Trade War Escalates: 100% Tariffs Threaten Global Meltdown | Shaun Rein
Summary
Trade War Dynamics: The escalating trade war between the US and China is negatively impacting both economies, with neither side currently winning. The US's imposition of 100% tariffs and China's retaliatory restrictions on rare earth exports are central issues.
Rare Earths Leverage: China's near-monopoly on rare earth refining gives it significant leverage in the trade war, as these materials are critical for US technology and defense industries.
Supply Chain Shifts: The trade tensions are prompting China to diversify its supply chain, sourcing products like beef and soybeans from countries like Australia and Brazil, reducing dependency on US imports.
Market Reactions: The potential for a 100% tariff implementation is causing concern over a possible collapse in US equity markets, which could pressure the US administration to negotiate.
Tech Decoupling: US restrictions on technology exports to China, such as Nvidia's AI chips, are leading China to focus on developing its own semiconductor industry, reducing reliance on US technology.
Economic Outlook: Despite challenges, China's economy shows resilience with a 4.8% growth in Q3 2025, while the US faces inflation and potential stagflation, exacerbated by trade tensions.
Future Strategies: China is focusing on increasing domestic consumption and reducing reliance on exports, while the US may need to reconsider its approach to trade and tariffs to avoid long-term economic damage.
Geopolitical Implications: The trade war is affecting global alliances, with countries like Australia strategically aligning with both the US and China to secure critical resources.
Transcript
If China doesn't export rare earths to the US, nothing in America works. Chinese can and will eat bitter more than the Americans. Even if the Chinese want to buy Nvidia products, two things have happened, David. First is China doesn't trust America anymore. You can't trust America under Biden and you certainly can't trust America under Scotty Besson and Trump. >> Who's actually winning this trade war currently right now? Well, nobody is winning the trade war. I think both countries are hurting right now. >> Trump's 100% tariffs on China are set to take effect November 1st. Assuming that no deal is reached before November 1st and it does take effect, what will this mean for global economies and the US economy? Meanwhile, China has placed further restrictions on key critical minerals exports as retaliation against this new tariff announcement. So, what will this mean for the entire supply chain and the global economies? Will this get resolved or will this escalate into something much worse? We'll find out where our next guest Sean Ryan, he is the founder, managing director of the China Market Research Group and the author of the book The Split. Welcome back, Sean. It's uh good to see you. Now, last time we spoke a few months ago, things like it looked like things were cooling off between China and the US, and now things are starting to escalate and heat up again. So, it's good to have you back. Welcome back. >> It's great to be here, David. Thank you for having me on this beautiful morning here in Shanghai. It's great that we're able to talk about what's happening on the ground in China. I think there's a mistake. >> Sorry. You think there's a mistake? Go ahead. >> There's a there's a mistake I think that the US administration under President Trump and Scotty Besson think they have when it comes to who has the upper hand in the trade war against China. So, I'm happy to answer any questions and give you the dirt on what's happening on the ground in China. >> Let's get uh this is why this is why we appreciate you, Sean. You are uh you are all business and all cander. So, thank you for your uh thank you for your participation today. Let me just get your reaction to Scott Bent uh Treasury Secretary Scott Bent um in an interview with CNBC just released today. Take a listen. Interestingly, the market lately has been more concerned about trade, I think, than the the government shutdown, especially this latest flare up between the US and China. So, what happened from your point of view? Because I thought talks were going well, lines of communication were open, and then we learned about this rare earth mineral restriction from China, and now it's back and forth, and things are heating up again. uh they they are and the Chinese are trying to backfill the narrative you know saying well the the US did A and C therefore we had to do D and that that's not true is there there was a lower level trade person who was slightly unhinged here in August uh I think his name is Lee Lee Kuangong and uh you know threatening saying that the chi China would unleash chaos on the global system if the US went ahead with uh our docking fees for Chinese ships and uh this is clearly something that they were planning all along. I I think that things can deescalate that we we don't want to have to escalate. Uh we have things that are more powerful than the the rare earth export controls that the Chinese want to put on. And sir, to be clear, this is China versus the world. It's not a US China problem. Good news is that this >> let's stop it here and then we'll talk about uh what he said so far. Few things to impact there. First of all, he has the US has more things that's well has things that are more powerful than the rare earth minerals ban. What things? What is what is he referring to Sean? >> Well, he doesn't have anything in his hand. So Scott Besson has been saying since the start of the trade war that the United States has the upper hand against the Chinese because it's the Americans who do all the buying. And essentially he's saying the customer is always right. But the reality, David, is aside from bombs, aside from weapons, which we've unfortunately have seen that the United States is willing to use time and time again, America really has run out of cards and China has the upper hand. So let me break down some numbers. Instead of buying American beef, China is now buying beef from Australia. Instead of buying American soybeans, now China is buying soybeans from Brazil. And even Argentina, which Scotty Bessant just bailed out with a $40 billion package. And China, instead of buying oil from the United States, is now buying oil from where you are in Canada. And you're starting to see a dat or warming of relations between Canada and China for the first time in since Mongan Joe from Huawei was kidnapped by the Canadians. So the key, David, is that anything that the United States can make and sell to the Chinese, the Chinese can make on their own, like with semiconductors, or they can buy from other countries like Canada. So Scotty Bessant is either fooling himself or he's lying to the American people that they have more cards to play because from my view and the view on the ground in China is China has the upper hand which is why Trump has had to step back and he has said in the last couple days an additional 100% tariffs just is not sustainable. This is why Scotty Besson has had to attack Lie Chong, who's a vice minister and the lead trade negotiator until yesterday with the WTO. So, he's not some minor official. He's a very powerful, influential person within China. And Scotty doesn't even know how to pronounce his name. So, the point being is Scotty is mis, you know, he's misjudging the situation. He's underestimating China. And at the end of the day, the Chinese have the upper hand. Um, and it's very clear to everybody in China. >> Is he right that it's China versus the world. >> You know, the last time you and I talked, I think was January, February of this year, and if China had launched the rare earth export controls, then he would have been right. He would have been right that it would be China against the rest of the world. The problem though is that under Trump, he's been bullying not just China, but even our closest allies. Like I'm American originally, like Canada. You know, look at what the US has done to Canada over the last 6 to 8 months. Look at what the US has done by trying to grab Greenland. So, no, Scotty Bessant is 100% incorrect. It's not China against the rest of the world. Right now, America has lost its prestige and its standing in world affairs. Nobody trusts them because it's clear that Trump is looking to extract as much benefit certainly for himself and arguably for the United States by trying to raise tariffs throughout the entire world. So no, Scotty is wrong. >> Wait a minute. Let me let me just back up a minute. Why Why did Trump implement or announce an additional 100% tariff on China? I thought things have slightly deescalated since Liberation Day on April 1st. What prompted this? So there was a feeling in China after the Madrid meetings between Scotty Bessen uh Jameson Greer on the American side and Kifong the vice premier in China and uh Lee Chong uh on the Chinese side that there was a data and that there was an agreement not to keep ratcheting up the pressure from either side. In my mind the Chinese did a gentleman's agreement and agreed to that and they committed and they carried that out. The Americans, however, broke that agreement. They launched more export controls and sanctions on companies that had less than 50% ownership by mainland Chinese companies. So, it added dozens, if not hundreds of more Chinese affiliated entities onto the export, control, and sanction list. That was number one. Number two, the United States started slapping ter um fees on boats that were built in China that landed into American ports. This might cost upwards of $3 billion US to Costco, one of the largest shipping companies in the world. Now, we have to think about it. This is a this is like another tariff on China because China produces or manufactures about 52 54% of the world's ocean lining shipping boats while the United States only about.5%. So Scotty Bessant is again either diluted or he's lying to the American people that they didn't break that gentleman's agreement in Madrid. And so China I think understandably was getting frustrated and angry so decided to launch the rare earth export controls around the world. Now I think this was a mistake. I don't think China should have done this. Um this was a shot not even just a shot across the bow. This was probably like taking a missile and shooting it around the world. And truthfully it wasn't just about threatening China. It also made the rest of the world. France, UK, Canada, Australia worried that they wouldn't be able to get access to China's rare earths. Now, I think that was a mistake. Now, for your viewers, before we go on, let me just say rare earths is actually not that rare. Okay? You can find rare earth in Saudi Arabia, in Brazil, in Russia, in Canada, even in the United States. What is rare, uh, David, is that China has the refining capability. So about 85% of all rare earth that's refined comes from China. But the critical aspect is 98 99% of the high-end rare earth is refined in China. So China has a near monopoly on the type of rare earth that powers the world's 7 trillion US consumer electronic uh sector. They have a near monopoly on all the rare earth that goes into the weapons and the radars that countries need in order to safeguard their national security. So, this was something that really scared the rest of the world and I would not have done that if I were China because I think there's going to be unintended consequences and I think it's going to backfire on them in the same way that America created um China's indigenous innovation sector like buying companies like Cameric and Huawei and semiconductors because China could no longer buy American semiconductors. I expect to see Canada, Vietnam, Australia to really invest and obviously America to invest billions to building up refineries to refine rare earth. And that's going to chip away at China's dominance in rare earth refining. Before we continue with the video, let's talk about our sponsor today, ODU. ODU is an all-in-one business management platform trusted by over 15 million users. But today, I want to highlight their website builder. It lets anyone, even without coding skills, create a professionallook website. Just drag and drop blocks, customize layouts, add animations, and launch. You can build anything from a personal blog to a full e-commerce site with secure checkout and payment integrations. It's also fully integrated with other odo apps, so your website connects directly to your sales, inventory, and customer data. That means less manual work and more time focused on growth. And like always with ODU, your first app is free for life, including unlimited hosting and support and a custom domain name for one year. To start building your site with ODU today, check out the link in the description down below to try ODO and simplify your business operations. That's going to take what 10 years, 15 years. Yeah. So I think basically you know China and the rest of the world uh China's probably 5 to 10 years ahead of the rest of the world when it comes to refining technology. It's not an easy process. Um now but let's be honest if the Chinese can do it the Americans can do it too. As long as America has the minds which they do. Do they have the capital? They do. The issue is do they have the political sanity and pragmatism to do it? That I'm not so sure about. But I think America can certainly catch up on the technology. The key in the trade war though is that it's going to take 5 to 10 years minimum. So in that interim, if China doesn't export rare earth to the US, nothing in America works. Whether it be that Ford F-150 pickup truck, whether it be that Apple iPhone, whether it be that washing machine from Seammens, uh whether it be those missiles and radar from Lockheed Martin or Rathon, none of it works without China's rare earth, which is why the Chinese feel they have the upper hand in the trade war, which is why they're putting maximum pressure on Scotty Bessant and Donald Trump during the trade negotiations. If so, if nothing is going to work, why why don't why don't the Chinese just completely halt the export of all rare earth minerals that the US needs right now today and say, "Hey, we're not going to continue exporting these minerals unless you remove all tariffs right now effective immediately." >> Yeah, that's one way of doing it. Um, I wouldn't do that because that might be the nuclear option. you know, the United States might ratchet up and respond with the only thing that they still have where they're more powerful than the Chinese, and that's with weapons and bombs. And there's still a lot of things that China wants to do with the United States. I think generally, um, a lot of people talk about China being an aggressive power. Um, I don't see that. So, they want to sort of calm and plate the world. It's kind of like what we talked about last time on Taiwan. Uh people in the west keep calling me asking me when is China gonna invade Taiwan. You see Palmer Lucky from Anderole yesterday said he has a 2027 plan within his company that everything has to be built to defeat the Chinese in 2027. For some reason Americans think China is going to invade Taiwan in 2027. David, but yet this past week there was a new woman won the chairmanship of the KMT or the opposition party in Taiwan and China has congratulated her because she has been talking about having good relations with China for years and she's sort of viewed as a dove on mainland Taiwan um relationships. So, in my mind and in the mainland Chinese mind, they're trying to wait out the current DPP term as president of Taiwan to try to forge closer relations and truthfully probably have reunification when the KMT chairwoman hopefully becomes the next president of Taiwan. I don't see China wanting to start a war with the United States, a conventional war, which is exactly what would happen if they said, "We're not going to sell any rare earth to you anymore." that would just be the nuclear option and China doesn't want to do that. >> On that front, before we continue, let me just play for you one more um clip of the uh Bent interview on CNBC. Let me um just show you what he uh is referring to here. >> President Trump wanted to reshore and part of the reshoring is strategic. So, we don't want to decouple with China. I don't believe they want to decouple, but this rare earth export control is a sign of decoupling. >> But we need them, don't we? >> Sorry. We need those rare earth minerals, don't we? >> We do. >> That's leverage that they have on us. >> We have lots of leverage on them, too. >> This goes back to what you were saying. America needs those rare earths. But if China is going to go this route, Sean, it's going to force the US and its allies to look for rare earth minerals elsewhere. Is this the beginning of this decoupling that um that Besson is just talking about here? >> In some ways, yes. But here's the reality, David. Since Trump launched the trade war in 2017 2018, China has been derisking from the United States. So, China wants to continue to do trade with the US. At the end of the day, the Chinese want to sell, export their products, be the manufacturing powerhouse so that they can get jobs and feed its citizens. So, China wants to work with the US, but they are starting to derisk and they have. If you look at it, in 2017, uh, 17% of China's exports went to the United States. That number is down to 12% while the number of exports to Azen has gone up to 18%. China has started to forge strong trade relations with the global south, or I like to call it the global majority. You know, if you go to Singapore right now, BYD, a Chinese NEV automaker, has replaced BMW and Toyota as the largest seller of cars there. So, China wants to keep working with the United States, but they have derisked from the US and they forged strong trade patterns elsewhere. Again, that's why right now, China is buying all of its soybeans, has bought zero soybeans in Q3 from the United States. They're buying all of their soybeans from Brazil and from Argentina. Again, anything America can make and sell to the Chinese, the Chinese can make on their own or buy from other countries except for ethane. Now, the United States are the ones that in my mind started the trade war, started decoupling, but America has not actually prepared for that. So, they've just yelled and screamed, "We need to decouple from China." They've tried to hurt China by banning Huawei or trying to take over Tik Tok or prevent Chinese companies like China Unicom and China Mobile from having access to the tele telecom infrastructure in the US and access to American capital by being listed in the New York Stock Exchange and NASDAQ. But at the end of the day, America has not really derisked or prepared to derisk from China. 95% of the world's ibuprofen comes from China. So if a person, a housewife or a husband somewhere in Iowa has a headache, if they don't buy ibuprofen from China, that headache's just going to get worse and worse. If they have a baby and they want to have a stroller, there's a very good chance that that stroller uh was built in China. So it's it's Scotty is overplaying his hand right now. Now, one thing on Scotty David is I used to advise him on his China investment strategy when he was still at Soros. So, I haven't spoken to him in 12 13 years. But when I spoke to him last, it was very frustrating because in 2012 2013, China's economy clearly was on the upswing. That was when Chinese consumers were frenzied and crazy about buying American and European brands. And I told Scotty, Louis Vuitton is going to boom. Nike is gonna boom. And he basically his thinking process was no, it's not going to boom because China is a communist country. And by definition, a communist country is going to fail. And I think from an ideological bigoted view, Scotty is misunderstanding China's vibrancy economically and politically. And so he's underestimating their power and resolve. And that's why I think the United States is in such a terrible position visa v China in the trade war where you see Trump today was going to Iowa saying those Chinese need to buy our soybeans again that that's what he's complaining about because he understands just like that last reporter said to Scotty China has all the leverage. What's going to happen then on November 1st? Is this 100% tariff on China actually going to go through? We're speaking on the October on the 20th of October today. That's 10 days from now. I'm hoping it's not. I I hope that there's going to be an accommodation. Um I think at the end of the day, it's very clear that America wants to make a deal. And frankly, I think China wants to make a deal, too. They won't make a humiliating deal. They won't be forced to do something that they don't want. But I'm hoping that Trump is going to say, "Look, buy more of our soybeans." Uh and China acquiesces and buy a lot of soybeans. I'm hoping that they do at a minimum a 30-day, maybe a 60-day or 90day rollover until the next negotiations because the dant was quite good for both countries. Um, you know, if they don't, then you're going to see that the American equity markets are going to collapse and that's something that Trump clearly doesn't want to have happen. I expect that there will be um an agreement of some sort, not a long-term agreement, but an agreement of some sort because you can even hear that Scotty is saying he wants to come to a deal with China. This is very different, David, from the wording that Trump talks about with Modi and India. Right? 6 weeks ago, Trump slapped 50% tariffs on India and he's kept them there because in the case with India, Trump has all of the leverage. He will bully, he will scream unless somebody can push back. And right now in the world, only China can truthfully push back. The other theory that's been circulating on the internet and on media is uh is is the notion that Trump will back off once the stock market forces him to back off. This is from the WSJ. Uh, Wall Street Journal published 14th of October. First sentence reads, "In its trade-off standoff, sorry, in its trade standoff with Washington, Beijing thinks it's found America's Achilles heel, President Donald Trump's fixation on the stock market." And then the article goes on to explain why. Scott Besson responded to this particular article by saying, and I quote The Hill, "This is a narrative that's just terrible." Wall Street Journal article today, just complete dot dot dot. They're taking the CCP dictation. President Trump likes a high stock market, but he like me believes a high stock market is a result of good policy. Will Trump reverse policies on this hardline stance in China once the stock market starts to correct on this news? >> Look, I I don't I'm not a particular fan of the Wall Street Journal. Um they used to quote me regularly for over a decade and they banned me um a few years ago because they said I was too pro-China, I guess. Um, so I don't consider, they're not my friend, but in this case they're correct. Um, I think one of the problems with having a Treasury secretary who is a former hedge fund manager twice failed actually was that they he and Trump both look at the vibrancy and the strength of the equity markets too much about uh how things are going on in the country. So I think Trump is going to back down if the equity markets get hit because he's going to get a lot of pressure. You know, Wall Street generally supports Trump over Biden before over Kla Harris. And so if his big political supporters and his big political donors, you know, start to pressure Trump and Scotty Bessant because they have a direct line to Scotty who used to work with the Tyber Tiger Cubs, then there's going to be pressure. I mean, there's rumors, and I don't know if it's true or not, but there's rumors that the Tiger Cubs pressured Scotty Bessant to bail out Argentina because they had big exposure there. So I think the danger is that the US overestimates the importance of the equity markets in the vibrancy of the economy and in the trade wars. The other thing is actually crypto markets because the Trump family itself has in you know is super kneedeep in the thick of it when it comes to crypto. So if crypto markets collapse that's also another tell or another signal that I think Trump is going to intervene and try to come to a deal with China. I think, you know, we have, unfortunately, a situation, and I have to be careful on how I say this, but, you know, I'm 48 years old. I am American. I'm a red-blooded American. I have not agreed with all presidents uh in my 48 years. Like, I disliked a lot of what Bush did. I disliked a lot of what Obama did. But at the end of the day, even though I disagreed with them, I believed that they were doing what they thought was the best for America. I think Trump unfortunately sometimes is doing what's best for his family's wealth and that's why he's going to bail out the equity markets or the crypto markets and make sure that there isn't too much of a disaster with China on what he's doing for America. Scott Passen claims that they're not reacting to the stock market. They're simply doing what's best for the American economy to quote uh what he said in that article. But take a look at this stat here now Sean. US budget deficit edge lower in 2025. tariffs. According to this article from CNBC and other sources as well, tariffs were to uh were to thank for this reduction of the deficit. It brought in a tremendous amount of revenue. So, in a year marked by bruising trade war and higher financing costs, the federal government managed to escape with an only $1.78 trillion shortfall. Some $41 billion or 2.2% less than in fiscal year 2024. Maybe it's working, Sean, is what I'm trying to say. >> Yeah, that's a great point, David. But a deficit is not necessarily a bad thing, right? It's, you know, Americans can buy lowcost products made in China and enrich in their lives. Right now, the average car in the US costs $50,000 US. I just spent a couple months in the United States and I was shocked at how much shoes cost, how much food cost. You know, America is facing inflation. Uh, China is facing deflation because of the trade tension. So reducing the deficit is not necessarily a good thing and it also only tells part of the story because you have to look that America exports services which doesn't get counted into that trade deficit which is something that I think needs to be taken into account right the Chinese the rest of the world are buying a lot of banking services computing services from American companies and that is going to start to drop because let's just take a Look, you know, at Nvidia, Jensen Hang, the founder of Nvidia, said that they had a 95% market share in China. That's now dropped to 0%. He's losing 17 billion US dollars a year in China because of the trade tension. How is that good for American profits? How is that good for American technological dominance? Because they've losing so many profits. So the trade deficit, yeah, that's like saying we're going to raise taxes 80% and that just lowered our debt. Sure, it's true, but at the end of the day, that's going to crimp and cramp the American consumer. The other thing is over the last few months because everybody knew liberation day was coming a lot of companies stockpiled their products and so they didn't raise prices immediately to the end American consumer or if they did they ate up a lot of the added costs because they were scared that the American consumer wouldn't buy. That has become unsustainable. Margins are getting squeezed by American companies like an Amazon like a Walmart too much. So what you're going to see over the next 6 months if the tariff war continues that they're going to start to transfer what would be about $1 trillion US in tariffs to the American consumer. I'm very worried not just about inflation in America. I'm worried about stagflation. Um, you know, Scotty, how Lutnik and Trump are leading America down a very dangerous path when it comes to e the economy and they're using things like the deficit using thing like which I think again is a false metric from looking at the health of the economy. I'm really worried about the United States right now. Um, prices are going to go up, companies aren't hiring, debt is too high, we have a combustable president who is attacking Democrats and isn't calm. And I'm not against Trump, frankly. I actually like him more than I like Biden and Kla Harris. But he's so polarizing that businesses don't want to invest. Consumers don't want to spend. We've got a really bad situation if America doesn't calm things down with China and doesn't calm things down in general. >> By the way, this just came in literally 2 minutes ago on Reuters. Um, as we're talking, Trump signed a new deal uh with Australian Prime Minister Anthony Albanese signed a critical minerals agreement aimed at counter China. So, China loomed large. The White House summit between Trump and Albanese. Trump and uh the Australian PM greeted each other. Uh he was not aware of the critical comments. Um I don't like you either or probably never will. I'm not sure whether he's referred to. Anyway, um the deal itself um $ 8.5 billion pipeline that we have ready to go. So now Australia seems to be playing both sides. Anyway, um I'll let you comment on this. Yes, >> Australia is smart. Like I said, this is why from a Chinese perspective, I think it was a mistake for them to threaten export controls on rare earths because this is rallying the rest of the world to understand, oh wait a minute, we can't have China monopolize what is an absolutely critical part of the supply chain. This was a mistake by China to do. Um now Australia under a company called Lionus uh probably has the best refining technology outside of China. Um so in my book the split I actually have a whole chapter on rare earths and I actually recommend in the book and I say that Australia is taking the lead in rare earth mining and refining outside of China. So investors should probably want to look there. Um I think it's smart for the United States to sign that deal with Australia. I also think it's smart for Australia to sign that deal with America. And right now, when it comes to Australia, Albanese, the prime minister, and Penny Wong, the foreign minister, are being really good at playing off both the Americans and the Chinese. You know, they're getting closer to China, resolving and fixing some of the relationship that was hurt under Scoie Morrison, um, the previous prime minister. But they're saying we want good trade with China, but I think it's smart for Australia to hedge their bets and also sell these critical minerals to America. I think this is a smart thing for those two countries. It's a big mistake for China to have gone so far to force other countries to shake get out of their stuper and realize we need access to rare earths too. Big mistake by China. >> You mentioned uh tech supremacy. So let's talk about tech supremacy. who is going to reign supreme in the AI race. This came in recently uh from Jensen Hang, Nvidia CEO. He said, "Nvidia is now 100% out of China. We went from 95% market share to zero." I can't imagine any policy America thinking that that's a good idea. That whatever policy we implemented caused America to lose one of the largest markets in the world. He didn't name names or administrations, but the Biden administration imposed rules in 2022 to restrict export of Nvidia's most advanced AI chips to China. uh do you think the current administration is going to reverse that uh first question and second what is China now doing uh to fill this void? So, I don't want to hype my book up, The Split, too much, but I have a chapter in the book on AI and semiconductors. And I basically wrote out for investors, and I hope your listeners read the darn book because you would have made a fortune the last nine months if you had. But I basically said that Nvidia is done for in China, even if they have the best technology and even if the Chinese want to buy Nvidia products, two things have happened, David. First is China doesn't trust America anymore. You can't trust America under Biden and you certainly can't trust America under Scotty Besson and Trump because they keep breaking agreements from Switzerland to Spain. So the feeling is they they'll buy soybeans because it's consumable and they if they don't want the soybeans from America anymore, the next quarter they can buy it from Argentine or Brazil. But when it comes to semiconductors, it's forcing Chinese companies to use the American tech ecosystem for five years, 10 years, generations. So the problem is they scared that the current president or future president will put on export controls again and take away the Nvidia chips or take away the repair uh and the servicing. So there's a feeling in China that yeah, we might want American technology because maybe it is better, but we just can't trust America in the technology supply chain. So we have to focus on building up indigenous innovation. And that's why I tout in the book, you got to buy be buying the American the Chinese semiconductors. And that's why you see Cabricom, Huahong, you know, their share prices have soared in the last 3 to 6 months because they are powering not just China's AI boom, but the global souths or what I prefer to call the global majority. Because America has weaponized Swift, because they've weaponized the US dollar, because they've weaponized technology, countries around the world are saying, "We don't want to buy American technology anymore because what happens if President Trump decides to sanction us, you know, these are what's happening, you know, in presidential palaces and rooms in Malaysia, in Vietnam, in France even. and they're saying, you know what, we want to buy American tech uh we want to buy American technology, but we can't trust it. So instead, we're going to buy te Chinese technology. That's why I'm super super bullish on Chinese semiconductor companies because they are going to power not just China's AI boom, but the global majority's AI boom because nobody trusts America as a steady trading partner right now. Do you think Taiwan will become less of a critical issue once China establishes I'm making the assumption that they will, but let's suppose that they do once China establishes its own fam on par rivaling China's TSMC's. I think it's always going to be an issue because I don't think that Taiwan is because of its strength and semiconductors is the main reason for why China wants to reunify. It's more, you know, coming from the body of the Chinese. They really feel that Taiwan is part of China. They need to bring Taiwan back under the fold. Whether it be one, you know, uh, one party, two systems, whatever it is, there's this guttural almost animallike feeling that Taiwan has to be brought back into the fold regardless of semiconductors. It could be a very poor nation of rice patty farmers and just from an ideological um humanistic view, China wants to control Taiwan again. Um you know, it's it's their red line. some it makes sense to me but it also doesn't make sense to me that much because at the end of the day I think chi China would give up a lot to the Americans in economic trade if Trump were to double down and agree to the one China principle. So this is sort of you know Trump has a lot of leverage over China that way. You know if Trump were to say we will double down on um agreeing to the one China principle but you need to sell us all the rare earths. I think that's something that China China will take. they almost become, you know, not insane, but they've become a little overworked, a little overhyped when it comes to the Taiwan issue, just not even regarding um semiconductors. But now that you've added in the last 10 years the importance of semiconductors, then yeah, you're absolutely right that you know controlling Taiwan is important for China. Uh it might not become as important aside from a gunal feeling if China builds up its own semiconductor sector to rival TSMC. Let's just evaluate uh how the two economies, China and the US's economies have performed thus far in 2025 since the uh start of the trade war. So let's take a look at the US side first. Um I'm just taking one particular data point. We can look at this from a number of angles here. This is reported by the Guardian. Uh items on the shelves of empty of uh grocery stores are starting to become empty. uh the US is expected to cost uh uh billions of dollars uh to households uh from these tariffs. Uh meanwhile, the Chinese economy has grown 4.8% in the third quarter from a year ago. This is widely expected. However, fixed asset investment, which includes real estate, unexpectedly fell 0.5% in the first 9 months of the year. uh analysts pulled by Reuters have forecasted 1 point or sorry 0.1% growth. Um I'll just take these numbers and of course your own uh to evaluate who's actually winning this trade war currently right now. >> Well, nobody is winning the trade war. I think both countries are hurting right now frankly. I mean it's inflation is a big problem in the United States as I mentioned. I'm worried about stagflation but let's be honest. I mean China's economy is okay but it's not booming. I'm more bullish on China's economy now than any time in the last six years because they are winning the trade war. So, you're starting to see more of the animal spirits are coming back. The Hong Kong equity markets are the second best performing in the world in 2025. Um, second after South Korea, which has boomed out of control. Um, but it's clear that consumers and business owners in China are still anxious. And that's why you have seen that overall retail sales went up over 4% in the first three quarters of 2025 in China, but in the last quarter it only went up 3%. There's still a lot of anxiety in the country. The deflation is scary. You know, Chinese don't want to buy big ticket items like cars or houses. Housing prices have dropped 30 to 50%. Because they think that prices are going to be cheaper next month. So instead of buying things, they're keeping all of their money in time deposits or in the bank. That's why Chinese citizens are sitting on 23 trillion US of household savings. So China might be doing a little bit better than the United States when it comes to the trade war right now on the overall economy. But let's not let's be realistic. China's not booming. Both countries are hurting from this. They need to come to a resolution sooner than later. But, and here's the next thing, David, Chinese can and will eat bitter more than the Americans. Ch. When I first moved to China in 1997, a lot of Chinese told me they could only eat meat once every month or two. They have 40% savings rates. The Chinese, as I said, are sitting on 23 trillion US of household savings. They can eat bitter and they have the resolve to shed the stink of theQing dynasty humiliation from 150 years ago when the Chinese capitulated to Western European and American imperialism and colonialism starting off the 100redyear century of humiliation. The Chinese don't want to do that. They will push back hard. Americans on the other hand get mad when there aren't enough free bread sticks at Olive Garden put on the table within two minutes. So the reality is I don't think the Americans can handle a long drawn out war. And I bet you David that the evangelical Christians, Trump's main base, are going to scream and cry if they can't get enough dolls for their sons and daughters for Christmas coming up in a couple months. China will go push back a lot harder than the Americans can understand. >> Uh well, let's see le let's see uh if uh Santa is going to be kind to us this Christmas uh here in the West. Sean, let's end on the final uh topic, which is the future. China is currently reviewing its upcoming 5-year plans. They're set to renew their 5-year plan, and the central committee is making um uh inroads into making these new plans. So, they're meeting currently in Beijing. Um, and we're expecting something by the end of October. What are you expecting? What should the next 5 years look like for China? >> I think the big thing they're going to talk about is how do we push consumption? Um, that's the that's sort of the big thing that all economists have been talking about forever, right? In the Chinese economy, consumers only account for about 40% of the economy. In the United States, it's 70 75%. So I think China is going to be looking at trying to improve social security, improve access to medical care, improve access to education, try to create more babies, you know, give more incentives because there is definitely an aging population in China and you just don't see people having babies right now because they want to push um more household consumption. Um that's not going to be an easy thing. I mean that's something that you know when Jaoba who is the prime minister you know 101 15 years ago was talking about improving the overall environment uh which China honestly has done. They've gotten better access to medical care, better access to education for everyday Chinese. But I think it's going to be very difficult to get Chinese to spend again as long as you have the spectre of a weak real estate market and most importantly weak income. Nobody's giving salary increases. No one's giving bonuses right now. And then most importantly with the threat of geopolitics, right? The Chinese feel that the United States is looking to impoverish China and contain them the way the US has done to Iran, North Korea, and Cuba for generations and which they might be trying to do with Maduro and Venezuela by doing extrajudicial killings of drug runners. But you also have seen two Trinidadians or Trinies have died. Um, so we don't really know what's happening with that. But the point being, David, is the Chinese when they see that geopolitical overhang, they're not just going to go out and spend easily. They'll spend when they see value. They'll go out on a short vacation with their friends and family to Malaysia to go gambling at Geng. They'll go to Japan. They'll go to Dubai. They'll travel within China because they want experiences and to relax. They're not going to spend a lot of money on food. They're not going to spend a lot of money on clothes unless they really, really value it. And that's why you see a company like Starbucks is in so much trouble in China because who wants to spend 35 R&B for a cup of coffee when you can buy one for 10 R&B from Lucken? But that I think is what you're going to see this week. Beijing is going to talk about how do we spur consumption? But it's not going to be easy. It's going to you're going to need to see a not a 90-day daunt with the Americans, but you're going to need to see a multi-year daunt with the Americans where maybe Trump says, "Let's let Chinese companies like a Xiaomi, like a BYD, invest billions, maybe even a trillion US dollars into America. Let's get our trade relationship back on path the way it was during the Bush and even Obama eras." Just just on that note, what's stopping the US from making a deal with China and say, "Hey, you have to build a BYD plant some somewhere. North I'm just making somewhere up, North Carolina, wherever." Um, and then we can lower the tariffs in the cars cuz right now they're not being shipped here in the US or Canada or anywhere else in the West for that matter because uh because of import tariffs. Why can't they make the same deal they made with Toyota decades ago? >> They should 100% absolutely make that deal. I personally have been looking around for Chinese companies and talking to them and saying if Trump allows it, let's go together and invest5 billion dollars into a plant or a factory in the United States. This is something that the US should do. They just have been saying no on the grounds of national security, right? China, you look at a company like BYD, they sell an $8,000 car that has fully autonomous. >> Is it actually Is it actually a national security issue? the I mean in just in theory the Chinese could use >> well they could use the cameras and the cars to spy on American citizens. I don't know I'm making this up but that's that's possible in theory right? It's I mean the 90year-old neighbor woman next door to me might kill me right but you know so I mean there's that's the problem right they say a national security threat you know it could be you know there is not 100% I can't promise no but I think when you outweigh the pros and the cons there would be benefits by having a BYD come into the United States what the US would have to do is ensure that they have oversight and make sure that they can check and make sure that BYD or Tik Tok or whatever Chinese company is not spying on Americans. But yeah, we can't overhype things, right? You can kill somebody with a Starbucks coffee, but China still allows Starbucks to open up outlets in China. One last question before we go. What's going to happen to the future of Chinese immigration? See, I grew up in the '90s where Chinese were predominantly or I think I think yeah, they were in the '90s the biggest uh nation to uh to uh immigrate into Canada and I think to some extent the US as well. Now that's India. I'm not saying Chinese immigrants aren't coming, but relative to other parts of the world, they're uh less predominant now. Uh what's the trend in the next 20 30 years? >> I think it's going to continue to lower. I think when we talk to a lot of Chinese, um, they're scared of going to the United States to study, especially if they're in STEM, because they're worried that they won't they'll get their visas revoked. They're worried that they'll be called a national security threat and arrested. They're worried that they won't be able to get a work visa. So, what's the point of spending $400,000 US in America to go to a top private school? So, what you're starting to see is top Chinese are saying, "Let's stay in China or if we want to get that overseas experience, they're going to Hong Kong. They're going to Singapore where it's cheaper." You know, frankly, why would you spend $400,000, which I think is a total scam, to go to a private university in America, come back to China where salaries are low at the starting level, making only 12 $1,500 US a month. The numbers don't add up. It worked 20 years ago when there was a gold rush towards making money in China, but now that salaries, you know, unemployment isn't an issue, David, in China, but undermployment is an issue. So, people can get jobs easily, but it's about 30 to 50% less starting salaries than they were before the trade war started. So, it just doesn't make sense for people to go to the United States right now. just in general, the high price of tuition is one of my personal pet peeves about the United States and the education system. You know, I'm American, but you and I went to the same university, McGill. I went because it was only $5,000 um when I was there at the time, and I thought that was reasonable. My son Tom Ryan just started at the University of Texas at Austin because a it's a great school, great tech ecosystem because he's into drones, but it's also only 11,000 US dollars for instate residents. Um, so I expect Chinese to follow the path of me and my son go to either wellpriced state universities in America and Canada or stay in China, stay in Hong Kong to stay in Singapore. And this is going to be a big problem for America when it comes to spending, buying real estate, you know, renting real estate, buying cars because the Chinese consumer or student used to spend a lot of money in the West. >> Excellent. Thank you very much for your update, Sean. Where can we follow you? So, I'll put the link to the split link down below so you can check out Sean's book. But where else? >> Thanks for having me, Dave. It's always a pleasure talking to you. You're one of the best anchors out there. You can follow me on Twitter or X under Sean Ryan or on LinkedIn. But the best place is to get my book. I'm going to shell a little bit, The Split, Finding the Opportunities in China's Economy and the New World Order because it's a bible for investing. >> All right, follow Shawn Ryan there. Thank you very much, Sean. We'll speak again soon. Plenty more to discuss before the end of the year, I'm sure.
Trade War Escalates: 100% Tariffs Threaten Global Meltdown | Shaun Rein
Summary
Transcript
If China doesn't export rare earths to the US, nothing in America works. Chinese can and will eat bitter more than the Americans. Even if the Chinese want to buy Nvidia products, two things have happened, David. First is China doesn't trust America anymore. You can't trust America under Biden and you certainly can't trust America under Scotty Besson and Trump. >> Who's actually winning this trade war currently right now? Well, nobody is winning the trade war. I think both countries are hurting right now. >> Trump's 100% tariffs on China are set to take effect November 1st. Assuming that no deal is reached before November 1st and it does take effect, what will this mean for global economies and the US economy? Meanwhile, China has placed further restrictions on key critical minerals exports as retaliation against this new tariff announcement. So, what will this mean for the entire supply chain and the global economies? Will this get resolved or will this escalate into something much worse? We'll find out where our next guest Sean Ryan, he is the founder, managing director of the China Market Research Group and the author of the book The Split. Welcome back, Sean. It's uh good to see you. Now, last time we spoke a few months ago, things like it looked like things were cooling off between China and the US, and now things are starting to escalate and heat up again. So, it's good to have you back. Welcome back. >> It's great to be here, David. Thank you for having me on this beautiful morning here in Shanghai. It's great that we're able to talk about what's happening on the ground in China. I think there's a mistake. >> Sorry. You think there's a mistake? Go ahead. >> There's a there's a mistake I think that the US administration under President Trump and Scotty Besson think they have when it comes to who has the upper hand in the trade war against China. So, I'm happy to answer any questions and give you the dirt on what's happening on the ground in China. >> Let's get uh this is why this is why we appreciate you, Sean. You are uh you are all business and all cander. So, thank you for your uh thank you for your participation today. Let me just get your reaction to Scott Bent uh Treasury Secretary Scott Bent um in an interview with CNBC just released today. Take a listen. Interestingly, the market lately has been more concerned about trade, I think, than the the government shutdown, especially this latest flare up between the US and China. So, what happened from your point of view? Because I thought talks were going well, lines of communication were open, and then we learned about this rare earth mineral restriction from China, and now it's back and forth, and things are heating up again. uh they they are and the Chinese are trying to backfill the narrative you know saying well the the US did A and C therefore we had to do D and that that's not true is there there was a lower level trade person who was slightly unhinged here in August uh I think his name is Lee Lee Kuangong and uh you know threatening saying that the chi China would unleash chaos on the global system if the US went ahead with uh our docking fees for Chinese ships and uh this is clearly something that they were planning all along. I I think that things can deescalate that we we don't want to have to escalate. Uh we have things that are more powerful than the the rare earth export controls that the Chinese want to put on. And sir, to be clear, this is China versus the world. It's not a US China problem. Good news is that this >> let's stop it here and then we'll talk about uh what he said so far. Few things to impact there. First of all, he has the US has more things that's well has things that are more powerful than the rare earth minerals ban. What things? What is what is he referring to Sean? >> Well, he doesn't have anything in his hand. So Scott Besson has been saying since the start of the trade war that the United States has the upper hand against the Chinese because it's the Americans who do all the buying. And essentially he's saying the customer is always right. But the reality, David, is aside from bombs, aside from weapons, which we've unfortunately have seen that the United States is willing to use time and time again, America really has run out of cards and China has the upper hand. So let me break down some numbers. Instead of buying American beef, China is now buying beef from Australia. Instead of buying American soybeans, now China is buying soybeans from Brazil. And even Argentina, which Scotty Bessant just bailed out with a $40 billion package. And China, instead of buying oil from the United States, is now buying oil from where you are in Canada. And you're starting to see a dat or warming of relations between Canada and China for the first time in since Mongan Joe from Huawei was kidnapped by the Canadians. So the key, David, is that anything that the United States can make and sell to the Chinese, the Chinese can make on their own, like with semiconductors, or they can buy from other countries like Canada. So Scotty Bessant is either fooling himself or he's lying to the American people that they have more cards to play because from my view and the view on the ground in China is China has the upper hand which is why Trump has had to step back and he has said in the last couple days an additional 100% tariffs just is not sustainable. This is why Scotty Besson has had to attack Lie Chong, who's a vice minister and the lead trade negotiator until yesterday with the WTO. So, he's not some minor official. He's a very powerful, influential person within China. And Scotty doesn't even know how to pronounce his name. So, the point being is Scotty is mis, you know, he's misjudging the situation. He's underestimating China. And at the end of the day, the Chinese have the upper hand. Um, and it's very clear to everybody in China. >> Is he right that it's China versus the world. >> You know, the last time you and I talked, I think was January, February of this year, and if China had launched the rare earth export controls, then he would have been right. He would have been right that it would be China against the rest of the world. The problem though is that under Trump, he's been bullying not just China, but even our closest allies. Like I'm American originally, like Canada. You know, look at what the US has done to Canada over the last 6 to 8 months. Look at what the US has done by trying to grab Greenland. So, no, Scotty Bessant is 100% incorrect. It's not China against the rest of the world. Right now, America has lost its prestige and its standing in world affairs. Nobody trusts them because it's clear that Trump is looking to extract as much benefit certainly for himself and arguably for the United States by trying to raise tariffs throughout the entire world. So no, Scotty is wrong. >> Wait a minute. Let me let me just back up a minute. Why Why did Trump implement or announce an additional 100% tariff on China? I thought things have slightly deescalated since Liberation Day on April 1st. What prompted this? So there was a feeling in China after the Madrid meetings between Scotty Bessen uh Jameson Greer on the American side and Kifong the vice premier in China and uh Lee Chong uh on the Chinese side that there was a data and that there was an agreement not to keep ratcheting up the pressure from either side. In my mind the Chinese did a gentleman's agreement and agreed to that and they committed and they carried that out. The Americans, however, broke that agreement. They launched more export controls and sanctions on companies that had less than 50% ownership by mainland Chinese companies. So, it added dozens, if not hundreds of more Chinese affiliated entities onto the export, control, and sanction list. That was number one. Number two, the United States started slapping ter um fees on boats that were built in China that landed into American ports. This might cost upwards of $3 billion US to Costco, one of the largest shipping companies in the world. Now, we have to think about it. This is a this is like another tariff on China because China produces or manufactures about 52 54% of the world's ocean lining shipping boats while the United States only about.5%. So Scotty Bessant is again either diluted or he's lying to the American people that they didn't break that gentleman's agreement in Madrid. And so China I think understandably was getting frustrated and angry so decided to launch the rare earth export controls around the world. Now I think this was a mistake. I don't think China should have done this. Um this was a shot not even just a shot across the bow. This was probably like taking a missile and shooting it around the world. And truthfully it wasn't just about threatening China. It also made the rest of the world. France, UK, Canada, Australia worried that they wouldn't be able to get access to China's rare earths. Now, I think that was a mistake. Now, for your viewers, before we go on, let me just say rare earths is actually not that rare. Okay? You can find rare earth in Saudi Arabia, in Brazil, in Russia, in Canada, even in the United States. What is rare, uh, David, is that China has the refining capability. So about 85% of all rare earth that's refined comes from China. But the critical aspect is 98 99% of the high-end rare earth is refined in China. So China has a near monopoly on the type of rare earth that powers the world's 7 trillion US consumer electronic uh sector. They have a near monopoly on all the rare earth that goes into the weapons and the radars that countries need in order to safeguard their national security. So, this was something that really scared the rest of the world and I would not have done that if I were China because I think there's going to be unintended consequences and I think it's going to backfire on them in the same way that America created um China's indigenous innovation sector like buying companies like Cameric and Huawei and semiconductors because China could no longer buy American semiconductors. I expect to see Canada, Vietnam, Australia to really invest and obviously America to invest billions to building up refineries to refine rare earth. And that's going to chip away at China's dominance in rare earth refining. Before we continue with the video, let's talk about our sponsor today, ODU. ODU is an all-in-one business management platform trusted by over 15 million users. But today, I want to highlight their website builder. It lets anyone, even without coding skills, create a professionallook website. Just drag and drop blocks, customize layouts, add animations, and launch. You can build anything from a personal blog to a full e-commerce site with secure checkout and payment integrations. It's also fully integrated with other odo apps, so your website connects directly to your sales, inventory, and customer data. That means less manual work and more time focused on growth. And like always with ODU, your first app is free for life, including unlimited hosting and support and a custom domain name for one year. To start building your site with ODU today, check out the link in the description down below to try ODO and simplify your business operations. That's going to take what 10 years, 15 years. Yeah. So I think basically you know China and the rest of the world uh China's probably 5 to 10 years ahead of the rest of the world when it comes to refining technology. It's not an easy process. Um now but let's be honest if the Chinese can do it the Americans can do it too. As long as America has the minds which they do. Do they have the capital? They do. The issue is do they have the political sanity and pragmatism to do it? That I'm not so sure about. But I think America can certainly catch up on the technology. The key in the trade war though is that it's going to take 5 to 10 years minimum. So in that interim, if China doesn't export rare earth to the US, nothing in America works. Whether it be that Ford F-150 pickup truck, whether it be that Apple iPhone, whether it be that washing machine from Seammens, uh whether it be those missiles and radar from Lockheed Martin or Rathon, none of it works without China's rare earth, which is why the Chinese feel they have the upper hand in the trade war, which is why they're putting maximum pressure on Scotty Bessant and Donald Trump during the trade negotiations. If so, if nothing is going to work, why why don't why don't the Chinese just completely halt the export of all rare earth minerals that the US needs right now today and say, "Hey, we're not going to continue exporting these minerals unless you remove all tariffs right now effective immediately." >> Yeah, that's one way of doing it. Um, I wouldn't do that because that might be the nuclear option. you know, the United States might ratchet up and respond with the only thing that they still have where they're more powerful than the Chinese, and that's with weapons and bombs. And there's still a lot of things that China wants to do with the United States. I think generally, um, a lot of people talk about China being an aggressive power. Um, I don't see that. So, they want to sort of calm and plate the world. It's kind of like what we talked about last time on Taiwan. Uh people in the west keep calling me asking me when is China gonna invade Taiwan. You see Palmer Lucky from Anderole yesterday said he has a 2027 plan within his company that everything has to be built to defeat the Chinese in 2027. For some reason Americans think China is going to invade Taiwan in 2027. David, but yet this past week there was a new woman won the chairmanship of the KMT or the opposition party in Taiwan and China has congratulated her because she has been talking about having good relations with China for years and she's sort of viewed as a dove on mainland Taiwan um relationships. So, in my mind and in the mainland Chinese mind, they're trying to wait out the current DPP term as president of Taiwan to try to forge closer relations and truthfully probably have reunification when the KMT chairwoman hopefully becomes the next president of Taiwan. I don't see China wanting to start a war with the United States, a conventional war, which is exactly what would happen if they said, "We're not going to sell any rare earth to you anymore." that would just be the nuclear option and China doesn't want to do that. >> On that front, before we continue, let me just play for you one more um clip of the uh Bent interview on CNBC. Let me um just show you what he uh is referring to here. >> President Trump wanted to reshore and part of the reshoring is strategic. So, we don't want to decouple with China. I don't believe they want to decouple, but this rare earth export control is a sign of decoupling. >> But we need them, don't we? >> Sorry. We need those rare earth minerals, don't we? >> We do. >> That's leverage that they have on us. >> We have lots of leverage on them, too. >> This goes back to what you were saying. America needs those rare earths. But if China is going to go this route, Sean, it's going to force the US and its allies to look for rare earth minerals elsewhere. Is this the beginning of this decoupling that um that Besson is just talking about here? >> In some ways, yes. But here's the reality, David. Since Trump launched the trade war in 2017 2018, China has been derisking from the United States. So, China wants to continue to do trade with the US. At the end of the day, the Chinese want to sell, export their products, be the manufacturing powerhouse so that they can get jobs and feed its citizens. So, China wants to work with the US, but they are starting to derisk and they have. If you look at it, in 2017, uh, 17% of China's exports went to the United States. That number is down to 12% while the number of exports to Azen has gone up to 18%. China has started to forge strong trade relations with the global south, or I like to call it the global majority. You know, if you go to Singapore right now, BYD, a Chinese NEV automaker, has replaced BMW and Toyota as the largest seller of cars there. So, China wants to keep working with the United States, but they have derisked from the US and they forged strong trade patterns elsewhere. Again, that's why right now, China is buying all of its soybeans, has bought zero soybeans in Q3 from the United States. They're buying all of their soybeans from Brazil and from Argentina. Again, anything America can make and sell to the Chinese, the Chinese can make on their own or buy from other countries except for ethane. Now, the United States are the ones that in my mind started the trade war, started decoupling, but America has not actually prepared for that. So, they've just yelled and screamed, "We need to decouple from China." They've tried to hurt China by banning Huawei or trying to take over Tik Tok or prevent Chinese companies like China Unicom and China Mobile from having access to the tele telecom infrastructure in the US and access to American capital by being listed in the New York Stock Exchange and NASDAQ. But at the end of the day, America has not really derisked or prepared to derisk from China. 95% of the world's ibuprofen comes from China. So if a person, a housewife or a husband somewhere in Iowa has a headache, if they don't buy ibuprofen from China, that headache's just going to get worse and worse. If they have a baby and they want to have a stroller, there's a very good chance that that stroller uh was built in China. So it's it's Scotty is overplaying his hand right now. Now, one thing on Scotty David is I used to advise him on his China investment strategy when he was still at Soros. So, I haven't spoken to him in 12 13 years. But when I spoke to him last, it was very frustrating because in 2012 2013, China's economy clearly was on the upswing. That was when Chinese consumers were frenzied and crazy about buying American and European brands. And I told Scotty, Louis Vuitton is going to boom. Nike is gonna boom. And he basically his thinking process was no, it's not going to boom because China is a communist country. And by definition, a communist country is going to fail. And I think from an ideological bigoted view, Scotty is misunderstanding China's vibrancy economically and politically. And so he's underestimating their power and resolve. And that's why I think the United States is in such a terrible position visa v China in the trade war where you see Trump today was going to Iowa saying those Chinese need to buy our soybeans again that that's what he's complaining about because he understands just like that last reporter said to Scotty China has all the leverage. What's going to happen then on November 1st? Is this 100% tariff on China actually going to go through? We're speaking on the October on the 20th of October today. That's 10 days from now. I'm hoping it's not. I I hope that there's going to be an accommodation. Um I think at the end of the day, it's very clear that America wants to make a deal. And frankly, I think China wants to make a deal, too. They won't make a humiliating deal. They won't be forced to do something that they don't want. But I'm hoping that Trump is going to say, "Look, buy more of our soybeans." Uh and China acquiesces and buy a lot of soybeans. I'm hoping that they do at a minimum a 30-day, maybe a 60-day or 90day rollover until the next negotiations because the dant was quite good for both countries. Um, you know, if they don't, then you're going to see that the American equity markets are going to collapse and that's something that Trump clearly doesn't want to have happen. I expect that there will be um an agreement of some sort, not a long-term agreement, but an agreement of some sort because you can even hear that Scotty is saying he wants to come to a deal with China. This is very different, David, from the wording that Trump talks about with Modi and India. Right? 6 weeks ago, Trump slapped 50% tariffs on India and he's kept them there because in the case with India, Trump has all of the leverage. He will bully, he will scream unless somebody can push back. And right now in the world, only China can truthfully push back. The other theory that's been circulating on the internet and on media is uh is is the notion that Trump will back off once the stock market forces him to back off. This is from the WSJ. Uh, Wall Street Journal published 14th of October. First sentence reads, "In its trade-off standoff, sorry, in its trade standoff with Washington, Beijing thinks it's found America's Achilles heel, President Donald Trump's fixation on the stock market." And then the article goes on to explain why. Scott Besson responded to this particular article by saying, and I quote The Hill, "This is a narrative that's just terrible." Wall Street Journal article today, just complete dot dot dot. They're taking the CCP dictation. President Trump likes a high stock market, but he like me believes a high stock market is a result of good policy. Will Trump reverse policies on this hardline stance in China once the stock market starts to correct on this news? >> Look, I I don't I'm not a particular fan of the Wall Street Journal. Um they used to quote me regularly for over a decade and they banned me um a few years ago because they said I was too pro-China, I guess. Um, so I don't consider, they're not my friend, but in this case they're correct. Um, I think one of the problems with having a Treasury secretary who is a former hedge fund manager twice failed actually was that they he and Trump both look at the vibrancy and the strength of the equity markets too much about uh how things are going on in the country. So I think Trump is going to back down if the equity markets get hit because he's going to get a lot of pressure. You know, Wall Street generally supports Trump over Biden before over Kla Harris. And so if his big political supporters and his big political donors, you know, start to pressure Trump and Scotty Bessant because they have a direct line to Scotty who used to work with the Tyber Tiger Cubs, then there's going to be pressure. I mean, there's rumors, and I don't know if it's true or not, but there's rumors that the Tiger Cubs pressured Scotty Bessant to bail out Argentina because they had big exposure there. So I think the danger is that the US overestimates the importance of the equity markets in the vibrancy of the economy and in the trade wars. The other thing is actually crypto markets because the Trump family itself has in you know is super kneedeep in the thick of it when it comes to crypto. So if crypto markets collapse that's also another tell or another signal that I think Trump is going to intervene and try to come to a deal with China. I think, you know, we have, unfortunately, a situation, and I have to be careful on how I say this, but, you know, I'm 48 years old. I am American. I'm a red-blooded American. I have not agreed with all presidents uh in my 48 years. Like, I disliked a lot of what Bush did. I disliked a lot of what Obama did. But at the end of the day, even though I disagreed with them, I believed that they were doing what they thought was the best for America. I think Trump unfortunately sometimes is doing what's best for his family's wealth and that's why he's going to bail out the equity markets or the crypto markets and make sure that there isn't too much of a disaster with China on what he's doing for America. Scott Passen claims that they're not reacting to the stock market. They're simply doing what's best for the American economy to quote uh what he said in that article. But take a look at this stat here now Sean. US budget deficit edge lower in 2025. tariffs. According to this article from CNBC and other sources as well, tariffs were to uh were to thank for this reduction of the deficit. It brought in a tremendous amount of revenue. So, in a year marked by bruising trade war and higher financing costs, the federal government managed to escape with an only $1.78 trillion shortfall. Some $41 billion or 2.2% less than in fiscal year 2024. Maybe it's working, Sean, is what I'm trying to say. >> Yeah, that's a great point, David. But a deficit is not necessarily a bad thing, right? It's, you know, Americans can buy lowcost products made in China and enrich in their lives. Right now, the average car in the US costs $50,000 US. I just spent a couple months in the United States and I was shocked at how much shoes cost, how much food cost. You know, America is facing inflation. Uh, China is facing deflation because of the trade tension. So reducing the deficit is not necessarily a good thing and it also only tells part of the story because you have to look that America exports services which doesn't get counted into that trade deficit which is something that I think needs to be taken into account right the Chinese the rest of the world are buying a lot of banking services computing services from American companies and that is going to start to drop because let's just take a Look, you know, at Nvidia, Jensen Hang, the founder of Nvidia, said that they had a 95% market share in China. That's now dropped to 0%. He's losing 17 billion US dollars a year in China because of the trade tension. How is that good for American profits? How is that good for American technological dominance? Because they've losing so many profits. So the trade deficit, yeah, that's like saying we're going to raise taxes 80% and that just lowered our debt. Sure, it's true, but at the end of the day, that's going to crimp and cramp the American consumer. The other thing is over the last few months because everybody knew liberation day was coming a lot of companies stockpiled their products and so they didn't raise prices immediately to the end American consumer or if they did they ate up a lot of the added costs because they were scared that the American consumer wouldn't buy. That has become unsustainable. Margins are getting squeezed by American companies like an Amazon like a Walmart too much. So what you're going to see over the next 6 months if the tariff war continues that they're going to start to transfer what would be about $1 trillion US in tariffs to the American consumer. I'm very worried not just about inflation in America. I'm worried about stagflation. Um, you know, Scotty, how Lutnik and Trump are leading America down a very dangerous path when it comes to e the economy and they're using things like the deficit using thing like which I think again is a false metric from looking at the health of the economy. I'm really worried about the United States right now. Um, prices are going to go up, companies aren't hiring, debt is too high, we have a combustable president who is attacking Democrats and isn't calm. And I'm not against Trump, frankly. I actually like him more than I like Biden and Kla Harris. But he's so polarizing that businesses don't want to invest. Consumers don't want to spend. We've got a really bad situation if America doesn't calm things down with China and doesn't calm things down in general. >> By the way, this just came in literally 2 minutes ago on Reuters. Um, as we're talking, Trump signed a new deal uh with Australian Prime Minister Anthony Albanese signed a critical minerals agreement aimed at counter China. So, China loomed large. The White House summit between Trump and Albanese. Trump and uh the Australian PM greeted each other. Uh he was not aware of the critical comments. Um I don't like you either or probably never will. I'm not sure whether he's referred to. Anyway, um the deal itself um $ 8.5 billion pipeline that we have ready to go. So now Australia seems to be playing both sides. Anyway, um I'll let you comment on this. Yes, >> Australia is smart. Like I said, this is why from a Chinese perspective, I think it was a mistake for them to threaten export controls on rare earths because this is rallying the rest of the world to understand, oh wait a minute, we can't have China monopolize what is an absolutely critical part of the supply chain. This was a mistake by China to do. Um now Australia under a company called Lionus uh probably has the best refining technology outside of China. Um so in my book the split I actually have a whole chapter on rare earths and I actually recommend in the book and I say that Australia is taking the lead in rare earth mining and refining outside of China. So investors should probably want to look there. Um I think it's smart for the United States to sign that deal with Australia. I also think it's smart for Australia to sign that deal with America. And right now, when it comes to Australia, Albanese, the prime minister, and Penny Wong, the foreign minister, are being really good at playing off both the Americans and the Chinese. You know, they're getting closer to China, resolving and fixing some of the relationship that was hurt under Scoie Morrison, um, the previous prime minister. But they're saying we want good trade with China, but I think it's smart for Australia to hedge their bets and also sell these critical minerals to America. I think this is a smart thing for those two countries. It's a big mistake for China to have gone so far to force other countries to shake get out of their stuper and realize we need access to rare earths too. Big mistake by China. >> You mentioned uh tech supremacy. So let's talk about tech supremacy. who is going to reign supreme in the AI race. This came in recently uh from Jensen Hang, Nvidia CEO. He said, "Nvidia is now 100% out of China. We went from 95% market share to zero." I can't imagine any policy America thinking that that's a good idea. That whatever policy we implemented caused America to lose one of the largest markets in the world. He didn't name names or administrations, but the Biden administration imposed rules in 2022 to restrict export of Nvidia's most advanced AI chips to China. uh do you think the current administration is going to reverse that uh first question and second what is China now doing uh to fill this void? So, I don't want to hype my book up, The Split, too much, but I have a chapter in the book on AI and semiconductors. And I basically wrote out for investors, and I hope your listeners read the darn book because you would have made a fortune the last nine months if you had. But I basically said that Nvidia is done for in China, even if they have the best technology and even if the Chinese want to buy Nvidia products, two things have happened, David. First is China doesn't trust America anymore. You can't trust America under Biden and you certainly can't trust America under Scotty Besson and Trump because they keep breaking agreements from Switzerland to Spain. So the feeling is they they'll buy soybeans because it's consumable and they if they don't want the soybeans from America anymore, the next quarter they can buy it from Argentine or Brazil. But when it comes to semiconductors, it's forcing Chinese companies to use the American tech ecosystem for five years, 10 years, generations. So the problem is they scared that the current president or future president will put on export controls again and take away the Nvidia chips or take away the repair uh and the servicing. So there's a feeling in China that yeah, we might want American technology because maybe it is better, but we just can't trust America in the technology supply chain. So we have to focus on building up indigenous innovation. And that's why I tout in the book, you got to buy be buying the American the Chinese semiconductors. And that's why you see Cabricom, Huahong, you know, their share prices have soared in the last 3 to 6 months because they are powering not just China's AI boom, but the global souths or what I prefer to call the global majority. Because America has weaponized Swift, because they've weaponized the US dollar, because they've weaponized technology, countries around the world are saying, "We don't want to buy American technology anymore because what happens if President Trump decides to sanction us, you know, these are what's happening, you know, in presidential palaces and rooms in Malaysia, in Vietnam, in France even. and they're saying, you know what, we want to buy American tech uh we want to buy American technology, but we can't trust it. So instead, we're going to buy te Chinese technology. That's why I'm super super bullish on Chinese semiconductor companies because they are going to power not just China's AI boom, but the global majority's AI boom because nobody trusts America as a steady trading partner right now. Do you think Taiwan will become less of a critical issue once China establishes I'm making the assumption that they will, but let's suppose that they do once China establishes its own fam on par rivaling China's TSMC's. I think it's always going to be an issue because I don't think that Taiwan is because of its strength and semiconductors is the main reason for why China wants to reunify. It's more, you know, coming from the body of the Chinese. They really feel that Taiwan is part of China. They need to bring Taiwan back under the fold. Whether it be one, you know, uh, one party, two systems, whatever it is, there's this guttural almost animallike feeling that Taiwan has to be brought back into the fold regardless of semiconductors. It could be a very poor nation of rice patty farmers and just from an ideological um humanistic view, China wants to control Taiwan again. Um you know, it's it's their red line. some it makes sense to me but it also doesn't make sense to me that much because at the end of the day I think chi China would give up a lot to the Americans in economic trade if Trump were to double down and agree to the one China principle. So this is sort of you know Trump has a lot of leverage over China that way. You know if Trump were to say we will double down on um agreeing to the one China principle but you need to sell us all the rare earths. I think that's something that China China will take. they almost become, you know, not insane, but they've become a little overworked, a little overhyped when it comes to the Taiwan issue, just not even regarding um semiconductors. But now that you've added in the last 10 years the importance of semiconductors, then yeah, you're absolutely right that you know controlling Taiwan is important for China. Uh it might not become as important aside from a gunal feeling if China builds up its own semiconductor sector to rival TSMC. Let's just evaluate uh how the two economies, China and the US's economies have performed thus far in 2025 since the uh start of the trade war. So let's take a look at the US side first. Um I'm just taking one particular data point. We can look at this from a number of angles here. This is reported by the Guardian. Uh items on the shelves of empty of uh grocery stores are starting to become empty. uh the US is expected to cost uh uh billions of dollars uh to households uh from these tariffs. Uh meanwhile, the Chinese economy has grown 4.8% in the third quarter from a year ago. This is widely expected. However, fixed asset investment, which includes real estate, unexpectedly fell 0.5% in the first 9 months of the year. uh analysts pulled by Reuters have forecasted 1 point or sorry 0.1% growth. Um I'll just take these numbers and of course your own uh to evaluate who's actually winning this trade war currently right now. >> Well, nobody is winning the trade war. I think both countries are hurting right now frankly. I mean it's inflation is a big problem in the United States as I mentioned. I'm worried about stagflation but let's be honest. I mean China's economy is okay but it's not booming. I'm more bullish on China's economy now than any time in the last six years because they are winning the trade war. So, you're starting to see more of the animal spirits are coming back. The Hong Kong equity markets are the second best performing in the world in 2025. Um, second after South Korea, which has boomed out of control. Um, but it's clear that consumers and business owners in China are still anxious. And that's why you have seen that overall retail sales went up over 4% in the first three quarters of 2025 in China, but in the last quarter it only went up 3%. There's still a lot of anxiety in the country. The deflation is scary. You know, Chinese don't want to buy big ticket items like cars or houses. Housing prices have dropped 30 to 50%. Because they think that prices are going to be cheaper next month. So instead of buying things, they're keeping all of their money in time deposits or in the bank. That's why Chinese citizens are sitting on 23 trillion US of household savings. So China might be doing a little bit better than the United States when it comes to the trade war right now on the overall economy. But let's not let's be realistic. China's not booming. Both countries are hurting from this. They need to come to a resolution sooner than later. But, and here's the next thing, David, Chinese can and will eat bitter more than the Americans. Ch. When I first moved to China in 1997, a lot of Chinese told me they could only eat meat once every month or two. They have 40% savings rates. The Chinese, as I said, are sitting on 23 trillion US of household savings. They can eat bitter and they have the resolve to shed the stink of theQing dynasty humiliation from 150 years ago when the Chinese capitulated to Western European and American imperialism and colonialism starting off the 100redyear century of humiliation. The Chinese don't want to do that. They will push back hard. Americans on the other hand get mad when there aren't enough free bread sticks at Olive Garden put on the table within two minutes. So the reality is I don't think the Americans can handle a long drawn out war. And I bet you David that the evangelical Christians, Trump's main base, are going to scream and cry if they can't get enough dolls for their sons and daughters for Christmas coming up in a couple months. China will go push back a lot harder than the Americans can understand. >> Uh well, let's see le let's see uh if uh Santa is going to be kind to us this Christmas uh here in the West. Sean, let's end on the final uh topic, which is the future. China is currently reviewing its upcoming 5-year plans. They're set to renew their 5-year plan, and the central committee is making um uh inroads into making these new plans. So, they're meeting currently in Beijing. Um, and we're expecting something by the end of October. What are you expecting? What should the next 5 years look like for China? >> I think the big thing they're going to talk about is how do we push consumption? Um, that's the that's sort of the big thing that all economists have been talking about forever, right? In the Chinese economy, consumers only account for about 40% of the economy. In the United States, it's 70 75%. So I think China is going to be looking at trying to improve social security, improve access to medical care, improve access to education, try to create more babies, you know, give more incentives because there is definitely an aging population in China and you just don't see people having babies right now because they want to push um more household consumption. Um that's not going to be an easy thing. I mean that's something that you know when Jaoba who is the prime minister you know 101 15 years ago was talking about improving the overall environment uh which China honestly has done. They've gotten better access to medical care, better access to education for everyday Chinese. But I think it's going to be very difficult to get Chinese to spend again as long as you have the spectre of a weak real estate market and most importantly weak income. Nobody's giving salary increases. No one's giving bonuses right now. And then most importantly with the threat of geopolitics, right? The Chinese feel that the United States is looking to impoverish China and contain them the way the US has done to Iran, North Korea, and Cuba for generations and which they might be trying to do with Maduro and Venezuela by doing extrajudicial killings of drug runners. But you also have seen two Trinidadians or Trinies have died. Um, so we don't really know what's happening with that. But the point being, David, is the Chinese when they see that geopolitical overhang, they're not just going to go out and spend easily. They'll spend when they see value. They'll go out on a short vacation with their friends and family to Malaysia to go gambling at Geng. They'll go to Japan. They'll go to Dubai. They'll travel within China because they want experiences and to relax. They're not going to spend a lot of money on food. They're not going to spend a lot of money on clothes unless they really, really value it. And that's why you see a company like Starbucks is in so much trouble in China because who wants to spend 35 R&B for a cup of coffee when you can buy one for 10 R&B from Lucken? But that I think is what you're going to see this week. Beijing is going to talk about how do we spur consumption? But it's not going to be easy. It's going to you're going to need to see a not a 90-day daunt with the Americans, but you're going to need to see a multi-year daunt with the Americans where maybe Trump says, "Let's let Chinese companies like a Xiaomi, like a BYD, invest billions, maybe even a trillion US dollars into America. Let's get our trade relationship back on path the way it was during the Bush and even Obama eras." Just just on that note, what's stopping the US from making a deal with China and say, "Hey, you have to build a BYD plant some somewhere. North I'm just making somewhere up, North Carolina, wherever." Um, and then we can lower the tariffs in the cars cuz right now they're not being shipped here in the US or Canada or anywhere else in the West for that matter because uh because of import tariffs. Why can't they make the same deal they made with Toyota decades ago? >> They should 100% absolutely make that deal. I personally have been looking around for Chinese companies and talking to them and saying if Trump allows it, let's go together and invest5 billion dollars into a plant or a factory in the United States. This is something that the US should do. They just have been saying no on the grounds of national security, right? China, you look at a company like BYD, they sell an $8,000 car that has fully autonomous. >> Is it actually Is it actually a national security issue? the I mean in just in theory the Chinese could use >> well they could use the cameras and the cars to spy on American citizens. I don't know I'm making this up but that's that's possible in theory right? It's I mean the 90year-old neighbor woman next door to me might kill me right but you know so I mean there's that's the problem right they say a national security threat you know it could be you know there is not 100% I can't promise no but I think when you outweigh the pros and the cons there would be benefits by having a BYD come into the United States what the US would have to do is ensure that they have oversight and make sure that they can check and make sure that BYD or Tik Tok or whatever Chinese company is not spying on Americans. But yeah, we can't overhype things, right? You can kill somebody with a Starbucks coffee, but China still allows Starbucks to open up outlets in China. One last question before we go. What's going to happen to the future of Chinese immigration? See, I grew up in the '90s where Chinese were predominantly or I think I think yeah, they were in the '90s the biggest uh nation to uh to uh immigrate into Canada and I think to some extent the US as well. Now that's India. I'm not saying Chinese immigrants aren't coming, but relative to other parts of the world, they're uh less predominant now. Uh what's the trend in the next 20 30 years? >> I think it's going to continue to lower. I think when we talk to a lot of Chinese, um, they're scared of going to the United States to study, especially if they're in STEM, because they're worried that they won't they'll get their visas revoked. They're worried that they'll be called a national security threat and arrested. They're worried that they won't be able to get a work visa. So, what's the point of spending $400,000 US in America to go to a top private school? So, what you're starting to see is top Chinese are saying, "Let's stay in China or if we want to get that overseas experience, they're going to Hong Kong. They're going to Singapore where it's cheaper." You know, frankly, why would you spend $400,000, which I think is a total scam, to go to a private university in America, come back to China where salaries are low at the starting level, making only 12 $1,500 US a month. The numbers don't add up. It worked 20 years ago when there was a gold rush towards making money in China, but now that salaries, you know, unemployment isn't an issue, David, in China, but undermployment is an issue. So, people can get jobs easily, but it's about 30 to 50% less starting salaries than they were before the trade war started. So, it just doesn't make sense for people to go to the United States right now. just in general, the high price of tuition is one of my personal pet peeves about the United States and the education system. You know, I'm American, but you and I went to the same university, McGill. I went because it was only $5,000 um when I was there at the time, and I thought that was reasonable. My son Tom Ryan just started at the University of Texas at Austin because a it's a great school, great tech ecosystem because he's into drones, but it's also only 11,000 US dollars for instate residents. Um, so I expect Chinese to follow the path of me and my son go to either wellpriced state universities in America and Canada or stay in China, stay in Hong Kong to stay in Singapore. And this is going to be a big problem for America when it comes to spending, buying real estate, you know, renting real estate, buying cars because the Chinese consumer or student used to spend a lot of money in the West. >> Excellent. Thank you very much for your update, Sean. Where can we follow you? So, I'll put the link to the split link down below so you can check out Sean's book. But where else? >> Thanks for having me, Dave. It's always a pleasure talking to you. You're one of the best anchors out there. You can follow me on Twitter or X under Sean Ryan or on LinkedIn. But the best place is to get my book. I'm going to shell a little bit, The Split, Finding the Opportunities in China's Economy and the New World Order because it's a bible for investing. >> All right, follow Shawn Ryan there. Thank you very much, Sean. We'll speak again soon. Plenty more to discuss before the end of the year, I'm sure.