Greenland Tariffs Are Off — Is There a Deal?

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1:13Additional restrictions may apply at some locations. Today's number? 1 ,654. That's how many pounds the heaviest taco in history weighed. It also measured 36 feet long and 34 feet wide, making it the largest taco ever. That was until yesterday.

1:43Welcome to Prof G Markets. I'm Ed Elson. It is January 22nd. Let's check in on yesterday's market vitals. The major indices rallied after President Trump said he would not use force to acquire Greenland and called off his tariff threats. More on that later. The yield on 10-year treasuries fell. The dollar rose. Gold dropped from record highs. And finally, Intel shares climbed 12 % to a four-year high amid optimism for the company's earnings due tonight. OK, what else is happening? Well, there's no shortage of global news this week, but there is one story you might have missed, and it is a pretty big deal, and that is China's birth rate just hit a record low.

2:28New government data revealed that the country's birth rate fell to 5.63 per 1 ,000 people. That is the lowest rate since the Communist Party took power in 1949. Last year alone, China's population fell by more than 3 million people, and the UN warned that if this trend continues, the country could lose half of its current population by the year 2100. So for more on China's population problem, we're speaking with Prof G Media's very own Alice Han, host of the China Decode podcast and China economist at Green Mantle. Alice, thanks for joining us. Good to see you, Ed, and happy 2026. Happy 2026. So, I mean, it's hard to focus on China right now, given what's going on in Davos.

3:14And maybe I've thought some what's happening there. And if so, feel free to discuss. But we wanted to focus on this birth rate, which was just released this week, Chinese birth rate hitting a record low. Seems like a pretty massive deal to us. I guess my question to you would be, is it? It's huge. And just for everyone to get historical perspective, we've seen four consecutive years of population decline. The birth level, 7.93 million births in 2025, that is the lowest level since 1949, the founding of the People's Republic of China. And most of that is driven by the fact that people are effectively having less children.

3:57Now, we can dig into the minutiae as to why, but the fundamental takeaway from this is that this is an inevitable change that is going to be extremely difficult for the Chinese government to counteract. We actually have seen a great degree of policy response to the declining birth rate and declining population issue from the Chinese government. For instance, they're making it way more flexible to marry. In the past, you had to go to the place where you were born to register your marriages. Now you can flexibly marry. They pay$500 a year for your child until the age of three. They just waived in, in the autumn of 2025, free preschool education nationwide for all Chinese.

4:42And I think that they will continue to act on this with more policy levers to try to boost birth rates. they're even putting back onto condoms a 13 % tax to try to get people to avoid contraception. So I sense that there's a level of policy desperation because, Ed, and as we've discussed in previous podcasts, this is going to be a huge demographic challenge for China because it has massive growth implications and massive labor market implications. Now, economists debate whether or not having a rapidly aging population is going to be net inflationary or net deflationary, whether it means older people spend less and ergo, it's going to be deflationary, or it's actually going to tighten labor markets and make things more inflationary.

5:31We're actually going to see this play out in China very rapidly. And China is doing it at a rate that is far exceeding what we saw in Korea and Japan and at a poorer level. And one thing that I will add just to drive this home is that by 2035, 30 % of the population, larger than the size of America's population, will be above the age of 60. So you think about what that means for society and for the economy. This is, no joke, a huge issue for China. How much of this is a result of the one-child policy, which I know is not in place anymore, but it used to be you could only have one child in China.

6:10Is this not just that? Well, that actually did, I think, respond to rather prudently massive population surges in China that we saw from the 60s onwards. After the Cultural Revolution, we did see an upswing in population. They brought it in in 71. They got rid of it by 2015. So effectively, by 2016, you could have more than one child. And now it's pretty much fair game how many children you can have. I don't think it really is the one-child policy that has created this big demographic challenge. I think it is far more structural, far more societal, and far more cultural in the sense that people are deciding they don't want to have kids, they don't want to marry.

6:57We've seen marriage rates, excluding last year when there was a bit of a surge in the first half of 2025, largely being on a downward trend because millennials like you and me are deciding, I don't want to get married. What's the point? We're getting highly educated women who are opting out of the marriage market saying, I can take care of myself financially. And think about the knock-on impact of the one-child policy creating highly educated women who decide, I can focus on my career. I don't need a man in my life. All that agglomerated has created a dynamic in which everyday young Chinese people of childbearing age have decided to opt out of the marriage market and opt out of the fertility market.

7:41That, I think, is the number one factor. It's the fact that young people are deciding they don't want to get married and they don't want to have children, even although the government is doing everything it can to try to encourage more births. The start you said earlier about the share of the population who will be over 60 and just the implications that that would have on the the labor force, what it would do to the social safety net. I mean, it sounds like all of America's problems on steroids. Where does this population issue rank for you in terms of China's macro risks right now? When you look at all of the things that China has to worry about, how big is this one?

8:25In the short term, Ed, candidly, it's not the biggest issue. The biggest issue is going to be trade with the US and with the rest of the world, which is why what comes out of Davos is going to be interesting. What comes out of the April meeting potentially between Trump and Xi and China will be very, very important. And what matters more in the short to medium run is China's technological advancements, especially in the realm of AI and whether or not that can, as the government hopes and aspires to, unlock productivity gains for the economy. Because if AI is able to do this, it can to some extent counteract the aging demographic problem.

9:03Because you might have a tighter labor market, but then you have these deflationary pressures from humanoid robots, from technology that effectively will soak up some of the shortfall in the labor market. They could be used in elderly care, for instance, in factories, in manufacturing, in education, in healthcare. So I think that the technology issue is going to be critical. But if we move into the medium to long term realm, the demographic challenge, when I think about 2035 onwards, is going to be, I think, the top three issue for the Chinese government. because thus far they've shown, I think, in the last five years where they've really focused on this issue that the government doesn't have the adequate policy toolkit to really ramp up fertility.

9:50And no other country in the world, I think, has been successful. You look to Korea, where the fertility rate is even lower. You look to Japan. You look to other countries that are actually desperately trying to respond to the aging demographic. No other country, I think, has shown a positive scenario or test case for how to respond. So I think when we zoom out of the short term, we look to the long term, the next decade and more, this is going to be a top three issue for the Chinese government. And here I'm a little bit worried about what it actually means for the labor market. And more importantly, what it actually means for the fiscal burdens of local governments and central governments, because it is true that historically we've had a very weak pension system, a very weak social security system by Western and East Asian standards.

10:36So a lot more of the local and central government balance sheets will need to be dedicated towards creating a more robust social security system for an ever-expanding population of 60-plus-year-olds. And they will have to, I think, continue to increase the retirement age, which compared to the rest of the world is so low. I mean, even before last year, the female retirement age was only 55. So if you think about that, that is as much as 10 or even more years lower than some of the other G7 countries. That I think is going to be a low-hanging fruit for them to change as well, to try to maintain some degree of robustness in the labor market.

11:15You mentioned one of the risks being the relationship with the U.S. right now, at least in the short term, and how that's relevant at Davos. Just before you go, what have you made of what we've seen in Davos, how does any or all of it relate to China? So I sense that after the rare earths fiasco that we saw towards the second half of 2025, that China feels very vindicated in its US strategy. It feels that it can continue to use the rare earths card if Trump doesn't play nice with them from their perspective on trade talks. We've seen in response from the Trump team, including Besson, I think a far more dovish approach to China on trade talks.

12:02So from Beijing's standpoint, they look at the unrest in Venezuela. They look at the unrest in other parts of the world and now the fiasco over Greenland, and they go, well, this is good. This means that the US is going to be distracted from the China challenge. It's going to be distracted from dealing with its own domestic issues, which, oh, by the way, keep growing. And this actually plays into Xi's strategy, which is to divide and conquer. In my view, he is using the Carney playbook, Carney going to China, and using that to effectively create what the communists would call contradictions in the West.

12:40So to divide the G7 countries from America and encourage them through a degree of panda diplomacy, you know, for instance, lowering tariffs or agreeing to bilateral trade and investment flows, using that lever to try to get the Canadians, the Europeans and the Brits to reset their relationship, quote unquote, with China. The next thing we'll have to watch is Starmer's trip. It should be at the end of January to Beijing, where it seems there are rumors that he also wants to reset the relationship and go back to some degree of the David Cameron golden era relationship. so i i think this is the trajectory that china is on and certainly right now the more that the u.s focuses on greenland and invokes the ire of the europeans i think the more likely it is that the europeans say hey china we're willing to uh compromise maybe further when it comes to the ev price minimums maybe we'll be more open to chinese investment in europe in a way that we weren't say even last year or a couple years ago so i i sense that china feels that it is vindicated whether or not that maintains as a theme through 2026 remains to be seen.

13:48Yeah, it seems like if anyone's celebrating what's happening in Switzerland right now, it's China and Xi Jinping. I can't see any winners coming out of this other than them. Lots more to discuss another time. Alice Han, host of the China Decode podcast, China economist at Green Mantle. Alice, thank you very much for your time. Thanks so much, Ed. Talk soon. After the break, a look at a bond sell-off in Japan and also another talker. And for even more markets content, you can subscribe to my new weekly newsletter, simply put, at edwardelson.substack.com.

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16:33We're back with Profity Markets. Japan's government bond yields surged to record highs on Tuesday amid fears of a looming debt crisis. The massive sell-off came after Prime Minister Sanai Takeuchi pledged to cut taxes and ramp up spending without explaining how she'd pay for it. The turbulence in Japan, combined with the heightened tensions over Greenland, sent US Treasuries tumbling while Japan's long-term bonds rebounded yesterday. Analysts warn that stability is unlikely until Tokyo provides a credible path toward deficit control. Okay, joining us to tell us what on earth is going on in Japan and how this all relates to global markets.

17:14We're speaking with William Chu, Senior Fellow and Deputy Director of the Japan Chair at the Hudson Institute. William, welcome back to Prof G Markets. Yeah, great to be back, Ed. So last time we spoke, Japan had just elected their new Prime Minister, Sanae Takeuchi. We talked a little bit about who she is and also the market's reaction, which was pretty positive. Here we are three months later. It appears that there's some sort of meltdown happening in the Japanese bond market. It appears it has something to do again with Prime Minister Takeuchi. What is happening in Japan right now? What triggered this and how did we get here?

17:56I think what's going on right now is that – so she had essentially all but declared that she will call snap elections once the Diet comes back to session on January 23rd. The elections are set for February 8th. That is essentially an election to affirm her mandate to govern. And I think very much in terms of her priorities is, one, the issue of just building up political support and focusing on issues of affordability that's obviously plaguing other countries other than just Japan and cutting the consumption tax, right? The expectation there is that it will cause Japanese debt levels to rise. There's also other considerations in terms of just in terms of her own plans on economic investment, defense buildup, all things that will also put more pressure on long term Japanese debt.

18:50So I think that those are the various issues at play. Related to that is also I think the opposition are trying to build up pressure in terms of like merging two opposition parties to create a centrist opposition bloc. And so I think, you know, that's creating more political pressure for her to address these more kitchen table affordability issues like cutting the consumption tax. Some people are calling this Japan's Liz Truss moment. That's something we've seen. And this is a reference to the former Prime Minister of Britain, Liz Truss, who left office. She planned this big package of all these unfunded tax cuts.

19:35There was this big sell-off in the bond markets. Is that an accurate description? Should people be making that comparison? Is this different? From what I understand, certainly of Liz Truss's policies, I think Sanaya Takeuchi has a much clearer policy vision. I think in her case, it's not just unfunded tax cuts or consumption tax cuts for no political purpose. It is, one, there is a political purpose, which is to actually build up the ruling party majority, which she needs to push through some of her other, more ambitious plans. And those ambitious fans involve economic security, basically investment in 17 key strategic areas that will allow for, well, at least it's designed for long-term Japanese economic growth and innovation, as well as defense spending, which obviously the China backlash has demonstrated to Japan that it needs to seriously invest in.

20:33And obviously there's also some pressure from the United States for Japan to spend more on defense. And so I think she's doing this for very reasonable reasons, right? These are all necessary reasons. So I think at least on the policy side, it makes sense. Is it a risk? Yes. But these are also things that she needs to do policy-wise. So I would push back on the sort of the LizTrust comparison. I think Sonata Takechi has a solid policy head on her shoulders, even if it is definitely running some risks. — There's one last question before we let you go. We've been seeing a lot of activity up and down in the stock market, in the wider stock market, in the U.S.

21:16stock market, given what's happening in Davos, all the conversations about Greenland. Scott Besant said the other day, when we saw all of the selling, he said that this isn't about Greenland. This is about Japan. It seems like that's probably not the case, given what happened after Trump basically taco'd just recently. But I guess it sort of introduces a larger question, which is, how important is the Japanese bond market to the rest of the market? Like, why does this matter, if at all, to U.S. investors? Sure. So I think the connection there is there's one primary and there's one secondary. One is that Japanese bond markets have always been stable, right?

22:06Like the fact that Japan can carry some of the highest levels of debt in the world is because so much of the debt is actually held internally in Japan. And so they're bought and re-bought and resold within Japan. So that provides a certain level of stability that allows for the Japanese government to essentially function on a deficit as they have for many years. And I think there is a lot of appeal to foreign investors because the Japanese bond market and more broadly the political economic system is fairly stable. So I think that's the appeal. I think what the U.S. rhetoric on Greenland has done is obviously it's certainly created some spikes in the market and also both in the stock and the bond market.

22:52I think what it really does, at least in terms of the connection to Japan, is it creates concern in Japan about, well, if the U.S. is focused on Venezuela or it's focused on Iran or it's focused on Greenland, you know, we – the Japanese are raising questions of like, you know, if something happens with China, especially given the recent China blowback against Takeichi over Taiwan, you know, like, do we have to spend more on defense because the U.S. might be overstretched or it's just unable to get around – come over. These are Japanese concerns, right? These are not my own personal concerns. But that is the way that they're voicing a lot of these concerns through, I think, both the bond, the expectations that Japan will have to spend more on defense and security, hence driving the long-term bond yields up, while also driving the stock market up, because there's expectations that there's going to be short-term money flowing into the security and defense sector, both because of its own needs immediately, as well as sort of like long-term trends over U.S.

23:57presence in the Pacific. Okay. William Chu, Senior Fellow and Deputy Director of the Japan Chair at the Hudson Institute. William, thank you. We appreciate your time. Of course. Thank you as always, Ken. Appreciate it.

24:15Well, the big news is obviously the taco. Trump has decided to cancel the tariffs because he has supposedly reached a framework for a future deal for Greenland. There's a lot there. We'll be breaking all of it down with Scott on our Monday episode. But before we go here, I do want to touch quickly on Trump's speech that he gave yesterday at Davos, the speech that preceded the taco. There was a lot of build-up to this speech. It was his first visit to Davos in six years. There was supposedly a 90-minute wait outside the conference room. Everyone wanted to be there because everyone wanted to know, what is Donald Trump going to say?

24:57And what happened next was notable, and that is he didn't really say anything. The speech was over an hour long. He clearly hadn't prepared any notes. He rambled from one talking point to the next. There was no coherence. There was no message. There was no agenda. It was basically just a stream of consciousness. I tried to watch it. I could barely get through it because it was so boring. Now, the headlines would indicate that he did say something, specifically that he wouldn't use force against Greenland. And that appears to be what initially moved markets before we saw the TARCO, the S &P, the Dow, and the Nasdaq all rose more than 1%.

25:39But let's not forget that in that very same speech, he also confused the country of Greenland with the country of Iceland, not once, not twice, but four times. It was obvious to everyone he didn't really know what he was talking about. Plus, when he said he wouldn't use force, it didn't sound like an actual policy position, something he'd predetermined and decided to announce. No, it just sounded like the words were appearing in his head. Like he realized in real time, oh yeah, I guess using force is a bit much. I guess I won't use force. That was the level of intention and the level of care with which he delivered this supposedly breaking news.

26:24Now, this isn't to say that he was lying about Greenland. Maybe it's true. Maybe he won't use force. Rather, this is to say, I'm not sure he actually said anything. I'm not sure there was a takeaway, because I don't think even he had one. And this would also inform the Tarko decision. Just a couple hours later, he decides he's calling off the tariffs because of his framework for a future deal, which of course could mean anything. But more importantly, it probably means nothing. And this is the great irony of this presidency. Most of what he says is actually meaningless. It's basically just shower thoughts.

27:08But because he is the most powerful person in the world, we are forced to make meaning out of it. and not just podcasters, but investors, traders, politicians, CEOs, all of us. We have to make business decisions. We have to make investment decisions. We have no choice but to try to understand him. And this is a theme that has played out constantly. We saw it with the tariffs last year where businesses had to spend billions trying to figure out what the hell he actually meant, in fact, according to one estimate from the Fed, that cost will come out to$71 billion each year. We also saw it with his AI chip policy, which ended up costing NVIDIA$5.5 billion, only to later be reversed.

27:55We even saw it with the Warner Brothers deal. First Trump says it could be a problem, then Netflix and Paramount hire an army of Trump whisperers to negotiate with him. Then he decides actually he doesn't care either way. The point being, think of all of the time and the money and the effort that we spend trying to figure out what he means, what he is actually saying. But what if he isn't saying anything? What if that speech or his tariff announcement actually tell us nothing about his foreign policy or his plans for Greenland or his relationship with Europe or his economic agenda, you name it?

28:37What if it's all actually meaningless? What if it's all just a way to kill the time? I don't know. But regardless of what he says, tariffs, no tariffs, invade Greenland, don't invade Greenland, use force, don't use force, I've seen enough at this point to know what the real takeaway actually is. And it's pretty simple. There is no takeaway.