U.S. Tariff and Trade Policy: Takeaways From President Trump’s Trip to Asia

GOODMAN: OK. Thanks, Alexis. Hello, everyone. Good to see you. I’m Matt Goodman. I am a senior fellow for geoeconomics here at the Council on Foreign Relations. And I’m joined by my colleagues Zoe Liu, who’s senior fellow for China studies; and David Sacks, a fellow for Asia studies. And we’re here to talk about the president’s recent trip to—or, trip, really, last week to Asia.

I’ll give a quick overview and then I’ll turn to Zoe and David to do the hard work. Just to say, as I think most people know, this was the first trip by President Trump in his second term to the Indo-Pacific region. It was driven, as always over the last thirty years, by the meeting of the Asia-Pacific Economic Cooperation, or APEC, Forum, which I’ll say a word about in a second. Actually, the president didn’t attend APEC, but—(laughs)—it was the rationale for him to go out there. He went to Malaysia, and met with a number of ASEAN leaders, and signed a bunch of trade agreements; then went on to Japan and had a first bilateral meeting with the new Japanese prime minister, Takaichi, and signed some more things; and then—and then went on to Korea and also signed a trade agreement there, and, as I say, left before the actual APEC ceremony or events themselves.

Just a quick word about APEC. I used to back in the day do APEC affairs at the White House a couple of times, and I’d say, you know, just sort of four takeaways.

First of all, the fact that Trump did not attend, you know, was not surprising, but you know, probably not ideal from the point of view of trying to send the strong message to the region that we were there and engaged with that forum. But you know, again, it’s sort of understandable that he skipped out; it’s a—it’s a difficult thing to sit through, frankly.

Second, APEC did issue a declaration or a communique—only three pages, which as a former communique writer is noteworthy and admirable. You know, that was not necessarily going to be the case, but it was good that there was a kind of consensus—enough of a consensus to issue some kind of document.

And there were some useful agenda things, including a statement in support of robust trade and investment as a source of—as a vital source of growth and innovation in the region, which I think at least as words is a positive thing, shout out for trade.

They—also, on the side, the APEC leaders agreed to an AI initiative which, you know, was sort of more principle than specific commitments. But it was, you know, kind of useful and interesting in leaning a little bit into AI as a—as a source of great potential for growth and innovation, you know, with challenges attached to it. But I think it was leaning on the side of the sort of enabling AI to prosper.

As a former White House staffer, I’d say I’d have come away with this—from this trip feeling, you know, it was a—it was a successful trip. President Trump, you know, essentially stuck to the script. You know, there was a lot of attention to the U.S. agenda, which is—which is always a good thing. It showed that the U.S. was—despite that APEC caveat, the U.S. is showing up for Asian—Asia-Pacific/Indo-Pacific affairs, which was always an expectation out there. You know, there were a bunch of deals signed. And there were some good bilateral meetings with the leaders of Japan, Korea, and China which we’re going to talk about in a second.

You know, I would just say on the—on the deals—and David and Zoe may have thoughts as well—but I think the—you know, the Malaysia and Cambodia deals, they’re kind of real trade deals—I think the first ones, really, that we’ve seen in the second Trump term—you know, with actual detailed commitments. Some, you know, vagueness about some of the issues, but they’re more than the previous framework agreements that you saw with a bunch of other countries. And they also included some economic security provisions that are kind of interesting, and a lot of trade wonks are commenting on that. We could talk more about that if you’re interested.

And then the Japan/Korea, the significant things there for me were the investment deals that got a little more specificity/granularity to them, lists of projects the Japanese are going to invest in or support. The Koreans got a deal that was a little better than the Japanese one in terms of only 20—only 20 billion of new investment a year over ten years as the expectation. So I think, you know, there’s—I think on balance both of those deals are—you know, are better than they were. They have more clarity and probably lower sense of an obligation to deliver, you know, huge, you know, 15, 20 percent of the GDP of those countries to the region in the next three years. I think there’s—that sort of expectation has been slightly shifted. So I think all that was good.

That’s all I’ll say. I’ll turn it over to Zoe to talk about China or anything else she wants to talk about. Go ahead.

LIU: Yeah. Thank(s), Matt. I also want to thank our Corporate colleagues for putting this together and thank you all for tuning in.

I guess on the U.S.-China, or President Trump and President Xi Jinping’s summit, I’d say probably everyone who dialed in now you’ve read a lot, because this is perhaps one of the most-expected and most-watched summit during this APEC period. I’ll very briefly focus on three things. The first thing is about the Chinese economy: Does the Chinese economy need this one-year truce? And then I’ll talk about whether I think this two—this one-year truce can hold. And then I’ll move on to briefly talk about what this means for U.S.-China relationship in the long run.

So, now the first one: Does the Chinese economy need a one-year truce? You know, if you ask this question to President Xi Jinping or some of his Chinese policy advisors, probably they feel pretty good about the Chinese economy, not just because year-on-year trade, or exports specifically, has continued to expand despite a six-year—six-month-in-a-row shrink of direct export to the United States, right—despite that, you know, export keep growing. So they feel really confident to walking in the room to meet with President Trump, saying that, you know, basically, tariff war not only hasn’t crashed the Chinese export machine yet, but the Chinese—the Chinese economy has demonstrated tremendous amount of resilience. And China can also say that their pursuit of self-reliance or self-sufficiency has not only achieved progress, but as a strategy it proved to be so far right. And I think this China’s—China’s confidence matters not just for how China views its position, its relative strength in U.S.-China relations, but also in terms of how President Xi Jinping calculate risk and his willingness to take more risk, not just in terms of geopolitical issues but also in terms of how it handles China’s domestic economic policies.

And the reason I emphasize how he emphasize China’s domestic economic policies is because this is the time when they are make the new, fifteenth five-year plan, and I think they are going to feature a lot promoting domestic consumption. But here my assessment is that they are trying to make a tactical shift to promote domestic consumption, not that they are making a strategic shift of trying to change or rebalance their economic growth model. And I’m happy to elaborate on that later.

So that’s on the first part, the economy. The economy shows resilience. And President Xi Jinping seems to be very, very confident.

Now, what this means in—what does this mean in terms of this one-year truce? And I think both market already priced it in before the two president(s) meet. Right after they—despite President Trump said this is a great meeting and how successful it is, market basically had a continued selloff for a variety of reasons. And I think the—I’d say, you know, we are not wrong to think that neither side would believe this one-year truce would hold. Part of the reason is because now that China realized that export controls with regards to rare earth—rare earth materials and expanding that to the entire supply chain basically is going to force President Trump and his administration to back off—not just back off once, but back off twice. So this basically relates to what I mentioned earlier in terms of President Xi Jinping’s risk calculation. It seems that whenever U.S. does—the Trump administration take any action that might be interpreted by the Chinese side as hurting China’s national interest, you know, whether it is—or it could also be arms sales to Taiwan, anything like that, they might just put out export controls.

And the fact that they now institutionalized export control simply means, you know—Matt, we talked about this yesterday, right? You know, the fact that they instituted this is not just that they can use it on rare earth materials, but that they have this whole expansive administrative manners that they can use to punish foreign entities. Export controls does not needs to be—you know, the government, yes, can add new stuff on the dual-use list. They can add companies on their unreliable entity list. But in fact, they actually do not even have to take actions like that because through the administrative process things can be delayed, paperwork can be sent back, things like that. So this basically means the one-year truce—like, as soon as folks walking in the room, they know that, you know, despite this—there is this readout saying that there is a one-year—one-year truce, they are already looking beyond the one-year framework and they’re trying to double down at measures to strengthen their own leverage and trying to neutralize the other’s leverage.

So this brings me to the third point: What does this mean for long-term U.S.-China relationship? I’m currently working on a new piece. I hope Foreign Affairs want to take it—(laughs)—but we’ll see. That piece basically explains the structural challenges in the U.S.-China relationship going forward. And I was surprised that I myself came to these conclusion. I tend to think that I’m more of an optimistic person along the pessimistic spectrum. That said, I realized that, after careful examination of the currents on both sides, neither side have the incentive to improve the relationship towards a more positive trajectory. And on top of that, China’s institutionalization of more coercive measures, as well as the strength of—the resilience of the Chinese economy, combined with the seemingly positive proving ground of U.S.-China trade tension, viewed from Beijing’s point of view time is on their side. And I think if—and this is going to make them probably going forward overplay their hand, either on—both in economic policy and probably on geoeconomic issues as well.

So I’ll just stop there. Matt, back to you.

GOODMAN: OK. Thanks, Zoe.

David, over to you.

SACKS: Yeah. Thanks, Matt.

I mean, I think that Zoe, you know, touched on this, but just to emphasize that, I think that there’s the question of kind of tactical moves that both sides make versus a strategic adjustment or shift. And I think that clearly the former happened. There was a tactical truce or ceasefire that was reached between Xi Jinping and President Trump in South Korea, but the underlying strategic kind of frictions in the U.S.-China relationship remain. And that’s what the two leaders will have to navigate when Trump visits Beijing, and he said that that visit will likely occur around six months from now in April. But I’m also pessimistic that there will—there will be a renewed understanding that fundamentally shifts the course or trajectory of U.S.-China relations despite what President Trump has said of a G-2 repeatedly since his meeting with Xi Jinping.

So, you know, I think that from the U.S. perspective and probably from the Trump administration’s perspective, the Chinese rare earth measures put a level of urgency to the meeting, and that was clearly priority number one. It is a chokepoint that China very clearly controls and has tremendous leverage over. And so actually, I think, Matt, you spoke at the beginning about President Trump’s other bilateral meetings in the region, but what we’ve seen is a focus in all of those on the rare earths question, right? There was a U.S.-Australian agreement prior to President Trump leaving for Asia on rare earths. That was also a feature of the U.S.-Japan agreement, as well as U.S.-ROK. And so, you know, I think Secretary of the Treasury Bessent mentioned over the weekend that he expected China’s leverage on rare earths to shrink in as little as twelve to twenty-four months. I think it’ll take much longer. But this has clearly, you know, trained the focus of the Trump administration on trying to, you know, overcome this hurdle and reduce Chinese leverage there.

But, you know, when we think about now the next six months of U.S.-China relations, as the two leaders focus on that meeting, I would expect some level of kind of tactical stability going into that meeting. I think both leaders don’t want to take certain measures that would prompt the other side to call off the meeting, to say that the atmosphere is no longer conducive to this. I think both have an interest in having that meeting occur and having it be successful. And so, you know, I would be surprised if either side took very escalatory steps in the next six months. Clearly, going into the meeting in South Korea, the Chinese view was that the United States had taken certain things that ran contrary to the consensus that they had agreed to in Madrid, but I think that right now both sides will be fairly cautious leading into the April meeting.

I would also say, you know, comparing or thinking about the South Korea meeting versus the one that’s likely to occur in Beijing, you know, there was only a hundred minutes between the leaders in South Korea. So, you know, that necessitated, I think, quite a narrow discussion. And also, both leaders wanted to address very specific things. For China, it was the removal of the so-called 50 percent rule, a reduction in the fentanyl tariff, both of which they secured. And for the United States it was really focused on the rare earths question. And so, you know, that didn’t leave much room to talk about broader kind of geopolitical issues. So when you think about Taiwan, for instance, there was a lot of speculation that Taiwan would come up, that Xi Jinping would seek concessions from President Trump on Taiwan. I feared that as well. But actually, I believe that there is a sequencing here where basically, you know, this was a far narrower conversation, but I would be shocked if Taiwan did not come up in Beijing.

When you have two leaders there for, you know, multiple days of meetings, meals together, I think you’ll have a much broader discussion of the U.S.-China relationship that will touch on those geopolitical issues. And so, you know, I wasn’t shocked necessarily that Taiwan didn’t come up in South Korea, but I would be shocked if Taiwan did not come up in Beijing. And I still have the fear there that Xi Jinping will seek concessions from President Trump on Taiwan, because we know that he sought—he seeks those concessions from all American presidents. And he sought them especially with President Biden at their Woodside Summit towards the end of his term. So I think that he’s going to put on the table the same asks of President Trump there, and potentially even more, and try to link that to other issues in the U.S.-China relationship.

The final thing that I would say just here at the outset is I think that it does raise questions, though, about, you know, the extent to which the global tariff regime makes any strategic sense. And I say that because in many ways now, you know, the tariffs on China are lower than the tariffs on, for instance, Brazil and India. And the delta between the tariffs on China and the tariffs on Southeast Asian countries are small enough where it probably does not incentivize some companies to move manufacturing away from China. So if one of the priorities here was to, quote, de-risk from China, to build supply chains that, you know, do not necessarily include China, then the removal of the 10 percent fentanyl tariff, you know, as well as the imposition of tariffs on other countries that could be substitutes for China in terms of manufacturing, I think that that raises real questions about whether it makes sense to move manufacturing out of China.

And if you’re looking ahead, again, to the April meeting, I think China will likely seek the other 10 percent fentanyl tariff to be removed. And so if you have another reduction in bilateral tariffs, then that really also does not incentivize companies to move production outside of China. So I think that, you know, the rationale going into the second term, Trump spoke about 60 percent tariffs on China. And the assumption was the tariffs on other countries in Asia would be far lower than that, and so companies would have the incentive to move out of China. And right now, I just don’t see that being the case as it stands.

GOODMAN: OK. If I could just ask a couple questions and then—and ask the audience to start thinking about your own questions, which I’ll turn to in a few minutes, let me just pick up on something you just were talking about. David. Well, two things you were talking about, that link together. That there were concerns, or there have been concerns—not just in the context of this trip—you know, that President Trump may be willing to make certain concessions that other people around him in his administration, let alone and the rest of the sort of Washington policy community, would advise—(laughs)—whether on Taiwan, or on export controls, you know, on advanced semiconductors, and so forth. There was even a story that he had to be sort of spoken to by Marco Rubio and others on his staff to try to get him to not make a concession there.

You know, he did, in a sense, make a concession on the fentanyl tariff, because there’s a process but there isn’t a commitment, but there’s no actual progress yet. Maybe it’s the area where there’s the most hope for something tangible happening, but it hasn’t happened yet. How would you evaluate, both of you, sort of the going-in expectations about what Trump might have offered, what he did offer, you know, and whether it’s a sign of his overall approach to China, you know, beyond the Taiwan point that you mentioned, David?

SACKS: Yeah. I mean, I think that in terms of what you just mentioned, Matt, you know, my conclusion is it wasn’t as bad as it could have been. I mean, I think that there was the fear that Trump would say something publicly on Taiwan, or reduce U.S. support for Taiwan in exchange for certain economic measures from China, or also that China would seek, again, exports of advanced semiconductors and Nvidia chips in exchange for withdrawing the rare earths measure. And so, you know, I think that the fact that we avoided both of those are a good thing. But, you know, what I would say is I don’t think that that’s necessarily a done deal. I think that China will reopen both of those issues in Beijing. And they’ll probably seek to tie that to other things that the president wants on his visit. And so, you know, for now I think that those are in a better place than they could have been, but I don’t think that we’re kind of out of danger on that front yet. And so I would caution, you know, against people who believe, well, Taiwan didn’t come up this time, so we’re OK on Taiwan and that’s not a priority for China. I don’t think that that’s the right read.

GOODMAN: OK.

Zoe, do you have thoughts on that? I have another question for you, if not, but go ahead.

LIU: Yeah, thank you, Matt. I agree with David, especially with regards to the Taiwan issue. But here the thing is, even if President Trump slipped and said something that is not necessarily aligned with classic or traditional American foreign policy language—you know, oppose the Taiwan independence versus not supporting Taiwan independence—the matter of truth is he might very likely forget what he said, you know, the next minute. So I feel like the—which basically means the—how to manage, and to your point, the summit, viewing from American side, could be considered as a success, to the extent that you know you managed the president to stay with the script.

And with regard to the other issues, especially your mentioning of chips, I think lots of people are asking this question, right? Does that mean America’s national security is up for negotiation with regard to these chips sales? I feel like the debate—you know, sort of, we are all familiar with kind of, like, the landscape of debate. But the reality is that additional export control would only force China—or, force the Chinese government, or prove to Xi Jinping that his thought on self-sufficiency might be accurate. And on top of that, it is closing the incentive mismatch between Chinese tech people, tech entrepreneurs, and the Chinese government. So from that perspective, I think the lack of—the lack of sort of a strategy, the lack of a coherence in terms of how we do tariff, what do we want it to achieve, versus these chip sales, seems to be just a waste of opportunity.

GOODMAN: OK. Interesting.

For both of you, again, you know, there’s been a fair amount of commentary also on some of the unintended consequences, or the reactions of the Chinese and U.S. actions in various—respectively. Like, you know, on the Chinese side, David, you touched on this, that, you know, they use these rare earth expert controls more aggressively, and that has prompted a lot of conversations among allies, partners, others, you know, signing various agreements. By the way, I saw the G-7 energy ministers happened to be meeting while all that trip was going on. And they signed something like twenty-five new critical minerals deals up in Canada. And so there’s all that sort of reaction, counter reaction sort of going on.

And then on the other side you saw a bunch of things going on that seemed to be maybe a kind of hedging from U.S., tariff and trade actions. You know, I think Korea and Malaysia signed an FTA. The RCEP, the Regional Comprehensive Economic Partnership countries, which is pretty much everybody in the Indo-Pacific except the U.S., agreed to advance some of their commitments and move forward towards greater integration. Canada is making a big push in the Asia region and trying to get an FTA with the Philippines and others. And, you know, you see—or even some have commented on the fact that President Xi and President Lee of Korea had the first—I think, the first summit of a Korean and Chinese leader in something like over a decade. And, you know, is that hedging activity, too, of some kind? And how should we think about those other kind of consequences of some of the things the U.S. and China are doing in the region?

SACKS: Well, I think, as you said, Matt, you know, the rare—and Zoe alluded to this as well—on rare earths there is this debate on whether China overreached and whether it kind of galvanized a response that wouldn’t have been there absent this Chinese measure. And I think, you know, clearly there’s some truth in that. And I spoke earlier about what the United States has announced with its allies on rare earths. But I think the Chinese wager is that this is going to take a long time to come to fruition, if it is ever successful, and that it can still have years to continue to kind of reintroduce this card if things don’t go the way that they want. I mean, we know, as you well know, Matt, fifteen years ago China played this against Japan. And so we knew that this was a possibility. There had been discussions on rare earths as a chokepoint that China controlled, and the need to de-risk away from China for well over a decade, and we’re still here today, right?

And so you might argue that, well, the level of urgency today is so different that there’s going to be political commitment and there’s going to be capital put behind this. You know, I’m curious for your view on this, but I think I’m a little more pessimistic that we will be able to solve this. Certainly we won’t be able to resolve this within the next year, when China can then reintroduce it. And then we’re right back at square one. So I’m a little more pessimistic on the rare earths front. And, you know, a lot—right now I think we’re looking primarily at the supply side, on bringing online, you know, mines and processing facilities. But we also at some point need to have a conversation on things like price floors, because what we also know, based on Chinese behavior and actions, is that if there is a chance that some of this succeeds, they’ll undercut everybody and try to drive them out of the market. So then what? So there’s going to need to be a lot of creativity and, I think, a lot of long-term support if this is going to get off the ground. So I don’t think that—you know, I don’t necessarily buy the narrative that China went too soon and now we’re all going to get out of this, and China won’t have leverage on this in the future.

GOODMAN: Right. No, I think I agree with you, that it’s going to take a lot longer than people are excitedly talking about now. But at least I think this has sort of prompted some meaningful action, including, you know, the point you made. The MP Materials investment by DOD includes a price floor, you know, price guarantee element. Which I think they recognize that there’s a risk there that has to be addressed. But to your point, it’s not going to be solved in the next year or even five, frankly. It’s going to take a lot longer.

OK, Zoe, any thoughts on that? And then I’ll turn to questions from the audience.

LIU: Very briefly. I think I do agree that China seems to be using its strongest card early on to sort of inflict a frontal assault American—not just American supply chain, but the global supply chain. And I feel like it’s not—I would be surprised if they did not know the global reaction, meaning the de-risk from China reaction, because, if anything, China has been talking a lot about unilateral restrictive measures and the weaponization of U.S. dollar leading to all sorts of things. That’s what China, or Chinese officials have been talking a lot. And as a result—to David’s point, right—as a result of China’s rare earth restriction against the Japanese, then it’s turned out that now Japan is the world’s second-largest processor and refiner of rare earth materials. Yes, there is—one might say that there is no national-level strategic reserve system, but at the company level they all have that.

And on top of that I think there are other options. The Europeans are moving forward a lot with recycling. So if we improve recycling efficiency and more recycling facilities being established, combined with this allied joint effort, I’d say from Beijing’s point of view they probably realized that their leverage, their rare earth card, they can only play it for a limited period of time. So the game that they are trying to play is, given that the U.S. has advanced chip restriction, China has its rare earth. So which restriction is going to drag the other side, cause the other side to spend more time and more expensive to make up for their leverage? So I feel like this is—I wouldn’t say—I feel like this is almost like a game of a chicken, despite both sides have leverage, if that makes sense.

GOODMAN: OK. In the—since we’re talking about critical minerals—just in the shameless advertising department, we’re doing a lot of work at CFR on this. Our colleague, Heidi Crebo-Rediker, is leading a study group on critical minerals. And, for what it’s worth, I hope later this month I and a couple of colleagues are going to be publishing a paper on the Japan experience and how they’ve—how they’ve managed to reduce their dependence on China, following the 2010 coercion incident.

So with that, I’m going to turn to Alexis to take the first question, if there is one, from the audience. Please feel free to—

OPERATOR: (Gives queuing instructions.)

We will take the first question from Brett Fortnam.

Q: Hi. Brett Fortnam with Inside U.S. Trade. Hi, all. And thank you guys for doing this.

I was wondering if you could put the one-year pause on export control—on the new rare earth minerals export controls, and also where the White House said that there’s going to be general license for gallium and germanium—if you could put that in context of what China was saying in its fourth plenum documents on its export control regime. I’m wondering kind of how this all fits together and whether or not—you know, there were questions about whether China would be able to impose the export controls that they had announced. So I wonder if this buys them time to be able to create the framework to impose much greater restrictions after the one-year deal expires.

GOODMAN: Zoe, you want to take that?

LIU: Sure. Yeah, thank you, Brett, for the question. I think you’re right. China so far doesn’t—I guess your question really is about to what extent China has the capacity to implement, and whether this one year is enough for them to build up this the system to actually monitor and implement the export control. I think, you know, right now China has the—China has the law, has institutionalized the regime, but they really do not want the human power to implement, to monitor, to go out and inspect whether the rare earth materials, or gallium, germanium, all these restricted items, has been fully implemented—the restrictions have been fully implemented. As a result, you do see a lot of smuggling activity going on through provinces like Yunnan. And as a result, you do see the Chinese government now has been doing this—almost a campaign-style anti-smuggling campaign, if you will, against all these restricted items.

So I feel like as long as there—as long as there is market price differences created by export restrictions, the incentive to smuggle is going to be high. So to what extent, where that—where the Chinese government will put more emphasis on, I think that’s unknown. From the from plenum readout, I didn’t really see any clear guidance in terms of do they want to follow the U.S. method and set up overseas offices? And to what extent, you know, overseas countries are willing to receive Chinese inspectors? I feel like that’s a huge unknown, because China does really have allies. So I’ll just stop there. Maybe David and Matt, curious your thoughts as well.

GOODMAN: David, anything to add to that? OK.

Alexis, I think we have a written question that came in which I can’t see. Could you read it out for us, please?

OPERATOR: Of course. We’ll take the next question as a written question: If there aren’t currently enough incentives for companies to fully divest supply chains from China, as you mentioned, how likely do you think it is that trade frameworks with countries like Vietnam, Malaysia, and others would increase those incentives? Ultimately, what would make it worth diversifying?

GOODMAN: David, you mentioned this, so you want to take a first crack at that?

SACKS: Yeah. Well, I’m curious for Zoe and your thoughts on it as well. Well, I mean, I think that obviously the tariff structure has gotten a lot of attention. And I think that some predictability in where bilateral tariffs are going to be around the world can help companies make those long-term decisions. I think that, you know, regardless of where they are today, the notion that, you know, India is at 50 percent today but could move down to 10-20 percent tomorrow. But it could also go up to 100 percent tomorrow. Companies aren’t going to relocate factories, and pull out supply chains, and make those kind of huge capital investments if it could be any side of that spectrum. And, similarly to China, you know, it is where it is right now. But if President Trump believes that Xi Jinping has overreached and has done something to—you know, that he believes doesn’t comply with this kind of deal that they reached, I could also see U.S. tariffs on China going up very dramatically and rapidly.

But I think that for now my sense is that companies probably are still taking a wait and see approach, just given the volatility of the tariffs. I think Matt mentioned at the outset that there was some good language in the bilateral trade agreements that President Trump signed in the region. In some instances, there was language on transshipment. And, you know, so still essentially targeting China, without saying that it’s targeting China. And so to the extent that the administration continues to prioritize, really, transshipment, and, you know, kind of, you know, where the value is really added in the assembly of a good, then I think that could also, you know, help tilt the scales. And so I thought it was actually interesting that some of that language made it into the agreements, with the Southeast Asian countries in particular.

GOODMAN: Right. I’d just to add on that but, like, the Malaysian deal, you know, they alluded to some of this, but they haven’t yet, I think, spelled out the exact rules of origin that will govern, you know, these decisions about whether a shipment has, you know, too much Chinese content and therefore is subject to some of these transshipment charges, or whatever. So that is yet to come, but there’s clearly, you know, movement towards—in that direction. And that will provide a little more clarity, as well as just the tariffs being, at least for now, set, you know, giving a little bit more certainty about some of those decisions. But, you know, that said, as David said, or Zoe said, I think we’ve all said in some way, there’s always uncertainty around Trump and trade policy. You know, it could go up, it could go down. And so that is going to be, I think, a continuing challenge for investors, companies trying to decide where to put, you know, long-term investments. But that’s me.

Zoe, do you have thoughts?

LIU: Yeah. I would definitely agree with you and David on the importance of figuring out a way to implement agreement with regards to transshipment. But here, the part that I am concerned about, is how are we going to—how are we going to implement it? You know, like, does the U.S.—the U.S.—how would the U.S. government tell countries like Vietnam, or Mexico, or—to, like, basically, how much—not just how much tariff you should impose, but how accurately you can report the volume or the value of transshipped goods. I feel like there are country of origin rules. But on top of that, is the U.S. government going to monitor the amount of transshipment? Or, like, are we going to rely—like, sort of outsource it out to our trading partners? Given that we’ve damaged a lot—like, the Trump administration has damaged a lot of the relationship during the past few months.

I feel like even if there is agreement there, even if there is language recognizing the challenge, we still haven’t seen the how—like, how this is going to be implemented. So I feel like this is why I’m very skeptical. And to David’s point, I’m very skeptical in terms of how the tariff is going to be implemented overall. And as a result of that, perhaps companies might just take a wait and see, or for that matter even not—even further implementing the making—what is the language—you know, making China for the Chinese market kind of strategy. But then again, if the global system becomes more and more fragmented, which basically means that, yeah, it’s not efficiency, but that also means that everybody else is equally terrible or not optimal situation as I am. So maybe I think the companies are very agile and they know how to adapt.

GOODMAN: OK.

Alexis, any other questions from the audience?

OPERATOR: No other questions at this time.

GOODMAN: OK. Let me just make one comment/question, if either David or Zoe want to comment on this. This week—we haven’t mentioned the IEEPA—the Supreme Court hearing about IEEPA tariffs tomorrow. Just, you know, interested in how that’s going to affect any or all of what we’ve just been talking about, if the Supreme Court signals that it may be ready to throw out the IEEPA tariffs. That probably wouldn’t actually happen until at least early next year, if not mid-next year. But if they hint tomorrow that they’re inclined to strike the Trump IEEPA tariffs, does that affect anything we’ve just talked about? Anybody want to hazard a guess about that? I can if you guys aren’t bold enough to there. (Laughs.) I’ll be bold enough.

Yeah. I mean, I think it’s going to create more uncertainty because you know that Trump is going to want to try to find—if he is facing—you’ve already seen some signaling and movement in this direction. He’s going to find other authorities that will allow him to impose tariffs. And, you know, whether it’s Section 301, or Section 232, or there are a bunch of numbers, 122, other ones, that could be used. You know, the problem with each of those is they’re more targeted, either by country or by sector. It’ll be really I think more confusing, more—create more uncertainty about some of the issues that we were talking about. But that’s not predicting that the Supreme Court is going to vote to strike the tariffs, let alone signal it tomorrow. But I’m just saying if that happens, I sort of feel it’s going to create even greater uncertainty around all of this.

SACKS: I was just going to maybe take a step back for a second because we’ve been talking a lot about the ins and outs of the trade deals, and I just wanted to make one broader point. Which is that, you know, in the China watching community there was a lot of speculation, especially over the summer, that Xi Jinping was losing control, or there were challenges to Xi Jinping’s rule. And a lot of this was focused on the ongoing purges in the PLA and Chinese military. But I think that if we look at—if we look at, you know, the negotiations with President Trump in South Korea, I think that Xi Jinping is now in a much stronger position domestically. I think that the consensus probably within China is that he played his hand very well. China was really the only country in the world that hit back to this extent at Trump’s tariffs. And I think that if you look at it, at least in my view, that was seen as probably the right move.

Rather than trying to basically find an off-ramp and a way to, you know, get Trump to unilaterally withdraw some of the measures against China, China found a chokepoint. It found something that it has leverage that it enjoys over the United States. It used it. And it received notable concessions from the United States. The United States negotiated away national security-related export control measures, which it had never done before. And China reduced its tariff rate to an extent where it is now lower than, you know, again, India, Brazil, and is comparable to, you know, major U.S., partners and allies like Canada. And so I think that if you’re sitting in Beijing, if you’re Xi Jinping, you’re pretty confident and pretty happy with how you played your hand. And so I think that Xi Jinping is in a stronger position now than he was a week ago. Certainly, he’s in a stronger position than when Trump really ratcheted up the trade war with China at the beginning of the administration. And so I think, again, as we look towards April in six months, I think that Xi Jinping will enter that meeting in a pretty good situation, in my view.

GOODMAN: OK.

Just really quickly I see we do have one more written question. Alexis.

OPERATOR: We’ll take the last question as a written question from Thomas Halverson, who asks: Any comments on Chinese purchases and long-term intentions with respect to U.S. soybeans and other ag exports?

GOODMAN: Zoe, you want to hazard?

LIU: Sure. I guess in the—yes, I think this is a great question. You know, like, China resumed—quietly stopped buying U.S. soybeans, and then right as the two presidents met, they resumed buying U.S. soybeans. And then I read a story, earlier today China also seek to buy U.S. wheat for the very first time in almost a year now. So I just say this basically goes to show China buying or not buying U.S. agricultural product now is being used conveniently as a card in China’s retaliation. And going forward, we can anticipate that if the two countries are getting themselves into another round of either trade tension or something else, China will use this card again.

But that being said, I’d also say that food security is China’s number-one most important national security. The country spend—if you look at fixed income investment, yes, it has been—it has gone down. But China’s investment in food processing and investment in food industry has actually been pretty steadily increasing. So from that perspective, in the long run China would need to import a variety of agricultural products from around the world. For them, the emphasis is really on diversity. But that being said, the short term, especially with regard to soybeans, I’d say, yes, they agreed to buy, but there are a lot of uncertainties.

Because the language—if we remember from the first trade war—the language that they used there was they would buy “based upon market conditions.” So monthly condition this time around means, OK, so by next February, Brazilian soybeans are coming onto the market. Are they going to continue to buy or not? If Brazilian soybeans are cheaper, are they going to buy U.S. soybeans and pay a premium? These are, I guess, unknown questions.

GOODMAN: OK. We’re a little bit over time so I think we’re going to have to wrap here. Let me just say one set of issues we didn’t talk about, and that weren’t talked about much it seems in the Trump-Xi bilateral, were my old Treasury issues of macro imbalances, overcapacity in China, exchange rates. I think there are a bunch of other issues in the relationship that are worth watching here in the runup to next April. So a final comment there.

With that, thank you from us. And over to you, Alexis. Or do we just say goodbye?

OPERATOR: At this time, you are welcome to disconnect from this virtual meeting.

(END)