00:00First off, we do see these Wall Street swings on what's coming out between U.S. and China.
00:04Why is this still, just remind everybody, why is this still the most important global economic relationship in the world?
00:10Or is it starting to kind of change a little bit?
00:13Well, they are the two world's biggest economies.
00:18They are, of course, completely interlocked with each other.
00:20China is the world's biggest manufacturer, but, of course, America is their biggest customer.
00:25It's the biggest consumer market in the world.
00:28So, obviously, the trade tensions between them do spill over to everybody kind of caught in the middle of that in terms of supply chains.
00:35And that's what we're kind of seeing some reaction or some response now to the rest of the world.
00:41And even if your starting point is that, yes, we'll always have to do business with America because the consumer is so powerful there.
00:47Trading partners are kicking tires on, hang on a sec, who else can I do business with?
00:51How else can I diversify my markets?
00:53China is looking around, say, buying more agricultural produce from South America, as we know.
00:58But also its exports are going gangbusters to parts of the world other than America.
01:02And then those other countries in the middle are saying, you know, who else can we start doing more trade deals with?
01:07They're accelerating trade negotiations.
01:09They're accelerating ways of doing business with each other, looking for new markets.
01:12So, it's very early stages, but the U.S.-China trade war is starting to poke some change in the global trade.
01:20You know, I mean, I think the question is, the question that J.D. Vance probably doesn't have an answer to,
01:27can China be cut off from U.S. trade longer than we can stay solvent?
01:32Because the rare earth minerals that they have, we cannot get in size from anywhere else.
01:39And we're not going to be able to process them here, to refine them here anytime soon.
01:46So, you know, Meredith Whitney, in a note on Sunday, said,
01:49aside from the massive dependence on the U.S. industrial complex for these rare earth metals and magnets,
01:56the U.S. military is 100% dependent on them and nearly depleted of its reserves.
02:03So, I mean, don't we need them more than they need us right now?
02:07Yeah, I think we're all at a point now where we are fully aware that if there is a vulnerability
02:12in the hawkish trade stance that the U.S. is taking on China, it's on rare earth supplies.
02:19China is the one digging them out of the ground.
02:21China is the one that's taking on the refining risk there,
02:24the environmental risk and the cost associated with it at a scale that no other country is doing.
02:29And that's why America and everybody else is so reliant on China and getting those minerals out here.
02:34And that's why China, of course, it's well aware of its leverage.
02:37It's floated those export controls that it did last week or the week before that, of course,
02:41extend shockwaves not just through the U.S., but the rest of the world, too.
02:45And China is making clear that it's in control of these.
02:47Now, this is a policy error, though.
02:49If you go back maybe 15 years ago, there was a big, there was a discussion around rare earth supply at that time.
02:55There were other options on the table.
02:57It's not just China that has these minerals.
02:59Other countries could have put money into the ground and put the money into the resources
03:03and the facilities needed to extract these.
03:05There are some companies in the U.S. that are talking about or trying to get off the ground at the moment in doing this.
03:10But the point is, we're at a stage where China has a grip and a lock on the system to the point where everybody else is years behind.
03:16It will take a long time.
03:17Well, it's not just getting them out of the ground.
03:19And, I mean, I talked to industrial CEOs who do business globally and have told me,
03:26look, we've seen the refining process in China and it is horrific.
03:31It is the kind of environmental risk that American voters just would not be willing to take.
03:38So, no one else can refine them at these levels, at least with today's methods,
03:45without sacrificing, like, a portion of humanity.
03:49So, we're not going to do that, are we?
03:51Well, and that's entirely right.
03:52Environmental risk is a big part of the equation.
03:54But there are some companies, by the way, there are, including some in the U.S.,
03:58who are looking for cleaner ways to do this.
04:01So, but obviously nothing like on the scale that China currently offers.
04:05But other countries as well are coming to the table.
04:06Pakistan, for example, is floating itself as a potential partner for these minerals for the U.S.
04:11They can be sourced from other countries too.
04:13That's why Argentina is in the mix at the moment when we talk about the support that the U.S. Treasury is offering Argentina.
04:20One of the reasons is because of the minerals that Argentina has.
04:23So, but yes, the point is that no one's doing it on the scale that China is right now.
04:28And until that changes, China has leverage over the rest of the global trading system.
04:32Hey, I want to go into your story that looks at global trade flows and you look at what shipping companies are seeing and some of the changes.
04:38But there's a quote in the story, an associate professor of economics at the University of California at Davis, Ina Siminovitska.
04:46And it says, this individual saying, it's very clear that we are redrawing the map of international trade.
04:51We're going to see a lot more bilateral trade agreements between countries and subgroups of countries.
04:57She predicts this.
04:58What does that mean for economic growth for individual countries and for the global economy overall?
05:03Do we know anything?
05:04Is it good?
05:05Is it bad?
05:05Well, it's early stages, but we're getting, we are seeing signs now that countries are looking at accelerating trade negotiations with each other and signing deals with each other.
05:17Now, the European Union is one example.
05:19They've finally gotten that deal signed with Indonesia.
05:22They are getting that big trade negotiation with South America, Mercursor, off the ground, trying to get that ratified.
05:29Other countries are also looking at doing business more with each other, like New Zealand and Switzerland and the UAE are among a group who've gotten together in this kind of a loose trading agreement that they've pulled together over recent months.
05:41And the point of all of this is, is, as I said at the start, it's nobody suggesting the US is not the world's biggest consumer market and that they don't want to do business here.
05:49That's not the point.
05:50But they're seeing the tariffs going up at the fastest pace since World War II.
05:54It's more complicated, more costly for some of the businesses who want to do trade with the US.
05:59And they're asking, what else can they do to diversify and mix up their supply lands and their markets?
06:06And we're seeing it in Peruvian fruit farmers.
06:09They're looking for new alternative markets in Lesotho.
06:12They're looking for alternative textile markets, maybe in Europe and in Asia.
06:16So, you know, as I say, the tariff wall, when it's gone up on the US side, it's not about countries not wanting to do business here, but they are certainly kicking tires on where else they can diversify.
06:28And that's what these trade negotiations are getting a shot in the arm, as one of the professors quoted in the article said to us.
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