1 00:00:05,989 --> 00:00:08,879 Speaker 1: Welcome to COI Time, a podcast series on markets and 2 00:00:08,880 --> 00:00:12,709 Speaker 1: economies from DBS Group Research. I'm Tambe, chief economist, welcoming 3 00:00:12,710 --> 00:00:17,349 Speaker 1: you to our 155th episode. Today, we are delighted to 4 00:00:17,350 --> 00:00:22,069 Speaker 1: have with us David Skilling, founding director of Landfall Strategy Group. Uh, 5 00:00:22,149 --> 00:00:25,950 Speaker 1: David is based out of Amsterdam, but as you will 6 00:00:25,950 --> 00:00:28,780 Speaker 1: realize during the course of this conversation, his scope is global, 7 00:00:29,110 --> 00:00:31,069 Speaker 1: and I have known David from the days he used 8 00:00:31,069 --> 00:00:33,189 Speaker 1: to live in Singapore, so of course, he takes a 9 00:00:33,189 --> 00:00:34,589 Speaker 1: great deal of interest in Asia. 10 00:00:35,130 --> 00:00:38,040 Speaker 1: Um, so the way we will structure the discussion is 11 00:00:38,040 --> 00:00:39,680 Speaker 1: get a sense of, you know, what is David up 12 00:00:39,680 --> 00:00:41,040 Speaker 1: to on a day to day basis, and then we 13 00:00:41,040 --> 00:00:43,680 Speaker 1: will talk about a paper that he recently wrote which 14 00:00:43,680 --> 00:00:45,759 Speaker 1: caught a lot of my attention. So with that in mind, 15 00:00:46,000 --> 00:00:47,958 Speaker 1: David Skilling, welcome to COI time. 16 00:00:48,450 --> 00:00:49,759 Speaker 2: Great, thanks so much. Good to be here. 17 00:00:50,360 --> 00:00:52,520 Speaker 1: Great to have you, David. I've been looking forward to this. 18 00:00:52,680 --> 00:00:57,680 Speaker 1: Your outfit landfall strategy focuses on the intersection of global economics, 19 00:00:57,889 --> 00:00:59,959 Speaker 1: geopolitics and economic policy. 20 00:01:00,540 --> 00:01:03,779 Speaker 1: Well, you certainly have been busy this year. Uh, let's 21 00:01:03,779 --> 00:01:06,319 Speaker 1: begin by getting a sense, David, of the sentiment of 22 00:01:06,319 --> 00:01:07,370 Speaker 1: your clients so far. 23 00:01:08,379 --> 00:01:12,738 Speaker 2: I, I, I think the overall, uh, sense is, uh, overwhelmed, uh, 24 00:01:12,750 --> 00:01:15,989 Speaker 2: just by the, the fire hose, the torrent of developments, 25 00:01:16,410 --> 00:01:19,470 Speaker 2: you know, directionally, not super surprisingly, Mr. Trump did tariffs 26 00:01:19,470 --> 00:01:21,789 Speaker 2: in his first term, he signaled tariffs again. So in 27 00:01:21,790 --> 00:01:24,229 Speaker 2: a sense, some of what he's done is not hugely surprising, 28 00:01:24,269 --> 00:01:27,259 Speaker 2: but I think the, the magnitude, the scale, the reach, 29 00:01:27,349 --> 00:01:30,790 Speaker 2: the tone, the aggression has taken people by surprise. Uh, 30 00:01:30,910 --> 00:01:33,149 Speaker 2: and certainly for those who thought that Trump won, would 31 00:01:33,150 --> 00:01:33,830 Speaker 2: be a good guy. 32 00:01:33,974 --> 00:01:36,684 Speaker 2: Trump too, which wasn't me, but for some, you kind 33 00:01:36,684 --> 00:01:39,154 Speaker 2: of thought that you could calibrate against what we saw 34 00:01:39,154 --> 00:01:41,194 Speaker 2: several years ago. I think they have been taken by surprise. 35 00:01:41,345 --> 00:01:43,675 Speaker 2: You know, Mr. Trump in a second term, a much 36 00:01:43,675 --> 00:01:47,875 Speaker 2: more disruptive, much more consequential, uh, agenda, you know, tariffs 37 00:01:47,875 --> 00:01:49,235 Speaker 2: to the start. But I think there's a sense that 38 00:01:49,235 --> 00:01:51,474 Speaker 2: actually this is going much further than um than tariffs 39 00:01:51,474 --> 00:01:54,824 Speaker 2: to capital flows, exchange rates, geopolitics. I think, you know, 40 00:01:54,995 --> 00:01:58,035 Speaker 2: one is just sort of surprise. Uh, the second, I think, is, 41 00:01:58,074 --> 00:01:59,535 Speaker 2: you know, as you mentioned, I, I 42 00:01:59,959 --> 00:02:02,230 Speaker 2: Work with clients around the world. I think in Europe 43 00:02:02,230 --> 00:02:05,879 Speaker 2: there is a sense of, you know, real pessimism, uh, 44 00:02:05,949 --> 00:02:07,900 Speaker 2: you know, a sense that the sky is falling in, 45 00:02:08,149 --> 00:02:11,228 Speaker 2: or the ground is moving, uh, beneath their feet in 46 00:02:11,229 --> 00:02:14,070 Speaker 2: terms of both on geopolitics or on economics. The US 47 00:02:14,070 --> 00:02:16,070 Speaker 2: is not what they thought that it was, uh, in 48 00:02:16,070 --> 00:02:17,669 Speaker 2: a real sense that the rules of the game are 49 00:02:17,669 --> 00:02:20,589 Speaker 2: being fundamentally rewritten in a way that's not, uh, that's 50 00:02:20,589 --> 00:02:22,710 Speaker 2: not positive, that carries real risk. But when I talk 51 00:02:22,710 --> 00:02:24,500 Speaker 2: to folk in the Middle East, in Asia, I mean, yes, 52 00:02:24,508 --> 00:02:25,919 Speaker 2: that's all true, Singapore. 53 00:02:26,460 --> 00:02:29,008 Speaker 2: Southeast Asia, for example, are exposed to tariffs and the 54 00:02:29,008 --> 00:02:31,479 Speaker 2: trade wars, and so on. But there's also a sense 55 00:02:31,479 --> 00:02:33,649 Speaker 2: of the world is tilting in their direction, right? There, 56 00:02:34,050 --> 00:02:35,929 Speaker 2: there are clouds to be sure, but there are some 57 00:02:35,929 --> 00:02:38,609 Speaker 2: silver linings, there are some opportunities as well. So I think, yeah, 58 00:02:38,690 --> 00:02:41,288 Speaker 2: there is a mixed view, depending on geography, you know, uh, 59 00:02:41,490 --> 00:02:45,079 Speaker 2: Europe quite depressed, uh, quite concerned, uh, Asia, the Middle East, 60 00:02:45,089 --> 00:02:46,369 Speaker 2: I think, a bit less so. 61 00:02:47,720 --> 00:02:51,000 Speaker 1: David, why isn't there a sense of this too shall pass, 62 00:02:51,110 --> 00:02:53,038 Speaker 1: I mean, there was Trump 1.0, but there will be 63 00:02:53,038 --> 00:02:55,910 Speaker 1: Trump 2.0 and at some point Trump will be gone. 64 00:02:57,720 --> 00:03:00,559 Speaker 1: Why is there so much pessimism and why is the 65 00:03:00,559 --> 00:03:04,678 Speaker 1: sentiment that this is structural, not just US political cycle? 66 00:03:05,258 --> 00:03:08,229 Speaker 2: So I think two things, uh, at least. Uh, firstly, 67 00:03:08,240 --> 00:03:11,630 Speaker 2: is that this is Mr. Trump's second go. During Trump 68 00:03:11,630 --> 00:03:15,429 Speaker 2: wonder since, OK, it's 4 years, it's bad, we'll manage 69 00:03:15,429 --> 00:03:17,270 Speaker 2: it through, and then in 4 years, we can kind 70 00:03:17,270 --> 00:03:20,429 Speaker 2: of return to, uh, some sense of normality. But the 71 00:03:20,429 --> 00:03:22,949 Speaker 2: mere fact that Mr. Trump has now been elected twice, uh, 72 00:03:23,070 --> 00:03:26,210 Speaker 2: and obviously more recently on a fairly aggressive, uh, kind 73 00:03:26,210 --> 00:03:28,550 Speaker 2: of agenda, you know, it says that actually there is 74 00:03:28,550 --> 00:03:29,229 Speaker 2: something structural. 75 00:03:29,306 --> 00:03:30,977 Speaker 2: This is not going to go away. It's not simply 76 00:03:30,977 --> 00:03:32,697 Speaker 2: a matter of waiting this out for 4 years and 77 00:03:32,697 --> 00:03:36,576 Speaker 2: hoping for a better outcome in the next election. And 78 00:03:36,576 --> 00:03:38,886 Speaker 2: obviously just the speed at which Mr. Trump is moving 79 00:03:39,097 --> 00:03:42,197 Speaker 2: to kind of rewrite the rules, be it the trade rules, uh, 80 00:03:42,337 --> 00:03:46,257 Speaker 2: be it the geopolitical or security guarantees, be it Ukraine, um, uh, 81 00:03:46,376 --> 00:03:48,136 Speaker 2: East Asia, and the like. You know, I think there 82 00:03:48,136 --> 00:03:50,526 Speaker 2: is a sense that actually there's a lot that is changing, 83 00:03:50,947 --> 00:03:53,177 Speaker 2: and Mr. Trump can actually do quite a lot. You know, but. 84 00:03:53,604 --> 00:03:58,363 Speaker 2: and relatedly, there was, you can draw a fairly coherent 85 00:03:58,363 --> 00:04:02,953 Speaker 2: line in US policy between Trump one, the Biden administration, 86 00:04:03,283 --> 00:04:05,893 Speaker 2: and now Trump too. Different in character, to be sure, 87 00:04:06,044 --> 00:04:09,244 Speaker 2: in rhetoric. Mr. Biden didn't undo very much of what Mr. 88 00:04:09,384 --> 00:04:11,884 Speaker 2: Trump did in terms of tariffs. He became more hawkish 89 00:04:11,884 --> 00:04:16,204 Speaker 2: on China, technology, investment, and other restrictions. And so there 90 00:04:16,204 --> 00:04:17,454 Speaker 2: is a sense that, you know, 91 00:04:17,630 --> 00:04:22,109 Speaker 2: Mr. Trump is reflecting, uh, underlying shift in US sentiment 92 00:04:22,110 --> 00:04:24,680 Speaker 2: as much as he is kind of the cause, if 93 00:04:24,680 --> 00:04:26,311 Speaker 2: you like. This is not simply about Mr. Trump. This 94 00:04:26,311 --> 00:04:29,270 Speaker 2: is about different US attitudes to the world. That's why 95 00:04:29,270 --> 00:04:32,450 Speaker 2: he's been elected now, twice. And I think, you know, 96 00:04:32,630 --> 00:04:36,330 Speaker 2: there is a realization that actually, whoever wins in a 97 00:04:36,330 --> 00:04:39,911 Speaker 2: few years' time, the next presidential election, the US is 98 00:04:39,911 --> 00:04:41,661 Speaker 2: just quite a different proposition. 99 00:04:42,000 --> 00:04:43,619 Speaker 2: Uh, and I think you know it's just a reminder 100 00:04:43,619 --> 00:04:46,359 Speaker 2: that that Europe, Asia, the rest of the world need 101 00:04:46,359 --> 00:04:49,260 Speaker 2: to accommodate themselves to a structurally different US approach to 102 00:04:49,260 --> 00:04:52,039 Speaker 2: the world, both in economics and in terms of geopolitics. 103 00:04:53,799 --> 00:04:55,829 Speaker 1: Uh, David, I couldn't agree with you more. I think 104 00:04:55,829 --> 00:04:59,760 Speaker 1: that many recoil at certain actions of Trump, but I 105 00:04:59,760 --> 00:05:02,239 Speaker 1: think that reactions should be seen in the context of 106 00:05:02,238 --> 00:05:04,640 Speaker 1: the fact that half of America does support a lot 107 00:05:04,640 --> 00:05:07,799 Speaker 1: of the things that Donald Trump is doing, and and 108 00:05:07,799 --> 00:05:11,190 Speaker 1: that support is going to outlast Trump becoming president again 109 00:05:11,190 --> 00:05:11,558 Speaker 1: and again. 110 00:05:11,635 --> 00:05:15,375 Speaker 1: Or or his successor. David, I was in Denmark last week. 111 00:05:15,494 --> 00:05:17,945 Speaker 1: I went to grocery stores where they put little stars 112 00:05:17,945 --> 00:05:20,385 Speaker 1: next to Made in America products because there is a 113 00:05:20,385 --> 00:05:22,825 Speaker 1: product boycott going on in Denmark. I mean, there's of 114 00:05:22,825 --> 00:05:25,975 Speaker 1: course the Iceland issue, uh, the Greenland issue is certainly 115 00:05:25,975 --> 00:05:28,894 Speaker 1: catching people's imagination, but again, it doesn't feel like a fad, 116 00:05:28,904 --> 00:05:29,424 Speaker 1: it seems. 117 00:05:30,350 --> 00:05:34,950 Speaker 1: Seems like, uh, in some ways, uh, Trump may have 118 00:05:34,950 --> 00:05:38,429 Speaker 1: done it in an aggressive manner, but the uh events 119 00:05:38,428 --> 00:05:40,309 Speaker 1: of this year seem to be more of a symptom 120 00:05:40,309 --> 00:05:44,149 Speaker 1: than an underlying uh uh cause itself, underlying causes that 121 00:05:44,149 --> 00:05:47,709 Speaker 1: the US is stretched and it is looking inward and 122 00:05:47,709 --> 00:05:50,428 Speaker 1: uh we will have to sort of deal with that 123 00:05:50,428 --> 00:05:51,469 Speaker 1: independent of the political cycle. 124 00:05:51,899 --> 00:05:55,618 Speaker 1: OK, so let's not wallow in the despondency, um, your 125 00:05:55,619 --> 00:05:59,130 Speaker 1: job certainly is to look for opportunities for your clients. So, um, 126 00:05:59,178 --> 00:06:01,850 Speaker 1: you're based in Europe, but you've spent a lot of your, uh, 127 00:06:01,859 --> 00:06:06,980 Speaker 1: life in Asia. Is Donald Trump inadvertently bringing these two 128 00:06:06,980 --> 00:06:07,769 Speaker 1: regions together? 129 00:06:08,839 --> 00:06:11,308 Speaker 2: I mean, yes and yes and no, the, the kind 130 00:06:11,309 --> 00:06:14,359 Speaker 2: of the obvious answer, I suppose, is yes. I mean 131 00:06:14,359 --> 00:06:17,230 Speaker 2: Europe is now looking for kind of additional friends, as 132 00:06:17,230 --> 00:06:18,200 Speaker 2: is Asia for that matter. 133 00:06:18,500 --> 00:06:21,040 Speaker 2: You know, kind of like-minded countries that want to trade, 134 00:06:21,119 --> 00:06:23,600 Speaker 2: that want to invest, that want to hold on to 135 00:06:23,600 --> 00:06:26,599 Speaker 2: what remains of a kind of a rules-based open order. 136 00:06:26,720 --> 00:06:29,959 Speaker 2: So for Europe's part, you know, they are more aggressively 137 00:06:29,959 --> 00:06:32,920 Speaker 2: looking for free trade agreements, uh, both in Asia, with India, 138 00:06:32,959 --> 00:06:36,488 Speaker 2: notably developing relationships with Vietnam and other Southeast Asian countries, 139 00:06:36,559 --> 00:06:39,010 Speaker 2: also with Latin America, uh, doing an FTA with, with 140 00:06:39,010 --> 00:06:41,529 Speaker 2: the Mercosur group, Mr. Macron. 141 00:06:41,940 --> 00:06:45,429 Speaker 2: Uh, was at the Shangri-La Dialogue recently in Singapore talking up, 142 00:06:45,540 --> 00:06:48,739 Speaker 2: you know, Europe-Asia relationships, uh, in, in its case, uh, 143 00:06:48,829 --> 00:06:51,700 Speaker 2: in the security and geopolitical realm. But I think more broadly, 144 00:06:51,980 --> 00:06:54,510 Speaker 2: you know, Europe is looking for options. Uh, it wants 145 00:06:54,510 --> 00:06:57,619 Speaker 2: to reduce its exposure to the US both economically and 146 00:06:57,619 --> 00:07:02,299 Speaker 2: on other dimensions, uh, and developing relations with Japan, with 147 00:07:02,299 --> 00:07:06,149 Speaker 2: South Korea, with Southeast Asia, with Australasia, with India, you know, I, 148 00:07:06,220 --> 00:07:08,578 Speaker 2: I think is very much top of the agenda. There 149 00:07:08,579 --> 00:07:11,239 Speaker 2: are lots of shared interests between. 150 00:07:11,299 --> 00:07:14,329 Speaker 2: Between the two. But I think the elephant in the 151 00:07:14,329 --> 00:07:16,609 Speaker 2: room on this is China. I mean, China is a 152 00:07:16,609 --> 00:07:21,119 Speaker 2: big part of Asia. Europe's relationships with China remain tense. 153 00:07:21,649 --> 00:07:25,059 Speaker 2: They are not what they were 56 years ago. You know, 154 00:07:25,250 --> 00:07:29,010 Speaker 2: there are an accumulating series of trade tensions, um, you know, 155 00:07:29,049 --> 00:07:32,529 Speaker 2: tariffs being imposed on Chinese electric vehicles, uh, rare earth 156 00:07:32,529 --> 00:07:35,850 Speaker 2: restrictions being imposed in the other directions, uh, recently restrictions 157 00:07:35,850 --> 00:07:38,359 Speaker 2: on things like medical technology. So there's a raft of 158 00:07:38,359 --> 00:07:40,649 Speaker 2: kind of trade disputes and frictions. 159 00:07:41,329 --> 00:07:44,809 Speaker 2: That will constrain the extent of, uh, you know, the 160 00:07:44,809 --> 00:07:48,170 Speaker 2: European pivot, if you like, uh, towards China. It's not 161 00:07:48,170 --> 00:07:50,609 Speaker 2: going to move away from the US towards China. We'll 162 00:07:50,609 --> 00:07:52,209 Speaker 2: be pragmatic, to be sure, but it's not going to 163 00:07:52,209 --> 00:07:56,170 Speaker 2: pivot markedly. And I think on a geopolitical realm, there's 164 00:07:56,170 --> 00:07:58,649 Speaker 2: a sense that China is a rival, is a competitor. 165 00:07:58,769 --> 00:08:01,959 Speaker 2: It is supporting Russia, which is a direct threat to Europe. 166 00:08:02,130 --> 00:08:04,450 Speaker 2: So I think there are going to be limits, if 167 00:08:04,450 --> 00:08:08,730 Speaker 2: you like, to how far Europe can maintain. 168 00:08:09,220 --> 00:08:13,739 Speaker 2: cordial relations with China. But for Asia, China, I think 169 00:08:13,739 --> 00:08:17,779 Speaker 2: certainly there is going to be increased European interest, investment, 170 00:08:18,209 --> 00:08:20,320 Speaker 2: both at a government level and at a firm level 171 00:08:20,750 --> 00:08:24,018 Speaker 2: in developing relations with like-minded countries in Asia. 172 00:08:25,890 --> 00:08:29,489 Speaker 1: David, last year, Mario Draghi's paper on competitiveness certainly caught 173 00:08:29,489 --> 00:08:30,929 Speaker 1: a lot of eyes, and I feel that it had 174 00:08:30,929 --> 00:08:33,799 Speaker 1: a lot of resonance within Europe even before Trump's election, 175 00:08:34,090 --> 00:08:34,789 Speaker 1: and I think that 176 00:08:35,710 --> 00:08:39,989 Speaker 1: Even rings truer today that Europe really needs to invest 177 00:08:39,989 --> 00:08:43,789 Speaker 1: on improving its productivity performance. Do you think that there 178 00:08:43,789 --> 00:08:46,429 Speaker 1: is a sense that the fact that China is going 179 00:08:46,429 --> 00:08:49,830 Speaker 1: through a bit of a techs search, uh, all sorts 180 00:08:49,830 --> 00:08:52,419 Speaker 1: of new technologies of the future are coming out of China, 181 00:08:52,669 --> 00:08:54,960 Speaker 1: that there is a degree of symbiosis that could happen 182 00:08:55,270 --> 00:08:57,739 Speaker 1: in an amiable world without the US meddling too much 183 00:08:57,739 --> 00:09:02,989 Speaker 1: into the China-Europe relationship where Europe can both provide as 184 00:09:02,989 --> 00:09:04,750 Speaker 1: well as benefit from Chinese technology. 185 00:09:05,729 --> 00:09:07,989 Speaker 2: I mean, yes, I mean you already see just a 186 00:09:07,989 --> 00:09:11,570 Speaker 2: prosaic example, you know, a lot more Chinese EVs on 187 00:09:11,570 --> 00:09:16,159 Speaker 2: European roads still fairly small in absolute numbers, but, but growing, uh, 188 00:09:16,169 --> 00:09:19,770 Speaker 2: quite quickly. You know, China obviously is fundamentally important to 189 00:09:19,770 --> 00:09:22,289 Speaker 2: the green transition, uh, in Europe, a provider of cheap 190 00:09:22,289 --> 00:09:24,049 Speaker 2: solar panels and batteries and 191 00:09:24,400 --> 00:09:27,760 Speaker 2: Uh, parts, wind turbines, uh, and the like. So there 192 00:09:27,760 --> 00:09:32,319 Speaker 2: is complementarity between what China offers, what Europe needs. The 193 00:09:32,320 --> 00:09:35,719 Speaker 2: challenge from a European perspective is that China has progressively 194 00:09:35,719 --> 00:09:39,179 Speaker 2: eroded the market share, uh, the competitive edge of lots 195 00:09:39,179 --> 00:09:39,390 Speaker 2: of 196 00:09:39,469 --> 00:09:43,390 Speaker 2: European industries. Obviously, the auto industry, Europe 1015 years back 197 00:09:43,390 --> 00:09:45,909 Speaker 2: had a very strong solar industry that's pretty much been 198 00:09:45,909 --> 00:09:49,750 Speaker 2: decimated by China. So yes, you can, at one level 199 00:09:49,750 --> 00:09:55,750 Speaker 2: see strong sort of complementarities between the two economies in 200 00:09:55,750 --> 00:09:58,939 Speaker 2: both directions. Europe has a lot, but China still wants also. 201 00:09:59,369 --> 00:10:02,130 Speaker 2: Uh, but there's also a real competitive tension. There's concern 202 00:10:02,130 --> 00:10:06,849 Speaker 2: in Europe about dumping, uh, around Chinese subsidies, around Chinese mercantilism, uh, 203 00:10:06,979 --> 00:10:09,809 Speaker 2: and the like, which is why Europe has been imposing 204 00:10:09,809 --> 00:10:11,760 Speaker 2: various tariffs, and I think there is more to come, 205 00:10:12,010 --> 00:10:14,729 Speaker 2: you know, in concern about, uh, sort of goods that 206 00:10:14,729 --> 00:10:16,890 Speaker 2: can't go into the US because of tariffs being diverted 207 00:10:16,890 --> 00:10:20,049 Speaker 2: into into Europe. We're already seeing that in terms of steel. 208 00:10:20,150 --> 00:10:21,849 Speaker 2: So I mean, I think yes, there is an answer, 209 00:10:21,890 --> 00:10:22,969 Speaker 2: and that's certainly been the European. 210 00:10:23,815 --> 00:10:27,085 Speaker 2: view over the last 1015 years. China's a big export market, 211 00:10:27,215 --> 00:10:30,994 Speaker 2: China's an important source of cheap manufactured goods. But I 212 00:10:30,994 --> 00:10:34,765 Speaker 2: think there is a sense that Europe's strategic autonomy, uh, 213 00:10:34,974 --> 00:10:37,494 Speaker 2: the ability for it to control its supply chains to 214 00:10:37,494 --> 00:10:42,255 Speaker 2: maintain a critical mass in core strategic industries, be they energy, 215 00:10:42,335 --> 00:10:45,924 Speaker 2: be they defense, be it tech, is being undermined by China. 216 00:10:46,094 --> 00:10:49,444 Speaker 2: So I think Europe is going to be pragmatic. It 217 00:10:49,445 --> 00:10:50,844 Speaker 2: understands the importance of China. 218 00:10:51,549 --> 00:10:53,070 Speaker 2: Uh, it's not going to do a US in terms 219 00:10:53,070 --> 00:10:55,270 Speaker 2: of trying to cut itself off from China, but I 220 00:10:55,270 --> 00:10:58,150 Speaker 2: think there's also growing awareness, certainly post Ukraine, but you 221 00:10:58,150 --> 00:11:01,859 Speaker 2: don't want to become overly exposed in terms of energy, uh, 222 00:11:01,950 --> 00:11:04,270 Speaker 2: in terms of tech, in terms of auto to a 223 00:11:04,270 --> 00:11:07,190 Speaker 2: particular market, particularly one with whom you're not fully values aligned. 224 00:11:07,270 --> 00:11:08,710 Speaker 2: So there are going to be, there are going to 225 00:11:08,710 --> 00:11:09,229 Speaker 2: be limits. 226 00:11:10,080 --> 00:11:14,000 Speaker 1: Yeah, absolutely. David, one anecdote I'll share with you last 227 00:11:14,000 --> 00:11:16,039 Speaker 1: week when I was in Denmark, I met with representatives 228 00:11:16,039 --> 00:11:20,959 Speaker 1: of a large uh biotech company and they had an 229 00:11:20,960 --> 00:11:23,079 Speaker 1: additional sort of, you know, wrinkle on this conversation. They 230 00:11:23,080 --> 00:11:27,429 Speaker 1: said that the reason they remain heavily invested in China, 231 00:11:27,770 --> 00:11:30,520 Speaker 1: of course, market access, B, they do a lot of 232 00:11:30,520 --> 00:11:32,919 Speaker 1: exporting out of China from the products that they manufacture 233 00:11:32,919 --> 00:11:33,359 Speaker 1: in China. 234 00:11:33,580 --> 00:11:35,840 Speaker 1: But third is that they felt that in the life 235 00:11:35,840 --> 00:11:38,710 Speaker 1: sciences area where they sort of stand at the frontier, 236 00:11:39,039 --> 00:11:41,070 Speaker 1: some of the real big breakthroughs are coming from China 237 00:11:41,070 --> 00:11:43,590 Speaker 1: and therefore they need to be in China to watch 238 00:11:43,590 --> 00:11:47,599 Speaker 1: that develop and seize that technology from a very close 239 00:11:47,599 --> 00:11:49,919 Speaker 1: proximity as opposed to being in Europe and just saying, well, 240 00:11:50,000 --> 00:11:52,450 Speaker 1: you know, that's a different world. I felt that that 241 00:11:52,450 --> 00:11:55,039 Speaker 1: conversation I would have not heard 57 years ago. It's 242 00:11:55,039 --> 00:11:57,880 Speaker 1: a new development, uh, that some of these breakthroughs coming 243 00:11:57,880 --> 00:11:58,659 Speaker 1: from China and then 244 00:11:58,713 --> 00:12:02,502 Speaker 1: It behooves on enlightened companies to be in China just 245 00:12:02,502 --> 00:12:06,223 Speaker 1: for that proximity. Um, so I I I've come back 246 00:12:06,223 --> 00:12:10,543 Speaker 1: from Europe with a new appreciation of China to some extent. Now, David, 247 00:12:10,752 --> 00:12:14,732 Speaker 1: we were talking about, you know, Asia and Europe. Uh, 248 00:12:15,062 --> 00:12:17,812 Speaker 1: one thing that Asia and Europe have in common is 249 00:12:17,812 --> 00:12:22,783 Speaker 1: that both are capital surplus economies, uh, both have been 250 00:12:22,783 --> 00:12:23,492 Speaker 1: more prudent. 251 00:12:23,856 --> 00:12:26,726 Speaker 1: Their American counterparts in terms of savings and have racked 252 00:12:26,726 --> 00:12:30,005 Speaker 1: up large surpluses and they've exported quite happily a large 253 00:12:30,005 --> 00:12:32,166 Speaker 1: part of the capital to the US over the years 254 00:12:32,166 --> 00:12:35,635 Speaker 1: and decades, allowing the US current account deficit to be financed. 255 00:12:35,806 --> 00:12:38,005 Speaker 1: Things are changing and you have been thinking about this. 256 00:12:38,285 --> 00:12:43,036 Speaker 1: You recently wrote an article telling the entitled Capital Wars, 257 00:12:43,125 --> 00:12:45,286 Speaker 1: and one of your arguments in that paper is that 258 00:12:45,285 --> 00:12:49,074 Speaker 1: a structural change to cross-border capital inflows is in the making. 259 00:12:49,565 --> 00:12:50,606 Speaker 1: Let's expand on that. 260 00:12:51,760 --> 00:12:53,829 Speaker 2: Sure, so it's two parts. So if you think about 261 00:12:53,830 --> 00:12:55,880 Speaker 2: kind of demand for capital and supply for capital. So 262 00:12:55,880 --> 00:12:59,080 Speaker 2: on the supply side, as you say, China, many other 263 00:12:59,080 --> 00:13:02,848 Speaker 2: East Asian economies, Japan, most notably, but also the ASEAN economies, 264 00:13:03,289 --> 00:13:09,059 Speaker 2: also the Gulf countries have been saving for many years, consistent, persistent, 265 00:13:09,239 --> 00:13:12,909 Speaker 2: fairly large current account surpluses that have in the main 266 00:13:12,909 --> 00:13:16,439 Speaker 2: been invested in the US. The US is on the 267 00:13:16,440 --> 00:13:20,190 Speaker 2: demand side, the large demander of capital. It's run. 268 00:13:20,489 --> 00:13:23,659 Speaker 2: Consistent current account deficits for a long period of time. 269 00:13:23,770 --> 00:13:26,450 Speaker 2: The UK also, but the US is the, uh, is 270 00:13:26,450 --> 00:13:29,020 Speaker 2: the large game in town. So you've had a, you know, 271 00:13:29,169 --> 00:13:32,848 Speaker 2: a picture where you've got persistent current account surpluses, exporting 272 00:13:32,849 --> 00:13:35,530 Speaker 2: capital into uh, into the US. But if you look 273 00:13:35,530 --> 00:13:38,419 Speaker 2: at the surplus countries, you know, there are dynamics that 274 00:13:38,419 --> 00:13:41,049 Speaker 2: suggest that the extent of those surpluses is going to 275 00:13:41,049 --> 00:13:42,479 Speaker 2: reduce over the next 5, 10 years. 276 00:13:42,650 --> 00:13:47,280 Speaker 2: In Europe, Germany is the major moving part here, the 277 00:13:47,280 --> 00:13:50,559 Speaker 2: new government and change German attitudes. It's going to be 278 00:13:50,559 --> 00:13:54,309 Speaker 2: more fiscal spending, more investment, be it military, be it energy, 279 00:13:54,559 --> 00:13:56,919 Speaker 2: other forms of infrastructure. The same is going to be 280 00:13:56,919 --> 00:13:59,479 Speaker 2: true to a lesser extent across most European countries. There 281 00:13:59,479 --> 00:14:02,718 Speaker 2: is an understanding that defense expenditure has to increase, and 282 00:14:02,719 --> 00:14:04,799 Speaker 2: so we are going to see reduced government. 283 00:14:05,030 --> 00:14:07,750 Speaker 2: saving. I think also reduced household saving as well, but 284 00:14:07,750 --> 00:14:10,789 Speaker 2: government saving is going to be the big thing that shifts. 285 00:14:10,929 --> 00:14:13,348 Speaker 2: And so I think we can expect reasonably for the 286 00:14:13,349 --> 00:14:17,840 Speaker 2: size of the European current account surplus to reduce as 287 00:14:17,840 --> 00:14:23,030 Speaker 2: savings comes down as investment in Europe comes up. Similarly, 288 00:14:23,059 --> 00:14:26,909 Speaker 2: in the Gulf, oil prices down, increased investment at home. 289 00:14:27,419 --> 00:14:31,820 Speaker 2: So again, Gulf surpluses are going to constrain, Japan. Interest 290 00:14:31,820 --> 00:14:35,219 Speaker 2: rates are normalizing during the rise, like they have repatriation 291 00:14:35,219 --> 00:14:38,780 Speaker 2: of capital for various reasons, I think also Japanese surpluses 292 00:14:38,780 --> 00:14:42,179 Speaker 2: reduced and over time, possibly China as well as China 293 00:14:42,179 --> 00:14:46,130 Speaker 2: moves to a more an economic model where domestic demand 294 00:14:46,130 --> 00:14:48,460 Speaker 2: is a more important component of final demand. So on 295 00:14:48,460 --> 00:14:52,119 Speaker 2: all of the big current account surplus countries for various reasons, uh, 296 00:14:52,340 --> 00:14:52,849 Speaker 2: you see. 297 00:14:52,969 --> 00:14:55,020 Speaker 2: dynamics that I think are going to shrink the size 298 00:14:55,020 --> 00:14:58,400 Speaker 2: of capital, the capital pool that is exported. And then 299 00:14:58,400 --> 00:15:00,809 Speaker 2: you've got the US on the other side. The US 300 00:15:00,809 --> 00:15:05,049 Speaker 2: has said run very large deficits, largely due to its 301 00:15:05,049 --> 00:15:08,020 Speaker 2: large and expanding fiscal deficit, and as we know from 302 00:15:08,020 --> 00:15:10,659 Speaker 2: the last few weeks, that seems to be moving up. 303 00:15:10,700 --> 00:15:13,500 Speaker 2: The budget working its way through the House at the moment, 304 00:15:13,609 --> 00:15:15,859 Speaker 2: or the House and Senate at the moment, looks to 305 00:15:15,859 --> 00:15:18,380 Speaker 2: be expanding that deficit. 306 00:15:18,989 --> 00:15:21,789 Speaker 2: Uh, but that's going to become tricky. Uh, you know, 307 00:15:21,900 --> 00:15:25,020 Speaker 2: if the pool of capital from overseas is shrinking, the 308 00:15:25,020 --> 00:15:27,299 Speaker 2: US is going to have to work harder, if you like, 309 00:15:27,309 --> 00:15:30,859 Speaker 2: or find it more difficult to attract that capital at 310 00:15:30,859 --> 00:15:33,369 Speaker 2: a minimum, we're gonna, we're seeing interest rates move up 311 00:15:33,369 --> 00:15:36,950 Speaker 2: to make the US more attractive, which we are already seeing. Um, 312 00:15:37,390 --> 00:15:39,820 Speaker 2: the dollar will probably come off, which again is what 313 00:15:39,820 --> 00:15:41,580 Speaker 2: we're seeing. But this is happening as we know, at 314 00:15:41,580 --> 00:15:44,580 Speaker 2: a time where people are questioning the risk profile of 315 00:15:44,580 --> 00:15:48,159 Speaker 2: the US. Is the US an unambiguous safe haven? You know, 316 00:15:48,219 --> 00:15:48,570 Speaker 2: what sort of 317 00:15:48,614 --> 00:15:51,164 Speaker 2: risk premium do we need to attach to the US? Uh, 318 00:15:51,284 --> 00:15:54,094 Speaker 2: and so, you know, the US is in a much 319 00:15:54,094 --> 00:15:57,255 Speaker 2: more intense competition for capital because the pool of available 320 00:15:57,255 --> 00:15:59,684 Speaker 2: global capital is shrinking. Now at the same time as 321 00:15:59,684 --> 00:16:03,085 Speaker 2: we're seeing, uh, some question marks. So capital wars, it's 322 00:16:03,085 --> 00:16:05,364 Speaker 2: partly a sense of, you know, there are, there's just 323 00:16:05,364 --> 00:16:07,724 Speaker 2: going to be an intense competition for capital. We're also 324 00:16:07,724 --> 00:16:09,695 Speaker 2: going to see, I think, more capital nationalism, you know, 325 00:16:09,844 --> 00:16:13,075 Speaker 2: countries wanting to kind of hold on to their national savings, uh, 326 00:16:13,164 --> 00:16:16,594 Speaker 2: to finance, uh, strategic investment, be it defense or energy 327 00:16:16,594 --> 00:16:18,125 Speaker 2: or infrastructure, and the like. 328 00:16:18,489 --> 00:16:20,690 Speaker 2: Uh, and so trade wars, I think, are very much, uh, 329 00:16:20,770 --> 00:16:23,409 Speaker 2: kind of a precursor to some of the, the international 330 00:16:23,409 --> 00:16:26,679 Speaker 2: cross-border conflict we'll see in terms of, uh, attracting, uh, 331 00:16:26,710 --> 00:16:29,000 Speaker 2: and retaining capital, and these, I think, will be at 332 00:16:29,000 --> 00:16:32,169 Speaker 2: least as consequential, uh, as the, uh, as the trade 333 00:16:32,169 --> 00:16:33,289 Speaker 2: wars that we're beginning to see. 334 00:16:34,369 --> 00:16:36,030 Speaker 1: So David, I want to sort of do a little 335 00:16:36,030 --> 00:16:38,710 Speaker 1: tour of the world, region by region in the context 336 00:16:38,710 --> 00:16:40,869 Speaker 1: of capital war. So let's start with the US. To 337 00:16:40,869 --> 00:16:44,510 Speaker 1: your point, the US is not really heading in the 338 00:16:44,510 --> 00:16:48,309 Speaker 1: direction of lower fiscal and current account deficit, but at 339 00:16:48,309 --> 00:16:50,830 Speaker 1: the same time, the world seems to be assigning higher 340 00:16:50,830 --> 00:16:53,789 Speaker 1: risk premium to the US and therefore you expect interest 341 00:16:53,789 --> 00:16:56,729 Speaker 1: rates to be higher. Do you also expect the US 342 00:16:57,539 --> 00:16:59,719 Speaker 1: to do some of the things that Stephen Moran wants 343 00:16:59,719 --> 00:17:03,109 Speaker 1: to do, which is force the world to buy US 344 00:17:03,179 --> 00:17:06,149 Speaker 1: Treasuries in return for getting US security protection. 345 00:17:06,968 --> 00:17:09,838 Speaker 2: Yeah, I think we need to be open to, if 346 00:17:09,838 --> 00:17:14,239 Speaker 2: you like, unorthodox, uh, measures. Uh, you know, the US 347 00:17:14,239 --> 00:17:17,198 Speaker 2: has a major imbalance that it needs to, uh, correct 348 00:17:17,198 --> 00:17:20,279 Speaker 2: in terms of external account. It's got a clearly unsustainable 349 00:17:20,279 --> 00:17:24,479 Speaker 2: fiscal path, and international investors in particular are worried about 350 00:17:24,479 --> 00:17:27,318 Speaker 2: the US. So market forces will take you a bit 351 00:17:27,318 --> 00:17:30,078 Speaker 2: of a way. Bond vigilantes doing their thing, trying to 352 00:17:30,078 --> 00:17:31,879 Speaker 2: curb some of the fiscal excesses. 353 00:17:32,339 --> 00:17:34,669 Speaker 2: You know, uh, uh, just given the politics in the US, 354 00:17:34,750 --> 00:17:37,030 Speaker 2: I'm not sure that is going to be, uh, enough. 355 00:17:37,079 --> 00:17:38,949 Speaker 2: And so, you know, I, I think we are going 356 00:17:38,949 --> 00:17:42,530 Speaker 2: to see a sort of unorthodox measures being, uh, investigated, 357 00:17:42,589 --> 00:17:44,430 Speaker 2: at least, so you mentioned Stephen Moran's paper. 358 00:17:44,859 --> 00:17:47,099 Speaker 2: You know, I would be very surprised if in the 359 00:17:47,099 --> 00:17:50,099 Speaker 2: context of the current tariff or trade negotiations that the 360 00:17:50,099 --> 00:17:53,069 Speaker 2: US are underway with countries like Japan and South Korea 361 00:17:53,069 --> 00:17:56,540 Speaker 2: and others, that as part of those negotiations, there weren't 362 00:17:56,540 --> 00:17:59,900 Speaker 2: some sense of, look, if you want to, you know, 363 00:17:59,979 --> 00:18:02,660 Speaker 2: have lower tariffs, if you want to continue to benefit 364 00:18:02,660 --> 00:18:05,500 Speaker 2: from the US kind of security guarantee. 365 00:18:06,170 --> 00:18:08,959 Speaker 2: Uh, be it East Asia or elsewhere, uh, then we 366 00:18:08,959 --> 00:18:12,170 Speaker 2: are expecting you to buy, you know, $100 billion of 367 00:18:12,170 --> 00:18:14,410 Speaker 2: US Treasury, perhaps on the market, but we expect you 368 00:18:14,410 --> 00:18:17,349 Speaker 2: not to be selling these down, um, and probably to, 369 00:18:17,479 --> 00:18:18,968 Speaker 2: to buying more. So in a sense you're trying to 370 00:18:18,969 --> 00:18:22,469 Speaker 2: expand the pool of demand, uh, for US Treasuries, you know, 371 00:18:22,650 --> 00:18:24,930 Speaker 2: not by, and it's essentially a kind of a coerced 372 00:18:24,930 --> 00:18:25,349 Speaker 2: or kind of. 373 00:18:25,405 --> 00:18:28,694 Speaker 2: The duress, uh, purchase, you know, we'll tariff you, we'll 374 00:18:28,694 --> 00:18:30,833 Speaker 2: remove US troops if you don't do this. So I 375 00:18:30,834 --> 00:18:33,435 Speaker 2: would be very surprised if we didn't see some pressure 376 00:18:34,035 --> 00:18:36,795 Speaker 2: in that regard. for countries like China, it's more problematic, 377 00:18:36,875 --> 00:18:40,754 Speaker 2: but for allies like Japan, like South Korea and others, 378 00:18:40,994 --> 00:18:43,275 Speaker 2: I'd be very surprised if we didn't see that. And 379 00:18:43,275 --> 00:18:46,265 Speaker 2: then one step further than that, beyond this kind of 380 00:18:46,265 --> 00:18:48,073 Speaker 2: international government to government negotiation. 381 00:18:48,589 --> 00:18:50,989 Speaker 2: You know, if that's not sufficient to do the trick 382 00:18:50,989 --> 00:18:54,389 Speaker 2: in terms of raising demand for US Treasuries, you know, I, 383 00:18:54,469 --> 00:18:58,819 Speaker 2: I think that, you know, issues around financial repression, requiring 384 00:18:58,819 --> 00:19:02,510 Speaker 2: commercial banks, uh, or households, or the Fed, uh, to 385 00:19:02,510 --> 00:19:05,149 Speaker 2: buy more government debt issuance, the type of thing we 386 00:19:05,150 --> 00:19:08,199 Speaker 2: haven't really seen at scale for, for many decades, you know, 387 00:19:08,310 --> 00:19:08,589 Speaker 2: I think. 388 00:19:08,699 --> 00:19:10,410 Speaker 2: on the table. So this is, you know, just the 389 00:19:10,410 --> 00:19:14,680 Speaker 2: fiscal math is very difficult to resolve unless you begin 390 00:19:14,680 --> 00:19:16,728 Speaker 2: to contemplate some of these other measures. I mean, ideally, 391 00:19:16,849 --> 00:19:19,560 Speaker 2: markets and fiscal discipline in the Congress would be enough. 392 00:19:19,750 --> 00:19:21,849 Speaker 2: I'm not sure what it is. Uh, and so I 393 00:19:21,849 --> 00:19:26,359 Speaker 2: think bracing ourselves for some more unorthodox measures, you know, 394 00:19:26,449 --> 00:19:28,800 Speaker 2: those sort of things are not, are not off the table. 395 00:19:30,270 --> 00:19:33,229 Speaker 1: I mean, OK, so in terms of domestic policies, you'll 396 00:19:33,229 --> 00:19:34,890 Speaker 1: make it sound like the US is about to become 397 00:19:34,890 --> 00:19:37,708 Speaker 1: like India in the 1980s and 1990s, um, but let 398 00:19:37,709 --> 00:19:41,699 Speaker 1: me stay on the external side, uh for a moment. uh, David, 399 00:19:41,869 --> 00:19:44,349 Speaker 1: the US has tried this before, uh Plaza Accord in 400 00:19:44,349 --> 00:19:48,430 Speaker 1: the 80s, they sort of course both Japan and Germany 401 00:19:48,430 --> 00:19:52,069 Speaker 1: to appreciate the Japanese yen and the Deutsche Mark and 402 00:19:52,069 --> 00:19:55,469 Speaker 1: Japan's had all sorts of voluntary restraint on exports, they 403 00:19:55,469 --> 00:19:58,349 Speaker 1: moved or they nudged Toyota Honda to move. 404 00:19:59,109 --> 00:20:02,500 Speaker 1: to the US to increase their manufacturing. All of that happened. 405 00:20:02,670 --> 00:20:04,629 Speaker 1: I really didn't see any, at least I don't see 406 00:20:04,630 --> 00:20:07,150 Speaker 1: in the data was there a market improvement in the 407 00:20:07,150 --> 00:20:11,150 Speaker 1: US fiscal balances uh till uh Clinton came in uh 408 00:20:11,150 --> 00:20:14,229 Speaker 1: years later and, and went for a fiscal consolidation. 409 00:20:14,599 --> 00:20:17,250 Speaker 1: So, and and and the upshot of all that was 410 00:20:17,250 --> 00:20:19,569 Speaker 1: that Japan entered a massive bubble and which had a 411 00:20:19,569 --> 00:20:22,719 Speaker 1: ruminous impact on its economy for the subsequent decades. So yes, 412 00:20:22,890 --> 00:20:25,250 Speaker 1: the Japanese are allies of the US and yes, they 413 00:20:25,250 --> 00:20:28,438 Speaker 1: do rely a lot on US security umbrella. Would they 414 00:20:28,780 --> 00:20:31,310 Speaker 1: sing the same song in response to US? 415 00:20:31,719 --> 00:20:32,800 Speaker 1: this time as they did in the 416 00:20:32,800 --> 00:20:34,139 Speaker 1: 1980s? 417 00:20:34,160 --> 00:20:37,728 Speaker 2: Well, in Japan and many other East Asian economies who 418 00:20:37,729 --> 00:20:41,349 Speaker 2: know the Japanese experience well, I think, uh, you know, reluctant. So, 419 00:20:41,630 --> 00:20:43,810 Speaker 2: you know, I think for for for most countries, both 420 00:20:43,810 --> 00:20:46,439 Speaker 2: for in Asia, both for economic and for security reasons, 421 00:20:46,520 --> 00:20:49,939 Speaker 2: they want to avoid a rupture, uh, with the US, 422 00:20:50,560 --> 00:20:53,640 Speaker 2: they're prepared to kind of accommodate some pain, some asks, 423 00:20:53,719 --> 00:20:56,280 Speaker 2: be it, you know, owning US Treasuries, allowing for some 424 00:20:56,280 --> 00:20:57,920 Speaker 2: appreciation of your exchange rates. 425 00:20:58,510 --> 00:21:01,750 Speaker 2: Whatever it is, uh, if that's the price that needs 426 00:21:01,750 --> 00:21:04,859 Speaker 2: to be paid for maintaining some kind of baseline level 427 00:21:04,859 --> 00:21:06,819 Speaker 2: of relationship with the US, but there comes a point 428 00:21:06,819 --> 00:21:10,069 Speaker 2: at which the ask just becomes too much. Uh, and 429 00:21:10,069 --> 00:21:13,060 Speaker 2: obviously the ask is more difficult again with China. Um, 430 00:21:13,229 --> 00:21:15,439 Speaker 2: but for allies, there will be some things I'll go 431 00:21:15,439 --> 00:21:17,829 Speaker 2: along with, but in terms of anything approaching kind of 432 00:21:17,829 --> 00:21:19,540 Speaker 2: plaza accord style. 433 00:21:20,255 --> 00:21:23,343 Speaker 2: Kind of recalibration, I find that very difficult to see. 434 00:21:23,474 --> 00:21:25,074 Speaker 2: You know, that said, I think there is a reasonable 435 00:21:25,074 --> 00:21:28,754 Speaker 2: case for, you know, if you like, a, a fairly 436 00:21:28,755 --> 00:21:31,675 Speaker 2: broad appreciation of many East Asian currencies. I mean current 437 00:21:31,675 --> 00:21:34,864 Speaker 2: account surpluses are persistently large. There is a reasonable argument 438 00:21:34,864 --> 00:21:37,704 Speaker 2: that there are some grounds for appreciation of those currencies. 439 00:21:38,035 --> 00:21:39,994 Speaker 2: The issue is how you do that. Uh, do you 440 00:21:39,994 --> 00:21:41,915 Speaker 2: do it at the, at gunpoint? 441 00:21:42,479 --> 00:21:45,040 Speaker 2: Uh, so to speak, you know, how does that process, uh, 442 00:21:45,160 --> 00:21:47,459 Speaker 2: how does that process happen? So I think, you know, there, 443 00:21:47,599 --> 00:21:49,670 Speaker 2: there are going to be some moving parts in terms of, 444 00:21:49,880 --> 00:21:52,920 Speaker 2: you know, sort of ownership of treasury's, um, uh, exchange rates, 445 00:21:52,959 --> 00:21:54,719 Speaker 2: but I think there is going to be real nervousness 446 00:21:54,719 --> 00:21:57,400 Speaker 2: about going too far, too fast, uh, and also an 447 00:21:57,400 --> 00:22:01,250 Speaker 2: awareness again from the Plaza experience, uh, that, you know, 448 00:22:01,359 --> 00:22:03,439 Speaker 2: any time these things start to move, you are likely 449 00:22:03,439 --> 00:22:06,399 Speaker 2: to get overshooting. It's likely to go much further than 450 00:22:06,400 --> 00:22:07,989 Speaker 2: you want it to. So I think there's gonna be, 451 00:22:08,119 --> 00:22:10,359 Speaker 2: you know, a good deal of, um, of caution. 452 00:22:11,689 --> 00:22:14,369 Speaker 1: Right, I think that if somehow this becomes policy and 453 00:22:14,369 --> 00:22:16,290 Speaker 1: it becomes a one-way bet, I think the risk is 454 00:22:16,290 --> 00:22:18,530 Speaker 1: substantial for Asian markets to have overshooting. 455 00:22:18,910 --> 00:22:20,510 Speaker 1: Asset bubbles and so on, and I think the Asian 456 00:22:20,510 --> 00:22:23,180 Speaker 1: authorities would be very keen on preventing that. I think 457 00:22:23,430 --> 00:22:26,550 Speaker 1: they can probably agree to not intervening on the exchange 458 00:22:26,550 --> 00:22:29,430 Speaker 1: rate if there's a lot of inflows, but for them 459 00:22:29,430 --> 00:22:33,550 Speaker 1: to sort of actively sell dollars to weaken the dollar 460 00:22:33,550 --> 00:22:36,069 Speaker 1: and appreciate the currency, I would think that that would 461 00:22:36,069 --> 00:22:39,140 Speaker 1: be a bridge too far, um, but you know, um, 462 00:22:39,310 --> 00:22:42,420 Speaker 1: countries like Korea, Japan have shown a proclivity to really, 463 00:22:42,430 --> 00:22:43,910 Speaker 1: really want to be in the US. 464 00:22:45,319 --> 00:22:48,410 Speaker 1: Umbrella, maybe they'll do more things than I think they would. 465 00:22:48,729 --> 00:22:51,369 Speaker 1: Uh look, even in Southeast Asia, look at the example 466 00:22:51,369 --> 00:22:54,458 Speaker 1: of Vietnam, once the reciprocal tariffs were announced, there was 467 00:22:54,459 --> 00:22:56,339 Speaker 1: no question of Vietnam being part of the ASEAN bloc. 468 00:22:56,380 --> 00:22:58,500 Speaker 1: They ran to Washington to do a trade deal. They 469 00:22:58,500 --> 00:23:01,619 Speaker 1: were disappointed, it didn't work out, but uh but I 470 00:23:01,619 --> 00:23:03,859 Speaker 1: can see that a lot of countries are basically looking 471 00:23:03,859 --> 00:23:07,260 Speaker 1: after themselves. Now, in the case of Europe, David, there's 472 00:23:07,260 --> 00:23:09,939 Speaker 1: the European Union. The region should be speaking in one 473 00:23:09,939 --> 00:23:12,780 Speaker 1: voice against or vis a vis the US. Is that 474 00:23:12,780 --> 00:23:13,329 Speaker 1: the case? 475 00:23:14,109 --> 00:23:16,430 Speaker 2: For for the most part, yes, and I think you 476 00:23:16,430 --> 00:23:19,188 Speaker 2: see real frustration coming out of Washington that the Europeans 477 00:23:19,189 --> 00:23:21,459 Speaker 2: are hard to deal with, but the Europeans are purposefully, 478 00:23:21,780 --> 00:23:23,239 Speaker 2: you know, hard to deal with. That's their thing. You've 479 00:23:23,239 --> 00:23:25,339 Speaker 2: got a bunch of, for the most part, small countries 480 00:23:25,339 --> 00:23:28,659 Speaker 2: coming together realizing they have much more leverage if they 481 00:23:28,660 --> 00:23:31,510 Speaker 2: negotiate as one. So yes, different parts of Europe will 482 00:23:31,510 --> 00:23:35,458 Speaker 2: have different interests, and some, like Italy, for example, have communicated, look, 483 00:23:35,469 --> 00:23:37,030 Speaker 2: we'd like to do a deal with the US, we 484 00:23:37,030 --> 00:23:39,430 Speaker 2: would like to kind of avoid tariffs, whereas you've got 485 00:23:39,430 --> 00:23:42,069 Speaker 2: some other more hawkish countries that say like France, for example, 486 00:23:42,109 --> 00:23:43,429 Speaker 2: let's say, no, no. 487 00:23:43,729 --> 00:23:46,089 Speaker 2: But I think, you know, attempts to play divide and 488 00:23:46,089 --> 00:23:49,250 Speaker 2: conquer uh in Europe and kind of try and engineer 489 00:23:49,250 --> 00:23:52,649 Speaker 2: cleavages in negotiating position with the US have not been 490 00:23:52,650 --> 00:23:55,569 Speaker 2: successful so far, nor do I think they will be successful. 491 00:23:55,609 --> 00:23:58,260 Speaker 2: I think Europeans know that if they start getting kind 492 00:23:58,260 --> 00:24:00,650 Speaker 2: of peeled off from each other, then they will get 493 00:24:00,650 --> 00:24:01,198 Speaker 2: run over. 494 00:24:01,670 --> 00:24:03,780 Speaker 2: Uh, by Washington. The same has been true for China. 495 00:24:03,819 --> 00:24:06,219 Speaker 2: I mean, China has been trying to play divide and 496 00:24:06,219 --> 00:24:09,410 Speaker 2: conquer across Europe, with a measure of success, but not really. 497 00:24:09,619 --> 00:24:13,560 Speaker 2: Europe has really hung together reasonably well. I think that will, uh, 498 00:24:13,680 --> 00:24:16,660 Speaker 2: that will continue. But that said, that, that creates tension 499 00:24:16,660 --> 00:24:18,859 Speaker 2: and conflict because Mr. Trump wants easy wins. You know, 500 00:24:19,020 --> 00:24:20,579 Speaker 2: he wants to do deals like he did with the UK, 501 00:24:20,660 --> 00:24:22,849 Speaker 2: which is, you know, literally a few sheets of paper, 502 00:24:23,180 --> 00:24:25,500 Speaker 2: some kind of provisional deals. That's not going to happen 503 00:24:25,500 --> 00:24:28,300 Speaker 2: with the EU because, you know, it's very rules-based, you've 504 00:24:28,300 --> 00:24:28,459 Speaker 2: got 505 00:24:28,520 --> 00:24:32,209 Speaker 2: Get clearance among all 27 members. It's just by design, 506 00:24:32,540 --> 00:24:35,979 Speaker 2: a much slower process. And so I think Mr. Trump 507 00:24:35,979 --> 00:24:38,500 Speaker 2: is going to find Europe quite difficult to negotiate with. 508 00:24:38,579 --> 00:24:41,260 Speaker 2: He's not going to get easy deals. Uh, he can't 509 00:24:41,260 --> 00:24:44,619 Speaker 2: just declare victory and walk away. So I think there 510 00:24:44,619 --> 00:24:47,739 Speaker 2: are going to be ongoing trade frictions between the US 511 00:24:47,739 --> 00:24:50,909 Speaker 2: and the EU for the duration of the Trump term, 512 00:24:51,180 --> 00:24:54,219 Speaker 2: at least, at least 10% tariffs, which is a floor, 513 00:24:54,260 --> 00:24:55,180 Speaker 2: but possibly higher. 514 00:24:55,979 --> 00:24:59,099 Speaker 2: Uh, for some goods, uh, he's threatened 50%, obviously, which 515 00:24:59,099 --> 00:25:01,729 Speaker 2: I think is unlikely, but this is not going to be, uh, 516 00:25:01,739 --> 00:25:04,689 Speaker 2: an easy fix. Um, and that's, as I said, by design, 517 00:25:05,020 --> 00:25:07,859 Speaker 2: Europe is holding together, and I think that will persist. 518 00:25:09,310 --> 00:25:11,719 Speaker 1: You incidentally mentioned the UK, so let me ask you 519 00:25:11,719 --> 00:25:13,079 Speaker 1: a couple of question in the UK. First of all, 520 00:25:13,119 --> 00:25:15,319 Speaker 1: those few sheets of paper on the trade agreement, do 521 00:25:15,319 --> 00:25:18,160 Speaker 1: you find that the UK US agreement a substantive one? 522 00:25:18,640 --> 00:25:20,719 Speaker 2: No, no, I mean, I, and I think, you know, 523 00:25:20,800 --> 00:25:22,439 Speaker 2: just the way that it was done, you know, Mr. 524 00:25:22,449 --> 00:25:24,479 Speaker 2: Trump literally calling out Mr. Starmer while he was watching 525 00:25:24,479 --> 00:25:26,229 Speaker 2: a football game to say, look, this is the deal. 526 00:25:26,400 --> 00:25:31,150 Speaker 2: I mean, the UK, you know, wants to, uh, you know, maintain, 527 00:25:31,489 --> 00:25:34,479 Speaker 2: you know, tariff-free access or minimal tariff-free access. It wants 528 00:25:34,479 --> 00:25:36,479 Speaker 2: to kind of prove that it can, you know, do 529 00:25:36,479 --> 00:25:39,239 Speaker 2: deals with Mr. Trump. It works for the UK government, uh, 530 00:25:39,319 --> 00:25:41,438 Speaker 2: domestically to be able to establish, uh, that. 531 00:25:42,040 --> 00:25:43,800 Speaker 2: Uh, and so what do you say? No, but there's 532 00:25:43,800 --> 00:25:46,479 Speaker 2: no real, there's no enforceability. There's a lot of vagueness. 533 00:25:46,520 --> 00:25:48,319 Speaker 2: They're still trying to hammer out the details. Now that's 534 00:25:48,319 --> 00:25:51,359 Speaker 2: going to take them months, if not longer, to, to 535 00:25:51,359 --> 00:25:53,640 Speaker 2: do that. The UK has already been negatively surprised in 536 00:25:53,640 --> 00:25:56,079 Speaker 2: terms of the steel and aluminum tariffs. You know, actually 537 00:25:56,079 --> 00:25:58,790 Speaker 2: didn't provide much protection. So I don't, as with many 538 00:25:58,790 --> 00:26:00,760 Speaker 2: of Mr. Trump's deals, you know, they look good as 539 00:26:00,760 --> 00:26:02,280 Speaker 2: a press release, but once you kind of get into 540 00:26:02,280 --> 00:26:03,400 Speaker 2: the detail, there's actually not. 541 00:26:03,814 --> 00:26:05,813 Speaker 2: there, and I think that's the case for the UK 542 00:26:05,814 --> 00:26:08,175 Speaker 2: as well. So for a time, you know, the UK 543 00:26:08,175 --> 00:26:10,375 Speaker 2: could say, look, we're doing better than the EU. We've 544 00:26:10,375 --> 00:26:12,494 Speaker 2: got better access to the US because, you know, we're 545 00:26:12,494 --> 00:26:15,175 Speaker 2: kind of we're outside the EU machinery in our kind 546 00:26:15,175 --> 00:26:18,694 Speaker 2: of post-Brexit incarnation, but I actually don't think that it's 547 00:26:18,694 --> 00:26:21,334 Speaker 2: brought the UK, um, it hasn't actually bought the UK 548 00:26:21,334 --> 00:26:23,494 Speaker 2: very much. I don't think the UK is in a 549 00:26:23,494 --> 00:26:24,964 Speaker 2: much better position, to be honest. 550 00:26:25,449 --> 00:26:27,609 Speaker 2: Uh, than is the case, uh, with the EU. The 551 00:26:27,609 --> 00:26:30,169 Speaker 2: one thing that the UK does have is a royal family. Mr. 552 00:26:30,310 --> 00:26:32,458 Speaker 2: Trump likes the royal family, that does sound silly, but 553 00:26:32,459 --> 00:26:34,689 Speaker 2: it does buy them, uh, it does buy them something, 554 00:26:34,719 --> 00:26:38,189 Speaker 2: and I think US UK relations will remain more cordial, uh, 555 00:26:38,290 --> 00:26:40,359 Speaker 2: on the surface. Mr. Stan will get a better hearing 556 00:26:40,609 --> 00:26:43,170 Speaker 2: in the, in the Oval Office than Mr. von der Leyen, 557 00:26:43,250 --> 00:26:46,290 Speaker 2: for example, but concretely, I'm not sure that it buys 558 00:26:46,290 --> 00:26:47,879 Speaker 2: the UK that much. 559 00:26:49,189 --> 00:26:52,160 Speaker 1: I, I remember when Prime Minister Starmer went for his 560 00:26:52,160 --> 00:26:54,680 Speaker 1: first visit to see Donald Trump, the first thing he 561 00:26:54,680 --> 00:26:56,238 Speaker 1: said was that he has, he had a letter with 562 00:26:56,239 --> 00:26:58,670 Speaker 1: him from King Charles inviting him to the White House, 563 00:26:58,680 --> 00:27:00,849 Speaker 1: and I, I, you could see in the body language 564 00:27:00,849 --> 00:27:04,899 Speaker 1: of Trump, he was very pleased with, with that letter, um, 565 00:27:05,000 --> 00:27:09,000 Speaker 1: but what about UK, Europe, uh, UK, what it's been 566 00:27:09,000 --> 00:27:11,920 Speaker 1: like 89 years now, walked away with Brexit. 567 00:27:12,589 --> 00:27:15,410 Speaker 1: clearly a lot of, you know, remorse on many parts 568 00:27:15,410 --> 00:27:18,930 Speaker 1: of UK society from that, uh, expectation is the Labour 569 00:27:18,930 --> 00:27:23,319 Speaker 1: government would normalize some of these, uh, damage done through 570 00:27:23,319 --> 00:27:26,698 Speaker 1: the Brexit process with vis a Europe. What's your sense? 571 00:27:27,560 --> 00:27:29,629 Speaker 2: It's going to be very, very gradual. Uh, I mean, 572 00:27:29,800 --> 00:27:32,079 Speaker 2: all of the polls in the UK say that most 573 00:27:32,079 --> 00:27:35,010 Speaker 2: people will regret Brexit. They think it was a mistake. Uh, 574 00:27:35,119 --> 00:27:37,160 Speaker 2: but the government just doesn't want to open Brexit as 575 00:27:37,160 --> 00:27:41,389 Speaker 2: a political issue. Uh, and so there are ongoing negotiations, 576 00:27:41,449 --> 00:27:45,439 Speaker 2: there are things like veterinary agreements and some cross-border mobility 577 00:27:45,439 --> 00:27:47,399 Speaker 2: for young people that are being negotiated, but it's all 578 00:27:47,400 --> 00:27:50,040 Speaker 2: fairly kind of on the margin. Yeah, it's not nothing, 579 00:27:50,119 --> 00:27:53,079 Speaker 2: and it's good to see things being, uh, normalized in 580 00:27:53,079 --> 00:27:55,189 Speaker 2: a more constructive professional tone being taken. 581 00:27:55,760 --> 00:27:59,280 Speaker 2: But there's no kind of at scale or material kind 582 00:27:59,280 --> 00:28:01,839 Speaker 2: of improvement in relationships, uh, and so you see in 583 00:28:01,839 --> 00:28:04,599 Speaker 2: the trade numbers between the UK and the EU, you know, the, 584 00:28:04,719 --> 00:28:06,708 Speaker 2: the growth in trade is not what you'd expect. 585 00:28:07,280 --> 00:28:09,359 Speaker 2: Uh, so it's, it's, it's still a drag on the 586 00:28:09,359 --> 00:28:11,420 Speaker 2: UK economy. There's going to be some improvement, but it's 587 00:28:11,420 --> 00:28:14,410 Speaker 2: not going to go anywhere close to kind of unwinding Brexit, 588 00:28:14,550 --> 00:28:17,150 Speaker 2: at least not for the next decade or so. It's just, uh, 589 00:28:17,599 --> 00:28:19,639 Speaker 2: despite the regret, it's not a political issue. No one 590 00:28:19,640 --> 00:28:22,430 Speaker 2: wants to expend political capital on it because you think 591 00:28:22,430 --> 00:28:24,880 Speaker 2: that you'll just get hammered. And the EU for its 592 00:28:24,880 --> 00:28:27,869 Speaker 2: most part regrets it, to be sure, but it's got. 593 00:28:28,314 --> 00:28:30,625 Speaker 2: Any other issues to worry about, be it Ukraine, be 594 00:28:30,625 --> 00:28:33,505 Speaker 2: it Mr. Trump, be it China, the UK, sure, it's 595 00:28:33,505 --> 00:28:35,305 Speaker 2: on the list, but it's not a high priority issue. 596 00:28:35,425 --> 00:28:38,864 Speaker 2: So I think we'll see kind of ongoing marginal improvements 597 00:28:38,864 --> 00:28:43,214 Speaker 2: in relationship. Defense is one issue, obviously, with the UK 598 00:28:43,214 --> 00:28:45,625 Speaker 2: and not the EU per se, but kind of Europe 599 00:28:45,625 --> 00:28:48,814 Speaker 2: more broadly, are going to cooperate because the Europeans need 600 00:28:48,814 --> 00:28:49,464 Speaker 2: the UK. 601 00:28:50,040 --> 00:28:52,670 Speaker 2: So there there are openings, it is more constructive, but 602 00:28:52,670 --> 00:28:55,699 Speaker 2: from an economic perspective, I wouldn't imagine there's going to be, 603 00:28:55,790 --> 00:28:59,709 Speaker 2: you know, enormous upside, uh, in terms of improving the relationship. 604 00:29:00,709 --> 00:29:03,349 Speaker 1: You mentioned earlier in the context of the US about 605 00:29:03,349 --> 00:29:06,030 Speaker 1: its deficit, but you also had touched up at that point. 606 00:29:06,069 --> 00:29:08,390 Speaker 1: The UK is also a current account deficit economy. So 607 00:29:08,390 --> 00:29:13,030 Speaker 1: let's go back to that context of wars. Who funds 608 00:29:13,030 --> 00:29:16,270 Speaker 1: going forward? How will they make their economy attractive and 609 00:29:16,270 --> 00:29:17,300 Speaker 1: draw in capital? 610 00:29:17,750 --> 00:29:19,859 Speaker 2: Well, as Mr. Carney said when he was at the 611 00:29:19,859 --> 00:29:22,819 Speaker 2: Bank of England, you know, the reliant on the kindness 612 00:29:22,819 --> 00:29:25,829 Speaker 2: of strangers. It's run a persistent account deficit for a 613 00:29:25,829 --> 00:29:26,380 Speaker 2: long time. 614 00:29:26,910 --> 00:29:30,449 Speaker 2: Uh, it's government debt is circa 100% of GDP. 615 00:29:30,849 --> 00:29:34,780 Speaker 2: Uh, and ever since Liz Truss's, you know, infamous budget, uh, 616 00:29:35,000 --> 00:29:37,930 Speaker 2: in 2022, you know, the UK has paid, you know, 617 00:29:38,040 --> 00:29:40,599 Speaker 2: an additional risk premium on its borrowing. People just don't 618 00:29:40,599 --> 00:29:43,199 Speaker 2: give the UK the benefit of the doubt, uh, to 619 00:29:43,199 --> 00:29:44,880 Speaker 2: the same extent. So the UK is between a rock 620 00:29:44,880 --> 00:29:47,359 Speaker 2: and a hard place, you know, structurally low growth rates. 621 00:29:47,439 --> 00:29:49,199 Speaker 2: You know, the, the government was hoping that it could 622 00:29:49,199 --> 00:29:51,359 Speaker 2: grow its way out of the fiscal constraint, uh, but 623 00:29:51,359 --> 00:29:53,920 Speaker 2: there's no evident sign of that at the moment. It's 624 00:29:53,920 --> 00:29:59,589 Speaker 2: got all sorts of investment needs, uh, energy, infrastructure, transport, defense, 625 00:29:59,680 --> 00:30:00,680 Speaker 2: that it needs to fund. 626 00:30:01,109 --> 00:30:03,760 Speaker 2: Uh, but the borrowing space for the UK is very, 627 00:30:03,800 --> 00:30:06,010 Speaker 2: very limited, you know, so you know, if you were 628 00:30:06,010 --> 00:30:09,170 Speaker 2: in the, uh, in the eurozone, you've got the ECB 629 00:30:09,170 --> 00:30:10,729 Speaker 2: as a kind of a, as a backstop. There is 630 00:30:10,729 --> 00:30:12,869 Speaker 2: an extent to which you can kind of, uh, uh, 631 00:30:12,930 --> 00:30:15,130 Speaker 2: you can borrow to invest because the ECB is kind 632 00:30:15,130 --> 00:30:16,689 Speaker 2: of there as a, as a bit of a backstop, 633 00:30:17,130 --> 00:30:19,010 Speaker 2: as an independent country. 634 00:30:19,550 --> 00:30:21,750 Speaker 2: Uh, the UK does not, uh, does not have that. 635 00:30:21,829 --> 00:30:24,750 Speaker 2: And so, you know, Ms. Reeves, the Chancellor is very 636 00:30:24,750 --> 00:30:27,109 Speaker 2: constrained in terms of what she can do, uh, public 637 00:30:27,109 --> 00:30:30,829 Speaker 2: spending wise. Markets are watching her like a hawk, uh, 638 00:30:31,030 --> 00:30:33,589 Speaker 2: and they are attaching a risk premium. So the UK 639 00:30:33,589 --> 00:30:36,069 Speaker 2: is in a very difficult position. It's not growing. It's 640 00:30:36,069 --> 00:30:39,189 Speaker 2: got limited fiscal space. It's got huge investment needs. You 641 00:30:39,189 --> 00:30:42,030 Speaker 2: need to attract private capital, um, but there are many 642 00:30:42,030 --> 00:30:45,939 Speaker 2: other parts, including continental Europe, but also have, you know, 643 00:30:46,109 --> 00:30:48,150 Speaker 2: massive demands of that private capital. It is a more 644 00:30:48,150 --> 00:30:48,979 Speaker 2: competitive world. 645 00:30:49,349 --> 00:30:52,170 Speaker 2: The UK needs to be much, much better, I think, 646 00:30:52,199 --> 00:30:54,599 Speaker 2: at providing a very strong value proposition. Yeah, come to 647 00:30:54,599 --> 00:30:57,119 Speaker 2: the UK, in addition to the rule of law, we've 648 00:30:57,119 --> 00:30:59,589 Speaker 2: got higher returning opportunities, and they haven't done that as 649 00:30:59,589 --> 00:31:01,839 Speaker 2: much as you would, um, as much as you would like. 650 00:31:01,880 --> 00:31:06,280 Speaker 2: So the UK, I think, is still in fairly significant 651 00:31:06,280 --> 00:31:09,880 Speaker 2: structural difficulty, uh, both economic and also in terms of 652 00:31:09,880 --> 00:31:10,880 Speaker 2: attracting capital. 653 00:31:12,339 --> 00:31:14,459 Speaker 1: If I, if I were in a position of power 654 00:31:14,459 --> 00:31:16,699 Speaker 1: in the UK, I would go all in on Asia 655 00:31:16,699 --> 00:31:18,699 Speaker 1: and the Middle East. I think the Middle East, particularly, 656 00:31:19,140 --> 00:31:21,140 Speaker 1: have no shortage of surplus capital, some of it goes 657 00:31:21,140 --> 00:31:24,459 Speaker 1: into funding football teams in the UK, uh, but I 658 00:31:24,459 --> 00:31:26,699 Speaker 1: think that they can do more for that, uh, and, 659 00:31:26,739 --> 00:31:30,619 Speaker 1: and certainly with respect to whether it's a green transition 660 00:31:30,619 --> 00:31:32,859 Speaker 1: or other tech, you know, I think Asia would be great. 661 00:31:33,189 --> 00:31:36,040 Speaker 1: OK, so speaking of Asia, uh, let's let's bring this 662 00:31:36,040 --> 00:31:40,250 Speaker 1: conversation back to Asia and its need for capital and 663 00:31:40,250 --> 00:31:43,449 Speaker 1: where it manages China on one side and US on 664 00:31:43,449 --> 00:31:46,500 Speaker 1: the other side, and somewhere in there, there is also Europe. 665 00:31:48,680 --> 00:31:51,709 Speaker 2: Yeah, so I think, you know, Asia, I mean speaking 666 00:31:51,709 --> 00:31:54,579 Speaker 2: very broadly, you know, is a capital exporter, you know, 667 00:31:54,630 --> 00:31:58,300 Speaker 2: it has savings that it can deploy, be it Japan 668 00:31:58,300 --> 00:32:00,359 Speaker 2: or China. So a lot of this is around kind 669 00:32:00,359 --> 00:32:04,900 Speaker 2: of policy framework, policy structure, notably in China, but also elsewhere, 670 00:32:05,310 --> 00:32:08,989 Speaker 2: the extent to which you, um, pivot your growth model 671 00:32:08,989 --> 00:32:14,790 Speaker 2: towards domestic demand, domestic investment, um, supporting private consumption, and 672 00:32:14,790 --> 00:32:16,150 Speaker 2: the like. I think one thing. 673 00:32:16,204 --> 00:32:18,354 Speaker 2: That we are going to see as a consequence of 674 00:32:18,665 --> 00:32:22,395 Speaker 2: the second Trump administration policies and the frictions on accessing 675 00:32:22,395 --> 00:32:26,685 Speaker 2: the US market, is a more pronounced rotation towards kind 676 00:32:26,685 --> 00:32:31,594 Speaker 2: of intra-Asia trade, investment and the life that it's not new, 677 00:32:31,714 --> 00:32:33,435 Speaker 2: but I think it's going to be accelerated. And so 678 00:32:33,435 --> 00:32:37,954 Speaker 2: I think we can reasonably expect increased investment opportunities across ASEAN. 679 00:32:38,489 --> 00:32:40,890 Speaker 2: Um, also India as well. And so I think it's 680 00:32:40,890 --> 00:32:43,770 Speaker 2: going to be capital within Asia is going to be 681 00:32:43,770 --> 00:32:45,410 Speaker 2: a lot stickier, a lot more of that is going 682 00:32:45,410 --> 00:32:48,609 Speaker 2: to stay within Asia. It's going to be less likely 683 00:32:48,609 --> 00:32:51,410 Speaker 2: to be exported to the US and other advanced economies. 684 00:32:51,489 --> 00:32:55,530 Speaker 2: And so I think we could reasonably expect, fairly robust 685 00:32:55,530 --> 00:32:59,449 Speaker 2: growth in investment as that savings is if you like redirected. 686 00:33:01,750 --> 00:33:04,819 Speaker 1: Europe has been trying to work out an FTA with India. 687 00:33:05,109 --> 00:33:07,619 Speaker 1: European companies seem to be, you know, keen to invest 688 00:33:07,619 --> 00:33:11,270 Speaker 1: in India. What has been the general sort of report 689 00:33:11,270 --> 00:33:13,060 Speaker 1: card over the last 10 years? I mean, we all 690 00:33:13,060 --> 00:33:15,709 Speaker 1: know that the headlines are very flashy and India is 691 00:33:15,709 --> 00:33:18,250 Speaker 1: certainly the flavor of the decade as far as EM 692 00:33:18,250 --> 00:33:20,510 Speaker 1: investment is concerned, but by and large, I mean, what 693 00:33:20,510 --> 00:33:23,079 Speaker 1: do you hear from European investors with respect to their 694 00:33:23,079 --> 00:33:24,349 Speaker 1: experience in investing in India? 695 00:33:25,329 --> 00:33:28,329 Speaker 2: Uh, difficult, uh, right, so as you say, on paper 696 00:33:28,329 --> 00:33:30,609 Speaker 2: it looks good. You just look at the demographics or 697 00:33:30,609 --> 00:33:33,530 Speaker 2: GDP growth rates sort of like it looks, uh, great, 698 00:33:33,540 --> 00:33:35,079 Speaker 2: and even for people playing the long game. 699 00:33:35,479 --> 00:33:38,310 Speaker 2: You know, taking a, a very long kind of view 700 00:33:38,310 --> 00:33:40,760 Speaker 2: on the size of the market, the experience has not 701 00:33:40,760 --> 00:33:45,400 Speaker 2: been straightforward. Uh, you know, domestic regulatory and tax environment 702 00:33:45,400 --> 00:33:47,989 Speaker 2: is challenging, obviously infrastructure and the like is not what 703 00:33:48,920 --> 00:33:51,750 Speaker 2: is the case in China. So I mean, yes, there are, 704 00:33:51,949 --> 00:33:54,530 Speaker 2: you know, some points of attraction. There is also kind 705 00:33:54,530 --> 00:33:57,319 Speaker 2: of the de-risking play, which is, you know, as Apple 706 00:33:57,319 --> 00:33:59,709 Speaker 2: and others have done, but also you see European firms, 707 00:33:59,920 --> 00:34:01,310 Speaker 2: you know, we want to be less exposed to China. 708 00:34:01,359 --> 00:34:02,430 Speaker 2: We're going to bring some of our. 709 00:34:02,729 --> 00:34:05,869 Speaker 2: manufacturing capacity and located in India. There is some of 710 00:34:05,869 --> 00:34:10,070 Speaker 2: that happening, but the numbers are not not fantastic in 711 00:34:10,070 --> 00:34:12,760 Speaker 2: terms of magnitudes of investment. The returns have not been 712 00:34:12,760 --> 00:34:16,189 Speaker 2: often what has been desired. And you see that even 713 00:34:16,189 --> 00:34:19,070 Speaker 2: in government to government relationships, India is seen as a 714 00:34:19,070 --> 00:34:22,509 Speaker 2: great prize, kind of non-aligned, if you like, within Asia, 715 00:34:22,830 --> 00:34:25,229 Speaker 2: a counterweight to Asia, be it in terms of trade 716 00:34:25,229 --> 00:34:28,759 Speaker 2: agreements or security relationships, there's a desire to do more, 717 00:34:29,550 --> 00:34:30,020 Speaker 2: but it's all 718 00:34:30,070 --> 00:34:35,530 Speaker 2: always pretty hard going. I mean, free trades take decades to, to, to, 719 00:34:35,939 --> 00:34:37,659 Speaker 2: to sign in the UK has made some progress, but 720 00:34:37,659 --> 00:34:40,580 Speaker 2: in general, it's just, it's, it's hard yards. So people 721 00:34:40,580 --> 00:34:43,739 Speaker 2: will continue to invest. India is a big prize, so 722 00:34:43,739 --> 00:34:46,979 Speaker 2: to speak. It is a very large economy. It matters 723 00:34:46,979 --> 00:34:49,340 Speaker 2: for many reasons. So people are not going to give 724 00:34:49,340 --> 00:34:51,340 Speaker 2: up on India, but I think there's just an awareness 725 00:34:51,340 --> 00:34:55,169 Speaker 2: that it is a, at best, a long-term play requiring 726 00:34:55,169 --> 00:34:57,300 Speaker 2: of long-term horizons. 727 00:34:58,570 --> 00:35:03,100 Speaker 1: So, India is a big prize, China is super consequential, 728 00:35:03,330 --> 00:35:07,320 Speaker 1: Taiwan makes chips that nobody else can make. What about Indonesia, 729 00:35:07,530 --> 00:35:10,330 Speaker 1: you live in the Netherlands, a country with long historical 730 00:35:10,330 --> 00:35:13,580 Speaker 1: ties with Indonesia, do you hear any? 731 00:35:14,320 --> 00:35:18,259 Speaker 1: Marginal increase in excitement, enthusiasm about the most populous Southeast 732 00:35:18,260 --> 00:35:18,909 Speaker 1: Asian country? 733 00:35:20,010 --> 00:35:24,319 Speaker 2: The short answer to that is no. Um, in Indonesia 734 00:35:24,919 --> 00:35:28,800 Speaker 2: still floats a bit below the investor radar, uh, and 735 00:35:28,800 --> 00:35:31,000 Speaker 2: I'd say just the kind of the public radar. I mean, 736 00:35:31,399 --> 00:35:31,919 Speaker 2: people know the number. 737 00:35:32,050 --> 00:35:35,560 Speaker 2: Of course, it's it's a very large economy by uh 738 00:35:35,560 --> 00:35:40,040 Speaker 2: by population. Uh, certainly, headline growth rates are interesting, but it's, it's, 739 00:35:40,280 --> 00:35:42,678 Speaker 2: it's not quite clear what Indonesia is, you know what's 740 00:35:42,679 --> 00:35:46,658 Speaker 2: its value proposition compared to other markets in uh in 741 00:35:46,659 --> 00:35:49,908 Speaker 2: the region, outside of outside of direct resources. 742 00:35:50,550 --> 00:35:53,699 Speaker 2: Uh, you know, there's a bit of understanding of Indonesia's 743 00:35:53,699 --> 00:35:57,020 Speaker 2: role in the green transition. But outside of that, Indonesia, 744 00:35:57,040 --> 00:36:00,179 Speaker 2: I'd say punches below its weight in terms of investor interest, 745 00:36:00,870 --> 00:36:03,820 Speaker 2: and the new administration, in my judgment at least, hasn't 746 00:36:03,820 --> 00:36:06,850 Speaker 2: done very much to to shift that. There's no kind 747 00:36:06,850 --> 00:36:10,469 Speaker 2: of uptick, if you like, uh, in investor interest. Um, yeah, 748 00:36:10,590 --> 00:36:14,219 Speaker 2: so Asia in general is is really increasing in kind 749 00:36:14,219 --> 00:36:17,570 Speaker 2: of mindshare, but I'd say Indonesia plays a pretty small, um, 750 00:36:17,659 --> 00:36:18,699 Speaker 2: a pretty small part of that. 751 00:36:20,479 --> 00:36:26,189 Speaker 1: And finally, my little red dot, Singapore, um, Singapore, of course, 752 00:36:26,270 --> 00:36:28,280 Speaker 1: is not as large as any of these countries that 753 00:36:28,280 --> 00:36:31,239 Speaker 1: we just talked about, but as you mentioned earlier, we 754 00:36:31,239 --> 00:36:33,959 Speaker 1: had the Shangri-La dialogue here, we had the different secretaries 755 00:36:33,959 --> 00:36:35,709 Speaker 1: around the world come to this. 756 00:36:37,250 --> 00:36:40,770 Speaker 1: Country and uh this country sort of stands for rule 757 00:36:40,770 --> 00:36:44,020 Speaker 1: of law, open trade and so on, is Singapore in 758 00:36:44,020 --> 00:36:47,610 Speaker 1: danger of becoming old fashioned, not capturing the zeitgeist of 759 00:36:47,610 --> 00:36:49,639 Speaker 1: inward looking nativist policies around the world? 760 00:36:50,580 --> 00:36:52,669 Speaker 2: Well, I, I would say, you know, I'm not sure 761 00:36:52,669 --> 00:36:55,179 Speaker 2: what small countries should absorb that zeitgeist. I don't think 762 00:36:55,179 --> 00:36:58,419 Speaker 2: that's the, um, the learning. And certainly the, the rhetoric from, 763 00:36:58,699 --> 00:37:00,908 Speaker 2: you know, political leadership from the Prime Minister on down 764 00:37:00,909 --> 00:37:02,310 Speaker 2: over the last few months in the run up to 765 00:37:02,310 --> 00:37:06,080 Speaker 2: the the recent election has been, you know, kind of danger, risk, 766 00:37:06,229 --> 00:37:08,310 Speaker 2: the world is turning upside down. We can't rely on 767 00:37:08,310 --> 00:37:11,379 Speaker 2: the US and for small countries like Singapore, that's problematic, 768 00:37:11,669 --> 00:37:14,780 Speaker 2: all of which is, you know, obviously, uh, true. Um, 769 00:37:14,989 --> 00:37:18,659 Speaker 2: but I'd also say that Singapore has seen this movie before. Uh, 770 00:37:18,790 --> 00:37:20,110 Speaker 2: you know, there's been many kind of 771 00:37:20,155 --> 00:37:22,344 Speaker 2: Shocks to the system from the Asian financial crisis, the 772 00:37:22,344 --> 00:37:24,745 Speaker 2: GFC of a pandemic, where there's a sense that kind 773 00:37:24,745 --> 00:37:29,114 Speaker 2: of Singapore as a very small, very open economy is 774 00:37:29,114 --> 00:37:33,094 Speaker 2: kind of deeply challenged either because foreign demand is reducing 775 00:37:33,094 --> 00:37:37,625 Speaker 2: or kind of various areas of fragmentation of the global economy. Yeah, 776 00:37:37,705 --> 00:37:42,304 Speaker 2: but Singapore is able to re-engineer itself to accommodate itself 777 00:37:42,304 --> 00:37:45,304 Speaker 2: to new realities and often to be the first cab 778 00:37:45,304 --> 00:37:47,344 Speaker 2: off the rank, if you like, in terms of redesigning 779 00:37:47,344 --> 00:37:49,735 Speaker 2: its value propositions. So as I said earlier, 780 00:37:50,300 --> 00:37:53,750 Speaker 2: You know, I think that one implication of the uh 781 00:37:53,750 --> 00:37:56,229 Speaker 2: of the Trump administration policies is going to be, you know, 782 00:37:56,310 --> 00:37:59,110 Speaker 2: a greater focus on Asia, uh, as an Asian economy. 783 00:37:59,429 --> 00:38:02,449 Speaker 2: Uh, it's going to be, uh, growing perhaps in different ways, 784 00:38:02,459 --> 00:38:04,409 Speaker 2: you know, uh, domestic final demand is going to be 785 00:38:04,409 --> 00:38:07,149 Speaker 2: a more important component. And so, you know, Singapore's been, 786 00:38:07,300 --> 00:38:09,659 Speaker 2: you know, pivoting, if you like, towards the greater ASEAN 787 00:38:09,659 --> 00:38:12,689 Speaker 2: focus over the last, you know, maybe decade, several years, 788 00:38:12,860 --> 00:38:14,649 Speaker 2: you know, I think we're going to see that supercharged, 789 00:38:14,820 --> 00:38:18,500 Speaker 2: you know, Singapore has strengths in AI, uh, in tech, uh, 790 00:38:18,659 --> 00:38:21,110 Speaker 2: that are, you know, increasingly, um, uh. 791 00:38:21,295 --> 00:38:26,355 Speaker 2: increasingly important and dominant. So I think that Singapore shouldn't 792 00:38:26,355 --> 00:38:29,156 Speaker 2: look around the world and saying fragmentation, friction, inward looking 793 00:38:29,156 --> 00:38:31,594 Speaker 2: and replicate that playbook. And I think the Singapore playbook, 794 00:38:31,635 --> 00:38:36,035 Speaker 2: which is, yes, open, but intelligently open, positioning itself for 795 00:38:36,035 --> 00:38:38,486 Speaker 2: new growth opportunities, new growth markets, figuring out where those 796 00:38:38,486 --> 00:38:41,605 Speaker 2: opportunities are in overseas markets will serve it well. And 797 00:38:41,605 --> 00:38:42,794 Speaker 2: so my money. 798 00:38:43,142 --> 00:38:45,852 Speaker 2: Remains very much on on Singapore. I think it's going 799 00:38:45,852 --> 00:38:48,602 Speaker 2: to be one of the better performing ASEAN economies, um, 800 00:38:48,940 --> 00:38:51,092 Speaker 2: you know, into the indefinite future because it is able 801 00:38:51,092 --> 00:38:54,602 Speaker 2: to re-engineer itself. So yes, frictions and risks, to be sure, 802 00:38:55,731 --> 00:38:59,091 Speaker 2: but Singapore has proved repeatedly over time, you know, that 803 00:38:59,092 --> 00:39:02,491 Speaker 2: it can adjust in a fairly flexible, agile way, and 804 00:39:02,491 --> 00:39:04,531 Speaker 2: I expect it will do the same again. 805 00:39:06,020 --> 00:39:08,800 Speaker 1: Indeed, uh, when I look at FDI numbers, I certainly 806 00:39:08,800 --> 00:39:13,009 Speaker 1: see resonance in your points, uh, it's been, it's been 807 00:39:13,010 --> 00:39:14,850 Speaker 1: basically a golden age of investment as far as Singapore 808 00:39:14,850 --> 00:39:17,209 Speaker 1: is concerned in the last three years, don't think that 809 00:39:17,209 --> 00:39:20,439 Speaker 1: is abating in any meaningful manner, even in 2025. 810 00:39:20,889 --> 00:39:24,040 Speaker 1: Uh, I was recently invited to go attend the British 811 00:39:24,040 --> 00:39:27,629 Speaker 1: High Commission ceremony where their big carrier fleet is coming 812 00:39:27,629 --> 00:39:31,310 Speaker 1: to Singapore, of course, the US aircraft carriers and other 813 00:39:31,310 --> 00:39:33,429 Speaker 1: big naval ships come to Singapore as well. So militarily, 814 00:39:33,510 --> 00:39:36,139 Speaker 1: Singapore seem to be very well aligned with the West, 815 00:39:36,189 --> 00:39:39,979 Speaker 1: but at the same time, economic ties with China is substantial. 816 00:39:40,350 --> 00:39:43,830 Speaker 1: I haven't really detected even with Defense Secretary Heet who 817 00:39:43,830 --> 00:39:46,750 Speaker 1: was a very hawkish gentleman, didn't really come to Singapore 818 00:39:46,750 --> 00:39:48,149 Speaker 1: and give a lecture like you are. 819 00:39:48,860 --> 00:39:50,739 Speaker 1: With us or you're not with a sort of 820 00:39:51,419 --> 00:39:54,169 Speaker 1: Thing, so yeah, my fingers are crossed and I do 821 00:39:54,169 --> 00:39:56,050 Speaker 1: think that Singapore is probably doing a pretty job of 822 00:39:56,050 --> 00:39:58,929 Speaker 1: balancing both, not forsaking one for the other, but at 823 00:39:58,929 --> 00:40:03,399 Speaker 1: the same time not being captured by one either. Um, David, uh, 824 00:40:03,409 --> 00:40:06,209 Speaker 1: very illuminating conversation, I can't thank you enough. Thanks so 825 00:40:06,209 --> 00:40:07,719 Speaker 1: much for your time and insights. 826 00:40:07,969 --> 00:40:08,409 Speaker 2: My absolute 827 00:40:08,409 --> 00:40:08,729 Speaker 2: pleasure. 828 00:40:09,870 --> 00:40:13,070 Speaker 1: Uh, thanks to our listeners as well. Copy Time was 829 00:40:13,070 --> 00:40:16,629 Speaker 1: produced by Ken Delbridge at Spy Studios. Daisy Sarma and 830 00:40:16,629 --> 00:40:21,589 Speaker 1: Violet Lee provided additional assistance. All 155 episodes of Copy 831 00:40:21,590 --> 00:40:24,139 Speaker 1: Time are available on YouTube as well as on Apple, Google, 832 00:40:24,149 --> 00:40:27,070 Speaker 1: and Spotify. Mind you, this is for information only and 833 00:40:27,070 --> 00:40:32,219 Speaker 1: does not constitute any trade advice. The research of DBS 834 00:40:32,219 --> 00:40:36,379 Speaker 1: are available all for public consumption, just Google DBS Research Library. 835 00:40:36,590 --> 00:40:37,550 Speaker 1: Have a great day, everybody.