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00:00I wonder then, Dr. Jin, what Donald Trump's approach to tariffs tells you about his understanding of the Chinese economy.
00:08Of course, very little. First of all, it's true that China has a trade surplus with the U.S. on goods, especially on basic manufacturing.
00:16But the U.S. has also always run a surplus with China on service exports, things like financial, tourism, medical, students, etc.
00:28But also it exports more high-tech components to China. That doesn't seem like such a bad deal.
00:34And in fact, if you really want to lock China into a low-tech, low-value-added, low-margin position, you want to lower the tariffs on China's basic manufacturing rather than make them higher.
00:49In which case, what do you think China's going to do?
00:51China's going to do more of the higher-value-added because it's going to tariffs adjust and reallocate resources toward these advanced components, which goes directly head-on-head with the U.S.
01:03But more broadly speaking, it is an absolute fact that China has exploited deflation to U.S.
01:10and especially beneficial to U.S. consumers at the lower-income household level.
01:15If you look at the data in the last 20 years, all of the rise in the price increases in the U.S. come from services, not from manufacturing.
01:24And that has tamed inflation and allowed for more investment and obviously greater capacity to growth.
01:30All of that is under jeopardy.