Money Talks: The Art of Trade War

0:00As a small business owner, you're the CEO, the marketing team, and the customer service rep all at once. I was recently talking to a shop owner who told me their worst nightmare isn't a slow day, it's the vanishing act. It's that moment you're inches away from a deadline and the Wi-Fi just disappears. We've all felt that pit in our stomach when the connection flares up right when it matters most. Your business is only as strong as your connection. AT &T Business is the reliable provider built for that exact brand of hustle. so you can stay focused on the work that builds your legacy. Powered by AT &T Business.

0:34Built to work. Get AT &T Business at business.att.com.

0:43Slate Money is sponsored this week by Bill, which is the intelligence finance platform that helps business and accounting firms scale with proven results. Bill is a leading provider of software that simplifies, digitizes and automates back office financial processes for accounting firms and small to medium-sized businesses. What does that mean? It means they help businesses pay and get paid by ACH, JET, credit card, wire transfers, you name it. It's secure. It has AI-powered accounts payable automation that erases the busy work from capturing invoices and processing payments. It syncs seamlessly with accounting software.

1:24It does your 1099 tax filings, you name it. It's an end-to-end workflow. Its customers come from all industries, ranging from startups to established brands and non-profits to accounting firms themselves. When business owners choose Bill, they aren't guessing. They're choosing infrastructure that is already proven by millions of users and over a trillion dollars in secure payments. Bill doesn't just move money, it enables the business's entire accounts payables workflow and it creates the ability for them to control their financial operations securely and at scale. So talk with a payments expert at bill.com slash proven and get a$150 gift card as a thank you.

2:05That's bill.com slash proven.

2:18Hello and welcome to Money Talks, a special extra podcast from Slate Money where we chat with brilliant and interesting people. I'm Emily Peck. I write the markets newsletter at Axios and co-host Slate Money. And I'm here today with not one, but two brilliant and interesting people. Sumeya Keynes, a columnist and podcaster for the Financial Times, and Chad Bowne, a senior fellow at the Peterson Institute for International Economics, who was recently chief economist at the State Department in the last year of the Biden administration. Welcome, Sumeya and Chad. Thanks for having us. Well, we're here not just to talk, but to talk about your amazing new book, How to Win a Trade War.

2:57Sumeya, in a recent column for the FT, you include the classic line, no one wins a trade war. So what are we doing with this book title? Can you unpack that for me? Oh, if I had a cookie for every person who was like, isn't the answer, no one wins a trade war? Is your book one page long? I would need a new wardrobe. Yeah, so this has been the classic line, right? No one wins a trade war. But I think, you know, the parallel is with real wars, right? So think about a hot war. No one wins a hot war either. They're terrible. People die. It's generally horrific. but at the end one side can come out victorious maybe they have more autonomy it is possible in a hot war to minimize your wounds and so the book is called how to win a trade war and we're slightly cheating we're kind of expanding the definition of winning to be broader than i am better off than i would have been had i not fought this trade war but the central premise of the book is that we're not in a world where it's okay to make that argument anymore because the trade wars have come to us.

4:01And so not fighting just isn't really an option anymore. You guys told Jon Stewart recently that it's the trade war we're in right now started on Liberation Day, as the president calls it, in April of last year. I don't know. I think the trade war, I mean, that was a big offensive measure, but the trade war did have roots before that, at least to the first Trump administration. And then the Biden administration didn't stop fighting either. So we may have said that on Jon Stewart. We also may not have. I actually have no memory. I blanked out. It was such an amazing experience. But I agree with you.

4:40Right now, we're actually fighting two separate trade wars. There is the sort of trade war of choice that President Trump unleashed on the world on Liberation Day in April of 2025, putting tariffs on everyone out there, friend and foe alike. Then there's the trade war that isn't the trade war of choice. It's sort of the trade war of you being invaded and is the one that you've got to respond to whether you want to or not. And that one has been going on longer. And I think we would say it even sort of predates the first Trump administration. And that one is the trade war with China. And that's one that really China more started in the sense that it really has more to do with China's economic system just being fundamentally different from ours and pushing all kinds of new pressures on the West collectively that we aren't really prepared to deal with.

5:35And just the way China thinks about trade and engaging with the rest of the world. China doesn't view interdependence in the benefits of trade in the same way that historically we have in the West for the last 70 years. China and under Xi Jinping, President Xi Jinping especially, has a view of the world that wants China to be independent, right? So have its supply chains not dependent on the West, on the United States, Europe, Japan, anybody else, but have the rest of the world dependent on China. And that's just a fundamentally different way of viewing things. And once it sort of became clear that China not only thought this way, but was taking policy actions to push in this direction, and it was achieving success in this direction, that's when the more fundamental trade war that we have to be involved in really got started.

6:27So maybe unpack the China piece for me, because I don't think we talk about it enough on Slate Money in the regular episodes. Everyone always says China entered the WTO, the World Trade Organization, 26 years ago now, And that sort of changed everything, completely changed the United States. Arguably, roots of Donald Trump start there because as people's jobs get displaced, blah, blah, blah, blah, blah. But when did it become clear, like you're saying, Chad, that China was doing trade war? What was like the first big indicator of that, would you say? Well, for me, I think it probably starts around 2015.

7:06I'm not saying we noticed it in 2015. But when you go back and you see what they started doing, they rolled out this thing called the Made in China 2025 strategy, right? And they basically said in 2015, by 2025, we have these aspirations to be globally dominant in a bunch of really important sectors. And you might just say, well, OK, that was aspirational. Lots of countries say that, you know, we hope to be great someday. But what was important looking back at those proclamations was these were sectors at the forefront of technology. This was advanced semiconductors and robotics and even at that stage kind of thinking about artificial intelligence, right?

7:46And it wasn't just that they wanted to be better at this stuff. They actually articulated they wanted to be dominant. They basically wanted to be self-sufficient and to create a new kind of world order where the rest of the world became reliant on them. And also what had happened at that point in time was they were already starting to show signs of success in other sectors that they could achieve these massively aspirational goals, right? So back then it was already clear that when they had set their minds to it in sectors like steel and aluminum and shipbuilding, that they could achieve some of these really big market share goals, right?

8:25And that was kind of, I think it took us a while to see fundamentally how important that change was. It maybe took us until 2019, 2020 or so before we really wrapped our heads around it. But I think that's really, at least for me, looking back when it became clear that China really was quite different. But Sumeya, I mean, don't all countries want to have goals and dominate industries and build up their technological prowess? I mean, the United States, we've been doing that for a very long time. So is there a thing, a strand, I feel like I noticed in your book of sort of a push and pull around is China like a bad guy or is China just trying to be great, trying to advance its economy?

9:08Yes, I'm really happy that you noticed this push and pull, right? Because I think a different way of framing what Chad was just describing is that, you know, for many, many decades, the U.S. was the dominant actor, right? The US ruled the roost and other countries had to basically do what the US said. The US had the dollar. It had enormous military power. It had huge soft power. And so one interpretation of what's going on is that the US is now experiencing some of what the rest of the world experienced when after it was kind of pushing other countries around. And so there is a version of the story where everyone's just playing nicely and then China comes along and wants to weaponize its dominance in certain areas.

9:48And the alternative version is that actually, no, it was already an unbalanced system. And the real change is that now that the US has, you know, a match, another party that can also weaponize its dominance. And, you know, obviously the big risk here is that by painting this picture of the Chinese being the aggressor, essentially you're creating the problem that you're warning about. The Chinese, I think to an extent, have been reacting to some of the Western concerns about its model on the Western behavior, you know, the tariffs, the export restrictions. I think there has been a real shift in the Chinese mindset towards a kind of security first mindset.

10:27I think, I don't think that the sense that they have to be self-sufficient, I think it's always been there, but I think it has intensified over the past few years. And so this is the big conundrum in international relations. By being clear about what the threat is, are you actually making the threat worse, right? Because then you're you're ending up painting this as an adversarial scenario, a zero-sum confrontation when it doesn't necessarily have to be. And you could argue what Donald Trump did on Liberation Day and what he did in his first term, these crazy high tariffs on China sort of set them loose to do the things that we then say that they're villains for doing, like export controls with rare earths and things like that.

11:09I mean, I actually think that the blueprint was published by the US earlier, in the form of export controls. Liberation Day may have been the trigger to activate some of the Chinese retaliation. But actually, if you look at the tools that China is using, in terms of its restrictions on companies in other countries using Chinese content, then there are pretty strong parallels between that and the export restrictions that the US had been applying over the previous few years, right? So China has watched, learned, and copied many of the kind of economic weapons that have been applied to it over the years.

11:47We should probably explain what export controls are and how the U.S. was using them. So export controls historically in the United States have been used to prevent sensitive technologies from getting to actors out there in other countries that we're worried about, typically for military purposes. And so you can imagine you're worried about China's People's Liberation Army, right, getting hold of artificial intelligence and fancy semiconductors because it might help them make better bombs or missiles or all kinds of bad things, right? And so historically, the United States and other countries have put export restrictions on not only the bombs and the missiles that you can't send those abroad, but also these what are called dual-use technologies, the things that could be used both to make video games really exciting, but also for nefarious purposes.

12:40And we have controls on those to prevent them from getting out there to bad guys. Where I would argue the difference comes in is China, and Simeon is absolutely right, has basically copied and pasted the US's export control regime in many respects, but they're applying it to a bunch of different products, right? They're oftentimes applying it not to things that are necessarily sensitive for military purposes, but oftentimes where they have market dominance, right? And that are essential inputs into just making stuff. And we saw this happen twice last year in 2025, when China decided to restrict exports of something called permanent magnets, which sure, maybe they have some military application somewhere.

13:23But for the most part, They're used in electronic devices. They are the things that go into cars. So without permanent magnets, your windows don't go up and down without having to crank them like in the old days, or the windshield wipers won't go back and forth, seats won't go back, things like that, that you can't make a car that a consumer is going to want to buy unless you have these things. Well, China makes 90 % of the world's supply of those permanent magnets. They weaponize those. Another one is low-end semiconductors. They weaponize those later in the year. So in any case, the reason or one of the ways why China is different is it's using these same tools, but not arguably because it's worried about American military might.

14:02It's really weaponizing them for economic security purposes and ways that are threatening American and Western production, jobs, and kind of just our ability to live our day-to-day lives. You know, it's interesting. While you were talking about that, I was just thinking, and you guys go into this a lot in the book, the Chinese government has quite a lot of control over companies in the country, whether they're companies that are owned by the state or even private companies. So when it wants to do export controls, it can just do them. But in the U.S., it seems like we are more restricted from doing that kind of weaponized export controls you're talking about.

14:38I'm thinking about NVIDIA and the Trump administration trying to restrict exports of NVIDIA's high-end chips to China. But NVIDIA is like, please, we don't want that to happen. We want to sell our chips to China. We need everyone to buy our chips. Otherwise, they'll come up with new chips and then we'll be out of luck. And NVIDIA has a lot of power. I mean, the president, I believe, owns stock in the company. But that's like another podcast. We can talk about that some other time. But is it harder, I guess, for the U.S. to do that kind of weaponized export control stuff because we have more of this theoretically free market situation over here?

15:15So I think that companies complain louder about it. I guess I do want to slightly push back on the idea that the U.S. has the moral high ground when it comes to export controls. So last year, we also saw that the Trump administration, you know, it applied export restrictions to planes, various other things that were not directly for military use as a tool of coercion to try to force China to reduce its own restrictions, right? So, you know, maybe in the past, the US was trying to keep this all to military specific items. But last year, that's just not what happened. I think the broader point, though, that the US, I think, struggles because historically, there's been a slightly greater separation between companies headquartered in the US and the government versus the big companies in China and the Chinese government.

16:03This is a really, really murky area and one that we really tried to grapple with in the book. Obviously, state-owned enterprises are going to be pretty cooperative with the Chinese government, right? There's no question there. And also, I think in a state of war, in a state of national emergency, see everyone will tend to cooperate with their government to an extent. We saw that when Russia invaded Ukraine, I think Microsoft intervened kind of essentially in support of the Ukrainian government. Obviously, Microsoft isn't a Ukrainian company, but you know, you get the gist, right? Companies can take sides.

16:37I will also say that everyone faces challenges, right? So, you know, thinking about semiconductors, for years, the Chinese government was trying to push its companies to stop buying US chips, right? To create some kind of homegrown alternative. And they just couldn't do it because these companies didn't want to, right? They wanted to buy the amazing US chips. And so there are limits to these relationships, even in China, right? Companies don't always do what the Chinese government wants them to do. And similarly, you know, Jensen Huang has been very upset about the US government restricting its exports to China.

17:13But, you know, they have applied the restrictions. I think there's been a certain amount of leakage, illegal chip sales, as actors elsewhere try to circumvent the tariffs. But my point is that the U.S. has more power over companies than some might suggest. And, you know, in some cases, the Chinese government has less power over its companies. Can you tell my role is to be the all but it's complicated person? I like that. We'll be right back for more on that after the break.

17:55slate money is sponsored this week by policy genius right now i am planning my summer vacation in canada where it's going to be cool i'm not going to be sweating and sweltering and i am going to be relaxing and one thing i am not going to be worrying about is life insurance because who wants to be worried about stuff like that you want to relax you want to take all of those worries off your shoulders policy genius makes finding the best life insurance for your family easier giving you a more carefree summer policy genius is an online insurance marketplace that allows you to compare quotes from some of america's top insurers side by side for free they have a licensed team and they will help you get what you need fast so you can get on with your life.

18:41You find what you need easily. Coverage amounts, prices, terms, no guesswork, just clarity. With PolicyGenius, you can see if you can find 20-year life insurance policies starting at just$276 a year for$1 million in coverage. So head to policygenius.com to compare life insurance quotes from top companies and see how much you could save. That's policygenius.com.

19:10Slate Money is sponsored this week by Upside, which is an app you can use to make those high gas prices, high grocery prices lower. You can get cash back if you're using the Upside app. I am a rational human being. I like getting credit card points. But if I can get cash back on top of credit card points, then what's not to love? This is one of those habits. It's just a handy thing to get into. It literally costs you nothing. It makes you money. You can transfer straight to your bank account. Over 100 ,000 participating locations means that once you start checking the app, you realize just how often there's an offer right where you're already going.

19:48Upside has given back more than a billion dollars to its users. So to find out how much you could earn, download the free Upside app and use promo code SLATEMONEY to get an extra 25 cents back for every gallon on your first tank of gas. That's an extra 25 cents back for every gallon on your first tank of gas using promo code SlateMoney. We already know that, you know, Americans are paying the tariffs. There's been so many reports by now and economists who have done the work. We know we're paying it. We know it's contributing to inflation. But there's other ways where longer term, the trade war that the president launched is something that we can lose.

20:30Like in other ways for companies, other countries turn to different suppliers or things like that. Like what are some other ways we're sort of losing here as this trade war rages on besides inflation and prices? Like what are the other kind of downsides that you're that you're seeing? Yeah, I think, you know, the big one is obviously autonomy. So in this kind of cold trade war with China, China has huge power because it has command over the rare earth supply chains. It can basically shut down US car manufacturers if it wants to. It can restrict supplies of permanent magnets that go into making Boeing planes.

21:08It supplies really critical imports to the defense industry. The US needs these things. And so the Chinese have leverage. And the Trump administration does not have the power to be as tough towards China as some within the Trump administration would like to be because China has this big tool of retaliation. Right. So if kind of winning a trade war is being able to do whatever you want, then on that dimension, I'm not sure the US is doing particularly well right now. I guess another metric that you could look at, although this is, you know, big and complicated, is the trade deficit or the current account deficit.

21:47Well, yeah. Do you want to just get into the trade deficit a little? Because I'm going to be honest with you. I've written about trade deficits. I think I understand it. I read the section in the book about trade deficits. I don't know. Do I understand it? Why it's bad? It's like we sell more, we get more, there's a services deficit, there's goods. Let me try and I'll try and clarify this. The other metric on which you might judge a trade war, or at least President Donald Trump would judge a trade war is the trade deficit, right? And this is something that economists like me and Chad have spent a long time saying like, Like, oh, you know, don't worry about the trade deficit as much as you do.

22:24Although actually recently, or, you know, in the book, one thing we try to explain is that overall, your overall trade deficit or your overall current account deficit, which includes some other things, but the trade deficit is a big component, that can matter, right? Because essentially what that means is, you know, the US has a big current account deficit. it buys more than it sells overseas and it funds the difference by borrowing. And that borrowing over time, if it's not offset by other financial, let's call them changes for simplicity, then essentially what you're doing is you're building up huge amounts of external debt, right?

23:02And the US is building up huge amounts of external debt. And ultimately at some point, we don't know when, but that could well blow up. And so in the long run, the problem of running these really persistent current account deficits is that you're building up debt, you're creating financial risk, and there could be some kind of financial implosion. And for the US, which is the kind of lender of last resort in a financial crisis, you really, really don't want that to happen. That's the kind of basic risk associated with these big persistent current account deficits. Maybe this is my own ignorance, but when you're saying more money's going out to buy stuff, then that's coming back in?

23:43Are you also taking into account all the money that's flowing into the stock market and investments and things like that? So if you think about it is with the current account deficit, basically you're buying in more stuff than you're selling the other way. And to pay for that, you're basically having to give foreigners money, right? And they use that money to buy claims on your stock market, for example, right? So you can sell a bit of your stock market to compensate foreigners for sending you all the stuff. And so essentially foreigners are owning lots of US equities. Those US equities have done pretty well.

24:15That's great. And that then kind of affects the US's sort of net international investment position, right? Because you also need to look at, well, the US owns assets overseas, what's happening to them. But overall, when you include it all together, the financial position of the US has been worsening quite a lot over the last couple of decades. So yeah, this is overall a financial risk and something we should not be completely relaxed about. Okay, well, that seems bad. And it seems like we're seeing that in the bond market this year a lot with the cost of borrowing going up and up. Yeah, I mean, I wouldn't want to attribute that to the US's specific current account.

24:56I mean, the bond market's a crazy thing, right? And, you know, I think the big challenge is that, you know, you might hope something about this global economic and financial system to be sort of self-balancing, right? So you might hope that someone would look at the US and be like, oh, well, that looks unsustainable. You know, we're going to charge them more and that will give them incentives to borrow less and then it will all be okay. But that's not really how those markets work. Often it's the cost of the US borrowing is, you know, it's relative to what other financial factors can overwhelm these kind of underlying structural forces that I'm describing.

25:31And so these imbalances can go on for a really, really long time. I was asking sort of downsides from the trade war, high costs being one for everyone in the United States. And then you're saying the second one, well, if the danger is we're buying more stuff than we're selling, wouldn't the trade war be seeking to, isn't that Trump's sort of stated goal to remedy, to make more stuff, to sell more stuff than we're buying? Yes, exactly. So just to, I guess, finish that overall thought properly, you know, so the trade deficit, the current account deficit, they are a thing that you could target in a trade war.

26:06And they are something that the US, the Trump administration has been trying to squash. And I think overall, I am sympathetic to the idea that it could pose a challenge. However, if you look at what happened to the overall trade deficit last year, it was basically the same as it was the year before. Right. So for all of those tariffs, they didn't do anything to reduce the trade deficit, which is, you know, what we would have predicted. We think that tariffs are a terrible, terrible tool for trying to manage those trade deficits. And yeah, if they're what you really, really care about, then it doesn't look like there's been a huge amount of success so far.

26:43Dang. Anything you want to add on that one, Chad, before I sort of change the subject? What I would say on the metrics question is if the underlying challenge, if one of the underlying challenges that we're really worried about is this over-dependence on China, are we making progress reducing that over-dependence in these key sectors where it exists, right? It's going to cost money for us to get there. We're going to have to subsidize to create new supply chains outside of China. We're going to have to use tariffs to incentivize companies to do that, right? And as you said, that comes with costs.

27:23That comes with higher prices, whether it's inputs or to American consumers. And so the worry is by fighting a trade war with everyone, you're making the costs really, really high and maybe not focusing on the goals that you need to achieve. And especially by imposing tariffs on everyone, including friends and partners like, you know, the Japans and the Europes of the world, economies that have the same exact challenges that we do. Japan, for example, has made much more progress than the United States has in terms of moving its demand for rare earths away from China. It's been buying a lot of this stuff from Australia.

28:00It's been subsidizing. It's made a lot of progress. We should be working with Japan, right, to further build out those outside of China supply chains. But we're not doing that. In fact, we're making it harder for Japan because we're putting tariffs on Japan. So in any case, that's my concern with this is the strategy. We're going to have some higher costs. But by taking the eye off the ball in terms of what we should be focusing on, it's much, much higher than it needs to be. And the American public may get sick of it before we actually achieve the objectives that we need to achieve. I feel like also another sort of downside is we lose out on the best stuff.

28:33Like we're Americans. We like to buy stuff. We're shoppers. I mean, you already see this, I think, with electric vehicles, I think, the most. China now sells, what, half of all EVs in the world or something. Americans can't buy them. We're prevented from buying them. They're supposedly awesome. We don't know. I'm dying to know. It just seems like the more barriers you put up and the more fights you start, the more you consumers lose out on good stuff. And American companies lose out too, like in the global market, so that they can't compete the way they maybe could have if they were able to work more inside, do what they want, that kind of thing.

29:09Chad is smiling, and I don't know why. Yeah, so we're both smiling because this was one of the most heated arguments we had while writing the book. Oh, yay! Yeah, yeah. I know that Samaya's itching to talk about this. That's why I'm smiling. Oh, we're willing to. So the argument was, I guess, a bit more specific than should consumers be allowed to have, you know, karaoke machines on wheels. Yes. And it was about basically the security implications of importing Chinese software-based EVs, right? Because it felt like... They spy on us. We drive around and they spy on us. Exactly. And I felt when I first encountered this debate that it just seemed like a bit much.

29:49And in the UK, we have Chinese EVs. We managed to cope with the risks. Why is the US just kind of overreacted, right? And you've always got to worry. You know, there are very, very strong private interests in the US in shutting out Chinese competitors, right? And of course, you know, there are incentives for those other companies to say, oh, you know, that their software is dangerous. You know, maybe the Chinese government could switch off the car remotely. Maybe it could spy. And to me, it seemed a bit disproportionate. Not yourselves like guys, if you want to watch my mum drive her groceries to the shops, sorry, drive, drive from the shops to home with her groceries.

30:31You wouldn't drive your groceries to the shops anyway. But two, surely there's some kind of technocratic test, right? Can't you just check that a car isn't sending secret messages back to the Chinese government or that there's no kill switch? Because, you know, if you, if you start banning cars based on this kind of security threat, then where does it stop? Should we be banning smartphones? What about, you know, all number of other electronic devices? And we had an argument about this because Chad was somewhat more hawkish than me. Oh, okay. So you think the Chinese, if we let the Chinese EVs in, then everyone will be tracked as they go to the supermarket.

31:07By the way, we're already tracked when we go to the supermarket, willingly and voluntarily. I tell the supermarket every time that I'm there and they make a list of all the things that I buy. For reasons? Yeah, so I think there's a slightly different argument between the supermarket knowing that you're coming and going to the supermarket versus, you know, for example, when I was driving around to my job at the State Department. Okay, but Chad, no one is saying that a State Department official has to have a Chinese EV. You don't have to ban all Chinese EVs from being used in the country to make sure that the chief economist at the State Department doesn't have a Chinese EV.

31:45Okay, but it is hard to prevent where those Chinese EVs would and wouldn't be allowed to drive around the United States, right? And what they would and would not be able to observe. And also the main point, I think, is it's really hard to come up with a technocratic solution to this problem. I think there have been now multiple examples, at least reported publicly, of things that have Chinese hardware and software in them having gaping holes in them that can be exploited for cyber attacks or backdoors or things like that. And if we're living in a world that we sort of don't trust each other, this is where you end up, unfortunately.

32:31I would love for there to be a technocratic solution as well, but somebody has to come up with a technocratic solution in order for it to be a technocratic solution. And right now we don't have a technocratic solution. And what that forces us into is one where we have to then go to extremes and say, in a world where we kind of don't trust each other for lots of different reasons, but some of them are militarily now. Unfortunately, we're going to have to go to the extremes and say, yeah, these sorts of products, because they could pose national security risks. They could lead to shutdowns and traffic jams and all kinds of problems for cities and in certain emergencies.

33:03That's where we end up. It's not a popular argument. I, too, have heard these amazing karaoke's on wheels are fantastic. I want to have a party in the car. But unfortunately, that's where we are at the moment. But we let in TikTok. Yeah, I think. But also, some of that comes with regret, too, right? And I think that's part of the challenge and maybe part of why there is this fear of allowing in Chinese electric vehicles. Once you would let them in, you wouldn't be able to get rid of them, right? Right now, China's flooding the world with these things. So you're at a kind of an inflection point.

33:34Do you allow in any or none? And if you allow in any, you're going to be overrun by them. And so you have to really be sure that it's good for your system to allow these things. And we'll see. A natural experiment is playing out all over the world, right? UK has got a lot of them. Europe's going to have a lot of them too. And we'll have different countries that have different amounts of these things. We'll see ultimately what the implications will be. Maybe the U.S. will turn out to have been wrong here. I wanted to switch gears and talk to you guys about a cold and hot war that's happening around trade.

34:06And that's the Iran war and the Strait of Hormuz. Because I feel like it's sort of a real-time natural experiment in export controls. We invaded or we attacked Iran. They leveraged a weapon of trade war that they never had done before. So now we're sort of like living out a lot of the strategies you talk about in the book. And I'm sort of wondering what you guys are thinking about with it. There's so much to unpack. Like, for example, when you talk about China being self-sufficient, they've really emerged as a huge kind of, I don't know, like smarty pants in the war. They stopped importing so much oil.

34:42They're keeping globally, the price of oil is lower than people thought. And a big reason is because China is simply, I don't know, it has a stash. and it's been okay. So I think that's really interesting. And then what lessons can we learn about the Iran war and trade war? Yeah. So there's a chapter in the book in which I spent some time on the Reddit preppers forum, who are the folks who buy a huge amount of freeze-dried macaroni for when the apocalypse happens. And I think the message of that chapter was that I think many of us might chuckle at the idea of this, in some cases, slightly odd sounding preparation.

35:21But actually, maybe we should do a lot less laughing and a lot more listening to people who've been preparing for emergencies, given this new world that we now find ourselves in. And I think China, they've been prepping for a while. And as you said, having those massive oil stocks certainly came in handy. I think the kind of bigger lesson on export controls for the Iran war. So I was really struck after the export restrictions first went on. And I was hearing people say the Iranians have made a mistake, right? Because they're shutting the Strait of Hormuz now, but that's just going to persuade others to find workarounds, right?

36:04Traders like water. And we did see some of that, right? So if you think about oil flows going out of the Persian Gulf, something like a third of the blocked oil actually ended up being rerouted through other pipelines, not going through the strait, right? So there were some workarounds. But I think the sense that, oh, in the medium term, you're just going to teach all these other countries that they can't rely on the Strait of Hormuz, it's a bit too neat. Because actually, when we look at the history of export controls, and this is something that we go into great detail on, it's never as simple, well, not never, it's often not as simple as you apply the export restriction and then you teach your target to protect themselves.

36:43Because the factors that created that dominance in the first place are the same factors that make it really hard to escape. So thinking about the Strait of Hormuz, there's not that much infrastructure in the region to get out of the Persian Gulf by other means. And there's actually weirdly not that much trade between those Arab neighbours. Or not that weird when you realise how many of them hate each other's guts and how it's quite a war-prone region. And, you know, you've got many governments who just don't trust each other, right? And so just, I think we should question their capacity to build huge amounts of new infrastructure to bypass the Strait of Hormuz.

37:18And so, you know, applying that much more generally, you know, one of the lessons that we explore is this sense of the dynamics of escaping an export restriction are pretty tricky, right? Because, you know, you're trying to escape, But the aggressor, the dominant actor, is trying to act to prevent you from escaping. Right. But it does seem to weaken. I mean, pipelines are being constructed now, or at least that's what I'm seeing reports about. And those electric vehicles are waiting in the wings. And it seems like the last oil shock we had, which was an export control shock, led to, you know, more fuel efficient vehicles.

37:54I mean, I agree. It seems it's complicated and it's not so easy to. just because you wield the dominance doesn't mean you will lose it right away, but it would weaken over time, it seems like. I mean, maybe. Or thinking about the oil shock that we experienced in the 70s, we diversified away from oil where it was easy, right? Which means that the things that we still use oil for are really hard to substitute away from. So to an extent, we might even be more vulnerable than we were before because there's less capacity to switch away. We can do some things, right? I think our capacity to substitute, great.

38:26Well done, everyone. We can do it. It's just always more complicated than a simple and neat phrase, which is why you need a whole book to explore all of this. Definitely. You definitely need this whole book. I think the other interesting thing to watch about a lot of those countries in the region is a lot of them are really rich, right? So they have resources to try to extricate themselves from these weapons that Iran is using by building additional infrastructure. In the short term, right, everybody kind of forgets that by blocking the Strait of Hormuz, it also stopped imports from coming into all these countries that are very reliant on trade for food.

39:07Obviously, everybody knows the climate there. It can't grow stuff, right? So they're very – so they're figuring out other ways to do it, trucking it in or medicines, right, flying it in. But that's oftentimes really, really expensive. But a lot of those countries are at a place in terms of their overall countrywide wealth where they can afford it. Had this happened elsewhere in the world, maybe it would have been a different story. So how we're going to interpret the lessons from this at the end of the day, I think, is a little bit still up in the air. Samaya, you have a podcast, so I feel you should plug it for people who want more.

39:36I have a podcast. I actually have a recording in nine minutes. Don't you have a podcast? I do have a podcast. It's called The Economics Show with Samaya Keynes, which is an innovative, pun-filled name for a show that is about economics. and yeah I love it and everyone should listen to it everyone should listen to it everyone should read Chad and Simea's book how to win a trade war an optimistic guide to an anxious global economy thank you guys so much for coming on this has been really fun thank you so much for having us and that's it for our show this week thanks to Justin and Molly for producing Ben Richman is senior director of podcast operations Mia Lobel is executive producer of podcasts and I'll be back in your feed on Saturday along with Felix and Elizabeth for a regular episode of Slate Money and until then, thanks for listening.

40:52of getting the job done. Call 1-800-GRANGER, click granger.com, or just stop by. Granger, for the ones who get it done. This is Kat and Nat from Kat and Nat Unfiltered, and this episode is sponsored by Michael's, your destination for all things birthday parties. If you've ever planned a birthday celebration, you know it goes from cute idea to full-on chaos real fast. The party shop at Michael's makes life easier with over 4 ,500 party supplies in 60 plus themes like Bluey, Rodeo, Soccer, Rainbow, and more. Starting at just 99 cents, you can shop same day delivery or order online for pickup in-store.

41:34And they even do free helium inflation on SelectBloonStyles. Michael's everything to celebrate anything. Visit Michael's in-store or shop online now.