Big Technology Podcast - A Week of Trade War Chaos & What's Next For Tech

Episode Date: April 11, 2025

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. We cover 1) Ranjan's experience during the financial crisis 2) The uncertainty around operating a business today 3) Why bond traders are important 4) Could the U.S. position in global trade decline? 5) Was it the tariffs or the rollout that's causing chaos? 6) Why Apple manufactures in China 7) Exposure of Amazon, Apple, Microsoft, Google, And Meta to tariffs 8) How this might end --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [e-mail]

How exactly will the trade war impact tech? And will it actually keep going for much longer? We're going to go deep, really deep into everything that's happening on a Big Technology Podcast Friday edition coming up right after this. Welcome to Big Technology Podcast Friday edition where we break down the news in our traditional cool-headed and nuanced format. We have a massive show today. One topic, we're going to talk about everything happening with the trade war,

how it's changing the economy, whether it's possible to roll it back, whether it is actually going to be rolled back and how it's going to change big tech. We're going to cover all these topics and more going in depth on the biggest story happening in business and in politics and in economics today. Joining us, as always, to do it is Ron John Roy of Margins. Ron John, welcome to the show. Oh, man, what a week, Alex. And it's only 2 p.m. on a Friday right now.

So we got a lot of road ahead of us. I have to say I was on a trading floor in 2008 during the global financial crisis and I think I stared at charts more this week or as much as I did then more than any time in that entire period. It's been, it's been insane. Okay. So what did this week feel like compared to the global financial crisis in 2008? I mean, obviously not the same thing. But talk about the vibes? In terms of the vibes, I think, so in 2008, I would say the big difference. Like, I was at Bank of America as an emerging market derivative trader. I was called in on Lehman Sunday that night and I went in and we were up all night. And at that time, it really felt like the entire

banking system could collapse. Like those of us sitting there really were wondering, could people's checking accounts be broken a few days from now. I think none of that is there right now. This is something completely different. But in terms of the price action, in terms of the way different asset classes interact with each other, this is something is completely off and broken. And I think you saw that all over media, social media this week. People are starting to smell there's something underlying that feels a bit broken. I want to get to what that might be. but first I want to talk through the state of play. So this is from the Wall Street Journal.

It says a closely watched survey showed consumer sentiment souring to one of the lowest levels in a decade as fears of a recession build. Respondents also say they braced for prices to surge 6.7% in the year ahead, a level of pessimism about cost last seen in the inflation racked early 1980s. A top central banker, New York Fed President John Williams, warned growth could slow below to below 1%.

while inflation and unemployment would both pick up. Jamie Diamond from J.P. Morgan said the economy faces considerable turbulence. And on Friday, China boosted tariffs on the U.S. to 125 percent and scoffed that further levies by President Trump's administration's administration would be seen around the globe as a joke. Of course, midweek Trump paused many of the tariffs, just not the one on China, and has set this 90-day window. to negotiate with other countries potentially for adjusted free trade deals or adjusted trade deals. We'll see how they turn out. Ranjan, what is your, first of all, what's your reaction to what's going on? And then we're going to get to what you think might be wrong underlying all this.

All right. So in terms of what's going on right now, it's the uncertainty. It's the chaotic nature with which this was all unrolled. Even what you just said right there about the pause, Speaking to people in the world of supply chains, there was a lack of clarity over whether the 10% universal tariff was actually going to be administered immediately or whether that came after 90 days. And only after a lot of clarification and research did people find out, no, there's a universal 10% tariff already in place on all countries. The 90-day pause was only on the bigger reciprocal tariffs like the 46% on Vietnam, etc. So already separate from China, there's a complete lack of clarity and understanding among the people who actually have to operate supply chains among border officials, among customs officials, and trying to operate a business in that, I mean, anyone can imagine, just is near impossible to even make strategic decisions around should we diversify more out of China, how should we react to this, it's impossible. That's just on Wednesday. My other favorite moment of the week was the 125% on China was actually 145%.

I mean, the scale of change in those two numbers when it's coming to the amount of trade that takes place between or from China to the U.S. And again, it had to be a clarification from the White House, and it was unclear whether they were even clear themselves over what the exact numbers were. So I think what we're seeing across markets this week, it's hard to have a real discussion over our tariffs a good thing. Does manufacturing need to be resured? You know, what's the impact on the American middle class? What's the impact on American national security? I think those are all very reasonable discussions to have, but that's not what's happening right now. Right. And so we discussed all of the reasons why the administration might want to levy this tariffs when we had Ryan Peterson and Adam Parker on Monday. But you're right, there's been

something about the rollout that's just been so bungled. Just to speak with you real quickly about this, what happens to companies that are shipping cross borders when there is this level of uncertainty? You have to imagine the first tariffs are announced on Liberation Day. I think that was exactly 11 or nine days ago. Someone is going to be doing some projections over what does this due to our overall supply chain cost, trying to figure out some kind of actual numbers that go along with those announced tariffs. Then it all changes, then you have to completely shift,

and then it all changes again, and then it all changes again. So on one hand, I mean, you could argue, it's clear that doing business with China is going to be very difficult, if not impossible, in the coming months. Until there's some kind of deal, like bilateral trade between America and China is essentially going to stop. So how does that affect a business?

Do you actually change your entire supply chain, which can take months, if not years? I think those are the decisions that like retailers, you know, hardware providers, all these types of companies are going to have to make in the coming weeks. But trying to make that kind of decision in this kind of uncertainty, it's impossible. Okay. You said earlier that you think something might be wrong underneath this all. What do you mean by that? All right. So I have to say I had not been on Twitter that often and have been more on blue sky. We've debated this. Twitter slash X is definitely back in my life. Finn Twit was on fire this week. But the big story was normally if stocks are going down, bond yields should go down. The price of treasury should go up. It's just like, you know, one of those econ 101 relationships that you learn. And explain why that is.

If stocks are going down, people want to shift the stocks that they're selling, shift that money into a safer asset. And the U.S. Treasury, U.S. bond market has been the safe haven for 30 to 40 years now, if not longer. And it's just that's where your money goes. And if you're buying treasuries, then the yield will go down. They have an inverse price and yield relationship. Bond yields not only went up, I mean, they, I was just a Tuesday night before the pause.

I mean, I'll admit, like, I could not get off Twitter. Joe Wisenthal at Bloomberg was on it. Zero hedge I'm watching. Everyone's like 442, 443, 447 on the 10-year yield. But these are such small, so explain, because these are such small increases, why are they meaningful? Well, no, a basis point in treasuries. can be a meaningful thing. When it's now 55, 60 basis points in a matter of days,

it was at 390, I think, on Monday. That is a massive move. And for that to happen at the exact same time that stocks are getting hit, it just doesn't happen. Or it means that traditional financial or economic relationships are not working as they have for a long time.

And again, the simplest explanation nation, U.S. Treasuries are no longer a safe haven, that that's not the knee-jerk reflex that everyone who is a trader will take. And it seems kind of clear, yes, U.S. treasuries don't seem so safe when we're running a large deficit anyways, but now throw on political instability on top of that. But to see that actually happening, I think that's what have everyone worried. So basically, like, we have this entire system and potentially, again, an over-financialized system, but it's been working. It's been working very well for us.

And if that starts to break, we have no idea where that leads to or what it looks like after. Okay. So I have so many questions to ask you right now. First of all, when it comes to the bond yields, right? So this is something, just to talk about the magnitude of it. This is Wall Street Journal reporter Nick Timmerous, quoting Evercore ISI. Yields higher, currency lower is common in emerging markets, but it's highly abnormal for the U.S. There are only four other episodes in the last 30 years in which the dollar appreciated more than 1.5% with the 30-year-old year yield up more than 10 basis points.

It reflects evaporating U.S. growth exceptionalism. All right, let me try to translate this all into English, right? So we're seeing three things happen, really. Stocks are falling. The bond yields are increasing as bond prices are going down. And the dollar is falling. But the thing that I feel like is worth you unpacking for all of us is, again, these are small fluctuations. Right. So it is, you know, going, the bond rate going from like 4.6 to 4.8 or something like that. Just explain what a movement like that actually leads to in practical terms. U.S. treasuries are the safe haven, you know, asset. So if it means that going forward, people will not move towards the U.S. treasuries when there's a moment of panic, then it starts to challenge the entire notion of the dollar as the world's reserve currency,

U.S. treasuries as the world's safe haven, which is a company. completely different paradigm than we've lived in for so long that, again, it introduces an entire level of uncertainty that we don't know what's going to happen. And again, I traded emerging markets. This was the common trap that emerging markets would get into. Their currency would fall. Their yields would rise and their stocks would fall. And what they actually had to do at that time would be to hike rates to combat inflation or to try to strengthen their currency again. And it's the U.S. were all hoping and waiting for J-Pout to come in and cut 75 basis points. And if we're actually behaving like an emerging market, that's not how it works. So are, like, is the fundamental way the U.S. financial market has been built over 40 years? Is that gone? Is it gone tomorrow? Is it gone in a year? I think that's the thing that is really concerning and really has people wondering, where does this end? Okay. So basically what we want to see is if people are selling stocks, they are going to move to bonds because they trust the U.S. to eventually pay those back.

Yep. But if they're selling stocks and they're selling, selling bonds, then they're just basically trusting some other financial system and moving their money out. Yes, and we're seeing Italian yields are dropping, German yields are dropping. The euro was up, I think, 2.6%, which is a huge move for the euro. The Swiss franc was up 3.5%, which is a huge move in currency. So it's not only that we think they're going other places, they are going other places and we're seeing it reflected in the prices.

Okay. So let me ask you this. Now I just want to get into implications or what's led us here. Do you think there's like two possibilities that we could be looking at? Is it the policies themselves, the tariff policies themselves, or is it the way that they've been rolled out? We started this conversation talking about the need for certain. for businesses and now we've seen the tariffs come out and then they've gone back and they're

paused but they're higher for China and they're lower for these groups. Is it the rollout and the back and forth, the whiplash of it or is the actual policy itself? Because the reason why that matters is because if it's just the policy, then Trump could basically say, just kidding and everything goes back to normal. I think it's the rollout. I do because it's difficult like most economic relationships, I feel, tariffs could go either way. Either they actually would raise revenue if implemented in theory correctly, and then that could decrease your deficit, which makes your treasuries look more attractive. On the other hand, they could be inflationary. And we're all talking about, are they going to be actually raising prices, which is a net negative, potentially bad,

certainly bad for your stock market, also bad for your bonds as well. So that part could go either way but that stuff would play out over time like even the producer price index today came in pretty weak and that's data from March which is good it means inflation is actually slowing as of March so those kind of numbers should mean that everything is kind of okay right now so that's what I think makes it very clear that from a market's perspective it's the rollout and we all feel it we all see the headlines right but in some ways the role rollout is, it's an even worse answer than the tariffs themselves. Because it was just the tariffs, you could say, just kidding, and everything snaps back to normal right away. But if it's

the rollout, what the rollout really means is that the globe is going to lose some trust in the U.S. economic system. Now, I'm not suggesting. And it seems like you do believe that this is a possibility that the system that the U.S. has basically dominated, being the reserve currency, being the global superpower is under risk. I'm not suggesting that it's under risk. I think maybe it takes a small hit. But is that sort of the problem with the rollout being the issue here versus the actual policy? I think both the rollout, but also it is kind of the stated goal that the U.S. dollar is not the reserve currency

and that we do detach ourselves or isolate ourselves from the world. And trade is a zero-sum game. and, like, we are going to remove ourselves from a lot of engagement and relationships in the world. So I think the overall kind of like the Stephen Miron paper from 2024, a lot of people have talked about, who's one of the economic advisors for Trump, was about restructuring global trade. Like, there's a lot of people who have reasonable, rational, academic arguments about why the current global trade order is bad. But I think still, it's just the chaos. I mean, it has to be like when, and we're definitely going to talk about a lot of those amazing moments from this week, but I think we've all seen and felt the chaos this week. And if you're an investor, you can't ignore that.

Okay. And then talking about the U.S. dollar falling being part of this plan, basically the idea is that if U.S. dollar is strong, it's hard for the U.S. to export. And if it falls a little bit, then U.S. will be able to sell exports outside of the country. Is that basically the idea? That's definitely part of it. And again, I think that one falls into the bucket of reasonable, rational, economic textbook arguments. Again, China has in the past, I mean, they do manipulate their currency, and plenty of countries do. I mean, the word manipulation is strong,

but manage their currency to promote domestic exports. So I think that is exactly one of those that the dollar weakening could be part of the plan, there is a coherent one. So I think that if things were actually done, again, if on Liberation Day we got 10% universal tariffs and a hard hit on China, where we ended up a week later, I think everything would be different. Now, when I finished recording on Monday with Ryan and Adam, we waited like a couple days and then all of a sudden on Wednesday, Trump went back and said, we'll do this 90-day pause. And it seems like now they might be open to speaking with China.

And I just kind of like sat back and said so many times when this administration or the Trump administration has made these big pronouncements and plans, they've tended to water them down. And I do wonder if we are sort of getting in a huff over nothing. Now, obviously, there's clearly something here. But, you know, as I introduced this show, I asked, what are the chances that this is going to stick? is this just going to be another memory when we look back a year from now? Because you remember, the beginning of Trump's first term started in chaos. And so is this just one of those beginning of the term things that we're going to look back in a year and say, well, that ended up being nothing because he relented and said, you know what? Like, we will roll back our 125% tariff

on China. And we want to have free trade with the EU, et cetera, et cetera. What do you think? Yeah, I've thought about that a lot because, I mean, Signalgate and the entire, the Atlantic accidentally being, you know, invited to a chat group about the Houthi missile, like launching missiles at the Houthis, I think that was two weeks ago, and we've already forgotten that. So there's a world where does this fall into the archive of random things that happen? But I think that's why, and if listeners, you know, you see stuff on social.

social media, you see headlines about the bond market is like the ultimate arbiter. The bond market is like the rational, sober actor. My favorite was a tweet that said, seeing the bond guy's panic is like seeing your parents cry as a kid. You don't understand it, but you know it's bad. I mean, this is why I think that has everyone in a real panic is because stocks moving up in individual stocks moving up and down what happens the market or the index is moving up and down a bit chaotically certainly happens but when the bond market keeps moving in this direction that does not fit into previous narratives and it means something's changed like the bond market in aggregate when it moves in this kind of way it means something more serious is happening so

then you picture what if one month from now we did 75 deals we you know had a great deal with china we're removing all the exports still for any individual business how do you plan around that like do you do you actually move your supply chain out to another country do you move it back to china do you just resume are we on like an entire economic pause right now those things in that kind of uncertainty just don't go away with a snap of a finger or a truth social post. I mean, so I think it means that the bond market recognizes there's genuine economic pressure

that's at least going to outlast how long this specific episode of the TV show lasts. Right, and we can talk about that in regards to the way that big tech is going to change its plans or might have to change its plans. And I think that is going to be one, I would say important illustration of the economic consequences that this could have here. But I guess like to take your answer, it's there's no real just kidding moment at this point.

The ball has been set in motion and shit is going to happen. Yeah, unintended consequences, however you want to think about it. It's like you said right now, you know, the EU has proposed one potential countermeasure is that they're going to tax big tech more in, you know, Europe. If you are any of the MAG7, does that, do you change your EU strategy today? I mean, a lot of these countries, companies are making hundreds of billions of dollars in these markets. Do you change on the threat that that might happen? If, as of today, we snap our fingers and say, actually, everything's okay, do you still assume that once they've threatened

this and this is on the table, this is not going to be there for the next four years? So I think that's where you see, like, this has to change the way everyone plans and or doesn't plan. Okay, so I think that we should just take a moment to talk about just one, just let's give a minute of airtime to like what the Trump strategy is here because they could say, listen, like we're going to the U.S. trade imbalance was unfair. We're going to take this moment and we're going to try to negotiate better deals with our trade partners. And what if they do come out of that 90 day period and end up with.

better deals. Yeah, I think obviously the defense is come out with like insane tariffs that are kind of like, I mean, just so over the top and then that's a strategy to start trying to bring them down and have all these one-off deals or individual deals. I think there's a world where yes, if you could show that now all these different countries, especially the bigger trade partners, you have negotiated significantly better deals, then, yeah, there's a world where that actually is good, and maybe countries and companies start to feel like they can actually start doing things again. But, I mean, it hasn't even been defined what is a good deal. And I think that's actually been one of the most telling parts of this. When Vietnam came back and said,

we'll move our tariffs to zero, you have Peter Navarro saying that that's not enough. It's still about currency manipulation. And we just talked about the Chinese UN and how they manage the currency. Do they have to free float the currency, which has never actually been the case? Like, is that going to be a demand? So I think it still leaves a certain level of uncertainty because we don't know what a good deal is. Okay. So we've spoken for about the entire show already, as if this is going to be like a psych moment from the Trump administration or at least a negotiation moment. But what if that does actually end up leading, this does actually end up leading to these tariffs sticking, like what is going to happen to big tech? What's going to happen to the economy?

So let's start with the economy and then we'll go into a few examples with big tech in particular. So Ranjan, turning it back over to you, what happens if these tariffs stay on? I think the first question is for any supply chain or manufacturer, where do you go? And like, do you actually take that multi-year impact decision to shift? Which, I mean, in reality, has actually been happening to a great deal since Trump's first administration. Like Nike dramatically diversified their manufacturing from China to Vietnam. Probably every big retailer had some kind of strategy, especially American retailer for diversification. If this sticks, they're going to have to do something.

I mean, from a pure supply chain perspective, you cannot manufacture in China anymore. Does that mean there's a lot of speculation over, and in the past there's been it's called trans shipments where basically they move stuff from China to Vietnam, and then the product comes from Vietnam to the U.S. to avoid duties and tariffs? Do you see a lot more of that, maybe? But I think it's going to, if they stick, it forces a massive rethink over every company, with a large supply chain, the apples of the world, the Teslas of the world, whoever else. Yes. And now we can get into big tech and what that might mean. Because as we know, big tech has a large reliance, a serious reliance on producing products within China,

producing products overseas. And yes, you mentioned Apple. And Apple is an important one to start with because they are deeply reliant on China and Vietnam and India, but really China. Let's take a minute to hear from Tim Cook about why China has been so important for Apple. There's a confusion about China, and let me at least give you my opinion. The popular conception is that companies come to China because of low labor cost. I'm not sure what part of China they go to, but the truth is China stopped being the low labor cost country many years ago. The reason is because of the skill, the quantity of skill. The quantity of skill in one location and the type of skill it is.

Like the products we do require really advanced tooling and the precision that you have to have in tooling and working with the materials that we do are state of the art. And the tooling skill is very deep here. You know, in the U.S. you could have a meeting of tooling engineers and I'm not sure we could fill the room. In China, you could fill multiple football fields. Okay. So that is Tim Cook on why Apple has such a reliance on China. And I think it's important to say that it isn't just the cost of labor. It's the expertise. And any way you look at it, whether Apple moves manufacturing to another country or whether Apple brings manufacturing to the United States, it has become so reliant on China, not just because the systems are set up there, but because the expertise that Cook speaks about is there. that any change to its operation which Cook has meticulously built for for many, many years, a decade plus, that's under threat. So what's your reaction to that, Ron John? Yeah, I think Tim Cook makes a really important point there that the assumption, at least in the

arguments of kind of the overall Trump rhetoric is China is just low cost. But he's correct. I think even in retail, you see that certainly in hardware, you see that. There is an expertise piece in the manufacturing and engineering that's been built over 25 years or even longer than that. So I think when we're talking about what can businesses do, it's a really difficult discussion because those skills might not exist in Vietnam or India or certainly in the U.S. So you can't just shift stuff around. And then also, I mean, on the Apple side, they made $67 billion in China last year selling

products to Chinese consumers. so does that just go away as of today it certainly feels like at this exact moment for the next few days till a deal is struck that revenue is gone so i think i mean apple is going to get hit on both sides here yeah and so it was almost a necessary risk that they had to take but we always have said even on this show in particular that it was always going to be a risk for them to be this close to china and now it seems like that's playing out now look i think you and i both believe And you correct me if I'm wrong, because I'm speaking for you here, that China and the U.S. are going to figure out a way for Apple to continue to operate in that country.

It's just too important for both of their economies. You know what? I think I disagree. I think like there is a world where, and we've just become so used to the idea that that is how it works. And there's a world where it doesn't work like that. Like maybe everyone's got a Xiaomi phone. They're actually pretty good. I kind of want to get one of their foldable phones.

Like, you know, there is a world where Apple is selling $67 billion of products to China. Maybe they're not, you know, like it's still not, I mean, it'll hurt them significantly. But they, Facebook and Twitter and all these platforms are banned. China does, I mean, that's the kind of ironic part of this whole discussion is for years I've actually been saying, you know, Chinese behavior and protectionism is often unfair. There's a lot of unfair trade practices. Economic conflict with China is one of the biggest issues and threats for America to deal with. So it is ironic that that is being dealt with, right?

That it's happening. I should be a little bit happier. But yeah, I definitely think there's a world where TikTok doesn't exist in India. Like there's plenty of economic borders that have been put up around the world. that we just kind of, because in the U.S., we do have such a free market that we forget about, but that could, Xiaomi phones for all, everyone's got a green bubble on their eyemessage for if you're getting messages from someone. Well, the Chinese government has banned iPhones in government offices, so we know that.

What's going to happen if Apple, though, completely goes? Because remember, it's not just not being able to sell into that market, which makes up 15 to 20, of its sales, but it's potentially not being able to produce there. Let's go to somebody who really has his finger on the polls here of what Apple is doing in China, and that's M.G. Siegler. I'm just going to read a little bit of his piece Trump throws Apple under the tariff bus. He says, Tim Cook may have put in the legwork and money to try to ensure that Apple was in the best possible position with the Trump administration, but at the end of the day, the president undoubtedly sees the world's most valuable company, or second most valuable company, because it did fall over the past.

as his greatest bargaining chip when it comes to China. Because Apple is so heavily embedded in Chinese manufacturing when it comes to the most profitable product on the planet, the iPhone, Trump must view the dynamic as not just important to Apple, but important to China too, and he's not wrong. There's no way Apple can or will move manufacturing to the U.S. They might move a small subset of the process or give some lip service about considering it to appease the president, but it will not happen because it cannot happen. Such a move would destroy Apple as a company that's not hyperbole. It's their most important and profitable product. Destroying the margins, as would have happened to, in a move in the U.S., as would

happen in a move to the U.S., would cripple the company as it stands today, at least on the stock market, and jacking up the price as would be required to maintain those margins and manufacture in the U.S. would probably destroy them. People love the iPhone. A lot, few people, fewer people are going to love the iPhone that cost $300 or $3,000 or $4,000. I mean, basically what M.G. is saying is that Apple cannot continue to operate if it moved to the United States. Now, maybe it moves to Vietnam. And that's part of this decoupling. That's always possible. But again, going back to what we just heard Tim Cook say about China, it's going to be some fairly important stuff for Apple to resolve and potential. I mean, what M.G's saying is it's existential to the company. 100% agree to existential. I think the way to think about this, and this is for a lot of companies out there, the business as it exists today, as every analyst has built any kind of financial model around it, what their margin structure looks like,

what any kind of growth forecast looks like, all of that completely gets demolished if this sticks. And not to say that Apple couldn't reinvent itself, reinvented supply chain. maybe make Siri work a little better, whatever. You know, like maybe they figure something out, but the business of Apple today is not in any way the business of Apple five years from now, if this sticks. Tim Cook has just had a horrid 2025 so far. Yeah.

The disaster, that is Apple Intelligence, this tariff thing, which is even worse, which is amazing. We were talking like the Apple Intelligence was existential. Not being able to make the iPhones, I think would be even further. of a problem. So terrible. They're down 18% of the year even after coming up a little bit today. So very bad for Apple. I think a lot of this might hinge on Apple and I wouldn't be surprised to see Tim Cook get involved in the discussions. Another company that this is very bad for is Tesla. And Elon Musk has been, I don't want to say absent on this, but he was a central figure in the administration from, let's say, January 20th to April 1st, maybe second. And then we start to hear things about he's going to, you know, go back to run Tesla.

He's not going to be as involved anymore. And this central voice of support for Trump has now become a detractor to the tariff policy. And he's called Peter Navarro, the aforementioned Peter Navarro, some very bad names on X. What is the implication for Tesla? Because Tesla also has supply chain and also a market within China. So this is one moment. I will be a bit more generous with Elon Musk and Tesla. The one advantage they have is they can manufacture in China to sell to the Chinese consumer. They can manufacture in the U.S. to sell to the American consumer.

Now, there's a lot of debate over how many of the parts are really coming from the country of manufacturing. Like, would they have to pay duties on some parts of the car? are there some other implications? But relative to Apple, they're a little better set up. But I agree. I mean, still, they made 20 plus percent, I think, of their overall revenue from the Chinese consumer or the Chinese market. Everything goes under threat if this stuff sticks. But him being silent has been quite something to watch, I think. Do you think he's going to come out a bit stronger soon? or? Well, it's not exactly silence. I mean, he has spoken against tariffs, but he hasn't been because he had been so loud and so amplified by the White House for so long, it does feel like he's being quiet, but he's not. Now, look, he's definitely anti-tariff. We know that. Now, listen, he might also say we already make Tesla's in the U.S., so we won't be impacted. What do you think about that argument?

No, no, that's definitely what he is saying. And again, that's, why it's true. So they're better positioned than Apple, I believe, but there's a lot of question again over what would apply to them. And I think that's the problem with so much of this is unclear. Like, are certain components going to be tariffed within a Tesla? There's no way, are the rare earth minerals that are going into making the battery? Could that be as a like a cost input tariff? So it definitely still would affect it and change it. And I do love the fact that I just said he is being quiet in any other world

would him calling the chief economic advisor driving this policy from the administration Peter I'll say it I mean it's it's newsworthy he's called him Peter Retardo like that is what he said there we go I mean in any other world

that would be screaming loud and like throwing a fit and I just in the world of Elon Musk he's actually being kind of quiet and civil about all this Yeah. Well, I think he's probably very anti. I think that he just can't. I mean, if he was pro, he would be defending it. He's not defending it. So he's probably anti and just realizes that his relationship with Trump might be at risk if he speaks up. Okay. Now we have some other companies that you did this ranking of the Mac 7. Tesla and Apple equals screwed. Okay. Negative is meta, Apple, and Nvidia for. advertising and supply chain reasons. Do you want to share a little bit more about that? Yeah, Meta Amazon and NVIDIA. So META solely on if recession comes, advertising is the first

market to be hit very severely. So I think... Wait, hold on. I'm going to stop you there already solely. I mean, there's so many Chinese products that are sold with meta ads. Yeah, sorry. There's going to be an immediate hit. Okay, no, no, that's fair. That's fair. And actually, yeah, sorry. Yeah, and Sheehan and Timor have been, I think, 2023. It was something like 15 to 20% of overall advertising revenue was from Chinese advertisers. So yes, okay, so it's both immediate and medium-term negative. Amazon, and they, Amazon is actually like, seems to be pretty calm about it. We all, most people know, they have very heavily moved towards lower cost Chinese suppliers.

And kind of, that was like a big strategic move that worked out really well and allowed them to compete on price against Xi'an. in TEMU, that could definitely have short-term or medium-term consequences. And Invidia, again, the uncertainty around the supply chain, any kind of downturn from any of these companies, AI spending could be the hardest hit in AI investment, or at least hit hard, and it'll change the trajectory of the company. So they're all kind of medium. This is not good, but it's definitely not existential for any of them. Yeah. I mean, Andy Jassy had the most CEO. line. This week he said that the company made strategic forward inventory buys, which basically meant that they were basically shipping pallets of Chinese goods to the U.S. as fast that they could

before the deadline. And Apple was doing the same. Apparently Apple this week loaded 600 tons of iPhones on to cargo flights from India and rushed them to the U.S. So there's definitely, even if they seem common in the exterior, they're taking pretty extreme actions to get around or to try to get ahead of this stuff. And then you have Google and Microsoft as okay. So talk through that part. Yeah, I mean, Google is suddenly benefiting from never really being given much access

to the Chinese market. And so they are relatively okay in this. There's no large piece of the business that I think is like a recession certainly will affect them. And I think Microsoft falls into relatively the same bucket. They have a bit more active business in the greater China region. but overall, like, those two businesses are probably the most decoupled already.

They're not selling really physical goods, maybe the pixel and other devices for Google. But, like, it's a, I think they're sitting relatively pretty short of a recession. And on a relative basis, very pretty. You're talking, though, about China, but what happens if the EU decides whatever's happening is not to their liking? Because they're talking about some unprecedented stuff. This is from the FT. The EU could tax big tech if Trump trade talks fall. The EU is prepared to deploy its most powerful trade measures and may impose levies on U.S. digital companies if negotiations would Donald Trump fail to end his terror for against Europe. The European Commissioner President Ursula von der Leyen told the Financial Times the EU would seek a completely balanced agreement with Washington and what is going to happen if that doesn't get pushed through.

She says, we are developing retaliatory measures. There's a wide range of countermeasures in the case negotiations are not satisfactory. An example is you could put a levy on the advertising revenues of digital services. I think this is going to become increasingly popular among countries that are negotiating with the U.S. Basically, so far, the tariff discussion has been goods for goods. But what about services? And what the EU is saying is like, you're all right, you want to tax our goods? We'll text your service right back.

or we'll tariff your services right back. And now, of course, there is sales tax in individual EU countries, but they typically operate in places like Ireland where the tax is low and there's incentives to operate. And this could be a block-wide tariff. So what do you think about the fact that, like, clearly Europe and other countries have seen that tech is sort of the golden child of the U.S. It's the thing that powers the economy behind Trump at the administration. We're at the inauguration.

We're Mark Zuckerberg, Bezos, Elon, et cetera, et cetera, Sundar. And what they're saying is, all right, you want to tax our goods? We'll hit you where it hurts. We'll tax big tech. Yeah, this one is one of those reminders. So we have like first order consequences. Any company doing business selling to China, manufacturing out of China, other really trade-related things.

But then we start to get into these kind of second. in order more unpredictable consequences. I mean, like, every big tech company runs a lot of revenue through Ireland because I think it's a low or almost no tax jurisdiction. It's actually my favorite named tax strategy, the double Dutch sandwich. Somehow it's called that, like to move revenue from there. I think anywhere else in the EU, it gets routed through there. If they go and hit that stuff hard, they have leverage.

And as you said, you're exactly right that, like, These are American companies that have dominated our markets, dominated the globe, have powered U.S. financial dominance for the last 10 years, 15 years. So if they can really show some pressure and hit them, it's certainly a card to play at the table. Yeah, I mean, that is a big risk. The other, I wrote about this in big technology. So you could see that. And by the way, this was not even an idea a couple months ago.

And now it's being advanced by the commissioner of the EU. So like, okay, now all of a sudden this idea of taxing. services in the U.S. like we weren't speaking about it before. We are speaking about it now, talking about like long-term implications, even if you say psych. What do you think about? We've talked about this with Brian McCullough a little while ago about this retreat from US AI models that, you know, speaking of trust countries or companies in different countries might be like, you know what? Open AI seems fine or anthropic and Google seem fine, but we'd rather just like work on, let's say, a Chinese open source or a French open source model

because we know there won't be any trade trouble with those countries. I think that's a possibility. Yeah, it's certainly a possibility. I mean, I think it's almost the policies are designed to do exactly that. And there's a world where you have no other alternative, like Tim Cook's saying manufacturing in China and expertise, you're dependent on it. But if Mistral is there, if Deepseek is there, if Alibaba's open source models are there, then, and suddenly you're like, do I got to pay a tax on my open AI?

API bill of 20, 30, 50%, whatever it is, you're certainly going to change your investment decisions and where you start to actually build out your AI solutions. And then you think, is there long-term implications of that for the entire AI battles? Because whatever people choose to start building on in the next one to two years could very well be their solution for the next 10. So I think that threat from them has a lot of weight. You know, Ron John, isn't it crazy that like we were talking about a soft landing or a no landing? It seems like just a couple months ago.

And now all of a sudden there's just like total upheaval in the markets and the economy. Yeah, it's just one press conference and one chart. And that's it. That's it. It's incredible. So where do you think is going to happen from here? What do you think is going to happen from here, Alex? I think that there will be, I think Trump is going to have to try to find some way to declare victory.

I don't know if he's going to find it. I think the Chinese are ready. I don't know if you've seen. I've been dropping it in our Discord. But the Chinese have absolutely been cooking the U.S. on social media. Their meme game is top notch. Now, I'm not cheering Chinese propaganda, but I do laugh at it sometimes. is. I think that China is prepared. I think that there could be, there could be some pretty

ugly consequences here. I just don't, I think that Trump is, I don't know if you've seen the polls, but Trump has been about as far down on the economy as he's ever been in terms of trust. And that was always sort of his floor. And so he could eventually look at that and respond. I don't know. I mean, if you, there's basically two ways that I see this happening. One is Trump goes back on the tariff plan and fires everyone. Fires Peter Navarro, fires Lutnik, fires Bessent, and says, you know, these people pushed me into this. It was a terrible decision. They're gone.

The other thing that he says is basically, all right, we have to decouple from China. It's going to be painful. He seems like he's willing to risk a recession. And so he could basically ride it out. And I don't necessarily see the Chinese caving either. my hunch is because of I've been talking about this through the whole episode my hunch is that basically Trump goes back from this and China backs away and in a year from now we're talking about the same system we've always had because I don't I don't know I guess that system is just

resilient and that would be my best guess but I would be the first to tell you I have no idea I'll be the second to say I have no idea but but I think to me the central question is is exactly what you ended on. Can the system survive a walkback on this? And I have to think it can't. Like you already have the Spanish prime minister or president is in China today. She's going, Xi Jinping's going to Vietnam next week.

Like the global system's getting reordered and all of this could have worked if China was a target and like it was around building alliances, and then going after China and encircling them and, you know, like being really clear on that and doing it strategically. But I don't see how you go back from that. And then you get into the, I mean,

when you start looking on a medium-term time horizon, if another, like, administration is voted in with very, very different, a very different worldview, does anyone trust us again? Like, can you rebuild? Like, I think we're past the point of the American-led system of the last few decades, maybe even longer, I think it's gone.

And there's plenty of people who, myself, who saw certain problems in it. There's a lot of people who thought overall it was bad. I think overall it was very good. But I don't see how America specifically comes back to the exact same system. I think that there's a chance that everything just goes back to normal. Maybe I'm naive. but I think that world leaders will see Trump as a singular type of figure, a unique individual, and they'll take a look at the clock and say that, okay, he's got three years left,

and things will probably go back to normal after he leaves and plan accordingly. I was thinking about, I was in Paris recently, and my wife took us, my son and me to Disneyland, Paris. and it's like insane to me where you watch everything is Americana like it's the old west they even have like a whole Casey stengle baseball thing set up like and all these little French kids are just indulging in pure Americana nostalgia and like thinking about the soft power that was built over I mean that's like a century almost I agree there's part of me that's like could all of that really evaporate? in three years from a singular figure, that it seems difficult, but it's also, I don't know, we got a long way to go. We're only in April. Yeah, nothing's impossible. I was recently talking to someone about how there was this theory

that two countries with the McDonald's never went to war with each other, right? That was kind of like the cliche globalization is good theory, and then, of course, it happened and then happened again. So I think some of our assumptions might be gone, but I just think the system is resilient and the world needs it to work. And it has left people behind. I'm not going to deny that like it has. And there are, I mean, the idea of trying to mitigate its downsides should have been the whole way.

If the U.S. had gone down this route, the U.S. had gone down this free trade route, the idea of mitigating this downsides should have been front and center the whole way through. And it hasn't been. And I mean, think about like U.S. politics. over the past, I don't know, three decades. Clinton said it was the economy. Bush was trying to basically continue an economic, you know, the NBA president, 9-11 happens.

And then our politics become about wars, culture war, COVID, and more culture war. So I think that the United States has completely, like, let its eye off the, you know, come off the ball to use that baseball metaphor and has allowed itself to fall into position because its leadership has not been concentrating on what's important. I mean, the U.S. was central in establishing this free trade system in the globe, understood that it was

going to be complicated while it could help everybody. There would need to be work to help everybody and then it refused to do the work. And then people got mad. And, you know, the answer being then smashed the entire system down just doesn't seem to me to be the right the right mitigation. But we'll find out. I mean, you're right. It could all crumble. It's just there's too many people's livelihood. Like think about all these CEOs that have donated all this money. And I'm not saying their money should buy influence, but I'm saying it does. They are powerful. And the president does care about the economy. We know that. So if it's all going to fall apart, there's a chance that that their influence will eventually hold sway. Even the bond market,

right pushed Trump to the pause, nothing else. So he is influenceable and I believe he'll be influenced, but I'm the first to admit that my position might be naive. Trust in the bond market. That's all we can do right now. Fingers crossed. All right, Ronan, any final words? Any final thoughts? Yeah, I think what you're saying just had me thinking, like in the 2017, 2018, I actually, like, wrote a lot about being a recovering neoliberal and, like, actually trying to identify these things. Regular listeners know, like, Sheen and Timu selling cheap shit into the U.S. and flooding our markets and hurting our actual business, like American businesses and retail has been one of my biggest rants for a long time. I mean, that's a tough part about all this.

It's like there's so many of the kind of, like, end goals that I actually do agree with, but it's the broad, don't, I, I, I, I can't trust this process, the process I do not trust. You know, it's, it's so true because we've been talking some of the, a lot of the stuff, we've been talking about they're trying, they're saying they're trying to address, right? This idea that all this cheap shit is flooding into the United States and hurting businesses, totally along the lines of the Shian and Timu stuff. Scott Besson has even been like very clear in saying that like if you're, if you don't have an, like a strong income and you can buy cheap shit, you're not better.

off. And we need to basically declutter ourselves. And I think you and I both agree with this, this idea. Yep. Just didn't picture it coming from Scott Bessent of all people. I think is the, no, definitely. But just to see that the tactics have obviously been bad. And we're going to spend a long time trying to figure out why this happened the way it did. That's about as much you can say about it. It's April 11th. S&P's up one and a half percent. So is the 10 years. years up, yields are up about a percent. So Sunday night's a long, long way away right now. I know. I mean, we had the Friday show last week that was Mustafa Suleiman because we flipped our Wednesday and Friday show. And as we, you and I were texting all through the weekend

about what the hell was happening. I was just like, man, like we've got to get back on the air with Ranjan. So I'm sure we'll have a lot to speak about next week as well. All right, Ron John, thanks so much for coming on the show. Great to see you as always. All right. See you next week. All right, everybody. Thank you so much for listening. we'll see you next time on Big Technology Podcast.