PBD Podcast
EMERGENCY PODCAST: USA vs China Trade War w/ Richard Werner | PBD Podcast | Ep. 574
Wed, 09 Apr 2025
Patrick Bet-David sits down for an emergency podcast with economist and "Father of Quantitative Easing" Richard Werner for a deep-dive conversation into the future of global finance. They discuss the rise of de-dollarization, central bank digital currencies (CBDCs), the real story behind quantitative easing, and how China’s latest tariff retaliation could reshape global trade.------📝 SUBSCRIBE TO RICHARD WERNER'S SUBSTACK: https://bit.ly/4cwC29G👕 GET THE LATEST VT MERCH: https://bit.ly/3BZbD6l📕 PBD'S BOOK "THE ACADEMY": https://bit.ly/41rtEV4📰 VTNEWS.AI: https://bit.ly/3OExClZ🎙️ FOLLOW THE PODCAST ON SPOTIFY: https://bit.ly/4g57zR2🎙️ FOLLOW THE PODCAST ON ITUNES: https://bit.ly/4g1bXAh🎙️ FOLLOW THE PODCAST ON ALL PLATFORMS: https://bit.ly/4eXQl6A📱 CONNECT ON MINNECT: https://bit.ly/4ikyEkC👔 BET-DAVID CONSULTING: https://bit.ly/3ZjWhB7🎓 VALUETAINMENT UNIVERSITY: https://bit.ly/3BfA5Qw📺 JOIN THE CHANNEL: https://bit.ly/4g5C6Or💬 TEXT US: Text “PODCAST” to 310-340-1132 to get the latest updates in real-time!ABOUT US:Patrick Bet-David is the founder and CEO of Valuetainment Media. He is the author of the #1 Wall Street Journal Bestseller “Your Next Five Moves” (Simon & Schuster) and a father of 2 boys and 2 girls. He currently resides in Ft. Lauderdale, Florida.
Chapter 1: What are the key topics discussed with Richard Werner?
The future looks bright. A handshake is better than anything I ever saw. It's right here. You are a 101? My son's right there. I don't think I've ever said this before. So Richard Werner, my guest, we were together three years ago, if I'm not mistaken, June of 2022. So it's been almost three years.
Amazing.
And we had a great conversation last time. The nickname you have is the father of quantitative easing. And when we spoke, it was all economy, all data, all Fed, all interest rates. All of that. And today, the timing of it was so perfect where Rob and Tony were talking like, hey, Richard Warner's in town.
I said, we absolutely must do something because everyone's so concerned with what's going on today with the economy, tariffs, especially with the big announcement that Trump made. So it's great to have you back on the podcast.
It's great to be here. Thank you very much.
Anytime. So do you mind if I get right into it?
Please do.
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Chapter 2: How are current US-China tariffs impacting global trade?
So here's the news. So first, this morning, we get word that China announces 84% tariff on U.S. goods in showdown with Trump, okay? And Europe also hits back. You'll obviously give a little bit more intel on this. Then the president, do you have the Europe one here as well, Rob, or no? Let me see on the story you were just on.
Yes, this has Europe in here as well.
If you can go a little bit lower, let's see what Europe's is. The European Union announced it would begin collecting retaliatory duties on U.S. imports starting Tuesday. Okay. All right. And that's fine. So now if you go back to Trump's tweet, here's what Trump puts on Truth Social. And this is as of two and a half hours ago, three hours ago.
Based on the lack of respect that China has shown to the world's markets, I am hereby raising the tariff charge to China... by U.S. to 125% effective immediately. At some point, hopefully in the near future, China will realize that the days of ripping off the U.S. and other countries is no longer sustainable or acceptable.
Conversely, and based on the fact that more than 75 countries have called representatives of the U.S., including Department of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed
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Chapter 3: What was Trump's response to China's tariff announcement?
relative to trade, trade barriers, tariffs and currency manipulation, and non-monetary tariffs, and that these countries have not, at my strong suggestion, retaliated in any way, shape or form against the U.S., I have authorized a 90-day pause. and a substantially lowered reciprocal tariff during this period of 10%, also effective immediately. Thank you for your attention to this matter.
He posts this. Immediately, the market, Rob, if you can go to the market, the market responds accordingly. Go to the one day. The one day ends up being 30%. At 3,000, that was up 3,000, nearly 8% in a single day right after the announcement is made. You can tell that, Rob, if you can do that again, that was great. He makes the announcement there at 37,941, boom.
The rest of the day ends up being nearly 3,000 today. So for you, with this back and forth, this is your world. This is what you do as an economist and somebody that's watched the quantitative easing and now we're doing a little bit of quantitative tightening that's going on. We'll show that as well. What do you think is going on here? Is this good news? Is this over with?
Is China going to come to the table? What do you think?
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.
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.
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.
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.
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Chapter 4: Can China withstand US tariff pressures?
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
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.
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.
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?
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?
I mean, meaning... You know, earlier today I tweeted something out. I said this is really going to come down to one of three things, right? Who needs who more? Okay. And then, yeah, right there, zoom in if you could, Rob. Who needs who more? Who has more leverage? And then who has more time? Right?
So when you look at the two here, back and forth, 84, 104, 125, who do you think can tolerate this pain long enough until the other has to cave?
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.
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.
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Chapter 5: What are the benefits of a zero-tariff agreement between the US and China?
What are we stronger in? We have the best customer base. We have the best buyer base. I just looked up right now China's top 10 biggest trade partners. Number one is U.S., roughly $600 billion. Hong Kong, $297 billion. Japan, $308 billion. South Korea, $328 billion. These are big numbers. Vietnam, $260 billion. Germany, $202 billion.
Netherlands 110, India 138, Malaysia 212, and Russia 245, right? So it's not like U.S. is 50% of the trade. It's not, okay? How much total trade does China do in 2024? How much was their total trade? What was China's... Total trade in 2024, China, 6.1 trillion. Okay, of the 6.1, so if you divide five, what was the number I said, 582, I mean, it's 9%, right? 582 divided by 61.
So if we do 582 divided by 61, 9.5%. Still a big number, but it's not 25, 40%. Yeah.
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.
So maybe check, Rob, what percent of China's export is U.S.? What percentage... what percentage of China's export is U.S.? Yeah, yeah, 15%.
That sounds right.
So total is 9.5% aggregate, but just export is 15%. 15%, if I lose, because here's the thing, if China does, let's actually do this, and maybe this is the better question. So, for example, if China agrees and say, you know what? Reciprocal tariff zero. We're not going to put any on you. You put nothing on us. If that was to be agreed upon, who loses more and who wins more?
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.
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...
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Chapter 6: How do tariffs affect domestic and global markets?
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.
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.
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.
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.
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.
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.
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.
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.
That's how the US overtook Britain.
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Chapter 7: What are the historical impacts of tariffs on economies?
Okay, fine. U.S. defense hawks and China skeptics. Companies that relocated from China during trade war. Domestic industries. These are saying who the losers are. For you, I see more positive on doing reciprocal than not doing it. Why isn't China agreeing to do it?
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.
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?
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.
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.
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.
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.
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.
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.
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Chapter 8: Who benefits more from US-China trade relations?
At that time, 2001, minimum wage in America was 5.15. So it was, let's just say it's 25 cents. It was 20 times cheaper to do it there than to do it here. Now, labor is not that big of a difference, China versus here.
Matter of fact, there's an article that came up about Hafizan in Mexico, that China's building Hafizan in Mexico with their BV, whatever that car is that they're doing, the BVD, BVA something. What's it called, Rob? BYD. BYD. Build Your Dreams. Build Your Dreams for $9,600. They're building it in Mexico because labor is now cheaper in Mexico than it's in China.
So they're kind of getting competition with labor that's going different places, right? I asked a question about how the other 195 countries, which one of us do they need more, is because if you remember what Trump did to Huawei, where he told everyone in the States and he told everyone in China, if you do business with Iran, I'm putting sanctions, you're done with us.
So Iran wanted to do business with Huawei, the CFO, which was the daughter of the CEO, was in Canada doing a deal with Iran. If you remember that, he said, we're done with Huawei, done deal. Was this the Trump administration hits China's Huawei with a one-two punch? This was in 2019, six years ago. So Trump's got the reputation to show that I'm going to go hard with this.
What if Trump calls all the partners that say, hey, guys, here's what I need you to do. I need you to not do business with China for three months. And if you do this, I'll give you zero tariffs for the next three months. What if he puts that kind of pressure? Because he's capable of saying something like that. He's now somebody that's going to be worried about it.
What if he says something like that? What if he says, I will give you, to save you money, 0% tariffs for whatever, 12 months, six months. But in return, you have to tell me that you're not going to do business with China for 90 days. What if he does something like that?
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.
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...
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.
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