Odd Lots - David Woo: What Trump Started is Worse Than a Trade War

Episode Date: April 24, 2025

For the most part, Americans haven't felt much pain yet from the tariffs that Donald Trump introduced (and then partially walked back) on April 2. The damage is highly visible in financial markets, but for the moment, shelves remain stocked, inflation measures have remained muted, and there hasn't been a significant wave of layoffs in official data. But according to our guest, real pain is coming. And what's going down is worse than a trade war. On this episode, we speak with the one and only David Woo, now the founder of David Woo Unbound. He also previously served as the Head of Global Rates, Foreign Exchange, and EM Fixed Income and Economics Research at Bank of America. He says that the administration has absolutely nothing to show for its initial months in office on any front. And he says this isn't a game of chicken, where one side can blink and avoid disaster. Instead, we're seeing a "war of attrition" where damage is being done to both the US and Chinese economies as we speak. As he sees it, the China hawks in the administration have been in control, and have the impulse to obliterate the Chinese economy, which makes the situation more than just a so-called trade war. He discusses the political, market, and real economy implications of this dramatic escalation. Read more:Trump U-Turns on Powell, China Follow Dire Economic WarningsA Bad Peace in Ukraine Carries Global Risks Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.

A lot of short daily news podcasts focus on just one story. But right now, you probably need more. On Up First from NPR, we bring you three of the world's top headlines every day in under 15 minutes. Because no one's story can capture all that's happening in this big, crazy world of ours on any given morning. Listen now to the Up First podcast from NPR. Bloomberg Audio Studios, Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenthall. And I'm Tracy Allaway.

Tracy, it is April 22nd. It is 1209 and 52 seconds as of the time that I am talking right now. Soon we'll have to do fractions of a second. Yeah, I know. The market is actually up today. We're recording this on Tuesday. We just got a headline. Apparently, Treasury Secretary Scott Bessent at a JP Morgan event in Washington said, Bessence sees de-escalation with China, situation unsustainable. That sent market surging. You know, everyone's looking for a little shred of hope, right? Or a little shred of optimism that, like, things could settle down. We get clarity, you know? That the two biggest economies in the world are going to go completely head to head.

Right. Like, because if, I mean, this is really the story, right? Even with the walkback on April 9th, the week after Liberation Day, even if, and we're not getting any deals yet, at least so far, we haven't gotten a deal with India. We haven't gotten a deal. We haven't gotten a deal with Japan, let alone the EU. But even if we got all those deals sometime in the next three months, and typically trade deals take like years to work out, there's still the fact of an economic rupture between the world's two biggest economies. Right. I think that's certainly a possibility. The one other thing I would say is, so you're right, stocks are up this morning because Bessent has been saying, you know, some mildly, potentially positive things on this issue,

but there is still this huge question of who would make the first move in this particular standoff. And I think it is a standoff. And I think, you know, both respective policymaking groups here, the Trump administration and the CCP under Xi Jinping, I think they both care about who is seen to be making the biggest concession here. So I think everyone can reasonably say that we would want some sort of, I was about to say, peace deal between China and the U.S. Peace deal isn't right, some sort of reconciliation, but the path to getting there seems like very confused and uncertain to me. Yeah, there's a lot. I mean, look, people call it a trade war, so I don't see why we can have a piece.

Trade peace deal. A detente of some sort. And look, we both know the stakes, right, because the U.S. relies substantially on China both for finished goods of all kinds of things that U.S. consumers enjoy, but also intermediate goods that are used for actual manufacturing. And we also know that at least in the short term, there is not some quick substitute for the sheer amount of demand that comes from the U.S. consumer. And so we've seen all the TikToks of factories in China, you know, trying to figure out ways to go direct to the U.S. consumer. At least in the short term, both economies have a lot to lose, it would seem. And so there's all this question of like, you know, who blanks first. Anyway, there's a potential, you know, and you just see it in the market pricing, there's a lot of pain being priced in immediate.

today may be accepted from the persistence of this trade war. Right. Well, I'm very excited. One of my favorite guests, I've talked to him, we've talked to him on the podcast before. I've talked to him on the TV, always energetic and always has just sort of interesting thoughts, a fun guy to talk to, also very serious. We're going to be speaking with David Wu. He is the CEO of David Wu Unbound.

And prior to that, he was the head of global rates, currency, emerging markets, fixed income and economics research at Bank of America. I always want to get David's takes on things. So, David, thank you so much for coming back on Oblobs. Thanks for having me. It's a pleasure. Is this a type of war that we're seeing right now, that, you know, whether trade war, you know, it seems like the obvious thing. But like how aggressive, how provocative, how combative are Trump's actions against China? I think it's very combative. I think this is much more than just a tre war. I think this is war, actually. And I think, you know, from that point of view, it's not that surprising the way is gone, because in a way, the whole thing has been heating

up under Biden. I mean, I'll tell you. Yeah. And I think in a way, you know, it's actually very interesting. In a way, Trump is picking up where Biden left off. Who picked up where Trump left off, right? Okay. Let me just take it back from what I mean, what I mean, let me explain better what I meant by that sentence, right? Under Biden, did you remember when Biden became president, okay, Harvard University Belfare Center published a big report in which they did a massive ranking of the technology leaderships across the major tech races, okay? It was a report sponsored by Eric Schmidt, the former CEO of Google, who was a big patriot. And in this report, they come to the conclusion, the U.S. and China were in basically dead heat. In first, what was second,

place in all the leading technologies in the world. And soon after that, Eric Schmidt went on a PR or political campaign across, you know, the Beltway, essentially lobbying every congressman, every senators who will listen to him that this is time to basically stop the access of China from advanced technology so that the U.S. has a chance to essentially regain the leadership. Okay. So therefore, under Biden, the most important thing, you know, in terms of vis-a-vis. China was not so much the trade war, but rather they put in finishing sanctions in terms of the

ability of China to be able to access, you know, semiconductors, advanced semiconductors, and in manufacturing equipment for advanced semiconductors. All that was meant to basically give the U.S. two to three year basically like head start, okay, in AI semiconductors, in automation, in robotics, and so on so forth. Guess what? Less than a month after Trump became president, we had the deep sea. The deep-seat news, basically, was a massive piece of news. I mean, it was a game-changer. Let me tell you this. I mean, the deep-seek news for me is no proof of China's technological prowess, but it is proof

that AI can be easily copied. All of a sudden, overnight, all the sanctions that happened under Biden, it was for nothing. Okay? to the extent that if these sanctions were designed to protect the monopoly of the big U.S. tech companies, okay? All of a sudden, that meant nothing, because anything that could be copied is worth nothing commercially. And this is the reason why, by the way, the day the D.C. news came out, I shorted basically NASDAQ. And it was a great trade, by the way. But I think that's what it gets down. So all the China Hawks, I mean, Trump has bought a lot of China Hawks into his.

I have to tell you that. For the China Hawks, if they thought that they had been more time with China, I think after deep sea news came out, literally there was this new sense of urgency. We need to basically stop China now. The only way they can do that is to bankrupt China economically. Because honestly, at this point, I mean, let's be honest, when you're talking about the 145% tariff, you're not engaging the trade war. You're engaging in basically economic murder. I mean, I mean, that's it. I mean, I don't see how China is going to be able to export anything to the U.S. who is there are 145%. So I think from now putting you this to me was, I think the so-called trade war that we call it as such really was always intended as an economic blow that will be so great to China, that China will no longer be in a position to threaten U.S. hegemony. So again, this is why I said this is more than a trade war. This is much more than a trade war. This is much more than a trade war. This is meant to protect U.S. hegemony. Right. Sort of existential in that sense.

Let me press you on one thing you said. So, you know, you mentioned the importance of deep seek, and you kind of suggested that some of the severity of the action taken on China was because of the deep seek threat. But, I mean, we know that Trump from his campaign was going to take a really hardline stance against China. So how can you connect deep sea? with some of the policies that we've seen coming out of the administration. Can you make that direct link? Crazy. I think that's an excellent question.

But let's think about this for a moment. Okay. I've always said, you know, listen, I'm probably the only person you know, like, has been on your show, was read the back-to-back 100-page, you know, essentially face one agreement that was signed between Trump and the Chinese back in 2020. I bet Dan Wong is ready to. But anyway, you're the other one. Keep going.

Keep going. Yeah. And let me tell you this. It was probably, I mean, I have. a PhD in international trade from Columbia University. And let me tell you this, that trade agreement, my humble opinion, was one of the best trade agreement signed between two countries in the last 50 years. And the reason was because it was a win-win, basically, deal. And the people tend to think, oh, whatever. People didn't read the whole thing. I mean, it's pretty amazing what that whole thing

actually meant. Now, in my humble opinion, the difference between Trump and Biden is that whereas Biden saw the U.S.-China rivalry as largely a zero-sum game. That is, if China wins, we'll lose. If we win, then China will lose. I think Trump, in his whole entire career, sees things through the lenses of deals. And Trump always understands that basically to do a deal, there has to be enough for everybody around the table. So from that point of view, in my humble opinion, if you look back on the first day of Trump's inauguration, what do you do? I still remember, I still remember, I don't know if you guys covered the story. I still remember.

He did a press conference in the Oval Office late at night, you know, on the inauguration day. And it was when he announced a 20% tariff on Canada and Mexico over the fentanyl. Okay? And he was asked during that press conference, why not China? You promised to hit China hard. So why did you decide to hit Canada and Mexico by not China? His response was, oh, because we hit China pretty hard my first time. We're going to give them a pass this time.

It was now until the next day, he announced the 20% for China. And then three weeks later, of course, we all know now. Like, you know, basically the tariff was extended for Mexico and Canada, and China was hit by 20%. Okay? And then the list goes on and off. In my humble opinion, you know, again, we're sitting here and thinking that Trump is in the driver's seat. I don't, I think at this point Trump is no longer in a driver's seat to the extent I think the China Hucks, are actually in the private seat.

I think the China Hawks are maneuvering him in a position that he's increasingly struggling to back away from. So it gets more extreme. And that is a different story. This is why to me, this is not just about Pete Navarro versus basically Scott Besson. This is about the China Hawks represented by Vance, by basically Rubio, by Waltz, and all of them, actually. So from that point of view, again, this is what we're talking about.

I think Trump really wanted, I think Trump was so eager to do a TikTok deal on the first day that he spoke with Beijing-Bing. Things were going to go very differently. But I think it was a series of mistakes that have now allowed the China Hawks to take over. And I think Trump now, in a way, is a little bit powerless. And I think, you know, we can talk about the process and the sequencing. But I think this is where I'm at right now, which is not entirely up to Trump anymore. The news doesn't stop on the weekends. Context changes constantly.

And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg this weekend. I'm Christina Rafini. We'll bring you the latest headlines, in-depth analysis, and big interviews. All the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people, and culture.

On Saturday mornings, we put the best. past week's events into context, examining what happened in the markets and the world. That on Sundays, we speak with journalists, columnists, and key political figures to prepare you for the week ahead. Join us as soon as you wake up and bring us with you wherever your weekend plans take you. Watch us on Bloomberg Television. Listen on Bloomberg Radio, stream the show live on the Bloomberg business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg Television, radio, and wherever you get your podcasts.

So, first of all, I just want to say, I appreciate the out-of-consensus perspective, because I would describe the consensus perspective is the only active force that happens are what's happening in Trump's brain. And so, first of all, you're disagreeing with that, and I respect that. Second of all, you know, from my perspective, Trump strikes, I know he likes to do deals and he loves talking about doing deals, et cetera. When he pulled that chart out on Liberation Day, April 2nd, and basically slammed every country in the world,

this did not come across to me as someone who likes positive some deals. This strikes me as someone who finds any trade gap is per se bad, that if you're running a trade surplus with the United States, you must be cheating. Yeah, it's all relative. And so, like, give me the counter argument here. Also, you know, this idea, you know, people have been used. using the good Tsar Bad Boyer's characterization.

Oh, it's the Navarroes of the world. It's the Vance's Trump is big, blah, blah, blah. And I tend to not find those things. But just convince me that Trump is not a zero-sum thinker when it comes to. By the way, I want to say this. There's a big difference between China versus everybody else. Okay. I think Trump understands that everybody else,

he thought that the U.S. is so big, he could just push them around. I think China is a very different story. Just think about this for a moment. The day that he unleashed whatever on, I mean, whatever, the, the, the tariff schedule on a liberation day. April 2nd, yeah. China was only hit with a 25% tariff. Yeah, that's true. Which is actually right in the middle of the range, by the way.

It's not like he did China a 30%. I mean, listen, I mean, Thailand was 29%, Switzerland, 35%. You can basically look across, you know, I mean, China was actually the low end, by the way. If you think about that for a moment. I think that was a sign that Trump did not, you know, I mean, because, I mean, again, you know, I think Trump understands depending on who you're dealing with here. If you're dealing with a little guy, you're going to basically like literally knock the other guy dead. And I think Trump feels like, you know, this is the reason why, I mean, I'm, you know, I think Mexico is a great example. Because Mexico, unlike any other country, has literally been bending forward, backward to meet Trump.

Like, forget about half the way, like 99% of the way. I thought Trump should have granted a deal to basically Shinebomb literally like three weeks into his presidency. He loves Shinebaum. And he didn't. And the reason is because apparently he saw Mexico as being a pusharound. Okay. Well, China, I think is a different story.

So I think, you know, we cannot basically apply the same logic to what Trump is. But you know what's interesting, though? What is interesting is the fact that as of today, right now as we speak, If I look at, you know, like, you know, yesterday, I was, I mean, I didn't, you know, as you know, I've got a YouTube channel now, you know, and I was trying to basically, I'm trying to upgrade my lighting. So I wanted to buy this very expensive light. This is a sort of very high-end light. The happy manufacturer in China. Oh, you need one of those, one of those circle lights, like a ring light, like a proper influencer. It's much more than a ring light. I'm talking about this is a professional basically a spot light, right?

So this is a very high-end, in case you don't know, like literally 90% of the high-end spotlights now are manufacturing China. I mean, that's just a fact, right? So they don't just make a low-end stuff. This is really high-end stuff. And as you know, I live in Israel now. And I mean, there's no inventory of this light in all of Israel. I literally, like, got in touch with every store, the importer, nothing. So I decided to call up B&H in New York.

Of course, they have it in stock, even though it's from China. And guess what? It costs literally half the price of what I wouldn't pay if I bought the like in Israel. Unfortunately, they don't have it in Israel anyway. So I was asking the B&H guy. So what, you know, listen, what about the tariff? He said, well, you know, listen, we're not raising prices until we've actually depleted our stock. The point I'm trying to basically tell you is like Americans have not even begun to feel the even iota of the tariff.

I mean, the stock market obviously has gone down a bit, that kind of thing, but it's like nothing. I mean, I think people don't realize what this really means because right now what's happening is that the inventory in the system, and then there's no doubt inventory got built up in Q1 because a lot of companies anticipated the tariff increase. That is providing a bit of a buffer. Wait until we get into June. When prices either would go up or that there will be no stock to the extent that just, you know, whatever you want to basically buy is simply not available.

I don't even know how Hollywood can basically do with their lighting without Chinese lights right now at this point because there's very low degree of substitutability. But the point here is that I think, you know, in a way, I think, you know, the pain is like absolutely. And I think this is where Trump is very misinformed, by the way. I truly believe Trump is surrounded by some really terrible advisors who at least didn't tell him the full story. Because when it comes to the trade war, I mean, I can just tell you, I mean, I think that. Every step in the way, I think, you know, they misfired. For one thing, I think the presumption that tariff was not going to be inflationary was, I don't know what they got that from.

And I'll tell you what they got that from, by the way. And that was perhaps the biggest, biggest basically, you know, essentially the assumption they were making when they basically unleashed this trade war because Trump figured that, well, first time trade war didn't have any impact on prices. So he expected this time the same to have. as well. And that, unfortunately, I don't care where Pete Navar got his PhD is worth nothing. His degree is not worth a piece of papers written on. But let me tell you one. The reason why the inflationary effect associated with Trump's trade war, one, was so limited, was because Chinese companies were able to set up shop very quickly somewhere else. In the Philippines,

Indonesia, and whatever they went, they were able to circumvent the U.S. terror. by continuing to export to the U.S. at whatever price they were selling previously, the U.S. So in a way, if there was very little price impact, was because Chinese companies were able to circumvent the tariff. This time, the entire tariff is designed to leave Chinese companies with no place to hide, as you know. Like, the only reason why, like, Trump hasn't taken out the whatever,

even the fists in basically, I mean, you know, hasn't basically, did not apply additional. reciprocal tariff of Mexico is because Mexico had already agreed to adopt the same U.S. tariff on Chinese imports. So this time, this is why Southeast Asia got hit really hard this time, you know, in the reciprocal tariff. It's because precisely Navarro and others, they understand they need to, they want to close the back doors to China.

So this time, there is no cushion in the system. You're going to see 100% pastoral in terms of prices. In fact, the Chinese government apparently has the same. that the more pass-through, the better. The reason being that, you know, we all know, only a couple of weeks ago, I think the Chinese in Beijing, Chinese officials met with Costco, with Walmart, and warned them against applying pressure on Chinese suppliers to basically take the hit on tariff. The reason is because I think from the Chinese perspective, they think that once the price

effect associated with the tariff is unleashed onto the U.S. economy, onto the U.S. consumers. it's going to get so bad that Trump will have no choice but to basically stand down. And I think this is the reason why, in a way, I said that we're right now in round two of this trade war. I think the round one basically ended the last week. We're now round two. Round two, you know, you could argue that China enjoys the advantage in so far that time is on their side. And I think, you know, I think things are going to get very obvious. I have many questions, But just to start with, okay, why should I care whether it's Trump or his policy advisors being, you know, Uber hawkish on China? Why does that matter when the policy result seems to be, you know, pretty much the same?

And then secondly, you talked about the pain potentially coming this summer. We've seen a lot of people in markets start to talk about the idea that maybe there isn't a Trump put, right? Like maybe he doesn't care about stock prices this time around. So what exactly is going to be the catalyst for some sort of detente? Yeah, Tracy, I think it's a very good point. See, again, this is whether it is Trump or somebody else around him, I think it makes a very big difference. And so far in this respect, let me basically take it back for a second if you would allow me because I think this is connected to a lot of other things that are on the table right now. For example, I thought it was a huge mistake that Trump started his presidency.

by making stopping the war in Ukraine a top priority. Okay? He thought that he was going to be able to stop in 24 hours. Forget about 24 hours. Let's just say he was indeed being sarcastic. But, you know, let me tell you this. At the beginning of his presidency, Polly Market was giving a 70% chance

that he was going to stop the war basically by 100 days into his presidency. And now is right now currently less than 3% chance. Now, this is why Trump went on this, you know, trauma offensive with Putin, that he appease Putin. It literally was, you know, I'm not going to use any more exaggerative at this point. But let's put it this way. Trump didn't understand that there was no way in hell that Putin was going to agree to a ceasefire

without having taken control of the rest of Dolnesk, where they've been stuck in basically very, very drawn-out battles for the last six months. But it doesn't really matter. The point here is that. I think three months into his presidency, Trump has got nothing to show for vis-a-vis Ukraine. Even though he has rupture transatlantic relations, he has sold Ukraine down the river, and he's got nothing to show for, and Putin is not buying it. Guess what?

At this point, in my humble opinion, Trump has one of two choices. He could either pivot by getting much tougher with Putin. Okay? So you see an increase in geopolitical risk. and bullish gold, or that he has to go even tougher on China. Because at this point, you know what, you cannot be seen as being weak on both Russia and China. Forget about Iran. I mean, it's pretty amazing what basically Steve Wickhoff is now proposing, by the way, capping Iranian Richmond at 3.67% was the key component of the Obama nuclear agreement with Iran that Trump walked away from.

So Trump is like going super-davish, Russia, on basically in Iran. Guess what? If he wants to continue that doveish approach, then he will have to throw some red meat to the China hawks within his administration, which means getting tougher on China. In my view, there is very little.

I mean, I feel sorry for Scott. Scott's a very nice guy. No, Scott, Scott is not a China hawk. I wouldn't say Scott is a China hawk. He doesn't hate China in that sense. But there are a lot of people within the administration who think that this is the time to destroy the Chinese economy once for all, right? Because the point here is it's not just about the fact that, oh, wow, Chinese export to the

U.S. is roughly around 5% of Chinese GDP. If you look at both direct and indirect, you know, 40% of Chinese industrial production. But more importantly is the fact that the Chinese economy is already on his knees. You know, 40% of GDP's investment. If we can somehow decimate China's export, then we can basically bankrupt their business model. And then, you know, the whole economy goes into recession and who knows what happens. And then they won't be able to catch up with us. So what I'm telling you is that in fact, actually it's interesting because the only way Trump can actually keep going with this trade war by getting the support from the general public from Congress and say, you know what?

This is about China. Nobody right now will say, oh, wow, let's, you know, let's be nicer to the Chinese. Because right now, anybody who stands up to the Chinese, they're seen as traders right away. And that to me is the most interesting part of the story, which is that I think the China Hawks in many ways have prevailed. And Trump right now is having to essentially see the ground to that because in a way he's got nothing to show for right now. And then he wants to keep the trade war going. the only way you can do that is by saying this is about China. Right. So just on the second part of the question then, what is the catalyst for a detente? And is it, you know, some sort of policy win for the

Trump administration that maybe allows him to back down a little bit on behalf of the China Hawks, I guess? I think, you know, listen, I mean, political actually write a very interesting story actually on Friday, Saturday, okay, which I think makes sense. I mean, I don't believe everything they say, but in this particular case, I think it makes sense, which is, you know, that forget about like Trump and she are not talking. Like even the back channel is not working. The one reason is interesting because Trump wants to basically manage the entire process on his own. He wants to talk to Xi Jinping directly.

This is why he doesn't want to send people to China talk to the Chinese. He wants to get on the phone with Xi Jinping. And Xi Jinping right now is not returning the call. Or rather doesn't want to talk. And I can perfectly understand why, by the way. But interesting things, I think Trump, listen, Trump is very suspicious of everybody around him, including Rubio, by the way. But just think about this, you ask yourself, Steve Whitkoff.

Why is Steve Wickhoff like the hardest working man in the Trump administration? This is a man who has already met with Putin three times. He's the guy who basically met with the Iranians twice. He's the guy who basically negotiated the ceasefire in Gaza. This guy seems to be the unofficial secretary of state. in my humble opinion, the reason why Steve Wickoff is everywhere, it's not because it's not a reflection of his diplomatic savvy, but because Trump trusts him.

Because guess what? I think he's no more than Trump's messenger. And so from that point of view, because Trump doesn't trust anybody. Trump, the fact that Steve Wickcoff is so prominent means that Trump is running U.S. foreign policy all by himself. And I think this is going to be especially so in terms of discussion, negotiation with the Chinese. I'm Francine Lacquois, an award-winning journalist, and I've got a new podcast, Leaders with Francine Laquois from Bloomberg Podcasts. I've interviewed everyone from Heads of State to fashion icons about the news of the moment.

But I've always been curious, who are these people as leaders? I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow leaders with Francine Lacroix, wherever you get your podcast. podcasts. Yeah, Steve Woodcock, he's a real estate guy from New York. So he does seem to, like, he doesn't have a real diplomatic background. He's a real estate guy in New York who's now the special envoy to the Middle East. And so I'm not surprised that maybe Trump sees him as the best one.

He's now the special envoy, period. He's the presidential. He's not just a special envoy for the middle. His title now is a special envoy. But it does seem like Trump himself, as you say, like he wants to shake Xi's hand. I mean, he did, he went to Singapore, right? In the first administration, Kim Jong-un, right? And, like, this was, like, what he lives for, right? This is what really gets him excited. The opportunity to, like, be on stage and shake hands with these guys and be part of it and come up with a negotiation.

That strikes me as actually a sort of very useful read into how Trump thinks about international relations. Yeah, I mean, TikTok is a great example. Right. I mean, the fact is that one day before inauguration, everybody thought TikTok was finished. Yeah. I mean, it was, you know, Congress already voted, Supreme Court had already gone along. And then it was it. And then guess what? Trump managed to revive it because over a phone call was shooting pink. That was it. So from that point of view, again, I think Trump has made a lot of mistakes, I think. But it doesn't take away from the fact that he is a dealmaker. He wants to do deals. okay and I think from that point of view he still thinks that he can pull off

a deal with the Chinese yeah the biggest challenge I think he has right now is to how to basically repair the total loss of trust okay on the Chinese side vis-a-vis Trump right because I have no doubt like you know I mean I think Xi Jinping was like well you know he got

the invitation to go to the inauguration he didn't go but he thought that was a real nice gesture and then he spoke with Trump over the phone and then you know and then even After basically, you know, China was hit by the 25, 20% tariff on fentanyl, he was probably so thinking that this is going to be okay. But it's like, it's getting worse every single day. You know what's very interesting?

So I'm conducting a daily survey, believe we're not. Okay. I mean, for the last three years, I mean, I have a joint venture, you know, with Riewe, which is a Toronto-based online survey technology company. They're actually a listed company in Canada and the one of the leading, you know, online survey technology companies in the world. So it's part of my, you know, research process. So we have joined forces to conduct proprietary surveys, okay, for my clients. And one of the surveys is what I call a Cold World II survey. So I'm conducting surveys of Chinese people and Americans every single day to gauge how they feel about each other, you know, in terms of U.S. China relations.

It is fascinating. Okay. I can tell you, even until a week ago, the Chinese people, when you ask them, like, is the U.S. an enemy or an ally? most Chinese people said ally as opposed to enemy, believe we're not. More people say ally, enemy. Okay. And that tells me that even though things were like, you know, getting worse and worse and worse, the Chinese media was very careful not to basically stoke, you know, nationalistic fervor in China.

They were still trying to basically, you know, find a way out of this. But the last week, I mean, there was a huge spike in terms of percentage of my respondents in China. who said the U.S. it's an enemy and adversary. Now, basically, 46% of Chinese said America is an adversary or an enemy versus only 40% of Americans who consider China as such. And so that is very, very interesting. So from that point of view, I think this is the biggest problem, which is that Aiden, China sort of feels like, you know,

they gave Trump three months, and then things got worse and worse and worse. Maybe they have no idea of it's Trump or Trump's advisor, the China Hawks and so on and so forth. or knows that they can no longer engage. Okay. Basically, so therefore, they are preparing the population in China for a long standoff. This is why people are wrong to call this thing, oh, game of chicken. Because in a game, I'm a professor of economics here in Israel, and I teach game theory.

In game theory, yeah, I mean, everybody who's taking a course in game theory, they think about a game of chicken. Game of chicken, by the way, it's completely irrelevant at this point. because in a game of chicken, as you know, one side will capitulate before the collision so that nothing happens. Okay, nothing happens. So somebody stops before something bad happens. I would argue we've already gone beyond a game of chicken.

We're now in a war of attrition. A war of attrition is another game in game theory except war of attrition. Basically, the game continues, even though it continues to inflict pain on both sides. But both sides sort of hang on until one side finally capitulate because the pain becomes unbearable. A little bit like World War I, if you like.

And I think the Chinese are now preparing for this war of attrition. And this is why I think Trump is still thinking he's going to get the Chinese, going to get basically Xi Jinping on the phone, he's going to do this and that. I am doubtful. I mean, even Scott Besson, as I said before, because Scott is not really, he's not a political type. He doesn't understand the hatred there is for China in Washington. And I think from that point of view, Trump is going to be, it's going to be difficult for Trump. But anybody can do it, still Trump, but I'm just saying it's going to be very difficult.

Tracy, in our episode with Martin Wolf, I brought up the fact that, you know, for the first time, I actually think it's really important to read those surveys of international perspectives on China or on the U.S. And David, giving a great example of like, why for any leader globally, now just China, the domestic attitudes probably really matter if any leader wants to maintain domestic legitimacy. Sure. Although one thing I would say in China is there is a rather authoritarian government. Sure. That probably makes a difference in that dynamic. But David, I want to ask you a question. So you're a smart guy, reasonably smart guy. That's one of the biggest compliments I've ever given on all thoughts, by the way. Thank you. He's so thrilled. But do you worry at all that when it comes to, I should say, you're obviously a very keen watcher of the White House and everything that's going to. on there and trying to disaggregate, you know, what's driving certain policymakers.

But do you worry that there's a degree of overthinking at play here or, you know, sanewashing, perhaps of Trump and the administration that you're trying to, like, put a framework on what's happening that maybe isn't the case. Like, maybe it is just quite chaotic and people are unsure of what they're doing, unsure of what the ultimate goals are? I do agree with that. I do think. that, like, in a way, I was hoping for more. I mean, to the extent that, you know, like, for example, Doge is a good example, right? So Elon Musk was like, you know what?

He had three months after the elections prepare for Doge, right? I mean, he supposedly had like hundreds of legal advisors, all sorts of people. They figured out everything. And guess what? It's gone from $2 trillion to $1 trillion. And then whatever, 10 days ago, he declared Trump's cabinet. he's going to find $150 billion of cuts for the $2,026 budget. I mean, I track the daily U.S. Treasury statement, okay,

which tracks every single, like whatever, in aggregate, but in very detail form of every dollar that goes out of the Treasury account that the U.S. federal government keeps with the Federal Reserve, where all this money goes in and out. And let me tell you this, I cannot see any evidence of any spending cuts so far. Okay? So what I'm telling you is this. I mean, and that's Elon Musk,

you know, which scares me because I've always thought while Elon Musk is supposed to be a very smart guy, you know, this guy. I mean, you don't become the richest man in the world just by talking big. Well, maybe it does. Maybe American capitalism is all about talking big, whatever it is. But this is a good example of basically literally like, you know, talking out of, I don't know, I don't want to use any, you know, things I'm going to basically regret.

But that's why this trade war thing is very important. I said before. Because Trump thought, Trump is in his political advisors, decided that because trade war in his first term was not inflationary. Therefore, it's not going to be inflationary this time. Therefore, there's no reason for the Fed not to cut interest rates. Okay? And that is completely like, so you see what I'm saying how that is important? Because now it's like, well, you know, like what? Trump, you're now you want, you want to fire basically power. Why did you think about that three weeks ago or a month ago or even two months ago when you're planning this whole tariff business, okay? Because I saw, you know, if you could get Elon Moss to cut

spending, and that will be deflationary, which could potentially offset any inflationary effect associated with a tariff, and then you could get the Fed on your side if there's fiscal tightening. But right now, we haven't got any fiscal tightening because Elon Moss hasn't been able to deliver other than talking big about spending cuts, and the tariff is going to be definitely inflationary this time. There is no way. It doesn't matter whether there's Powell or anybody else. It was the Chairman of Federal Reserve. No Chairman of Federal Reserve will be cutting interest rates right now under the circumstances. So from that point of view, for Trump to be basically throwing in Tamsden right now, penalty tables said, well, Powell's not doing his job. That to me, again,

just shows that this administration is off to a terrible start to extend the assumptions that they're making for where they get to now were completely wrong. And unfortunately, I'm sorry to say this, I think Scott is a great guy, but Scott did not have the same kind of relationship that Steve Mnuchin had with Trump in his first term. If you remember, Steve Mnuchin was Trump's

answer to the campaign chair person. Okay? So from that point of view, there was much more trust. And I think therefore Mnuchin was a much more careful person. And then whereas I think Scott Besson is more of an academic philosopher, hedge fund guy, who thinks big in terms of like the theory. But like I think in terms of the day-to-day stuff, I don't know how much influence he has over Trump. As a result, I kind of feel like, I think there are a lot of mistakes that have been made. And what worries me more than anything else is that maybe these mistakes cannot be undone. Okay, what happens when the crunch

arrives? As you said, Americans outside of investors haven't actually felt any of this impact at all. As you say, like, how does Hollywood even continue with something as simple as losing access to affordable, advanced lighting? And that's just a fairly small sliver of the U.S. economy. What does this summer look like to you in the United States, given this war of attrition dynamic that's going on? I think it's going to look at a shit show. I really believe it's going to be a shit show. I think we're going to be going to recession. I think Trump's approval rating is going to collapse.

Okay. And I think, you know, the point. here is this. I mean, again, you know, like, obviously, you know, there's only one question of any interest to anybody right now, which is, okay, fine. So when will Trump and Xi Jinping get on the phone? That's the only question, right? I mean, I think we can only, we can say right now that things will probably barren once the two men have gotten on the phone. Whatever for that matter, Trump announces he's going to be on his way to Beijing. To me, things are not bad enough for him to get to that point. So from that point of view, this is why I think, you know, at least in the near term,

I think stocks are still going lower. I think, you know, from that point of view, because precisely the Chinese believe that time is on their side. And Trump, the problem is, is when you have a 145% tariff on China, how do you even back down from that? Let's just say, you say, okay, fine, let's go from 145 to 125% or even to 100%. You know what? It makes no difference. And 145% to 100%. That doesn't mean that China is going to be able to export any more to the U.S. So from that point of view, let's think about that for Joe for a second. In a negotiation, I thought from the very beginning,

that's why I thought TikTok was a very good beginning. I thought the only way Trump can do deals with China is by doing a bunch of small deals. They eventually add up to a big one. But right now, with tariffel, 145%, the only kind of deal you can do will be a very big deal. I think we can all agree right now to do a big deal is going to be very difficult.

For one thing, it takes a lot of time. And moreover, it takes a lot of political capital that Trump doesn't have. And again, you have to remember, you know, with Elon Musk trying to cut spending, the only thing that the House and the Senate can agree on is to increase defense spending. Like for this, the only difference is,

the House wants to increase defense spending only by $100 billion next year. The Senate wants to increase about $150 billion next year. Everything else is going to be going down. That's it. So with the politicians believe that, you know, China is an existential threat. That these people are evil. We need to basically stop them before they stop us.

Then you know what? It would be very, very difficult for Trump to make that big deal that I think is necessary right now to stop this whole thing. And this is why I cannot see. me just, if I put my hat as a game theory is on right now, I'm struggling to see a way out right now. But maybe, you know, I'm sure you'll find better, you know, more smarter against the night. If you do, let me know, like, you know, what is the way out here? David Wu, that was a blast. Really appreciate your perspective. And maybe in a six months or a year

or when Trump and Xi Jinping get on the phone, we'll have you back. Thank you so much for coming back on odd lots. Thanks for having me. I always feel like I have to catch my breath a little bit after talking with David. I knew that, but it's always like, it's always that energy. You did say that in the intro, didn't you? Energetic. He's an energetic fellow, that's for sure. Yes, for sure.

And one thing I will say, I really do appreciate some of his insights into the Trump administration. Because in Trump one, you know, a lot of people got that call wrong. Yeah. And a lot of people thought that we would see inflation from trade war number one. And we didn't really get that. And so it is very interesting to me to hear someone who was pretty supportive of that administration, the first Trump administration, sound quite negative on the second administration. And I guess our headline for this is going to be, you know, David Wu on the coming SHIT show in America. Look, whether it's the czar, whether it's the Boyers, the conclusion is this is a very bad situation. Right. And as he said, they've literally. gotten zero accomplishments so far. The war in Ukraine is still going. There's not even a TikTok deal.

And then I really do think, you know, again, like, you know, it's useful this idea. It's not a game of chicken. And the damage is being done today as we speak with hardening of opinions on both sides and the domestic polity. And, you know, every leader, even an authoritarian one, has to maintain domestic legitimacy to varying degrees or another. So this idea that, like, we're, you know, this is not a situation where someone could blink. There's already been this sort of like damage and it drags on further every single day. And I think part of what we're seeing in the market is no one can see what that obvious off ramp is given those dynamics. Yeah, it's funny you said that.

I was literally about to say the same exact sentence that the off ramp is hard to see. You know, one thing I realized we mentioned Whitkoff going from like being a real estate guy. to special envoy. One thing I appreciate about the Trump administration is the ability for personal progress in terms of careers. Like, you can kind of become, you know, they're very into personal development and experimenting with new roles, which is interesting to see. That's nice. Yeah. I wanted to end on a nice name. Yes. Okay. Shall we leave it there? Let's leave it there. This has been another episode of the Odd Lots podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthal. You can follow. You can follow.

me at the stalwart. Check out David Wu, his stuff, at David Wu Unbound. He's certainly unbound. Follow our producers, Carmen Rodriguez, at Carmen Armand, Dashel Bennett, at Dashbot, and Kale Brooks and Kail Brooks. For more OddLots content, go to Bloomberg.com slash Oddlots, where we have all of our episodes and a daily newsletter that you should subscribe to. And you can chat about all of these topics. We even have a China room in our Discord.org.g.g. slash odd lots. And if you enjoy Odlots, if you like it when we talk about the off ramp from the trade war or lack thereof,

then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening. You can get the news whenever you want it

with Bloomberg News Now. I'm Amy Morris. And I'm Karen Moscow here to tell you about our new on-demand news report delivered right to your podcast feed. Bloomberg News Now is a short five-minute audio report on the day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed. Yes, there are other products like this from a variety of news organizations. But they usually rerun their radio newscasts throughout the day. That's not what we do. We create customized episodes that can only be.

be heard on Bloomberg News Now. And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast feed within minutes. So you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts we're all over the world. Listen to the latest from Bloomberg News Now on Apple, Spotify, or anywhere you listen.