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