POLITICO Tech Podcast Summary Episode: Trump’s Real Trade Fight with China: Tech Dominance
Release Date: January 30, 2025
Host: Stephen Overlea
Guest: Bob Davis, Contributor to Politico Magazine and Former Wall Street Journal Reporter

1. Introduction

In the January 30, 2025 episode of POLITICO Tech, host Stephen Overlea delves into the impending global trade war spearheaded by President Donald Trump, with a particular focus on the technological battleground between the United States and China. Joining him is Bob Davis, a seasoned reporter with nearly four decades of experience covering global economics for the Wall Street Journal and now a regular contributor to Politico magazine.

2. Overview of Trump's New Trade War

Stephen Overlea opens the discussion by highlighting Trump's imminent escalation of the global trade conflict, set to commence on January 30th. Trump has pledged to impose tariffs on imports from Canada, Mexico, and China starting February 1st, with a targeted impact on key industries, notably semiconductors.

"President Donald Trump could begin his global trade war as soon as Saturday, and the tech industry will surely find itself in the crossfire."
(00:35)

Bob Davis provides context by reflecting on Trump's first trade war, describing it as "inconclusive" due to its limited effectiveness in altering the economic relationship with China.

"The trade deal was a pretty good trade deal. It wasn't terrible, but it didn't come close to changing the way China does business or didn't come close to changing the relationship, the economic relationship between the two countries. So that's why I would say it's inconclusive."
(02:19)

3. Tech Dominance as the Core of the Trade Battle

Davis emphasizes that the new trade war is fundamentally a tech war, a shift from traditional trade disputes. Trump’s advisors recognized early on the importance of technology, particularly in sectors like semiconductors and 5G technology, exemplified by actions against companies like Huawei.

"The real battle in the trade war will be over tech. On the show today, Bob digs deeper into that idea and why this time may be different."
(02:35)

Davis notes that unlike conventional trade negotiations focused on tariffs and import quotas, this iteration targets high-tech industries to assert technological superiority over China.

4. Lessons from Trump's First Trade War

Reflecting on the past, Davis points out that while Trump was effective in shifting public opinion against China, his trade deals lacked the depth needed to significantly alter China’s business practices or the broader economic ties.

"Trump negotiated a trade deal. That's what he did. That's what he put all his effort into. And the trade deal was a pretty good trade deal. It wasn't terrible, but it didn't come close to changing the way China does business."
(02:27)

He further contrasts Trump's approach with that of his advisors, highlighting internal dynamics and decisions, such as the handling of Huawei and the differing perspectives on engaging with Chinese tech giants like TikTok.

5. Influence of Silicon Valley Leaders on Policy

Overlea brings attention to the increased influence of Silicon Valley leaders in Trump's second term compared to his first. Figures like Elon Musk, Mark Zuckerberg, and Tim Cook from Apple are now closer to the administration, potentially shaping tech and trade policies.

"Is there retaliation that the tech industry should worry about?... Some of these companies are not in the Chinese market because they've not been allowed into the Chinese market."
(07:32)

Davis acknowledges the possible impact of tech leaders on policy but remains cautious, noting that while individuals like Tim Cook played significant roles in the past to protect companies like Apple from tariffs, the broader influence of tech leaders on the new trade policies remains uncertain.

"I think they have a better shot at it... The question of Elon Musk is the most interesting one."
(10:06)

6. Risks of Chinese Retaliation Against the Tech Industry

The discussion shifts to the potential retaliation from China against U.S. tech companies. Davis warns that the tech sector is particularly vulnerable to Chinese countermeasures, such as antitrust fines, blocking mergers, or slowing down shipments—strategies China employed previously against companies like Qualcomm and Apple.

"Tech is very vulnerable to that kind of retaliation... There are so many weapons they can use. The question is at what cost?"
(12:00)

He underscores the heightened risk in the current climate, noting China's increased capacity to inflict economic damage on foreign investments and overall economic growth sectors.

7. Continuation of Export Controls Strategy

Both Trump and the Biden administrations have utilized export controls as a cornerstone of their strategies against China. Davis argues that this approach is unlikely to shift significantly in Trump’s second term, as it aligns with the broader objective of maintaining technological supremacy.

"The Biden people clearly pushed it way, way beyond where Trump had it... While it's hard to see a rollback, I think it is possible you'll see Trump trying to negotiate an exemption from further kind of controls as leverage for getting a trade deal."
(14:03)

He cites the recent Supreme Court decision to allow TikTok to continue operating under certain conditions as an example of Trump navigating these complex regulatory waters.

8. Future Implications and Conclusion

As the episode draws to a close, Davis predicts that Trump's upcoming tariff implementations will be more severe and widespread than those in his first term, potentially reaching 25% on imports from Mexico and Canada and 10% on Chinese goods related to immigration and fentanyl.

"He is even more committed to the idea that tariffs are a very powerful instrument that have been underused."
(15:11)

Davis anticipates that the real impact of these policies will become evident imminently, possibly influencing market reactions and Wall Street's response. He suggests that the new trade war could be more damaging due to Trump's intensified focus and determination to leverage tariffs as a primary tool of economic strategy.

"I think you'll see the Dow fall off the cliff, that could have a restraint on him."
(15:11)

Stephen Overlea concludes by acknowledging the gravity of the situation and the high expectations of Trump's followers for decisive action in line with his campaign promises.

"Trump made big promises on the campaign trail. To do this. So follow through, I think, is something his followers certainly expect."
(16:35)

Conclusion

This episode of POLITICO Tech provides a comprehensive analysis of President Trump's renewed approach to the U.S.-China trade relationship, emphasizing the centrality of technology in the ensuing conflict. With insights from Bob Davis, listeners gain an understanding of the complexities and potential ramifications of the trade war, particularly concerning the tech industry’s vulnerability and the strategic maneuvers likely to unfold in the coming weeks.