Mike Bird
Appearances
Today, Explained
The day after "Liberation Day"
But I think it's more interesting to break down the countries that are really much closer diplomatically to the US. So the cabinet of Taiwan called the Trump tariffs deeply unreasonable and highly regrettable. Korea said that they were studying what was happening.
Today, Explained
The day after "Liberation Day"
The Japanese trade minister did call the move extremely regrettable.
Today, Explained
The day after "Liberation Day"
But a lot of these countries are a little bit more circumspect and a little bit more, a little bit quieter, precisely because they have these very tight security relationships with the U.S. And they're very, very keen not to upset D.C., basically. So, yeah, there will be a little bit of a reserved reaction from some of them.
Today, Explained
The day after "Liberation Day"
So to be clear, we should start by saying there are trade restrictions that other countries put on the US. In some cases, they're steeper than the ones going in the other direction. That, from first principles, is a reasonable thing for US policymakers to be upset about. But
Today, Explained
The day after "Liberation Day"
What became very clear in the immediate aftermath of the announcement yesterday is that the figures being used weren't drawn from any meaningful measure of what, for example, the rates that Vietnam tariffs US goods at. There was no relationship with that data. What seems to have happened is there's been a sort of reverse engineering of a figure
Today, Explained
The day after "Liberation Day"
via the trade deficits and surpluses that individual countries have with the US. Basically, they've taken the trade surplus that Vietnam has with the US, they've divided it by the figure for Vietnamese exports to the US. It's a sort of Excel spreadsheet job. And it bears almost no relationship to what these countries actually limit U.S.
Today, Explained
The day after "Liberation Day"
trade with, whether that's tariffs or other various non-tariff barriers. These do exist. The tariffs, as they're going to be implemented, as they've been announced, bear no relationship to that. And it's a very strange measure. to have used to decide which countries have been hit hardest.
Today, Explained
The day after "Liberation Day"
And it's why you have a country like Vietnam, which does export a huge amount of the US and does have a very large trade surplus with the US. Why you've seen such high tariffs be levied on them, for example.
Today, Explained
The day after "Liberation Day"
This is basically the most predictable element of these tariffs, right? It's if you could have possibly thought of anything that Donald Trump was going to do when he came into office that he would almost definitely do. It was raise tariffs on China. So while painful. Essentially, I think a lot of Chinese companies have had eight years to be strategizing about this.
Today, Explained
The day after "Liberation Day"
While you can never be fully prepared, I'd say that a lot of companies and the Chinese government perhaps were as prepared as they could reasonably be. certainly a lot more prepared than companies operating in the other countries that were tariffed yesterday have been. You've seen Chinese companies over the years execute a lot of the strategy that has protected them so far.
Today, Explained
The day after "Liberation Day"
For example, moving lots of production, especially lower value added production of things like apparel, the final finished touches of making electronic goods into Southeast Asia. Now, obviously, that's not a strategy that works as well as Southeast Asia's being tariffed, but that was the idea up until yesterday.
Today, Explained
The day after "Liberation Day"
I think it will change the attitude quite a bit. One thing that the US government has tried to do a lot in the past few years is get cooperation from the Japanese and Korean governments in particular to cooperate on things like export controls of semiconductors to China. That's going to be a lot more difficult to execute if you're putting really, really steep tariffs on them.
Today, Explained
The day after "Liberation Day"
I don't think there's as many politicians in Japan or Korea that will wake up today and say, I would really like to cooperate with the US on these restrictions on Chinese trade. It's much more difficult to do that if you're also sort of slapping them in the face with these tariffs.
Today, Explained
The day after "Liberation Day"
I think it probably should if you're taking a really long-term view. Not wildly nervous. So there was a Chinese state media announcement after this meeting which said that China, Japan, and Korea had agreed to sort of react jointly, to react in concert against any U.S. tariffs because obviously, you know, they knew they were coming out.
Today, Explained
The day after "Liberation Day"
The Japanese and South Korean governments were fairly quick to say that wasn't quite their understanding of the meeting.
Today, Explained
The day after "Liberation Day"
It's the understanding that policymakers in Beijing would like to have. But I would say that this question of closer trilateral cooperation between China, Korea and Japan has been going on for a long time. And it's always been frustrated to some degree by the fact that
Today, Explained
The day after "Liberation Day"
These are three countries where usually at any given time, someone's upset with someone else, whether that's Japan and South Korea, they have a very fractious relationship, whether it's South Korea and China, or whether it's Japan and China, there's usually someone that's upset about something. And it's limited the sort of trilateral cooperation.
Today, Explained
The day after "Liberation Day"
There's always been discussion of a potential Japan, South Korea, China, free trade area, and it's never really come to fruition. Now, if you wanted to make it come to fruition, what you would want is an external threat that was common to all of those countries. I'm not sure that this will actually come out in the wash. I'm not sure there'll be a trade agreement of that nature.
Today, Explained
The day after "Liberation Day"
But if I wanted to force one through, these are exactly the circumstances which I'd create to try and do that.
Today, Explained
The day after "Liberation Day"
One thing the Chinese government has really struggled with in the past and for good reason is that they don't really have a lot of natural allies or friends. Even in Asia where sort of bellicose decisions around the South China Sea, around China's land borders, you know, difficult negotiating positions have left it. the country without obvious close friends.
Today, Explained
The day after "Liberation Day"
I think the US seriously damaging its own relationships in the region does make things easier on that front. If you listen to the Chinese Ministry of Foreign Affairs, they will tell you and they have done for decades that the US is a country that bullies smaller countries. It talks a sort of high and mighty game about all these lofty ideals of freedom and democracy and human rights.
Today, Explained
The day after "Liberation Day"
But in reality, it's just looking out for itself. Basically, I think these tariffs make that argument a lot easier to make in large parts of Asia. And I think to countries that are US allies, this will be very difficult. And these countries feel like they're being really set upon by decisions made in DC. That is a really natural opening for the Chinese government. It's a huge opportunity for them.
Today, Explained
The day after "Liberation Day"
You know, you couldn't have drafted these conditions better if you were a Chinese diplomat. You know, this is the absolute perfect storm from that perspective.
Today, Explained
The day after "Liberation Day"
I'm Mike Bird. I'm the Wall Street editor at leading magazine, The Economist. We call it a newspaper internally. Just to be clear, I'll get in trouble if I don't say that.
Today, Explained
The day after "Liberation Day"
They really are very, very steep. So I was looking across a group of them where the tariffs run to between 24 and 46 percent, depending on the country. So, yeah, very, very steep, considerably more than I think I was expecting, considerably more than most investors were expecting. It's a It's really extensive and broad.
Today, Explained
The day after "Liberation Day"
There's a big range of reactions, and I think that reflects the difference in both relationships with the US and sort of some different strategies going on. So the Chinese government reaction to note that the tariffs are sort of deeply unreasonable, that it's a sort of attack on the rest of the world, basically, is probably the least surprising of these.