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From Courtship to Clarity: The Trump-Xi US-China Trade Saga Explained with Jim Tompkins · Beyond Fulfillment Podcast

• 0:02
  Hi, everyone.
• 0:03
  Dave Gulas, Beyond Fulfillment Podcast.
• 0:06
  Back again with my good friend Jim Tompkins.
• 0:08
  Welcome, Jim.
• 0:10
  Thank you, Dave.
• 0:11
  Good to be here.
• 0:14
  Likewise.
• 0:15
  So we are talking all about the situation with the US And China.
• 0:20
  And Jim, I noticed that you've got the title of this podcast as From Courtship to Clarity, the Trump XI Saga.
• 0:29
  Very interesting.
• 0:30
  So what's that about?
• 0:32
  Well, this is a story about the two most powerful leaders in the world from the two most powerful countries in the world.
• 0:42
  And it's gone on for nine years now of what I believe will be a 12 year story.
• 0:49
  The story began with handshakes at Mar A Largo where they, you know, kind of talked nice and had some elegant meals and some appeared to be togetherness.
• 1:04
  But shortly after that, we found that things weren't so good.
• 1:09
  And in fact, if you look over the nine years that we've had, what we really have is a master class in geopolitical theater.
• 1:19
  And it's an extremely interesting story.
• 1:22
  Between 2017 and 2027, these leaders have danced through eight distinct stages, each of those stages having an impact on global trade and on the economic landscape of the world.
• 1:39
  So this is really a really critical story to every country in the world and every citizen of the world today.
• 1:46
  I will start in 2017 and describe the, the drama, the diplomacy and the disruption that's taken place over this time frame.
• 1:57
  And what began as a promise of cooperation evolved into a huge battle, a huge rivalry.
• 2:05
  And now I'm predicting by 2027 we will have a path to clarity.
• 2:12
  And therefore, From Courtship to Clarity is the title.
• 2:16
  So today's podcast is about the first 10 years, 2017 to 2027, of this 12 year story that stars Trump and Xi.
• 2:28
  And it's going to take us through the summits, the sanctions, and the search for trust, the search for a relationship.
• 2:37
  And so this is not a timeline as much as it is an architecture of modern trade and where we are today.
• 2:47
  Okay, so where are we right now in this eight stage journey?
• 2:53
  Well, right now we're right in the middle of stage six.
• 2:57
  And so let me walk you through those first five and a half stages so we can understand how we got here and where we're heading.
• 3:06
  2017 is the year I call courtship.
• 3:09
  That's when XI went to Mar A Lago for a summit.
• 3:14
  There was lots of optimism, lots of diplomacy, and what took place was basically positive in that Trump and Xi promised to cooperate on trade, they promised to cooperate on North Korea, but they were primarily symbolic gestures.
• 3:32
  There was no real deal done.
• 3:35
  There's nothing that came out of it from a results point of view.
• 3:39
  And so that 2017 courtship only could last so long.
• 3:44
  And the positive feelings.
• 3:46
  And by the time 2018 came around, the gloves came off and we entered stage two.
• 3:52
  Stage two, I label as chaos.
• 3:55
  So we went from courtship to chaos.
• 3:58
  And the setting for that was the G20 summit in Argentina, where the tone was escalation and retaliation.
• 4:05
  Trump began the battle, but he launched a series of section 301 tariffs, and China retaliated.
• 4:13
  The trade war intensified.
• 4:16
  Lots of disruptions of global supply chains because of the uncertainty.
• 4:20
  And so this chaos went on for two years, 2018 and 2019, and it was a tit for tat.
• 4:26
  I did this, you did this, I do this, I did this.
• 4:29
  And both sides really were getting tired of it by 2020.
• 4:34
  So in early 2020, we left the stage two chaos and we entered stage three, which was calm.
• 4:43
  And so in early 2020, Xi and Trump got together in Washington D.C.
• 4:50
  and the tone was, let's have a truce.
• 4:54
  This fighting back and forth is not helping anybody.
• 4:57
  And in fact, it's hurting everybody.
• 4:59
  And so let's move on.
• 5:01
  And so they moved on, and they came to a phase one trade deal that was signed.
• 5:08
  It actually had some tenants in it and some conclusions and some autographs.
• 5:12
  And so it focused on agriculture, on ip, on currency.
• 5:17
  And so this was a time of positiveness.
• 5:20
  We thought, okay, now we have something going.
• 5:23
  Just as they were leaving Mar A Lago and getting back to the work at hand, Covid hit, and Covid obviously dominated everything.
• 5:35
  And the tone shifted from us working on transactional competition and went into a strategic competition type of phase.
• 5:46
  And so there was A really, from 2021 to 2024, Trump had had left office.
• 5:55
  We're now in the Biden era.
• 5:58
  Biden is not cooperating with the theory of detente, of working together.
• 6:06
  Biden did maintain the tariffs.
• 6:08
  He emphasized multilateralism, and he framed China as a competitor.
• 6:15
  And so there was no Trump interaction with Xi.
• 6:19
  There was no Biden interaction with Xi.
• 6:22
  It was a period of 2021, 2024, where there was simply no cooperation at all.
• 6:29
  And so when stage four ended, Trump reignited the battles when he returned to the White House.
• 6:37
  So now if we look at the quarter one of 2005, this year, chaos returns.
• 6:43
  There was no setting, there was no meeting that took place.
• 6:47
  Trump just came out of the gate and was issuing a huge number of tariffs and reignited the entire tariff battle around the world.
• 6:57
  Executive orders were raised on duties on China Imports, China responded with countermeasures.
• 7:05
  And what we saw in the first through the third quarter, quarter of 2025 was chaos had returned.
• 7:12
  And it became clear in the second quarter and then even more clear in the third quarter that chaos resulted in no winners.
• 7:20
  Everybody was losing.
• 7:22
  And so it became clear that there was something needed more.
• 7:27
  And so what took place, took place in South Korea.
• 7:30
  The summit we had just weeks ago until here was we enter stage six, calm returns again.
• 7:39
  And so we felt really good about the South Korean summit.
• 7:43
  There was a tactical detente.
• 7:46
  There was moves in two key areas, both of which were major on trade and tariffs.
• 7:53
  China, we took them from a 57% tariff down to 47% tariffs, or 10% reduction.
• 8:01
  China agreed to substantial purchases of soybeans, and China agreed to postponing the restrictions on rare earth exports.
• 8:13
  And so the three big things that we needed to get accomplished at that time was to reduce the tariffs on China and to get the soybeans moving and to get the rare earth mini moving.
• 8:27
  And so that will happen.
• 8:28
  In addition, on a very positive note, China and US agreed jointly to cut back on the illicit flow of fentanyl and that they would work together on that.
• 8:41
  So that was a very positive meeting.
• 8:44
  Trump thought it was very, very positive.
• 8:46
  They asked him out of 0 to 10, well, how would he rate the meeting?
• 8:50
  And he said, I would rate it a 12.
• 8:52
  And that says that he accomplished everything he wanted.
• 8:55
  China was a little bit more reserved.
• 8:58
  China and us agreed on what they accomplished, but what the difference was is China was looking at a more of a long term dialogue and less of fixing individual, temporary problems.
• 9:11
  But what we did for sure get out of South Korea is a temporary leave, a framework for further talks.
• 9:19
  They decided Trump will go to China in 26, Xi will come to the US in 26.
• 9:26
  And so there was a mechanism put in place to create further peace and further positive trade as we go forward.
• 9:35
  So that's where we are right now, is the South Korea meeting is done, and we're now looking at the benefits we got from it, but wondering where this takes us in the long run.
• 9:48
  Okay, and so what are the last two stages?
• 9:53
  Well, the last two phases are really trying to institutionalize what we began in South Korea.
• 10:03
  I believe both nations are in the process, as we speak, of building the scaffolding for creating a durable trade mechanism.
• 10:15
  There's lots of work going on in this, and it's very, very, very positive.
• 10:20
  Now, I, of course, am an optimist, so I'm taking the optimistic view.
• 10:24
  Of this.
• 10:25
  But I believe we can see Trump and Xi are also taking a very positive view of it.
• 10:30
  And so this work is going on today and it's being done with a sense of urgency.
• 10:36
  You know, Trump is 79 years old, Xi is 72 years old.
• 10:41
  Trump will be leaving office in January of 2029.
• 10:46
  Xi, of course, has eliminated the two term limit in China.
• 10:49
  And so he can serve as president as long as he is alive.
• 10:54
  And he probably will, he probably will go for a third term and probably will even go for fourth term.
• 11:00
  So Xi will be the head of China as long as he lives up until a year 2037.
• 11:08
  But what they see is an opportunity in the next three years to get something done.
• 11:14
  And so both presidents really want to do this.
• 11:18
  And so I see stage seven taking place between the quarter two of 2026 and quarter two of 2027.
• 11:29
  This is a one year stage.
• 11:31
  And I call the stage codification.
• 11:35
  It's where we're going to develop a bilateral cross US China institutionalized set of rules and regulations and mechanisms to make sure that we have a durable trade mechanism that's going to allow us to have standardized methods on how
• 11:54
  to handle disputes, export controls, joint compliance bodies.
• 12:00
  And I think it's going to give us the real, real, real chance for where we're heading, which is stage eight.
• 12:08
  Where stage eight is clarity.
• 12:11
  And stage eight clarity is going to be the US And China establishing the new world trade rules, which is going to be based upon trust and transparency.
• 12:23
  And so this is critical.
• 12:25
  That's what this whole saga has been about.
• 12:28
  Where is the trust and transparency?
• 12:31
  And I believe by the end of 2027 we will have that in place.
• 12:37
  And so what we will have is a relationship that's based upon a rules based framework where transparency in the supply chain and transparency in the technology governance is going to be key.
• 12:53
  And this is going to become the theme of where we head forward and where we are going to accomplish great, great, great work in world trade and world peace.
• 13:04
  Okay, very interesting.
• 13:07
  All right, so Jim, let's, let's change the subject and let's just talk about something that's going on today.
• 13:12
  So the Supreme Court is having some hearings on the legality of President Trump using the Emergency Economic Power Powers act to impose tariffs.
• 13:22
  So, so what's happening here?
• 13:25
  Well, it's, it's a, it's a good question and I wish the news media would have asked this question before they started running reports this week.
• 13:35
  There's some news channels which are saying we're going to get an answer to this question about does the president have the right to use the International Emergency Economic Powers act to impose tariffs?
• 13:52
  We are not getting an answer.
• 13:54
  Today in front of the Supreme Court.
• 13:57
  We are holding the oral arguments on the landmark case here, Learning Resources versus Trump, which is challenging President Trump's right to do tariffs.
• 14:09
  There will be no ruling today.
• 14:13
  It will not take place.
• 14:14
  There's oral arguments.
• 14:15
  And even on the simplest, most clear cases that sit in front of the Supreme Court, it takes weeks and months to deliberate, deliberate on what the answer should be and lots of negotiation takes place.
• 14:31
  So there's a decision I believe will take someplace between February and June.
• 14:39
  Now you say, Jim, February and June is not a very specific time frame.
• 14:46
  That's a long time in 2026.
• 14:49
  Why is it going to take so long?
• 14:51
  And the answer is it's two sided.
• 14:54
  Number one, the case is very, very, very, very important.
• 14:58
  And so that means they want to move quickly.
• 15:01
  The second thing, it's very, very, very complex because if you take one action or the other can have major impacts on everything that's happened over the last year.
• 15:12
  And so it's not going to be a simple yes or no type of thing that the Supreme Court comes up with because they're dealing with a very difficult topic and one that's going to take time.
• 15:25
  So I think at the best we can hope for is a ruling in February.
• 15:29
  The worst we can count on is, I think, sometime in June.
• 15:33
  Now, the question that's going to come up is what's the impact of this?
• 15:41
  Well, if they uphold Trump's right to do this, that's going to expand executive branch power.
• 15:50
  If they strike it down, it's going to result in theory at least, in that the congressional body will hold the authority to do tariffs.
• 16:00
  So I think it's really important that we don't jump on.
• 16:05
  We're going to have a conclusion in November and December because that's not going to happen.
• 16:08
  In my opinion, it's going to be at least February.
• 16:12
  And the best I can say as to when it's going to happen is February, March, April, June, sometime in there.
• 16:18
  And it's going to be a very interesting result that's going to have major impacts on world trade.
• 16:29
  Okay, so when we get that, that final ruling in the next three to six months, I mean, what do you expect to happen?
• 16:37
  Well, I think there's two high level scenarios that you can come to.
• 16:42
  Obviously, one is the Supreme Court rules against President Trump, and the other is they rule with President Trump and so those are the two options.
• 16:51
  If we think about the first option, they rule against President Trump.
• 16:57
  What they're going to say is that Trump is not authorized under the IEEPA tariffs.
• 17:08
  He cannot do that.
• 17:09
  He does not have that power.
• 17:12
  And so therefore, the tariffs that he has put in place need to be removed.
• 17:18
  They need to be reversed.
• 17:20
  Now, a lot of the tariffs he's put in place have been taken out of tariff and have been made into agreements between countries.
• 17:27
  And so those would still stand, but the ones that are just, it's the stated tariffs that are not in a written agreement would need to be withdrawn.
• 17:38
  If nothing happened, that would result in a whole trade reset, where tariffs on hundreds of billions of dollars of imports would need to be lifted and recalculated.
• 17:52
  There would be a very complex set of rules with respect to how we could get the Congress to participate in working together on that, which I don't anticipate would be done in an expedient way.
• 18:08
  And so it would be sending our allies and our adversaries a very negative message because the US Trade consistency and the rule of law would not be understood.
• 18:22
  However, I don't think that's going to come into play if, in fact, the Supreme Court rules against President Trump.
• 18:32
  I believe he is.
• 18:34
  And in fact, there's some facts out there that validate these approaches.
• 18:39
  There is already work being done on taking all of those tariffs out of the IEEPA and putting them in section 301 of the Trade act of 1974.
• 18:53
  And this is the trade act that Trump has used in the past.
• 18:57
  And this trade act is clearly a thing that can be used against China, for example, because it's been done in the past and it is a precedent that has been set.
• 19:09
  And so Trump has previously used this approach, the 301 approach, to put tariffs in place in his first term.
• 19:16
  And, and although this does require a U.S.
• 19:19
  trade Representative investigation, that investigation can be fast tracked.
• 19:26
  And in fact, that fast track can begin as soon as Trump asks for it to be done.
• 19:31
  So you don't have to wait for the decision to be made, and the time to do the investigation is less than the time it would take for the Supreme Court to make a decision.
• 19:42
  The second thing that Trump could do is he doesn't go with 301, but he goes with Section 232 of the Trade Expansion act of 1962, which do allow tariffs based on a national security concern.
• 19:57
  And Trump is very clear on how this works.
• 20:01
  This ruling 232 has been used on steel and aluminum in the past because of the defense industry, also would affect everything in the semiconductor industry.
• 20:12
  So Trump could argue that the supply chain vulnerabilities or the fentanyl trafficking justify us him doing the tariffs under 232.
• 20:24
  In addition to that, Trump has the option of using the IEEPA but using it with a different justification for the emergency.
• 20:35
  And so if you rewrote the emergency as a fentanyl targeting thing, I think it could go through.
• 20:43
  And so that would be using the law that just got struck down, but now he's using the law on a different topic.
• 20:51
  In addition to that, if Trump got surprised and this thing happened very quickly, which would surprise me as well, he always come back and use the executive orders.
• 21:01
  And executive orders can stand for a period of time where it would have time to do these other things.
• 21:08
  And so if the Supreme Court votes against Trump, Trump will have mechanisms in place to immediately re implicate those tariffs.
• 21:20
  And the only question will be is when?
• 21:23
  What's the effective date of those?
• 21:25
  And the Supreme Court is not, in my opinion, going to go say, go back and backdate it.
• 21:30
  They're going to say starting on this date, you can't use this law and therefore there'll be no major change.
• 21:36
  The other scenario, of course, is the Supreme Court votes in favor of Trump, and I think there's a 50, 50 chance they're going to go with Trump or they're not going to go with Trump.
• 21:46
  And the court in this case would affirm the IEEPA use and would say that the president does have the authority to put these tariffs forward and therefore there's no change of anything.
• 21:59
  It's going to be business as usual and we're going to move forward.
• 22:03
  And so this would result in substantial increases in the responsibility of the executive branch and the congressional branch using some power.
• 22:13
  And that, in fact, is what the Supreme Court's been doing for the last eight months as they've been deliberating topics.
• 22:20
  So I believe people getting all excited about this, I believe President Trump saying this is the biggest case in the last hundred years, I think that's wrong.
• 22:31
  I don't think this is the biggest case in the last hundred years.
• 22:34
  I believe this is a case that if it goes this way, we're going to take this result.
• 22:37
  If it goes this way, we're going to take this result.
• 22:39
  But no matter where we are, we're going to be back with the same tariffs and doing business the same we have.
• 22:45
  And so it's not going to have a big impact.
• 22:50
  Okay.
• 22:50
  All right.
• 22:51
  Well, thanks so much, Jim, as always.
• 22:53
  Fantastic hearing your opinion and learning all these valuable insights.
• 22:57
  And we appreciate you sharing this with our listeners.
• 23:00
  Super Dave, good to see you again.
• 23:02
  Okay, likewise.
• 23:03
  Till next time.
• 23:04
  Bye now.