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It is the most talked about book right now across the transatlantic. So Maya Keynes is wonderful at the Times, and she's teamed up with Adam Ponson's crew at the Peterson Institute. Chad Bound joins us. Chad has thought harder about American trade over the last two or three decades than anyone I know. The book is how to Win a Trade War. And because, you know, Chad wanted to do 800 pages and so Myers said, are you kidding me? It's readable, it's approachable, it's airplane ready. How to Win a Trade War. This isn't the trade economics chad of when you were a youngster at Bucknell, isn't it? What does the new trade war look like?
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Well, the new trade first. Thanks. It's great. Great to see you, Tom. The new world is all about trade wars and the world has fundamentally changed. Right. We used to say, I as an economist used to say nobody wins from a trade war, so you shouldn't even fight it. Well, unfortunately, that's not the world that we are living in right now. We have to fight the trade war. President Trump likes to use tariffs in the trade war. So that's one thing that you have to use. But I think what we try to do in this book, and you're right, it is an airplane read, but it's not even a transatlantic airplane read. You can, you can get it, you know much, couple of hours, right? Figure out what's going on here. It's about much more than tariffs. It's about stockpiling, it's about using subsidies, it's about export restrictions. All these stuff now making the headlines.
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When William Klein and the team, the oldsters at Peterson Institute were thinking about this, we were giving textiles away from the Carolinas to China. The distrust in America about the labor component is tangible. How do we get the trust of American labor back to do trade?
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Well, I think the first thing you have to do is you have to be honest with them about what the underlying problems are. Right? And yes, some of the problems was the speed of the shock that the United States faced with all these imports from China. But that's sort of the, that was the thing that we could have maybe should have dealt with 20 years ago. But that's not the trade war that we need to be fighting today. And so the first lesson of the book is fight the right trade war. The right trade war today is recognizing that China is playing a fundamentally different game than the United States and every other major Western economy out there. China wants a world where the world outside of China is dependent on China for its supply chains. But China doesn't want to be dependent on the rest of the world for its supply chains. So that lack of interdependence. Right. China wanting the rest of the world to be dependent on it so that it can weaponize it sometimes, as we saw last year with rare earths, permanent magnets, that next period semiconductor story. I think we have to be honest with the American people that this is a trade war that actually we do have to fight. It may be different from what they thought, but it's, it's the important sort of level set to getting the stakes right. Chad I think I'm probably like most of our listeners and viewers, I didn't even think about logistics and trade and all that kind of stuff. Stuff just kind of showed up on the shelves and then the pandemic happened and then we're like, oh yeah, now I get it, we need to pay attention to this stuff. Did we need tariffs and that tariff policy to achieve maybe some of our strategic goals of onshoring or near shoring? So what we argue in the book is that tariffs are an important part of a part of the story. But really I think where the United States has not quite gotten it right so far is the breadth of the tariffs. You certainly don't need to have them on all products. So strategically use them and the countries with which you apply the tariffs. So if you're thinking about what's the problem, right. Well, we've got excessive concentration of production of certain goods, essential products that American manufacturing needs, American consumers need, and it's all in China. Well then it might make sense to use tariffs as part of some other policies against China, but you don't simultaneously need to impose those tariffs on Europe, in Japan, especially if you want those other friends and partners to be working with you because then you've got them fighting a trade war, a two front trade war, dealing with China, but then also having to deal with you, the United States at the same time.
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Chad Bowen, this is the hottest book in economics right now, how to win a Trade War. Can't say enough about it. We're going to continue here, an optimistic guide to an anxious global economy. Chad, I got two ways to go here. On your back blurbs, you've Got my book of the summer, two, three years ago, Chip wars by Chris Miller of Tufts. In the basic idea of technology, semiconductors and such. How do we prosecute a trade war wrapped around the technology of Taiwan and Korea?
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Yeah, well, that's, I think, an important part of the trade war story here. And I think there's at least two different pieces of that that we have to confront. One is, and you're right, Chris's book is amazing. The first is dealing with the challenge of Taiwan. Right. So it is a little bit worrying that 90 plus percent of global production of leading edge chips takes place in one location. Right. It's not China. China. So it's not the same sort of problem. As, you know, are they going to weaponize it against us? But having it all there in a world that suffers from floods, earthquakes, not good. We've got to diversify. How do you do that? Industrial policy? A little bit, but it's got to be smarter than the way we've done industrial policy in the past. You've got to think about demand, what the United States did with the CHIPS Act. But you also. Sorry, supply. But you also have to worry about demand. What we didn't do necessarily with the CHIPS act. All these fabs in the United States. Great, we've got the production capacity now, but why isn't it that in video and AMD and all the chip design companies want to use them yet?
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Right.
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We've got to create some other incentives there too. But then the second part is the AI challenge with China and this race. Right. And the use of export restrictions and balancing those in the appropriate way to make sure that the American side of this story does end up okay.
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I got to squeeze this in. This is important, folks. I mean, he's doing this tour with some I canes while she shows up with a ukulele. I mean, she's playing ukulele at their book shows.
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Nice.
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It's too much. Chad's like, you know, a wallpaper. He's like hanging out. Chad, nobody knows that you're the heritage of Fred Bergsten, who is hugely supportive to my act, to Peter Peterson, who is hugely supportive of my act, and Adam Posen, who's a bigger Red Sox fan than I am. Does your shop the Peterson Institute after your book the Trade War? Think we nudge back to the Washington Consensus?
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The beauty of the Peterson Institute where I work is there is no institutional line. Everybody has their own views that does their own analysis, comes up with their own perspective. So I will leave it to my boss. Adam Posen to give his own views. But I agree. You know, we're going to have these debates about what's the right way to tackle these sorts of problems, and it's great that we're doing so. And I'm just super glad to be able to bring not a ukulele but a copy of the book and to show it here on your show. Thanks for having me, Tom.
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John Tucker is going to have a ukulele next time. The book is how to Win a Trade War. Airplane reading, even not Transatlantic to Richmond, New York to Richmond. Pretty good to say the least. I can't say enough about this. A lot of other people are on board what Keynes and Bone have done to really bring us up to date on a lot going on in trade.
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