Speaker 3
I've come around to the theory that it's not even about protectionism so much as it is creating the tailwinds for an opinion shift about protectionism. I think there's a lot of chatter instantly of companies saying, oh, maybe we should be on-shoring things again. Something because there's an unpredictability here and we want to be closer to the market. There's a lot of people that are actually pulling forward demand, right? I know a lot of people trying to, consumers get in front of tariffs by buying cars and furniture and durables and all of these things. And I think like, you know, yes, the administration wants to see manufacturing jobs return. And there's a lot of memes about that. And there's a lot of jokes about that as well, because, you know, we're not probably going to be manufacturing sweaters and socks and Nike shoes here that much. Speak
Speaker 2
for yourself. I'm getting to work after the show. All right. I see. Hit the factory. You look pretty
Speaker 4
good in that AI video, Robert. I think you should consider, you know. That's true. That's true. Putting toys in the box. The
Speaker 2
tiny little nails. The little screws. Yeah. I
Speaker 3
don't think realistically, there's the expectation that we're going to be bringing, you know, low end manufacturing back to America. I think if anything, it's for a couple extremely targeted industries, like semiconductors
Speaker 2
and chips and things that are strategically important. But we didn't put tariffs on semiconductors.
Speaker 3
I know. I know. Because, I mean, that's a sensitive form. The one
Speaker 2
part of this policy that would potentially make a lot of sense geostrategically was excluded from tariffs. Totally. But we can't shock
Speaker 3
the system that hard. Can you imagine if we put tariffs on that too?
Speaker 2
To accomplish strategic goals of bringing – yeah, okay. We can't do that.
Speaker 3
But I do think there is a piece that's being not talked about enough, which is, I think, the geopolitical strategic element to this. Beyond trade itself, it's, in my opinion, attempting to shift the balance of manufacturing out of China and into countries that we're more closely allied with.
Speaker 2
That is absolutely not true. We've been trying to do that to get people to go build in Vietnam and to go get people to build in Malaysia and Mexico. And then we slap them with higher tariffs than we did on China.
Speaker 3
But we're going to find deals with them and we're going to find amicable resolutions with those countries. We're probably not going to find it with China. The rhetoric and the escalation with China, it's a very different situation. allied countries. And if you're a business located in China, your first thought is like, I need to like uproot and go to Vietnam or go to Japan or go to one of these other countries that are more closely aligned with the US. Yeah,
Speaker 1
I agree with you, Rob, that this is the path we have to imagine at some level as Americans too, because that is kind of the most efficient and optimal outcome. At the same time, it will be wrong for us to all assume there is no path dependency in how you achieve that outcome. That could be net negative two, right? So for example, I think yesterday, the White House communicated Japan will have like priority track, right? As a way to engage tariff negotiations. Part of that, I'm sure, was to go back to Japan to give them a little something on what was probably a little bit of a big offense, to give them a strategic advantage as an ally. So they're playing these games, right? But guess what happened actually in the last week and a half? In that period while Japan was annoyed and the US did not give that priority pass, China actually came out and said that they are now exploring a tri-party relationship on trade with Korea and Japan. And for that announcement to have been made public, to me, already implies that some backhand conversation happened in a way that China will get something out of it, right? Because China wouldn't have put itself out there to make a statement like that of the three most unlikely countries, by the way, in Asia that kind of all hate each other to come forward and say, we're going to set up a new trade alliance. So you don't know, like in the path dependency of what the US is doing, where side deals are being made, that is ultimately like a net negative to the power vacuum that's being created by the US. That's kind of my biggest worry, that there is collateral damage to these things in ways that comes back later, because it is a multilateral world we live in. And we should be thoughtful about that. I
Speaker 2
mean, I think I wanted to avoid getting into the actual kind of political tit for tat stuff around tariffs. Well, let's bring it
Speaker 3
to crypto. Yeah. Yeah.
Speaker 2
Look, given that we're here, I guess it's pretty obvious from what everyone's heard from me so far is that I think these tariffs are obviously incredibly misguided and that there is no coherent strategy, which you can see from the fact that, yeah, we exempted semiconductors, which are the most militarily and geopolitically important thing that you could consider reshoring. We put our allies, many of them have higher tariffs than our stated enemies. Russia and Belarus are the only countries excluded from the list, such that we presumably have the door to have free trade with Russia and Belarus. And China itself is taking advantage of all this by being an incredibly stable partner that is now increasingly committing themselves to free trade and being a more stable trading partner to more and more countries around the world. So I think Trump's instincts around negotiating and politics clearly are oriented around power and not around alliances and diplomacy. And there are times when that is tactical. I think peacetime, where everything's going great, where you have historically low unemployment, where you're making money hand over fist, you're on the cusp of a technological revolution with AI and crypto, is not the time to suddenly start picking fights and making everyone your enemy. No,
Speaker 1
this is true. And the thing that I'm concerned with a little bit is that if we have the world reassessing the role of the dollar and the US global financial system that is created, it is true that there are alternative models that are out there. And one of the ways I like to have this conversation is reminding about the impossible trinity, which a lot of econ 101 students may be familiar with. But it's this idea that in the way that we have floating currency post Bretton Woods, there's actually an impossible trinity where you can only have two of the three things to run the monetary system that you want, right? The three things are you must have open capital border to flow. You have to have an independent central bank that can set your own monetary policies. And the third thing is the FX has to be floating. And in other words, if you take away one of these things, the other thing has to give. So for example, the US chose that they want open capital borders, they want the Fed, but because to do that, they need to let the dollar float. Whereas China has done something different, which is that they're actually not going to have open borders and they are going to have PBOC. So they can fix the FX and it is therefore closed and they can manipulate that. Euro has actually done the other version where they do have open capital borders. The euro obviously floats, but there is no real sovereign central bank that is dict like policies in the ways that it rolls up to like the greater entity of like the euro trade area, right?
