Latest / Trumponomics / How China Can Weather Trump’s Trade War with Nouriel Roubini

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How China Can Weather Trump’s Trade War with Nouriel Roubini · Trumponomics

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. That deal may not
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  Speaker 1: be feasible, and it's not feasible, then there is a
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  Speaker 1: real escalation that leads to an economic war and eventually
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  Speaker 1: can lead to a real war that there is square
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  Speaker 1: facing with China. It's not a willingness to have a call,
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  Speaker 1: but what happens next.
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  Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg.
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  Speaker 2: Welcome to Trumponomics, the podcast that looks at the economic
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  Speaker 2: world of Donald Trump, how he's already shaped the global economy,
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  Speaker 2: and what on earth is going to happen next. Well,
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  Speaker 2: this week we're focusing on the all out trade war
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  Speaker 2: that the Trump administration has kicked off with China, a
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  Speaker 2: trade war that China seems to think it can win.
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  Speaker 2: Just this week, Beijing escalated its class with Washington, ordering
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  Speaker 2: Chinese airlines to halt new Boeing jet deliveries and banning
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  Speaker 2: the export of some rare minerals to the US. That
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  Speaker 2: comes after that mad bidding our tariff rates we've seen
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  Speaker 2: since the start of the month, which saw US tariffs
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  Speaker 2: on some goods go to one hundred and forty five percent.
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  Speaker 2: China in return taking theirs to one hundred and twenty
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  Speaker 2: five percent. Now, Donald Trump and members of the administration
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  Speaker 2: believe they have the upper hand in this fight. China
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  Speaker 2: needs our consumers and our money, as his press secretary
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  Speaker 2: put it this week. If so, someone seems to have
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  Speaker 2: forgotten to tell the Chinese. At every stage of this
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  Speaker 2: tit for tat between the world's two largest economies, the
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  Speaker 2: Chinese have seen confident, cocky even as far as I
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  Speaker 2: can see, they've also been a bit more resolute. No exemptions,
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  Speaker 2: no pauses. So is this all bluff? Chinese, after all,
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  Speaker 2: are all about saving face? Or has Donald Trump picked
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  Speaker 2: a fight here that the US could conceivably lose. Well,
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  Speaker 2: I'm going to go through some of this with Dr
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  Speaker 2: Neurial Ribini. Neuriel is a senior advisor Hudson Bay Capital
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  Speaker 2: Management and Professor Emeritus of Economics at NYU Stern School
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  Speaker 2: of Business. He's also a former advisor to the US treasurer,
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  Speaker 2: where he worked with me, among others, the IMF and
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  Speaker 2: World Bank. Neuriel, thank you very much for joining us.
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  Speaker 1: Great being review Stephanie today a pleasure.
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  Speaker 2: Let's start with the basics. We have focused quite a
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  Speaker 2: lot on the cost of the US economy of these
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  Speaker 2: tariffs on China. But putting it simply, what does China
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  Speaker 2: stand to lose in this fight?
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  Speaker 1: Technically speaking, actually the impact on growth of this trade
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  Speaker 1: war is more serious for China than it is for
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  Speaker 1: the United States on impact before you consider any other
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  Speaker 1: micropolicies that China and US can implement. And the reason
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  Speaker 1: is that Chinese running a trade sort of relatively United
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  Speaker 1: States of about two percent of its GDP, while imports
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  Speaker 1: from China for the United States are about one percent
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  Speaker 1: of the US GDP. So, technically speaking, suppose that this
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  Speaker 1: startive remain at the current level and we are having
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  Speaker 1: a pure authorkey no trade within US and China. In
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  Speaker 1: the extreme, the impact on Chinese growths are going to
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  Speaker 1: be a negative two percent, while the impact on the
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  Speaker 1: United States in principle will be only one percent. Of course,
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  Speaker 1: the shock is also inflationary for the United States and
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  Speaker 1: is deflationary for China. You have to consider that. But
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  Speaker 1: actually the country that is running a trade service with
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  Speaker 1: the United States has a bigger shock to their growth
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  Speaker 1: and demand than the United States. That's true for China,
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  Speaker 1: is true for Europe, for Japan, South Korea, Taiwan and
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  Speaker 1: all other major trading partners that have with the United States.
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  Speaker 2: That is obviously double Trump's point that they need us
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  Speaker 2: more than we need them, and the fact that Bluebery
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  Speaker 2: Economics has calculated similar kind of numbers to you. Even
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  Speaker 2: at the initial level LITTL where they went to you
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  Speaker 2: have more than two percent of GDP at risk in China.
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  Speaker 2: They pretty much wipe out most of Chinese exports to
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  Speaker 2: the US. But somehow they're still fighting and they seem
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  Speaker 2: to think that actually their ability to withstand this might
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  Speaker 2: be a bit greater than Americas. So I just I
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  Speaker 2: wonder why do they seem to be standing so firm
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  Speaker 2: in this sight?
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  Speaker 1: The question is what are their policy reactions now to
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  Speaker 1: reduce the impact on growth. China can do massive fiscal
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  Speaker 1: stimulus while the US is in a fiscal contraction. Given
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  Speaker 1: the needs of the best and administration to reduce the
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  Speaker 1: badger devsit, China, because it's the deflationary shock, can do
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  Speaker 1: massive monetary and credit easing instead. In the US, the
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  Speaker 1: FED is going to stay on hold and we're not
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  Speaker 1: going to get credit easy. More importantly, China also doesn't
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  Speaker 1: face elections. She is in power for as long as
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  Speaker 1: he wants to be, while Trump is gonna face Mitrum
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  Speaker 1: election next year, so they can be more patient. China's
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  Speaker 1: had all the philosophy of eating bitterness, meaning suffering for
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  Speaker 1: the sake of the country. China can also retaliate, of course,
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  Speaker 1: if China poses like they have similar tariffs to the
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  Speaker 1: US ones and one hundred and forty five for the
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  Speaker 1: US one hundred and twenty five for China. There's no trade.
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  Speaker 1: But China can do other things. China can restrict that
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  Speaker 1: it started the exports of rare earth that are mostly
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  Speaker 1: produced in China. China can reduce or cut off the
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  Speaker 1: exports of refined metals, especially in dust selling great metals.
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  Speaker 1: Seventy percent of all refinement of copper is done in China.
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  Speaker 1: China can panic Apple, Tesla and other firms that invested
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  Speaker 1: hundreds of billions of dollars from the US into China,
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  Speaker 1: and China could also, potentially they've not done it so far,
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  Speaker 1: they could use the potential nuclear weapon of essentially dumping
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  Speaker 1: their treasury holdings, and they have a bit less than
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  Speaker 1: a trillion of treasury holdings. That could shock, of course,
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  Speaker 1: the bond market in the United States. There would be
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  Speaker 1: subject to losses, but they could try to do that
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  Speaker 1: as well, but then that will be the option of
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  Speaker 1: last resorts. And finally, if this trade war becomes a
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  Speaker 1: full scale economic war and China feels that they're being
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  Speaker 1: contained and the US is trying to prevent the rise
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  Speaker 1: of China economically, and even bastn't spoken about a strategy
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  Speaker 1: of economic encirclement of China, meaning using friends and allies
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  Speaker 1: and negotiation with them to then corner China. China may
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  Speaker 1: even go after Taiwan. You know, the main reason why
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  Speaker 1: China doesn't go after Taiwan right now is because they
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  Speaker 1: know that there'll be massive trade sanction. Letter on the
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  Speaker 1: potential of a war, but the potential of a war
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  Speaker 1: is limited, while the potential of trade sanction is large.
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  Speaker 1: But if US is already imposing such trade sanction that
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  Speaker 1: there is not much ability of China to export, you
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  Speaker 1: might as well go and take over in Taiwan. So
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  Speaker 1: a trade war can escalate in a full scale economic war,
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  Speaker 1: and a full scare economic war can escalate into a
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  Speaker 1: real hot work as well. People don't seem to be
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  Speaker 1: realizing that I.
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  Speaker 2: Want to go through some of those options in a minute,
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  Speaker 2: but I guess you know. There's also one point that's
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  Speaker 2: worth making, which is China has already learnt from the
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  Speaker 2: first Trump administration and indeed the tariffs that were maintained
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  Speaker 2: and even increased under the Biden administration. They have now
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  Speaker 2: had nearly a decade of recognizing that the US is
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  Speaker 2: in a different place when it comes to China, and
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  Speaker 2: in many ways their economy has also adapted, maybe even
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  Speaker 2: a bit more than the US economy. As we were
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  Speaker 2: looking at how they had managed to diversify it, it's
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  Speaker 2: managed to diversify a little bit more away from the
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  Speaker 2: US as the source of its export. Then the US
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  Speaker 2: has managed to wean itself off China. There's that new
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  Speaker 2: real it's just a stronger position now than it was
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  Speaker 2: a few years ago because it's kind of seen as coming.
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  Speaker 1: Absolutely they've done that. One capital make is that some
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  Speaker 1: of that diversification export is now China, and not just
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  Speaker 1: Chinese firms, but also American firms and others going for
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  Speaker 1: a strategy of China plus one many not just producing China,
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  Speaker 1: but other parts of Asia. Some of the final assembly
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  Speaker 1: of many of these goods is done in Bangladesh, in Vietnam,
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  Speaker 1: in Pakistan, you name it, and the US right now,
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  Speaker 1: even if it reaches an agreement with Vietnam, Bangladesh, and
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  Speaker 1: you name it on reducing the tariffs, they're going to
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  Speaker 1: make sure that the local content criteria are strictly in forced.
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  Speaker 1: So the China plus one strategy was a way for
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  Speaker 1: both US and other multinacial to diversify the China is
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  Speaker 1: but also for the Chinese to diversify. But now China
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  Speaker 1: plus one doesn't work anymore because there'll be these types
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  Speaker 1: of additional restrictions.
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  Speaker 2: Yeah, and actually just on that we're recording this on
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  Speaker 2: Wednesday morning, But overnight there was a Wall Street Journal
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  Speaker 2: story that was talking about how the Trump administration is
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  Speaker 2: wanting to make as part of its famous negotiations with
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  Speaker 2: over seventy countries that are looking to do deals with
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  Speaker 2: the US, one of the conditions that they're thinking about
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  Speaker 2: is that they take more steps to separate from China.
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  Speaker 2: When it comes to a lot of those countries in
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  Speaker 2: Asia that are already have a very close trading relationship
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  Speaker 2: and even a dependency relationship economically with China, how realistic
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  Speaker 2: is that you're going to separate some of these economies Vietnam, Malaysia,
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  Speaker 2: or these places from China in any kind of meaningful way.
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  Speaker 1: Well, what the US can do, and that's legitimate, is
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  Speaker 1: to say, if I do a deal with you, yes Nam,
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  Speaker 1: and your tariffs are not anymore, say forty six percent,
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  Speaker 1: they're going to be ten, fifteen, twenty, whatever the negative
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  Speaker 1: is going to agree, then most of the stuff that
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  Speaker 1: you export the US has to have local content. If
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  Speaker 1: you take Chinese parts and you assemble them in Vietnam
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  Speaker 1: and the value added is only, say twenty percent in
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  Speaker 1: Vietnam and eighty percent China, then those goods are not
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  Speaker 1: going to be subject to the low tarifs. They'll be
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  Speaker 1: subject to higher tariffs. Every trade dealer has this local
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  Speaker 1: content criteria. So that's just something you can do and say,
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  Speaker 1: this is not Vietnam is good. It's mostly Chinese good
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  Speaker 1: that pretends to be vietname is the same way in
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  Speaker 1: which the Chinese exported to Mexico, and try to rerupt
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  Speaker 1: it this way, so that can be enforced. The second
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  Speaker 1: thing can be enforced, in my view, is that the
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  Speaker 1: US can tell friends and allies that you need to
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  Speaker 1: risk your relationship with China on stuff that has to
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  Speaker 1: do with the key strategic technology like you know, things
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  Speaker 1: like AI semiconduct or high tech and so on, and
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  Speaker 1: the way to do it is already been done. When
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  Speaker 1: Biden was living in January, there was an executive order
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  Speaker 1: that essentially says what are the criteria for AI dicusion
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  Speaker 1: And it has three buckets of countries. Here one countries
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  Speaker 1: are friends and allies, and they have accessed to as
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  Speaker 1: many advanced Navidia ships, they can build as many data
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  Speaker 1: centers with advanced ships and use all the ais l
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  Speaker 1: l ms and technology of the US. There are then
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  Speaker 1: Tier three countries that are Russia, China or Korea run
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  Speaker 1: and real rivals, and they cannot have access to any
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  Speaker 1: of those advanced ships. And there are here two countries
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  Speaker 1: that are sort of enemies or friends but not trustworthy,
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  Speaker 1: and say Dubai may not be able to get as
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  Speaker 1: many in Navidio chips because maybe their data centers in
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  Speaker 1: Dubai are not as safe as those say in Canada
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  Speaker 1: or in Europe or whatever. So I think that part
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  Speaker 1: of the strategy is going to be to try to
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  Speaker 1: de risk the relationship with China and force people to
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  Speaker 1: choose you want to be in Tier one or Tier
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  Speaker 1: two or Tier three and If you decide to be
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  Speaker 1: even in tier three, you're going to have less success
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  Speaker 1: to US technology than you do, and then you have
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  Speaker 1: to use Chinese technology. Friends and allies are going to
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  Speaker 1: be in tier one, rivals are going to be in
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  Speaker 1: tier three, and everybody else in the middle left to
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  Speaker 1: decide to go with the Chinese AI or go with
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  Speaker 1: the American AI, because the world will be essentially a
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  Speaker 1: world of either US high tech or Chinese high tech,
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  Speaker 1: and they're not going to be compatible with each other.
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  Speaker 1: That's the world we're moving to.
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  Speaker 2: I guess one question is whether China has already progressed
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  Speaker 2: so far in some of these technologies that it's whether
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  Speaker 2: it's practical to do that. But that's certainly what you've
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  Speaker 2: described makes a lot of sense, and I would say
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  Speaker 2: is also more consistent with the verse version of Donald
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  Speaker 2: Trump's China policy that the Biden administration pursued. As long
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  Speaker 2: as you can, as long as you can persuade all
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  Speaker 2: these friends, that so called friends and allies that they
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  Speaker 2: are indeed still your friends and allies, after you threatened
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  Speaker 2: all this nasty stuff.
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  Speaker 1: Well, you know, let's put this way, even after the nasty,
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  Speaker 1: nasti stuff, NATO members, and Europeans and Canadians and Japan,
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  Speaker 1: South Korea, Taiwan, they have no choice, no choice to
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  Speaker 1: rely on the US because if they spend more on
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  Speaker 1: the fence, then the security umbrella is going to remain.
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  Speaker 1: And if the security Rombella remains and there is a
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  Speaker 1: trade deal on reducing the current tariffs to say half
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  Speaker 1: as much, say only ten percent for Europe rather than twenty,
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  Speaker 1: or only ten twelve for Japan rather twenty four, these
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  Speaker 1: countries have no choice but to stay in the sphere
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  Speaker 1: of influence of the United States in terms of security. So,
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  Speaker 1: in spite of the tension with Friends and Allies, my
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  Speaker 1: baseline is one in which you reach a deal on security,
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  Speaker 1: you spend more on defense all over the world Friends
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  Speaker 1: and Allies, you buy more US weapons and US tech goods,
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  Speaker 1: You buy more energy and energy from the United States,
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  Speaker 1: more of there are goods, and you do other things. Therefore,
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  Speaker 1: even technologically, Friends and Allies is going to be under
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  Speaker 1: the technological order of the US, because in technology US
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  Speaker 1: is number one, China is a closed second, but everybody
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  Speaker 1: else is not number three or four. Europe is only
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  Speaker 1: number ten. So they have no choice. They left to
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  Speaker 1: accept to maintain and remain under the US security, trade, military, geopolitical,
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  Speaker 1: and technological influence. I think that's going to be the outcome,
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  Speaker 1: whether you like it or not. The idea the day
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  Speaker 1: Europeans going to now embed themselves with China, I think
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  Speaker 1: is totally ridiculous. It's totally far fetched. It's not gonna happen.
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  Speaker 2: You're obviously right that the US does have still a
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  Speaker 2: lot of means of persuasion, and it sort of reminds
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  Speaker 2: me one of my colleagues, Josh Green, was saying, you know,
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  Speaker 2: it's like it's the sort of Mara Lago version of
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  Speaker 2: global trade, not Maura Largo, the currency core that we've
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  Speaker 2: talked about on this show, but the cost of joining
• 15:11
  Speaker 2: the Mari Largo golf club was jacked up the moment
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  Speaker 2: that Donald Trump even became the Republican nominee, that alone
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  Speaker 2: winning the presidency, and there's a sort of pay to
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  Speaker 2: play element to this. He has the same approach people
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  Speaker 2: should have to pay to play in the US market.
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  Speaker 2: So clearly the US has a lot cards, as Donald
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  Speaker 2: Trump would say. But you identified at the beginning that
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  Speaker 2: although the short term economic cost to China of this
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  Speaker 2: war is obviously greater. They also have a greater macroeconomic
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  Speaker 2: room to offset that. So if they have a hit
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  Speaker 2: of two percent GDP, they can stimulate the economy in
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  Speaker 2: other ways. They have room to do that. They don't
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  Speaker 2: have an inflation problem as the US, so they also
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  Speaker 2: have a capacity to sustain a bit of pain in
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  Speaker 2: a way that potentially the US doesn't have. I just
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  Speaker 2: want to test if it's willing to do things that
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  Speaker 2: are not necessarily in its interest but it thinks will
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  Speaker 2: be more likely to push the US to change course.
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  Speaker 2: You know, does that include things like selling those holdings
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  Speaker 2: of US bonds? How far can it go on? Things
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  Speaker 2: like that, which people have often thought of, was the
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  Speaker 2: kind of equivalent of the sort of going nuclear. They're
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  Speaker 2: sitting on these enormous stocks of treasuries. Is it feasible
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  Speaker 2: that they could sell a lot of those without just
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  Speaker 2: inflicting too much pain on themselves.
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  Speaker 1: It's an option, but in my view, is an option
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  Speaker 1: of last resort after they've used all the other things
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  Speaker 1: we discussed, because there is a meaningful economic cost to them.
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  Speaker 1: The economic costs are the following. If you sell treasuries,
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  Speaker 1: depending on their duration, you have a market to market
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  Speaker 1: loss because bond years will be higher, and then you're
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  Speaker 1: having a loss on the existing stock of your treasury.
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  Speaker 1: Number one. Number two, If you sell treasuries and you
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  Speaker 1: convert those dollars into R and B, the R and
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  Speaker 1: B appreciates, and what you're trying to do in China
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  Speaker 1: is actually having a depreciation of the R and B
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  Speaker 1: as the way of compensating for the trade shop. So
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  Speaker 1: you're hurting yourself if you're selling treasury and you don't
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  Speaker 1: buy RMB, you have to buy other currencies. If you
• 17:16
  Speaker 1: buy yen, euro s with frengths and you name it,
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  Speaker 1: you are forcing an appreciation of yen and euro relative
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  Speaker 1: to US dollar, and you're going to create trade fiction,
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  Speaker 1: if not a trade war with Japan, with Taiwan, South Korea,
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  Speaker 1: with Europe or whoever. And at the time where you
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  Speaker 1: actually are trying to divide these countries from you because
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  Speaker 1: you're forcing an appreciation of this currency and you're transferring
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  Speaker 1: them the trade tariff risk to them. If instead, the
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  Speaker 1: last thing you can do, probably if you cannot essentially
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  Speaker 1: sell treasury and buy RMB because it appreciates your currency,
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  Speaker 1: or damage your relations with their trading partners like Europe
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  Speaker 1: in Asia, you can sell the treasure is then buy gold,
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  Speaker 1: and that's what China and other strategic rivals of the
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  Speaker 1: US have been doing, and that's why gold has gone higher,
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  Speaker 1: because if you think about it, the only global reserve act,
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  Speaker 1: of course, is the asset. Liquid asset is not a
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  Speaker 1: currency that cannot be seized by the US, is a
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  Speaker 1: liquid bullion because we saw in the case of Russia Ukraine,
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  Speaker 1: not just dollars but euro yenes, it's frank pounds were seized,
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  Speaker 1: and therefore the only one that they cannot seize is
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  Speaker 1: gold bullion. But gold bullion that you keep in the
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  Speaker 1: basement of the PBOC if you're buying GLD, that is
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  Speaker 1: the financial version of gold. Of course, that can even
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  Speaker 1: be seized or controlled or whatever. So that's I think
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  Speaker 1: what's the most likely scenario. If they decide to sell treasury,
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  Speaker 1: they still get the loss marked to market on the
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  Speaker 1: value of those bonds, but maybe the best thing to
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  Speaker 1: do will be gold rather than R and B or
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  Speaker 1: rather the other current. I think that's a possibility. They
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  Speaker 1: already been doing it for a while because if things
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  Speaker 1: escalated in the US and China, one of the things
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  Speaker 1: the US can do, of course, is to seize their
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  Speaker 1: holdings of treasury the same way the holdings of treasuries
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  Speaker 1: of Russia over sees the same way. Similar transaction restriction
• 19:17
  Speaker 1: occur for North Korea, run and you name it. So
• 19:20
  Speaker 1: that's a mutual thread. The Chinese can use that nuclear
• 19:24
  Speaker 1: weapon or nuclear threats, but the US can use the
• 19:27
  Speaker 1: counter nuclear threat of seizing those assets. The game of
• 19:30
  Speaker 1: chicken between the two sides.
• 19:32
  Speaker 2: On one side doesn't have an election coming up, in fact,
• 19:36
  Speaker 2: will be around for the foreseeable future.
• 19:38
  Speaker 1: That's true on the other side. As I said, a
• 19:42
  Speaker 1: huge amount of the manufacturing of China two percent of GDP,
• 19:46
  Speaker 1: but the larger fraction of the manufacturering is thirty percent
• 19:49
  Speaker 1: of GDP, is expert to the US. Suppose this factory
• 19:54
  Speaker 1: all have to shut down because you're not going to
• 19:55
  Speaker 1: be able to reroute those experts to other countries because
• 19:59
  Speaker 1: other countries will have the same problem access supply. That
• 20:02
  Speaker 1: access supply implies that part of their industrial base manufacturing
• 20:06
  Speaker 1: is obsolete, is essentially stranded asset, and that's a huge
• 20:10
  Speaker 1: cost in terms of capital losses, but the bigger loss
• 20:13
  Speaker 1: in terms of jobs, massive job losses. Unless against China
• 20:18
  Speaker 1: does staff to increase domestic consumption and consumption of services,
• 20:23
  Speaker 1: and those factory workers may become eventually over time service workers.
• 20:27
  Speaker 1: You can do it over a medium term of a
• 20:29
  Speaker 1: few years, you cannot do it in twelve months. So
• 20:32
  Speaker 1: both sides have capability and threats, and both sides have
• 20:36
  Speaker 1: significant upside costs and risk. It got both ways. But
• 20:40
  Speaker 1: you're right that's in Pin doesn't face election. But you know,
• 20:44
  Speaker 1: as we saw during COVID, when people become restless, they
• 20:47
  Speaker 1: can go in the streets, even in China, and millions
• 20:50
  Speaker 1: of unemployed the factory workers could be a threat, even
• 20:54
  Speaker 1: in the case of China. So it's not as if
• 20:56
  Speaker 1: political pressures are zero in China and are simile in
• 21:00
  Speaker 1: the United States. It's a bit more complicated than that.
• 21:04
  Speaker 2: Final question, Neil. I think some have been surprised in
• 21:08
  Speaker 2: the last few weeks at China's apparent willingness to dig
• 21:12
  Speaker 2: in and not blink as perhaps they have in some
• 21:15
  Speaker 2: past rounds. Even earlier this year, they were responding in
• 21:19
  Speaker 2: a quite measured way to the initial tariffs that Donald
• 21:23
  Speaker 2: Trump would put on. Do you think that this will change,
• 21:26
  Speaker 2: that they will ultimately come to the table as Donald
• 21:28
  Speaker 2: Trump's people would say, or is there something a bit
• 21:30
  Speaker 2: different now? Have the state's been just raised too high
• 21:34
  Speaker 2: in terms of their face apart from anything else.
• 21:37
  Speaker 1: Well, you know, there's a game of chicken between Trump
• 21:39
  Speaker 1: and Shape, and there is a third person in this
• 21:42
  Speaker 1: game of chicken, is how well as well? As I said,
• 21:45
  Speaker 1: and I've said for a while, that they strike a
• 21:48
  Speaker 1: price for a Trump put is a price much higher
• 21:52
  Speaker 1: for the power put and is also much higher than
• 21:56
  Speaker 1: for the fishing pin put. Meaning Trump is going to
• 21:59
  Speaker 1: blink before the Fed and Trump is going to blink
• 22:02
  Speaker 1: before Jipin. Guess what Trump has been blinking by starting
• 22:07
  Speaker 1: negotiations with friends, allies and enemies seventy countries. The exception
• 22:13
  Speaker 1: is China power is not blinked so far, and it's
• 22:16
  Speaker 1: unlikely to blink. And this game of chicken between Trump
• 22:20
  Speaker 1: and she Himpin is continuing. But in the short run
• 22:23
  Speaker 1: the Chinese can be more patient. Trump is saying, is
• 22:26
  Speaker 1: waiting for a call from Jimpin. Su Jianpin is saying,
• 22:30
  Speaker 1: you started this tread war. Maybe you should make a call.
• 22:33
  Speaker 1: The point is not whether you make a call. The
• 22:35
  Speaker 1: backside channels through which people can organize a phone call
• 22:40
  Speaker 1: within SI and Trump. That may happen, but even that's
• 22:44
  Speaker 1: not the issue. There can be a phone call, you
• 22:46
  Speaker 1: can have the beginning of negotiation to the escalate. But
• 22:50
  Speaker 1: the problem is that the sets of policies that may
• 22:53
  Speaker 1: be acceptable to Trump might be empty or a null
• 22:58
  Speaker 1: set compared to the sets of policy that are acceptable
• 23:02
  Speaker 1: to shish in Pin. Because like last summer around, it's
• 23:05
  Speaker 1: not just about tariffs. It's also about non tariff restrictions,
• 23:09
  Speaker 1: about restriction to SDI, is about joint ventures, it is
• 23:13
  Speaker 1: about intellectual property rights, It's about government properement. Is about
• 23:17
  Speaker 1: the fact that China subsidized experts, low wages, the cost
• 23:21
  Speaker 1: of capital, the cost of energy, the cost of water,
• 23:25
  Speaker 1: the cost of land, pretty much subsidize everything for the
• 23:29
  Speaker 1: last decades. Telling China give up on state capitalism and
• 23:33
  Speaker 1: become a true market economy without any of these policies,
• 23:37
  Speaker 1: it is something that is not acceptable. The problem is
• 23:40
  Speaker 1: that the kind of deal that US wants is to
• 23:43
  Speaker 1: win essentially fully the economic world with China, and Chinese
• 23:47
  Speaker 1: has got consider that one as a strategy of full
• 23:50
  Speaker 1: economic containment of the rise of China. So even if
• 23:53
  Speaker 1: they sit down, I fear that instead of a grand
• 23:56
  Speaker 1: bargain in which you the risk on technology, but you
• 24:01
  Speaker 1: don't decouple and everything else. That deal may not be feasible,
• 24:05
  Speaker 1: and if not feasible, then there is a real escalation
• 24:08
  Speaker 1: that leads to an economic war and eventually can lead
• 24:11
  Speaker 1: to a real war. That's there is square facing with China.
• 24:15
  Speaker 1: It's not a willingness to have a call, but what
• 24:18
  Speaker 1: happens next.
• 24:19
  Speaker 2: Jenny welsh, our chief geoeconomics analyst who was the Taiwan
• 24:23
  Speaker 2: advisor in President Biden's National Security Council, wrote a piece
• 24:27
  Speaker 2: with the headline last week, I dealt with China. Here's
• 24:31
  Speaker 2: why they'll fight. After years of sitting across the table
• 24:34
  Speaker 2: from Beijing and official negotiations, I've learned this. They guard
• 24:38
  Speaker 2: their pride, drive a hard bargain, and play the long game.
• 24:42
  Speaker 2: I guess we're going to find out whether Donald Trump
• 24:45
  Speaker 2: can do those things. No, Rabini, thank you so much.
• 24:48
  Speaker 1: That was great, great being with you, Stephanie.
• 24:51
  Speaker 2: That thanks a lot. Thanks for listening to Trump Noomics
• 24:59
  Speaker 2: from Bloomberg. It was hosted by me, Stephanie Flanders, and
• 25:02
  Speaker 2: I was joined by Nurial Rubini. Trumpelomics is produced by
• 25:06
  Speaker 2: Samasadi and Moses and with help from Chris Martin and
• 25:10
  Speaker 2: Amy Keene. Special thanks to Flora Pine and sound design
• 25:14
  Speaker 2: has been done by Blake Maples. Brendan Francis Newnham is
• 25:18
  Speaker 2: our executive producer and please to help others find the show,
• 25:21
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• 25:24
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