Trade Wars: The Cautious View On China (w/ Tony Nash)

Welcome to Trade Ideas. I’m Jake Merl, sitting down with Tony Nash,
founder of Complete Intelligence. Tony, it’s great to have you on the show for
your very first Real Vision interview. Thank you. So, as we’ve seen, this trade war has really
heated up over the past few weeks or so. US stocks are taking it on the chin, Chinese
stocks are falling, the yuan is weakening, global growth is slowing. And you’re someone that spent a lot of time
in Asia over the course of your career. You know the situation better than anyone
else, or just as well as anyone else. So, what’s your take on the current environment
right now? Sure. You know that we’ve been writing about the
trade war for about a year and a half. And our view is, the US is definitely in a
stronger position on the trade war. And we have a very large global database of
world trade. And we do forecasts of world trade. And looking at how world trade has come together,
we’ve done a lot of analysis around the types of products that China exports to the US and
who’s competitive with those products. The real issue right now is that five of the
top 10 products that China exports to the US are also produced in Mexico, and they’re
among Mexico’s top 10 exports to the US. You have other products like mobile phones. Mexico really isn’t strong yet. But they’re building that pretty quickly. So, the real issue that China has is they
make manufactured goods largely. They don’t export primary goods, like agriculture
goods to the US. So, there’s a lot of competition for manufactured
goods. Of the rest of those goods, say three or four
their top 10 exports to the US, they’re things like suitcases and chairs, very low-level
manufactured goods that can be made in Vietnam or Bangladesh or other places. So, there’s an assumption from developed markets
and investors that China has some competitive advantage with their manufacturing. And the fact is they don’t. So, who pays for the tariffs? Well, if China was the only source of these
goods, then the Americans would be paying for those tariffs. But the fact is, there is a lot of competition
for manufacturing of those goods. And when there’s a lot of competition, the
receiving end doesn’t pay for the tariffs, the manufacturer has to absorb those tariffs. Okay? So, I think when I hear people saying Americans
are actually paying for the tariffs, it’s not true. Okay? It’s something that’s absorbed by the manufacturer,
because those goods can be made in Mexico, those goods can be made in Vietnam, Korea,
Japan, Germany, elsewhere, okay? And so, when you look at places like, in 2017,
it was the first year in many years that the US imported more TVs from Mexico than from
China. The global trade environment is changing,
and it’s a move toward regionalization that has been underway for about four years, has
been talking about regionalization for probably 20 years, and China joining the WTO really
disrupted that move toward regionalization. After NAFTA was signed in the early ’90s,
there was this move toward regionalization, but China entering the WTO really change that
trajectory and move to more reengaged globalization. But let’s say the subsidies, the non-tariff
barriers that China’s put on since joining the WTO has made them uncompetitive, okay? It’s great if you’re a manufacturing firm
in the early days going into China, and up until say, 2008, 2009, taking advantage of
those subsidies for competitive advantage. It’s a no brainer, right? Why not do it? But at this point, supply chains have been
so centralized in China, that it’s actually a risk for those firms, for those manufacturing
firms. And if you look at Japanese firms in 2012,
they’re a great lesson to what happened to Japanese manufacturing firms. In 2012, there was a real pushback, political
pushback against Japan over the Senkaku, Diaoyu Islands between Japan and China. The Chinese government whipped up anti-Japanese
sentiment, and they rated a lot of Japanese companies and this sort of thing. So, Japanese firms, a number of them closed
down their manufacturing sites or severely drew them down in China and moved them to
other parts of Asia. There are those risks for American firms and
for other developed market firms that have such concentration in China. So, they have to be really careful, especially
in the highly charged political environment today, to diversify out of China. And so, the trade talks, the trade wars, whatever
you want to call them, they’re really putting the pressure on those firms to make a choice. Do they want to have a diversified supply
chain? Or do they want to have a concentrated supply
chain? And the risks of having a concentrated supply
chain are coming to light. So, those companies that have a concentrated
Chinese supply chain right now are a real risk. Okay? So, I would take a really close look at how
diversified those supply chains are if I’m investing in companies. I would want to understand the risks that
those guys have of trade stoppage, the risk that those guys have of tariffs, and I would
question their executive team. It’s not as if this happened overnight. Why on earth have you not diversified your
supply chain over the last two, three, five years? Why did you not see what happened to Japanese
manufacturing firms in 2012? These are no brainer things that should have
been happening already. Many firms did it, but the ones that haven’t
who were exposed, it’s really a leadership problem. So, who’s the biggest loser from this trade
war? Is it the US consumers? Is it China? Or is it manufacturing companies? Or is there collateral damage somewhere else
that’s going to be affected? There are two losers, I think, of course,
nobody wins 100%. Okay? So, there are issues in the US and of course,
certain goods will be more expensive. But there are two losers. One is China, one is Europe. Okay? And actually, Southeast Asia loses as well,
some countries in Southeast Asia. But China loses because the margins for private
sector companies in China are pretty thin. They’re heavily loaded with debt. And if they have to absorb the cost of these
tariffs, you’re going to have mass closures in China. You saw this in 2008, and ’09, when say toy
factories and these other types of really low margin goods factories closed in Guangdong
province and other provinces in China, and you had massive layoffs and a lot of unemployment. And the Chinese government had to come in
and stimulate and give those guys jobs. Not really give them jobs but help them get
jobs. And you had DD drivers, which are the equivalent
of Uber drivers over that time. So, you had growth of those types of businesses
to help absorb those jobs. So, China loses, at the same time, there’s
this you have African swine flu that’s hit the pig farms in China as well. Officially, they’ve called 20% of their herd,
I think it’s probably double that, okay? So, you have
food inflation, you have a hit to CPI, you have a weakening CNY, you have manufacturing
firms who have lower margins. So, you have this nightmare scenario for the
Chinese government. At the same time, you have slowing growth,
industrial production, retail sales, all these things have been down this week. And so, you have a very, very difficult environment
for the Chinese government. The problem that the Chinese government has
is if they make the reforms that the US government wants them to make, the central government
loses control of the economy, maybe not overnight, but gradually. And if the central government of China loses
control over the economy, then the Chinese Communist Party loses control of the country. That’s a very difficult play for the CCP. And that’s why we’re seeing the pushback. It has nothing to do with Chinese manufacturers. It has nothing to do with fairness in global
trade and all this stuff. It ultimately has everything to do with the
Chinese Communist Party keeping power. So, another loser in the same region in Southeast
Asia, okay? You have countries like Vietnam, who are going
to do very well out of the rotation of manufacturing out of China. But you have other countries like Thailand,
or Malaysia, other places that have good manufacturing plants, but they’re a part of the overall
Chinese supply chain. If you look at Korean data, semis are down
over 20% year on year. And so, Korea is suffering. Southeast Asia suffering as a result of this
because China is the largest trading partner of every country in Asia. The third loser is the EU. The EU will lose because any good that China
can’t export to the US, okay, and then if you go back to the Japan point in 2012, Japan’s
imports from China are down I think $40 billion a year since 2012. So, China can’t offload those goods to Japan,
okay? So, who has the income profile that the US
has? Its Europe, okay? So, China will send that deflation to Europe,
because they have to put those goods somewhere. And that puts the ECB in a very, very difficult
position. So, ECB was talking about getting out of stimulus
in Q3, Q4. If the trade wars keeps going, if China can’t
send goods to the US, then the ECB is going to have a real dilemma, because inflation,
you could potentially see deflation accelerate in Europe. So, there are a number of issues globally. And if China can’t get itself off of the subsidies,
and off of the non-tariff barrier addiction, I think it’s a real problem for everybody. So, how do you actually see these trade negotiations
playing out? Do you think we’re actually going to get a
deal? Do you think we’re not going to get a deal? How do you see it unfolding? I’ve never really thought we would have a
single deal. I think you have to have a series of confidence
building measures. Look, this deal- I hear people say the US
should be in a multilateral stance against China, with Europe, Korea, Japan, so on and
so forth. That would never work. China is amazing at splitting up multilateral
parties, okay? The only way this can work is in a bilateral
environment. And so, I think you’ll get a series of deals. China needs US agriculture. They need US soybeans. There’s a lot of talk about why US soybeans
are down. And there’s been a lot of false causality
signs saying soybean actually exports are down because of the trade war, that’s absolutely
false. Soybean exports are down because of African
swine flu. US soybeans are used for animal feed in China. Those exports are down because the Chinese
have cut 20%, 30%, 40% of their porker. I think you’ll start to get ag and energy
agreements in place. So, they can take those things with lower,
no tariffs from the US. Because they need it. They need low cost energy. They need our corn, our soybeans, our pigs,
everything. The US will then lower some tariffs on things
as a good faith measure with some contingencies and agreements. Will China stop subsidizing overnight? No, it’s going to take a matter of years. So, there has to be a plan, an implementation
plan for that to happen. Now, the subsidy removal is not a Trump era
issue necessarily. The Obama administration in 2016 had the Chinese
remove 1500 subsidies. So, I don’t want people to think that this
is simply a Trump administration issue, these issues have been going on for years. So, I think you’ll see some ag agreements,
good faith movements, I think you’ll see the tariffs stay at 25%. Now, keep in mind, under the gap, which was
the precursor to the WTO, global tariff averages were 35%, on average, okay? This was up until the ’80s. A 25% tariff by historical post-World War
II standards is really not that high. So, when Trump says he could push things about
25%, that’s feasible, that’s possible. And that would revert to historical mean. And so, I really don’t think 25% is where
things stop if things need to intensify. So, and we may actually need to see that. So, we see the real question is, what leverage
does China have to play with if this intensifies? So, we have to look into that a little bit. We also have to look at how can both sides
balance a little bit. Okay? And what we really see, as I said before,
happening is a reemergence of regionalization. So, the USMCA, the replacement for NAFTA,
will help Mexico develop, and will help Mexico become a substitutional origin for Chinese
goods to the US. And that’s good for the region, right? That’s good for economic development, that’s
good for wages, that’s good for society in Mexico to have more income, better institutions
and more wealth. So, I think all of this- the big winner out
of the trade war, it’s not China or the US, it’s Mexico. If we do get this series of deals over the
next few years, will it include intellectual property? What do you see going on there? Well, I think it has to. I think it has to. I think there has to be an inventory of what
major intellectual property violations have there been. I think there has to be an assessment of damages
donecommercial damages. And I think there has to be a transparent
governing set of data going forward. Okay? The real issue around trade is trade values
are tracked a lot. Trade volumes are terrible. So, anybody who tracks trade volumes, what
they’re actually getting is, say 60% of the volume. Volume reporting is terrible in International
Trade Statistics. There is no tracking of subsidies. You can go to the WTO website and scour it,
there’s no tracking of subsidies. Why is that? Maybe they don’t want to track it. Okay? There’s no tracking of non-tariff barriers. Again, maybe they don’t want to track it. Okay? Those things must be tracked. Okay? There has to be transparency. And I hope that coming out of the agreement,
is an agreement on what will be tracked for those things. Okay? Additionally, IP has to be tracked as well. There has to be transparent, publicly available
data on subsidies, non-tariff barriers, which is really a regulatory issue. Okay? And intellectual property violations. If those are in place, if there is transparency
around that, then it’ll be easier for the parties to have a discussion around that. And I think the US and China can actually
set a global standard for reporting of subsidies, non-tariff barriers and intellectual property
violations with some publicly available, say, database of this stuff. And so, shifting back to China’s economy,
what do you see going on there? PMIs have been weak, the Chinese yuan is weakening,
it looks like it might break through that key seven level. So, what do you see going on there? The Chinese economy has really been weak since
say, July, August of last year. I was told that senior levels of government
and other areas have been really on edge since last summer, when there were assumptions over
here that China was still strong, and they were getting hit 6.7, 6.8 GDP growth. I was telling people, it’s breaking down,
it’s breaking down quickly. Okay? I think there has been a real panic for about
nine months in China. We saw the industrial production numbers yesterday. We saw the retail sales numbers. And now, these data are- what you’re seeing
are the officially reported data and you can discount those, I would guess by about 30%. Okay? And so, things in China are reported to be
slowing down. They’re slowing down even more. So, our outlook on China for 2017- or sorry,
2018 was growth of 5.8%. So, we don’t think China came close to the
reported 6.6 or 6.7% growth they said. For this year, we think Chinese growth has
a four handle on it. Okay? So, we’re not the doom and gloom negative
growth or zero or whatever. We do think there’s growth, we do think China’s
matured very quickly. But we think there’s a drag based on debt. Okay? China has slowed down as debt has been contracting. It’s corporate debt, it’s personal debt, it’s
government debt. And as you have a contraction of debt, you
necessarily have a contraction or a slowdown of the economy, because you don’t have as
much fuel to fire the economy. And so, that’s really the main issue. The causality of the trade war slowing the
Chinese economy. Yes, there’s a bit of that, but I don’t necessarily
think it’s the trade war that’s slowing the economy. I think China has bigger issues with CPI associated
with ASF, with African swine flu, with the debt drawdown, with any number of other things. So, when you look at the currency, our expectation
has been that we would cross seven this month. Now, it’s just a breach, it could be event
based, we believe will approach it on a sustained basis by July, we believe will breach beyond
seven for a few months, and then the currency will appreciate again. And that’s you’re looking at maybe late Q3,
Q4, okay? So, you do see these cycles where China deteriorates
and then comes back. And it’s gradual, so we don’t think we’re
going to hit 6.5 again anytime soon. But we do see things deteriorating pretty
bad. And then coming back later in the year. So, in terms of the markers of health, things
like industrial production, things like fixed asset investment, things like total social
finance, expansion, those things will likely continue to slow down. We won’t necessarily see an expansion of Chinese
yuan as a global currency. Right now, it’s 4% of currency action globally. Not huge, not a major global currency. We don’t expect Chinese to sell treasuries. It’s like, why would I sell gold? Why would I sell treasuries? It’s a core asset. And if you don’t have dollar reserves, or
don’t have as much as you need, you have to hold those treasuries. So, it would be a really silly thing for them
to do. Even with all of the problems that China has,
I do believe that the economic planners in the NDRC, the planners in the PBOC, they’re
all extremely smart people. So, I hear people say publicly that they’re
not that bright. They don’t know what they’re doing. That’s absolutely not true. Okay? These are incredibly smart people. There are political forces working against
those economic forces that are stumbling blocks, and there are I will say economic infrastructure
impediments to the evolution of the Chinese economy that are holding them back. But I think the guys who are in place of say,
planning the economy and making economic, say three, four, five-year plans, those guys
are really smart. A lot of Chinese CEOs are really smart. So, it’s not an intelligence issue. It’s not a capabilities issue. It’s a legacy issue. So, we’ve recently had Kyle Bass on Real Vision
a couple of times, and he’s bearish on the Chinese economy. He’s worried about the leverage of the banking
system, the current account going negative, and the fact that they’re massively short
dollars, does that worry you at all? : Yeah, it all worries me. I’ve thought for a long time that China doesn’t
have the dollars that they claim to have. And so, it all worries me, but I don’t believe
that we’re going to wake up a week from now and China is going to be falling apart. I’m not that China bear. I’m cautious on China. I wouldn’t necessarily say I’m bearish on
China, I’m cautious on China. And what I mean by that is, things are not
as rosy as people are saying. But you still get 4% growth. It’s not bad. It’s just different. And so again, we don’t see this precipitous
short-term fall in China, we see a deterioration. And that’s normal as China shifts from the
hyper growth that it had to a more normal environment with a rapidly growing population. And so, taking a step back, a simple way of
looking at an economy is simply just the population times its productivity. So, what do you see going on with the Chinese
demographics right now? Sure. So, we just released a piece a couple weeks
ago, looking at Chinese demographics. And what we saw was in 2018, birth rates declined
pretty dramatically in China, so this dividend that the Chinese government wanted by lifting
the one child policy, really, there was a tail on that for maybe two years, and then
it broke down. And so, birth rates are way down, or every
family that’s wanted to have a baby, an extra baby has had one for the most part. The key thing to know is that every woman
who will have a child before 2035 is already alive. Okay? So, we see, given the slowdown in birth rates
in China, we see the peak of Chinese population in 2024. Government expectations were five years from
then. So, we’ve moved that expectation ahead by
five years. So, when you think about the peak of an economy,
set aside the growth expectations of the economy, again, it’s not catastrophic. We’re not expecting the bottom to fall out
of the Chinese economy. We’re just expecting expectations to change. These silly 6.6, 6.8, 6.5% numbers that the
government’s putting out, they really need to change that perspective. I remember in 2012, when Xi Jinping first
came to power, he and Luca Chong announced that they were dispatching officers from the
Central Audit Bureau to the provinces to look at government statistics and improve them. I think that was in February, March of 2012. We heard about that for one day, and we never
heard about it again. Okay? So, the accounting and the reform of this
government statistics bureau never happened. Because it was too hard, right? And so, I’m hoping that this type of event
with demographics forces the NBS to change their perspective on things and say, look,
we just really need to review our expectations. And that would come from the State Council
reviewing their expectations. And then that will filter through the global
economy. Now, just because China say recalibrates their
expectations doesn’t mean it changes the growth rates in any other country in the world, right? So, if 6.6 is a fake number and they’re really
growing at 4%, growth rates in other countries are still the same, right? So, just because China’s showing their real
growth rates, it’s not a devastating blow to the world economy, it’s just better transparency. But wouldn’t that affect the Chinese yuan,
which would then affect other parts of the global economy? It would affect the Chinese yuan. It would affect the ability of Chinese country
companies to pay back their USD debt. And you would have bankruptcy laws evolve
in China, and you would have some real economic reform. So, sure, you would have some event-based
shocks in China. But would it necessarily change the trajectory
of say, European growth or US growth or Japanese growth or something? I don’t think so. I think those- we have an interconnected world
economy that’s already interconnected and working. Just because like, with the currency, just
because you take a few zeros off of a currency, it doesn’t mean that it’s worth more or less,
it’s just a different number, right? So, just because China says you know what,
we’re going to revise our GDP data back 10 years, and 4.4 is the new 6.8. It’s the same thing, right? And so, sure, you’d have a little bit of devaluation
of the currency. They would probably have to do that. But I don’t necessarily think it would have
major impacts, because it’s only 4% of international transfers globally. So, if China’s demographics are already baked
in the cake, and they don’t look too good, will their productivity be able to save them
down the road? It could. China buys more robots than anybody on Earth,
right? And so, I think Northeast Asia makes something
like 35% of all manufactured goods globally. And you have China, Japan, and Korea, they’re
all aggressively pursuing automation. They’re all aggressive manufacturers and purchases
or purchasers of robots. And so, I think you have this environment
where you have to have necessarily within the manufacturing sector, you have to have
more automation in order to stay competitive. And this is what’s happening in factories
in the US, this is what’s happening factories across Asia, across, say, Germany and other
places. So, I think you’ll see a rise in productivity. But that’s based on the capital expenditure. It’s not necessarily based on the evolution
of the workforce. And so, there has to be an improvement in
Chinese education. There has to be a relevance of those students
coming out of schools to be much more relevant to the national workforce first. You always get people relevant to the global
workforce in every country, and those are people who are achievers, and those guys are
going to achieve anyway. Right? But you have to develop a workforce that is
conditioned and relevant to a globally competitive national economy. And until China can do that, their productivity
will continue to lag. But I think look at- it’s not a perfect analogy,
but Japan 15 years ago will be China in 10 years. And, so, these are some analogues that we
have to make. China will not grow infinitely forever. And we have to be really cautious about things. So, the growth in Asia is not ahead. The growth in Asia is behind us. And again, that’s not a pessimistic view. That’s a realistic view. I spent 15 years there, I saw it, I lived
it, I saw the growth, it was synthetic. And it was based on debt. And so, the Asian century, we lived it over
the past 20 years. We’re not going to live the Asian century
over the next 80 years. Companies, individuals, governments have borrowed
against the next 30 years to build the last 20. And so, it’s a real dilemma and a real problem
for Asia, but I don’t see Asia with the growth multiple that it’s had for the past 20 years. You have disorganized, opaque and slowing
markets. It’s not a huge opportunity. Yes, there are opportunities in pockets. But it’s not a huge macro opportunity. So, you have to become very selective about
where those emerging markets, an emerging market Asia bets are placed. And so, Tony, with all this in mind, how do
you recommend investors play the current situation? If you look at things like Chinese yuan, we
do expect that to hit seven, we do expect that to devalue let’s say for the next several
months. We expect that to reappreciate in Q3. So, there is weakness there. And there is short, there are short opportunities
there. If we look at let’s say pork and chicken and
other say proteins in commodity markets, in futures markets, those are markets that will
not normalize we don’t think for probably two years. We think that the global markets are going
to be short of pork for at least two years because of ASF. There are substitutionality factors from pork
to chicken in China. And so, we see chicken and beef prices remaining
elevated for an extended period of time as well. Now, when say looking at soybeans, because
you have a shortage of proteins of live cattle, live pork, live chicken, we do see weakness
in soybeans, we see weakness in corn and those agricultural products. When we switch to things like metals, we look
at China’s belt and road program is slowing down dramatically, with the economic difficulties
offsetting that as the potential of a US infrastructure program. But nonetheless, overcapacity in China for
steel will continue. But the market demand will not be there, and
the prices won’t be there. So, we see sustained weakness in industrial
metals generally. And so, across those assets, there any number
of permutations, recommendations we can make there. Throughout all of this, we see a strong dollar. So, we called strong dollar starting in say
third quarter of 2017. We started telling our clients that the dollar
would be strong in second quarter of 2018. And then it would continue strength generally
for the next couple of years. There was at that time, a consensus weak dollar
call for 2018 and ’19. But we got that right. We think we’re pretty right on with the dollar
strength for our forecast horizon as well. Well, Tony, that was great. Thanks so much for joining us. Thank you. So, Tony is currently bearish on the Chinese
yuan. Specifically, he thinks CNY could hit seven
against the dollar over the next three months. He also thinks the US Dollar Index, DXY, will
break through 100 over the next six months. That was Tony Nash of Complete Intelligence
and for Real Vision, I’m Jake Merl.

100 thoughts on “Trade Wars: The Cautious View On China (w/ Tony Nash)

  1. We need to make products here in the USA or buy them from friendly countries.

  2. One of the best interviews on RV. This guy speaks so well, would love more from him.

  3. As did the old Soviet Union, the Chinese Communist will never relinquish power until necessary… Then again, there could be another Tienanmen Square situation…

  4. At 7;48 Mr. Nash states that if the Chinese government makes the reforms the U.S. government wants, then the CCP will loose control of the country. I suppose I don't know what we are asking China to do, but I do wish this was explained more thoroughly. Nevertheless this was very helpful, especially the part on how Chinese manufacturing actually pays the tariffs.

  5. 20:00 this guy should be more bearish. His analysis assumes 🛢 price doesn't go ☝, but it will (Iran sanctions etc.)
    Kyle Bass makes some very good points:

  6. Childish analysis, the fastest growing and largest market for goods is China, it is not Europe or the US. Both the US and Europe have middle classes that are shrinking rapidly from class warfare. The USA will have its IC and high technology industries decimated. When you are an unreasonable and unreliable business partner people will replace you. Between the BRI and China you will see lots of growth, the BRI will be debt and fiscal growth whereas China will be primarily fiscal. The US dollar will weaken and is very fragile. China growth rates will be about about 6 to 8 percent. The birth rate has increased significantly, one should visit Beijing and you will see baby trolleys everywhere. Judging from the quantity of twins I saw I would say they are stimulating fertility and very successful. This fellow is blowing a lot of smoke, basically a pile of bull.

  7. This guy seems like a trump supports who is talking out his ass.

  8. Enlightening, I must say…no one else is being specific on these tariffs.

    Won't the US need to wait a month+ to see how Chinese tariffs effect the consumer? (Walmart's prices and many other retailers).

  9. China is sending us high tech manufactured good, US sending China soy, but China needs us more then we need them according to this guy, lol.

  10. If US wins the trade war then all east asian countries go bankrupt

  11. Idiots goods out of China or other nations is still a deficit to the banana republic USA.

  12. The Theory of this guy has 2 obvious mistakes, 1, Any supply chain is replaceable, this is not true, yes , some can be eventually switched, but the eco system of co-operated supply chains can't be switched to other regions over the night. And some specific items definitely can't be switched to any competitors as you imagine; 2, Manufacturer will absorb the tariffs, think it twice。 Now tariff jerked up to 25%, but what if it goes up to 40% or higher? This guest apparently has similar straight mind like Trump.

    He can just sit there to pick who is the loser, but the whole world is a complex organic body and if simply organ like China cut off or isolated, other part wont be impacted? Given current Chinese economy size, If Trump damage China, I told u , everybody will be hurt eventually one way or the other.

  13. Everybody can talk about bullshit, if Trump keep do these damage hostile talking ,the global capex will be stalling, why European now sitting on zero growth? Global tariff threat and bully itself just like plague it will kill everybody around the world

  14. This guys claim don't check out, majority of the goods china export to US are electronics, well over 40%. these have low elasticity. the suit cases and chairs he talks about accounts for less then 3.2%

  15. China won’t lose as much as Nash thinks. They have a huge domestic market who’s net capital income have quadrupled in the last 10 years. They’ve been signing trade deals all over Asia, Europe, and Africa. (ie the recent Regional Comprehensive Economic Partnership which covers 16 countries and half the world’s population) There will be new customers to take over the US’s market share. China is not as export driven as they were in the past. They’ve been transitioning towards a service based economy for years. They have the ability to mobilize and adapt their economy much faster because they are backed by the state. These so called experts have gotten China wrong for years.

  16. This guy is not living in reality. While Chinese manufacturers could take on cost of some of the tariffs if there is a backlog, the majority of it will still be paid by US companies. US agriculture industry has already been taking hits due to the trade war. China just cancelled a 3200 ton US pork import despite the African swine flu epidemic. Earlier this year, they cancelled another order of 53 tons. This is a huge blow for the $6.5 billion export market for American pork.

  17. Easier said then done. If other SE countries were as good or better than China US companies would’ve already moved all their manufacturing seeing how they are constantly accusing China of so called unfair trade practices. Finding other sources of production would most likely lead to higher cost. Plus Lots of US supply chains are so ingrained in China that moving away would not even be an option. This is especially true for smaller companies who lack the resources to move all its operations without taking huge losses in the interim. Losses that would put them out of business.

    Furthermore, transitioning to other countries for US companies also means new logistical challenges as well as new laws that have to be adhered to. Many of these developing countries lack the infrastructure (railways, roads, shipping ports, etc), worker training, and supplier base to support large scale exporting. All this can present a lot more problems for American companies. Many smaller US companies also lack the resources to make dramatic adjustments to their supply chains. Bottom line is China’s sheer manufacturing capabilities are currently unrivaled as far as capacity, supplier networks, and speed of production. Moving out would be much more complicated and risky for many US companies.

  18. A commodity supply chain is much quicker to shift than a manufactured good supply chain. China relies on US commodities, the US relies on China's manufactured goods. I believe the US depends more on Cina than the other way around.

  19. Buy them there pork bellies! Pork bellies I say! Souie! Souie hog! And also NGL. Not financial advice.

  20. I think people are missing the point of the tariffs entirely. They are about IP reform to prevent China from doing to Silicon Valley what they did to the US manufacturers.

  21. WTF 27:11 HE SAW IT HE LIVED IT FOR 15 YEARS. iT WAS A SYNTHETIC DEBT. wtf IS HE ONE, ???? MONEY IS FUTURE DEBT WHICH IS ALL SYTHETIC TO A VALUE OF THE DOLLAR. dont get me wrong, i he ha reat points, but that one.. no

  22. This guy has no real world experience – The US is in a stronger position in the trade war? What an imbecilic statement. What does the US export to China? Soy beans, scrap steel, scrap cardboard, diabetes, US Dollars and pornography? Look at what we import – finished electronic goods of all types, automotive parts & sensors, chemicals, paint, medical equipment and devices, machine tools, computers etc. I’ve worked with the Chinese for years. One Chinese worker can do the work of 5 lazy ass drug addicted American millennials.

  23. Since the start of the trade war,China has been weaning itself off the USA. The trade difference with the USA is now barely 5% of China’s GDP and its growing domestic market will take up the slack, not to mention its increasing overseas markets elsewhere (like the BRI) will keep it growing. But without China, the USA may be in real danger of RECESSION anytime! Where do you think many big companies in USA are making money from?
    China has learnt from what the USA did to Japan and knows how to avoid it.
    So China has learnt to live without USA now while the USA has to find a replacement for China,like Mexico which is inviting China to do their goods for the USA there. Or Vietnam or India which will become another China if they can fill the shoes.Hahaha
    That is why China walked away when the USA tried to do a Japan to them in the trade talks.

  24. This guy is fake when he doesn’t even know who will eventually pay the tariffs and had no clue ,when it is so very serious, what 10%+ 25% tariffs can do to the poor people! Try asking yourself to choose between losing a fridge or a tv or a washer when you thought you just made it to own all three basic stuff? That is INFLATION! That is what tariffs do. The ordinary Americans will be paying for it.

  25. Clear, concise and detailed! You won't get that watching mainstream media. Well done!

  26. Yeah, 2008/2009 lots of toy factories closed over there, but who is there now? Huawei, ZTC. Do you know how much China will lose? 0.3~0.6% GDP

  27. All the talk are based on USA is strong and China is weak,that’s just not true.40% American families only have 400usd free money for emergencies,you will never get anything from a long period trade war with China.How many Americans can support Trump when their benefits are really affected?

  28. Sounds very bad that we europeans ate going to pay less, export more to china because the usa is in war with china.

  29. China printing a trillion plus yuan A MONTH to prop up there economy,will China be the 1st major country to hit the hyperinflationary wall!

  30. Absolutely, Mexico is killing it in the trade war. Mexico is winning the trade war. Canada is winning the immigration ban. 100,000 new jobs in April in Canada. Equivalent to a million new jobs in the USA can you imagine how insufferable Trump would be if he created a million new jobs in one month.

  31. Competing manufacturers do not imply that the Chinese manufacturer pays the tariff. If a Mexican manufacturer offers the best value, an American accepts the Mexican offer. A tariff moves the American to buy Mexican instead only if the Chinese price plus the tariff is more than the competing, Mexican price, so the tariff costs the American at least the difference between the Mexican price and the Chinese price without the tariff.

  32. This is pure crap, the American people are paying for the tariffs one way or another the goods are al higher priced regardless of the country of origin. Without the tariffs, Mexican goods cannot compete and for many goods there are no other countries providing, it's just China at a higher price.

  33. you dont hear this take often. how refreshing. if you listen to the media the us cant win ever and should just give up.

  34. China´s communist party will be fatally wound if free market reforms are ever fully implemented in China, instead they have transitioned into a sort of crony-capitalist-totalitarian state, they have done it successfully with great help from Apple, Microsoft, Dell and many other stupid american companies who literally gave the golden hen of technology to China in exchange of a few million slave-like labor to be more "competitive" in markets and achieve great profit margins. Now that Huaweii is grabbing consumers away from Apple, this coming back to bite them, and there will be more, the totalitarian won´t be easily stopped.

  35. So we are going to disrupt the supply chain and raise tension just to shift our trade deficit to other countries that hold less of our treasury debt and the American consumer will pay up to 25% more on goods from these other countries? Sounds like the same BS that we were told during the NAFTA negotiations in the 1990's..

  36. Watch Mexico pay for the wall with all the new business they receive.

  37. If the real winner of this trade war is Mexico and not the US, why would the US pursue it with enough vigor to be a loser along with China?

    Even if Trump won more than Xi, the beneficiaries even within the US will not be predominantly blue-collar less-educated and less adaptable workers but Americans in good shape already.

  38. Procedurally China does not pay any of the 25% tariffs, but the actual fraction China has to pay (of the 25%) depends on the price elasticity of demand of the imported goods. This is true but I don't believe the elasticity is high enough to dictate that China pays the major fraction of the 25%.

    Moreover, if the objective of tariffs is not the tax collected but to reduce imports, then American will have to pay more and feel the pain to reduce imports; such is a tautology.

    Tariffs are categorically inflationary; all sellers, non-Chinese imports and US domestic, will not price goods based on cost-plus but what the market will bear. This is why washing machines of all brands cost more after tariffs on Korean imports were placed. Expect higher inflation in the US if the 25% tariffs on Chinese imports persist.

  39. Uncertainty decreases price elasticity.

    If you own a factory in Mexico that produces TVs, would you at once sink in tens of millions of dollars to expand not knowing whether there will be a trade deal between the US and China? If there is going to be one, there will be a TV glut.

  40. B.S interview. I was so disappointed. China has to lend us money to pay for the Chinese stuff. We are the worst customers.

  41. The real problem is our media here in the US will never put a guy like this on TV

  42. This is nonsense. The Chinese sell to far more countries than just the US. The problem is that American companies are making enormous profits in China and that could get cut off. Why buy American goods when they could buy them from Germany, Russia or Iran? The Chinese market is the biggest market in the world. Their demographics may be bad but it's like that all over the world. Plus, the Yuan is quite devalued. It could easily float 2 to 3 times higher than it currently does. The Chinese do not have the accumulated material wealth to the extent that Americans do. In short, they need stuff. They could produce for their own market alone. Chinese are also great savers and tend to pay for things in full or at least at a much higher rate than in the US. Americans buy most things on credit. Mexico could be the winner in this exchange but it certainly won't be the US. Our fundamentals are absolutely horrible. The obfuscation and lack of transparency about the real reasons why the stock market is sky high and we have less people than ever participating in the job market can only go on for so long. These tariffs are a gigantic push for the Chinese and the rest of the world to decouple from the US dollar hegemony. While we were always headed towards it, the future means a multi-polar world.

  43. Retail numbers? There is no retail in China. Everything is online now.
    Does the retail number include online domestic sales?

  44. Excellent interview, great questions and great information. Thank you Real Vision!

  45. If you boil it down to a choice between giving up on power and getting a deal with the US, the Chinese government is going to stick to its guns come hell or high water. Expecting them to open up china's financial markets would be like expecting them to hold general elections. It wont happen.


  47. I'm not sure how to take someone who believes the tariffs aren't ultimately paid by the end user. No, the consumer doesn't write a check to uncle sam, however there's no way manufacturers are going to just absorb the extra costs. Maybe the manufacturer doesn't have to pay the 25% tariff because they can get the same material for only 5% more than Chinese originating goods. And maybe I can buy into the idea that manufacturers will absorb that extra cost for a short period of time. But the manufacturers are not going to continue with a product that is a money loser in hopes the tariffs eventually go away.

  48. So, in his opinion, china will eat the diff even though their margins are so low, and mexico, with its qc is going to benefit, long run. Does this take into account, the two narcissists that are working this squabble, and can not afford to appear to have lost this deal. Are they going to be like two amorous eagles staying in the throws too long hitting the ground or will one pull up before bottom.

  49. This dude was presented as an "expert" and all I heard was shallow thinking. Mexico to replace China … really? After US did their best through their entire history to keep Mexico poor and uneducated they will suddenly start making iPhones for US? This requires educated and disciplined people and stable political system. China has them, most do not. Simple as that. Don't get fooled into believing something just because "an expert" tells you and it sounds reasonable.

  50. Chinese bullshit. We must be extra cautious about the misinformation because China blocked google and foreign apps first not the other way. For people still have a brain. I don't mind being spied by America because it doesn't mean the same thing as being spied by the Chinese CCP. Try to say Xi Jinping, the President of China is an asshole you will be put in jail in China but you can say the President of America is an asshole, nobody will put you in jail. China wants to control what people think and say. America doesn't care what you say. China is in the enemy of the free world. Why do you think such a large company like Huawei doesn't publish their accounts and is totally opaque? They hide their true nature because Huawei is the Chinese army PLA. Chinese assholes trolls will spread their propaganda on social media but don't believe a word China is the biggest liar in the world. Why do you think Huawei prepare the ban from US for years? Because they know what they do is illegal and they will face the ban not only from America but from the world.

  51. 杨世光 几个月前都已经讲了,这鬼佬现在才出来吹牛B😀

  52. I used to import stuff from China. You could buy something for $2 and resell here for $30. The tariff is on the wholesale price, so the import + tariff price would go to $2.50. You coukd leave most retail prices alone. If you shop at the dollar store or walmart then I would guess 10% increase so your $1 store becomes your $1.10 store. Granted many things dont have as big a markup as I was importing, but the retail prices still won't change much. If it's a car the price could go up a couple thousand, so I doubt they'll add the car tariffs since u.s. customers would complain to Trump.

  53. This guy is talking about the American dream. But the American dream must be in when the United States in sleep. So keep going to sleep. keep on dream Continue to hope.

    There are so many Americans who can on talk. powerful economists. So the US economy is chaotic.

  54. This guy is like the rest of them. More FDI is not going to improve Mexico’s economy and will only cause more revolt by the Mexican people when the peso is penalized for improving their economy. How has FDI worked out for any Latin American country? Gargoyles like you have a hidden agenda. I don’t trust your type and never will. China is a sovereign currency nation. They don’t have as much an issue with debt as the US. The US can not afford a stronger dollar without strangling foreign US denominated debt. Why? Because international trade will shift to a cheaper alternative. The Yuan has that flexibility.

  55. So, the Chinese manufacture even with all the unfair practice , ip theft , low labor and env standard, according to the guest profit is very thin. I believe that is the fact, then we need think why it is, who get the most benefit. If they don't do all those, does it means they just can't survive?

  56. This man is very US centric….

    China has already been regionalising trade in Asia…..

    Euro-Asia century….

    How big is the US market?

    We laugh that….

  57. This analyst first of all needs to trim his eyebrows because he looks like the devil. If this is the best guy to represent America’s position forget it

  58. The competition you talk about is Chinese and most of the US Companies have their Factory's in China. The Consumer is tapped out…The only growth is going to be in China for 350 KM Trains, Fission Power, Telecomunication 5G……Take a look at the big picture,this guy is a spokeman for the Populist US Machine

  59. China will just get Soy Beans from Brazil & Argentina you lying SOB

  60. China owns Vietnam…The blatent BS from this Idiot is just crazy

  61. I think if you want to regulate Comm's then China have the right to demand the same deal with the Banking System

  62. The panic comes from the US getting desparate for a deal to keep the Stock Market pumped.

  63. All the Debt in China is fully tied to the PBOC, big difference to the Western world….Our debt is with Private Banking Institutions

  64. Ok so you want simple….China Growth 6 to 6.5% last 2.5 years. Interest Rate 4 to 4.5%…..The world is in a race to the bottom…China is in a better position than the EU or USA….The EU growth and Interest rate is basically 0…The US growth is around 2.5% and interest rate the same. …..The Banking Meltdown coming will throw this useless Podcast in the Bin

  65. He doesn't even know the definition of growth…350 km Trains, Fission Power, 5G etc..this is what produces growth…you dummy
    and yes every time a country goes broke the US sets fire to the Debt….That's what makes the US dollar stronger…So what he is saying is, more Country's are going to default. This is a classic diversion conversation to divert your attention well away from the real problem.
    A Banking collapse.

  66. Disappointed interview. This guy should be on Fox news saying his BS. First, you are telling us that you started a war with China to help Mexico economy 😂😂😂. Second, if the ECB will be in trouble and euro zone economy deteriorates, the global stock markets will fall which lead to Trump not wining a second term.

  67. This guy is totally up his own backside. Trade wars rarely have a clear winner or loser: just Losers.
    China makes what America wants and cannot make itself for even half the price. What planet is this man from? Continued high tariffs hurt America as much as China, intensifying tariff war will only create a global misery. The more I listen to this guy the more I dislike him. He is full of crap, masquerading as Intelligence. China are buying soya beans from elsewhere. Also he is no understanding of the Chinese mindset. He may have been to Asia, but did not understand them, he simply transposed his values and ideas without accepting or understanding theirs. Typical arrogant fool.

  68. China won't absorb. China is moving up the value chain and proactively moving the supply chain itself to SEA and other emerging markets. China is also transitioning to services from manufacturing. Just as it has stopped collecting waste to recycle for the rest of the world, China is happy for Mexico and other lower cost markets to take on the environmental liabilities.

  69. Has anyone ever heard of Complete Intelligence? must be a reason why. As per 8 minutes into the video and the CCP giving up control of the economy – most Americans won't realize that Chinese private sector contribution to GDP, employment and growth are actually higher than places such as France.

  70. Tony talks about subsidies by China but the fact is that the US manipulates the most important price in the world – the risk-free interest rate that everything in the world is priced off of.

  71. Real Vision going down hill. Reaching for more eyeballs and low quality interviewees. Take a look at the dumb-ass comments. Sorry – forget about the comments. Tony Nash is a complete dumb-ass.

  72. The one thing everyone is born with is the opportunity and right to control themselves and the way they spend their money – when it comes to buying products and services you start at home remembering that cheaper options are often very enticing but they come at a greatly increased risk – lets face it, we have all been taught the golden rules 'better the devil you know' and 'buyer beware'!

    If you continue to buy imports from countries who don't trade with you then accept the consequences. Sometimes you are better to walk home than hitch a ride with a stranger. Or wait for someone you trust.

  73. Brilliant and clear exposition by Tony a rue Chine expert – so much bullshit spread by the financial mainstream cheerleader media as well as the shadow refusnik media.

  74. So he is saying that the Chinese economy was already slowing down before tariffs ( due to factors such as the debt burden), and now China is in a weak place to retaliate vs tariffs. Also skeptical on the future Chinese growth potential.

  75. This guy ended up being wrong about China selling us treasuries.

  76. One thing you forget is that Russia has the capacity to replace US soft commodities.

  77. Just imagine if you put all these product I P's and all these different packages on a blockchain can't be f*** with 😆

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