David Woo: What Trump Started is Worse Than a Trade War

SPEAKER_2 (0:02)

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Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:24)

And I'm Tracy Alloway.

Joe Weisenthal (0:25)

Tracy, it is April 22nd. It is 1209 and 52 seconds, as of the time that I am talking right now.

Tracy Alloway (0:33)

Soon we'll have to do fractions of a second.

Joe Weisenthal (0:35)

Yeah, I know. The market is actually up today. We're recording this on Tuesday. We just got a headline. Apparently, Treasury Secretary Scott Besant at a JP Morgan event in Washington said, Besant sees de-escalation with China's situation unsustainable. That sent market surging. Everyone's looking for a little shred of hope, right? Or a little shred of optimism that things could settle down. We get clarity.

Tracy Alloway (1:00)

That the two biggest economies in the world are going to go completely head-to-head.

Joe Weisenthal (1:04)

Right. This is really the story, right? Even with the walk back on April 9th, the week after Liberation Day. We're not getting any deals yet, at least so far. We haven't gotten a deal with India. We haven't gotten a deal with Japan, let alone the EU. But even if we got all those deals sometime in the next three months, and typically trade deals take years to work out, there's still the fact of an economic rupture between the world's two biggest economies.

Tracy Alloway (1:30)

Right. I think that's certainly a possibility. The one other thing I would say is, so you're right, stocks are up this morning because Besant has been saying some mildly, potentially positive things on this issue. But there is still this huge question of who would make the first move in this particular standoff. And I think it is a standoff. And I think both respective policy making groups here, the Trump administration and the CCP under Xi Jinping, I think they both care about who is seen to be making the biggest concession here. So I think everyone can reasonably say that we would want some sort of, I was about to say peace deal between China and the US. Peace deal isn't right, some sort of reconciliation. But the path to getting there seems very confused and uncertain to me.

Joe Weisenthal (2:22)

Yeah, there's a lot. I mean, look, people call it a trade war. So I don't see why we can't have a peace detente of some sort. And look, we both know the stakes, right? Because the US relies substantially on China, both for finished goods of all kinds of things that US consumers enjoy, but also intermediate goods that are used for actual manufacturing. And we also know that at least in the short term, there is not some quick substitute for the sheer amount of demand that comes from the US consumer. And so we've seen all the TikToks of factories in China, you know, trying to figure out ways to go direct to the US consumer. At least in the short term, both economies have a lot to lose, it would seem. And so there's all this question of like, you know, who blanks first? Anyway, there's a potential, you know, and you just see it in the market pricing, there's a lot of pain being priced in immediately today, maybe accepted from the persistence of this trade war. Right. Well, I'm very excited. One of my favorite guests, I've talked to him, we've talked to him on the podcast before. I've talked to him on the TV, always energetic and always has just sort of interesting thoughts, a fun guy to talk to, also very serious. We're going to be speaking with David Woo. He is the CEO of David Woo Unbound. And prior to that, he was the head of global rates, currency, emerging markets, fixed income, and economics research at Bank of America. I always want to get David's takes on things. So David, thank you so much for coming back on Odd Lots.

David Woo (3:52)

Thanks for having me. It's a pleasure.

Joe Weisenthal (3:54)

Is this a type of war that we're seeing right now? Trade war seems like the obvious thing, but how aggressive, how provocative, how combative are Trump's actions against China?

David Woo (4:07)

I think it's very combative. I think this is much more than just a trade war. I think this is war, actually. And I think from that point of view, it's not that surprising the way it's gone, because in a way, the whole thing has been heating up under Biden. I mean, I will tell you. And I think in a way, you know, it's actually very interesting, in a way Trump is picking up where Biden left off.