ChinaTalk Podcast Summary: "Are We Cooked? Q1 2026" (Jan 7, 2026)

Overview: In this lively roundtable, Jordan Schneider welcomes Kevin Shue, Matt Klein, and Peter Harrell to assess America’s standing in a rapidly shifting geopolitical and technological landscape—focusing on allied scale, supply chain vulnerabilities, US-Europe dynamics, the role of the Middle East in AI, and the evolving US-China technology competition. The central question: "Are we cooked?"—as in, is America’s global advantage fatally eroding, or is the situation more complex?

1. Allied Scale: Does America Still Lead With Its Friends?

Main theme (00:00–07:40):

• The group opens with Rush Doshi’s “allied scale” theory—America staying competitive by leveraging the full economic and industrial power of its allies.

• Peter Harrell notes that the strategy for allied scale is “TBD,” with the US historically believing “being nice to our allies” built strength, but recent events (e.g., the US seizure of Maduro in Venezuela) showing a more “19th-century” approach—potentially unsettling allies.
  — Peter Harrell: “The bet we have made since the end of World War II...was we will get to allied scale by being nice to our allies, and Trump sort of making a different bet...force your allies into your sphere of influence...we'll see how that plays out.” [00:38]

• Matt Klein argues allied scale is undermined, especially with Europe:
  — He observes Europeans increasingly see the US as a “threat” to their sovereignty, noting EU worries about running on AWS are as acute as their ongoing Russian energy imports.
  — Matt: “The perspective that EU companies run on AWS is viewed in some quarters as much of a problem as the fact that Europeans still are importing Russian LNG.” [03:24]

• The group critiques the US focus on Latin America ("our backyard") as a sign of diminished global strategic scope: — Matt: “It just seems kind of strange... like this is really just like a diminishment...instead of making great. Again, it's the diminishment of the United States really radically.” [04:25]

2. Middle East and AI—Meaningful or Marginal?

(07:41–16:51):

• Kevin shares takeaways from a recent AI-focused delegation to the UAE.
  — The Middle East is aggressively building AI data center capacity, but faces skepticism as a meaningful part of the “allied scale.”
  — On the “bear case”: Data residency anxieties mean excess UAE capacity may be underutilized—Europe won’t be comfortable routing sensitive workloads via the Middle East if they won’t even trust American clouds. — On the “bull case”: If US domestic politics or energy shortages stall datacenter growth, American AI workloads could shift overseas—to places like UAE.

• Singapore Analogy:
  — Kevin: “This feels like Singapore 10 years ago...ultimately ruled by a royal family...the Emiratis, which is one out of 10 million people, rule the place and everybody else is a visitor.” [15:11] — Jordan and Matt counter: Singapore had neighbors and a manufacturing story; UAE and the Gulf lack these advantages, casting doubt on analogous success.

3. US-EU Economic Friction—Manufacturing, Tech, and Tariffs

(16:51–27:54):

• Peter sees Europe’s robust manufacturing and consumer market facing a deluge of Chinese imports, with the US no longer the unambiguous partner of choice.

• AI/data center backlash builds:
  — Europeans are “deeply skeptical about having to rely on US cloud providers,” but can’t build competitive domestic alternatives—leading to mutual distrust with no quick fix. — European initiatives (like “sovereign AI”) sputter as US firms (e.g., Jensen Huang of Nvidia) co-opt and commercialize these ambitions.

• Trump’s stance is to “force Europe to eat the relationship on our [US] terms"—a short-term win, but possibly “not going to land well long term.”
  — “The Trump administration...thinks we can kind of force them to eat the relationship on our terms.” [21:03]

• Matt argues Trump’s “lopsided” trade deals are mostly for show—US tariffs are self-defeating, Europeans “placate the angry old man,” but the result is less economic integration, not strategic gain.
  — Matt: “We said, okay, we will raise the prices of imports from Europe by 15%...They said they would vaguely commit...But in practice...are Americans actually buying fewer things? Not obviously, no.” [22:32] — The European DAX index outperformed the S&P—the market’s vote of confidence. [26:32]

4. US-China AI “Co-Opetition”—Race or Interdependence?

(27:54–34:55):

• Kevin reframes the “AI arms race” as “coopetition”—a messy mix of competition, cooperation, and mutual co-option:
  — Despite all the rhetoric, US and Chinese AI labs pirouette around restrictions: Chinese hyperscalers quickly repackage Western models; US startups quietly use Chinese open weights for cost-effective NLP. — “The zero-sumness of this characterization...is actually just completely inaccurate to the ground truth...I think coopetition—competition, cooperation, co-opting each other—is really what's happening right now.” [29:51]

• Jordan highlights other intersections:
  — Chinese firms (ByteDance, etc.) buying cutting-edge Nvidia chips, routed through Malaysia or by exploiting loopholes with Western cloud providers.
  — Western manufacturing equipment remains pervasive in Chinese fabs, with ongoing drama over rare earths as leverage points. — Calls back to earlier US-China “trade war hot minutes,” like the rare earths episode. [33:27]

5. Supply Chain Vulnerabilities—Rare Earths and Beyond

(34:55–48:38):

• Peter: The US government was surprised by China’s willingness to weaponize rare earths, prompting a “pivot towards détente.”
  — US now making a serious effort to throw money at domestic rare earths and magnet production, but the challenge is sustained focus:
  — “Can we actually maintain the focus and the open checkbook for the couple years that it will take to get there?” [35:58]

• Jordan and Matt: Solving for one choke point (rare earths) doesn’t erase broader dependency—car seats, board books, and other “unsexy” imports are also strategic vulnerabilities. — Matt: “There are lots of other things that are a lot less catchy...but the US is extremely dependent on Chinese imports—children’s board books, strollers.” [39:31]

• The US lacks a rigorous, prioritized framework for which supply chains truly matter—which undermines resilience planning.

• Peter: Total independence from Chinese leverage is unrealistic. Most achievable is selective, strategic insulation, especially for defense or key economic spillovers. — “We are very, very unlikely to get to a world where the Chinese have no leverage over us.” [44:28]

6. Policy Mirroring and Reverse Engineering—Who Learns Faster?

(48:39–55:58):

• The FCC’s ban on new foreign drones (largely targeting DJI/Chinese models), but not existing ones, is an attempt to create lead time to build a domestic/non-Chinese drone industry before pulling the plug. — Peter: “If you are a US drone maker or a venture capitalist looking to back a drone maker, you now can see this market. They’re trying to use this as part of industrial policy.” [51:17]

• Kevin: The US can learn from China’s “engineering society” approach—reverse engineering foreign successes, then scaling new industries. Will the US/West embrace such humility or remain attached to original R&D? — “If the US or the West were to take this very, very seriously, there has to be a willingness, a humility and a capacity to reverse engineer whatever is the best on the market. A good chunk of it will come from China.” [53:26]

• Peter shares a recent story of a US defense contractor allegedly copying the Iranian Shaheed drone—a reversal of US critique of Chinese cloning:
  — “Maybe we are taking this...maybe we are taking this—spy plane coming down, right, all this sort of stuff, that’s been the practice at least in that world.” [55:24–55:58]

7. Are We Cooked? Tariffs, the Supreme Court, and the Mood for 2026

(56:05–end):

• Closing reflections: The group edges toward “not cooked”—but acknowledges the US is “overheating a little bit,” in the “sous vide” zone (“overcooked sun” riffs in the closing song).
• The fate of US tariff policy hangs in the balance, with a Supreme Court case possibly invalidating emergency tariffs rolled out during the Trump administration. The administration has backup plans—Section 122 (temporary crisis tariffs), Section 301 (country-specific), or even revisiting old Smoot-Hawley provisions. — Peter: “If I were them, what I would do is pull the trigger on something called Section 122, which lets them impose a 15% tariff for up to five months...then spend the next five months figuring out what to do after that.” [59:19–61:05]
• High water marks: While crises may raise tariffs on certain goods or China, the overall US tariff average is likely at or past its modern peak.

Notable Quotes & Moments (with Timestamps)

• On US standing and the allied scale:
  — Peter Harrell: “...we'll see how it plays out. It has been interesting hearing reactions to the seizure of Maduro down in Venezuela...” [00:38] — Matt Klein: “Compared to the global population...economically, not a lot going on [in the Western Hemisphere].” [04:25]
• On US-EU tech friction:
  — Matt: “Europeans can get very excised about what Americans are doing, regardless of what it is.” [22:32] — Kevin: “...Europe is sort of like sitting on their own idea kind of half baked all the time...contrasted with the UAE, [which is] so aggressive about trolling Europe.” [19:00]
• On AI “co-opetition”: — Kevin: “The zero-sumness of this characterization...is actually just completely inaccurate to the actual ground truth.” [29:51]
• On resilience and reverse engineering:
  — Kevin: “If the United States or the West...were to take this very, very seriously, there has to be a willingness, a humility and a capacity to reverse engineer...” [53:26]

Segment Timestamps

• [00:00] – Allied scale kickoff
• [07:41] – Middle East in the AI era
• [16:51] – US-EU economic friction
• [27:54] – US-China AI coopetition
• [34:55] – Rare earths, supply chain leverage
• [48:39] – Drone industrial policy, mirroring China’s playbook
• [56:05] – Tariff policy and “are we cooked?” closing
• [64:35] – Closing song (satirical recap)

Closing Thoughts

• The panel’s consensus: US strategic position is challenged, complicated, and increasingly interdependent—definitely “not cooked,” but overheating, and the game is more ambiguous than ever. Much depends on whether the US can build and sustain smarter, more strategic alliances and supply chains—and if the West can learn, even copy, with the best.
• As the closing song echoes: “So are we cooked? The answer still TBD.”

Recommended for listeners interested in: US-China technology politics, global supply chains, economic strategy, AI geopolitics, US-Europe relations, and industrial policy.

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