Tariffs , Tensions and Tumult :Real battle behind the global economy

Summary

Highlights

• Trump's favorite English word is 'tariff,' reflecting his aggressive economic policies. 💼
• China produces a third of the world's manufactured goods, surpassing the US. 💪
• US tariffs induce reciprocal actions from China, creating a trade standoff. 🚫
• Economists compare current tariffs to the Smoot-Hawley Tariffs, predicting economic gloom. 🌧️
• The 1929-like scenarios are feared if trade barriers continue to rise. 📉

Key Takeaways

• Economic powerhouses are defined by the interplay of technology, politics, and economy. 📊
• The US-China rivalry is reshaping global trade dynamics. 🌍
• Trump’s tariffs aim to make America a manufacturing giant again, but with uncertain outcomes. 🚧
• Trade wars could disrupt the global economy, leading to unforeseen economic challenges. ⚠️
• India might find opportunities amidst the chaos, but internal reforms are crucial. 💪

Overview

Chapters

• 00:00 - 01:00: Introduction and Overview of Global Economic Situation The chapter titled 'Introduction and Overview of Global Economic Situation' introduces the topic of the global economy's current state and its effects on national economies. It sets the stage for an in-depth discussion on the interconnectedness of economic activities across borders, signaling the importance of understanding global economic trends and their implications on individual countries.
• 01:00 - 02:30: Historical Perspective on the Rise and Fall of Superpowers The chapter discusses the historical context of the rise and fall of superpowers, focusing on the interplay of three crucial elements that influence this dynamic: political power, technological advancements, and economic strength. These elements are interlinked and collectively contribute to the development or decline of nations on the global stage.
• 02:30 - 04:00: Impact of China's Economic Growth This chapter delves into the historical pattern where nations with superior technology have used their political power to conquer others, thereby gaining control over various economic resources and establishing their status as economic superpowers. It highlights the critical role of technological advancement in achieving military victories and consequently acquiring significant political influence.
• 04:00 - 06:00: Trump's Economic Policies and Trade Wars The chapter explores the impact of technological advancements in the past, specifically during the 18th and 19th centuries, on warfare and how it has influenced political power dynamics. Transitioning into the 20th and 21st centuries, it highlights how the United States emerged as a superpower post-World War II, playing a significant role in shaping global political and economic landscapes.
• 06:00 - 09:00: Views and Predictions from Economic Experts This chapter discusses the significance of the Bretton Woods Agreement, which established the U.S. dollar as a reserve currency. It highlights how the U.S. leveraged this position to influence global politics and economics. However, it also notes that over time, circumstances have changed, possibly implying shifts in economic and technological leadership.
• 09:00 - 12:00: Societal and Political Implications in the US The chapter discusses the economic competition between the United States and China, particularly highlighting the change over the decades. In the past, specifically in 1960, the US was responsible for manufacturing 25% of the world's goods. However, this landscape has shifted, and currently, 35% of the world's manufactured goods are now produced by other economies, with China being a significant competitor. This shift in economic power has societal and political implications, especially within the US, as it navigates its role in the global market amidst China's rising influence due to its participation in the WTO and the opening up of its markets.
• 12:00 - 17:00: Technological Impacts on Global Manufacturing The chapter discusses the significant role China plays in global manufacturing, highlighting its position as a leading manufacturer in the world. Despite not having a GDP as large as the United States, China is challenging the U.S. on various technological fronts, affecting the global economy. The U.S. is experiencing economic challenges, but continues to face strong competition from China in the technology sector, which is influencing global markets and economic dynamics.
• 17:00 - 21:00: US-China Economic Relations The chapter titled 'US-China Economic Relations' discusses the impact of President Trump's policies on global economic relations, particularly between the United States and China. It highlights how President Trump, upon taking office, initiated significant changes aimed at 'making America great again.' These changes were described as 'phenomenal' and had a transformative effect on the geopolitical and economic landscape. The future remains uncertain as it is closely tied to President Trump's unpredictable actions and decisions.
• 21:00 - 26:00: Potential Trade Agreements and Global Economic Cooperation The chapter discusses escalating trade tensions between the United States and China, with the U.S. imposing reciprocal tariffs of 150% on Chinese goods and China retaliating with 125% tariffs on American goods. The situation raises uncertainty about future outcomes. In response to the trade war, then-President Trump announced a temporary reprieve with 10% tariffs on goods arriving from other countries, indicating a brief pause in escalating trade measures while seeking potential trade agreements and further global economic cooperation.
• 26:00 - 31:00: Implications for the Indian Economy and Future Prospects The chapter discusses the current economic scenario, focusing particularly on the negotiations involving the United States with other countries. It highlights that within a 90-day period, significant decisions will be made, and 75 countries are currently negotiating, with some having already provided specific plans for cooperation or resolution. The chapter sets the stage for a conversation among experts, expressing a bit of trepidation from the author due to their lack of economic expertise, but an intention to delve into how these international dealings could impact the Indian economy and its future prospects.
• 31:00 - 32:00: Conclusion: Call for National Unity and Strategic Reforms This chapter titled 'Conclusion: Call for National Unity and Strategic Reforms' contains a dialogue or an acknowledgment in which Shankaria appears to be thanked for participation or contribution. It manifests gratitude towards Shankaria's presence and implies a retrospective acknowledgment of Shankaria's illustrious career. It references Shankaria's academic background, with degrees from Oxford and Harvard and professional tenure at the World Bank. Shankaria's return to India in 1982 and advisory role in the Ministry of Finance are highlighted, along with his long service as a chief economic advisor from 1993 to 2001. Despite such credentials, it humorously notes the difficulty in securing employment.

Tariffs , Tensions and Tumult :Real battle behind the global economy Transcription

• 00:00 - 00:30 [Music] namaskar in this episode of Dils we'll talk about what's happening in the global economy and what impact does it have uh on our national economies around the
• 00:30 - 01:00 world and in particular of course our own economy but before we get into that I just want to um share something with you which is my personal thought which is there are three elements that determine uh the rise of nations the interaction between um politics of power technology and economic clout and these are three things are interlin if you
• 01:00 - 01:30 look at the history of the world whenever um nations with superior technology through political power have conquered uh the rest of the world and taken over its economic resources and then become an economic superpower and if you are an economic superpower you have great political influence but none of this will work unless you are in technology ahead of the others uh you can win wars um by
• 01:30 - 02:00 using uh technology and that's happened in the past 18th 19th century we've seen uh the invaders win wars here so in the context of this in the 20th century 21st century we've seen that the United States of America became a super power uh politically um at the end of the second world war they determined what's going to happen to the rest of the world and then of
• 02:00 - 02:30 course Breton was was signed because of gold the dollar became a reserve currency and uh they determined the politics of the world in many ways they were politically far superior to the rest of the world economically they could exploit because of their political position and in technology they were ahead of the others but over the years uh there's been a change of circumstances uh with the opening up of
• 02:30 - 03:00 China and uh with the WTO and the opening up of markets other economies have prospered in particular the Chinese economy the Chinese are now competing with the US as far as economic strength is concerned in 1960 uh and I'll be corrected if I'm wrong 25% of the manufactured goods of the world were manufactured by the Americans and Today 35% of the manufactured goods of the
• 03:00 - 03:30 world are apparently manufactured by the Chinese uh so they are ahead in manufacturing they have got huge reserves of course they are not as strong in terms of the GDP of the United States of America but they're challenging the United States uh the United States on the other hand their economy is in the decline uh but again the Chinese are challenging them on technology on various fronts this is impacting the world and
• 03:30 - 04:00 President Trump when he came to power realized that something needs to be done to make America great again now but what he has done uh is is phenomenal and uh overnight he has changed the politics of the world the economic relations between the United States and the rest of the world um we don't know what's going to happen tomorrow because we don't know what President Trump uh is going to do tomorrow but as we stand here today uh
• 04:00 - 04:30 we have a situation where the Americans are imposing reciprocal tariffs uh at least quay the Chinese to the extent of 150% now the Chinese are imposing tariffs on American goods to the extent of 125% i don't know where it's going to lead but as far as uh other countries are concerned the President Trump has said look we're going to have a period of reprieve where there's going to be 10% tariffs on goods coming to the
• 04:30 - 05:00 United States and within a 90-day period we'll decide what's going to happen he also says 75 countries are negotiating with us and some of them have given us some specific plans to deal with them so this is the scenario in which we are today and we have three extraordinary people with us i mean people who I'm actually somewhat hesitant to deal with because I'm no economist but I will try and sort of see how the conversation moves on in
• 05:00 - 05:30 the context of what I have said shankaria thank you very much for being with me today ba honors from Oxford 1967 PhD Harvard World Bank 71 to 82 director World Bank report in 1979 and um you came back to India in ' 82 Ministry of Finance you were adviser I think the longest serving chief economic exider 1993 to 2001 couldn't get a job
• 05:30 - 06:00 you are involved with SEB regulations as well and you've published so many books 12 finance commission in 2004 you have published can India grow without bhat India and global crisis 2009 India after the global crisis and many others so thank you very much for being here Shankar um my dear dear friend Rakkesh thank you thank you u my god I just feel very very hesitant look at electrical engineering that you got your first degree in that PA economics from Yale
• 06:00 - 06:30 doctorate from Princeton World Bank 76 to 80 planning commission advisor uh you published in 94 the um Rakkesh man infrastructure report 2009 you were DGNCER 2005 to 2009 you were deputy governor reserve bank so my god this is uh well you're the you people are the best guys to be around
• 06:30 - 07:00 thank you Jeremy uh for being here because you're going to give us a a analysis not only of the economic outfall of all this but how this is going to impact the world germany distinguished economist author former diplomat multifaceted career left your deep commitment to academic excellence you did your master's bachelor's from St stevens physics followed by a master degree from Massachusetts MIT then PhD in finance from Tufts and 76 BU joined
• 07:00 - 07:30 the Indian foreign service served in the department of atomic energy additional secretary of the ministry of external affairs and prior to that joint secretary capital markets and pension reforms and u appointed India's ambassador to the European Union Belgium Luxembourg in 2008 where you served till 2012 then high commissioner to the UK 2012-13 and after completing your diplomatic service you went into academia and policy research served as
• 07:30 - 08:00 RBI chair professor of the Indian council for research on international economic relations and you conducted research on international economic policies noted author in August 2019 you published the promise of India how prime minister Nu Modi shaped the nation 1947 to 2019 thank you all of you of being here let me start with you Shanka how do you view the world in the light of what Trump is trumping everybody it seems
• 08:00 - 08:30 well couple I I currently view it very gloomy but one should uh emphasize that all the shocks that we've experienced in less than three months since he actually took office were all precaged by his campaign promises i mean he said many times that tariffs was his favorite word in the English dictionary he said that when I come I want to bring manufacturing back to the
• 08:30 - 09:00 USA he said I'm going to raise tariffs which he thinks falls on the foreign countries and finance income tax uh cuts for the US uh people and of course uh we know that Jee will inform us better that his view on allies was rocky at best yeah i mean even in his first Trump first uh uh uh Trump won Trump one he uh totally
• 09:00 - 09:30 alienated uh other members of NATO the leading members and uh basically at one time as you know there was a doubt about his honoring article five about there's an enemy attack on one NATO country US and others are obliged to respond correct me if I'm wrong Germany uh he actually almost challenged that luckily it didn't get removed so I mean
• 09:30 - 10:00 he's a disruptor and he and he doesn't care what happens as long as his image and his popularity as he sees it is expanded and that he is seen to be do doing things that nobody else has done before whether they're good or bad posterity will say but but will manufacturing come back to the United States according to I I personally don't believe so does I mean even if he keeps high tariffs on all countries at present
• 10:00 - 10:30 as you said we're on a reprieve except for China but even if he brings them up to levels that he had before or similar levels and don't forget he's already imposed significant tariffs since he came uh on steel and aluminium yes on the automobile sector yes he's talking about pharmaceuticals so he's done a whole lot already uh the reciprocal tariffs is the thing of April yes these were done March yes exactly and so uh but
• 10:30 - 11:00 the don't think his understanding of how economies work in the 21st century is at all deep it's true that manufacturing has declined from quite high levels to something like less than 10% in the US today uh but against that their services sector has grown tremendously and this
• 11:00 - 11:30 is in many ways a cutting edge service sector it's not that's the technology part that's the technology part you were mentioning and uh and as you said they're leading in many areas China may be catching up in quite a few but they are leading so I mean I think his reading of it comes from politically he in a way his base is what uh Hillary Clinton once described to her political doom as the deplorables that is those who've been left behind by globalization
• 11:30 - 12:00 in the United States context in states which haven't done well blue collar jobs which have gone away because of the decline of manufacturing and so forth so that's a solid 40% or thereabouts of the electric maybe 35 40 I don't know what's the future ation of the United States economy in the context of what Trump is doing i'm actually even more gloomy than my usually gloomy friend
• 12:00 - 12:30 um what he is doing is really totally unprecedented mhm uh many people have been looking at the Smoot Holly tariffs of 1929 which were also came about with sim sort of somewhat similar circumstances uh where people felt that US had to protect itself put up tariffs and so on
• 12:30 - 13:00 mhm but what is interesting is that what he has already done the tariffs are probably somewhat higher than what the smoothie tariffs were okay which was an average around 20% and more than 60% even then of imports the US uh were not taxed so there were only about a third or so were taxed average of 20% and the result was I mean of course the other things that also happened was a
• 13:00 - 13:30 depression unemployment shot up within a year doubled from 6% from 8% to 16% and the was already high at that time there was a fall in global trade by almost 2/3 so what he's doing now is much worse or much more than that global trade is I believe already falling already falling but the point is that then it will by 2/3 yes so God knows what will happen now second what is also interesting to
• 13:30 - 14:00 me as an economist is that about a thousand economists actually wrote to Herbert Hoover okay don't do this what I find very interesting now I don't see a similar action by American economists who've been lecturing us on free trade forever okay so I'm very I'm quite amazed actually that this hasn't happened um but he blames the free trade for this yes so this th this also coming
• 14:00 - 14:30 what is very interesting to me is that the whole premise is wrong that the US has suffered u I was looking at the ratio of the US per capita income relative to some of the main other advanced countries like Japan France it's $80,000 per capita now it's about $80,000 per capita they reached so it's now almost two and a half times that of Japan in the year 2000 this is when some China entered and
• 14:30 - 15:00 WTO that's what sort of blamed that look this is we allowed them to WTO this is what they've done so so it's good to see what was the situation in the year 2000 so in the year 2000 actually the US per cap was slightly lower than that of Japan now it's two and a half time 2.4 times what they were similarly if you compare with um uh uh France it was out 1.6 times in uh 2000 now it's 1.9 times uk it was 1.3 times now it's 1.9 times
• 15:00 - 15:30 so the premise is basically wrong what is correct is of course that China has come up tremendously there's no question of that uh but the idea that US has been taken advantage of by other countries just does not stand up to scrutiny it is true what Shankar was saying that many manufacturing jobs have been lost but then you know 100 years ago 150 years ago so many agriculture jobs are lost no
• 15:30 - 16:00 not only that i think you're right that manufacturing jobs have been lost but there's been low inflation in the United States because of the fact that Chinese goods are coming into now if you raise your tariffs you're going to be having an inflationary effect absolutely and another thing that Shanker was saying in terms of technology and service sector that if you take the usual thing everyone talks iPhones okay all the value added is in the US it's only a small that when you pay
• 16:00 - 16:30 $1,000 or whatever it is for a cell phone for a iPhone less than 10% or so would be in China or now India almost all the value areas up there second I was also talking to some government exporters here and uh then asking them look what is the ratio between the landed price of some piece of clothing a shirt or woman's dress or whatever and the retail price in the US is about five
• 16:30 - 17:00 the retail price 5 to1 so if the landed price is say $5 is sold at $25 $10 $50 okay so again there the value added is there not in Bangladesh or Vietnam or wherever so what is interesting to me is that a false stories have been spun in terms of the impact of trade on the United States what is true however
• 17:00 - 17:30 is that certainly certain pockets in particularly the northeast have been impacted because of the job shifting abroad right now since I used to uh live in New Haven first as an undergraduate more recently as a professor you take the train from New York say to Boston and on both sides I've taken that several times yeah on both sides of track you see old garment factories that's right uh which have
• 17:30 - 18:00 been you know Detroit for example detroit same Detroit exactly so what I'm saying is that uh this has been going on forever in the world even read novels about the UK that when the looms etc came in uh they also used all the clothing was in my hand before that right lots of jobs were lost and of course there was a lot of suffering there's no doubt about that one thing that I do wonder actually on this issue is that
• 18:00 - 18:30 um is to do with women's labor force participation that uh which has gone up tremendously in United States so say till the late 60s or so it was still relatively low uh one of the I'll address you the connection with this that in those days earlier days when this kind of disruption took place only the basically the men who worked then they had to find another job somewhere
• 18:30 - 19:00 else now to find two jobs to move because almost all all women are working okay so I just wonder because what I do know is that mobility has traditionally geographical mobility has traditionally been very high in the United And I know that till the mid70s or so one in every five household in the US moved every year some of them would be just moving from here to the next neighborhood well it depends on tax advantages and different and also just moving going up in the world and moving
• 19:00 - 19:30 now that has come down tremendously so what I'm saying is that that one of the thing what is interesting to me is that despite all the economists everything else so much research etc you haven't seen much saying that look all the value added is here unemployment has been loose it doesn't mean that Americans are out of jobs okay to um just look at all the jobs created by the imports right and whether it's trading or designing marketing and everything
• 19:30 - 20:00 else three that there hasn't been that much of an effort to concentrate on these areas the suffering does exist lots of people have lost jobs there's no question about that what do you do how do you help those people how do you help those places why women have to work in the United States because only with one salary you can't make ends meet in the United States this is what I given to understand question of expectation no and how do you expect to live expectations are based on how your parents live yeah a lot of people feel
• 20:00 - 20:30 they don't live as well as their parents that's right that's right so but before I get on to that I I'll refer to one u person who was their finance minister uh but let's talk about the overall situation uh my learned friends here have talked about the economics and financial uncertainties let's talk about what is certain some things have become certain which is counterintuitive what
• 20:30 - 21:00 has become certain which was always there in the background is this US uh discomfort with the rise of China absolutely both as an economic power and as well as in the future as a strategic rival now even during Biden's time and even earlier than that there were murmurss there were some moves done by Biden trump has made it crystal clear enemy number one China so and obviously the Chinese are reacting to that but
• 21:00 - 21:30 we'll come to that later his global vision which I think is shared by a number of within inverted comma strategic experts in the US is that uh Russia is not that much of an enemy russia is not what Soviet Union used to be russia is not even uh uh communist in the traditional sense europe is neither here nor there the US spends more on Europe security via NATO
• 21:30 - 22:00 than is warranted given the fact that Europe is relatively affluent so Europe is well they will look after themselves russia we don't need to be that worried about them in terms of what's going on in Ukraine enemy number one is China and let's go back to Monroe doctrine so that's why Greenland that's why Panama Canal the US is thinking of itself as northern hemisphere this is ours right from the top and that's why this silly
• 22:00 - 22:30 stuff about Canada should join us so there you see there is a certain I'm not saying that it is rational i'm saying I'm trying to peer into Trump you're finding you're finding logic where none exists that's a usual habit so this is but if you listen to some of the so-called strategic experts and Vance and so on the the kind of stuff that Vance said while he was in Greenland with his Indian origin wife
• 22:30 - 23:00 I'm sure she must have been not feeling that comfortable if she is well read enough that he was basically saying that you know you guys that means Denmark not looking after the Greenlanders and we need to step in basically we need to take over Greenland so that's the vision that Trump and his followers and acolytes and those who believe in what he thinks right or wrong is my understanding so these things have become certain they've all come to the surface i'm referring to the certain
• 23:00 - 23:30 versus uncertain while on the economic side there are just too many imponderables so uh is this good for the US i think most rational people will say it's not but on the other hand I would disagree with this uh feeling that everything was going well with the US there's tremendous amount of discontent whether it's this talk about opioids whether it is the talk about one and two marriages breakup i remember an incident
• 23:30 - 24:00 in Los Angeles uh some chap went to the top of a hotel and with a rifle with telescopic site he picked off people from somebody listening to music one by he doesn't know a single one of them and then you've all heard about the odd shootings in schools and post offices i've not heard about it anywhere in the world okay there is too much availability of guns but is it only availability of guns is there something deeply uh how should I say
• 24:00 - 24:30 unsettling to many in the US for a variety of reasons they have family that is use of excessive use of more than recreational drugs uh so some of this is uncertain and is showing up in Trump saying that family is important that's why he brings in uh somebody to say a prayer in his first cabinet meeting and so on you know God will save us prayers is what is needed
• 24:30 - 25:00 so he's appealing to that Christian right in the US and I'll stop with one last comment which is color people don't want to say it out aloud i'm sure there are number of people who are highly educated in the US who are uncomfortable with the US gradually not having a majority of white people this is not to say that they're racist they feel we have built this society we have built
• 25:00 - 25:30 this country they forget about the red Indians and so on but and now the anti-immigration stuff that's right and uh this is that we don't want too many people who are too different from us well there is one other thing in this I think while we're looking at the darker side so to speak um misogyny i mean there is a backlash I think I mean I I was there as a graduate student during not not just the antivietnam war but the
• 25:30 - 26:00 women's liber liberation and civil rights were in full swing right and I think what we are seeing today in America last few years as well is a backlash to if you like the rise of black people colored people compared compared to what it was 50 60 years ago and on the misogyny side I think you know all this work business yes all of that is creating a backlash which has
• 26:00 - 26:30 the political base and is part of his popularity and power going a bit far perhaps but I don't know if you agree yes I agree i agree with you yes there is a strong element of this the funny thing is that there are a lot of women who have voted for so maybe they also somehow feel that the US was great when men worked women were at home looking after the children our families were uh should we say more current and more stable so I think some uh ladies also
• 26:30 - 27:00 obviously share this uh kind of backwardlooking thinking and that's despite all his known actions that's right all through let me just add to this issue actually that um that is this issue about color and how the um white still majority may be feeling that in the elite universities now Harvard Princeton Yale Berkeley etc the entering
• 27:00 - 27:30 class no longer has only about 35 to 40% whites in these elite places that's right uh partly because of the rise of Indians and Chinese origin people but also because of affirmative action so there many more Hispanics many more afroamericans etc so one can sort of just put your mind into their heads that you know that say upper middle class
• 27:30 - 28:00 elite white Americans have great difficulty getting their children into these schools also because they are very expensive i'm talking about the elite places only that's right so one can sort of understand the kind of resentment that Germany is uh kind of talking about um and you know this is just going on consistently also at least I find it very interesting that in many of the channels when I first went there in in
• 28:00 - 28:30 1969 uh to the US you never had a black anchor in television channels now it's quite common so so let me just get back one on on this issue of the rise of China actually that if you go back in history See the last time that the hegeimon changed was prior to the first world war that is you had glob the last real huge wave of globalization was
• 28:30 - 29:00 the late 19th century and uh by then the US had started coming up and but the US was still hesitant in terms of there was still a lot of isolationist views in the US they were reluctant to get in the first world war they were reluctant to get in second world war the point that I was trying to make was take for example uh America trying you know spending all the money on defense for Europe for the defense of Europe right and the outcome of that is
• 29:00 - 29:30 that Europe is doing the kind of social security programs which can do which it can do with the savings because they don't have to spend anything on defense and so therefore the the the nature of polities in the Scandinavian countries in Europe are far more uh what should I say not socialistic but there's no no real gap between the rich and the poor in other words everybody is fairly well off unlike the United States there's a huge gap so when you talk about
• 29:30 - 30:00 $80,000 per capita you're not realizing that this is really concentrated like it is in India right we talk about our per capita but ultimately it's that's the average that's the average it's not showing it's not showing therefore the benefits the benefits of trade have not percolated down to the ordinary American no I think there No but I'm just saying this is a contra view i I wanted you I wanted you not sufficiently would be
• 30:00 - 30:30 from the consumption angle us I believe has benefited hugely essentially from good quality cheap imports correct and if you had didn't have them you'd have much more inflation but housing is expensive you see you we must understand what the needs of the American family is which is why I was talking about it housing is very expensive in the United States everybody wants to you know live in an up uh you know neighborhood
• 30:30 - 31:00 neighborhood right very expensive healthcare is very expensive higher education is very expensive so you're right consumption is cheap but still the American ordinary American and I've talked to several of them feel that they are not sharing the wealth of the United States of America and and that's creating some problems and that's why differences which creates jealousy and envy it's not in an absolute sense that they are bad that's the point I was trying to make absolutely compared to the global average they are very well
• 31:00 - 31:30 off but it's the differences which have increased over time which is leading to this ironically He's backed by billionaires yes of course and oligarchs that's because tax because of tax reasons that's for other reason altogether the the one question that does arise in this uh sort of breakdown of social fabric or people feeling unhappy because where they are is then they see what exactly people are doing how much social media has contributed to
• 31:30 - 32:00 that in the last 25 years right in terms you can you can see much more everyone is doing so much better than you are correct um you can see you can see their yards absolutely so that maybe also now one of the thing I would bring back to economics so to speak yeah yeah so let's get back to it that um trade barriers have never brought back manufacturing and they've never plugged trade deficits um the what people forget in all this is
• 32:00 - 32:30 what we economists call the macro identity which is that a current account deficit or trade deficit is equal to the gap between investment and savings in a country correct so the problem is different the problem is not trade the problem is Americans are not saving enough the government is saving continuously higher budget not saving enough because they have they things are expensive and I no no no your housing US
• 32:30 - 33:00 government US government US government okay because they have done so many tax cuts strictly on the rich which goes back to the point I was making that because you're not taxing the rich enough you have major budget deficits therefore there's general total deaving in in the country and therefore you therefor people should have vote would not voted for Trump because you know Trump is saying that I'm going to you But then he yeah but he's addressing it a different way he says I'll get money in terms of revenue from tariffs which he which he will if you can do the
• 33:00 - 33:30 tariffs but so what I'm saying is that the the diagnosis is wrong one that the US has suffered from others it is not true even if it may be the case that they're less welloff Americans who do feel resentful about where they are but they've not suffered because of other countries so what is going to happen to the American economy according to according to you well it's going to suffer tremendously if this action continues because this is as I said right at the beginning that the kind of
• 33:30 - 34:00 levels of tariffs that are being talked about is totally and utterly unprecedented uh and second thing we've not gone to in the global economy if this tug of war between China and the US so US 145% on China um China 125% 125 on the US this would lead to a total global trading breakdown there can't be trade at those tariff levels but if I may add to what
• 34:00 - 34:30 he said about the change of the hegeimon what we've all seen the film called openheimer and how nuclear weapons were first tested in Los Alamos that is a big gamecher you cannot have the kind of hostilities and warfare between two major powers because of nuclear weapons you just can't mr trump is talking about bombing Iran i hope he doesn't try to do that because my sense is Iran is almost
• 34:30 - 35:00 there as far as nuclear weapons iran is now willing to talk to the US on this issue yeah you know they will continue to talk but continue to develop that but but uh on the financial sector side which my two learned friends haven't talked much about you must have noticed that he left that to you remember uh one uh chap called James Cville he was an adviser to Bill Clinton he says if I get uh reincarnated if I come back I want to come back as
• 35:00 - 35:30 the bond market because the bond market bond bonds are rising you know the yields have risen the yields have risen 30 years Yes and this is very strange because at times of stress investors around the world go and buy US government bonds because they see it as a safe haven i'm sure they still see the US government bonds in terms of their creditworthiness as AAA and above what they are concerned about is the kind of economic decisions Trump is
• 35:30 - 36:00 making that it will lead to all kinds of inflation so they are not prepared to accept treasuries at the current rate so it has pushed by selling the treasuries they pushed rates up but what people are saying okay he is blink because people are forgetting that every day the US treasury has to issue treasury bills and treasury bonds because many are maturing every day so it's not something which will happen in the future which some analysts seem to think okay you know no but every day there are billions which
• 36:00 - 36:30 are maturing so you have to issue fresh debt correct absolutely so that is what is really spooky that's why we probably had a near crash that's right because J I want to ask you that 40 or 45 or 50 basis point increase in one day of the yield on the US 10year Treasury no that's factually incorrect it's about 12 or 14 uh basis points not 40 basis points that spiked up came back so uh so yeah but
• 36:30 - 37:00 it's still a lot in terms if you hold $1 billion worth of 10year US securities the yield goes up by that much you you have lost in terms of present value of that bond so so J this is the other issue that given that China holds a significant portion I'll give you the exact number China holds according to media reports I don't have any access to privileged information the total holdings that China has of US
• 37:00 - 37:30 government bonds and bills is about 700 billion and it has uh another nine or 10 billion worth of US uh equity equity in various companies etc so total investments as per media reports is about 1.6 1.7 trillion in US government so they'll have to come to a deal no so that's that's one they'll have to come to a deal that's one reason why uh they're not happy with the drop
• 37:30 - 38:00 in prices yes so this idea that they can use those holdings to threaten us is counterproductive for that's why Trump is saying no he's a good friend of mine she is a good friend of mine we'll come to a deal that's that's my question that out of the 700 billion holdings of the Chinese and US treasuries suppose this withdraw 50 would that make a huge difference to the market a huge difference to draw too
• 38:00 - 38:30 much because nowhere else to put them well it depends on what the reaction is correct yeah others they probably sell 5 billion to begin with to test you know you put your toe into the water to see how hot or cold the water is we'll see what happens let me go on to another topic sure as I started this conversation with the proposition that technology political power and economic clout are elements that go into the rise of any nation now Trump is talking about
• 38:30 - 39:00 taking over Greenland trump is talking about taking over uh Palestine right sending the Palestinians out he's he's again talk and Panama Canal he's talk he's trying to assert his political power correct right he wants an economic deal uh within Ukraine right he wants some of those rare earth elements there so he's trying to use his political power to get economic benefit
• 39:00 - 39:30 that's part of his strategy I think i mean you're absolutely correct right is that right and technology is ahead so he wants to regain the political power of the United States by aggrandizing right and using that to retain US hedge money how far am I correct on that analysis well uh you know his intentions are exactly what you said you know but intentions are intentions the ability to
• 39:30 - 40:00 achieve for instance his uh offer to Canada become a state of the United States you've seen the reaction that's not going to happen that's not going to happen you saw the reaction so he may be able to take over Panama Canal yeah the biggest beneficiary of that is going to be Mark Carney so I think as some of his uh statements one have to one has to take seriously because and I think Latin Americans must be watching very carefully he can't threaten countries like Brazil they are
• 40:00 - 40:30 rather big but uh you know smaller countries like Chile and so on must be not comfortable at all with what if he says no but you're right at the bottom of South America and I need certain uh roots as far as my ships are concerned warships and other things so I need to take over your country so he may have these illusions and delusions there will be some votes in the security council which he will veto because he's a permanent member because uh China will
• 40:30 - 41:00 definitely bring in a resolution at the UN SC my sense is that he will finally get distracted from some of these things because of what we just discussed as the economy staggers or in some way takes a misstep which it already took some days back he is going to get distracted because many of his supporters are extremely high netw worth individuals or we don't have to talk only about Musk but so Musk is not happy because this Tesla is going to get
• 41:00 - 41:30 hurt thinking of China also as a possible market although China has build your dreams you must wonder what is this BYD the full form is build your dreams right yeah that's the name of that car which is as good as a Tesla and they're supposed to be very Good yeah i've ridden on them in taxi cabs in in in France in Mets and half the price every time you call for a cab in some of these cities in France a BFID shows up already
• 41:30 - 42:00 let me let me ask you this will AI impact manufacturing in the world it's already impacted and to what extent will it impact that is what $64,000 question but uh uh AI robotics and all these technological and the US is ahead in all this no US has been China's catching up but the reason why in a sense the decline in manufacturing has occurred in the US
• 42:00 - 42:30 over this long period that's part of the reason is because of technological change lot of studies which is why I asked the question really with impact on techn manufacturing at all and which is why raising tariffs is not going to bring a lot of manufacturing back there's also an enormous contradiction amongst his two objectives you know raise tariffs in order to bring manufacturing back and to give me money that is him money to do income tax cuts
• 42:30 - 43:00 correct now you can't have both yes if you raise the money to do that then if you or rather if you raise taxes tariffs to a high level what happens trade declines correct so your base declines right so you don't get much revenue income will decline in the first you know what do you have to distribute furthermore because of the much greater interconnection of global value chains as they say um if if if you raise tariffs across the
• 43:00 - 43:30 board you're raising the tariff as much on intermediate goods yes steel aluminium uh components which go in and out and so you really jacking up inefficiency and prices of everything actually um and that will bring down uh incomes it'll it'll increase inflation it'll bring down incomes so in fact as Shanka is saying it has it'll have exactly the
• 43:30 - 44:00 opposite effect you also uh that you impacting your your exports i'm sure the economists have told him this no I'm sure they have they did but they have but how is it going to affect politics now because if the Europeans are going to have reciprocal tariffs to the extent of say 21 billion euros worth of US goods that's what they're talking about now that's going to change the politics of the world definitely but before I
• 44:00 - 44:30 answer your question uh on one thing which Trump is right it's very difficult to find what he's right on given uh is the what you not get a visa to the United States anytime no that's why I'm going to praise him now so uh he has talked about what he considers are unnecessary wars now if you look at the cost in Afghanistan it was1 trillion US dollars of course you can say "Oh 1 trillion us can afford it." But you know the war in Iraq
• 44:30 - 45:00 continuing number of troops in uh Iraq Iraq has been set back 50 years that's true and if you go there their bridges and all that still destroyed so to that extent if he I'm not suggesting US should become isolationist but at least in terms of not invading or taking over countries militarily if he doesn't do that although that's that's what he says that's inconsistent with what he's
• 45:00 - 45:30 talking about in the northern hemisphere uh so I mean he's not a person for consistency in any any way but looking forward to Europe and how will it affect the trade between those two uh the Europeans may go to the Chinese and have a deal with them i don't know i think that I think the only real hope for the rest of the world outside US is to sort of design a set of policies and institutions in the
• 45:30 - 46:00 area of trade which recognize that the reality that they're facing now and probably given where he's coming from one says probably there's huge uncertainty that US is really going to turn protectionist for a significant time it won't suddenly correct now if that is the case and if Europe large chunks of Asia yes are truly committed to something like uh W2 regime no even bilateral trade
• 46:00 - 46:30 agreements yeah but I think multi bilateral multilateral regional basically open trade rules-based and where people stick to the rules if they can essentially strengthen those elements which exist it's not that they aren't there but protect them that's their only hope so you mean something like a COP where the US has withdrawn yeah but everyone that's not going to happen i guess that's not going to happen everyone's continuing it's going to happen
• 46:30 - 47:00 bilateral agreements are going to happen you see we don't know where what the outcome is going to be because if you have tariffs quiles I'm giving you an example sure vietnam on textiles with very high tariffs 46% and you have relatively lower tariffs as far as textile industry in India is concerned you have an opportunity actually to get the market in the United States on textiles alone so it depend on what kind of bilateral arrangements are made with different countries which impact your economies
• 47:00 - 47:30 and their economies so in fact you brought me the I was about to ask this question that one of the uh sort of ration for what uh the Trump administration has done on these tariffs is really as a negotiating tactic yes which is therefore then reflected in this 90-day reprieve reprieve that one possibility if one looking at the positive side is that he actually succeeds in other countries bringing
• 47:30 - 48:00 down the tariffs as they would like him like them to uh in our case many of us economists have been saying that we shouldn't raise those tariffs in any case and we need to bring them down Okay in some I mean one doesn't like to do anything like this but the Indian industry like you know doesn't want to compete doesn't do that i agree with you they didn't back in the early 90s yes exactly exactly but what I was going to say is that the Bombay club yes so
• 48:00 - 48:30 whereas one country any country I don't like doing something because someone is bearing down on me but that's still an opportunity for us no I agree i agree with this because you know I keep referring to this 105% duty we impose on a secondhand car exactly it's ridiculous the kind of and in the last 10 or 12 years of this current government tariffs have been raised and they talk in terms of being more private sector friendly
• 48:30 - 49:00 but in an overall sense but in actual terms please correct me if I'm wrong I think they have raised uh our our duties on imports on a variety of things and on Modi is Modi has been protectionist far before Trump it's a fact it's a because of the high tariff very tariffs on some of the items I looked at these numbers the average applied tariff on what we do import from the US is 14% correct only it has risen
• 49:00 - 49:30 from 10% 10 years ago to 14 similarly the average applied tariff on what US imports from us is 3.5 was 2.4 in 2014 this is act from so see this is is it weighted by volume of imports weighted by the yeah it's weighted by the values imported okay okay no but the point here is because subtariffs our tariffs are so high then nothing comes right right this is only what stuff that actually comes
• 49:30 - 50:00 okay yeah okay but much more could have come more could have come and we hardly import any agricultural goods except for dry fruits and stuff that's because we've been blocking it from blocking everything there are also genuine livelihood issues agree with you not that the kind of subsidies that the Americans give to their agriculture you know is just they don't count it as part of subsidy at all but let me go on to now the Indian economy because it's going to impact the Indian economy big time textiles pharmaceuticals
• 50:00 - 50:30 gems and jewelry automobile components gems and jewelry this is this is going to this is going to affect us deeply uh and negatively the number one export bought in terms of value the latest financial year is still clothing bedding etc so the margins are very very narrow very thin very thin because there are other you can't negotiate a better price yes all the Bangladeshes and everybody else is also a competitor Vietnam but I don't China
• 50:30 - 51:00 is China the biggest no but you see the advantages of China the the tariff is 150% or 125% and Vietnam is 46% and Bangladesh and others are high and we are relatively less we have an opportunity actually no but couple this is as I think uh Germany said Rakkesh negotiating position that's correct and I think the reality reality will be like us all these countries will negotiate
• 51:00 - 51:30 bilaterally so that the so-called reciprocal tariff yeah which by the way has it's calculated in a way which has nothing to do with tariffs will come down yes yes in the end so that's the positive possibility that's a positive possibility so if they come down but what in the steel sector the automobile component sector it's going to be tough for us again and those may last longer because those I think uh you know for one thing they're much lower so
• 51:30 - 52:00 they're not ridiculous that's correct that's correct there's another aspect to that actually steel aluminium these commodities that if the if if the gloomy stuff happens or the tariffs continue etc and the global slowdown then the prices of these commodities all of them will go down a lot this happened after the great financial crisis what I always call North Atlantic financial crisis and a lot of our NPAs that took place in India you know the 2010s of the banking
• 52:00 - 52:30 system at least onethird were to do with these metals commodity sectors okay so this is again this could be a global thing and this is particularly in the light of China having huge excess capacity right that's right so this is another aspect of what might happen the global economy and for to us but if we're going to have a bilateral trade agreement with the US and we are now seeing that look we should have some kind of an interim agreement with the US at the moment till such time as 90 days
• 52:30 - 53:00 expired and we get a bilateral agreement what's likely to happen and I think that's something that I want your thoughts on that the US is going to insist that you open up other sectors of the economy yes right and that's where we'll be in real economic trouble because we can't afford to open up agriculture we can't afford to open up dairy products we can't afford to open up beats and other products there we need to distinguish so then how do we deal with that i think on our side we have these blanket
• 53:00 - 53:30 no agriculture no dairy but actually I think if you negotiate carefully and distinguish carefully there are areas we are genuinely competitive with whether it's New Zealand or Australia or US if if our farmers don't get the real price for what they produce how how can we be competitive sorry don't get the they don't get the price of of their agricultural produce how are they going to be I'm not saying you're going to be able to do this in rice and wheat yes okay but there are
• 53:30 - 54:00 there are a whole lot of other agricultural commodities where we I think could be competitive and where if we allow sort of bits and pieces to prop enormous political impact on our country but will Modi allow it that's the other question puts us in a hard place you'll have enormous pressure yes but you'll possibly have enormous political backlash that's correct so what do you do you see we have the highest tariff our
• 54:00 - 54:30 highest tariffs on things that come in US is in spirits and spirits beverages spirits that's over 100% Indians are very spirited people so we allow them to send us yeah given a spiritual nature we can bring down these tariffs especially in bourbon because no one drinks bourbon so you may bring that down to zero bring the tariffs down on these motorbikes ridiculous so same thing like this also um coffee teammate you know why do we
• 54:30 - 55:00 have 60 more than 60% tariff on coffee any case US you ask the the coffee you know producers in Kerala and they'll tell you yeah you see you have to see this impact but you say US doesn't produce any coffee anyway I'm not talking about the US generally I'm talking about but can you you are saying that you'll do this only in terms of an agreement with the bilateral but there is a thing called WTO MFN and so on no we've given up on it there's no
• 55:00 - 55:30 there's no WTO it's very unfortunate i see but I think we'll have to make compromises real compromises where politics is involved because you know there's always a danger with the kind of leadership you have in the US that he'll come back he can hit you hard in so many other ways right so it's it's not going to be easy but I think doing a bilateral deal which is somehow possible with the US is one step that we have to do secondly we have to
• 55:30 - 56:00 do a real reasonably deep FDA on Europeating okay and most important I think we have to at least announce that we'll negotiate uh with one of these mega regional free trade areas in Asia asean asean is relatively small by itself small but it's not it's not it's not RP the other CPTPPP which is yeah
• 56:00 - 56:30 that is even more important comprehensive and progressive trans uh partnership transpacific partnership in which UK has joined so it's it's really a mixed very important thing there is China is not part of it not yet but they've applied not yet but we should get in and then prevent we should look to the future for there to because the interesting thing about Asian uh uh regional areas trade areas is they by and large abide by yes by the rules of
• 56:30 - 57:00 the game rules of not always so obviously there exceptions and so we we need to be there and these are the countries which are going to continue to grow quite well by most projections they're sizable populations we have a special problem with China which we have to sort out but you know I've been noticing the Chinese are certainly making very positive statements now because they also realize that they too have to actually start doing deals with others so the the the temperature has
• 57:00 - 57:30 gone down a bit and they're willing to talk i think this is an opportunity to what Shanker is saying actually and go further in the sense that as many people have now been writing uh make this into 1991 moment yes yes that given all this pressure from the US so instead of sort of being seen to be caving in to American pressure be proactive be proactive domestically in
• 57:30 - 58:00 terms of really doing a relatively comprehensive trade policy reform or tariff reform which then connects to other as Sakur is saying in terms of the trade agreements uh think of the CPTP i would even go further and think of uh ARP you do I'm sure that if you wanted to join REP and if they let you then you could negotiate certain safeguards for things that are really worried about because the reality today is that you know if you look at imports into China
• 58:00 - 58:30 by country our rank is number 31 okay and the country that is just above us is Ireland huge country called Ireland so my point is that we could really do a kind of very comprehensive thing on this there must be lots of things that China you know China imports two trillion or something like that worth of goods so presume I mean I've not looked at those data very carefully but it seems to me that this is a good
• 58:30 - 59:00 opportunity and especially with the softening you're seeing with China that you really go into details and say look this is stuff these fellows are importing that's correct why can't we double triple our exports because they're nothing actually and that'll do a lot of good to us yes and as Shagar said I have been saying this for a long time that we just don't focus on a neighborhood that is Asia okay and if we go further than that see between South Asia China and Assan there were 4
• 59:00 - 59:30 billion people all right okay average income with a lot of variation is something like $4,000 or something like that if even that grows at three 4% a year which could be higher there's a huge market out there including our own market of course the problem Rakkesh and I agree with you and uh the problem is that our sectors of the economy especially the MSME sector has been completely destroyed so if really you do
• 59:30 - 60:00 some trade deals unless you reform within no I agree with that you know unless you reform within the benefits are not going to absolutely no I agree with this but let me just finish that I agree with this but we have too long been very stareyed about MSME sector the MSM sector the best way they can grow if some large manufacturing firms grow and they source for MSM best example is Maruti which you've done very good deal
• 60:00 - 60:30 msmes cannot grow if you look at the composition of exports from everywhere including ourselves they're from large companies but I'm not saying MSM will die i'm just that the MS the future what am I saying i think whatever connect we need to reform the Indian economy from within is what I'm saying that's what I'm saying unless you are able to do that the trade benefits are not going to That's what I'm saying i'm exactly saying the same thing you're not they're sort of tied at you know they have happened together you know in 91 or 92 that's the 91 moment no
• 60:30 - 61:00 they should do it together absolutely but you feel otherwise you know our growth rate will come down you'll have even more employe employment or poor employment and for that you need to reform your entire schooling system your skill development your health my god unless you do that you remember I I congratulated you on your speech in Rajya Sabha on talking about schooling and that's correct and health you're absolutely right we have short-term measures we have medium-term measures we have long-term measures so long-term
• 61:00 - 61:30 measure obviously is education but first of all the political establishment has to basically guard its lines and say we are going to go and explain to people even as we do some of this before you do that Germany they have to talk to the opposition they have to talk to others in the country talk to stakeholders in this country have a consensus move forward as a nation you see you can't do
• 61:30 - 62:00 in India what Trump is doing to the United States it's not going to work so we are shifting responsibility to you as a politician and also as a member of Raja Zimbab no no but you know really I'm very pained at the fact that you know we are we are moving in a direction which is inconsistent with the growth story of India quite right we have so much potential and we're not exploiting that potential so let's end this program by saying let's all get together think of the nation use this as a great opportunity and have it as another 1991
• 62:00 - 62:30 moment absolutely thank you