This Is How Chinese Manufacturers Are Countering Trump's Trade War

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (0:18)

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

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:25)

Tracy, I don't know this for sure, but I kind of have this feeling that there's a bit of a fantasy, perhaps on the part of Americans or the administration or so forth, that in this trade war, that non-China Asian countries, they could be our partner. They could be our big trading partner, and that somehow China could be isolated from them.

Tracy Alloway (0:47)

Maybe. I mean, I know there's a lot of concern about Chinese goods basically flowing over the border into places like Vietnam, so I think it's a little bit more nuanced than that. You know, one thing I find really funny, and my definition of fun might differ to a lot of other peoples, but you know, if you look at the real exchange rate, so currency adjusted for inflation and stuff like that, the real effective exchange rate for the dollar is up like 20% since January, and the real effective rate for the UN, the Chinese UN, is down 14%. So if you're trying to like make your own goods competitive, American goods competitive, it feels like we're heading in the opposite direction.

Joe Weisenthal (1:31)

Wait, isn't that really true? That even with the nominal, the massive nominal decline in the US dollar against all these currencies, that on a real basis is actually up massively?

Tracy Alloway (1:39)

According to Bank of America.

Joe Weisenthal (1:41)

Huh, that's pretty crazy. I would not have, I certainly would not have guessed that. And also, this sort of gets back to the point that like with the tariffs and with the trade war, I still don't know what the goal is. And it changes a lot. I don't know the degree to which I knew if it was successful, but under the Biden administration, I had some sense of, okay, we have this specific goal with trade policy and other tech transfer policies to be at or near or ahead of the frontier of cutting edge in a certain key areas.

And when it comes to trade policy under this administration, it strikes me as all over the map.

Tracy Alloway (2:17)

Yeah. So there's the question obviously of whether the US needs to be manufacturing things like toys in America, whether people would be interested in taking those manufacturing jobs. And then finally, as you pointed out, the goals are so confusing because on the one hand, it seems like, all right, it's about bringing manufacturing back to the states. But on the other hand, the Trump administration has said that it's a way of raising revenue as well. And then you have Trump saying, I'm going to strike all these deals. So deals are seen as a win for him as well. But then if he needs to raise revenue, is he actually going to strike deals?

Joe Weisenthal (2:53)

Totally. Well, anyway, there's a million questions and we will have hundreds of more episodes in our lifetime, probably that revolve around this topic. But I think it's a good time to get some perspective from the perspective of the Chinese business community, Chinese manufacturing and so forth, Chinese policy, et cetera, and how a lot of this is being perceived from the Chinese perspective and the response to the aggressive actions.

Tracy Alloway (3:18)

Yeah, because US policy isn't happening in a vacuum, right? Like China is reacting to it and sometimes China can move pretty fast, so we should talk about it.

Joe Weisenthal (3:28)

Totally. Well, I'm very excited to say, I think we do have the perfect guest. We are going to be speaking with Cameron Johnson. He is a senior partner at Tidalwave Solutions. He's based in Shanghai, but he's temporarily here in the US visiting us. Someone who has his finger on the pulse of Chinese business and manufacturing. Cameron, thank you so much for coming on Odd Lots.

Cameron Johnson (3:47)

Thanks for having me, guys. It's great to be here in New York with you.

Joe Weisenthal (3:49)

What's Tidalwave Solutions? What do you do?

Cameron Johnson (3:51)

So it's a boutique firm focused on supply chain manufacturing, advising, consulting. Think if you're a business that needs a supply chain map and a risk assessment, maybe you need some operational efficiencies. Maybe you need to understand the policy roadmap for the next five years that the various governments around the world are doing. Those are some of the things that we focus on.

Tracy Alloway (4:07)

Given recent events, how busy have you actually been?

Cameron Johnson (4:11)