Xi’s Bromance Diplomacy Is Challenging Trump’s World Order

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0:57IBM. dot com. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined.

1:38An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by public investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Bloomberg Audio Studios, podcasts, radio, news. On the first day of September, Chinese President Xi Jinping hosted Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, and more than 20 other foreign leaders in the port city of Tianjin.

2:29The occasion? The annual summit of the Shanghai Cooperation Organization, or SCO. So the Shanghai Cooperation Organization is a regional security bloc. Daniel Tenkate is Bloomberg's executive editor for Asia Economy and Government. He says the SCO as an organization isn't that important. But at the summit, there was one particular moment that made the occasion significant. Modi being really chummy with Putin and with Xi. Smiling broadly. They were laughing about something. Xi was holding Modi's hand at one point. A lot of back slapping. It was just old friends getting together. And it was significant because Modi hasn't actually been to China in seven years.

3:16So this wasn't like we talk all the time. Now, Xi and Putin talk all the time. They meet up regularly and they do this all the time. But Modi joining the group, that was highly significant. He's back in the fold, so to speak. China and India have clashed over border disputes for decades. Their relationship hit rock bottom in 2020 after fighting along the border in the contested Western Himalayas left soldiers on both sides dead. But at Tianjin, there were no signs of hostility. Instead, Dan says Modi's presence at the summit and his chummy interactions with Putin and Xi were deliberate signals aimed squarely at one person.

3:59All of this has to be seen in the context of what happened last month with Trump essentially putting on punitive tariffs onto India, calling India's economy a dead economy, really dialing up the insults to Modi. So when Modi joins and he's smiling with Putin and Xi, that's essentially a message to Trump saying, look, I don't need you. I have options. I'm not going to be bullied and pushed around by you. I'm not going to kowtow to what you want. It doesn't really mean that Modi is jumping into China's camp, but it does mean he can be friends with whoever he wants to and nobody's going to tell him what to do, especially Trump.

4:46This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, China, Russia and India appear to be forming a new and powerful partnership. What's driving the bromance between Xi, Putin, and Modi? And what could it mean for Trump?

5:19The image of Xi, Putin, and Modi holding hands and laughing together in Tianjin was a striking moment that went viral. But beyond the symbolism, this apparent alliance could have big consequences, politically and economically. Dan, what does each country want from this alignment? Russia needs money. It's got its two biggest buyers of energy there. India buys a lot of oil from Russia. Having India buy oil gives them hard currency. Same with China. China has been the primary economic partner of Russia and has stuck by Russia ever since Putin's evasion of Ukraine. It's been its most important economic partner.

6:04To the extent where Putin really needs China to stay afloat and fight this war. And what about Modi and India? What's in it for them? India, they were buying Russian oil because it's cheaper and India's got a big population. It's very price sensitive. So if they can keep costs down, keep inflation down, that's politically good for Modi and good for India's economy. With China, India also needs inputs for its manufacturing sector. So it needs Chinese expertise, needs engineers, it needs inputs so factories can get what they need to assemble in India and ship that overseas. So if India wants to be a manufacturing center, it also needs good relations with China.

6:46And there's increasing realization in Delhi that that is essential to move forward. And just politically, when Trump is going after you, these are your friends. They're willing to welcome you with open arms. And so it gives Modi some strategic depth in that sense. Now, energy is such a crucial component to these relationships. And I want to delve into that a little bit more. Following the summit and the military parade in Beijing, you had Gazprom, Russia's state-controlled energy giant, saying it signed a binding deal with China to build a new gas pipeline called Siberia 2. What does that deal entail and why is it so important?

7:27So Russia has been wanting this deal to go through for years, and it comes up every time Xi and Putin meet, and we never really get anything. So the fact that we got something on paper indicates that there's progress here. So what does the deal entail? We got some details from Gazprom. The chief executive officer, Alexei Miller, said that Gazprom could ship as much as 50 billion cubic meters a year for 30 years. So at full capacity, it would be equal to nearly a third of total Russian pipeline exports to Europe back in 2021. Dan says while the deal is big, it wouldn't offset what Russia would sell to Europe if it had the opportunity.

8:15And it's not clear exactly when the project will move forward. The two sides still haven't agreed on how much China will pay for Russian oil, which is a key sticking point. What people are saying is that they want a deal that is far below what Gazprom charges customers in Europe and is essentially what Russians pay for it, which is a low price. So for China, they're looking for a deal here and they're probably going to get one. This comes as the U.S. and its European allies have made sanctions on Russian oil and gas a pain point, right, to bring Putin to negotiate peace with Ukraine and end the war.

8:49What does this mean for the U.S. then in terms of this deal? Yeah, it's interesting. If you look at how the U.S. is trying to pressure Russia right now, it's mainly targeting India. So why is that the case? China is Russia's most important economic partner. It's buying a lot of energy. The problem is that Trump already has put massive tariffs on China earlier this year, up to 145%. Then China cut off rare earths, and Trump realized he needed those for military applications and other things, including cars and all sorts of sectors. So they reached a deal where Beijing would keep the rare earths flowing.

9:31They would bring tariffs down to a certain level, and there's sort of a truce and an equilibrium now. So there's not many options for Trump here. That's why he's hitting India, because he can raise tariffs on India. And there's not much India can do about it. What's interesting is that Xi decided to announce this now. He didn't give us many details, and this thing might all fall apart still. But it certainly sends a message to Trump. You know, you're hitting India for financing Russia's war effort by buying cheap oil. Well, hey, we're going to buy gas for 30 years and keep financing his regime.

10:08And there's not much you can do about it. Now, how is this club of three good for China and Xi's image? Xi Jinping wants to be this diplomat, this statesman, someone the world can turn to as an alternative to the U.S.-led world order. Now, if you think about the Biden administration, there was at one point right after Putin's invasion of Ukraine, the U.S. was really trying to isolate Russia on the world stage and isolate China along with it and get every country to gang up against those two and put sanctions on. And China was feeling the pressure at that time. Now, fast forward to today, and it's the exact opposite.

10:52You have Putin going to Beijing, and you have a bunch of other countries, including India, including democracies. You know, this notion that the Americans were pushing for a long time, which is, you know, you're an authoritarian regime, you're against the tide of history, you're destroying the rules-based order. Now Xi Jinping is in Beijing talking about how all countries need to be equal, strong countries shouldn't pressure weak countries, Everyone needs to follow international law. Xi Jinping is using some of the same language that the Americans were using against China for years. And because Trump is in office and just breaking norms left and right, throwing tariffs on everyone else, he's able to attract all these countries looking to Xi as the more stable option right now in the world.

11:42And Beijing's gain could be Washington's loss. Narendra Modi was one of the first world leaders to visit the White House following Trump's return to office. He called Trump a great friend, and the two pledged to double U.S.-India trade to$500 billion by 2030. Now, Modi's seen holding hands and laughing it up with the leaders of Russia and China, two of the U.S.'s biggest rivals. How did we get here? And what could it mean for the U.S.? That's after the break.

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14:19Just two days after President Xi, Putin, and Modi put the bromance on display in Tianjin, Xi hosted a second gathering, a military parade attended by more than 25 foreign leaders.

14:35Modi wasn't there, but Vladimir Putin and North Korea's Kim Jong-un were the guests of honor. The event's guest list and its lavish display of weaponry caught the attention of President Trump. He took a swipe at Xi on social media. He said, may President Xi and the wonder people of China have a great and lasting day of celebration. Please give my warmest regards to Vladimir Putin and Kim Jong-un as you conspire against the United States of America. So clearly he's watching that. He actually said something to the effect of they hoped I was watching and I was watching. So, you know, Trump really wanted to meet all of these leaders, actually, Putin, Kim and Xi.

15:19So, you know, there's in some ways. A little FOMO there, right? I think so. I mean, in some ways, I'm sure he wishes he was there. He even said, I have great relations with all these countries. Like, you know, he's trying to be buddy-buddy with them. He's really stuck here because in some ways he knows that if he capitulates, he will look weak. But at the same time, he wants to be part of this club. The parade in Beijing and the summit in Tianjin put China's global influence and ambitions on display. And it seemed to unite world leaders who are sick of being pushed around by Trump. Take India's Narendra Modi.

15:55New Delhi has long-standing ties to Moscow, the date back to the Soviet era. And Russia is India's biggest weapons supplier. But Russia's invasion of Ukraine has cast a spotlight on the relationship and put India in a tough spot. India wanted to have good relations with the West. It wanted to wean itself off of Russian weaponry in particular and get more into the American defense orbit. And of course, the U.S. wanted India closer as a counterweight to China. Now, Modi and Xi, yeah, it wasn't great at all since the 2020 clash. And India might have gone even further than the U.S. in some respects in banning Chinese investment and taking kind of a hard line against China.

16:43So there was certainly no love there. And that was pretty remarkable to go from that situation to holding hands and laughing at like world best buds. You mentioned how Trump has insulted Modi in the past few months. Can you walk us through exactly how this relationship has deteriorated to this point between the India and U.S.? I mean, how did we get here with the U.S. and India being in the state that they are now? If you look back in the beginning of the year, Modi went to the White House, restored the friendship. And this goes back to Trump's first term when Modi invited Trump to Gujarat, which is Modi's home state in India.

17:24And then India was probably the first out of the gate to try and negotiate a trade deal. They were announcing progress really early after Liberation Day in April. So it looked like India could be one of the first deals. and then Trump realized what is his leverage against Putin. That really took over everything. Modi was just caught in that because India was the only bit of leverage that Trump had against Putin. Now, you could argue, did Trump need to call India's economy a dead economy? I think that's what stunned everyone was the way he did it. He could have done it in a way that was more, I really don't want to do this.

18:03This is important now. And you could have done it in a way that could save Modi some face. But that's just not Trump style. You know, he goes full in when he goes. All scorched earth. All scorched earth. And he's used to just, you know, using his charm. He'll insult you one second and then he'll be your best buddy the next. But that's not going to work in India. The idea of a strategic triumvirate consisting of Russia, India and China goes back to the 1990s. And for decades, the U.S. has courted India as a counterweight to China in Asia, with some success. Still, India has long maintained a neutral stance on diplomacy that goes back to the Cold War.

18:44It rarely shows outright support for either China or the U.S. That's why Dan says this sudden souring of relations between the U.S. and India is baffling to almost everybody. I talked to former U.S. officials all over the region. I mean, everyone is talking just about Trump's U-turn on India. I'm sure the Indians are wondering the same thing. It was so abrupt, and in a matter of weeks, you just undid really decades of work, and it's going to cause decades of damage. And how are these new and old relationships that China's forming, how are they reshifting the world order? Are we seeing a geopolitical realignment of the world order here that China is orchestrating and leading at the moment?

19:31In some respects, yes. I mean, everything is caveated in a way because there's no country that really wants to choose between the U.S. and China. When countries lean more toward China, that's a natural reaction to the U.S. using every financial weapon it has to squeeze every country out there. If China were to do anywhere near the same thing, countries would shift back to the U.S. That's just the way things work. Now, I think the worry among some U.S. strategic planners is that as China grows more powerful and countries increase their dependencies on China, it's then very hard to reduce those dependencies, particularly if China continues to control all the world's manufacturing.

20:16The fact that China can make all this stuff, the U.S. can hardly build a ship anymore. That's why you see the tensions that are emerging. And the worry is that, OK, if that gets entrenched, then there is no alternative to China for things that you need to run a country. And if the U.S. can't provide a credible alternative, then maybe you capitulate to some of these geopolitical demands that China wants, which is like, you know, you're going to keep quiet if China wants to take Taiwan one day or something like that. India is not going to jump in bed with China. There's just too many obstacles for that to happen.

20:58They have constant disputes along the border. There's a lot of concern about Chinese infiltration of the economy. But for the moment, those divisions are put aside for a bigger problem right now, which is Trump. Trump is the bigger problem. And so you put aside all your differences and you smile with each other and you hug each other and you focus on the thing that unites you at the moment. And the thing that's uniting everybody is the need to push back on Trump and not be pushed around by Trump. And that's what we're seeing play out in Beijing.

21:40This is The Big Take Asia from Bloomberg News. I'm Wan Ha. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. If you liked the episode, make sure to subscribe and review The Big Take Asia wherever you listen to podcasts. It really helps people find the show. Thanks for listening. See you next time.

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