Gordon Chang: “This is an existential struggle… and we better win it.”

jamie Diamond said this "Why don't you just pick up the phone?" Well the reason is we've had that attitude for five decades and look where it's gotten us you know if the Chinese want to do something about our tariffs it's up to them to pick up the phone as the US China trade war continues to escalate I'm sitting down with China analyst Gordon Chang what is the current state of play when it comes to Trump's tariff strategy the only way China wins this trade war is if it gets Trump to preemptively surrender this is an existential struggle it is more than just a trade war more than just a tariff war and we better win it and how is Xiinping's leadership being challenged inside China general Hu I think was sacked not by Cining but by the adversaries of Cining and the Chinese military we have seen all of these unexplained and unusual disappearances of military officers i I think this is the most dangerous moment in history this is American Thought Leaders and I'm Ya Kellik gordon Chang author of The Coming Collapse of China so good to have you back on American thought leaders thank you Yan so Gordon 245% is the new tariff number we're hearing about uh what's the meaning of this that tariff rate is for electric vehicles but you know electric vehicles are not going to get into the US regardless of tariff rate because the Biden administration actually essentially prohibited them on American roads because of their capability of spying on America so um whatever the tariff rate is 245% 1450% they're just not getting in and so give me a picture as of today we're following up on our short conversation last week what's the state of play with these tariffs and what's your best sense of what they're really all about well President Trump is negotiating with those 130 or so countries that have contacted the White House since his April 2nd Liberation Day announcement and essentially what Trump is going to do is redirect trade flows around the world um everybody needs the US consumer market it comprises almost 30% of global consumer spending um and so he's going to negotiate with Japan and with other countries and this is going to really set a template um once he gets those first deals in place he probably will extend them to others china which is refusing to talk to the United States now is probably going to be left out in the cold and eventually it will have to come to the table um but regardless of whether China talks to us or not um Trump is resetting um everything around the world right now with these tariffs well that's actually very interesting because I've seen analyses on both ends of this some people are telling me who I find quite credible that they will come to the table it'll maybe take a month or something like that and there's other people who believe for pretty credible reasons that they're just not going to come to the table any any thoughts here well countries are not required to trade with us um but if they don't trade with us they're not getting access to our consumer market so I think countries will understand that they have to do that but you know we'll see um there's a 90-day pause um and we'll see what happens at the end of that and we're going to un we'll understand one way or the other but I think that economic reality is countries need the United States more than we need them so this is going to be I think good for us and not good for China well and so specifically on China that's actually what I what I was I probably didn't say the word China um specifically I've heard that they may of course there's plenty of countries i mean there's I think there's 80 plus right now that that I'm aware of that have or are have decided to come to the table but China itself as you mentioned has not been very forthcoming and the question is will they ever I suppose at some point they will um you know CN is perfectly capable of taking China off the cliff and so yeah you know he says he won't be bullied he says he's not going to talk to us until we come begging so I I don't know um but this is not going to be a good story for China because remember um our economy is much bigger than theirs even with their inflated gross domestic product reports their economy is less than 2/3 the size of ours last year China ran an enormous merchandise trade surplus against us 295.4 billion which was 5.8% bigger than the merchandise trade surplus in 2023 i mean they've got everything to lose now they can retaliate as they've done with the rare earth uh export ban but you know they tried that against Japan in 2010 it didn't work china collapsed in a couple months you know they can tell Boeing "We're not accepting deliveries of planes." But if President Trump says if he prohibits Boeing from selling planes and replacement parts they're going to be a lot of planes in China not flying so you know we have the power um the only way China wins this trade war is if it gets Trump to preemptively surrender now Trump knows he holds the high cards but the question is and a lot of people say well you know we're a democracy we've got to give up i don't think so because Trump actually believes in these tariffs he knows how important it is but that's China's only route out of this so one of the biggest uh I guess criticisms that I hear often is that the the these tariffs the the the cost of the increased goods good cost is going to be transferred to the consumer and how do you view that well we actually have an experiment um and that was 2018 when Trump imposed 25% tariffs on China we know that China absorbed at least 75 to 81% of the cost of those tariffs the American consumer didn't feel it and by the way we can we tend to think of tariffs as a bilateral matter when we impose tariffs on China we think in binary terms US and China but we got to remember that when we impose tariffs on China companies move supply chains and production out of China which to areas which are lower tariffed um so yeah we didn't feel it in 2018 now is a different situation um but I think that if Trump is able to do what I think he can do which is uh stitch up these trade deals with other countries we're going to see a redirection of trade and the American consumer is just not going to feel it but there's a more important point for decades American presidents have pursued deeply injurious trade policies with China and we're going to have to pay some cost um it's just I I think that's inevitable i don't think the cost is going to be as great as all the smart people in New York and Washington think but even if it is this is a cost we have to pay because if we don't pay this cost we become a vassal state of China and so I just don't want to see that um how exactly do we become a vassal state of China in the scenario you're describing well we basically have no industry left we sell China raw materials like uh we sell them soybeans and wheat and we buy their manufactured products you know and that is not a good scenario which we're almost at that point anyway um but um we just have no industry left we have the United States completely devastated like we see in the rust belt in the south where towns and factories left people have no hope people are dying of fentanyl it just becomes a wasteland that's what we can become and President Trump understands that he has a heart he sees what's happening to those communities he's not going to leave the American worker behind like Wall Street wants us to so yeah this is something we absolutely have to do we owe this to our fellow Americans and so you mentioned uh you know these injurious policies and of course one of those very injurious policies was the hollowing out of the working class of the shifting of manufacturing all of the you know what's unfortunately called the rust creation of what's called the rust belt um can you give me a broader picture of how these injurious policies played out what they were and what the impact was just broadly speaking well in 2001 uh China beceded to the World Trade Organization after it came to a 1999 agreement with the US and uh China um took all the benefits of being a WTO member um and it did not adhere to many of its promises and to our shame we had a series of presidents who actually did not enforce the promises that China had made to us so factories just did what was you know the the logical thing they said "Well look we can move to China you know and so that's exactly what they did." And we allowed American business um to sort of be intimidated by China um we didn't enforce our WTO rights and that's how we got into this situation and every American president from George W bush on until Biden um were guilty of this including by the way a guy named Donald John Trump who was the 45th president of the United States before Biden but Trump 47 is very different from Trump 45 trump 45 signaled that he was going to impose tariffs he put them on at 25% which was inadequate um Trump saw this uh and as president number 47 he said "I'm not doing that again i'm not making the same mistakes that I made in my first term and great for him because he's defending the American worker like no other president has done in the WTO era so the American people owe him a debt of gratitude we may not like the way he's doing things we may not like him you know a lot of people in America don't but the point is this is an existential struggle it is more than just a trade war more than just a tariff war and we better win it and we've only got one president who can defend us right now and like him or not that's Donald John Trump gordon when I first saw those tariff tables I was at the White House on Liberation Day when the announcement was made um something struck me immediately and it was that these countries that are the prime transment hubs uh for the Chinese Communist Party that started after actually 2018 with this with the with the Trump 45 regime on China um basically it looked like the countries that have the highest tariffs I mean this is broadly speaking there were exceptions were the were these trans shipment hub countries and I found myself wondering is this part of the play uh to actually stop that and make that part of the deal to cut out all the loopholes that the Chinese Communist Party has placed uh in order to be able to basically avoid uh this type of activity from the US the change of the status quo with its relationship with the US well Commerce Secretary Howard Lutnik has actually reportedly spoken to Vietnam and other countries in Southeast Asia and basically said "Cut out this trans shshipment business." You know part of it is you know China's companies they set up factories in Vietnam um they just don't add very much value in Vietnam and they send it to us as a made in Vietnam product well that's our fault we know what's going on but there's something else and that is we know that there's completely fraudulent bills of lighting where goods never go to Vietnam but they are labeled as coming from Vietnam um and we see this on the trade documentation we know that this is going on and we don't you know we haven't done enough about it so this is on us Yan and this is something that I think that this administration unlike previous administration is actually going to go after the Chinese uh on this uh China has appointed a new top trade go negotiator seemingly unexpectedly actually i wasn't I didn't realize that would happen by any stretch of the imagination what do you make of that they want to talk I guess um you know they they say that uh they're willing to talk to us but they really want us to call them first and I I'm just you know a lot of people say Jamie Diamond said this why don't you just pick up the phone well the reason is we've had that attitude for five decades actually more than five decades and look where it's gotten us so you know if the Chinese want to do something about our tariffs it's up to them to pick up the phone um you know I'm just done pleading with China to do the right thing this is just not good for us it's not good for anybody else either and yet we have very smart people in our country suggesting that we continue policies that obviously haven't worked for decades gordon there's also been some ex very prominent exemptions that were announced uh as well you know on Apple semiconductors pharmaceuticals um some people have characterized that as being actually the US backing down somehow how do you read it well what's really important is the Chinese view it as us backing down and right after um what the exemptions were announced by the Trump administration what did China do did it reciprocate no it didn't what it did was it started to impose the embargo on the export of rare earths to the United States in other words they doubled down so um this was not good implementation um you know but apart from what the Chinese think you know and I don't think the Chinese are right um that this was the Trump administration surrendering I don't think the Chinese are right but apart from all of that um yeah there should have been a better roll out of the tariffs if the Trump administration wanted to have an exemption for electronic products and semiconductors that should have been part of the original announcement that makes much more sense to me um because then people can't say oh well this was a climb Um so implementation you know on the part of the Trump administration left a lot to be desired but especially it left a lot to be desired because we saw the way the Chinese reacted and that's important and you you mentioned earlier uh as you were talking about countries that are negotiating i think you singled out Japan you said Japan and other countries is there a reason you note Japan in particular well they're talking with Japan right now and Japan's really important because it's a you know a country where the tariffs aren't the trade barrier the trade barrier the non-tariff rules um that inhibit trade so we have to deal with that and we deal with that general issue that's important also Japan's an important economy it's the third largest in the world um it's an important American ally treaty obligation to defend Japan and Japan to defend us um so yeah I think Japan is really important in terms of the initial trade agreement we get a good deal with Japan then I think that the other countries will fall in line that will be the form that will be the template so you know to go back to something you said right at the beginning this is kind of a reg renegotiation of the global trade order really um you know one uh analyst Valina Czecharova she's sort of characterized this as the US basically asking do you want to be part of us or do you want to be part of what she calls dragon bear right which is Russ the Russia China axis with with some others yeah i mean and and she's been um you know she's been talking about Dragon Bear for quite some time and she's a very perceptive observer of what's going on um and yeah it's time for the United States to say enough is enough um this is a very new world the one thing that that Trump has recognized is that this world is very different than it was precoid um we're in a delobalization phase or at least we're beginning one and the countries that react the fastest to the new world situation are going to be the ones that prosper um and we have a lot of people in this country talking about the way the world once existed as if it was still in play you know Larry Frink um globalist um certainly has got more um reason to be a globalist than others because he's the head of Black Rockck the world's biggest asset manager 11.6 six trillion dollars under asset uh management you know he said it in March of 2022 he said the Ukraine invasion has put an end to the globalization that we've experienced for the past three decades he came to that stark conclusion because he said globalization had already been weakened by COVID which had weakened the connections among countries among companies and among people he's absolutely right this is a new world trump recognizes it a lot of very intelligent people in our country and elsewhere don't and I'm very happy that we got a president who's doing something about it we can argue about whether President Trump's doing the right thing or not but he's doing something which the previous president didn't you know one of the things we've talked about before Gordon is the fragility of the Chinese economy you know for example the housing sector the old building sector having collapsed and so forth beyond that there's also you know all sorts of rumblings of big unrest among the Chinese Communist Party itself questions about how much power does Xiinping have now given the failure of some of his policies uh broadly speaking I know you've been following this a bit i'm going to have uh one of our top analysts kind of give us the whole entire picture in an upcoming interview but what do you see happening there i think Cinping's in trouble um just give you one example General Hu Dong um the number two or number three unformed officer in the People's Liberation Army um vice chairman of the Communist Party Central Military Commission he hasn't been seen in public since March 11 now he was Cining's hatchet man but the general narrative is that Cining um got rid of him now I don't think that that is right um and there's a little bit of a history but let me go through it since July 9th of last year PLA Daily the main propaganda organ of the Chinese military has been running these articles praising quote unquote collective leadership that's a direct criticism of Cin now those articles could not appear unless the senior leadership of the military approved of them so for instance the number one unformed officer had to be behind that this means that General Hu I think was sacked not by Cining but by the adversaries of Cinping and the Chinese military makes much more sense to me and especially we have seen um all of these um unexplained and unusual disappearances of military officers especially since the middle of 2023 this is turmoil if there's turmoil it is unlikely that Cining is in full control of the military and especially when Cinping's loyalists are being detained I think that he has essentially lost control of the military that's not to say he isn't still the most powerful figure in China he is but there are a number of factors that point I think to his problems not only in the military but among civilian leaders at the top echelons of the communist party as well so um I I don't know how strong Cining is if you let me go on for just a minute more um I know I'm going on but to set the context when Cinping became general party secretary at the end of 2012 he inherited a consensual political system where no top leader got too much credit or too much blame because every decision of consequence was shared across the poll bureau standing committee and indeed across the wider polit bureau as well but Cinping by grabbing power from everybody else he also ended up with near total accountability which means he's got nobody else to blame now if you're Cing in 2017 and everything's going China's way this is great you're getting the credit for all of this good stuff but if it's 2025 and things are not going China's way and you're Centing you're getting blamed for all of this so it seems to me counterintuitive that he is as strong as people says he is and you know how should the US be responding to this like clearly uh you know this presents opportunity or at least it should inform you know decision-m whether it's on trade whether it's on military considerations security what what do you think i I think we have to um you know Ronald Reagan um his policy was that we could not exist with the Soviet Union called it an evil empire work to get rid of it and that's not Trump but we got to remember that the Communist Party believes that it cannot exist with the United States and we know this from any number of from their what they actually say they declared a quote unquote people's war in a landmark editorial in May 2019 in People's Daily the most authoritative publication in China people's war in Communist Party lingo means total war and we know that they believe that we are an existential threat and we're an existential threat not because of anything that we say or do Yan but because of who we are an insecure regime in Beijing is worried about the inspirational impact of America's values and form of governance on the Chinese people so we will never have amicable relations with China as long as the Communist Party rules it it's either them or us there's only going to be one survivor it'll either be the People's Republic of China or the United States of America not both i know that's a message that President Trump does not want to hear i know it's a message that most every American does not want to hear but if we don't start paying attention to what the Chinese are saying and doing we're going to lose our country remember we could not have cared less about what Osama bin Laden was saying about us even after he killed six Americans at the bombing of the World Trade Center in 1993 we didn't pay attention until one day he killed 2,977 Americans and then we said "How did this happen?" Well it happened because we're Americans and we believe that we have every god-given right not to pay attention to what our enemies say so we better listen up you know it's interesting how you said one survivor uh United States or the People's Republic of China now uh the United States I think survives you know h however it basically this this turns out right but but the People's Republic of China that is the Communist Party's version of China not China proper at least that that that's that's my that's my take on what you said yeah i said the People's Republic of China which is the Communist Party i didn't say China um I said the People's Republic of China um but we've got to pay attention what to our enemies say because we're going to lose a lot of Americans and I'm not I'm not entirely clear that uh if we don't pay attention that we're going to win nonetheless yes we're the far stronger society but China is the much more malicious political system and it's willing to do whatever it wants um and whatever power it has so we have an existential crisis and so it's kind of bizarre to be watching you know Europe and certain European countries making you know very warm overtures towards communist China as if it were you know just kind of another friendly nation of their own ilk that that's odd and what do you see this how how do you read that if Europe was resolute there would not have been World War I there certainly wouldn't have been World War II um what can I say europeans are Europeans feeble yeah i don't know i I don't want to get angry again so I'll just leave it at that but do do you think the president uh President Trump will be able to bring Europe in because that seems to be part of the strategy indeed right yeah but remember Vladimir Putin invaded Crimea europe didn't think anything about it vladimir Putin invaded the rest of Ukraine in 2022 europe still didn't do very much about it it only until Trump threatened to um reduce or even withdraw from NATO that the Europeans started thinking about increasing defense spending so I mean this these are to you much of Europe Western Europe they're feeble societies they they just they don't know how to defend themselves um and it's really going to take I think a lot of American um persuading and threats and coercion and maybe that might not even work um you know we should try um because we do need a stable Europe um but um by God this is getting to be very very difficult may not be worth the cost at some point gordon this has been a fascinating conversation a final thought as we finish now i think this is the most dangerous moment in history you know people will say "Oh the Cuban missile crisis ' 62 or Checkpoint Charlie crisis of the preceding year in Berlin were more dangerous." And they certainly look more dangerous Yan but we know from the archives that neither Kennedy nor Krushche were willing to use their most destructive weapons i don't think we can say that about Vladimir Putin or Cinping um and so I really worry about this at a point where China is mobilizing for war it's not mobilizing just as military it's also it's a general societal mobilization calling up reser taking over civilian factories to make war material uh standing up militia units and state enterprises um we've seen these war signals and we're not responding with the required sense of urgency so I worry about this moment and I hope that the you know I the way I'd put it is I hope the almighty protects us now I know that you don't share the same religion I have but I'm sure that you feel that um whoever you pray to is going to protect you and all of us as well well uh I mean 100% and but let's what what is the typ let's say someone watching right now is thinking to themselves wow Gordon I agree with you know what what does that person do now prepare for the worst you know China's infiltrated an unknown number of soldiers and operatives onto our soil um and the and you know it's there there's an increased incur rate of incursions and attempted incursions into our military bases these illicit drone surveillance that um illegal drug lab biological weapons facility in Reedley California where they had at least 20 pathogens and almost a thousand mice had been genetically engineered to spread disease we're going to get attacked if there's a war in East Asia and I think it's increasingly probable it's going to be fought on American soil this is going to be the first time since the War of 1812 that we Americans will had a sustained battle with a foreign enemy on American soil and we are so unprepared so basically you're saying make yourself prepared but how how does the typical person do that stock up you have to assume that you're not going to get water or food for maybe six months got to be able to defend yourself you got to be able to sustain life without anybody's assistance for a very long time well Gordon uh these are you know heavy words you're leaving us with but it's such a pleasure to have had you on well thank you Yan