← Breaking Points with Krystal and Saagar
Breaking Points with Krystal and Saagar
5/13/26: GOP Midterm Bloodbath, Trump's Oligarch Trip To China, Prof Pape On China Advancing Rapidly
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Guaranteed Human support for the show comes from Public, the investing platform for those who take it seriously. On Public you can build a multi asset portfolio of stocks, bonds, options, crypto and now generated assets which allow you to turn any idea into an investable index with AI. It all starts with your prompt. From renewable energy companies with high free cash flow to semiconductor suppliers growing revenue over 20% year over year, you can literally type any prompt and put the AI to work. It screens thousands of stocks, builds a one of a kind index and lets you back test it against the S&P 500. Then you can invest in a few clicks. Generated assets are like ETFs with infinite possibilities, completely customizable and based on your thesis, not someone else's. Go to public.com podcast and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com podcast paid for by Public Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors llc, SEC Registered Advisor Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or advice. Complete Disclosures available@public.com Are you trying to
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Krystal Ball
Sagar and Krystal here.
- [03:08]
Saagar Enjeti
Independent media just played a truly massive role in this election and we are so excited about what that means for the future of this show.
- [03:15]
Krystal Ball
This is the only place where you can find honest perspectives from the left and the right that simply does not exist anywhere else.
- [03:21]
Saagar Enjeti
So if that is something that's important to you, Please go to BreakingPoints.com, become a member today and you'll get access to our full shows unedited ad, free and all put together for you every morning in your inbox.
- [03:32]
Krystal Ball
We need your help to build the future of independent news media and we hope to see you@breaking points.com
- [03:40]
Saagar Enjeti
so we have some new fairly bombshell reporting from Atlas intel, which if I'm not mistaken, Saga was the most accurate pollster both in 2020 and in 2024. So let's go ahead and put this piece up on the screen here with regard to the midterms. So this is what they call the generic ballot. They say just like, okay, Democrat versus Republican, not putting specific candidates in. Who do you prefer? The Democrats are winning here by 14 and a half points on the generic ballot for the House. That is a shocking margin. You know, all these, all the concerns, justified concerns about the way maps are being redrawn, et cetera, like you are not if, if Democrats are winning the national vote by something approaching 14 points, there is no amount of map changes, there is no amount of ice at the polls that is going to truly be too big to rig in terms of taking control of the House. And poll after poll shows. It's not that people love the Democrats, the Democrats have a lot of work to do to reclaim any sort of decent brand with the American people. It's just that they are utterly disgusted with The Republicans, with Donald Trump specifically and Sager. It does have some credibility given the fact not only atlas's track record but given what we've seen in all of these special elections. 15points is the average, roughly the average shift toward Democrats that we've seen in all of these seats. So you know, that gives it some credibility. Again, it's an outlier, I wanna make that clear. But it does give those numbers some credibility given that when people have actually gone and voted, this is roughly what we have seen.
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Krystal Ball
Let's start with that. So remember, special election is the most predictive of midter. It is by far going back many, many years for what's actually going to happen. Then we can start to look at some of the polls and their past track record. Now you're absolutely right. 2022 and 2024. Atlas intel was a plus, was in 2.2 points of the general 2024 electorate. It was the most accurate of that year. However, what we also learned is what is that Iowa Seltzer poll traditional track record can be wrong. So let's put all those caveats. But I think whenever you combine the two things you could say a general in this direction unless it's some sort of Seltzer esque, you know, crazy misfire. But you know, when I take a look actually at the issue by issue, that's where I really start to see huge problems for the Republicans. Let's put D2 up there on the screen from Atlas now lead on every major issue. Trump's two strongest areas are D +9 and D +7. This is from immigration and for defense. But at the very, very top, this is usual environment and education and health care. Democrats usually are there. But this is where it gets interesting. Employment and job market and inflation and cost of living, those are two areas. For very traditional Republican strongholds you have plus 15, plus 17, Democratic preference, trade policy and tariffs. You also have another shift towards the Democrats at plus 13. Foreign policy, immigration, taxes even you have a plus 8 crime at plus 3 for Dems. So you know, things are absolutely insane when Dems are getting plus three whenever it comes to crime. Maybe a lot of people are taking all these headlines about these white collar pardons. Wouldn't be, honestly wouldn't be surprised to me true. If it were. I'm being dead serious in terms of how they're thinking.
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Saagar Enjeti
Honestly, the lowest number of white collar prosecutions in history happening right now under the Trump and there has been a
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Krystal Ball
massive decline in the murder rate. So if you put those two things together you're not as worried about violence. Then you also have this white collar prosecution. It wouldn't shock me. But I think what it comes down to is a rejection at the mass level. Very similar to how the public reacted after Obama was president for a year. There are a lot of reasons largely for that. But it culminated in that huge wipeout, the shellacking of 2010. And I think, well, first of all, the problem with this is it all presumes that Trump cares at all about their chances, which it just doesn't seem like they care. Like anybody who cares about their midterm election chances is not saying things which we let our show about. I don't care or think about Americans financial situation at all. Right? So this is where I'm like, I genuinely think that they have given up entirely on the domestic front, like completely. This is the only thing that can explain the sheer obsession with Venezuela, 51st state, the reflecting pool, the ballroom, Iran. That's all they really have any control over. The rest of the party has a political future. He doesn't, he doesn't care. He only cares about the future. But he's gonna drag it down. Because the one last thing that we have to be clear on with the Republicans is while many people are fleeing the Republican Party, in particular, many of these independent or north swing voters, not just swing, non identified Trump voters, the actual Republican base is all in for Trump. I mean, do you remember these very recently, these Indiana Senate races that were happening where a lot some of these Indiana Republicans crossed Trump? They all lost, okay? So the actual MAGA people, they're still all in. And that's just a caveat that I wanna make very clear. Like Trump is still the chief of the declining. In fact, it might be more powerful because at this point, if you're still all in for Trump, there's literally nothing he can do, including shooting someone on fifth Avenue, for which they will decline. And so that actually leads a very good place I think for the Democratic Party. I would compare it, I'm trying to think maybe the 1970s where like McGovern, this is a good example. So the 1970s, the entire, you know, post Watergate Democratic Party was having a tough time, especially after Jimmy Carter kind of figuring out like what we're going to do. And what they did is it opened up this huge space for, remember the Reagan Democrat, that was like a thing back in the 1980s. Really what it was was an inverse rejection of kind of the embrace of the new left and this identitarian, this Democratic Party, which Had no real identity. There was a very hardcore base of people who supported it, but not enough to create like a majority coal, which is really what all these people decided to do when they voted for Reagan. Even if some of them even didn't even agree with their policy. I would compare it now to the others. So you have a very, very small slice of the country which is still very much all in and believing, but it leaves all of this open negative polarization space which is the defining politics of our era towards the Democratic Party. They not like them, but they don't like the Republicans at all. Kind of very similar to the 2024 dynamic. A lot of voters hated Biden. They didn't love Trump. They didn't like a lot of things about him. He still had a negative approval rating. We're still willing to vote for him in the end.
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Saagar Enjeti
Yeah. I mean, you could also potentially compare it to, depending on how bad things get here with the Iran war and a possible global depression. You could also compare it with Herbert Hoover, you know, and we're not there yet.
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Krystal Ball
We're not there yet.
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Saagar Enjeti
But that's a possibility.
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Krystal Ball
It is.
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Saagar Enjeti
You know, I mean, but that requires having that FDR like figure who can have a really broad appeal centered around sort of not only national patriotism, but also a broadly shared prosperity was really the cornerstone of what he offered. Obviously within the context that there was not completely shared by black Americans. Certainly Japanese internment can't. All the caveats notwithstanding and very significant caveats at that. But if you had that type of figure, I do think there's a possibility for that sort of coalition coming together. We get very used to this very narrow partisan victories when you have both politicians basically sort of playing to the culture wars and not really promising significant economic change in a way that's credible. And that part, the way that's credible is the most significant part because one of the biggest questions is whether you can get Americans to really believe in a big national project of any sort, given the level of humiliation and decline that we're suffering right now. But in any case, you know all of this. So you've got Republicans falling apart in terms of the national standing. Certainly the Trump coalition has broken down. His hard to score supporters are always going to be there with him. But it is a minority of somewhere around a third of the population. That is obviously not nearly enough to win House elections when, you know, even maintain control of the Senate, let alone hold on to the presidency in 2028. This poll from Atlas intel was also very interesting on the Democratic side and very different from what we've seen on other Democratic primary 20, 28, you know, trial run. So let's put this up on the screen. This is the first one that we've seen, AOC leading the field with 26% of the vote. Next in line, you've got Pete at 22, Gavin at 21, Kamala down at 13, and then everybody else is pretty far below that. Andy Beshear for Cory Booker, 4, none of the above. 3. Shapiro 2, Whitmer 1, Walls 1, Khanna 1, Rahm Emanuel 0.6 and Westmore 0.4. So look again. It's an outlier, but it does add an interesting data point. AOC is very much seen as the, you know, the heir to Bernie Sanders. She is the seen as the vanguard of the left of the party and the sort of inheritor of that legacy. What we've seen in primary contests around the country and actually, if we can jump forward and put Abdul's numbers up here on the screen here, D5, is that the energy in the Democratic Party is very much with the left of the party in a way that it truly, in our lifetimes, has never been, including during the times when Bernie Sanders was running where people liked Bernie, but they were worried, oh, is he electable? I don't know. And there was kind of a limit to how far people were willing to go in terms of voting for him or voting for candidates who styled themselves in his image. That seems to be changing. We now have in the Michigan Senate race, Abdul Al Said is really surging here. We've got a new poll that has him emerging as the race's clear front runner, 28% support ahead of Haley Stevens at 18 and state senator Mallory McMurro at 17%. So they're basically in a tie for second. And this is really stunning. They have him getting 80% of the support of voters between the ages of 18 and 44. So Gen Z and millennials, 80% support. Stevens is getting 4% and McMurray is getting 3%. So massive, massive generational divide in terms of the view of this race. We can also look in terms of that left energy dominating the base of the party, certainly Graham Platner coming out of nowhere, having never run for anything before, and easily dispatching with the sitting governor of Maine who was backed by the establishment of the Democratic Party. So, you know, this poll showing AOC in the lead fits with that trend of voters in the base of the party looking around and going, okay, well, who is aligned with that Sanders wing Who is going to, you know, who is going to stand up to corporate interests? Who is going to be different? And, you know, I've got my concerns about AOC that I've voiced on this show previously, but in terms of voter perception of who she is and what her branding is, I think it's very consistent with the energy that we've seen behind Abdul El Sayed and Graham Platner.
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Krystal Ball
It is interesting. I. Yeah, I don't know. I just don't see her coming out of primary. I don't. She's not a good debater. She folded in Munich. She doesn't really. I don't know. What was the analogy you made about how she always seems like she's studying for the test and looking for the right answer as opposed to having an answer that she already. That's really important for a politician. A lot of it right now is the idea of AOC as opposed to aoc, the politics.
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Saagar Enjeti
Yeah, I agree with that.
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Krystal Ball
Right. And that you can't get through a primary through something like that, especially if you're going to be challenged. You know, the one thing that I think this whole thing presumes is that Kamala's not gonna run again, which I am not putting off the table. She very clearly does.
- [15:56]
Saagar Enjeti
They have her in there, and she's led most of the polls. She has led for Democratic primary trial runs. That's why this one is different. But it had her at 13%, so still, you know, garnering some support. But, you know, I'm. Look, I'm not that concerned for the same reason you're saying, like, you don't think AOC can come through a primary. I mean, I think Kamala has proven herself. You have the proof that you're a loser, not well under public scrutiny. So, you know, I think even though people. She'll be able to come out and say, look, I warned you that I said this about Trump, and I was right. Like, I warned you. I tried to tell you. And there is an. Like, there continues to be a lot of warm feelings towards her, you know, in. In certain parts of the party. But I. I'm not personally that concerned with that translating into a Kamala Harris primary.
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Krystal Ball
The last thing I'll just flag is I don't.
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Saagar Enjeti
I don't think she'll hold up to scrutiny.
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Andy Brown
Once again.
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Krystal Ball
Yeah, the last thing I'll flag. Cause we have our guests standing by, is the primary calendar matters so much. It matters so much how that primary calendar is going to look like. And as far as I know, you can tell me. I don't think that it's yet set in stone. But if they go the traditional route, which. Or at Biden route where they wanted, South Carolina and first, and without any of the Rust Belt or Nevada, any of these places where Bernie did really well, remember, it can significantly skew the way things go. And I wouldn't put it past the DNC after what they've pulled with his Biden autopsy and everything that they've done. And I mean, remember before what's her name? Mills dropped out against Platner. The Schumer and them were going all in for them. So I would not put it past them whatsoever to nominate or to rig the scales, rig the system in favor of a Gavin or a Kamala, if it were somebody like that. So that's my last flag for people because it's so hard.
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Saagar Enjeti
They're going to try. They're going to try. I just think it's going to be difficult to do what they did in the past because just like with the Mills race, people are like, oh, you're Schumer's candidate. That means I'm definitely not voting for you. And the ability to manufacture consent with the media outlets is really severely degraded too by the rise of independent media and also by the degradation of trust in mainstream liberal outlets.
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Krystal Ball
Yeah, good point. All right, I've got our guest standing by. I'm gonna do this one solo. Cause he's in studio and then Crystal's gonna be back on whenever. We're with Robert Pape. So we'll see you then.
- [18:20]
Robert Pape
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- [19:51]
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- [20:53]
Krystal Ball
Joining us now is Andy Brown. He is the Semaphore China columnist and expert who's gonna join us here for the Trump Xi Summits. Good to see you. Thanks for joining us.
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Andy Brown
Thanks for having me.
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Krystal Ball
Absolutely. So we're gonna start off just as you and I are talking. President Trump on the ground in Beijing. Let's take a look at it. He's coming in the middle of the night. You can see him there in the grand arrival ceremony. The Vice President I believe. Or is it Premier of China? I forget. One of the vice somethings of China greeted him there on the red carpet and he's got a full two days schedule ahead of him. The most interesting news Andy that's come out is on his way to Air Force One. President Trump actually put out a truth social post which we will have here. I'm gonna Go ahead and read from some of it. CNBC incorrectly reported that the great Jensen Huang of Nvidia was not invited to the incredible gathering of the world's businessmen. He is currently on Air Force One unless I ask him to leave, which is highly unlikely. He lists the others. It is Jensen Elon, Tim Apple, Larry Fink, Steven Schwartzman, Kelly Orberg, Boeing. He lists in parentheses Brian Sykes of Cargill, Jane Fraser of Citibank, Larry Culp, GE Aerospace, David Solomon, Goldman Sachs, Sanjay Malhotra, Micron Cristiano Aman from Qualcomm and many others, including Brett Ratner, the Hollywood director. So I have described this as some kind of 19th century trade mission, like where the Brits would come with the Monarch and the Olig with The company.
- [22:17]
Andy Brown
The McCartney mission.
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Krystal Ball
Exactly, the McCartney mission. And so you can Google that if you don't know what we're talking about. But what's your modal like view of how this. I mean it's extraordinary. You've never seen a president of the United States go with very few NSC members or any of that on the China desk and instead have half of Air Force One be the richest, most powerful CEOs here in the United States.
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Andy Brown
Well, first of all, let's hope it's not the McCartney mission. Because the end result of the McCartney mission was the Chinese emperor saying to Lord McCartney, we don't want anything that you're offering.
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Krystal Ball
Right?
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Andy Brown
Right. So it's hilarious, actually. Memes all over Chinese social media today showing Jensen in his leather jacket racing down the Runway after Air Force One, grabbing hold of the wheels as it takes off. I mean he's a rock star in China. I mean, of course there was a list. They put out a list. He wasn't on the list. I can kind of see why a Jameson Greer at USTR might not want him in the party. I mean, if you look at the composition of the companies in that delegation, you've got start off with the finance, the Wall street guys, right? Goldman City, Jane Fraser. These are people that basically want to look after Chinese money, look after Chinese money inside China, look after Chinese money when it leaves China for investment, travel, credit card. Credit card companies that not controversial. They're already embedded into China and really want to do more business there. You've got the agricultural people, right? So the Cargills of this world that is selling soya beans and beef to China unambiguously. Good for the US economy, good for farmers, must be there. Then you get into technology. Some parts of technology are less problematic than US So, you know Tim Apple, as he's called, making his iPhones in China, that's okay. There's a lot of value here in the United States on the design side, on the marketing side and so on. Elon Musk is there. He's making EVs somewhat more problematic because actually he was the flywheel for the entire Chinese EV industry. But he's not selling them back to the United states. That's okay. 100% tariffs. Then you get into semiconductors. Okay? That is the most problematic, most troublesome area of US China. That is where these two superpowers compete. It's all about AI. AI is all about compute. Compute comes from chips. It's hard to imagine anything coming out on the chip side that won't be controversial. Let's say that Xi Jinping, when he meets with Trump, says, okay, we'll take Nvidia chips. Trump has already offered him.
- [25:11]
Krystal Ball
Yeah, he has, right?
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Andy Brown
I mean, he wants a cut, right? 25% of anything Jensen sells in China. But let's say they do a deal comes back to the US hail of criticism. You've just given it all away. And actually quite understandable. If on the other hand, they don't do a deal, then this is going to overshadow the trip. Oh, Xi Jinping rejects some deal one way or another is very difficult. Plus, this is so complicated. There's nothing that these two leaders are going to sort out over chip and Nvidia sitting around two days, right? I mean, you can't do that over a cup of tea at the Great hall of the People. But what you can do over a cup of tea is make an agreement on what they call the three B's. Boeing beef and beans. Right?
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Krystal Ball
So what I'm really interested in is let's put E3 up here on the screen. And your colleague Ben Smith, I was texting him this morning. I think he wrote one of the most prescient columns on China I'd seen in quite a long time. I'm curious for your own view, where he said that Trump is poised to end the Washington decade of the China hawks. And so when I see Trump, first of all, in that true social post, there was another word that he used. Open up. Right? Open up China. This is the president who ran against pntr, permanent normal relations with China. This is the president who wanted to reform our trading relationship with China. This time around, you have those oligarchs who are all on board Air Force One. You just laid out very eloquently all the various Business interests. But this is one which is shaping up for potential Bloomberg reports here, some sort of trillion dollar investment deal. And if we look into Trump's psychology, this is something he needs probably more desperately now than ever, considering where the economy is. He did this with Japan, he did this with Korea, he did this with the European Union. He needs the headline China agrees $1 trillion investment. So you mentioned potential deals on semiconductors. Another one I'm tracking closely is autos. That's another reason, I think Elon might be there, some sort of licensing technology. But I'm curious, first of all, from that high level view of like, this is the literal opposite of what a lot of people thought was gonna happen back in 2006.
- [27:18]
Andy Brown
Well, it's a literal opposite of what some of the people on Air Force.
- [27:22]
Krystal Ball
Yeah, you're right.
- [27:23]
Andy Brown
Saying their entire careers, not least Marco Rubio.
- [27:27]
Krystal Ball
Yeah, you're right.
- [27:28]
Andy Brown
The Secretary of State who was a China hawk until he joins the Trump administration. It is amazing. Right. So you've got to remember Trump is the guy who really changed the game with China.
- [27:40]
Krystal Ball
Yes.
- [27:41]
Andy Brown
So before Trump, all the way back to Nixon, you have presidents who've gone after engagement. Right. We want to make the Chinese look more like us commercially. We want them to play by the rules of the game. The rules that the United States set after World War II, integrate them into the global system. He broke that consensus in his first term. He came in, they're raping us, they're pillaging us, they're making fun of us, they're cheating, lying, and so on. It was China, China, China. Right. So he puts in place a whole system of tariffs, export controls, sanctions against Chinese companies. He tries to kill Huawei, the avatar of China's technology ambitions, doesn't work. And then things go from bad to worse. At the end of his administration. Do you remember during COVID blame it on China. It was the lab China virus, the Kung flu, the Kung flu, as he calls it. And so, you know, he comes into his, he comes into his second term and he starts reassembling that sort of group of China hawks within the National Security Council, the people with a similar mindset to the people that he'd gathered in his first administration. And he was, he does this u turn and he gets rid of them all. He gets rid of all the China hawks, marginalizes the National Security Council. And then since then, he's just worked incredibly hard, doing everything he can to do a deal with China, which includes, as we just mentioned, saying, okay, you can have our most advanced or some of our very advanced chips. National security document. They bring that to him. It's all written out boilerplate about how China is a threat, major competitive adversary, and so on. And Trump looks at this and he threw it out.
- [29:35]
Krystal Ball
Yeah, yeah.
- [29:36]
Andy Brown
No, no, no, no, no. That's not what I want at all. Blue pencils. All this comes back to his desk, and there's all kinds of language about how we want, you know, an honorable peace. I think Hegseth talks about everlasting peace with China. So it's all flipped. People say he is the most China friendly member of his own administration.
- [29:54]
Krystal Ball
I think it's true. And I think what it reflects is this business instinc. Dig himself out of the hole that he created, not just with tariffs. Now, the Iran war, I mean, you need something? I also, I'm curious for your view. How do the Chinese view it? Because this is. Now, remember, this summit has been postponed as a result of the Iran war. I don't think America's ever been strategically. This is my opinion. I don't think we've ever been strategically weaker than after this conflict. Not only in terms of the standoff munitions that have all been expended, but just the sheer inability of the United States Navy to even open the Strait of Hormuz. If you're Xi Jinping in the plaque, hey, you're watching this with glee. And so at a moment in a summit like this, what is China looking at? So I'd read some stories. I see China trying to, you know, they're warning Meta of an acquisition. They're telling their companies, the teapot refineries. They're saying, yeah, we're not listening to this US Sanctions nonsense. All of these are signals. So what is Xi's objective in a summit like this?
- [30:49]
Andy Brown
Xi's number one, two, and three objective is Taiwan. So he thinks that he has leverage because, as you say.
- [30:58]
Krystal Ball
Well, he does.
- [30:59]
Andy Brown
He does, right. That the latest peace agreement proposal has collapsed in Iran. Huge, huge mess. Strait of Hormuz more or less closed. Big pressure on the US Economy. We just saw the inflation numbers out, prices going up, real threat in the midterms. She sees all this. So he sees that as leverage to get concessions on Taiwan. So he wants that. He wants tariff scale back. He wants U.S. technology. He wants Chinese companies off these blacklist, Pentagon blacklists. He wants more access to US Technology. But Taiwan is. Number one.
- [31:42]
Krystal Ball
Interesting.
- [31:42]
Andy Brown
Number one, ask.
- [31:43]
Krystal Ball
So whenever we say Taiwan, he wants what? An end to the Taiwan consensus? Because I've seen some senators sending Trump letters, hey, you can't just. Just stop Taiwan. The Taiwan's Relations act is locked. Trump clearly. I mean, I think he's reported in 20 saying something like, there's not a fucking thing we can do about it.
- [32:00]
Andy Brown
Are we allowed to say that on a podcast?
- [32:01]
Krystal Ball
Oh, yeah.
- [32:01]
Andy Brown
Oh, yeah, don't worry.
- [32:02]
Krystal Ball
Listen, there's no cable, no fcc. You can say whatever you want. So, yeah, I mean, in terms of Trump's mindset, I don't think he particularly cares at this point. I think he's all about business. In the age of Iran, there actually is literally not a fucking thing you can do about it. So I'm curious, like, from Trump and the defense perspective, like what? Because usually a China and a US Summit is all about defense. Trade would be secondary. Taiwan is number one for the Chinese here. It seems Trump is a lot more desperate to get some sort of business accommodation than anything having to do with defense, despite the fact that Hegseth is there on the trip. Right.
- [32:38]
Andy Brown
So the easiest way to get a business deal with Xi is to give something away on Taiwan. Right, Right. I don't think there is that. The Chinese expect that Trump is going to sit there ripping up the Taiwan relation. He can't do it anyway because it's an act of Congress. He's not going to give away Taiwan. Right. He's not going to go down in history as the president who handed Taiwan over to authoritarian China. That's not going to happen. And that's not what the Chinese are expecting. I think what they want out of him is a little tweak in the language. She's going to sit down with him and he's going to explain the problem he's just had. By the way, the head of the Kuomintang, the opposition.
- [33:17]
Krystal Ball
I saw that. Shocking event. Yeah, yeah.
- [33:20]
Andy Brown
Amazing. Right? So, you know, he thinks he's got her in his back pocket. And to an extent, he has. She's already parroting Chinese talking points. Right. So that gives him some hope that there's a resolution to his Taiwan, his Taiwan problem. So he wants Trump to tweak the language. Right. So he wants Trump to say things like. And it doesn't actually even have to write it down. He could just say this to Xi, you know, we do not support or we are opposed to Taiwan independence or. Yeah, we think unification of Taiwan with the mainland is a good idea.
- [33:56]
Robert Pape
Right.
- [33:58]
Andy Brown
Small concession, and you might argue, not a big deal. It goes down like a seismic shock in Taiwan, because what it says to the people of Taiwan is, we're on the table. Right. We're a negotiating chip. And that is exactly what Xi Jinping wants. He wants to get inside Taiwanese heads. He wants to demoralize them. He wants to give them the sense that they don't own their future, that their future is going to be negotiated between the United States and China over their heads. And then they run up the white. Run up the white flag. The signal that then sends to the rest of the region is, my God, if he's going to put Taiwan on the table, what about U.S. korea? Right, the Japanese, that's what that's. I've been writing about the Japanese, the Koreans, they all have big problems with China. Now, look, they all trade with China and don't get me wrong, a lot, right? They want US China, they want US China relations broadly to be okay, but they don't want it to be so okay that they form this kind of G2 condominium, lord it over the whole world and sell out their interest. You know, China right now has sanctions on Japan. I know 40 Japanese companies. It's intimidating. It's intimidating Japan around these disputed islands. Right. Same with South Korea. So that is what Asia Pacific countries are looking at. What is he going to give away to get his precious trade deals?
- [35:27]
Krystal Ball
That's my last question. Japan and South Korea already relations are strained. The trade, it was a big problem. I wish we'd spent even more time covering it. But that really pissed a lot of people off. The way that the tariffs and things went down caused big problems in Japan, big problems in South Korea. Then the Iran war was like gasoline. Like it literally actually gasoline for their economies, their stock markets and all that have recovered. But they're furious about what's happened here. They can't really say a lot of it out loud. If we do see some movement here with China, what I am curious for your view, I think the autos would be the thing that changed everything because obviously everybody knows the Chinese auto companies are just better than ours. It's not really a question. Like, it's not even really in dispute. If we have some sort of licensing agreement of the big three and these autos, the two people it would hurt the most are the South Korean and the Japanese who have done everything hand over fist, bent over backwards to invest and to build here in the United States. And even they, they probably wouldn't be able to compete. So how worried are they about some. Not just about a deal, but specifically autos, which accounts for a lot of the trade that happens between the two. Or do you think I'm off The mark on autos. Because I really think something's going to happen.
- [36:40]
Andy Brown
I think something might happen. I'm not sure that it's going to happen this time. Don't forget, they're going to meet four times this year. Right. Or at least that's, that's, that's the plan. And it, it really is, it really is a complicated one. First off, look, I don't think this trillion dollar. I don't, I don't buy this trillion. I mean, I was hearing that number a couple of months ago, big Chinese. First of all, a trillion dollars of investment requires a level of trust that simply does not exist. Right. I mean, you're building factories. You're talking about the next 10, 20 years. Right.
- [37:09]
Krystal Ball
But that wouldn't stop them from announcing it. Yeah, from a fake number. It doesn't have to be real.
- [37:12]
Andy Brown
Well, exactly. Look, look, you talk about the Japanese and the South Koreans combined. They announced $900 billion. Right. Of investments in the U.S. eVs is the interesting one. And, you know, question Trump himself has said, you know, fine, he said it in.
- [37:30]
Krystal Ball
I know Detroit, right?
- [37:31]
Andy Brown
It's like, yeah, let him, let him in, let him build. Jim Farley at Ford is much less sure about this because as you say, these cars are much better politically. This is a huge problem because you're talking really now about EVs and about connected vehicles. They can connected to the Internet and this is sort of Chinese ccp, spies on wheels and so on. The question is, is there a safe way to do this? The Canadians are working on this. The Japanese themselves are working on it. The Koreans are working. And don't forget, the Chinese have American EVs manufactured by Elon Musk. In China, it would be an obvious one, but as you say, and at the bottom end, see, they'd come in at the bottom end of the market, right? So with kind of 15, 20,000, $25,000 cars, which is the area that they, and they would compete in that space against Japanese and Koreans, not against Detroit. Detroit is now all about big trucks and SUVs selling for sort of 60, 70, 80,000 bucks. Right. They're probably going to be okay. Americans still love their combustion engines. Although in time, if you allow the Chinese in, they're going to be going after all of those markets. But I agree with you. I think this is the big open question is what do they do on EVs?
- [38:47]
Krystal Ball
Well, Andy, I really enjoyed talking to you. It's been a great preview. Everybody go and read his columns. We'll have links down in the description. Thank you for joining us sir. Appreciate it.
- [38:54]
Andy Brown
Thanks for having me. Appreciate it.
- [38:57]
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- [41:29]
Krystal Ball
Joining us now is our great friend Professor Robert Pape of the University of Chicago. It's great to see you, sir. Thanks for joining us.
- [41:36]
Robert Pape
Thanks for having me.
- [41:37]
Krystal Ball
All right, so professor, originally we're gonna talk about Iran. However, you sent along some slides that you've put together from your most recent travels to China. We just spoke with a journalist about what happened, what's going to happen in this summit. But you have a little bit more of an interesting and more in depth. Go ahead and start with some of these and put these slides up here on the screen and you can tell us a little bit about what we're seeing.
- [42:01]
Robert Pape
So the most important thing that's going to come out of this trip is the world is about to rediscover China in ways they are going to be blown away. And I know because I've been going to China since 1979. I've been touring economic industries since 1979. And when I went back in 2000, June last year, while we were bombing Fordeau, I was touring China's advanced industries. Two weeks. And China is just simply becoming an AI juggernaut. This isn't about is one company or one software ahead of America. That's a soda straw view of what's happening in China. The big picture which is starting to blow away the journalists is that China, we are beginning to confront the scale and the, the speed of China's already a transformation in the economy. I don't just simply mean on the stock market. And so what China is doing is they are massively integrating AI, electrification, robotics, infrastructure in cities and manufacturing to uplift whole regions, mountains, not just simply small areas or small cities. They are producing massive products. This is what the journalists are discovering as they drive through Beijing. Cars, brand new that are seas of cars, not seas of bicycles. And these are electric vehicles you can't buy in the United States. They're beyond Tesla. They're going to see, they're going to come back and they're going to say I want one of them those. And the reason is because during COVID what happened is we put all our money, $10 trillion plus in debt and that was for good reason to help our people. But what China did, and China can do this as an authoritarian state, they invested, they didn't give, they invested. And what I saw in China are not just seas of Cars. But I visited these advanced cities now that have been uplifted in the last five years. Major construction that's occurring. Here's a good example. This is China's Pittsburgh, so to speak. And in 2015 when I was last there, it looks like Pittsburgh. Now this is like a version of Wuhan, calls it their optics Valley after Silicon Valley. These are advanced, advanced AI driven laser robotics that are just uplifting the entire city of 10 million people. Because it's not just about building a company. They're building, they're integrating all this citywide. So there's massive construction going on. This is another good example. I was in Hangzhou in 1979. I was part of the trip I was on and it was a fishing village. Today look at this. This is a completely different Hangzhou. There's still some fishing there, by the way. But what you see is this has been uplifted as a city. Just imagine if that was St. Louis. Imagine if that. This is Sen. Chen. Here's another example of what was a fishing village just a couple hours outside of Hong Kong on the Chinese side of the border. Also. I was there in 1979. Now this is an industry leader. This is where BYD is. But notice the city. It's not just electric manufacturing, electric vehicle manufacturing. Look at the entire city of 10 million people. Brand spanking new airports. This is what we're missing, China. It's not that China's catching up to America, it's that we now need to catch up to China. And it's not about inventing a single product. You see, I think we think that, oh, as long as we have the latest single widget, we are ahead. What China's doing is inventing new widgets and then diffusing them massively across whole sectors and regions. They've uplifted about 50 to 100 million people in the last six years. What have we done for our Rust Belt? What have we really done for Erie, Pennsylvania where I was born? Pittsburgh, St. Louis, Detroit, Baltimore? They look almost exactly the same and in many ways worse than they did six years ago. What has China done? They have invested up and we're missing the big picture.
- [46:46]
Saagar Enjeti
Yeah, that's such an important point and important insight and I wonder what you make of the fact President Trump was bragging about all of these CEOs who made the trip with him. You've got Tim Cook, you've got Jensen Wang, you've got Elon Musk and over 12 individual CEOs of American companies who decided to go along with him who he brought along with him. What do you make of that decision and what do you think that indicates about what he's hoping to get on this?
- [47:11]
Robert Pape
Everything. This slideshow you just showed, and I have a lot more, puts everything in a new light. Those tech bros are going because they're falling behind. They want to catch up. Elon Musk is getting beat out by byd. He's going to try to find how can he get in on the electric panels that are the we need for AI. We need massive electricity. What is China doing? They are producing massive solar power. And yeah, that will help the planet, but that's not. I'm sorry, that's not why they're doing it. They're not selling it to help the planet. They're selling it to beat America and jettison above America. And those tech bros are going because they're falling behind. They don't want to admit it, they want to pretend. Just like Trump. Victory talk. Same thing's been going on here. We are falling behind and Covid was the hinge. And hardly anybody has been to China since COVID I know because when I used to go to China, I was surrounded by what? American. Americans. I go last June, there's no Americans. I mean, there are a few, but you could hardly find them. When was the last time a politician went to China? Gavin Newsom went about 18 months ago for three days. Okay, he went to BYD for three days and there's still a video of it. That's it. And I came back, I tried to get a lot of politicians. I even, I'm sorry to say I tried to get journalists interested. Nobody could find the time because it wasn't on the radar. Are, well, Trump's trip here. This is what the journalists are all talking about. The seas of EVs, the green license plates, brand spanking new, beautiful Porsches, EVs. This is not like Tercell's, okay? This is the leading edge. And they have even more that I got to see. And. And they won't put it the robotic assembly line. You can't find them on Google. That's why I had to go. So they are not bragging, talking smack like we do. What they're doing is staying under the radar and just eating our lunch.
- [49:20]
Krystal Ball
Right. You know, professor, to link this a little bit to Iran, if we could put F4, for example, up here on the screen. This is from the New York Times. New classified military intelligence assessments from earlier this month show Iran has regained access to most of its missile sites. Launches underground facilities. U.S. intel assesses Iran has restored operational access to 30 of the 33 missile sites it maintains along the Straits of Hormuz and that 90% of their Iranian underground missile sites are partially or fully operational. We just spoke with Andy Brown from Semafor. He made clear Xi Jinping's number one priority one, two and three out of this trip is something on Taiwan. Not necessarily a total change in the status quo, but trying to pierce the armor of the American view of Taiwan and his own own Taiwan problem. It seems to me an American president has never met with a Chinese or even any counterparty in an instance in the midst of such a tremendous strategic defeat like what we have just suffered and how that's going to shift the trip. I mean, I'm not exactly sure, not just because of what you're talking about, about their ascendants, but of our own weakness, of the relative weakness in a moment like this at the time of their meeting. I'm just curious.
- [50:32]
Robert Pape
Let me just make. Make two points here. Three. So first, on your show a couple weeks ago, I said this is going to be scary for America because he's about to go in this position of strategic defeat. She's got all the cards. He's going to want concessions on Taiwan. So this was number one, absolutely predictable. Number two, if you look at that intel assessment. So what has happened with America's bases? It's not that we didn't refurbish anything. Those are bases basically 30 years old, 20 years old. We're still living in the 90s a lot of the way, like we're living in the Rust belt in the 90s. Point number three, imagine what's going to happen now with this emerging alliance. Remember, I'm talking about China, Iran emerging as the fourth center of world power in concert with Russia and with China. Start to imagine even a trickle of China's AI that we're now seeing diffusing here in the electric vehicles and robotic assemblies. Any of that going to Iran, and Iran can take advantage of it here. So this is the future here that we're going to contend with. We're still basically stuck in equipment, in basing structures that are 20 years out of date. With COVID there was a hint, and China used Covid to jettison ahead in AI, not inventing a single product, but in diffusing this and integrating this across whole sectors. This could be Iran in the coming years.
- [52:09]
Saagar Enjeti
Yeah, well, that is very fascinating to think about. And Trump tried to downplay the Iran aspect of what would be discussed With China saying, oh, I don't think that's going to be a big part of it. What do you make of China's view on our attack on Iran, on the Iran war? Trump loves to point out that they get a lot more of their oil through the Strait of Hormuz, which is true, than we do. So they certainly are impacted by it. Of course, China is a nation that does a lot of trade with the world. So anytime that trade flows are impacted, that's gonna be something that they pay close attention to. So what do you think will be said and discussed with regards to the Iran war on this trip?
- [52:46]
Robert Pape
Yeah, so a couple of points. First, notice that Trump is the master of sleight of hand, like a magician. And that stat that you, you just said is not false, but it's out of the larger context. He doesn't want you to focus on like a magician. The bigger context is China has been weaning itself off of oil over the last decade. Only 20% of its energy needs now, 20% are met with oil and only 38% of that come from the Persian Gulf. So last summer when I was visiting the, those electric, those advanced industries, the business people were telling me in the dinners that, yeah, they may suffer a percent or two here or there loss of gdp, but the fact of the matter is their whole business plan is built around Asia. It's built around. This will create opportunities for them to buy things and get deals on the cheap. They're more likely to jettison ahead as a result of this. Well, America gets sunk here. And what you are seeing is we just keep getting spun by Trump's rhetoric here and we're missing big pictures. Some of it's because we just don't go to China. We try to get everything from behind our computers. And I know it's ironic that here I am, a professor, spend most of my life behind a computer and I'm telling journalists and I'm telling politicians, you've got to get out and meet people and see the real world. That's what's happening. Otherwise we're just stuck listening to President Trump's vision of the real world.
- [54:16]
Andy Brown
Right.
- [54:17]
Krystal Ball
I think it's very important and I do think that this is like a collision of moments with the Iran war and this summit, because I do expect some sort of accommodation as something in terms of trade. Taiwan, I don't know exactly what it's gonna look like and it may not be immediately obvious, but in the long run, professor, how do you see this playing out like the Taiwan question. From China's perspective, it doesn't seem to me that they would want to do a full on military invas more recent.
- [54:44]
Robert Pape
They would be foolish to do a full on military invasion even if they could succeed because what that would do is it would take the focus off of blame of the United States. It would push Europe away, push some of the other Asian partners away. They want so they could help us out. I say this only half jokingly here to my classes. The best way to bail out Trump from the Iran war would be if she would attack, attack Taiwan because this would fundamentally help Trump and maybe he's going to try to tickle Xi and say, don't you want to do this? Well, I'm sorry, I don't want to be too facetious, but the fact of the matter is what China has done now since the 1996 Taiwan Strait crisis, think about that. Thirty years ago they did some missile gunboat diplomacy. It totally backfired and failed. They haven't done that since. Now they've done some incursions. I know, I've been to Taiwan. I've been, I've had the briefings from the national security advisor here. So I've got some action. I've go to Taiwan too. And what you are, what you're really seeing is China here is just getting stronger and stronger and stronger incrementally. That's true economically, that's true militarily. And at some point, Taiwan may just fall in their lap. They just, they may not have to actually use military force. And look at, we've run out of all of these boutique missiles. There's so many of them. We're really hurting now in terms of supporting Taiwan. What's keeping Taiwan afloat is its actual Taiwanese military power, which is not trivial here. They have months. They could hold out against China on its own. But whether America is the cavalry that would come to the rescue after say, four or five months of a blockade against Taiwan, that's an open question at this point. And she sees it.
- [56:37]
Andy Brown
Yeah.
- [56:38]
Saagar Enjeti
And finally, we can't have you here without asking you a little bit directly about the Iran war. What's your sense of where we are? And are things just sort of on pause right now while Trump makes this trip? And do you feel that the pressure is continuing to build on him to take some sort of action?
- [56:55]
Robert Pape
Yeah, this is a lull before a likely storm. We just don't know whether that storm is going to be, you know, sort of a cloud burst or it's going to be a Hailstorm. And the issue here we've talked about many, many times is President Trump is going to have an incredibly difficult time swallowing that big L on him, which will as bad as you think his political prospects are now, he's still got a large part of MAGA behind him and they will be even more behind him as they get into the midterm terms. However, if he accepts the loss and really just says, yep, you're right, I've got to stand aside while Iran gets a nuclear weapon, think about that, because that's what the real future is here, then a lot of even MAGA is going to lose confidence in the great leader because that great leader isn't so great anymore. So this is where the real problem of the trap is. As bad as it might seem to go down a road of escalation, going down the other road for Trump is worse. Now, the rest of us may be perfectly happy to let you know, make the choice. We don't want casualties. We'd rather go down and allow Iran to emerge as the fourth center of world power. That's the choice. And we may make a different choice. But the guy in the Oval Office is President Trump and he's in there for two and a half more years.
- [58:18]
Krystal Ball
Well, you always leave us with a lot to think about, Professor. You certainly do. Is escalation trap on substack? Go subscribe. Link down in the description. Thank you very much, sir. We appreciate your time.
- [58:28]
Robert Pape
Oh, thank you. You're always ahead. You guys are always ahead and help keep my substack ahead.
- [58:33]
Andy Brown
Good.
- [58:34]
Krystal Ball
Number one.
- [58:35]
Saagar Enjeti
Glad to be part of it.
- [58:35]
Krystal Ball
Let's make it number one. Thank you guys so much for watching. We appreciate it. We will have a great break. Another breaking point show tomorrow. All right, so things got switched up but nobody got shorted. All right, we'll see. You all.
- [59:03]
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