00:00What does it tell you that the two sides managed to come to, yes, an extension of their trade truce,
00:05but only two months?
00:08I think that the truce, the continued detente was a grudging one.
00:12The U.S. side is looking at what it had required or what it asked the Chinese to do, and
00:17it's seeing a lot of noncompliance.
00:19You know, you do see a little bit of soybean flow, but there's all these promises of purchase of corn
00:24and wheat.
00:24None of that's materialized.
00:26You know, the rare earth magnets, critical minerals are supposed to be flowing.
00:30Normally, they're not at all.
00:32There's huge problems in sourcing these for a lot of companies.
00:37So I think the U.S. side is looking at the compliance aspect and saying China's not doing a good
00:42enough job, and therefore we need more frequent check-ins.
00:46I think the Chinese side is looking at this and saying, we think we're doing fine.
00:50Why don't you just leave us alone for the next few years and let us go about our business?
00:55Do you think if we didn't have the midterms coming up very much on the near horizon, Leland, that we'd
01:00be seeing something different?
01:01Is that one of the factors that means that this relationship is not sort of blowing up at the moment?
01:08You know, that should be.
01:10I think the answer to that normally would be yes, but it's actually very unprecedented to have a state dinner
01:16for, you know, a potential adversary a few weeks before the midterms.
01:20This is not normal.
01:21So I think that, you know, this is what's going on in the summit is not a reflection of politics
01:26for the most part.
01:29I think it's a reflection of the fact that, you know, President Trump wants to keep a stable relationship with
01:33China.
01:34He wants to try to encourage them to live up to the purchase commitments that they've made.
01:39And it's just looking at this as sort of separate, separate from traditional domestic politics.
01:44That's a that's a not a very normal way of looking at this.
01:46But I think that politics are entering this less than they normally do, not more.
01:51Do you think that the U.S. will want to put pressure or to try and exert some pressure on
01:55China to rethink their currency policy?
01:57Because a lot of the agreements we get here are, you know, ways, yes, of trying to counter the trade
02:02imbalance in the short term.
02:03But they're not fundamental.
02:04They're not structural changes to the relationship in the way that maybe big movements in the currency could be.
02:09I'm not suggesting they'd be successful.
02:11But do you think is that in the mind of the U.S. administration right now?
02:16Yeah, you know, I think it's very likely that's what comes next.
02:19You know, when I was looking at the four year term at the very beginning, what I was telling people
02:24is that the first year, at least year two, are going to be about tariffs.
02:28And then once the tariff stuff is worn off a bit, the focus may turn to currency.
02:33Because if you look at the imbalances in China's economy, you can require purchase commitments.
02:37But you can't do any of this macroeconomic rebalancing without some sort of attention to the currency.
02:45So do I think that the administration starts focusing on currency policy the last, you know, two years of this
02:50four year term?
02:51I do think that.
02:52I don't know how much of it's going to be on China.
02:54But I do think that that's a good guess as to where things are going next.
02:59It seems as if many commentators have quite low expectations for what actually comes out of this summit then, Leland.
03:05With that in mind, I know that the Board of Trade is something that could get a mention.
03:09Remind us the function of that and what how that could move forward during this visit.
03:15Well, you know, it's funny how many people have gotten excited about this concept of a Board of Trade or
03:20a Board of Investment,
03:21which has gotten very little attention since it's the first summit.
03:25These are not mechanisms meant to be ambitious and they're not meant to build up the Chinese,
03:31U.S.-Chinese, you know, trading commercial relationship.
03:34The investment flows in both directions.
03:37They're meant to stabilize.
03:39You know, the comparison used to be to the S&ED.
03:41But the S&ED, the strategic and economic dialogue the United States used to have for many years,
03:46was all about this idea that if we just get Beijing, we get Chinese government officials in the room,
03:51we can convince them it's in their best interest to do what we want.
03:54And I think that, you know, the wool is off our eyes on this.
03:57I think that the more realistic approach is what we're doing right now,
04:01which is saying there are certain aspects that we need to stabilize.
04:04There's other aspects that have national security dimensions that we have no business dealing with the Chinese on.
04:08And so let's figure out those aspects that are part that are an appropriate part of trade discussions or investment
04:14discussions,
04:15particularly trade, and then let's have them in a specific forum where we can talk about non-strategic goods
04:20and go about our way.
04:22So I think that the fact that we're creating these mechanisms is not ambitious
04:25and it's not part of this goal of, you know, improving and expanding the relationship.
04:31It's saying that instead of floor of the relationship, there's not much upside at this point,
04:37but there is a potential for downside.
04:39Let's cap the downside and try to work together on what we think we can work together on.
04:42Hmm. Leland, with a longer lens of history, I suppose, how do you compare this visit to President Xi's last
04:50visit,
04:50which I think is nearly 10 years ago now?
04:55Well, there clearly is some desire for the relationship to be worked out between the two leaders.
05:01I think that there's a view on the U.S. side that, you know, big things will only happen
05:08if you get the two leaders in a room together.
05:10And I think the Chinese are comfortable with this framing of the relationship,
05:14although I guess they're occasionally worried about what President Trump might say at any given time.
05:18So I think for right now, the fact that there are two leaders who are very much leading the relationship
05:25is the new norm.
05:28I think what's encouraging, though, is we are setting guardrails on the relationship.
05:33We need to set more guardrails on the relationship, but we also need to be very, you know,
05:39we have to recognize that the future of the relationship is not about us convincing the Chinese to do a
05:45bunch of things,
05:45the Chinese convincing us to do a bunch of things.
05:47It's making sure that worst case scenarios don't happen.
05:52And when we see guardrails around AI, can there be a landing ground there at all, Leland, a meeting of
05:57minds?
05:59I think so over time, but it's a process.
06:03First of all, the United States, the American team doesn't have one view of this.
06:07So if you get the American, you know, quasi-negotiators in the room or the administration people in charges in
06:12the room,
06:13there are a lot of different opinions on what this should look like.
06:16You know, U.S. side is not of one mind in terms of how this should be governed.
06:20Secondly, I don't think that China is particularly cognizant of the full threat.
06:25Maybe they are in theory, but they haven't been hit hard enough by some sort of hugging face type incident
06:30where, you know,
06:32they get really scared and say, OK, well, the party has to be worried about this.
06:35This is not a U.S.-China issue.
06:37This is a China issue that makes us worried domestically.
06:41So I think as these incidents keep proliferating on both sides of the Pacific and all around the world,
06:46I think both sides will realize that there needs to be some sort of dialogue, some sort of notification mechanism.
06:52But right now, the Chinese are just looking at the U.S. and saying, you guys have the frontier labs.
06:55You're at the very top.
06:57You guys do the regulating, and we're just going to do whatever we want.
07:00That's not a sustainable path going into next year.
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