965: What Happened with the U.S. and China Tariffs?

Unknown Speaker  0:00  
Music. Instead of

Brian Nichols  0:08  
focusing on winning arguments, we're teaching the basic fundamentals of sales and marketing and how we can use them to win in the world of politics, teaching you how to meet people where they're at on the issues they care about. Welcome to The Brian Nichols Show. Well, hey there folks, Brian Nichols here on their fun filled episode of Yes, The Brian Nichols Show, I am, as always, your humble host, joining you from our lovely cardio miracle Studios here in not so sunny Eastern Indiana. The Brian Nichols Show is powered yes by cardio miracle, the best heart health supplement in the world. If you want to lower that resting heart rate, lower your blood pressure, while improving your pump at the gym. Stick around. We'll talk about more about that later in today's episode. But first we're discussing all things economics, between China, the United States, tariffs, but not in the way that you're thinking about, but actually, let's just talk about maybe going back to phase one, and is actually going to phase one, a step backward, to discuss all that and more. Joining me from young voices, is Alex Rosado, Alex, welcome to Brian Nichols show. How you doing? Doing well. Thanks so much for having me. Great to have you, Alex. Looking forward to today's conversation, but first, Alex, do us a favor before we jump into all things US and China. Introduce yourself here to The Brian Nichols Show audience, if you be

Speaker 1  1:19  
so kind, sure. So I'm Alex. I am currently a professional programs assistant at the Alexander Hamilton society, a foreign policy nonprofit in Washington, DC. And before that, I graduated from Gettysburg College in 2024 and I'm super excited to be joining you today. Great to

Brian Nichols  1:35  
have you. You're not engaging any duels with Aaron Burr. Are you over at Alexander Hamilton College there? Not

Speaker 1  1:41  
that I know if my holster is empty. Okay, go. Let's keep it that way. All right, Alex, let's dig into the US China relationship. Obviously, things have been well, I'd say definitely more on the the 10th side, especially with the I say looming trade war, as if it's looming. The existing trade war we're seeing right now is tariff rates are being levied, you know, one against the other, up and up and up. But this is, I think, a symptom right of a greater problem that we have here. And we're looking at the United States relationship with China as it return, pertains to trade. So Alex, do us a favor. Just hit, hit the the audience here with just some of the basic groundwork. And maybe, let's avoid the legalese, the confusing talk, and just set the stage, say, set the stage here for the audience. What's going on with the China us relationships? Why did we get to a point where we have such an escalation in trade wars? I'll let you kind of set the stage here, if you'd be so kind Sure. So at least within recent memory, you're seeing that China, when it comes to a lot of trade deals with the United States is simply just not abiding by the terms of it. They're not a hearing by the spirit of the deal, and especially on the United States sides that they feel that they're being fleeced, and they feel that they're not being respected within the international community. So that why you're seeing protectionist tariffs come into place, because it's a way for the United States to vend its frustration on the international stage, and also try and renegotiate the scene for some better trade deals, ones where they feel that they can excel, they can continue promoting democracy and free markets. And it really just takes two to tango in that regard. And especially when it comes to China, they have a long history of not abiding by it. I'd love to jump into more with that later

Brian Nichols  3:19  
on, for sure, and let's just set the stage for the audience here in terms of this phase one conversation, because the phase one trade deal between the US and China was signed in 2020 and the The goal was to reduce the trade deficit, right and increase economic opportunities across the board. But apparently, I know you mentioned it there, China's only fulfilled 57% of the the purchase commitment due to a variety of factors, currency manipulation, regulatory barriers, and then obviously this big thing called COVID 19, which was a, I guess, a global pandemic. Alex, I'm not sure if you heard about that, but apparently that threw some wrenches into the cogs the machine as well. So let's kind of start in 2020, and really talk about this phase one trade deal. What was the goal of the trade deal beyond what I outlined here, what actually happened and how did it transpire to where we are today, five years later, certainly. So

Speaker 1  4:07  
even to take a step back to 2016 when Donald Trump was still a presidential candidate, he said that China was engaging in Job theft. And of course, Donald Trump comes from a business background, and he's won, especially with the New York City to witness a lot of job creation with some of the real estate sites, and he's seeing that, especially on the global scale, these aren't the terms that we should be abiding by and the song and dance that we should be adhering to. So when he got into office in January of 2018 originally, he imposed tariffs on imports of steel centric goods such as washing machines and solar panels, and this is a broad tariff across all countries, but he saw that China, even from then, was being a little bit flimsy with it, so he narrowed the tariffs in July of 2018 and slapped about 15% reciprocal tariffs on them. China didn't like it, so they started getting into that first trade war that you saw from 2018 onwards, and you saw American imports being tariffed at. 21.1% and Chinese imports at about 21% as well. So this made both sides come to the table. In January of 2020, you saw phase one come about. And what that did is it binded China to buy about $200 billion worth of US, goods and services divided over 2020, and 2021, and also slashing the last round of bilateral tariffs, and it also established China as the first customer for us crops. You had some intellectual property rights that were now being given to China. You also saw China decrease their foreign equity limits and licensing specific American firms. But ultimately, it didn't do much, and that's because of the COVID pandemic. As you mentioned beforehand, China only fulfilled 57% of their commitment, but the agricultural sector saw 83% commitment, but it totally can't be contributed to phase one. There were some WTO rulings, the World Trade Organization, that forced China's hand into selling some crops, and there were just a lot of confounding economic factors that didn't make phase one the most effective it could be, because of global circumstances, but also because China was not really the most keen on the deal. They signed it, but you had former commerce ministry secretaries saying that this isn't the deal that we really wanted, and because of that, because there aren't any real mechanisms to abide by it, we don't have to. So they lifted their foot off the gas and really just let the deal go into vain. So

Brian Nichols  6:28  
this, Alex, I think, is where a lot of folks more in my I, and I'm not trying to be disparaging towards anyone, but my more common sense approach to economics here, where we look at, yes, free trade is exactly the goal we want to have. Tariffs should be a tool in the toolbox, not the ultimate means to an end, right? But with that being said, it also is under the expectation that everybody's playing by the same rules and actually holding up their end of the bargain, right? So you look at again, the outcomes of phase one, not only did China not uphold its end of the bargain, it actually quite a bit missed the end goal that it was trying to target right, falling 57% short of its numbers. So when you look at that, and then on the flip side, America actually did hold our end of the bargain right, and then you fast forward to today, I think this is where a lot of folks in more of this economic you know, call it common sense perspective, start to say, Listen, at the very minimum, those tariffs in 2016 were a tool in the toolbox to get China to the negotiation table to begin with. But the fact that China is not playing by the very rules that they helped put together in building this agreement in phase one, it speaks to why America does have to be able to have these tools in our tool belt. Because if not, what do we have as a means to actually help steer behavior, in this case, from the other large superpower, China. And I don't think a lot of people have strong answers to that. I guess with that being said, Alex, do you think that phase one was, in fact, a good plan of attack to try to bring China to the table and create a true, freer and more fair trade environment? Or do you think that this was a fool's errand in the United States? It was just barking up the wrong tree and thinking that he could get China to the table and actually be a good faith actor.

Speaker 1  8:06  
Well, I think Phase One was certainly a product of its time, and nobody could have foreseen the COVID 19 pandemic that was happening, except for Dr Fauci. But I digress, except for Dr Fauci. Yes, he did play a hand to that as well, especially the World Health Organization too, that Trump withdrew from just holding the funds back was terrible for you guys, but in terms of what phase one actually entailed, it had all of the right conditions for making China and its markets more liberal, and especially making them more free and conducive to the entrepreneurialism that China should have. But it doesn't, and this is due to many factors, one of which is when Xi Jinping took power in November of 2012 he increased the amount of state run enterprises by about 57% so you're seeing now that not only are these government funded structures really giving consumers less of a choice, but these are the ones that are actually doing the bulk work of China's economy, and you're seeing their key economic indicators suffer from it. Their GDP, in recent years has slowed to an annual growth rate of about 4.75% which is a massive drop from seven to 8% growth that you saw throughout the 2010s and you're seeing that China's household savings now have surged to about 55% and that's because consumers have very low confidence within the economy of China. They don't want to go out. Their purchasing power has significantly decreased, so they figure, let's keep it under the mattress, where we know where it is and we know that it's safe. And you're seeing also, too, that with the autocracy, as we mentioned before, with Xi Jinping, the private sector share of fixed assets and investment in China have decreased from 65% to 51% from 2015 to today.

Brian Nichols  9:48  
Wow. So that's huge. Well, that right there, I think speaks to, pardon the the analogy China is kind of a paper Dragon, right? Because you look at where China. Is today, and the posturing on a global scale that China does, dare I say, it kind of feels like America and what we've been doing for the past, what 5060, years after the post world war two environment, where we were the leading superpower, I mean, obviously we had the Soviet Union, but it was us versus the USSR. And then come 1991 that entire world powers dynamic change. And really the void was filled for a country like China to take over. But you look behind the scenes, I mean, yes, America is the leading superpower, but from what perspective, is it just our economic powerhouse that we have, or is it the fact that we have a US military that's backing up a world currency that's being leveraged by the US dollar? No, by the way, you look at all the other countries across the globe who are invested in America, and then you look at the bond markets. You look at our our debt, by the way, $36 trillion plus and counting. I don't really care so much about trade deficits, because I think, you know, that's just a number that we could, you know, play with anywhere you have, I have a trade deficit with my grocery store, right? But what really comes down to are some of those more, I would say, like impactful industries like pharmaceuticals, like the technology sphere, which this is also where I think China has not been a good faith actor, Alex, and I want to hear your perspectives here, because you look at the pharmaceutical industry, you look at, you know, China, by the way, just in general, stealing IP across the board. Now this is not debate today about whether or not intellectual property is, you know, should be, should be, you know, codified and protected from a government perspective. That's a different conversation for a different day. But China is absolutely leveraging the the ability to take IP or steal IP from other folks in the private sector that are non, you know, non Chinese, not that that should matter, but then using that to help strengthen their own industries. It just seems that China, especially in some of these more, I would say, like, not just a national security standpoint, but just a keeping America rolling. We be we need to be able to support ourselves in the event of another unimaginable crisis, like a COVID pandemic, right? So, I mean, do you see that being an issue that's that was, you know, being overlooked by the Phase One approach here? And it's something that maybe is being ignored today. Or am I making this more of an issue than it actually

Speaker 1  12:12  
is? Well, in general terms, the US is winning the trade war, and this comes with many different aspects. You see that with research and development, a 2024 report from the Tax Foundation found that the US performs a lot more R and D than China does, and the US is more R and D intensive in that sense, and especially within 2021 3.5% of the US GDP went towards research and development, compared to 2.4% in China. So we're winning in that regard, in terms of the service sector as well, you saw a recent report come out from the Commerce Department saying that the US now has a trade surplus of about $293 billion in 2024 which was a 5% increase from 2023 and a 25% rise from 2022 even going back to that one statistic with China Before about their GDP has been slowly crashing down over the last couple of years, and also that's due to their population decline. You saw that their population fell for the third consecutive year in 2024 by about 1.4 million people. You've seen that they have ghost cities now with housing. They invested way too much in urbanization. Actually, a report from the American Enterprise Institute came out that said that they have 65 million unoccupied houses within China, and especially within their urban areas, or at least the rural areas. Excuse me, you're seeing that folks over there have a lower GDP per capita income than a lot of different other countries. So I think in terms of analyzing the US economy, internally and externally, and then both the Chinese economy internally and externally, China is engaging in power projection. They want the idea that they are strong on the world stage. Meanwhile, they have a lot of cracks on the armor on the inside that their government just isn't designed to fix. And especially what you were saying before about IP development, especially with China's hunch for more state run enterprises, you're seeing now that phase one was decently affected with implementing damages for copyright infringement and phrasing confidential business dealings as trade secrets, which aligns more with US legal constructs. So at least China is acknowledging Western principles and implementing it in some regard, but you're also seeing that their IP docket is still very hidden. I think this is an opportunity for the United States to push for more transparency initiatives, whether that be through more trade deals or leveraging places like the World Trade Organization.

Brian Nichols  14:33  
And that's obviously the goal, right? Alex, and I think we all keep in mind I forget the The Economist was, it was it Rothbard? Was it high? Maybe it was Hayek, where goods cross borders, armies do not right? And I look at China as a country, I think we very much across the board, want to agree that we want to continue having goods cross those borders versus having some. It wouldn't just be a US versus China conflict. This would be a global conflict. And. Of the worst, the worst instances we've ever seen in human history. I mean, it would be just catastrophic if China and the United States were to engage in a true hot war. So I say all that, do you see any possible negative, you know, ramifications here where China, you know, they're feeling the pressure. To your point, there are cracks in the armor they're projecting this, this posture of we are, you know, the big guy in the Southeast Asian block. And with that, you know, we are, we're gonna fight economically, but until we can't, then we'll fight militarily. Do you see that being a threat? Alex, and if so, what should we do to try to avoid the worst case scenarios at all costs,

Speaker 1  15:41  
sure. So just even taking a step back from that, I think, in terms of China's military, that is one of the ways that they are, if you were to say that they're quote, unquote, winning the trade war, that might be an area, especially within ship building. The China, as of right now, has a ship killed. Ship building capacity 232 times the amount that the United States does. And thank Jones Act. It's especially due to the Jones Act, and especially a lot of those southern states within the US that used to have ports that were thriving now have only built in the last year, five ships. How many did China build last year? A lot more 1700. That'll do. China has a commercial ship building chair that's about 50% of the world's total. And the US has fallen to less than a sliver of point 1% so with China's now having the largest naval fleet too. They have 35 shipyards that are linked to military or national security projects. There's only four of those in the US. So if you really want to deter China from military action, you're going to need to confront them economically first, and that's why you need us ship building and manufacturing back in the United States. So I think especially recently with Trump's recent office of US ship building, that's going to be fantastic for not only booming state economies, local economies, but making us more able to compete with China as well also making sure that we, if there are foreign ships coming in, we tax them a little bit. So that way the US has some more revenue in its pockets and more economic leverage. So that way we can use it to procure better circumstances on the world stage. So I truly do think that if you're going to tackle China, you need strong US industry first. That's going to proliferate outwards and deter others from terrible action,

Brian Nichols  17:26  
I think at the end of the day too. Alex like one of the overarching themes that we've been kind of dancing around, but I think it becomes more and more clear when you paint that picture, is that the more free enterprise that America can implement within our own borders, just better off we're going to be, just in a comparison standpoint, to China, the easier it is for businesses to do business in America, to build in America, to do commerce in America. That the better across the board, America will be as a global, you know, global presence, because we want to be able to encourage not just, you know, economic activity, but to the other things we've been talking we've been talking about today, being able to build our own, our own military fleets or vessels. We want to be able to make sure that we're protecting our IP we want to make sure that we're not just protecting, you know, protecting American workers, but also being able to help them better their lives. Let's do that, not by watching them have their jobs sent overseas, but let's make it more competitive here to do business in America for these corporations. Stay here lower let's lower the tax rates from a corporate perspective, so there is an incentive not just to do business here, but to invest here. And I just think across the board, this is where the real conversation needs to be had, because so many folks just get, they get stuck in this mentality of good guy, bad guy. It's the Hollywood ification of politics, and it really it does nobody any good to put ourselves in this black and white good guy, bad guy perspective there. Like economics is everything, and the idea that we can just put in the right people to pull the right levers and create the right outcomes, I think, is a fool's errand. Now, that's not to say that there is a role for people in these positions of power to push things towards a general direction, but when it comes down to the actual meat and potatoes of how you get things to get better, it comes down to us being able to do things in America in a free enterprise perspective and actually build something better, because that's exactly what put us in a better spot, and not just in a post 1945 world, but that was what helped America become one of the leading super powers back in the 20th century. So that's my final thoughts for today, Alex, bring us home. What would you want the audience to take away from today's episode? And obviously, we want people to be be able to go ahead and reach out to you to continue the conversation. So where can folks go ahead and find you should they want to learn some more? Certainly,

Speaker 1  19:45  
you can follow me on Twitter. Slash x at Alex P Rosado,

Brian Nichols  19:49  
perfect. Alright, bring us home. Final thoughts here for us. Alex, like, what would you want folks to take away from today's episode?

Speaker 1  19:55  
What are free market ways that you can hold China accountable that aren't tariffs? One of the. That we discussed is intellectual property enforcement, making sure that China is abiding by the terms that they're supposed to, and having their citizens actually engage within market structures and not be afraid to be entrepreneurial. The United States has shown the way for that, and China has a lot to learn with it as well. You can also leverage international institutions like the World Trade Organization, not only in terms of just complaints, but even the CATO organization, or the Cato Institute, says that the WTO is member driven, so there's not a lot of bias there. So everything has to be settled within these parts as well, making sure that there isn't a forced technology transfer. China loves poaching, not just IP, but non Chinese businesses to have more contributions towards their GDP and their agenda. The United States should make sure that that doesn't happen, and you can leverage other institutions, like the Committee on Foreign investment in the United States with subpoena power to compel these disclosures. Make sure that they're being transparent. Make sure that they're being honest. Make sure there's a level playing field for the United States to compete, making sure that our interests are the ones that proliferate outwards. But it also comes with investing in America, not only just with ship building, but with manufacturing. You saw that in February, manufacturing actually came back and re short to the United States. And even this past week, in April, you saw that NVIDIA is now producing super computers and chips within Arizona and in Texas. And Ford is now going to stop sending their trucks that they're manufacturing in Michigan. They're going to stop, yeah, manufacturing their trucks in Michigan to send to China, and now they're going to sell them broadly within the US. So definitely that's going to be great for American jobs. It's going to lower the cost of everyday products and services, and truly, it's going to be one where an American led approach is going to lead the way and hold China accountable for the years to come. Alex

Brian Nichols  21:50  
Rosado, what a great conversation today, folks. If you got some value, which I know you did, I'm going to ask you, do me a solid go ahead and give today's episode, episode of share. When you do, please tag Alex as well as yours truly. You can find myself over at B Nichols liberty, on Twitter, on Facebook and on Instagram. As for The Brian Nichols Show, we are both a video and an audio show, so if you want to go ahead and check us out on your favorite video platform, platform. So first of all, heads up, we do a live stream of the show, both on Monday and Friday evenings, at 9pm Eastern, we get this stream rolling, I think around like 830 or so. So make sure you go ahead and hit subscribe over there. But otherwise you can check us on YouTube, Facebook, wherever it is you like to consume your video content, and then, if you like to bring your shows on the road, like I do, head over to your favorite podcast catcher, like Apple podcast Spotify, YouTube music. I like podcast attic, wherever it is you get your podcast, hit that subscribe button, and, of course, head back and check out the archives of over 960 episodes here of The Brian Nichols Show, going all the way back to 2018 which, by the way, the podcast feeds, is the only place you can find all 960 plus other episodes here of the show, because, yeah, believe it or not, Some of those those gatekeepers over at the other platforms like YouTube and the likes, they don't like some of the stuff that we did back during COVID, so they've let me know under no uncertain terms that they don't like it either. So fun stuff. But with that being said, we're gonna go ahead and put a pin in today's conversation. That being said, Brian Nichols, signing off here on The Brian Nichols Show for Alex Rosado, we'll see

Unknown Speaker  23:19  
you next time you.

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