Replay Available | What do the US Election Results Mean for Asia?

00:00:01:05 - 00:00:23:11

Alex Wolf

Good morning, everyone. Thank you for dialing in and joining our call. Titled What Do the Election Results Mean for Asia? My name is Alex Wolff. I'm the head of investment strategy for the private bank in Asia. We're very fortunate to be joined live from Washington, D.C. with Paul Haenley. For those of you that have joined a few of our calls in the past with Paul, you might already know his background, but I'll give a quick introduction.

00:00:23:13 - 00:00:58:08

Alex Wolf

Paul is recently joined recently joined J.P. Morgan, where he is the head of Asia Pacific Policy and Strategic Competitiveness. In that role, which is a newly created role, a newly created team, he advises our operating committee on kind of all things with regards to economic policy geopolitics, particular with a focus on Asia Pacific.

He served in the region for many, many years, both in Beijing and Singapore, as the head of the Carnegie Endowment, a very large, well-known think tank withoperations in Washington and around the world.

00:00:58:10 - 00:01:20:20

Alex Wolf

And prior to that, he served on the National Security Council as the China director under Presidents George Bush, George W Bush and Barack Obama. As part of that position, also was a member of the negotiating team on the six party talks with North Korea. Also has a number of years of experience as a special assistant to two national security advisers.

00:01:20:22 - 00:01:43:18

Alex Wolf

So many years in Asia, many years working on U.S. Asia policy. Now, we're very fortunate to have him with us at J.P. Morgan. I'm very fortunate to have him on the call. The call will be interactive. So we have a QR code which will flash on the screen here. You can scan that type in any questions that you have for Paul.

00:01:43:18 - 00:02:02:16

Alex Wolf

I know there's a lot that we're going to try to cover. We will try to we will definitely save time at the end for questions so you can scan that, type them in. And towards the end, I'll I'll leave some of the questions in and we'll save time at the end to ask questions as as well. Okay. So with that, we'll kick off.

00:02:02:18 - 00:02:30:10

Alex Wolf

Just starting. Very high level as many have seen the results come in. We can see that the Trump's win and the overall Republican win both in the Senate and as we're seeing in the House, was significant. I mean, you could describe it perhaps as a landslide. But in many ways, we saw really Republicans dominate in terms of overall overall support across the country.

00:02:30:12 - 00:02:50:02

Alex Wolf

And now they have what you could say is a strong mandate, a strong mandate from the American people. Given that Trump won the popular vote, he won every swing state. So, Paul, just starting with that as a backdrop, and if you want to add any color as well around the election and some thoughts on the governor relations team.

00:02:50:04 - 00:03:10:09

Alex Wolf

But then with that strong mandate from winning the popular vote and what we have is now a unified Republican government. What do you think they'll prioritize from a foreign policy perspective? What are some of the first things that you think that the Trump team will do when they take office?

00:03:10:11 - 00:03:23:02

Paul Haenle

Well, thanks, Alex, and thanks for inviting me to join. I always enjoy having the opportunity to sit down with you. And I may ask you a couple of questions tonight, if you don't mind.

00:03:23:04 - 00:04:04:02

Paul Haenle

Appreciate your insights and your judgment. No, look, I think you described it very well. I think a lot of people, you know, were hoping for, you know, you had people vote, hoping for Kamala Harris to win. You had people voting for Donald Trump to win. But something that a lot of people of both parties were hoping to see was, in either way, a decisive victory, because what they didn't want is for a really close election to then be drawn out by disputes and and legal cases and demonstrations and post-election violence potentially, and all the rest.

00:04:04:04 - 00:04:30:05

Paul Haenle

We managed to avoid that. Right. And so, as you mentioned, you know, he won. Donald Trump won the Electoral College, which is what you have to do to become president. But he also won the popular vote. And first time in 20 or so years since the president that I worked for, George W Bush, won the popular vote. So that's the first time in a long time for a Republican president.

00:04:30:07 - 00:04:51:16

Paul Haenle

He also won all the swing states, all seven swing states. I think I think I think we've got all seven states decided and I think he won all of them. And you mentioned the Senate. It's going to go Republican by three or four seats. And the House of Representatives, which still needs to play out, still needs some time.

00:04:51:18 - 00:05:20:04

Paul Haenle

But all reports I hear is more than likely it will come out Republican. That's a clean sweep. And, you know, he's already got the Supreme Court stacked with Republicans from his first term. So as you have you use that word mandate. I agree with that. He's going to feel as though he has a very significant mandate by the American people to do what he talked about doing in the campaign.

00:05:20:06 - 00:05:56:09

Paul Haenle

Now, the other aspect of it, and I think you and I have talked about this and I think it's important for people to recognize in the first term, he had advisers who thought it was their job to prevent him from doing certain things that he himself wanted to do as president. They felt it was their job to sort of, you know, restrain him from his excesses and to do what they could to kind of, you know, prevent him from doing some of the things they thought were not in line with the American interest.

00:05:56:11 - 00:06:23:02

Paul Haenle

And you can think of like people like, you know, his chief of staff, former Marine John Kelly. General Mattis at DOD. A number a number of folks. John Bolton, national security adviser. And I think this time around, he is going to bring in advisers. They will certainly try to shape and influence his decisions. But at the end of the day, they're not going to obstruct him.

00:06:23:04 - 00:06:51:10

Paul Haenle

They are going to they're going to see their job is helping him to accomplish the things that he wants to accomplish. And that's going to be a very different dynamic that you had in the first term. And so they learned a lot in terms of the priorities. You know, he talked about it on the campaign trail. You got immigration and what's he going to do with, you know, the illegal immigrants that he talked about, you know, sending back across the border, get to getting the economy back on track.

00:06:51:10 - 00:07:22:23

Paul Haenle

That's going to be a tougher nut to crack. But that's what he ran on. And then, you know, he's run on a number of cultural issues around, you know, wokeness and things like that. And in terms of foreign policy, the one thing I'll say and then and then I'll stop is, you know, we engage with a lot of Trump advisers over the last several months, you know, just to try to get a sense of what they're thinking, what they think a President Trump would do.

00:07:23:00 - 00:07:55:03

Paul Haenle

And when it comes to sort of engagement with leaders like Kim Jong Un from North Korea or President Xi Jinping from China, President Putin from Russia, they say, look, we don't necessarily advise this, that he engage with leaders like this, but we're pretty convinced he's going to want to do it and we're not going to stop him. So, you know, I think there's a pretty good chance he's going to want to, you know, get back together with Kim Jong un and see what's possible there.

00:07:55:05 - 00:08:12:13

Paul Haenle

You may want to try to do some sort of deal with the Chinese president, like the phase one trade deal or something beyond that. And I think he's going to be engaging President Putin, you know, to the degree where it's going to cause you know, quite a bit of controversy in the United States. So on the foreign policy side, I guess that's the one thing that I would say.

00:08:12:19 - 00:08:23:14

Paul Haenle

When a president feels they have a mandate, they're going to act in bold ways and feel confidence to do the things they want to do.

00:08:23:16 - 00:08:49:07

Alex Wolf

Interesting. Interesting. So we can expect we can expect a slightly different second Trump term in terms of him feeling more emboldened to pursue his own personal priorities. And so it's touch that on trade, they will flash a slide here real quick just to catch everyone up to speed at where we are and how we got to where we are so we can put a slide up on on screen real quick.

00:08:49:09 - 00:09:09:14

Alex Wolf

And just as a quick background. Of course, Trump kicked off the first trade, Trump kicked off the trade war and was really focused on the trade deficit. He remains to be focus on the trade deficit in terms of how he how he talks about trade and his priority was with China and with other trading countries, eliminating that trade deficit.

00:09:09:18 - 00:09:33:15

Alex Wolf

Very, very focused on that number. Now, we went from a focus on the trade deficit, really to a Biden administration that was more focused on containing China's technological advancement. We didn't see this with the exception of EVs, real significant increase in tariffs, but we saw more of a focus on containing the technological advancements. So here on the slide, you can see what Trump's priorities were.

00:09:33:15 - 00:09:53:14

Alex Wolf

You can you know, it's feels like ancient history, but the slide on the right in terms of the tariff levels, how much they really got ratcheted up and where they are at right now. And so the U.S. tariff against China is sits right now at about a trade weighted average of 19%. He's talking about taking it up potentially to 60%.

00:09:53:16 - 00:10:20:18

Alex Wolf

So that is a that is a substantial increase in essentially a tripling of tariffs that we're now proposing. His big focus is the chart on the left just showing that's looking from China's perspective, China's trade relationship. Surplus versus deficit across its trading partners. It is running a massive surplus with the U.S. and that is its largest surplus, a big reason for that.

00:10:20:20 - 00:10:41:02

Alex Wolf

That's in goods. Just looking here on this chart is. And this is from the U.S. perspective, it is the most unbalanced trading relationship around the world. And a big reason is while China simply doesn't buy a lot of goods from the U.S., it also does not import services. So this is looking at it from a goods and services perspective.

00:10:41:04 - 00:11:07:05

Alex Wolf

China does not open up, it has not opened up its markets to import of U.S. services. So the U.S. actually has a fairly balanced trading relationship across many of its trading partners, except for China. Now, I'll turn back to you, Paul, just with that as kind of a with that as as a backdrop, do we expect Trump to refocus on that trade deficit on that number, or do we expect him to be more focus on technological advancements?

00:11:07:11 - 00:11:25:17

Alex Wolf

Or is it is it is it a bit of both? I think what are we what are we thinking in terms of what he'll prioritize, how he'll pursue the relationship and act broadly with with China, especially as we look at his first hundred days of first few months in office. How will he approach it? What will he prioritize?

00:11:25:17 - 00:11:28:16

Alex Wolf

What are we expecting?

00:11:28:18 - 00:11:56:05

Paul Haenle

Yeah, I think, Alex, to your question, you know, he's talked a lot about tariffs and I think it's you know, we learned from the first Trump presidential campaign that we should take his campaign pledges seriously. And I, for one, you know, take his threat of upwards of 60% tariffs seriously. And again, he thinks that addresses that trade deficit issue that is so important to him.

00:11:56:07 - 00:12:22:19

Paul Haenle

The president has broad authority to impose tariffs without congressional support. So this is something he can do. And there's also consensus within not only the Republican Party, but across the aisle that the U.S. needs a more level playing field with respect to China. And you saw the Biden administration imposing tariffs on China as well, on electric vehicles and in the clean energy stack.

00:12:22:19 - 00:12:48:11

Paul Haenle

So they're not you know, they used to argue tariffs are bad and they're not there anymore. And they did not the Biden team did not pull down Donald Trump's tariffs that he imposed in the first term. So the debate about tariffs has really changed in the United States. It's really between the Republicans and Democrats more about how far how how, how much to use tariffs.

00:12:48:13 - 00:13:22:02

Paul Haenle

We heard Vice President Harris in the debate with Donald Trump basically say that, you know, the way to use them is to use them selectively in targeted and that Trump used them across the board, which hurt the American consumers. So the debates about de-risking versus decoupling in a sense, and I think the trade relationship more from a commercial and an economic growth perspective, as you're saying about the trade deficit rather than a national security lens or a strategic lens, I don't think Donald Trump sees it that way.

00:13:22:07 - 00:13:49:21

Paul Haenle

However, Bob Lighthizer, who is his trade rep, the first administration, and will go into a important position in this second administration, and other advisers are much more focused on those fair trade issues and the national security implications of the trading relationship, as well as, as you said, maintaining a technological lead over China. And I think they will see, you know, those aspects.

00:13:49:23 - 00:14:08:23

Paul Haenle

Driving those policy aspects is very important. Donald Trump will be the tariff guy. For what purpose? We can we can discuss and we can discuss what kind of scenarios we might have with the tariffs. Do you get them all at once? Do you get them incrementally, but that's the way I see it

00:14:09:00 - 00:14:40:03

Alex Wolf

Now, there's a view both in the U.S. and in the region, and I think particularly as well in financial markets of Trump as a dealmaker versus Trump as an ideological hawk. And that debate goes back and forth. Are the tariffs going to be a means to an end or is he ultimately seeking a deal or is it, like you said with Robert Lighthizer, more about decoupling in the conversations that you're having with Trump advisers that you've been having the last couple of months?

00:14:40:05 - 00:15:01:17

Alex Wolf

What is what is your sense? What is the sense from Washington of that kind of Trump Trump the dealmaker versus Trump, that that the ideological hawk? What do you think we're likely to see? And I think specifically with from the perspective of tariffs, do you think that you would put a higher probability on a deal or a higher probability on using them for more of a strategic decoupling?

00:15:01:19 - 00:15:28:01

Paul Haenle

Well, Alex, I think you put the finger your finger on the thing that we really need to see how it plays out early on. This is where the real uncertainty is, because as you are implying, if you talk to advisers like Bob Lighthizer, Peter Navarro, there's a guy to watch named Scott Bessant who's angling for the Treasury secretary job who comes out of Wall Street, worked with George Soros.

00:15:28:01 - 00:15:52:21

Paul Haenle

He's a billionaire, knows Trump really well. You know, they all talk about tariffs for the purpose is of decoupling from China, imposing serious tariffs on China. The US has become overall overly dangerously overreliant on China, that the kind of economic and commercial and business interaction we do with China, you know, strengthens China to the disadvantage of the United States.

00:15:52:21 - 00:16:24:14

Paul Haenle

And we need to use tariffs, decouple. And you know, one scenario, as I mentioned, scenarios is this I call strategic decoupling that that Lighthizer and Trump's advisors convince President Trump to take a hard line approach to China and impose, you know, pretty heavy tariffs early in the administration through kind of emergency measures, too. They could use, you know, which President Nixon imposed in 71 to to impose 10% tariffs on all US imports.

00:16:24:16 - 00:16:49:23

Paul Haenle

So I think there are folks that really want more extreme measures for decoupling. Donald Trump fancies himself a dealmaker and I think he is probably one of very few people in his first term who thought the deal that he got from China and the first in his first administration was a good deal for him because it worked. It worked out for him politically.

00:16:50:00 - 00:17:13:04

Paul Haenle

So he could and but but you and I know it wasn't a deal that really addressed structural issues they were aiming for. It really ended up being more of a purchase agreement to address the trade deficit. So Chinese farmers to buy agricultural projects, products, energy, and they didn't fulfill that which we can we can talk about. So he may try.

00:17:13:06 - 00:17:39:22

Paul Haenle

President Trump may prefer to use the threat of tariffs to try to leverage that for a deal. And he could try to negotiate with President Xi early on, asked for more purchases, asked to go back to phase one and finish phase one, because the Chinese didn't do that. The first time. They did not follow through on the purchase of any of the additional $200 billion worth of U.S. goods.

00:17:39:24 - 00:18:09:00

Paul Haenle

And it had agreed to in 2020 and 2021 during the pandemic. President Trump said recently at a campaign rally that he'd call Xi Jinping and day one and ask for 50 billion in agriculture purposes. So purchases of this scenario would be kind of the least disruptive scenarios, like a grand bargain that he would just, you know, request that Xi Jinping, you know, go back to the phase one agreement and buy more.

00:18:09:02 - 00:18:43:10

Paul Haenle

The other, which I think is possible, is that is, as I said before, you just use the tariffs as a threat. And what he could do is ask his trade rep to announce new tariff lists, Section 301 tariff list on day one. The Trade Representative Office would have to get input from industry, and that would give Trump time to negotiate and say, look, if you don't strike a deal, these tariffs are coming in an incremental way.

00:18:43:12 - 00:19:07:21

Paul Haenle

And in the end, you know, the baseline assessment, I think, is you'll get some tariffs, you'll get higher tariffs, but if you get a deal in that process, then the tariffs will stop being imposed. Once the administration gets a deal, they refrain from implementing broader tariffs. And that's what President Trump that I call that the Trump 1.0 playbook, which is what he did in one point.

00:19:07:22 - 00:19:23:03

Paul Haenle

Okay, so you've got three, you got the grand bargain, you got the Trump 1.0, and then you've got the strategic decoupling. And his advisors want the decoupling. Trump probably wants the deal. And we'll just have to see how that plays out.

00:19:23:05 - 00:19:40:08

Alex Wolf

Okay. I think that's a good framework for laying out the different potential scenarios, especially with with the amount of unknowns that we have. And I think also gives us things to look at in terms of who he staffs his administration with and what their views are and how influential they can be. Now, it's a bit of a tricky question.

00:19:40:08 - 00:20:01:09

Alex Wolf

I'm not going to ask you to speak for all the American people, but given that Trump's a populist, what do you think would play better politically? So maybe two questions. What do you think would play better politically? Just being purely hawkish and raising tariffs and engaging a trade war or a deal from from from from a populist perspective?

00:20:01:09 - 00:20:24:14

Alex Wolf

And also, do you think, given how close you are to really that the temperature on both sides of the Pacific is there's space for a deal in Washington and Beijing, given that both sides would have to make some concessions? Is there even political space in Washington to engage in negotiations and offer some concessions as part of a deal?

00:20:24:16 - 00:20:55:10

Paul Haenle

So my own sense is that within Trump's advisors, there's significant skepticism that a deal would be good for American interests. Right. And I think they have general distrust in the relationship with China. But that said, again, I think Trump would see a deal as good politics that he can bring back to the American public to show he's, you know, quote unquote, winning against China.

00:20:55:12 - 00:21:40:15

Paul Haenle

I think he also sees himself as having a good relationship with President Xi. And at the very least, President Trump could push China to fulfill, as I said, those purchase agreements that they didn't follow through on in phase one. You know, whether China can fulfill purchase agreements, actually, that's another story, right? Because we know from the first deal, the premise of the purchase agreements kind of defied market economics in a sense, because China would have to direct its companies, particularly probably the state owned enterprises, to switch suppliers and pull forward demand and build up inventories to fulfill the purchases.

00:21:40:17 - 00:22:12:13

Paul Haenle

So kind of an anti market, you know, counter market thing. Another constraint is since the first trade war, China has been shifting its supply chains away from the U.S. to countries like Brazil and countries in Southeast Asia in commodities and raw materials and in agriculture in addition to purchase agreements. Some in the US, some advisors have talked about, well, maybe we could have potential export quotas or price floors on Chinese goods.

00:22:12:15 - 00:22:38:20

Paul Haenle

The Chinese Foreign Ministry has proposed to the EU this kind of conceptual framework for as an alternative to anti-dumping duties. But to answer your your key question, how does the American public view it? You know, I do think that, you know, President Trump in the first term got some political traction by saying, you know, he went toe to toe with the Chinese and got a deal.

00:22:38:22 - 00:23:03:16

Paul Haenle

But the trade experts that that look at the deal walk away and say that's not a very good deal. But but President Trump got some, you know, political upswing because it did help. For example, the agricultural communities in the Midwest, the the energy producers, because they brought deals. He brought deals to them.

00:23:03:18 - 00:23:04:18

Alex Wolf

Yeah.

00:23:04:20 - 00:23:35:07

Paul Haenle

In terms of the tariffs and let me just conclude with this. One of the things that I think President Trump thinks about more than somebody like Bob Lighthizer or Peter Navarro, some of his advisors I have heard from, you know, folks that have worked for President Trump in the first term, you know, he's very conscious of not negatively impacting the U.S. stock market and not damaging the global economy.

00:23:35:07 - 00:24:05:03

Paul Haenle

You know, not not bringing down the global economy. And if he takes a drastic step on tariffs early on, I think he would be worried about what the implications would be for the U.S. stock market and for the global economy. And I think that is a restraint on President Trump himself. And so I think, which is I think why he kind of probably ended up in the first term doing the incremental approach of tariffs as opposed to, you know, more of a bigger bang approach.

00:24:05:03 - 00:24:16:05

Paul Haenle

And I think what I hear from Lighthizer and his advisors is they prefer a bigger bang approach. So again, that's the thing to watch In the first term is how that plays out.

00:24:16:07 - 00:24:34:07

Alex Wolf

Okay. Okay. Perhaps I'll jump in here for a minute or two. On that point of constraints around Trump for tariffs, and also just to remind everyone, there is a QR code on the slides here that you can you can scan and submit questions. I know if you have come in already, we'll try to get to them at the end.

00:24:34:09 - 00:24:56:01

Alex Wolf

That question of what would constrain Trump in his desire to use tariffs comes up a lot. And what the two things that people often point to are inflation. And then, as Paul just mentioned, the stock market. And we think I'm just going to show just a chart here on most on the on the stock market side from inflation side.

00:24:56:03 - 00:25:26:23

Alex Wolf

The work that we have done across the bank shows that broad tariffs, if we see 10% on all imports or 20% on all imports, that would have a significant impact on price levels and inflation. If it's just focus on one or two trading partners, if it's just focus on China, it actually wouldn't have that significant of an impact on inflation because at the end of the day, the inflation basket is primarily services, let's say about 70% services, 30% goods.

00:25:27:00 - 00:25:49:19

Alex Wolf

Of that 30% goods, you have, again, a rough estimation, but about one third is imported goods. All of those imported goods, you have about 15% from China. So 15% of one third of one third isn't really that inflationary. So so we don't see that necessarily as a constraint. Although he got elected on a on around anger over inflation.

00:25:49:19 - 00:26:13:12

Alex Wolf

So we have to suspect that the administration will be sensitive to inflation. However, on the stock market, you can see this on a slide here. Total U.S. multinational profits derived from China is actually relatively small. You're looking at about so corporate income from China as a share of total corporate profits or as a share of total overseas income.

00:26:13:14 - 00:26:52:12

Alex Wolf

You're looking at just a low single digits, about 1% derive from China. However, of the listed universe it's going. The left side is all companies of the listed universe. It's about seven and a half percent. And you do have a lot of very big, important publicly traded companies that do have very significant business in China. So so if you were to ratchet tariffs up as a big bang, as Paul said, really high really quickly, then that could potentially have an impact on on the overall stock market, especially if we see retaliation on US businesses’ operations in in China.

00:26:52:14 - 00:27:15:15

Alex Wolf

Paul, anything to add on that? and but also would like to transition just very briefly on tech. So we've been talking a lot about trade and about tariffs. And you laid out the different scenarios. Do you think that Trump will follow the the Biden administration on export controls, outbound investment restrictions, especially around semiconductors, some of the measures that we've seen.

00:27:15:20 - 00:27:30:07

Alex Wolf

So we'll be more balanced and focus on trade or focus on tech or both. But what are what are some of the expectations that you have from the conversations you're having around what we could see from a from a US-China tech policy perspective?

00:27:30:09 - 00:27:50:23

Paul Haenle

Great question. So again, I'm going to talk about Trump's advisors first, and then I'll talk about Trump. So you can see there's a theme here, right? Which is, you know, when I talk to his advisors, a lot of them say, you know, we have our ideas, but we don't know if they're going to survive first contact with Donald Trump because we know he has his own ideas.

00:27:51:00 - 00:28:19:15

Paul Haenle

But Trump advisers in the second administration of Donald Trump will want to be more hardline in a sense, on technology competition than the Biden administration has been in that. And I think most people will would would sort of, you know, assess that the Biden administration has been pretty tough on this in general. They what they say is they want to shift from Biden's approach of de-risking toward more decoupling.

00:28:19:17 - 00:28:53:23

Paul Haenle

They also say they want to shift away from the Biden administration's approach of small yards and tall fences in terms of restrictions on technology and the like. And they want to shift to big yards and big fences. So they want to expand the areas that are restricted. And, you know, they're already talking about the Bidenadministration's executive order on outbound investment, which included AI, semiconductors, and quantum computing was too narrowly scoped that they need to add more areas to that.

00:28:54:00 - 00:29:22:12

Paul Haenle

So they want the type of technologies and the sectors subject to restrictions to grow. Right. The U.S. government's the other the second point to make is that during the Biden administration, okay, the U.S. government's capacity to implement technology competition with China has grown substantially. I was in the White House today. I went to the office on technology and national security.

00:29:22:14 - 00:29:48:01

Paul Haenle

They do the export calls. They do the investigation on controlled vehicles. Right? They do you know, they do all the technology competition issues they didn’t have that office. When I was there in the Bush, Obama administration. It’s new office and by the way, they are that office is interacting with Trump advisors on a regular basis. And there is strong support for what they're doing.

00:29:48:01 - 00:30:12:12

Paul Haenle

So there's not a lot of daylight between the advisors. In the Commerce Department, the information of communications technology and services in the last two years has gone from a handful of employees to 150. So the bottom line is the US government now has new national security tools, a new tool kit and new and new offices and capacities to drive these issues.

00:30:12:12 - 00:30:42:10

Paul Haenle

So they're going to be looking for [...] And the last point I'll make, Alex, is the Trump administration will have these greater capabilities. But tech policy under Trump, 1.0 was quite haphazard and was less organized. Well, you and I have talked about ZTE. President Trump puts it on the BIS entity list and and then he took them off the list in the interest of trying to get a deal.

00:30:42:12 - 00:31:08:24

Paul Haenle

As part of his effort. I think we could see more of this, especially if Trump brings in Elon Musk or Teal in this administration. If they if they become kind of the go betweens between the U.S. and Beijing, I think that's going to get folks like Lighthizer and Navarro and some of the more strategic strategic focus advisors pretty nervous and unhappy.

00:31:09:01 - 00:31:26:15

Paul Haenle

And I think they could expand export controls through a new multiple packages the Biden administration did in 22 and 23. And I think the Trump administration can continue that. So they've got quite a bit that they can do.

00:31:26:17 - 00:31:43:10

Alex Wolf

Okay. So you think that the expanded toolkit under Biden is one that will be relatively attractive for Trump advisors to to to use to expand some of the controls around export now about investment and maybe.

00:31:43:12 - 00:32:02:02

Paul Haenle

I think the [...] and advisors will want to use that Trump will be will be in and some of it may get caught up in the deal making process. I don't I think this is more of a, you know, kind of the interagency in the bureaucracy pushing on these issues and they now have the capacities and the toolkits to do it.

00:32:02:04 - 00:32:22:14

Alex Wolf

Okay. Interesting. So a key focus will be, again, as you mentioned a few times, what advisors end up with the administration and some of the push and pull between the different priorities of those advisors and how influential they are over over the President. We are getting a few questions and so. oh, go ahead.

00:32:22:16 - 00:32:49:21

Paul Haenle

I should say. I think, you know, most of his advisors were probably advocate advocate a strong push on technology restrictions. The uncertainty is between Trump's advisors and Trump himself and whether, you know, he himself will take this on as an issue that he sees as a priority and does he wrap some of it into potential deal making that he wants to do, like we saw in Trump 1.0.

00:32:49:23 - 00:33:16:21

Paul Haenle

Another example is Tiktok, Alex, you know, he was banning Tiktok and Trump 1.0. But recently he decided he's no longer against Tiktok in the U.S. because one of his donors is a key investor in Tiktok. So again, I don't think Trump is seized by these issues, but his advisers are. And I think his advisors will try to drive these forward.

00:33:16:23 - 00:33:48:17

Alex Wolf

To transition a bit from from from trade. Talk a bit about other spots in the region. You know very well the the history of Taiwan policy in the US. You've been a party to a number of different administrations and involved in Taiwan policy. Where do you think Trump stands in terms of kind of his view towards Taiwan and U.S. policy with regards to the region?

00:33:48:19 - 00:34:07:00

Alex Wolf

Where do Republican advisers at this focus on Trump versus advisors or to his advisors? Dan, do we expect any change in policy in broadly, what are you expecting with regards to where the US, how the U.S. approaches approaches Taiwan?

00:34:07:02 - 00:34:41:05

Paul Haenle

So again, on Taiwan, this is another area where there is an apparent, you know, split between his advisors and and Donald Trump himself, most of his advisors, maybe even all of them support you know you look at, you know, his vice president, J.D. Vance, you know, Robert O'Brien, who is his last national security advisor, Mike Pompeo, who is his CIA director and Secretary of state, they all advocate for increased support to Taiwan arms sales and other efforts.

00:34:41:07 - 00:35:17:21

Paul Haenle

In contrast, President Trump implies that defending Taiwan could be too costly to the U.S. and likely not possible given the geography that, you know, is so close to Taiwan, so close to the mainland, he said. I don't even think we could get there in time. Trump has made a few statements that had led many, including many of his advisors, to question whether he will maintain the traditional U.S. one China policy that includes strategic ambiguity and that's guided U.S. policy since normalization with China in 1979.

00:35:17:23 - 00:35:44:09

Paul Haenle

In a Bloomberg interview recently, Donald Trump called on Taiwan to pay the United States for defense. You know, if it expects the United States to defend it. And it accused Taiwan of stealing the U.S. semiconductor business. You know, the result is that we you know, it sounds like, you know, he's inclined to reduce support to Taiwan, but we don't really know right now.

00:35:44:11 - 00:36:11:08

Paul Haenle

The last important to keep this in mind, he has had these views for some time. John Bolton writes about it in his book. And he implied that, you know, the real game was in Beijing, not in Taipei. But in terms of a track record, if you go back to the Trump won first administration, they took significant actions in support of Taiwan.

00:36:11:10 - 00:36:39:10

Paul Haenle

They did probably three times more arms sales than the Biden administration has done. They've done symbolic They did symbolic moves like breaking precedent. Speaking with the Taiwan president after being elected, we all remember that actions that were aiming to strengthen Taiwan’s defense capabilities. So it's important to note that in his first term, the inner agency, the bureaucracy, it's probably less Trump himself.

00:36:39:10 - 00:36:55:24

Paul Haenle

But they did a lot. And, you know, I'm not sure if he if he decides that he wants to weigh in more on these issues, will he make the policy? It's an uncertainty that we need to see how it plays out.

00:36:56:01 - 00:37:24:00

Alex Wolf

Yeah, it sounds like there's a quite a cloud of uncertainty between Trump's views and as advisors views. And I think you make a good point using the Trump's first administration as as a guidepost and the actions that we saw were quite were quite supportive. Yeah. So whether or not we see a shift there, it would depend on who's in what position and and how influential, how influential they are.

00:37:24:02 - 00:37:55:03

Alex Wolf

But another source of potential uncertainty. Maybe we could get to a few of the specific questions that are coming in and perhaps slash the QR code back up there for any additional questions. I'm getting in a few. With regards to other regions as well, if you if you care to comment on both Middle East and Ukraine, two areas that Trump has has as talked about quite a bit on the campaign trail, wanting to end the conflict in Ukraine even before he gets into office.

00:37:55:05 - 00:38:17:23

Alex Wolf

Also with regard to the Middle East, we saw Netanyahu and his congratulations towards towards Trump and the expectation that Trump could be much more hawkish with regards to Iran. Maybe just touching on those. Any thoughts on what we might see from the Trump administration on those two regions and the changes and what the impact would be?

00:38:18:00 - 00:38:52:20

Paul Haenle

So on Ukraine, I mean, President Trump spoken he spoke quite a bit during the campaign about his desire to end the war in Ukraine. That's been a key feature of his foreign policy. Again, some advisers, I think, don't really support that, but I'm not sure how much they're going to push back against that. You know, Robert O'Brien, I think they've got more traditional views, but as Vice President J.D. Vance, other advisors bridge Corby, you know, they argue that Europe should provide more for Ukraine's defense and that the U.S. ought to disentangle itself and focus on other parts of the world.

00:38:52:20 - 00:39:22:00

Paul Haenle

So I think President Trump will turn to this. He's talked about it a lot. It's unclear exactly how he's going to go about a negotiated settlement in Ukraine. He's had some advisors from the American First for American First Policy Institute that previously served on the National Security Council. They've drafted proposals for a cease fire that would freeze the front lines and their current position in and then begin negotiations.

00:39:22:03 - 00:39:49:23

Paul Haenle

Right. Other sources have said that, you know, Trump would be opened for closing the possibility that Ukraine joins NATO which I think it's like the risk, of course, of a cease fire would be that Russia then uses that time and space to kind of regroup its military forces and then launch another offensive at Ukraine or a surrounding

country.

00:39:50:00 - 00:40:12:21

Paul Haenle

And then in addition, Trump will likely require any further financial or military aid to Ukraine would be in the form of a loan rather than a grant. So those are some of the things to think about with Ukraine and the Middle East. You know, we go back to Trump 1.0, a very pro Israel policy. They move the embassy.

00:40:12:21 - 00:40:43:05

Paul Haenle

Remember the U.S. embassy to Jerusalem, That was quite controversial. They recognized Israel's sovereignty over the Golan Heights. And he oversaw the Abraham Accords where several Arab states normalized diplomatic relations with Israel in terms of what he might do in his second administration. He has called for peace in the Middle East, but he I think he's likely to give Netanyahu a freer hand to carry out his war on his own timeline.

00:40:43:07 - 00:41:12:05

Paul Haenle

He's very pro-Israel in his first term. And I don't see anything that's going to change that. He's called for renewed maximum pressure on Iran that could raise tensions in the region and for that matter, he put it could put China at risk of secondary sanctions for purchases of Iranian oil. That's that's something that the biden administration had the authority to do, but they never followed through on doing that.

00:41:12:07 - 00:41:48:05

Paul Haenle

I mean, there's one US-China China angle on the Middle East, which is interesting. I have heard some Chinese scholars make the case that China and the US might be able to align in the Middle East if if Trump comes in because he and President Xi have similar interest in regional peace and they make the same argument around Ukraine and that this may bring the US and China closer, I mean, it's a possible scenario given China's diplomatic relationship with Fatah, Hamas and Iran.

00:41:48:07 - 00:42:00:20

Paul Haenle

I don't I don't expect the Middle East actually will be top. I don't see that playing out. But you do hear it's important to note, you do hear Chinese scholars talking about it as a possibility.

00:42:00:22 - 00:42:28:23

Alex Wolf

In your opinion, do you think that a policy of maximum pressure on Iran in terms of increasing sanctions, coupled with an Israel that feels like it has a freer hand to pursue its objectives, does that raise the risk of a broader regional conflict of Israel launching more of a decisive blow against Iran, US perhaps becoming more involved? Do you think it raises or do you think Trump's desire to avoid war lowers?

00:42:29:02 - 00:42:34:06

Alex Wolf

How do you see the risk of more of a wider regional conflict in the Middle East?

00:42:34:08 - 00:43:16:02

Paul Haenle

You know, it's a it's a fair question. And I think, you know, the Biden administration gets a lot of criticism for its approach. But I think they have tried, you know, to take a balanced approach and, you know, press the Israelis when they felt it was needed, recognizing their right to self-defense. They've tried to work within the region to make sure, as you as you say, that it didn't expand, that it didn't grow even wider, you know, abrupt moves, you know, bold steps, maximum pressure campaigns, they they do run the risk of creating even greater attention and greater instability.

00:43:16:02 - 00:43:29:05

Paul Haenle

Right. So I think it would have to be implemented in a very careful, you know,orchestrated way for it to make sure that situation did not get out of control.

00:43:29:07 - 00:43:56:13

Alex Wolf

So last question and back to the region. You spent quite a bit of time in your career working on North Korea negotiations as part of the six party talks. That's one of the more famous aspects of Trump's first term was a meeting with Kim Jong un in Singapore. Now that North Korea is is more actively participating in the Ukraine Russia conflict, raising tensions with the West.

00:43:56:15 - 00:44:13:21

Alex Wolf

What's your best guess for how Trump will approach North Korea? ReEngage, open up discussion, negotiations, or do you think he'll just be more combative? Because he realized from the first experience that there really perhaps wasn't that much to gain from that?

00:44:13:23 - 00:44:33:16

Paul Haenle

It's a great question. And I'll start, you know, with some of the things that you mentioned in terms of developments, because it's important to remember that, you know, it's not the same situation as when President Trump was in office in the first term. North Korea has not been willing to engage in dialog and diplomacy with the Biden administration for four years.

00:44:33:18 - 00:45:03:00

Paul Haenle

They've expanded their missile tests in development. They've declared themselves to be a nuclear weapons state. It's part of its constitution. Now they've strengthened their alliance with Russia. As you mentioned, they've sent, you know, over 10,000 troops to Ukraine or, you know, to help with Ukraine in exchange for money. You know, food and oil and technology support. We know about the space and missile program, could be could be more beyond that.

00:45:03:02 - 00:45:23:15

Paul Haenle

So the situation has changed quite considerably since the first Trump administration.

Now, President Trump, you know, he says he's got a very good relationship with Kim Jong un and he could be ready to reengage in diplomacy. His advisers tell me that they would not be surprised, they would not advise it. It would not be top of the list of their recommendations.

00:45:23:15 - 00:45:50:11

Paul Haenle

But they recognize he may want to do that. You know, if Trump stresses the security alliance with South, if he, you know, puts puts put stress on the security relationship with South Korea and Japan by calling for more burden sharing, which he did in the first his first term, that it could create some conditions where, you know, North Korea might be willing to engage.

00:45:50:13 - 00:46:26:19

Paul Haenle

If Trump is also serious about negotiating an end to the Russian Ukraine war that could also implicate North Korea because they now have troops involved. They it's interesting that North Korea recently sent a new ambassador to Singapore and the rumors are that they're preparing for a renewed diplomatic set of dialog with with with with President Trump. And you remember the first set of dialog was about whether it would be feasible for the US to negotiate to ending North Korea's missile and nuclear program.

00:46:26:21 - 00:46:44:13

Paul Haenle

You know, that's another question. I don't know, you know, how that would play as President Trump found it difficult the first time. I think it's even more difficult because North Korea's capabilities have advanced so much in just the last four years that it would be a tougher nut to crack.

00:46:44:15 - 00:47:06:24

Alex Wolf

All right. I think we'll have to have to wrap up wrap up there. It's late for you and I'm sure you have another few calls before the night is over. Thank you very much for joining us. Insights were incredibly informative, very, very helpful for everyone on the call. Maybe just a quick a quick summary. Of course, there's still quite a bit of uncertainty over what we're going to see in a second in a second Trump term.

00:47:07:05 - 00:47:34:24

Alex Wolf

That uncertainty really emanates from the fact that Trump did pursue somewhat of an unconventional foreign policy. The first administration he a bit more boxed in or influenced by his advisors and some of the traditional Republican Party platforms.

This time around, given how sweeping the victory was and the fact that he's not going to be running for reelection, that he could be a bit unencumbered, who is this administration with might just be those that support his own ideas.

00:47:34:24 - 00:47:56:12

Alex Wolf

So it will really will be very important to see exactly what he himself wants to pursue also than what advisers he staffs his administration with and how influential they are, how much they can they can try to convince him of maintaining a more of a traditional policy or help him pursue his own his own policy agenda. We spent a lot of time talking about trade.

00:47:56:14 - 00:48:26:17

Alex Wolf

We do think that tensions will increase and increase. Shortly into his administration, though, how we see tariffs and their use, whether it's a grand bargain or some sort of limited negotiation or strategic decoupling, it's still unclear. We'll be looking at it very closely. Paul will be in pretty constant communication likely with the incoming administration, and we'll be very happy to follow up with anyone on this call as we learn more and as you have more questions on on what to expect.

00:48:26:19 - 00:48:40:03

Alex Wolf

But thank you very much for dialing and hopefully that was helpful. Hope that was informative. We look forward to keeping in touch and and continuing the dialog as we get closer to the start of Trump's second term. Thank you again, Paul.