Phase One Trade Deal Signals `Cease Fire'

phone from San Francisco. Also here with us in our Bloomberg Interactor Broker studio right here in New York City, Stefan Sila. He's Cela. He is managing partner at Bridge Park Advisor's former Under Secretary of Commerce for International Trade UM and this was during the Obama administration. So, gentlemen, great to have you here with us. Stephan, I want to start with you this trade deal Phase one, Phase two is expected shortly. I don't think we're necessarily expecting

a phase three. We'll have to wait and see. What do you make of the news. Well, I'm not sure, Carol, i'd expect to phase two so fast either. I mean, it did take the better part of three years to

get to where we are today, and for sure. Um, there was some real progress in the administration deserves some real credit, but we haven't tackled what are the most difficult issues, which are the structural issues with the Chinese economy, broad market access for foreign firms and including US businesses, as well as the state support of local firms in particular, UM, the s o s, the state owned enterprises, subsidies at the government propose subsidies exactly, and um, you know, as

a result of that, UM, you know, I kind of have a balanced view of what was announced today, which is real progress has been made, but there's still real work left to do. And so I would think of this more as a ceasefire than actually a real um uh ending of the conflict. All right, So David Rido,

come on in here. Help us understand this from the Chinese perspective, because obviously we saw a lot of pump and circumstance here in the United States down in Washington today, a full room with the President sort of name checking so so many people as we went through, uh, that whole process. But if you're over in Beijing, Shanghai, how are you viewing this deal? Well, it's it's it's a

transaction more than a deal. Right, They didn't have to give up anything structural or related to their industrial policy, so that's a big win for Beijing. Uh, they are required to make some additional purchases of US goods and services, quite a substantial amount in fact, which will have a positive impact on the US economy. There are also a couple of areas where things opened up a little bit

for financial services companies and things like that. But really they didn't have to make any of the big structural changes which they have no interest in making about their industrial policy and how they run their economy. So they got some relief on some tariffs that have been implemented, so sort of sort of causing a problem and then solving it right, which is is a is a transactional move for any negotiation, um, and then gave a little bit of market access. But it remains to be seen,

um what the fundamental impact is on Chinese business. I have to say, David, I wonder how much of this was really kind of a political agreement versus really a better trade agreement, And it feels like in some ways politics were much more at play, not just on the part of the U S certainly in an election year, but also on the part of the Chinese who are facing you know, some pressure at home to kind of

you know, get something done as well. That's true. I would say that the political pressure is much more acute in the United States, where these taxes on American consumers in the form of tariffs, we're really exacting a toll, a political toll as well as an economic tool. Uh here at here at home. I've always said that Chinese have virtually unlimited ability to absorb tariffs with their substantial reserves.

They're huge control of major swact the economy and a very um populist that's willing to go along with nationalistic themes um. So I think the Chinese will take this as a win. Um. They'll show some relief for their their constituents without giving away the store, which is the way that they run their economy and their industrial policy.

So Stephane, I'm gonna ask you the same question to ask Steve Schwartzman earlier when he joined me from just outside the White House, having been in that room, which is, if you're an investor, if you're running a company, does this deal, transaction agreement, whatever we want to call it, does it change your behavior in the near term and how Yeah, So, I think Jason, the answer to that is a decided yes, because fundamentally, what it does is

reduces some of the uncertainty, It quells some of the fear. Um it gets rid of this notion that there's going to be further escalation, and as a result of that, I think this will be good for the markets, good for investors, and good for businesses, but um, it is not going to get to some of the long term aspects that are still going to weigh on the minds of businesses going forward. Stefan, Do we need China like we used to need China and just trying to need

the US like it used to need the US? You know, that's that's an interesting question, Carol. In the end, historically, what has happened is we become an integrated world. Old um and supply chains have merged and we've been moving

in that direction. The question is now, are we going to become a bipolar world in which there is going to be a Chinese access access in the US access and companies are going to arrange supply chains and businesses around That notion clearly would be less efficient for the global economy and would cost US and Chinese companies real growth. And that really remains to be seen, which is, are we going to figure out a system in which our economy and their economy are going to be able to

coexist effectively and fairly over the long term. And there's no precedent for that, so we don't know. So, David, I want to make sure that we get to to one specific question with you, which is this is not just about the U. S And China. We you know, we talk a lot about these two nations, and yet there's another very powerful country. We got a reminder of that today with Vladimir Putin essentially rearranging his own government. Russia has a role in in this drama as well.

Tell us about that, they really do. And it's interesting because after trade, or maybe in front of trade, the biggest flash point of US China relations is the South China Sea and this massive territory grab that China has made into the South China Sea, through which a third of global trade travels, also tremendous oil reserves and fisheries

reserves and so and so forth. This has been a great frustration to their neighbors like Vietnam and the Philippines and other places who have overlapping claims on some of those territories. Now Here comes Russia, who has been in military um maneuvers and exercises with with China in recent years, but allowing for an encouraging oil exploration in these contested waters with joint ventures with companies in Vietnam and the Philippines.

That's a fascinating way for Russia to insert themselves into this region and really becoming a playing a role for those US allies to sort of needle China and push back on China's territorial ambitions without going directly uh into

the into the arms of the US. So it's a it's a fascinating development and one I think we're all going to need to keep an eye on because those three big powers contesting those uh those important waters of the South China see could really be a flash point in the next five retention, Jason, but I would say that, um, you know, the Russian economy is still reasonably relatively small, and it's very focused on natural resources, and in terms

of the commercial relationship, Russia isn't particularly relevant. They are, as David said, from a geo political strategic UM base is very relevant. But in terms of really global trade flows, Russia's that, you know, Europe is far more important. Stephan ce Leg still with US managing partner Bridge Park Advisors here in New York City. Uh So, just you know, before we get back into the trade deal, I do want to ask you, you know here on you don't

have to worry about just about them that. Um, that's become my favorite moment of the day. So thank you very much. You know you're also a deal making guy. You're a Wall Street guy. What's the mood on on Wall Street? Right now? It's bank earnings week. Um. Look, obviously bank earnings, including my former former employer, Bank of America today were somewhat disappointing. Fixed income trading obviously was a bright spot. Um, but interest margins have been coming down.

I think overall the U S economy is quite healthy, and overall that is the most important thing in terms of what is going to drive bank earnings going forward. And I think this conversation we're having about trade is clearly incrementally helpful for the reasons I've suggested, which is going to remove this cloak of uncertainty that has been

over the economy. It's going to help at least drive some investment going forward by companies, and companies are going to be able to plan more effectively if they believe that this is going to be pushed to the side for the foreseeable future. So one would expect that in terms of you know, company needs their attitude beam or upbe just got about thirty seconds here, we should expect to see more capital expenditures right going out and doing things,

whether it's buying plants, hiring more or what have you. Yes, And I guess the question is, Carol, is this going to be enough to really drive renewed foreign investment in the US, because this is not just a China story, right, We're still also fighting with Europe, for example, threatening a whole host of tariffs on cars and wine and a whole host of other things, and that is obviously going

to give companies pause about further integrating supply chains. It really comes back to your your question, which are company is going to be looking to be less globally integrated going forward at the expense of the global economy. Stephan See still with this managing partner Bridge Park Advisors, also a former Undersecretary of Commerce for International Trade at the U. S. Department of Commerce during the Obama administration. So here's the question.

I'm gonna use your phrase back to you. Was the light worth the candle for all of this trade? Full credit to you. I did not make that up, that's your I'm not sure I could have coined that phrase, but I certainly repurposed it. Um. You know, look, I think Jason, there were clearly some real costs to the U. S. Economy. Um. There were costs to our treasury. There were cost to our businesses, their cost to our consumers, there are cost to our workers. Um. But we did make some progress.

I think at the end of the day, it's going to be hard to answer that question until we see if this preest sages a phase one and phase two, Phase two or three phase three deal. If the answer to that is yes, and this is a first step to a larger series of agreements that were able to reach with China, I would say the answer. I would say affirmatively that it was worth the pain, um, in

our economy. If the answer to that is no, I probably would have concluded that there would have been a more effective way to come uh to these this conclusion than the way that the administration UM proceeded. What do we well, what do you think the administration did wrong? Well? Um, I'd say a couple of things, Carol. One is we did this unilaterally and didn't approach China with our friends and allies, which would have given us a much more

effective bargaining position. Two is this focus on tariffs I think was misguided. Um. I think the president believes that tariffs are paid, We're paid by China. I think that the economists have been pretty clear that that has not been the case. And I think thirdly, perhaps most importantly, is this focus on our bilateral trade deficit as being the right metric to focus on in terms of our

trade relationship. And I think economists have also been clear that bilateral trade deficits are not the result of trade policy, but they are the result of consumption savings, exchange rates. And to some degree, these purchases, the two dollars of purchases which China has been committed to, are going to also come out of purchase is by others. And it is not incremental. It is not a zero zero sum game. Unfortunately, and so I guess as we look around the world,

we think about Europe. There we think about U S m c A, Carolusa called Usmica. But it's an unfortunate obviously, have no marines in your family. So what where else do we need to be worried about trade in the world from the US perspective? Or what's the number one place that we should be thinking about? What have to be Europe? Right because kicking collectively, Europe is obviously our

largest trading partner, the Canada and Mexico. Things seems to have largely have been solved with the U S m c A. One could have asked the same question, was the light worth the candle in terms of all of that drama because most of the things we got in U S m c A were frankly in the Trans Pacific Partnership, which I spent so many years working on in my government service. But it was helpful and that's

put to the side. And so I think the next big dog in the room is going to be how we interact with Europe and the EU, and is a part of that obviously um with the United Kingdom. I was going to stay with the UK. I mean that to me becomes one of the more interesting conversations, not the least of which because you've got Trump versus Johnson, or Trump and Johnson together. Uh, talk about a couple.

Although I would say Jason that don't forget both our economy and their economies are open economies and so our issues are incremental issues. We don't have substantive tariffs in our two countries. We have broad based open markets and market access for our companies. The United Kingdom is a huge investor in the U S and vice versa. So clearly, while there are things to do, um uh, there's not

kind of the big tall trees to chop down. Stephen, I have to ask you, are we as a nation being left behind because we are pursuing rather than multilateral multilateral you know, trade um deals and doing bilateral especially with a country like China in terms of its role in this global economy. Are we making a big mistake that's going to hurt us for years to come because I do feel like China is exploring multilateral agreements around the globe. They are and they're doing their own version

of the T p P the r st um. Uh. The one thing I would say, Carol is it's hard to leave the United States out of any global commercial economic discussion given the size and strength and importance of our economy, even if even though it feels like we're pulling back, well, what I would say is we're not going to be to you to use your phrase left out. Is it going to cost us growth? Might have cost us jobs? I think the answer to that is yes, um. And I think equally as importantly, what is going to

be the impact to peace and prosperity globally? So don't forget this system that we've created since World War Two has led to the longest period of time without a major um a major power conflict. It has led to a period of time where we bought more people out of poverty or around the world because of this global integration. And the question is how is that going to slow down? And what is going to be the ancillary knock on

effects to the US that aren't just narrowly commercial and economic. Alright, having you here, loved catching up with you. Thank you so much for spending so much time with this. Stephan see like managing partner Bridge Park Advisors, and of course former Under Secretary of Commerce for International Trade at the Department of Commerce,