April 24, 2025 • 45 mins
For the most part, Americans haven't felt much pain yet from the tariffs that Donald Trump introduced (and then partially walked back) on April 2. The damage is highly visible in financial markets, but for the moment, shelves remain stocked, inflation measures have remained muted, and there hasn't been a significant wave of layoffs in official data. But according to our guest, real pain is coming. And what's going down is worse than a trade war. On this episode, we speak with the one and only David Woo, now the founder of David Woo Unbound. He also previously served as the Head of Global Rates, Foreign Exchange, and EM Fixed Income and Economics Research at Bank of America. He says that the administration has absolutely nothing to show for its initial months in office on any front. And he says this isn't a game of chicken, where one side can blink and avoid disaster. Instead, we're seeing a "war of attrition" where damage is being done to both the US and Chinese economies as we speak. As he sees it, the China hawks in the administration have been in control, and have the impulse to obliterate the Chinese economy, which makes the situation more than just a so-called trade war. He discusses the political, market, and real economy implications of this dramatic escalation.
Read more:
Trump U-Turns on Powell, China Follow Dire Economic Warnings
A Bad Peace in Ukraine Carries Global Risks
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, it is
April twenty second. It is twelve oh nine and fifty
two seconds as of the time that I am talking
right now.
Speaker 3 (00:33):
Soon we'll have to do fractions of a second.
Speaker 4 (00:35):
Yeah, I know.
Speaker 2 (00:36):
The market is actually up today. We're recording this on today.
We just got a headline apparently Treasury Secretary Scott Bessant,
at a JP Morgan event in Washington said besn't cees
de escalation with China situation unsustainable. That sent market surging.
You know, everyone's looking for a little shred of hope,
right We're a little shred of optimism that like things
(00:58):
can settle down, we get clarity that the two.
Speaker 3 (01:01):
Biggest economies in the world aren't going to go completely
head to head.
Speaker 2 (01:04):
Right like, because if I mean, this is really the story,
right even with the walk back on April ninth, the
week after Liberation Day, even if and we're not getting
any deals yet, at least so far, we haven't gotten
a deal with Indial, we haven't gotten the deal with Japan,
let alone the EU. But you know, even if we
got all those deals sometime in the next three months,
and typically trade deals take like years to work out,
(01:25):
there's still the fact of an economic rupture between the
world's two biggest economies, right.
Speaker 3 (01:30):
I think that's certainly a possibility. The one other thing
I would say is, so you're right. Stocks are up
this morning because Bessend has been saying, you know, some
mildly potentially positive things on this issue. But there is
still this huge question of who would make the first
move in this particular standoff. And I think it is
(01:51):
a standoff. And I think, you know, both respective policy
making groups here, the Trump administration and the CCP under
Sheashon Paging, I think they both care about who is
seen to be making the biggest concession here. So I
think everyone can reasonably say that we would want some
sort of I was about to say peace steal between
(02:14):
China and the US. Peace steal isn't right, some sort
of reconciliation, but the path to getting there seems like
very confused and uncertain to me.
Speaker 2 (02:22):
Yeah, there's a lot. I mean, look, people call it
a trade war, so I don't see why we can't
have a piece, trade pieceeal, a detent of some sort.
And look, we both know the stakes, right because the
US relies substantially on China booth for finished goods of
all kinds of things that US consumers enjoy, but also
intermediate goods that are used for actual manufacturing. And we
(02:43):
also know that at least in the short term, there
is not some quick substitute for the sheer amount of
demand that comes from the US consumer. And so we've
seen all the tiktoks of factories in China, you know,
trying to figure out ways to go direct to do
this consumer at least in the short term, economies have
a lot to lose, it would seem. And so there's
(03:04):
all this question of like, you know, who blanks first. Anyway,
there's a POTENTI there, you know, and you just see
it in the market pricing. There is a lot of
pain being priced in immediately today, maybe accepted from the
persistence of this trade war.
Speaker 4 (03:18):
Right.
Speaker 2 (03:18):
Well, I'm very excited. One of my favorite guests, I've
talked to him, We've talked to him on the podcast before,
I've talked to him on the TV. Always energetic and
always has just sort of interesting thoughts, A fun guy
to talk to, also very serious. We're going to be
speaking with David Wu. He is the CEO of David
Wu Unbound, and prior to that, he was the head
(03:40):
of Global Rates, Currency, Emerging Markets, fixed Income, and Economics
research at Bank of America. I always want to get
David's takes on things, So David, thank you so much
for coming back on odd blots.
Speaker 4 (03:52):
Thanks for having me the pleasure.
Speaker 2 (03:54):
Is this a type of war that we're seeing right
now that you know, whether trade war? You know, I
guess it seems like the obvious thing, but like how aggressive,
how provocative, how combative are Trump's actions against China.
Speaker 5 (04:07):
I think it's very combative. I think this is much
more than just a trey war. I think this is
war actually, And then I think, you know, from that
point of view, is not that surprising the way it
is gone, because in a way, the whole thing has
been heating up under Biden.
Speaker 4 (04:23):
I mean, I will tell you, yeah, and.
Speaker 5 (04:24):
I think in a way, you know, it's actually very
interesting in a way, Trump is picking up where Biden
left off.
Speaker 2 (04:30):
Who picked up where Trump left off?
Speaker 1 (04:32):
Right?
Speaker 5 (04:32):
Okay, let me let me just take it back from
you and what I mean, explain better what I meant
by that sentence. Right, did you remember when Biden became president? Okay,
Harvard University Belfare Center publish a big report in which
they did a massive ranking of the technology leaderships across
(04:52):
the major tech races. Okay, it was a report sponsor
by Eric Schmid, the former CEO.
Speaker 4 (04:57):
Of Google, who was a big patriot.
Speaker 5 (05:00):
And in this report they come to the conclusion the
US and China were in basically debt heat in first
or second place in all the leading technologies in the world.
And soon after that, Eric Schmid went on a pr
or political campaign across you know, the Beltway, essentially lobbrying
every Congressman, every senators who listened to him that this
(05:21):
is time to basically stop the access of China from
in advanced technology so that the US has a chance
to essentially regain the leadership.
Speaker 4 (05:32):
Okay.
Speaker 5 (05:32):
So therefore, under Biden, the most important thing, you know,
in terms of Visa VI China, it was not so
much the trade war, but rather they put in punishing
sanctions in terms of the ability of China to be
able to access you know, semiconductor advance conductors and in
manufacturing equipments for advanced conductors. All that was meant to
basically give the US two to three year basically like
(05:55):
head start okay in AI, semiciconductors, in automation, robotics, and
so on and so forth.
Speaker 4 (06:02):
Guess what lessen?
Speaker 5 (06:03):
A month after Trump became president, we had the Deep
Seek news, the Deep Seat news. Basically it was a
massive piece of news. I mean, it was a game changer.
Let me tell you this, I mean Deep Seek News
for me, is no proof of China's technological prowess, but
it is proof that AI can be easily copied. All
(06:24):
of a sudden, overnight, all the sanctions that happened under Biden,
it was for nothing. Okay, to an extent that if
these sanctions were designed to protect the monopoly of the
big US tech companies, okay, all of a sudden, that
meant nothing, because anything that could be copied is worth
(06:47):
nothing commercially. And this is the reason why, by the way,
I know, the data DeepC news came out I shortened
basically nastac and it's you know, it was a great trade,
by the way, but I.
Speaker 4 (06:58):
Think that's what it gets down.
Speaker 5 (07:00):
All the China hawks, I mean, Trump has brought a
lot of China Hawks into his administration. To tell you that,
for the China Hawks, if they thought that they had
been more time with China, I think after DeepC news
came out, literally there was this new sense of urgency.
We need to basically stop China now. The only way
they can do that is to bankrupt China economically, because honestly,
(07:21):
at this point, I mean, let's be honest, when you're
talking about the one hundred and forty five percent tariff, Yeah,
you're not engaging the trade war. You're engaging in basically
economic murder. I mean, that's it. I mean, I don't
see how China is going to be able to explore
anything the US with one hundred and forty five percent.
So I think point of view this to me was,
(07:45):
I think the so called trade war that we call
as such really was always intended as an economic blow
that will be so great to China that China will
no longer be in a position to threaten New Wes hegemony.
So again, this is why I said, this is more
than a trade war. This is much more than a
trade war. This is meant to protect US hegemony.
Speaker 3 (08:07):
Right, sort of existential in that sense. Let me press
you on one thing you said. So, you know, you
mentioned the importance of deep seek and you kind of
suggested that some of the severity of the action taken
on China was because of the deep seek threat. But
I mean, we know that Trump from his campaign was
going to take a really hardline stance against China. So
(08:31):
how can you connect deep seek with some of the
policies that we've seen coming out of the administration. Can
you make that direct link?
Speaker 4 (08:38):
Crazy? I think that's an excellent question. But let's think
about this from moan.
Speaker 5 (08:42):
Okay, I've always said, you know, listen, I'm probably the
only person you know like it's been on your show.
We've read the back to back, one hundred page you know,
essentially faced one agreement that was time between Trump and
the Chinese back in two thousand point I.
Speaker 2 (08:55):
Bet Dan Wong is yeah, the other one, keep going,
keep going.
Speaker 5 (08:59):
Yeah, tell you this it was probably I mean, I
have a PhD in international trade from Columbia University, and
let me tell you this. That trade agreement, in my
humble opinion, was one of the best trade agreements signed
between two countries in the last fifty years. And the
reason was because it was a win win basically deal.
And if people tend to think, oh, whoa whatever, I mean,
(09:20):
people didn't read the whole thing. I mean, it's pretty
amazing what that whole thing actually meant. Now, in my
humble opinion, the difference between Trump and Biden is whereas
Biden saw the US China rivalry as largely a zero
sound game. That is, if China wins, will lose. If
we win, then China will lose. I think Trump in
his whole entire career sees things through the lenses of deals.
(09:45):
And Trump always understands that basically to do a deal,
there has to be enough for everybody around the table.
So from that point of view, in my humble opinion,
if you look back on the first day of Trump's inauguration,
what do you do this? I still remember, I don't
remember you guys covered the story. I still remember he
didn't press conference in the Oval office late at night,
(10:06):
you know, on the auguration day. And it was just
when he announced the twenty percent tariff on Canada and
Mexico over the fentannel, okay, And he was asked during
that press conference, why not China? You promised to eat
China hard. So why did you decide to hit Canada
and Mexico by not China, he asked. His response was, Oh,
(10:27):
because we hit China pretty hard my first time.
Speaker 4 (10:29):
We're going to give them pass this time.
Speaker 5 (10:31):
It was now until the next day he announced the
twenty percent for China. And then three weeks later, of
course we all you know know now like you know,
basically the tariff was extended for Mexico and Canada and
China was hit by twenty percent, okay, and then the
list goes on and off. In my humble opinion, you
know again, we were sitting here and thinking that Trump
(10:53):
is in the driver's seat.
Speaker 4 (10:55):
I don't.
Speaker 5 (10:55):
I think at this point Trump is no longer a
driver's seat to the extend, einting the Chin in a
hawks or actually in a private seat.
Speaker 4 (11:03):
I think the.
Speaker 5 (11:03):
China Hawks are maneuvering him in a position that he's
increasingly struggling to back away from. So it gets more extreme,
and that is a different story. This is why, to me,
this is not just about Pete Navarro versus basically Scott Besson.
This is about the China Hawks represented by Vance by
basically rule bio by Waltz and all of them actually,
(11:26):
So from that point of view, again, this is this
is what we're talking about. I think Trump really wanted.
I think Trump was so eager to do a TikTok
deal on the first day that he spoke with basically
Jijing being things We're going to go very differently. But
I think with a series of mistakes that have now
allowed the China Hawks to take over, and I think
Trump now in a way is a little bit powerless,
(11:48):
and I think, you know, it's we can talk about
the process and the sequencing, but I think this is
where I'm at right now, which is is not entirely
up to Trump anymore.
Speaker 2 (12:12):
So, first of all, I just want to say I
appreciate the out of consensus perspective, because I would describe
the consensus perspective is the only active force that happens
or what's happening in Trump's brain. And so, first of all,
you're disagreeing with that, and I respect that. Second of all,
you know, from my perspective, Trump strikes. I know he
(12:35):
likes to do deals, and he loves talking about doing deals,
et cetera. When he pulled that chart out on Liberation
Day April second and basically slammed every country in the world.
This did not come across to me as someone who
likes positive some deals. This strikes me as someone who
finds any trade gap is per se bad, that if
(12:57):
you're running a trade surplus with the United States, you
must be you must be relative, and so like, give
me the counter argument here. Also, you know this idea.
You know people have been using the good Czar bad
Blowyers characterization. Oh, it's the it's the Navarros of the world.
It's the vances Trump is being blah blah blah. And
I tend to not find those things. But just convince
(13:17):
me that Trump is not a zerosome thinker when it
comes to convince you.
Speaker 5 (13:21):
And by the way, I want to say this, there's
a big difference between China versus everybody else.
Speaker 4 (13:25):
Okay, I think Trump.
Speaker 5 (13:27):
Understands that everybody else he thought that the US is
so big he can just pushing them around. I think
China is a very different story. Just think about this
for a moment. The day that he unleash whatever on
I mean, whatever the time schedule on a liberation there.
Speaker 4 (13:44):
Yeah, China was only hit with a twenty five percent. Yeah,
that's true.
Speaker 5 (13:48):
Which is actually right in the middle of the range.
By the way, it's not like he China thirty percent.
I mean, listen, I mean, I mean Thailand was twenty
nine person in Switzerland thirty five percent. You can say,
look across, you know, I mean, China was actually doing
the low. And by the way, if you think about
that for a moment, I think that was a sign
that Trump did not you know, I mean, because I
(14:10):
mean again, you know, I think Trump understands depending on
who you're dealing with here, if you're dealing with a
little guy, you're gonna basically like literally knock the other
guy dead. And I think Trump feels like, you know,
this is the reason why I mean, I'm you know,
I think Mexico is a great example because Mexico, unlike
any other country, has literally been bending forward backward to
(14:32):
meet Trump, like forget about half the weigh like ninety
nine percent of the way. I thought Trump should have
rented a deal to basically shining bomb literally like three
weeks into his presidency, and he didn't. And the reason
is because apparently he saw Mexico as being a push around. Okay,
was China, I think is a different story. So I think,
(14:52):
you know, we cannot basically apply the same logic to
what Trump is saying. But you know what's interesting though,
what is interesting is the fire that as of today,
right now, as we speak, if I look at you know,
like you know, yesterday, I was, I mean, I didn't
you know, as you know, I've got a YouTube channel now,
you know, and and I was trying to basic the
(15:12):
I'm trying to upgrade my lighting. So I wanted to
buy this very expensive light. This is a very high
end lights to have manufacturing in China.
Speaker 3 (15:20):
Well, you need one of those one of those circle lights,
like like a ring light, like a proper, proper influence
much more than a ring line.
Speaker 4 (15:27):
I'm talking.
Speaker 5 (15:27):
This is a professional basicly spotlight, right, So this is
a very high in case you don't know, like literally
ninety percent of the high end spotlights now are manufacturing China. Okay,
I mean that that's just that's just a factor, right,
So they don't just make a low end stuff.
Speaker 4 (15:40):
This is really high end stuff.
Speaker 5 (15:41):
And you know, as you know, I live in Israel now,
and I mean there's no inventory of this light in
all of Israel. I literally like got in touch with
every store the importer. Nothing, So I decided to call
up be An H in New York. Of course they
have it in stock, even though it's from China. And
guess what it costs. Literally have the price of what
(16:02):
I wouldn't paid if I bought the like in Israel. Unfortunately,
they don't have it in Israel anyway. So I was
asking to be and H guy. So wal, no, listen,
what about the tariff? He said, well, you know, listen,
we're not raising prices until we've actually depleted art stock.
But the point I'm trying to basically tell you is
like Americans have not even begun to feel the even
(16:23):
iota of the tariff. I mean, the stock market obviously
has gone down a bit, that kind of thing, but
it's like nothing.
Speaker 4 (16:29):
I mean, I think.
Speaker 5 (16:29):
People don't realize what this really means, because right now
what's happening is that the inventory in the system. And
then there's no doubt inventory got built up in Q
one because a lot of companies anticipated the tariff increase,
that is providing a bit of a buffer. Wait until
we get into June when prices either will go up
(16:50):
that there will be no stock to the extent that
just you know, whatever you want to basically buy simply
not available. I don't even know how Hollywood can basically
to do with They're lighting without Chinese lights right now
at this point, because there's very low degree of substitutability.
But the point here is that I think, you know,
in a way, I think you know, the pain is
like absolutely, and I think this is where Trump is
(17:11):
very missing formed by the way, I truly believe Trump
is surrounded by some really terrible advisors who at least
didn't tell him the full story, because when it comes
to the trade war, and I can just tell you,
I mean, I think that every step of the way,
I think, you know, they misfired. For one thing, I
think the presumption that tariff was not going to be
(17:33):
inflationary was I don't know what they got that from,
and I'll tell you where they got that from, by
the way, And that was perhaps the biggest, biggest, basically
you know, essential, the assumption that we're making when they
basically unleashed this trade war because Trump figured that well,
first time trade war didn't have any impact on prices,
so he expected this time the same to happen as well,
(17:56):
and that unfortunately, I don't care where Pritnavar got his PhD.
Is worth nothing. His degree is not worth a piece
of papers written on. But let me tell you what.
The reason why the inflationary effect associated with Trump's trade
War one was so limited was because Chinese companies were
able to set up shop very quickly somewhere else in
(18:19):
the Philippines, Indonesia.
Speaker 4 (18:21):
And whatever they want.
Speaker 5 (18:22):
They were able to circumvent the US tariff by continuing
to export to the US at whatever price they were
selling previously the US. So in a way, if there
was very little price impact was because Chinese companies were
able to circumvent the tiff. This time, the entire tariff
is designed to leave Chinese companies with no place to hide.
(18:44):
As you know, like the only reason why like Trump
hasn't take out the whatever even the fists in basically,
I mean, you know, hasn't basically did not apply additional
reciprocal tariff on Mexico is because Mexico had already agreed
to adopt the same US tariff on Chinese imports. So
this time, no, this is the why Southeast Asia got
(19:06):
hit really hard this time, you know, in the reciprocal
terraff It's because precisely, Navarro and others. They understand they
need to. They want to close the back doors to China,
so this time there is no cushion in the system.
Speaker 4 (19:19):
You're gonna see.
Speaker 5 (19:19):
One pass through in terms of prices. In fact, the
Chinese government apparently has decided that the more passed thorugh
the better. The reason being that, you know, we all know.
Only a couple of weeks ago, I think the Chinese
uh in Beijing, Chinese officials met with Costco, with Walmart
and warned them against applying pressure on Chinese suppliers to
(19:40):
basically to take the hit on terror. The reason is
because I think from the Chinese perspective, they think that
once the price effect associated with the tariff is unleashed
onto the US economy, onto the US consumers, it's going
to get so bad that Trump will have no choice
but to basically stand down then. And I think this
is the reason why, in a way I said that
(20:03):
we're right now in round two of this trade war.
I think the round one basically ended the last week.
We're now round two Round two. You know, you could
argue that China enjoyed the advantage in so far that
time is on their side, and I think, you know,
I think things are going to give wrong.
Speaker 3 (20:19):
I have many questions, but just to start with, okay,
why should I care whether it's Trump or his policy
advisors being you know, uber hawkish on China. Why does
that matter when the policy result seems to be, you know,
pretty much the same. And then secondly, you talked about
the pain potentially coming this summer. We've seen a lot
(20:40):
of people in markets start to talk about the idea
that maybe there isn't a Trump put right, like, maybe
he doesn't care about stock prices this time around. So
what exactly is going to be the catalyst for some
sort of detent.
Speaker 5 (20:55):
Yeah, Cracie, I think it's a very good point. But
you see, again, this is whether Trump or somebody else
around him, I think it makes a very big difference
in so far in this respect, let me basically take
it back for a second and you would allow me,
because I think, please, this is connected to a lot
of other things start.
Speaker 4 (21:12):
On the table right now.
Speaker 5 (21:13):
For example, I thought it was a huge mistake that
Trump started his presidency by making stopping the war in
Ukraine a top priority. Okay, he thought that he was
going to be able to stop in twenty four hours.
Forget about twenty fourth let to say he was indeed
being sarcastic. But you know, I can tell you this.
At the beginning of his presidency, polymarket was giving a
(21:35):
seventy percent chance that he was going to stop the
war basically by one hundred days into his presidency, and
now it's right now currently less than three percent.
Speaker 4 (21:44):
Chants.
Speaker 5 (21:44):
Now, this is why Trump went on this you know,
trauma offensive with Putin, that he appeased Putin and literally
was you know, I'm not going to use any more
exaggerated adjective at this point, but let's put it this way.
Trump didn't understand that there was no way in hell
that Putin was going to agree to a ceasefire without
(22:06):
having taken control of the rest of Donskue, where they've
been stuck in basically very very thrown out battles for
the last six months.
Speaker 4 (22:15):
But it doesn't really matter.
Speaker 5 (22:16):
The point here is that I think three months in
his presidency, Trump has got nothing to show for visa
the Ukraine, even though he has rupture transatlantic relations. He
has sold Ukraine down the river, and he's got nothing
to show for and Putin is not buying it. Guess
(22:36):
what At this point, in my humble opinion, Trump has
one of two choices. He could either pivot by getting
much tougher with Putin. Okay, so you see an increase
in geopolitical risk in bullish gold, or that he has
to go even tougher in China because at this point,
you know what, you cannot be.
Speaker 4 (22:56):
Seen as being weak on both Russia and China. Forget
about you.
Speaker 5 (23:00):
I mean, it's pretty amazing what basically Steve Wikoff is
now proposing. By the way, capping Iranian Richmond at three
point sixty seven percent was the key component of the
Obama you clear agreement with the Iran that Trump walked
away from. So Trump is like going super dubbish rat
shot a basically in Iran. Guess what If he wants
(23:24):
to continue that dubbish approach, then he will have to
throw some red meat to the China Hawks within this administration,
which means getting tougher on China. In my view, there
is very little I mean, I you know, I feel
sorry for Scott Beston. Guess Scott's a very nice Scott. No, Scott,
Scott is not a China Hawk. I wouldn't say Scott
is a China hawk. He's certainly you know, he he
(23:45):
doesn't hate China in that sense, but there are a
lot of people within the administrations who think that this
is the time to destroy the Chinese economy once for all, right,
Because the point here is it's not just about the
fact that while Chinese export to the US, it's probably
around five percent of Chinese GDP if you look at
both the wrect and indirect you know, forty percent of
Chinese industrial production. But more important is the fact that
(24:08):
the Chinese economies already on his knees, you know, forty
percent of GDP's investment. If we can someholp decimate China's export,
then we can basically bankrupt their business model, and then
you know, the whole economy goes into the recession and
who knows what happens.
Speaker 4 (24:23):
And then they will be able to play catch up
with us.
Speaker 5 (24:26):
So what I'm telling you is that, in fact, actually
it is interesting because you only win Trump can actually
keep going with this trade war by getting the support
from the general public, from Congress and say you know
what this is about China. Nobody right now will say,
oh wow, let's you know, let's be nicer to the Chinese,
because right now, anybody who stands up to the Chinese,
(24:47):
they're seen as traders right away. And that to me
is the most interesting part of the story, which is
that I think the China Hawks in many ways have prevailed,
and Trump right now is having two essentially see the
grounded that because in a way, he's got nothing to
show for right now, and then he wants to keep
the trade work going. The only way you can do
that is by saying this is about China.
Speaker 3 (25:09):
Right So, just on the second part of the question,
then what is the catalyst for a detente and is it,
you know, some sort of policy win for the Trump
administration that maybe allows him to back down a little
bit on behalf of the China Hawks. I guess I
think you know that.
Speaker 5 (25:25):
I mean political actually write a very interesting story answerably
on Friday Saturday, Okay, which I think makes sense. I mean,
I don't believe everything they say, but in this particular case,
I think it sort of makes some sense, which is
that forget about like Trump and she are not talking
like even if back channel is not working. The one
reason is interesting because Trump wants to basically manage the
(25:47):
entire process on his own. He wants to talk to
she think, think directly. This is why he doesn't want
to send people to China, talk to the Chinese. He
wants to get on the phone with she didn't think
and she think right now? Is not returning the call?
Well right, it doesn't want to talk, okay, And I
can perfectly understand why, by the way, but interesting things
I think Trump listen. Trump is very suspicious of everybody
(26:08):
around him, including Rubio by the way, but just think
about this, you ask yourself Steve Wikoff, why is Steve
Wikoff like the hardest working man in the Trump administration.
This is the man who has already met with Putin
three times. He's the guy who basically met with the
Iranians twice. He is the guy who basically negotiated the
the cease fire Gaza. This guy seems to be the
(26:32):
unofficial Secretary of State. In my humble opinion, the reason
why Steve Wikoff is everywhere is not because it's not
a reflection of his diplomatic savvy, but because Trump trusts him.
Because guess what, I think he's no more than Trump's messenger.
And so from that point of view, because Trump doesn't
trust anybody Trump. The fact that Steve Wikoff is so
(26:55):
prominent means that Trump is running US foreign policy or
by himself. And I think this is going to be
specially so in terms of discussion negotiation with the Chinese.
Speaker 2 (27:19):
Yeah, Steve wouldcof He's a real estate guy from New York.
So he does seem to like he doesn't have a
real diplomatic background. He's a real estate guy in New
York who's now the uh Special Envoy to the Middle East.
And so I'm not surprised that maybe Uh Trump sees
him as the best.
Speaker 5 (27:36):
Now the special period. He's the presidential He's not just
a special envoy for the Middle East. His title now
is a special Envoy.
Speaker 2 (27:43):
But it does seem like Trump himself, as you say,
like he wants to shake she's hand. He I mean
he did. He went to Singapore right in the first
administration Kim Jong un, right, and like this was like
what he lives for, right, This is what really getshim excited.
The opportunity to be on stage and shake hands with
(28:04):
these guys and be part of it and come up
with negotiation that strikes me is actually a sort of
very useful read into how Trump thinks about international relations.
Speaker 5 (28:15):
I mean, TikTok is a great example, right, I mean,
the fact is that one day before inauguration, everybody thought
TikTok was finished.
Speaker 4 (28:24):
Yeah right, I mean with you know, Congress already.
Speaker 5 (28:26):
Voted, the Supreme courts had already gone along, and then
it was it. And then guess what, Trump managed to
revive it because over a phone call was seeking pink.
Speaker 4 (28:35):
That was it. So from that point of view, again, I.
Speaker 5 (28:38):
Think Trump's made a lot of mistakes, I think, but
it doesn't take away from the fact that he is
a dealmaker. He wants to do deals, okay, and I
think from that point of you he still thinks that he.
Speaker 4 (28:49):
Can pull off a deal with the Chinese.
Speaker 5 (28:52):
The biggest challenge I think he has right now is
to how to basically repair the total loss of trust
okay on the Chinese side visa VI Trump, right, because
I've no doubt, like you know, I mean, I think
she Ping was like, well, you know, he got the
invitation to go to the inauguration, he didn't go, but
he thought that was a real nice gesture. And then
(29:12):
he spoke with Trump over the phone, and then you know,
and then even after basically, you know, China was hit
by the percent tariff on fentannel.
Speaker 4 (29:20):
He was probably thinking that.
Speaker 5 (29:21):
This is going to be okay, But it's like it's
giving getting wars every single day, you know. What's very interesting.
So I'm conducting a daily survey believe or not? Okay,
I mean for the last three year. I mean, I
have a joint venture, you know, with reewe, which is
a Toronto based online survey technology company. They're actually a
list of company in Canada and the one of the
leading you know, online survey technology companies in the world.
(29:43):
So it's part of my you know, research process. So
we have joined forces to conduct proprietary surveys okay for
my clients. And one of the surveys is what I
call Cold World two survey. So I'm conducting surveys of
Chinese people and Americans every single day to gauge how
they feel about each other, you know, in terms of
(30:05):
US China relations. It is fascinating, okay. I can tell
you even until a week ago, the Chinese people, when
you asked them, like is the US an enemy or
an ally most Chinese people said all as opposed to enemy.
Speaker 4 (30:19):
Believe or not?
Speaker 5 (30:20):
More people said al eth livi okay. And that tells
me that even though things were like, you know, getting
worse and worse and worse, the Chinese media was very careful,
not too basically stoke, you know, nationalistic fervor in China.
They were still trying to basically, you know, find a
way out of this. But the last week, I mean,
there was this huge spike in terms of percentage of
(30:44):
my respondents in China who said the US it's an
enemy and adversary. Now basically forty six percent of Chinese
said America is an adversary or an enemy versus only
forty percent of Americans who considered China as such. And
so that is very very interesting. So from that point
of view, I think this is the biggest problem, which
is that EID in China sort of feels like, you know,
(31:07):
they game Trump three months and then things got worse
and worse and worse. Maybe they have no idea if
it's Trump or Trump's advisor, the China Hawks and so
and so forth, or I knows that they can no
longer engage, okay, basically, so therefore they're preparing the population
in China for a long standoff This is why people
(31:27):
are wrong to call this thing, oh game of chicken,
because in a game. I'm a professor of economics here
in Israel, and I teach game theory in game theory. Yeah,
I mean everybody who's taking the course in game theory,
they think about game of chicken gaming chicken. By the way,
it's completely irrelevant at this point because in a game
of chicken, as you know, one side will capitulate before
the collision, so that nothing happens. Okay, nothing happens, So
(31:52):
somebody stops before something bad happens. I would argue, we've
already gone beyond a game of chicken. We're now in
a war of attrition. A war of Attrician is another
game in game theory, except war of Attrician. Basically, the
game continues even though it continues to inflict pain on
both sides, but both sides sort of hang on until
(32:13):
one side finally capitulated because the pain becomes unbearable, a.
Speaker 4 (32:16):
Little bit like World War One if you like it.
And I think the Chinese are now preparing for this
war attrition. And this is why I think Trump is
still thinking he's gonna get the Chinese, gonna get basically
shooting being on the phone he's gonna do this, and
that I am doubtful. I mean even Scott Besson, as
I said before, because Scott is not really he's not
a political type. He doesn't understand the hatred there is
(32:38):
for China in Washington, and I think from that point
of view, Trump is going to be It's going to
be difficult for Trump, but anybody can do but it's
still Trump. But I'm just saying it's gonna be very difficult.
Speaker 2 (32:48):
Tracy. In our episode with Martin Wolf, I brought up
the fact that, you know, for the first time, I
actually think it's really important to read those surveys of
international perspectives on China or on the US, and David
giving a great example of like why for any leader
globally now just China, the domestic attitudes probably really matter
if any leader wants to maintain domestic legitimacy.
Speaker 3 (33:11):
Sure, although one thing I would say in China is
there is a rather authoritarian government. Sure that probably makes
a difference in that dynamic. But David, I want to
ask you a question. So you're a smart guy, reasonably
smart guy. That's one of the biggest compliments I've ever
given on all blots.
Speaker 2 (33:27):
By the way, is so thrial.
Speaker 3 (33:31):
But do you worry at all that when it comes
to I should say, you're obviously a very keen watcher
of the White House and everything that's going on there
and trying to disaggregate you know, what's driving certain policy makers.
But do you worry that there's a degree of overthinking
at play here or you know, sane washing perhaps of
(33:53):
Trump and the administration that you're trying to like put
a framework on what's happening. That maybe isn't the case,
Like maybe it is just quite chaotic and people are
unsure of what they're doing, unsure of what the ultimate
goals are.
Speaker 5 (34:07):
I do agree with that. I do think that, like
in a way I was hoping for more. I mean
to the extent that you know, like for example, Dulge
is a good example. Right, So Elon Mosk was like,
you know what he had three months after? Yeah, the elections,
prepare for those, right, I mean he supposedly had like
hundreds of legal advice. There's also some people they figured
(34:29):
out everything and guess what, it's gone from two trillion
dollars to one trillion dollars and then whatever. Ten days ago,
he declared Jub's cabinet He's going to find one hundred
and fifty million dollars of cuts for the twenty twenty
six budget. I mean, I track the daily US Treasury statement, okay,
which tracks every single like whatever, in aggregate, but in
(34:53):
very detailed form every dollar that goes out of the
Treasury count that the US federal government keeps with the
Federal Reserve where all this money goes in and out.
And let me tell you this, I cannot see any
evidence of any spending come so far. Okay, So what
I'm telling you is this, I mean, and that's Ela Mosque,
you know, which scares me because I've always thought about
(35:14):
Elamsk is supposed to be a very smart guy.
Speaker 4 (35:15):
You know this guy.
Speaker 5 (35:16):
I mean, you don't become the richest man in the
world just by talking big. Well maybe he does. Maybe
American capitalism is all about talking big, whatever it is.
But this is a good example of basically literally like
you know, talking out of I don't know, I didn't
want to use any you know things I'm going to
basically regret. But that's why this trade war thing is
very important, As I said before, because Trump thought Trump
(35:40):
is in his political advisors decided that because trade war
in his first term was not inflationary, therefore it's not
going to be inflationary this time. Therefore, there's no reason
for the FAT not to cut interest rates. Okay, and
that as completely like so you see what I'm saying.
How that is important because now it's like, well, you know,
(36:02):
like what Trump now you want you want to fire
basically power. Why did you think about that three weeks
ago or a month ago, or even two months ago
when you're planning this.
Speaker 4 (36:11):
Whole tariff business.
Speaker 5 (36:13):
Okay, because I thought, you know, if you could get
Elon Moss to cut spending and that would be deflationary,
which could potentially offset any inflationary effect associated with the tariff,
and then you could get the FED on your side
if this fiscal tightening. But right now we haven't got
any fiscal tightening because Elon Muss hasn't been able to
deliver other than talking big about spending cuts, and the
(36:35):
tariff is going to be definitely inflationary this time.
Speaker 4 (36:37):
There is no way.
Speaker 5 (36:38):
It doesn't matter whether it's how anybody else it was.
The German of Federal Reserve, no chairman of Federal Reserve
will be cutting interest rates right now under the circumstances.
So from that point of you, for Trump to be
basically throwing in tangent right now, Pennant Tables said, well,
how's not doing his job? That to me again just
shows that this administration is off to a terrible start.
(37:01):
To extend that, the assumptions that they're making for where
they get to now were completely wrong. And unfortunately, I'm
sorry to say this. I think Scott is a great guy.
But Scott did not have the same kind of relationship
that Steve Mnuchen had with Trump in his first term.
If you remember, Steve Mnuchen was Trump's answer the uh,
(37:21):
you know, campaign campaign share person. Okay, So from that
point of view, there was much more trust and I
think therefore Munuchuen was a much more careful person. And
then where I think Scott business more of an academic philosopher,
a hedge fun guy who thinks big in terms of
like the theory, but I think in terms of the
day to day stuff, I don't know how much influence
(37:42):
he has over Trump. As a result, I kind of
feel like I think there are a lot of mistakes
that have been made, And what worries me more than
anything else is that maybe these mistakes cannot be undone.
Speaker 2 (37:52):
Okay, what happens when the crunch drives? As you said,
Americans outside of investors haven't actually felt any of this
impact at all, Say, like, how does Hollywood even continue
with something as simple as losing access to affordable advanced lightings?
And that's just a fairly small sliver of the US economy.
What does this summer look like to you in the
(38:13):
United States? Given this war of attrition dynamic that's going on.
Speaker 5 (38:18):
I think it's gonna look a shit show. I really
believe it's going to be a shit show. I think
we're going to be going to a recession. I think
Trump's approval rating is gonna collapse, Okay, And I think
you know the point here is this? I mean again,
you know, like obviously you know, there's only one question
of any interest to anybody right now, which is okay, fine,
(38:38):
So when will Frump and Shiginging get on the phone?
That's the only question, right I mean, I think we
we can only we can say right now that things
will probably bartom once the two men I've gotten on
the phone. Where for that matter, from announced that he's
going to be on his way to Beijing. To me,
things are not bad enough for him to get to
that point. So from that point of view, this is
(39:00):
why I think, you know, at least in the New
York term, I think stocks are still going lower. I think,
you know, from that point of view because precisely the
Chinese believe that time is on their side and Trump.
The problem is is when you have a one hundred
and forty five percent tariff on China, how do.
Speaker 4 (39:17):
You even back down from that?
Speaker 5 (39:18):
Let's just say you say, okay, fine, let's go from
one forty five to one percent, or even to one
hundred percent. You know what, it makes no difference. And
one five percent and to one hundred percent, that doesn't
mean that China is going to be able to explot
anymore to the US. So from that point of view,
let's think about that'smare Joe for a second in a negotiation.
I thought from the very beginning, that's why I thought
(39:39):
TikTok was a very good beginning. I thought, the only
way Trump can do deals with China is by doing
a bunch of small deals they venture add up to
a big one. But right now, with Tarifa one hundred
and forty five percent. The only kind of deal you
can do will be a very big deal. I think
we can we can all agree right now to do
(40:00):
a big deal. It's going to be very difficult. For
one thing, it takes a long time, a lot of time,
and moreover, it takes a lot of political capital that
Trump doesn't have. But again you have to remember, you know,
with elamsk trying to cut spending, the only thing that
the House and the Senate can agree on is to
increase defense spending.
Speaker 4 (40:19):
Like this, the only.
Speaker 5 (40:20):
Difference is, well, the House most to increase defense spending
only by one hundred billion dollars next year. The Senate
wants to increase about one hundred and fifty billion dollars
next year. Everything else is going to be going down.
Speaker 4 (40:29):
That's it.
Speaker 5 (40:30):
So when the politicians believe that, you know, China is
extensive as an existential threat, that these people are evil,
we need to basically stop them before they stop us,
then you know what, it would be very very difficult
for Trump to make that big deal that I think
is necessary right now to stop this whole thing. And
(40:51):
this is why I cannot see me just if I
put my hat as a game theorist on right now.
I'm struggling to see a way out right now. But
maybe you know, I'm sure you'll find better, you know,
more more smart.
Speaker 4 (41:03):
I guess now you do. No, let me know, like
you know what is the way out here?
Speaker 2 (41:08):
David WU, that was a blast. Really appreciate your perspective.
And uh, maybe in a six months or a year,
or when Trump and shouldn't Pin get on the phone,
we'll have you back. Thank you so much for coming
back on odd lots.
Speaker 4 (41:20):
Thanks for having me.
Speaker 2 (41:35):
I always feel like I have to catch my breath
a little bit after talking with David. I knew that
it's always like, it's always that energy.
Speaker 3 (41:41):
You did say that in the intro, didn't you energetic?
Speaker 2 (41:44):
He's an energetic fellow, that's for sure.
Speaker 3 (41:46):
Yes, for sure. And one thing I will say, I
really do appreciate some of his insights into the Trump
administration because in Trump won, you know, a lot of
people got that call wrong and a lot of people
thought that we would see in from trade war number one,
and we didn't really get that. And so it is
very interesting to me to hear someone who was pretty
(42:08):
supportive of that administration the first Trump administration, sound quite
negative on the second administration. And I guess our headline
for this is going to be, you know, David wu
on the coming sh show in America.
Speaker 2 (42:23):
Look, whether it's the Bizar, whether it's the Bowyer's, the
conclusion is this is a very bad situation. Yeah, right,
And as he said, they've literally gotten zero accomplishments so far.
The war in Ukraine is still going. There's not even
a TikTok deal. And then I really do think, you
(42:44):
know again, like you know, it's useful this idea. It's
not a game of chicken and the game the damage
is being done today as we speak, with hardening of
opinions on both sides and the domestic polity and you know,
every leader, even an authoritarian one, has to maintain domestic
legitimacy to varying degrees or another. So this idea that
(43:06):
like we're you know, this is not a situation where
someone could blink. There's already been the sort of like
damage and it drags on further every single day. And
I think part of what we're seeing in the market
is no one can see what that obvious offering, even
those dynamics.
Speaker 3 (43:21):
Yeah, It's funny you said that. I was literally about
to say the same exact sentence that the off ramp
is hard to see.
Speaker 5 (43:27):
You know.
Speaker 3 (43:27):
One thing I realized we mentioned wit Coough going from
like being a real estate guy to special envoy. One
thing I appreciate about the Trump administration is the ability
for personal progress in terms of careers like you have
kind of become. You know, They're very into personal development
and experimenting with new roles, which is interesting to see.
Speaker 2 (43:49):
That's nice.
Speaker 3 (43:50):
Yeah, I wanted to end on a nice new Yes. Okay,
shall we leave it there.
Speaker 2 (43:54):
Let's leave it there.
Speaker 3 (43:54):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy allow and.
Speaker 2 (44:00):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Check out David Wu his stuff at David Wu Unbound.
He's certainly unbound. Follow our producers Carman Rodriguez at Carman Arman,
dash Ol Bennett at Dashbot and Kilbrooks at Kalebrooks. From
our odd Laws content, go to bloomberg dot com slash
odd Lots, where have all of our episodes and a
daily newsletter that you should subscribe to and you can
(44:22):
chat about all of these topics. We even have a
China room in our discord discord dot gg slash.
Speaker 3 (44:28):
Odd Lots And if you enjoy odd Lots, if you
like it when we talk about the off ramp from
the trade war or lack thereof, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcasts
(44:48):
and follow the instructions there. Thanks for listening
Speaker 5 (45:01):
It
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:18):
Hello and welcome to another episode of the Odd Lots Podcast.
I'm Joe Wisenthal and I'm Tracy Alloway. Tracy, it is
April twenty second. It is twelve oh nine and fifty
two seconds as of the time that I am talking
right now.
Speaker 3 (00:33):
Soon we'll have to do fractions of a second.
Speaker 4 (00:35):
Yeah, I know.
Speaker 2 (00:36):
The market is actually up today. We're recording this on today.
We just got a headline apparently Treasury Secretary Scott Bessant,
at a JP Morgan event in Washington said besn't cees
de escalation with China situation unsustainable. That sent market surging.
You know, everyone's looking for a little shred of hope,
right We're a little shred of optimism that like things
(00:58):
can settle down, we get clarity that the two.
Speaker 3 (01:01):
Biggest economies in the world aren't going to go completely
head to head.
Speaker 2 (01:04):
Right like, because if I mean, this is really the story,
right even with the walk back on April ninth, the
week after Liberation Day, even if and we're not getting
any deals yet, at least so far, we haven't gotten
a deal with Indial, we haven't gotten the deal with Japan,
let alone the EU. But you know, even if we
got all those deals sometime in the next three months,
and typically trade deals take like years to work out,
(01:25):
there's still the fact of an economic rupture between the
world's two biggest economies, right.
Speaker 3 (01:30):
I think that's certainly a possibility. The one other thing
I would say is, so you're right. Stocks are up
this morning because Bessend has been saying, you know, some
mildly potentially positive things on this issue. But there is
still this huge question of who would make the first
move in this particular standoff. And I think it is
(01:51):
a standoff. And I think, you know, both respective policy
making groups here, the Trump administration and the CCP under
Sheashon Paging, I think they both care about who is
seen to be making the biggest concession here. So I
think everyone can reasonably say that we would want some
sort of I was about to say peace steal between
(02:14):
China and the US. Peace steal isn't right, some sort
of reconciliation, but the path to getting there seems like
very confused and uncertain to me.
Speaker 2 (02:22):
Yeah, there's a lot. I mean, look, people call it
a trade war, so I don't see why we can't
have a piece, trade pieceeal, a detent of some sort.
And look, we both know the stakes, right because the
US relies substantially on China booth for finished goods of
all kinds of things that US consumers enjoy, but also
intermediate goods that are used for actual manufacturing. And we
(02:43):
also know that at least in the short term, there
is not some quick substitute for the sheer amount of
demand that comes from the US consumer. And so we've
seen all the tiktoks of factories in China, you know,
trying to figure out ways to go direct to do
this consumer at least in the short term, economies have
a lot to lose, it would seem. And so there's
(03:04):
all this question of like, you know, who blanks first. Anyway,
there's a POTENTI there, you know, and you just see
it in the market pricing. There is a lot of
pain being priced in immediately today, maybe accepted from the
persistence of this trade war.
Speaker 4 (03:18):
Right.
Speaker 2 (03:18):
Well, I'm very excited. One of my favorite guests, I've
talked to him, We've talked to him on the podcast before,
I've talked to him on the TV. Always energetic and
always has just sort of interesting thoughts, A fun guy
to talk to, also very serious. We're going to be
speaking with David Wu. He is the CEO of David
Wu Unbound, and prior to that, he was the head
(03:40):
of Global Rates, Currency, Emerging Markets, fixed Income, and Economics
research at Bank of America. I always want to get
David's takes on things, So David, thank you so much
for coming back on odd blots.
Speaker 4 (03:52):
Thanks for having me the pleasure.
Speaker 2 (03:54):
Is this a type of war that we're seeing right
now that you know, whether trade war? You know, I
guess it seems like the obvious thing, but like how aggressive,
how provocative, how combative are Trump's actions against China.
Speaker 5 (04:07):
I think it's very combative. I think this is much
more than just a trey war. I think this is
war actually, And then I think, you know, from that
point of view, is not that surprising the way it
is gone, because in a way, the whole thing has
been heating up under Biden.
Speaker 4 (04:23):
I mean, I will tell you, yeah, and.
Speaker 5 (04:24):
I think in a way, you know, it's actually very
interesting in a way, Trump is picking up where Biden
left off.
Speaker 2 (04:30):
Who picked up where Trump left off?
Speaker 1 (04:32):
Right?
Speaker 5 (04:32):
Okay, let me let me just take it back from
you and what I mean, explain better what I meant
by that sentence. Right, did you remember when Biden became president? Okay,
Harvard University Belfare Center publish a big report in which
they did a massive ranking of the technology leaderships across
(04:52):
the major tech races. Okay, it was a report sponsor
by Eric Schmid, the former CEO.
Speaker 4 (04:57):
Of Google, who was a big patriot.
Speaker 5 (05:00):
And in this report they come to the conclusion the
US and China were in basically debt heat in first
or second place in all the leading technologies in the world.
And soon after that, Eric Schmid went on a pr
or political campaign across you know, the Beltway, essentially lobbrying
every Congressman, every senators who listened to him that this
(05:21):
is time to basically stop the access of China from
in advanced technology so that the US has a chance
to essentially regain the leadership.
Speaker 4 (05:32):
Okay.
Speaker 5 (05:32):
So therefore, under Biden, the most important thing, you know,
in terms of Visa VI China, it was not so
much the trade war, but rather they put in punishing
sanctions in terms of the ability of China to be
able to access you know, semiconductor advance conductors and in
manufacturing equipments for advanced conductors. All that was meant to
basically give the US two to three year basically like
(05:55):
head start okay in AI, semiciconductors, in automation, robotics, and
so on and so forth.
Speaker 4 (06:02):
Guess what lessen?
Speaker 5 (06:03):
A month after Trump became president, we had the Deep
Seek news, the Deep Seat news. Basically it was a
massive piece of news. I mean, it was a game changer.
Let me tell you this, I mean Deep Seek News
for me, is no proof of China's technological prowess, but
it is proof that AI can be easily copied. All
(06:24):
of a sudden, overnight, all the sanctions that happened under Biden,
it was for nothing. Okay, to an extent that if
these sanctions were designed to protect the monopoly of the
big US tech companies, okay, all of a sudden, that
meant nothing, because anything that could be copied is worth
(06:47):
nothing commercially. And this is the reason why, by the way,
I know, the data DeepC news came out I shortened
basically nastac and it's you know, it was a great trade,
by the way, but I.
Speaker 4 (06:58):
Think that's what it gets down.
Speaker 5 (07:00):
All the China hawks, I mean, Trump has brought a
lot of China Hawks into his administration. To tell you that,
for the China Hawks, if they thought that they had
been more time with China, I think after DeepC news
came out, literally there was this new sense of urgency.
We need to basically stop China now. The only way
they can do that is to bankrupt China economically, because honestly,
(07:21):
at this point, I mean, let's be honest, when you're
talking about the one hundred and forty five percent tariff, Yeah,
you're not engaging the trade war. You're engaging in basically
economic murder. I mean, that's it. I mean, I don't
see how China is going to be able to explore
anything the US with one hundred and forty five percent.
So I think point of view this to me was,
(07:45):
I think the so called trade war that we call
as such really was always intended as an economic blow
that will be so great to China that China will
no longer be in a position to threaten New Wes hegemony.
So again, this is why I said, this is more
than a trade war. This is much more than a
trade war. This is meant to protect US hegemony.
Speaker 3 (08:07):
Right, sort of existential in that sense. Let me press
you on one thing you said. So, you know, you
mentioned the importance of deep seek and you kind of
suggested that some of the severity of the action taken
on China was because of the deep seek threat. But
I mean, we know that Trump from his campaign was
going to take a really hardline stance against China. So
(08:31):
how can you connect deep seek with some of the
policies that we've seen coming out of the administration. Can
you make that direct link?
Speaker 4 (08:38):
Crazy? I think that's an excellent question. But let's think
about this from moan.
Speaker 5 (08:42):
Okay, I've always said, you know, listen, I'm probably the
only person you know like it's been on your show.
We've read the back to back, one hundred page you know,
essentially faced one agreement that was time between Trump and
the Chinese back in two thousand point I.
Speaker 2 (08:55):
Bet Dan Wong is yeah, the other one, keep going,
keep going.
Speaker 5 (08:59):
Yeah, tell you this it was probably I mean, I
have a PhD in international trade from Columbia University, and
let me tell you this. That trade agreement, in my
humble opinion, was one of the best trade agreements signed
between two countries in the last fifty years. And the
reason was because it was a win win basically deal.
And if people tend to think, oh, whoa whatever, I mean,
(09:20):
people didn't read the whole thing. I mean, it's pretty
amazing what that whole thing actually meant. Now, in my
humble opinion, the difference between Trump and Biden is whereas
Biden saw the US China rivalry as largely a zero
sound game. That is, if China wins, will lose. If
we win, then China will lose. I think Trump in
his whole entire career sees things through the lenses of deals.
(09:45):
And Trump always understands that basically to do a deal,
there has to be enough for everybody around the table.
So from that point of view, in my humble opinion,
if you look back on the first day of Trump's inauguration,
what do you do this? I still remember, I don't
remember you guys covered the story. I still remember he
didn't press conference in the Oval office late at night,
(10:06):
you know, on the auguration day. And it was just
when he announced the twenty percent tariff on Canada and
Mexico over the fentannel, okay, And he was asked during
that press conference, why not China? You promised to eat
China hard. So why did you decide to hit Canada
and Mexico by not China, he asked. His response was, Oh,
(10:27):
because we hit China pretty hard my first time.
Speaker 4 (10:29):
We're going to give them pass this time.
Speaker 5 (10:31):
It was now until the next day he announced the
twenty percent for China. And then three weeks later, of
course we all you know know now like you know,
basically the tariff was extended for Mexico and Canada and
China was hit by twenty percent, okay, and then the
list goes on and off. In my humble opinion, you
know again, we were sitting here and thinking that Trump
(10:53):
is in the driver's seat.
Speaker 4 (10:55):
I don't.
Speaker 5 (10:55):
I think at this point Trump is no longer a
driver's seat to the extend, einting the Chin in a
hawks or actually in a private seat.
Speaker 4 (11:03):
I think the.
Speaker 5 (11:03):
China Hawks are maneuvering him in a position that he's
increasingly struggling to back away from. So it gets more extreme,
and that is a different story. This is why, to me,
this is not just about Pete Navarro versus basically Scott Besson.
This is about the China Hawks represented by Vance by
basically rule bio by Waltz and all of them actually,
(11:26):
So from that point of view, again, this is this
is what we're talking about. I think Trump really wanted.
I think Trump was so eager to do a TikTok
deal on the first day that he spoke with basically
Jijing being things We're going to go very differently. But
I think with a series of mistakes that have now
allowed the China Hawks to take over, and I think
Trump now in a way is a little bit powerless,
(11:48):
and I think, you know, it's we can talk about
the process and the sequencing, but I think this is
where I'm at right now, which is is not entirely
up to Trump anymore.
Speaker 2 (12:12):
So, first of all, I just want to say I
appreciate the out of consensus perspective, because I would describe
the consensus perspective is the only active force that happens
or what's happening in Trump's brain. And so, first of all,
you're disagreeing with that, and I respect that. Second of all,
you know, from my perspective, Trump strikes. I know he
(12:35):
likes to do deals, and he loves talking about doing deals,
et cetera. When he pulled that chart out on Liberation
Day April second and basically slammed every country in the world.
This did not come across to me as someone who
likes positive some deals. This strikes me as someone who
finds any trade gap is per se bad, that if
(12:57):
you're running a trade surplus with the United States, you
must be you must be relative, and so like, give
me the counter argument here. Also, you know this idea.
You know people have been using the good Czar bad
Blowyers characterization. Oh, it's the it's the Navarros of the world.
It's the vances Trump is being blah blah blah. And
I tend to not find those things. But just convince
(13:17):
me that Trump is not a zerosome thinker when it
comes to convince you.
Speaker 5 (13:21):
And by the way, I want to say this, there's
a big difference between China versus everybody else.
Speaker 4 (13:25):
Okay, I think Trump.
Speaker 5 (13:27):
Understands that everybody else he thought that the US is
so big he can just pushing them around. I think
China is a very different story. Just think about this
for a moment. The day that he unleash whatever on
I mean, whatever the time schedule on a liberation there.
Speaker 4 (13:44):
Yeah, China was only hit with a twenty five percent. Yeah,
that's true.
Speaker 5 (13:48):
Which is actually right in the middle of the range.
By the way, it's not like he China thirty percent.
I mean, listen, I mean, I mean Thailand was twenty
nine person in Switzerland thirty five percent. You can say,
look across, you know, I mean, China was actually doing
the low. And by the way, if you think about
that for a moment, I think that was a sign
that Trump did not you know, I mean, because I
(14:10):
mean again, you know, I think Trump understands depending on
who you're dealing with here, if you're dealing with a
little guy, you're gonna basically like literally knock the other
guy dead. And I think Trump feels like, you know,
this is the reason why I mean, I'm you know,
I think Mexico is a great example because Mexico, unlike
any other country, has literally been bending forward backward to
(14:32):
meet Trump, like forget about half the weigh like ninety
nine percent of the way. I thought Trump should have
rented a deal to basically shining bomb literally like three
weeks into his presidency, and he didn't. And the reason
is because apparently he saw Mexico as being a push around. Okay,
was China, I think is a different story. So I think,
(14:52):
you know, we cannot basically apply the same logic to
what Trump is saying. But you know what's interesting though,
what is interesting is the fire that as of today,
right now, as we speak, if I look at you know,
like you know, yesterday, I was, I mean, I didn't
you know, as you know, I've got a YouTube channel now,
you know, and and I was trying to basic the
(15:12):
I'm trying to upgrade my lighting. So I wanted to
buy this very expensive light. This is a very high
end lights to have manufacturing in China.
Speaker 3 (15:20):
Well, you need one of those one of those circle lights,
like like a ring light, like a proper, proper influence
much more than a ring line.
Speaker 4 (15:27):
I'm talking.
Speaker 5 (15:27):
This is a professional basicly spotlight, right, So this is
a very high in case you don't know, like literally
ninety percent of the high end spotlights now are manufacturing China. Okay,
I mean that that's just that's just a factor, right,
So they don't just make a low end stuff.
Speaker 4 (15:40):
This is really high end stuff.
Speaker 5 (15:41):
And you know, as you know, I live in Israel now,
and I mean there's no inventory of this light in
all of Israel. I literally like got in touch with
every store the importer. Nothing, So I decided to call
up be An H in New York. Of course they
have it in stock, even though it's from China. And
guess what it costs. Literally have the price of what
(16:02):
I wouldn't paid if I bought the like in Israel. Unfortunately,
they don't have it in Israel anyway. So I was
asking to be and H guy. So wal, no, listen,
what about the tariff? He said, well, you know, listen,
we're not raising prices until we've actually depleted art stock.
But the point I'm trying to basically tell you is
like Americans have not even begun to feel the even
(16:23):
iota of the tariff. I mean, the stock market obviously
has gone down a bit, that kind of thing, but
it's like nothing.
Speaker 4 (16:29):
I mean, I think.
Speaker 5 (16:29):
People don't realize what this really means, because right now
what's happening is that the inventory in the system. And
then there's no doubt inventory got built up in Q
one because a lot of companies anticipated the tariff increase,
that is providing a bit of a buffer. Wait until
we get into June when prices either will go up
(16:50):
that there will be no stock to the extent that
just you know, whatever you want to basically buy simply
not available. I don't even know how Hollywood can basically
to do with They're lighting without Chinese lights right now
at this point, because there's very low degree of substitutability.
But the point here is that I think, you know,
in a way, I think you know, the pain is
like absolutely, and I think this is where Trump is
(17:11):
very missing formed by the way, I truly believe Trump
is surrounded by some really terrible advisors who at least
didn't tell him the full story, because when it comes
to the trade war, and I can just tell you,
I mean, I think that every step of the way,
I think, you know, they misfired. For one thing, I
think the presumption that tariff was not going to be
(17:33):
inflationary was I don't know what they got that from,
and I'll tell you where they got that from, by
the way, And that was perhaps the biggest, biggest, basically
you know, essential, the assumption that we're making when they
basically unleashed this trade war because Trump figured that well,
first time trade war didn't have any impact on prices,
so he expected this time the same to happen as well,
(17:56):
and that unfortunately, I don't care where Pritnavar got his PhD.
Is worth nothing. His degree is not worth a piece
of papers written on. But let me tell you what.
The reason why the inflationary effect associated with Trump's trade
War one was so limited was because Chinese companies were
able to set up shop very quickly somewhere else in
(18:19):
the Philippines, Indonesia.
Speaker 4 (18:21):
And whatever they want.
Speaker 5 (18:22):
They were able to circumvent the US tariff by continuing
to export to the US at whatever price they were
selling previously the US. So in a way, if there
was very little price impact was because Chinese companies were
able to circumvent the tiff. This time, the entire tariff
is designed to leave Chinese companies with no place to hide.
(18:44):
As you know, like the only reason why like Trump
hasn't take out the whatever even the fists in basically,
I mean, you know, hasn't basically did not apply additional
reciprocal tariff on Mexico is because Mexico had already agreed
to adopt the same US tariff on Chinese imports. So
this time, no, this is the why Southeast Asia got
(19:06):
hit really hard this time, you know, in the reciprocal
terraff It's because precisely, Navarro and others. They understand they
need to. They want to close the back doors to China,
so this time there is no cushion in the system.
Speaker 4 (19:19):
You're gonna see.
Speaker 5 (19:19):
One pass through in terms of prices. In fact, the
Chinese government apparently has decided that the more passed thorugh
the better. The reason being that, you know, we all know.
Only a couple of weeks ago, I think the Chinese
uh in Beijing, Chinese officials met with Costco, with Walmart
and warned them against applying pressure on Chinese suppliers to
(19:40):
basically to take the hit on terror. The reason is
because I think from the Chinese perspective, they think that
once the price effect associated with the tariff is unleashed
onto the US economy, onto the US consumers, it's going
to get so bad that Trump will have no choice
but to basically stand down then. And I think this
is the reason why, in a way I said that
(20:03):
we're right now in round two of this trade war.
I think the round one basically ended the last week.
We're now round two Round two. You know, you could
argue that China enjoyed the advantage in so far that
time is on their side, and I think, you know,
I think things are going to give wrong.
Speaker 3 (20:19):
I have many questions, but just to start with, okay,
why should I care whether it's Trump or his policy
advisors being you know, uber hawkish on China. Why does
that matter when the policy result seems to be, you know,
pretty much the same. And then secondly, you talked about
the pain potentially coming this summer. We've seen a lot
(20:40):
of people in markets start to talk about the idea
that maybe there isn't a Trump put right, like, maybe
he doesn't care about stock prices this time around. So
what exactly is going to be the catalyst for some
sort of detent.
Speaker 5 (20:55):
Yeah, Cracie, I think it's a very good point. But
you see, again, this is whether Trump or somebody else
around him, I think it makes a very big difference
in so far in this respect, let me basically take
it back for a second and you would allow me,
because I think, please, this is connected to a lot
of other things start.
Speaker 4 (21:12):
On the table right now.
Speaker 5 (21:13):
For example, I thought it was a huge mistake that
Trump started his presidency by making stopping the war in
Ukraine a top priority. Okay, he thought that he was
going to be able to stop in twenty four hours.
Forget about twenty fourth let to say he was indeed
being sarcastic. But you know, I can tell you this.
At the beginning of his presidency, polymarket was giving a
(21:35):
seventy percent chance that he was going to stop the
war basically by one hundred days into his presidency, and
now it's right now currently less than three percent.
Speaker 4 (21:44):
Chants.
Speaker 5 (21:44):
Now, this is why Trump went on this you know,
trauma offensive with Putin, that he appeased Putin and literally
was you know, I'm not going to use any more
exaggerated adjective at this point, but let's put it this way.
Trump didn't understand that there was no way in hell
that Putin was going to agree to a ceasefire without
(22:06):
having taken control of the rest of Donskue, where they've
been stuck in basically very very thrown out battles for
the last six months.
Speaker 4 (22:15):
But it doesn't really matter.
Speaker 5 (22:16):
The point here is that I think three months in
his presidency, Trump has got nothing to show for visa
the Ukraine, even though he has rupture transatlantic relations. He
has sold Ukraine down the river, and he's got nothing
to show for and Putin is not buying it. Guess
(22:36):
what At this point, in my humble opinion, Trump has
one of two choices. He could either pivot by getting
much tougher with Putin. Okay, so you see an increase
in geopolitical risk in bullish gold, or that he has
to go even tougher in China because at this point,
you know what, you cannot be.
Speaker 4 (22:56):
Seen as being weak on both Russia and China. Forget
about you.
Speaker 5 (23:00):
I mean, it's pretty amazing what basically Steve Wikoff is
now proposing. By the way, capping Iranian Richmond at three
point sixty seven percent was the key component of the
Obama you clear agreement with the Iran that Trump walked
away from. So Trump is like going super dubbish rat
shot a basically in Iran. Guess what If he wants
(23:24):
to continue that dubbish approach, then he will have to
throw some red meat to the China Hawks within this administration,
which means getting tougher on China. In my view, there
is very little I mean, I you know, I feel
sorry for Scott Beston. Guess Scott's a very nice Scott. No, Scott,
Scott is not a China Hawk. I wouldn't say Scott
is a China hawk. He's certainly you know, he he
(23:45):
doesn't hate China in that sense, but there are a
lot of people within the administrations who think that this
is the time to destroy the Chinese economy once for all, right,
Because the point here is it's not just about the
fact that while Chinese export to the US, it's probably
around five percent of Chinese GDP if you look at
both the wrect and indirect you know, forty percent of
Chinese industrial production. But more important is the fact that
(24:08):
the Chinese economies already on his knees, you know, forty
percent of GDP's investment. If we can someholp decimate China's export,
then we can basically bankrupt their business model, and then
you know, the whole economy goes into the recession and
who knows what happens.
Speaker 4 (24:23):
And then they will be able to play catch up
with us.
Speaker 5 (24:26):
So what I'm telling you is that, in fact, actually
it is interesting because you only win Trump can actually
keep going with this trade war by getting the support
from the general public, from Congress and say you know
what this is about China. Nobody right now will say,
oh wow, let's you know, let's be nicer to the Chinese,
because right now, anybody who stands up to the Chinese,
(24:47):
they're seen as traders right away. And that to me
is the most interesting part of the story, which is
that I think the China Hawks in many ways have prevailed,
and Trump right now is having two essentially see the
grounded that because in a way, he's got nothing to
show for right now, and then he wants to keep
the trade work going. The only way you can do
that is by saying this is about China.
Speaker 3 (25:09):
Right So, just on the second part of the question,
then what is the catalyst for a detente and is it,
you know, some sort of policy win for the Trump
administration that maybe allows him to back down a little
bit on behalf of the China Hawks. I guess I
think you know that.
Speaker 5 (25:25):
I mean political actually write a very interesting story answerably
on Friday Saturday, Okay, which I think makes sense. I mean,
I don't believe everything they say, but in this particular case,
I think it sort of makes some sense, which is
that forget about like Trump and she are not talking
like even if back channel is not working. The one
reason is interesting because Trump wants to basically manage the
(25:47):
entire process on his own. He wants to talk to
she think, think directly. This is why he doesn't want
to send people to China, talk to the Chinese. He
wants to get on the phone with she didn't think
and she think right now? Is not returning the call?
Well right, it doesn't want to talk, okay, And I
can perfectly understand why, by the way, but interesting things
I think Trump listen. Trump is very suspicious of everybody
(26:08):
around him, including Rubio by the way, but just think
about this, you ask yourself Steve Wikoff, why is Steve
Wikoff like the hardest working man in the Trump administration.
This is the man who has already met with Putin
three times. He's the guy who basically met with the
Iranians twice. He is the guy who basically negotiated the
the cease fire Gaza. This guy seems to be the
(26:32):
unofficial Secretary of State. In my humble opinion, the reason
why Steve Wikoff is everywhere is not because it's not
a reflection of his diplomatic savvy, but because Trump trusts him.
Because guess what, I think he's no more than Trump's messenger.
And so from that point of view, because Trump doesn't
trust anybody Trump. The fact that Steve Wikoff is so
(26:55):
prominent means that Trump is running US foreign policy or
by himself. And I think this is going to be
specially so in terms of discussion negotiation with the Chinese.
Speaker 2 (27:19):
Yeah, Steve wouldcof He's a real estate guy from New York.
So he does seem to like he doesn't have a
real diplomatic background. He's a real estate guy in New
York who's now the uh Special Envoy to the Middle East.
And so I'm not surprised that maybe Uh Trump sees
him as the best.
Speaker 5 (27:36):
Now the special period. He's the presidential He's not just
a special envoy for the Middle East. His title now
is a special Envoy.
Speaker 2 (27:43):
But it does seem like Trump himself, as you say,
like he wants to shake she's hand. He I mean
he did. He went to Singapore right in the first
administration Kim Jong un, right, and like this was like
what he lives for, right, This is what really getshim excited.
The opportunity to be on stage and shake hands with
(28:04):
these guys and be part of it and come up
with negotiation that strikes me is actually a sort of
very useful read into how Trump thinks about international relations.
Speaker 5 (28:15):
I mean, TikTok is a great example, right, I mean,
the fact is that one day before inauguration, everybody thought
TikTok was finished.
Speaker 4 (28:24):
Yeah right, I mean with you know, Congress already.
Speaker 5 (28:26):
Voted, the Supreme courts had already gone along, and then
it was it. And then guess what, Trump managed to
revive it because over a phone call was seeking pink.
Speaker 4 (28:35):
That was it. So from that point of view, again, I.
Speaker 5 (28:38):
Think Trump's made a lot of mistakes, I think, but
it doesn't take away from the fact that he is
a dealmaker. He wants to do deals, okay, and I
think from that point of you he still thinks that he.
Speaker 4 (28:49):
Can pull off a deal with the Chinese.
Speaker 5 (28:52):
The biggest challenge I think he has right now is
to how to basically repair the total loss of trust
okay on the Chinese side visa VI Trump, right, because
I've no doubt, like you know, I mean, I think
she Ping was like, well, you know, he got the
invitation to go to the inauguration, he didn't go, but
he thought that was a real nice gesture. And then
(29:12):
he spoke with Trump over the phone, and then you know,
and then even after basically, you know, China was hit
by the percent tariff on fentannel.
Speaker 4 (29:20):
He was probably thinking that.
Speaker 5 (29:21):
This is going to be okay, But it's like it's
giving getting wars every single day, you know. What's very interesting.
So I'm conducting a daily survey believe or not? Okay,
I mean for the last three year. I mean, I
have a joint venture, you know, with reewe, which is
a Toronto based online survey technology company. They're actually a
list of company in Canada and the one of the
leading you know, online survey technology companies in the world.
(29:43):
So it's part of my you know, research process. So
we have joined forces to conduct proprietary surveys okay for
my clients. And one of the surveys is what I
call Cold World two survey. So I'm conducting surveys of
Chinese people and Americans every single day to gauge how
they feel about each other, you know, in terms of
(30:05):
US China relations. It is fascinating, okay. I can tell
you even until a week ago, the Chinese people, when
you asked them, like is the US an enemy or
an ally most Chinese people said all as opposed to enemy.
Speaker 4 (30:19):
Believe or not?
Speaker 5 (30:20):
More people said al eth livi okay. And that tells
me that even though things were like, you know, getting
worse and worse and worse, the Chinese media was very careful,
not too basically stoke, you know, nationalistic fervor in China.
They were still trying to basically, you know, find a
way out of this. But the last week, I mean,
there was this huge spike in terms of percentage of
(30:44):
my respondents in China who said the US it's an
enemy and adversary. Now basically forty six percent of Chinese
said America is an adversary or an enemy versus only
forty percent of Americans who considered China as such. And
so that is very very interesting. So from that point
of view, I think this is the biggest problem, which
is that EID in China sort of feels like, you know,
(31:07):
they game Trump three months and then things got worse
and worse and worse. Maybe they have no idea if
it's Trump or Trump's advisor, the China Hawks and so
and so forth, or I knows that they can no
longer engage, okay, basically, so therefore they're preparing the population
in China for a long standoff This is why people
(31:27):
are wrong to call this thing, oh game of chicken,
because in a game. I'm a professor of economics here
in Israel, and I teach game theory in game theory. Yeah,
I mean everybody who's taking the course in game theory,
they think about game of chicken gaming chicken. By the way,
it's completely irrelevant at this point because in a game
of chicken, as you know, one side will capitulate before
the collision, so that nothing happens. Okay, nothing happens, So
(31:52):
somebody stops before something bad happens. I would argue, we've
already gone beyond a game of chicken. We're now in
a war of attrition. A war of Attrician is another
game in game theory, except war of Attrician. Basically, the
game continues even though it continues to inflict pain on
both sides, but both sides sort of hang on until
(32:13):
one side finally capitulated because the pain becomes unbearable, a.
Speaker 4 (32:16):
Little bit like World War One if you like it.
And I think the Chinese are now preparing for this
war attrition. And this is why I think Trump is
still thinking he's gonna get the Chinese, gonna get basically
shooting being on the phone he's gonna do this, and
that I am doubtful. I mean even Scott Besson, as
I said before, because Scott is not really he's not
a political type. He doesn't understand the hatred there is
(32:38):
for China in Washington, and I think from that point
of view, Trump is going to be It's going to
be difficult for Trump, but anybody can do but it's
still Trump. But I'm just saying it's gonna be very difficult.
Speaker 2 (32:48):
Tracy. In our episode with Martin Wolf, I brought up
the fact that, you know, for the first time, I
actually think it's really important to read those surveys of
international perspectives on China or on the US, and David
giving a great example of like why for any leader
globally now just China, the domestic attitudes probably really matter
if any leader wants to maintain domestic legitimacy.
Speaker 3 (33:11):
Sure, although one thing I would say in China is
there is a rather authoritarian government. Sure that probably makes
a difference in that dynamic. But David, I want to
ask you a question. So you're a smart guy, reasonably
smart guy. That's one of the biggest compliments I've ever
given on all blots.
Speaker 2 (33:27):
By the way, is so thrial.
Speaker 3 (33:31):
But do you worry at all that when it comes
to I should say, you're obviously a very keen watcher
of the White House and everything that's going on there
and trying to disaggregate you know, what's driving certain policy makers.
But do you worry that there's a degree of overthinking
at play here or you know, sane washing perhaps of
(33:53):
Trump and the administration that you're trying to like put
a framework on what's happening. That maybe isn't the case,
Like maybe it is just quite chaotic and people are
unsure of what they're doing, unsure of what the ultimate
goals are.
Speaker 5 (34:07):
I do agree with that. I do think that, like
in a way I was hoping for more. I mean
to the extent that you know, like for example, Dulge
is a good example. Right, So Elon Mosk was like,
you know what he had three months after? Yeah, the elections,
prepare for those, right, I mean he supposedly had like
hundreds of legal advice. There's also some people they figured
(34:29):
out everything and guess what, it's gone from two trillion
dollars to one trillion dollars and then whatever. Ten days ago,
he declared Jub's cabinet He's going to find one hundred
and fifty million dollars of cuts for the twenty twenty
six budget. I mean, I track the daily US Treasury statement, okay,
which tracks every single like whatever, in aggregate, but in
(34:53):
very detailed form every dollar that goes out of the
Treasury count that the US federal government keeps with the
Federal Reserve where all this money goes in and out.
And let me tell you this, I cannot see any
evidence of any spending come so far. Okay, So what
I'm telling you is this, I mean, and that's Ela Mosque,
you know, which scares me because I've always thought about
(35:14):
Elamsk is supposed to be a very smart guy.
Speaker 4 (35:15):
You know this guy.
Speaker 5 (35:16):
I mean, you don't become the richest man in the
world just by talking big. Well maybe he does. Maybe
American capitalism is all about talking big, whatever it is.
But this is a good example of basically literally like
you know, talking out of I don't know, I didn't
want to use any you know things I'm going to
basically regret. But that's why this trade war thing is
very important, As I said before, because Trump thought Trump
(35:40):
is in his political advisors decided that because trade war
in his first term was not inflationary, therefore it's not
going to be inflationary this time. Therefore, there's no reason
for the FAT not to cut interest rates. Okay, and
that as completely like so you see what I'm saying.
How that is important because now it's like, well, you know,
(36:02):
like what Trump now you want you want to fire
basically power. Why did you think about that three weeks
ago or a month ago, or even two months ago
when you're planning this.
Speaker 4 (36:11):
Whole tariff business.
Speaker 5 (36:13):
Okay, because I thought, you know, if you could get
Elon Moss to cut spending and that would be deflationary,
which could potentially offset any inflationary effect associated with the tariff,
and then you could get the FED on your side
if this fiscal tightening. But right now we haven't got
any fiscal tightening because Elon Muss hasn't been able to
deliver other than talking big about spending cuts, and the
(36:35):
tariff is going to be definitely inflationary this time.
Speaker 4 (36:37):
There is no way.
Speaker 5 (36:38):
It doesn't matter whether it's how anybody else it was.
The German of Federal Reserve, no chairman of Federal Reserve
will be cutting interest rates right now under the circumstances.
So from that point of you, for Trump to be
basically throwing in tangent right now, Pennant Tables said, well,
how's not doing his job? That to me again just
shows that this administration is off to a terrible start.
(37:01):
To extend that, the assumptions that they're making for where
they get to now were completely wrong. And unfortunately, I'm
sorry to say this. I think Scott is a great guy.
But Scott did not have the same kind of relationship
that Steve Mnuchen had with Trump in his first term.
If you remember, Steve Mnuchen was Trump's answer the uh,
(37:21):
you know, campaign campaign share person. Okay, So from that
point of view, there was much more trust and I
think therefore Munuchuen was a much more careful person. And
then where I think Scott business more of an academic philosopher,
a hedge fun guy who thinks big in terms of
like the theory, but I think in terms of the
day to day stuff, I don't know how much influence
(37:42):
he has over Trump. As a result, I kind of
feel like I think there are a lot of mistakes
that have been made, And what worries me more than
anything else is that maybe these mistakes cannot be undone.
Speaker 2 (37:52):
Okay, what happens when the crunch drives? As you said,
Americans outside of investors haven't actually felt any of this
impact at all, Say, like, how does Hollywood even continue
with something as simple as losing access to affordable advanced lightings?
And that's just a fairly small sliver of the US economy.
What does this summer look like to you in the
(38:13):
United States? Given this war of attrition dynamic that's going on.
Speaker 5 (38:18):
I think it's gonna look a shit show. I really
believe it's going to be a shit show. I think
we're going to be going to a recession. I think
Trump's approval rating is gonna collapse, Okay, And I think
you know the point here is this? I mean again,
you know, like obviously you know, there's only one question
of any interest to anybody right now, which is okay, fine,
(38:38):
So when will Frump and Shiginging get on the phone?
That's the only question, right I mean, I think we
we can only we can say right now that things
will probably bartom once the two men I've gotten on
the phone. Where for that matter, from announced that he's
going to be on his way to Beijing. To me,
things are not bad enough for him to get to
that point. So from that point of view, this is
(39:00):
why I think, you know, at least in the New
York term, I think stocks are still going lower. I think,
you know, from that point of view because precisely the
Chinese believe that time is on their side and Trump.
The problem is is when you have a one hundred
and forty five percent tariff on China, how do.
Speaker 4 (39:17):
You even back down from that?
Speaker 5 (39:18):
Let's just say you say, okay, fine, let's go from
one forty five to one percent, or even to one
hundred percent. You know what, it makes no difference. And
one five percent and to one hundred percent, that doesn't
mean that China is going to be able to explot
anymore to the US. So from that point of view,
let's think about that'smare Joe for a second in a negotiation.
I thought from the very beginning, that's why I thought
(39:39):
TikTok was a very good beginning. I thought, the only
way Trump can do deals with China is by doing
a bunch of small deals they venture add up to
a big one. But right now, with Tarifa one hundred
and forty five percent. The only kind of deal you
can do will be a very big deal. I think
we can we can all agree right now to do
(40:00):
a big deal. It's going to be very difficult. For
one thing, it takes a long time, a lot of time,
and moreover, it takes a lot of political capital that
Trump doesn't have. But again you have to remember, you know,
with elamsk trying to cut spending, the only thing that
the House and the Senate can agree on is to
increase defense spending.
Speaker 4 (40:19):
Like this, the only.
Speaker 5 (40:20):
Difference is, well, the House most to increase defense spending
only by one hundred billion dollars next year. The Senate
wants to increase about one hundred and fifty billion dollars
next year. Everything else is going to be going down.
Speaker 4 (40:29):
That's it.
Speaker 5 (40:30):
So when the politicians believe that, you know, China is
extensive as an existential threat, that these people are evil,
we need to basically stop them before they stop us,
then you know what, it would be very very difficult
for Trump to make that big deal that I think
is necessary right now to stop this whole thing. And
(40:51):
this is why I cannot see me just if I
put my hat as a game theorist on right now.
I'm struggling to see a way out right now. But
maybe you know, I'm sure you'll find better, you know,
more more smart.
Speaker 4 (41:03):
I guess now you do. No, let me know, like
you know what is the way out here?
Speaker 2 (41:08):
David WU, that was a blast. Really appreciate your perspective.
And uh, maybe in a six months or a year,
or when Trump and shouldn't Pin get on the phone,
we'll have you back. Thank you so much for coming
back on odd lots.
Speaker 4 (41:20):
Thanks for having me.
Speaker 2 (41:35):
I always feel like I have to catch my breath
a little bit after talking with David. I knew that
it's always like, it's always that energy.
Speaker 3 (41:41):
You did say that in the intro, didn't you energetic?
Speaker 2 (41:44):
He's an energetic fellow, that's for sure.
Speaker 3 (41:46):
Yes, for sure. And one thing I will say, I
really do appreciate some of his insights into the Trump
administration because in Trump won, you know, a lot of
people got that call wrong and a lot of people
thought that we would see in from trade war number one,
and we didn't really get that. And so it is
very interesting to me to hear someone who was pretty
(42:08):
supportive of that administration the first Trump administration, sound quite
negative on the second administration. And I guess our headline
for this is going to be, you know, David wu
on the coming sh show in America.
Speaker 2 (42:23):
Look, whether it's the Bizar, whether it's the Bowyer's, the
conclusion is this is a very bad situation. Yeah, right,
And as he said, they've literally gotten zero accomplishments so far.
The war in Ukraine is still going. There's not even
a TikTok deal. And then I really do think, you
(42:44):
know again, like you know, it's useful this idea. It's
not a game of chicken and the game the damage
is being done today as we speak, with hardening of
opinions on both sides and the domestic polity and you know,
every leader, even an authoritarian one, has to maintain domestic
legitimacy to varying degrees or another. So this idea that
(43:06):
like we're you know, this is not a situation where
someone could blink. There's already been the sort of like
damage and it drags on further every single day. And
I think part of what we're seeing in the market
is no one can see what that obvious offering, even
those dynamics.
Speaker 3 (43:21):
Yeah, It's funny you said that. I was literally about
to say the same exact sentence that the off ramp
is hard to see.
Speaker 5 (43:27):
You know.
Speaker 3 (43:27):
One thing I realized we mentioned wit Coough going from
like being a real estate guy to special envoy. One
thing I appreciate about the Trump administration is the ability
for personal progress in terms of careers like you have
kind of become. You know, They're very into personal development
and experimenting with new roles, which is interesting to see.
Speaker 2 (43:49):
That's nice.
Speaker 3 (43:50):
Yeah, I wanted to end on a nice new Yes. Okay,
shall we leave it there.
Speaker 2 (43:54):
Let's leave it there.
Speaker 3 (43:54):
This has been another episode of the All Thoughts podcast.
I'm Tracy Alloway. You can follow me at Tracy allow and.
Speaker 2 (44:00):
I'm Joe Wisenthal. You can follow me at the Stalwart.
Check out David Wu his stuff at David Wu Unbound.
He's certainly unbound. Follow our producers Carman Rodriguez at Carman Arman,
dash Ol Bennett at Dashbot and Kilbrooks at Kalebrooks. From
our odd Laws content, go to bloomberg dot com slash
odd Lots, where have all of our episodes and a
daily newsletter that you should subscribe to and you can
(44:22):
chat about all of these topics. We even have a
China room in our discord discord dot gg slash.
Speaker 3 (44:28):
Odd Lots And if you enjoy odd Lots, if you
like it when we talk about the off ramp from
the trade war or lack thereof, then please leave us
a positive review on your favorite podcast platform. And remember,
if you are a Bloomberg subscriber, you can listen to
all of our episodes absolutely ad free. All you need
to do is find the Bloomberg channel on Apple Podcasts
(44:48):
and follow the instructions there. Thanks for listening
Speaker 5 (45:01):
It
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Joe Weisenthal
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