00:00Where Premier Li Keung says United States tariffs have dealt a severe blow to the global economy.
00:06The world's second largest economy has nonetheless posted a record $1 trillion trade surplus,
00:11raising concerns in Europe and prompting French President Emmanuel Macron
00:14to threaten tariffs of his own on his visit to Beijing.
00:18Meanwhile in Washington, Donald Trump is awaiting a Supreme Court ruling on the legality of the tariffs
00:22he's imposed since taking office.
00:24Monty Francis has the details on the growing tensions and what they could mean for global trade.
00:30My fellow Americans, this is Liberation Day.
00:33When Donald Trump announced sweeping tariffs on most U.S. imports in April, he called it Liberation Day.
00:40But so far, few in the U.S. or the rest of the world appear to be cheering.
00:44On Tuesday, China's premier said the tariffs had been bad for the global economy,
00:49despite the fact Beijing's trade surplus has just surged past $1 trillion.
00:54Starting from the beginning of this year, we've seen the stick of tariffs being wielded around the world
01:01with growing restrictive measures on the economy and trade,
01:05which have dealt a severe blow to the global economy.
01:09Trump's tariffs have caused China to redirect goods from the U.S. to Europe.
01:15And French President Emmanuel Macron, who just returned from a visit to China,
01:19has threatened to impose tariffs of his own on Chinese imports in the coming months,
01:24if Beijing fails to reduce its massive trade surplus with the European Union.
01:30Meanwhile, Trump appears nervous about what the U.S. Supreme Court could decide about the legality of his tariffs,
01:36given the Constitution gives the power to impose taxes to Congress, not the executive branch.
01:42On Tuesday, he said in a social media post,
01:45the biggest threat in history to the U.S. national security would be a negative decision
01:50on tariffs by the U.S. Supreme Court.
01:52We would be financially defenseless.
01:55On Monday, Trump seemed to tacitly acknowledge the tariffs were not having their intended effect,
02:00announcing a $12 billion bailout for American farmers,
02:03calling it a bridge payment until China resumed buying U.S. farming goods,
02:08something he extracted from President Xi during their meeting in October.
02:12Critics of the president say he's just solving a problem he himself caused,
02:17given China boycotted U.S. agricultural goods in response to the tariffs.
02:21For more insights, let's turn to Jean-François DiMeglio, economist and honorary chair at the Asia Center.
02:28Jean-François, thanks so much for joining us here on the show.
02:31In terms of the American farmers, if we can just start there,
02:34would you go as far as to say, like those critics,
02:36that Trump has, in fact, just solved the problem that he himself created,
02:40especially when you look at how the U.S. is going head-to-head with China?
02:45Well, the main impact is obviously China redirecting its experts, as was said,
02:51from the U.S. to other parts of the world.
02:54If you look at the latest numbers, when you mentioned the $1 trillion billion surplus,
03:00that's over the last 12 months, and actually experts to U.S. fell 25% roughly,
03:07while experts to Africa went up 27%.
03:12To Europe, it was about 15%.
03:14So obviously, there is a redirection of Chinese experts.
03:19And the main region which benefits from this redirection is probably Southeast Asia,
03:23which becomes now the first trade partner for China.
03:27So obviously, China is hedging its bets.
03:31Yet, China is heavily relying on trade and heavily relying on experts to reap benefits from experts,
03:39because otherwise, China's growth is impacted by the various trade tariffs.
03:45You mentioned the exports and its heavy reliance on them.
03:48In fact, that has also been criticized, with many pointing to the fact that China
03:52is overly reliant on exports.
03:54And now you say that it is going to increase by 15% here in Europe.
03:59What will that mean for the average European consumer?
04:03Well, European consumers may be impacted by tariffs, as President Macron hinted.
04:11Yet, the first point is that tariffs are not decided at the national level,
04:15but they are decided at the European level.
04:17And if, indeed, tariffs are decided, that could mean that Chinese price would go down for two reasons.
04:25One would be the value of the Chinese currency.
04:29Currently, the Chinese currency is very weak, because first, it's indexed to the US dollar,
04:35which is very weak, versus euro.
04:39And Chinese currency is also weak, obviously, euro, of course.
04:45That brings prices down.
04:47And on top of this, you may have price cuts by Chinese exporters.
04:52If they want to remain, they keep their market share to Europe, especially for cars.
04:58Chinese cars have been impacted by tariffs, as you know.
05:01Some brands up to 37%, yet Chinese cars are still selling into Europe,
05:07because they are still cheaper than European electric cars.
05:12Who do you see blinking first in this growing trade war?
05:16Just leaving the Europeans aside, is it going to be the United States reducing tariffs on Beijing,
05:20or is it going to be Beijing diversifying away from its export-driven model?
05:26Well, I wouldn't say who will blink first.
05:29First, the two counterparts, China and the US, know that over time, they would decrease their mutual reliance.
05:39It's obvious that China is going towards strategic autonomy, exactly like Europe, just like France, but it will take time.
05:47So whenever you see negotiation between the US and China, that means each side is buying time
05:55and trying to become more autonomous vis-a-vis the other one.
06:00For example, for chips, China is now building its domestic industry, which is becoming really competitive to the US.
06:10Now for Europe, it's a very different game, because Europe will have a very, very hard time
06:16to become totally autonomous on various sectors, be it agriculture, be it chips, be it other sectors, energy in particular.
06:27So it will take time.
06:28We are also moving towards autonomy, but it will take probably much longer than for the US or China.
06:34Just a final word on those chips.
06:36The United States hardliners have criticised Donald Trump's administration for allowing the sale of thousands of NVIDIA chips to be shipped to Beijing.
06:46They say that it could lead to China harnessing that technology for military purposes.
06:51I'm just curious where you stand on that.
06:55Well, there's probably no mystery about that, but it's not the first time.
07:00And this is probably part of a wider bargain.
07:04I don't think China is only relying on NVIDIA for its military equipments.
07:10China also has its own military equipments, which are domestic.
07:15And as you can see, every month, NVIDIA is changing tack from releasing some chips or keeping them from being exported.
07:27So, yes, the US criticism is right.
07:30However, it's only a matter of time before China becomes totally autonomous in that sector.
07:36Jean-François Dimeglio, thanks so much for just unpacking the situation as it stands.
07:40A real thorough economic outlook on what's happening in the world of trade.
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