And these kinds of trade wars or tariffs, they poison the diplomacy.
Buckle your seat belts if you have seat belts because the automotive industry is going to be the one that may be the most affected by some of these tariffs.
America is going to stop us.
It is actually a lost, lost situation in this case.
The chat lounge. Chat Lounge.
Chat Lounge. The chat lounge unpacks views and opinions on hot issues in a more casual way.
Welcome to the chat lounge.
I'm Tuyen joining me to discuss the new tariffs the US is about to impose on the rest of the world are Professor Joseph Sirakusa, Dean of Global Futures with Curtin University, Australia, Harvey Zodin, Senior Fellow at the Center for China and Globalization, and it's great to have you back at the chat,
gentlemen. So in less than two months, the trembling world economy is set to face another wave of turbulence.
American President -elect Donald Trump has pledged new tariffs on Mexico, Canada and China, the top three US trade partners.
He said that on his first day in office, he would impose a 25 percent tariff on all products from Mexico and Canada and an additional 10 percent tariff above any additional tariffs on China.
So let me begin with Joseph.
What's your first response to the announcement, which is actually widely expected, especially regarding extra tariffs on products from China, right?
Well, I think it's a very bad idea and a long history of bad ideas.
Tariff was central to American life in the 1780s, 90s and throughout the 19th century when the Americans were trying to, the American government was trying to protect trade and raise income.
That was the only way to bring any money into the treasury.
But by the time you get to the 20th century, we're not really protecting American manufacturing industry because it's starting to dominate the world.
And of course, by that time, income is coming through the taxation, through the Income Tax Act of 1916 and the rest of it.
So look, I understand Trump playing around with this, but keep in mind, and maybe your other guests might confirm this, I think that Trump likes the idea of threatening tariffs more than putting down tariffs.
You know, he wants to win trade wars without fighting them.
So he terrifies people at three o 'clock in the morning with these tweets, telling them what he's thinking of doing.
Of course, he, the man literally took the oxygen out of the air for four years when he was president with those morning tweets controlling the American headlines and the stock markets around the world.
But look, there'll be people around him who say you can only go so far with this.
I mean, I can see if you want to use a tariff against someone who has an accompanied terrorist against the United States, that's OK.
That makes sense. And it's part of his trade policy.
But in terms of laying across tariffs everywhere and imagining that the American people are not going to pay for it or worse yet, there's no collateral damage in the United States, I think is naive and extreme.
But you said it's probably it's just some tactic he used to achieve his goals, like bringing back manufacturing to the US.
Yeah, it's a tactic and it appeals to people who, you know, don't know a lot of history.
I mean, there are a lot of Americans around.
I mean, I'm a professional historian.
I'm old anyway. But I know what happened in the late 1920s and the 1930s when we had all these tariff wars introduced by the Smoot -Hawley tariff 1929 after the Great Depression.
These tended to make matters worse.
We had a 20 percent tariff to protect the American farmer.
And pretty soon the American farmer lost two thirds of his income.
So, you know, it had kind of worst effects than we thought.
And it's come and go.
What I don't like about tariffs is this.
Tariffs lead to trade wars.
Trade wars lead to currency wars.
And these kinds of trade wars are tariffs.
They poison diplomacy.
They make things very difficult.
It raises nationalism and populism in different places.
And there is more than anecdotal evidence to suggest that after the Americans kicked in with their tariffs in late 1920s that a lot of banks in Europe fell apart that creating the conditions for extreme ideologies on the left and in the right different places.
So in a sense, these tariffs can have far ranging effects.
Maybe that's what it won.
I will dive deeper into what kind of effects it'll generate later on in the show.
But to Harvey, how is Trump's announcement surprised you to any extent, you know, when he named Canada and Mexico, given they signed the U .S.-Mexico -Canada agreement during Trump's first term?
Right. Right. Well, with Trump, nothing surprises me because he said he's a tariff man, because he said that his favorite word in the dictionary, a book he probably never opened, is tariffs.
That I'm not particularly surprised by this.
And actually, I think Joe is overly optimistic.
I think this is more than a negotiating tactic.
I think Trump and the people he's nominated are deadly serious and they're going to follow Trump's lead.
And in most cases, it's not just going to be a negotiating tactic.
This week, you know, we've been obsessed with turkeys and Trump has shown himself to be the leader of what I call the gobbler gaggle.
I'm really not surprised by all this, but it leads me to believe of some ancient Turkish wisdom that fits perfectly with our self -described stable genius.
And that is, if you put a clown in a palace, he doesn't become a king, but the palace does become a circus.
And that's what we're going to have for another four years.
We had it before, but now it's a circus on steroids.
And I believe that Trump does not understand tariffs and the implications of them.
And so I'd say buckle your seat belts if you have seat belts, because the automotive industry is going to be the one that may be the most affected by some of these tariffs.
But don't you expect less drama from him because, you know, at least he could have learned some lessons from his previous term, right?
Yeah, he learned. The lessons he learned was that he was too weak, that he had people he didn't trust.
There had people who knew what they were doing who undertone him.
So, no, no, I'm not optimistic at all.
I'm more pessimistic.
I'm more pessimistic than Joe is, and I'm more pessimistic than Trump won.
I think he's out to make his mark, but I think it's not a good mark.
All right. What about Dr.
Yau? What's her first response?
And why do you think Donald Trump is so obsessed with tariffs?
Well, Donald Trump is obsessed with tariffs.
It's because the Italian political driven, the American first.
And how to do American first, I think the American staff has quite a lot of, you know, supreme power in terms of international choice and international investment technology and so on.
You know, a small open economy in this case, like Mexico and Canada, they are far more vulnerable than the big open economy is obsessed with the United States and China.
So by erecting the tariff, I think the people who do stuff the most is actually the small open economy like Canada and Mexico, if Donald Trump really imposed a 25 percent tariff across the board for everything to be put into the U .S.
I think the U .S. suffers slightly less than Canada and Mexico produces.
But for China, I think it could be a slightly different story because China is a big country.
A big country means that the relationship between the China and the United States way, the proportion, first of all, is much smaller than the competitive proportion between Canada, the U .S.
and Mexico. So China would also suffer, of course, but to a lesser extent.
So by imposing another 10 percent tariff on China, it means that China will suffer a little bit more further.
But it also implies that China may diversify away from the United States.
So by launching these multiple target international trade tariffs against the three biggest trading partners of the United States, I think that America is going to suffer.
The consumers in America, they have to pay, you know, a percentage of prices of 10 to 25 percent more in the domestic market.
And, you know, the so -called coming back manufacturing into the United States is probably just a very analytical assumption because it will take time, certainly more than four years of Donald Trump's second term, to get any little effect of manufacturing facility moving into the United States.
And another thing is that the production cost is not going to be as low as those in China, Mexico or Canada.
So launching the massive scale trade is not a win -win situation.
It is actually a loss -loss situation in this case.
So this some advice they have to give Donald Trump whether he's really going to go ahead.
If he's really going to go ahead, it's not the single story that all the other countries suffer about America in here.
This is definitely the case.
But over the past few years after Donald Trump launched this trade war, if you will, against China, we did see some, you know, backflow of manufacturing to the states.
Right. You see Foxconn or some other South Korean chip makers.
They're moving their supply chain or establish their factories in the states.
And besides, Brian Hughes, a spokesperson for Trump's transition team, said the tariffs would protect the U .S.
manufacturers and workers from unfair practices of foreign companies and foreign markets.
Does that make any sense?
Well, it makes some sense, but it doesn't make the full sense because even the manufacturing like Foxconn, you know, the South Korean manufacturing going to the United States, it doesn't avoid the problem of high domestic costs.
I think why the terms of trade in this basic manufacturing is against the United States is because of the competitive advantage of the United States.
It's not for this particular sector and China, Mexico and Canada.
So by doing the reversal of manufacturing, the location is not going to solve the problem.
The only problem is the structural adjustment within the U .S.
domestic economy. I think on the face the U .S.
economy stock market and the GDP is going up.
But especially the underlying problem is hyperinflation in the domestic market.
I think people in the United States, including my colleague in the panel, they may hear from the United States that the prices are rising much faster under Donald Trump and the Biden administration than before.
And this is a real issue.
All right. And then, Joseph, how do you expect the proposed tariffs, well, if in place, to affect your trade volumes between the U .S.
and its, you know, top three trade partners, Mexico, Canada and China?
Well, historically, it would contract the market available.
You know, I've spent my first 29 years of my life in the United States and having visited in Canada and Mexico.
It's quite clear that they're part and parcel of the American economy.
They buy a lot. They sell us a lot.
You know, half of our stuff that comes in our dinner tables.
America comes from Mexican farmers and Mexican helpers who pick the crops in California.
Look, I think Americans right now have been sold a story.
And the story is that these tariffs will return their jobs.
Well, there's nothing on this green earth is going to return their jobs to them.
And certainly not in the near term.
This is going to be because it takes years and years to do this.
Donald Trump will be a historical footnote in a couple of years.
You know, we're not going to.
There isn't going to be some guy after him raising tariffs, et cetera.
But I'll tell you what I have seen in the last 10, 15 years.
And maybe our other panelists can back me up on this.
As America has retreated from the concept of free trade, you know, trade without discrimination sounds pretty good to me.
We invited the world to compete with us after the 1950s.
And of course, Chinese have done it very well.
They've done so well that we decided to play another game because we couldn't beat them.
It's just too huge.
I think in the last 10, 20 years, I've been seeing that a lot of the free trade in the open door world has yielded to a very 17th, 18th century concept of protectionism and mercantilism.
Now people are gathering, you know, precious oils and chips and things like that.
And they're starting to imagine that they can do things on their own while they can't.
I mean, free trade is what opens the world to the world.
I mean, I have in my home, I have a beautiful air fryer and computers and equipment from China at one tenth the price of what they used to be in Australia because of a relatively free trade over the years.
So, you know, we can see with our own eyes that things become cheaper.
Now, if Americans are enamored to cheap running shoes or T -shirts or whatever it is, then, you know, they're going to have to pay the bill on it.
But your ordinary people in America are not going to feel the benefits of this for a long time.
And in my little time in Wall Street, I spent two years there.
I think there'll be a lot of people there putting on the brakes.
I mean, there's going to be a lot of countervailing advice headed towards Washington.
And, well, you know, a lot of the people surrounding Trump, I think they're birdkicks.
I mean, you know, they're not real economists.
These are people who will have a message to sell and they're pushing it.
I mean, Trump's major exponents of these things tend to have single issues.
And Trump is surrounded in himself, too, I think, is by opportunists who are going to push any wheelbarrow they can in order to enhance their position, make themselves indispensable.
And pushing this tariff wheelbarrow isn't going to get you very far because there's going to be a blowback on it.
And if Americans have to pay more for automobiles or for lettuce or, you know, steaks or whatever, they have to spend more money for food on the table.
They're going to pick that up right away.
And Trump, of course, is counterintuitive.
You know, he's latched on to the tariff because it seems like a good idea.
You can sell MAGA that way.
But once it starts to backfire, also the opportunist, you'll make the other case.
And you know what? I don't think he has a lot of firm ideas about this.
I think he's essentially what he is, a real estate salesman from Queens.
I think he's a transactional political creature and he wants something for something.
And when he gets what he wants and then maybe that's the end of the story.
But I don't I don't think he's going to ride the tariff to the end of his career because he knows it when it doesn't work and doesn't go to work.
He isn't going to stick to something that just produces zeros on the board.
Maybe he only understands how the real estate market operates.
But what about his, you know, the whole team, you know, JD Vance, he he's quite familiar with what the, you know, working class lifestyle, right.
And how to save them from a business probably.
And, you know, isn't he aware of that?
Maybe he also believes it's a good idea.
Right. Well, I mean, Trump is surrounded by, God bless him, lawyers and opportunists.
And they don't study history.
Now, Trump is enamored of this tariff because he doesn't know the history of tariffs and people surrounding him don't know the history of tariffs.
Oh, it's no secret.
But for the last 50 years, only five percent of degrees at universities are history degrees.
No one has a sense of international history.
One of these guys, you know, they invent the wheel every Wednesday and they say, hey, this is a pretty good idea.
And when Trump said, you know, tariffs in those beautiful words in the dictionary.
I agree with Harvey.
I'm sure you never had a dictionary in his hands.
Someone told him this is a good idea because not only does it protect you, but it raises money.
Well, neither of those things is true.
And sooner or later, Trump, who is essentially a pragmatist to stay in business, he's going to see that doesn't work and then he's going to have to backtrack.
And but, you know, he can't push a policy that ultimately will fail.
History tells us this doesn't work.
It leads to trade wars.
And sure, you know, if you're going to have currency wars, right here, two minutes later and then you're going to have very poisoned relations and it isn't going to work.
So and of course, I think whatever Trump says or does, I think that when he gets in the room with President Xi, or finally when he gets in the room with President or anybody else, I think he would cut a deal that goes 180 degrees in the opposite direction from which he's headed.
You know, he's not tied to principles.
You know, if a man has no principles, there are no principles to guide him.
So as an opportunist, I think Trump will do whatever he has to say to get subtraction.
He surrounded himself with people who don't know much about history and who are headed for trouble.
And I'm not as optimistic as how they suggest.
I try to be optimistic because I've been around a long time.
He's seen a lot of strange people in Washington.
But I think Trump will ultimately fail on the alter of practicality because the American people are not about to commit economic suicide because Donald Trump has an idea in his head.
Seems so. All the way to the end.
This has been the chapter when we come back, find out how businesses and governments can adapt to mitigate the negative impacts of possible tariffs.
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Welcome back to the chat lounge.
We continue our chat on the new U .S.
tariffs rattling the rest of the world.
It seems there's a consensus that the new tariffs could trigger further inflation, probably for American consumers themselves.
But what about the rest of the world?
You know, people like us in other countries or average consumers in other countries, could it be some good news because we may see some cheaper goods if they don't go to America?
It should go to somewhere else.
Right. Which means maybe the prices could be lowered.
Dr. Yau, is that the case?
Yeah, it's a really good question.
I think there are two potential consequences of the Cold War in Texas between the U .S.
and China, in this case, Canada and Mexico.
Yes, theoretically, I think when these three trading partners diversify their goods and services to other countries, other than, you know, the United States, yes, the prices in other countries could be lower.
But this is one possibility.
The other possibility is that the trade war also raised the cost of production, you know, produce, they have to pay for a higher price, a higher price, the higher cost of production or export.
So they would suppress their profitability and reduce their production.
If the production is reduced, they will be a indirect effect to other countries as well.
So the outcome is, you know, whether the effect on other countries is lower cost and more supply from China and Mexico and Canada, it really depends on the counteractive effect of these two consequences.
My view is that it is probably unlikely because the other countries would also be affected because given the China and the United States accounting more than 40 percent of the global economy, and if both countries is going to slow down, let's say, by, you know, one percentage point where most people
already figure out, then that would trigger down to other countries as well.
So the global economy expansion rate would be slow down.
And if the expansion rate slows down, I think everybody will suffer.
And this is why the confusion between the world's largest, two largest economies is not only America and China, but also the other country will be affected.
The global economy system would be affected.
People get scared. The production chain, the supply chain, they have to be shortened.
And people have to prepare for the any potential unpredictable Donald Trump exit, because my colleague just mentioned Donald Trump doesn't have any principle of guiding his action.
He could do everything he like as the president of the United States.
And everybody has to face the uncertainty and risk.
And this is the real issue to me.
Right. Very unpredictable, like you said about it.
You mentioned some industries like the automotive or tech industries may be heavily affected than any other sectors that might need to prepare themselves better for forthcoming headwinds.
Any any industry which produced for export, export to the United States, they have to prepare for this in unpredictable change.
Basically, they have to adapt to strategy.
One is to make the production more efficient so that they can still make a profit by exporting to the United States with raising tariff.
And the second strategy is to diversify to other countries, including the domestic market, in this case, like for China, many producers, they have to look inward to see whether their product they can be sold in the domestic market.
For example, like the new vehicle car is very popular in the major emerging consumer items in the domestic market, if a new energy car cannot be exported to the United States, they have to find a market within China, in other parts of the world, in mobile phones, computers, everything, because China is probably
the biggest producer for so many products.
So they have to look at carefully how much can be diversified to other parts of the world and whether they can just take the production scale so that they don't being hit by the unpredictable policy of the US.
Good suggestions, but we'll have more of that later on.
But, Harvey, Mexico actually has won Trump's move.
Its tariff on Mexico could kill 400 ,000 US jobs.
Do you have any estimation or do you see it an exaggerated figure?
Or what's the likelihood there?
No, I don't necessarily think it's exaggerated.
President -elect Trump has already had a conversation with the president, the new president of Mexico.
They've already had a go around here.
But I do think it's going to affect a lot of jobs in US, in Canada, and in Mexico.
And also it's going to raise hell with the inflation in America, too.
So Americans voted for Trump because they didn't like the fact that their grocery costs, their fuel taxes were going up.
And so Trump was elected, I think, based on that reason.
But if you look at some of the figures, a 25 percent tax on Canadian crude oil is estimated to increase gas prices regionally in the US in the Midwest and in Rockies by 25 to 75 cents a gallon.
And that'll cost US consumers about six billion to 10 billion per year.
So if consumers have less money, they're going to buy less goods from Mexico and from Canada.
Canada is a great agricultural country that produces a lot of grain and a lot of other agricultural products.
Americans are going to buy less.
So what's that going to do to the Canadian economy?
And all these effects are knock on effects.
They're all interrelated.
You can't consider these in isolation.
We live in an interconnected world, an interdependent world.
Now, this is not the 18th century that Joe talked about a little bit ago.
This is a world where if you squeeze the balloon at one point, it's going to the bulge is going to come out somewhere else.
And I think Trump has a very simplistic view of the world.
It's why he has a simplistic view of tariffs.
And that's not going to get us very far.
But I do worry that he's not going to abandon these policies because he's thrown this red meat to his mega base.
And it's not going to sit well with them if he quietly discards these tariffs.
So I really worry that the economy, the global economy is going to come apart and that we could have something like a worldwide recession.
China's economy, for example, is facing some significant headwinds now, although it's doing a little bit better.
But a challenge like these tariffs to China could make all the difference between moving forward and just treading water.
I'm really very pessimistic about this.
And I don't think the effects are only on America.
I think they're global.
Indeed, Joseph, you're into this global futures, right?
And so what would be your estimation that the impact those tariffs, if implemented, could have on the global economy, which is also already shaky?
The news wouldn't be good.
I'll tell you that.
But look, before I get into that, I want to say something both to our guests that we we really forgot to mention so far.
Before we turn this into a Harvard seminar on the economic consequences of tariffs, let's remember what the president said to Mexico and Canada and China a couple of days ago.
He didn't talk about raising tariffs there for some economic reason.
He was threatening them.
He told the Mexicans and the Canadians to clean up their borders.
That is, to stop those people coming in the United States and particularly the Mexicans to stop the flow of fentanyl.
And then he threatened the Chinese, who he is convinced are producing precursors to are producing the goods of fentanyl coming in the United States.
And so, you know, his argument with these people, my colleagues, is not about economics.
It's about it's rocketeering.
It's just a stand over job.
He is using blackmail.
He's telling the Mexicans, we don't want any more migrants.
So we don't want any more aliens coming through.
He's saying the same thing to Canadians.
The Canadian border is very porous.
OK, it's not as well known as the Mexican border.
But his comments the other day, you know, our classic blackmail is rocketeering.
He's telling both of them, if you don't clean up your borders and our fentanyl crisis, which, of course, is an imagination in his head that they can solve the problem.
My argument about fentanyl crisis in America.
It's a moral crisis, as well as everything else.
Can't blame the Chinese and Mexicans or anybody for that.
But his demand of these people, these countries, was very, very narrow.
Clean up your borders and get rid of the fentanyl.
And he talked nothing about pricing or consequences, economic consequences, which is just plain stuggary.
Right. What are you saying?
You're saying that if Mexico, Canada or China does what he asked for, he would stop those tariffs?
Absolutely. He made it very clear that tariffs are just there as a punishment.
It's not about cars in Mexico or oil coming from Canada.
I mean, those are the economies of long term effects and very deleterious ones at that.
But he's saying to them clean up your borders.
But he's totally unpredictable, right?
Like what I think Dr.
Yao and Torrey have already mentioned.
Oh, yeah, he's unpredictable, mercurial.
But I'll tell you what.
He's laser focused on those borders because those millions of people coming into the United States looking for a better way of life or why ever people or why people go to the United States, including my grandparents.
You know, he's saying to them, you can't facilitate their American dream.
OK, you got to do our work for us and stop them at the borders.
But you know, if anybody else but Trump or the president was doing this, this would be just this would be blackmail.
You know, he's using tariff blackmail to get them to do the work on their borders.
I mean, there's no connection here between smooth economies or whatever the tariffs are supposed to be doing or protecting anything.
He's just saying to them, fix this up or we're going to hurt you.
And the best way to hurt them without going to war, of course, are these tariffs.
Because these countries are very trade sensitive.
It seems the Europeans or Australians take his words very seriously.
They've already begun their preparations for, you know, possible or new tariffs.
Right. Actually, major European stock markets have reacted very negatively to the news.
Well, yeah, they see.
The thing is, 37 nations go to bed at night.
Imagine the United States will protect them with extended nuclear deterrence.
Trump has made it very clear that if you want American protection, that is, if you want to think about your sovereignty and your territorial integrity, you're going to have to give into this.
You know, in him, alliances protection money.
OK, you're going to have to pony up your money here, either for American troops or whatever on the soil to pay your own bills.
And so what these nations will do is I've seen in Australia and all the governments here, the Labor Party and the National Liberal Party, they're quite obsequious about Trump.
You know, they they kind of roll any which way that he goes.
And these tweets just, of course, do enormous damage every morning because Australian politicians and European politicians are obsessed with them.
And there won't be cheaper goods in Australia because he's going to tell them they're going to be part of this tariff alliance that whatever America does to America's enemies, economic or otherwise, the allies are going to have to come in on this.
So, you know, if you push the tariff issue as a punishment, you know, irrespective of economic common sense, you're going to ask people to commit economic suicide.
And you're right. If something goes wrong with the United States economy, if America catches a cold, Australia catches pneumonia.
And the very, very markets here are very time to America.
American, Australian exports to America are very, very important.
But look, let's not lose sight of why he made these threats the other day.
Nothing to do with economics.
It's about cleaning up your borders, about changing their internal politics.
And I think that's dangerous because that's just to me that I grew up in Chicago's Cook County.
So I've seen this act before.
This is just thuggery.
And that's why I don't like it.
Right. Dr. Yao, what's your take?
Do you do you expect, you know, Donald Trump may really put this in place?
I think Donald Trump.
We already need the first term.
He did a lot of things which people get very concerned.
Some people get frightened.
Some people get very concerned.
And he got away with the United States on the main, does perform relatively better than the Western counterparts like Europe and Japan and the other rich countries.
So this gives a position for Trump to believe that what he was doing is correct.
I put it in a bucket, in quotation marks, and he will continue to do so.
So I believe that Trump will do something probably more radical than the first term.
I don't think he is going to just to back up if people met his short -term demand.
It's not correct. It's a little.
I think he will do it because by doing so, he's saying that the United States would certainly get less harm more than getting good for the United States.
And other partners, they get more harm than good.
So this is his belief.
And in the economic rhetoric, I think he's probably right.
United States is highly dominant.
He's certainly still the biggest economy and military power.
So he could actually use the power to intimate the other partners like the neighbor, the close neighbor like Canada, Mexico and the like and even Western Europe and even Australia or Japan.
So there will be certainly international relation, there will be increased tension between the United States and the other six members of the G7.
And this is the international politics.
Unfortunately, the United States want to be the major power rather than the rest of his friends.
And it's for China.
I think China is certainly the target for conflict because China is emerging.
China has so some resilience during the first term and even under the Biden term and under the covid -19.
So China is certainly, in my view, certainly suffering from what Donald Trump has done.
But China is still surviving.
I mean, the Chinese still have the degree of resilience.
So what is interesting in the international economy and political relations is who is going to be more resilient in the in the new terms of Trump administration?
And certainly I think, at least in China, people are considering the worst scenario.
If the teles, if the technological blockades is going to intensify compared to the first term, can China actually survive?
Can China actually do as resilient as in the past?
I mean, surviving, I think China is not going to have a stubborn job in the economy continuation of growth.
They've got to be maintained a certain level of growth and enhance this trends of the domestic market.
So certainly Trump is going to change the global economy, the nation and also the global international power.
The biggest surprise for me is also threatening his neighborhood like Canada, Mexico.
And maybe in the future when he actually in power again, he will sweat Western Europe and Japan and Australia.
So how much he can do is depending on how much monopoly power in dual policy dominant of the United States economy in terms of trade and technology.
But the thing is that they are probably some of the best for the United States.
The United States could be successful under Trump, but if it's not successful or it cannot fulfill the objective of Trump, then the United States in the end have to suffer even more.
So this is the issue, the potential price that the United States may have to pay.
Right. But at least for now, we cannot see how harmful it could be for the states.
Right. There is no specific numbers for that.
But as people say, if Trump can threaten some close allies like Canada, there is nothing he couldn't do.
Harvey, you're now living in Europe.
What's the sentiment there?
And are those European countries doing any preparations for that?
European countries are very worried about this dynamic because the EU is really caught between China and the US, and they're not prepared to deal with this on an economic defense or many other dimensions that you could bring up.
So, no, I don't think there's a lot of preparation going on here.
I'm sure that the EU, like China and other countries many months ago, ran game simulations and things like that about what if Trump were elected again.
But I don't think that the EU has many arrows in its quiver to deal with this.
And I think it could be the EU that suffers the most from this economic geopolitical war that's about to intensify.
And I think that they're kind of at a loss as to what to do.
What Europe has to do in many senses is to do what China has done and what President Biden started to do.
And that is to increase the competition of the European industries.
But I can tell you...
Isn't it too late? A bit late, right, for the Europeans?
Better late than never.
It is late for the Europeans.
But the problem with Europe and having lived here and seen how it works or doesn't work up close is that it's still very much a work in progress.
They have so much trouble reaching consensus and making policies that are common to all the member states that it's almost impossible to get a quick or reasonable decision in its lowest common denominator.
And personally, I think Europe is a wonderful idea.
It's prevented many wars, except I don't believe that it has what it takes at the moment to go forward and be what they had envisioned originally as a United States of Europe that could be a counterbalance to China and the U .S.
So I think there's a lot of worry in European capitals at the moment.
And I think they're kind of at a loss for what to do.
Most of them follow the lead of the U .S.
And that's not taking them very far at the moment.
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It seems Mexico and Canada are preparing countermeasures once the tariffs are in place.
But on the Chinese side, there is general sentiment of what Trump said is very likely to happen.
You know, the 10 percent extra tariffs on on top of all additional tariffs.
And that sounds quite taunting maybe.
But I'm curious about, you know, this role of Eel Musk, you know, if his interest in China, namely the Tesla factory in China, is affected by the new tariffs.
Could he play any, you know, buffering or positive role there to mitigate this whole thing?
I'm not quite sure.
What's your interpretation, Joseph?
Well, I've had my I've had my nose in a number of free trade agreements.
That is, I was about an 18000 page document between the United States and Australia when they had a free trade agreement.
And there are hundreds and hundreds of waivers and dispensations.
So class industry in Akron, Ohio, for example, wasn't subject to any tariff or costs or anything like that.
So I think Musk would organize a dispensation or a waiver for the electric car business in China and he would be home free.
And while it goes across the board, there is every industry with his peak leadership can ask for a waiver.
And this would allow a lot of people to get through the field.
This is what a lot of European leaders are doing right now.
They're trying to queue up at the court of Donald Trump and look for dispensations for their own country.
So, you know, it's it's not out of the question.
I think Musk will get out of this either with a waiver or he'll get out of it some other way.
I mean, Elon Musk doesn't really bet on the wrong horse too many times.
So, Joe, I think something else.
I think that this goes beyond Elon Musk and Tesla and SpaceX and his other companies.
I think Elon Musk, who some years ago came out with a very pro green pro -environmental statements.
I think he still has some values.
And one value that he has is he obviously has Trump's ear for the moment anyway, although some people say that relationship may be fraying.
But he also has the ear of the Chinese leadership.
And he's on good terms with the Chinese leadership.
And so I think Elon Musk is singularly qualified if he has the strength and fortitude to be the bridge between China and the US and to be almost like a mediating force between them.
He's obviously a very smart man.
He's obviously self confident in the extreme.
And I wish him well.
My only worry is that he seems to be taking too much of Trump's limelight.
And if there's one thing that Trump hates is to share the stage with somebody else, especially in this case, someone who's obviously smarter than he is.
So I honestly don't think that Elon Musk is going to last for the duration.
But I hope while he's there that he builds this bridge because I think it's one of the only potential hopeful signs in this dark picture that we've been discussing for the last few minutes.
I think you're right.
I mean, instead of talking about just economic forces and all the rest of it, political programs, we got human beings involved here.
And you're right. Musk is perfectly positioned to play a mediator or interlocutor between the Chinese leadership and the American leadership, even when Musk leaves that office in Washington.
He will still play this role.
And I just don't know if he has the ability to conjure up these statesmanlike tools that you have to have.
I mean, where you place human beings over everything else.
But you're right. He's perfectly placed.
He won't last. But in that sense, also, I think he will last in the background.
I think he will have an important play to role, important role to play in Trump's administration for the next four years.
Indeed. Call me naive, but I do wish or hope Musk has this willingness and ability to do something that might be influential globally.
And it's also some good deeds he could do for the world.
And that's what he's been trying to build up his image for.
But if he cannot achieve that or cannot play some influential role there, it's very likely that China would also come up with some retaliatory measures if Trump fulfill his promises.
So, Dr. Yao, under such circumstances, what potential industries or sectors of the U .S.
economy may be the victims of those retaliatory measures, either from China or from Mexico or Canada?
I think the biggest victim is probably the American agriculture, agriculture sector.
And also the overall declining of the influence of the United States across the globe in the short term.
Actually, you know, my mother is almost illiterate.
He told me that Trump is going to destroy the United States.
Of course, he may be watching the TV too much and believe that the extreme discourse.
But there's some lost analogy of this statement.
You know, Trump, actually, his primary objective is to get America stronger than ever.
But he's more ambitious than just America first.
He actually wants America to be highly dominant.
And he is the real king in the world.
So everybody has to watch the thing.
But this is wrong because there is no relationship.
Even the weaker part of it, like, for example, Western Europe, the G7 lines of the United States and Canada in this case, and to a lesser extent, Australia and Mexico.
You know, Trump is actually antagonizing almost everyone.
And I can see why he is doing so.
It's because he want to be the king.
And by doing the king, you certainly have to pay a certain price.
For example, by, you know, erecting the talus, it's actually, you know, on the service, it's going to protect the domestic manufacturing.
But he actually protecting the wrong thing because the comparative advantage of the United States is not the traditional.
No labor cost manufacturing is actually the competitive advantage is the Internet, the artificial intelligence, which the United States is doing very, very well.
But Donald Trump is doing two things.
One thing is to suppress the trading partner at the lower level, but also try to maintain the superiority at the higher level.
You cannot win everything.
The actual United States have only three hundred twenty million people.
It's not the biggest, the most popular nation in the world.
The biggest nation in the world is India and China.
And India is emerging also very fast.
So the global economy politics is going to change.
It's not going to be stay stable as Donald Trump is going to expect it for.
And by doing so, I think it's a very dangerous game.
If you're talking about Elon Musk, I'm quite sure that whatever Donald Trump would do, China's door will be open to Elon Musk and also Apple, Microsoft and all the other American companies.
You know why? Because China has a longer vision.
China wants to maintain the longer competitive advantage.
And by maintaining or gaining the long term competitive advantage, China's door has to still be open because it needs the most international advanced technology and management practices.
So despite China is not doing a lot of retaliation, China has some long term objective rather than the short term extent like Donald Trump.
So I'm pretty sure China will still continue to open.
Whatever Elon Musk do, whatever Bill Gates do, this is the long term case.
Because by doing the retaliation, it's very easy.
China could just kick out all the United States business from China and the United States will suffer massively.
But in the percussion, I think China will suffer even more.
So this is why China have been very cautious of imposing any retaliation in the more competitive sector.
Actually, China could retaliate the agricultural sector if they would import less from the United States market with the United States farmers.
They would suffer. If they suffer, the rural area in the United States would suffer.
So I don't think China is going to have this on across the board affiliation.
China will probably pick up a few key areas and make some part of the United States population feel painful so that they can have political lobby against Donald Trump not to be so radical.
And this is probably the case.
Right. Fair enough.
Before we're hitting the last question, let me first show my respect to your mother who must have a big wisdom despite being illiterate.
She's a lovely lady, I guess.
And Dr. Yau already mentioned some of his suggestions to those businesses or governments.
Then what about Harvey and Joseph?
What would be your suggestions for the companies or governments that might be affected by the possible tariffs?
You know, how could they adapt to mitigate the negative impact of the tariffs than Harvey?
Well, I think what's needed here are more conversations.
So it's very difficult to achieve win -win solutions.
If you're talking past each other or shouting past each other.
The US and China, for example, had a lot of mechanisms, institutionalized mechanisms like the security and dialogue for the country until Trump killed him.
If he were smart, which he isn't, but he may see the light.
It's really important to start discussing these issues on a bilateral basis first and then on a multilateral basis.
Second, because I think it's the only way that we can solve problems in a rational way.
Right. But the question is whether he would initiate or take such kind of initiatives, right?
Yeah, but he's negotiable.
So in a negotiation, it's win -win, right?
So somebody gets something and somebody gives up something and the same for the other side.
And I think there are areas where it could be win -win if he wanted to sit down.
But maybe that can't happen right away.
Maybe he has to do his little dance and show for his mega followers.
But when things get serious, especially before the next congressional elections, which by historical trend will go overwhelmingly to the Democrats, he probably will want to start making some inroads and improving relations rather than killing them off.
Yeah, you're right.
He's a businessman and must feel very comfortable conducting negotiations.
And then lastly, Joseph.
Well, I think Harvey's right.
We're going to have to have more conversations, particularly in the United States, as we discuss free trade versus these kinds of tariffs.
And, you know, tariffs have been in the past a valuable tool for trade policy.
But they have to realize and this is the argument we should be seeing on the Sunday shares in America, is they surely be utilized as a last resource after reliance on much less damaging things.
I mean, we can negotiate our trade differences without 25, 35 percent across the board tariffs on everything.
I mean, I think that will be a discussion.
I think Trump will withdraw from these maximum positions because he tends to do that kind of thing.
But if I were a foreign country, I would make sure that I would employ some of the best lobbyists in Washington or wherever I could get them to barrage American Congress and the people around the American Congress, that there are other ways to do this and that we have to point out to the American people.
You know, conversation by conversation that these may have collateral damage effects no matter how good you feel about doing something.
And we have to look at these things in their totality.
I mean, free trade.
America rode that as far as it could go.
You know, we wrote the rules after 1945.
Today, if we have less than free trade, we're going to have to figure out what we want.
Are tariffs the way to redress this balance?
Now, tariffs are OK for certain things.
But, you know, in terms of redressing a trade balance overnight, not going to happen.
And so I think more Americans can see after discussion.
Now, I don't know if they're open for discussion.
Sometimes Americans have closed their minds.
But if I were a European or an Asian government, I would be lobbying the hell out of the United States for the next four years.
Well, I guess Canada or European countries got some opportunities there.
Do you think China, you know, stands a chance given this bipartisan anti -China sentiment in Washington?
Well, you know, I know Washington's gone anti -Chinese and even anti -Russian according to the intelligence mob.
But, you know, when President Trump is sitting in the room with President Xi and is able to conduct business on a face to face basis, you know, and then we're not looking at this kind of unfettered Trump on his Twitter account, I think we're going to have a very different thing.
You know, there are two Trumps.
There's the public Trump who, you know, acts like a clown.
And then there's the private Trump, who I think is in awe of other leaders in other places because they do something that he can't do.
And Harvey has already touched on this, is that other people, other great players in the world, they're playing the long game.
Trump's not playing the long game.
He plays four years and in four years, or actually he's a lame duck president right now because he's not going to get another shot at this.
He's looking at the short term.
And of course, Americans spend a lot of time looking at the short term.
But I think when he's in a room with people who are looking at the long view of things, I think he can be persuaded.
Trump, I think he's open for business when he's behind closed doors with important influential leaders.
I mean, there is something about him.
I know he's in awe of strong characters around the world, but I think he actually pays attention to them behind closed doors because, you know, as a businessman, he wants to stay in business.
And now he's starting to think about God and his legacy.
You know, he wants to be remembered as a great president.
Well, that ain't going to happen, but we can't tell him that.
So I think he's amenable to different positions behind closed doors.
And I think he can surprise you.
I mean, in my own lifetime, Richard Nixon surprised everybody by showing up in China one day and no one ever thought he'd be making that trip.
So I have high hopes that we can do business in the future.
Right. Let's hope that could happen and end this session with a positive note.
And with that, we wrap up our chat for this session.
Many thanks to Professor Joseph Sirakusa, Dean of Global Futures with Curtin University Australia, Harvey Zodin, Senior Fellow at the Center for China and Globalization, and Dr.
Yao Shujie, Changkong Professor of Economics, Chongqing University, China for sharing your insights.
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