00:00From your position now, how do you read the need for this extension? It's not long, it's just two extra
00:06months.
00:07Yeah, so I mean, we'll take anything we can get, right? An extension to the truce is an extension to
00:10the truce.
00:11But really what this is, is this is really sort of partly for the convenience of the two parties.
00:15Because right now we've got a summit about to happen, people need deliverables, they need to show that they've got
00:19forward motion,
00:20they need to show that they've got stability. And the truce was set to expire on November 10th.
00:25There were legal actions in the United States that would go into effect, the affiliates rule, on November 10th.
00:30But at the same time, there were rules that would go into effect on the Chinese side,
00:33really curtailing the ability of the U.S. to obtain rare earths.
00:36So this extension wasn't optional. This was something that was absolutely necessary.
00:40So I think it's a good thing, but 60 days isn't a lot of extra time to play with.
00:45If I could add one more thing, though, there's really two parts to the truce.
00:49There's this really legally defined part on rare earths and on the affiliates rule.
00:53But then there's this more amorphous side that the two sides have not really agreed on what's covered by the
00:58truce.
00:58The Chinese say the truce means the United States shouldn't take national security actions by Department of War
01:04or by the Federal Communications Commission.
01:06And the U.S. says, no, no, that's fair game.
01:08And the U.S. says, well, China, under the truce, you shouldn't take things to regulate rare earths
01:12that maybe weren't covered under these previous agreements.
01:15And so the two sides haven't really agreed on what that truce is.
01:18So while this helps us with the legal bet, what we hope comes out of the summit tomorrow
01:23is a discussion of what really does this truce entail?
01:27Is it just these legal things or is there more?
01:29Now, who has the leverage right now?
01:31Because Jameson Greer, in an interview with us, seemed to think that obviously he has the leverage.
01:36The United States has that leverage.
01:38They want to hold the fire to the feet of the Chinese to fulfill their commitments.
01:43But the Chinese, they probably want more certainty and a longer runway, don't they?
01:48They want two-year extension.
01:50I think what the Chinese want more than anything is the Chinese want stability.
01:54The Chinese want predictability.
01:56You know, on this question of leverage, I think now is a difficult time to be Ambassador Greer.
02:01He's got a big mandate and he's got a lot he wants to accomplish.
02:04But if we go back to, say, Liberation Day, just before Liberation Day, I was in China on Liberation Day.
02:09And in the run-up to Liberation Day, the Chinese had a lot of concern, a lot of fear of
02:14U.S. tariffs.
02:14What will it do to investment?
02:16What will it do to sentiment?
02:16What will it do to employment?
02:17So they had real concerns.
02:19Now, a year and a half later, when you talk to the Chinese, the opinion has completely changed.
02:24There's a phrase they use in Chinese that says, you know, the thunder was loud, but the storm was not
02:29so big.
02:29And that's how they talk about tariffs now, because they thought that the tariff hit was going to be big.
02:33But in fact, it didn't materialize.
02:35They now have a $1.2 trillion trade surplus.
02:37So what it means is the tools that Ambassador Greer has for leverage, those tools just don't have the sharp
02:44edge they once did.
02:46But there's still the threat of tariffs.
02:48And I know that, you know, after the SCOTUS rebuke of the 301 or the IEPA tariffs,
02:54Donald Trump has been looking for other ways to add, including maybe on overcapacity in China
03:00or also purchases of Russian oil or support of Tehran in this ongoing seven-plus-month war in Iran.
03:09Does Donald Trump have the leverage to add that?
03:12Well, the question is, does the U.S. have the runway?
03:14And what I mean by the runway is, we've seen the U.S. side be very clear that the Busan
03:19truce means
03:20that tariffs will not go above the level that they agreed to at Busan, which is about 20%.
03:24And so while right now tariffs are lower than that, and there's 7.25%, 7.5% they could raise
03:29them,
03:30it's just not clear that they could go beyond that without blowing up the truce that they just extended.
03:35And remember, blowing up the truce is blowing up rare earths that industry needs, that factories need,
03:40that the U.S. defense establishment needs.
03:41All of those things are sort of at stake.
03:43And so what it means is I think that while there may be a desire on the part of the
03:47United States
03:47to use China to shape Iran's behavior, the ability to have tariffs be the incentive for doing that,
03:54I think, is quite limited.
03:55What does this U.S.-China AI dialogue look like to you?
03:59And what does it resolve?
04:00Yeah, so there's a lot of, I think, misconceptions about this AI dialogue.
04:03I often hear, how can the two sides trust each other?
04:06Well, when you look at an AI dialogue or sort of cooperation between the two countries,
04:10there's really two parts.
04:12There's the security part, the national security part, and there's the safety part.
04:15The national security part is how do countries use them to target each other?
04:19All of this sort of, you know, dangerous things.
04:21But that's not what the dialogue is about.
04:23The dialogue is about safety.
04:25The dialogue is how do we ensure that both sides have guardrails on their leading-edge tools?
04:28How do we notify each other when they are misused?
04:31And how do we make sure that bad actors can't employ these tools?
04:34And so that discussion on safety is enormously important.
04:38But it often gets conflated with the idea that they're going to talk about security.
04:41And I think there just isn't enough trust yet to get into the security realm.
04:44So it's all going to be safety, and it's all really important.
04:46What does the U.S.-China relationship look like at January 10th?
04:49Because from May summit till now, let's face it,
04:54the Trump administration and the building behind us here has been preoccupied with the war
04:58and, more recently, the midterms.
05:00So there hasn't been, by most accounts, a lot of progress on trade or investment.
05:05Yeah, so I think the tell is we've seen both sides talk about there will be four meetings
05:11between the presidents in this one-year period.
05:13And what does that mean?
05:15It means both sides recognize there are really hard issues,
05:18and those really hard issues aren't going to get resolved in one meeting or two meetings,
05:22but they're going to have to have a steady, consistent dialogue throughout the course of the year
05:25to really hopefully get beyond just stabilization to an era where they're making progress towards resolution.
05:31And so I think the positive scenario is we have a very good summit tomorrow.
05:35The two sides start to build trust.
05:38They start to create mechanisms to have more regular dialogue.
05:40That gets built on up in APEC, and it gets built on again at Doral in the margins of the
05:46G20.
05:47So the better scenario is that between now and January 10th, we have stability,
05:51and we're on a path to where we can start resolving some of these issues.
05:55You probably weren't surprised.
05:58By most accounts, Xi Jinping did not bring his C-suite.
06:02He did not bring his executives.
06:04Maybe there were no deliverables on that front because the investment landscape here is murky.
06:10Sure, there was an opening door by Trump himself to EVs maybe being made here,
06:16but I think there were not a lot of deliverables there.
06:19Is that how you read it?
06:20Yeah, I read it slightly differently.
06:21I think it is a big lost opportunity for both sides that we don't have the Chinese corporates here.
06:27The Chinese corporates, you know, there are many sectors that would welcome more participation.
06:32There are states that would welcome more participation of Chinese companies in the U.S. economy,
06:35whether through a joint venture or a licensing deal or something.
06:38And so I think that the breakdown didn't come down to deliverables.
06:41The breakdown came down to protocol.
06:44And the inability of the two sides to work out these protocol issues
06:47is what made it difficult for the Chinese side to bring a delegation
06:51and they made it difficult for the U.S. side to accommodate a delegation.
06:54So this was protocol, not deliverables.
Comments