When President Trump announced sweeping tariffs on all Chinese imports, China retaliated back with tariffs of its own. Since February 2025, the US and China have engaged in a renewed trade war — and to this day, no agreement is in sight. Bill Bishop, a China expert and former media executive with more than a decade experience living and working in China, joins Chris Hayes to unpack the state of US-China trade relations under Trump 2.0.
Note: This is a rough transcript. Please excuse any typos.
Bill Bishop: China, you know, positions itself as a leader of the Global South. You know, it used to be called the developing world, now it’s Global South. They are out there offering clean energy solutions that are affordable to the rest of the world. And the U.S. is like, here, buy some LNG.
Chris Hayes: Hello and welcome to “Why Is This Happening?” with me, your host, Chris Hayes.
Well, we’re getting news recently of trade deals, although in many cases, they appear to be way less than advertised. A lot of times these trade deals are not deals in the formal sense you might think of. There’s no paper on the deals. It’s like a handshake deal between two nations. One thing that keeps cropping up is that Trump will come out and say something about the deal, like, Japan is going to give us $500 billion and we’re going to keep 90% of the revenue and they’re going to get 10.
And you’re like, okay, well, that doesn’t, what even are you talking about? But also, why would they agree to that? And then, you know, a day or two, a news cycle goes by and then like, you have to read in translated foreign press and then eventually the American press, the Japanese are like, no, we never agreed to that. What are you talking about? That’s crazy.
This keeps happening in place after place. So whatever all these quote-unquote “deals” amount to really remains to be seen. Like it’s just actually not clear what has been agreed to, what’s going to be enforceable and what’s going to happen.
But the biggest of them all is the U.S.-China trade relationship. And, you know, the quick history here was that the U.S. announced these enormous tariffs on China. China responded with retaliatory tariffs. U.S. responded with even more tariffs. We had about four weeks of essentially kind of complete embargo between the two nations in which the tariffs were so prohibitively high that there was no trade. That’s when we were covering the empty ships that were coming across, the empty ports. And then they struck a deal, the U.S. and China struck a sort of temporary deal. We said, okay, we’re not going to do this. We’re going to go back to higher than normal but not crazy tariffs between these two countries while we work out a deal. The day that I’m talking to you is July 29th. They’ve announced they’re going to extend this period of deal talking.
But I don’t, this is such a complicated and consequential relationship along many different avenues, not just because of trade, that I thought it would be really useful to sort of check in with a China expert I really like and admire. We’ve had him on the podcast before. Bill Bishop is an entrepreneur. He’s a former media executive with more than a decade’s experience living and working in China. And he writes this great sub stack called “Sinocism” S-I-N-O-C-I-S-M. And I just wanted to kind of get a sense of like how Chinese media is covering this, where the Chinese government is coming from, what they want out of this, and how we should sort of think about this bilateral relationship under Trump 2.0.
So Bill, welcome to the program.
Bill Bishop: Thanks. Thanks for having me. It’s really nice to be back. I think we last spoke about two and a half years ago.
Chris Hayes: Yeah, we spoke at the end of the COVID zero moment when China was kind of coming out of these restrictions and you had a lot of really interesting insights about how they were going to manage that. I guess first let’s start with independent of the U.S. relationship, how you sort of read where China is at right now having emerged from COVID in the sort of whatever the new world order is now, how the Chinese economy and political situation is sort of independent of whatever that the Trump aspect is.
Bill Bishop: So on the one hand, the economy coming out of COVID has had a lot of struggles. They have been managing a real estate crash over multiple years. It has had a significant negative effect on the economy. The COVID lockdowns and then the exit from COVID did a lot of damage to the economy, did a lot of damage to consumer sentiment. There is a sort of several significant overlapping debt crises in the country from local government to real estate related debt. At the same time, the leadership, Xi Jinping and the Communist Party have been very focused for several years about shifting the Chinese growth model away from focusing on real estate and speculative things to manufacturing and to the next, what they call new quality productive forces, which is really sort of the new frontiers of high technology and high technology manufacturing.
And I think that the answer is on the one hand, the economy is not doing well in certain areas. On the other hand, they’re making a lot of progress in dominating high-end manufacturing, dominating the clean energy revolution. And so I think you have actually, and I think it’s something the Trump administration misunderstood going into the second administration was I think there’s an underappreciated amount of confidence that Xi Jinping and the top leadership have in the direction they’ve set for the Chinese economy.
And so that confidence, it goes to the lessons they learned from the first trade war and how they have been hardening their economy and system. Some people call it building Fortress China as a way to make it less vulnerable to U.S. pressure specifically, but also how they have built a set of tools like export controls around rare earths and rare earth magnets specifically to actually be able to sit equally at the table with the U.S. and say, okay, if you’re going to punish us here, then we’re going to squeeze you here. And our squeezing will lead to multiple industries shutting down because you can’t get our magnets.
And so this round, this is the second round with Trump. The Chinese have come to the table with a lot more capacity to both withstand U.S. pressure, but also exert pressure on the U.S. And I think that is something that initially was not appreciated at least in D.C. around President Trump. Clearly though now the Trump administration understands that both sides can actually do a lot of damage to the other. And so now we’re into this, I think today just concluded the Stockholm talks after Geneva, after London. So this is the third round of talking. And as you said, they agreed to a 90-day extension.
Chris Hayes: Again, I’m the furthest thing from China expert, but from my sort of reading, right? I mean, you have this fascinating combination of in some ways, free market and planned economy. A lot of capital investment is directed by the state because banks are connected to state apparatuses. That means that that money can flow into sort of big investments a lot, there’s huge amounts of infrastructure development. There’s a huge amount of real estate development. China’s had a sort of issue in its economy in that it’s got a very high savings rate. People don’t like to consume. There’s been a lot more like consumption stimulus and demand support by the government, as I understand it, in trying to sort of encourage that consumption, a larger consumption sector in China.
What has been the, you know, there’s sort of this underlying all this is kind of tacit social contract of like, we deliver year after year between 7% and 10% growth. And that’s sort of the bargain between the state and its citizens. How intact is that right now? It seems like it’s sort of beaten the odds in some ways.
Bill Bishop: So that bargain specifically around like 7% to 10% growth, that has been gone for several years. The growth rate now, the target is 5%. And it will sort of likely stay at 5% for several more years. And, you know, there can be a debate about whether they actually hit 5%. Of course they hit, officially they hit it.
Chris Hayes: They always hit it.
Bill Bishop: But that social contract, and this goes back to, I think, sort of the end of COVID, coming out of COVID when we last spoke, is consumer sentiments down, employment has become a real issue, especially for new college graduates. And so bits of the social contract have definitely been fraying. The government has made a big push or made a lot of, said a lot of things about how they’re going to increase social spending, increase spending on certain types of social welfare. They’re making a big push for vocational training, for, you know, for vocational, to train you for those types of jobs. But there’s no question that that social contract has been fraying.
And so, you know, the thing that goes back to, right, is a lot of times, especially, I think, you know, you end up sort of, especially in Western, sort of the D.C. and certain places, you kind of have this caricature, either China’s going to take over the world or the economy’s on the verge of collapse.
I remember, I think it was last summer, there were two “Economist” covers in a row where basically it was like China’s economy’s collapsing.
Chris Hayes: Right.
Bill Bishop: And so usually that’s set at the bottom, right? But the point is, like, it has this ability to have a lot of problems, yet continue to grow and continue to muddle through. And that is sort of, has always been my baseline. And I think here, what we have is, on the consumption side, the Chinese is, again, the Chinese government is talking again about more consumption, stimulating consumption. It’s the top, the number one priority for this year out of this economic work conference they had in December last year. And yet, they also are, have built up massive overcapacity in all sorts of sectors, and they’re exporting that globally, which is one of the reasons why the U.S. is, especially, and EU as well, have been in the middle of these very difficult trade talks with the Chinese.
And so the economy is a mixed bag. On the one hand, it is not booming, it’s not great. A lot of people have employment issues. On the other hand, it’s not, as U.S. Treasury Secretary Bessent said in the early parts of the U.S.-China talks, they’re not playing with a pair of twos.
Chris Hayes: Yes, I mean, the point, it’s funny you say that, because I think it reminds me of another economy, which is the U.S. economy, which also tends to get covered in the same way.
Bill Bishop: Right.
Chris Hayes: And that’s like, one of the things we learned about the U.S. economy over the last several years is, there’s a sort of similar story for different reasons, which is, it’s an enormous economy. It’s a huge enterprise with unbelievable amount of productive capacity. It can both be the case that like, it’s got a huge bunch of problems, and people, when you pull them, don’t like it. And also, it is macroeconomically, incredibly robust and resilient to a million different things you throw at it.
Bill Bishop: Right, no, I agree. And so, you have to have this cognitive dissonance. On the one hand, you can see all the problems, but on the other hand, just because there are a bunch of problems does not mean, oh, you push hard, and all of a sudden, they have to cave, which I think was, again, sort of a view, at least in part of the Trump administration at the beginning of this administration. And that turned out to be a miscalculation.
Chris Hayes: So, let’s talk about two areas where there’s really interesting strategic questions. So, one on this sort of next frontier manufacturing. I mean, I’m sure you know this, but on the ByteDance-owned, Chinese-owned TikTok, there’s an entire genre now of essentially Chinese propaganda, but it often will not feel exactly like Chinese propaganda, but it’s basically short videos about China as the future.
And in some cases, I think it’s like, I don’t know enough, I think it’s like literal propaganda. I think it’s been actually paid for by the state in some way. And in some cases, it’s American influencers who’ve been brought over to China. And in some cases, it’s just videos at a car show being like, this new model by Chinese car manufacturer BYD is super cool.
What it all comes together is like this sense that on these cutting edge technologies, particularly electric cars, battery technology, which is going to be pivotal, and solar, China is just racing out ahead. And you even have the CEO of Ford Motors basically saying this about Chinese car capacity. Like, tell us about the developments in those areas and I guess how real it is and how much it is kind of a propaganda.
Bill Bishop: No, so the stuff online and the Chinese have programs to bring over foreign influencers. And so they may not know they’re doing propaganda, but some of them actually are doing propaganda. They’re part of a directed sort of structured program. But that only really works when the substance is actually mostly real. And so for example, in the case of EVs, the Chinese now make world beating cars.
Chris Hayes: They’re so good, dude. I mean, I haven’t driven one, but every time I see one, I’m like, yo, that looks amazing. And it’s like $13,000.
Bill Bishop: Right, no, and they’re cheap. I mean, this is another area where China has massive, they’re in the middle, the Chinese government calls it involution, which is this idea that there’s such crazy competition in the industry, everyone’s driving the price down, no one’s making money, suppliers are getting screwed. And so the Chinese have now, in the middle of this anti-involution campaign around EVs because there are a hundred and something brands and the price just keeps dropping, dropping, dropping. But they are amazing cars. They have some of the battery technology in the thousand kilometer plus ranges or charge in five minutes.
What’s interesting though is, Tesla is in China, its share has been dropping because they haven’t updated its models. But just last week, sort of like one of the top kind of Chinese car influencers, a Chinese guy did a show where he looked at the autonomous driving systems of all the Chinese cars, because there’s actually been an issue where a lot of the Chinese brands are saying, we can do like autonomous driving. And in fact, there are a bunch of accidents that doesn’t really work right. So they actually took over a highway, tested all these cars and became quite a bit of a scandal because the one that they rated the most, the safest autonomous driving was actually Tesla.
And so in some areas, as great as the Chinese cars are, Elon Musk and Tesla are still ahead. But they’re more expensive and their models are kind of old, they’re kind of stale. The Chinese cars are really impressive. And they, if they were unfettered, if they were able to compete in an unfettered way around the world, no tariffs in the U.S., for example, or in the E.U., they would, as the Ford CEO is correctly worried, and as the Mercedes-Benz CEO is worried, and all the big German car companies, they would cause a lot of problems for the traditional ICE, internal combustion engine manufacturers, because those guys, most of them just completely missed this shift into EVs.
Chris Hayes: Yeah, there’s this classic business school book called “The Innovator’s Dilemma,” which I’ve read and a lot of people have read, which is about basically why do dominant incumbents in a certain area or industry get beaten by upstarts?
And there’s a bunch of reasons. A lot of times the upstarts start making stuff that’s sort of in the lowest level of value chain, the lowest margins, and the incumbent’s like, that’s the bad stuff of the business, let them have it. But part of it too is about sort of internal culture and what you focus on. And one of the things I think is so fascinating here is BYD, if I’m not mistaken, which has become a big Chinese auto manufacturer, started as an electronics phone company and making batteries.
And so you’ve had this sort of fascinating thing where, Tesla aside, in the U.S., you have some of the most amazing automotive engineers and capacity and all this stuff built up over a century to make internal combustion engines. And then you’ve got this Chinese company that’s coming at it from the battery first, which ends up being so central, and they’re now becoming a dominant player.
Bill Bishop: The car industries have seen this, you know, the rise of Japanese car companies, there was a lot of arrogance, so they can’t make cars and they were crappy to start with. And then of course, they caused the crisis. Korean cars, right? And the thing is, just with China, they’re just the manufacturing, their home market is so big, and their manufacturing capacity is so massive, that they pose in a much faster way, they’ve sort of present a much larger global threat to these existing companies. And there’s no question though, that in COVID, COVID did have an impact because for a couple years, top executives from foreign auto companies just weren’t going to China.
Chris Hayes: Right.
Bill Bishop: And so there was, we shouldn’t underestimate the amount of arrogance, sort of, oh, the Chinese can never make these, they can’t innovate. You know, not true. And obviously now they understand that. But at the same time, the rise of the EV industry is also an example of an incredibly, perhaps the most or one of the most successful industrial policies, right? Where this industry was originally built on lots of government policies, including forcing foreign auto manufacturers to do joint ventures, and transferring know-how to local incumbents, training up entire generations of auto engineers and people who had experience in making cars, lots of subsidies, but they’re not successful now because of those subsidies. They are successful now because they, you know, the ones that are at the top, like BYD, NIO, some of these other Chinese companies, Xiaomi now has these great cars. They’re successful because they are some of the best entrepreneurs in the world. And they are able to not only survive, but thrive in perhaps the most cutthroat market in the world. And so they’re beyond sort of the subsidy phase.
And now the Chinese government is actually dealing with how do they clean up the policies that created this massive overcapacity across China, because lots of cities all wanted a car company because it’s employment. And now they got to rationalize that and force these local officials to say, you’re not going to have a car company because your company is a zombie.
Chris Hayes: Right. And, you know, in the case of BYD, I mean, yeah, I’ve seen some of the articles about like, you know, that thing you just mentioned before about charging in five minutes to 85% and they even do, or like have like hot swap where like you pull the car and they like–
Bill Bishop: You drive it and it’s staying, you sort of, you get out, it like raises it up, it takes the battery out, puts it in and off you go. And I think it’s like four or five minutes.
Chris Hayes: Yeah. It’s totally amazing.
Bill Bishop: It’s cool. It’s very cool.
Chris Hayes: The other place where we’re seeing this in a huge way is on solar. And in some ways it’s such a fascinating question. You know, one of the things I think we’ll come back around when we start getting to trade is this axiom I always think about, which is so important when you’re talking about trade is like, one person’s income is another person’s price. Right? So like when something goes up or down in price, it’s good or bad depending on whether you’re the buyer or the seller.
Bill Bishop: Right.
Chris Hayes: So like when you see like American home prices are declining, you’re like, wait, good or bad? Like, well, if you want to sell your home, it’s not good. If you want to be a first time buyer, it’s good. And this is really true. I think of like of solar as a place where you really see this. Right. Cause at one level it’s like the cost of solar is dropping at this just shocking rate, mostly thanks to the Chinese. It also means that it’s very hard, the margins for creating indigenous, you know, solar enterprises around the world are getting thinner and thinner and harder and harder.
But tell us a little bit about, I mean, my understanding is that dominance here is just insane about what China’s able to do on solar.
Bill Bishop: Oh no, absolutely. I mean, and they, you know, the German industry is gone. There’s not much of U.S. industry. I mean, if some of your viewers might remember the Obama era had Solyndra, which I think they’re trying to do solar. That was what? 2000 watts somewhere. Big disaster. You know, the Chinese, again, industrial policy, it’s a green technology, green energy, except it’s a very, very dirty process. And so the Chinese had no problem with the dirty process in terms of making the panels, getting the polysilicon. Some of it comes from Xinjiang where, you know, there’ve been incredible reports of, you know, labor abuses among other things. It doesn’t matter. Right. It was all about building up this industry. And then, you know, the Chinese government has had a, you know, massive program to build up their, you know, add clean energy to their grid.
And so all these solar panel makers, you know, they have in the, the related industries, they have the biggest market to their, to themselves, right. The domestic Chinese market. And then as they perfect it domestically, then they can then push it out to the rest of the world and no one can compete with them on cost. And so, you know, now, same thing with the EVs, the Chinese government is very specifically cracking down on, you know, there are too many companies making polysilicon, right. Their prices have collapsed. So they’re forcing them to rationalize. They’re forcing to work together. They’re getting the price back up because once again, the industrial policy worked at the high level and now they have to go clean it up so that they sort of get rid of some of the waste, but then the rest of the world, right. It’s, it’s on the one hand, okay, people want clean energy. China has these solutions that are cheap and plentiful. On the other hand, some countries are like, well, maybe it’s not a great idea to rely on Chinese, even Chinese solar panels or Chinese inverters, which in some countries have been found to have sort of unknown communications back to China.
It’s just like, you know, the U.S. has spent a long time saying it was probably a risk to have reliance on Saudi Arabia for oil. Does it make sense to have all, you know, the U.S. build a grid that’s has a massive amount of solar where all the solar, if something breaks, you got to get fixed by China. That’s, I think a problem too.
Chris Hayes: It’s a great question. I mean, part of what’s maddening about this from where I stand is that American progressives and particularly climate people were saying 25, 30 years ago, exactly this thing about like, we have an opportunity to sort of own the future on this next, you know, industrial revolution where we get off fossil fuels. And there were some successful efforts and there really were like some of the investments have really been massively successful here in the U.S. but there was so much more resistance than there ended up being in China, partly because I think China understood the math of their energy demand.
Bill Bishop: China doesn’t have a climate denial faction. There’s no question at sort of throughout the Chinese government and throughout industry throughout sort of activity, the climate is an issue and they see it both as a threat in Beijing is in the middle of these massive floods. Dozens of people have died in the last couple of days, you know, they understand climate change directly, but also they saw it rightfully so as an opportunity, you know, they saw it as a massive global opportunity where they, and for them, you know, going back to sort of the stepping back a little bit, you know, China, you know, positions itself as a leader of the Global South, you know, used to be called the developing world and that’s Global South.
They are out there offering clean energy solutions that are affordable to the rest of the world. And the U.S. is like here, buy some LNG. And you know, the thing, what’s also frustrating going back a little bit, we, we talked about these, the fast charging on the batteries, that technology it’s from a U.S. company. They licensed it.
I mean, a lot of this stuff, we actually the U.S. at some point had been involved in developing or developed it and either has been licensed by Chinese firms or they couldn’t make it work here. The company got bought or the IP got bought. Right? And, and so it, it goes back to that broader question of, and you know, the U.S., I think the Biden administration struggled with it and, you know, they had the IRA and tried to try to look at building out industrial policy, specifically around clean energy. Trump administration is talking different ways about industrial policy. We’re going to look back, you know, maybe next few years, next generation. I mean, you look at what China didn’t say, wow, they actually had very successful, there are lots of external costs or lots of wastage, but at the end of the day, they are now in a position where they’re dominating these industries of the future. And they’re dominating them in ways where it’s hard to see how in this round of technological revolution on clean energy that the U.S. for example, catches up.
Chris Hayes: More of our conversation after this quick break.
(BREAK)
Chris Hayes: You know, one of my, one of the things I’m going to ask a sort of annoyingly, one-on-one naive question about China, but, but bear with me, which is that if you ask me why I believe in democracy, I believe in it for a bunch of reasons. One, it’s sort of first principles philosophical commitment about self-determination. So there’s a, there’s a sort of deep set of moral commitments. But I also think generally in the aggregate on average, that there’s really practical reasons that democracies produce more for their people because of essentially the kind of informational effects of feedback. And that when you have power concentrated, it’s very easy to get leaders that are corrupt, insane, a combination of both completely out of touch, deluded, et cetera. Right? And history is littered with these examples.
What is it about the Chinese system that it manages to be both single party rule, no elections, but not as like incompetent, you know, as, as sort of beholden to the whims of one person or as incompetent or as practically problematic as so many other states’ structure around one party rule?
Bill Bishop: That’s a great question. And you know, this is not, you know, this is not to say everything’s great or this is a, you know, a model.
Chris Hayes: No, I mean, where we started off, I think is important. We’re not, we’re not saying like they’re everything in the future or they’re, you know, there’s something in between.
Bill Bishop: But they’ve been actually successful in a lot of these areas in ways that a lot of people originally predicted they wouldn’t be precisely for, for some of the reasons you just mentioned. And I think it has to do with one, you know, the system, the way people move up through this system, it tends to, they make mistakes. But I think you tend to have a fairly high proportion of people are actually pretty smart and have some real technical ability. I think also that they are able, you know, they’re in the middle of their next five-year plan, the fifth five-year plan. They’re in the middle of drafting it. They still have a planning cycle where they still put together in all sorts of areas. These are what we’re going to do over the next five years. This is what’s important.
And, you know, once they set those plans, and again, those plans could be wrong or they could have, you know, they could have goals that not everyone agrees with. Once they set those plans, the system then works towards those plans. And it’s very hard for them to be disrupted by midterms or, you know, some other sort of short-term thing and good and bad, right? Again, this is, it has its advantages. It has its disadvantages.
You know, there was also, I think something to be said for a view of really, and part of the planning process is sort of looking out and, and understanding where they had deficiencies and weakness and specifically places like energy. They were far too reliant on, you know, that a backward power grid, far too reliant on imported oil. And so they spent decades looking at how do we reduce this reliance on foreign oil?
Because obviously, you know, that kind of reliance, excessive reliance on these key foreign supplies leads to, gives pressure points for foreigners, leads to, you know, maybe reduces their options around things that they want to do, say for around Taiwan, for example. And so when you put it all together, I mean, ultimately I think they were able to say, this is an area where it’s helps our economy, but at the same time, you know, they, part of it around solar and the clean energy is also a reaction to the massive pollution problem they had, still have in some places.
But, you know, I remember, you know, our kids are now in college, but we would walk them to primary school in Beijing and, you know, multiple days we’d look like insects with these crazy face masks because the air pollution was so bad. Air pollution is much better in most big cities now. Right. And so part of that was a reaction to, again, it’s not a democracy, but it was a reaction to popular pressure. People were getting really upset with the degradation in the quality of life because of all the environmental problems.
And at the same time too, you look at it now, they’re in a situation where it is a, again, it’s an industry that they can both dominate globally. It makes money for China and Chinese companies, but it also, they now are, you know, they position themselves as, look, we are the country that cares about the most important existential issue in most countries have, which is climate change. You know, we are the ones who are now in a position to help you deliver the goods and fix that.
And it is very, you know, it’s useful on several levels for them. It’s also very useful in their long sort of ongoing long-term competition with the U.S.
Chris Hayes: So that I think brings us to this round of this trade war, this is the second one. I mean, there was one initiated largely by Trump, even though, again, I think it’s fair to say that there was a really growing set of critiques about the U.S. Chinese bilateral trade relationship, a growing set of critiques about the negative costs that the, what’s often referred to as the China shock had had on the U.S. and U.S. manufacturing, particularly rural areas and places away from large metropolises.
There was a round of trade battles between the two countries. And then a kind of a sort of resolution to that. It led to a higher tariff rate, my understanding than ex-ante that was preserved in Biden. How do you view this, this round? And which started off as a almost war by other means now seems like as, as cooled down a little bit, but what are you looking at here as you, as you watch these two sides?
Bill Bishop: So I think the first thing, you know, Trump was not wrong, right? And his diagnosis of the problem in Trump 1, I mean, the, the Trump 1 trade deal was not a great deal, but it was, it was the best he could get because the Chinese were just intransigent on some of the bigger asks from the U.S. that had involved structural change in the Chinese economy and frankly, the political economy that the Chinese system, the Chinese leadership was just not willing to do.
Like you said, Biden kept those tariffs in place and then Trump came in, Trump 2, restarted it. And what I think, you know, what’s interesting, right, is the Chinese system is good at learning and good at, like we talked about it, good at planning in some areas. And so the Chinese side came much more prepared this time than they were in Trump 1, where in Trump 1, they really, you know, they could put tariffs, reciprocal tariffs on, but because they bought less than we bought, then they really didn’t, it wasn’t as impactful.
So the Chinese figured out and they knew this, but they really ramped up their dominance, not only dominance, but also control of rare earths and rare earths magnets, which are integral to all electronics.
Chris Hayes: Yeah. Well, you, I don’t know how much of an expert you are on this, do you have — can you give me like two minutes on this?
Bill Bishop: Sure. I mean, I’m not an expert, but rare earths, critical minerals, they’re actually not that rare. There are certain elements that then you refine, the refining is very environmentally difficult and dirty. And then you can define them into magnets that then are used in all, you know, they’re used in all over cars, missiles, toasters, computers, phones, for clean energy, windmills.
Chris Hayes: Batteries too, I think.
Bill Bishop: Batteries, batteries. And the Chinese ended up totally dominating that. And we’ve known, Japan, everyone’s known for 15 plus years that the Chinese had this point of leverage and they wanted to dominate it. And, you know, it’s interesting back in 2019, when in the, at the height of the first Trump-China trade negotiations, when there was a deal, but then it blew up and it looked like things could get pretty, pretty messy. Xi Jinping, you know, went off and did this inspection tour in Jiangxi province, which was the primary producer of rare earths, rare earths magnets and visited the leading rare earths magnets company in China.
It’s basically to say, okay, you know, this is his showing everyone, this is what our leverage is. And so fast forward now, when, you know, this time when Trump put on his tariffs and the Chinese responded, their response was much more sophisticated because it was not just reciprocal tariffs. It was a few things, but the most important one was they had perfected over the last few years, this export control system for rare earths magnets and they started using it. And that’s why, you know, the U.S. and China, you know, things got pretty dicey after the London, after Geneva, right? Where the Chinese were not delivering, they held back on magnets because they thought the U.S. had done some stuff. So the U.S. added a bunch of stuff and then everyone, they met again in London and sort of walked it back.
And even today at the press conference after Stockholm, Jamieson Greer, Ambassador Greer, the U.S. trade representative, you know, he basically said, well, we ensure that the flow of rare earths magnets will continue. I’m paraphrasing. Because cutting those off will shut factories in the U.S. And so the Chinese came back this round in this, this second phase of the trade, the trade war with the Trump administration, they came much better prepared.
And with really a tool that the U.S. has no answer for and won’t have an answer for, for several years, you probably saw a couple of weeks ago, the defense department announced this, I think it was $400 million investment. It’s sort of the great hope for U.S. rare earths mining and magnet production. Now they’re going to be serious. This is a problem that multiple governments have talked about. They’ve admired the problem. The Biden administration knew about it. They wrote papers about this dependency. They talked to Australia. But again, back to the planning, lots of people knew this was coming at the Chinese were building this dominance. Nobody did anything about it.
And so now the U.S. is in a position where the Chinese stranglehold on some of these key magnets best case will be broken in several years. So they have a lot more leverage over the U.S. then I think the Trump administration understood going in. The U.S. has leveraged, the U.S. has areas where they can also really hurt the Chinese economy. And so both sides are trying to reach kind of a ceasefire. The question will be not that everyone’s going to sort of kumbaya be happy and things will be fine going forward. The Chinese are very good at understanding where the points of vulnerability are and how they address those.
The question will be for the U.S. and for the EU and for Japan and their trade issues with China is will they now get serious about addressing these vulnerabilities that they have and actually use government support along with the industry to actually break that Chinese stranglehold on rare earths. That will require political will, that will require money, that will require consistency, which is again something we talked about where you can’t set a plan now and then next year or three years, pull it back or have a new budget bill that you cut funding for rare earths. And then you’re back to square one and the Chinese have a real stranglehold on you.
Chris Hayes: Yeah, it’s a really good point. I mean, what do you think, what does China want? I mean, China’s not really initiating this round of the trade war. It’s being initiated, we should make it clear here, Trump is initiating this and he’s initiating it, I think, out of a combination of one of his few genuinely held like zealous ideological beliefs, which is like mercantilism is good. Like he genuinely to his core is that he likes mercantilism more than he likes trade. Like he thinks there’s no such thing as non-zero sum exchange, that every deal someone’s getting screwed and someone’s screwing someone else. So everything fits into that frame or form.
But the point of the China thing, the reason I bring this up is it’s not just the U.S.-China. The last time it was much more directed U.S.-China. There was a renegotiation of the NAFTA deal, which they renamed, but now it’s like us against the world multilateral one verse 165 trade war. So I kind of have a sense of what Trump wants out of it, which is honestly, I think he wants to be able to go bragging about stuff and also to create like an American autarky where we all make everything in house, basically.
Bill Bishop: Yeah. Speaking of TikTok and the Chinese propaganda videos, I’m sure you saw some of the AI videos of all the fat American workers screwing an iPhone.
Chris Hayes: Exactly.
Bill Bishop: Based on one of the Commerce Secretary Lutnick’s comments.
Chris Hayes: Howard Lutnick literally said, we’re going to have the factories where you screw in the tiny screws in the phones. And then he also said, you and your kids and your grandkids are going to work in this factory, which I was like, wait, that’s your positive vision? My grandkids going to work in a factory?
Bill Bishop: I’m not sure Trump’s getting the best and the brightest in every cabinet position.
Chris Hayes: So, I mean, the reason I’m saying all this is set up is I have a sense of where Trump’s coming from on all this, sort of what they want. There’s a mix of like some genuine real critique and real interesting things about a post-neoliberal order in the U.S. and then a lot of insane nonsense. But what do you think China wants out of this? So, China wants a few things. One, they want access to the U.S. market. They need access to the U.S. consumer market. So, that is, again, that is one of our points of leverage. There are some bits of technology that have not been expert controlled yet that the Chinese need. And you could see that from the way, after the London talks, after the Geneva talks broke down, one of the things the U.S. did was they sent a letter saying, you can’t sell your engines to the Chinese commercial aircraft program, because the Chinese are trying to build the Boeing and Airbus killer, and they’re using a lot of U.S. technology to do it. And if the U.S. cuts that off, those planes basically don’t fly.
But most important is the U.S. market. The other thing they want, and they want to make sure, is that the U.S. is not able to cut deals with all the other countries the U.S. is working with that have clauses in there that penalize Chinese goods that are either being made or being transshipped through those countries. And so far, you hear that maybe it’s in the UK deal, maybe there’s something in the Vietnam deal. And deal, again, as you pointed earlier, I think is a fairly generous term for some of these things.
We haven’t seen the details, so we don’t know what they are. But the Chinese are regularly saying they’re going to be very, basically, they’re, diplomatically speaking, they’re going to be very upset and take action if third countries take it out on China or are forced to discriminate against Chinese goods. And so, because ultimately, and the Chinese, I think, have reason to be fairly confident, is they know that they can still access the U.S., their companies, a lot of them can still access the U.S. consumer market, even when the U.S. tariffs are so high, by transshipping through these other countries. The Trump administration knows that. And I think, especially on the USTR side, where you have actually people who are focused on process and understand trade law and are very serious about trade, my understanding is that they had a set of proposals that were much more buttoned up in terms of how to deal with this on a broader, not necessarily a bilateral basis, but actually work with other countries to address what they say is a Chinese over capacity issue. But that was not the viewpoint that went out when the trade war was launched, when Tariff Liberation Day came around on April 2nd.
And so now it feels a little bit more, it’s one by one, it’s a little more ad hoc. And the officials come out and say, we did these great things. But then, like in the Japan deal, the Japanese are saying, we didn’t agree to that.
Chris Hayes: I mean, on its face, it’s like, if you come back to us and say, I just didn’t deal with this guy. He’s not here to back it up, but he said he’s going to give me $90 and I’m going to give him 10 bucks. You’d be like, okay, well, what’s the catch? Why is that?
Bill Bishop: And this is an ally. So from the outside, at least, it looks a bit incoherent. It looks like the process has a lot of issues. And so that, again, I think accrues to China’s benefit because they were much more worried about a well-structured, well-thought-out process where the U.S. can get its traditional allies like Canada, Mexico, EU, Japan, working as a united front to tackle what all these countries say are concerns they have over China exporting their industrial capacity.
And so in some ways, it feels like a bit of a missed opportunity. Although then you have folks, certainly on the Trump supporters, more hawkish folks, say, “It doesn’t matter. We’ve tried for years to work with the EU. We’ve tried for years to work with the Japanese. They’re not serious. They won’t do it unless you force them. And so we’re in the phase where Trump is not about, let’s be nice to allies. Trump is about, we’re just going to smack everybody around and see what we can get.
Chris Hayes: Yeah. Although I have to say, and again, I’m trying to be really ruthlessly fair here, but the first round of this where Trump was just jacking up the tariffs to the point where it felt–
Bill Bishop: With China, where it went to 145%.
Chris Hayes: Yeah. It felt like the U.S. basically cried uncle on that. I mean, it felt like they were like, there’s this big back and forth of who’s going to call who for the talks, and he lied. He very clearly lied and said she called him. Very obviously that wasn’t true.
Bill Bishop: More than once.
Chris Hayes: Yeah. And basically, we cover day in, day out. There was a certain amount of runway of inventory, but it was about to hit the point where it was like empty shelves.
Bill Bishop: Yeah.
Chris Hayes: And I feel like the U.S. basically caved. I mean, obviously, China wanted to talk because they don’t like it either. It hurts both people.
Bill Bishop: Yeah. They would prefer not to have this happening.
Chris Hayes: Yeah. But it also didn’t feel like, it felt like Trump caved more than Xi did. I mean, just my read of the situation.
Bill Bishop: I think that’s fair. I think that ultimately, Trump, again, was getting, my understanding, I think it was reported in the press, was getting lots of calls from big retailers, companies saying, we’re going to run out of stuff, and we’re going to shut factory lines, because everybody’s still too reliant on China. China is the factory of the world. And for all this talk of decoupling and de-risking over, especially since Trump won, since COVID and the issues of supply chains that surfaced during COVID, not enough has been done about it.
Chris Hayes: Right? And I think people were saying, oh, Christmas is ruined if they don’t get the ships back in the next two weeks. And I think ultimately, yeah, I do think that ultimately, the U.S., and I do think, again, it goes back to also the export controls of earth magnets, where the Chinese have been smart. And the win for China here, not just where it looks like they were able to stand toe to toe with the U.S. and President Trump and force him to back to the table, force him to back down. Of course, the Trump administration said, we didn’t back down.
But the message that sends to the rest of the world, especially the Global South, where China says they’re the leader, is, look, we’re fighting this fight for you. We’re fighting against the bully. We’re fighting against, they call it the hegemon.
Chris Hayes: Right. And particularly when the U.S., you know, it’d be one thing if this was some concerted, again, you keep making the point, which I think is important, is there really are these fundamentally destructive or problematic trade imbalances with China. There really is some real asymmetries and problems in the global system that is so dependent on Chinese manufacturing. There’s real, that’s not just a nutty Trump belief. But when you pair that with him sending a letter to Brazil saying, even though we have a trade surplus with you, we’re going to slap on tariffs because you’re prosecuting the ex-right-wing leader who tried to coup. To all the world, it’s very hard to see it as anything other than pure bullying and power play when you’re doing it to your closest ally in Canada. So even if there’s legitimate critiques in there, it’s going to look not that legitimate when you’re just doing it the way that they’re doing it.
Bill Bishop: And that, you know, again, it’s not clear what benefit that has, you know, going after Canada or Brazil has for the U.S. economy, but it does benefit China. And so I think the Chinese have, are generally, again, feeling fairly confident where things are because of the way they’ve built up their resilience in their economy, their ability to withstand. In some ways, better, you know, CEOs are not going to be calling Xi Jinping and complaining about empty shelves, right?
Even if they have this problem, the Chinese system has ways to make them, to force them to just deal with it. But at the same time, if the U.S. is going around torching relationships with traditional allies, you know, even if they don’t go embrace China, and, you know, the E.U. had the China summit last week, didn’t go particularly well because the Chinese, again, and the reports before and after were, the Chinese were not willing to play ball because they actually felt really confident. They said, we stood up to the U.S., you know, you’re not the U.S., we don’t have to listen to you. You know, the U.S. is still powerful, and China still needs a lot of things from the U.S. They don’t need as much, they need some stuff from the E.U., they don’t need as much, but they also know that the EU is much more fragmented, you know, 27 countries. And so it’s much easier for them to divide and conquer and to basically stand their ground and tell the E.U., okay, you know, we’ll call your bluff and see what happens. And most of the time, the E.U. caves.
Chris Hayes: We’ll be right back after we take this quick break.
(BREAK)
Chris Hayes: One place the U.S. does seem to have strategic advantage and has expert controls and leverages on the export of GPUs, particularly NVIDIA GPUs. China had this big breakthrough about six months ago, where a Chinese company that was sort of spun off from a finance hedge firm sort of used this very ingenious, low-cost means of creating a large language model AI chatbot called DeepSeek that, you know, came out of nowhere and started performing incredibly well. There’s a bunch of questions about, like, did they maybe have access to some GPUs that they’re not being upfront about? And, you know, the status of how many of these next-gen NVIDIA chips are actually in China is an open question that people don’t really know. But where do you think this sort of, I mean, I guess what I’m trying to say is, if China’s sort of leverage is rare earth, it seems like GPUs and chips are the sort of U.S. leverage, and how important that is.
Bill Bishop: No, it is U.S. leverage if it’s done properly. The problem is, you know, the export control regime around semiconductors, you got the chips, and then you’ve got all the things to make chips. And the Biden administration, especially, was pretty tough on chip exports, specifically some NVIDIA chips, but had a lot of holes in the export controls around semiconductor manufacturing equipment.
And so what’s happened is the Chinese have now become, you know, both individual companies, but also with state direction, incredibly focused on breaking through what they call the U.S. chokeholds on core technologies, specifically around semiconductors.
And so you’ve had like about a year or so ago, there was a complete restructuring of the entire science technology bureaucracy in China. They’re throwing a whole bunch of money at research and development, at chip startups, you know, state-run funds, encouraging other companies to invest, huge policy support to break through this chokehold, eventually, and it will take them years. But they’re at the point, you know, Huawei, of course, is the company leading these efforts. They’re at the point where a Huawei chip is not as good as the modified NVIDIA chip called H20 that NVIDIA can now sell into China for use in AI. But it’s gotten better, and over the next several years, there’s no reason to think it won’t, the Chinese won’t continue to advance. They may not be at the cutting edge where the U.S. is, and Taiwan is, but they’ll be good enough for a lot of things.
And so again, it’s a, you know, this is one of those things, right? The H20, this chip to spin the news, there was a proposal in the Biden administration went to Secretary Raimondo to ban sale of that chip, and the Biden administration didn’t want to do it. And so the Chinese could buy it.
Chris Hayes: Ban it to China, to sell to China.
Bill Bishop: To China, yeah, to sell it. So it was modified for China, right? They had these export controls, and NVIDIA built it to fit under the technical limit.
Chris Hayes: And the reason is NVIDIA wants to sell that chip, and they go to the White House and say, we’re the most, we’re the highest performing American company in the stock market, and we have lots of employees. Like, don’t screw us, we’re an American company, basically.
Bill Bishop: Well that, and also like basically saying, look, the Chinese are really trying hard to build their own AI ecosystem. In fact, you know, Xi Jinping, the politburo, right? The top 24 members of Communist Party, they meet monthly, and usually, or they have a public meeting monthly, usually, and then usually they’ll have a study session. And the April study session was about AI. And in that study session of the readout, it was mostly Xi’s comments. One section was Xi talking about how China needed to build effectively its own, soup to nuts AI technology stack, from the hardware to the software, right? And NVIDIA is about the hardware, but it’s also about CUDA, the software that you use to work with the chips.
And so NVIDIA, their argument, Jensen Huang’s argument to Trump and to David Sacks, the AI czar is, look, let us keep selling because that keeps, our chips are still better. It keeps the Chinese hooked on our system. It keeps them in our ecosystem. And we wanted to build on American technology, not on Chinese technology. And, you know, this is an argument that’s been made in other sectors for years by American CEOs. Xi Jinping and the Communist Party have a very different view of that, and they’re not there yet. But just because Jensen Huang can now sell these chips does not mean that there won’t be a massive pressure inside China and from the Communist Party to, over time, force these companies to de-Americanize their entire AI stack.
And whether or not it’ll happen faster because they can’t get H20s or happen a little slower because they can’t get H20s now, you would be, I think, mistaken to bet that it won’t happen because China has non-financial reasons to want to de-Americanize that technology stack. And they’re very good at pursuing those goals.
Chris Hayes: Yeah, and my understanding is that Jensen Huang was at the White House just the other day to basically be like, let us sell the chips, and was victorious, right? I mean, like–
Bill Bishop: Yeah, no, and it was interesting because he went to spend a million dollars to go have dinner in Mar-a-Lago when there was rumors that, I mean, people were saying the H20 ban is coming, you know, and the idea was he’s going to go there and he’s going to get it. It’s not going to happen. He had dinner and then it was still banned, right? And so he got something else he wanted, which was this Biden-era AI diffusion rule. He got that removed. But then this time he went back and he was able to convince the folks around President Trump that, okay, we should let us sell to China.
One of the things that’s happened is, my understanding is there’s very little policy process now, especially around technology.
Chris Hayes: There’s none. There’s none.
Bill Bishop: Because the technology director at the NIC was gutted. They were purged. The folks over at State Department were riffed, you know, like the week before the H20 decision. There’s, you know, and over in commerce, the people have been fired, the people have not been, you know, there’s–
(CROSSTALK)
Bill Bishop: There’s no policy process. So if you’re the CEO, you get to the AI czar, you get to Trump, you get to the commerce secretary. That’s all you need. And then you present them with your view and there’s no one saying, well, here are the other reasons why maybe think about it. So you’re seeing this week, there’s some pushback from some former Trump officials wrote a letter talking about why this is a bad decision. You’ve got, so far it’s only, it’s not bipartisan. It’s some of the Democrats on the Hill have written a letter about why it’s a bad decision. Trump, I mean, he doesn’t, I don’t think he cares. I think he’s got the, you know, the CEO of the most, the richest company in the world or the highest market cap in the world who he talks to, he thinks he’s great. You know, Jensen Huang was at this conference and he said, like, basically, America AI is leading because we have Donald Trump. I mean, it was some, I’m paraphrasing, but it was just some like–
Chris Hayes: Right, but I mean, the funny thing is you got two horses pulling in opposite directions, which is always, you know, one of the contradictions here is that one of them is the American first horse and the other is like corruption and what’s in it for me. Right?
Like, that sort of all comes back to that. Like, you could have your puffed up ideological views on stuff, but then if someone offers you some deal or they’re going to license your, you know, buy a lot of your Trump coin or they’re going to, you know, lord knows what. Like, that you’re, you know, that’s always an option. Right? Like, that–
Bill Bishop: I mean, the next NVIDIA chip should be called like the Trump.
Chris Hayes: Right, yeah. Best chip ever. You know, I’m reading, and it might be a strange place to end this conversation, but for some reason, I decided to read a history of the cultural revolution recently.
Bill Bishop: Which one?
Chris Hayes: A book called “Mao’s Last Revolution.” It’s McFarquhar, and I forget the other, the author.
Bill Bishop: Oh, that’s a heavy book.
Chris Hayes: Dude.
Bill Bishop: That’s a hard read.
Chris Hayes: It is a slog, man. It’s, that is a–
Bill Bishop: It’s three volumes, isn’t it? I’m looking ‘cause I think I have it on my bookshelf.
Chris Hayes: It’s really long and very sort of claustrophobically embedded in the day-to-day communications and decision-making of inside the Chinese state and party apparatus. And one thing that’s interesting to me is like, at some level, like a lot of this stuff is, you know, recognizable and relatable in human politics have certain, but there’s a distinctness to like, what would I say? That the language of sort of factional and ideological combat within the party is just so different than anything I’ve really encountered, except in like, you know, when reading about factional fights in other places, particularly in some communist countries and early, you know, Bolshevik purges.
But then there’s this specific distinctness of Chinese sort of governing culture and all these things. And the reason I bring this all up is just like, it feels like lame and problematic and suspect to be like, wow, that’s a really different system. But man, does it feel like a different system.
Bill Bishop: No, it is. And it’s also, I mean, it’s good you brought it up because one of the things that has came out during the, you know, around Tariff and Liberation Day, you know, that sort of the system, that some of the party propaganda apparatus started circulating, talking about this essay Mao wrote in the 30s called “On Protracted War,” which is during the war with the Japanese. And it was basically like, how do you fight when you’re in weaker position in some ways? And it’s all about fight, take a break, fight, fight, talk, talk, right? As the Chinese say, sort of, and how do you regroup? How do you, you know, how do you find your enemy’s weakness? How do you plan for this?
And there just is, you know, you look at Xi Jinping, you know, Xi Jinping at one point when he was vice president, he was in charge of party history. He is steeped in the history of the party. He’s steeped in Mao Zedong and how Mao was able to overcome rivals both externally and domestically. And so, and he’s also steeped in how brutal the system is. And so, this is not like dealing with Macron or dealing with Starmer. This is a completely different political creature who has an entirely different view of how you sort of deal with these struggles.
Chris Hayes: Yeah, and not only that, I mean, one of the things that seems hitting home to me, and this is the thing I always say in the American context, when I’m talking to people about politics, I always say to people, when you’re looking at American politics and you’re thinking about people making decisions because of quote-unquote politics, interest group lobbying, financial donations, you know, mobilization by citizens, the thing I always say to people is don’t underestimate genuine ideological commitment as a motivating force of American political actors. Like, often it really is the case that like, American politicians just do stuff because they genuinely believe in it. And the reason I say that is ‘cause I actually think that’s really important. But one of the things that comes through in this book is that there’s a ton of interpersonal struggle and Machiavellian calculations about who’s on top and who’s not. But there’s also just a tremendous amount of sincere belief in the ideological project of the Chinese Communist Party. And how palpable that is and how important that is to understanding the decisions that are being made of like, there’s just a lot of actual belief there in the project by the leaders.
Bill Bishop: Right, and a belief that ultimately that China should be the more powerful country in the world than the U.S. Now, there’s a lot of the motivating enemies is this sort of continued struggle with the U.S. from the Mao era to today. And ultimately, as Xi, you know, this is, China is more powerful than it’s been in many hundred years. They’re much closer to achieving that part of that goal than they’ve ever been.
Chris Hayes: Bill Bishop writes the fantastic substack called “Sinocism.” He’s an entrepreneur, foreign media executive, more than decades experience living and working in China. I read him all the time.
Bill, that was great. Thank you so much.
Bill Bishop: Thank you. That was really a pleasure. Thank you.
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