The ongoing tariff war between the world's two largest economies, the United States and China, continues to reshape global trade dynamics.
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00:00Hello and a very warm welcome. You're watching The Newstrak. I'm Rahul Kamal.
00:04This is a special edition of The Newstrak because I am delighted to be joined by two of the world's foremost experts on China, on trade and on what's happening in the Trumpian world.
00:17I want to introduce first William Kirby. William Kirby is arguably America's top China scholar.
00:23He's at Harvard University, runs the China Fund. He's an historian and also an economist and understands this trade war between China and the United States in a historical arc.
00:34And some of the comments he's been making are viraling in academic circles, corporate circles.
00:38So I requested him to join us and he's agreed and I'm delighted that he's here. Welcome, sir.
00:43I also have Martin Wolf, one of the world's leading economic commentators, heads up the economic coverage of the Financial Times.
00:51is tracked very widely. Again, the world over, people who matter, read his articles very closely.
00:57So you've got two super sharp minds, one from the United States, the other from Europe, to talk to us about what the post-Trump tariff world looks like.
01:10World's biggest economies at loggerheads.
01:13Tid for tat, tariffs and trade war.
01:27Who holds the Trump card?
01:34Who will blink first?
01:36U.S. vs. China, tariff war decoded.
01:44That is our big focus on the news track.
01:51While American President Donald Trump has put a pause on his tariffs against other countries,
01:57he's going all out, for the most part, against China with a few exceptions.
02:02You have a situation in the larger context of economic rivalry between two superpowers,
02:09a situation where you've got an emerging power up against the modern-day superpower and they're now very deeply in conflict.
02:17Now, this is being looked at at different planes.
02:20This is being looked at in the moment in terms of what's happening on tariffs where the headlines change on a day-to-day basis.
02:27But we can also step out and look from far, in a larger historic arc, the economic rivalry between the current power and the emerging power
02:41and what's happened in the past when these two economic powers and giants have been in conflict going back millennia, going back centuries.
02:50It's a very tough thing to do, but it's something that Professor William Kirby, my guest on the news track today, specializes in.
02:58I want to tell our viewers a bit about why this guest is so special, because he's at the intersection of history,
03:04he started out as a historian, and economics.
03:08Highly rated professor at Harvard University, runs the Harvard China Fund, author, hugely acclaimed expert.
03:16And if you read academic circles and see what professors are saying at this moment, many of them are quoting Bill Kirby.
03:23So I requested Professor Kirby to join us on this broadcast, and here he is.
03:26Thank you very much, Professor Kirby, for taking our time and joining us on India Today.
03:31I'm really looking forward to this conversation.
03:32It's a real pleasure to join you on India Today. Thank you so much.
03:35Thank you, sir.
03:35Sir, I want to start by getting you to explain to our viewers, in a historical prism, what we're seeing currently,
03:45between, take the personalities out, Trump versus she, but in a historical prism, the battle between the modern day power,
03:52the United States, and an emerging power that hopes very clearly to unseat the standing economic power.
03:59So just zoom out, explain this in a historical context, and then we'll build on that.
04:02Well, I think we'd need to take it back several centuries in order to understand where we are.
04:10You talked about China as an emerging power, and of course it is, but it's also a returning power.
04:18My colleagues and I have just finished a new online course called The Return of China.
04:23And, you know, when the United States, you know, I live here in Lexington, Massachusetts, where 250 years ago this month,
04:31the American Revolution broke out.
04:34But when the American Revolution broke out, this was a kind of economic and cultural backwater of a comparatively undeveloped Britain
04:43in comparison with the great Qing Empire, which was in many ways the most sophisticated polity
04:50and the largest, and without question, the largest economy on Earth.
04:54And what you see today with the rise, you can call it the rise, or the return of China to a position of global eminence,
05:05the rise, or in many ways the return of India to a position of, these are civilization states
05:11that have an enduring impact on the history of the world.
05:15And the United States, we have to, with a good bit of humility in this country, which is unusual for us,
05:23we have to recognize that the United States has been around less long than the great Qing dynasty,
05:29which was the last of 24 imperial dynasties in China.
05:35And so what you are seeing today is in many ways really a mutual paranoia on the part of the United States and of China,
05:46sometimes I think quite unwanted fear in the United States about China's return to prosperity
05:55and its seeking a position of global influence in the world,
05:59and a paranoia in China about what the intent of the United States is toward it
06:07and toward its attempted return to a position of eminence.
06:13The one simple lesson of history, in the history of U.S.-China relations,
06:19is that whenever these two countries have worked together, it has been very good for both countries.
06:25And whenever they have been at loggerheads, or at worst, at war in Korea,
06:32it has been very bad for both countries.
06:36Both have an enormous stake in having an accommodation at this moment in time
06:43and finding a way to work and live with one another
06:48because our interests are much more intertwined economically, culturally, educationally,
06:55than ever they have been before, even if our political and strategic aims seem to have gone further apart.
07:03So, use what history teaches us to now project out into the future
07:09and given the lessons from history, when these two economic giants clash
07:16in the way that now seems inevitable and probably irreversible,
07:21how does it play out in your view?
07:24I don't think it's inevitable, and I don't think it's irreversible.
07:27I do think you see here a panicked set of responses on the part of Americans,
07:35particularly in the Trump administration, who see this as—
07:40and again, the Trump administration, as you will know, is hardly a united group.
07:46There are many different views within it, many of which wish to engage more deeply with China.
07:52At the same time, you have others who seek to, as it were, bludgeon China into trade agreements
08:00as the United States believed it had done in the 1980s with Japan.
08:07So, several of Trump's advisors on the tariff business
08:12basically are children of the 1980s in terms of their policy backgrounds
08:18and sought to use pressure on Japan in order to change
08:25and alter the trade balance between Japan and the United States at that point.
08:29But what we did also in the 1980s was to begin to welcome
08:33and allow Japanese investment into this country,
08:37in particular in the automobile industry,
08:40to the great benefit of the American public
08:43and actually to the ultimate benefit of the American automobile industry.
08:48But at the moment, that is not the way the world is going today.
08:54And if you look at your great wall of tariffs here,
08:57you know, these—
08:59I mean, it is—
09:01you know, it's—
09:02if it weren't so tragic, it would be comical to see numbers such as this.
09:06India's so-called reciprocal tariff was imposed at 27 percent
09:14before this 90-day pause.
09:16We brought it back to 10 percent temporarily.
09:20But even a 27 percent increase of tariffs on India
09:26could reduce Indian exports to the U.S. by $30 billion or more,
09:30costing India nearly one point of GDP, prospectively.
09:37We just don't know what will happen
09:40because you see here an administration
09:42that is quite literally making it up on the fly.
09:46And that is not good for the global economy.
09:50It's not good for stability.
09:51And so I hope that more sane views will prevail in Washington
10:01to allow for reasonable conversations
10:03between the United States and its major trading partners,
10:07China and India included.
10:09This has happened in the past.
10:11You said we can go back several millennia.
10:13The fact is when there are two powerful empires
10:16and they turn their economic backs on each other,
10:19how does it typically impact the other emerging powers,
10:24countries like India?
10:25So looked at more from a historical lens,
10:27what do you think is the more likely impact
10:30of these trade wars,
10:31which you're calling not irreversible,
10:34on a country like India?
10:36Well, I would say that history gives us uneven guidance,
10:40as it always does.
10:41You know, history is much easier.
10:42As a historian,
10:44I find it much easier to predict the past
10:46than to predict the future.
10:48But if you were to look at where we are,
10:51where we have been,
10:52before the First World War,
10:54the European economy was extraordinarily integrated.
10:57Germany and France,
10:59France and Russia to a considerable range,
11:01certainly Germany and Britain,
11:03as great rivals as they were in matters military
11:07and matters naval,
11:08their economies were complementary one to another
11:12to a significant degree.
11:15And that did not stop war from breaking out.
11:19In the Second World War,
11:21by contrast,
11:22is the best example we know of
11:24in which trading blocks
11:26actually seem to accelerate the pace of conflict.
11:31the high American tariffs,
11:34the Smoot-Hawley tariffs of the early 1930s,
11:38have long been considered one of the causes
11:41of turning a real recession into the Great Depression.
11:45The fact that you would have currency blocks
11:48that are putting you a pound block,
11:52a yen block,
11:53a dollar block,
11:54limiting global trade to those areas.
11:57the trade disputes
12:00between the United States and Japan
12:03are without question proximate causes
12:05of the Japanese attack on Pearl Harbor
12:08on December 7th, 1941.
12:11Okay, let's spend a moment
12:13on how this plays out for the United States.
12:16Over the weekend,
12:18all the major research houses
12:19have increased almost to 60%
12:21the probability of the United States
12:23going into recession.
12:24Are you seeing Trump at this moment
12:27as a master negotiator?
12:30You know, he's pulled out the sword,
12:32said, I don't want to behead you
12:32and then just not put the sword
12:35back into the sheath,
12:36but basically held back the attack.
12:38Now, precipitating the process
12:41of trade negotiation,
12:43which may have otherwise taken, say, years,
12:45he kind of tries to pack it in
12:46in, say, a 90-day window,
12:48which may or may not get fulfilled
12:49in that period.
12:50So do you see this as negotiation tactics
12:53by someone who's super smart
12:55or do you think the guy, frankly,
12:57has no clue about what he's doing
12:58and is just making up policy on the fly?
13:01Well, I'm feared that the truth
13:03may more be on the latter side
13:05of your question
13:07rather than on the former side of it.
13:09One can hope
13:10that there is a grand strategy
13:12behind this
13:14and an endgame that is clearly played out.
13:16But you see extraordinary amounts
13:19of division within the administration.
13:21You see Mr. Musk attacking Mr. Navarro,
13:26the trade representative of President Trump,
13:29the trade advisor of President Trump.
13:32And so the fear is consistent.
13:36The one thing that is consistent
13:37is the policy continues to change
13:39almost daily,
13:41a flip and flopping of priorities.
13:44And so the one thing that is constant
13:47is the inconstancy of it.
13:49That is possible
13:51that this level of, you know,
13:54inconstancy will speed negotiations.
13:56I think that's actually a very good point.
13:58It will speed negotiations
14:00that might well have taken many, many years.
14:02But it will not necessarily lead
14:04to great outcomes
14:07if one believes,
14:08as Mr. Trump clearly does,
14:09the one area of utter consistency
14:11is he believes that tariffs are important.
14:14He believes that they are a means
14:16of raising revenue
14:18as he does not see them
14:20for what they are,
14:21which is taxation on goods
14:24and ultimately on the people
14:25who purchase those goods.
14:27So a major tax increase on Americans.
14:31So it is,
14:33that is absolutely consistent.
14:35He believes in this policy instrument.
14:37But his capacity to wield it
14:39is hindered dramatically
14:42by his own inconsistency
14:43and by the fact that he seems to agree
14:46with whomever he has spoken with.
14:48Let's spend some time on China
14:50and your understanding
14:52of the impact of these tariffs on China.
14:56Because outside China,
14:57there are very few people
14:58who understand China
14:59the way that you do.
15:01In the belligerence
15:03with which Xi Jinping has hit back,
15:05he has not come to the negotiating table
15:07like Trump said,
15:07we will have a meeting,
15:08we will try and talk things out.
15:09She doesn't seem interested.
15:10Why is that?
15:12Well, you know,
15:13I don't think any country
15:14could not react
15:17to the kind of aggressive tariffs
15:20that this near declaration
15:22of economic war
15:23by the United States on China.
15:25At least so it appears
15:26at this 145% rate.
15:30That does not apply to all goods,
15:31for example,
15:32and some of the most important goods
15:33and most valuable goods
15:34are exempt from those tariffs.
15:36It's really quite a complex
15:38and messy situation.
15:41But I don't think President Xi
15:43would have had any choice
15:44but to respond.
15:45And it isn't just President Xi.
15:47I think any Chinese leader
15:48would have no choice
15:50but to respond in some way or other.
15:51And I can guarantee you
15:52that if India were suddenly hit
15:54with a 145% tariff increase,
15:58Mr. Modi, I think,
16:00would be hard-pressed
16:01not to respond to this.
16:03This is what governments do.
16:05They have to respond.
16:06They have domestic constituencies.
16:08They have to,
16:09if there is to be a negotiation,
16:11they will want to go in
16:12with a stronger rather than weaker hand.
16:14And there are thousands
16:18of American businesses in China,
16:20thousands, millions and millions
16:22of Americans
16:22who regularly are customers
16:24of Chinese goods.
16:25These are all constituents
16:27in what had been
16:29a largely beneficial
16:31bilateral economic relationship
16:34between the United States
16:35and China
16:36over the last quarter century.
16:37Will this tariff war
16:39lead to an economic decoupling
16:40between Beijing and D.C.?
16:42Given how intertwined
16:44these two economies are,
16:45is that even possible?
16:47Is the world likely
16:48to be divided
16:49into two trading blocks?
16:51Right.
16:52I think it is possible.
16:54I think it's unlikely.
16:55But I think it is possible.
16:57These two countries
16:58in many ways
16:59could not be more intertwined
17:01in their economies,
17:03more mutually reliant
17:05one on another
17:06in their economies.
17:08And at the same time,
17:10you have a history
17:12of U.S.-China relations
17:14at times
17:14when we were deeply involved,
17:17for example,
17:17politically and militarily
17:18in China in the 1940s,
17:21and they were the total cutoff
17:22of relations
17:23from the early 1950s
17:27until the early 1970s,
17:29and really until the early 1980s
17:31in practical terms.
17:33So it is possible
17:34to see decoupling,
17:35but that was a period
17:36of enormous tragedy,
17:37we must remember.
17:38It's a period
17:39when Americans
17:40and Chinese
17:40fought each other
17:42in the utterly needless
17:44Korean War.
17:46It is a time
17:47in which all business contacts
17:49were severed,
17:51all academic contacts,
17:52which had been very robust
17:54between American
17:55and Chinese universities,
17:56were severed.
17:57and if we believe
18:01that decoupling
18:02is somehow
18:03to the benefit
18:04of either
18:05the United States
18:06and China,
18:07then we actually
18:07don't know
18:08our history at all.
18:10Trump's premise
18:11is that he can make
18:12America great again
18:13when it comes
18:14to manufacturing.
18:16You know,
18:16you've seen
18:16all the social media memes.
18:19The fact is
18:19that America
18:20doesn't have a workforce
18:21that can do
18:21low-end manufacturing.
18:23The workers
18:24are simply not there.
18:25So how does this play out?
18:27Because as I speak
18:28to industrialists,
18:29especially in India,
18:31those who have interests
18:31in the US
18:32and elsewhere,
18:33they're putting a lot
18:33of investment decisions
18:35on hold
18:35because they frankly
18:36don't know
18:37what to expect next
18:38in terms of tariffs
18:39and in that uncertainty
18:40no one's going to go out
18:41and commit to
18:41major capacity expansion plans.
18:45The idea
18:46that Trump can,
18:48with the use of tariffs,
18:49turn America
18:50into a manufacturing power
18:53like it used to be
18:54back in the day.
18:55Is that possible
18:56or is he just chasing
18:57an oasis?
18:59Well,
19:00the fact is,
19:01of course,
19:02that this era
19:02of globalization
19:03has cost the United States
19:05many,
19:06many thousands of jobs
19:08in the industrial sector.
19:11But if you were to
19:12look at,
19:13for example,
19:13where we have lost positions,
19:15are these areas,
19:17are these the kind
19:17of industries
19:18that we would like
19:19to revive
19:19in the United States?
19:21I don't think
19:22you can find
19:22too many descendants
19:24or too many
19:27older people
19:29who used to work
19:30in American textile factories
19:32who believed
19:32that a revived
19:33textile industry
19:34would be
19:36a source
19:37of pride
19:38for the United States.
19:40these were difficult,
19:42difficult jobs
19:44that have been replaced
19:46in some cases
19:47by higher value-added
19:49manufacturing positions
19:51such as in the
19:52international automobile
19:53industry and so on.
19:55What's much more likely
19:56to happen
19:56is that more industry,
19:58more Chinese industry,
20:00and more multinational companies
20:02will move
20:03to other places
20:04beyond China.
20:05This has already
20:06happened,
20:07of course,
20:07as Chinese firms
20:08have set up
20:09factories
20:10in Southeast Asia,
20:12in South America,
20:14in Mexico.
20:17India stands
20:17to benefit,
20:18possibly,
20:19from this
20:20ridiculously high
20:22degree of tariffs
20:23on Chinese goods
20:24if it stands,
20:25which I doubt
20:25that it will,
20:26because that could
20:28entice multinational
20:29companies to move
20:29production from China
20:31to India.
20:32iPhone production,
20:33for example.
20:33Now, the iPhone
20:34isn't quite
20:35what it once was,
20:37but Apple aims
20:39to move iPhone production
20:40so that India
20:41can account for
20:42half of American demands,
20:44given that the tariffs
20:45on Chinese goods
20:46could add maybe
20:47$400, $500
20:49to the cost
20:52of my phone
20:52right here.
20:54And in that case,
20:56maybe I would be
20:57better off
20:57buying a Huawei phone.
20:59Oh, you could just
21:00buy a made-in-India iPhone.
21:02That's my suggestion.
21:03That's all right.
21:04Okay, I'll do that.
21:05I'll do that.
21:06How does this impact
21:07China in the current
21:08economic moment,
21:10given the fact
21:11that they have
21:11an aging population,
21:13fewer younger people
21:15than they did
21:15in the past,
21:16a real estate
21:17bubble,
21:19which continues
21:19to be a cause
21:20of concern,
21:21slacking consumption
21:22demand.
21:23So, it's not as if,
21:24if this tariff wall
21:26gets built,
21:27that China can just
21:29ride over.
21:29they have a consumption
21:30challenge
21:30and they have
21:31a growth challenge.
21:32They've got this
21:33capacity they need
21:34to export.
21:37Well, they actually,
21:38I'll come back
21:39to their need
21:39to export,
21:40but this is not
21:41a good time
21:41for the Chinese economy
21:42even before
21:43this kind of
21:45declaration of economic
21:46war by the United States.
21:48China is suffering
21:51what I would call
21:52a political
21:52and economic
21:53long COVID
21:54and many of the
21:56problems that emerged
21:57during the COVID
21:58lockdown
21:58have persisted
22:00consistently.
22:02Demand has not
22:03picked back up
22:04internally.
22:06The real estate
22:06market has continued
22:08to collapse.
22:09Now it's perhaps
22:10at bottom,
22:12but the many,
22:13you know,
22:14really hundreds
22:15of millions
22:15of Chinese
22:16feel less wealthy
22:17today.
22:18than they did
22:19five years ago,
22:20considerably less wealthy.
22:22Those with resources
22:23have tried to
22:24either get their
22:25resources out
22:27of the country
22:27or their children
22:28out of the country.
22:30Others, of course,
22:31are simply hunkering down.
22:33And so you see
22:33malls
22:34with numbers
22:36of, you know,
22:37vacant stores
22:38and so on
22:39in a way
22:39that you did not
22:40up to five years ago.
22:42Does China
22:43absolutely need
22:44to export
22:45in order to grow?
22:46However,
22:47it has been,
22:48of course,
22:48the major source
22:50of growth
22:50in the industrial
22:52economy,
22:52or one of the
22:53two major sources
22:54of growth,
22:54but domestic consumption
22:55had been one.
22:57That is now
22:58considerably lowered.
23:00What one is missing
23:01in this
23:02and what the Chinese
23:03government has missed
23:04all along,
23:05perhaps it will
23:06change tack now,
23:07is that China,
23:09unlike the United States,
23:10unlike Europe,
23:11has another internal
23:13market of two
23:14to three hundred
23:15million people
23:16who are simply
23:17too poor to consume.
23:18These people
23:19have no social
23:20safety net
23:21whatsoever.
23:23And if they were
23:24given one,
23:25if they were given
23:26rudimentary health care,
23:28education,
23:29at prices
23:30that individuals
23:31could afford,
23:31that families
23:32could afford,
23:33if they were given
23:34the rights
23:35to own the land
23:37for farmers,
23:38that their families
23:39had plowed
23:40for generations
23:41rather than
23:42have the state
23:42own the land
23:43and gain all the
23:44profits from
23:45its eventual sale,
23:47if those things
23:48were to happen,
23:49you could see
23:50an enormous
23:51domestic boom
23:52in China
23:53based on a new
23:54generation of
23:55consumers at home.
23:56Does he have
23:56the financial
23:57wherewithal
23:58to unleash
23:59such a
23:59government-led
24:00stimulus?
24:01It does.
24:02It does,
24:03absolutely.
24:03It would be a
24:03stimulus that is
24:04based also on
24:05fundamental policy
24:06changes,
24:07particularly in
24:08terms of
24:08property ownership
24:09for farmers.
24:12But Mr. Xi Jinping,
24:15he is a
24:17communist leader.
24:17He's the chair,
24:18of course,
24:19chair of the
24:20Chinese Communist
24:20Party,
24:21general secretary
24:22of the party,
24:23but he's not
24:24a socialist
24:24at heart.
24:26He doesn't
24:26believe in
24:27welfare.
24:28He says
24:28welfareism makes
24:30people lazy.
24:32And yet,
24:32if you're a
24:33poor farmer
24:33in China,
24:35you cannot
24:35work hard
24:36enough in
24:37order to
24:37get well
24:38enough off
24:39in order
24:40to be a
24:40major consumer
24:41in that
24:42market.
24:44And you
24:45are consigned
24:46ultimately to
24:49poverty.
24:51There's a
24:51great businessman
24:52in Thailand,
24:53Dhanin Cherubinat,
24:54of the big
24:54agribusiness,
24:56the CP Group.
24:57This is a
24:57Chinese family
24:58that has been
24:59active for over
25:00a century in
25:01Southeast Asia
25:02and now in
25:03China.
25:04And he has
25:04a very wise
25:06saying.
25:07He says,
25:07a rich country
25:08cannot have
25:10poor farmers.
25:12And if you
25:13look at any
25:14enduringly rich
25:15country today,
25:16whether it's in
25:17Europe,
25:17North America,
25:19or East Asia,
25:19Japan,
25:20Korea,
25:21Taiwan,
25:21they all have
25:22vibrant agricultural
25:24sectors.
25:25China only has
25:27poor farmers.
25:29And that is
25:30a problem that
25:31the government
25:31could begin to
25:32resolve through
25:34a variety of
25:35social safety net
25:36measures and
25:37educational
25:38improvements and
25:39many other ways
25:40of helping to
25:43bring these
25:43people out of
25:44poverty.
25:45But at the
25:45moment...
25:45Would that
25:46mean at an
25:47admission by
25:48Xi Jinping
25:49that things are
25:50much worse than
25:50he'd like?
25:51Because he
25:52likes to project
25:53military economic
25:55strength, create
25:56strategic acumen,
25:57government, if
25:58he dials back
25:59on notions that
26:00have been a
26:00key part of
26:01his economic
26:02DNA for
26:02decades, then
26:04is that just
26:04an admission by
26:05the almighty
26:06Xi that things
26:06aren't as rosy
26:08in mainland
26:09China as he'd
26:09like the world
26:10to believe?
26:11Well, the
26:12almighty Xi,
26:13as you put it,
26:13President Xi,
26:15did reverse
26:15himself from
26:16one day to
26:17the next on
26:17zero COVID.
26:19And so he
26:20is a person
26:21who is capable
26:22of grand
26:23gestures.
26:23this is, in
26:26principle, a
26:27socialist regime.
26:29Nothing would be
26:29more socialist than
26:30trying to help
26:31those of greater
26:33need, those in
26:34greater need.
26:35But at the
26:36moment, you have
26:37two constituencies
26:38that are really
26:40not doing well at
26:40all.
26:41Obviously, farmers
26:42and the rural
26:43sector, generally
26:44speaking, in
26:45economic terms.
26:46But then, second,
26:48you have youth.
26:49You mentioned the
26:50demographic challenge
26:51that China has,
26:53but China still
26:53has a large
26:54number of young
26:55people today.
26:56And the de facto
26:57unemployment rate
26:59of young people
27:00in China, 16
27:01to 24, is
27:02probably about
27:0440%.
27:05And that,
27:08the official
27:09number is, of
27:10course, much
27:11lower, is
27:12closer to 20%.
27:13But the official
27:15number assumes
27:16that if you work
27:17one day a month,
27:18then therefore
27:19you are employed.
27:20it's a stunning
27:23degree of youth
27:25unemployment today
27:26that is perhaps
27:27a social problem
27:28waiting to happen.
27:31How serious is
27:32that problem?
27:33Because it's like
27:34a giant dark
27:36curtain, you can't
27:37really see through
27:38it.
27:3840% youth
27:39unemployment is a
27:40lot.
27:41Is there a crisis
27:43bubbling just
27:44below the surface
27:44waiting to
27:45explode?
27:45there may be,
27:48but I think
27:49that, you know,
27:51it's a crisis
27:52that can be
27:52averted with
27:53policy changes
27:54by the government
27:56with increased
27:57stimulus,
27:58with perhaps
27:59reduced investment
28:01on physical
28:02infrastructure,
28:03and greater
28:03investment on
28:04human infrastructure,
28:06on the human
28:07capital that
28:08comprises this
28:09extraordinary
28:10country.
28:11given what
28:12you know of
28:13the current
28:13state of
28:14play between
28:14China and
28:15the United
28:15States,
28:17and given
28:17what's happened
28:18in the past
28:19when there's
28:20been a similar
28:20economic rivalry
28:21between the two
28:22most important
28:23powers of the
28:24world,
28:25and if nothing
28:26were to change,
28:27I know you
28:27suggested that you
28:28think that there
28:29will be a dial
28:29back on the
28:30part of Donald
28:31Trump,
28:32if that doesn't
28:33happen and
28:34the tariffs
28:35persist and
28:36the war gets
28:37worse,
28:37the economic
28:38war gets
28:38worse,
28:40which of
28:40these two
28:41elephants wins
28:42in your view
28:43in the future?
28:45What does the
28:46future look like,
28:47Professor,
28:47if I were to
28:47ask you to
28:48project?
28:48Yes,
28:49well I think
28:49neither of them
28:50win.
28:51I think it
28:52would be
28:52destructive to
28:53both economies,
28:54probably more
28:55destructive to
28:55the American
28:56economy and
28:57to American
28:58leadership in
28:58the world.
29:00The United
29:00States has
29:01been,
29:01in many
29:02ways,
29:03both a
29:04leader and
29:04a guardian
29:05of the
29:05global
29:05economic
29:06order,
29:07and now
29:07we are
29:08the one
29:09that,
29:09the country
29:10that has
29:10brought about
29:11the greatest
29:12global
29:12disorder in
29:14the international
29:14economy,
29:16and China
29:16has been
29:17comparatively
29:18consistent in
29:19its approach,
29:21but I think
29:22both countries
29:22lose,
29:23neither side
29:24wins.
29:25What is
29:26also lost
29:27though,
29:28if you were
29:28to think of
29:29the greater
29:30danger of a
29:30U.S.-China
29:31confrontation
29:32beyond the
29:33economic
29:33confrontation,
29:35is that
29:35working together
29:37on matters
29:37economic is
29:39not a
29:40precondition,
29:41but it has
29:42been an
29:42important part
29:43of U.S.-China
29:45cooperation on
29:46many other
29:47fronts,
29:48before the
29:48Trump
29:49administration,
29:49on climate
29:50change,
29:52before,
29:52in better
29:55times,
29:56on the
29:56denuclearization
29:58situation of
29:58North Korea
29:59and the
30:00Korean
30:00peninsula,
30:02and I
30:02always say
30:03if one
30:04thinks of
30:05the areas
30:06where a
30:07physical
30:07struggle,
30:08a war,
30:09is more
30:10likely to
30:10break out
30:11in East
30:11Asia,
30:11involving both
30:12China and
30:13the United
30:13States,
30:14the two
30:15obvious
30:16places are
30:18either in
30:19Korea or
30:20in the
30:21Taiwan
30:21Strait.
30:21does this
30:23tariff war
30:25make Xi,
30:26in your
30:26view,
30:27more likely
30:28to make a
30:29go for
30:29the Taiwan
30:29Straits?
30:32Unclear.
30:32I think it
30:33gives him
30:33more to
30:34worry about
30:34in the
30:35immediate
30:35terms at
30:35home,
30:36so maybe
30:37makes it
30:37less likely
30:38that one
30:39does something
30:40dramatic.
30:41But the
30:41fact is,
30:42anyone who
30:43knows anything
30:44about the
30:45situation
30:45between
30:46Taiwan,
30:47mainland
30:47and the
30:47United
30:48States,
30:49the best
30:49security
30:50for Taiwan
30:51is in
30:52a
30:54professional
30:54and ideally
30:55friendly
30:56relationship
30:57between
30:58Washington
30:58and
30:58Beijing.
31:00When
31:00Washington
31:01and
31:01Beijing
31:01are at
31:02odds,
31:03Taiwan
31:03is at
31:03much
31:03greater
31:04risk
31:04than
31:05when
31:06they
31:06work
31:06together.
31:08And this
31:08is something
31:09that...
31:09Can I
31:09counter-argument?
31:10You're the
31:10professor,
31:10I'm just
31:11asking a
31:11question,
31:11so allow
31:11me that.
31:12The
31:13counter-logic
31:13to what
31:14you're
31:14saying,
31:14could be
31:15that if
31:16China and
31:17the United
31:17States are
31:17getting along
31:18really well,
31:19then the
31:20United States
31:20feels less
31:21compelled to
31:22jump in
31:23if China
31:23attacks Taiwan.
31:24But when
31:24China and
31:25the United
31:25States are
31:26already daggers
31:27drawn,
31:28that then
31:28puts someone
31:29like a
31:29President
31:29Trump
31:30more...
31:32gives him
31:33a greater
31:33chance of
31:34going in
31:34to save
31:34Taiwan,
31:35because
31:35Taiwan is...
31:36China is
31:36doing something
31:36he doesn't
31:37like.
31:38I don't
31:39think so.
31:39I think,
31:40first of all,
31:40daggers drawn
31:41economically
31:42can lead
31:43to all
31:44kinds of
31:45other
31:45conflict.
31:46But I
31:47think a
31:47military
31:48conflict,
31:48one has
31:48to understand
31:49the risks
31:50for all
31:51sides in
31:51a military
31:52conflict,
31:52and they
31:53are not
31:53small.
31:54Obviously,
31:55the risks
31:55to Taiwan
31:56are enormous.
31:57The risks
31:58to the United
31:58States for
31:59its credibility
32:00and its
32:00capacity
32:01are very
32:01large.
32:02But above
32:02all,
32:03the risks
32:03to China
32:03are extraordinary
32:05because a
32:06war in the
32:07Taiwan Strait
32:08would end
32:08China's
32:09international
32:09economic
32:10cooperation,
32:11not just
32:11with the
32:12United
32:12States
32:12overnight,
32:14but also
32:14in all
32:15likelihood with
32:16Japan,
32:16with Korea,
32:17with Europe,
32:18and so on.
32:19This would
32:19be a major
32:21catastrophe for
32:23the Chinese
32:23economy and
32:24for China's
32:24position in
32:25the world.
32:26And even
32:26if China
32:27won a war
32:29over Taiwan,
32:30what does
32:31it get?
32:32It gets
32:3223 million
32:32people who
32:33don't want
32:33to be part
32:34of it.
32:35It gets
32:35a beautiful
32:36island, to
32:37be sure.
32:38It reunites
32:39the country
32:40in a theoretical
32:41sense, but
32:43it will set
32:43China back
32:44very dramatically
32:46for the
32:47point of
32:47view, for
32:49the pursuit
32:50of narrowly
32:51nationalist
32:52territorial
32:54aims.
32:56Now, the
32:57United States
32:57would have a
32:58better plank
33:00to stand on
33:01if its own
33:02president weren't
33:03calling for the
33:04territorial expansion
33:05of the United
33:05States in such
33:07strategically important
33:08places as
33:10Greenland.
33:11Give me a
33:12break.
33:12break.
33:14But I think
33:15the most
33:15important thing
33:16is it's so
33:17important that
33:18the leaders of
33:19China and the
33:20United States,
33:20and above all
33:21their national
33:22security people,
33:23their military
33:24people, their
33:25economic security
33:26people, begin to
33:27talk very
33:28directly one
33:30with another.
33:31Because the
33:32longer that this
33:34goes on, the
33:34more entrenched
33:35these attitudes
33:36will be, and
33:37the more entrenched
33:38certain policies
33:39may become.
33:39and there's a
33:41great British
33:41historian of
33:43modern international
33:44history named
33:45H.A.P.
33:45Taylor, who
33:47said this, war
33:48is never
33:49inevitable until
33:51it breaks out.
33:53Wow.
33:55Professor Bill
33:56Kirby, I was on
33:57a Harvard Business
33:57School call with
34:00some professors for
34:00my batch last
34:02week.
34:03There were
34:04several who were
34:04quoting you, which
34:05is when I said we
34:05must reach out to
34:06you and have you
34:07on the show, and
34:09they were all
34:10super impressed
34:10with the
34:11insights that you
34:12had to offer on
34:13this particular
34:13topic.
34:14This has been an
34:15absolute delight to
34:16know that everything
34:17that you've said has
34:17been music to
34:18anybody's ears.
34:18It's not, but you've
34:20been able to put it
34:20in context and in
34:21a framework which
34:22is super sharp and
34:24incisive, and for
34:24that I appreciate you
34:25taking our time and
34:26joining us here on
34:27the India Today
34:28News Trek.
34:28Thank you, sir.
34:30Wow, it's been an
34:31honor to be with
34:31you.
34:31Thank you so much
34:32for having me on
34:33India Today.
34:34Thank you very
34:34much.
34:39What does the
34:42post-tariff world
34:45look like?
34:46Lots of
34:47conversation the
34:48world over around
34:49how this impacts
34:51the United States,
34:53India, and economic
34:54growth in other
34:55countries.
34:56To talk about what
34:57to expect from
34:59here on, we're
35:00joined live and
35:01exclusive on the
35:02news track by one
35:02of the world's
35:03sharpest economic
35:04affairs commentators,
35:05Martin Wolf from
35:06the Financial
35:06Times.
35:07His articles and
35:08thoughts are very
35:09closely tracked
35:10world over, so
35:11we're very delighted
35:12at a time of so
35:13much uncertainty,
35:14Mr. Wolf, that
35:14he could take our
35:15time and join us
35:15in India Today.
35:17It's a pleasure,
35:18of course.
35:19So, you've
35:20written in one of
35:21your columns that
35:22Trump's tariff
35:24formula is utter
35:26lunacy.
35:27Do you want to
35:27start by explaining
35:28why you think
35:30Trump has got his
35:31tariff script
35:32all wrong?
35:35Well, I think
35:36you have to
35:37separate the
35:38objectives from
35:39the calculations
35:41and both are
35:42pretty crazy.
35:44Trump believes
35:45that in the
35:47right world,
35:49the decent world,
35:50bilateral trade
35:51would balance with
35:52every country in
35:53the world.
35:54This is like
35:55saying, it's a
35:57strange metaphor,
35:58but it's like
35:58saying that my
35:59trade with my
36:00barber should
36:01balance.
36:02Obviously, it
36:03doesn't.
36:04I spend money
36:06with some people
36:07and I earn money
36:08from other people,
36:09far fewer, of
36:10course, and as
36:11long as my income
36:12and my expenditures
36:14balance, I'm fine.
36:16So, the same
36:16applies to countries.
36:17There's absolutely
36:18no reason to worry
36:20about bilateral
36:20trade.
36:21The US has an
36:22overall deficit,
36:23that's an issue,
36:24but you never try to
36:25balance with every
36:26country.
36:27Now, having decided
36:28that's the objective,
36:30they have decided on
36:31a formula which
36:32essentially increases
36:33the tariff with the
36:35larger, with the
36:37size of the
36:40bilateral deficit.
36:41So, essentially,
36:43it's the ratio of the
36:45bilateral deficit of
36:47the US with its total
36:48imports from a country.
36:50So, the bigger the
36:51deficit relative to the
36:52total imports from the
36:53country, the higher the
36:54tariff.
36:54And that also makes
36:56absolutely no sense
36:57because you might have
36:58a big bilateral
36:59deficit with a country
37:00simply because it makes
37:01something you don't
37:02produce and you want.
37:04So, you have a big
37:05bilateral deficit.
37:06Now, they're going to
37:07impose a massive tariff
37:08on the import.
37:09Well, they were
37:09proposing, they now
37:10stopped, to impose a
37:11massive tariff on the
37:12import of something that
37:13they actually want.
37:15And it led to some
37:16really crazy results.
37:17Just about the highest
37:18tariff was going to be
37:19imposed on Lesotho.
37:21And if you think about
37:22it, I mean, it's obvious
37:23it cannot possibly make
37:25sense for the gigantic
37:26United States to be
37:28worried about a
37:28bilateral deficit with
37:30Lesotho.
37:31Okay, let's take this
37:33one by one.
37:34What does a post-Trump
37:37tariff world look like
37:39according to you?
37:40Right now, there is
37:41some fluidity around
37:42the tariffs he imposes,
37:44pauses, takes back,
37:45does multiple
37:46somersaults.
37:47But once all this
37:48tariff dust settles,
37:50what does the new
37:50economic order look
37:51like?
37:51Well, the honest
37:53answer is I think we
37:55still don't know.
37:57I think there's one
37:58thing we do know now,
38:00or at least nothing is
38:02forever.
38:03And this is so unstable
38:04and fluid, it's difficult
38:06to be sure.
38:06But it looks as though
38:07tariffs between the US
38:10and China will remain
38:12prohibitive.
38:13They're at a level 145%,
38:16at one level 125% on the
38:18other, these are close to
38:25prohibitive tariffs.
38:26It's going to make many
38:28goods going on both sides
38:30unprofitable to trade.
38:32So that looks a major
38:35shock to the system.
38:36What it's going to look
38:37like on the trade with
38:39other countries is still
38:40unclear.
38:41We have 10% tariffs all
38:43round.
38:43I suspect they're not
38:44going to be lower than
38:45that.
38:46How much higher than
38:47that they're going to be
38:49on some countries, I
38:51think we genuinely don't
38:52know because that's what's
38:53now being discussed.
38:54And of course, there are
38:55special tariffs on certain
38:57industries, particularly
38:59automobiles and steel,
39:02because he's very, very
39:03sensitive on those cases.
39:05And there are very
39:06complicated arrangements
39:07now with Canada and
39:08Mexico.
39:10USMCA is still, rates
39:13are still applied, so
39:14they're very, very low.
39:16And we have this very
39:20special exemption, which
39:21is supposed to disappear
39:22soon, on electronics
39:24imports from China, which
39:25is exemption from the
39:27prohibitive tariffs.
39:29But they've already said
39:30repeatedly that that's
39:32going to disappear.
39:33So that's basically what we
39:34know, and the rest is just
39:36uncertain.
39:37You know, research reports
39:38put out over the weekend
39:39seem to suggest that the
39:41probability of recession
39:43is now close to 50-60%.
39:45Some CEOs were quoted as
39:47saying they think we're
39:48already in the middle of
39:49a recession.
39:50Mr. Wolf, what's your
39:51sense?
39:52As far as America is
39:53concerned, is America
39:54already in recession,
39:56slipping towards the
39:57recession, likely to slip
39:58into recession?
40:00Well, there are two
40:01problems with that.
40:02The first is that there is
40:03no scientific way of
40:05defining a recession.
40:06People want to know
40:07whether we're in a
40:09recession, but there's
40:10huge disagreement on
40:11what a recession actually
40:12means.
40:13There's a popular
40:15expression that is to
40:16say a negative growth
40:18in one quarter or two
40:20quarters, more normally
40:22one.
40:24But that's just a
40:25popular one.
40:27There is no standard
40:28definition.
40:29So we don't even know
40:30whether we're in a
40:31recession when we're in
40:32one until somebody,
40:33basically the National
40:35Bureau of Economic
40:36Research has told us
40:37that the U.S.
40:38has a recession.
40:39So that's the first
40:39big difficulty.
40:41The second is this is
40:41very early in this
40:43process.
40:43It seems to me
40:44perfectly plausible a
40:46recession is on the
40:47way.
40:48But the impact of all
40:50this tariff mess on the
40:52economy is right at the
40:54beginning.
40:55And before we get the
40:57measurements that show
40:58that the economy is
40:59really slipping will
41:00probably take months.
41:01So my guess is a
41:03recession is quite likely
41:04but we definitely don't
41:06know yet.
41:07What impact would an
41:08American recession have
41:09on global growth and
41:12the likely impact on
41:13India's growth?
41:15Well here we've got two
41:18economies affected.
41:21Obviously a U.S.
41:22recession is clearly
41:24going to slow the growth
41:25of other countries
41:25depending on how open to
41:27trade they are.
41:28It depends then on how
41:31that affects U.S.
41:33trading partners big
41:34ones like Europe, Japan
41:37and so forth and then
41:39how it affects India.
41:40India isn't very open to
41:42trade.
41:43It would clearly be
41:44affected but given the
41:46growth of the Indian
41:47economy there will be a
41:48slowdown but nothing like
41:50a recession I would assume
41:51that would seem
41:52extraordinary and policy
41:53can be respond to that.
41:56But the other question of
41:57course is what happens to
41:58China.
41:59If China's slowdown is
42:01quite significant after
42:03this these tariffs then
42:07that will affect the rest
42:08of the world too particularly
42:09commodity exporters for
42:11whom China is a huge
42:13market and that will
42:15affect other other
42:16countries and we don't
42:17know how that's going to
42:19work.
42:19A very important element in
42:21this is a lot of Chinese
42:23exports come out via other
42:25countries they're included in
42:28products exported from other
42:29countries like say Vietnam.
42:31Now at the moment Vietnam is
42:33very low tariffs about 10% 10%
42:36so presumably Chinese
42:39transshipments directly or
42:41indirectly via Vietnam and
42:42similar countries will
42:44continue.
42:45This would suggest that for
42:47this period the effect on the
42:49Chinese economy might be
42:50muted to a significant degree
42:53and therefore that wouldn't
42:54have a big effect on the
42:55world.
42:55But if the US follows up very
42:57quickly by tightening up on
43:00transshipment, the use of
43:02Vietnam and Chinese supply
43:05chain, Vietnam and Chinese
43:07supply chains to the world, then
43:08it could be more serious and
43:09again that's something we just
43:11don't know about.
43:12I argued a long time ago that
43:14rules of origin would
43:15inevitably come into play in
43:18this discriminatory world.
43:19all this discrimination we're
43:20talking about is illegal under
43:22the WTO.
43:23But rules of origin would come
43:25into play and that would make
43:26it very complicated as the US
43:28starts, if you like, bashing a
43:31mole as it runs around
43:33underground because Chinese
43:35exports are going to reappear in
43:37many different places.
43:38What do you make of China's
43:41policy response to Trump's
43:44status?
43:44Far from buckling down,
43:47Xi Jinping seems determined to
43:49fight on.
43:50Do you think he has the right,
43:51from China's point of view, the
43:53right pushback strategy?
43:55Who suffers more in the end?
43:57China or the United States?
44:00Well, I don't know whether he's
44:03right or not, but I thought it
44:04was inevitable.
44:05China is a very major power.
44:09It's a very proud country.
44:11It feels very strongly that it
44:14was humiliated in the 19th
44:16century and is not going to be
44:18humiliated again.
44:20So to bow down to a bully like
44:23Trump, and clearly is a bully,
44:25will be very humiliating for Mr.
44:27Xi and I think more broadly for
44:29the Chinese elite.
44:30So I always thought they wouldn't
44:32do so.
44:33They would resist.
44:34They have clearly worked very
44:38hard over many years to to
44:43trump proof, if you like, their
44:45economy, and I think they will be
44:49in reasonable shape to do so.
44:52The trade impact will be
44:54significant, particularly if in the
44:57long run the Americans are able to
44:58attack indirect Chinese exports, as I
45:01discussed, direct exports from China to
45:04the US are not that huge.
45:05They can clearly survive.
45:07If they attack, all the indirect
45:08exports will be more significant.
45:11But China finally has huge policy
45:13room.
45:14It can expand demand if it wants to.
45:16Public sector debt, government debt is
45:18very modest.
45:20It can clearly borrow more and spend more.
45:25It can transfer money to households,
45:28which need it.
45:29It has a weak economy anyway, and that
45:31would motivate them, I think, to do
45:34these sorts of things.
45:35So I think they have a pretty fair degree
45:37of maneuver, room for maneuver.
45:40But that seems to be against Xi's economic
45:43instinct.
45:44You know, while he's a communist, he
45:46doesn't seem to be a socialist.
45:48And this kind of public welfare, social
45:50sector spends from what he's said and
45:52done so far, seem to be against his
45:54economic instinct.
45:56Yes, that I think is right.
45:57But there's an even more important
45:59instinct for survival.
46:01And the, I've just been in China a
46:03couple of weeks ago, and they are very,
46:07the technocrats, I spoke, were very
46:09clear that they are thinking about
46:10serious stimulus policies, really
46:13serious, and Mr.
46:15Sheen knows very well, given that
46:17there's a weak demand already, there's
46:19a risk of deflation, he will be told
46:21by people that if they allow this to
46:24tip them over into a serious
46:25deflationary problem, with all the debt
46:28problems that will create in the
46:30private sector, in the local
46:31authority sector, that will be very bad
46:34for him.
46:34So in the end, I expect the Chinese to
46:37be pragmatic.
46:38Usually they have been.
46:40Donald Trump said infamously, famously,
46:42I mean, call it what you will, that there
46:44are 75 countries that are wanting to
46:45kiss his backside, wanting to do trade
46:47deals, and he's now given a 90-day pause.
46:51India and the United States have said
46:53that they hope to conclude a bilateral
46:54trade agreement by fall.
46:56Is that doable, given the differences of
46:59opinion being deeply entrenched,
47:01particularly on issues to do with
47:02agriculture?
47:03Well, I suspect it's up to India to decide.
47:08And I'm sure you can do a deal very, very
47:10quickly if you accept all America's
47:12demands.
47:13But at least judging by our experience,
47:17because the issue has risen, agriculture
47:20is usually a central element.
47:22Agriculture is a very important interest in
47:24the United States.
47:26And I would have thought, but you would know
47:27much more, that for India acceding to
47:30really something close to free trade in
47:35agricultural products with the US would be
47:37sort of politically out of the question.
47:39But I may misjudge that.
47:41If that is out of the question, then I
47:43would have thought, and also in some other
47:47sectors, probably easier services is
47:49another sector that will be important.
47:52Then not much to worry about with US
47:54manufacturers.
47:55But agriculture and services could be a big
47:57issues.
48:00And I have no idea whether India is going to
48:03make serious concessions.
48:05Of course, I also don't know how demanding the
48:07US will be with India.
48:08There's no doubt Mr. Trump likes Mr.
48:11Modi, likes India.
48:13And India is a very important country.
48:15And if he sort of burns his bridges with China,
48:18he's in terrible relations with Europe.
48:21Well, he's even got problems with Japan and
48:24Korea now.
48:25So I would have thought it would be sort of
48:27mad for him to get into terrible trouble with
48:29India too.
48:30But he's so unpredictable, I'm not sure.
48:33Has Trump thought this through?
48:35Is there a grand strategy?
48:37I mean, we saw Bill Ackman say, well played,
48:40Mr. President.
48:40You know, you first unsheathe your sword, make it
48:43seem as you're going to chop somebody's head off.
48:45Then say, I give you a 90-day pause and then
48:47the courtiers are clapping.
48:48Is this policy thought out, you think, deeply?
48:52Or is he just making a policy on the fly based
48:54on what his billionaire friends are telling him?
48:56Obviously, I'm not inside Mr. Trump's head.
49:00I can only watch him.
49:02But I'm pretty clear that I've never seen a sign
49:07of very careful strategizing.
49:09He doesn't strike me as a brilliant player of
49:13three-dimensional chess.
49:14So my instinct has always been what you see is
49:17what you're getting.
49:18He put forward these very radical proposals.
49:21They led to market turmoil.
49:23And he backed down because it really frightened him.
49:26And now he's playing it again.
49:27He's always playing it by ear.
49:29That's my sense.
49:31Could be wrong because I'm not in his brain.
49:33But that's what I see.
49:34There's a lot of talk about what, you know,
49:39who emerges stronger in the end, China or the United States.
49:42And there have been past examples going back centuries
49:45of two leading economic powers unleashing trade wars
49:50against each other.
49:51Given the relative current state of economic strength,
49:55if there's no back down on either side
49:58and if this is a what in the end,
50:01who do you think emerges stronger, China or the US?
50:05Well, I think it's very difficult to say.
50:08My guess is China.
50:11And I think it's because they are very, very determined.
50:14I think this could actually force them to reform
50:17in very effective ways.
50:21I don't think Trump will be able to stop everybody else
50:25trading with China.
50:26He's such a huge trading partner for so many other countries.
50:30And I think, crucially,
50:32that the US has made itself untrustworthy.
50:37I mean, the way the US has behaved in these last few months
50:41has burnt its relationships and undermined trust
50:46in really important partners, Canada and Mexico, obviously,
50:49but also Europe, even Japan and Korea,
50:52longstanding allies, are very concerned.
50:55Is the US trustworthy?
50:57And it's not just here about trade.
50:59What they've done with Ukraine has also made people feel,
51:02is it a US really a trustworthy ally?
51:05If it's not a trustworthy ally,
51:08and you're a country that already trades a lot with China
51:11and China's next door,
51:14with its huge and growing military,
51:16are you really going to go all out
51:18to side yourself with the US
51:20and break with China?
51:22It would seem very, very risky.
51:23No, so do you think...
51:24They're not going to do that.
51:25Do Trump's actions and China's response
51:28force countries in the Asia-Pacific region
51:30to pick a side?
51:31Or will more countries, you think,
51:33try and do this fine rupees,
51:35balancing both China and the United States?
51:38That's what I think will happen.
51:40Or that's what I think they will try.
51:42Now, Mr. Trump may say,
51:43if you don't have tariffs like ours on China,
51:47we won't import from you.
51:49Well, for many countries,
51:50then I think they will stick with China.
51:53Just as reliable right there,
51:55and for many, a bigger market.
51:56Now, this, it could break up,
52:00could make crisis in ASEAN, for example.
52:02But I think simply choosing the US,
52:05which is far away and becoming very erratic
52:07over the rising power of China,
52:10would for many countries just seem foolhardy.
52:13But of course, they will do everything they can
52:15to avoid making that choice.
52:17Will China push countries to pick a side
52:20between DC and Beijing?
52:23Or will China not force countries
52:26in the Asia-Pacific region
52:27to either be with them or against them?
52:29That's a very good question.
52:33I think if the Chinese are sensible,
52:36they'll leave the Americans to try and force them.
52:38Because sort of that will give the result.
52:41But if it appears that American pressure
52:44is starting to make important countries
52:47lean towards them,
52:48I would well imagine the Chinese
52:50will also put pressure on them.
52:52And if that happens,
52:53then you can imagine lots of countries,
52:56like Indonesia and so forth,
52:57in the most horrible situation,
53:00because they just won't want to be at war
53:02with either of them, of course.
53:03It's a terrible situation.
53:06But the Chinese will do,
53:07they're completely pragmatic,
53:09whatever they think they need to do
53:10to defend themselves.
53:12We can predict that.
53:13They will do it fairly cleverly
53:15and deliberately.
53:17And at this stage,
53:17I think all this is really unpredictable.
53:20We don't know how this game will play out.
53:23They've started a new game.
53:24It's a very big game.
53:26It will determine the shape of our world,
53:28I think.
53:28But I'm not at all clear who's going to win.
53:32It's impossible to say for certain,
53:34but I want to know your thought.
53:35Is this the new normal?
53:38These tariffs and the effort
53:41that Trump is making after him,
53:42possibly Vance?
53:44Or is this just a phase
53:45in a very long economic arc?
53:50Well, I think it's probably how it is
53:52so long as Trump,
53:54or someone like Trump,
53:55remains president.
53:57I mean, if Vance succeeds him,
53:59for example,
53:59I don't know whether he played
54:00this game in this way.
54:02Trump is sui generis.
54:03Because the way he's done this
54:04is sort of unique.
54:06Once Trump leaves the scene,
54:08and after all, he's 78.
54:09He is going to leave the scene
54:10not that far in the future.
54:12I think relations with the U.S.,
54:14between the U.S. and China
54:16are going to remain
54:16very, very difficult.
54:18It's clear that they have now defined
54:21each other as the major enemy.
54:23And that could last a century.
54:25I have no idea how long,
54:27but it could last
54:28for the indefinite future.
54:30But I suspect it wouldn't be played
54:32in quite this way.
54:33I mean, the tariff trade obsession
54:37that Trump has,
54:39his desire to say
54:41for bilateral balancing
54:42and balance rate,
54:43that's sort of uniquely him.
54:45And it might not last
54:46in that form.
54:47But the great rivalry
54:48is the fundamental structure
54:51of our world,
54:52it now seems to me.
54:54For sharing the wealth
54:55of your insights
54:56in a very turbulent world,
54:58Martin Wolf,
54:58thank you for your time.
55:00Great pleasure.
55:01Thank you, sir.