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- [00:00]
Joe House
All right, my birdie buddies, my par saving pals, my Eagle enthusiasts, it's Joe House here. Major season is finally upon us. The Masters, the PGA Championship, the U.S. open, the Open Championship, and Fairway. Rowan is here to break down all of the storylines. Offer a little help on those betting cards for every single major this golf season. Join me and our incomparable accomplice, Artur Boots on the ground, Nathan Hubbard, as we guide you from Augusta all the way to Northern Ireland Royal Port Rush. Away we go.
- [00:44]
Derek Thompson
This episode is brought to you by Shopify. Forget the frustration of picking commerce platforms when you switch your business to Shopify, the global commerce platform that supercharges your selling. Wherever you sell with Shopify, you'll harness the same intuitive features, trusted apps and powerful analytics used by the world's leading brands. Sign up today for your $1 per month trial period at shopify.com tech. All lowercase. That's shopify.com tech Are you still quoting.
- [01:15]
Jason Miller
30 year old movies? Have you said cool beans in the past 90 days?
- [01:19]
Derek Thompson
Do you think Discover isn't widely accepted?
- [01:22]
Jason Miller
It if this sounds like you, you're stuck in the past.
- [01:25]
Derek Thompson
Discover is accepted at 99% of places that take credit cards nationwide, and every.
- [01:30]
Jason Miller
Time you make a purchase with your card, you automatically earn cash back.
- [01:34]
Derek Thompson
Welcome to the Now It Pays to Discover.
- [01:37]
Jason Miller
Learn more at discover.com credit card Based.
- [01:41]
Derek Thompson
On the February 2024 Nielsen report, there's a word that's thrown around a lot these days. With Trump's tariffs and China's response to those tariffs, and the market's response to China's response to those tariffs. That word is re industrialization. Reindustrialization is a fancy word belying a simple premise. America used to be an industrial giant that got rich by making hardware. Now we're a finance and tech superpower that gets rich with software. Go back to the 1930s and 1940s, and the US economy was dominated by manufacturing firms, by industrial firms, in other words, Ford, GM, GE. In the last 70 years, manufacturing as a share of employment has steadily declined in the last 25 years. In particular, the number of jobs in American factories has plummeted, just as China has become the factory of the world. Today, the US hasn't just lost the capacity to sew clothes at scale or assemble household electronics. We've lost the technological frontier in industries that are core to our national security or our economy. Shipbuilding, advanced computer chip manufacturing. China, for its part, is not just the world leader in making toys and underwear anymore. The antiquated notion that Made in China connotes some cheap scaling of low skilled labor is a holdover from a previous era. China has taken the lead in making electric vehicles and clean energy manufacturing and industrial robots and drone technology and flying taxis. Its AI capabilities appear to be right on the heels of the us. Its patent filings exceed America's. In this context, re industrialization should not just mean turning back the clock and reviving the economy that made us the richest country on the planet in the 1950s. We need to invest in the industrial economy that will make us rich in the 2000 and 50s. Alright, so that's a nice pat line. Why can't we just do it? I sometimes see folks talk about bringing back manufacturing jobs as if it's as simple as retrieving a child's toy you left at a friend's house. Just call them up, bring it back. US companies can't just call up their foreign offices and factories and demand jobs back. We need time to build factories here. We need workers to be in those factories. We need industrial robots to work alongside those workers. And those workers might need training. The US in 2025 is a fully developed economy with a low unemployment rate and declining business investment. Where are these factories supposed to come from? Where are these workers supposed to come from? Where is their training supposed to come from? Now I believe in the possibility of change. I believe in the ability of the US economy to evolve. But change takes time and it would be nice to have clarity on America's trade policy to invest over time in our new re industrialized future. On China, however, the trade policy is as clear as mud. The US imposed a 10% tariff on Chinese goods in February, raised it to 20% in March, raised it to 145% in April, then announced that electronics were exempt from those tariffs, and then 24 hours later reversed course and declared that tariffs on electronics were coming. But no, under a separate law, I haven't spoken to a single trade expert or manufacturing executive who says this yo yo approach to trade is the best way to reshape the global order. What is clear, however, is that the US is in the opening innings of a full blown trade war with China. So I wanted to know, what do we actually sell to China? What does China sell to us? How is each country dependent on the other for the supply of electronics and food and medicine and machines and other goods? Jason Miller is a professor at Michigan State and an expert on global supply chains. A supply chain is the story of how all the parts that make it into a final product actually get there, you take something like a number two pencil, very simple product. Wood on the outside, graphite for the writing, rubber eraser, that little piece of metal to hold the rubber at the end. But good luck finding one city that has a cedarwood forest and a graphite mine and a synthetic rubber facility and an aluminum processing smelter. There aren't a lot of pencil towns, so to speak. So to keep pencils cheap, we rely on an international network. Say wood from Oregon, graphite from Sri Lanka, rubber from Indonesia, assembled in China, packaged with recycled paper from Canada and shipped to your local target. That's a supply chain. What I wanted to know from Jason was what happens in a trade war between two of the richest countries in the world when both China and America are trying to kick the other one out of their supply chain? The short answer is chaos. The medium length answer is that one of these two countries seems better positioned to weather a protracted trade war. And I'm worried it's not America.
- [07:21]
Joe House
The long answer is this show.
- [07:25]
Derek Thompson
I'm Derek Thompson. This is plain English.
- [07:50]
Joe House
Jason Miller, welcome to the show.
- [07:52]
Jason Miller
Hey, thanks for having me.
- [07:54]
Joe House
So who are you and what do you do?
- [07:57]
Jason Miller
So I'm a professor of supply chain management here at Michigan State University. And a lot of what I specialize in is essentially distilling a tremendous amount of government data. So the business community can, you know, derive insight from that.
- [08:15]
Joe House
I have to confess something for this show that I don't think I have confessed on other shows because I'd like to see myself as either an explainer or someone who facilitates explanations. I am extremely, I think, confused by the state of these tariffs. Like on any given morning that I wake up, I'm not exactly sure what the tariff rate on the world is or on China is. You're an expert in this field. Is my confusion okay? Acceptable? Understandable. Are you confused, Jason?
- [08:47]
Jason Miller
Oh, absolutely. I was doing an executive ed session the other day and that was when they announced the 90 day pause and the reciprocal tariff. So I just spent two and a half hours talking about a lot of these issues. Literally, we broke. And somebody said, well, everything we just learned no longer applies. So do not feel bad. That's what we're all experiencing right now.
- [09:08]
Joe House
And before we jump into the story of supply chains and America and China, I do want to just briefly extrapolate from that point. If I'm confused and you're confused and you're a supply chain management expert and you're doing all of this research for hour long seminars for other supply chain Practitioners and all of the work that you're doing proves kaput. By the time you finish speaking, what is the logical implication that we should draw for the entire US Economy and the confusion that companies and importers and exporters and customs agents are feeling right now? What are the costs of this level of confusion and uncertainty?
- [09:51]
Jason Miller
Yeah, so. And you missedaid it with the last word. It's uncertainty. And when things are uncertain, you naturally hit the pause button. And so right now the biggest challenge is folks don't know what to do. Do I shift production from China to Vietnam because now there's this massive 135 percentage point difference in tariffs for a lot of items? Or do I stand pat thinking the President may have a trade deal with China because that would be the biggest single trade deal that could be struck? That's the issue that so many folks are facing. And it's being carried out by hundreds of thousands of decision makers around the country at the moment.
- [10:31]
Joe House
And just practically speaking, what does it mean if people are hitting the pause button? If they're simply saying, I'm going to wait this out, does that mean you don't order new toys if you're a toy store because you think maybe the tariff rate for toys that you order in three weeks is going to be 130% lower? Does it mean you don't invest in a new factory expansion that you were planning because you have no idea what the relative tariff rates are going to be for various countries? Like what are the practical quantitative costs of this kind of uncertainty pausing economic activity?
- [11:09]
Jason Miller
Yeah, well, you captured a lot of them as you, you know, from the big capital investment standpoint building factories in the United States, it becomes harder to justify those investments. What I would tell folks, don't let these announcements my like Nvidia saying they're going to build AI servers and AI supercomputers in the United States fool you? Those are decisions that would have made sense without tariffs being in place. But the challenge that decision makers are facing is do I buy that new piece of capital equipment knowing that it's now 10% more expensive? Let's say, let's say. Or if it was coming from China, 145% more expensive. Do I have to find a different supplier? Do I pause adding employees? You know, just as an example, there's about 8,000 different firms that operate a hobby shop or toy store. Those firms employ 130,000 people almost. They're right now trying to make decisions. Do we cut imports? Do we trim certain product categories? Do I not Hire as many people, because I don't think my growth is there. And so right now, we're seeing that play out across millions of different businesses in the United States that are affected, either directly or indirectly, by this continual whirlwind of tariff policies.
- [12:30]
Joe House
So mostly I want to talk to you about the supply chains passing through China and the US and what happens if indeed we have tariff rates of 145% or even higher placed on China. The Trump administration is clearly directing its tariff efforts at the moment toward isolating China, which naturally raises the question, how effective will that strategy be? So let's start with some basic facts. What is it that we buy most from China? Where is America most reliant on Chinese manufacturing?
- [13:05]
Jason Miller
So those are going to be two slightly separate questions. So what do we buy the most from China? Number one is smartphones. Number two is laptops. Number three is lithium ion batteries, and for electric vehicles. And number four, when you lump it together, a bunch of product categories is going to be toys, believe it or not. So that's kind of the list of the top four. And then whole bunch of other consumer electronics, headphones, things of that sort. And in many of those categories, China accounts for more than 70% of our imports. So, for example, in 2024, there were 81, 81% of smartphones that we imported came from China. Now, what are we most dependent on China for? If we think about essentially China's share of our total imports, it's a lot of stuff associated with being a parent. So car seats, baby gates, strollers, things of this sort, a lot of items, baby safety equipment, a lot of things of that sort. You start then getting into your kitchen, your blender, your microwave, your mixer, all this other stuff, very heavy, heavily reliant on China. Something over 90, 95ish percent of electric toasters, for example, or above, come from China. And so what we run into for categories like that, and there's many others, is there's just not an easy option of leaving China. Because the key thing to remember is China's producing electric toasters, let's say, for the entire world. They're not just making toasters for the United States. And so the entire ecosystem to build those products is anchored in China. And you just can't up and move that to another country easily. There's nowhere else in the world that has even remotely the capacity to do it. And per the comment about uncertainty, I wouldn't want to open an electric toaster factory here in the United States if the only way this product could even remotely be cost Competitive is with 100% plus tariffs on Chinese goods. If there's a trade deal struck, I'm suddenly out millions of dollars and I'm doubting too many banks would want to give me a loan to make that. And even worse, if I did build my toaster factory, most of the components would have to come from China because that's where the ecosystem is. I wouldn't be able to buy those components from the United States. So I would pay tariffs on components anyway. And then my investment makes no sense.
- [15:41]
Joe House
I want to talk about both of these categories which you outlined so well. Both categories of big ticket manufact, automakers, aerospace manufacturers, military contractors, electric vehicle makers. That's one big category. But I'm so glad you mentioned the other category which is stuff parents need. I mean, just going through the list that you sent me over the weekend, we rely on China for 99% of imported child safety seats with detachable hard shells. I got one of them, 93% of children's coloring books. I got seven of those, 95% of cooking appliances, 96 of toys for pets, 88% of Christmas ornaments and Christmas trees, and 74% of toy parts for ages 3 and under. Just looking at this, Jim, it seems like a trade war with China is going to give the American consumer, and in particular the American parent, a very painful lesson in how dependent we are on China for a lot of stuff we don't even think think about in our everyday life. Practically speaking, what happens if the wall goes up and this stuff just stops coming in?
- [16:57]
Jason Miller
Yeah. So this is going to be. It is the question of what do importers do. So the first is there will be a dramatic reduction in product variety. So in other words, importers are not going to bring in the range of products they would have without the tariffs. That in and of itself is a loss to the consumer because more variety is general viewed as better. You get to pick the thing that you like the best for the goods that are still brought in. And we still will need child steeds, we will still need electric toasters. The price is going to go up and go up substantially at 145% tariff. I feel comfortable saying the price of these items is going to become 75% to 100% greater than it currently is because there's not enough margin it to essentially be spread out amongst the firms to fully absorb this. And we actually saw this in our import data through March and that while it does appear that suppliers of cell phones are actually Lowering their prices a little bit to help the importers absorb some of the tariffs. Not all of it, just a fraction of it. We didn't see any type of drop for the price of imported household appliances, which would suggest that the US importers are essentially absorbing the entirety of that tariff. Because to again clarify, importers pay tariffs, exporters do not pay tariffs. And so the reality is the consumer is going to see less variety and for the goods that are brought in, they're going to face a higher price. There is no way around that. That is why I largely believe the administration backtrack on smartphones and laptops. And they managed to do that at like 10pm on a Friday night to where I woke up Saturday morning seeing this announcement. And sure enough, those are the products. And the reality is there is no feasibility of producing the US's needed quantities of these goods in the United States in any type of short time period. And certainly not at the cost that we see from overseas production from China.
- [19:08]
Joe House
And let me just pin you down in that last point because one thought that a person might have, hearing me list all these products we rely on China for is, we're America, dammit. We should be able to make that stuff here. We should be able to make our own child safety seats with detachable hard shells and our own pet toys. What is your response to that take, like both on how long it would take to set up those manufacturing facilities and whether it's worthwhile in the first place for the US to have, say, a deliberate strategy of reshoring toy manufacturing.
- [19:43]
Jason Miller
Yeah. So could we make it here? Of course we can. We can build F35 stealth aircraft, we can build Boeing airplanes, we can build incredible motor vehicles. Of course we can make this stuff. The question is, is this what we want to devote our limited resources to making? And the answer to that is no. And the reason is, is for any manufactured good you can sort of think there's kind of three big buckets of where value to that good. There's the design and innovation piece. So think about Apple developing a new iPhone, developing the iPhone 17, all of the code, making sure the components integrate, developing their own chips for their computers. Now there's the physical transformation process. Then this is bucket number two, which is what we think of as traditional manufacturing. This is putting all the components together to produce a finished motor vehicle at a Ford plant. And then the last piece is marketing and distribution. There's value added there. Think of Nike taking a sneaker that cost them not that much money and convincing all of us to pay a heck of a lot more for it.
- [20:54]
Joe House
Right.
- [20:55]
Jason Miller
What you can think about with the United States is a lot of those things you mentioned, child safety seats, pet toys, you know, human toys. Sometimes those are interchangeable as I found with our dog is essentially the value adding for a lot of these goods that we've offshored is in step one, which is the design and innovation. So again the iPhone or it's in step three, it's the marketing and distribution. Think the Nike. There's not much value to be added by snapping together pieces of a doll or snapping together the pieces of the iPhone. And so that doesn't make sense to perform in the United States. The United States, where we tend to manufacture extensively and lead the world, is topics like aerospace, topics like farm equipment. And those are the type of goods where there's an inherent connection between that design piece and the production piece. John deere cannot with 100% certainty anticipate when they design a tractor the exact how it's going to be manufactured and how the components will all interact with each other. The same applies to motor vehicles. That's why the motor vehicle makers design their cars and build the cars. When Apple tried to do that and apply the same model that it uses for laptops and cell phones to cars, it didn't work because this is a vehicle that is inherently far more complex and you can't anticipate these interactions. And so the challenge we run into is we right now have an unemployment rate that's slightly above 4%. You don't want half the labor supply in the United States to produce a lot of these goods at scale easily two we don't have. These aren't jobs that would pay well. We would be looking at jobs that would be paying not that much because this is not skilled labor to put together a Barbie doll. I'm not trying to be mean to folks, but that is not highly skilled work. And in general, and so this is where it is a huge challenge to understand what the logic here is for a lot of the proposed tariffs because it's not a strategic focus of only finished motor vehicles made outside of North America. There maybe you could actually see some type of argument. I would still be very skeptical of it, but at least at that point you're trying to channel production to a type of good for where we are very competitive and it is a tremendous amount of value added.
- [23:42]
Joe House
Jason, I have one more question about the first category that you talked about. Lithium ion batteries, electronics, smartphone parts. You mentioned that in a full on trade War scenario, we might have a situation where American parents are paying double for, you know, toys for their kids, toys for their pets, new toasters. What happens to American automakers or military contractors or smartphone companies if the guts of their machines are suddenly tariffed 100 or 200%? Or even if China stops selling us those critical supplies entirely? Like, how catastrophic could it be for automakers, aerospace manufacturers, military contractors?
- [24:32]
Jason Miller
Yeah, so one of the things we're watching very closely at the moment is China recently essentially halted exports of what are called heavy rare earth elements. These are things we wouldn't think about very much, but these elements are needed to produce very powerful magnets. And as you mentioned, those are type of essentially. Essentially, we call them rare earth magnets. They're used as components for electric vehicles, drones, missiles. So aerospace gets affected, the auto sector gets affected. And right now, the open question that we're still trying to fully understand is what type of inventories of, you know, these heavy rare earth elements are there out there. And so sort of you can think, China's a huge player in this space. Japan and Germany to a much lesser extent as well. And so the concern sort of right now at the moment is lack of access to these heavy rare earth elements would be extremely challenging for certain industries to deal with. It's too early for anybody to start, you know, to get worked into a panic thinking, oh, my heavens, like, the auto sector is going to shut. But it also shows, I think, sort of the somewhat asymmetric responses that China has went with in this regard. No, at the same time, China's right now suffering because they've tariffed American propane so much that propane is now very expensive over there. The challenge with that is propane is a feedstock to plastic manufacturing. So Chinese plastic manufacturers that are making essentially those like raw basic plastics are seeing massive increases in their costs. And so this is, you know, right now we're seeing sort of these complex effects play out. And that's why, again, we're all, I think, hoping for some type of de Escalation to take place, and take place rather quickly.
- [26:45]
Joe House
Let's take a look at the other side of the ledger here. Not what we buy from China, but what we sell to China. After looking at your data and doing a bit of writing for the Atlantic, I calculated that as a share of global exports, China buys 89% of our grain, sorghum, 52% of the soybeans we sell to the world, 30% of our cotton, 27% of our pistachios, 73% of our frozen pig organ exports, 51% of our optical instruments for inspecting and making computer chips, which is particularly important because that can layer with tariffs of the smartphone components that then we buy back from China. What should people know that's most important about what we sell to China?
- [27:34]
Jason Miller
You covered a lot of the key categories there. But what people really need to realize is that we, you know, China is a big export destination for us. We exported about $125 billion of products to them. And so as an example, just today, China announced that they will no longer take deliveries of Boeing aircraft that are going to be finished. And aerospace is our number two export to China. On a line item basis, we export over $10 million, $10 billion back in 2024. And so the concern here is that these negative effects it has on US Exporters, and therefore they're then engaging in less economic activity in the U.S. another example that is almost incredibly ironic is companies like intel manufacture CPUs here in the United States for computers. They export those to China for assembly into finished products, which are then re exported back to the United States. All of a sudden you have China putting 125% tariff on an Intel CPU. So even if you have a computer now assembled in China, it's going to be coming back to the U.S. not just with a 20% tariff. But the key part of his guts got doubled in cost by that first tariff. And so unless there's a drawback provision that is allowed for the Chinese exporter, a computer would be more expensive. And so part of the challenge as well with these tariffs is there's a lack of clarity about the extent that what we call drawbacks exist. And the concept of a drawback is, let's say I import steel from Canada. I put that in a finished product that I then export to Germany. Under normal circumstances, even if I pay a tariff on that imported steel because I export my product, I can go to the government and say, hey, give me my money back that I paid on that tariff. We're not allowing that for like the steel and aluminum tariffs. No, we are allowing drawback on the reciprocal tariffs. There's lack of clarity, though, on whether China would allow for drawback in the scenario I just exclaimed. And so that's where we're just really struggling because things are moving so fast to understand these little nuances that really play a big role in affecting the overall costs that consumers will ultimately bear with these tariffs.
- [30:19]
Joe House
There's two points here that I think are so, so important, and I just want to slow down a little bit to make sure that I listeners get them. The first point that I hear you making is that the US And China are at risk of severely tariffing one another's intermediate products. So, like, if China tariffs our instruments for making computer chips and then we tariff their computer chips, those tariffs can stack in a way that makes the entire electronics industry significantly more expensive. Because every time these products are crossing state borders, there's another 10 or 110% tariff that's hitting that product. Is there any way that this has any effect besides significantly raising the cost of making complex machines and complex computers throughout the world?
- [31:18]
Jason Miller
No. At least from a US Consumer side, it would be certainly detrimental for what we're going to experience. Again, we may see some production and assembly shift out of China for these products. Again, Apple's strategically relying on their capacity in India to service more of the US Market and potentially using more of their Chinese capacity to service Europe as an example. But because of the complexities of global supply chains, no one wins in trade wars. And that's, I think, what's important to everybody to understand is there's all these nuances and unanticipated complexities that exist that are very problematic to essentially, you know, understand. And, you know, again, let's say that there is a global tariff ultimately put on laptops. So what that does is it makes a laptop assembled in Vietnam more expensive to the US Consumer. Yet intel is likely exporting the CPU to that lap for that laptop to Vietnam. And so all you end up doing is you hurt the domestic production of CPUs because consumers buy less laptops. And so the irony is there's more value added making that CPU in the United States than there is slapping the laptop together in Vietnam?
- [32:44]
Joe House
The second point that I heard from your answer, and this is a subtle point, so I might have misunderstood it, is that I feel like there's an asymmetry between what we rely on China for and what China imports from the U.S. like, China imports a lot of, you know, cotton, pistachios, frozen meat processors. I have to imagine that the Chinese can shift a lot of their import strategies and just buy frozen pig organ meat from some other country or maybe buy processors from, say, Japan. But you mentioned that the US Relies on China, the number one global manufacturer for so many things that we can't easily just re aim our economy toward one other country and say we're going to buy all of your toasters instead. Am I right in hearing that there's a dangerous asymmetry between the way that China relies on American imports and the way that America relies on Chinese imports?
- [33:47]
Jason Miller
No, there certainly is in some product categories. And so, for example, one of our top exports to China is semiconductor manufacturing equipment. So it's the equipment needed to make semiconductors. It's one of our top exports. Our exporters are very reliant on the Chinese market for business. Chinese importers do have the option of going to European or Japanese manufacturers. Now, it may not be a perfect substitute, but there is that possibility for us for something like toaster ovens. There really isn't a Plan B to China. Same way with soybeans. That is our top export to China. China does have the option of going and buying from Brazil, which they have increasingly done. Now, for some items, China is dependent on us. So again, people want to buy a laptop with an intel cpu, well then it may have to come from the United States. Now Apple is a global manufacturer, so perhaps there's an alternative strategy that they fulfill the need for Chinese demand from a facility in Ireland, let's say. And so there is some potential for essentially Chinese importers to do the same exact thing that US Importers are doing. But certainly for some product categories it does feel like China has potentially more ability to go elsewhere. But again, this is not always straightforward. And we've seen this on the propane side, where propane is one of our top exports to China. They're not sourcing from the US Everybody else in the world knows they now can't effectively buy from the US So their prices are going up, but we're getting to sell our propane elsewhere. And so that's one where essentially we're coming out ahead and they're essentially bearing the brunt of this. And so there's a lot of complexity. And so it's certainly not a one to one, we're always at a disadvantage, or one to one, they're always at a disadvantage. It's going to be very specific items and the dynamics playing out over thousands upon thousands of different types of goods.
- [35:59]
Joe House
I want to close by thinking about surprising winners and surprising losers of this trade war you mentioned earlier. I believe the quote was nobody wins a trade war. So maybe the answer is there is no surprising winner. But you also said something else, which is that if tariffs are going to be prohibitive on China but low on, say, Vietnam, then there'll be a huge incentive for Chinese producers to sell their products through Vietnam. Right, like send the product into Vietnam, have it painted in 45 seconds and then have it sent out to the US as a Vietnamese export rather than a Chinese export, which might theoretically help create a new kind of shadow Vietnamese economy for repackaging de facto Chinese goods. Are there other ways in which you could imagine certain countries might be able to narrowly benefit from the chaos in US Chinese trade relations?
- [36:58]
Jason Miller
Yeah. So I think there's a couple angles. So one, just so everybody listening knows what you describe doing, while it does happen, like, you can't as an importer, do that. That's illegal as can be. So don't go out there and try to do that. Everybody listen, please don't do that. So right now, if usmca, the US Mexico, Canada Agreement, stays intact, the biggest winner of all of this likely is actually Mexico, depending on what happens with tariffs from Vietnam. So this is going to be important, depending on what happens, depending also on what happens with the auto side piece, because right now USMCA compliant vehicles from Mexico are not being tariffed because basically customs doesn't know how to subtract out the U.S. value in those imports from Mexico. No one knows when they'll figure, figure this out right now. I hate to say this, but in the big grand scheme of things, I personally believe, and the Wall Street Journal's written about this, probably the biggest winner out of all of this is China, because China, prior to this event, the entire world was looking at them very suspiciously with a lot of their trade practices, and that they were saying, you're overproducing, you're dumping products. The EU is putting tariffs in place, other countries are putting tariffs in place. And the world was essentially starting to unite against China for a lot of their trade practices. We have come in and in the last two months, completely gotten rid of that dynamic, and we've now made ourselves essentially the outlier in how we're behaving. And you can see this right now with President Xi of China going on a tour of South Asian nations at the moment. And what are they talking about? They're talking about tariffs. You've got Japan, South Korea and China talking about the potential for a trade agreement. That's shocking in terms of how these developments are. And so effectively, we have seeded a momentum in the world that was looking much more suspiciously on China and their trade practices. And we've essentially now set ourselves out as the odd behaving nation. And we've essentially taken 80 years of goodwill in a system that we helped create, and we've thrown it away, seemingly because people want to make toys again in the United States.
- [39:27]
Joe House
There's a way in which it's even much worse than how you described. I mean, one of America's advantages over every country on the planet is the fact that disproportionately, the world's smartest people want to go to school here and want to stay here for work. And if you look at what's happening in American science policy and higher education, we are making the US A very risky bet for folks who want to practice science over the course of many decades. And that, again, is undercutting a historical advantage that we have spent, you said it. About 80 years developing. I want to end with a surprising loser here or an ironic loser. I've spoken to several large and small manufacturers in the last few days, and one consensus that I'm hearing is that this yo yoing of tariff rates is an enormous procedural headache. I mean, this is the first thing that you and I talked about. Big companies might have the personnel and the resources to push through and plan for the future, but small companies exposed to the global trade war, I think, are going to get crushed. Do you agree with the assessment that ironically, a plan that is being sold is all about helping the little guy is creating an amount of confusion that will ironically hurt the little guy most?
- [40:50]
Jason Miller
Oh, absolutely. This tariff war will put tens of thousands of small retailers that specialize in sourcing goods from China and selling them in the US it will put them out of business if this stays in place for six months. And again, this is the challenge we all have is because we don't make many toys anymore in the United States, because we don't make much apparel in the United States. That's what a lot of us are struggling with, is understanding the logic for how this is good for the whole economy.
- [41:26]
Joe House
Jason Miller, thank you very much.
- [41:28]
Jason Miller
Thanks for having me.
- [41:50]
Joe House
Sa.