Peter Thiel with Joe Lonsdale on tariffs, trade policy, and China.

Peter Thiel with Joe Lonsdale on tariffs, trade policy, and China [clip]

"You need a very drastic reset with China. In theory, you need to reset with other people, but what we really need to get them to do is also reset things with China."

Full episode drops next week!

JOE: We've been talking about China on and off for over 20 years, and their imbalances. This week the President declared trade war on them, effectively, with 125% tariffs as of now; it'll probably change in the next few days. What do you think of the trade and tariff policy? What's gonna happen? Bond yields sold off more than I expected. The yields went higher than I expected so far. What's going on?

PETER: I'm hesitant to comment since obviously it's a very, very fluid situation, but something like the sort of reset that they're talking about now seems where we're going, where you need a very drastic reset with China. In theory you need to reset with other people, but what we really need to get them to do is also reset things with China.

I think the rough numbers are that about a quarter of the US trade deficit is bilaterally with China, but another quarter is indirectly with China. So China is sort of half the problem...

And then China is the geopolitical rival. So there's a way in which people in Mercedes in Germany are selling cars to the US. We might want to have those pretty well paying jobs in the US and, and not in Germany. And there are all kinds of sort of mercantilist policies that at the margins Germany engages in.

But, you know, it's probably not gonna repurpose the Mercedes factory to build tanks to invade the US or something like this. Whereas this sort of dual use problem is the problem with China.

...There are ways the economic relationship with China is fairly efficient.... if people are working for a dollar and a half an hour in a Foxconn factory, we don't really want to get those jobs in Wisconsin. But it is this geopolitical rivalry where... you have to somehow factor in that the economists never are able to factor in properly with China.

I'm not sure I would call this the optimistic plan, but the reset in trade that seems desirable to me would be that we radically changed the relationship with China and we sort of induce a lot of other countries to radically change their relationship with China.

And that's how we, you know, maybe that's how we build a stronger western alliance of the free world.

JOE: Well there's going to be some interesting negotiations in the next few months. Did you think that we could bring, maybe using AI, some more advanced manufacturing here that was in China? Is that a real thing the next decade to do a bunch more here, thanks to our more efficiencies and productivity?

PETER: There's probably always a decent amount of things like that. You have to always be extremely granular on how expensive the robots are, how expensive the equipment is, because in some sense, manufacturing has been getting steadily more automated for 250 years.

And you've had the machines that make the machines. The machines that make the machines are getting sort of smarter and more complicated. And there are ways in which AI is a quantum leap. There's a way in which it's just, you know, a natural continuation of this, you know, two century long process.

I think there are some parts that can be moved to the US with AI. Maybe also if you change some of the environmental rules and some of the other anti-industrial policies we have in the US. But then if parts of this are moved to other emerging market countries. Vietnam is a communist country. It has bad mercantilist policies, but it's not planning to take over the world. And so at the margins, if we can move things from China to Vietnam, that's a big win.

Full episode drops next week!
https://x.com/i/status/1910779975302607071