort 309 00:15:10,440 --> 00:15:12,680 Speaker 2: to get a good from one place to another via 310 00:15:12,800 --> 00:15:16,560 Speaker 2: a third country or another region. The classic example from 311 00:15:16,600 --> 00:15:19,880 Speaker 2: the geopolitical perspective, and something that has been very much 312 00:15:20,040 --> 00:15:23,480 Speaker 2: in focus for the Trump administration has been the transhipment 313 00:15:23,480 --> 00:15:26,480 Speaker 2: of Chinese goods from China through Southeast Asia and other 314 00:15:26,520 --> 00:15:29,440 Speaker 2: economies into the United States. This was a phenomenon that 315 00:15:29,560 --> 00:15:32,680 Speaker 2: really took off during Trump's first administration, his first trade 316 00:15:32,680 --> 00:15:35,160 Speaker 2: war with China. Because those goods coming directly out of 317 00:15:35,240 --> 00:15:38,080 Speaker 2: China faced a higher tariff rate, it made economic sense 318 00:15:38,120 --> 00:15:40,480 Speaker 2: for those supply chains to shift and in many cases 319 00:15:40,520 --> 00:15:43,880 Speaker 2: for Chinese companies to move their manufacturing out of China 320 00:15:43,880 --> 00:15:47,040 Speaker 2: at least their final assembly to places like Vietnam, ship 321 00:15:47,080 --> 00:15:49,120 Speaker 2: it from there to the United States to enjoy lower 322 00:15:49,200 --> 00:15:51,880 Speaker 2: tariff rates. Coming back into office and launching his second 323 00:15:51,880 --> 00:15:54,920 Speaker 2: trade war with China, the Trump administration has tried to 324 00:15:55,120 --> 00:15:58,120 Speaker 2: close that loophole. Essentially, they are talking with partners, in 325 00:15:58,160 --> 00:16:01,239 Speaker 2: particular in those economies that were the focus of transhipment 326 00:16:01,280 --> 00:16:03,920 Speaker 2: in the past, so Vietnam, Indonesia. This is part of 327 00:16:03,960 --> 00:16:07,200 Speaker 2: their announced trade deals with the United States that transhipped 328 00:16:07,200 --> 00:16:11,120 Speaker 2: goods which are the definition that the Trump administration will 329 00:16:11,200 --> 00:16:14,240 Speaker 2: use to define that to be determined, but essentially trampship 330 00:16:14,280 --> 00:16:16,680 Speaker 2: goods will be charged at a tariff at a higher 331 00:16:16,760 --> 00:16:19,400 Speaker 2: rate than Indonesian goods, Vietnamese. 332 00:16:19,000 --> 00:16:19,720 Speaker 1: Goods, et cetera. 333 00:16:19,880 --> 00:16:22,960 Speaker 2: Again, how they're going to determine what counts as transhipped, 334 00:16:23,080 --> 00:16:26,800 Speaker 2: what counts as manufactured within those countries still to be determined. 335 00:16:26,800 --> 00:16:28,760 Speaker 2: How they're going to actually enforce it, I think is 336 00:16:28,800 --> 00:16:30,840 Speaker 2: also going to turn out to be very tricky. But 337 00:16:30,920 --> 00:16:32,960 Speaker 2: I think this is in large part our response to 338 00:16:33,000 --> 00:16:36,000 Speaker 2: that First trade war phenomenon in an effort to essentially 339 00:16:36,080 --> 00:16:38,200 Speaker 2: wall in the Chinese to a certain extent. 340 00:16:38,240 --> 00:16:40,360 Speaker 3: And this can take a number of different forms. We're 341 00:16:40,400 --> 00:16:43,000 Speaker 3: looking at battery data recently, and it seems like there's 342 00:16:43,000 --> 00:16:46,160 Speaker 3: been a concurrent rise in imports and exports of batteries 343 00:16:46,160 --> 00:16:48,840 Speaker 3: from Southeast Asia, which is you know, has been timed 344 00:16:48,920 --> 00:16:51,280 Speaker 3: with the imposition of much higher tariffs that we had 345 00:16:51,320 --> 00:16:53,880 Speaker 3: in the past on batteries as we've mentioned, coming into 346 00:16:53,880 --> 00:16:56,360 Speaker 3: the US from China. So we're looking at that trying 347 00:16:56,400 --> 00:16:58,440 Speaker 3: to develop a view about the extent to which that 348 00:16:58,480 --> 00:17:02,680 Speaker 3: represents some form of transhitionment. And as Jenny mentioned, there's 349 00:17:02,680 --> 00:17:05,520 Speaker 3: also lots of cases of supply chains shifting around, and 350 00:17:05,560 --> 00:17:07,760 Speaker 3: that's when things get really difficult because when deciding you 351 00:17:07,760 --> 00:17:09,879 Speaker 3: know what the country of origin is for a given 352 00:17:09,880 --> 00:17:12,240 Speaker 3: product where the transhipment has occurred, you need to start 353 00:17:12,320 --> 00:17:15,520 Speaker 3: looking at the transformation that a product has undergone as 354 00:17:15,560 --> 00:17:19,119 Speaker 3: it goes through another country, and that's when you know 355 00:17:19,160 --> 00:17:21,919 Speaker 3: we we're starting to get a lot more attention given 356 00:17:22,119 --> 00:17:25,320 Speaker 3: to supply chains for electric vehicles, for example, where there's 357 00:17:25,320 --> 00:17:27,480 Speaker 3: a number of different countries that have announced something that 358 00:17:27,520 --> 00:17:29,800 Speaker 3: we've been seeing in the solar sector for many years, 359 00:17:30,000 --> 00:17:34,679 Speaker 3: which is factories Chinese manufacturers shifting where they're producing from 360 00:17:34,760 --> 00:17:38,600 Speaker 3: to perhaps get around some tariffs. And there's been some 361 00:17:38,680 --> 00:17:42,040 Speaker 3: tensions and discussions happening at inter government levels about the 362 00:17:42,080 --> 00:17:46,720 Speaker 3: extent to which those manufacturing investments represent significant value add. 363 00:17:46,920 --> 00:17:51,840 Speaker 3: So for EV's for example, Brazil is site of an 364 00:17:51,840 --> 00:17:55,520 Speaker 3: EV factory by BYD, and it's been the object of 365 00:17:55,560 --> 00:17:59,840 Speaker 3: heated discussion and debate within Brazil, with different trade associations 366 00:17:59,840 --> 00:18:02,600 Speaker 3: and groups interacting with the government about the extent to 367 00:18:02,640 --> 00:18:06,400 Speaker 3: which that involves what is basically just parts assembly versus 368 00:18:07,240 --> 00:18:11,439 Speaker 3: meaningful investments that will then result in technology spillovers and 369 00:18:11,680 --> 00:18:15,560 Speaker 3: more sort of economic value add from Brazil's perspective. So 370 00:18:15,760 --> 00:18:18,080 Speaker 3: there's a lot going on, and I think what's really 371 00:18:18,119 --> 00:18:19,720 Speaker 3: important as well is that we saw this a lot 372 00:18:19,720 --> 00:18:21,560 Speaker 3: in the past for solar this is a lot more 373 00:18:21,600 --> 00:18:24,520 Speaker 3: difficult to do for sectors like batteries, where if you're 374 00:18:24,520 --> 00:18:27,120 Speaker 3: shifting around the downstream bit of the solar value chain, 375 00:18:27,160 --> 00:18:29,800 Speaker 3: you're moving a module making factory. You can do that 376 00:18:29,840 --> 00:18:32,240 Speaker 3: in six months and is pretty simple stuff. Doing the 377 00:18:32,280 --> 00:18:35,560 Speaker 3: same thing for a battery cell manufacturing facility is much harder. So, 378 00:18:35,600 --> 00:18:38,600 Speaker 3: although we're starting to see announcements of battery cell manufacturers 379 00:18:38,680 --> 00:18:43,040 Speaker 3: citing themselves in Southeast Asia to manufacture from Southeast Asia 380 00:18:43,080 --> 00:18:45,600 Speaker 3: to export a broad and get around potential tariffs in 381 00:18:45,640 --> 00:18:48,240 Speaker 3: the future, doing that as nimbly as has been the 382 00:18:48,240 --> 00:18:50,480 Speaker 3: case in the solar sector, for example, is quite tough. 383 00:18:51,320 --> 00:18:53,680 Speaker 1: Where we draw that line is really in the manufacturing 384 00:18:53,760 --> 00:18:55,880 Speaker 1: end of things and not where the raw materials come from. 385 00:18:55,920 --> 00:18:56,520 Speaker 1: Is that correct? 386 00:18:56,800 --> 00:18:59,600 Speaker 3: So yeah, it's about the stage of the value chain 387 00:18:59,720 --> 00:19:02,919 Speaker 3: that's that's being looked at, and that is relevant to 388 00:19:02,960 --> 00:19:06,399 Speaker 3: the country where there's this potential risk of transhipment and 389 00:19:06,440 --> 00:19:08,920 Speaker 3: the extent to which that's determined by the courts or 390 00:19:08,960 --> 00:19:12,440 Speaker 3: the customs authority to involve a substantial transformation, and that's 391 00:19:12,440 --> 00:19:14,960 Speaker 3: where there's a real gray zone and things get very tricky. 392 00:19:15,080 --> 00:19:17,080 Speaker 3: There's lots of case law about this in the past, 393 00:19:17,080 --> 00:19:19,640 Speaker 3: about how it's been interpreted differently for different products. It's 394 00:19:19,640 --> 00:19:20,919 Speaker 3: something that we're following closely. 395 00:19:21,240 --> 00:19:23,199 Speaker 1: And you had mentioned a couple of different countries that 396 00:19:23,280 --> 00:19:27,800 Speaker 1: were particularly benefiting from this in the last couple of years, 397 00:19:27,920 --> 00:19:31,920 Speaker 1: So Vietnam, Indonesia, Brazil. Are there other countries that really 398 00:19:31,960 --> 00:19:34,200 Speaker 1: stand out as having a lot to gain or lose 399 00:19:34,359 --> 00:19:36,480 Speaker 1: in this move towards transhipment. 400 00:19:36,600 --> 00:19:40,480 Speaker 3: So it's always quite fraught. And again I distinguish between 401 00:19:40,600 --> 00:19:45,000 Speaker 3: transshipment and then sort of you know, factories reciting themselves 402 00:19:45,119 --> 00:19:48,199 Speaker 3: as a hedge against these tariffs, and there is a 403 00:19:48,240 --> 00:19:50,480 Speaker 3: gray line that means that both of those terms are 404 00:19:50,480 --> 00:19:53,240 Speaker 3: relevant to each other. But when it comes to factories 405 00:19:53,280 --> 00:19:58,000 Speaker 3: sort of moving to jurisdictions where they're facing lower US tariffs, 406 00:19:58,040 --> 00:20:00,000 Speaker 3: that's something that we've seen in the case of Indonesia 407 00:20:00,160 --> 00:20:03,439 Speaker 3: and now recently for the solar sector. And it's always 408 00:20:03,440 --> 00:20:05,479 Speaker 3: a bit of a game of it's always fraughts. Why 409 00:20:05,480 --> 00:20:07,520 Speaker 3: I say it's fraught is that this involves you know, 410 00:20:07,600 --> 00:20:09,760 Speaker 3: this is on the assumption that, as has been the 411 00:20:09,800 --> 00:20:12,040 Speaker 3: case over the last few months, Indonesia continues to face 412 00:20:12,040 --> 00:20:15,359 Speaker 3: a relatively low rate on its solar module exports to 413 00:20:15,400 --> 00:20:18,000 Speaker 3: the US compared to some of its neighbors like Cambodia 414 00:20:18,200 --> 00:20:20,440 Speaker 3: or Vietnam, And that's the case now, but that could 415 00:20:20,520 --> 00:20:22,640 Speaker 3: change very quickly. And right now we've got an anti 416 00:20:22,720 --> 00:20:26,199 Speaker 3: dumping countervating duty case investigation that's been launched in the 417 00:20:26,280 --> 00:20:30,560 Speaker 3: US which is specifically looking at Indonesia Lao and whether 418 00:20:30,640 --> 00:20:32,680 Speaker 3: or not it's worth, in the eyes of the US 419 00:20:32,720 --> 00:20:36,440 Speaker 3: of Customs Authority imposing higher tariffs on those countries, which 420 00:20:36,440 --> 00:20:39,080 Speaker 3: would mean that the efforts that Chinese manufacturers have made 421 00:20:39,080 --> 00:20:42,480 Speaker 3: at reciting their production would be for naught because it 422 00:20:42,480 --> 00:20:45,240 Speaker 3: would then be much more difficult to export from them 423 00:20:45,560 --> 00:20:48,479 Speaker 3: without making a big loss. So things shift around, they 424 00:20:48,480 --> 00:20:50,960 Speaker 3: can do so fairly quickly, but there's always a risk 425 00:20:51,080 --> 00:20:54,040 Speaker 3: that a knee jer sort of change in tariff policy, 426 00:20:54,080 --> 00:20:55,600 Speaker 3: which has been part of the course over the last 427 00:20:55,640 --> 00:20:57,760 Speaker 3: few months as far as the US is concerned, can 428 00:20:58,040 --> 00:20:59,960 Speaker 3: make investments look quite risky. 429 00:21:00,280 --> 00:21:02,439 Speaker 1: Also, one of the things you've brought up is the 430 00:21:02,480 --> 00:21:05,840 Speaker 1: fact that we're moving supply chains around and things are 431 00:21:05,880 --> 00:21:08,600 Speaker 1: being manufactured in different parts of the world, and that 432 00:21:08,720 --> 00:21:12,800 Speaker 1: is invariably a reaction to creating more favorable conditions for 433 00:21:12,840 --> 00:21:16,680 Speaker 1: your business. But one of the desired outcomes of these 434 00:21:16,720 --> 00:21:20,560 Speaker 1: tariffs is to increase the amount of domestic US manufacturing. 435 00:21:20,800 --> 00:21:24,000 Speaker 1: Are we seeing signs in the energy transition and actually 436 00:21:24,080 --> 00:21:27,520 Speaker 1: outside of the sectors in the energy transition potentially as 437 00:21:27,720 --> 00:21:30,520 Speaker 1: Bill weather for what's to come for the energy transition 438 00:21:31,000 --> 00:21:36,560 Speaker 1: affected industries. Are we seeing some manufacturing starting to really 439 00:21:36,640 --> 00:21:39,320 Speaker 1: show up in the US or is it a situation 440 00:21:39,480 --> 00:21:41,760 Speaker 1: where things are kind of being held on ice more 441 00:21:41,840 --> 00:21:44,320 Speaker 1: or less until some of these court cases are revealed, 442 00:21:44,440 --> 00:21:47,600 Speaker 1: or trade agreements or ratified, or other things that companies 443 00:21:47,640 --> 00:21:52,000 Speaker 1: may be waiting on before really committing to domestic manufacturing. 444 00:21:52,200 --> 00:21:54,800 Speaker 2: I think the general view is, honestly, we're it's still 445 00:21:55,000 --> 00:21:57,200 Speaker 2: very early days to be able to make that assessment. 446 00:21:57,280 --> 00:22:00,440 Speaker 2: The White House is claiming trillions of dollars of investment 447 00:22:00,520 --> 00:22:03,239 Speaker 2: have been made since President Trump returned to office at 448 00:22:03,240 --> 00:22:06,640 Speaker 2: cross sectors. Many of those deals, though, were are either 449 00:22:06,680 --> 00:22:10,000 Speaker 2: referencing decisions that corporations had made while in the past 450 00:22:10,040 --> 00:22:13,879 Speaker 2: to for example, continue growing their workforces or make investments 451 00:22:13,920 --> 00:22:16,600 Speaker 2: here and there. Some of them are new, but we're 452 00:22:16,600 --> 00:22:18,800 Speaker 2: in the process right now of teasing out what's new 453 00:22:18,920 --> 00:22:21,680 Speaker 2: and what was pre existing and what sectors are those 454 00:22:21,720 --> 00:22:22,600 Speaker 2: going into. 455 00:22:23,080 --> 00:22:25,760 Speaker 3: And that's something that's quite tricky to do. So there's 456 00:22:25,800 --> 00:22:28,080 Speaker 3: been two, you know, sectors of the economy where when 457 00:22:28,119 --> 00:22:30,760 Speaker 3: we've thought of onshoring in the US, they've come up 458 00:22:31,160 --> 00:22:35,440 Speaker 3: front and center, and that's semiconductor manufacturing, and then that's 459 00:22:35,520 --> 00:22:39,520 Speaker 3: clean tech manufacturing writ large, which includes battery, solar evs, 460 00:22:39,560 --> 00:22:42,200 Speaker 3: et cetera. The Trump administration has made it a lot 461 00:22:42,200 --> 00:22:44,240 Speaker 3: more in some cases difficult to access a lot of 462 00:22:44,280 --> 00:22:47,080 Speaker 3: the funding that was key to a lot of the 463 00:22:47,119 --> 00:22:50,080 Speaker 3: plans that were announced by manufacturers in those sectors. So 464 00:22:50,119 --> 00:22:52,920 Speaker 3: if we take the Chips Act, for example, with semiconductors, 465 00:22:52,960 --> 00:22:55,840 Speaker 3: that's something that's been the object of repeated attacks by 466 00:22:55,880 --> 00:22:57,840 Speaker 3: the Trump administration. And then when we look at the 467 00:22:57,880 --> 00:23:00,200 Speaker 3: Inflation Reduction Act, which was underpinning up a lot of 468 00:23:00,240 --> 00:23:03,560 Speaker 3: the investments in the kean tech manufacturing side of things, 469 00:23:03,720 --> 00:23:06,040 Speaker 3: and that's you know, that represents over one hundred billion 470 00:23:06,080 --> 00:23:09,080 Speaker 3: dollars of announced investments, then things start to get quite 471 00:23:09,080 --> 00:23:12,800 Speaker 3: tricky too. And you know, tariffs in theory can provide 472 00:23:12,840 --> 00:23:15,840 Speaker 3: something of a case for manufacturing locally when they're seen 473 00:23:15,880 --> 00:23:18,960 Speaker 3: to last and where there's expectations that will remain in place. 474 00:23:19,520 --> 00:23:23,120 Speaker 3: When you have fluctuations and volatility, that weakens that narrative. 475 00:23:23,320 --> 00:23:25,720 Speaker 3: And when you have sort of concurrent efforts which are 476 00:23:26,080 --> 00:23:28,800 Speaker 3: being undergone now to make it a bit harder or 477 00:23:28,880 --> 00:23:32,359 Speaker 3: much harder to access key subsidies or tax credits. So 478 00:23:32,400 --> 00:23:35,040 Speaker 3: we saw this recently in the recent bill that was 479 00:23:35,040 --> 00:23:37,480 Speaker 3: passed by the Trump administration, where we've started to have 480 00:23:37,720 --> 00:23:40,960 Speaker 3: various strings attached to many of the tax credits that 481 00:23:41,000 --> 00:23:45,280 Speaker 3: were most important for manufacturing Kean technology equipment. Then that 482 00:23:45,359 --> 00:23:49,199 Speaker 3: reduces the impetus for making those announcements of reality. So 483 00:23:49,200 --> 00:23:52,600 Speaker 3: we've got a big pipeline. Tariffs come in, tariffs, when 484 00:23:52,640 --> 00:23:54,639 Speaker 3: they change all over the place, none really knows what 485 00:23:54,680 --> 00:23:57,000 Speaker 3: to make of them. So business is waiting and seeing 486 00:23:57,080 --> 00:23:59,760 Speaker 3: and things have stored somewhat in terms of new announcements. 487 00:24:00,000 --> 00:24:02,720 Speaker 3: And then for the existing pipeline, we've had additional moves 488 00:24:02,840 --> 00:24:05,520 Speaker 3: to make the business case for many of the clean 489 00:24:05,560 --> 00:24:09,440 Speaker 3: tech factories. For example, WEAKA and that's been something that's 490 00:24:09,480 --> 00:24:11,679 Speaker 3: quite recent and we're still sort of passing exactly what 491 00:24:11,720 --> 00:24:12,399 Speaker 3: that represents. 492 00:24:13,520 --> 00:24:16,080 Speaker 1: So then let's talk about the rest of the world. 493 00:24:16,200 --> 00:24:18,639 Speaker 1: Because invariable, we've spent a lot of time discussing the 494 00:24:18,680 --> 00:24:23,119 Speaker 1: relationships between the US and their trading partners. But as 495 00:24:23,440 --> 00:24:27,480 Speaker 1: those relationships are being negotiated, there are also the relationships 496 00:24:27,480 --> 00:24:29,480 Speaker 1: that other countries have with each other, and I think 497 00:24:29,640 --> 00:24:32,520 Speaker 1: one that immediately comes to mind are electric vehicles. So, 498 00:24:32,760 --> 00:24:36,840 Speaker 1: for separate reasons, internal combustion engines are being favored in 499 00:24:36,880 --> 00:24:39,480 Speaker 1: the US, but a lot of these vehicle manufacturers have 500 00:24:39,560 --> 00:24:42,720 Speaker 1: announced that they will be making electric vehicles, and these 501 00:24:42,720 --> 00:24:45,880 Speaker 1: are multi year plans. They will have these electric vehicles 502 00:24:45,920 --> 00:24:48,440 Speaker 1: coming off the lines regardless of whether or not there's 503 00:24:48,440 --> 00:24:50,680 Speaker 1: appetite in the US and need to look for appetite 504 00:24:50,720 --> 00:24:53,200 Speaker 1: in other parts of the world. The largest electric vehicle 505 00:24:53,240 --> 00:24:56,040 Speaker 1: manufacturers in the world are indeed in China, selling both 506 00:24:56,080 --> 00:24:59,600 Speaker 1: domestically and abroad. So the question there is to what 507 00:24:59,640 --> 00:25:05,040 Speaker 1: extent has this actually kicked off trade negotiations between other 508 00:25:05,119 --> 00:25:08,400 Speaker 1: countries separate from the US, and are we seeing signs 509 00:25:08,440 --> 00:25:13,360 Speaker 1: that that's actually creating kind of a global discussion around trade. 510 00:25:13,160 --> 00:25:15,280 Speaker 2: At a high level. Yes, we have seen a number 511 00:25:15,280 --> 00:25:19,200 Speaker 2: of countries and economic blocks respond to President Trump's terrists 512 00:25:19,200 --> 00:25:22,440 Speaker 2: with an effort to diversify their trade relationships and deepen 513 00:25:22,480 --> 00:25:24,520 Speaker 2: them with other countries. We've seen this, for example, the 514 00:25:24,560 --> 00:25:27,440 Speaker 2: EU looking to reach out to other countries, not necessarily 515 00:25:27,520 --> 00:25:30,640 Speaker 2: to form an anti US block, but again to diversify 516 00:25:30,680 --> 00:25:32,840 Speaker 2: its trade relationships. There's also been a lot of interest 517 00:25:32,880 --> 00:25:36,159 Speaker 2: in this Latin America among bricks partners, et cetera. I 518 00:25:36,160 --> 00:25:38,040 Speaker 2: think the challenge that many of them are going to 519 00:25:38,119 --> 00:25:41,480 Speaker 2: face is the US is the largest economy in the world. 520 00:25:41,520 --> 00:25:45,280 Speaker 2: It's hard to really diversify or navigate away from that 521 00:25:45,320 --> 00:25:47,640 Speaker 2: in a lot of ways. And there's also the geopolitical 522 00:25:47,720 --> 00:25:50,200 Speaker 2: risk that comes with that of the President Trump, as 523 00:25:50,200 --> 00:25:52,480 Speaker 2: we've seen him do in the past, things that countries 524 00:25:52,520 --> 00:25:56,119 Speaker 2: are essentially, as he might put it, collaborating against the US. 525 00:25:56,320 --> 00:25:59,280 Speaker 2: Will he respond to that with, for example, higher terrists 526 00:25:59,359 --> 00:26:01,440 Speaker 2: or other periodify action. So there's a lot of risk 527 00:26:01,480 --> 00:26:03,280 Speaker 2: that comes with this, and to date, a lot of 528 00:26:03,320 --> 00:26:07,080 Speaker 2: these conversations have been relatively nascent. They've they've just started 529 00:26:07,080 --> 00:26:09,480 Speaker 2: talking about this, and there's certainly interests there. But I 530 00:26:09,520 --> 00:26:12,440 Speaker 2: think actual execution implementation is going to be challenging. 531 00:26:13,040 --> 00:26:16,679 Speaker 3: And the energy veig example is really interesting. I've mentioned Brazil. 532 00:26:16,800 --> 00:26:19,520 Speaker 3: Brazil is a country that's been you know, that's being 533 00:26:19,560 --> 00:26:22,400 Speaker 3: treated as a target by the Trump administration. That's led 534 00:26:22,480 --> 00:26:25,119 Speaker 3: to the Lula government sort of getting even closer to 535 00:26:25,480 --> 00:26:27,560 Speaker 3: China in terms of its alignment and in terms of 536 00:26:27,600 --> 00:26:30,240 Speaker 3: sort of trying to curry favor and get investments coming 537 00:26:30,240 --> 00:26:33,080 Speaker 3: into Brazil from the Chinese government. And we've seen that 538 00:26:33,119 --> 00:26:36,440 Speaker 3: on a number of occasions recently, and that's something that 539 00:26:36,600 --> 00:26:38,760 Speaker 3: is going to be really interesting to keep an eye on, 540 00:26:38,880 --> 00:26:40,800 Speaker 3: just because of the fact that the Trump administration has 541 00:26:40,840 --> 00:26:44,200 Speaker 3: demonstrated that in some cases it's willing to sign pressure 542 00:26:44,400 --> 00:26:48,560 Speaker 3: countries and pressure them specifically to shun Chinese investments or 543 00:26:48,600 --> 00:26:51,960 Speaker 3: to align quote unquote with the US's own approach to 544 00:26:52,000 --> 00:26:55,000 Speaker 3: dealing with Chinese electric vehicles, which are basically in a 545 00:26:55,080 --> 00:26:59,200 Speaker 3: number of forms, to ban them from American roads. And 546 00:26:59,280 --> 00:27:01,720 Speaker 3: that's something that's up in the context of the UK. So, 547 00:27:01,840 --> 00:27:05,680 Speaker 3: the United Kingdom signed something akin to a trade deal 548 00:27:05,760 --> 00:27:08,639 Speaker 3: with the US a few months ago, and during that 549 00:27:08,720 --> 00:27:11,439 Speaker 3: process there were reports that the Trump administration had be 550 00:27:11,480 --> 00:27:16,440 Speaker 3: pressuring the British government to specifically put in place rules 551 00:27:16,560 --> 00:27:20,600 Speaker 3: that would restrict the deployment of Chinese evs into the UK. 552 00:27:20,840 --> 00:27:23,359 Speaker 3: The United Kingdom is quite open when it comes to 553 00:27:23,480 --> 00:27:26,000 Speaker 3: Chinese EV's and that's the case with Australia as well, 554 00:27:26,119 --> 00:27:28,800 Speaker 3: so that's an interesting dimension. And then another thing to 555 00:27:28,880 --> 00:27:30,560 Speaker 3: just take note of is that when it comes to 556 00:27:30,680 --> 00:27:33,920 Speaker 3: clean energy products, whether we're talking about battery evs, plug 557 00:27:33,960 --> 00:27:38,920 Speaker 3: in hybrids, batteries themselves, wind turbines, even as well as 558 00:27:38,960 --> 00:27:42,359 Speaker 3: solar products, we're year on years seeing a higher share 559 00:27:42,400 --> 00:27:45,520 Speaker 3: of Chinese exports go to what we would classify as 560 00:27:45,520 --> 00:27:49,080 Speaker 3: emerging economies. So that's a trend that's been driven in 561 00:27:49,200 --> 00:27:52,240 Speaker 3: large part by price declines as the cost of these 562 00:27:52,359 --> 00:27:55,359 Speaker 3: different technologies falls, and has continued to fall over the 563 00:27:55,440 --> 00:27:57,399 Speaker 3: last few years. But it's also something that could be 564 00:27:57,440 --> 00:28:01,679 Speaker 3: accelerated if things fragment further, if trade barriers continue to 565 00:28:01,680 --> 00:28:04,400 Speaker 3: go up in the richer parts of the world, and 566 00:28:04,440 --> 00:28:07,359 Speaker 3: that would see what we're seeing currently accelerate, which is 567 00:28:07,440 --> 00:28:10,480 Speaker 3: Chinese companies redoubling their efforts not just to set up 568 00:28:10,520 --> 00:28:14,560 Speaker 3: manufacturing facilities in lower income countries, but also to double 569 00:28:14,600 --> 00:28:16,880 Speaker 3: down on their exports to those countries as well. 570 00:28:17,200 --> 00:28:20,720 Speaker 1: My last question has to do with different tools that 571 00:28:20,720 --> 00:28:23,680 Speaker 1: are in the toolkit for different countries when it comes 572 00:28:23,720 --> 00:28:28,440 Speaker 1: to exerting power. Sanctions have historically been used in order 573 00:28:28,520 --> 00:28:31,600 Speaker 1: to exert pressure on other countries, but now tariffs are 574 00:28:31,600 --> 00:28:34,320 Speaker 1: really starting to come to the fore. They are discussed 575 00:28:34,560 --> 00:28:37,000 Speaker 1: much more than they have been maybe in some respects 576 00:28:37,040 --> 00:28:40,040 Speaker 1: for the last hundred years. Are tariffs, in your opinion, 577 00:28:40,400 --> 00:28:45,080 Speaker 1: becoming more widely used tool than sanctions. There's the US, 578 00:28:45,120 --> 00:28:46,640 Speaker 1: but then there's also the rest of the world, and 579 00:28:46,680 --> 00:28:49,320 Speaker 1: we think that this next era that we're entering will 580 00:28:49,320 --> 00:28:51,600 Speaker 1: be more defined by tariffs than by sanctions. 581 00:28:51,800 --> 00:28:54,400 Speaker 2: It's a really great question, Dana, and I think you're 582 00:28:54,440 --> 00:28:57,520 Speaker 2: really onto something. Obviously, much of this is stemming from 583 00:28:57,520 --> 00:28:59,480 Speaker 2: the United States, but as we've seen in the past, 584 00:28:59,520 --> 00:29:02,719 Speaker 2: and as you're referencing classic case the nineteen thirties, when 585 00:29:02,760 --> 00:29:04,880 Speaker 2: the US lobs terrifts at the rest of the world, 586 00:29:04,960 --> 00:29:07,640 Speaker 2: a lot of countries have to respond with terrifs in response, 587 00:29:07,880 --> 00:29:10,080 Speaker 2: and that can lead to sort of this tit for 588 00:29:10,160 --> 00:29:13,440 Speaker 2: tat escalation cycle that leads to very high tariff barriers 589 00:29:13,480 --> 00:29:16,280 Speaker 2: all around the world. Certainly, for President Trump, terra seemed 590 00:29:16,280 --> 00:29:19,800 Speaker 2: to be the tool of choice, indeed, despite the fact 591 00:29:19,840 --> 00:29:23,400 Speaker 2: that in some cases, as you mentioned, sanctions might actually 592 00:29:23,480 --> 00:29:27,240 Speaker 2: be the more appropriate or more calibrated weapon of choice. 593 00:29:27,320 --> 00:29:30,480 Speaker 2: Looking at, for example, his threat of using this new tool, 594 00:29:30,560 --> 00:29:34,120 Speaker 2: he's invented of secondary tariffs against for example, countries that 595 00:29:34,160 --> 00:29:37,080 Speaker 2: buy venezuela and oil, and then more recently against Russian oil. 596 00:29:37,200 --> 00:29:40,440 Speaker 2: That's actually very difficult to implement in practice. The legal 597 00:29:40,480 --> 00:29:43,640 Speaker 2: authorities for it are kind of questionable. But secondary sanctions 598 00:29:43,640 --> 00:29:47,400 Speaker 2: are a very robust, well used tool that would typically 599 00:29:47,440 --> 00:29:49,040 Speaker 2: be the one that you turn to. And I think 600 00:29:49,040 --> 00:29:51,200 Speaker 2: that's indeed why we saw a lot of uncertainty about 601 00:29:51,200 --> 00:29:53,360 Speaker 2: what he was actually referring to if it was secondary 602 00:29:53,440 --> 00:29:56,160 Speaker 2: terrists or secondary sanctions when he first mentioned it. I 603 00:29:56,160 --> 00:29:58,320 Speaker 2: would put another tool on the table that I think 604 00:29:58,400 --> 00:30:00,280 Speaker 2: is remains very much relevant and I think think will 605 00:30:00,280 --> 00:30:03,760 Speaker 2: continue to be very relevant going forward, and that's export controls. Certainly, 606 00:30:03,760 --> 00:30:07,160 Speaker 2: we've seen a lot of US expert controls towards, for example, China, 607 00:30:07,240 --> 00:30:09,440 Speaker 2: but I think one of the defining moments of the 608 00:30:09,480 --> 00:30:12,640 Speaker 2: trade wars this year has been China's expansion of its 609 00:30:12,680 --> 00:30:15,960 Speaker 2: export control toolkit and very effective use of export controls 610 00:30:16,040 --> 00:30:18,800 Speaker 2: on critical minerals to for example, bring the US to 611 00:30:18,840 --> 00:30:23,320 Speaker 2: the negotiating table and extract concessions on US policy towards China. 612 00:30:23,400 --> 00:30:26,680 Speaker 3: So, to reiterate what Jenny just said is the Trump 613 00:30:26,720 --> 00:30:30,480 Speaker 3: administration is very clear that it sees tariff's as a 614 00:30:30,520 --> 00:30:34,520 Speaker 3: more effective tool than employing sanctions. I mean, it's always 615 00:30:34,600 --> 00:30:37,000 Speaker 3: worth sort of stopping and considering what the actual objective 616 00:30:37,160 --> 00:30:39,400 Speaker 3: of tariffs are, and it's not always easy to pass 617 00:30:39,400 --> 00:30:41,520 Speaker 3: when it comes to the Trump administration and its actions. 618 00:30:41,560 --> 00:30:44,320 Speaker 3: It can be to encourage local manufacturing, it can be 619 00:30:44,400 --> 00:30:47,560 Speaker 3: to raise revenue, it could be to punish the actions 620 00:30:47,560 --> 00:30:50,200 Speaker 3: of a given trade partner, and things get really jungled 621 00:30:50,240 --> 00:30:52,880 Speaker 3: and mixed and unclear, and so it's hard to really 622 00:30:52,920 --> 00:30:55,520 Speaker 3: come to a firm or conclusion on, you know, is 623 00:30:55,600 --> 00:30:58,000 Speaker 3: what they are actually being employed forward lot of the time. 624 00:30:58,080 --> 00:31:00,400 Speaker 3: But it's really interesting and we are seeing a couple 625 00:31:00,440 --> 00:31:02,320 Speaker 3: of things again. We're seeing, you know, the use of 626 00:31:02,360 --> 00:31:05,760 Speaker 3: different a wider toolset, which is fascinating, and that also 627 00:31:05,800 --> 00:31:09,320 Speaker 3: applies to things like anti coercion instruments that the EU, 628 00:31:09,440 --> 00:31:12,600 Speaker 3: for example, has developed specifically to try and counter the 629 00:31:12,680 --> 00:31:15,440 Speaker 3: threat of tariffs being used to boss it around. And 630 00:31:15,480 --> 00:31:18,760 Speaker 3: we're also seeing, you know, other countries who weren't previously 631 00:31:18,880 --> 00:31:22,400 Speaker 3: using tariffs in bolden to do so, and that includes 632 00:31:22,600 --> 00:31:27,720 Speaker 3: emerging economies such as Brazil and India who granted had 633 00:31:27,760 --> 00:31:30,400 Speaker 3: been imposing tariffs on ke energy products for some time, 634 00:31:30,440 --> 00:31:32,560 Speaker 3: but are continuing to do so, and in some cases 635 00:31:32,600 --> 00:31:34,360 Speaker 3: doing so to a much greater extent when it comes 636 00:31:34,400 --> 00:31:36,440 Speaker 3: to the energy transition than was the case before. But 637 00:31:36,480 --> 00:31:38,280 Speaker 3: it also applies to parts of the world that were 638 00:31:38,360 --> 00:31:41,600 Speaker 3: previously quite tied to the principles of free trade and 639 00:31:41,640 --> 00:31:45,400 Speaker 3: abiding by World Trade Organization rules, and the EU is 640 00:31:45,440 --> 00:31:48,000 Speaker 3: a good example there where there was an investigation which 641 00:31:48,080 --> 00:31:51,640 Speaker 3: was really pretty historical into Chinese electric vehicles which led 642 00:31:51,720 --> 00:31:55,920 Speaker 3: to various company specific tariffs being applied. And that's the 643 00:31:55,960 --> 00:31:59,160 Speaker 3: direction of travel. And what we aren't seeing is everyone 644 00:31:59,440 --> 00:32:02,080 Speaker 3: in turns sort of imposing the same levels of tariff 645 00:32:02,080 --> 00:32:04,440 Speaker 3: that the US is. But what we are seeing is 646 00:32:04,800 --> 00:32:08,680 Speaker 3: a continued move towards protectionism as a tool of choice, 647 00:32:08,720 --> 00:32:11,240 Speaker 3: and that really impacts our sort of scenarios for the 648 00:32:11,320 --> 00:32:13,000 Speaker 3: energy transition, a lot of which were based on the 649 00:32:13,000 --> 00:32:15,320 Speaker 3: premise that free trades would continue to be a thing 650 00:32:15,320 --> 00:32:17,080 Speaker 3: and we could benefit from cost of clients from a 651 00:32:17,080 --> 00:32:18,280 Speaker 3: global perspective. 652 00:32:18,680 --> 00:32:20,840 Speaker 1: The two of you certainly are busy, and I imagine 653 00:32:20,840 --> 00:32:24,160 Speaker 1: every day is a different announcement and rollercoaster, it seems 654 00:32:24,480 --> 00:32:27,160 Speaker 1: at the moment. So for those who are interested in 655 00:32:27,240 --> 00:32:29,000 Speaker 1: knowing more about this. First of all, thank you for 656 00:32:29,040 --> 00:32:31,480 Speaker 1: coming on the podcast, but we also have webinars, and 657 00:32:31,520 --> 00:32:35,120 Speaker 1: invariably you and your teams are both actively publishing research 658 00:32:35,240 --> 00:32:38,040 Speaker 1: every single day trying to make sense of all of this, 659 00:32:38,200 --> 00:32:41,920 Speaker 1: whether it's for specific pieces of manufactured goods or countries 660 00:32:41,960 --> 00:32:44,320 Speaker 1: and trading blocks around the world. So thank you very much, 661 00:32:44,360 --> 00:32:46,720 Speaker 1: Antoine and Jenny for joining the show today. 662 00:32:46,800 --> 00:32:47,959 Speaker 2: Thank you so much for having me. 663 00:32:48,080 --> 00:32:48,960 Speaker 3: Thanks so much. Data. 664 00:32:57,920 --> 00:33:01,000 Speaker 1: Today's episode of Switched On was produce by Cam Gray 665 00:33:01,240 --> 00:33:04,960 Speaker 1: with production assistance from Kamala Shelling. Bloomberg NEIF is a 666 00:33:05,000 --> 00:33:08,120 Speaker 1: service provided by Bloomberg Finance LP and its affiliates. This 667 00:33:08,200 --> 00:33:10,920 Speaker 1: recording does not constitute, nor should it be construed as 668 00:33:10,960 --> 00:33:14,680 Speaker 1: investment in vice, investment recommendations, or a recommendation as to 669 00:33:14,720 --> 00:33:17,440 Speaker 1: an investment or other strategy. Bloomberg. A NEIF should not 670 00:33:17,480 --> 00:33:20,520 Speaker 1: be considered as information sufficient upon which to base an 671 00:33:20,560 --> 00:33:23,719 Speaker 1: investment decision. Neither Bloomberg Finance LP nor any of its 672 00:33:23,720 --> 00:33:27,440 Speaker 1: affiliates makes any representation or warranty as to the accuracy 673 00:33:27,520 --> 00:33:30,320 Speaker 1: or completeness of the information contained in this recording, and 674 00:33:30,440 --> 00:33:34,000 Speaker 1: any liability as a result of this recording is expressly disclaimed.