PDB Situation Report | May 3rd, 2025: Economic Pain in Beijing & U.S.–Iran Negotiation Breakdown
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What is the main topic of this episode?
Welcome to the PDB Situation Report. I'm Mike Baker. Your eyes and ears on the world stage. All right, let's get briefed. We'll start things off today with the latest in the U.S.-China tariff war, perhaps you've heard about this, where both economies are starting to feel the heat, and Beijing may be quietly looking for an off-ramp.
How is the US-China tariff war affecting both economies?
Steve Yates from the Heritage Foundation joins us to break it all down. Later in the show, a fourth round of nuclear talks between the U.S. and Iran has been abruptly, yeah, that's a good word for it, postponed, with both sides blaming logistics. Always was a logistical issue. Former Deputy Assistant Secretary of Defense Frank Gaffney, he stops by to give his insight on the negotiations. But first, today's Situation Report Spotlight. The tariff war between the US and China is showing signs of strain on both sides. I think that's fair to say. In China, reports continue to emerge of factories slowing down and even shutting their doors altogether.
What are the implications of China's tariff exemption list?
And in a quiet but telling move, Beijing is now circulating a 125% tariff exemption list to certain companies, trying to ease pressure on its economy without making a public concession in its ongoing fight with Washington. Back here in the U.S., the economy shrank at a 0.3% annual rate in the first quarter. That's the first contraction in three years.
How is the US economy responding to the trade war?
Economists say the drop was driven in part by a surge of imports as companies scrambled to beat Trump's new tariffs. Both governments claim that they're open to negotiations, but neither looks ready to blink. And frankly, this is a game of who blinks first. For more on this, let me bring in former Deputy National Security Advisor to the Vice President and Senior Research Fellow for China and National Security Policy at the Heritage Foundation, that's a mouthful, Steve Yates. Steve, thanks very much for joining us again. Thank you, Mike. It's great to be with you again. Thank you. Hopefully, you feel that way at the end of our discussion. Let's start with the China-US trade war, of course. It's always been a matter of, with something like this, I think, of who blinks first. Do you think China's blinked?
What is Steve Yates' perspective on China's strategy?
I don't think they've blinked. And I think there's actually something very different going on in China right now. Xi Jinping's been a different kind of leader. We've talked about that before. And there are a lot of off-ramps that were available to Xi Jinping where he might have even been able to improve terms with the United States. I don't want him to, but those options were probably there if he'd have... Maybe used a little bit of conversation and sugar at the beginning of this administration and after these announcements. But at every turn, Xi Jinping has chosen escalation and confrontation and still is. So, I don't think they blinked yet. I do think they're under pressure. They just have a different kind of system.
And so, they have... warehouses that are getting too full and stuff not moving, ports that are getting empty. They're going to feel this, and they're going to feel it worse than we do. The question is the tolerance within China for eating bitterness, as they say in Chinese, versus Americans, who might start seeing some pressure at the pump and change in supplies, and small businesses might get squeezed.
Do you think, going back to your comment that you started out with, where he's had an opportunity to de-escalate, or however you want to put it, but at every turn he's escalated, is that just simply a reflection of who's on the other side of the table, meaning President Trump and President Trump's tendency to be aggressive in something like this? So what I'm saying is, if it had been somewhat different. Of course, we may not even be in this position because we wouldn't be looking to rebalance trade, which I think is absolutely the right thing to do. But I'm just wondering whether this is just a characteristic of the, perhaps of the Chinese mindset that if the person on the other side of the table is being aggressive, there's no way you can deescalate your position.
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Chapters
8 chapters
1
What is the main topic of this episode?
0:12–0:32
2
How is the US-China tariff war affecting both economies?
0:32–1:10
3
What are the implications of China's tariff exemption list?
1:10–1:34
4
How is the US economy responding to the trade war?
1:34–2:20
5
What is Steve Yates' perspective on China's strategy?
2:20–4:15
6
What challenges does the US face in negotiations with China?
4:15–12:42
7
What are the potential consequences of resetting US-China relations?
12:42–18:22
8
How does the US plan to manage supply chains post-pandemic?
18:22–54:40
Speakers
3 identifiedMore from The President's Daily Brief
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