Tchir: China "Very Happy" to Let U.S.-Iran War Continue, "Hurts Us" More

SPEAKER_1 (0:00)

It's a busy week when it comes to the geopolitics, so let's talk about this. Joining us now, very pleased to say, is Peter Tchir, Head of Macro Strategy Academy Securities. Peter, good morning to you. A very busy week here on foreign policy with respect to what Trump is gonna be doing in the next couple of days. We're watching the China meeting very, very closely.

A lot of noise going into this. I'm just wondering exactly what you would say would be the barometer of success for this meeting.

Peter Tchir (0:32)

Yeah, no, there's so much going on. As you said, we kind of got through Greenland in a deal that at least is better than what we had before. I'm not sure we needed to create all the noise we did to get that sort of deal. We're still going after Iran, which is a little bit surprising. I thought maybe we would try and reach out to the president while he was here and get something going there. Russian Ukraine, it's kind of torn. We seem to get very mixed messaging. So all those are in the background and now we move to China.

I don't think we're gonna get a whole lot. It's like I'm not even sure what the US wants to ask on compute and AI. So that's up in the air. And if you asked me two weeks ago, right, this would have been much more about trade, rare earths, critical minerals. It would have been an extension of what we are talking about in Geneva. And it seems to have changed dramatically to what is China doing with compute? What are we doing with AI?

I think we're gonna walk away with some nice sound bites that don't really mean anything.

SPEAKER_1 (1:21)

And that's really been the view that it's gonna be more sort of pomp and pageantry than policy. You just wonder exactly what they could kind of agree on when it comes to AI, particularly because you've got Broadcom in the headlines today now under scrutiny in China over switches, for instance. And in that case, if both of these presidents, as we know, because they always do, are playing to their domestic audience, what do you suspect Trump would like to get out of this as he goes into the midterms?

Peter Tchir (1:52)

You know, I think he wants this to be Xi looks up to him a little bit. I think when we went to China recently, Xi clearly had the upper hand. So I think Trump wants to make it look a little bit better from our perspective. I'm sure he'll say they've agreed to some things. But again, what they agree to and what they actually do, especially on AI and compute, are very different things. They're clearly trying to build out their own AI. They're trying to use their own chips.

They have the advantage on energy and energy access that we don't have.

SPEAKER_1 (2:22)

Yeah.

Peter Tchir (2:22)

And I really think if you look a year ago, it's very different.

SPEAKER_1 (2:26)

Right. And Alibaba came out with this V900 just a couple of days ago, which it believes is the most powerful chip, which I bet, I guess, underscores the strides that China is able to make in the face of these export controls with this limitation to access to US technology here. What about Iran? Because you mentioned that.

I'm just wondering how much of that is likely to play into the conversation because there has been some thinking since the war began that maybe Beijing could use its leverage. We haven't necessarily seen that. And then obviously, when you and I last talked, it was Besant who is talking about secondary sanctions, which they obviously haven't fired the gun on yet.

Peter Tchir (3:10)

Right. I think they've talked that time, oh, by Friday, we're going to get some sort of secondary sanction on a major Chinese financial institution. We've seen none of that.

So, yeah, I think we are very reluctant to do anything against China.

We might continue to say some things. We might get some nice sound bites again. China is very happy to let this war continue. Yes, it hurts them on purchasing oil, but I think they like watching the US flounder, right? We are struggling. We are losing some of our global reputation. And more importantly, we're taking our eye off the ball, right? We're supposed to be all in on rarest critical minerals, deregulation, getting energy up and running. And every time Trump takes his eye off that ball, it doesn't move as quickly. And I think China is gaining the upper hand. They are moving faster on compute than we are moving on rarest and critical minerals. That's bad for us. So I think they are very happy to keep both wars going. They are not going to do anything to stop those wars because it hurts them a little bit. But I think they see it as hurting us more.