That damage would be very far -reaching and this is going to hurt the average American.
They just don't feel like it right now.
Their policy is not successful in the first place.
So why you are trying to repeat in a very different time, different position, with the same failed policy?
The U .S. economy today represents no more than about 13 % of global imports.
The rest of the world with 87 percent has a substantial stake in ensuring the development and continual enhancement of multilateral coding environments.
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Chat lounge. The chat lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to the chat lounge.
I'm Tu Yan. and with me to comb through the price americans have to pay due to the U .S. launched tariff war are Dr. Gen Lian, Professor of Economics, Ulamich University in the United States, Dr. Warwick Powell, an adjunct Professor at Queensland University of Technology, Australia, and Dr. Qiu Qian, a Fellow of the Belt and Road Research Center at Mingsu University of China.
Thank you for coming to the chat.
A warm welcome. So, the International Monetary Fund has warned that America's unpredictable tariff policy and countermeasures by its trading partners will likely deal a heavy blow to the global economy, with US prosperity hit particularly hard. And over a hundred economic scholars, including two Nobel laureates, have signed a letter opposing the US Government's protectionist tariff policy.
They're warning the policy, quote unquote, will impose extraordinary costs on Americans from all walks of life.
So let's first check the visible impact.
Dr. Leon, let me begin with you.
You're living in the state of Oregon, which, according to the latest report, has joined over 10 other states in suing the Trump administration over its tariff policy.
So, has the tariff policy affected your daily life or work so far?
And how has the State of Oregon been affected?
Well, good to be with you.
So, I think at this point, we haven't visibly seen a lot of the increases in prices just yet, because a lot of these retailers are sellers, they still have some inventory.
But I think very soon we're likely to see that impact.
As a matter of fact, I think, according to some of my colleagues who have just recently purchase them use the cars.
They reported that the price has visibly risen.
And it's very clear that even Eve right now, as I said, there are some inventories.
So people are not going to immediately feel the need to increase price, but a lot of the sellers will go ahead and raise the price anyway, because they can take advantage of this perception that because of tariff price is going to rise.
And I think so many people argue, you know, tariff is not going to cause the price to rise very much, or if it does so it's going to be just a one time price increase.
I would really back to difference, because I think we have just experienced in the United States a solar inflation.
Many of the suppliers having the monopoly power have the pricing power take advantage of the disruption in supply chain and cost increased during the pandemic and they take advantage of that and basically raise prices and propagate the increasing cost and by adding, you know, rising profit margins onto that rising cost. So that would easily translate into higher prices and continuous price increases.
So I think it's definitely very likely that the inflation rate is going to rise in the U .S. due to this massive sweeping tariffs, especially on China.
So not only the consumer prices will take a hit right away, but also because many of the imports from the United States consist of intermediate goods, machineries.
So you are very likely to see cost of production will rise.
And so that would translate into higher prices as well.
So the IMF basically now forecasts the U .S. inflation rate will increase to 3 percent this year.
Almost one percentage point higher than their January forecast as a result of the tariff.
So I think things are not looking very rosy as far as the consumers are concerned.
But there are also many other impacts.
You know, I just recently talked to Oregonian reporter for the local newspapers, and so they are all worried about this, especially for some smaller businesses as well as the farmers, because Oregon states, you know, it's actually the fifth largest state that rely on trade with the rest of the world and they do trade heavily with Asian economies, China, Japan and others.
So they're very worried about how this tariff is going to affect their businesses.
The governor of Oregon State actually had recently invited some of the industry leaders and businesses to both have a survey but also have some roundtable discussions just to gauge a little bit of the impacts and to take some measures to help.
What about other states?
Do you have any idea?
Like, would Oregon be the most affected one?
Well, I think California, right, would be definitely a big one that would take the hit because it's very much externally oriented.
They do a lot of trade, especially in the tech sectors.
They also, you know, on top of the tariffs impact, they also rely a lot on, you know, international talents, right, immigrant workers.
Even earlier, Governor Newsom was saying that California state should have their own negotiation with countries, right, instead of following the federal government's lead, and which basically antagonize all these trading partners.
So it's very interesting to see, like you said, many states are not in agreement, right, with Donald Trump's policies, and they're trying to find ways to help their own local economies, but also take some measures to counterbalance, counteract these kinds of very erratic, very wrong -headed federal policies.
Indeed. Zooming out to the national economy, which sectors have begun to feel the pinch less We have seen it this month since the tariff policy took effect.
Tell us the most striking issue in your observations.
Well, I think, again, giving the wide spread with this very sweeping nature of this tariff, but also the way it's rolled out, right?
Very on and off, like a yo -yo every day.
There's a different sort of policy.
It's on, it's off, it's sectoral, it's exempted, it's paused.
I do think that this will have a very wide ranging effect on all sectors, but so far you can see the agriculture sector is going to take a hit because China was a large agricultural buyer, right, importer from the United States.
And so now that is at stake.
The manufacturing sector is definitely going to take a hard hit.
I think there has been various estimates about even if the Trump's policy can create some manufacturing jobs, it's going to be devastating for many of the service base jobs, right, which is the main source of employment for the U .S. economy.
As a matter of fact, you know, the aerospace is having a hard hit right now because China has been returning some of the Boeing airplane orders.
Automotive industries, Atlantis just temporary laid off 800 employees because of this supply chain disruptions made mostly because of the tariffs with Canada and Mexico.
So tourism, I think it's another industry that we have seen I think a 12 % reduction in international travels into the United States in March. And so that again is a significant impact because the tourism sector is actually a large employer, right?
it actually employs about, I want to say 15 million workers, which it's very ironic when you think about you know, with all the tariffs, Trump is trying to boost manufacturing jobs.
The manufacturing sector only employs about 12 .9 million of American workers, whereas the, you know, the tourism industry employed 15 million.
But with Trump is all these very anti globalist basically anti all countries, right?
Policies it really damaged the US's reputation, its image, so that it's hurting its tourism industry.
So I think, you know, And none of these policies is helping any of the industries, I would say at this point.
Not in the short term and not likely in the medium or long term either.
So yeah, so I think overall these policies are really self -inflicted chaos and self -inflicted economic ills, as I said, in the US economy.
Right, and I think the tourism sector is quite interesting.
When asked whether some foreign tourists to the states, they are scared by some stories.
President Trump replied that America treats tourists quite well.
And so to Dr. Powell, I think quite interestingly, I just read about some story about Australian tourists.
They usually during the Easter holiday, they usually go overseas to spend their holiday like the states.
But this year I think a lot of Australians choose to stay within Australia.
Is the tariff policy or the tariff war launched by the US a big reason behind that?
But I think that there's some broader reason and they go to growing concerns around safety as far as travellers are concerned, visiting the United States as well as numerous stories now appearing in the news related to the search and customs experience that many travellers are now having to go through.
So the news in Australia is awash with stories of travellers having their phones taken off them, having their bodies searched and ultimately creating a very poor travel experience.
And let's face it, the world is a big place and the world has many fantastic places to go and visit.
Many of them of course have been in the United States but if the overall travel experience is poor then travellers or intending travellers will end up going elsewhere and I think that that's certainly proven to be the case.
Not just with Australians I might add, I in terms of their reluctance now to travel to North America.
We're seeing data from Europe which shows that there has been a significant drop -off in travel intentions and travel behaviour.
And again not just in the last couple of months but over quite a number of months in the lead up to to this second Trump administration.
Then apart from tourism is there any other issue or sector that's most striking in your observation when it comes to the negative impact on the U .S. economy?
Yeah look education's an obvious one too, the education sector has been a significant earner for the United States economy and there's a broad raft of services so education and tourism are the obvious ones.
The one that I think is also interesting, well there's two actually, one is LNG and LNG was a sector that in particular China was a significant buyer of American LNG and it has ceased doing so and has transferred its short term LNG purchases to Canada and it's also striking additional LNG supply agreements from other parts of the world.
So LNG is an obvious one where the trading relationship between China and the United States is affected not just in the short term, but ultimately I think propelling or catalyzing long -term risk mitigation measures.
The other one is in retailing and as Professor Liang touched on, the flow -on effects are yet to be fully felt but I think it's fair to say that when you have the CEOs of some of America's largest retailers.
You know, Target, Walmart and the like making personal and direct representations to the administration about the impact on prices.
And more importantly, I think the impact on availability of goods in the not too distant future.
And we're looking at an environment where retailing can be seriously disrupted.
The other disruption by the way, on retailing, isn't just the immediate impact on availability of goods, in other words, empty shelves and the short -term impact on pricing.
But it's actually the long -term disruption to the supply chain networks that have been built.
And we have seen in the last two weeks or so, a very active campaign by Chinese manufacturers, particularly the OEM manufacturers, who've traditionally made things to be sold under other brands.
Now reaching out to the broader marketplace globally saying, look, you know, if you're paying $100 for a branded product, be aware that that branded products being made by us and it comes out of our factory at $20 so you might as well buy direct.
So this supply chain reconfiguration that has actually been going on for the best part of the last five years is likely to accelerate.
And as that accelerates, not only will the challenges of having stopped shelves become more apparent in the United States but the US retailing sector employs about 15, 16 million people as well.
And many of those workers are from your lower income sectors and they are the ones who tended to support President Trump.
so many from his own electoral base are actually at risk of being significantly hurt as a result of these policies." The chat lounge.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
And to Dr Shue, I think the film industry actually is emerging as an unexpected casualty.
Why? I think number one is not because of the tariff war, is because the currently the Hollywood sucks.
If you take a look at their movies made in recent years, it's basically all kinds of sequels, like the Marvel series, DC series and you know, all kinds of, or the Pixar's.
What Pixar's doing pretty okay.
Dreamworks is pretty okay, but still they're doing so much of the sequence.
So the originality has been losing, people are losing the appetite to watch it just one after another, after another.
In a movie with the same IP, was the same themes.
This is the root cause for movie market losing its position.
And secondly, yes, about the Tarah four, because in America, one of the most important exported service slash product, it's culture service or culture product.
And the movie, TV theories and also games are one of the most important products in this aspect.
And what we know is that Hollywood is leading, flared in this area.
And also Netflix is doing very, very good in this area.
just take a look at fiscal report of the Netflix in the last year.
They're doing pretty okay.
But that was before the terror force going on.
I think this will become a major impact towards the whole culture industry in America.
So what we know is that many countries is trying to retaliate in America, try to streamline the import of American culture products, even though it's online.
So a lot of people need to take some VPN to watch the Netflix, and you're going to see that reflecting on their Q2 and Q3 fiscal report.
And also China and many other nations, for example, European Union countries are also talking about, they probably should import less of the American movies because if you import American movies, you're going to pay a lot of lots of lots of loyalties.
And also, you know, the share in the ticket box is also huge.
So that means a lot of the capital flow, lots of the money has been flowing out of this market and backed into US.
That's something, you know, will be not very desirable against the current situation, isn't it?
So movie or culture industries are really the collateral damage of this foolish policy and that You stop the people getting access to their cultural product, but also I think Hollywood really need to work harder to actually have a better position in this home market.
Anything else that's eye -catching to you?
Well Professor Pou and Professor Lang had just mentioned about, you know, all kinds of the damages.
Well, we'll continue with the topic on the cultural industry, you know, people -to -people exchange actually has been really, really hampered.
Because it's terror for, a lot of people mention about the trade, right, or a lot of people saying about finance, but actually the culture industry can, you know, generally become a victim about all this.
For example, you know, overseas studies, overseas students.
Right now if you take a look at the overseas students and their application numbers has been dropping very, very sharply between China and America, a potential drop -out.
We've been interviewing lots of the overseas study, you know, agencies and the application towards the United States has been dropping, but on the contrary, the application, you know, switched to Europe, to the uk to Australia has been rising very very quickly so that is i think people try to you know avert from the potential risks and also about tourism actually america is a very very large tourism destination but right now according to the data we've been observing that is even though it's just a terra four towards all kinds of the products but uh people because of the terra four people just
don't like what american is trying to do so uh they get revoked all kinds of a plan percent of their tourism arrangements.
So there are 20 percent drop from European Union tourists to America.
This is just a one month, not one month, just about three weeks.
We have already seen 20 percent drop of the tourists to just go from the European Union.
And I think the number from China side is not in a statistic yet.
But according to our rough calculation, it's similarly about 30 percent drop or 20 percent of the drop in the tourists from china to america and i think similar situation happening in many other countries as well so i think this is some damage happening to america you know very unexpectedly because america really is a service -oriented economy so this actually means a lot to america thanks for the specific numbers um those are the visible influences we've already seen but what about the hidden damage average americans don't see but is actually happening, professor Chu?
Well, about the hidden damage, a lot of people probably, for American families, ordinary families, what we probably don't think is the purchasing power of the U .S. dollar is dropping very, very fast financially.
In China, we don't feel it very much because we are trying to stabilise our exchange rate with the U .S. dollar.
But, U .S. dollar indexes have been dropping the lowest to about 98 .2.
This is probably the lowest in the past five years because US dollars index as strong, usually it's been going beyond 100 -105, and now it's only 98.
And on the contrary, the euro and the Japanese ENN on the ferocious rise, well, this is actually not a very good sign.
It's because in a European market, there's always a gap of supply of US dollar, which means European market, they always need US dollars to support the euro market liquidities.
But right now, I mean, Even though there was a shortage of the U .S. dollar, the U .S. dollar is falling, dropping against the euro.
That can mean a very, very large systematic risk financially is in the bruising.
This is very dangerous.
And also the gold price is also on a very ferocious rise just two days ago.
Well, yesterday it's been dropping.
But you know, two days ago, gold price is rising, very, very ferocious.
In behind that you're seeing a triple kill.
It's basically what we call impossible triangle.
The triple kill means the US dollar, US T -Bond, US stock market, together are falling.
Because according to the 101 economics, basically you can only see two falling, but always there is another one rising.
For example, the stock market is falling, US dollar is falling, but the T -Bond of the United States government is always on the rise.
And this time, triple kill.
But who is on the rise?
The both. So this can also mean a potential perfect storm is in the making.
and a lot of people didn't realize how much of the damage it's going to be causing towards the long -term American economy gross.
Today I think the situation has been reversed a little bit.
But I don't think this is the end, and this is just a prelude.
And we're going to see more of this kind of a triple kill, perfect storm to show up very, very soon in the next 20 years.
You've focused on the financial market, but Professor Powell, I think you touched upon this a little bit, about the supply chain.
then what's your most concerned about the hidden damage that's undergoing right now?
Well, once supply chains change and they lock into new patterns, then many of the old systems that have been put into place, many of which, by the way, are distribution systems in the United States, will ultimately go idle, and the ability for those enterprises to adjust their systems to new realities will be quite challenging.
This will also have spatial implications and demographic implications as well.
I think that there's a broader issue, not just in terms of supply chain destruction, and it goes to the wider reputation of the United States both at a political level as well as at a financial level.
Politically, what we've seen in effect is an administration that makes decisions capriciously, driven by whims and which are largely pernicious in nature, and that leads to a very strong perception and arguably the reality that the United States is less dependable as a counterpart today than ever been.
This perception is all the more reinforced by the willingness of particularly this administration to step back from playing constructive and responsible roles in a plethora of multilateral institutions.
You simply cannot be a meaningful global player on the back of slogans.
The reality of the shallowness and the capriciousness of this administration is going to leave a very bad taste in the mouth of other countries and their governments for quite some time down the track, which leads to wider questions about the acceptability of the US dollar going forward. As the previous speaker noted, we've had a triple in terms of the global markets rejection of US dollar -denominated assets, including the US dollar itself, of course.
And the broader question that this raises now is the extent to which the rest the world will continue to be willing to accept American government backed IOU's in exchange for real goods and services.
The fact of the matter is that this so -called trade deficit which has been the focal point of this administration's sloganeering and ultimately its emotionally charged political campaigning, represents the willingness of the rest of the world to take American IOU's in exchange for the things that the rest of the world producers.
Now these IOUs won't be very useful if they can't be exchanged for other useful things and increasingly the risk is that these IOUs will become less and less useful as time goes by.
And that's a possibility at the moment, I'm not saying that it is locked in stone, but when you see Chinese financial regulators and institutions actively now encourage their state -owned enterprises to expand the use of the RMB for trade settlements.
I think it's fair to say that there has been an incredible amount of damage done to what is actually a very fragile foundation that underpins the acceptability globally of the American IOU.
Right. I think you share similar opinion with, you know, California governor Gavin Newsom in that America's reputation has been damaged.
In his words is permanently damaged but is it so serious, is that a just a hyperbole or real warning or is it just linked to this administration?
Once it's the people in the White House has changed for another group of people, things will change.
Probably people will regain that confidence in the United States.
Professor Liang? Yes, I think I agree.
I think what the United States, the Trump administration is essentially doing right now is to uproot the current economic, security, financial system at the global level that the United States has been building in the past at least 80 years, if not really from the very beginning of the foundation of the United States.
So I think, yeah, it's a big change.
It's pretty much a pivot when it comes to, for example, the U .S. has been boasting itself, being this light tower, this shiny city on a hill.
And when you look at, you know, what the US has been quote and quote lead in the global system, when it comes to its military prowess, when it comes to the dollar king, and when it comes to the liberal democratic value, I think all three are undermined by Trump's administration, right?
So this is sort of, at the global level, you're seeing the US's so -called leadership, you know, has been really, I think, shaken.
So take military prowess as an example, I mean, domestically, they have pointed people like hashtags, right?
They just have this sort of, the scandal, right?
That they had a group chat and they accidentally brought a journalist into the group and then they revealed a lot of details about the attack in Yemen against the Houthi group.
A lot of these military detail were basically released to the public, so to speak.
And then he didn't bear any consequences of that and he did it again, right?
So I think, you know, this is a very significant, I think, undermining of their own through military operation and apparatus.
On the other hand, internationally, you hear in the United States going around and push countries to increase their defense spending, military spending, including European airlines and now with Japan.
They just finished the first round of trade talk, and when Ishida came back to Japan and basically said, well, there are concessions we'll make, but there are also concessions that we can't make, which including, for example, basically take away all the protections in their rice production in the cultural industry.
This is not something that the Japanese is willing to concede completely, nor are they willing or able to continue to increase their military spending.
So when it comes to military prowess, I think Trump's policy, tariff war or otherwise, had been undermining that.
Now, the King Dollar, I think Dr. Powell has already elaborated, right, with all the concerns about the U .S. dollar weakness.
So in just recent days and weeks, we have seen the dollar index gone down from one point 102 to now actually rise a little bit to 99.
But still that's a quite noticeable decline.
Then the treasury also, right, that it has basically the yield has gone up from, I believe, 4 .05 % back on that liberation day, April 2, to now 4 .36.
So it's only 31 basis points.
But when you think about the 30 trillion U .S. debt, that basically adds to over $111 billion dollars of interest payment.
So I think a lot of concerns about the usefulness and the safety -ness of this US dollar and the US asset.
And so I think that it undermines the so -called King dollar, right, the status.
And finally, I think, you know, this liberal democracy is a value, right?
I think again, the Trump administration is basically unveiled that all this is just mirage, all this is just delusional, right?
The United States has talked very openly about taking over Greenland and, you know, making countries to make concessions and, you know, the Russian cruise war in a very hasty and completely uncensible way.
So I think just a lot of these damages is being done by the Trump administration.
And I also just want to add one last point about the sort of invisible damage, or I would say some of these are not invisible, they just take some time to be manifested.
And I think that has to do with the technological innovation, the inevitability, right in the U .S. economy, which I think is really now a very, very important, almost the only, I would say, a big sort of pillar for the U .S. economy.
But this idea of bending chips, right, semiconductor chip cells, to China tightened that ban.
For example, even the H200 by NVIDIA used to be greenlighted to be exported to China.
And now the Trump administration are setting some barriers to that.
And this leads to, you know, Jason Wang basically said this is going to cloud the company, you know, five point five billion dollars.
And I think the damage here is that when you insulate the country from foreign competition, when you also put the barricades to tap into the foreign market to raise revenues to fund your R &D, I think all of this will undercut the technological innovation in the United States.
That damage would be very far -reaching and it's going to be very difficult to reverse and it's going to be long term.
and this is going to hurt the average American.
They just don't feel it right now, just yet.
You've been listening to the chat lounge.
Check out some possible gains the US may get from the tariffs and whether they are real gains when we return.
Welcome back to the Chat Lounge.
We continue our chat on the price Americans have to pay due to the U .S. launched tariff war.
And Professor Che, do you also believe this damage is irreversible, especially when it comes to U .S. reputation or its global influence?
I think this question can be answered in the short -term and in the long -term.
In the short term, I fully agree that this kind of damage is very lethal.
A nation needs dozens of years of history and accumulated performances to mount on all kinds of the creditability and the power of its currency and international influences.
It takes time and resources, people's determination, leadership, to achieve what they have already been achieving right now.
But if you want to damage and destroy everything, you probably only need just one foolish leader in three or five years.
And you can get the job done.
So I don't think it's been worth it for American people.
Actually, they don't deserve it.
In the long term, that's very hard to say that, because I think America is not always going on a very smooth way.
They have been experience a lot of the bumpy road in history as well.
And I think the monroes and isolationists and also the nationalists also been appearing in American as well.
And also they used to take some very foolish policies like probation, like closing up their market and erasing, you know, terror to about 80 percent and above levels.
For example, to President Hoover's period of time.
And they've been causing really strong damage towards American economy, reputation, credibility and also global presence.
But I believe America is a country that sometimes they will find a way to recover from their old mistakes.
I'm not saying in the future they're still going to do the same thing, but I think there is a possibility that they still can revert the whole story and also make America truly great again to make this country a respectable country.
Really. And as a Chinese, I sincerely wish they can do that if they can find a way to peacefully coexist with other nations.
America being great is not a problem for the other nations, but the only problem is that are you going to be great at the cost of other nations?
That would be a problem.
If that's going to be the problem, and I think a lot of people, a lot of countries in the whole world, it would be a problem to make you not great again.
So I think we're going to take a look at the whole consideration or observation from a very, very long perspective.
So figure across that we still pray for the best for our very important trading and economic partners.
Until then, we'll have another session.
But seems that it's not all about damage or losses, right?
I think the Trump administration also has some gains, you know.
Japan has expressed a willingness to increase US rice and soybean imports.
I think Australia also reached some agreement with the US there.
So Professor Powell, should that be viewed as a win for Washington as well?
Well, in the scheme of the American trade deficit writ large these so -called wins are drops in the ocean and that of course is if you take seriously the complaints and concerns about the trade deficit.
So I think it's important to keep these things in context, the other thing is that typically in commodity markets there will be swings and roundabouts so as the US loses access to one market and that market gets filled by someone else then US products will find a place somewhere else within the global market environment.
Now, that's an interesting observation because what that tells us is that the ability of the US to achieve these sorts of outcomes is a consequence of there being a robust and functional open multilateral trading environment whereby trade diversion and sending products from one market to a different market, if you lose access to one you can go to another, is made possible because there are actually long -standing practices of open multilateral trade.
Now, this current administration doesn't think much of those institutions, but of course it needs those institutions to enable it to make the kinds of adjustments that it's trying to make at the moment.
I think that there's another issue too though.
And again, I'll just go back to this question of reputation.
Reputations, of course, are hard won but easily lost. And there is never, ever the ability to go back to the status quo ante.
You can't just wind the clock back and pretend nothing has happened.
And so whilst the United States can and most likely will be able to develop and rebuild its relationships and standing in the rest of the world, particularly as lessons are learned institutionally out of this current episode, the rest of the world will have also moved on and it will have moved on by developing new relationships by consolidating other relationships that may have been fragile.
It will also move on because the rest of the world I think is now more aware than it has ever been aware of until now that The global economy is more than the United States economy The US economy today represents no more than about 13 percent of global imports It is not the be all and end all of the global economy the rest of the world with 87 percent has a substantial stake in ensuring the development and continual enhancement of multilateral trading environment.
So that's where I think the real issues are.
It's that not only do we have a short term impact on American reputation, but that in fact, put all of that aside, and the fact that the US can modify some of its trading relations and get the odd win here and there.
It's actually the longer term fundamental changes that are unfolding in the structure of the international political economy.
Right, actually, to demolish your mansion takes probably just one second and to build one takes a longer time.
Back to the gains, some believe the Trump administration is using the economic pain caused by tariffs to pressure the Federal Reserve into cutting interest rates to ease the debt crisis.
Some analysts actually expect Fed Chair Jeremy Powell to give in and cut interest rates by mid -year when several Treasury bonds are due.
Otherwise, the U .S. government will face a debt default, which could have severe economic consequences, so do you expect the Fed to succumb to the pressure?
If yes, is that also a win for the Trump administration?
Professor Powell? Well I don't know whether the Fed will lower interest rates or not, but I don't think it's got anything to do with the American federal government defaulting.
It's not going to default on a debt that is denominated in the currency that it issues, so that's a non -issue.
This issue of interest rates however has other implications and of course it goes to What that's also aligned with is a reduced buying power globally of the US dollar At one level you would say that in theory if you subscribe to some of the mainstream theories about reduced interest rates spurring Investment activity and such like in the domestic economy that might have some catalytic effect though I doubt it but what it's also going to do is reduce the buying power of American enterprises who if they were intent on embarking on the industrialization and investing in fixed capital and expanding
their productive capacity domestically.
They're going to need to import capital goods from other parts of the world, they're going to need to import intermediate input factors from other parts of the world.
So whichever way you look at it, the United States economy, by virtue of its structure and its highly financialised nature, is always going to need at least in the short term, to engage in substantial imports, either as in consumer products or intermediate products into existing production systems or if it seeks to expand its productive capacity it's going to need to import capital machinery and if it's not going to import it from China then it's going to have to import it from Germany or Japan or the Republic of Korea which are actually high cost options.
So reduced interest rates may in theory reduce the cost of borrowings that may contribute to some investment activity in the United States but Ultimately, if that investment activity is to augment productive capacity, they're going to need to import more goods anyway.
And if you're buying power is reduced, those goods are going to become more expensive.
Professor Liang, what's your take here?
Well, first of all, I think going back to your original question, whether Arnold Powell will cut rates by mid -year.
I think that really depends.
Right. The Fed has been pretty open about it.
They are data dependent.
So if the tariff war among other Trump's policies damaged economy so much so that the economy slows down significantly or even at the risk of recession, which we know the IMF puts the probability at 40%, then, of course, Powell will have to lower the rate to stimulate the economy.
But on the other hand, if the tariffs trigger inflation higher than the tolerance of the Fed, then they won't lower the interest rate and could keep the interest rate as it is or even raise it.
Right? Because that is what they believe.
Interest rate needs to be hiked to find inflation, even though the theory is unsound, but that's what they operate based on.
So I think by the mid -year, if Powell does go ahead and cut rate, I don't think it's necessarily a concession made to Trump, but rather, it could be just the economy requires a reset of the Fed's policy.
Now, if that really helps the economy or not, again, I think that it's unknown.
I think we tend to overstate the effectiveness of monetary policy.
I think at this current high level of interest rate, cutting it may be helpful.
But I think if the structural issues of the United States are not being resolved, so in other words, these turf policies and other necessary policies like fiscal expansion or infrastructure construction and so on and so forth, if this structural problems are not resolved by effective policies, then I don't think cutting rates is going to do a great deal to help the economy.
Not to mention, I do agree that industry has an impact on exchange rates, but there are so many other factors that would have an impact on exchange rates, especially given the very sweeping, very unpredictable policies that Trump administration would roll out that would really shape the expectations of the market by the minute, by the hours.
So I think the direction of the travel of the dollar would be, I would say, very unpredictable at this point, especially when you think about if the timeline is short term, medium term, or long term.
So, just to say that even if the rates are cut, it may not do a good deal to revive the U .S. economy.
And I also want to go back to what Professor Chi mentioned earlier in terms of whether or not the Trump administration can roll back the policy and remedy some of his damages.
I think, of course, the sooner they can reverse course, the better it is.
But I think time is running out.
I think, also given the current political landscape, right, when Trump is basically monopolizing not only the executive power, but all the other branches of the division of power.
I am just worried whether or not a reverse course will take place and if that will take place soon enough.
I think again, the damages is not just to the United States or to China for that matter.
We have the entire global economy, especially some of the lower income countries that are really struggling when the global trading system is at decline.
The WTO has forecasted that this year the trade is going to decline by 0 .2 percent as supposed to grow by 3%, as they earlier predicted.
What that means is that many countries that are very trade -dependent, smaller countries especially, that rely on imports of fuels and medicine and food, these countries will suffer, right, when the global trading system is in such a derail.
And not to mention, I think many countries are suffering from debt crises, and that really requires some immediate actions.
But, you know, as we know the IMF and Wobang are having a spring meeting right now, And yet the attention, the energy are all consumed by this tariff war.
Very little attention is paid to IMF quota reform or replenish some of these concessionary loans and these funds and how to facilitate debt restructuring.
So I think many of these developing countries are struggling and they're struggling right now and lives are being lost, right?
Many countries are paying more debt than what they spend on education, healthcare.
So, in that sense, I think it's irreversible, because these lost lives, these lost opportunities are hard to recover in the near future, if ever.
The chat lounge. The chat lounge unpacks views and opinions on hot issues in a more casual way.
They're saying it all depends whether it comes in a timely manner, but some people may see some silver lining because US officials, including President Trump himself, have indicated tariffs on China, arguably the most important ones, could drop substantially.
But as we speak it hasn't happened yet.
So Professor Liang, when do you expect that to take place according to your understanding of the US government and how reliable is such a statement?
I think this is a really interesting question.
I think we want to be hopeful and in these very dark times we do want to look for a silver lining.
But again, I think we need look at the real actions of Trump, not what he says.
Because he can say all kinds of things.
I do think that he is under the pressure for sure.
Not only Americans are protesting.
I think, two weekends in a row, they had these large hands -off protests.
Millions of Americans are protesting against Trump's policy.
Not that Trump really care about the popular views, but still, I think the stock market, the bonds market, the dollar, and also his billionaire their donors, people like Bill Ackman.
And he's a very close member of his cabinet, right?
Elon Musk. All of them are opposing tariffs.
Bill Ackman actually described this as a nuclear economic winter as a result of the tariffs.
And of course, Elon Musk simply used a very colorful language to describe Trump's top trade advisor.
So anyway, I think Trump is, he said that people feel a little bit yippie, right?
I think he does feel the pressure of changing some of his practices, especially with China.
Now, I think the context that he said this is, first of all, the stock market was very volatile.
And second, his Treasury Secretary, Besant, basically said the current status quo with the very high tariff rate with China is unsustainable.
So I think Trump took some of his advice and he wanted to back down on his current tariff with China.
But he also said something along the lines that, you know, it may take weeks to work out.
And actually, Scott Besant said a real trade deal could take years.
And I think last but not least, even if we see some kind of temporary decalculation of this trade war, Trump being Trump, I think people were still very skeptical, right?
Especially from China's perspective, how much Trump is going to demand for the conditionalities to drop this tariff and for two, whether he will honor the kinds of trade deal that may or may not be made.
Just quickly to sort of, again, Trump's track record has not been great.
I mean, he was the one who pretty much inked the USMCA with Canada and Mexico.
and yet he then completely reneged on the so -called greatest treaty he ever made.
He imposed tariffs on Mexico and Canada for all kinds of reasons.
So I think there's this credibility issue.
Even if tomorrow he's able to strike a deal with China, who knows when he's going to renege and say, oh, maybe I didn't get a good deal, I wanted to renegotiate.
Or okay, the deal was the deal, but now I have something new that I would like China to honor.
So I think there are just a lot of these complications that I don't think a quick resolution can be really reached so the ultimate deal can be made, but at least we may be able to see some temporary breathing room between the two countries.
Because this is a quite new development.
So I wonder your thoughts from our other two guests very quickly.
Professor Chu, how hopeful are you?
Not very hopeful, especially in a very soon future.
Besant is, you know, changing his attitude all the time because Trump is a cephrides all the time.
So that's the things he told us.
So still the decision, well, the attitude can be say out loud, but the decision is not far from being made yet in the White House, so this is surely what I know.
So like a professor Yanlin has just mentioned, yes, we're very conservatively optimistic about making the deal, but it's not going to happen very, very soon.
And also another point I'm going to point out is that a lot of people saying, OK, it's all about Trump.
And if Trump is out of the picture and everything what we saw of America will be truly being great again.
No, I don't think that's fair.
I think Trump is just the result because we believe the problem of us made or brought about Trump, it's not Trump brought about American problems. It's because American society and economy have some trouble.
You know, 19, it was just a family, got more than 1 trillion augments in the money in the past six months other than the rest of the United States families.
So this kind of problem actually causing Trump, and then caused all the problem by Trump, you know, not reversally.
So even though Trump says, okay, we're going to stop all this kind of fuss, we're going to stop all kind of the tariff and everything else, still, American will have some other probably foolish policies, and also impacted towards the world from some other angle.
So this is going to be a must. So until America can actually reverse all its problems and can truly be great again, and then we're going to face more and more of the kind of impact from time to time.
I really suggest that our audience to read one book is called America, Anti -America.
It's been written in the 1990s by a very outstanding Chinese leader.
I think that was full of wisdom and just in the 1990s, he already predicted all this kind of problem is going to happen today.
So I think, yes, conservatively optimistic.
All right, Professor Powell, from the Australian perspective.
I don't know what the Australian perspective is other than Australia is a trading nation that depends heavily on the institutions of open multilateral trade to remain in place and so long as those institutions remain in place and other countries in the world are willing to play along with those rules then from a trading point of view I think it's okay I think the broader issue again is in to me the question around optimism or pessimism goes to optimistic about what and we are going to go through a period of a significant domestic turmoil in the United States in large part because in problems today
are a consequence of many decades of accumulated action and it will take quite a long time for those issues to work themselves through the political economy of the United States.
In the meantime, the rest of the world actually just needs to move on.
So I'm actually quite optimistic about the prospects of the rest of the world moving on.
And America can catch up with the rest of the world when it's good and ready.
And when it's ready to behave like a normal nation, as opposed to a nation that seeks to dictate terms to everyone else.
And when it's ready to participate and contribute to the global community of a normal, equal partner, then I'm sure they'll be welcomed with open arms. So I'm optimistic that the rest of the world can move on successfully, leverage the opportunity to enhance existing institutions and devise new ones.
And as for the United States and its ability to sort out its own problems, well, time will tell.
I'm either optimistic or pessimistic.
I'm just hopeful that the Americans can figure it out at some point or another before they cause too much damage to everyone else.
Indeed. Last question.
A little bit maybe philosophical then.
I wanted to answer from each of you.
The Trump administration's tower policy was believed to be inspired by what former US President William McKinley did over 120 years ago.
Some people were asking, how can a nation obsessed with past controversial policies hope to lead in the future?
So, your thoughts on this.
Professor Lam. Well, I think I've talked a lot, but I think this is a very interesting question.
I think times are different.
I think McKinley's era is very different than where the United States is today.
There is reasons for, you know, maybe protectionism back then to protect some sort of so -called infant industries at that time.
Also, the federal government is very small compared to what now.
So this idea of somehow we can use a tariff to raise revenues to protect our industry I think even if it worked back then, it's no longer really applicable today when the federal government is not spending 3 % of the GDP.
It is spending 23 % of the GDP.
You can never raise enough tariffs to fund that, and you can never protect your mature and sunset industries as if you were protecting the infant industry.
Also, I think, very interestingly back then, the Republicans were actually pretty clear that the tariffs are paid by Americans.
But they say, we're paying for it, we're just trying to get better jobs, higher wage jobs.
But I don't think the same thing can be said today.
I don't think manufacturing jobs are coming back, nor that the average Americans want to work in the factory.
So I think there are very important differences in terms of what may be working in a short period of time, in a very specific circumstances back then, and it's not making much sense today.
And the final last thing that I wanted to say is that I think Trump also, if he does read McKinley, he does look into history, he should also remember that in 1901, major McKinley made this very famous last speech before he got assassinated and he said, I quote, the period of exclusiveness is past. The expansion of our trade and commerce is a pressing problem.
Commercial wars are unprofitable.
He's skipping some lines.
He said reciprocity treaties are in harmony with the spirit of the times, measures of retaliation are not, end of the quote.
So again, if Trump really wants to imitate, McKinley really wanted to look into history.
I think he should look at the history in its fullness and learn the full lesson from the history.
Brilliant. Professor Chu?
Yes, I think your question is great.
I agree with Professor Lan.
Actually, it reminds me of a Chinese story, an ancient story, it's called Ke Dou Cho Jian.
It means you lost something on a boat and then you carved a mark on the rail of the boat, on the ship board, and then when the ship finally reached the destination and then you jump into the river where you carved the mark on the board. So everybody knows this is ridiculous because the boat has already moved a very, very long distance along the river, even though you jump on the same position on the shipboard, but basically it's not the same part of the river anymore.
So I think this is what happens in American politics and policy making.
McKinley or Hoover or any president, you name them, it's a different America.
It's a different world and you know, you cannot just try to repeat.
And plus, their policy is not successful in the first place.
So why you are trying to repeat in a very different time, different position, with the same failed policy.
So I don't think that's a very wise thing to do.
I think the problem that America step into the same trap again and again is because sometimes they fail to combine the short -term benefit with long -term benefits that coordinate people's urgent yelling with long -term goods.
So that's a problem.
So I really suggest to our American friends or international audience to read one book.
I think that book is called The Governance of China.
His author is President Xi Jinping of China in his book.
He very clearly described how the CPC is working on this relations, how we can very well balance the long term and short term vision, and also how we can answer people's call, but also try to provide a proper guidance towards the long term development.
That's very, very important.
So I think vote politics and public attention decided Trump's short -term actions and responding in the policy i don't think that's wise even though it's been you know beneficial to himself in the short term but also he's going to hurt himself and also hurt american long -term benefit as well and also american credibility is going to be damaged if they're still going to repeat the same reason so we still hope for the best for american friends and hope this country can get well to its right track but if they don't solve the problem if they don't change the behavior you will probably stumble into the same
trap again maybe one tip being nostalgic at an appropriate time?
And last but not least, Professor Powell please.
Delicate, you say nostalgia.
Nostalgia is a dead end road.
It might be useful in electoral politics because it appeals to the emotional dimensions of voters who are experiencing the American nightmare but are yearning for the American dream.
But the dream will not happen by reaching back into its history, particularly if it only reaches back into it in a partial way.
There is another Chinese saying which is, shì shì shì.
America can do with a good dose of reality and an ability to address reality as objectively as possible rather than through the effective lenses of bygone times.
Each America is to be able to fulfil the promise of America which is a vast land with incredible natural resources, a large population with a legacy of high standards of education then it is going to need to adjust to the world as it is as opposed to imagining a world as it may well once have been and that's really I think the lesson of the current moment.
Well said and on that note we wrap up our chat for this session.
Many thanks to Dr Warwick Powell Adjunct Professor at Queensland University of Technology, Dr. Chi Chiang, Fellow of the Belt and Road Research Center at Minzu University of China, and Dr. Yen Liang, Professor of Economics at Willamette University in the United States, for your time and thought -provoking insights.
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