How the Trade War Is Putting Christmas In a Brand New Light

this podcast also have quite busy day jobs. And we're not putting our feet up this week just because it's Christmas. Oh No. Instead, you're going to hear from a third Nobel Prize winner, the economist Joe Stiglets, a conversation I had with him recently in London when he was here to deliver a lecture on progressive capitalism at the London School of Economics. If progressive capitalism was on your Christmas

list this year, you should listen in. But first a return trip to Vietnam, a country we've talked about surprisingly often here on Stephanomics. Now, if you've paid attention, then you'll remember it's been a winner and a loser in the US China trade Wars. It's complicated, but what you probably don't know is that it might be about to

light up your next Christmas. Here's our South Asian Economy correspondent Michelle jam Briskin to explain what good ah Yes Christmas, or, more specifically, the classic holiday movie National Lampoon's Christmas Vacation. You just heard the part when Clark Griswold drains all the electricity in the city to light up what must be a million bulbs covering his big suburban house. Americans have been putting lights up since they became affordable in

the mid twentieth century. It's a half billion dollar business even if you only count those US customers, and in recent years, virtually all the lights made in the world come from one place, China. As an American economic journalists based in Singapore, I found myself in a good position to explore this issue as it touches on two major stories, the US China Trade War as well as the rise of Vietnam's economy. My colleague win Win and I decided to head to a street and Hannoi's old quarter called

hang Ma or Vodo Street in English. It's a spectacularly colorful road whose shops are overflowing with Christmas decorations. At other times of the year, there are goods for holidays like Lunar New Year, or paper products that are burned in rituals. Dead catd to lost loved ones. By early December, there are Santa suits, reindeer wreaths, snowmen, garland, and Christmas lights as far as the eye can see. But even if it's beginning to look a lot like Christmas, the

mood this year feels a little bit off. We met a shopkeeper named new in quan Hui. He's thirty five and has been selling on Hangma for five years. Sales have been slow this year due to too many reasons. One is because there are so many suppliers this year, they flooded the street with Chinese stuff. Secondly is people cutting down on spending this year. Take just one of

those items flooding the streets Christmas lights. For many years, China was essentially the only country in the world producing them. The data suggests that might be changing. Of course, the trade war has been waged not in the name of Christmas lights. It's supposed to be about America's ballooning trade deficit with China and allegations over intellectual proper e theft. But the supply chain for Christmas lights shows just how difficult it is for the US to penalize China without

also making things more difficult on American soil. We dug into US customs shipping data to figure it all out. Christmas lights actually have their own six digit international code and category. US imports from China this specific item by sea have declined over the past year and a half, while those from Vietnam have surged from almost nothing. Other data, which includes shipments by sea and air show Cambodia is

also sending a lot of Christmas lights to America. All this is happening after Christmas lights got caught up in the trade war. They were originally slapped with a ten duty effective in September, that went up to and May of this year, and that phase one agreement between the US and China to reduce tariffs on some goods, it doesn't cover Christmas lights, so the higher duties remain. What's more,

Christmas lights are tangled in a bigger trend. Chinese companies are trying to find ways to offset lost business directly to the US. One solution is to route those same products through third countries for final production. Another is to find new customer basis like Vietnam. Here's Jacque mor Say, the World Bank's lead Vietnam economist, talking about Vietnam's dilemma. Is a winning on a temporary basis because you have

a press adjustment. So that was taking place and I think magnified what was taking place before, you know, moving from China to Vietnam. So I think it's a temporary again. At same time, just temporary again doesn't have to be too big because the way you will be on the radar screen of the U s stor it is more, Say says. The increase in the official data for Vietnam's exports is clear, but it isn't matched by figures on

foreign direct investment or FDI. That makes it more difficult to calculate how much Vietnam is winning and whether the winning can be sustained. You would expect it being increasing in the dy from China. You don't see it to the data for items like Christmas lights that have shown a discernible shift, and all too often from made in China to made in Vietnam. The trend is concerning for

Vietnam's government. That's because Vietnam is stuck in a delicate balance, almost as if trying to learn how to win quietly in the trade war. Investors have cheered an economy that's growing at an almost seven percent pace. K Sarah, Sharp, and Nintendo are among the big names that have been expanding in Vietnam amid the US China tensions. But Vietnam has also felt the sting of winning too much. In July, the U s slap tariffs of more than on steel

from Vietnam. America accused the nation of not doing enough to prevent tear off goods from being trafficked through their ports. Vietnamese customs officials have taken the charge seriously, especially this year. They see a high risk of trade fraud, and they talk about not wanting to be used as a pawn in the trade war. They're keeping a list of items that have drifted from Chinese origin to Vietnamese origin. What they don't want to see are new labels on an

item that was actually completed elsewhere. So what does meet in Vietnam actually mean? In the case of Christmas lights? It appears to mean finished or near finished Chinese goods finding their way over the border before export. That's what another shopkeeper back on Hangma is seeing. Here's new antih. There are some local companies that brought material and parts from China and assembled them into these Kai supplies to sell. They can't produce by themselves because it would cause them

way more than importing paths from China to assemble. Likewise, on the u S side, companies that import Christmas lights emphasized the supply chain ships couldn't happen overnight, even if they were enthusiastic to buy from Vietnam. Doug Topham the owner of a business called Christmas Light Decorators in Arizona, so the search for supplier outside of China has been fruitless.

He's been importing Christmas lights from China since two thousand five and was looking to avoid Hefty's hairriff bills this year. He forded an email from one supplier who suggested that he falsify his invoice with a lower value to offset the tariffs. Others offered to repackage the lights, either with an erroneous origin or with a different company name. Topham said he just wants to play by the rules. For

this Christmas season. Topham kept his order similar to previous years, but he is looking elsewhere in Asia for next year's orders. He's unlikely to find a Vietnamese supplier. Several larger Vietnamese lighting companies don't produce Christmas lights specifically. They told us that they very much doubted that any Christmas lights exported from Vietnam were actually made by Vietnamese businesses. For those selling Christmas lights and other festive gear along Hangma, that's

just fine. They don't see Vietnam trying to replicate the Chinese model of mass export of cheaper goods. Drawn nuc On is a fifty three year old veteran shopkeeper on Hangma. Here's how she put it, tank to you have even these companies cannot make these kinds supplies because it will cost them a lot more than Jennese products, so they can compete. I hadn't seen any locally made ones. When Jennese producers lower the prices of their products, the poet

is also poorer. But it's very easy for us to sell this Chinese stuff because they have many new designs and the prices are so cheap. Some items just cost even less than a pup of tea or a bowl of foot back for those hawking goods along Hang Ma further, trade war piece could go a long way to making for a merrier Christmas next year. In the meantime, the price tag for Clark, Griswold and everyone else is at a high risk of staying more expensive. For Bloomberg News,

this is Michelle Jammer. Still m M. I wonder whether we'll hear from Vietnam again in But now here's that conversation I had with the Nobel Prize being an economist, Joe Stiglets here in London. So, Professor Joe Stiglets, thank you very much for taking the time in London. You were here in London doing a lecture to the London School of Economics asking the question, is progressive capitalism an

answer to America's problems? So do you think it is? Yes? Uh, Maybe I should explain what I mean by progressive capitalism in a way of a new card tract between the market of the states of a society. The market will play a role. Some people say progressive capitalism is an oxymoron. I think you cannot run a complex society without some degree of decentralization, and markets are going to play an important role. Corporations are going to play role in that

decentralization process. But the kind of unbalanced market economy, unfettered capitalism that we've had in the United States and in many other countries is the central cause of many of

the problems the United States is facing. The growing inequality, the oprioch prices, the child diabetes crices, the climate prices that we have not responded to, and even in to a larger them, the political crisis, you say, and Steals actually said that one of the reasons that we've got into a message that we failed to understand the true sources of What do you mean by that, Well, the true source the reason that we have such a higher standard living today than we did two hundred fifty years

ago after centuries and centuries of stagnation, is the advance is brought about by science and the advances in social organization.

Running a complex, innovative manufacturing post manufacturing economy requires a lot of cooperation and coordination, requires collective action, not only individuals acting individually, and needs regulations, and needs the role of the state to promote basic research, UH, infrastructure, technology, technology, education, and the dominant doctrine ideology of the last part of years. Neoliberalism didn't pay attention to these pub days. And it

made one more mistake. UH. It confused what made individuals wealthy with what makes the wealth of a nation. So individuals can get wealthy by taking money from other individuals, by exploiting them, by using market power, by taking advantage of their vulnerabilities. And we see a lot of people becoming very wealthy through that kind of activity that economists referred to as rent seeking wealth grapping. UH. The real source of the wealth of nation and are as I said,

these big advances the people who discovered DNA, people transistor lasers. Interestingly, none of these people are among the wealthiest people in our country. And among the wealthiest people are those who have become wealthy through him seeking. And of course there are some people who made a contribution, achieved some degreement, ample power, but really amplified their wealth through this kind

of exploitation. I guess I should. It's a lot of people. Certainly, some economists I've seen recently have been highlighting how strong, how good the economy is looking relative to a lot of other past elections. If you look at the us UM I saw one estimate that kind of the tail

winds for a presidential election. If you're looking at the level of unemployment, if you're looking at growth, you're looking at the level of inflation, Mortgage rates, debt levels are all actually much better than they have been in quite a long time. Even wages for the lower part of the wage spectrum, after a long time of stagnation, have actually been doing better in the last few years. So is this is this critique sort of failing to notice

what's actually happening out there? No at no, I mean it's taking nada quarter by quarter, or by moderate month or day by day. Perspective is looking at it over a longer period at the time. But even if you look more narrowly what's been happening in the last few years,

you see some real indicators that things are not going well. Uh. Growth for instance, is slow from three point one percent down to one after a massive tax cut, resulting in a trillion dollar deficit this year, probably the largest deficit that we've had in peacetime out of a recession. Life expectancy is in decline. This should happen in a country where we're breaking all the frontiers in medical research. It's

because we have a broken healthcare system. Students are graduating with massive amounts of debt that's strangling their ability to start a family and UH live up to their dreams and aspirations. Median income is stagnante. Real wages at the bottom at the same level as they were sixty years ago. Media and income of a full time mail worker and the full time men are the lucky ones, is the same as it was more than forty years ago. This

is not a picture that of a prosperous economy. The unemployment rate may be relatively low, but the employment rate is also relatively low. A lot of people dropped out of the labor force. So when I see the picture of the economy, and when I don't use a number of like GDP, it it is one of the indicators. But what really matters is how well ordinary citizens are doing, and in those terms, things aren't so rosy. I'm interested.

I mean, you won your your Naval prosper Economics for your contributions to thinking about the way that information UH played produces market well. Information failures and the market failures in general asymmetries of knowledge and how they can contribute to to inefficient outcomes. Do you think whether it's Elizabeth Horn or anyone else, you know, a lot of people recognize the market power of this massive internet companies globally

is posing an unprecedented issue for economies everywhere. The regulators and governments are really struggling with Do you think that she has a genuine answer? Do you think anyone has a rigorous approach to this? Yes, I do. The clearly the monopolies of century are different from standard royal and the monopolies of the end of the nineteenth century or twentieth century. UM. It's very clear that the anti drusservice,

our competition wives have not kept up with the changing economy. UM. Our business leaders have had a kind of you might say, resolution to increased market power that has not been met with a publics. In fact, a major school in economics, the Chicago School, took the view that markets are naturally competitive,

so don't worry about it. And actually there's been a weakening of antitrust laws over the last fifty years, so I think there is now a lot of focus on where we made a mistake, both in weakening our competition laws and in not keeping up with the new challenges posed by the changes in our technology. I've been uh participated in FTC hearings where these issues are are being discussed, and I think there is a growing consensus at least some elements that we need to begin with in making

our economy more competitive once again. Do you think I mean? I was looking at some of the rulings over the years, and there's a lot of people who are now written about how effective the internet companies have been, the likes of Google and Facebook and actually resisting regulatory pressure, even to the point of not responding to letters. I wonder what I mean when you look at some of these issues, do you think is there a question about whether they've just got too big to even respond to some of

these challenges from government? Are they now bigger than any single government? They are even bigger than most governments. And what is so striking is the kind of arrogance that they've exhibited. Uh, they realize how powerful they are. Facebook famously signed an agreement to respect privacy and then when they had and violated it, well, they were fined over

five billion dollars. So there's just nothing regular standpoints, but there's a lot by regular staying board, and they're put out notice that they will be fine a lot more if they don't comply with regulations. Tim Cook, the head of Apple, famously, uh, of course, I'm not going to pay taxes, uh, paraphrasing what he said in response to what Apple didn't in our own But then he said, but if you lowered the tax rate, then I'll comply. In fact, you acting and say if you have a

tax rate that I agree with, then I'll pay. But if you don't, of course I'm going to avoid taxes. Well, countries around the world and are saying, you know, this is not the way society functions. The remarkable thing is that these tech giants grew on the basis of government funded research. The Internet was a result of government spending, The first browser was a result of government spending. All the basic insights that have led to all these advances

were a result of government spending. So they're willing to take, but they're not willing to reciprocate. And I think that's not the basis of a social kind fract which you can mean to a successful society. I should ask you about the green new deal because I noticed we were talking recently in Beijing with Nick Starn, who had written the quite an important report or climate change, and think about ten years ago. I noticed that you actually lead

a big report on environmental issues. Even longer ago, I think the mid nineties. If you look, if you think about the challenges you saw it then and you see now how far we've come in in terms of the warming of the planet, but also a new feeling of urgency. Finally, on the political side, do you think we are now in a better place, at least when it comes to confronting it, even though we've let a lot of time

go by. Public reception is so much stronger today. Any scientific knowledge when we did our report, no new vibe. We were aware that global warming would lead to more extreme events, but we didn't say that in our report because the there was not overwhelming evidence of that. Today, there is overwhelming evidence. The US has been losing almost two percent of GDP using extreme events. People are realizing we got extreme cold, its, fires, floods, hurricane cyclones, and

the young people particularly get it. And since the young people are going to be the future of our of our world. Uh, I am hopeful I am worried that the you know, mistakes that we made is we did not anticipate how fast things would change. And we understood that there was an urgency, but we didn't understand how urgent it was. Now we do and that why are we responding fast enough? And next that I give you trying it behind the Green New Deal, we need real

mobilization to arrest this issue. And when you look, I mean, there are some who've said that the Green New Deal is just so ambitious, um and so aggressive in its timing that it could ultimately be be counterproductive because of the sheer pace of what it's suggesting, you know, retrofitting every single building in the country within ten years, decarbonizing the economy within ten years, which even the most committed

experts in this field says is really not plausible. That there's not enough people in the workforce to do some of these things. I mean, do you think, um, do you think it is potentially counterproductive or better to have a more urgent goal. I don't know. I think it's really important to have an urgent goal. But the broader perspective that people have focused on, you know, carbon reality, I think that's clearly attainable, but that isn't the green

you did agree you do something much more aggressive. I guess the question is do you do you make it harder to reach the reasonable goal by by trying too hard and actually maybe imposing too aggressive to changes on people. I think that what we need is a kind of wartime mobilization, and we need to do what we can. And uh, you know, some of the things that people say are very difficult aren't really that difficult. Putting installation in housing, this is not require high skilled labor. We

have a lot of unskilled labor unemployment. We could brain people to do it. Uh. So to me, addressing these issues would actually make our economy stronger if everybody were aware of the issue, if we commit ourselves to having finance to enable people to do the expulation that they need with actually would more than pay for itself, So they would actually be better off if they can get the finance to do it. Um. I think we would

have a very hard take up, right. So, whether it's going to be or even the real issue here is very quickly changing norms and expectations. And uh, you know, we've been dawdling since we became aware of the problem more than thirty years ago, and what the Great New Deal is really a statement, let's stop dawdling, let's start

doing something. Do you think, looking at where we are, looking at where policies are, that the next recession will be another will produce another major crisis the way we've seen we saw in two thousand and eight, Or do you look at that and say, no, this will be you like a more normal recession, but we will continue

to have all the problems. Yeah, it will be. My best bet is that it would be more like a more normal reception, but coming on top of a situation where we haven't fully recovered from the last major doctor. So that means that it will be in some sense ugly harder for a lot of the people at the bottom. And because interest rates are already very low, monetary policy

will be hard to respond. And because the US, for instance, squandered UH fiscal policy, not using UH using it when we needed it in two thousand and ten, but using it when we didn't need it in two thousand seventeen, we will be in a much harder position respond effectively. Thank you, thank you, thanks listening to Stephanomics. Will be back next year. With a special roundtable discussion on what to expect from the global economy in in the meantime.

You can find us on the Bloomberg Terminal website at or wherever you get your podcasts, and we would love it if you took the time to rate and review our show. For more news and analysis from Bloomberg Economics, follow at Economics on Twitter, and you can also find me on at my Stephanomics. The story in this episode was written and reported by Michelle jam Rusco and Uya Naguyan,

with assistance from Kevin Varley. It was produced by Magnus Hendrickson and edited by Scott Lamman, who is also the executive producer of Stephanomics Special thanks to Joe Stiglett's Nazarene Syria and hung True On the head of Bloomberg Podcasts is Francesco Levy five