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00:00Lauren, let me start with you. Where's your head at at the moment? Well, gosh, I think uncertainty is certainly the word of the day, if not the word of the year. So looking at this from the outside, I think it's really interesting to see how China strategy is shaping up. So it seems to be a strategy of patience, matching action with retaliation and courting the rest of the world and anticipation that others are going to be hurt by Trump's trade policy right now. Cameron. I don't think we can put the same question to you. You know, I mean, the reality is, is that much of the zeitgeist of the US now is just kind of is gone. And I think one of the things you you see here when you talk to suppliers and buyers is that this essentially gives Asia and Africa to Chinese supply chains and influence because now as American firms have to focus more on the home market, the companies and organizations with the money to invest in new areas, whether it's new products in Southeast Asia, whether it's going into Africa, that will be mostly Chinese money. And China also has the technology and they also have the talent and the people to to use that. So here on the ground, that's kind of how they're looking at. I think the other thing is, is that we haven't really been here before, at least for a century. So there's not only uncertainty, but a what is going to happen next. I think Loren actually pointed that out. We just don't know. And it's causing great uncertainty in the markets. Cameron There's something very prescient about that observation that we haven't been in this situation in a century. If you look back that even a century looked back 50 years, there wasn't a trade relationship to talk about really to. To the extent that we've seen evolve over the last few decades. So. Lauren, on that note, the do we need to prepare the companies need to prepare for a complete, almost near complete decoupling on bilateral trade between the two. Well, frankly, I think the trajectory is well understood at this point. Right. This isn't new territory. This is our second trade war under this current president. Right. So I think a lot of that, you know, there are no illusions about the direction of travel here. I think what's now become the most difficult, the least predictable element of this is U.S. policy. And that's what's really affecting these broader questions of global trade order. Right. Obviously, companies are having a significant amount of difficulty planning five, ten years out. But there are bigger questions here about what it means for the U.S. to pull back from the global trade system. Cameron We we were speaking with the Footwear Association from the US earlier as well. They represent more than 95% of the shoe industry across the states. And they were saying that they're already hearing of orders that are being cancelled by companies in China. How are the suppliers in your network or contacts that you have also reacting to this? You know, we're seeing across the board a wholesale casting of polls, particularly anything in the near future, I would say in queue to pass that, though, we're seeing a bit of a pause. More of, you know, we'll put some down payment on, but we're not going to fully execute the peaoe until we have better clarity. So in the supply chains, at least anything in the next couple of months basically is a no go, particularly if they don't have any any exemptions tied to it. Electronics will be safe, things related to that. But any any kind of footwear, toys, puzzles, you know, the things you might buy at a Walmart, even on Amazon, all of that is basically stopping at the moment. What are you seeing, though, Cameron Because one of the interesting sort of phenomenons that maybe we're seeing and we are discussing it at least, is are these tick tock videos essentially where suppliers are going through and sort of breaking down different products either from from France or the US and essentially going into suppliers and how these are made, the costing behind it. What have you seen of this so far? Yeah. Basically what we've seen is the democratization of sourcing. In the past, you might use a middleman or a trading company to source your products for you deal with quality control or go visit the factory, establish those relationships, and then maybe you would come on occasion. But now what we're seeing is just a complete democratization of sourcing products. But we're also seeing the with that is the actual break down of what it costs. So when people actually realize, wait a minute, I'm paying $40,000 for a bag that actually only totally with all the bells and whistles really only costs 2500 bucks. That's a huge tent. And so basically they're also taking the veil off of what actually a lot of companies are doing and the markups involved. And that, I think, ultimately will spur more buyers of general products. Do you think that that's any sort of effort to erode brand value from Western companies? And is there any sort of coordinated effort as well, if this is sort of a major push to have these sorts of videos showing up in people sort of discover pages? No, this has been happening actually for a couple of years. And it started when people couldn't come to China because during the pandemic, of course, it was closed down. And so a lot of it was, here's our products, here's what you need to know. We're going to inform you about them. And then it has actually evolved over time. And now what we're seeing is just kind of this and I, I don't think it's any effort to degrade brands. I think, though, what we have to realize is a lot of factories are under extreme pressure and stress. And so when your option is, well, I'm just going to shut down the factory, maybe I'll make some cheap TikTok videos and show how this stuff is made and maybe I can drive some business that way. They're always going to make the TikTok videos and try to drive business back to them. Now, Lauren, I'll bring you in. What realistic options do you think American companies have or let's call them multinationals have, and trying to, I guess, replicate a synthetic version of the supply chain we have not just in mainland China, but going through parts of Southeast Asia, parts of South South Asia, for example. What are the what are the plan BS out there that people are talking about? Well, it's difficult because there had already been a mitigation strategy in place, right? A China Plus one and starting to find third or fourth markets to reroute supply chains. Now, if we're looking at a tariff wall being erected by the Trump administration, that China plus one strategy is effectively closed. And so I think, you know, a lot of this ultimately depends upon where tariff rates rise after the 90 day pause, Right. If this is a strategy ultimately that results in a significantly higher tariff rate or trade with China and something that looks more manageable for third countries than I think multinationals will have a way to understand the strategy and a way to work around it over time. Time is another important factor here. Right. There has to be a decision and a predictable way forward. And Lauren, I guess just to follow up on that. Do companies need to take action right now? Donald Trump's not going to be around in the White House. Let's say he doesn't do a term three that he's talked about because that's a different kind of worms. He's likely not going to be the president after four years time. Can companies just sit and just wait for things to set? It does take five years to put up a factory. Many companies can't. And of course, we're talking about multinationals, but Chinese exporters as well. Right. These many of these Chinese exporters are going to have to receive significant government support just to be able to maintain employment. And a number of these firms, smaller sized exporters, for example, have never been hit with these de minimis tariffs before. That's going to have tremendous implications on global trade as well. Cameron, do you see any risk of of backlash from other parts of the world, for instance, other countries in Asia, ones in Europe? I mean, one of the risks of this is that is that as China tries to find new export markets, there's there's concerns of overcapacity being sent elsewhere. China says that it's, you know, opposes protectionist measures. But at the same time, China has followed protectionist measures. I think when you look at the export markets and it was interesting, the call between Van der Leyen and Lee Chong last week is that they recognise that they can't necessarily flood the world with capacity that the US can't take. And so one of the things you're starting to see is these negotiations. This is one of the reasons why we think that President Xi is in Southeast Asia this week is because they recognise that there is a prime opportunity here to take advantage of some of the trade chaos, but at the same time they can't do business as usual, right? They have to actually invest more locally. They can't flood markets with certain goods, some products maybe. But the other thing is overcapacity is very much in the eye of the beholder. Some products are just fine in terms of overcapacity because many countries can't produce them. But others, to your point, particularly this local industry, that could be harmed. So I think what you're starting to see is the Chinese trade strategy is more we're going to negotiate on a on a local level, but at the same time, we're going to try to see where we can actually take these products that aren't going to the US and move them. Other places being sensitive to local demands and needs.

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How Trump's Tariffs Are Hitting Global Supply Chains

President Donald Trump's sweeping tariffs are putting supply chains under pressure as businesses navigate a potential increase in costs. Eurasia Group China Director Lauren Gloudeman says companies are now facing difficulty planning for the next five and 10 years. Meanwhile, TidalWave Solutions' Senior Partner Cameron Johnson says the tariffs are shifting suppliers' and buyers' focus to Asia, the Middle East and Africa. (Source: Bloomberg)

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