Richard Werner
Appearances
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
The principle to be successful as an economy is through international trade, and you have to follow the rule of mainly importing raw materials. That means low-value-added goods. Then you do the adding of value, and you export high-value-added goods. And the U.S. is very good with certain high-value-added goods. Goods and services are included, of course, particularly the services. The U.S.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
is very good. And there's high-valued, whether it's software, technology-related, telecommunications and IT and so on. That's the principle. That applies throughout history to all countries at all time periods. And that's where tariffs can be very useful if you want to move up to the next level and you put on tariffs such that you enhance that pattern.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
of basically you want to get raw materials very cheaply, so you'd never put tariffs on raw materials that you're importing, import tariffs, you'd never have that, and on raw materials. But of course, if the other country is mainly exporting finished goods, that you are also trying to... you know, manufacture yourself or services, you know, they're offering services that you are trying to offer.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That's where the tariffs make sense. If behind this tariff wall, if you want, or tariff protection, I mean, it's only a partial protection because you're not banning those, you know, it's just getting slightly more expensive depending on the percentage.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
If you're behind this protection, you make sure that industry and your domestic players are actually stepping up to the plate and are getting ready because in the future you want to take this off and then let them roam freely and let the foreign things come in freely. And that pressure has to be there. And then it can be extremely successful.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That's how Japan was in the 20th century, the country that had the most dramatic economic development, only overtaken towards the end of the 20th century and then beginning of 21st by China. Although if you take the whole country, because, you know, it's huge and, you know, rural areas, some are still not so developed, you know, this is a bit of a mixed batch, but big chunks of China developed.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
did beat Japan in that respect. But they all followed the same pattern. And it's also true if you go further back in history, German economic development in the 19th century, the US development in the 19th century, overtaking number one economic power, Britain, happened with the same pattern, namely very selective tariffs.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So that this trade pattern was encouraged where you get your raw material imports cheaply, and you have development of your domestic high-value-added goods and service industry, and you then encourage the exports. And so usually it's a combination of tariffs and subsidies to work on that pattern. But it's only justified because it is a government intervention. That's quite clear.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
This is a government intervention, tariffs. Normally a free market is preferred. But if you do it cleverly, you combine this intervention with – incentives for the private sector to step up to the plate and deliver, you know, shift to the higher level manufacturing or service sector value added activities, then it's extremely successful and has been in history consistently.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That's how the US overtook Britain.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
$2,300.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I think we do have a political element here, and that is on both sides. We saw it in the message from President Trump. It was the second or third word of his message, disrespectful. And the Chinese have the same attitude. They feel what President Trump's been doing has been very disrespectful.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So we do have, I mean, it's like between humans, you know, we're sort of, it's the, oh, this has not been a nice way of doing it. We're slightly miffed now and we're going to... We don't want to be pushed around. So there is that element. But in principle, if you have no tariffs on either side, basically each country still has to think, is this a healthy relationship?
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And I mean there's this long history and we're just – President Trump is being – quite focused on this and willing to have a dramatic policy change because until now, all the presidents didn't touch this and they let the State Department and all the trade negotiators work in line with standard trade, orthodox economics. And so there really hasn't been much of a dramatic policy change.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But the end result has been essentially previous administrations overseeing the transfer of labor of US jobs to China. And that's really essentially also been US policy. And so the US policy has helped in making China very strong. Because all the U.S. companies were more or less encouraged. Yeah, that's fine. You do that. The environment was like that.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And so President Trump is unusual because he doesn't care about all this economic orthodoxy. He just sees the jobs going and he wants to reverse it. He sees and has seen since the 80s, as we saw from that whole interview, that there isn't really quite a level playing field when it comes to tariffs. And he just thinks, hey, let's change that.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But in my view, there's a slight missing element, and that is one needs to combine that with a policy that sets the right incentives, not to dictate to anyone at all, no, but to create the incentive structure for the private sector in the US such that you will have still boosted high-value added activities expanded in the U.S. You want to keep that.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
You want to offshore essentially low-value added activities. That's not the big problem. And I think where to draw the line is the question. And I think it's being drawn at too high a level so that the U.S. has been quite successful in the IT sector and in software and things like that. But too much of the manufacturing has been offshore, and that's where President Trump has a point.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But is this going to change? Is it going to be reversed just through tariff policy and perhaps even this agreement? If you do this agreement, zero-zero, then it's not going to change, actually.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
for this point on this point that really you'd like to have more jobs in the higher value-added manufacturing sector in the US.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That's quite a complex setup.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I think it totally depends. It totally depends on the specifics of the type of software. China has made great progress in creating its own software. and still has a price advantage. There used to be the attitude, well, it's just copying and it's similar to the US and it's cheaper, okay. But the US is really where the creative new ideas come and so on.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And that's also being challenged in China because you've got new developments, things that are not even available in the US are available in China and they're trying all sorts of things with various apps and combinations of services. So, and they still have the price advantage, although this is what, you know, a tariff policy could address.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I think really, though, you know, it's beyond just, you know, if you look at software, because you're looking at the sector where the US is doing best. And so perhaps that's not really the main concern. Because, you know, the US is doing okay with that one. It's the level below, which is still high value added but is lower where there's still some manufacturing.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
There's an argument for maintaining manufacturing in your country because manufacturing gives you the – Basically, the skill set required in having certain assemblies and manufacturing and the people involved in that, that's also what creates new ideas about processes, how to improve processes, how to offer new things, working with different materials, you know, is so important.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
All the new materials that are being worked on. If you don't even have the manufacturing, you'll never get into the new materials. China is making massive progress in new materials, you know. And the U.S. in some areas has lost the skill set because it's been offshored.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, it could work for some countries. This would be attractive. And if then they say, OK, this would disrupt the supply chains. This would disrupt the relationships because suddenly, you know, you have to find other sources. You have to find other partners. Once you've done that. You have actually let other companies from other countries substitute China. And then it could stick.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
To some extent, it could stick. So it could work. This hasn't been tried. And it could work. But really, I don't know. I mean, in many ways, yes. And, you know, this very aggressive policy with Huawei is...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
At the time, I was a bit surprised how, you know, this lady who was the CFO, she was arrested and she was essentially kept, was it house arrest in Canada or something like that for a long time, a year or more. That was, to me, that didn't seem quite right because these are sort of Soviet methods, you know, that was a bit unnecessary. Right. But you're right.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
As a result, he has this reputation of being very brutal when it comes to China. But is this really the right way of dealing with China? In my experience, it's not. And I think that's actually the reason why China has responded this way, because there is this baggage. There's this history of how President Trump has dealt with China.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And sadly, that brings out the politics where they say, well, we're not going to be pushed around by President Trump in this way. We also want to be respected. You have to understand, I mean, it's like on the human level, everyone wants to be respected and countries want to be respected. Russia has the same issue. They want to be respected as an equal when they talk to the US.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And now here, President Trump was the first who said, yes, we'll talk to them as an equal. And it works like magic, although still a long road to go, but it's clearly working. Why isn't he trying this with China? It would soften up China, you know, it's... Thank you. Thank you. Thank you. Thank you.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, the question is for who? Good news for who and bad news for who? Certainly the markets take the viewpoint. that this is good for most of the countries. So stock markets are up not only in the US, but also in Europe and any market that's open.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And actually, you wonder, because really what's happened is President Trump, who previously had this longest list of countries that were faced with these new tariffs and partly extremely high tariffs in one go, The longest ever, I think, has been announced in one go. But they're now gone. It's all back to a minimum of 10%. Some were at 10%. The UK was 10%. And which one is left over? China.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Thank you. Thank you.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Thank you. Thank you. So – and this is central bank policy. In Europe, it's official ECB policy. Europe is overbanked. We have to close the banks. Well, not the Goldman Sachs. They're closing the small local banks. They're crucial for job creation and wealth creation. And this is, in fact, my research area. And I'd love to reach out to the Trump administration because you need to have that –
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So you're really now pinpointing, zooming in on China. And clearly, China is the target now. The question is, was this now caving in to the market pressure? Because there's been relentless selling last week, relentless also Monday, Tuesday. And that clearly created a lot of pressure at Treasury. They were quite concerned. And there were some voices at Treasury saying, you know.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
the right policy there, then your tariff policy can be extremely successful. If you do the tariff policies because you feel, okay, we need a level playing field, I can understand that, I get all that. But if it's without the backup of the right policy, and I'm not talking about micromanaging government intervention, not at all, quite the opposite.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But some policy namely to encourage small local banks. That is decentralization. That is the real capitalism. That's what made America great. There used to be free banking. It used to be super easy to set up a bank. Why is banking now the most regulated industry? That favors the big banks. That's part of this drive to kill small banks.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Absolutely. And if we go back to that era – That's when America had high growth. America was a fast-growing, emerging economy, double-digit economic growth like China for decades. That's how America overtook Britain. Britain used to be number one economic power, way ahead of everyone. And then the US and Germany in the 19th century started to create lots of small local banks.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And that created this drive. You see, let's talk about tech industries. Not software, but, you know, there's still manufacturing, but at the high end. This is where Germany has been very strong. And the amazing thing is that Germany has the largest number of small firms...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And actually, there was this announcement, I think it was on Monday, that there will be a 90-day reprieve, which was then denied by the White House. They said, no, no, that's not true. That's a rumor. You see, so clearly it's been proposed by somebody, perhaps from Treasury, you know, why don't we do this? And now it's become policy. Well, we can't know.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And of course, Germany used to be the top exporter, even exporting more than China, even though China is like 30 times the size by population of Germany. And so the surprising thing is that many of these exports are by small firms, family-owned small businesses. They are leading in the world in their market niches. They're called hidden champions. Hidden because they're small firms.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
SMEs, they're not brand names. We don't know them. But in their particular market niche, they are world leaders, whether it's the taps in the bathroom or whether it's small things they're specializing in. And you'll find German firms are – many of these small firms are world-leading champion because market share number one, two, or three in the world champion, like gold, silver, bronze.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
With this definition, if you look at how many hidden champions, that means small firms that are top market share, one, two, three in the world, are there in each country, you will see Germany is head and shoulders above everyone else. with 1,500 plus of these firms. Number two is the US, and China is way down the road. So how is that possible? Because of banking.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Germany used to have the largest number of banks in Europe by far, and particularly the vast majority, over 80% of those banks were small local banks only lending in the local area for productive business investment. What year is this? Well, until 2009, Germany was number one exporter in the world. And the data on hidden champions is sort of – it's a bit late, 2014. So it's not too long ago.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Germany has now been in a recession with terrible government, terrible leftist socialist policies. So it's a disaster. And they're killing the banks, of course. ECB is killing the banks. So at the moment, it looks pretty bad. But we know why that is. It's these wrong policies. But before, the strength is due to this –
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Essentially, an industrial policy that was non-interventionist, but creating the right environment. I just want to make one more point on this. Because if you compare, for example, to the other extreme, which is Britain, United Kingdom, five banks dominate the banking sector. And then you see the contrast and you see why this makes a difference.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So in the UK, a small firm gets no loans from the big banks because they're so huge. Lending to a small firm... 50,000 pounds, 100,000, 200,000 pounds. It's too tiny. They're just exactly who cares. They'd rather lend a billion to a hedge fund, private equity fund. That's how it works. So let's say we have a UK firm, small firm, and a German firm. They're competing in the same market.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Now there's a new innovation. These small firms, they're not necessarily the innovators. Sometimes that happens, but rarely. They don't need to be the innovators. But when a new innovation comes out, they need to be able to very quickly... Apply it, you know, actually apply it, get it.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So what happens in Germany is the leadership, usually the owner of the small firm, realize, okay, that's the new technology my guys have shown me. They go to the local bank. The local bank is headquartered in their village. It's very decentralized because everywhere you can work because there's a local bank everywhere. And that means there's money everywhere.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And the local bank knows the small firm very well. And the owner explains, look, we need to buy that technology. We need to apply it. Otherwise, we'll lose market share. Otherwise, we'll fall behind. The bank manager understands, knows, quickly does the figures. Within 24 hours, sometimes 48 hours, they get the loan. They get the new technology. They buy it. They implement it.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
We can only guess and speculate exactly how it came about. But the result is clear. Trump has made a major statement last week on this Liberation Day, on these tariffs, and certainly woke up the whole world. Like, they're paying attention. to what he's saying and what the us is doing that's for sure so he clearly got that attention
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
They stay ahead of the game. UK, same situation. They will never get the loan. So they can't apply the new technology. They don't have the money to do it.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Actually, I looked into this, and to get a new banking license, I mean, in most states, it even hasn't happened in the last five years. So the number of new bank licenses given and new bank creations has really dropped. And it's quite clear the regulators are very reluctant to do this. I mean, banking is very profitable now.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
We need to always create new local banks because what we see over time is... Let me tell you what it shows you to me.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Amazing.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And as he said in his tweet and his message on Truth Central, so many countries have got in touch with the US and they're saying, hey, let's make a deal. That's, of course, what he wants. So in that sense, you could say, well, it's worked. They're all coming, crawling back to the US saying, oh, yeah, OK, we realize we did have some tariffs on you guys and you wanted to have a level playing field.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I would try to defuse this now because otherwise we'll see a standoff where each party – I mean this is number one, number two economic power and political power in the world.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, exactly. We avoid that. We need to avoid that both parties think, oh, I can't cave in.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
No, no, no. Well, this has to be done the right way so that, of course, the U.S. also is not caving in or is not seen to be caving in because, likewise, China doesn't want to be seen to be caving in. That's the whole tricky bit.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, of course, ideally, you would have never got into this situation, right? Because that was pretty predictable.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Still, the way to address this each time I think would have been to sit together, the right people, maybe fairly high level, and say, look, we have these and these concerns. Can we deal with this? And this is off the record. First, you have these discussions not in public, precisely because you want to avoid a public standoff where each party can't be seen to be caving in.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I think it can be diffused and I think it will be successful to diffuse it. In many ways, OK, both parties have now shown that, OK, there can be tough guys. Both are tough guys. Great. Fine. So let's now get down to business and resolve this issue. So maybe they have to be private meetings, secret meetings that are not official.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But between, you know, respective top guys, whether it's Trump himself or potentially, you know, Secretary of State or, you know, you have to find the right level. And meeting their counterparty and saying, look...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
we want to diffuse this but of course we want to achieve you know if you understand what we're trying to achieve can we agree that you know certain things we are saying are reasonable and we get your viewpoint you don't want to be seen to be bullied Okay, so let's come up with a formula. They will make suggestions. That's the Asian way. They will be very creative suddenly. Okay, we understand.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
You don't lose face. We don't lose face. We'll come up with a solution. It's possible. It could be, I mean, there's all sorts of things you could think of. I mean, potentially even with a... With another party or you create some kind of diversion where both parties seem to have to now change something because of something else happening.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
You know, there's so many things you can do if both parties want to diffuse it. And it's made clear that we don't want to lose face.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, that'd be great. That'd be great because, I mean, I could help. I could help defuse it.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So fair enough. Let's come to a deal. And in many ways, that was clearly the goal. And of course, you need to get those deals worked through and signed and done and dusted. So we're not there yet. But he's got the reaction. They know he can be very serious. And if they don't negotiate properly, it will become serious again. There's no doubt.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That was a surprise.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
In what sense?
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Well, I mean, this can be part of any deal. And it seemed like a bit of a concession, you know, that this will become, you know, essentially the Hong Kong company selling those ports, okay. It seemed like an olive branch from the Chinese side. And therefore, I mean, I assumed it will go ahead if it's also recognized. I mean, this is the thing.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Both parties also want their actions to be recognized and appreciated. I think the way to approach it is to, is not to say your Chinese success has been due to us Americans and America. It's partly true, but only partly, because it was hard Chinese work, very hard work at low wages, people really working their ass off for a long time, long working hours and so on.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So the Chinese worked for it, that's for sure. But it's also true at the same time that both, in fact, the Japanese rise and the Chinese rise wouldn't have happened in this way and wouldn't have been so dramatically successful if the U.S. hadn't been this very open, accommodating market place. that they could sell into quite nicely. So that is a contribution.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So I think if one appreciates both parties' contributions, then what you come to a conclusion there is, well, it's a team. This is teamwork. We've done this together. Let's be proud of it. You know, there's a way of shaping the conversation where both sides see that, okay, what I've done is being appreciated. And yes, now we have some issues. Let's try to resolve them. I think it's possible.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
I mean, I've been in China, professor of finance at Fudan University in Shanghai for three years. So I've spent some time there. And, you know, I met some senior people. I think it's possible. It's possible to diffuse it in a way that both parties will be happy and then actually establish a long-term relationship. There is one aspect where I see difficulties, and that is the military side.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Because we have this military-industrial complex in the US, the deep state, and in China they feel this is so strong we need countermeasures. And the Chinese feel like we're doing all this because we're kind of afraid of... all the U.S. military threatening here and there and accusing us of stuff. So a lot of work would be needed on that side as well.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
But it's good to start with the economy, and then you can move on to that trickier bit.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
So in many ways, and I think that was in favor of this idea that, hey, let's have a reprieve. because you've got everyone's attention. They want to negotiate. Negotiations can be tricky, can take a bit of a while. So why don't we have this reprieve?
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Was it just China though? Yes, we know these experiments and sort of research was outsourced to Wuhan by who? By US institutions. When in Fort Detrick, they were told by judges to shut it down Then they moved and Fauci moved it to Wuhan. So it was actually on US instructions. That's often what gets left out.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And of course, you know, all these institutions, I mean, the roads go back to the World Economic Forum and some string pullers there. They're just using China and China is saying, oh, this is Americans. We help them, you know. Actually, you know, they've also been used and tricked, I think, into this.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Because they thought it's an American virus that they did perhaps in Wuhan, sort of tricked into it in China. But that's why there were these very strong lockdowns because they always suspected because the U.S. side was working on this genetically – targeting viruses.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
You know, we've seen this also in all these Ukraine locations, US locations in Ukraine that Russia has been unhappy about and has been working to shut down, where there's genetic targeting of particular ethnic groups. And once you have evidence for that, the Chinese, of course, felt, well, maybe they're targeting us.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
We better be careful and have these extreme shutdowns and lockdowns and extreme measures that were then world famous, right? And sort of set the stage. I can see that this was sort of triggered by the U.S. deep state doing all this stuff.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And I can imagine when somebody suggested that, perhaps from Treasury, I'm speculating here, but I'm sure President Trump's response was, ah, but not China, surely. We can't let China off the hook. I'm not going to let China off the hook. What do you think is going to happen with this?
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
When you have 5,000 banks with 35 branches, 30 loan officers.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Oh, and if I could just mention my Substack, rwerner.substack.com. I'd love... To have some more subscribers. I put out reports on things like that.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
It's a tricky question. You're talking about the number one and the number two economies in the world. You know, we're not talking about, say, the US negotiating with the UK or, you know, some other, you know, lesser ranked economy in the world. It's number one and number two.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And of course, you know, by some measures, purchasing power parity measures, China could be considered number one in some way. And obviously that's disputed. But so, you know, it's a it's a big thing. This is a big thing.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Now, timing is important because had this happened only 10 years ago or 15 years ago, China clearly would have been in a much weaker position and it would have been, from a US viewpoint, strategically much better to have it done then. And interestingly, if you go back to some of the old interviews that President, well, Donald Trump in those days gave, There's one I saw from 1988. Oprah Winfrey.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Amazing. And he's already saying, hey, we've got to have some proper tariffs. You know, there's some unfair things going on. We're paying, you know, our products are being, you know, faced with this tariff wall as they're trying to export to other countries. We need to do this.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And of course, that would have been, for some countries, a brilliant time, even for the following decades vis-a-vis China, because China was still building up its industrial strength. now it's not so obvious you know the answer to your question is not so easy because Because China is now in a very strong position, clearly stronger than 15 years ago or 10 years ago.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And also it has other trading partners. The U.S. remains, and this is the strong side from the U.S. viewpoint, and that's what President Trump, of course, is very much aware of and is playing on. The U.S. remains the number one desirable market to export to. There's no doubt about that. And of course, that gives the US a strong hand.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And that's the whole point of this way of bringing about trade negotiations. But having said that, China does have options. in the last 10 years, increasingly, rapidly, an expansion of an alternative network, the BRICS groups of countries. And in fact, the BRICS has grown. More and more countries have joined. Also, China has set up this Shanghai Corporation Organization.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
It's great to be here. Thank you very much.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And there is the Belt and Road Initiative, which recently celebrated its 10-year anniversary last year, where I think more than 150 countries signed up, and they are in bilateral arrangements and deals with China. So China has other options. But of course, as a single market, the U.S. remains... Number one, also for China, the most attractive single market.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Please do.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
With the others, you have to aggregate a lot of countries to get anything close to what the U.S. offers. So it's fairly – it's quite balanced. And I think that's what the Chinese response also shows. Why have they been so – well, disrespectful is how President Trump puts it – but clearly not very accommodating, let's say. Why? They seem very self-confident. Who's they, US? Sorry, China.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
China has not been accommodating and has been quite aggressive in its response, unlike other countries, has not been... accommodating. And as immediately said, we're not going to be pushed into a corner. We're just going to do the same. We're just going to have higher tariffs on the US products and so on.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And so now we have this literally this very aggressive, bilateral, mutual raising of tariffs, which will kill off trade between these two major economies. And that will...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
even if everything else now is fine, everyone gets a deal and things will be sorted out with all other countries, that still will have a negative impact on global trade and reverberations in many sectors, whether it's shipping or whether it's particular industries where China is a necessary partner, rare earths and various...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
actually even inputs that other countries need, not to mention final products that we've been getting quite used to buying from China. So this trade war... has become at the moment with this 90-day reprieve very focused on just the U.S.-China trade, well, dispute, trade war, if you want.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
And in that sense, and markets take a view, okay, that's much better than before with all these dozens and dozens of countries. But it still remains an issue. if that continues to escalate, it will actually hurt the world still. And yeah, your question, you know, who's got more time? Who's got more leverage? It's fairly evenly balanced. On some things, the US is stronger.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
On some things, China has built up a very formidable position.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Yes, this has Europe in here as well.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Now, of course, this is from the aggregate, you know, 6.1 trillion imports and exports aggregated. If you say, okay, let's look at just exports, you know, you probably get a higher figure. So, but yes, so it's not, you know, it's not negligible either way.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Actually, that is the best scenario. And that's where actually the standard international trade theory has a bit of a point. I'm usually quite critical of mainstream economics, but that's the one point where they're perhaps slightly stronger. Everyone would win. Because you see, tariffs... The reason is the following. Trade is really the source of wealth creation for everyone.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Trade, whether it's internal trade or external trade. But actually, when you then have the country divisions and you look at how countries are doing compared to each other, you will see that international trade is the main source of wealth creation between countries. So trade is extremely valuable. Now...
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Most economists very simplistically follow from that that you should never have tariffs, not even unilateral tariffs, not even if the other guys have lots of tariffs against you, you should not respond by putting tariffs on. It's always better not to have tariffs. That's the official mainstream economics response, and they're very clear-cut about this.
PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
That's not entirely true, and therefore, to some extent, President Trump has a bit of a point, namely – Tariffs have proven in history to be extremely successful and in fact necessary when you are a developing economy that wants to move up to the next level and you want to raise the level of value added of your entire domestic economy.