Will Japan & Australia Stand Up to US Bullying Over Taiwan? W/Einar Tangen & Warwick Powell

All right, hello everybody and welcome to Geopolitical Trends, where truth matters. Excited to be with you. I'm even more excited because my two dear friends Einar Tengen and Warwick Powell are here, so you're gonna be in for an interesting conversation. But before I bring them on, guys, I just want to give you a quick heads up about tomorrow. Remember to join me for my live conversation with Dr. Ken Hammond. You all remember, I'm sure some of you remember, uh, Dr. Hammond. Uh, he's also been on the channel, uh, before. And on, on the same, uh, on in the evening tomorrow, I'm gonna be having a conversation with Carl Zah. So he's gonna be here, uh, as well. So, so let me bring in my guests here and we're gonna get on with our conversation. So There is Warwick, and here is Einar. Good to see you, gentlemen, and thank you for being here.

Pleasure.

All right, yeah, to those who do not know, let me start with, uh, just a brief intro, and we're gonna get into the topic. So I'm gonna start with Warwick Pao. Uh, he— Dr. Warwick Pao, that is— he's an adjunct professor at Queensland University of Technology. And a senior fellow at Tahir Institute in Beijing. He is also the author of China, Trust, and Digital Supply Chain Dynamics of a Zero Trust World. Here is the book copy here, guys, for those who are interested in that. So, uh, Einar, Einar Tengen, is a senior fellow at Tahir Institute in Beijing, and he is also a founder of Asia narrative. So, so once again, welcome gentlemen, and, uh, I am going to start with the— I'll take, uh, I'll start with you, Arek, please. If you can just give us your assessment, uh, as to where do you see the US pressure regarding Japan and Australia over Taiwan? Will they agree or will they push back against the US?

I've been asked this a little bit in the last week, particularly in relation to Australia, and my general sense is, well, actually I don't know whether Australia will push back or not, in part because, David, that Australia does have a long history of getting involved in other people's wars. And in fact, a friend of mine recently took a delegation visiting Australia to a war memorial which listed all the fallen soldiers in the various conflicts that they'd been involved in, and they were all overseas. And the visiting delegation was incredibly surprised that in fact Australia had gone overseas on so many occasions to fight in wars that had nothing to do with what was happening to Australia itself. So Australia does have some form, in terms of traipsing off and gallivanting around the world under one pretext or another. So I don't know, um, but I am quietly hopeful, if not entirely optimistic, that Australia, uh, will ultimately resist, um, in part because the world is changing. American primacy in Asia is waning, and it is a reality that has caused quite a deal of anxiety in the Australian policy establishment, security and defense establishment. But, um, but these are realities, and it is hard to conceive of an environment where, short of absolute stupidity, Australia would send its own troops into fight someone else's war, um, in the region. So fingers crossed.

Interesting. Uh, the same argument, the same question for you, Einar, if I could have, for the community to have your insight. How do you see it play out?

Well, Warwick is much closer to the situation than I am. I'm in Beijing right now, so I don't really have the ability to comment on what's happening internally. However, From a regional strategic view, this to me, it seems very clear. Washington is stirring the pot. What they want is to put pressure under, under Australia to say that they'll commit. But the fact is, this would be against their economic interests and would be certain to result in business moving away, Chinese business moving away from Australia. It would be a big hit to the, um, to the economy. The one, one of the major red lines is a One China policy. Uh, saying that they would come to the defense of Taiwan is, is kind of like, uh, China saying they would go to the defense of Puerto Rico. Uh, it just doesn't fly. And this would result in economic sanctions, it would downgrade the relationship. And possibly put Australia on a downward economic path because so much of what they produce is going towards China. So, I think this is just Washington trying to press Australia. They feel that this is the time to do that and, you know, extract more value than they could otherwise. Australia says they don't. Donald Trump can say, well, if you don't stand with me, here's another 10% tariff.

Interesting. And we will touch later on, especially with you, Eric, regarding the visit of the Australian president to— or the Australian PM, rather, to China. Yeah, yeah, we'll touch about that one as we move forward. I'm gonna stay with you, Einar, and I'd like to have your take on your assessment, uh, regarding, uh, the Philippines President Marcos Jr. visit to the White House. Now, in your opinion, did he get a deal or did he get marching orders?

Marching orders, uh, obviously the United States would be the one that would be in charge. Uh, they would say, if you're committed to putting troops on the ground which the United States has not done. I mean, this is the irony here. Here's what you're going to do, but we're not, we're not going to tell you what we're going to do. We're going to remain somewhat ambiguous about this while offering you up as proxy sacrifices to this situation. So, I mean, this is just Donald Trump playing cute. There's no endgame to it. There's no advantage to the U.S. by making these kind of pressures. It is just simply, as I said, the kind of inanity that Donald Trump likes to engage in under the theory that he's playing 16-dimensional chess.

Interesting. Warwick, how do you see it?

Well, the US is grooming a number of actors in the region in the hopes that they will be willing proxies for them. The, the American presence in Asia has been declining both economically and also militarily. The slow process of retrenchment of American capability and force projection in Asia, um, has not altered American doctrine, which is to pursue primacy in all theaters globally. It just has to adjust its means. And principal way that it is seeking to do that is to mobilize and compel allies, client states, and former colonies to fill the breach. And that means being at the front line of any potential conflict, bearing the brunt of any hostilities, and of course putting other countries' citizens in harm's way fighting America's wars. And we're seeing that playbook unfold in Asia just as, just as it has unfolded in Europe over the past few years. Unfortunately, um, the Philippines at the moment, um, is particularly beholden to this particular agenda. To some extent, it is a function of domestic politics, um, and to another extent, it is of course a, a function of the intimate historical connections between the Marcos family and the United States establishment. And these intertwining threads, I think, place the Philippines in a difficult and invidious position insofar as its own interests are concerned, as well as its contributions, if you will, to, uh, provoking regional instabilities. This set of instabilities is actually not in the Philippines' long-term national interests, and in fact I would suggest that it reflects also an internal question in the Philippines about its own post-colonial national identity. Until these issues are resolved, the Philippines will unfortunately be pulled and pushed by greater forces, particularly those that, that continue to have a military presence and hold the purse strings in very personal ways. In relation to parts of the Philippine national leadership.

Very interesting. Warwick, just to stay on this point before we move on to our next topic, when you realize that Donald Trump has agreed to lower the tariffs by 1%, which to me, it's an insult anyway, but he's saying, well, you guys got a better deal than some other Asian nations. I'm sure he was referring to Vietnam, and I think he was referring to Japan, which we will talk about Japan later on. In your opinion, Aynor, how do you see the US-Philippines trade versus China-Philippines trade?

Oh, there's no comparison, uh, in reality. That the— if you start looking at it though, the big, um, difference is in the remittances. About 40% of the $14 billion, in remittances that come in, uh, each year come from the United States. Now that could drastically change. There's a lot of concern about, um, you know, what's gonna happen to Filipinas, um, who are working in the United States. Are they gonna be wholesale, uh, you know, pushed out and that type of thing that would end the remittances or they'd have to go elsewhere in order to earn a, a living. And right now the economic situation globally is not great. So, uh, that could be a big factor. But, you know, Marcos is going back with his hat in his hand. He achieved nothing. No one believes that 1% is somehow a huge victory. Uh, once again, a special relationship. He's, uh, acquiesced to everything that the United States has asked for in terms of military bases, stationing missiles, uh, and putting the Philippines in harm's way. But there is a political other side to this. This will be unpopular. You're starting to see a downgrade in the economic growth of the Philippines. They're going to be hit hard by these tariffs. But there are— in waiting in the wings is you have Sara Duterte. Now, it's not absolutely certain where she's going to go, but she's— it's expected that she would be much more pragmatic in her approach to the Philippines-China-US situation. So at this point, um, you know, he's coming back. He's going to be very unpopular. Uh, there are going to be questions asked, uh, and the question is, why is he so compliant, uh, with U.S., uh, demands? Uh, his family, you know, absconded originally with billions of dollars many, many, many years ago. A lot of that money is supposedly held by the United States. If that is what the carrot that they're using, that they'll at some point release that, I think he's deluded. They will not. I cannot see Donald Trump releasing any kind of cash, uh, to some other person unless, uh, he's getting part of it.

So they understand— I hope they do understand that they're going to be used by the United States. Sadly, what— that's the reality. So, uh, Warick, I wanna, I wanna address one of the, uh, uh, you, you had recently an interview with Dr. Yan Lian, uh, and I watched that interview. By the way, guys, I'm gonna post in the chat box a link to that particular, uh, video if you are interested in wanting to learn something about it. Very, very interesting. You mentioned, Warwick, that the director or the governor of the People's Bank of China, his name is Peng Gongxin, and I think I have a picture of him right here.

Yeah, hold on.

There we go. Can you hear me?

Yes.

Yep. Okay.

Okay.

Yeah.

I just wanna make sure, um, you mentioned that, that, uh, there are 4 key points that the governor has talked about. Would you please just share with the community, uh, your perspective on that particular, uh, uh, uh, statements from him?

Yeah, happy to. And I'm glad that, that I was pre-warned because I had to dig up a copy of the speech again just to remind me of some of the details. But just before I touch on that, I might just also just draw attention, I think, to one other point in relation to how we think about these trade negotiations and the kind of comprehensive deal. And it is tempting to view them always through this frame of sort of geopolitical bargaining in terms of who won and who lost and who backed down and who didn't. There's another aspect to of this, and that is, um, actually looking at what the economic significance is. So rather than the theater of the negotiation, um, and theater of, you know, the, the event in the White House itself, um, which is a little bit tilted in favor of, um, of, of America, you know, that's the whole point of that setting. The other issues to be thinking about is what does this mean economically, and Case of the Philippines, we have a very interesting situation where, um, a large part of American exports to the Philippines is actually, um, uh, microprocessors, and a significant part of Philippine exports to America is actually electronic goods, including computers. So these two things are actually related to each other. So if America wants to export more to the Philippines, um, such as its microprocessors, it will necessarily require to export more computers and other electronic goods to America. And electronic goods actually have greater value than microprocessors. So as America increases its export volume of microprocessors to the Philippines, it will actually result in widening trade deficits rather than narrowing trade deficits. Visits. So I think it's important for people to keep in mind what the economic significance of these things are. The other thing is, whether it's 20% or 19% is largely immaterial because at the end of the day, uh, this is actually a consumption tax. So it's a tax on buyers of imported goods from the Philippines, and the buyers, whether they are wholesale importers or ultimately retailers and household or enterprise consumers will be impacted by rising costs of up to 19%. So that's the second thing to, to remember in all of this. The third thing to remember is actually the emerging variability of tariff rates of products into America. And I'm not convinced that there's actually any grand design behind any of these variations. And of course, variations in in tariff rates may or may not impact the future spatial redistribution of economic activity, particularly in terms of trade with the United States. Unless there is a significant differential between a tariff applied on similar products produced in one country or produced in another country, and that, that differential is big enough to make a difference in terms of existing cost differences as well as impact the qualitative aspects of how products differentiate themselves from each other, these tariffs are largely going to have limited economic effects, um, other than the additional cost burdens on Americans. So I just wanted people to remember that, that, yeah, on a day-to-day basis, looking at the theater of things, we can have one perspective on what's going on. But when you actually look at the economic significance of these policy decisions, there is actually something else going on as well. So this speech by, um, Pangongshan, um, from the governor of the, uh, central bank was important because he touched on four main things. Um, the first one was a critique of the international financial system as it exists today, particularly in terms of its governance and the fact that it is not representative of the growing strength and relevance of economies of the Global South. So the International Monetary Fund and the World Bank continue to be dominated by the countries of the North, the Global North, and his argument is that the first flaw in the system is that it is no longer representative in a fair sense of the of the emerging economic power of the developing world. The second thing is, is that as a result of that, the global financial architecture does not serve the Global South fairly and equitably. And in fact, there is an argument that the financial institutions that emerged in the '60s, '70s, '80s, and and continue to dominate landscape today, um, have actually detracted from economic development in the Global South. So that's his first point. The second thing he touched on was the ongoing evolution of cross-border payments. Historically, uh, cross-border payments, particularly over the course of the last 30, 40 years, has been dominated by the SWIFT interbank messaging network and the outsized role of the US dollar in the settlement of cross-border accounts. He launched a critique, in effect, of that, in the— again, on the basis firstly that the dominance of the US dollar was no longer representative of the relative strength and the relative volume of trade that was taking place without the United States being involved, and secondly, that the existing architecture was costly, um, so it was slow, it was expensive, and in fact increasingly weaponized. So that was an ex— an important, um, intervention. The third thing he touched on goes to an assessment of post-financial crisis— so this is 2008 financial crisis— institutional and regulatory reform that aims to create Stability in the Global Financial System. His argument is that, um, notwithstanding the reforms that were implemented since the financial crisis, such as Basel III and increasing or enhancing the systematic oversight of financial institutions, that there are still a number of important problems in the regulatory architecture globally. I won't bore your listeners with those elements, but he touched on the challenges and problems of global financial stability. And the last thing he touched on, which I mentioned earlier but which he really brought to a head at the conclusion of his speech, was actually around questions of the future of the governance of international financial institutions, arguing very strongly that without substantial reform and without the Global South actually having a fair say in how these institutions operated. We are heading into a period in which global finance will become less representative, less useful and functional, and ultimately alternative systems will necessarily emerge, as they are already doing, as a parallel alternative to what are in effect failing institutions. The importance of the speech was not just the substance which in and of itself was significant, David, but the fact that this is, I think, the first time that the governor of the People's Bank of China has, while still using the diplomatic tones that you often get from central bankers, actually laid out a fairly comprehensive framework of concern and critique of the global financial architecture. And this hasn't been done before.

I, uh, well, thank you. So first of all, thank you for that. To those who just joining us here, I am here with my friend Warwick Pao, joining me live from Brisbane in Australia. And of course, Einar Tengen, which we lost, he'll be back here. He was joining us from directly from Beijing, so he'll be, he'll be back here. So, so thank you very much, Warwick, for sharing this. And because I always get concerned about, at least for our community here, that I always want them to learn something from my guests when they come here. And when it comes down to the financial aspect, is very, very crucial. And I speak for my country right here, the financial issues that is going on right now, and how Americans, an average Joe, average Jane, are struggling to make ends meet because of where the, the value of the dollar is vis-à-vis what Trump's policies are. And this is why I, I thought of you, uh, when, uh, you did that interview with Dr. Yanlian and touching on the financial aspect, because finance impacts geopolitics and vice versa. So that was one of, uh, one of them.

This, this issue of the dollar, I think, is, is, um, it's important for the rest of the world, but it's actually just as important for Americans. Um, as you know, and as I'm sure the community knows, um, President Trump has said on a number of occasions that, uh, he believes that it is imperative that the US dollar maintains its position as the global reserve currency, and that in fact losing that status is akin to losing a world war. Now, I think that that is something of an exaggeration.

Yeah.

Uh, in terms of being akin to losing a war. But I think that, uh, he does go to or raise some important issues for Americans to actually deeply think about. And that does go to the standard of living that the structure of the global system and the role of the United States dollar within that has afforded Americans. So for many decades, America has been, as we know, a net importer of many goods, and that has been possible because of the issuance of US dollars domestically and the acceptability of US dollars globally. Without that, American living standards would likely be considerably lower today than they already are. The future is actually quite challenging because in fact President Trump has contradictory objectives. On the one hand, he speaks of maintaining US dollar hegemony or primacy, but on the other hand, he speaks of revitalizing industrial production in the United States. The challenge with that is that a high dollar makes it less likely for industrialization to reoccur Um, but a low dollar, um, undermines American living standards. So this is the contradiction that is now at the heart of, um, American economic policy vis-à-vis the rest of the world.

Very, very interesting. And, and the idea of, is this why, uh, Warwick, the Chinese went ahead and dumped, uh, some of the debt, uh, uh, that they hold? As you, as you all know, guys, Japan and China are the two major countries in the world that are holding our debt. So, so China recently, uh, has gone on a spree dumping. Is this the reason why? Because they are foreseeing what's coming.

Look, I put this into a slightly longer frame, um, and personally I would probably be less inclined to describe it as dumping. Um, though, and, and in large part because there's a few different things going on. First thing to remember is that China and Japan, as you mentioned, are significant surplus countries vis-à-vis trade with the United States. What that means is that China and Japan accumulate, um, a substantial amount of United States dollars. So that's the first thing that happens.

Okay.

The second thing, of course, is, um, is, well, what do you do with these dollars?. And the obvious thing and the natural thing that happens is that the dollars are ultimately recycled into American assets of one sort or another. And therefore, um, US Treasuries, um, is one of the most significant assets that these dollars get rotated back into. So countries and their central banks will purchase, um, Treasuries, um, because they, uh, have an interest attached to them, whereas holding dollars doesn't. So over time, both China and Japan and some others have accumulated substantial US Treasuries because they've, you know, operated trade surpluses. Now, what has happened since about 2013 or thereabouts has been a progressive decline in the dollar value of the Treasuries that China holds. Um, there has been some acceleration in recent times, and I guess that's what's— people describe it as, as a dumping, but it is part of an ongoing and long-term pattern of progressive reduction. So much so that the value held today, um, is about 40% less than it was a bit over a decade ago. Um, so this has been something that's been going on for some time. Part of what's going on with that, David, is that as the treasuries mature, rather than rolling over and buying the next tranche, um, China is simply not rolling them over. And so, uh, so rather than being a process by which they're dumping or selling treasuries, simply just not buying the next lot as their previous tranches mature. The reason why, uh, China actually has been quite cautious and prudent in how it's dealt with its reductions in treasury holdings is that it has no reason to oil the market. Dumping treasuries in large volume would require the market to absorb a very substantial amount of treasuries, um, which would drive up yields. Um, that's actually not in China's interests either. So, uh, you can see that the holdings have been part of a managed reduction rather than, um, a, a hasty, you know, sudden move. Now, all of this is happening in part because there is less need for China to hold on to, um, US financial assets. And these assets are liquid, of course, which means that you can convert out of those back into US dollars. But the real question now, particularly with the changing nature and contours of international trade, the weaponization of the US dollar, uh, and sorts of factors— why is it that a country like China would need to hold a substantial amount of American financial assets? And the short answer is, is that it doesn't. And, and so what's going on now is part and parcel of the, the evolution, the structural evolution of production systems around the world, and as a result of that, the trading relationships that exist. We're not turning back, by the way, you know, the world isn't going to go back. So President Trump's ambitions to try to maintain a position of, um, uh, financial primacy in the sense of how the US dollar's function as a global reserve in the past, um, is simply not going to become— it's not going to return. You know, the system is going to change, and the US dollar will diminish in terms of its relative status in the world. But of course, because the American economy is a big economy and, uh, and an important part of the global system, The US dollar will, of course, continue to play a big part in what happens in the future.

But still, in Washington, there are certain types of individuals are living in denial regarding where the status of that dollar is and what you talked about, where they're just having a hard time accepting that reality. And this, in my humble opinion, is tied to the shift from a unipolar to a multipolar system. We are in it whether we like it or not. And that's a fact. And I think just some entities within Washington— I used to work there, so you kind of understand who's pushing the button in certain directions— they just don't want to admit it and they don't want to accept it.

So yeah, looking at the census, David, there is this displacement anxiety, right? As the American system is being decentered, And I say that because often people talk about decline, right, um, as if it's, it's necessarily going down and backwards. There are aspects where I think it's probably reasonable to at least think about this question of decline, but another way of describing what's going on is really just a decentering of the American economy within the global system. Again, that's not to say it's unimportant, it's simply to say that the system no longer has one single center around which everything else revolves. Now, that leads to a whole range of anxieties, of course. And a part of this anxiety, I think, is, as you've described, this sense of denial. Now, that really comes from grief. And these folk are grieving the loss of their central position. And the first reactions to this kind of loss, of course, is to deny it. It's not happening. And to be angry about it, right? So, you know, these are the two typical emotional and psychological responses to experiences of significant and actually irreversible loss.

Very interesting. Before we move on into the next part of this conversation here, sorry that Einar Tangen couldn't rejoin us back here. Must have been some technical difficulties. So we will have him again here, guys. I'll have both Warwick and Einar once again together. So, uh, you have my word on that. So I wanted to go back just to mention this one just for the audience regarding the governor of the central bank, the, the Chinese governor of central bank, Ben, uh, Gong Xin. And, uh, to my knowledge is that He's been described, and please correct me if I'm wrong, Warwick, he's been described as a taskmaster. And that even President Xi Jinping sort of is not in favor of letting him retire. That's how good this guy is. Will I be wrong in this assessment here?

I've never worked for him, so I can't be certain of that. But, um, what he's talking—

they're talking about the policies he implemented. Because when you look at the last 4 years, literally where China is, and I'm looking at it from that financial aspect, the way how they managed— I mean, I look at it just with trade. We, we try and we're trying to bully our way and end up backfiring.

Yeah, look, he, um, he obviously leads a team of, um, uh, you know, very serious and well-informed people who think very carefully about, um, uh, the state of the world, and of course think very carefully about financial stability. Uh, you know, economic system stability is quite central to China's driving ethos, and that goes to the very heart of ensuring that the national economy and its society is able to develop in a stable, um, and secure way. So financial stability is actually quite, uh, central to all of that. The other interesting thing is that, uh, as he has led the People's Bank of China, we have also had, uh, the development of, I think, um, a more explicit view about the finance system in terms of China's own economic development model. So coming from the political powers in Beijing, uh, there is an explicit call for finance to play an important role in China as a great nation and to contribute to economic development as a modern nation in Chinese terms. We also have this other broader idea of finance being are there to serve the real economy, right? So these two things are central to the mandate, if you will, of the People's Bank of China from a strategic alignment point of view with the overall policy imperatives of the national government. And there is no doubt that the PBOC has executed its role very, very well. If you look back just a little bit further— not that much further, but only to the aftermath of the global financial crisis It was clear from then that, um, the People's Bank of China began to think very, very seriously about the state of finance and about how global financial interactions, uh, exposed the Chinese financial system to the risk of contagion. And at the same time, how it was that the domestic financial institutions needed to continue to be modernized to help China's own development ambitions, to contribute to China's global obligations and strategic objectives, particularly through financing Belt and Road Initiative-related projects, and deliver that, that institutional robustness that would enable China to weather future storms. And notwithstanding a couple of episodes of potential risk during the course of the 2010s. We've reached 2025 with China's financial system in a reasonably robust state. Around 2013, 2014, we had the emergence of, uh, peer-to-peer lending platforms, which ran the risk of destabilizing finance domestically because it really was unregulated and functioned largely as part of the shadow banking infrastructure. We then moved into 2016-2017 when blockchains and tokenization took China a bit by storm, like it did elsewhere in the world, and we saw a proliferation of initial coin offerings, which again caused some disruption to finance, but more importantly, it caused a bunch of social disruption as people lost money. And of course, we've had the extensive overleveraging in the property sector that has brought the heel in recent years. So there have been episodes in which finance has become destabilizing, whether it's destabilizing for an industry sector such as property, or whether it was more socially destabilizing as a result of what is in effect shadow banking.

Very, very interesting. I want to just play a clip here quickly. Liking this video so far? Don't just be a watcher. Go ahead and hit the like, share, and subscribe button, and don't forget to tap the bell so you will not miss any of my videos or live streams. This way you will be supporting the channel that stands for the truth and objective reporting. The choice is yours. Thanks for your support. Before we move on to talk about which we're going to be talking about Australia and China, because it's very, very important. Before that, I want to just get your, your insights into the recent stats of the Chinese GDP. Which, by the way, some sort of exceeded the analysts' expectations because they were putting it at a certain number. That is not what I want to focus on. What I want to focus on and get your take on, Warwick, is that the idea of this Chinese GDP growth, did it defy the US tariffs? In other words, despite the US tariffs, still the Chinese economy performed far better than what analysts were expecting. What do you contribute that to?

Well, largely the Chinese economy grows because of domestic reasons rather than trade, and that's the first thing to remember. Um, and, uh, and well, I'm very pleased that Ina's been able to—

Ina is back.

I've had to fill big shoes and for the last 10 days.

I think you probably did better than anything I could add. So I don't, I'm not going to feel for you there. I had a construction field going on in the background. I was trying to get them to stop.

I was wondering what that was. And I thought, because I have a construction site next to me as well, but fortunately they've They must be taking morning tea or an early lunch. Um, the, the Chinese GDP, or China's economic growth, um, is largely a function of domestic factors. Um, it is underpinned by ongoing growth in investment demand and a growing role for domestic consumption demand. So domestic consumption demand contributed, um, actually a little bit over 50% of GDP growth, and about 40-odd percent, well over 45%, came from, uh, government or, or investment demand. The net— the, the impact of net trade, including trade with the United States or the lack thereof, actually is only about 2% of China's GDP. So it's important to keep trade in that context because trade as a contributor to GDP is measured by, um, by net trade. Uh, the, the, the tariffs certainly, um, caused firstly a significant drop in Chinese trade to the United States and vice versa. It then saw some recovery when there was the, uh, the, the détente, uh, that was achieved, which was to bring things back to, the levels that they were on the 1st of April. And we have seen since then a little bit of front-running by American importers who perhaps are anticipating that, um, there will be problems again in the future, and they've ramped up their imports from China. So there has been a spike in, in imports from China from America in the last last couple of months. But trade in and of itself with the United States is a relatively small component of the Chinese economy. The— as I mentioned, China's economy in the first half of the year grew largely on the back of sustained growth in investment, capital formation, consumption growth, and retail expenditure. All of these exhibited growth rates in excess of 5%. Underpinning all of that actually is credit growth, and the credit impulses have been very strong over the last 12 months. In the last 12 months, so data for June showed that compared to a year ago, credit growth was some 8.9% higher than it was at the same time last year. So, you know, and, and in fact, modern financial economies function and grow because of credit being injected. Into the, the system by way of new liquidity. So China's economy has, um, has, uh, been able to weather the storm, so to speak, and it's done that, as I mentioned, largely for domestic reasons, but also because it continues to have strong trading relationships with the rest of the world. So what it lost in terms of trade with America, it more than made up for trade with other parts of the world, and That's an important takeaway because what that points to, again, is that American influence in the global trading system has been decentered, that other parts of the world are growing in importance, and therefore, um, other parts of the world can in effect act as offsets for the relative decline of America's role as a, as a global importer.

Very, very interesting. Einar, I'm, I'm glad you're back, man, because, well, I was nervous. Anyway, I, I wanted to get your, your insights, and the community wants to learn about, uh, whether— and I know, uh, Warwick mentioned some part of it, but I'd like to have your insights regarding the Chinese GDP, which has sort of surprised some expectations from some analysts. And the question to you, Einar, is that, is this despite the tariffs, which means the US tariffs didn't work, didn't hold the Chinese economy from moving forward? What do you contribute this growth to?

Well, I think Warwick covered the numbers, but, you know, to simplify it a little bit, What you have is a situation where the U.S. cannot separate it from China. If it says, okay, I'm not going to buy from China, what do they end up doing? They buy from Cambodia or Thailand or Malaysia. Guess where those things come from? China. So, you know, you can— if anyone's interested, you can just go back and take a, you know, a direct look. For instance, take Vietnam. Look at how much the increase in exports from Vietnam to America, uh, went up. Then take a look at how much Vietnamese imports from China went up. You'll see a direct correlation. So I mean, this, this is a situation when you have 35% of the world's, um, you know, manufacturing, when everything like down to a little screw, down to, uh, you know, chips— I mean, China actually produces a lot of chips. The real— the chips that are actually used in vacuum cleaners and, you know, consumer items and things like this. These are things you cannot do without, you know. You can't tell your children, ah, well, your shoes have holes in them, forget it, just bind them up with cloth and go off to school. You know, even backpacks. I mean, when Americans go to get their children ready for school this coming fall, they're in for a huge shock. Everything from pencils, everything their kids use— crayons, paper, etc.— is going to be more expensive. And that's where I think the, um, you know, real change is going to happen. Donald Trump is going to be confronting a very, very angry group, including his core, who are already feeling that things aren't going well. Now, in terms of China, um, it continues to do well because it's essential, but it doesn't mean there isn't pain. I talk to people in cities. I've been doing some traveling. Things are tough, and a lot of Chinese companies are looking abroad, but they basically have written off the United States, and they're uncertain about Europe right now. They're, they're looking to Africa, South America, ASEAN, the 'Stans, Russia, anywhere, Middle East, anywhere except the traditional partners of China. So you can see a global shift, and it's not just that they're looking, they're producing results. You start looking at the double-digit increases between China's trade with ASEAN as compared to, you know, it's decreasing trade, especially with the United States. You can see where the trend line is going, and it's not going to be good the U.S. Donald Trump has been bluffing. He either doesn't understand or chooses to ignore the economic realities and gravity, and he's simply trying to beat his way to the top. Unfortunately, his big tariff stick is just— you know, I want to make this very clear. You have a president of the United States who's negotiating with other countries as to how much his consumers are going to pay. Because think about it, all the tariffs are paid by American consumers. So when he says, oh, I got 19%, I got 20%, that's a direct defeat for the American consumer because they're the ones who are going to pay that. Now, he thinks that he, you know, has this big slush fund, it's going to be $300 billion a year.

Well, the—

I hate to say this— American, uh, the budget is $6 trillion or just under $6 trillion, and $300 billion isn't going to make a dent in that.

Well, actually, you are right, because I just read the report this morning from Bloomberg that, for example, GM, the tariffs that Donald Trump imposed cost GM $1.1 billion for the second quarter. Of this year. So you're absolutely correct, Einar, that that tariff thing is translated to us paying that, given that the inflation is way up now anyway, it's moving up into that direction. So I want to move into one particular event that is taking place, and I'll stay with you on this one here. And this one has to do with the European Union representatives are in China. What do you make out of this? Are they now pivoting towards China, or is this just wanted to stick it to Donald Trump?

Well, the European Union is a headless horseman. I mean, you have 26 countries who can't agree on anything. What did they bring to Beijing?

Nothing.

You start looking at what they said before, what they said during, what they posted afterwards, all it was was a broken record litany of all the things that they want from China, but not a single thing about what they were prepared to do to affect the compromise. And then you have von der Leyen first poisoning the well by saying China is somehow support— you know, wants the Ukraine war to go on. And then, you know, coming here and say, well, you know, things are at an inflection point. That's a threat, but it's an empty threat. Europe has the same problem as the United States. China is an indispensable partner, and it goes both ways. I mean, China really wants to do a deal with the European Union, but they're not interested in being a straw horse in von der Leyen's idea of negotiating with the US. Basically, we'll go to China, get them to throw some concessions our way, and then we'll go back to the US and say, hey, you know, you could swing the other way. Von der Leyen, remember, if you look at her rhetoric over these years, she does not like China. She sees it as a threat. Forget the friendly handshake. The fact is she only changed her tune When Donald Trump started imposing these unilateral tariffs, which have confused and enraged European capitals across the board, they just don't know how to respond and they don't know how to come together. And there's nothing that they can offer because they're leaderless.

Yeah. Warwick, you've been in Europe recently and you and I, we talked offline regarding your trip to Europe. And based on some conversations that you mentioned to me, Do you foresee any good outcome out of the European Union representatives in Beijing?

Look, I think I nailed it. You know, von der Leyen brings a patrician's sensibility to dealing with the Orient, and hectoring and lecturing others that you want concessions from is hardly going to get you very far. Interestingly, I think von der Leyen talked about, you know, this idea of rebalancing the relationship. I mean, I think that there's an irony in all of this because for the 500 years, the relationship between European colonialism and places like China has been anything but balanced. Um, so, so perhaps, um, the lesson to be learned out of this particular trip, particularly for the European delegates, is that they need to start thinking in terms of treating others as equals. Look, the situation in Europe, I think, is very messy. It, as Aina indicated, we have 26 member states of the European Union, most of whom can't agree on much. There are internal divisions amongst nations on critical issues, just as there are growing divisions within countries themselves as a result of declining living standards and the growing gap between the promises that are made about European revitalization, competitiveness, and being the pinnacle of human civilization and the experiences that many people are having on the ground. Yeah, Europe needs to resolve, in my view, my humble opinion, perhaps arguably not that humble at times, but, um, but my observation But you're always right, so don't be humble. Well, I can accept that I'm not always right. No, you are.

I mean, you pat pretty consistently. They should have you in the cricket matches for Australia. You'd be tearing all the rest down.

Look, Western Europe needs to, I think, resolve some very foundational questions. Right? It, it actually needs to, um, come to a view, um, on the Russia question. This is a 300-plus-year-old question. It needs to actually come to a realization that Russia is a geographical neighbor. It is substantial in size. It's not going to go away. And it must have a mentality that enables it to have a functional modus vivendi or a détente with Russia. That's the first thing, right? Without resolving this, um, and continuing to carry on as if somehow you can defeat, um, Russia and that, uh, this is a meaningful foreign policy objective is a total distraction from the problems that Europe has. Its second problem actually relates to its sense of connection to a transatlantic empire. So the issue is, is does Europe see a future as being a pivotal part of Eurasian revitalization, notwithstanding all of its historical difficulties with Central and Eastern Europeans and the people of Slavic origin? Um, or does it continue to see itself as somehow tethered to the American Empire. And until it resolves that question, it's going to largely run around without any sense of strategic direction whatsoever. And, um, and I think the kind of rhetoric you see, um, on these sorts of visits to Beijing, which really, um, is, uh, is a formality to mark 50 years of formal diplomatic relationships, but without an agenda, right? What's the the agenda? Oh, we want to rebalance the relationship. What does that mean? Um, you know, where, where is the common ground that can actually advance both Western Europe's objectives together with China's objectives? Um, was there any substantial discussions around that? I saw some reports, for example, that there may be agreements around shared ambitions concerning, you know, the, the greening of, of the economic future. But again, what does that mean? Um, could they actually arrive at serious discussions about the future of AI and its governance, about technology questions, when you've got the Americans on the other side largely saying to the Europeans, um, get out of our road, get out of big American technology's road, so that American big tech can come and gobble up your market and continue to dominate the data, um, ecosystem that currently runs Europe. So Europe is a mess, um, it has big unresolved questions, and these questions are actually not ones that people from outside of Europe can actually answer for Europe. The answers come from within Europe, and they will come one day because reality will impose itself upon, um, upon the institutional leadership that seeks to, well, that holds the positions of leadership and guidance for, you know, 600 million or thereabouts people on this planet.

Interesting. Thank you so much for that, Dave. Einar, I want to ask your opinion on the statements regarding Japan. That just been mentioned here by the Treasury Secretary, uh, uh, Bessant, who hails financing, uh, sort of financing pitch that is in Japan trade deal, uh, stating that Japan now is going to be investing about $500 billion in the US. On the other hand, I read elsewhere that Japan has played Donald Trump. Which is which?

Well, the $500 billion is definitely a play. I mean, you can start looking around the world. A lot of leaders have promised big numbers, and they promised big numbers during Trump's first presidency. How much actually materialized? Very, very, very little. Basically, you have people who understand that you praise Trump You give him a big number and he leaves you alone and moves on to his next potential victim. He, he wants people to bow down to him. He's, you know, a typical schoolyard bully. He wants everyone to know that he's in charge, and if you, if you mess with him, it's, it's going to be bad for you. But in terms of Japan, uh, that 15% is not playing the U.S. This has serious consequences. It's going to have, uh, add-on consequences to the automotive industry, which has already come out and said, look, you're, you're killing us here. This is the exact opposite. You, you say you want to have car companies develop here in the United States. You're killing us. Uh, GM, as you mentioned, $1.1 billion in one quarter alone, and it's going to bleed red even more. So Donald Trump is not re-industrializing. The United States. He is in essence killing it. So this, this is not a, a good look. Um, but when, you know, Kishida, who is chronically wounded by this last election where he lost, he lost the upper house, uh, he's now in a minority government, uh, he's determined to cling on to it. And here's the irony, he says, I made a bad deal, 15%. Guess what? I need to stay around and make sure that bad deal gets done. I don't think this is going to, uh, you know, push the, uh, Japanese public. And you know what, Warwick, um, you know, before he was this eloquent doctor, uh, he was a hardscrabble political guy. He and I both know that the force he's talking about are the electorate who are not amused, and they, they will be speaking out quite forcefully, and they will be changing governments. I don't think— I don't give much chance for any government during this next 3 and a half years to have longevity, simply because the uncertainty that's there and the impatience of the electorate who say, look, you got to do something, you got to help me out here, and if you don't, I'm going to switch over. So we're looking at a prolonged period of destabilization, uh, no content, very little continuity, uh, in governments, and it's all being pushed by the United States, which says, oh, okay, let's make a new order. If the new order is disorder, there's nothing to be gained.

Well, you're absolutely correct, Warik, especially when— I'm sorry, Einar— when you have the—

We're interchangeable. We're brothers from different mothers.

That's why both of you are my friend. And this is why I found this—

Just the smarter one. Just the smarter one. I'm not going to hold that against him. For the rest of my life.

I, I do find that, on a serious note, I do find it interesting how the statements of the Commerce Secretary, which I'm gonna play a clip for you guys because I don't want— for you, the community, because you need to hear, and I'll have both Einar and Warwick comment on it. So take a listen, please.

Ahead of next week's August 1 deadline, FT did report yesterday that a potential deal would impose 15% tariffs on European imports, similar to the Japan number that we got this week. Joining us this morning, Commerce Secretary Howard Lutnick. Mr. Secretary, great to have you. I know you've been busy. Streets hungry for an update on the EU. What can you tell us?

Well, the EU really, really, really wants to make a deal.

I mean, what's happened is Donald Trump sent them a letter and said, look, if you don't make a deal, you've got a huge trade deficit. Deficit.

I mean, $235 billion trade deficit, which means they sell us more stuff than we sell them.

And so the president said it's 30% if you don't get a deal done. So you know how badly they want to make a deal.

Is 15% the new benchmark?

Well, look, the Japan deal, which I'd like to talk about, was amazing. I mean, not only are they paying percent, but they gave Donald Trump and the American people $550 billion, $550 billion to invest at our— and Donald Trump's discretion, the American people's discretion, to build in America the things that Donald Trump wants to build.

Yeah, um, yeah, I'm gonna stop that there because I mean, he got one, one thing right for me, in my opinion. Just to ask your opinions, uh, gentlemen, was he right about when he said the 15% now is the new benchmark?

Oh, I look— yes, I think it's somewhere around there. I mean, if you start looking at the numbers, uh, that they put out, I thought it was going to be closer to 20%. Um, so we'll see. But, you know, Donald Trump is getting desperate right now. Uh, you know, he's the taco effect. Trump always chickens out.

Yeah.

Now here, let's take a little look at Lutnick. All right, he was— he, um, Cantor Fitzgerald fell into his lap because of 9/11. He was, uh, the one who survived. He didn't go in the office that day. I'm sure it was a terrible tragedy for him, but he came out basically taking over the, uh, company away from the widow of the guy who actually started it, and he's been running it. Now, you know, you, you heard him, you know, his whole persona is this kind of, um, like a used car salesman as far as I'm concerned. I don't want to get personal, but I mean, he doesn't talk the way I would expect somebody in his position. And let's take a look behind the curtain. His sons, who are now running Cantor Fitzgerald while he is sitting in the position of power. What are they doing? They're developing products that are basically betting that Donald Trump is chickening out against these tariffs, and they're selling them. So you have this, you know, this incredible hypocrisy between a guy who's talking about tariffs on one hand and his children who are making big money by betting against it.

Warwick, what do you think? Is 15% the new benchmark?

Well, who knows? Um, the, the number changes every day, but, um, the, the, the fact that people are talking about this as, as a, as a potential benchmark number actually, um, exposes the original rhetoric around reciprocity as a bald-faced lie. Because if it is about reciprocity, then it it is impossible to have a single benchmark number. So that's probably the first thing to bear in mind, that in fact none of this actually reflects the original rationalization. That's the first thing. The second thing though is that, you know, this braggadocio of imposing tariffs is premised on essentially a second tranche of misleading statements. And that is that somehow exporters, or exporting countries more to the point, foot the bill. In some senses, there are impacts, of course, on exporting countries. That's the point. The point is actually to reduce imports from them, right? That's the idea, by making them more— by making products from those countries more expensive. But it is ultimately the importers and their customers that actually foot the bill. So if you actually understand what happens when goods land in the United States, the import agent completes paperwork against which the Customs Control will issue what is in effect an invoice for the tariff or the duties that are to be levied. And until those levies are paid the goods are cleared, right? So the, the payment comes from the import agent to the government's general account. That's what actually happens. What those import agents then do in terms of pricing markups is a matter for them, and how that then feeds through into the economic system. So the idea that in fact it's other countries that pay tariffs is also a a fiction of an imagination. The situation in terms of Japan, and I'll just follow up on some of the comments Aina made, I think are also very telling because it tells us something about the relationship between, or the gap between, the theater of this entire process and again what is likely to unfold on the ground or what is in fact reality. Aina touched on the tariff questions in terms of the motor vehicles industry. And what has actually happened is that the tariff rate of about 27.5%, from memory, that has been in place against Japanese manufactured motor vehicles coming into the United States is going to be reduced to 15%. Now, that would likely lead to an increase in American motor vehicles coming into the United States, and no wonder American automakers and American autoworkers are already expressing deep concerns that this decision is going to be deleterious to the future of the autos industry. That's number one. The second thing is this so-called $550 billion of investment. You got to really understand how trade works and finance associated with trade works. A surplus trading nation accumulates the currency of the detonation. That's what happens. Japan and China have been significant accumulators of American dollars over time, and of course they don't hold those dollars in dollars because, uh, that's not interest-bearing, right? There's no yield associated with holding dollars. So countries who hold surplus dollars ultimately recycle them into the assets of the, of the deficit nation. Basically, they buy things like treasury bonds, other financial instruments, um, stocks on the stock exchange, property, real estate, um, and eventually they would also invest or purchase stakes in enterprises as well. So, so surplus nations always recycle dollars back into American assets. All Trump's talking about, or he's given a label to this, right? But basically Japan's agreed to do what it's always done— it cycles its dollars. The, um, the third thing that I think is probably worth touching on, which we haven't touched on yet in relation to the Japan deal, is this question of Boeing. So just about everything, um, that, um, that, uh, President Trump has gone around the world, or his team's gone around the He comes back with commitments from the counterparty to buy more Boeing aircraft, right? It sounds pretty impressive, you know. He, in a sense, Boeing's chief salesperson. The reality of Boeing, of course, is that Boeing already has a backlog of close to 5,000 airplanes. At current rates of production, it's going to take between 10 and 12 years to meet that backlog. The idea that the supposed orders that have been agreed to as a result of these negotiations being meaningful in a material sense. This is of course a nonsense, but it does speak to the financialization of the American state, because what Boeing is able to do is that it books these orders into the backlog, announces it to the market, which they have done, and then it can secure structured finance against these— against the future orders. And that's great from a valuations point of view, even if it doesn't mean anything materially. And this is exactly what we're starting to see with the Boeing situation. And it matters to Boeing because it's had some horrible years. Um, global, uh, safety concerns about Boeing. Um, there have been some tragic, um, uh, disasters related to Boeing aircraft. And, um, and it is understandable that the US president is of course trying to boost Boeing in that circumstance. But really, it's got massive backlog. It exploits future orders for financialization imperatives, but in a material sense, it's not really meaningful. Certainly it's not selling more planes today.

Oh, for sure. We just had an incident last week, and the media didn't want to disclose this. When a plane in California— it was a flight, Delta if I'm not mistaken, it was Boeing— one of the engines caught on fire right midair, right there. And they stayed quiet about it for about a week. So it makes you just wonder, so where this is going. So, uh, Einar, I want to ask you about your insight regarding APEC. Uh, to those in the community, APEC is the Asia-Pacific Economic cooperation. What I want to know, or the community that is, how do you foresee the upcoming summit which is going to be taking place soon? How do you see the trajectory of this economic bloc moving forward? Will it be in line with what ASEAN is doing? Will it be in line with what SCO is doing? Or are they gonna forge a trajectory on their own per se?

Well, I think like all multilateral organizations, they face a dilemma. The United States is not in favor of any multilateral organizations, and they in essence are paralyzed in terms of going forward on that basis. But beneath the surface, what you are seeing irrevocably, you know, it's just step by step, uh, NTCs are coming together to try to figure out exactly how they can de-risk from the United States. Uh, and you're seeing that from countries from the Middle East, um, and APEC. It doesn't matter who it is. You see it with BRICS. Every single one of them is saying, okay, the reality is the U.S. is not reliable. Uh, we have to figure out a plan. We have to start developing markets within the Global South because we're not certain where everything else is going to land. Uh, you know, you look at Europe They're responding to the loss of their cheap yellow cake that was coming from their former colonial possessions by running over to the stands and saying, "Hey, we're here, you know, we love you. Let's figure out a deal for cheap yellow cake." But, you know, things have changed. Everybody is aware of what happened in the Sahel of Africa. Africa, and no one is going to sign on to kind of silly deals that France wants to push out there. You know, we'll develop it and you sell it to us for 20 cents euro, and we'll turn around and sell it for 200 euros per, uh, per kilo, uh, what we bought from you for 20, uh, 20 cents, uh, euro. So this, this isn't going to happen. This is going to impact Europe very much. But these are the types of seminal changes as the Global South wakes up to the fact that it has what these developed nations need, and it's time to start getting value for what they're selling.

Very interesting. Is this— just to stay with you on this, Einar, before I'll turn to another topic with Warwick— is this the reason why Singapore Why Singapore decided to really— I was surprised, I'll admit it. I didn't expect Singapore to take that stand when it really pivoted towards China.

Well, they don't really have any choice. I mean, Singapore is the largest investor, although it's flow-through investment. But they're in a situation where they say it's becoming intolerable. I mean, their official position for years has been to balance things, to not align too closely with either side but deal with both. Uh, but you know, with the US, uh, pushing, with ASEAN growing, with, uh, trade between, um, Asia and the United States and Europe in doubt, um, they're making what they think is their best play, which is to say, look, uh, we would rather cooperate with an entity, uh, with a country that does not try to tell us what to do, uh, rather than one that is trying to dictate, uh, what— how we operate.

Oh, that's very, very interesting, uh, because I was just wondering, uh, I had a— my friend Dashan Fang shared the, uh, message with me, uh, regarding three thinkers here in the US— actually two in the US and one in Singapore. It was Professor Kishore Professor Mersheimer and Professor, what's his name, from Columbia University. I draw a blank on his name. Anyway, which one?

Sachs.

Sachs, that's correct. The two, Sachs, Professor Sachs and Professor Kishore, are saying, listen, China is going to have to— it's moving whether you like it or not. It's moving in a direction where it doesn't have to get into a war and so forth. Professor Mearsheimer is saying no, no, no, no, no, the war is inevitable. And here is the interesting thing about all this, and I wanted to share this with you. Uh, I did a survey for the community, uh, right here in, in, in my channel here, and the question was, what do you believe, uh, will the US allow or sort of be okay with China moving forward? In other words, surpass it economically. You know, the surprising thing about the survey is that 48% said yes, 48% said no, and 5% don't know. I found it very— and you know, individuals in our community Literally, they are sort of— they understand what's going on. And I was surprised at this survey, the outcome of it. 48% saying yes to the question, and that is, will America allow China to surpass it economically? I know I used— probably I shouldn't use the word allow because who the heck are we to dictate? But I said, let's just use it that way. But my surprise was 48%, it split 50/50. That was really, really my surprise into this.

Well, I just want to add on to that. Yeah. I mean, if you look at America's past history, we're an empire. We always like to take things from other people when we're having problems. Donald Trump has displayed that with saying, I'm going to take Panama, Canada, Greenland, Gaza. But I mean, it's— America is running out of runway. The idea that it can take China, no, it can't. The idea that it can take ASEAN, Africa, they're all country areas, continents that are turning away from the U.S. because of the, you know, first off, they're not a reliable partner. So yeah, there is the biggest challenge that I, I, and Warwick and I have talked about this at great length, is the fact that the U.S. is slowly being deprived of every single card. They don't have the political influence they have, they don't have the economic influence they have, the only card left is the military, and there is a real danger that one president or another will decide that the only way to work this out is to use that military very hard.

Wow.

And that is very, that is very concerning, uh, because I read the, I read the white paper in a foreign language, in Arabic. It was coming out of the Middle East, and one of the, the, one of the theme of the, of the white paper is that there are now 3 countries considering the nuclear route, and those 3 countries, that includes South Korea, Japan, and of course, Iran. To me, was the surprise of the two, the Asian nations there. So, Warwick, I want to get your take on this because I can't let you go without having your insights regarding the meeting that took place right here between Albanese and President Xi. In the big scheme of it, is Australia coming to its Census?

Um, well, uh, reality is working its magic and it's forcing Australia to confront, um, some important questions. Uh, the biggest question that Australia is actually having to face up to is, uh, what constitutes Australia's national interest in an environment where American primacy in Asia is fading and that America is heading into, or is already in, its strategic abyss in geopolitical and economic terms. How Australia resolves the answer to that question will ultimately shape, um, you know, its long-term posture towards the region, and particularly how it relates to the region through the prism of its historic relationship with the United States. This visit by Prime Minister Albanese was important in a few different ways. A lot of the discussion, of course, focuses on the duration of the visit, which was 6 days. He visited Shanghai, Beijing, and Chengdu. It's important to note that each of those cities hosts an Australian mission, whether it's the embassy in Beijing or, um, consulate operations in the other two cities. And it was good that the Prime Prime Minister visited the cities where Australia has a permanent physical presence. The second thing, of course, that's noteworthy about the trip, and many have talked about, is the breadth of the agreements that have been entered into around a whole range of things, predominantly economic but not just economic. The third thing that was interesting, that again drew a lot of public attention, was the fact that Prime Minister Albanese and President Xi Jinping had a 1-hour-long private luncheon. Um, Australian media have tried to extract details from the Prime Minister about what was discussed at that meeting, but he has of course kept the confidences of those meetings. But nonetheless, that was a significant, um, uh, symbolic event if nothing else. However, I think that there is two other things that are probably more interesting other than those things which are important, but I think that there are two things which are strategically of interest. One is actually a message that Prime Minister Albanese posted on social media after his meeting with President Xi on the 15th of July, where he said that the relationship between Australia and China is important for Australia's economic, uh, interests, uh, his security, and the region's stability. So it's a very short tweet, or X post, or whatever we call them these days. And, and the importance of this is that he brought three things together: Australia's economic interests, Australia's security interests, and regional stability, wrapped up in the context of Australia's relationships with China.

China.

Bringing these three things together in the context of a bilateral relationship has not in my experience, uh, featured much in the way that, uh, the Australian body politic has thought about this question for a long time. The aim has always been to talk about the economic interests on one side and the security questions on the other and hope that the contradiction between them won't come to a head. The fact that Prime Minister Albanese has actually articulated these three things as an integrated proposition I think is significant. Now, that has certainly provoked a reaction in Australia and also in Washington. The, uh, the trip was marked by a leaking of a story to the Financial Times of Elbridge Colby, uh, or representatives of Colby, who is the, um, one of the assistant secretaries in Department of Defense in America, uh, demanding to know whether Australia would join in— Australia would join in an American war with China over Taiwan. So that was the, the sort of immediate reaction out of the United States. And of course, in Australia, we've seen a whole flurry of critical reactions to, uh, to the Albanese visit, um, to a point where some of those who are incredibly anxious the reduction in American, uh, primacy in the region and what that might mean for Australia. They're literally now saying that, um, that given that Australia hosts American military bases, in effect, through the troop rotation agreements, and that Australian facilities are available for American military machines to use, and Australia of course hosts a significant American intelligence facility at Pine Gap, amongst other things. Given all of that, Australia in effect is part and parcel of the American fabric of war in Asia, and Australia simply needs to accept that it, uh, that that's the case, and it should insist actually on being part of joint war planning. So we've already seen, um, a significant reaction in Australia to the trip and to Albanese's comments to bring these three questions together. How all of this unfolds is going to be the big question over the next, um, you know, so many years. But, um, the, the cold comforts that Australia once had, that, um, that Australia's security could easily be built on the assumption that America had regional primacy, that's gone. And, um, and this visit, together with Prime Minister Albanese's reframing of of the issues, I think, is going to be seen in time as catalytic to a substantial rethink from Australia's part.

Wow, very, very insightful. Einar, what do you think of it? How do you see it? How do you read the visit by the Prime Minister Albanese? I mean, I didn't expect it, I'll be honest. I didn't expect it.

Uh, what, what Warwick said.

I'll go with that.

No, no, I mean, it's, uh, clearly, I mean, you, you have, you know, he points to the main factor here. Washington panicked, uh, and they threw out this kind of nonsensical question about, well, are you with us or against us?

Yeah.

Uh, and, and those within Australia are also panicking and they're pushing saying, this is, well, we're already there, uh, we're just an appendage of American military and diplomatic things. But, you know, when the tariffs finally get put on Australia, um, at some point, uh, the global demand goes down. That means that Australia is going to feel some pain along with the rest of the world. When that happens, uh, there's going to be real questions. Is the U.S. really our friend? And that's where I think Warwick is absolutely right. People suddenly realize, look, we've been sold a bill of goods. We're not the United States. The United States doesn't care about us. We need to start thinking about regional stability, our economics, and of course maintaining peace. And that, that means that in essence Donald Trump is pushing Australia to the point where it needs to be, which is to consider itself within the regional context as opposed to this kind of colonial idea that it's been hanging on to for so many years.

Very interesting. I have one last point, or I want to get your insights on it. Once again, I had a chance to read something in a foreign language. I did my own translation for it. I speak Arabic fluently, and this one pertained to— it didn't happen yet, by the way, guys. I just wanted to share this with the community. And also get your take on it, uh, uh, Warwick and Einar. Uh, China is considering linking the Indian and the Pacific Ocean with a new canal. And when I read through, uh, it, it came to my attention that there were two camps: those in favor and those against it. And all this centers around the Silk Road. So those who argued against it saying that this is going to strengthen now the separatist movements in the southern provinces in Thailand, and this will sort of fuel the widespread fears about growing Chinese influence. Those who were in favor is saying that no, no, no, no, the ones that supporting this will make Thailand one of the world's largest transport hubs. And this in itself, sort of, if I recall, strongly supported by those groups that will create economic opportunities, more jobs, and economic security for the region. What do you guys make of this? It is just a study, by the way, nothing it's 100% original stones. I'll start with you, Warwick.

I was hoping I could just say what Aina said.

Then we go with that, Warwick. We go with that.

All right, let me, let me go, let me go first, and then he can correct me because I'm always wrong, but never in doubt. Anyway, um, so you have a situation here which is Uh, you know, China has proposed this, and you notice that Singapore has suddenly become very, very China-friendly. Who would lose in this? Singapore, obviously. The Malacca Straits, all these areas, they're not going to be things. In terms of Thailand, Thailand right now has bigger problems, uh, fish to fry in terms of its, uh, this situation with Cambodia, um, you know, all stemming from Guess who? Colonial French times when they decided to draw borders, not to harmonize countries, but to destabilize them. And this is continuing on today. I mean, it's amazing how much damage was done by these imperial forces as they, you know, thrust themselves on upon these hapless countries and demanded things. I mean, look at India, 24 4% of the world's GDP before the British came. When the British left, they were 4%. And this is not, not just India. This is a pattern that's been repeated elsewhere. And it was not just the economic degradation that happened. There was also cultural. All these countries were reduced to cartoonish entities where, you know, they were just a bunch of clowns or or incapable of ruling themselves and they had no culture, they were savages. And what it was in fact quite the opposite. The savages were in fact the barbarians coming from Europe.

All right, we lost Einar. We lost Einar. So just you and I, Warwick.

It's you and I again. Well, what Einar said.

That's it, we'll go with that.

Uh, look, there's— there are some interesting features about this, um, canal proposition. You know, it has come up and, you know, on, on more than one occasion over the course of the last couple of decades. So, um, it's not the first time. I just said what you said, Ina.

Um, but then you— then you're bound to be wrong, so you gotta be careful about that.

But this—

I'm sorry, there was some problem.

That's all right.

I'm just saying that this canal proposition has come up on more than one occasion over the course of the last couple of decades, and there has, of course, always been question marks about economic viability, whether there's a need for it, some of these other concerns about its impacts on splitting communities and creating domestic destabilisations and such like. So, you know, these are complex problems. My own sense, and perhaps this is a bias that I have, which is generally in favor of diversification of the means of trade and connectivity to reduce risks and to create more opportunities for trade flows and movements of people and ideas and things to happen. My own sense is that I'm generally in favor of these sorts of proposals, but they will ultimately spin on the detail, and it basically doesn't matter what I think anyway. Um, the, the interesting question, in addition to the sort of high-level pros and cons, I guess, of this from a trade point of view, is ultimately what happens in this part of the world from an economic development point of view. You know, Thailand, Cambodia, Laos, um, and the countries, um, around that, um, that, that the Gulf of Thailand, have of course historically, as Aina described, been exposed in one way or another to the impacts of colonialism. And of course, some of these places had the— I'll use an Australian colloquialism here— had the living bejesus bombed out of them. So much so that in fact there are still people losing limbs and dying as a result of encounters with unexploded ordnances. I mean, Laos— so these are poor places, and, and there is a crying need for economic development and infrastructure development that facilitates that. And I think it behoves everybody to think seriously about how it is that these kinds of initiatives can be designed and executed in a responsible manner.

If I can just jump in and finish off what I was going to say is there's a massive difference between bypassing, uh, doing an economic thing like this to bypass the country, all right, basically saying, well, we're just going to use you as a conduit and, you know, forget about their few jobs, you know, manning the locks, and that's that, versus what China has been doing, which is helping ASEAN become a major powerhouse. So these countries, if, if it was just China saying, okay, we're looking out for our own interests, we need alternative logistics to make sure that we're not bottled up in the, in the Straits of Malacca, uh, and this is just, you know, that. But it isn't the case. Uh, if China builds this, there will be a huge economic opportunity on both sides of that, uh, canal, and hopefully this, uh, would bring about a stability. A lot of the issues in Thailand have to do with jobs, economic opportunity. There's a lot of concerns about bringing those to that area. As long as it's not, you know, radicalism isn't being fanned by other interests, uh, you could have a situation where you could bring stability to Thailand and prosperity, as well as, as Warwick said, developing alternatives so that you don't have these logistical bottlenecks.

Wow.

Well, gentlemen, I can't thank you enough on behalf of the entire community. I think we should be doing this more frequently.

Well, it's up to Warwick. He's the smart one.

Well, the community, if I am to ask the community, I'm gonna ask you guys, do you want to see, uh, Warwick and Einar at least once a month in this setting like this? Please just answer in chat box yes or no and be honest about it. So, so I truly, truly appreciate you being here and I really look forward to seeing you once again. And, and I can't thank you enough for carving out time to share your knowledge with us, the whole community here. So, so we're very, very grateful to you guys both. So thank you so much.

Thank you. It's been a pleasure.

Oh, all right. All right, guys, I hope you enjoyed listening to Einar and Warrick. They are very wealth of information here. And, uh, uh, of course, that will be great if they're busy people, So that's just— I want you to know this, uh, they was just kind enough when I reached out and they always like to be here with us. And, and your answer in the community, all of you saying yes, then I'm going to coordinate with them based on their schedule and we'll have them here at least once a month because you need to keep up with what's going on. And hearing from someone like Einar, someone like Warrick will really sort of broaden your intellectual horizon, which is exactly what I stand for in this channel. So, uh, I take this opportunity quickly to say thank you to Noel for your Super Sticker and your continued support for the channel. Very, very grateful. And I look forward to seeing you guys tomorrow for my conversation with Dr. Ken Hammond. So we'll be addressing— he's, by the way, a Chinese historian, just for you, for those who do not know. So I look forward to seeing you tomorrow. As always, remember, geopolitics impacts your daily life in more ways than one. Till next time, guys. Bye-bye.