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- [00:01]
Sponsor
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- [00:35]
Stephen Overlea
Welcome back to POLITICO Tech. Today's Thursday, January 30th. I'm Stephen Overlea. President Donald Trump could begin his global trade war as soon as Saturday, and the tech industry will surely find itself in the crossfire. Trump has pledged to impose tariffs on imports from Canada, Mexico and China starting February 1, and he has also announced plans to target key industries, including semiconductors. Trump spent much of his first term at odds with Beijing and promised on the campaign trail to up the pressure if he returned to the White House. Bob Davis spent nearly 40 years as a reporter at the Wall Street Journal and covered global economics from both Washington and Beijing. He's now a regular contributor to Politico magazine and recently wrote about the dynamics that will define Trump's trade policy in his second term. One of them caught my eye. The real battle in the trade war Bob wrote, will be over tech. On the show today, Bob digs deeper into that idea and why this time may be different. Here's our conversation. Bob, welcome to Politico Tech.
- [01:57]
Bob Davis
Thanks. Thanks for having me.
- [02:00]
Stephen Overlea
So you've written this piece for Politico magazine looking at the facts from Trump's first trade war with China as a way to kind of gauge what might be to come. I wonder if I were to challenge you here to kind of sum up his first trade war in a word, what would it be and what word would kind of describe the trade war to come?
- [02:19]
Bob Davis
Wow. So one word for Trump, who is has many words. I would say the first, the word that comes to my mind is inconclusive.
- [02:28]
Stephen Overlea
Okay.
- [02:28]
Bob Davis
And the one coming up for the one coming up, I think it's going to be more damaging.
- [02:35]
Stephen Overlea
Why inconclusive on the first trade war? Walk me through what we know about whether it was effective at all.
- [02:42]
Bob Davis
Well, remember, I mean, one thing you would give Trump credit for, Democrat or Republican, is changing the way Americans looked at China. China was losing popularity, I would say, by the end of the Obama administration. But only somebody like Trump could have turned public opinion so strongly in a different direction when it came to China. So that's what people Remember, they remember him as kind of a tough guy when it comes to China. They also conflate what happened after Covid, which was very different than happened before COVID But if you look at it dispassionately, what he did was something very, very traditional. He 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 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.
- [03:42]
Stephen Overlea
I've covered both tech and trade, and I've really kind of come to see trade wars these days as tech wars. I mean, that is so much kind of the focus of what countries are fighting about. How true is that in the case of the US versus China?
- [04:00]
Bob Davis
100%. 100%. Trump's advisors recognized that very early on. You know, took a look at trying to get American semiconductors to ship less to China, which at that point was a very controversial effort focused on Huawei and its 5G technology. And the person who didn't get that was Trump. Trump looks at trade deals as trade deals. He looks at it as tariffs. What are you going to buy from me? What kind of changes are you going to make? So in many ways, the Trump advisers had to work around. Trump had to find moments where he was pissed at China and was looking for another way to get back. And tariffs weren't the only way. That was how it was. John Bolton actually finally convinced Donald Trump to take on Huawei. Up till then, he hadn't been interested in doing it. He'd been talking to Xi Jinping about making a deal he had earlier than that saved ZTE Corp from what would have been a corporate death because they were about to be hit with a sanction. That would mean they couldn't do business with American firms, and they got components and software from those firms, so they just would have been out of business. And he saved them.
- [05:19]
Stephen Overlea
How different do you think things are this time around? Because from where I sit, it does seem like we're hearing Trump already talk more about tech and frankly, talk about it in a more sophisticated way than I think we did during his first.
- [05:34]
Bob Davis
Term, I would say. Is he more sophisticated about it? Yeah. I mean, but it is, you know, eight years he's been looking at these issues. Right. But I would not say that he has changed fundamentally on. On the trade versus technology. Technology. Take a look at him saving TikTok. Right? I mean, TikTok was, you know, just about out. Well, was out. The Supreme Court confirmed that he has saved TikTok, and he has very clearly rejected the idea that TikTok poses a very unique national security threat. And also very instructive, I think, is that he has invited, several times, he invited Chinese car companies to set up operations in the U.S. that was what happened in the 1980s with the U.S. fight with Japan. I mean, that ultimately was settled. And to the extent it was settled because the Japanese diffused a lot of the trade tensions by setting up factories in the United States. But Japan was never truly seen as a military threat. China is. And the Biden administration in its last days had started a proposal called the Connected Car Initiative. And what that means is that cars, particularly electric cars, are looked at as generators of data, very much like TikTok, generators of all sorts of data which, you know, can go back to China, which the Chinese company will collect and they could ship back to China. So he has kind of said the opposite. I mean, if the Connected car proposal was accepted, there's no way you would ever get a Chinese car in the United States, no matter where it was made. And he is essentially offhandedly suggested a different route. It's interesting also because his advisors clearly know what the Biden people are doing in one of the executive orders as a reference to that proposal. But it's clear that Trump doesn't know anything about it.
- [07:33]
Stephen Overlea
You know, it's been interesting to watch in kind of these very early days of Trump's second term, how influential some of these Silicon Valley leaders have been, how close to Trump. They've been, obviously, Elon Musk, but even other folks like Mark Zuckerberg and Tim Cook from Apple. Of course, that is a sharp difference from his first term, and we've already seen it influence, in some ways, Trump's tech policy and energy policy. Do you think it could impact his trade policy, too?
- [08:02]
Bob Davis
Sure, sure. I mean, one thing you mentioned, Tim Cook, he had a. He had an important role in the last administration also, and he managed to, by lobbying, keep Apple out of all the retribution that the US Was trying to, you know, hit China with. So he. He played an important role. But, yeah, no, without a doubt. I mean, the question of Elon Musk is the most interesting one. Right? I mean, Musk does a lot of business, a huge amount of business in China with Tesla. So you would think that he would be arguing for a much softer Easier cooperative policy with China. On the other hand, he also competes enormously with China. SpaceX, all those satellites China's trying to build up its own, essentially equivalent to SpaceX. So you don't really know, but I would think it's more likely that outside business people, these happen to be tech people, but outside business people might have more influence in helping to shape trade policy. The last time, there were plenty of rich guys in Trump's ear, including a lot of his biggest supporters and financial supporters, people like Sheldon Adelson, Steve Schwarzman, but they really didn't have any fundamental influence on the direction of trade policy. They might have helped, you know, deliver messages, maybe hold off on a tariff for, you know, this week or that week. But Trump was, you know, very determined, and his chief lieutenant, Bob Lighthizer, was very determined about the direction they wanted to go.
- [09:32]
Stephen Overlea
Well, then the business community in general was obviously very much against the tariffs that Trump put in place the first time around and sort of the use of tariffs as aggressively as Trump applied it in the first term. You mentioned Tim Cook's role in the first trade war with China, and he really was savvy about essentially getting Apple exempt from Trump's tariff policies. How successful do you think he and other tech leaders will be this time around? If Trump does, in fact, launch this expansive trade war that he's talked about?
- [10:06]
Bob Davis
I think they have a better shot at it. You know, honestly, I don't know. I mean, I think overwhelmingly the tech guys will be looking for a cooperative relationship with China, a much more cooperative relationship. And also, Trump is not ideologically opposed to that remotely. You know, I mean, he might be. He is the deal maker. Right. And so it isn't inconsistent for Elon Musk or somebody like him to push for a more cooperative trade relationship and for Donald Trump to say, yeah, I'm going to try to get this change and that change and have the Chinese buy X, you know, billion dollars worth of this product or that product. But I think you should also keep in mind that the tech community isn't uniform. There are members of the tech community now that are very invested in the defense industry. I'm thinking of Palantir in particular. That will also have an important role in the Trump administration because they're pioneering the types of technologies that the US Is counting on to stay ahead of the Chinese.
- [11:14]
Sponsor
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- [11:44]
Stephen Overlea
Is there retaliation that the tech industry should worry about? Because on the one hand, some of these companies are not in the Chinese market because they've not been allowed into the Chinese market. You know, on the other hand, some of them do have pretty significant exposure to China.
- [12:00]
Bob Davis
Tech is very vulnerable to that kind of retaliation. The last time the Chinese made a couple of plays, they held up one merger and then they fined Qualcomm a billion dollars. That's what it was over antitrust. But there are so many things they can do. So many. Well, I kept waiting for them the last time just to slow up shipments of iPhones, not even to stop them, just to slow them up. So you mess up Christmas, you know, I mean.
- [12:26]
Stephen Overlea
Right.
- [12:26]
Bob Davis
I think the way they looked at it, you would think if you would put yourself in the position of Samsung, let's say they focus on Apple, would you think to yourself, oh, this is great, you know, we've, you know, Apple's wounded, will be able to pick up market share, or would you think this is really scary? You know, they did to Apple, they can do it to us next. And I think they looked at it that way. They were afraid of frightening off foreign investment. But there are a million things the Chinese government can do. Yeah, of course, they should be quite concerned that this time they'll be tougher. And I mean, they've already. I think it's a antitrust action against Nvidia. There have been a couple of things where they can just slow things up, make their lives miserable. If there's a merger, they can block a merger. Yeah. There are many, many, many weapons they can use. The question is at what cost? Right. And they are even more vulnerable on the foreign investment and economic growth area than they were the first time.
- [13:30]
Stephen Overlea
You know, we're talking a lot about tariffs, obviously, but under both Trump and Biden, export controls were a key plank of their sort of approach to China. And China was never able to really negotiate those away as part of their, their trade conversations with either administration. I think the impact of those export controls is debated, but is there any reason to believe that there will be a shift in strategy there in Trump's second term as these kind of trade wars and negotiations get underway?
- [14:04]
Bob Davis
I don't think so. I don't think so because they're moving in that direction, the Trump people, as you say, started. It took them a while to get it right. I mean, the industry has very smart lawyers and they kept finding all sorts of loopholes and they eventually closed a lot of the loopholes. The Biden people clearly pushed it way, way beyond where Trump had it. It's hard to see a rollback, but 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. I mean, I think you can look at TikTok in that way. I mean, TikTok was a regulatory, essentially a regulatory movement. You know, in export control, you can't operate, you know, a data sensitive industry in this country. So he's giving him a waiver at the moment. We'll see how it goes.
- [14:55]
Stephen Overlea
I want to come back here at the end of our interview to the very first question. You know, you said kind of the trade war to come. The word you would use to describe it is damaging. What will be more damaging about this trade war this time around compared to Trump's first administration?
- [15:11]
Bob Davis
Well, again, the guy has had eight years, four years as president, four years to think about this. And he is even more committed to the idea that tariffs are a very powerful instrument that have been underused. I mean, I think we'll know a lot by Saturday, frankly. So by Saturday, he has said he will put 25% tariffs on Mexico and Canada and 10% tariffs on, on China, relating to immigration and to fentanyl. You know, we'll see if he does. You know, I think it's very possible he will. And the last time he threatened those sort of things, but he never really pulled them off because also he had a lot of advisors who were cautioning him about the economic impact. I mean, the wild card here, as the wild card was last time, is Wall Street. If Wall street freaks out, you know, and all of a sudden takes seriously that Trump is really serious about tariffs and you see the Dow fall off the cliff, that could have a restraint on him. I mean, another possibility is on Saturday he, you know, does instead of 25% tariffs, he does two and a half percent tariffs and then says he's going to increase them every week or month or something like that. But I think we'll get a very early sign about how he plans to use it. In fact, I would argue that he probably will use it because he knows everybody's watching.
- [16:35]
Stephen Overlea
Absolutely, everybody's watching. And, you know, he made big promises on the campaign trail. To do this. So follow through, I think, is something his followers certainly expect. Listen, Bob, appreciate you being here on Politico Tech.
- [16:47]
Bob Davis
Great. No, I enjoy the conversation, and thanks for having me.
- [16:55]
Stephen Overlea
That's all for today's Politico Tech. If you enjoy Politico Tech, be sure to subscribe. And for more tech news, subscribe to our newsletters, Digital Future Daily and Morning Tech. Our managing producer is Annie Reiss. I'm Stephen Overle. See you back here tomorrow.