Dan Collins: Tariffs and the Future of US Manufacturing — #85
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Because I'm from Michigan, I grew up in a 30-year deindustrialization process, basically what I call a 30-year recession. I saw all the factories close around me in my hometown, none of my friends getting decent jobs. And I'd asked my superiors at the time, what do you think about this? We're moving all our capacity out of the U.S. And they didn't care. They didn't even think about it. It was, I got to get my bonus. ♪

Welcome to Manifold. My guest today is Dan Collins. He is the founder of Tyrell Chemical. He is a graduate of Michigan State University and also attended Tsinghua University in Beijing. He spent 20 years in China, participating in the manufacturing boom there and actually setting up local manufacturing for major U.S. companies, I believe, including General Motors. And he's a

We are here to talk about U.S.-China trade war, tariffs, manufacturing, supply chain, everything that's in the news recently. Dan, welcome to the show. Thanks, Steve. Great to be here.

Now, you, we were just talking about this. You are a Michigander, and you are one of several generations in your family to have attended Michigan State University. Absolutely. So now, the way we say it around here is go green. Absolutely. I was, my dad went there. I was actually spent, as a young child, my dad lived in married housing on campus. So I literally grew up at Michigan State as well, from about zero to four or five years old.

When I first moved here, I was at the University of Oregon and I moved here to be the vice president for research. And I came here before my family could make the move because they really wanted me to start. And I lived in that married housing, which they've now torn down. But I forgot what the name of that Spartan village or I forgot what it's called. Yeah.

Yeah. So I lived there for, I don't know, three or four months or something. Yeah. So, yeah, I still I still try to get back to Michigan State every year. I love wandering around the campus, you know, one of the most beautiful campuses in the country. So it is. Yep. It's very nice. Yeah. So let's talk about your experience in China. You after graduating from Michigan State was around ninety six. Ninety seven. Yep.

End of 97. 97? Yeah. Okay. And right away you went to Tsinghua on an exchange program. I did, yeah. And for the audience. Yeah. Michigan State had a deal at the time with Tsinghua University, an exchange program. I was a group of about, I think there was seven of us that went over from Michigan State. I was supposed to do one semester there. Ended up staying there 20 years, which was not part of the plan. Yeah.

But yeah, Tsinghua at the time, people may or may not know, but end of 90s, very few foreigners in China, even less foreign exchange students. I mean, we were in the foreign exchange student dorms.

So what I did at Tsinghua was I got a really great chance to – they were very focused on bringing in foreign students and kind of the economic development of China was just about to boom at that time, late 90s. They had previously a lot of inflation issues and things, but all those kind of free market reforms were about to take off.

And I was doing or studying reform of state-owned enterprise under the dean of the business school at Tsinghua. So I got to do a lot of research there. And, yeah, it was a fascinating time. But it was the kind of experience where, you know, I would walk out of the dorm and I would be followed around town. You know, oh, my God, there's a foreigner here. What's he doing? You know, it was a different time, you know, at that time. Yeah.

Yeah. So for my audience, probably people know that Tsinghua is one of the most elite universities in China. By some metrics, it's the most elite and possibly the hardest one to get into. Um, similar to Beida and, uh, which are both in Beijing. And, um,

I think a very significant fraction of the top leadership of the Chinese government has actually passed through Tsinghua University. So in a way, it's a little more technically focused than Beida. So it's a little bit more like MIT than like Harvard. But in a way, it's kind of like a combination of MIT and Harvard. Yep. Yeah. Tsinghua, they call it the MIT and Beida, which is, as you mentioned down the street, is really like the Harvard. And it's all in that Haidian district. You get one of the

most concentrated clusters of brain power in the world. You know, you're, you get into Tsinghua, you're not a joke. I mean, it's like, uh, you gotta be at the very top echelons, uh, in their educational program to get in. So it's, uh, not that I was there. I got through an exchange program, but, uh, yeah, no, that's always impressed by Tsinghua people still proud to be associated with it in any way. So also Michigan state. Yeah.

Yeah, Michigan State's not bad either. We're not at Tsinghua levels, but, you know, you get out of state. I always said you get out of state what you want. Like, you have even some of the world's top professors, and you get out of it what you put into it, really. You can do anything. Yeah. You know, there's a famous among, if you're in academia, there's a thing called the Shanghai Ranking. Mm-hmm.

which is done by, I forgot which, probably Shanghai Jiao Tong University does it. But it's basically an educational research project where

some professors there have created this project where they just gather data on all the universities in the world and then they rank them. And it's a very, it's very quantitative criteria like papers in top journals, citations, Nobel prizes. It's, it's, it's very cut and dried how they rank the schools. And, um, and it's not subjective. It's not based on like reputations, just based on what the researchers at the school produce. And, um, so maybe,

Michigan State's usually ranked like right around 100 in the world, something like this. And interestingly, when I first came here, Chinois was only ranked like

Maybe a little bit above that, if at all. But now, Chihuahua is probably in the top 5 or 10 or 20 in the world. And a lot of Chinese universities have moved up on these very objective rankings. They went from, wow, it's a top university in this country of 1.5 billion people. But it's still ranked at the level of like, oh, a good Big Ten university.

in the United States, but now it's quite different. Now in those quantitative rankings, a bunch of Chinese schools are now really at the top in the world. So that's a big change in, say, roughly 20 years. Well, yeah, I think a lot of those rankings, too, have traditionally overstated the U.S. schools.

Relative to, you know, you take a look at Moscow State University, which produced the Soviet space program. You know, a lot of very high tech accomplishments from their engineering school. Extremely difficult to get into like Tsinghua. And yet they're like 200 and something, you know, below, you know, some U.S. party schools. I just don't buy some of those rankings. But absolutely all the China schools have moved way up.

which they deserve. I mean, these are not, you know, I'm sure you're very familiar with the Chinese education system. It's no joke. And it's very, you know, it's not easy to get into. So at some of those top schools and it's, it's only based on your scores, you know, there's not any slush, you know, there's no fluff. I did so many community hours, nobody cared. Yeah. It's one of the,

It's one of the places that still it's basically, you know, in a way it's so meritocratic, it could be considered cruel because students have to take the Gaokao exam at the end of high school. And that determines what college you go to. Yep. And, you know, Qinghua would admit a few thousand kids every year, but those are like literally the few thousand best scoring students.

out of about 10 million recently, or maybe a few years back, it would be 15 million or 20 million kids who took the exam. So, you know, it's a very, very select group on very, very hard material. Like if you look at the math problems,

On the Tsinghua exam, they're actually like math problems that would be on an Olympiad contest in the United States. They're not like the SAT math problems. They're way, way harder. Right. And so they really are doing a kind of high ceiling measurement of math.

people's ability and also how hard they studied because you really have to study hard to do well in that absolutely i had a i had a guy work for me once uh he was not from beijing he was from gansu so there is a little preferential treatment at those top schools for like beijing people right and for the beijing universities a little bit but uh he was from gansu and i'm like oh you you're from gansu and you got into chinghua you must have done really well on the gaokao he's like yeah i was number two in the province i'm like

Okay, that explains why you're so smart. Yeah, that could be like number two out of like 300,000 kids who sat the exam. Yeah. And actually, just since you seem to know a lot about this stuff, I'll mention something which most Americans don't know, even the experts. In China, if you're in one of the ethnic minority groups, so the non-Han, roughly maybe 6% of the population, which includes the Uyghurs in Xinjiang,

Rather than the Uyghurs being discriminated against, they were never subject to the one-child policy. Right.

And they get very, very strong affirmative action to get into the top universities. Correct. So the score you need to achieve as a Uyghur to go to Tsinghua or Beida is not nearly as high as what the ordinary Han kid, either from Beijing or from Gansu, would have to get to get in. So there is very strong, in a way, favoritism toward these ethnic minorities in China, particularly

Which, you know, like I think in the usual narrative in the U.S., the idea is that they're heavily discriminated against. But it's actually the opposite. Yeah, I would recommend anybody go to Urumqi. And, you know, Urumqi has become a capital. It's literally the most developed city in all of Central Asia. Which is kind of shocking because 30 years ago, 50 years ago, you're talking complete backwater.

I mean, you're talking, you know, camels and little bazaars and and, you know, sheep herders. And now it's modern industrialized city. There's car plants, solar panel manufacturing plants. You know, it's heavily industrialized in a geography that's basically in the middle of nowhere. You go from, you know, from Bay to the Urumqi, it's thousands of kilometers or so.

If you study the engineering of what they had to do to bring power supplies, 5G access, all of that stuff to places like Tibet or Xinjiang, the government spent, and also even just roads, like good roads. Right. The government spent unbelievable amounts of money to develop those far western regions of China. And, you know, if you're cynical, you could say, oh, they had to do that because otherwise they would have unrest there.

if those areas were not developed but for whatever reason those are far more developed than the non-chinese uh countries just across the border absolutely oh yeah because of because of that resource investment yeah yeah it's not exactly well that's a whole subject we get into i'm you know i was always very impressed with um you know the the cpc they had a rough start i would say post ww2 of

Of course, they were able to organize, but they really started to figure it out in terms of basic practical economic development, you know, because they were pushed so far. You know, they had cadres in every little city and village listening to people trying to figure out what would work. And then when they went from the Soviet, you know, the Soviet command and control model started to break down clearly in the 90s when the Soviet Union collapsed.

They kind of saw that and then moved farther towards this, which we could talk about terrorists, but what I call the East Asian Economic Development Model, which was based off Japan, South Korea. Not a lot of people remember that South Korea, you go back to the 50s and 60s, it was sub-Saharan level of poverty. Sub-Saharan Africa, level of poverty. I worked with guys, some Korean guys, who'd be about 70 now, but they told me, Dan, you got to understand, when I grew up, I was hungry. I didn't have food.

So that's what East Asia rose up out of. And what China basically did, if you look at the big scope of things, started with the command and control, complete central planning, didn't work. It could marshal redevelopment after the wars, World War II. That also worked in the Soviet Union, but then it really flatlines everything.

And then when they put in that, so they kept their command and control backbone, oil and gas is nationalized. Banking's nationalized. Some heavy industry is nationalized, but then on layered on top of that, they created the most hyper competitive private enterprises in the world.

So all of this ecosystem is functioning together. And a lot of that private system is based off the East Asian economic model, which is export led development, capital accumulation. Right. And then human human bringing up the human index. So how did we do that? So in China, when I went there, 98, 5 percent of people got a university degree.

I think that number is now north of 50%. And you can literally, maybe getting towards 60. If you look at East Asia, Korea, Japan, you could expect China to go to 70% plus, you know, in university degrees at some point.

So, yeah, you saw, I mean, I lived through this. I saw the generations, you know, the dad was a steel worker. The son gets an engineering degree, you know, and they just keep rising up. The human capital index improves. So, you know, if you want to get into tariffs, I can, we can pivot there now, but that's where we're at.

So, yeah, I mean, I lived through this whole what I call the rapid most rapid ascent of any society in the history of the world. I mean, it was. Yeah. Let's let's stick. Let's stick on this topic a little bit, because I think even even people who think they know about China or East Asian development generally don't understand this, especially if you're not as old as you and I are. You wouldn't really know this because it's all kind of in the history books for a 30 year old person today. So just to focus on HDI, Human Development Index, again,

If you look at height, so the height of a 19-year-old kid in countries like South Korea or in China, through that period of development, when people grow up hungry...

And it's a big deal to even get some meat. See, Americans can't understand this. But at the time when you or maybe just before you went to China, people would be lucky to get some meat to eat every week. Right. So just imagine that if you're an American. And same thing in South Korea right after the Korean War. They were desperately poor. So what that does is stunt your growth. Right.

And even in Taiwan, the younger generation is much taller than the people that were born 30, 40 years ago. Right.

We just completed a genetic study in Taiwan using the Taiwan Biobank. And one of the interesting things is we could document that the genetics of height have not changed in Taiwan, but the average height has gone up several inches. Just because people got richer, they can eat more calories when they're growing up. They get more calcium. They get more protein. Everything changes. Right.

And now I just looked at some numbers and the average 19 year old in China is taller than the average Italian. Okay. Yeah, I believe that. Yeah. Yeah.

Yeah, so you just see this crazy thing where, like, among old people, you see very few tall people. But then among young kids, you see a lot of kids that are over six feet tall. Sure. Well, you know, it was the 90s or the 2000s, China had to redesign the city buses because they had to make them taller. Yes. To your point, yeah, people are, you know, it makes sense. And really post, yeah, you're talking post-1980, most of Asia was desperately poor.

And not a lot of people understand as well is that East Asia, we're talking Taiwan, Japan, South Korea, you know, these tiger economies, as they were called at the time, Hong Kong. These guys were desperately poor and developed under military dictatorships through this export development model. Now, the problem we get into with trade is that they're still doing the export development-led model, and it's creating a lot of issues with the states. So, but...

Let me mention two other things about development and human development. So I was just talking about nutrition. You mentioned already that at the time that you went to China in the 90s, only 5% of high school students were able to go to college or 5% of 19-year-olds were able to go to college. And now it's well over 50%. So if you think about that, that's a 10x. Yep.

So if you were a smart kid in China in 1990 or 1995 and you wanted to learn to be a semiconductor engineer, you were probably out of luck because unless you were really at the tippy top in that society, you were not allowed to go to college. There just weren't enough resources for you to get trained.

So now you have a 10X within that society. You have a 10X in the fraction of the 19-year-olds who can go and learn how to do machine learning programming or semiconductor development or mechanical engineering, whatever it is.

now you're at developed world levels of human capital development. And that has come as a shock, even to American scientists and researchers, because they were used to this idea that like, yeah, China is this huge country, but they, and they send a lot of their people here for graduate school and stuff. So we're used to like, Oh, that level of human capital flow, but they don't realize that a 10 X happened. A 10 X happened in the pool, just as you've outlined from 5% to 50%, a 10 X happened in the pool, uh,

And all of a sudden, they're just awash in really, really smart, well-trained 25-year-olds, which just wasn't the case in the 1990s. So an environment where you had to copy everything

You didn't have any strong tradition of world-class engineering or world-class science or chemistry, whatever. You just didn't have it in 1990 or 1995. Now, all of a sudden, you have it for the first time. You have it, and you have it at this crazy scale where every year they're turning out about 10 times as many scientists and engineering grads.

As the United States or roughly equivalent to the rest of the world actually combined. So it's a, that, that Delta has not been like, uh, incorporated into people's thinking about what the U S is actually competing against right now. Absolutely. Um,

And the other thing you said, which I want to emphasize, is that all these Asian tigers went through an authoritarian phase where, you know, if you want to like bulldoze somebody's farm because we need it for, you know, an airport tarmac or we need it for a superhighway, that it's much easier if the authoritarian just says, look, this is our economic development plan. We're doing this to you. There's no courts that are going to protect you. We're just going to do it. We're going to move you over there. And maybe it's terrible for that individual farmer, but the country develops very fast. Yep.

As long as the government knows what is kind of doing the right thing. And but in the case of the other East Asian economies, they transitioned out of that authoritarian mode into very vibrant democracies. And I personally don't think that once China gets a little bit more developed and a little bit wealthier, it couldn't become more like a Singapore economy.

or a South Korea than a North Korea. So, so everybody, the anti-China people in America want to portray the country. That's like, it's, oh, it's like a giant North Korea. Yeah. But in my mind, it's much more like a giant Singapore than a giant North Korea. Yeah, absolutely. The Chinese, even going back 20 years ago, they laugh at, they kind of laugh at North Korea. They laugh at the Kim family. You know, I study with some North Koreans at Tsinghua, but you know, they're deathly afraid to talk to me. Yeah.

and spent some time on the North Korean border. But yeah, the Chinese, they look back and Mao is still a hero, but they also realize, why did we get into this cult leadership thing? It's crazy. And they laugh at the Kim family, North Korean people buying into that. So yeah, absolutely. China is way closer to Singapore on the scale than North Korea. North Korea, 1960s China is like,

history it's long gone yeah you know when i meet with government leaders there like sometimes i'll be there and i'll for some reason i'll be at some event or i'll be sitting at lunch some you know at the event with some government official i even have relatives uh on my father's side who are government officials right and when you talk to them they're just like technocrats that you that might have come from singapore actually um

And the way they think about their society, like none of them are thinking about, oh, I don't like this business guy. I'm going to send the secret police over to his house now and interrogate him or have him shaken up. Like that just isn't part of the mentality there. So the picture that even like J.D. Vance has of like what Chinese society is like or something is totally wrong. It's like –

There is, there is a legal system there. Maybe it's not exactly like ours, or maybe it doesn't operate as efficiently as it should or effectively, but generally things are resolved through that set of rules. They have a set of rules by which the society is run and they, they, they mostly follow those rules actually. Yeah. What I tell people is you feel more free in China than they do the United States, to be honest. So, you know, drove a car there 20 years. I never got pulled over by police. They were stopped at a checkpoint. Um,

um you know you basically do what you want shine as long as you're not hurting anybody you can basically do what you want it's very you know free society you're not you're not forced with high insurance bills and high medical medical costs or high property taxes um it was you know the 90s from today was kind of the wild west from i'd say 90s to uh

2010 ish. You know, it was really a wild West. It was like, just build the businesses, get it, get it done, do anything. Nobody cared. But then after that, they really started clamping down on, you know, environmental regulations and these types of things. But yeah, I know I lived through the wild West section. Not a lot of people remember to late nineties.

China was so it was it was not as poor as it used to be, but it was still in big trouble. Like when I was at Tsinghua, they had to open businesses. The government didn't have money to send the universities. So they said, go open businesses. So they'd open a telecom company. They were the military were running hotels. Government said, we don't have money for you. The military opened bars and restaurants and hotels. Eventually they were told to get out of that businesses.

But it's also how they develop their massive industrial base they have now, which is very impressive. I would say the world's leader in terms of actual manufacturing capabilities is

is they did a bunch of joint ventures with foreign companies, the best manufacturers in the world. I used to run a Norinco JV, a joint venture. Norinco is like the Lockheed Martin of China or something. And yeah. You didn't make assault rifles. They do assault rifles. They do all types of different artillery, weapon systems.

But, yeah, they learned, okay, let's bring in the guys that know how to do forging and castings and stampings and precision engineering and manufacturing. That's how they learned it. So it was really smart where, you know, invite people in, learn how to do it, and then you can do it yourself. And so I lived through that whole joint venture kind of model, and

It was quite interesting because I used to visit Chrysler a lot and I'd go through the second floor, which was the Beijing, Beijing military section of something. Something was developing military.

was developing their military vehicles. And then the third floor was the Chrysler JV. At the time it was called Chrysler, but yeah, no, it was interesting. But they went from that to, you know, we used to have too many workers. I, one of my, my first job off Tsinghua was at General Motors. They had bought a bunch of facilities, but nobody wanted to go visit these companies. Like though they send me, I was the young guy I'd go out to the boondocks and the boondocks like Hangzhou, right. Which is like amazing place now.

But back then, everyone considered it like backwoods or something.

And, you know, I'd look at all these joint ventures that we would have 800 listeners. I don't. Sorry. Go ahead. For the listeners. That's now the home of Deep Seek. Yes. For example, and Alibaba. Alibaba. But yeah, at the time it was a backwater. Looks like the future. It looks like the future. If you go there, it's just amazing place. But yeah, back then, you know, all the big executives didn't want to leave Shanghai. Basically, they send me out to all these facilities and I would be in different places.

factories every week, just trying to understand what's going on. And, you know, they would have seven, 800 people. They would probably need a hundred. So we literally had way too much labor in the late nineties in China. It was a huge excess of labor. And then by 2010, what had happened, you'd already started to see the first signs of labor shortages, which was incredible. Like nobody would have believed that 10, 15 years before it would be incomprehensible. And

Because there was a lot of Rust Belt unemployed up in the Northeast. The whole Chinese economy was shifting. And then now you still have China. You have, I think, you have an economic transformation issue. So when we talk about all those people that went to college, now they don't want to work in factories anymore.

So you have all the one-child policy. You have all these highly new educated people. How can you shift your economy on a dime to go from blue collar to white collar like this within a decade? Extremely difficult. I think China's doing their best to manage it. But the slowdown of what we talk about now in China, I think it's basically that. It's how to convert that economic system where your human capital index rises so fast that

Right. And you're seeing that with these young engineers and deep seek and all these other types of companies, right.

And it's just it's just changed so fast. So there's a lot of transitional things that are happening now in China that have to go forward. But but yeah, it was amazing. Let's let's let's spend a little time talking about the joint ventures that you worked on. So I think most Americans are not familiar with what happened. So we have this cartoon campaign, you know, slogan kind of thing. People say that like they stole our jobs. They stole our IP assets.

And part of that could be, depending on which party you're in, it could be something like the rich Americans sold out the working class Americans by moving all the factories to China. So this is very complicated and emotional rhetoric around this, but you are ground zero. Yeah, yeah. Right. So so my understanding is if if you worked at the GM joint venture in China. Yep.

They were forced to do a joint venture. So GM owned half maybe or a little bit less than half. And a Chinese maybe state-owned entity owned the other half. The two parties agreed that they would set up manufacturing in China. There was agreed upon know-how and IP transfer as part of the JV. Mm-hmm.

GM signed on to it. Chrysler signed on to it. In return, they got access to this huge market, which for many years until recently was a huge profit center for all of these automakers, including Volkswagen and other automakers outside the US. But-

The point I want to make is that it was legally, it wasn't that Americans went there and said, oh, we're going to build stuff here, but we're going to protect all our know-how. It was actually from the get-go an agreement that there was going to be knowledge transfer and IP transfer to the Chinese JV, and that is indeed what happened. Now,

Tell me if I'm right about that. No, that's generally right. I think so. A lot of people don't understand. So what historically the companies like a GM or anybody went there originally for was this market access, right? So all the joint ventures we did were for market access. The car makers had to be JVs, but parts makers didn't have to be JVs. I set up a lot of 100% wholly owned facilities in China. I also worked for Taiwanese Steel Conglomerate. I had 2,000 employees.

I was the only non-Taiwanese manager. So I did that, you know, all in Chinese as well. So, you know, spent years doing that. But yeah, so we went for market access, right? They did the numbers, the Chinese car market. Well, we're selling half a million cars this year. But just do the math. As they get wealthier, they're going to buy a lot of cars. Sure enough.

Today, a few years back, GM was already selling many more cars in China than they were in the United States. And we're not buying any Chinese cars. So it always looks at the... You always look at the market. So...

China has been very open with their market, unlike Japan and South Korea, which have basically blocked their markets. And we'll, you know, like I always say, Japan won't buy South Korean cars. South Korea won't buy Japanese cars. Neither want to buy Chinese cars. So that gets into that kind of mercantilism export led development thought process.

But China, on the other hand, foreign multinationals have made a fortune in China and continue to do so. General Motors, I think the last number I saw official reports where it has made over 15 billion dollars in China.

So China eventually became 30 million vehicles at the time. This gets into like, it is related to what's happened in the U S which is basically what I say. One of the four big geopolitical trends of my lifetime, fall of Soviet union, rise of East Asia, rise of China and the de-industrialization United States. These are the four overarching things that have happened in

East Asia, rise, China, U S are all interlinked. So they didn't steal our jobs. We went there to, for the domestic consumer market, number one, but number two, when people realize how easy it was to manufacture, uh,

uh, the export started flowing, right. Already by year 2000, I think Walmart was eating up 10% of all Chinese exports. Just, you know, China got so good at, you know, mom and pop setting up this little shop and that little shop, you know, it could be done in days, right. Little guy with a screw machine company just sets it up. Um, like we talked about the human capital index, you know, they were working in the factory, uh,

Next week, they're making that stuff, right? You saw these, you know, in China's today, all these little ecosystems of certain product lines develop. Oh, this little village is known for sunglasses. Next thing you know, they're producing 90% of the world's sunglasses because they've got 50 little companies that have set up making them. So they just learned, they just climbed up that value chain so fast. So the exports, right?

Absolutely became a huge thing, but it wasn't all the only intended original reason for going to China. Most of it was like this consumer market is going to be massive. And then people also forget that half of the trade deficit with China is created by our own multinationals manufacturing in China.

So, you know, there's very few Chinese branded products in the United States. There's a lot of Chinese products. It's 80 percent of everything you touch. But most of it's controlled by the U.S. multinational firms, you know, like the Apple. Good. Yeah. I want to get more into that in a moment. But I just I want to get back to this one point of like, what was GM thinking about?

When they hired you to set up a line. Oh, it's consumer market. 100%. And so it's primarily so they could access the China market. But then as a byproduct of that, a little bit further in the future from there, they realized, oh, I could actually make stuff in China and re-export it back to the United States. Not necessarily cars, but other things. Yep.

And the sort of populist line, maybe the MAGA, even though I'm kind of a Trump supporter, like the MAGA line here would be, hey, the rich corporations sold out the American worker and replaced the American worker with Chinese workers. That fulcrum that like where that happened was they went there originally to capture the market.

They did explicitly transfer technology and know-how to China. China got good at making stuff to the point where the companies ended up re-exporting back to the U.S. Right. But how conscious was this decision? Like, if you talk to some guy, like maybe you talk to some exec at GM and maybe he has Michigan roots and his dad worked on the line, you know, making –

Cadillacs or something, you know, did he say like, well, this is the smart business thing for us to be doing, but I see this is not going to be good for Michigan in the long run. Like, did you ever have conversations like that? I had those conversations. I am, I basically, you could call me a MAGA guy, but I have a lot of practical, more real world intricacies in the whole political stuff, especially with regards to economics and tariffs. But no, I had those conversations as a young engineer because I'm from Michigan. I grew up in a 30 year de-industrialization process and,

basically what I call a 30-year recession. I saw all the factories close around me in my hometown, none of my friends getting decent jobs, and I'd ask my superiors at the time, what do you think about this? We're moving all our capacity out of the U.S., and they didn't care. They didn't even think about it. It was, I got to get my bonus. So there's a room, there's blame to go around on how the U.S. got to where it is

Number one is, you know, the unionization is not, you know, the union has not helped the U.S. in terms of manufacturing capabilities. It's been a hindrance. From day one, Shanghai General Motors produced higher quality than U.S. General Motors with many fewer workers.

In China than the U.S. used. Because unionization rules, this kind of thing. It was never about salary, but it's unionization rules. Second thing, at that time frame, people forget year 2000 to 2016, we had the highest corporate tax rates in the world.

Yes. Under North Korea, just under North Korea, 38%. So what the multinationals all did was they said, why am I, if you set up a fixed asset plant and equipment in the U S you're going to get tax 50%, right? When you factor in everything. Okay. And you've got all these retirees and you've got a unionized workforce. I'm going to go make it in China, run the financial transaction through Hong Kong, and I'm going to pay 0% tax.

Every multinational out of the United States did this. I was kind of shocked and learned when I was younger. I'm like, you're all running these financial transactions through Hong Kong? And it was an issue even in China because you would transfer price stuff out of China with no profit, recognize all the profit in Hong Kong, ship it back to U.S. The U.S. company is a wholesaler distributor. They recognize no profit. So that was basically the gain that was going on this whole time.

But, you know, not so different from maybe Google, Facebook, Google Meta and Microsoft, all their profits being in Ireland or something, right? Like totally brought, you know, just exploiting the tax law. We've got to get to the bottom of all this tax dodging and get more realistic on where to recognize profits and keep taxes at a reasonable rate where you can manufacture, right? So we push people out of the country, basically. Yeah.

Okay, but just to make that historical point very crystal clear, American executives in your era were just following obvious incentives. It was like a no-brainer for them to just be like, well, I know my dad worked 30 years at that factory, and I'm sad that my cousin's not going to be able to work at that factory, but-

the only way we can survive as a company or the best way we can thrive as a company is we're going to move the manufacturing to China. We're going to recognize the revenue in Hong Kong. It was like not rocket science. It was almost like this, you know, this is the obvious way to do business. And yet it ended up hollowing out the American economy. Yeah. That's what price water house would tell you to do. Right. That's what the consulting companies would tell you that that was, that was the model everybody was following. Um,

Right. And as you mentioned with the tech companies, because still goes on. Yeah. Because, because there is, if you're at anti China Hawk today, uh,

you don't know or care about any of that history. You just say like those Chinese guys, the CCP stole all our jobs and stole our IP. That's right. It's all, it's been morphed into that now. Right. So yeah, there's a lot of intricacies that, you know, I really hope the U S can like that. Unfortunately, I don't think we have the people in the U S at the top that are conveying all these things, but yeah,

There's blame to go around. There's win-win situations involved here, both parts. I'm constantly pushing the G2 concept, which is let's U.S. and China work together. If you look in AI, it's the U.S.-China game. You know, most of the industries are now for large-scale companies, right? Macedonia is not going to be able to come out and make an EV or an AI game.

you know, better AI. It's basically China, US, and then maybe Europe can get its act together and catch up. Maybe, maybe not. But, uh, we need to work, you know, this whole concept of the Thucydides trap. I like to say, do you realize like Athens and Sparta, you can drive between these two cities in three hours, right?

Okay. So the point is U S and China, the world's big enough. Let's work together. Let's build mutual prosperity. I think China would understand that U S yeah, you have a manufacturing problem. Let's work together. We have, you know, no issue for us to reindustrialize. It has to, we're the only large, you know, we can't be 350 million people and make nothing. You know, that's what I tell people. Like if you also, there's a lot of trends as I'm sure you're familiar with that are

helping all and what I do today in my businesses is we're focused on reshoring a lot of manufacturing because what you're having now the humanoid robotics which is going to be here by 2030 low-cost energy in the U.S. you know hopefully if they can keep up with the power generation build-outs

The whole story for offshoring is going to be gone. The tax rates are lower, automated 5G connected equipment, and most of this stuff will come back just based on national security reasons. So it's in the process of a lot of the transferring back, but you have to know how to do it smartly, right? Maybe you want to keep your tool makers offshore and just do final assembly, bring in some labor-intensive subcomponents, but...

The whole tariff thing, I've been for tariffs for 20 years because, as I was telling people, moderate tariffs because...

China is not a free market economy. It's really not. Japan and South Korea block their own markets. So you can't be fully what, you know, even Germany and UK have tariffs against you. You had no tariffs against them. So you can't be as wide open economy forever. And then everyone else blocks their own markets. You get what you have now in the U S which is hopelessness. The initialization. So if I could just recap a little of that for the audience. So I think you are saying that like,

Trump is not crazy when he says other countries are and have been using tariffs against American companies for a long time. And, you know, a lot of the things he said, like, look, I would just be happy if we just had exact. We'll just mirror what you do. If we if you wherever you are, we'll be there. And at least it's fair. Right.

And I think the press, which is still as anti-Trump as it's ever been, that message never gets across. Trump is reacting to an unfair setup that has been in existence for generations. The correct concept is the execution, I think, was done poorly. So

The concept is, yeah, Japan imports 1% of their cars, China 0.3%, South Korea 1%. There's a reason that is the situation. If they're all so competitive, why aren't they buying each other's cars, right? So there's tariffs and there's also non-tariff trade barriers. So I can give you some examples in China. This is a real story. You'll never hear this. This is from real experience. I think it was 2003, the China car market started to boom.

uh government came to us with a letter no official no official overhead on it here's the plan you got to localize all this stuff because the car makers we were making fortunes on importing components and sub assemblies and just putting it together that's not what china wanted because all the jobs and technology came with building the stuff right not just lashing it and ratcheting it together

So they gave us a plan like you localize 60% of the car or it will be taxed as an import. So we set up all the factories. I would spend the next five years, like literally doubling the capacity of the plant. I was at every six months. So, um,

What I call weaponization of the customs customs will constantly monitor. Why is this still getting imported? They come to you. Why do you have to import this? Why can't you just buy this here locally? Right. These are the things that go on. So in Korea, there was a time if you drove a foreign car, they wouldn't sell you gas. Right.

OK, they're nationalistic. Oh, he he thinks he's too good for a Korean car. I'm not going to sell him gas. You know, so that's the reality of the global trade system. You don't find it in textbooks. Right. In textbooks, it's very simplified and it works beautifully. But in reality, as I say, you'll only find free trade in an economic textbook. That's the only place it actually exists. So Trump had the right concept.

You can't be a superpower and not make cars. We made 9 million cars last year, the same number we made in 1970. You can't be a superpower and not be able to make steel, not be able to make ships. You see all this erode into the U.S. defense industrial base capacity where we have trillion-dollar budgets and we can't make anything on time and everything's five times over budget.

You're seeing even things we should be leading on, like automation. South Korea is way ahead of us. China is way ahead of us. You know, in terms of I think you posted a chart on X about robots per amount of workers. Right. So I follow the automation in China very closely because I plan to use it for a lot of my plants in the States.

It's just incredible what's going on. But we've lost the basic core of manufacturing. When you lose that, you can't do the more advanced stuff, right? So we've got to get back to making stuff. So they had the right idea, wrong execution. It's been chaotic. It's been changing. It's mass tariffs. I just paid at one of my companies, just paid the first fentanyl tariff ever paid. It literally says fentanyl tariff on it, on the documents. That was 20%.

but I have a chemical that we import. It's only made in China. It's sold to some of the largest semiconductor makers in the world. And it, uh, there's now 200% tariff and it's not made here. Right. Um,

Everything, when we 200% tariffed on China, that's 145%, 20% fentanyl, 24% Section 301 tariff. We're going to have shortages here real quick. We're going to have mass chaos. So I would have executed the tariff system by HTS code. That's product code.

Go start with cars. Cars, sure, 20%. People can switch to American cars. People importing cars can work on localizing cars. There's a substitute there, but people don't realize how deep the Chinese supply chains are. When they do trade or manufacturing numbers, they do it in revenue. But keep in mind, everything in China, the U.S. is five times more expensive than China.

So what it is, 80% of everything you physically touch is coming from China. If you look at it in terms of widgets, how many containers are leaving globally every day? You know, the top 10 ports, I think eight are in China because they're moving the volumes. So it's not just a revenue game. It's a volume game. And now we've tariffed everything out of China. It's going to be a disaster. We're going to have issues. Yeah.

Could I dig into that point? Actually, you've said a bunch of things in the last few minutes that I want to return to, but this one I want is specifically I want to drill down on. So

If we look at the goods that are affected by the tariffs right now, and effectively a lot of them – I mean, you mentioned one where there's no substitute. So that's just going to be an increased cost component in our process here. But some of them are like stuff that's sold at Walmart may just stop coming. Yes. So we have finished goods going to retail that maybe will just disappear. Yep. When –

When someone imports something here and they pay X for it, they're generally selling it for 5X at the store. Roughly.

But then all the people who moved it and managed Walmart and Walmart shareholders, they were getting that 5X when they sold it. And that economic activity could potentially go away. So that is actually an asymmetry against the U.S. for goods that can't be sourced somewhere else, right? If the X had to come...

Absolutely. From China. Is that a fair analysis for finished goods? Absolutely. And I've argued for years the American GDP is a lot of fluff. It's capturing a lot of financial flows. It's expensive hospital bills and legal services. And yeah, no, you're right. Absolutely. That $5 item in Walmart that costs a dollar out of China, America will lose the $5 GDP if they don't have it. Yeah.

Yeah. To simplify it if they don't have the item. Yeah. And to your point, items are stopping. Container traffic leaving China was down 50% for the last, say, three weeks. And now I just saw today the Port of L.A. is saying this week 30% decline in incoming traffic. Why is that happening? Because guys that are importers...

So it's the chaos. Nobody knows. Is someone willing to pay 200% more than they were just paying? Some things you could eat. When it was 25%, you could eat that margin. You could figure it out. You could ask for a little price increase. Even if it's 40%, oh, my God, I'm going to have to raise your price 20%, right? But when you get in these kind of levels, it just shuts the system down.

At 200%, like, I don't know if anyone will pay for that. I'm just not going to order it. I'm just going to wait. They're just stopping. So the example I gave, finished good that would be sold at retail in the United States, and that Trump, in a recent comment, said, oh, so what? So instead of your kid having a choice between 30 dolls or getting 30 dolls at Christmas, she only gets two dolls, not the end of the world, okay? Let me shift to something else, which is that

There's some high value add manufacturing process in the U.S., like maybe making a car. Yep. And but some screws or pumps or some significant component is necessary to build that car. And it's being sourced from China. Now it can't come in because of the tariffs or whatever it is.

That's hidden from most people. I think most people don't, they can think about Walmart. What's going to happen tomorrow at Walmart. They don't understand how embedded all this is in, you know, advanced manufacturing that we really want to work in the United States. So cut,

Comment on that. Or you could even talk about semiconductors, which you're involved in. Yeah, no, absolutely. So your point is exactly correct. It's called the golden screw theory, right? If you have an entire $100 million operation and you're missing that golden screw for some piece of equipment...

You just don't have it. It just shuts down. But it's actually much worse than that. To your point, so many U.S. manufacturing is a lot of assembly. It's not real manufacturing anymore. All the hardcore manufacturing, the dirty stuff, the forging, the castings, all this type of stuff, the stampings is all imported, most of it from China. The chemicals, China makes 50% of the world's chemicals. We almost make none. Our chemical production left.

years ago, decades ago. All of this stuff has to get imported, get put in the manufacturing equipment. Absolutely, you could start seeing...

you can see massive shutdowns. I always say if the China trade ships stop showing up, it could shut the U.S. down in 30 days completely. So that's the non-retail side of it. You're absolutely right. The manufacturing that is here in the States is fully dependent on it. I gave you an example on semiconductors. It takes 1,000 chemicals to make a semiconductor chip.

thousand different chemicals. Most of those are not made here. They're imported, many of them from China. So yeah, that's why you want to keep the trade open. But you have to, you know, this system's been building up for 50 years. And then to think you can change it just with the stroke of a pen overnight, it doesn't work that way. It's just going to, and guess what? It's going to be a lot easier to reindustrialize with a decent economy than if you just crash the whole thing down.

I think what Trump has done is they come in and they get the problem. They go to Michigan. They go to Pennsylvania. They look around and they go, what has happened? All our manufacturing is gone. Okay, they look around. Where did it go? China. Okay, and now they're flipping the card table over of the global trade system just in anger.

You know, but we really need to be wise at this point. We really need to take a more thoughtful approach how we handle things. Okay. So one of the main reasons I wanted to invite you on the show is for that perspective. So under the hypothetical that we don't get a negotiated settlement with China in the near term, so say this extends for months and the tariffs stay at this super high level, 100%, 200% level for months, right?

You're predicting basically even like a lot of the core manufacturing that we really care about in this country, even semiconductors, is going to seize up.

Potential to seize up. Yeah. I think the first thing we'll see is on the retail side. So when you get 30% less containers coming in, that's just less stuff. So what I always say, if you don't make stuff, then you have to import stuff. If you don't import stuff, there just ain't no stuff. So what happens to the stuff that is here, all the prices start to rise because it's in demand. So I think on the production side,

The first noticeable for everything will be the retail side. Production side, they will air freight components in to save their production. They'll pay the extra money if they absolutely have to. So you may or may not see some seizing up, but you're going to just start. It's so chaotic right now, and I deal with all types of companies, Fortune 500s. Nobody knows what to do. Nobody knows where the tariffs are actually going to end up.

Or B, I know I want to get out of China. Oh, I can't get out of China. Guess what? When we talked about, it's not just dolls, okay? If you want your car repaired, almost every AutoZone, O'Reilly, Nampa, 90% of the car components are all made in China, okay? And those are all imported. So even if you want to make those here,

Okay, just to replace, like take a brake disc, right? If you want to make brake discs and furnish the whole U.S. market, you need 35 factories, okay? Each one's $100 million. Okay?

OK, start making it. And then when you do make it here. Oh, by the way, the price is double. So these are the thing, you know, to reindustrialize the U.S., it's got to be a plan and it's got to happen over time. It can't just be you can't just wish it into existence, you know. Right. So now I think what you just told us, that example of, you know, the brake pads or whatever it is. Yep.

I don't think the average American understands that 90% of the car parts at Napa are coming from China. I'm not even sure the Trump team understands that. They don't. But I'm pretty sure some CEOs are pounding down the door to the White House and to Trump's team to tell them this is our future if this doesn't get settled relatively soon. Yeah. So –

Do you have any prediction for how this is going to play out? Because it looks like the Chinese, we're playing hardball, though maybe they're softening a little bit. So what do you think is actually going to happen now? So from the Chinese side, you know, a lot of also people, we make the mistake here. We look at everything, oh, made in China because we can't make anything. Everything's from China. So we think that's China's economy, right? This is not correct. So 15% of their exports now go to the U.S. Like I always say, if they lose that, yes, it's painful.

Yes, you're going to have individual factories where all their market is U.S. They're going to be in big trouble. Yes, but we buy everything from China. We're just not going to have stuff. That's going to be much more trouble. You're talking recession versus depression here. So on the U.S. side, I'm like one degree separated from some people in the Trump administration. We are pushing some of these narratives in there. I'm sure guys like

I'm sure the big boys, you know, the apples of the world and things have been

been talking to them about this. I agree with your point. I don't think they understand how deep the China supply chain is. They haven't thought the second order, third order, fourth order. They just think... And by the way, the U.S. manufacturers with manufacturing plants are booming. Many of their order books are now 10 years out. They have no capacity. They're full. But the cases of that happening, there's just not enough of them.

You know, there's just not enough. So it's got to be phased in gradual. So I can give you an example on syringes. I think people realize, oh, my God, 90 percent of our syringes are imported from China. That's that's a national security issue. So there is one syringe manufacturer left in the US. There's a couple of real tiny ones, but there's one large one.

Their order book is out 10 years now. I have no capacity. I can only give you allocation because the tariff on our medical syringes is 245%. And guess what? That capacity is also not laying around the rest of the world. It was all in China.

So these things have to transition slowly. We could have done, and I know Trump's probably thinking political. I got to do it now. If there's a recession, it's got to get over now before the midterms. He's not thinking long term because our political system. But what would have been smarter is you could phase in tariffs. Okay, guys, this year it's 10%.

Next year, it's 15%. The year after, that's 20%. The year after, that's 30%. That gives everybody the runway from the planning perspective of these corporations because you can't just set a factory up overnight. It gives them time to figure out, and it gives them the direction. Yep, okay, I've got to finally reshore this stuff.

And that would be a much more stable plan. But yeah, I'm afraid how it ends up is we've got a lot of chaos coming, unfortunately. So inflation shortages, tariffs at some point. Yeah, it's not sustainable. I think both groups will back down. I did hear some positive things on the fentanyl side of it where it's

you know, they'll maybe get something done on that. But yeah, I'm just hoping we go back to say a 40% range. I think it's survivable if that happens, but the current rate is not. Yeah. So could you,

This is now more of a political analysis, but could Trump come back and like, maybe, maybe it comes down to like 40% or 35%. And Trump comes back and says, Hey, we put the heaviest tariffs ever on these bastards. And we got him to stop sending fentanyl and killing Americans. And then that's his political win. Right. And then we settle out there. I think that would be viable on the U S side. At least the MAGA side wouldn't notice like how stupid the whole thing was. Right. But, but,

But the Chinese side might not let him off. That's the question. They're talking so tough now. They might not let him off. So I don't know. I don't know what's going to happen. I have a win-win for both groups. To your point, it's funny. I agree. Trump could actually declare victory, but with nothing happening.

Yeah. You know, and people may not notice, right? So, but a win-win on that. On Fox, they'll just report it as a win, right? Yeah, they'll report it as a win. Yeah, I see win-wins for both groups here. So let me cover the fentanyl thing right now real quick. Fentanyl is a cancer drug precursor. It's sold all over the world, mostly by China, I think 70% China, some Turkish, some Indian companies. It goes into Mexico.

where the drug cartels mix it with other stuff to make the street drug fentanyl. And then they distribute it in the United States. Somehow China gets the blame for this, which I find ridiculous. You know, it's not the drug cartels, it's China, right? So I had a very easy win-win here. China just says, you know what, Mexico, you're abusing fentanyl.

that we export to you and cut them off okay china wouldn't even lose a sale because mexico's then going to go to the u.s to buy the fentanyl cancer drugs right then the fentanyl the china can easily just say guys that fentanyl is from the u.s we don't even export to mexico we cut them off because they were abusing it okay done not your problem right it's a win-win for everybody

The trade side, I agree with you. I think China wants to level some kind of a lesson. And not only just the tariff duty rates. China has tariff duty rates. They have a 25% tariff on cars. So I don't think – I think if you went sanely to China before and said, guys, we have to manufacture, we're going to put these tariffs on everybody –

then you were not excluding them. I think China, you're kind of backing them into a corner. We're publicly trying to get, you know, the quad around them, India, Australia, Japan. We're trying to, we're trying to create these like world war two type alliances against them. And now we force them into the arms of Russia, which culturally the Chinese and Russians don't,

really have an affinity there. The Chinese love America. They loved Americans. There's a lot of cultural affinity between China and America. So we kind of dropped that ball in pushing them towards Russia geopolitically. But yeah, I think

The end of the day, the U.S. could win this very easily. You know, you get you start selling them chips again. Right. I think one of our biggest own goals was stopping ship ship shipments to China. It's like, why are you why are you reducing the profit of our firms and forcing them to develop competitors? That's all you've done.

Because at the end, and I know you're in this field, I'm sure you know better than I do, but it just doesn't make sense to me. Why handicap your own companies from the world's largest market? No, I had exactly the same analysis of this as you, Dan. I think it was a huge mistake. The whole chip war was a mistake by the United States and...

It hasn't kept them back because in generative AI, they're just barely behind us, if at all. And now they've got a blossoming, very, very vibrant, powerful domestic semiconductor industry, which was energized by this whole crisis that we engineered. And actually, to be honest, if you were a Chinese nationalist,

You would just hope that we just keep this NVIDIA ban on for a while because Huawei is right there with clusters and advanced technology that can compete with NVIDIA. So now Huawei is going to have one of the largest markets for its AI chips, and NVIDIA's AI chip market goes down by a factor of two because of something done in the White House, right? Yep.

I think on the Chinese side, they'll be like, yeah, keep your NVIDIA. Exactly. We just gave them short-term headaches, right? So on that win-win side, short-term headaches. How we win this back is not only did we give them short-term headaches, but we also, though, created an alignment between all their companies. Everybody's following their own incentives, right? So the guys who fab the chips,

They have to compete with TSMC and Samsung. Yep. So the dumbest, easiest thing for the purchasing guy at SMIC to do is buy the same chip making equipment that TSMC buys, which is all Western companies.

But the moment you sanction and you say like, hey, we're going to cut this all off for you. Well, then the guy has to go down the street to hide on. Right. To his buddy's startup and say like, hey, does your thing work? Because we got to buy it now. And well, if it doesn't work, my engineers are going to help you get it working. Right. And that whole dynamic was just triggered under Biden by what we did. Right. And they went from like.

very tough for these small companies making semiconductor equipment to break in for the reason I described to suddenly like they are like embraced by Huawei and all these other companies. So it's insane. Funny when you mentioned high down district, funny story. The, when I was at Tsinghua to give people the idea to let you know how much brain power is clustered in this area. That's where Tsinghua and Bay die is the guys out selling the fake CDs at the time, the fake DVDs and CDs. They, I would take a look at it. I'm like, what is this? AutoCAD,

sql database it's all advanced computer software software engineering software i'm like how much is this oh that's a 40 000 site license oh but here's eight rmb okay but that's how we did it back in the day we just would and we learned learn the systems play with them you know but uh yeah it's it was uh huawei as you mentioned now now has a wall walled garden in the world's largest market

It makes no sense. Exactly. We always used to say in not just tech industries, but auto as well. If you're not competing in China and winning, you've lost. You have to be able to compete in China.

Because it's the world's largest market for everything. It's 80% of the EVs, right? So if you're not in China winning, you're losing not only their market, the consumer market, but the engineering talent, the supply chain. You know, all of this stuff is it's just so crucial to be in China competing there.

And, you know, and trying to because if you're not doing that, you're they're going to leap ahead of us. And then by that point, it's going to be almost impossible to catch up, I think. Yeah, it's it's just a scale thing. I mean, it's the largest 30 million cars a year sold there as big as U.S. plus Europe together. And also the most competitive, like cutthroat competition.

cutting-edge technology competition. And if you can't compete there, you're eventually going to lose. How are you going to beat them in Brazil? Or how are you going to beat them in the UK? You're going to be out-competed. And we're seeing global retrenchment by American multinationals all over the world and that kind of thing. Ford sold their car plant in Brazil to BYD. So it's already at a stage where these Chinese corporates are going to take most of the global market share in most everything.

I would say our last technical redoubt might be NVIDIA chips, Apple iPhones. So if we lose that, what else do we have? There's not much left. So it's going to be interesting. Actually, sorry, go ahead.

In terms of cost performance, I would say the Chinese cell phone. I mean, of course, you might just be locked into the iOS ecosystem. They're better. Just in terms of the cost performance of the phones, the Chinese phones are actually better than Apple phones, honestly. It's been that way for 10 years. Yeah, and they're losing in China. I mean, Apple's iPhone market share in China has been going down. Exactly. And that's, again, the most competitive market for this stuff.

Everybody's there. Apple, I'm not. They have a lot of problems. I mean, 20% of their sales are China, which is declining. And I think still 70% or more is manufacturing. Just got a 145% tariff. So they're in a difficult spot. And what's the difference between the latest iPhone and an iPhone from seven, eight years ago?

I'm not seeing much. I'm not seeing much. Where you look at the Chinese phones, they're just moving ahead. China's an interesting market, as I say. It's like an alligator swamp over there. If you survive, you're the biggest alligator in the world. Yeah, you're Godzilla if you survive. Yeah. There's no IP protection, right? People think, oh, they steal anything. So in China, someone will copy your stuff the next day.

So they have to constantly be re-innovating over there. That's why these companies become so powerful, the Ten Cents and the Babas. These are just juggernauts companies. Yeah, I think most of the world would be buying BYDs, Xiaomi's, and they're even displacing their own industry. So interesting thing in the car market.

Now you've got the tech firms, right? The BYDs, the Xiaomi's, the Huawei's. Yeah. They're displacing the old state-owned enterprise companies, the SEICs, the FAWs, the Dongfeng. So there's this redistribution there that has to happen where you bleed down those old state-owned car makers and these brand new private companies are coming up. So, yeah, it's interesting dynamics. Sounds like, though, you think,

Maybe we come off this problematic rollout that Trump just had. We come off it to some more reasonable place. Over time, the U.S. can get some manufacturing going, right? I mean, it's not absolutely too late, is it? Well, so what came with the deindustrialization of the United States, and I mentioned that's the four pillars of huge economic change, I think, the last 40, 50 years. One of the four.

What came with that deindustrialization is massive social issues. You see that. Go take a drive to Flint. Lead in the water. You know, go to, I mean, Detroit. Look, God, I mean, I tell D.C. people, go to Detroit sometime if you don't think we need tariffs. Twenty five percent of Michigan's on Medicaid right now. OK, and that's just not Michigan. It's every state.

So how we get it back is, and what I focus on with a lot of VC investors now, on reshoring. Number one, you have automation, right? That takes away a lot of the old labor cost issues that were involved with moving manufacturing out. Number two, you've got low-cost energy. U.S. has some of the lowest LNG prices in the world. They still, though, we have to be able to convert that to low-cost power generation.

If you want to create a prosperous society, you need to be able to create power for the future, for the AI, the EV, all this stuff at $0.10 a kilowatt hour or less. And keep that, you know, you've seen what's happened in England. They're at $0.33 and every productive enterprise in the world they had is gone. Their last steel mill closed. Yeah.

England's last steel mill closed, and now they're trying to start a war with Russia. I mean, the delusion is insane. So how we bring it back is we have low-cost energy. We have automation. We now have reasonable tax rates.

And the thing, oh, we don't have the labor is kind of a non-issue for me. I think it's 350 million people. You tell me you can't find 1,000 people to work at TSMC? Of course you can. So there is, of course, absolutely we need to develop our own STEM people. We need the best tier of immigration on the engineering side. Keep that open.

But, you know, absolutely it can be done. It will have to be done. We were the world's manufacturing power 50 years ago. We were making 25% of the world's chips 10 years ago. So all this can come back. It just...

Our system, when we got deindustrialized, it became set up for financialization. Everything's money printing, debt, buy to lease, private equity focus. The worst thing you can do in a private equity company is spend money and invest it. Cap X. Don't do it. Just go buy it somewhere, right? It's all about return on investment. So we have also the whole system itself will have to focus back on

on setting up a sustainable environment for a manufacturing economy, you know, and get our human capital index going back the right way instead of down. So these are all hard things and they're going to take time. I just hope the society, our society can commit to a sustained rational strategy.

And, you know, these quick wins that that this guy, Howard Letnick, just just I can't listen to this guy for even five seconds. But but yeah, I mean, like that kind of attitude is not going to get us there. You have to admit that you're in a long term marathon and, you know, it's too important to lose. We need someone to explain that, guys. This is not a this is not a 2025 thing.

this is a come on with a 10 year plan, come on with a 10 year plan, come on with a 10 year plan. And they said, this is where we need to be in 10 years. And this was going to take and get out of the constant political cycles and both political parties, you know, literally you have whoever's out of power is rooting against the country. You know what I mean? The Democrats say we'll cheer bad economic growth. We'll cheer shortages, you know, for political reasons, you know, it's craziness. So,

Yeah, hopefully we get it sorted out. I think we need China's help to re-industrialize. I think that should be the focus. Like, literally... Yeah, you know, one of the things...

One of the things Trump said during the campaign, which gave me some hope, is he actually said, he said, look, these Chinese guys, they can sell their cars, their EVs in America, as long as they build the factories here and also transfer know-how to Americans. Like, that's fair, right? That's turnabout is fair play. And that made me think Trump is reasonable on this, right? Yes. And that's all what I'm doing now. It's part of my reshoring, my facility, new company I'm trying to build now.

I got the first one going in Tampa to make medical equipment. That is Chinese joint venture strategy, but flip it on its head. Get these Chinese companies to come over in U.S. and invest. Oh, by the way, guys, in U.S., your price point is going to be five times what it is in China.

You have less competition. Bring the facility over, you know, manufacture it here and capture that market while you can. Right now, China's not getting value for what they make. You know, they'll make something for a dollar and it sells for $5. Yeah.

Get the plant over here, sell it wholesale at $250. You know what I mean? You're getting double what you get in China for, triple. So I think that avenue is open if we do it smart. Chinese companies obviously are scared of U.S. now. They don't want to invest in U.S. There's too much tension. But if it's done at the high level, you literally could go with China and say –

U.S. needs to remanufacture. We're going to invite a trillion dollars in capital equipment investments from China to the United States. Here's a great example. The pork industry, Smithfield Foods. Have you heard of this company? It's Chinese owned. They own about 60% of the pork industry in the United States. They manage 18 million hogs. So keep these ratios in your head. In China, the entire pork industry manages 118 million hogs.

So 118 million versus 18 million. The entire Chinese pork industry profit is about $1.7 billion. Smithfield makes $10 billion a year. Wow. Yeah. Well, it's literally 10x the profit for 10x less management. You see? So because the Chinese market is so competitive. Yeah.

And the U.S. market has become these oligopolies. Every industry you're in, there's two companies, three companies. So we need to go also back to the drawing board and figure out how to let 100 flowers bloom. Let entrepreneurs and new manufacturing companies develop.

Figure out what's blocking that. Is it regulation? Is it capital? And get that fixed. And then it will take care of itself. The system, the private enterprise system will take care of itself. You just need to, you know, we're like fish. And if you set the fish tank up properly, we'll thrive. But if you leave in dirty water, we're all going to die. So that's how it works. Yeah.

That's the beauty of the market system. And, you know, the communists, you know, to their credit in China figured out, like, if you really want to get stuff done, you have to have the incentives aligned. You have to have a free market and let people go and they'll do it. Oh, absolutely. I tell people China is much more capitalist than U.S. People don't get it. They're the best capitalists in the world. But as I mentioned, they kept a backbone of kind of key strategic sectors.

And it's not a free market. I mean, they will, they pump the EV industry full of money. I mean, that's because they saw that as strategic. They want to stop oil imports, you know, as much as they can. So, but, but the private enterprise system that, that,

functions in China is completely, you know, it's cutthroat capitalism. You know, it's funny because in academic economics, they sometimes argue about this question of like, well, if you really had perfect competition, wouldn't the profit margin just be driven is absolutely to zero. And China, China in a lot of areas is just like that. They literally drive the profit margin. They compete so hard. The profit margin is literally zero. That's correct. Theoretically, if capitalism is done right, margin should go near zero.

Yeah. Or just enough to keep people alive. And that's what's happening. Which is crazy. Yeah. Yeah. It's crazy. It's amazing to see. It's very interesting. And that's why they're so competitive, you know. So.

Well, Dan, I've really enjoyed this conversation. We're about an hour and 20 minutes in, so I should probably call it. And I'm sure our listeners really enjoyed benefiting from your vast experience. Is there any place you are online that I should point to in the show notes or point people to? Best place to find me is on X at DanCollins2011. Great. I'll put a link there in the show notes. Yeah, cool.

All right. All right, man. Take care. Great to meet you, Steve. Yep. Talk soon. Keep in touch. Yeah. I hope we meet in person someday.