Angry Planet - If You Must Fight a Trade War, Fight to Win

Episode Date: July 3, 2026

The world I grew up in no longer exists. The decades after World War II were boom times for free trade lovers. During the Pax Americana it seemed that most diplomatic problems could be solved by exporting blue jeans and lowering the cost of consumer goods for everyone. But in 2026 trade is a serious weapon and economic policy seems less a path to prosperity and more a weapon for waging war.On this episode of Angry Planet, Chad P Bown is here to talk about his new book How to Win a Trade War. Bown is a senior fellow at the Peterson Institute for International Economics and co-authored the book with journalist Soumaya Keynes. The book is a brisk walk through a history of economic conflict full of humor and history.The world according to nerd trade economistsIf we must fight, fight this way“It’s a China story”Rare earth minerals, magnets, and the weaponization of tradeWhat’s the goal of our trade war?The Hormuz of it allThe trade war against China isn’t going greatChina’s delicate danceTrade war as precursor to kinetic warSome thoughts on robotics and AIBuy How to Win a Trade WarSupport this show http://supporter.acast.com/warcollege. Hosted on Acast. See acast.com/privacy for more information.

Love this podcast. Support this show through the ACAST supporter feature. It's up to you how much you give, and there's no regular commitment. Just click the link in the show description to support now. Hello and welcome to another conversation about conflict on an angry planet. I am Matthew Galt. I am sitting here looking at how to win a trade war, a deflated globe. I have to say I like the UK cover better, the battleship.

and I'm sitting with the author Chad P. Bown. I got it right this time. We had to re-record because I screwed up his name the first time. Sir, how are you doing today? I'm doing great. And don't worry, it's not the first time. It's, in fact, more often than not, I should have just changed the name. Well, it's the least complicated name that I've screwed up.

Usually it's a much lengthier name that I'm going to mispronounce, so I apologize. No words. So this is a really interesting book to me. It's a slight like 215 pages. It reads as part like history lesson and part desperate plea in some ways. Can you just give me the background of like when you started writing this book, like when you thought to like sit down and do it. Like what was the impetus? Yeah.

So let me tell you a little bit about me and a little bit about my co-author. So I'm a we're both nerd trade economist. That's kind of how to think of us. And we're earnest guides that are through this book going to try to bring you the prospective trade warrior on this journey and kind of teach you what you need to know. We don't necessarily want to go through this fight ourselves, but we've done all the work to prepare. And so we're going to guide you on that journey.

Okay. So how do we convince you that we're the right guides for you? Well, I'm a nerdy PhD trained economist, and I have been doing international trade for my entire career. And that's been a long time now, as I'm not young. I started off as an academic. So I was a professor for a dozen years at Brandeis University in Boston. I've had a couple of different government jobs. I was in the White House at the Council of Economic Advisors in the Obama administration.

I was at the chief economist at the State Department in the Biden administration. I've worked for some of these big international organizations that deal with international trade, the World Trade Organization for one, and now I'm made a think tank. My co-author, though, she's amazing. Her name is Samaya Keynes. She's also a trained economist, but she is a journalist and a writer. She's right now a columnist for the Financial Times. She spreads on a ukulele as well.

And she plays an amazing ukulele. She's a singer-songwriter. She does all the things. And she's very fun. She's very funny. So there's lots of jokes in the book. But she's an incredible, you know, analyst and economist better than I am, but she's also an amazing storyteller and writer, right?

And so basically what we're trying to do in this book is we've gone out and we've read all the economic studies. We've talked to all the experts so you don't have to. I've been in policy. We've talked to all the policymakers that are working in this area, both historically and the ones that are, you know, kind of fighting today's trade wars, so you don't have to. And what we're going to do is we're going to write all that up into a really fun, quote unquote, fun.

We think it's fun. Book to try to help the non-expert understand and better grapple with what they're seeing in the headlines today every day, right? Which no one, aside from us nerds, should really have to think anything about. Well, today, for a lot of different reasons, we're all being forced, you know, forced to confront. this whole trade war business. The way you kind of pitch it is interesting. And the way you've talked about it in some of your other interviews is very interesting.

That there's this idea that like we don't want to be doing this. We don't. It's almost like we don't have to write this book. Yeah. But we need to. Yeah. It's almost because like you and I have probably lived most of our lives in a free trade world. Right.

And now we've entered into something very. different, but something that is not unprecedented. Like you said, there's a bunch of history, and there's a lot of history in this book, and there's a lot of wonderful stories about the history in this book. So how did, can you kind of set the scene for me of what, like, the last 40 or so years has been like, and why you would want, like, why was it good, why was it bad, and why would you want to disrupt it? Yeah. So, um, the open trading system that you and I grew up basically living under was really something that came about in the ashes of the Second World War. So this was really something called the General Agreement on Tariffs and Trade.

It was a, it was agreement largely spearheaded by the Americans and the British. A bunch of economists on both sides kind of got together and wrote down some rules and then they got 21 or so other countries to sign up to them. And it was basically like we're going to have these basic rules for international trade, reciprocal relationships, lowering tariffs, some rules on not having a lot of subsidies, not using export restrictions, things like that. And it worked really, really well, you know, for 50, 60 years. And it was primarily a system that was designed to deal with, one, market economies, right? So economies where when you say this is a tax, this is a tax, This is a tariff.

I know what the implications of that are going to be for my economy and your economy, if I impose a new one or subtract one, things like that. And for countries that were sort of getting along harmoniously. So during the Cold War era, the Soviet Union was not part of this thing. China was not part of this thing. And all of that began to change, obviously, when, you know, the Berlin Wall fell and sort of China started opening up in the, in the, you know, 90s and early 2000, China comes into the World Trade Organization. Russia would eventually come in as well. And initially, you know, the expectation was

perhaps that China would become more market oriented, more like us. And, you know, and, and it would be kind of an equal player in this system, right? Unfortunately, that really didn't happen. And there's a, I think, you know, I want us to talk through this. There's really maybe two or three fundamental challenges that are posed by China, but it's really a China story is why we're really struggling today to, you know, fight a trade war or to deal with this challenge is really, really, really a China story. Now, before we talk about that, though, I do have to say one other thing, which is, Samay and I didn't always feel this way, right?

So Samay and I began to work together in 2017 or so. So we've been working together almost for 10 years. And originally we were doing a really nerdy trade podcast together called Trade Talks. I mean, to be fair, this was entirely due to President Trump in his first administration, right? Only President Trump could make tariffs so popular to be able to support a niche podcast dedicated entirely to international trade. Right. So we owe President Trump a lot for making our little, our little podcasts. as famous as it was.

But during that era, Sam and I were some of the loudest voices complaining about, oh, you don't fight trade wars. You know, nobody wins from a trade war. Economists would say that. And the point today is we've now moved so far beyond that. It's no longer an option of should we fight a trade war or not. We're fighting a trade war. We have to fight a trade war.

So the key question is to decide which trade wars to fight and then how to learn to fight them well. And that's really what the point of this book is. So can we circle back to China then? And let me ask you, why? Why are we fighting a trade war? Even if, you know, even if 10 years ago we don't agree, like, what is the justification? Originally, the big challenge with China was this thing that its economy is just fundamentally different from ours, right? It has, it's not the Soviet Union. So it's not command. and control and bread lines and, you know, things, things like that. They have things that look like prices and markets within their economy, but there's still

a tremendous amount of economic activity that is decided by the state, influenced by the state, either through five-year plans, industrial policy, or the state ownership of firms, which is huge, right? And these companies don't just follow, you know, the profit maximization shareholder value systems that we live in in the West, right? These companies, they are themselves subsidized, but they can live into perpetuity without having to make profits, unlike our firms. And that makes it impossible for our companies sometimes to be able to compete on a level playing field. So that was kind of the first problem, this one that China's system wasn't fundamental. fundamentally going to change. That led to one set of concerns about, ah, we need a different world.

The existing trading system, this thing that came up over the last 70 years, it was this thing called the GATT, the General Agreement of Tariffs and Trade, turns into the World Trade Organization in 1995, ultimately not going to be fit for purpose. That's sort of the first challenge. But the second one is really President Xi Jinping. And he comes along and starts to do things like in 2015. They announced their made in China 2025 strategy, which, you know, was, it picked out a bunch of sectors and said, these are our market share targets. We want to be global leaders in these things. And a lot of countries do this kind of thing and say, yeah, we have aspirationally, we want to be better. Like, we're going to set goals for ourselves. But the challenge at the time

was these were a lot of kind of the leading edge sectors. It was going to be, um, uh, semiconductors and robotics and AI and green tech and electric vehicles and batteries and things of the future back then. And there was growing recognition that China was having success in some of its earlier aspirational statements of achieving these massive market share targets that they had been announcing. So it was no longer just, you know, an aspiration and it, yeah, it wouldn't be able to make it and everything would be okay. No, no, no. China was starting to actually dominate some global markets and things like steel and aluminum and shipbuilding. So this kind of raise concern. And then you fast forward five years later, and this is around 2020 or so now, and President

Xi gives this famous speech that now knows the dual circulation speech, where he essentially says, he envisions a world for China, where China is not going to be dependent on the rest of the world for its supply chains, but he wants the rest of the world to be dependent on China. So us, you know, United States, UK, Europe, Japan, all the Western economies to be dependent on China for their supply chains. So a fundamental asymmetry, right? And when you step back and you think about what makes a trading system function, what makes an international exchange of goods really work? Yeah, there are rules.

But really, it's a willingness to be interdependent with one another and say, I'll export stuff to you. You export stuff to me. it'll be relatively balanced, and I'll be there for you when you need it, and you'll be there for me when I need it. There's some values and trust there. Well, China was saying that's not our view of the world. We want a one-way relationship where you're dependent on us and we're not dependent on you. And you just can't have a trading system that's based on that. And then it was not only that it was aspirational to do these things, but then it started weaponizing its dependencies in practice.

Right. And that's when I think things have really blown up. as we've seen, you know, over the last couple of years. Explain how they were weaponizing in the last few years. So the highest profile examples of this were in 2025. And this was part of the, you know, the Trump administration's tariff escalation in trade war with China that took place. So President Trump came into office on January 20th of 2020. 25 really quickly afterward, he started raising tariffs on China. Within two months, had already increased them by another 20 percent beyond what he had done in his first term.

And China wasn't really happy with that. It announced some things and retaliated. That didn't make President Trump happy. He announced, everybody remembers, the big broad set of tariffs he imposed on the world on Liberation Day. This was in April of 2025. Well, at that stage, China basically says, well, we've had enough. And what we're going to do now is, you know, not just retaliate against the United States by imposing higher tariffs. We're actually going to cut off from the United States. Our exports of something called rare earths and permanent magnets.

So rare earths are these minerals that come out of the ground. They're not particularly rare, but China has a lot of them. And, you know, over the last two decades or so, China has come to dominate their mining and their processing. It's not as if nobody else could do them. It was largely, these things are really dirty environmentally. Nobody wanted to do them. And China was pursuing a strategy of making it difficult for other countries to actually mine them and processing them by frequently, you know, lowering prices whenever it looked like somebody else wanted to enter the market.

So China's got basically 90% of the world's supply of this stuff. And then you turn these rare earths into a lot of different things. You can use them and they're essential for consumer electronics. You need them for a lot of military goods. But they're also essential for these things called permanent magnets, which before last year, nobody knew what permanent magnets were either. Now we all do. They are, again, not super complicated, but China produces 90% of these things.

They're essential for going into car parts. So they're what makes your car seat go backward. and forward, or the, you know, your window go up and down, or the windchill wipers go back and forth. And without these permanent magnets, you basically can't build a car that people would want to drive. So when China, because it was making most all of the world's permanent magnets, shut down their exports to the United States, the North American, the United States American automotive supply chain just panicked. They said, we're not going to be able to make cars. And, you know, that's almost a million people, right, that would suddenly be thrown out of a job because it's a just in time supply chain.

If one of them, you know, kind of can't get their part, then the next thing in the line can't do their thing. There's no finished cars, right? And so seeing all of that and the panic by the automakers in the United States is really what caused President Trump and the Trump administration in 2025 to finally back off from raising their tariffs on China, right? It was seeing that China had this market dominance, this market power over us, that it was willing to weaponize, right, is what really forced the United States to dial back. So that was the first example. They did it one other time, but the main point is China has now shown its willingness to do this kind of thing. When it has these one-way dependencies that the rest of the world is reliant on it, it will use them both for economic purposes to get its way and sometimes for foreign policy, you know, other other reasons as well. Yeah, and rare earth

minerals, there's not exactly something we can set up domestic manufacturing for very quickly. You know, you probably want a lot of investure in Africa and a lot of those countries aren't super happy with us right now. Yeah, I mean, so it's fascinating. You know, the only other place in the world that actually does this successfully at the moment. that really mines them and then processes them is really, it's actually a fascinating story. It turns out that what China did in 2025 on rare earths was not the first time it had done this. It did basically the same thing back in 2010 when it got into a dispute with Japan over territorial dispute,

the Sankako Islands, and it cut off these rare earths from going to Japan. And Japan is basically, it has companies that really are the only one other ones out there that make these permanent magnets, right? So Japan, you know, if you can't get them from the Chinese companies, you need to get them from the Japanese companies. So what Japan did at that moment in time was to really actively try to reduce their dependencies on China. And back then, day two, we're sourcing 90% of this stuff from China. Now, Japan doesn't have any of these rare earths anywhere locally. I mean, they have been looking around in the seabed locally to see if there's any, you know, underwater there. But what they did do, and quite effectively is they said,

ah, Australia actually has some of these rare earths in the ground. So we can work with Australian companies to mine them. And then Malaysia, you know, is willing to set up or have these processing facilities to do the, you know, the transformative work there. But what it took was government money. It took subsidies. But interestingly, subsidies from the Japanese government to Australian companies, sometimes operating in a fourth country Malaysia to be able to help break some of Japan's dependency

on this, right? So it is complicated, right? When you have to do these things, you have to work with other countries and the companies of other countries, but it is feasible, right? And I think what was fascinating looking back at that episode was Japan has provided a template for how it is that actually countries that are facing the same kind of concern when it comes to China. And believe me, it's not.

not just the United States. When China shut off these rare earth and permanent magnet exports last year, it wasn't just the U.S. that was affected. It was Europe and their auto supply chain. It was Japan and Korea as well, right? But what's fascinating is to see there are solutions out there if you're creative and oftentimes if you're willing to actually engage constructively with other countries to help get it done. And if you're willing to spend the money, right, I imagine it's not cheap to do all of that. It is. You do have to spend the money. And we are now in the United States spending the money. Right. And so, you know, in response to those set of events last year, the Trump administration now has done a number of different things. We now, the United States taxpayer, right, we're now partial owners of some rare earth companies out there, one called MP Materials, not just rare earths, right?

There's other critical minerals that China similarly has market dominance in that the U.S. government now has taken out equity stakes in. over the course of the last year in response to these concerns. We have now set up not only ownership stakes but price floors. And so again, part of the challenge with China historically has been, and this even happened when the Japanese started subsidizing that Australian company back in the early 2010s. This company is called Linus. What happened was China saw that and said, whoa, we want to discourage it.

Let's start throwing out a lot of the, you know, let's go do the opposite of restricting the exports of rare earths. Let's start dumping them onto world markets, drive down world prices, maybe drive that company out of business, right? So the Japanese government at that time had to step in again and offer them more money, right, to keep them afloat. Now, it turns out great because they were able to kind of weather the rare earth shortage better than anybody last year.

But now that's part of the problem. You're worried that, you know, once we do start to encourage, whether through subsidies or something else, some of these Western mining companies and processing companies to enter into this space, China might do the same thing. Start dumping it again and drive them out of business. So one way that the administration has tried to tackle that is to set up what are called price floors, right, a minimum price that, you know, for the next 10 years,

if you're willing to sink the investment, these companies in the mining, in the processing, and making the... You're guaranteed you'll get this price regardless of what's happening out there in world markets because of China's dumping, right? And those are the kinds of crazy policies. I mean, I'm saying crazy, but innovative policies that you are forced to have to think hard about implementing when the underlying challenge

out there is China, right? And so, yeah, this is part of what, you know, to bring it back to the book, this is what we walk through in the book. How do you do these kinds of things, you know, best, right? What do we know from history, from economic evidence, from economic incentives, when you're forced to confront a problem like this of China's market

dominance, what can we learn about how to do it in the least costly way possible, right, to help us address the underlying challenge? So a recurring theme on this show, which is usually about more martial forms of war, is that people get into trouble, nations get into trouble when they don't have an articulate, vision of what victory is. Why are you fighting the war? What is the political goal you were hoping to achieve at the end of the war? I think my argument is that America has been pretty bad about that for a long time.

So if we're looking at this trade war and we want to follow the metaphor, like what is the political or economic goal at the end of it? what does victory in a trade war look like in this trade war specifically? Yeah. Well, I think that's a super important point because one of our key arguments is there's actually multiple trade wars going on right now, most of which should not be fought and do not need to be fought, right? And actually, by fighting some of them, you're distracting yourself from the one that does need to be fought.

And so to be clear, again, the one that does need to be fought. is the challenge that China poses to the United States and to Western market-oriented economies of it building up this market dominance in a number of different sectors that are essential, sometimes for military purposes, but other times just for our economic security as well, right? It's kind of also bad if they can hold back an export

and it throws a million of our workers out of their jobs, right? So that's right now the most imminent trade war that needs to be fought. And achieving that objective, success there would be, well, let's not live in a world where China has 90% of the world's production of this stuff. Let's get it down to 40%. Right? So we have diversified sources of production and that we're not worried about China weaponizing it against us.

We can have these functioning alternative sources. So I think that would be kind of the end game of that particular trade war. But the challenge at the moment is President Trump is fighting many, many trade wars at once. He's got a multi-front trade war going on. And why that's a challenge is that means that our partners and allies, the countries out there that are facing the same exact challenge with China that we are, right? So the Japan's, the Koreas, Australia, Europe, they're having to fight a multi-front trade war. Instead of them being able to focus on the China challenge and doing hard policies that they would need to do as well, cooperating with us, coming up with the money, right? You're right.

It's not easy to come up with money to subsidize these kinds of industries. Nobody wants to have to subsidize these kind of industries, right? But they're finding it more difficult to do that because they're also having to fight the United States at the same time because President Trump is imposing tariffs on them too, right, through a different trade war that he has in. mind with them. So yes, it's not only do you need to be clear about what your objectives are, but you really do need to limit the trade wars that you're fighting to the ones that actually need to be fought. There's this perennial joke in military social media. It's on Twitter and like where all the nerds gather that like United States Pacific Command, every time that they're about to get their way and like the pivot to China is going to happen, like, all right,

we're going to get to focus on this central command, which oversees the Middle East, like rears its ugly head and says, actually, no, let's focus all of our resources over here. And, you know, we're fighting a war against Iran, but it also seems like it's, there is a large economic dimension that is doing just what you said. Like, we're pulling away. It's really hard to focus on China when the Strait of Hormuz is closed, right? How, like, how does the Hormuz? of it all, like, factor into all of this right now.

Yeah. So let me, let me talk about maybe answer that two different ways. So one, first, I'll come back to straight-of-h-h-h-h-h-hose, because that's a super-interesting question. But to put a nail exactly in what you've just said, this week, the Trump administration is rolling out its new tariffs on 60 countries for concerns over forced labor, right? arguing that these other countries, including countries that actually have the experts would argue stricter trade regulations, not allowing in forced labor products made with forced labor into

their countries, Europe, Canada, are suddenly going to be hit with new tariffs from the administration. So again, right, distracting away from the war that needs to be fought because now they have to fight this other war. Okay. So just to make clear you're exactly right in our trade war context, too. Now, Strait of Hormuz, I think there's a lot of lessons that, you know, we came up with and wrote down in this book for having us think through the Strait of Hormuz. And to be fair, we completed the book before the Strait of Hormuz. Yeah, I don't think. It's not, yeah, it's not, it's not fair to ask you why you didn't have straight of Hormuz in the book.

Yeah, we had to turn into manuscript in December. Right. But we've obviously been thinking hard about it. So the first thing I would say is you've got, the way to think about trade wars is there just like real wars in the sense that you have to do your homework. Real wars are won by preparation and logistics, right? The same thing is true with trade wars. Well, straight of Hormuz, right, you really need to do your homework and understand your

vulnerabilities. How much, you know, trade is going through the Strait of Hormuz, right? And as we saw, you know, it's something like 20 to 25 percent of global crude oil needs to get out that way. 25 percent of LNG needs to get out that way. And yeah, the United States were not particularly reliant and we're a, you know, a net energy exporting country. So we're not the ones that are going to be most negatively hit by this. But if you're thinking about countries in Asia, right, that may have been very, very dependent on the energy coming out of the Gulf and not really understanding how concentrated their sourcing was, yeah, they kind of didn't do their homework.

There's countries that are going, that are pulling back to like four-day work weeks and things like that because it's that bad over there right now. Because they're so short and prices are so high. Yes, exactly. Just like in the 1970s, right, in the United States, when we had the, you know, oil price shock, that's when the 55 mile per hour speed limit went on, right? And there was rationing of gas. Yeah, all sorts of, you know, sort of demand side measures to try to tackle that.

So that's kind of the first thing. Another, though, is lessons about stockpiling, right? So, again, coming out of the 1970s, the OPEC oil price shocks then, we stood up in the United States, the Strategic Petroleum Reserve. we establish this coalition of, again, mostly Western democracies called the International Energy Agency to coordinate the establishment of oil reserves, you know, kind of global, or at least amongst our partners and allies. But other countries have done this effectively as well, right?

And you look at China. And China, again, incredibly non-transparent country. We're not really sure how much oil reserves in their strategic reserves China actually has. But so far, right, it seems like they've been able to weather the fact that their imports coming through the Gulf of which they were incredibly reliant, right, were suddenly cut off, drawing down on their reserves, but then also substituting. And one of the other things from, you know, economic analysis, you learn about in these moments of when there's export restrictions. which is effectively what the Strait of Hormuz is, the big question is a country's ability to adjust away, right? And so China has a lot of coal, right, that they can pivot to as an alternative source of energy.

Obviously, they're the leaders in green technology, right, in solar. This is going to be good for battery electric vehicles at which, you know, they're dominating the world as well, right? So on the adjustment front, I think there's some interesting lessons. to come out of the Strait of Hormuz. Plus, there has been some ability to get the oil, especially out of the Gulf through other ways, right? Both Saudi Arabia and UAE had pipelines that were not at capacity,

that they had been able to ship maybe somewhere between, you know, 20-ish percent of the oil that would have normally gone out through the straight, you know, through these pipelines instead. So in any case, you know, we oftentimes think about. about these export restrictions, like what Iran did in the Strait of Hormuz, is kind of one-shot games, right? You know, Iran, hey, you can do this once, but once you do it once, you know, everybody's then going to, you know, work around it. Now everybody's building new port infrastructure, building new pipelines to make sure this, this isn't going to happen again.

The spice must flow, so to speak. Yeah, maybe. But on the other hand, there's also arguments against that, which we have some history lessons from too. And some of those arguments against it are, well, we've seen oil shocks before, right? We have largely dealt with them in the ways that we could stockpiling, coming up with alternative forms of energy. But there's just certain things that we, that are essential, right? Jet fuel. We can't figure out how to fly jets with solar panels or with, you know, really heavy batteries, right? Not going to work. So you can't get away from some essential uses. And then even if, you know, you can imagine the escalation of tensions in the Gulf there, right,

even if these countries build additional port infrastructure or pipelines, Iran could go after those as well and bomb them, right, and maybe shut them down that way. So in any case, there's lessons for, you know, when and how these uses of export restrictions actually materialize in the real world, the adjustments that take place, and then maybe the limits to what those some of adjustments are that we can apply to even a situation like Hormuz. I think the days of the jets dominance of the military sky are probably over. Though, I think that would be my answer is like, well, don't fly jets, send a swarm of drones. It's cheaper.

You don't lose a person when they're destroyed. That's like a whole different podcast, though. So how are we doing on this trade war then? Where would you put us? Specifically, I know we're fighting like 10. Yeah. But specifically this China one. So the China one, I would say not great with a caveat, right?

So on one hand, look, the argument is we need to be doing this, the United States, this trade war that needs to be fought with China in order to get the diversification of production, supply chains outside of China, is best done with partners and allies. Because that helps us achieve scale. We save costs. If they're subsidizing some of it as well, right, we're not paying it all ourselves. We don't need 17 supply chains for rare earths popping up outside. outside of China. We just maybe two or three, right, that are reliable. So let's try to figure out how to do that at low cost and doing it with partners and allies is the way to go. Now, to be fair,

everybody, myself included, criticized President Trump in the administration, and especially the Liberation Day trade war tariffs is doing the opposite of that, right? It's hitting the allies with tariffs as well. But to be fair, it is really, really hard. to get the allies to work together. And, you know, one of the interesting things to have watched is how they responded when they were all hit with those tariffs. Initially, there was talk amongst Canada, Europe, other countries, South Asia, that maybe they would band together as a group and come back to the United States and say, no, we're not

going to accept this. You know, we're going to either retaliate against you as in a group or we're going to negotiate with you as a group. And so we're going to fight back as is one kind of common entity. But they couldn't pull it off, right? They couldn't organize amongst themselves. Every one of them wanted their own quick deal with the administration, knowing that, gosh, you know, sometimes what matters is just that I get a lower tariff than the other guy.

And if I can get in there quickly, especially if, you know, the big problem out there the Americans have is with China. And all those multinationals are wondering, you know, where do I go set up my supply chain next if I'm going to. to leave China, you know, if I'm Indonesia or Vietnam, I want to get in early, right? And, and, and get whatever tariff I can get just to send the signal to the multinationals to, hey, come set up your investment in my shop. The point is, those countries couldn't coordinate amongst themselves in responding to President Trump's tariffs. It's also very, very difficult to get them to coordinate in response to the China challenge as well. Maybe that will now change, right? I think what was really interesting again with what China did last year when it weaponized those rare earths and permanent magnets is it didn't just isolate in on the United States, right?

It really went after the world. And so now maybe Europe and Japan, I think you're seeing that happen right now in Europe. Europe has woken up a lot to the China challenge and seems to be willing to do things when it comes to China, whether it's talking about tariffs or its own sorts of industrial policy, that you're. Europe hasn't been willing to do in the past. Now, the challenge, I think, is for the United States to say, oh, is this a moment for us to actually engage with Europe and to do this kind of thing together? And the challenge, I think that's not normally how President Trump thinks about things. So I'm not optimistic yet that that's the direction of travel.

The delicate dance that China has to do here is kind of interesting, if I'm thinking about things from their perspective, because they do want political, power on the world stage to bend the world to their will, so to speak. And I don't mean that pejoratively. That's just what countries do. But they also

have to make sure that they keep the customers. Right? Because if they fight too hard or pull too hard, then they lose enormous sources of income, right? No. Like, I don't know how you thread that needle long term. Yeah. No, this is the

challenge with weaponized. trade like this with weaponizing export restrictions. Everybody hates them, right? Your companies hate them because, you know, you're telling your companies, you're not allowed to sell stuff abroad anymore and you're not allowed to make any more money, right? So they, you know, the foregone profits, they hate it. And then your customers out there look for alternative sources if they can, if they can find them, right? So they're really, really an unpopular tool. And yet government governments kind of can't keep their hands away from them at times, right, when they want to use them for other purposes. Without recognizing, right, the potential longer term impacts of once you use these things, it does really try to incentivize the other side to adjust.

Now, sometimes they can't, right? Sometimes the economic forces are just so strong. And we'll see with this rare earth's problem, right? The other interesting thing was China lighting this fire under the United States, hey, we're now, you know, spending more money and implementing more policies that we've never politically been able to do before to fight back against this challenge. So maybe it's actually triggered something useful in the United States. But even if so, right, the stories are, wow, gosh, you know, it could take a decade for us to really establish the mines, the processing facilities, the manufacturing,

know-how to be able to make these permanent magnet things that we just haven't really done in a long, long time. And China really is not only the producer of all the stuff, but it owns all the technology, right? So figuring out how to how to do it ourselves is not going to be trivial either. So you've looked through the history. You've spent some time doing that. How often is a trade war the precursor to an actual war? And I think that's the big worry, right? We were starting at a point of a lot of interdependence. especially between the United States and China, a lot of trade between our two economies,

oftentimes maybe too much trade in the sense that we've been talking about. It's soul sourcing from China and a lot of these different things. But there really is a risk of going too far in the other direction. If you imagine the extreme case, you reduce those trade dependencies to zero.

Now all of a sudden, there's nothing economically to push back against the military economy. conflict, right? Yeah, there's the normal military reasons and humanitarian reasons and all those kinds of things. But when you do have this trade interdependence, there's also an economic reasons not to do it. It's really costly for your economy if you actually engage in military provocations, right? And so that is a risk. And I think something that we have to have to take into consideration for today. You know, historically, there are instances where this, you know,

seemed to be a trigger. You know, one that came up, obviously, was, you know, cutting off Japan in oil, you know, in the 1930s was one of the triggers for, you know, kind of the Second World War because it really was interpreted by the Japanese as a, you know, provocative step by the United States. And again, it was, you know, this was after Japan had done a whole lot of really nasty stuff in the, you know, Asia-Pacific.

region, right, to try to get access to resources and energy, whether it was Indonesia at the time, you know, China, other parts of that world. But it was interpreted when the U.S. cut them off as kind of an economic act of war in one of the precipitating of events, which led to the, you know, kind of bombing of Pearl Harbor. So I think that's definitely a concern. And you can even see that coming up. We've noted that in some examples today, you know, I recall there was, you know, I recall there was testimony in Congress, maybe in this U.S. China Security Review Commission, one of the commissioners asked how they should interpret the fact that this is a couple of years ago, China is doing all of this stockpiling. Should we interpret that as them getting ready for war with us? Right? And that's a

concern, right? Is when you misread what the other side is doing in terms of, you know, not only their, their economic actions, which may be trade warfare, but even the preparations, right? Stockpiling could just be a normal thing that you would do to protect yourself, right? But it could also be misinterpreted or maybe properly interpreted. Or misread. Or misread. Right. Like you may, like you've said that are not exactly the most transparent country in the world.

Who knows if you've got the right information? Yeah. No, exactly. And that's where, you know, again, you know, I've, you know, I've, I've criticized the administration a fair amount on a lot of the economic stuff, but I do want to give them credit for really, really trying hard to have leader-level meetings, you know, despite the conflict in Iran recently that kind of push the most recent meeting between President Trump and President Xi for a while. I think it's really, really important to have those open lines of communication so that there aren't, you know, serious miscommunications that could come up, especially when you do have. a system that's as non-transparent as the Chinese one. Can we get into the future here at the end of the conversation?

Maybe ask you a couple of weird questions. So I know that one thing that China is very interested in is kind of automating labor robots. Do you have any sense of how far along they are on that and what the economic impacts of that might be? It's hard to get data on it. But obviously, you know, AI and robotics have been an area of China's industrial policy strategy for a long period of time. And they're now amongst, you know, the global leaders in robotics.

So the economic motivation for them and why this makes sense. is the shrinking size of their population. Demographics means in order for them to continue to be growing and have productivity increases with a shrinking labor force, they need to increasingly automate things, right? And so it makes sense for them economically to be pushing in that direction. the challenge is going to be the sectors in which they choose to emphasize that. So, you know, again, we're just thinking out loud here.

But if they make major advances, for example, in automating what are traditionally really labor-intensive sectors like garments, right? So forever, clothing, we have not figured out a way to be able to sew clothes. with robots, right? You still need a lot of people to make the clothes that we wear. And that's incredibly important because that has been the path to economic development for countless countries now, right? This was, you know, the United States in Europe, in the whatever, 17, 1800s, 1800s, Japan, Korea, and their miracles in the mid-20th century, you know, Bangladesh, India, a lot of the progress they have made is largely on the, back of labor-intensive manufacturing like that. Now, if China somehow miraculously comes up with

the robots to make it so you don't need people to do that kind of work, the negative implications of that could spill over to these other countries, which haven't yet developed, right? So if you can think of sub-Saharan Africa, which is the next set of countries on the development ladder, the ones that would be doing that kind of work after China finally vacates that those kinds of sectors to move in. into the higher tech stuff as it's been doing more recently. China finally gives up footwear and clothing. It should go to Africa.

But if China's figured out how to automate it all, right, then maybe it never does. And then you've got to think about, wow, if you're Africa, what's your path to economic development then if that traditional one is no longer available to you? So anyway, that's one example. In the book, we don't go through that in the book, but we do paint some different scenarios about how the trade war might ultimately play out. And there we imagine ones where China comes out on top, right? It overcomes the challenges of its debt problems, of its demographic problems,

of its bloated, you know, state-owned enterprises and subsidies. It figures that stuff out. And it's the one that comes out on top. We imagine a scenario where, nope, that's not the case. It's instead it's the United States and the West that they come out on top, right? And then finally, we imagine a scenario. And again, this is not tomorrow, right? We're thinking more like 2050 here.

a scenario where we all do kind of figure out how to come together. We realize China system's not going to change. We're never going to make them a market-oriented democracy. But we can figure out a new economic system to engage not like we had been under the WTO, which really didn't work with China, but in a way that is more sustainable and that addresses the fundamental challenge that we have of this market dominance doesn't allow us to have those sort of things build up again, but also doesn't force us to live in this constant state of tariffs and other sorts of trade wars as well.

Do you use AI for anything? Yes and no. I mean, yes, I mean, yes. It's interesting. AI, for what I do is actually kind of more of a hindrance. than a help at the moment. So I kind of have a very niche expertise, right? And the challenge I often have is cleaning up what AI gets wrong in my field.

And so AI gets maybe 80% of the stuff right in my area, but the last 20% it gets exactly wrong, but everybody believes it. And so I have to explain why it's wrong. So that really, at the moment for me at least, is what most of my time with AI is spent dealing with. Now, you know, in terms of a researcher, AI can be incredibly useful as a, you know, I found it to be incredibly valuable as a really sophisticated version of Google, right?

When you're doing historical archival research, for example, we're looking for quotes of, you know, crazy things that parliamentarians in Australia were saying in the 1980s, in response to them, Australian, you know, wheat prices falling because the Reagan administration pivoted and suddenly decided to sell wheat to the Soviet Union, right? So I was curious, well, did any Australian parliamentarians get upset about this? You can set, you know, chat GPT on looking through the archives to find that kind of stuff. Now you have to verify it and, you know, actually then make sure that it's right and double check and triple check and that kind of stuff. but it has the ability to, you know, assist research in ways that I think are useful for scholars and

writers and researchers there. But it's faster to triple check after it's found it and you kind of know where it is than it is to go searching through the archives yourself. Exactly. Yeah. I wouldn't have known where to start, right? I'm not an expert on, you know, state level parliamentary debates in Australia and where to even find that work, right?

So it got me there relatively quickly. And then the triple checking, you know, was maybe another hour's worth of work. Do you have concerns or what are your thoughts about how much of that stuff is driving American economic growth right now? And I'm particularly thinking about like data centers, which I think have become an enormous like local level fight that I think people did not quite see coming. And I think it's it is one of these things where. you need them right now, but they're going to take a lot longer to build that I think some people are prepared for.

What do you think the effect of all that is going to be? Yeah. Multiple effects. I think the first thing that I will say that folks may find interesting is, you know, as a trade nerd and a trade nerd, you know, data nerd, what I was really fascinated in is what happened to

U.S. imports last year in 2025 in response to all those tariffs that President Trump imposed, right? And again, he imposed on tariffs on the world. And you would think that that would mean imports would fall. The U.S. would stop importing as much from the rest of the world. Actually, U.S. imports from the world last year increased. So then I thought, oh, my gosh, why did they, you know, where was that coming from? And it turns out a lot of it was coming from products that had been excluded from the tariffs, but where it was really coming from and the products that were excluded from the tariffs that were most important were products related to AI. So there was a massive amount of U.S. imports from Taiwan and Mexico, right? And now we all know. Yes, it's Nvidia and AMD,

American companies that design the chips, but they're all manufactured at TSMC in Taiwan. And then they're assembled onto printed circuit boards and racks that go into the data. So all that stuff is either done in the assembly is done either in Taiwan or Foxcon, these Taiwanese companies have also set up facilities in Mexico to do the assembly. And then they ship it into the United States. The point is that you strip that data out, right? Take all the AI related imports out of the U.S. data. And U.S. imports actually fell last year, right? So it wasn't as rosy a story as it turned down to be. And that's just one example of where what's happening now with AI, whether you're talking about the trade numbers or the economic activity numbers, economists are still grappling

with how to interpret what it's going to mean and then forecast what the implications are ultimately going to be that be for the future. But I will also say as somebody who has children, very worried about what the future of work is going to be in the world of AI too. So it's definitely something it. Every podcast, we need to be asking and answering the question. What have we learned since the last episode to keep us up to date? I don't know. I think that there is, it is a bubble of some sort, how much of it retracts and is left over at the end of it. I don't know. But I think there's a lot of stories just this week about, and last week about companies learning how expensive their token costs for some of this stuff are and pulling back,

and it's not as good as they thought it was. You know, it's still useful for a lot of things, but I think that it's been oversold. And I think the infrastructure is going to be a little bit harder to build than people were expecting. You know, you can only build nuclear power plants so fast. Yeah, exactly. The book is How to Win a Trade War,

an optimistic guide to an anxious global economy. Sir, thank you so much for coming on to Angry Planet and walking us through this. Thanks for having me. And I promise it's optimistic in the sense that there are a lot of jokes in there to help you get through it. They may be bad jokes, but you'll laugh at them either way. Thanks for having me. Thank you so much.