The Unraveling is Accelerating; Post-Escalation Options for the PRC; Trump Goals and EU Possibilities; Another Maddening TikTok Development
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Thank you.

Hello and welcome back to another episode of Sharp China. I'm Andrew Sharp and on the other line, Bill Bishop. Bill, it's great to be back. How are you doing? I'm good. I missed you. I missed everybody. I'm glad we're back. Yeah, I mean, we were off last week. We didn't miss much, you know, pretty quiet week. I figure you probably had a lot of time to catch up on your gardening, go to a Zen place for six or seven days. Yeah.

Let's just say that during the President Trump's Rose Garden announcement of the tariffs, I did a live stream of Tashi napping with his speech in the background. And he had 500 viewers. I tuned in. There you go. I tuned into the Substack Live and I was like, man, I hope Bill releases this as a podcast because the sound

of a gold doodle snoring is what we all needed last week. We don't need to hear that, but I will say Itachi has gotten quite concerned because he's realized that at least two of his favorite treats while made in America have inputs, have ingredients sourced globally. And so he's now getting worried whether or not those treats may actually go away. We're trying to revive domestic production. Maybe Itachi's going to have to start pulling his weight around the Bill Bishop household, you know? I don't know. We're going to have to find some rabbit in his keep.

Rabbit treats. Yeah, perhaps. Maybe he'll catch a rabbit one of these days and solve his problem himself. That is where we're going to begin, though. The trade war has begun in earnest. And I'll start with three posts.

From President Trump on Truth Social. I've spent more time on Truth Social in the past week than at any point in the past couple of years. I'm not going to read the full post because that would just be a wall of text, which nobody wants. Trump can get awfully verbose on Truth Social. But on Monday morning at 6.40 a.m., he wrote in part,

The biggest abuser of them all, China, whose markets are crashing, just raised its tariffs by 34%, not acknowledging my warning for abusing countries not to retaliate. And then a few hours later on Monday, he wrote, if China does not withdraw its 34% increase above their already long-term trading abuses by tomorrow, April 8th, the United States will impose additional tariffs on China of 50%.

effective April 9th. Additionally, all talks with China concerning their requested meetings with us will be terminated. And then on Tuesday, he followed up and said, I just had a great call with the acting president of South Korea. We are likewise dealing with many other countries, all of whom want to make a deal with the United States.

China also wants to make a deal badly, but they don't know how to get it started. We are waiting for their call. It will happen. So that's where we are as we record here on Tuesday afternoon. I want to talk about the U.S. side of these tariffs later in the podcast.

But I want to start with your read on the PRC side. We got a report on the way into recording here. The White House press secretary says that 104% additional tariffs on the PRC went into effect at noon on Tuesday because China has not removed its retaliatory tariffs. The 104% additional tariff will be collected starting tomorrow, April 9th. That was from Edward Lawrence.

So I guess noon... I'm not sure they're good on timing, but I guess they assume noon Eastern time on Tuesday is already... Tuesday, the 8th of April, is already the 9th of April in Beijing. Ah, okay. And we are recording at 2 p.m. Eastern time, Tuesday, April 8th. So by the time this...

between now and when we publish the podcast tomorrow morning, who the heck knows what's going to happen. The tariffs will have taken effect. Time is a construct here. But the PRC Ministry of Commerce has said that these additional tariffs are, quote, a mistake on top of a mistake, and that if the U.S. insists on its own way, China will fight to the end. Yeah.

And there was another comment I saw from the foreign ministry. China is not a seeker of trouble, but make no mistake, when challenged, we will never back down. So they've been striking that chord for a couple of days. Well, that's consistent with how they've approached this over a longer timeframe. Last week, when the President Trump announced this 34%, China was going on holiday for the Tomb Sweeping Festival. So everything was really shut down from Friday through Sunday.

over the weekend on... It ran in the Monday, April 7th People's Daily, but it was published basically the afternoon of April 6th, Sunday in China. There was a commentary in People's Daily that was titled, Focus on Doing Our Own Things Well and Strengthen Confidence in Effectively Responding to US Tariff Impacts. And that piece was one of a

There was a government statement and there was a piece from Xinhua where they sort of worked together, jointly put out the message. And I think, you know, again, one of the things this commentary said on Sunday, and I translated Sunday, sent it to my subscribers, was, quote, the U.S. tariff abuse will impact China, but the sky won't fall.

And then basically... And that's a significant quote because it echoes Mao. Is that right? I mean, yes and no. People use it all the time. I think they can over-interpret that they're using a phrase that Mao also used. But no, it certainly is a...

you know, it's an important message and it's an important message domestically. It's an important message externally. You know, they also go on to say in this commentary, I mean, there's a lot of things they say, but they talk about, you know,

facing the US variability and extreme pressure. We haven't closed the door to negotiations, but we don't harbor wishful thinking either, having made various preparations to respond to impacts. And I think that's right. I think they had actually, the government had modeled out to the promise 60% tariffs, you know, where that Trump had been talking about on the election campaign, on the election campaign trail. And, but now, you know, when this addition of the 34%,

on top of the two 10% tariffs from two rounds of 10% from fentanyl, got the new Trump tariffs to 54. But those are on top of tariffs that started in the Trump one and then were continued under Biden. So they were already in this 70-ish percent range last week. Today, now we've added this new 50%. They're at 120 or so, which is basically going to decimate US-China trade. And so at this point, there's really no way

So exporters in China can adjust to 120% tariffs or buyers in the US. There's no, you know, who's going to, it's, you can make people absorb 10, 15, 20%, 120% might as well be 1000%, right? And so this is, I think, very much a significant escalation of the trade war.

This, I think, puts U.S.-China relations in the most precarious position it's been in a very long time because trade is really the... That trading relationship is the linchpin of the relationship in so many ways. Right. It's been the bulwark against conflict for the last 20 years. The ballast, the bulwark, whatever, something that's keeping the floor in place. Terrorists at this level, with no indication of either side pulling back, I think are going to

create a whole new set of variables that could in non, potentially in non-economic realms that could add to all sorts of volatility in the relationship. And so this is a, this is a, we can talk about, you know, the logic behind the U S tariffs, the logic on the Chinese response, but,

But where we are right now, I think, is we're in a very dangerous position in the US-China relationship. And there will be an impact in China. The Chinese government and various... The messaging out of China, the messaging on all the propaganda channels is, we can deal with this. We'll be fine. We're prepared. And I think that's true to a point. I think they have prepared for a lot of things and a lot of contingencies. But there's no question this will cause some pain. The Chinese system...

I think has, we've talked about it, where they have non-economic ways to deal with economic pressures in ways that we here in the US don't necessarily have in terms of the ability, they have this entire social stability system. They have all sorts of

So when you say deal with, because we're outside the paywall this week, so for somebody who might be new, deal with economic pressure, we mean social stability in terms of a social safety net and or?

for basically population control and controlling unrest. Is that right? Soft and hard measures. And I think that one of the things I think the Chinese side and Xi Jinping, I think they've been, since Trump won and since the trade war back in 2018-19, he's been very focused on hardening the economy, building whether you call it Fortress China or really...

Self-sufficiency, yeah. Self-sufficiency, reducing vulnerability to external shocks, specifically external shocks from the US and some of its allies. And so I think that they have a high tolerance for pain, higher than I think the people in DC generally probably appreciate. And I think one of the things the Chinese side is betting on is that

the US has a lower threshold because we have midterm elections, because we still buy a lot of stuff from China. Not everything can be replaced

you know, by, you know, buying it from some other country where the tariff rate is lower. And so this is likely to cause some real inflation in the US. And, you know, it's, we're now what, 15 months, 16 months from the 17 months from the midterms. And so, but ultimately, this kind of a tariff rate really effectively has the potential to just obliterate the key foundation of US-China relations. Robert Leonard

Yeah, I mean, it certainly feels like a seismic moment in world history that we're all living through here. The other thing I'll say is as we, you know,

The rollout last week was obviously, look at the market reactions. It was chaotic. It seemed incoherent. It seemed a bit indiscriminate in terms of how they picked the rates, who they go after. I think that what the Chinese side, I think at the top level, how they see it is this is a part of a broader US strategy to encircle and contain China. I mean, in the...

In the commentary on the Monday People's Daily that I referenced earlier, they specifically use, you know, say the U.S. isn't... It's just basically the U.S. containment and suppression of China. And so...

What we've seen in the last few days as the dust is sort of settling from the Trump announcement last Wednesday is you are starting to see countries trying to call, trying to negotiate. Yesterday it was Japan. Today it was South Korea. A couple days ago it was Vietnam. Clearly, the messaging is garbled from the White House, but it's becoming clear that there are actually willing to have negotiations. And I think the Chinese are going to be very concerned if...

those negotiations happen, those countries are able to cut bilateral deals where their tariff rates go down. But I think the US will push for the tariff rates not going down on

PRC exports and transshipment?

There were proposals in the run-up to this announcement last week that were more focused on targeting the Chinese origin goods, specifically targeting anything related to Made in China 2025 coming from any country. Proposals on the US side, that is. Yeah, they were not taken up because someone said they were too nuanced for President Trump.

But I would not at all be surprised as the US negotiates some of these bilateral deals, we don't see that, which will then feed into the Chinese perception, which again, I think is correct. And a lot of this is about what they say is, what they believe is the containment and suppression of China. And so from the Chinese perspective, I do think this is really far more than just a trade war in economic. And so that also then makes it hard to be optimistic that they

there is any good solution that is going to arrest what I really think is we're starting on a very precipitous decline in the US-China relationship. Right. Shifts that may not be reversed anytime soon. And I want to come back to the isolating China point. But just on the PRC side, as far as countering these tactics, what sort of macro options does China even have at this point?

because I don't see many good options on the board. You threw out a couple possibilities in your newsletter on Monday, devaluing the UN, attacking American companies like Tesla and Apple, imposing restrictions on rare earths that would hurt the U.S. manufacturing sector. More restrictions.

Yeah, more restrictions.

With the UN, for instance, what are the downsides of that approach in terms of countering what the US is doing? Well, I don't think... Again, the US reaction is, you have to take it, right? We're going to impose tariffs and you're the bad person. You're the bad actor. You have to take it, which again...

Some countries are going to take it, and they are taking it, at least for now, but Xi and China are not going to take it. And so, like we said a few minutes ago, we are recording at 2 p.m. on Tuesday. It's, I think, what, three-something in the morning Wednesday time in Beijing. There's probably some poor person in the Ministry of Commerce or Ministry of Foreign Affairs who has to stay up all night watching the Truth Social feed.

So, so, so they know, so they know, right. So, so, so somewhere in the system, they must know that, that these terribly 50% now is, is effective and,

But we don't have a reaction yet. That will probably come... By the time we publish this podcast tomorrow, we'll probably have a reaction from China. I would not be surprised if it includes more, in addition to their tariffs, potentially more rare earths restrictions. The response, I think, over the weekend or on Friday was also to

to investigate DuPont, investigate some products. There's a whole menu they've used. They have this toolbox. The challenge is, of course, that that's just going to keep feeding this cycle, this escalatory spiral, and it's not going to change the calculation in the White House, I don't think, at this point. Yeah. Yeah. Well, I mean, in devaluing the UN to try to mitigate the impact of tariffs, it's

That may have been viable with 35% tariffs or even 50% tariffs. But if you're talking about a total tariff rate of 120%, I don't know how much of a difference that's going to make. And at the same time, it jeopardizes the PRC standing with other partners around the world and would be problematic on that basis.

Well, exactly. So they, as of, I think, starting Monday, they started to, again, allow it to value, depreciate a bit against the US dollar. Potentially, it's a signal that they might do more. But again, for them to do enough to counteract the 120-ish percent tariffs would be devastating to- Self-sabotage, basically. Well, but it would undercut... Part of the messaging from China globally is-

The US is crazy. They're destroying the world order. This is another sign of US hegemony and hegemonic bullying. They're not at all interested in the development interests and development rights of other countries and especially the global south. And if China were... And China needs to try and get other countries to effectively now pick sides. And if they embark on a massive beggar thy neighbor policy by devaluing the renminbi in a significant way...

There are already trade tensions between China and lots of countries, not just the US, also with Japan, South Korea, the EU, countries in Southeast Asia. I mean, there's a long list of problems. Brazil, yeah. Brazil, exactly. And so for them, the value in the renminbi is a... You never say never, but I think that is something that has a lot of problems if they do it in a meaningful way.

And so their options are not great in kind of a symmetrical response. So the question will be, what will stop this escalatory spiral? So again, we have to watch to see how the Chinese side reacts to this latest 50%. And I was hoping last week, and I put it in my newsletter, of course, I was wrong because every time I get hopeful, I turn out to be wrong. It really pisses me off. But I was hoping that Xi Jinping and the Chinese side could take a breath for the holiday. Yeah.

right? Sort of used the holiday as an excuse to just sort of let things settle, but they didn't, right? And so now we're back to the next round of 50%. And do you think it was a mistake to not let things settle? Ultimately, end of the day, if China retaliates, they know that the Trump administration is coming back with another round of heavy-handed tariffs. Would they have been better served to just

take a beat, wait it out, see where things stand two months from now? Or is that not viable domestically? It was a holiday. It was a national holiday. They control the media, especially on the holiday. They could have waited three days. I think it would have actually been more constructive, but that's not how the leadership decided. And so...

Here we are. I mean, I think you can go back to specifically around fentanyl. There were many people who were trying to tell the Chinese that

when Trump came into office, they should make some sort of a gesture around fentanyl because that was a massive issue for him. Yeah. He was serious about that. And I mean that people who were communicating with very senior people on the Chinese side and the Chinese response all the way down was basically a recitation of their white paper on all the great things they've done for fentanyl in the U S it's just no, no flexibility, no concept that they won that the U S doesn't think they've done enough. And two, um,

giving a gesture to Trump some sort of a show might have broken the ice a little bit. And so, I mean, I think that was a lost opportunity too. So here we are. And I was going back to earlier today, reading through something I wrote in May 2019, when the last time the first Trump trade war, the first US-China trade war under Trump. And

It was in May. Thought they had a deal. It got blown up in a tweet. And I'm just going to read this because this has been a multi-year downward cycle. But it was basically, I don't remember ever being this pessimistic about the trajectory of US-China relations. Oh, wow. Now it's like 2019 would be great if we could all reset. But part of that was coming from

people I was talking to on the Chinese side, in the Chinese system, one of them has this great quote, which is not great because it's very tragic, but it's true. Even before 2019, who would sort of jokingly, in kind of a dark Beijing gallows humor way, would jokingly would say, today's the best day in US-China relations for many years to come. And they were right. That has proven true. And so fast forward five years and 11 months from that blow up in 2019, and

And we are in a much worse place in terms of the U.S.-China relationship and the U.S.-China trade relationship than we were then. And so I honestly don't have any great ideas how this is going to get resolved because I really don't see the Chinese side doing

making real concessions. I think they really believe that they can withstand more pain than the US can, that they have now much more ability to inflict pain on the US economically than they did in the first trade war. And so this is going to get, potentially, I think it could get quite ugly.

Yeah. I mean, there was more pain on China during the first trade war than there was with the United States. Maybe it will be different this time around. I think a lot of that depends on what sort of deals the Trump administration can negotiate around the world with other trade partners in the meantime. And that goes back to sort of this debate here in the U.S. about whether or not there is this grand China strategy in the Trump administration. And, you know, if there is, they're

They're hiding it pretty well, I think. I don't know. A grand strategy might be a little bit much. But I do think, I mean, going back last week when all this came down, I was thinking back to when Trump got elected. And I think it was the first episode that you and I recorded after the election where you said something like, you know, people might want to allow for the possibility that Trump means what he says and he's going to do what he's promised to do.

And that has certainly proved prescient. But also, I think possibly in that same podcast, we mentioned that first trade deal, the PRC badly shirked its obligations as part of that trade deal. And that may factor into how the Trump administration approaches China the second time around. And that may be informing some of what's playing out here. No, I think so. And it's obviously happening much faster. There's really no foreplay like there was in the first Trump administration. Right, right.

You know, the markets on Hong Kong, Hong Kong was down like 13% on Monday,

the mainland market, I think Shanghai was down over 7%. They came back because at least because the state started buying to support the market. Friday the market was closed. It was sort of like a two-day catch up from the bad news. But it's just not clear what's going to get the Trump administration to pull back on these really, really punitive tariffs on China. And I think ultimately it's just going to have to be, we're going to start seeing a fair amount of inflation flow through. And

Yeah. Ben Thompson at Stuckery, he had a good post this morning about Apple and how they're going to react to tariffs. And Apple may, they may have enough capacity outside of China to sell into the US to miss the worst of the tariffs, but their supply chain being still so heavily reliant on China is a big problem for Apple. And it's a big problem.

I think it's a big mistake by Apple because they've known this stuff needed to get resolved for many years and they focused on getting exemptions more than they focused on diversifying their supply chain. Right. And I know, I mean, Trump won trade war because they got an exemption. They were not as focused on the diversification. It was actually the Shanghai lockdown that panicked them and caused them to pay much more attention. And that was only

Three years ago. No, exactly. And this risk has been sort of looming in the future for a while now. And it's accelerating, obviously. But it's been here for five or six years, maybe more in terms of like the worst case scenario possibilities, particularly given she's proclivity and proclivities and some of the aggression we've seen over the last several years.

So I have one question on the PRC side before we turn back to the US. As a veteran of the China watching internet, can you tell me more about who Chairman Rabbit is and why his WeChat post was taken seriously as far as potential PRC responses over the last 24 hours? So he was one. There were several influential bloggers, one with, I think, a connection to Xinhua,

who put out a similar list of six possible countermeasures that got a lot of play online and even got a, uh,

pretty much looked like a planted question at the foreign ministry press conference on Tuesday. Chairman rabbit is, he's a minor Prince Ling. His grandfather was an official in Mao era. That's his, that's his claim to fame is that, and then he was Ezra Vogel's like, like student research assistant at Harvard for, I think for a master's degree. He's gone back. I think he worked in banking and then he became a very sort of prolific, like sort of America interpreter in,

And, you know, so he's got a big following on WeChat. And he he was one of those people who put out this sort of list of six. Mm hmm. I'll read the list of six potential responses. His his post, he wrote, Donald Trump has entered a state of frenzy. And then further down, he says, based on communication with sources, it is this author's judgment that the likely areas for countermeasures are as follows.

suspend cooperation on fentanyl, significant tariff increases on us agricultural products, such as soybeans and sorghum banning import of U U S poultry into China countermeasures in the service trade sector, banning the import of us films into China and investigating the intellectual property benefits of us companies operating in China. Um,

On that list, I just want to say to the threat of banning U.S. films in China and removing the leverage that the CCP has had on all these Halloween studios. I think that'd be great. Honestly, I support that. Don't threaten me with a good time, Chairman Rabbit. But yeah, other than that, you look at that list, and I'm not sure any of it moves the needle enough. I mean, the services sector in China is

doesn't do the same business that it did 10 years ago. These would still hurt. I do think it's important where, you know, he prefaced this list with sort of from talking to sources or whatever it is. This is not, and we've seen it, you know, this other, at least, you know, other prominent bloggers, similar list. This is a,

Whether it's a trial balloon or this is just previewing what's coming. This is not like some random blogger made this stuff up in his bedroom. Right, exactly. And I could tell a lot of people were taking it seriously. And then you had the question planted at the press conference or maybe planted. I don't know. But I enjoyed that as well.

In the midst of all this, Premier Li Chang had a call with EU President Ursula von der Leyen on Tuesday, and per the EU readout, there are plans for an EU-China summit in July.

What do you think about the possibilities for EU partnership in response to the U.S. over the months and years to come here? So we're what, three weeks, three months or so between now and July. Lots could change once we get past the sort of the shock of the bluster period.

We'll see whether or not the EU and the US can actually work towards a more mutually acceptable deal. Right. You know, the Chinese side has been pushing for a long time to find ways to create daylight between the EU and the US, you know, pushing...

EU as its own strategic autonomy, sort of the third pole or in the multipolar world. There are a lot of issues that the EU has, especially some of the bigger countries have with Chinese exports, Chinese industrial practices. And so even if there is common ground in being aghast at sort of the Trump administration approach to tariffs,

it's not so simple as common bedfellows, let's figure out a way to work together and screw the US. That's not impossible.

But there are a whole series of issues that the EU wants China to resolve around, you know, overcapacity, for example, and a whole series of exports that I think unless the Chinese are actually able to make real offers, it's unlikely that they'll be able to cut some sweeping deal that completely reshapes the global trade system. Because, you know, the issues the US has with Chinese trading practices, the EU has the same issues. Right.

That's yeah. And I just want to make that point because it's been a dizzying week of online conversation. I mean, we've talked in the last couple of months about convergence between the U S and China, and then also some surreal role reversals happening. Um, and, uh,

I mean, along those lines, we saw the Chinese embassy tweet a video of Ronald Reagan extolling the virtues of free trade. The Ministry of Foreign Affairs tweeted a video about US violence and greed and China's openness. And the video was set to John Lennon's Imagine. And so it's all been pretty out there. But there have been a lot of people who are saying these policies on the US side are going to drive the EU into China's arms. And

And I don't know. I just think the practical implications of that partnership are going to be unworkable for the EU. Well, I mean, and especially with Ukraine. So again, if the Chinese were not supporting Russia in its land war on a European country, there might be a completely different attitude or level of willingness to accept more of a grand bargain with the PRC on this trade stuff.

Yeah. China provides none of the security guarantees that the U.S. has provided, at least in the past, and in recent years has been presenting security problems for the EU with its support for Russia. And then, as you said, on the manufacturing side, there's so much overcapacity already in Europe that the EU is going to have to adopt a lot of the protectionist policies that the U.S. is currently exploring. Now, Andrew, there you go again, using Western propaganda. It's not overcapacity.

So-called overcapacity is how we refer to it on the podcast. Absolutely. Joking it aside, it really is quite remarkable because, again, forget what the US says. The EU has its own problems and is very clear about issues around Chinese overcapacity. Even the Chinese, of course, we don't have overcapacity. But I think you've also got...

What's interesting, right, is Premier Lee and von der Leyen from the EU had a call, I think, today, Tuesday. And right about the time of the call...

Zelensky, the president of Ukraine, posted on X that they had captured two Chinese fighting for the Russians on Ukraine territory. And I don't know what to make of that. So I think there's no reason at this point to believe that those two were actually sent as part of some sort of official contribution of troops to Russia. There are Chinese citizens who've been fighting on the Ukraine side. There are Chinese citizens, obviously, who've been fighting on the Russian side. There are Americans, I mean, there are mercenaries. There are people who want to go fight.

And so this is a war where there's an opportunity. So I think in the absence of more evidence, we shouldn't jump to the conclusion that this is evidence that the Chinese are sending troops to help Russia. I think that is not, I would be surprised if that's happening. It wouldn't be the PRC's style to do that. No, I mean-

Look, it's possible, but in the absence of real evidence, I would be very careful about jumping to that conclusion. But I would also be careful. It's a good reminder to be careful about jumping to the conclusion that, oh boy, there's going to be a new trading block with the PRC and the EU beginning with this summit in July. And we had something last week, which was not EU related, but a little bit similar, which was there was a WeChat account. I think it was like the CCTV account.

that after this trilateral economic meeting between the Chinese, South Koreans, and the Japanese, posted something saying that the three had agreed to work together at the WTO to counter any U.S. actions. And that got picked up. I think it was Reuters. I'm not sure. It got picked up by a bunch of media outlets. It got amplified by the usual sort of

propaganda shill network on X, and it turned out to be complete BS. Well, it was amplified by the US propaganda shill network as well. I could not believe how many people took that report seriously. I called BS on the newsletter last week. Sadly, we didn't have a podcast to call BS on it. But fast forward five days, and you've got Monday, you've got...

Japan's first in line. Japan's first in line. Today in South Korea, the idea that somehow that those two countries are going to get... It's completely ahistorical. And so, again, just because people are mad at the US, just because people are mad at President Trump doesn't mean they're going to immediately jump in bed with China and create some grand alliance. It's going to be messy. I mean, those countries have their own problems with China. It's not all about the United States. Yes.

So leaving that ridiculous report aside, as far as alliances generally and the talks with South Korea and Japan, when you step back and look at the past week,

Obviously, the rollout of the tariff policies was as ham-fisted as you can possibly imagine. A lot of the explanations from administration officials were in direct conflict with each other. Incoherent in conflict. Yeah. But I do wonder, in terms of the Trump strategy, everything that the U.S. is doing makes some sense if you think that

the administration's goal is to, on one hand, impose a baseline 10% blanket tariff to incentivize domestic manufacturing, and then, on the other hand, use these additional tariffs as leverage that makes it easier for Trump to negotiate more favorable deals with trade partners in North America, Canada, and Mexico, the EU, Southeast Asia, and

And possibly those negotiations include limiting engagement with the PRC and isolating the PRC and its massive export business. I don't know if that's what's happening. I don't know. I definitely don't know if that plan will work.

But it seems like in the immediate aftermath, possibly because the messaging was so ham-fisted, a lot of people reacted to the tariffs as if Trump is just stupid and we're watching America renounce its global leadership. And my guess is that the

opposite is happening, where the US is trying to reassert its dominance in the global trading system and possibly use its leverage to isolate the PRC in a new Cold War scenario. What do you think of that possibility? A lot of people have floated it. Am I giving the Trump administration too much credit? They could both be true. I mean, I think that is what

sort of, that is the, hopeful is the wrong word, but that is the sort of... I mean, there's a bit of wish casting as we try to infer strategic thinking. So I am, I'm just not, honestly, I'm just not sure. You know, I would say that

if there really is a strategy to use this, these trade actions as a way to effectively ring fence China or really go hard after what the U S considers is to be, you know, it's, it's problematic trade practices that bashing allies at the same time and bashing countries in Southeast Asia that the U S needs, but that are also in the neighborhood and, you know, can't really publicly offend China is, is,

if someone thought that was the strategy, then they should be fired. If somebody had a strategy and then it got overtaken by the political side at the top and the nuance was lost and it was pushed out in this sort of much more of a blunderbuss way,

you know, sledgehammer kind of way. And now you have people in the administration and the bureaucracy who are trying to backfill. That may be possible. That could be happening, yeah. Part of that may be then what we're seeing is sort of trying to restructure the narrative to say, actually, there's more of a plan here. Yeah. But there's no, I don't think there's any question that we, the U.S. did a lot of damage to relationships with some key countries, some key allies.

that are going to be very hard to repair. Even if they get, you know, even if they show up at the White House and they get some big deal and they get a special gold, you know, a gold sign letter from Trump saying, you know, we have a special deal. The damage, some real damage has been done. I think that's fair and true and

And I'm sympathetic to the people who expect coherent explanations from the U.S. government and didn't get that last week and also expect a president to understand that it's stupid to try to zero out trade deficits with countries all over the world. Yeah. And I think going back to Trump one and some of the conversations we had.

Right after he was elected and saying, let's look to Trump one to learn some lessons like there are different factions within the Trump administration. And I think there are different goals attendant to these policies. And they're trying to do a number of things at once. Some of those goals are more realistic than others. I don't think any of this is going to magically return manufacturing levels to where they were 75 years ago.

But I do think the stage is set to negotiate with partners and really undermine the PRC's rise here, which is one goal that is attainable or might be. Well, see, I think it's a goal. I think the question whether or not it's attainable is a really important one. I think part of the challenge is...

You know, if that's what the Trump administration is trying to do, how are they assessing the strength of the Chinese economy, the strength of the political system? And are they operating off of realistic assessments? Or are they wish-cashing? Do they have people who are telling them, no, no, the place is a house of cards and it'll collapse? Right. Or they can't stand the pain. And I think that that...

That has been a problematic assumption for a long time. And we've talked about it a bunch on this podcast. I think you remember the summer, two summers ago, when I think The Economist had back-to-back covers about China collapsing. And so going back to what we talked about earlier, I do think that the US runs a real risk of underestimating the amount of pain that the...

country and the party is willing to bear and willing to push off onto the populace. And at the same time, I do think that we should listen to them when they talk about, starting last September, we did have a shift at the top in terms of how they look at

the economy and stimulus supportive measures. People were, and multiple times, were disappointed by the size of the fiscal stimulus, by some of the policy measures. The counter argument was, well, they're holding back some because they don't know what's going to happen with Trump. And now we're here. And it's worse already

than I think they had modeled in terms of, I think, really, I think they got to 60%. I don't think they did any scenario planning for 120% in terms of tariffs. So we will likely see over the next period of time, and certainly this is what people are hoping, and you see it in the hopeful, you know, the sell-side reports, you know, the investment banks, sort of the research studies

stock research analysts talking about certain types of stimulus coming. The people saying the commentary on Sunday hinted at some of the stuff, sort of cutting the interest rate reservation, more fiscal stimulus. I think we will start seeing more supportive policies and that will...

The Chinese government has some firepower, and so that will cushion the blow. And I think the U.S. does run the risk of overestimating its leverage here. Right. Well, and the key is also going to be negotiating with allies and getting their cooperation. Right. So the South Korea, I mean, that's all important. And so the question then is, is the Trump administration, one, do they have a realistic assessment of resources?

what this will do to the Chinese economy, or do they expect that Xi's going to come crawl back because this hurts too much? And I think that is a

That is a risky assumption if that's what they have. Yeah. And I wonder whether that's even a goal at this point. What is Xi crawling back? What can he offer that changes the global dynamics?

So in some ways, from the Chinese perspective, is it almost better to just rip the Band-Aid off and deal with it?

It might be. And, you know, at the same time, you look at the risk that they've been running for years now, and particularly over the last couple of years, like Janet Yellen went over there a couple of years ago and warned them about overcapacity. The risk all along has been that countries around the world will recognize how corrosive the China export strategy has become. But I think a lot of countries recognize that they just can't do anything about it.

They need the China market. They need the Chinese goods. This goes back to the, quote unquote, united front to deal with this. And what Trump has done is basically he's shattered any pretense of a united front, and maybe they can put that back together again.

with individual deals. But in some ways, I think he's made it a lot harder to do that. Yeah. Well, and that's why, I mean, confident predictions about how this strategy will age. A lot of it depends on what happens over the next three to six to nine months and what deals are or are not negotiated. Yeah. I think even shorter than three months. But I do think that

Going back to the earlier comment about how this is a moment in the US-China relations that I think is more perilous than we've seen in a really long time.

is if the economic, the trade relationship, the bottom falls out, what's left? And so, for example, back to the list of six potential responses that you cited that were coming from Chairman Rabbit and some other bloggers, if the Chinese cut fentanyl cooperation,

I do think Trump will go nuts. And that goes back to, fine, if they want to do that, then I think we are going to start seeing... The Trump administration is not going to say, yeah, okay, let's go negotiate. But I do think the risk now is that the Chinese, if they run out of ways to respond economically...

we may start seeing other signaling or other actions outside the economic realm that will be further destabilizing the relationship. I hope not. So... Yeah. But we are at a perilous point. No kidding. You've called it the great unraveling. And it is. It is accelerating at a pace that I don't think anybody even a month or two ago would have expected here. And the one thing that occurs to me when you mentioned Apple earlier, I mean...

The partnership between the U.S. and China has been blamed for hollowing out U.S. manufacturing capacity, hollowing out the American middle class. And that's the fault of Americans, not the Chinese, to be clear. But when you step back, I was talking to Ben about this earlier, like the manufacturing expertise gap.

and the cost structure available in China allowed for tremendous US success stories with companies like Apple and companies like Tesla. Tesla doesn't exist if not for the Shanghai Gigafactory. Well, it existed. It just isn't the size it is. It isn't the market cap it is. Yeah. It's not the success story that it has become. And

And there was a real consumer surplus that may be very difficult to replicate in the future. And in the meantime, the imposition of these tariffs is going to lead to a lot of short term pain for American consumers.

American businesses, big American businesses, small American businesses, like everyone is going to suffer here without any guarantees of long term gains. And so it may be that going this direction is more about insulating the U.S. from extreme catastrophic downside risks. And so it could be a not terrible idea on that basis.

but this is the sort of thing that could end up being unfortunate for everyone involved by the time we get to the end of it. And I think also, you know, from the Chinese perspective, they just don't eat it. You know, there's... Eat bitter, right? Well, and then, you know,

If they go after more ag, if they go after the chickens, they're going to hit constituents in a lot of red counties and states. And the GOP is going to... They have a very small majority in the House. The midterms are 16, what, 17 months away. They've seen this movie before in some sense where they think that the US system can't bear the pain for too long and the politics will shift so that you will start seeing...

folks on the GOP, and you're hearing it already in some quarters, or mostly in some senators, not so much on the House side, are going to try and sort of say this is a little bit nuts because they're going to start seeing, you know,

Some of their constituents are going to lose their jobs, lose their businesses, right? It's going to cause a lot of pain here. Yeah. Well, and that's why for a couple of days, the Trump people were messaging, this is not a negotiation. We're not negotiating. And I think that language has been softened over the last couple of days, which has helped mitigate some of the short-term panic and outrage. For all this talk we've been going on about whether or not it's a grand strategy and who will blink, you know,

When it comes to TikTok, the president blinked. Well, that is a natural segue. No, but it's right. And so again, there maybe is a grand strategy, except when it involves donor equities and social media support for the GOP, for my party, from Trump's perspective. I don't know. But again, I'll let you take over from there. Sorry. Yeah. Well, I'll just read the news. Politico said...

President Donald Trump granted TikTok another 75-day reprieve on Friday, further prolonging the Washington drama over the ultra-popular video app owned by a Beijing-based company. Trump's tariff policy may have derailed an existing deal, according to two people close to the negotiations.

The White House had finalized a deal by Wednesday, they said, and President Donald Trump was planning to sign an executive order to approve that deal and initiate a 120-day closing period.

I mean, I almost have to throw up my hands at this point. Do you have any reactions? Are you just officially numb to the lawlessness and the absurdity of this process over the last couple months? So one, like these extensions are not covered by the law. So I know there have been some euphemisms in the media about sort of maybe they're outside the scope of the law. I know they're illegal.

Two, the deal itself, at least what's been reported on the press, is also not compliant with the law because ByteDance still controls the algorithm. So it's the old Project Texas thing all over again. And three, the Chinese clearly got involved. Trump announced tariffs. ByteDance says we can't do this deal. The answer in that kind of a negotiation with the Chinese side is...

And it's if you're... At any level of negotiation over anything is not to be like, yeah, okay, let's have an extension. It's like, okay, here's my number. We're done. You're offline in 24 hours. You decide. Right. That's it. Right? And let them get turned off or let them come back and say, no, no, no, no, no. We're going to do this deal. Right? So it was just, again...

There's no strategic thinking. It's clearly, you know, he's got significant donor equities, right? He's got to satisfy big donors who have big chunks of this company. Also, I think he, you know, and I wrote about this a little bit yesterday, Trump, quote unquote, saving TikTok, you know, has a lot of upside, right? He has satisfied some big donors. He also...

has TikTok. People will say, oh, Trump is the hero. He saved it. The people who love TikTok on TikTok. And then he also has the company and its algorithm beholden to Trump and the GOP, which will be perhaps... I don't know. Whoever's controlling the algorithm may not be pro-Trump after the last couple of weeks. But yes, I take your point. Fair point. But I think that's how they would see it. And so...

you can understand why he wants to sort of get a deal, but I don't understand why no one like no, none of the Democrat state attorneys generals out there. Why no one has sued what is an obviously illegal deal. It's totally legal. He's violated like several parameters of the law. Um, the,

latest extension. A law that the Supreme Court upheld 9-0. Well, that's what I wonder about. I mean, to be honest with you, yes, I am a lawyer, but I forget the specifics of constitutional law. I'm not a practicing lawyer anymore. So standing questions are elusive to me at this point in my life. I don't know who has standing to sue, but my guess would be that state AGs could do it

And I hope that somebody does in part because you mentioned the Supreme Court. I truly don't know how the administration could stand up in court and even begin to defend themselves in a legal context here. Like everything about the way this has been handled violates the plain text of the law and obviously the spirit that underlies the law and the legislative process, which would be taken into account as well. And so it's...

It's frustrating. It's demoralizing just as a matter of principle to watch the administration completely disregard the will of Congress and the text of the law. But then also allowing Beijing to retain control over the algorithm is a real legitimate national security risk that the U.S. government shouldn't tolerate. And so not banning it is bad in its own right. But now we have to confront the possibility that.

that Trump will potentially moderate on trade in service of executing some fig leaf deal with TikTok that takes care of his donors. I mean, like it's really, really bad across the board. And we always laugh about TikTok when we bring it up on the show because TikTok, let's face it, is like face smackingly stupid. But it's a real national security issue in my eyes. And to watch it in the

In Congress's eyes.

But what I think is also interesting, right, is so the reporting last week as the deal looked like it would be signed, and it does sound like there actually was a deal that was about to be signed, but then the tariff announcement blew it up. It sounded like they wanted to announce it even on Friday and weren't sure whether they could. So yes, there was some deal in place. But the new investors who are coming in, they got to put money into this new company or this new entity. Yeah.

or however they're structuring the deal, they are out on the Hill. They're trying to get Congress to insert language in...

any bill that they can get passed, like a sentence effectively indemnifying them because they're concerned. They have good legal counsel. They're confirmed. They're quite concerned that they're going to put a lot of money at stake for something that might actually not be legal. Absolutely. What a concept. That would be paragraph one on any deal that I sign. And so Apple, and you know, I guess the Apple and Google had to get another letter from the attorney general saying that it's okay to keep breaking the law and, and hosting, um,

TikTok in the app store and ByteDance's other apps in the app store. And so again, going back to who has standing, what I've been asking around and certainly have, you know, the answer I've gotten from people who are quite knowledgeable is, well, they asked the attorneys general, state attorneys general could sue. And so then the question is, if that's correct, what's stopping a Democratic state attorney general from doing it?

I don't know. And so if it's a political thing where they think it's really bad to shut down TikTok, then that's just brain-breaking fecklessness. Because the Democrats have no upside on this TikTok deal. They're going to lose either way. They're much better off losing fast so people have forgotten about it by the midterms.

This is what's complicated about the Trump outrage. If the Democrats were in power, I mean, Biden wasn't going to enforce the law either on his way out of office. And then there have been a number of notable Democrats, Chuck Schumer, I believe, and I know who have come out trying to save tick tock themselves.

So it's not like the Democrats are much better on this issue. They're less brazenly corrupt and lawless. No, they're just feckless because they don't understand that there's no political upside for them here. Because either way, if TikTok survives, it's a big win for Trump and the GOP. And that's a big downside for the Democrats. And if

They sue, a Democratic AG sues, and TikTok gets shut down. It's a big loss for Democrats. But the faster that happens, the better for the Democrats. Because again, they shut it down in India, people forgot like six months later. So you want to do it soon if you want to get it shut down. If it keeps dribbling on, then the Democrats will get even more scared as they get closer to the midterms.

Yeah. Well, and it's all interesting context for everything that's happening on trade generally, because I think if you look at the dynamics with the US and China over the last several years,

It is Cold War 2.0 in a lot of different respects, and the U.S. in a lot of different respects does not act like it and does not behave like it's Cold War 2.0. If it did, TikTok would have been shut down when the law was passed. And the trade is a real departure from U.S. complacency. And some of these tariff policies and the attempts to ring fence China would be a departure if that's the direction it goes. Again, no.

not going to try to divine the logic that's animating Trump and his decision making in the weeks to come here. But we shall see. That is a that is a sucker's game to try and again, a very dangerous parlor game. Yeah, maybe maybe they'll have a call before the publication tomorrow that the

of the podcast and everything be fixed. I'm not going to have my hopes up for that. We can always hope. And then people can just laugh at us for this podcast. Well, one more topic before we close out. Leo He's son being investigated. I find that story pretty interesting. I think the timing is poignant given that US-China trade wars are back making international news. Can you explain to people why

Leo Ha's son being investigated is notable and it was in the Financial Times this week. So Leo Ha is retired. He was previously, he was a popular member who was a vice premier and he was the point person to negotiate with the US during the first Trump administration. And he was a trusted intermediary for Mnuchin. Right. He had known Xi since I think since high school. I think there was some

overstating of their relationship, but they had a relationship, not just political. And his son had started a private equity venture capital fund. And then when his dad, I think, became vice premier, he technically stepped away. But like a lot of folks, he just found some white gloves to run it. But effectively, the economic interests were still...

the allocation towards him were still there. The son, not, there's no indication that Leo Ho was involved, but like a lot of these officials, uh,

You hear the party when they talk about dealing with corruption, one of the key messages is you have to manage your family members well because they know that so many spouses or children basically are using their parents' positions or access or influence to then run their own businesses or get parts of deals and make tons of money. So back to this. The FT a few years ago had written a story about his fund and that he was still involved and then it sort of went away.

And then rumors started bubbling up a few months ago or so that the Sun was in trouble. Maybe Leo Ho is in trouble, although this article doesn't. It's about the Sun. And I don't know if you've a couple months ago started hearing a lot more details about what was going on. And then the FT report traced it back to and it's what I had heard as well, that the trigger for this investigation was when

China pulled the IPO after Jack Ma's speech. One of the things that Xi Jinping ordered was a report on all the true shareholders in Ant, not just the people whose names were as shareholders, but who they were holding shares for. Right? Because there were a lot of big families that had pieces of that. And

Apparently, in that investigation turned up the fact that Leo Hassan had a not insignificant economic interest. And then that led to investigations that uncovered a lot of other deals that were really just gotten because it was trading on his father's position and name. Okay. And that apparently...

It was not in the article, but it's been in some Chinese language overseas media, and I've heard it other places, is that has led to investigations of other retired Politburo members' children, including a predecessor of Leo Ho's, whose child is also in trouble. And so what's interesting is a bunch of levels. One is I think, you know, the story of the ant-IPO being pulled has been washed into this, oh, it was all part of a rational...

regulation by the Chinese government to rein in a company that was effectively creating a whole bunch of financial risk. And it was a normal risk management or normal crackdown that you'd see in any other country, which completely leaves out the corruption piece of it, which at the time I heard about and which I think this piece, this again,

The story behind the pulling of that IPO is a lot more complicated than sort of the, I think, some of the attempts to normalize it as kind of like a regular course of doing business. Right. It wasn't just that. Second is, you know, especially from the era before Xi Jinping and into his first term, you, Politburo members, most of whom are all of whom now retired for the most part,

Most of them had family members in business. So does this mean that everybody's fair game? And when you say family members in business, they're benefiting from their proximity. They're benefiting on their parents' position and influence, which you're not supposed to do. And they were off limits from these sorts of investigations in the past. Right. And so what does that mean for sort of stability? You have a lot of... And maybe nothing because she's so powerful that no one can do anything, but

But it sends, I think, another chill among the elite about who's really safe. No, exactly. Yeah. And reading the FT article, they had a piece in there from Dennis Wilder, former head of China analysis at the CIA, who suggested that Liu He himself might face problems. And Liu regularly met foreigners after retiring in 2023.

including Janet Yellen in 2024. But his meetings have been severely curtailed over the past year. Leo has been on a very tight leash, said one person familiar with the situation. And the reason I say it's poignant is only because

To me, it underscores how much has changed in the past five years in the U.S.-China relationship and just in China generally. Because, you know, from what I've read, Leo was pretty instrumental in helping China and the U.S. navigate that first trade war. And he was trusted by the American side and...

It just to see him marginalized it. The PRC, as much as America has changed over the last two months, the PRC has been turning inward regardless. And the environment just looks deeply, profoundly paranoid from afar. So, no, I mean, I, I, I, yeah, I would say,

that there was a fair amount of wish-cashing from the American side about, you know, Leo Ho is my... He's my friend. You heard that from some folks. You know, my understanding is Leo Ho is also one of the key architects of the ways that they would evade sanctions on Russia. Perfect. So, you know, there's a lot of other stuff going on here. But no, it's...

I mean, the numbers, not confirmed, they weren't in the FD story, but the number that I heard involved with sort of the money that Leo Hassan had made were staggering. Oh, wow. And if they're true, then, you know...

He earned it. He earned it. He earned the investigation. Yes. Well, on that note, I was just curious for backstory because the ant IPO, we've never had time to dig into it, but maybe that's worth an episode of discussion at some point. No, I mean, if they ever get back to the point where they can go public and clearly, you know, Jack Ma has been rehabilitated, Ali Baba has been rehabilitated. So at some point, you know, we may see that ant IPO.

And that's part of what is fascinating is it looks like she would never admit that he's made a mistake, but she is certainly trying to walk back a lot of the contentious tactics that we saw a couple years ago. It's all hands on deck to fix the economy and compete with America. And so this is not the time to be

keeping your best and brightest in the doghouse. So I think the point has been made and they've become much more well-heeled or much more to heal. And so this is a... He needs to marshal as many forces as he can marshal to deal with this

increasingly difficult US-China relationship. Indeed. Well, we'll see what the relationship looks like 24 hours from now, seven days from now. We'll be back podcasting probably next week. One note, though, at the very end here, Sebastian says, I have a new name for your gardening podcast.

Sharp shears. Okay. I'll show myself out now. Some good gardening humor from Sebastian. I just want to say- I like it. I like it. For newcomers, Bill, your garden is spectacular on an annual basis. So you're not just some half-assed gardener out there. And-

there's never been a better time to launch a gardening podcast and just leave it. I appreciate that. We actually, you know, it's April and, and my, my wife's best friend is, uh,

So late, her late career changed, became a landscape designer. She lives up outside New York and she was actually visiting the last couple of days. And so it was walking through all the problems in our gardens. Oh, wow. I'm a little bit defeated. I think nature's winning. Well, there you go. Nature always wins. A good gardener can always be better. So the future is bright over at the Bishop household. On that note, Bill, we will come back next week. Who knows what the hell we'll talk about. But,

But for now, I hope you have a good couple of days and I will talk to you soon. Please give Tashi my best as he snores away the afternoon. Thank you. Thanks, everybody.