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What Trump wants is very, very simple: give me money and save me money. The stakes now for the U.S. are even more near. China is the grown-up in the room and is responding to the United States in a very sensible way.
I don't think that what he's doing now will create those opportunities. For the rest of the world, my advice is buckle up and get ready and embrace yourself for more of the shock. There is no prospect to re-industrialize the United States. The Chat Lounge. Chat Lounge. Chat Lounge. The Chat Lounge unpacks views and opinions on hot issues in a more casual way.
Some say it's the art of the deal. Others argue it's merely extortion and blackmail. Welcome to the chat lounge. I'm Tia, and joining our discussion on U.S. President Donald Trump's tariffs are...
Dr. Joseph Mahoney, a professor of politics and international relations at East China Normal University. Dr. Zhu Chang, fellow of the Belt and Road Research Center, Minsu University of China. And Dr. Christos Tombezos, associate professor, Department of Economics, Monash University, Australia. It's a great pleasure to have you all on the chat, gentlemen. Welcome. As widely expected, U.S. President Donald Trump has wielded his tariff stick.
with the first strikes hitting America's two neighbors and China. So the first question goes to you all. Has any specific part of the first strike surprised you to any extent? Dr. Tom Bezos, this is your first time on the show, and as you're from a country that has so far not been hit by the tariff stick,
Shall we begin with you, please? What's your response here? Well, thank you for having me on the show. So this is exactly what Mr. Trump did in 2019. He threatened the use of tariffs against Mexico and then accepted a set of pseudo concessions by Mexico as the reason for suspending his decision to implement those tariffs. By now, Mr. Trump has established a well-known pattern of behavior: manufacture a crisis, resolve the crisis, take credit for resolving the crisis, and rally his base.
But the danger of oversimplifying much of Mr. Trump's behavior is theatrics. It is important to recognize that the so-called concessions by Mexico and Canada that allegedly motivated Mr. Trump to suspend the implementation of tariffs are anything but concessions.
Let's take Mexico first. The promise by President Shane Boehm that allegedly appeased President Trump was the stationing of 10,000 troops at the border. But Mexico sent 15,000 troops to the border in 2019 and again 10,000 troops in 2021. In other words, Shane Boehm agreed to do what her country is already doing.
And the case of Canada is very similar. Mr. Trump's decision to delay his plan to implement tariffs against Canada followed a phone call with Prime Minister Justin Trudeau in which, as President Trump put it, Canada agreed to implement their 13 billion border plan.
The wording here is important. Mr. Trump did not say that Canada announced a new plan, but rather that Canada will implement their plan. Note that Canada's $13 billion border plan was announced during the Biden administration. Of course, all this suggests that Mr. Trump picked a fight, saw the stock market decline, and caved in exchange for nothing. And this is the standard modus operandi that we observe over the years. Right. So you're saying that...
President Trump, what he wants is some obedient attitude from those two countries and make the whole world his theater. Yeah, you know, I think he's expecting the guys, the message that these countries are obedient to his demands, even though in substance he's achieving absolutely nothing. Now, admittedly, this perspective oversimplifies certain things. I think the case of China is quite different, but we'll get to talk about that a little bit later.
Certainly when it comes to Canada and Mexico, though, I don't think he had any real demands. And he merely wanted the theater, which targets the domestic audience, his voters. He wanted to appear as the strong leader who makes demands and gets what he wants. In reality, the demands were rather unclear, imprecise, quite unreasonable to the extent that they were articulated. And he got literally nothing in return. Hmm.
And what about Dr. Chu? Has anything surprised you to any extent? Say, the less than expected 10% rate on some, not all Chinese products?
Well, I think I'm not quite surprised. Trump is not a hater. He is a businessman, a very shrewd businessman. You can call him and his administration everything but stupid. I think they are not trying to be crazy. They're not trying to be stupid. They just try to shake off their opponent, for example, like China and other countries and even their own alliances. This is just a tactic.
Well, I think among his administration, among his team, there are many professionals like the secretary of the treasury, like the trade rep office. And they are professionals. They understand, they fully understand what they're doing right now. So I think this is a typical and a very classic tactics hold on poker tactic. We call it bluffing.
So by using this, they try to negotiate a better deal with their opponent, for example, like China, for example, like Mexico and Canada. For them, especially with Trump and his role, basically, they don't have so-called friends. They only have the one who can give them benefit or not. So they try to shake off China with 10% of the tariff fees because of trade surplus issues.
are basically too large in America's perspective. They don't understand this trade surplus in China or trade deficit in America is basically a good manifest of a good economic health status of America, but they think this is bad. So they try and shake China off. But also the
At the same time, they understand if they tried it too hard, they push it too far, inflation into America will skyrocket off the roof. They don't want to do that because that means a longer lasting inflation environment and also a more tightened up interest rate environment. They don't want to see that.
And also for Mexico and for Canada, I think at least a 30 days delay or even more days delay can be also expected. I don't think Trump really want to do that. This is also a bluffing tactic because that can create what we call the shocking wave towards Mexico and Canada to urge them to coerce them into doing things that America want them to do.
And also they can set up an example telling some other third party country that is I'm okay to put up some policy against my own alliance with my own neighbor. So I wouldn't hesitate to, you know, do the same thing to you if you are not that close to me, at least. So I think they're doing it right now. I think.
Mexico and Canada are basically dancing towards Trump's rhythm. They basically have no choice. They don't have any state to bargain with Trump. So I think all things are playing out according to Trump's playbook. I think it's very, very smart. And I think only China right now has been fully geared up towards Trump and all his strategy because we've been waiting for this moment for like
two years ago. For the rest of the world, my advice is buckle up and get ready and embrace yourself for more of the shocks because they're coming. They're coming not only onto China, but they're coming onto the rest of the whole world. I think the whole world is well aware of that. And Dr. Mahoney, you're living in China. Were you surprised when you heard that the tariffs on Chinese products is only like 10%?
Because a lot of people were expecting, I think the maximum is like 60%. Well, I think we all realize that if you impose 60% tariffs across the board, that it would have destroyed the US economy. It would have destroyed his position with his own voters and so much as he had offered to try to find solutions to high prices. And we know that tariffs simply push costs to consumers. I would disagree a little bit with my two colleagues, as an American,
who's lived in China for the last 14 years. So the extent to which I'm still an American, one could definitely question. But nevertheless, I find Trump so repulsive, both in terms of the policies that he undertook in his first administration, in terms of how he handled the pandemic, in terms of how he handled foreign relations.
And I don't see anything to suggest that he's a smart guy or that he's doing things better now. So I would disagree slightly with Professor Chu's estimation that those are smart people. And I would underscore the point that he himself made, which is they don't really seem to understand the position of trade imbalances and what they signal for the U.S. economy. Probably later we'll talk about whether or not Trump's efforts really amount to a serious attempt to spur the reindustrialization of the United States. I don't think that what he's doing now will create those opportunities.
So I don't know what he's actually gaining other than playing to his base, but that doesn't really change things long term. At the same time, I would go a little further. Professor Tambazos was a little too kind with some of the detrimental aspects in terms of what we've seen. What we haven't mentioned so far is what happened to Colombia and Panama. And in the case of Panama, things are still a little vague and we don't yet really know what's going to happen.
But there we basically saw economic coercion and military coercion, the passive threat of invasion, if Panama did not start breaking ties with China, if Panama didn't bring into review Hutchinson Port Holdings contracts on either end of the canal, which by the way have nothing to do with the canal itself. They're completely separate operations. So I concur with the idea that Trump creates crises that don't really exist. But in Panama's case, we did see them break the MOU with China on PRI.
In Colombia's case, we saw the humiliation of a left-wing leader. We saw the attempt to humiliate the president of Mexico, who's a left-wing leader. And we see that the Trump administration also has ambitions to meddle in Canada during a very difficult election year, where conservatives are expected to make gains and
where they were already exploiting Trump's gestures against Canada to further strengthen their hand to show that they would be better capable of dealing with him going forward. So I do think that there are other objectives here other than just whether or not he can achieve short-term economic gains. I think there's a broader political aspect that we also have to consider and the downsides that he's creating for these countries.
But I do agree that there is a tapping here. It will be interesting to see what comes next in terms of Europe. We know that Europe is knocking at his door trying to start some early negotiations to prevent getting hit, and the White House has promised to hit Europe. So, you know, we may be just seeing him setting the stage. And in this case, I agree with my colleagues. He's showing how he can discipline others, even if he's just getting some superficial wins. He may be looking for gains that he can get in other places.
But in terms of China, I think that he took a softer approach because he couldn't afford to go much further than what he and Biden have done.
Indeed, actually, the elephant is back in the China shop, but this time with obviously with more destructive measures. But back to the tariffs, like you mentioned, Trump agreed to pause tariffs on Mexico and Canada, actually hours before the sweeping actions were enacted. So, Dr. Tom Bezos, what does this dramatic shift mean?
Tell me. Well, I'll go back to my first point that I made. I mean, the dramatic shift, I think, was perhaps part of the plan. He was looking for an excuse, I believe, to reverse the original decision for 25 percent tariffs, which would have been devastating for the American economy. I think it was merely posturing. I think the shift was in the mix in the plan from the very beginning.
beginning. I do not think that President Trump was serious about the 25 percent tariff. The fact that he used only a 10 percent tariff in the case of China, I think is perhaps indicative that that is a bit of a different case, that perhaps he's more serious about maintaining that tariff at least for a while. China is quite different than Mexico and Canada.
not only because it is the third as opposed to the first or the second trade partner of the United States, but because there is the sentiment in the United States that Chinese imports are affecting adversely the American labor market and that they are particularly responsible for the expanding wage inequality between skilled and unskilled labor in the United States.
This is an issue that, if I may make a side point, this is an issue that I've been working on for the last three decades. In my research, I find that that is not true. I find that imports from China into the United States are, in fact,
promoting wage equality, not wage inequality in the United States. And that is because those imports from China into the United States undergo extensive downstream handling that involves a disproportionate number of unskilled workers.
But to go back to the original point, there is this presumption that Chinese imports are destroying American jobs, driving inequality, causing the industrialization of the United States. And I think this environment gives...
President Trump a bit of flexibility in terms of maintaining those tariffs. So I do not believe that in the case of China, he's exhibiting the same interest in theatrics that he is in the case of Canada and Mexico. And I think that goes back to the fact that I do not believe that Mr. Trump or his administration truly understand the way tariffs
work. Mr. Trump is somebody who, I would disagree with my colleague that is a shrewd businessman, I think he's a rather mediocre businessman. This is somebody who thinks of the world as a zero sum game, where deficits signify losses and surpluses gains. These are the lenses through which he is looking at the
the trade relationship between the United States and China. And that goes back to something that my colleague, Professor Mahoney, mentioned. It is evident that President Trump is under the impression that the American trade deficit, bilateral trade deficit with China, he thinks of that as a negative. And that is a ridiculous way to look at the world. Bilateral deficits
characterized the overwhelming number of economic transactions in the world. We visit the restaurant for a meal, we pay for the meal and sell nothing back to the restaurant in return. That is, we import a meal from the restaurant and export nothing. This is a bilateral trade deficit between the diner and the restaurant.
which of course means absolutely nothing. Bilateral trade relationships across countries are very similar, and they are no indication of the health, of the effectiveness, or of the fairness of cross-border transactions. So I believe that Mr. Trump and his administration lack knowledge and expertise in terms of how international trade and tariffs work.
They impose tariffs thinking that they are paid by China, whereas in fact the overwhelming percentage of the price increases of the tariff, in effect, is paid by the American consumer. And that, I think...
is what might be going on here. Right. Maybe he and his officials don't have a good idea how, you know, the way tariffs work, but he obviously knows how bluffing may work. He was quite confident that Canada and Mexico, or most countries he tries to coerce with tariffs, maybe would concede. But when it comes to China, it's another story. But can Americans stand... If I may interrupt you, I mean, I agree with the sentiment that he knows something about bluffing.
But when you bluff, you should bluff for a meaningful stake. What are you bluffing for? You know, to be complaining about the bilateral trade deficit with China is crazy. You know, that is something that cannot be ameliorated. It is what it is. You cannot blackmail China to buy more of your goods if you don't produce the kind of quality goods that China requires. So I think that he's successful in bluffing, but he's not successful in knowing what to bluff for.
Indeed, he might think that Americans can stand this 10% price hike on Chinese goods. But how long they can stand with increasing inflation caused by the tariffs is another story. But we'll come to that later on. But what may come next? Mexico and Canada have been given at least one month of grace. So what's going to happen next?
After that, will President Trump come up with more aggressive demands on its two neighbors? Dr. Chi, what's your take?
Well, I do think they will have more of this kind of move coming after that, as Mr. Bezos has just mentioned. Bluffing is just a tactic. It's just a move. There is a purpose behind that. Well, in China, we have a saying that is you wouldn't set up a table for nothing. It means you've set up all this table. You have made all this fuss. You definitely want something after that. So I think that's the same thing for Trump.
Trump, I think, is making a lot of very, very shocking and all-in moves towards the whole world. For example, claiming the territory of Greenland, of Canada as the 51 states, and everything. And also about this high tariff against their own trade partners, especially the alliances and everything. And I think he set up a very, very large and a weird table in there. So the thing is, what kind of food is he expecting to be served on the table?
And I think there are going to be more things to be put on the table. And I think number one is about immigration across the border from the south to the north. Illegal immigrants and all kinds of illegal products that can be smuggled across the border. They can't be the purpose that Trump would like to urge those two countries to help him to clear the borders, controlling the drug trafficking, population trafficking. And this is something that these two nations, I think, would like to cooperate because this is just lowest hanging fruit. I think it
Trump really understands about human nature. That's the reason he can have this landslide in the election. But he knows if I'm a threat, if I want to force you to cooperate with me, first of all, I will make a threat that I can't deliver. For example, like 25% of the tariff. Yes, this is something that is very realistic that I can deliver immediately within my own power. But when I say 25% or even 35%, 45%, but eventually I give you like 10% or I give you 30 days delay.
So you will feel as a victim, you probably will feel, okay, he is not that bad after all. There is a negotiation space for us. So you will feel good or feel better about him. What we call this is a Stockholm syndrome, which means you can sympathize with the one who put up all this for you.
So that's a very, very tricky mind game that a good shrew negotiator knows how to play. So you see that's already been happening when Trump granted them 30 days delay and two presidents in the North and the South immediately are showing good gestures. Even though this threat shouldn't be there in the first place, they never will if Trump did not set up this table.
those two countries will never feel any gratitude or have any kind of this lucky feeling until that Trump threatened them in the first place and then removed the threat temporarily. So I think this is actually a very, very smart mind game. And do you think Trump will stop there by that? I don't think so. Because those two nations have already been cooperating with Trump, which is also something they can deliver. Trump is very reasonable. The
They're not asking, okay, if I stop this 25% of the tariff, or if I immediately will implement this tariff, you should cooperate with us. Otherwise, I will take you in as my 51st state. Well, I probably think Canada wouldn't be cooperating that soon. But Trump asked some favor that Canada can deliver, and it wouldn't hurt Canada's integrity. For example, cooperating with and controlling the border, controlling the people or the product smuggling. Well,
Canada thinks this is something fair enough. We can do that in order to avoid that stupid tariff. So they cooperated, and that's the purpose, and that's step one, or the lowest hanging fruit has been picked up by Trump already. And what comes next if they know how to threaten people and coerce people to cooperate with them?
they will have escalated the threat after that. For example, more of the tariff, more of sanctions, more of the other requirements and more of the favor, you know, that Canada has to deliver for America, same as Mexico. Or the land of Canada. That will only escalate step by step. You can just keep my word for that. Right. Maybe President Trump is pinning his eyes on the land of those two countries already. But Dr. Mahoney, what's your take there then?
What do you expect Trump to further demand those two neighbors come up with? I think he's going to watch and see what happens in Canada and Mexico over the next month. Again, I think that he has ambitions that go beyond simply posturing in terms of the threats that he made. I do think he is trying to meddle in the internal politics of both of those countries.
especially Canada. And I think that he's done this not only with the tariffs, but he's also done it with calling Canada the 51st state. I've spoken to Canadians who are really quite furious with Trump. I don't think there's a Stockholm syndrome effect. I think a lot of people feel insulted and betrayed that Trump is trying to humiliate them. And whether or not he gets real or substantial concessions from them or not,
And so I think it's creating some deep resentment. And if we see increasing pressure from Washington, if Canada doesn't somehow pass the 30-day test, then that invites more aggression from Trump. Then we will see more revulsion in Canada. At the same time, I think there was already deep unhappiness with Trudeau. And of course, he's on his way out. And we do expect a conservative government to win power.
The question here is, how is Trump going to play this going forward to ensure that he doesn't endanger conservatives taking power? And how does he give conservatives in Canada a win a month from now, as opposed to giving Trudeau's party a win? So I think that it's a little more complicated than just pandering to the American base or just getting a superficial win. At the same time, there is sort of, again, the broader perspective of what is he playing for on the world stage?
I do think that there is one thing that Trump understands, whether or not he understands tariffs or basic economics or trade imbalances. I think it's very wise not to underestimate him or anyone in his administration. So on the one hand, I think that what they're doing is stupid policies, but I don't think that they're stupid people. I think we have to consider that they have other strategic
goals in mind. And one of the things that I think that he's very, very clear on, and we've seen this in several statements that he's made, is that above all, he has to protect the power of the U.S. dollar as the global currency. And he has to try to sustain American hegemony over the global financial system. You know, so to what extent is he trying to set the table to go to Professor Chu's analogy to find deals ultimately that preserve
the dollar and prevent de-dollarization, which is coming sooner or later. But once it does come, I think the broad perception is that the U.S. economy is a house of cards built on the dollar, the dollar's relationship to deficit financing, the U.S. military. So once that falls, then the U.S. falls as a global power substantially. This has been The Chat Lounge. When we come back, we'll check out the outlook for Trump achieving the vision of revitalizing America's manufacturing. Stay with us.
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Welcome back to the chat lounge. We continue our chat on US President Donald Trump's tariffs. Dr. Mahoney, then how do you expect smart people like President Trump to respond to China's moves? Obviously, we've seen, like we said, Beijing or China is another story. And Beijing has announced a flurry of countermeasures, including additional tariffs of 10 to 15% on liquefied natural gas, coal, farm machinery and other products from the US, as well as restrictions on the export of more critical materials.
minerals. So how do you think they will respond? I was interviewed by Bloomberg and the piece that they ran, I didn't like the title. It was, you know, China is taking a very moderate response because China has more to lose. I don't think that's I mean, that wasn't the gist of what I of the broader comments that I gave them. But I think China has responded in a responsible and modest way without trying to up the ante to provoke
a spiral, because I think on the one hand, no one can afford that, neither China nor the United States, although China is prepared to go down that road, much better prepared now than it was eight years ago or six or seven years ago when Trump started this mess. That said, I do think that when we talk about setting the stage for a trade deal, an eventual trade deal between China and the U.S., which we realize that Trump did reach a trade deal with China before, it just got sidetracked by the pandemic and him losing reelection.
that the stakes now for the U.S. are even more dear. It's clear that tariffs didn't and neo-mercantilist policies didn't lead to the reindustrialization of the United States. It's clear that efforts to foster tech decoupling and stymie China's technological advancement have not succeeded. It's
It's clear, I think, that the containment strategies even in the Asia-Pacific region probably failed sometime in 2023. Gina Ramon, on her way out of office or a couple weeks after, even said that all that they had done to try to prevent China's tech advance had basically failed. So I think after looking at the advances that we've seen in Chinese AI in the past several weeks, after we've seen China just continuing to move forward in ways that I think are not that strange to people who live in China, but are in some ways a stunning reality for those elsewhere.
that what the US really needs more than anything else is to buy time. And in terms of empires or imperial control,
On the one hand, I do think that what we're seeing is a strategic retreat in terms of drawing back to the Western Hemisphere, especially in the Northern Hemisphere. We've seen Rubio saying, "Okay, the reality is that we live in a multi-polar world." That's sort of a powerful concession, perhaps. But at the same time, the U.S. needs to sort of sustain the position of the dollar and the position of the U.S. military. When you go back and you look at old histories or the history of the Roman Empire, in the
Inevitably, what happens to these empires, they end up with internal contradictions that are part of their imperial system. But these contradictions just keep getting worse and worse, and they're not able to really reform themselves. So eventually, they exhaust themselves. And the US seems to be stuck in the same kind of spiral. I don't want to be so ahistorical to directly compare Rome or other British empires to the US.
But we go back and we see that what empires start doing as they reach the end of their life is they realize that they can't really reform their system because to do so would mean that they basically have to crash the things that are holding themselves up already. We saw this to you. I know you're familiar with the late Qing history. The Qing tried to hold on to power for so long that when they finally came time to try to reform themselves, it was their undoing.
So in this case, I think the US is trying to buy time in terms of buying time. The number one thing it needs is some sort of commitment from China to continue to protect the dollar and not to accelerate efforts that Russia wants, that Iran wants, that other countries are maybe thinking they might want in terms of de-dollarization. So I think we're setting the table for that kind of deal sometime
in the next year or so, because that's really the only thing that I think will work for the U.S. at this point in time. Yeah, maybe a lot of people are saying that the United States of today resembles a lot of the Lecheng dynasty. But apart from buying time, I think maybe Washington also wants others
to buy from them, especially, you know, the European-- - Well, you know, I don't know, because if the US would sell its best products to China, then the trade cap would narrow substantially. The trade deficit would, the US restricts a lot of the products that China wants to buy, so that's kind of silly. And it does that out of fears of strategic competition militarily.
The other thing is, you know, why buy time? Is it just to buy time so you can stay on the top for a little bit longer? You're sort of in a perpetual crisis mode, perhaps. But another side of it is, you know, there are other things that are happening when we look at, you know, the mounting singularities associated with tech, but also climate change and pandemics. These are all still moving us down a dark path. And we know that the global south, where China is really building its position now, and China itself are some of the countries that are most vulnerable to these types of
challenges. The global north has a little bit more protection from climate change. So there could be all sorts of strategic end games that are being played here. So if the U.S. could buy itself another 5, 10, 15 years, you know, how does this, the dark art of climate change or other issues change China's position, what happens when we have these generational shifts in China, so forth and so on. So, you know, there are a lot of other factors and variables that
people start dreaming of when they're trying to buy time right buying time so that they can you know push china further down but when it comes to europe as we speak uh trump hasn't given any order to impose tariffs on europe but he has said tariffs will happen with the european union and when it comes to britain he suggested britain may be able to avoid extra tariffs from the us
Dr. Tom Bezos, what do you expect Trump to demand from the EU and Britain, respectively? I know you're originally from Greece. Maybe you have a better clear vision. From Cyprus, actually. From Cyprus. All right. So, you know, I'm happy to answer your question, but before I do, I'm wondering if I may say one or two words about some of the things that Dr. Chu and Professor Mahoney mentioned. You know, I think that both of my colleagues are
are crediting the Trump administration with a greater degree of rational thought than is evident. You know, Professor Mahoney's thesis is particularly smart and very, very interesting, the buying time thesis. It is what he puts forth is perfectly reasonable and logical and thoughtful. And indeed, an American president would be behaving very much in accordance with Professor Mahoney's framework
if that president were sufficiently thoughtful and sensible. I just doubt that this administration is as strategic and thoughtful as perhaps suggested in the buying time scenario. You know,
It has been said that the greatest mistake an adversary may do is to underestimate their opponent. I think that we are doing exactly the opposite with Mr. Trump. I think we are overestimating his thoughtfulness and abilities. He's not really playing three-dimensional chess. He's playing checkers. And yet we look at him playing checkers and we interpret what he does as if he is playing three-dimensional chess. And I do not believe that he does.
You know, Dr. Chu also, I believe, gives a lot of credit to the administration. He said that, you know, the administration plays a smart mind game that resulted in good gestures by the leaders of Mexico and Canada. But, you know, Dr. Chu, what are those good gestures? On behalf of Canada, the good gesture was to implement a plan that, in fact, was already in place. What sort of gesture is that, to implement a plan that you've already voted for and allocated a budget for?
That's not a good gesture. That's actually nothing. And how about Mexico? Mexico promised to have 10,000 troops stationed, but it has already 25,000 troops. So what is the good gesture? Nothing.
So I think that President Trump is, in fact, far less thoughtful than we give him credit. So that was by way of responding to some of the comments that my colleagues made. Now, going back to your question on Europe, again, he's threatening tariffs without articulating demands, at least demands that make sense. I believe that in relation to the European Union, he mentioned only a couple of different things. He mentioned the
European Union's treatment of American digital technology. And he'd like some of those taxes to decrease. And he is complaining about the imbalance between American and European car trade.
I mean, these are, first of all, the car trade issue cannot be resolved. Americans no longer make quality cars and no European wishes to buy American cars, whereas Europe makes the best cars in the world. You know, together, of course, with Japan and China and so on. But, you know, some of the best cars in the world. So those kind of complaints are just childish. What about agricultural products then? That is a third point.
And admittedly, when it comes to agricultural products, Europe is perhaps more productive than it should be. I believe that it should be far less productive than it is. But agricultural products is not really the highlight or it gets lost. Even if we accept that that might be a legitimate thing to put on the table, it gets lost in the mix of talking about card trading balances and
and digital technology taxes and so on. So what is he demanding then? Maybe European carmakers or investors investing in the States? Yeah, I don't believe that the administration articulated exactly what they expect from Europe in relation to this.
You know, I've only seen the grievances, but not a specific plan of action that they would like to implement. So I think that in relation to Europe, it's a case of Mr. Trump posturing for internal consumption in the hope that something good may come out of it. The world has a significant experience when it comes to trade negotiations.
And we know that good outcomes result from sensible, good, healthy international relationships, not from threats. Threats do not achieve much. They humiliate the adversary without generating proper outcomes. Dr. Chu, do you think the Europeans have to worry about that? If it's like what Dr. Tom Bezos just said, President Trump actually doesn't know what he actually wants from the Europeans.
Well, yes, I agree, but also disagree because I think Trump will have a bigger picture. The bigger picture is a shake of everybody for money. Well, I don't think he's a hater, but basically he's still trying to money-making purpose. So I think Trump right now – well, as I just said, he's going to – going after Mexico and Canada as well further.
And later, I don't think European Union can rest assured. I think European Union will also face such kind of a blackmailing or threatening for the similar purpose. I think what Trump wants is very, very simple. Give me money and save me money. That's it. How to do that? I don't think he has quite a flow. And also among the people around
around him and Amaro Largo. I think there are many different voices, according to my intel, that he's a teen of staff and a teen of Elon Musk, a teen of Silicon Valley giants. And all those people have a different opinion of how to do things. And all the three forces, or even four and five or different more forces surrounding Trump will pull them to different directions and eventually make his move unpredictable.
Trump is a person who do not like to make very, very tactical, detailed plans or agendas. He's not a technocrat. He wants something clear and simple, and he orders that. No matter who can deliver that, well, if he likes you, he will do what if you tell him to do. If he don't trust you or don't like you, he probably wouldn't buy it, and that's how he is.
So he's not a person of details, which makes his move very unpredictable because all his details are implemented by the underlings, well, probably with three or four different sects, and they will have their own agenda, very, very hidden agenda and a very different way of doing things.
which makes European Union or Canada or rest of the world should be really, really stay alert of. Because you will never know where the next stab is coming from and where he's going to. But just mind that. He wants you to give him money. And that's it. No matter how much you're going to pay or how much American people are going to pay, I don't think Trump have any plan about that. Maybe more military spending by those European or NATO countries in Europe. Yes, that can be true. The Chat Lounge.
The chat lounge unpacks views and opinions on hot issues in a more casual way. The EU is seeking early talks with the US to avert Trump's tariffs. What if they fail? Which country would be most affected then, Dr. G? Well, I think the most affected country can be Germany and France. To be very frankly, I don't think Trump likes the current person in charge of Germany and France.
Macron is definitely not the one who is in the liking of Trump. And also, the chancellor of Germany, Olaf, is basically also not who Trump is like to associate with.
So I think right now there is a trend in German politics and also in French politics that the right wing is coming into power, and it's going up very, very quickly. And if you can see, the current activities of Elon Musk has been stand out and speak out for the right wing in the German politics a lot.
So it keeps us in asking who is behind that. I think eventually Trump is behind that. Trump wants to see German turn right, wants to see France turn right. And I think those two countries really have to be very careful because they are the two leading engines of European Union's economy. Well, I think there's a third engine that's Italy. But Italy has already been turning to extreme right with Melanie in the office. And everything turns to be very, very conservative. But considering
But Italy still is not that influential, like German politicians and French politicians. So there's still a space to rewind a little bit. But if in France and in Germany, those leading nations in the European Union turn right,
And I think it's going to be very, very, you know, bizarre situation. We're going to see, you know, very different from the past 20 years. You know, also I have to remind you that in a Nordic country, in Norway, in Sweden, there is a trend and sign that their politics also turning to be, you know, turning right. So I think if the trend continues like today, I think within three or four years, the European Union will have a major right turn. And also the whole world, a political and economic scenario is going to be changed for good. Hmm.
And a quick question to Dr. Tom Bezos. What other nations or blocs do you expect Trump to target with tariffs? India, Japan or Australia? Well, you know, as I argued throughout this discussion, Mr. Trump is not a rational agent. In this light, we may only speculate. I would not be surprised if he threatened tariffs against countries such as Colombia to curb the outflow of migrants to the U.S. and perhaps even Egypt and Jordan.
to accept more Palestinian refugees, which would facilitate his plans to ethnically cleanse and take over Gaza, as we found out last night. So, you know, it is difficult to predict these things, but he seems to be a big fan of tariffs, and I wouldn't be surprised if he uses them in other negotiations around the world. And then to the direct impact, as an economist, Dr. Tom Bezos, how would you expect
President Trump's behavior to affect the global economy. Actually, last month, the World Bank released its global economic prospects, predicting global growth will hold steady at 2.7% in 2025 to 26. And the International Monetary Fund said in its report global growth was projected at 3.3% in 2025 and 26, broadly unchanged from the outlook forecast in October with an upward revision in the U.S.,
offsetting downward revisions elsewhere. So given what's happened over the past few weeks, Dr. Tom Bezos, do you expect the institutions may have to revise their forecasts? Well, you know, I believe they already are revising their forecasts. I have seen a report, a recent report by the World Bank and the IMF, a joint report that looks at this trade war and finds or estimates that it is expected to reduce global GDP by 0.5 to 1 percent.
That is by about a trillion U.S. dollars. I mean, this is quite unprecedented and remarkable. And it will be a direct result of what the Wall Street Journal refers to as the dumbest trade war in history. These kind of trade wars have profound and significant implications on the world economy for a host of reasons.
Tariffs raise the price of imported goods. That reduces consumer spending. It reduces corporate profits. It slows economic growth. Companies are nowadays reliant on global supply chains. And a particular commodity may cross borders multiple times because one country may add a particular component on the product. Another country may add another component and so on and so forth. And every time
these components, change hands and tariffs slapped on top of that. So these tariffs are going to disrupt the supply chains, they will increase costs, they
They will create all sorts of logistical challenges affecting the operations and profitability of different companies around the world. And, of course, retaliatory measures limit access to key markets, affecting sales and revenue growth and so on. But at the end of the day, perhaps the most important effect of tariffs is that they contribute to a climate of uncertainty, leading investors to adopt a risk-averse stance.
So investors walk away from the market, sell stocks, and that is, in fact, what we already observed. When President Trump announced his intention to impose a 25% tariff against Mexico and Canada, the stock market in the U.S. near collapsed.
So I'm expecting the economic effects to be significant, regardless of the extent to which countries around the world retaliate. Now that I mentioned retaliation, I'd like to point out something in relation to earlier discussion in terms of what China is doing at the moment. Well, the first thing I'd like to point out is that China is the grown up in the room and is responding to the United States and
in a very sensible way. Trade wars are unfortunate, of course, but I do not think that Beijing has a choice but to retaliate. And their approach to their retaliatory actions is quite sensible. It is not over the top. It is measured. It is controlled.
And it is intended to send the message that these trade wars do not benefit anyone. So I commend China for being reserved and not escalating the trade war beyond the extent to which it has to be escalated.
Thinking about retaliation, I am wondering how the United States would react if China would say impose a tariff against certain Tesla models, such as Model S and Model X, which are in fact not manufactured in China or in Berlin, but rather in Fremont, California.
You know, I would imagine that a simple tariff on specific Tesla models would get the message through to President Trump that these kind of trade wars are inevitable.
not benefiting anyone. In fact, I would imagine that something like this would resolve the trade war in about 24 hours when Elon Musk understands that this trade war nonsense is in fact affecting everyone and causing significant problems for the American economy and himself in particular. You said China's the grown-up in the room, so I suppose China wouldn't do that because
it knows that it's a double-edged sword. Then how do you expect Trump's behavior to affect Chinese economy then, very briefly? Well, I mean, it would certainly have a negative effect on the Chinese economy. Heavily affected? Pardon? Heavily affected? I would say modestly affected. All right. Turning to the impact on the U.S. itself,
We already said that maybe the 10% price hike on Chinese goods or on any goods from other countries is bearable for the moment, though President Trump has already said there must be some pain. Then the question is, how long can Americans stand with such a pain? The Trump administration said it's worth the price. Dr. Mahoney? I'd like to respond to a couple of earlier points, and then I'll try to circle back to what you've raised.
The first point is, I think the last thing that China wants to do is to alienate Elon Musk. We saw some provocative tweets from Musk in the past week or two against China. And I think there is sort of a concern that Musk could become the loudest anti-China voice in the administration, as opposed to what people generally perceive, and that is that he's a friend of China because he's got an exposed position with Tesla. There's an alternative analysis that holds that
Musk has already soured on Tesla, that he realizes that Tesla can't compete with Chinese models and that he may be moving to his more profitable businesses at this point, which depend more on a closer relationship with the US government, SpaceX and his AI company and others.
So I don't think that they would target Tesla in California, also because Beijing has tried to maintain a positive relationship with Gavin Newsom. In terms of your question, can you bring me back to what your direct question was? Yeah. How long can Americans put up with the pain the Trump administration said is worth the price?
Well, I haven't seen what the pain will be with regard to the modest tariffs that have been put in place with China. It's going to take a while for those to bite. In fact, they don't even take effect until the 10th, if I remember correctly. And the tariffs with Mexico and Canada were put on hold. So I don't think there's been anything yet that is coming down the pike other than uncertainty that, as Tomas mentioned, can roil the markets and increase risks and have longer term effects.
Again, I do think that Trump's playing for something else with a system that supports him, which is far more organized and disciplined in this – at the start of this term in office versus where it was when he began his previous term in so much as he had gone to war with the Republican establishment and didn't have enough support for him in place. That has now changed. So there's much more of an institutional foundation that's behind him.
The key is, I think he needs to see some sort of significant win, not just ceremonial wins, but some sort of significant win that he can promote to the American people to ensure that Republicans continue to hold power in Congress past the midterms.
And, you know, I think the various things that he's doing now haven't offered that sort of win. So he's going to need some sort of big real deal that will at least give a short term boost or even buy some time, as we were saying earlier. Otherwise, he risks losing the midterms and being a lame duck for his last two years in office, which I think he desperately wants to avoid, even if he doesn't understand the fine art of economics.
And the last question also to you all, it's the outlook, although I think some of you already touched on this earlier in the show, but Trump has emphasized using tariffs to bolster America's reindustrialization and encourage foreign businesses to establish factories within the U.S. So how far do you expect him to go with this strategy? Could there be any U-turn or he stop what he's doing abruptly? And what's the outlook of
of Trump achieving his vision. And let's begin with Dr. Chu. Well, I think right now what Trump really wants to achieve is, you know, monrolaism, you know, isolate America and just try to do what he's promised, the MAGA. American first and, you know, make Americans so-called great again. And he believes by shaking off the others, he can achieve this purpose. But he ignored one fact that American has to be, today's American is based on the international orders and globalization. Wow.
only by enabling others, only by cooperating with others, partnering up with others. And I think America has benefited so much as a global empire as it is today. But if Trump wants to reverse this trend, even though what he means is to do good for American people, but actually he will drag down America to another swamp, the swamp he wants to drain himself. He will create a bigger, deeper, and worse swamp himself. This is the problem that he's facing.
He's going to continue with this agenda. No question about it. The only problem is that how many problems are going to create and how much of the uncertainty is he's going to make for the rest of the world? And Dr. Tom Bezos, please. You know, there is no prospect to reindustrialize the United States. In economics, there is a very, very large literature on the use of tariffs in efforts to industrialize. Right.
This literature comes under the title of import substitution industrialization and works like this. You impose a tariff in an area that you would like to expand, let's say an industry of vital interest.
keeps foreign imports out of the country that allows the domestic industry to expand, to cover the space that was previously occupied by foreign imports. And the hypothesis is that that is how you achieve industrialization.
There have been countless economic experiments over the years. This theory was very popular in the 1940s. It was used in the 1950s extensively, 60s, 70s, and so on, when it was understood that it simply does not work. Yes, you can use this policy to force resources to flow,
from certain sector of the economy to other sectors. That you can achieve, but that is not industrialization. That will not give you the comparative advantage that is required to be able to stay in business in the absence of government protection. For that, you require technology, you require education, you require a healthy economy that engages in free trade. Free trade
in fact, is the greatest disciplining mechanism that we know. If you engage in an environment of free trade, you need to be the best at what you do. You need to stay competitive, adopt the latest technologies, the latest logistical mechanisms, the latest distribution frameworks, because otherwise you lose your business. But if...
If the United States can straighten up or come up with a better development of those sectors, technology, education, like what you just mentioned, can they get re-industrialized? Because, you know, the Institute for Supply Management said U.S. manufacturing actually grew for the first time in more than two years in January. Its PMI increased to 50.9 last month. Isn't it some good sign there? Right, right. You know, absolutely. But that is an outcome that you achieve.
by providing technology, facilitating the development of technology, by facilitating education, by facilitating industrial training, not through tariffs. Tariffs are not going to achieve that outcome. Tariffs are merely able to shift resources in the economy from the efficient sectors to the inefficient sectors, but they do nothing
to correct or improve the inefficiency of the sectors themselves. Whereas technology, education and so on are the catalyst for industrializing and improving the performance of any economy. And I believe those numbers that you mentioned pertaining to the recent performance of the American manufacturing sector were the result of the Biden administration's very heavy emphasis on facilitating those inputs that are required for industry to become efficient and productive.
All right. And last but not least, Dr. Mahoney, please. Yeah, I think, you know, it's funny because I wrote my undergraduate thesis on Jatulio Vargas's ISI policies. And the one thing that I recall is that they don't work. And we all know what happened to him politically. So or at least we should.
But in any event, I think one of the things that we look at a couple of things. The first is we saw the United States pursuing these policies where they were pressuring companies like TSMC to locate bigger operations in the U.S. And it's interesting that these firms have really struggled to establish and begin producing, even though something like chips manufacturing is something that's so important to the American strategic worldview. What they find is that American workers and
and local jurisdictions are finding it very, very difficult to actually work in those industrial models. The second thing is, I think there's been some speculation that maybe Trump wants to induce Chinese investment and Chinese manufacturing in the United States, and that could include EVs. And of course, I'm sure his good friend, Elon Musk, might be disappointed by that. But, you know, Trump has betrayed independent comrades-at-arms in the past.
That said, I've been to the most advanced Chinese EV plants in China that are more advanced than Musk's Gigafactory here in Shanghai. And you can have an entire factory line that has only three workers on it. So we're not talking about bringing a lot of jobs to the US if you start seeing these types of investments. And if you're going further down the value chain, then of course, you're looking at other issues. The final point is that when Vargas and others were pursuing ISI policies,
They weren't living with the recognition of what reality they were in. And I think one of the things that whether Trump understands it or those around him understand it or not, we're in this period that is referred to by many as the fourth industrial revolution. So the idea that you would industrialize, the idea that you would be able to rebuild your infrastructure and
compete with China, which is already so much further ahead, already has the foundation, is much further ahead in tech development than many people realize. But not just that, how China functions as an advanced technological society in terms of how it organizes and leverages infrastructure, people, government, industries in a way that produces these highly efficient manufacturing and supply chains and logistics and so forth.
We're now in China transitioning to the next thing. We're moving up the value chain. So the idea that the US wants to reindustrialize is sort of a 19th century or 20th century way of thinking.
that was disproved in the 50s and 60s, even in the 40s. So I don't know where that ends up, but the prospects are not very good. Adding to what you've just said before we sign off, I don't want to end with some negative note, but let me quote Mao Zedong, the founding father of the People's Republic of China, who said in his 1940 speech, new democratic constitutional government, whoever tries to profit at others' expense will come to no good end.
With that, we wrap up this session of the chat lounge. Many thanks to Dr. Joseph Mahoney, Professor of Politics and International Relations at East China Normal University, Dr. Christos Tombezos, Associate Professor of Department of Economics, Monash University, and Dr. Chu Chang, Fellow of the Belt and Road Research Center, Minsu University of China, for sharing her insights. The show is available on all major podcast platforms. Please email us your comments at radio at cgn.com. I'm Tuyen. Thank you for listening. We'll have more chat at the chat lounge next week.
next week.